FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE [FNMAH] Filings

10-Q 1 fnm-20240930.htm 10-Q fnm-20240930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-50231

Federal National Mortgage Association

(Exact name of registrant as specified in its charter)

Fannie Mae

Federally chartered corporation

52-0883107

1100 15th Street, NW

800

232-6643

Washington,

20005

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No ☑

As of October 14, 2024, there were 1,158,087,567 shares of common stock of the registrant outstanding.


TABLE OF CONTENTS
		Page
PART I—Financial Information		1
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	64
	Condensed Consolidated Statements of Operations and Comprehensive Income	65
	Condensed Consolidated Statements of Cash Flows	66
	Condensed Consolidated Statements of Changes in Equity	67
	Note 1—Summary of Significant Accounting Policies	69
	Note 2—Conservatorship, Senior Preferred Stock Purchase Agreement and Related Matters	70
	Note 3—Consolidations and Transfers of Financial Assets	72
	Note 4—Mortgage Loans	73
	Note 5—Allowance for Loan Losses	88
	Note 6—Investments in Securities	90
	Note 7—Financial Guarantees	92
	Note 8—Short-Term and Long-Term Debt	93
	Note 9—Derivative Instruments	94
	Note 10—Segment Reporting	99
	Note 11—Concentrations of Credit Risk	101
	Note 12—Netting Arrangements	106
	Note 13—Fair Value	107
	Note 14—Commitments and Contingencies	116
	Note 15—Regulatory Capital Requirements	117
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
	About Fannie Mae	1
	Executive Summary	2
	Legislation and Regulation	2
	Key Market Economic Indicators	5
	Consolidated Results of Operations	7
	Consolidated Balance Sheet Analysis	16
	Retained Mortgage Portfolio	17
	Guaranty Book of Business	19
	Business Segments	20
	Single-Family Business	20
	Single-Family Mortgage Market	20
	Single-Family Mortgage-Related Securities Issuances Share	21
	Single-Family Business Metrics	22
	Single-Family Business Financial Results	23
	Single-Family Mortgage Credit Risk Management	24
	Multifamily Business	37
	Multifamily Mortgage Market	37
	Multifamily Business Metrics	38
	Multifamily Business Financial Results	40
	Multifamily Mortgage Credit Risk Management	40
	Consolidated Credit Ratios and Select Credit Information	47
	Liquidity and Capital Management	48

	Risk Management	55
	Institutional Counterparty Credit Risk Management	55
	Market Risk Management, including Interest-Rate Risk Management	55
	Critical Accounting Estimates	57
	Impact of Future Adoption of New Accounting Guidance	60
	Forward-Looking Statements	60


Fannie Mae Third Quarter 2024 Form 10-Q						i


Item 3.	Quantitative and Qualitative Disclosures about Market Risk	119
Item 4.	Controls and Procedures	119
PART II—Other Information		121
Item 1.	Legal Proceedings	121
Item 1A.	Risk Factors	122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	122
Item 3.	Defaults Upon Senior Securities	124
Item 4.	Mine Safety Disclosures	124
Item 5.	Other Information	124
Item 6.	Exhibits	125


Fannie Mae Third Quarter 2024 Form 10-Q						ii


						MD&A \| About Fannie Mae

PART I—FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with our unaudited condensed consolidated financial statements and related notes in this report and the more detailed information in our annual report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). You can find a “Glossary of Terms Used in This Report” in MD&A in our 2023 Form 10-K.

This report includes forward-looking statements based on management’s current expectations that are subject to significant uncertainties. Future events and our results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in “Forward-Looking Statements,” “Risk Factors” and elsewhere in this report and in our 2023 Form 10-K.

About Fannie Mae

Fannie Mae is a leading source of financing for residential mortgages in the United States. We provided $273.9 billion in liquidity to the mortgage market in the first nine months of 2024, which enabled the financing of approximately 993,000 home purchases, refinancings, and rental units.

We are a government-sponsored, stockholder-owned corporation, chartered by Congress to provide liquidity and stability to the U.S. housing market and to promote access to mortgage credit. We primarily do this by buying residential mortgage loans that are originated by lenders. We place these loans into trusts and issue guaranteed mortgage-backed securities (“MBS” or “Fannie Mae MBS”) that global investors buy from us. We do not originate mortgage loans or lend money directly to borrowers.

