home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News

 

Mortgage News

HOT Topics

production

servicing

compliance

legal

fraud

secondary

jobs

appraisal

site map

www.loan-academy.com/
twitter linkedin
facebook google+
Search:

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Fannie Mae Reports Record 2001 Financial Results

Operating Net Income of $5.367 Billion up 20.7 Percent over 2000

Operating Earnings Per Diluted Common Share of $5.20 up 21.2 Percent. Results Include Contribution of $300 Million in Common Stock to Fannie

WASHINGTON, Jan. 14 /PRNewswire-FirstCall/ -- Fannie Mae (NYSE: FNM), the nation's largest source of financing for home mortgages, today reported operating net income for 2001 of $5.367 billion, or $5.20 per diluted common share. Operating net income was 20.7 percent above 2000, while operating earnings per diluted common share rose 21.2 percent over the same period. For the fourth quarter of 2001 Fannie Mae's operating net income was $1.438 billion, or $1.40 per diluted common share, compared with $1.164 billion, or $1.12 per diluted common share, for the fourth quarter of 2000. The company's fourth quarter and full-year 2001 results include a commitment to contribute $300 million of Fannie Mae common stock to the Fannie Mae Foundation.


                                Fourth Quarter             Full Year





                            2001     2000   Change    2001     2000   Change





    Operating Net


     Income (in billions)  $1.438   $1.164   23.5%   $5.367   $4.448   20.7%





    Operating


     EPS     (in dollars)   $1.40    $1.12   25.0%    $5.20    $4.29   21.2%

















Operating net income and operating earnings per common share exclude the variability in the market value of purchased options and the one-time cumulative change in accounting principle which resulted from the implementation of Financial Accounting Standard 133 (FAS 133) on January 1, 2001. Net income and earnings per share (EPS) for 2001 including FAS 133 items were $5.894 billion and $5.72, respectively. Net income and EPS for the fourth quarter of 2001, including FAS 133 market value changes, were $1.969 billion and $1.92, respectively. Page one of the charts with this release provides a reconciliation of operating net income and net income.

2001 Financial Performance Summary
Highlights of Fannie Mae's 2001 financial performance include:

  • Book of business growth of 19.0 percent versus 9.3 percent in 2000.
  • Taxable-equivalent revenue growth of 30.2 percent compared with 12.2 percent in 2000.
  • Growth in guarantee fee income of 9.7 percent versus 5.4 percent in 2000.
  • Growth in adjusted net interest income of 32.2 percent versus 15.9 percent in 2000.
  • Average net interest margin of 1.11 percent compared with 1.01 percent in 2000.
  • Credit-related losses of $81.3 million compared with $89.1 million in 2000.
  • After-tax losses of $340.5 million ($523.9 million pre-tax) from the call and repurchase of debt, compared with after-tax gains of $31.5 million ($48.5 million pre-tax) in 2000.

Franklin D. Raines, Fannie Mae's Chairman and Chief Executive Officer, said, "This was an extraordinary year for Fannie Mae in every respect. The company achieved 21 percent growth in operating earnings per share, greatly exceeding consensus expectations of 14 percent earnings growth at the beginning of the year. Very high levels of mortgage activity enabled us to increase our book of business by 19 percent, the fastest in nine years. Our net interest margin rose 10 basis points, and our credit losses continued to fall in spite of the onset of recession last March. With growth in our taxable-equivalent revenues exceeding 30 percent, we were able to make a $300 million stock contribution to the Fannie Mae Foundation, conduct repurchases of high-cost debt, and launch a significant upgrading of our technology infrastructure -- all of which will enhance our financial performance in the future."

Raines noted that the contribution to the Fannie Mae Foundation in the fourth quarter of 2001 would reduce the Foundation's need for company contributions over the next several years. In addition, Raines said, by making the contribution in Fannie Mae shares at a time the company believes the shares to be substantially undervalued, any future Foundation contributions should be reduced even further as the shares appreciate. Raines said the company expects to acquire the shares it will contribute to the Foundation through open market purchases by the end of the first quarter of 2002.

