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Segment Reporting
12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
Our three reportable segments are: Single-Family, Multifamily, and Capital Markets. We use these three segments to generate revenue and manage business risk, and each segment is based on the type of business activities it performs. Under our segment reporting, the sum of the results for our three business segments does not equal our consolidated statements of operations and comprehensive income (loss), as we separate the activity related to our consolidated trusts from the results generated by our three segments. We also include an eliminations/adjustments category to reconcile our business segment financial results and the activity related to our consolidated trusts to net income (loss) in our consolidated statements of operations and comprehensive income (loss).
The section below provides a discussion of the three business segments and how each segment’s financial information reconciles to our consolidated financial statements.
Single-Family
The primary source of revenue for our Single-Family business is the guaranty fees the segment receives as compensation for assuming the credit risk on the mortgage loans underlying single-family Fannie Mae MBS, most of which are held within consolidated trusts, and on the single-family mortgage loans held in our retained mortgage portfolio. The primary source of profit for the Single-Family segment is the difference between the guaranty fees earned and the costs of providing the guaranty, including credit-related expense.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Single-Family segment. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
Guaranty fee income—Guaranty fee income reflects the cash guaranty fees paid by MBS trusts to Single-Family, the amortization of deferred cash fees (both the previously recorded deferred cash fees that were eliminated from our consolidated balance sheets at transition and deferred guaranty fees received subsequent to transition that are currently recognized in our consolidated financial statements through interest income), such as buy-ups, buy-downs, and risk-based pricing adjustments, and the guaranty fees from the Capital Markets group on single-family loans in our retained mortgage portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate guaranty fees and the amortization of deferred cash fees related to consolidated trusts as they are now reflected as a component of interest income; however, such accounting continues to be reflected for the segment reporting presentation.
Net interest income or loss—Net interest loss within the Single-Family segment reflects interest expense to reimburse Capital Markets and consolidated trusts for contractual interest not received on mortgage loans, when interest income is no longer recognized in accordance with our nonaccrual accounting policy in our consolidated statements of operations and comprehensive income (loss). Net interest income (loss), also includes an allocated cost of capital charge among the three segments that is not included in net interest income in the consolidated statement of operations and comprehensive income (loss).
Multifamily
The primary sources of revenue for our Multifamily business are guaranty fees the segment receives as compensation for assuming the credit risk on the mortgage loans underlying multifamily Fannie Mae MBS, most of which are held within consolidated trusts, guaranty fees on the multifamily mortgage loans held in our retained mortgage portfolio and other fees associated with multifamily business activities. Investments in rental and for-sale housing generate revenue and losses from operations and the eventual sale of the assets. While the Multifamily guaranty business is similar to our Single-Family business, neither the economic return nor the nature of the credit risk is similar to that of Single-Family.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Multifamily segment. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
Guaranty fee income—Guaranty fee income reflects the cash guaranty fees paid by MBS trusts to Multifamily and the guaranty fees from the Capital Markets group on multifamily loans in Fannie Mae’s portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate guaranty fees related to consolidated trusts.
Gains or losses from partnership investments—Gains (losses) from partnership investments primarily reflect gains or losses on investments in affordable rental and for-sale housing partnerships measured under the equity method of accounting. To reconcile to our consolidated statements of operations and comprehensive income (loss), we adjust the gains or losses to reflect the consolidation of certain partnership investments.
Capital Markets Group
Our Capital Markets group generates most of its revenue from the difference, or spread, between the interest we earn on the mortgage assets in our retained mortgage portfolio and the interest we pay on the debt we issue to fund these assets. We refer to this spread as our net interest yield. Changes in the fair value of the derivative instruments and trading securities we hold and gains and losses on securitizations and sales of available-for-sale securities from our portfolio impact the net income or loss reported by the Capital Markets group. The net income or loss reported by our Capital Markets group is also affected by the impairment of AFS securities.
Our segment reporting presentation differs from our consolidated balance sheets and statements of operations and comprehensive income (loss) in order to reflect the activities and results of the Capital Markets group. The significant differences from the consolidated statements of operations and comprehensive income (loss) are as follows:
Net interest income—Net interest income reflects the interest income on mortgage loans and securities owned by Fannie Mae and interest expense on funding debt issued by Fannie Mae, including accretion and amortization of any cost basis adjustments. To reconcile to our consolidated statements of operations and comprehensive income (loss), we adjust for the impact of consolidated trusts and intercompany eliminations as follows:
Interest income: Interest income consists of interest on the segment’s interest-earning assets, which differs from interest-earning assets in our consolidated balance sheets. We exclude loans and securities that underlie the consolidated trusts from our Capital Markets group balance sheets. The net interest income reported by the Capital Markets group excludes the interest income earned on assets held by consolidated trusts. As a result, we report interest income and amortization of cost basis adjustments only on securities and loans that are held in our retained mortgage portfolio. For mortgage loans held in our retained mortgage portfolio, when interest income is no longer recognized in accordance with our nonaccrual accounting policy, the Capital Markets group recognizes interest income for reimbursement from Single-Family and Multifamily for the contractual interest due under the terms of our intracompany guaranty arrangement.
Interest expense: Interest expense consists of contractual interest on the Capital Markets group’s interest-bearing liabilities, including the accretion and amortization of any cost basis adjustments. It excludes interest expense on debt issued by consolidated trusts. Therefore, the interest expense recognized on the Capital Markets group income statement is limited to our funding debt, which is reported as “Debt of Fannie Mae” in our consolidated balance sheets. Net interest expense also includes an allocated cost of capital charge among the three business segments that is not included in net interest income in our consolidated statements of operations and comprehensive income (loss).
Investment gains or losses, net—Investment gains or losses, net reflects the gains and losses on securitizations and sales of available-for-sale securities from our portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate gains and losses on securities that have been consolidated to loans.
Fair value gains or losses, net—Fair value gains or losses, net for the Capital Markets group includes derivative gains and losses, foreign exchange gains and losses, and the fair value gains and losses on certain debt securities in our portfolio. To reconcile to our consolidated statements of operations and comprehensive income (loss), we eliminate fair value gains or losses on Fannie Mae MBS that have been consolidated to loans.
Other expenses, net—Debt extinguishment gains or losses recorded on the segment statements of operations relate exclusively to our funding debt, which is reported as “Debt of Fannie Mae” in our consolidated balance sheets. To reconcile to our consolidated statements of operations and comprehensive income (loss), we include debt extinguishment gains or losses related to consolidated trusts to arrive at our total recognized debt extinguishment gains or losses.
Segment Allocations and Results
Our business segment financial results include directly attributable revenues and expenses. Additionally, we allocate to each of our segments: (1) capital using FHFA minimum capital requirements adjusted for over- or under-capitalization; (2) indirect administrative costs; and (3) a provision or benefit for federal income taxes. In addition, we allocate intracompany guaranty fee income as a charge from the Single-Family and Multifamily segments to Capital Markets for managing the credit risk on mortgage loans held by the Capital Markets group.
The following tables display our business segment financial results for the years ended December 31, 2013, 2012 and 2011.
 