We support both single-family and multifamily housing. Our Single-Family business provides financing for properties that have four or fewer residential units. Our Multifamily business provides financing for residential buildings with five or more units. As of June 30, 2024 (the latest date for which information is available), Fannie Mae owned or guaranteed an estimated 26% of single-family mortgage debt outstanding and an estimated 21% of multifamily mortgage debt outstanding in the United States.

We provide a guaranty on the MBS that we issue. If a borrower fails to make a payment on a mortgage loan that is included in a Fannie Mae MBS, we pay the shortfall amount to the MBS investor. In exchange for providing this guaranty, we receive a guaranty fee. Guaranty fees are the primary source of our revenues.

Because we assume the credit risk for mortgage loans in our MBS, our earnings are affected by the credit performance of these loans. Credit risk management is therefore key to our business and financial results. To help manage our mortgage credit risk exposure, and in response to capital and other requirements, we transfer some of our credit risk exposure to third parties through credit risk transfer transactions and mortgage insurance. For a discussion of how we manage credit risk, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” and “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” in this report and in our 2023 Form 10-K.

We are in conservatorship, with the Federal Housing Finance Agency (“FHFA”) as our conservator. During conservatorship, our Board has no fiduciary duties to the company or its stockholders, as they owe their fiduciary duties of care and loyalty solely to FHFA as conservator. Conservatorship and our agreements with the U.S. Department of the Treasury (“Treasury”) significantly restrict our business activities and stockholder rights. For more information about the impact of conservatorship and these agreements on our business, stockholders, and our uncertain future, see “Business—Conservatorship and Treasury Agreements” and “Risk Factors—GSE and Conservatorship Risk” in our 2023 Form 10-K.


Fannie Mae Third Quarter 2024 Form 10-Q						1


			MD&A \| Executive Summary

Executive Summary

Please read this summary together with our MD&A, our condensed consolidated financial statements as of September 30, 2024 and the accompanying notes.

Overview of Financial Results

Summary of Financial Results

Quarterly Results

•Net revenues were relatively flat in the third quarter of 2024 compared with the third quarter of 2023.

•Net income decreased $655 million in the third quarter of 2024 compared with the third quarter of 2023, primarily driven by a decrease in fair value gains and a decrease in benefit for credit losses.

Year-to-Date Results

•Net revenues increased $522 million in the first nine months of 2024 compared with the first nine months of 2023, driven by an increase in net interest income.

•Net income decreased $617 million in the first nine months of 2024 compared with the first nine months of 2023, primarily driven by a decrease in benefit for credit losses and a decrease in fair value gains. This was partially offset by an increase in net interest income.

•Net worth increased to $90.5 billion as of September 30, 2024 from $77.7 billion as of December 31, 2023.

For more information on the drivers of our financial results, see “Consolidated Results of Operations.”

Legislation and Regulation

The information in this section updates and supplements information regarding legislative, regulatory, conservatorship and other matters affecting our business set forth in “Business—Conservatorship and Treasury Agreements” and “Business—Legislation and Regulation” in our 2023 Form 10-K, as well as in “MD&A—Legislation and Regulation” in our Form 10-Q for the quarter ended March 31, 2024 (“First Quarter 2024 Form 10-Q”) and in our Form 10-Q for the quarter ended June 30, 2024 (“Second Quarter 2024 Form 10-Q”). Also see “Risk Factors” in our 2023 Form 10-K for discussions of risks relating to legislative and regulatory matters.

Proposed 2025-2027 Housing Goals

We are subject to housing goals, which require that a specified amount of the mortgage loans we acquire meet requirements relating to affordability or location. Our housing goals are set by FHFA in accordance with the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended (the “GSE Act”). In August 2024, FHFA published a proposed rule that would establish single-family and multifamily housing goals for Fannie Mae and Freddie


Fannie Mae Third Quarter 2024 Form 10-Q						2


			MD&A \| Legislation and Regulation

Mac for 2025 through 2027. Comments on the proposed rule were due in October 2024. See “Risk Factors—GSE and Conservatorship Risk” in our 2023 Form 10-K for a discussion of how pursuing our housing goals may materially adversely affect our business, results of operations and financial condition.

Proposed Single-Family Housing Goals

Under FHFA’s proposed rule, FHFA would continue to evaluate our performance against the single-family housing goals using a two-part approach that compares the goals-qualifying share of our single-family mortgage acquisitions against both a benchmark level and a market level. To meet a single-family housing goal or subgoal, the percentage of our mortgage acquisitions that meet each goal or subgoal must equal or exceed either the benchmark level set in advance by FHFA or the market level for that year. The market level is determined retrospectively each year based on actual goals-qualifying originations in the overall market as measured by Home Mortgage Disclosure Act data for that year. Typically, this data is made available by the third quarter of the following year.