Outlook
Raines said that the company's exceptional financial performance was likely to continue in 2002. "We expect growth in Fannie Mae's operating earnings per share in 2002 to again be significantly above the very positive long-term EPS trend we anticipate for the company," said Raines. Raines noted that the long-term trend for Fannie Mae's earnings would be built upon growth in the residential mortgage market. Raines said the company anticipates that growth in residential mortgage debt outstanding -- which averaged 7 percent per year during the decade of the 1990s -- will average between 8 and 10 percent per year during the current decade. Raines added that over this period Fannie Mae expects to continue to grow both its book of business and its earnings at rates that exceed the growth in mortgage debt.

Raines said that Fannie Mae's financial performance in 2001 and prospects for 2002 make it very likely that the company would achieve the goal it set in May 1999 of doubling its earnings per share between 1998 and 2003. "At the time we set this goal," said Raines, "few expected us to attain it. Not only are we very likely to, we will do so without increasing our risk profile, and with unwavering focus on our housing mission."

Fannie Mae's Executive Vice President and Chief Financial Officer, Timothy Howard, said that Fannie Mae's above-trend earnings prospects for 2002 stem from a variety of factors. Howard said that the recent sharp rebound in long- term interest rates was likely to significantly lower the volume of mortgage liquidations over the course of the first half of the year. This would mean, said Howard, that the company's net interest margin -- which had benefited from the call and refunding of a large volume of debt during 2001 -- would likely be at elevated levels for a longer period of time than previously anticipated.

Howard added that Fannie Mae's very high levels of business activity during the second half of 2001 would have beneficial carryover effects in the current year. Howard noted that the company ended 2001 with $55 billion in outstanding commitments to purchase mortgages, compared with $16 billion in outstanding commitments at December 31, 2000. As this $39 billion in additional commitments settle, Howard said, it will add over five percentage points to portfolio growth in 2002. Howard also said that Fannie Mae's mortgage-backed security (MBS) outstandings on January 1, 2002 were 10 percent above the average MBS balance for 2001. Said Howard, "If average guaranty fee rates simply remain stable this year, the company will not need to add any additional MBS balances to produce double-digit growth in guaranty fee income in 2002."

Howard said that while credit losses may rise somewhat in the aftermath of the recession, they are likely to remain low in 2002. Howard noted that the company's book of business is backed by homes with average equity exceeding 40 percent of market value. In addition, Howard said, 35 percent of the mortgages the company owns or guarantees benefit from some form of third-party credit enhancement. Howard added that Fannie Mae's taxable equivalent revenues of $10.2 billion during 2001 were well over one hundred times the $81.3 million in credit-related losses the company recorded during the same period. "Even were Fannie Mae's credit losses to double this year -- which is highly unlikely -- it would take less than one percentage point off the company's 2002 EPS growth," said Howard.

Finally, Howard said that Fannie Mae's administrative expenses in 2002 were likely to grow at a mid- to high-teens rate due to an initiative begun last year to upgrade the company's operating infrastructure. "This important technology initiative will significantly enhance Fannie Mae's transaction processing, product development and risk management efficiencies, and increase the company's ability to meet the needs of its customers," said Howard. Howard added that the company's guidance for 2002 EPS growth fully reflected the impact of higher-than-normal administrative costs related to this technology project.

"Fannie Mae had an exceptional year in 2001, and we are poised for another exceptional year in 2002," said Howard.

Details of Fannie Mae's 2001 financial performance follow:

Business Volume
Fannie Mae's business volume -- mortgages purchased for portfolio plus mortgage-backed security (MBS) issues acquired by other investors -- totaled $615.3 billion in 2001, a 137 percent increase compared with 2000. Business volume in 2001 consisted of $270.6 billion in portfolio purchases and $344.7 billion in MBS issues acquired by investors other than Fannie Mae's portfolio, compared with $154.2 billion and $105.4 billion, respectively, in 2000. Retained commitments to purchase mortgages were $296.5 billion in 2001 compared with $151.9 billion in 2000. Business volume in the fourth quarter of 2001 was $185.2 billion compared with $80.0 billion in the fourth quarter of 2000.