For the Year Ended December 31, 2013
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest income (loss)
$
205

 
 
$
(74
)
 
 
$
9,764

 
 
$
10,939

 
 
 
$
1,570

(3) 

$
22,404

 
Benefit for credit losses
8,469

 
 
480

 
 

 
 

 
 
 

 
 
8,949

 
Net interest income after benefit for credit losses
8,674

 
 
406

 
 
9,764

 
 
10,939

 
 
 
1,570

 
 
31,353

 
Guaranty fee income (expense)(4)
10,468

 
 
1,217

 
 
(1,115
)
 
 
(5,233
)
(5) 

 
(5,132
)
(5) 

205

(5) 
Investment gains (losses), net
3

 
 
21

 
 
4,911

 
 
(122
)
 
 
 
(3,622
)
(6) 

1,191

 
Net other-than-temporary impairments

 
 

 
 
(64
)
 
 

 
 
 

 
 
(64
)
 
Fair value (losses) gains, net
(10
)
 
 

 
 
3,148

 
 
(722
)
 
 
 
543

(7) 

2,959

 
Debt extinguishment gains, net

 
 

 
 
27

 
 
104

 
 
 

 
 
131

 
Gains from partnership investments(8)

 
 
498

 
 

 
 

 

 
19

 
 
517

 
Fee and other income (expense)
630

 
 
182

 
 
3,010

 
 
(321
)
 

 
224

 
 
3,725

 
Administrative expenses
(1,706
)
 
 
(280
)
 
 
(559
)
 
 

 
 
 

 
 
(2,545
)
 
Foreclosed property income
2,736

 
 
103

 
 

 
 

 
 
 

 
 
2,839

 
TCCA fees(4)
(1,001
)
 
 

 
 

 
 

 
 
 

 
 
(1,001
)
 
Other (expenses) income
(628
)
 
 
(2
)
 
 
20

 
 

 

 
(133
)
 
 
(743
)
 
Income before federal income taxes
19,166

 
 
2,145

 
 
19,142

 
 
4,645

 
 
 
(6,531
)
 
 
38,567

 
Benefit for federal income taxes(9)
29,110

 
 