The table below sets forth the single-family housing goal benchmarks applicable to Fannie Mae for 2024, as compared with FHFA’s proposed single-family housing goal benchmarks for 2025 through 2027.


Current and Proposed Single-Family Housing Goals
	2024 Benchmark Level(1)		Proposed Benchmark Level 2025-2027(1)
Low-income home purchase goal(2)	28	%	25	%
Very low-income home purchase goal(3)	7		6
Minority census tracts home purchase subgoal(4)	10		12
Low-income census tracts home purchase subgoal(5)	4		4
Low-income refinance goal(6)	26		26

(1) The FHFA benchmarks are expressed as a percentage of the total number of goal-eligible single-family mortgages acquired during the year.

(2) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 80% of area median income.

(3) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 50% of area median income.

(4) Home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 100% of area median income in minority census tracts. Minority census tracts are those that have a minority population of at least 30% and a median income of less than 100% of area median income.

(5) (i) Home purchase mortgages on single-family, owner-occupied properties to borrowers (regardless of income) in low-income census tracts that are not minority census tracts, and (ii) home purchase mortgages on single-family, owner-occupied properties to borrowers with incomes greater than 100% of area median income in low-income census tracts that are also minority census tracts. Low income census tracts are those where the median income is no greater than 80% of area median income.

(6) Refinance mortgages on single-family, owner-occupied properties to borrowers with incomes no greater than 80% of area median income.

The low-income areas housing goal benchmark level was not included in the proposed rule. Under the existing regulation, the benchmark level for the low-income areas home purchase goal will be the sum of the benchmark levels for the minority census tracts subgoal and the low-income census tracts subgoal established above, plus an additional amount that will be determined separately by FHFA by notice that takes into account families in disaster areas with incomes no greater than 100% of area median income.

The proposed rule would establish new criteria for assessing whether a housing plan would be required for failing to meet certain single-family housing goals. By statute, if FHFA determines that we did not meet a feasible housing goal, FHFA may require that we submit a housing plan describing the steps that we will take to improve our performance. Under the proposed rule, FHFA generally would not require that we submit a housing plan if our performance meets or exceeds the market level for the goal minus a specified enforcement factor. FHFA stated that the proposed enforcement factors address, in part, the uncertainty in forecasting the market several years in advance, as well as the time lag in determining the actual market level retrospectively.

Proposed Multifamily Housing Goals

Under FHFA’s proposed rule, FHFA would continue to evaluate our multifamily housing goals performance against the benchmark levels only. Both the multifamily housing goal benchmarks for 2024 and FHFA’s proposed multifamily housing goal benchmarks for 2025 through 2027 are based on the percentage share of the goal-eligible units in our annual multifamily loan acquisitions that are affordable to each income category.


Fannie Mae Third Quarter 2024 Form 10-Q						3


			MD&A \| Legislation and Regulation

The table below sets forth the multifamily housing goal benchmarks applicable to Fannie Mae for 2024, as compared with FHFA’s proposed multifamily housing goal benchmarks for 2025 through 2027.


Current and Proposed Multifamily Housing Goals
	2024 Benchmark Level		Proposed Benchmark Level 2025-2027
Low-income goal(1)	61	%	61	%
Very low-income goal(2)	12		14
Small multifamily low-income subgoal(3)	2.5		2

(1) Affordable to low-income families, defined as families with incomes no greater than 80% of area median income.

(2) Affordable to very low-income families, defined as families with incomes no greater than 50% of area median income. The current regulation refers to the very low-income housing benchmark level as a subgoal. The proposed rule would refer to it as a goal.

(3) Units in small multifamily properties (defined as properties with 5 to 50 units) affordable to low-income families.

2023 Housing Goals Performance

In October 2024, FHFA notified us that it had determined that we met four of our six 2023 single-family housing goals and subgoals, and all of our 2023 multifamily housing goals and subgoals. FHFA determined that we missed the single-family low-income home purchase goal and the single-family very low-income home purchase goal. FHFA also determined that we are not required to submit a housing plan as a result of the two missed single-family goals because those goals were not feasible for us to achieve for 2023. See “Business—Legislation and Regulation—Housing Goals” in our 2023 Form 10-K for more information regarding our 2023 housing goals requirements.