Fannie Mae's combined book of business -- the net mortgage portfolio and outstanding MBS held by investors other than Fannie Mae's portfolio -- grew at a compound annual rate of 19.0 percent during 2001, ending the period at $1.564 trillion. This growth was fueled by a 16.1 percent annualized growth rate in the net mortgage portfolio to $705.2 billion and a 21.5 percent rate of growth in outstanding MBS to $858.9 billion at December 31, 2001. For the fourth quarter of 2001 the combined book of business grew at an annual rate of 17.1 percent compared with 13.8 percent in the comparable time period in 2000.

Portfolio Investment Business Results
Fannie Mae's portfolio investment business manages the interest rate risk of the company's mortgage portfolio and other investments. The results of this business are largely reflected in adjusted net interest income, which is net interest income less the amortization of purchased options expense. Adjusted net interest income for 2001 was $7.500 billion, up 32.2 percent from $5.674 billion in 2000. This increase was driven by an 18.5 percent rise in the average net investment balance and a 10 basis point increase in the average net interest margin. Adjusted net interest income was $2.165 billion in the fourth quarter of 2001, or 45.8 percent above the fourth quarter of 2000.

Fannie Mae's net investment balance -- consisting of the net mortgage portfolio and the company's liquid investments -- averaged $717 billion during 2001 compared with $605 billion during 2000. The net investment balance was $781 billion at December 31, 2001.

The company's net interest margin averaged 111 basis points in 2001, up from 101 basis points in 2000. The net interest margin averaged 121 basis points in the fourth quarter of 2001 compared with 99 basis points in the fourth quarter of 2000 and 110 basis points in the third quarter of 2001. Fannie Mae's net interest margin benefited from this year's sharp declines in short-term interest rates, which enabled the company to call debt early in the year in amounts that substantially exceeded the timing and volume of mortgage liquidations. Much of this debt was reissued with short-term maturities in anticipation of a subsequent rise in mortgage repayments. Although most of Fannie Mae's short-term or variable-rate debt has some form of protection against a rise in interest rates, the company's interest costs declined as interest rates fell, and its net interest margin rose as a result. Fannie Mae's interest margin also benefited from attractive spreads on new mortgage purchases during 2001.

Fannie Mae's net mortgage portfolio grew at an annual rate of 16.1 percent during 2001, ending the year at $705 billion. For the fourth quarter of 2001 the mortgage portfolio grew at an 11.1 percent annualized rate compared with a 27.7 percent rate in the fourth quarter of 2000 and a 15.2 percent rate during the third quarter of 2001. During the second half of the year an unusually large number of portfolio commitments were made for settlement a number of months forward. As a result, portfolio growth in 2001 was lower than normally would have been the case given the volume of commitments, while portfolio growth in 2002 will be correspondingly higher.

For the full year 2001 the company realized net losses from debt repurchases and debt calls of $523.9 million ($340.5 million after tax), compared with net gains of $48.5 million ($31.5 million after tax) in 2000. During the year the company realized losses on debt repurchases of $405.5 million ($263.5 million after tax) and losses on debt calls of $118.4 million ($77.0 million after tax). For the fourth quarter of 2001 the company had realized losses on debt repurchases of $70.3 million ($45.7 million after tax) and losses on debt calls of $20.9 million ($13.5 million after tax).

Credit Guaranty Business Results
Fannie Mae's credit guaranty business manages the company's credit risk. The results of this business are primarily reflected in guaranty fee income and credit-related losses. Guaranty fee income was $1.482 billion in 2001, a 9.7 percent increase compared with 2000. Guaranty fee income was driven by a 12.3 percent rise in average outstanding MBS, partially offset by a decline in the average effective guaranty fee rate compared with the previous year. The effective guaranty fee rate in 2001 was 19.0 basis points compared with 19.5 basis points in 2000. Guaranty fee income for the fourth quarter of 2001 was $398.3 million compared with $339.3 million in the fourth quarter of 2000. The effective guaranty fee rate in the fourth quarter of 2001 was 18.9 basis points compared with 19.3 basis points in the fourth quarter of 2000

