Federal National Mortgage Association Fannie Mae 8-K, filed Feb 13, 2020

Federal National Mortgage Association Fannie Mae (FNMA)

8-K 2020-02-13 For: 2020-02-13

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Added on April 05, 2026

About this 8-K

Federal National Mortgage Association Fannie Mae filed this 8-K on February 13, 2020.

Items reported

Item 2.02: Financial results
Item 9.01: Financial statements and exhibits

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Federally chartered corporation	0-50231	52-0883107	1100 15th Street, NW			800	232-6643
			Washington,	DC	20005
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)	(Address of principal executive offices, including zip code)			(Registrant’s telephone number, including area code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A




Exhibit Number		Description of Exhibit
99.1		News release, dated February 13, 2020
99.2		Q4 and Full Year 2019 Financial Supplement, dated February 13, 2020
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document included as Exhibit 101




		FEDERAL NATIONAL MORTGAGE ASSOCIATION

	By	/s/ Celeste M. Brown
		Celeste M. Brown
		Executive Vice President and Chief Financial Officer



Fourth Quarter and Full Year 2019 Results

•	Fannie Mae reported 2019 net income of $14.2 billion and fourth quarter 2019 net income of $4.4 billion. Fannie Mae’s solid financial performance reflects its strong business fundamentals and stable single-family and multifamily guaranty books.	“Our results further demonstrate the strength and earnings power of Fannie Mae’s business in 2019, including our ability to manage risk and generate solid returns in both our Single-Family and Multifamily business lines. We continue to fulfill our mission to provide liquidity to the mortgage market and meet our housing goals, while growing our guaranty fee income and managing expense growth. We begin 2020 with a net worth of $14.6 billion, thanks to strong retained earnings and prudent risk management.” Hugh R. Frater, Chief Executive Officer

Business Highlights

•	Fannie Mae’s net worth increased to $14.6 billion as of December 31, 2019, as the company continues to retain quarterly earnings and restore its capital base. Based on the current agreement with the U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA), the company may retain quarterly earnings until its net worth reaches $25 billion.

•	Fannie Mae provided more than $650 billion in liquidity to the mortgage market in 2019, helping families across the country to own or rent a home through the financing of more than 3 million home purchases, refinancings, and rental units.

•	Fannie Mae was the largest issuer of single-family mortgage-related securities in the secondary market during 2019 with an estimated market share of single-family mortgage-related securities issuances of 37%. Fannie Mae has financed approximately 1 in 4 single-family mortgages in the United States.

•	Fannie Mae provided $70 billion in multifamily financing in 2019, which enabled the financing of 726,000 units of multifamily housing. More than 90% of the multifamily units the company financed in 2019 were affordable to families earning at or below 120% of the area median income, providing support for both affordable and workforce housing. Fannie Mae finances one fifth of the multifamily mortgage debt outstanding in the United States.

Fannie Mae continued its ongoing capital management and risk reduction efforts in 2019:

•	Fannie Mae made changes to its Single-Family credit risk transfer structures in 2019, increasing the company’s capital relief and reducing the company’s risk. Fannie Mae also began obtaining credit protection on single-family reference pools containing seasoned loans, increasing the percentage of the company’s book covered by credit risk transfer, reducing the company’s capital requirements, and further reducing risk.

•	Fannie Mae also enhanced its risk transfer capabilities through the company’s first Multifamily Connecticut Avenue Securities (MCAS™) transaction in the fourth quarter of 2019, while remaining committed to lender risk-sharing through its Delegated Underwriting and Servicing (DUS®) program. These and other multifamily credit enhancements through 2019 have reduced the company’s conservatorship capital requirement for credit risk on multifamily loans acquired in 2018 by more than 70%.

•	Fannie Mae’s retained mortgage portfolio decreased to $153.6 billion as of December 31, 2019 from $179.2 billion as of December 31, 2018, due primarily to a decrease in the company’s loss mitigation portfolio driven by sales of reperforming loans.



☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



(Dollars in millions)	4Q19			3Q19			Variance			2019			2018			Variance
Net interest income	$	5,850		$	5,229		$	621		$	20,962		$	20,951		$	11
Fee and other income	301			402			(101		)	1,176			979			197
Net revenues	6,151			5,631			520			22,138			21,930			208
Investment gains, net	923			253			670			1,770			952			818
Fair value gains (losses), net	84			(713		)	797			(2,214		)	1,121			(3,335		)
Administrative expenses	(786		)	(749		)	(37		)	(3,023		)	(3,059		)	36
Credit-related income
Benefit for credit losses	279			1,857			(1,578		)	4,011			3,309			702
Foreclosed property expense	(151		)	(96		)	(55		)	(515		)	(617		)	102
Total credit-related income	128			1,761			(1,633		)	3,496			2,692			804
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees	(626		)	(613		)	(13		)	(2,432		)	(2,284		)	(148		)
Other expenses, net	(644		)	(571		)	(73		)	(2,158		)	(1,253		)	(905		)
Income before federal income taxes	5,230			4,999			231			17,577			20,099			(2,522		)
Provision for federal income taxes	(865		)	(1,036		)	171			(3,417		)	(4,140		)	723
Net income	$	4,365		$	3,963		$	402		$	14,160		$	15,959		$	(1,799	)
Total comprehensive income	$	4,266		$	3,977		$	289		$	13,969		$	15,611		$	(1,642	)


⁽¹⁾	Includes revenues generated by the 10 basis point guaranty fee increase the company implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.