Fannie Mae Third Quarter 2024 Form 10-Q						4


			MD&A \| Key Market Economic Indicators

Key Market Economic Indicators

In “MD&A—Key Market Economic Indicators” in our 2023 Form 10-K, we discuss how varying macroeconomic conditions can influence our financial results across different business and economic environments, and we provide forecasts and expectations with respect to some of these macroeconomic conditions. Below we provide an update to these forecasts and expectations, as well as updates to certain macroeconomic information. Our forecasts and expectations are based on many assumptions, subject to many uncertainties and may change, perhaps substantially, from our current forecasts and expectations. See “Risk Factors” and “Forward-Looking Statements” in our 2023 Form 10-K and in this report for a discussion of factors that could cause actual results to differ materially from our current forecasts and expectations.

Interest Rates

Selected Benchmark Interest Rates

(1)Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac’s Primary Mortgage Market Survey®. These rates are reported using the latest available data for a given period.

(2)According to Bloomberg.

(3)Refers to the daily rate per the Federal Reserve Bank of New York.

The average 30-year fixed-rate mortgage rate at the end of the third quarter of 2024 decreased compared to the end of the second quarter of 2024 and the end of the fourth quarter of 2023.

Home Prices

Single-Family Quarterly Home Price Growth (Decline) Rate(1)

(1)Calculated internally using property data on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s home price index is a weighted repeat-transactions index, measuring average price changes in repeat sales on the same properties. Fannie Mae’s home price index excludes prices on properties sold in foreclosure. Fannie Mae’s home price growth rates represent estimates based on non-seasonally adjusted preliminary data and are subject to change as additional data becomes available.

Home prices on a national basis grew by an estimated 5.9% in the first nine months of 2024. Based on our expectation of a slight decrease in home prices in the fourth quarter of 2024, we forecast national home price growth of 5.8% for the full year of 2024. We expect regional variation in the timing and rate of home price changes.


Fannie Mae Third Quarter 2024 Form 10-Q						5


			MD&A \| Key Market Economic Indicators

Housing Activity

New Housing Starts(1)

(1)According to the U.S. Census Bureau and subject to revision.

Single-family housing starts decreased modestly in the third quarter of 2024 compared to the second quarter of 2024. We expect single-family housing starts will be higher in 2024 overall compared to 2023 due to elevated demand for new single-family housing.

We expect a decline in multifamily housing starts in 2024 overall compared to 2023, due to the large amount of new rental units expected to be completed in 2024.

For further discussion on housing activity, see “Single-Family Business—Single-Family Mortgage Market” and “Multifamily Business—Multifamily Mortgage Market.”

Economic Activity

GDP and Unemployment Rate

(1)Real GDP growth (decline) is based on the quarterly series calculated by the Bureau of Economic Analysis and is subject to revision.

(2)According to the U.S. Bureau of Labor Statistics and subject to revision.

U.S. gross domestic product (“GDP”) increased in the first nine months of 2024. The unemployment rate increased in the first nine months of 2024, and we expect it to continue to increase modestly in the fourth quarter of 2024.

See “Risk Factors—Market and Industry Risk” and “Risk Factors—Credit Risk” in our 2023 Form 10-K for further discussion of risks to our business and financial results associated with interest rates, home prices, housing activity, and economic conditions.


Fannie Mae Third Quarter 2024 Form 10-Q						6


			MD&A \| Consolidated Results of Operations

Consolidated Results of Operations

This section discusses our condensed consolidated results of operations and should be read together with our condensed consolidated financial statements and the accompanying notes.


Summary of Condensed Consolidated Results of Operations
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,

	2024		2023		Variance		2024		2023		Variance
	(Dollars in millions)
Net interest income	$	7,275	$	7,220	$	55	$	21,566	$	21,041	$	525
Fee and other income(1)	66		76		(10)		206		209		(3)
Net revenues	7,341		7,296		45		21,772		21,250		522
Investment gains (losses), net	12		8		4		(28)		(34)		6
Fair value gains (losses), net	52		795		(743)		979		1,403		(424)
Administrative expenses	(925)		(897)		(28)		(2,793)		(2,629)		(164)
Benefit (provision) for credit losses	27		652		(625)		507		1,786		(1,279)
TCCA fees(2)	(862)		(860)		(2)		(2,581)		(2,571)		(10)
Credit enhancement expense(3)	(411)		(390)		(21)		(1,235)		(1,115)		(120)
Change in expected credit enhancement recoveries(4)	89		(128)		217		189		(168)		357
Other expenses, net(5)	(270)		(535)		265		(720)		(922)		202
Income before federal income taxes	5,053		5,941		(888)		16,090		17,000		(910)
Provision for federal income taxes	(1,009)		(1,242)		233		(3,242)		(3,535)		293
Net income	$	4,044	$	4,699	$	(655)	$	12,848	$	13,465	$	(617)
Total comprehensive income	$	4,047	$	4,681	$	(634)	$	12,848	$	13,448	$	(600)

(1)Single-family fee and other income consists primarily of compensation for engaging in structured transactions and providing other lender services. Multifamily fee and other income consists of fees associated with certain Multifamily business activities such as credit enhancements for tax-exempt multifamily housing revenue bonds.

