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Conservatorship, Senior Preferred Stock Purchase Agreement and Related Matters
12 Months Ended
Dec. 31, 2024
Conservatorship, Preferred Stock Agreements, And Related Parties [Abstract]  
Conservatorship, Preferred Stock Agreements, And Related Parties Conservatorship, Senior Preferred Stock Purchase Agreement and
Related Matters
Conservatorship
In September 2008, FHFA was appointed as our conservator pursuant to authority provided by the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992, as amended (the “GSE Act”). Conservatorship is a statutory
process designed to preserve and conserve our assets and property and put the company in a sound and solvent
condition. Our conservatorship has no specified termination date.
FHFA, as conservator, succeeded to:
all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae
with respect to Fannie Mae and its assets; and
title to the books, records and assets of any other legal custodian of Fannie Mae.
As conservator, FHFA has broad authority over our business and operations, including the authority to:
direct us to enter into contracts or enter into contracts on our behalf; and
transfer or sell our assets or liabilities.
The GSE Act provides special protections for mortgage loans and mortgage-related assets we hold in trust. Specifically,
mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the
conservator for the beneficial owners of such MBS and cannot be used to satisfy the company’s general creditors.
While we are operating in conservatorship, our directors:
serve on behalf of the conservator;
exercise their authority as directed by and with the approval (where required) of the conservator;
owe their fiduciary duties of care and loyalty solely to the conservator, and not to either the company or the
stockholders; and
are elected by the conservator, not by our stockholders.
FHFA, as conservator, has issued an order authorizing our Board of Directors to exercise specified functions and
authorities, and instructions regarding matters for which conservator decision or notification is required. The conservator
retains the authority to amend or withdraw its order and instructions at any time.
The conservator has suspended stockholder meetings since conservatorship, and our common stockholders are not
empowered to vote on directors or any other matters. The conservator also eliminated dividends on our common and
preferred stock (other than dividends on the senior preferred stock issued to the U.S. Department of Treasury described
below) during the conservatorship.
Receivership
Under the GSE Act, the FHFA Director must place us into receivership if they determine that our assets are less than
our obligations (that is, we have a net worth deficit) or if we have not been paying our debts as they become due, in
either case, for a period of 60 days. FHFA has clarified that the 60-day measurement period will commence no earlier
than the SEC filing deadline for our Form 10-K or Form 10-Q for the relevant period. In addition, the FHFA Director may,
with the prior consent of Treasury, place us into receivership at the Director’s discretion at any time for other reasons set
forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no reasonable
prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions would be
required to determine the carrying value of our assets, which would likely lead to substantially different financial results.
We are not aware of any plans of FHFA: (1) to fundamentally change our business model, or (2) to reduce the
aggregate amount available under the senior preferred stock purchase agreement or held by the company under our
equity structure.
Senior Preferred Stock Purchase Agreement
Overview
FHFA, as conservator, entered into a senior preferred stock purchase agreement with the U.S. Department of the
Treasury (“Treasury”) on our behalf in September 2008. In connection with that agreement, we issued Treasury one
million shares of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, which we refer to as the “senior
preferred stock,” and a warrant to purchase shares equal to 79.9% of our common stock, on a fully diluted basis, for a
nominal price of $0.00001. We have assigned a value of $4.5 billion to Treasury’s commitment, which was recorded as
a reduction to additional paid-in-capital at the time of the issuance and was partially offset by the aggregate fair value of
the warrant of $3.5 billion. We received no cash consideration for issuing either the senior preferred stock or the
warrant.
The senior preferred stock purchase agreement and the terms of the senior preferred stock have been amended
multiple times since 2008 by FHFA (acting on our behalf) and Treasury. On January 2, 2025, modifications were made
to certain provisions of the senior preferred stock purchase agreement, senior preferred stock and warrant, including the
following:
Removed the restrictive covenants in the senior preferred stock purchase agreement that had previously been
suspended by a September 2021 letter agreement.