⁽²⁾	Includes interest income from assets held in the company’s retained mortgage portfolio and other investments portfolio, as well as other assets used to generate lender liquidity. Also includes interest expense on the company’s outstanding corporate debt and Connecticut Avenue Securities^®debt.


•	Single-Family net income was $3.8 billion in the fourth quarter of 2019, compared with $3.3 billion in the third quarter of 2019. The increase in net income in the fourth quarter was driven primarily by:


◦	higher net interest income driven primarily by higher amortization income in the fourth quarter, resulting from increased mortgage prepayment rates;


◦	an increase in investment gains driven primarily by an increase in gains from sales of single-family held-for-sale loans and available-for-sale securities; and


◦	fair value gains in the fourth quarter compared to fair value losses in the third quarter, driven by increases in interest rates in the fourth quarter.



	Emerging growth company	☐



(Dollars in millions)	4Q19				3Q19				Variance			2019			2018			Variance
Net interest income	$	5,071			$	4,484			$	587		$	18,013		$	18,162		$	(149	)
Fee and other income	103				156				(53		)	453			450			3
Net revenues	5,174				4,640				534			18,466			18,612			(146		)
Investment gains, net	880				198				682			1,589			850			739
Fair value gains (losses), net	148				(719		)		867			(2,216		)	1,210			(3,426		)
Administrative expenses	(666		)		(634		)		(32		)	(2,565		)	(2,631		)	66
Credit-related income	124				1,747				(1,623		)	3,515			2,709			806
TCCA fees	(626		)		(613		)		(13		)	(2,432		)	(2,284		)	(148		)
Other expenses, net	(482		)		(424		)		(58		)	(1,661		)	(1,012		)	(649		)
Income before federal income taxes	4,552				4,195				357			14,696			17,454			(2,758		)
Provision for federal income taxes	(734		)		(872		)		138			(2,859		)	(3,708		)	849
Net income	$	3,818			$	3,323			$	495		$	11,837		$	13,746		$	(1,909	)
Serious delinquency rate	0.66			%	0.68			%



(Dollars in millions)	4Q19				3Q19				Variance			2019			2018			Variance
Net interest income	$	779			$	745			$	34		$	2,949		$	2,789		$	160
Fee and other income	198				246				(48		)	723			529			194
Net revenues	977				991				(14		)	3,672			3,318			354
Fair value losses, net	(64		)		6				(70		)	2			(89		)	91
Administrative expenses	(120		)		(115		)		(5		)	(458		)	(428		)	(30		)
Credit-related income (expense)	4				14				(10		)	(19		)	(17		)	(2		)
Other income (expense)	(119		)		(92		)		(27		)	(316		)	(139		)	(177		)
Income before federal income taxes	678				804				(126		)	2,881			2,645			236
Provision for federal income taxes	(131		)		(164		)		33			(558		)	(432		)	(126		)
Net income	$	547			$	640			$	(93	)	$	2,323		$	2,213		$	110
Serious delinquency rate	0.04			%	0.06			%


◦	The increase in net income was partially offset by a decrease in credit-related income in the fourth quarter driven primarily by a benefit in the third-quarter due to the company’s enhancement of the its single-family loan loss allowance model.


•	For the year, single-family net income was $11.8 billion, compared with $13.7 billion in 2018. The decrease in single-family net income in 2019 was driven primarily by a shift to fair value losses in 2019 from fair value gains in 2018 as a result of decreasing interest rates throughout most of 2019.


•	The average single-family conventional guaranty book of business increased by $21.6 billion during the fourth quarter of 2019, while the average charged guaranty fee, net of Temporary Payroll Tax Cut Continuation Act of 2011 (TCCA) fees, on the single-family conventional guaranty book remained relatively flat at 44 basis points compared with the third quarter of 2019.


•	The single-family serious delinquency rate was 0.66% as of December 31, 2019, a decrease from 0.76% as of December 31, 2018. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process.