(2)TCCA fees refers to the expense recognized as a result of the 10 basis point increase in guaranty fees on all single-family mortgages delivered to us on or after April 1, 2012 pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 and as extended by the Infrastructure Investment and Jobs Act, which we pay to Treasury.

(3)Consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance and certain lender risk-sharing programs.

(4)Includes estimated changes in benefits, as well as any realized amounts, from our freestanding credit enhancements.

(5)Includes debt extinguishment gains and losses, expenses associated with legal claims, foreclosed property income (expense), gains and losses from partnership investments, housing trust fund expenses, loan subservicing costs, and servicer fees paid in connection with certain loss mitigation activities.

Net Interest Income

Overview

Our primary source of net interest income is guaranty fees we receive for assuming the credit risk on mortgage loans underlying Fannie Mae MBS held by third parties in our guaranty book of business. We also recognize net interest income on the difference between interest income earned on the assets in our retained mortgage portfolio and our corporate liquidity portfolio (collectively, our “portfolios”) and the interest expense associated with our funding debt. In addition, income or expense from hedge accounting is a component of our net interest income. See “MD&A—Consolidated Results of Operations—Net Interest Income” in our 2023 Form 10-K for a description of the components of our single-family and multifamily guaranty fees and the components of our net interest income from our guaranty book of business, portfolios, and hedge accounting.


Fannie Mae Third Quarter 2024 Form 10-Q						7


			MD&A \| Consolidated Results of Operations

Components of Net Interest Income

The table below displays the components of our net interest income from our guaranty book of business, from our portfolios, as well as from hedge accounting.


Components of Net Interest Income
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024		2023		Variance		2024		2023		Variance
	(Dollars in millions)
Net interest income from guaranty book of business:
Base guaranty fee income(1)	$	4,159	$	4,060	$	99	$	12,357	$	12,077	$	280
Base guaranty fee income related to TCCA(2)	862		860		2		2,581		2,571		10
Net deferred guaranty fee income(3)	831		942		(111)		2,475		2,611		(136)
Total net interest income from guaranty book of business	5,852		5,862		(10)		17,413		17,259		154
Net interest income from portfolios(4)	1,624		1,596		28		4,817		4,554		263
Income (expense) from hedge accounting(5)	(201)		(238)		37		(664)		(772)		108
Total net interest income	$	7,275	$	7,220	$	55	$	21,566	$	21,041	$	525

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

(2)Represents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is paid to Treasury and not retained by us.

(3)Excludes the amortization of cost basis adjustments resulting from hedge accounting, which is included in income (expense) from hedge accounting.

(4)Includes interest income from assets held in our retained mortgage portfolio and our corporate liquidity portfolio, as well as other assets used to support lender liquidity. Also includes interest expense on our funding debt, including outstanding CAS debt.

(5)For more information about our hedge accounting program, see “Note 9, Derivative Instruments.”

Net interest income remained relatively flat in the third quarter of 2024 compared with the third quarter of 2023. Higher income from base guaranty fees and lower expense from hedge accounting was substantially offset by lower net deferred guaranty fee income.

•Higher base guaranty fee income. Higher average remitted guaranty fees on new acquisitions in our single-family guaranty book of business was the primary driver of the increase in base guaranty fee income in the third quarter of 2024 compared with the third quarter of 2023.

•Lower expense from hedge accounting. We had lower expense from hedge accounting in the third quarter of 2024 compared with the third quarter of 2023, primarily driven by lower interest expense on derivatives in hedging relationships in the third quarter of 2024 than in the third quarter of 2023.

•Lower net deferred guaranty fee income. Net amortization income decreased in the third quarter of 2024 compared with the third quarter of 2023, primarily due to a lower balance of net unamortized deferred guaranty fees. See “Analysis of Unamortized Deferred Guaranty Fees” below for additional information.