Amended provisions of the senior preferred stock purchase agreement that permitted FHFA to terminate our
conservatorship in certain limited circumstances without Treasury’s prior consent. As modified, the senior
preferred stock purchase agreement now requires Treasury’s prior written consent for the termination of our
conservatorship in all cases, except if receivership is required under the GSE Act.
Amended the requirement in the senior preferred stock purchase agreement that we comply with the terms of
the enterprise regulatory capital framework as published in the Federal Register on December 17, 2020,
disregarding any subsequent amendment or other modifications to that rule, to now require that we comply with
the terms of the enterprise regulatory capital framework as amended from time to time.
Additional miscellaneous changes, including modifying the notice provisions of the senior preferred stock
purchase agreement, senior preferred stock and warrant.
The amendment to the senior preferred stock qualifies as a modification rather than an extinguishment and issuance of
a new equity instrument. As a result, this amendment will not trigger a change in the carrying value of the senior
preferred stock during the first quarter of 2025. 
The senior preferred stock purchase agreement and accompanying stock certificate include key provisions that impact
us, including those described in the table below. For a discussion of the terms of the senior preferred stock related to
dividends, liquidation preference, and limits on redemptions and paydowns, see “Note 12, Equity.”
Treasury Funding
Commitment
On a quarterly basis, we may draw funds from Treasury to cover the amount that our total
liabilities exceed our total assets for the applicable fiscal quarter (referred to as the
“deficiency amount”), up to the amount of remaining funding commitment under the
agreement.
As of the date of this filing:
$119.8 billion has been paid to us by Treasury under this funding commitment; and
$113.9 billion of funding commitment from Treasury remains; this amount would be
reduced by any future payments by Treasury under the commitment.
Termination
Provisions for
Funding
Commitment
Treasury’s funding commitment has no specified end date, but will terminate upon:
our liquidation and the fulfillment of Treasury’s obligations under its funding commitment;
the payment in full of, or reasonable provision for, our liabilities (whether or not contingent,
including guaranty obligations); or
Treasury funding the maximum amount under the agreement.
Treasury also may terminate its funding commitment and void the agreement if a court
vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment
of the conservator or curtails the conservator’s powers.
Rights of Debt
and MBS Holders
Holders of our debt securities or our guaranteed MBS may file a claim in the United States
Court of Federal Claims for relief if we default on our payment obligations on those
securities and:
we and the conservator fail to exercise all rights under the agreement to draw on
Treasury’s funding commitment, or
Treasury fails to perform its obligations under its funding commitment and we and/or the
conservator are not diligently pursuing remedies for Treasury’s failure.
Holders may seek to require Treasury to fund us up to:
the amount necessary to cure the relevant payment defaults;
the deficiency amount; or
the amount of remaining funding under the agreement, whichever is the least.
Any Treasury funding provided under these circumstances would increase the liquidation
preference of the senior preferred stock.
The terms of the agreement generally may be amended or waived; however, no such
amendment or waiver may decrease Treasury’s aggregate funding commitment or add
conditions to Treasury’s funding commitment that would adversely affect in any material
respect the holders of our debt or guaranteed MBS.
Commitment Fee
The agreement provides for the payment of an unspecified quarterly commitment fee to
Treasury to compensate it for its ongoing support under the agreement.
Until the capital reserve end date, the periodic commitment fee will not be set, accrue, or be
payable. The capital reserve end date is defined as the last day of the second consecutive
fiscal quarter during which we have had and maintained capital equal to or exceeding the
capital requirements and buffers set forth in the enterprise regulatory capital framework.
No later than the capital reserve end date, we and Treasury, in consultation with the Chair of
the Federal Reserve, will agree on the amount of the periodic commitment fee.
Covenants
The senior preferred stock purchase agreement contains covenants that prohibit us (and, in one instance, FHFA) from
taking several actions without the prior written consent of Treasury or require us to take specified actions, including the
following described in the table below:
Dividends and
Share
Repurchases
We may not pay dividends or make other distributions on or repurchase our equity securities
(other than the senior preferred stock).