7,924

 
 
8,381

 
 

 
 
 

 
 
45,415

 
Net income
48,276

 
 
10,069

 
 
27,523

 
 
4,645

 
 
 
(6,531
)
 
 
83,982

 
Less: Net income attributable to noncontrolling interest

 
 

 
 

 
 

 
 
 
(19
)
(10) 
 
(19
)
 
Net income attributable to Fannie Mae
$
48,276

 
 
$
10,069

 
 
$
27,523

 
 
$
4,645

 
 
 
$
(6,550
)
 
 
$
83,963

 

 
For the Year Ended December 31, 2012(11)
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest (loss) income
$
(790
)
 
 
$
(13
)
 
 
$
13,241

 
 
$
7,156

 
 
 
$
1,907

(3) 
 
$
21,501

 
Benefit for credit losses
672

 
 
180

 
 

 
 

 
 
 

 
 
852

 
Net interest (loss) income after benefit for credit losses
(118
)
 
 
167

 
 
13,241

 
 
7,156

 
 
 
1,907

 
 
22,353

 
Guaranty fee income (expense)(4)
8,151

 
 
1,040

 
 
(1,291
)
 
 
(4,737
)
(5) 
 
 
(2,951
)
(5) 
 
212

(5) 
Investment gains (losses), net
8

 
 
37

 
 
6,217

 
 
(1
)
 
 
 
(5,774
)
(6) 
 
487

 
Net other-than-temporary impairments

 
 

 
 
(711
)
 
 
(2
)
 
 
 

 
 
(713
)
 
Fair value losses, net
(8
)
 
 

 
 
(3,041
)
 
 
(313
)
 
 
 
385

(7) 
 
(2,977
)
 
Debt extinguishment (losses) gains, net

 
 

 
 
(277
)
 
 
33

 
 
 

 
 
(244
)
 
Gains from partnership investments(8)

 
 
123

 
 

 
 

 
 
 
(4
)
 
 
119

 
Fee and other income (expense)
759

 
 
207

 
 
717

 
 
(395
)
 
 
 
(13
)
 
 
1,275

 
Administrative expenses
(1,590
)
 
 
(269
)
 
 
(508
)
 
 

 
 
 

 
 
(2,367
)
 
Foreclosed property income
247

 
 
7

 
 

 
 

 
 
 

 
 
254

 
TCCA fees(4)
(238
)
 
 

 
 

 
 

 
 
 

 
 
(238
)
 
Other expenses
(841
)
 
 
(5
)
 
 
(22
)
 
 

 
 
 
(73
)
 
 
(941
)
 
Income before federal income taxes
6,370

 
 
1,307

 
 
14,325

 
 
1,741

 
 
 
(6,523
)
 
 
17,220

 
(Provision) benefit for federal income taxes
(80
)
 
 
204

 
 
(124
)
 
 

 
 
 

 
 

 
Net income
6,290

 
 
1,511

 
 
14,201

 
 
1,741

 
 
 
(6,523
)
 
 
17,220

 
Less: Net loss attributable to noncontrolling interest

 
 

 
 

 
 

 
 
 
4

(10) 
 
4

  
Net income attributable to Fannie Mae
$
6,290

 
 
$
1,511

 
 
$
14,201

 
 
$
1,741

 
  
 
$
(6,519
)
 
  
$
17,224

  

 
For the Year Ended December 31, 2011
 
Business Segments
 
Other Activity/Reconciling Items
 
 
 
 
Single-Family
 
Multifamily
 
Capital Markets
 
Consolidated Trusts(1)
 
Eliminations/ Adjustments(2)
 
Total Results
 
 
(Dollars in millions)
 
Net interest (loss) income
$
(2,411
)
 
 
$
(38
)
 
 
$
13,920

 
 
$
5,765

 
 
 
$
2,045

(3) 
 
$
19,281

 
Provision for credit losses
(26,453
)
 
 
(265
)
 
 

 
 

 
 
 

 
 
(26,718
)
 
Net interest (loss) income after provision for credit losses
(28,864
)
 
 
(303
)
 
 
13,920

 
 
5,765

 
 
 
2,045

 
 
(7,437
)
 
Guaranty fee income (expense)
7,507

 
 
884

 
 
(1,497
)
 
 
(4,486
)
(5) 
 
 
(2,181
)
(5) 
 
227

(5) 
Investment (losses) gains, net
(2
)
 
 
18

 
 
3,711

 
 
(315
)
 
 
 
(2,906
)
(6) 
 
506

 
Net other-than-temporary impairments

 
 

 
 
(306
)
 
 
(2
)
 
 
 

 
 
(308
)
 