Net interest income increased in the first nine months of 2024 compared with the first nine months of 2023, primarily as a result of higher base guaranty fee income and higher net interest income from portfolios, partially offset by lower net deferred guaranty fee income.

•Higher base guaranty fee income. Higher average remitted guaranty fees on new acquisitions in our single-family guaranty book of business was the primary driver of the increase in base guaranty fee income in the first nine months of 2024 compared with the first nine months of 2023.

•Higher net interest income from portfolios. Higher net interest income from portfolios in the first nine months of 2024 compared with the first nine months of 2023 was primarily driven by higher interest rates in the first nine months of 2024 than in the first nine months of 2023 on securities in our corporate liquidity portfolio, primarily securities purchased under agreements to resell.

•Lower net deferred guaranty fee income. Net amortization income decreased in the first nine months of 2024 compared with the first nine months of 2023, primarily due to a lower balance of unamortized deferred guaranty fees.


Fannie Mae Third Quarter 2024 Form 10-Q						8


			MD&A \| Consolidated Results of Operations

Analysis of Unamortized Deferred Guaranty Fees

The following charts present information about the interest rates of the loans in our single-family conventional guaranty book of business as well as information about our deferred guaranty fees.

As shown in the chart below (on the left), most of our single-family conventional guaranty book of business as of September 30, 2024 had an interest rate lower than the average 30-year fixed-rate mortgage rate. Per Freddie Mac’s Primary Mortgage Market Survey®, as of September 26, 2024, the U.S. weekly average interest rate for a single-family 30-year fixed-rate mortgage was 6.08%. Accordingly, even if interest rates decline meaningfully, most of the borrowers whose mortgage loans are in our single-family conventional guaranty book of business still would not be incentivized to refinance.

The other chart below (on the right) presents guaranty fees that will be amortized into deferred guaranty fee income in future periods, which we refer to as “unamortized deferred guaranty fees,” as described in “MD&A—Consolidated Results of Operations—Net Interest Income—Analysis of Unamortized Deferred Guaranty Fees” in our 2023 Form 10-K.


Interest Rates of Single-Family Conventional Guaranty Book of Business Compared with Average 30-Year Fixed-Rate Mortgage Rate			Unamortized Deferred Guaranty Fees(1)
As of September 30, 2024			(Dollars in billions)


—	Represents the average 30-year fixed-rate mortgage rate as of September 26, 2024, according to Freddie Mac’s Primary Mortgage Market Survey®, the last published rate for the quarter ending September 30, 2024.	(1)	Represents the net unamortized cost basis adjustments (consisting of premiums and discounts on single-family and multifamily mortgage loans and debt of consolidated trusts) that will be recognized through deferred guaranty fee income over the remaining contractual life of the mortgage loans or debt. Although we are in a net premium position for both mortgage loans and debt of consolidated trusts, we have a greater amount of premiums with respect to debt of consolidated trusts. Primarily as a result of the upfront fees we charge, the net amortization of these cost basis adjustments will result in income.

—	Represents the percentage of single-family conventional guaranty book of business by select interest rate band based on the current interest rate of the mortgage loans.

The amount of deferred guaranty fee income we record can vary and is primarily impacted by: (1) the amount of upfront fees we charge on single-family mortgage loans, and (2) changes in interest rates, which affect the premiums and discounts we record on newly acquired mortgage loans and newly created debt of consolidated trusts. The balance of our unamortized deferred guaranty fees decreased as of September 30, 2024, compared with December 31, 2023, largely as a result of amortization of existing premiums on debt of consolidated trusts. In addition, interest-rate-driven pricing changes have increased the premiums on newly acquired loans, which further reduced the balance of unamortized deferred guaranty fees.


Fannie Mae Third Quarter 2024 Form 10-Q						9


			MD&A \| Consolidated Results of Operations

Analysis of Net Interest Income

The table below displays an analysis of our net interest income, average balances and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages.