Issuances of
Equity Securities
We may not issue equity securities, except for common stock issued:
upon exercise of the warrant;
as required by any pre-conservatorship agreements; and
following the satisfaction of two conditions: (a) the exercise of the warrant in full, and (b)
the resolution of all currently pending significant litigation relating to the conservatorship
and the August 2012 amendment to the senior preferred stock purchase agreement.
Termination of
Conservatorship
Neither we nor FHFA may terminate or seek to terminate the conservatorship without the
prior consent of Treasury, other than through a mandatory receivership.
Asset Dispositions
We may not sell, transfer, lease or otherwise dispose of any assets, except for dispositions
for fair market value in limited circumstances, including if:
the transaction is in the ordinary course of business and consistent with past practice; or
the assets have a fair market value individually or in the aggregate of less than
$250 million.
Subordinated
Debt
We may not issue any subordinated debt securities.
Mortgage Assets
Limit
We may not hold mortgage assets in excess of $225 billion; however, we are currently
managing our business to a $202.5 billion mortgage asset cap according to FHFA
instructions.
Indebtedness
Limit
We may not have indebtedness in excess of $270 billion.
Executive
Compensation
We may not enter into any new compensation arrangements or increase amounts or
benefits payable under existing compensation arrangements with any of our executive
officers (as defined by Securities and Exchange Commission (“SEC”) rules) without the
consent of the FHFA Director, in consultation with the Secretary of the Treasury.
Equitable Access
and Offers for
Single-Family
Mortgage Loans
We may not vary our pricing or acquisition terms for single-family loans based on the
business characteristics of the seller, including the seller’s size, charter type, or volume of
business with us.
We must offer to purchase at all times, for equivalent cash consideration and on
substantially the same terms, any single-family mortgage loan that:
is of a class of loans that we then offer to acquire for inclusion in our MBS or for other non-
cash consideration;
is offered by a seller that has been approved to do business with us; and
has been originated and sold in compliance with our underwriting standards.
Single-Family
Loan Eligibility
Program
We must maintain a program reasonably designed to ensure that the single-family loans we
acquire are limited to:
qualified mortgages;
government-backed loans;
loans exempt from the Consumer Financial Protection Bureau’s (the “CFPB’s”) ability-to-
repay and qualified mortgage rule (other than loans secured by timeshares and home
equity lines of credit, which, we are not allowed to buy);
loans secured by an investment property;
refinancing loans with streamlined underwriting originated in accordance with our eligibility
criteria for high LTV ratio refinancings;
loans originated with temporary underwriting flexibilities during times of exigent
circumstances, as determined in consultation with FHFA;
loans secured by manufactured housing; and
such other loans that FHFA may designate that were eligible for purchase by us as of
January 2021.
Enterprise
Regulatory
Capital
Framework
We are required to comply with the enterprise regulatory capital framework rule as amended
from time to time.
Risk Management
Plan
While in conservatorship, we must provide an annual risk management plan to Treasury.
Senior Preferred Stock and Common Stock Warrant
For information about the senior preferred stock and the common stock warrant, see “Note 12, Equity.”
Impact of U.S. Government Support
We have been operating under the control of FHFA as conservator since 2008, which is a form of government support.
We continue to rely on financial support from Treasury pursuant to our senior preferred stock purchase agreement to
eliminate any net worth deficits we may experience in the future, which would otherwise trigger our being placed into
receivership by FHFA. Treasury also has authority under the Charter Act to purchase up to $2.25 billion of the debt
obligations that we issue. We believe that continued support from Treasury and our status as a government-sponsored
enterprise are essential to maintaining our access to debt funding and maintaining the liquidity necessary to conduct our
normal business activities. Therefore, changes or perceived changes in (i) our status as a government-sponsored
enterprise, (ii) our support from Treasury and/or (iii) the creditworthiness of the U.S. government could have a material
adverse impact on our access to debt funding or the cost of debt funding. These events would have a negative impact
on our liquidity, financial condition, and results of operations. Our reliance on support from the U.S. government is
critical to keeping us operating as a going concern.
Related Parties
Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number
of shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of December 31, 2024,
Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $212.0 billion.