•	Multifamily net income was $547 million in the fourth quarter of 2019, compared with $640 million in the third quarter of 2019. The decrease in net income in the fourth quarter of 2019 was due primarily to:


◦	a decrease in fee and other income resulting from a decrease in prepayment volume; and


◦	fair value losses in the fourth quarter compared with fair value gains in the third quarter, driven primarily by losses on commitments as a result of rising interest rates during commitment periods in the fourth quarter;


◦	partially offset by an increase in guaranty fee revenue as the multifamily book grew during the quarter.


•	The average multifamily guaranty book of business increased by approximately $8 billion during the fourth quarter of 2019 to $334 billion, while the average charged guaranty fee on the multifamily book remained relatively flat at 72 basis points compared with the third quarter of 2019.


•	New multifamily business volume was $18 billion in the fourth quarter of 2019. On September 13, 2019, the Federal Housing Finance Agency’s (FHFA) revised the multifamily business volume cap structure setting a $100 billion cap for the five-quarter period ending December 31, 2020. Approximately $82 billion of new business capacity remains under the revised cap structure.


•	The multifamily serious delinquency rate was 0.04% as of December 31, 2019, a decrease from 0.06% as of December 31, 2018. Multifamily seriously delinquent loans are loans that are 60 days or more past due.


⁽¹⁾	Aggregate amount of dividends the company has paid to Treasury on the senior preferred stock from 2008 through December 31, 2019. Under the terms of the senior preferred stock purchase agreement, dividend payments the company makes to Treasury do not offset its draws of funds from Treasury.


⁽²⁾	Aggregate amount of funds the company has drawn from Treasury pursuant to the senior preferred stock purchase agreement from 2008 through December 31, 2019.



	As of December 31,
	2019				2018
ASSETS
Cash and cash equivalents		$	21,184			$	25,557
Restricted cash (includes $33,294 and $17,849, respectively, related to consolidated trusts)		40,223				23,866
Federal funds sold and securities purchased under agreements to resell or similar arrangements		13,578				32,938
Investments in securities:
Trading, at fair value (includes $3,037 and $3,061, respectively, pledged as collateral)		48,123				41,867
Available-for-sale, at fair value		2,404				3,429
Total investments in securities		50,527				45,296
Mortgage loans:
Loans held for sale, at lower of cost or fair value		6,773				7,701
Loans held for investment, at amortized cost:
Of Fannie Mae		94,911				113,039
Of consolidated trusts		3,241,494				3,142,858
Total loans held for investment (includes $7,825 and $8,922, respectively, at fair value)		3,336,405				3,255,897
Allowance for loan losses		(9,016		)		(14,203		)
Total loans held for investment, net of allowance		3,327,389				3,241,694
Total mortgage loans		3,334,162				3,249,395
Deferred tax assets, net		11,910				13,188
Accrued interest receivable, net (includes $8,172 and $7,928, respectively, related to consolidated trusts)		8,604				8,490
Acquired property, net		2,366				2,584
Other assets		20,765				17,004
Total assets		$	3,503,319			$	3,418,318
LIABILITIES AND EQUITY
Liabilities:
Accrued interest payable (includes $9,361 and $9,133, respectively, related to consolidated trusts)		$	10,228			$	10,211
Debt:
Of Fannie Mae (includes $5,687 and $6,826, respectively, at fair value)		182,247				232,074
Of consolidated trusts (includes $21,880 and $23,753, respectively, at fair value)		3,285,139				3,159,846
Other liabilities (includes $376 and $356, respectively, related to consolidated trusts)		11,097				9,947
Total liabilities		3,488,711				3,412,078
Commitments and contingencies (Note 16)		—				—
Fannie Mae stockholders’ equity:
Senior preferred stock (liquidation preference of $131,178 and $123,836, respectively)		120,836				120,836
Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding		19,130				19,130
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,087,567 shares outstanding		687				687
Accumulated deficit		(118,776		)		(127,335		)
Accumulated other comprehensive income		131				322
Treasury stock, at cost, 150,675,136 shares		(7,400		)		(7,400		)
Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement, Senior Preferred Stock and Warrant for information on the related dividend obligation and liquidation preference)		14,608				6,240
Total liabilities and equity		$	3,503,319			$	3,418,318