Analysis of Net Interest Income and Yield(1)
	For the Three Months Ended September 30,
	2024						2023
	Average Balance		Interest Income/ (Expense)		Average Rates Earned/Paid		Average Balance		Interest Income/ (Expense)		Average Rates Earned/Paid
	(Dollars in millions)
Interest-earning assets:
Cash and cash equivalents(2)	$	47,241	$	643	5.44	%	$	56,077	$	753	5.37	%
Securities purchased under agreements to resell	41,706		572		5.49		41,570		563		5.42
Investments in securities(3)	57,212		350		2.45		55,115		322		2.34
Mortgage loans:
Mortgage loans of Fannie Mae	52,105		576		4.42		51,802		615		4.75
Mortgage loans of consolidated trusts	4,092,789		35,814		3.50		4,086,890		33,096		3.24
Total mortgage loans(4)	4,144,894		36,390		3.51		4,138,692		33,711		3.26
Advances to lenders	3,325		57		6.86		3,973		66		6.64
Total interest-earning assets	$	4,294,378	$	38,012	3.54	%	$	4,295,427	$	35,415	3.30	%
Interest-bearing liabilities:
Short-term funding debt	$	10,445	$	(137)	5.25	%	$	15,388	$	(201)	5.22	%
Long-term funding debt	104,952		(1,014)		3.86		111,351		(942)		3.38
CAS debt	2,197		(64)		11.65		3,702		(100)		10.80
Total debt of Fannie Mae	117,594		(1,215)		4.13		130,441		(1,243)		3.81
Debt securities of consolidated trusts held by third parties	4,081,619		(29,522)		2.89		4,087,136		(26,952)		2.64
Total interest-bearing liabilities	$	4,199,213	$	(30,737)	2.93	%	$	4,217,577	$	(28,195)	2.67	%
Net interest income/net interest yield			$	7,275	0.68	%			$	7,220	0.67	%


Fannie Mae Third Quarter 2024 Form 10-Q						10


			MD&A \| Consolidated Results of Operations


	For the Nine Months Ended September 30,
	2024						2023
	Average Balance		Interest Income/ (Expense)		Average Rates Earned/Paid		Average Balance		Interest Income/ (Expense)		Average Rates Earned/Paid
	(Dollars in millions)
Interest-earning assets:
Cash and cash equivalents(2)	$	46,687	$	1,897	5.42	%	$	60,521	$	2,258	4.97	%
Securities purchased under agreements to resell	46,046		1,887		5.46		39,834		1,505		4.98
Investments in securities(3)	54,371		932		2.29		54,443		899		2.20
Mortgage loans:
Mortgage loans of Fannie Mae	51,057		1,711		4.47		52,179		1,833		4.68
Mortgage loans of consolidated trusts	4,091,464		105,512		3.44		4,078,981		96,670		3.16
Total mortgage loans(4)	4,142,521		107,223		3.45		4,131,160		98,503		3.18
Advances to lenders	2,882		146		6.75		3,379		160		6.24
Total interest-earning assets	$	4,292,507	$	112,085	3.48	%	$	4,289,337	$	103,325	3.21	%
Interest-bearing liabilities:
Short-term funding debt	$	11,808	$	(462)	5.22	%	$	13,628	$	(503)	4.87	%
Long-term funding debt	103,133		(2,854)		3.69		116,433		(2,686)		3.08
CAS debt	2,422		(207)		11.40		4,381		(332)		10.10
Total debt of Fannie Mae	117,363		(3,523)		4.00		134,442		(3,521)		3.49
Debt securities of consolidated trusts held by third parties	4,084,450		(86,996)		2.84		4,081,140		(78,763)		2.57
Total interest-bearing liabilities	$	4,201,813	$	(90,519)	2.87	%	$	4,215,582	$	(82,284)	2.60	%
Net interest income/net interest yield			$	21,566	0.67	%			$	21,041	0.65	%

(1) Includes the effects of discounts, premiums and other cost basis adjustments, including basis adjustments related to hedge accounting.

(2) Prior to March 31, 2024, “Cash and cash equivalents” were previously reported within “Investments in securities.” Prior periods have been updated to conform to the current period presentation. Cash equivalents are composed of overnight reverse repurchase agreements and U.S. Treasuries, if any, that have a maturity at the date of acquisition of three months or less.

(3) Consists of U.S. Treasuries not classified as cash equivalents and mortgage-related securities.

(4) Average balance includes mortgage loans on nonaccrual status. Interest income includes loan fees of $711 million and $2.1 billion, respectively, for the third quarter of 2024 and first nine months of 2024, compared with $722 million and $2.1 billion, respectively, for the third quarter of 2023 and first nine months of 2023. Loan fees primarily consist of yield maintenance revenue we recognized on the prepayment of multifamily mortgage loans and the amortization of upfront cash fees exchanged when we acquire the mortgage loan.


Fannie Mae Third Quarter 2024 Form 10-Q						11


			MD&A \| Consolidated Results of Operations

Fair Value Gains (Losses), Net

The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and implied volatility, as well as activity related to these financial instruments.