Credit-related losses -- foreclosed property expense plus charge-off recoveries -- improved despite the slowing economy, totaling $81.3 million compared with $89.1 million in 2000. Foreclosed property expense was $192.7 million in 2001 compared with $214.0 million in 2000. Charge-off recoveries were $111.4 million in 2001 compared with $124.9 million in 2000. Fannie Mae's credit loss rate -- credit-related losses as a percentage of the average combined book of business -- was 0.6 basis points in 2001 compared with 0.7 basis points in 2000. Credit-related losses were $17.5 million in the fourth quarter of 2001 compared with $23.0 million in the fourth quarter of 2000. Foreclosed property expense was $45.8 million in the fourth quarter of 2001 compared with $51.1 million in the fourth quarter of 2000. Charge-off recoveries were $28.3 million in the fourth quarter of 2001 compared with $28.1 million in the fourth quarter of 2000. For the fourth quarter of 2001, the credit loss rate was 0.5 basis points compared with 0.7 basis points in the year-ago quarter.

Credit-related expense, which includes foreclosed property expense and the provision for losses and is the amount recorded on the company's income statement, totaled $77.7 million in 2001, in line with credit-related losses. Fannie Mae's loss provision was a negative $115.0 million in 2001 compared with a negative $120.0 million in 2000. In the fourth quarter of 2001, credit-related expense totaled $15.8 million compared with $21.1 million in the fourth quarter of 2000. Fannie Mae's loss provision was a negative $30.0 million in the fourth quarter of 2001, unchanged from the fourth quarter of 2000. The company's allowance for loan losses stood at $806 million at December 31, 2001 compared with $809 million at December 31, 2000.

Fee and other income
Fee and other income in 2001 totaled $151.0 million compared with a negative $43.5 million in 2000. The change between 2001 and 2000 resulted primarily from increases in volume-related technology and transaction fees and the absence of a hedging loss. Fee and other income in the fourth quarter of 2001 totaled $50.2 million compared with $0.8 million in the same period last year.

Fee and other income includes technology fees, transaction fees, multifamily fees and other miscellaneous items, and is net of operating losses from certain tax-advantaged investments -- primarily investments in affordable housing which qualify for the low income housing tax credit. Tax credits associated with these investments are recorded in the federal income tax line.

Efficiency
Administrative expenses totaled $1.018 billion in 2001, up 12.4 percent from 2000. Expenses in 2001 included a $10 million contribution to the September 11 disaster relief effort and incremental costs related to a multi- year investment in the company's core infrastructure systems. In 2001, the company launched a major modernization of its core technology infrastructure designed to enhance its ability to process and manage the risk on mortgage assets.

The company's ratio of administrative expense to the average combined book of business in 2001 was .071 percent compared with .072 percent in 2000. Fannie Mae's efficiency ratio -- administrative expense divided by taxable- equivalent revenue -- was 10.0 percent in 2001 compared with 11.6 percent in 2000. Administrative expenses totaled $251.3 million in the fourth quarter 2001, up 8.4 percent from the fourth quarter of 2000.

Capital
Fannie Mae's core capital was $25.2 billion at December 31, 2001 compared with $23.8 billion at September 30, 2001 and $20.8 billion at December 31, 2000.

The company repurchased 6.0 million shares of common stock during 2001 compared with 25.2 million shares in 2000. The company repurchased 3.3 million shares in the fourth quarter of 2001. Fannie Mae had 997.2 million shares of common stock outstanding as of December 31, 2001 compared with 998.8 million shares as of December 31, 2000. The company issued $400 million of preferred stock and called $375 million of preferred stock in 2001. At December 31, 2001 preferred stock made up 9.1 percent of Fannie Mae's core capital.

The company issued $5.0 billion of subordinated debt during 2001. Subordinated debt serves as an important supplement to Fannie Mae's equity capital, although it is not a component of core capital. Earlier this year Fannie Mae announced that by the end of 2003 it would issue sufficient subordinated debt to bring the sum of total capital and outstanding subordinated debt to at least 4 percent of on-balance-sheet assets, after providing adequate capital to support off-balance sheet MBS. On this basis Fannie Mae's capital and outstanding subordinated debt, as a percent of on- balance sheet assets was 3.4 percent at December 31, 2001.