On January 2, 2025, certain provisions of the senior preferred stock purchase agreement, senior preferred stock and
warrant were modified by FHFA (acting on our behalf) and Treasury, as described above in the “Senior Preferred Stock
Purchase Agreement” section.
FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed
related parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a
limited liability company created to operate a common securitization platform; as a result, CSS is deemed a related
party.
Recurring transactions with our related parties are described below:
Related Party
Transaction
Description
Treasury
Temporary Payroll
Tax Cut Continuation
Act of 2011 (“TCCA”)
Under the TCCA, we have an obligation to collect 10 basis points in guaranty
fees on single-family mortgages delivered to us and pay the associated
revenue to Treasury. The Infrastructure Investment and Jobs Act was enacted
in November 2021 and extended our obligation under the TCCA to October 1,
2032. In January 2022, FHFA advised us to continue to collect and pay these
TCCA fees on and after October 1, 2032 with respect to loans we acquired
before this date until those loans are paid off or otherwise liquidated.
Capital Magnet Fund
The GSE Act requires us to set aside funding obligations for Treasury’s
Capital Magnet Fund. These funding obligations are measured as the product
of 4.2 basis points and the UPB of our total new business purchases for the
respective period, with 35% of this amount payable to Treasury’s Capital
Magnet Fund.
FHFA
Annual Assessments
under the GSE Act
The GSE Act authorizes FHFA to establish an annual assessment for
regulated entities, including Fannie Mae, for FHFA’s costs and expenses, as
well as to maintain FHFA’s working capital.
Treasury &
Freddie Mac
Making Home
Affordable Program
We served as program administrator for Treasury’s Home Affordable
Modification Program (“HAMP”) and other initiatives under Treasury’s Making
Home Affordable Program. Our role as program administrator concluded in
the third quarter of 2023. We received reimbursements from Treasury and
Freddie Mac for expenses incurred in this role and our final reimbursement
was received in the fourth quarter of 2023.
CSS & Freddie
Mac
Equity Investment in
CSS
Our investment in CSS is accounted for using the equity method. As a part of
our joint ownership, Fannie Mae, Freddie Mac and CSS are parties to several
agreements which set forth the overall framework for the joint venture and the
terms under which CSS provides mortgage securitization services to us and
Freddie Mac. CSS operates as a separate company from us and Freddie
Mac, with all funding and limited administrative support services and other
resources provided to it by us and Freddie Mac.
The following table provides the income statement impact of our related party transactions for the periods presented in
addition to the associated liability at period end. The associated liability represents amounts accrued with respect to the
related party transactions that have not yet been paid to the applicable related parties. In addition to the impact
described in the table below, our equity investment in CSS is classified as “Other assets” in our consolidated balance
sheets. We contributed $68 million and $72 million to CSS for the twelve months ended December 31, 2024 and 2023,
respectively.
Related
Party
Activity
Income
Statement
Classification
For the Year Ended December 31,
Other Liabilities as of
December 31,
2024
2023
2022
2024
2023
(Dollars in millions)
Treasury
TCCA fees
Legislative
assessments
$3,442
$3,431
$3,369
$861
$861
Treasury
Treasury’s Capital Magnet
Fund
Legislative
assessments
56
54
101
56
54
FHFA
FHFA assessments
Legislative
assessments
164
159
132
Treasury &
Freddie Mac
Making Home Affordable
Program reimbursements
Other
expenses, net
6
15
CSS &
Freddie Mac
Net operating losses
associated with our
investment in CSS
Other
expenses, net
68
72
65
In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac
in the capital markets. Some of the structured securities we issue are backed in whole or in part by Freddie Mac
securities. Fannie Mae and Freddie Mac each have agreed to indemnify the other party for losses caused by: its failure
to meet its payment or other specified obligations under the trust agreements pursuant to which the underlying
resecuritized securities were issued; its failure to meet its obligations under the customer services agreement; its
violations of laws; or with respect to material misstatements or omissions in offering documents, ongoing disclosures
and materials relating to the underlying resecuritized securities. Additionally, we make regular income tax payments to
and receive tax refunds from the Internal Revenue Service (“IRS”), a bureau of Treasury.