The table below displays the components of our fair value gains and losses.


Fair Value Gains (Losses), Net
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(Dollars in millions)
Risk management derivatives fair value gains (losses) attributable to:
Net contractual interest income (expense) on interest-rate swaps(1)	$	(272)	$	(348)	$	(860)	$	(1,123)
Net change in fair value during the period	(198)		852		831		1,544


Impact of hedge accounting(2)	215		(339)		471		283
Risk management derivatives fair value gains (losses), net	(255)		165		442		704
Mortgage commitment derivatives fair value gains (losses), net	(567)		591		(266)		675
Credit enhancement derivatives fair value gains (losses), net	(38)		47		(52)		61
Total derivatives fair value gains (losses), net	(860)		803		124		1,440
Trading securities gains (losses), net	1,267		(318)		1,127		(295)
Long-term debt fair value gains (losses), net	(471)		406		(343)		356
Other, net(3)	116		(96)		71		(98)
Fair value gains (losses), net	$	52	$	795	$	979	$	1,403

(1)“Net contractual interest income (expense) on interest-rate swaps” is primarily impacted by changes in interest rates and changes in the composition of our interest-rate swaps portfolio.

(2)The “Impact of hedge accounting” reflected in this table shows the net gain or loss from swaps in hedging relationships plus any accrued interest during the applicable periods that are recognized in “Net interest income.”

(3)Consists primarily of fair value gains and losses on mortgage loans held at fair value.

Fair value gains, net in the third quarter of 2024 were driven by gains on fixed-rate trading securities, which were substantially offset by losses on mortgage commitment derivatives, long-term debt of consolidated trusts held at fair value, and risk management derivatives, all of which were primarily due to declining interest rates in the third quarter of 2024.

Fair value gains, net in the first nine months of 2024 were driven by:

•gains on fixed-rate trading securities and risk management derivatives, partially offset by

•losses on long-term debt of consolidated trusts held at fair value and mortgage commitment derivatives.

Declining interest rates during the third quarter of 2024 drove gains on fixed-rate trading securities, losses on long-term debt of consolidated trusts held at fair value, and losses on mortgage commitment derivatives. Rising rates in the first half of 2024 drove gains on risk management derivatives, which were partially offset by losses in the third quarter of 2024 as rates declined.

Fair value gains, net in the third quarter and first nine months of 2023 were primarily driven by gains on mortgage commitment derivatives, risk management derivatives, and long-term debt of consolidated trusts held at fair value, primarily due to rising interest rates.

These gains were partially offset by the impact of declining prices of fixed-rate trading securities, primarily driven by rising interest rates.


Fannie Mae Third Quarter 2024 Form 10-Q						12


			MD&A \| Consolidated Results of Operations

Benefit (Provision) for Credit Losses

The table below provides a quantitative analysis of the drivers of our single-family and multifamily benefit or provision for credit losses and the change in expected credit enhancement recoveries. Many of the drivers that contribute to our benefit or provision for credit losses overlap or are interdependent. The components shown below are based on internal allocation estimates. The benefit or provision for credit losses includes our benefit or provision for loan losses, accrued interest receivable losses, our guaranty loss reserves, and credit losses on our available-for-sale (“AFS”) debt securities. For purposes of this attribution table, credit losses on AFS securities are excluded.


Components of Benefit (Provision) for Credit Losses and Change in Expected Credit Enhancement Recoveries
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(Dollars in millions)
Single-family benefit (provision) for credit losses:
Changes in loan activity(1)	$	(328)	$	(335)	$	(769)	$	(1,075)
Redesignation of loans from held for investment (“HFI”) to held for sale (“HFS”)	(96)		(591)		(131)		(591)
Actual and forecasted home prices	603		1,901		1,929		4,005
Actual and projected interest rates	248		(260)		15		(284)
Other(2)	24		21		290		146
Single-family benefit (provision) for credit losses	451		736		1,334		2,201
Multifamily benefit (provision) for credit losses:
Changes in loan activity(1)	(278)		(103)		(444)		(187)
Actual and projected interest rates	81		(242)		(20)		(234)
Actual and projected economic data(3)	(83)		234		(154)		(69)
Other(2)	(144)		27		(209)		75
Multifamily benefit (provision) for credit losses	(424)		(84)		(827)		(415)
Total benefit (provision) for credit losses	$	27	$	652	$	507	$	1,786

Change in expected credit enhancement recoveries:(4)
Single-family

FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE [FNMAH] Filings
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE [FNMA] Filings
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