Voluntary Disclosures

As part of Fannie Mae's voluntary market discipline, liquidity and safety and soundness initiatives of October 2000, the company now discloses on a quarterly basis its liquid assets as a percent of total assets, the sensitivity of its future credit losses to an immediate 5 percent decline in home prices, and whether it has passed or failed an internal interim version of the risk-based capital stress test based on its interpretation of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

At December 31, 2001 Fannie Mae's ratio of liquid assets to total assets was 9.5 percent, compared with 7.8 percent at September 30, 2001. The company has committed to maintain a portfolio of high-quality, liquid, non-mortgage securities equal to at least 5 percent of total assets.

At September 30, 2001 the present value of Fannie Mae's net sensitivity of future credit losses to an immediate 5 percent decline in home prices was $467 million, taking into account the beneficial effect of third-party credit enhancements. This compares with $332 million at June 30, 2001. The September 30 figure reflects a gross credit loss sensitivity of $1,349 million before the effect of credit enhancements, and is net of projected credit risk sharing proceeds of $882 million.

At both September 30, 2001 and June 30, 2001, the company passed its internal interim risk-based capital test with a capital cushion that exceeded 30 percent of total capital. The company intends to manage its risks so that the cushion between total capital and internally calculated risk-based capital is at least 10 percent of total capital.

Fannie Mae's quarterly disclosures, together with the monthly interest rate risk disclosures, are included with the company's Monthly Summary statistics. For more information about Fannie Mae's voluntary disclosures, please refer to our Web site at http://www.fanniemae.com .

FAS 133
During 2001 Fannie Mae adopted Financial Accounting Standard No. 133 (FAS 133), Accounting for Derivative Instruments and Hedging Activities. FAS 133 resulted in changes to accounting presentations on both the company's income statement and balance sheet.

FAS 133 requires that Fannie Mae mark to market on its income statement the changes in the time value of its purchased options. FAS 133 requires that only the company's purchased options be marked to market, but none of its option-based debt or mortgage investments. The change in the time value of Fannie Mae's purchased options during 2001 was a net loss of $37.4 million. This amount includes $590.1 million in option cost amortization expense that formerly was included in net interest income and is currently included in adjusted net interest income. The company recorded a cumulative gain of $258.3 million, or $167.9 million after tax upon adoption of FAS 133 on January 1, 2001.

At December 31, 2001 the notional balance of Fannie Mae's purchased options -- consisting of pay-fixed interest rate swaptions, receive-fixed interest rate swaptions, and interest rate caps -- totaled $219.9 billion. At December 31, 2000 the notional balance of Fannie Mae's purchased options was $82.5 billion.

FAS 133 also requires that the company record any change in the fair values of certain derivatives, primarily interest rate swaps it uses as substitutes for non-callable debt, on the balance sheet in a separate component of stockholders' equity called other comprehensive income, or OCI. FAS 133 does not require non-callable debt to be marked to market. At December 31, 2001, the OCI component of stockholders' equity included a $7.4 billion reduction, or 1.0 percent of the net mortgage balance, from the marking to market of derivatives. The comparable reductions to OCI were $10.6 billion at September 30, 2001 and $3.7 billion at June 30, 2001. Other comprehensive income is not a component of core capital.

At December 31, 2001 Fannie Mae had $281.8 billion in interest rate swaps that were marked to market through other comprehensive income. The company had $202.5 billion in comparable derivatives at December 31, 2000.

Conference Call
Fannie Mae will host a conference call to discuss its 2001 results and the outlook for 2002 on Monday, January 14, 2002 at 4:00 p.m. EST. Fannie Mae will provide an audio webcast of the conference call, which interested parties can access from Fannie Mae's Web site. A replay of the conference call will be available on Fannie Mae's Web site for two weeks starting January 14, 2002 at 7:00 p.m. EST.

Glossary of Business Terms
Net Mortgage Portfolio - Unpaid principal balance of mortgages held in portfolio, less unamortized purchase premium or discount and deferred price adjustments and allowance for loan losses.

Net Investment Balance - The sum of Fannie Mae's net mortgage portfolio and other liquid investments (including float).