	For the Year Ended December 31,
	2019				2018				2017
Interest income:
Trading securities		$	1,627			$	1,336			$	706
Available-for-sale securities		175				230				335
Mortgage loans		116,764				114,605				108,319
Federal funds sold and securities purchased under agreements to resell or similar arrangements		843				742				373
Other		163				136				123
Total interest income		119,572				117,049				109,856
Interest expense:
Short-term debt		(501		)		(468		)		(250		)
Long-term debt		(98,109		)		(95,630		)		(88,873		)
Total interest expense		(98,610		)		(96,098		)		(89,123		)
Net interest income		20,962				20,951				20,733
Benefit for credit losses		4,011				3,309				2,041
Net interest income after benefit for credit losses		24,973				24,260				22,774
Investment gains, net		1,770				952				1,522
Fair value gains (losses), net		(2,214		)		1,121				(1,211		)
Fee and other income		1,176				979				2,227
Non-interest income		732				3,052				2,538
Administrative expenses:
Salaries and employee benefits		(1,486		)		(1,451		)		(1,328		)
Professional services		(967		)		(1,032		)		(933		)
Other administrative expenses		(570		)		(576		)		(476		)
Total administrative expenses		(3,023		)		(3,059		)		(2,737		)
Foreclosed property expense		(515		)		(617		)		(521		)
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees		(2,432		)		(2,284		)		(2,096		)
Other expenses, net		(2,158		)		(1,253		)		(1,511		)
Total expenses		(8,128		)		(7,213		)		(6,865		)
Income before federal income taxes		17,577				20,099				18,447
Provision for federal income taxes		(3,417		)		(4,140		)		(15,984		)
Net income		14,160				15,959				2,463
Other comprehensive loss:
Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes		(179		)		(344		)		(206		)
Other, net of taxes		(12		)		(4		)		—
Total other comprehensive loss		(191		)		(348		)		(206		)
Total comprehensive income		$	13,969			$	15,611			$	2,257
Net income		$	14,160			$	15,959			$	2,463
Dividends distributed or amounts attributable to senior preferred stock		(13,969		)		(12,613		)		(8,944		)
Net income (loss) attributable to common stockholders		$	191			$	3,346			$	(6,481	)
Earnings (loss) per share:
Basic		$	0.03			$	0.58			$	(1.12	)
Diluted		0.03				0.57				(1.12		)
Weighted-average common shares outstanding:
Basic		5,762				5,762				5,762
Diluted		5,893				5,893				5,762



	Fannie Mae Stockholders’ Equity (Deficit)
	Shares Outstanding			Senior Preferred Stock		Preferred Stock		Common Stock		Accumulated Deficit			Accumulated Other Comprehensive Income			Treasury Stock			Total Equity (Deficit)
	Senior Preferred	Preferred	Common	Senior Preferred Stock		Preferred Stock		Common Stock		Accumulated Deficit			Accumulated Other Comprehensive Income			Treasury Stock			Total Equity (Deficit)
Balance as of December 31, 2016	1	556	1,158	$	117,149	$	19,130	$	687	$	(124,253	)	$	759		$	(7,401	)	$	6,071
Senior preferred stock dividends paid	—	—	—	—		—		—		(12,015		)	—			—			(12,015		)
Comprehensive income:
Net income	—	—	—	—		—		—		2,463			—			—			2,463
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available-for-sale securities (net of taxes of $28)	—	—	—	—		—		—		—			53			—			53
Reclassification adjustment for gains included in net income (net of taxes of $139)	—	—	—	—		—		—		—			(259		)	—			(259		)
Total comprehensive income																			2,257
Other	—	—	—	—		—		—		—			—			1			1
Balance as of December 31, 2017	1	556	1,158	$	117,149	$	19,130	$	687	$	(133,805	)	$	553		$	(7,400	)	$	(3,686	)
Senior preferred stock dividends paid	—	—	—	—		—		—		(9,372		)	—			—			(9,372		)
Increase to senior preferred stock	—	—	—	3,687		—		—		—			—			—			3,687
Comprehensive income:
Net income	—	—	—	—		—		—		15,959			—			—			15,959
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available-for-sale securities (net of taxes of $21)	—	—	—	—		—		—		—			(79		)	—			(79		)
Reclassification adjustment for gains included in net income (net of taxes of $70)	—	—	—	—		—		—		—			(265		)	—			(265		)
Other (net of taxes of $0)	—	—	—	—		—		—		—			(4		)	—			(4		)
Total comprehensive income																			15,611
Reclassification related to Tax Cuts and Jobs Act	—	—	—	—		—		—		(117		)	117			—			—
Balance as of December 31, 2018	1	556	1,158	$	120,836	$	19,130	$	687	$	(127,335	)	$	322		$	(7,400	)	$	6,240
Senior preferred stock dividends paid	—	—	—	—		—		—		(5,601		)	—			—			(5,601		)
Comprehensive income:
Net income	—	—	—	—		—		—		14,160			—			—			14,160
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available-for-sale securities (net of taxes of $0)	—	—	—	—		—		—		—			1			—			1
Reclassification adjustment for gains included in net income (net of taxes of $48)	—	—	—	—		—		—		—			(180		)	—			(180		)
Other (net of taxes of $3)	—	—	—	—		—		—		—			(12		)	—			(12		)
Total comprehensive income																			13,969
Balance as of December 31, 2019	1	556	1,158	$	120,836	$	19,130	$	687	$	(118,776	)	$	131		$	(7,400	)	$	14,608