Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

Notes to Consolidated Financial Statements [Abstract]

Stock-Based Compensation

12.Stock-Based Compensation

We have two stock-based compensation plans, the 1985 Employee Stock Purchase Plan and the Stock Compensation Plan of 2003. Under these plans, we previously offered various stock-based compensation programs where we provided employees an opportunity to purchase Fannie Mae common stock or periodically made stock awards to certain employees in the form of nonqualified stock options, performance share awards, restricted stock awards, restricted stock units or stock bonus awards.Under the senior preferred stock purchase agreement with Treasury, we may not issue Fannie Mae equity securities without the consent of Treasury, other than the senior preferred stock, the Treasury warrant, common stock issuable upon exercise of the warrant, or as required by the terms of any binding agreement in effect on the date of the senior preferred stock purchase agreement. As such, we currently do not intend to grant equity compensation to employees under these plans.

In connection with our stock-based compensation plans for shares or awards issued prior to conservatorship, we recorded compensation expense of $17 million, $39 million, and $52 million for 2011, 2010 and 2009, respectively.

Stock-Based Compensation Plans

The 1985 Employee Stock Purchase Plan (the “1985 Purchase Plan”) provided employees an opportunity to purchase shares of Fannie Mae common stock at a discount to the fair market value of the stock during specified purchase periods. Our Board of Directors sets the terms and conditions of offerings under the 1985 Purchase Plan, including the number of available shares and the size of the discount. There were no offerings under the 1985 Purchase Plan in any year presented. The aggregate maximum number of shares of common stock available for employee purchase is 50 million. Since inception, we have made available 38,039,742 shares for purchase by employees under this plan.

The Stock Compensation Plan of 2003 (the “2003 Plan”) is the successor to the Stock Compensation Plan of 1993 (the “1993 Plan”). The 2003 Plan enabled us to make stock awards in various forms and combinations, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance share awards and stock bonus awards. The aggregate maximum number of shares of common stock available for award to employees and non-management directors under the 2003 Plan is 40 million. Including the effects of share cancellations, we have awarded 10,850,062shares under this plan since its inception. The shares awarded under the 2003 Plan were authorized and unissued shares, treasury shares or shares purchased on the open market.

Restricted Stock Program

Under the 1993 and 2003 Plans, prior to conservatorship, employees could have received restricted stock awards (“RSAs”) and, under the 2003 Plan, employees may have received restricted stock units (“RSUs”). The type of award employees received under the 2003 Plan generally dependedupon years of service and age at the time of grant. Each RSU represented the right to receive a share of common stock at the time of vesting. As a result, RSUs are generally similar to restricted stock, except that RSUs do not confer voting rights on their holders. By contrast, holders of the RSAs do have voting rights. Vesting of the grants was based on continued employment. In general, grants vested in equal annual installments over three or four years beginning on the first anniversary of the date of grant. Based on the fair value of our common stock on the respective grant dates, the fair value of restricted stock that vested in 2011, 2010 and 2009 was$38 million, $51 million, and $83 million, respectively. The compensation expense related to restricted stock is based on the grant date fair value of our common stock. We recorded compensation expense for these restricted stock grants of $17 million, $39 million, and $52 million for 2011, 2010 and 2009, respectively.

The following table displays restricted stock activity for 2011, 2010 and 2009.

			For the Year Ended December 31,
			2011			2010			2009
				Weighted			Weighted			Weighted
				Average Fair			Average Fair			Average Fair
			Number of	Value at		Number of	Value at		Number of	Value at
			Shares	Grant Date		Shares	Grant Date		Shares	Grant Date
		(Shares in thousands)
Nonvested as of January 1			1,510	$	37.34	2,873	$	39.53	5,934	$	41.19
	Vested		(944)		40.39	(1,199)		42.58	(1,858)		44.78
	Forfeited		(81)		32.89	(164)		37.34	(1,203)		39.61
Nonvested as of December 31			485	$	32.14	1,510	$	37.34	2,873	$	39.53

The following table displays information related to unvested restricted stock as of December 31, 2011, 2010 and 2009.

	For the Year Ended December 31,
	2011		2010		2009
	(Dollars in millions)
Unrecognized compensation cost	$	1	$	19	$	56
Expected weighted-average life of unvested restricted stock		0.1years		1.0years		1.6years

Nonqualified Stock Options

Under the 2003 Plan and prior to conservatorship, we could have granted stock options. Generally, these options may not be exercised until at least one year subsequent to the grant date, and the options expire ten years from the date of grant. Typically, options vest 25% per year beginning on the first anniversary of the date of grant. The exercise price of each option is equal to the fair market value of our common stock on the date we grant the option.

The following table displays nonqualified stock option activity for 2011, 2010 and 2009.

		For the Year Ended December 31,
		2011					2010					2009
					Weighted-					Weighted-					Weighted-
			Weighted-		Average			Weighted-		Average			Weighted-		Average
			Average		Fair			Average		Fair			Average		Fair
			Exercise		Value at			Exercise		Value at			Exercise		Value at
		Options	Price		Grant Date		Options	Price		Grant Date		Options	Price		Grant Date
	(Shares in thousands)
Beginning balance, January 1		4,799	$	75.07	$	23.01	8,759	$	72.39	$	23.60	12,293	$	72.12	$	23.62
Forfeited and/or expired		(1,720)		79.96		27.49	(3,960)		69.15		25.26	(3,534)		71.45		23.66
Ending balance, December 31(1)		3,079	$	72.34	$	20.50	4,799	$	75.07	$	23.01	8,759	$	72.39	$	23.60
Options exercisable, December 31		3,079	$	72.34	$	20.50	4,799	$	75.07	$	23.01	8,759	$	72.39	$	23.60

__________
(1)	All options outstanding are fully vested.