Outstanding MBS - Mortgage-backed securities (MBS) held by investors other than Fannie Mae's mortgage portfolio. (Formerly referred to as net MBS outstanding).

Combined Book of Business - The net mortgage portfolio plus outstanding MBS. Also referred to as the book of business. (Formerly referred to as total book of business).

MBS Issues Acquired by Other Investors - Lender-originated MBS issues less MBS purchased by Fannie Mae's mortgage portfolio. Also referred to as MBS issues. (Formerly referred to as net MBS issues). Does not include Fannie Mae-originated MBS, which generally are immaterial and disclosed in a footnote.

Business Volume - Mortgages purchased for portfolio plus MBS issues acquired by other investors.

Amortization Cost of Purchased Options - Purchased options expense less the change in the market value of purchased options.

Adjusted Net Interest Income - Net interest income and the amortization cost of purchased options (Comparable to net interest income pre-FAS 133).

Taxable Equivalent Revenue - The sum of net interest income, the amortization cost of purchased options, guaranty fee income and fee and other income, together with a taxable-equivalency adjustment for tax-exempt income and investment credits (principally mortgage revenue bonds and low income housing tax credit investments).

Net interest margin - Taxable-equivalent net interest income plus the amortization cost of purchased options, divided by the average net investment balance. (Adding the amortization cost of purchased options, which prior to FAS 133 had been included in net interest income, keeps the net interest margin consistent pre- and post-FAS 133).

Efficiency Ratio - Administrative expense divided by taxable-equivalent revenue.

Core Capital - Total stockholders' equity excluding other comprehensive income (OCI).

Realized Common Equity - Total stockholders' equity excluding preferred stock and OCI. Realized common equity is used in calculating return on equity.

MortgageDaily.com
                                  Fannie Mae


                        Selected Financial Information





    (Dollars in millions, except per share amounts)





                                             Quarter Ended


    Income Statement:    12/31/2001  9/30/2001  6/30/2001 3/31/2001 12/31/2000





      Net interest income  $2,404.3   $2,079.1   $1,899.4  $1,707.3  $1,485.5


      Guaranty fee income     398.3      383.9      357.1     343.1     339.3


      Fee and other


       income (expense)        50.2       49.0       24.5      27.3       0.8


      Provision for


       losses                  30.0       30.0       30.0      25.0      30.0


      Foreclosed property


       expenses               (45.8)     (45.1)     (47.4)    (54.4)    (51.1)


      Administrative


       expenses              (251.3)    (272.4)    (254.4)   (239.5)   (231.9)


      Special


       contribution          (300.0)       -          -         -         -


      Purchased options


       income (expense)       577.9     (413.1)      35.4    (237.6)      -


      Income before taxes


       and extraordinary


       items                2,863.6    1,811.4    2,044.6   1,571.2   1,572.6


      Federal income


       taxes                 (835.6)    (447.4)    (549.7)   (391.4)   (405.9)


      Extraordinary gain


       (loss), net of tax


       - early


       extinguishment of


       debt                   (59.2)    (134.5)     (92.5)    (54.3)     (2.5)


      Cumulative effect


       of change in


       accounting


       principle                -          -          -       167.9       -


      Net income           $1,968.8   $1,229.5   $1,402.4  $1,293.4  $1,164.2


      Preferred stock


       dividends              (35.0)     (35.0)     (34.7)    (33.3)    (35.2)