Fair value losses, net
(7
)
 
 

 
 
(6,596
)
 
 
(226
)
 
 
 
208

(7) 
 
(6,621
)
 
Debt extinguishment (losses) gains, net

 
 

 
 
(254
)
 
 
22

 
 
 

 
 
(232
)
 
Gains from partnership investments(8)

 
 
81

 
 

 
 

 
 
 

 
 
81

 
Fee and other income (expense)
579

 
 
218

 
 
478

 
 
(329
)
 
 
 
(10
)
 
 
936

 
Administrative expenses
(1,638
)
 
 
(264
)
 
 
(468
)
 
 

 
 
 

 
 
(2,370
)
 
Foreclosed property expense
(765
)
 
 
(15
)
 
 

 
 

 
 
 

 
 
(780
)
 
Other (expenses) income
(857
)
 
 
25

 
 
(34
)
 
 

 
 
 
(81
)
 
 
(947
)
 
(Loss) income before federal income taxes
(24,047
)
 
 
644

 
 
8,954

 
 
429

 
 
 
(2,925
)
 
 
(16,945
)
 
Benefit (provision) for federal income taxes
106

 
 
(61
)
 
 
45

 
 

 
 
 

 
 
90

 
Net (loss) income attributable to Fannie Mae
$
(23,941
)
 
 
$
583

 
 
$
8,999

 
 
$
429

 
 
 
$
(2,925
)
 
 
$
(16,855
)
 
__________
(1) 
Represents activity related to the assets and liabilities of consolidated trusts in our consolidated balance sheets.
(2) 
Represents the elimination of intercompany transactions occurring between the three business segments and our consolidated trusts, as well as other adjustments to reconcile to our consolidated results.
(3) 
Represents the amortization expense of cost basis adjustments on securities in the Capital Markets group’s retained mortgage portfolio that on a GAAP basis are eliminated.
(4) 
Pursuant to the TCCA, effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us on or after that date by 10 basis points, and the incremental revenue must be remitted to Treasury. The resulting revenue is included in guaranty fee income and the expense is recognized as “TCCA fees.” This increase in guaranty fee is also included in the single-family average charged guaranty fee.
(5) 
Represents the guaranty fees paid from consolidated trusts to the Single-Family and Multifamily segments. The adjustment to guaranty fee income in the Eliminations/Adjustments column represents the elimination of the amortization of deferred cash fees related to consolidated trusts that were re-established for segment reporting. Total guaranty fee income related to unconsolidated Fannie Mae MBS trusts and other credit enhancement arrangements is included in fee and other income in our consolidated statements of operations and comprehensive income (loss).
(6) 
Primarily represents the removal of realized gains and losses on sales of Fannie Mae MBS classified as available-for-sale securities that are issued by consolidated trusts and in the Capital Markets group’s retained mortgage portfolio. The adjustment also includes the removal of securitization gains (losses) recognized in the Capital Markets segment relating to portfolio securitization transactions that do not qualify for sale accounting under GAAP.
(7) 
Represents the removal of fair value adjustments on consolidated Fannie Mae MBS classified as trading that are in the Capital Markets group’s retained mortgage portfolio.
(8) 
Gains from partnership investments are included in other expenses in our consolidated statements of operations and comprehensive income (loss).
(9) 
Primarily represents the release of the valuation allowance for our deferred tax assets that generally are directly attributable to each segment based on the nature of the item.
(10) 
Represents the adjustment from equity method accounting to consolidation accounting for partnership investments that are consolidated in our consolidated balance sheets.
(11) 
Certain prior period amounts have been reclassified to conform with the current period presentation.
The following table displays total assets by segment as of December 31, 2013 and 2012.
 
As of December 31,
 
2013
 
2012
 
(Dollars in millions)
Single-Family
$
41,206

 
$
17,595

Multifamily
10,848

 
5,182

Capital Markets
596,436

 
723,217

Consolidated trusts
2,812,459

 
2,749,571

Eliminations/adjustments(1)
(190,841
)
 
(273,143
)
Total assets
$
3,270,108

 
$
3,222,422

__________
(1) 
Includes the elimination of Fannie Mae MBS in the Capital Markets group’s retained mortgage portfolio that are issued by consolidated trusts. Also includes the elimination of the allowance for loan losses, allowance for accrued interest receivable and fair value losses previously recognized on acquired credit impaired loans as they are not treated as assets for Single-Family and Multifamily segment reporting purposes because these allowances and losses relate to loan assets that are held by the Capital Markets segment and consolidated trusts.
We operate our business solely in the United States and its territories, and accordingly, we generate no revenue from and have no assets in geographic locations other than the United States and its territories.