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PRESENTED BY

MD. TAZUL ISLAM

MBA 46DROLL:133

AN OVERVIEW OF A FORTUNE 500

COMPANY:FEDERAL NATIONAL MORTGAGE

ASSOCIATION (FANNIE MAE)

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Business

Borrows at lower rate and lends at higherrate

Borrowings are from selling bonds andlendings are to mortgages and MortgageBased Security

A significant portion of income came fromguaranty fees it received as compensationfor assuming the credit risk

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Business (Contd.)

Buys loans from approved mortgage sellers, either for cash or inexchange for a MBS .Carries Fannie Mae's guarantee of timelypayment of interest and principal.

Fannie Mae may also securitize mortgages from its own loan

portfolio and sell the resultant mortgage-backed security toinvestors in the secondary mortgage market

By purchasing the mortgages, Fannie Mae provides banks andother financial institutions with fresh money to make new loans.This gives the United States housing and credit markets flexibility

and liquidity.

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Income Profile

Revenue US$ 22.9 billion (2012)

Net income US$ 17.2 billion (2012)

Total assets US$ 3.2 trillion (2012)

Total equity US$ 7.2 billion (2012) $8.1 billion in net income for the first quarter of

2013 fifth consecutive quarterly profit and the

largest quarterly pre-tax income in our history. Going to pay a dividend of $59.4 billion to its

owners

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History (Pre 2000)

Established in 1938 by amendments to theNational Housing Act after the GreatDepression

For the first thirty years following itsinception, Fannie Mae held a monopoly overthe secondary mortgage market

In 1981, Fannie Mae issued its first mortgagepass-through and called it a mortgage-backed security.

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History Contd. (Post 2000s)

The growth of private-label securitization and lack of regulationresulted in the oversupply of underpriced housing finance andconsequently more decrease of the price

Depreciation in home prices led to growing losses for the GSEslike Fannie Mae

In July 2008, The US Treasury Department and the FederalReserve took steps to bolster confidence in the corporations,including granting access to Federal Reserve low-interest loans(at similar rates as commercial banks)

On September 7, 2008, James Lockhart, director of the FederalHousing Finance Agency (FHFA), announced that Fannie Maewas placed into conservatorship. The action was "one of the mostsweeping government interventions in private financial markets indecades".

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Controversies

All the Devils are Here by Mclean &

Nocera

Accounting controversy

Conflict of interest

2011 SEC charges

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Nassim Taleb wrote in The Black Swan: "Thegovernment-sponsored institution FannieMae, when I look at its risks, seems to be

sitting on a barrel of dynamite, vulnerable tothe slightest hiccup. But not to worry: theirlarge staff of scientists deem these events

'unlikely'".

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Stock Performance

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70

5/25/2007 5/25/2008 5/25/2009 5/25/2010 5/25/2011 5/25/2012

Adj Close Price

Adj Close Price

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