      Operating net


       income (1)          $1,437.8   $1,376.5   $1,314.2  $1,238.4  $1,164.2





      Total taxable-


       equivalent


       revenue (2)          2,871.2    2,591.4    2,448.4   2,275.6   2,052.2


      Taxable-equivalent


       revenue growth         39.9%      30.6%      29.1%     20.3%     12.9%


      Effective tax rate


       on operating


       income                   26%        25%        26%       25%       26%





      Operating earnings


       per diluted common


       share (1)              $1.40      $1.33      $1.27     $1.20     $1.12





      Earnings per


       diluted common


       share                   1.92       1.19       1.36      1.25      1.12





      Cash dividends per


       share                    .30        .30        .30       .30       .28





      Diluted average


       shares (in


       millions)            1,005.2    1,006.9    1,006.7   1,006.3   1,005.4





      Operating return on


       realized common


       equity (ROE) (3)       25.3%      25.5%      25.5%     25.4%     25.1%








      Reconciliation of


       net income to


       operating net


       income





      Net income           $1,968.8   $1,229.5   $1,402.4  $1,293.4  $1,164.2


      Purchased options


       (income) expense      (577.9)     413.1      (35.4)    237.6       -


      Purchased options


       amortization


       expense               (239.0)    (186.9)    (100.1)    (64.1)      -


      Net purchased


       options adjustment    (816.9)     226.2     (135.5)    173.5       -


      Federal income


       taxes on purchased


       options                285.9      (79.2)      47.3     (60.6)      -


      Cumulative effect


       of change in


       accounting


       principle, net of


       tax                      -          -          -      (167.9)      -





      Operating net


       income (1)          $1,437.8   $1,376.5   $1,314.2  $1,238.4  $1,164.2





      Preferred stock


       dividends              (35.0)     (35.0)     (34.7)    (33.3)    (35.2)





    (1) Excludes the cumulative effect of change in accounting principle upon


        adoption of SFAS 133 and the change in market value of purchased


        options. Includes the amortization expense of option premiums.


    (2) Includes revenues net of operating losses and amortization expense of


        option premiums, plus taxable-equivalent adjustments for tax-exempt


        income and investment credits using the applicable federal income tax


        rate.


    (3) Annualized operating income divided by average realized common


        stockholders' equity (common stockholders' equity excluding other


        comprehensive income).














                                  Fannie Mae


                         Selected Financial Information





    (Dollars in millions, except per share amounts)





                                              Twelve Months Ended December 31,


    Income Statement:                               2001              2000





       Net interest income                         $8,090.1          $5,673.9


       Guaranty fee income                          1,482.4           1,351.3


       Fee and other income (expense)                 151.0             (43.5)


       Provision for losses                           115.0             120.0


       Foreclosed property expenses                  (192.7)           (214.0)


       Administrative expenses                     (1,017.6)           (905.2)


       Special contribution                          (300.0)              -


       Purchased options income (expense)             (37.4)              -


       Income before taxes and


        extraordinary items                         8,290.8           5,982.5


       Federal income taxes                        (2,224.1)         (1,566.4)


       Extraordinary gain (loss), net of


        tax - early extinguishment of debt           (340.5)             31.5


       Cumulative effect of change in


        accounting principle                          167.9               -


       Net income                                  $5,894.1          $4,447.6


       Preferred stock dividends                     (138.0)           (120.8)





       Operating net income (1)                    $5,366.9          $4,447.6





       Total taxable-equivalent


        revenue (2)                                10,186.6           7,825.1


       Taxable-equivalent revenue growth              30.2%             12.2%


       Effective tax rate on operating


        income                                          26%               26%





       Operating earnings per diluted


        common share (1)                              $5.20             $4.29





       Earnings per diluted common share               5.72              4.29





       Cash dividends per share                        1.20              1.12





       Diluted average shares (in


        millions)                                   1,006.3           1,009.2





       Operating return on realized common


        equity (ROE) (3)                              25.4%             25.2%








       Reconciliation of net income to


        operating net income





       Net income                                  $5,894.1          $4,447.6


       Purchased options (income) expense              37.4               -


       Purchased options amortization


        expense                                      (590.1)              -


       Net purchased options adjustment              (552.7)              -


       Federal income taxes on purchased


        options                                       193.4               -


       Cumulative effect of change in


        accounting principle, net of tax             (167.9)              -





       Operating net income (1)                    $5,366.9          $4,447.6





       Preferred stock dividends                     (138.0)           (120.8)





    (1) Excludes the cumulative effect of change in accounting principle upon


        adoption of SFAS 133 and the change in market value of purchased


        options. Includes the amortization expense of option premiums.


    (2) Includes revenues net of operating losses and amortization expense of


        option premiums, plus taxable-equivalent adjustments for tax-exempt


        income and investment credits using the applicable federal income tax


        rate.


    (3) Annualized operating income divided by average realized common


        stockholders' equity (common stockholders' equity excluding other


        comprehensive income).











                                  Fannie Mae


                        Selected Financial Information





    (Dollars in millions)





                                                       Quarter Ended


    Other Data:                            12/31/2001   09/30/2001  06/30/2001


       Mortgage portfolio:


       Retained commitments                 $100,485       $54,079    $65,592


       Mortgage purchases                     82,378        64,209     65,270


       Mortgage liquidations                  60,074        39,835     41,560


       Mortgage sales                          4,406           602      1,397


       Mortgage portfolio growth rate


        (compounded)                           11.1%         15.2%      14.6%





       Mortgage-Backed Securities:


       MBS issues acquired by others        $102,854       $94,596   $100,439


       Outstanding MBS liquidations           65,117        52,050     53,355


       Outstanding MBS (1)                   858,867       816,724    773,836


       Outstanding MBS growth rate


        (compounded)                           22.3%         24.1%      29.3%


       Average effective MBS guaranty fee


        rate (bp)                               18.9          19.2       18.9





       Book-of-Business:


       Business volume                      $185,232      $158,805   $165,709


       Book of business                    1,564,034     1,503,525  1,436,834


       Book of business growth rate


        (compounded)                           17.1%         19.9%      22.3%





       Expense Ratios:


       Ratio of administrative expense to


        average book-of-business              0.066%        0.074%     0.073%


       Efficiency ratio (2)                     8.8%         10.5%      10.4%





       Credit-related:





       Single-family properties acquired       3,892         3,435      3,566


       Single-family serious delinquency


        rate at period end                     0.47% (3)     0.45%      0.43%


       Multifamily serious delinquency


        rate at period end                     0.33% (3)     0.10%      0.07%


       Charge-offs (Recoveries):


         Single-family                        $(29.0)       $(26.2)    $(31.2)


         Multifamily                             0.7          (0.2)       0.0


         Total                                 (28.3)        (26.4)     (31.2)


       Foreclosed property expenses:


         Single-family                          43.7          43.3       46.9


         Multifamily                             2.1           1.8        0.5


         Total                                  45.8          45.1       47.4





       Credit-related losses                    17.5          18.7       16.2


       Allowance for losses                    805.7         807.4      811.0


       Provision for losses                    (30.0)        (30.0)     (30.0)


       Credit-related expenses                  15.8          15.1       17.4


       Credit-related losses as a


        percentage


         of average net portfolio and net


          MBS (annualized)                    0.005%        0.005%     0.005%








      (1)  MBS held by investors other than Fannie Mae's portfolio.


      (2)  Administrative expense divided by taxable-equivalent revenue.


      (3)  As of November 30, 2001, most recent data available.











                                  Fannie Mae


                        Selected Financial Information





    (Dollars in millions)


                                                                Twelve


                                                             Months Ended


                                    Quarter Ended            December 31,


    Other Data:               03/31/2001   12/31/2000     2001         2000


      Mortgage portfolio:


      Retained commitments       $76,342    $50,462     $296,498     $151,903


      Mortgage purchases          58,727     52,959      270,584      154,231


      Mortgage liquidations       22,943     15,642      164,412       57,233


      Mortgage sales               2,576      1,328        8,981       10,982


      Mortgage portfolio


       growth rate


       (compounded)                23.8%      27.7%        16.1%        16.2%





      Mortgage-Backed


       Securities:


      MBS issues acquired by


       others                    $46,850    $27,034     $344,739     $105,407


      Outstanding MBS


       liquidations               30,018     22,676      200,540       88,149


      Outstanding MBS  (1)       725,685    706,684      858,867      706,684


      Outstanding MBS growth


       rate (compounded)           11.2%       3.3%        21.5%         4.1%


      Average effective MBS


       guaranty fee rate (bp)       19.1       19.3         19.0         19.5





      Book-of-Business:


      Business volume           $105,577    $79,993     $615,323     $259,638


      Book of business         1,366,419  1,314,083    1,564,034    1,314,083


      Book of business growth


       rate (compounded)           16.9%      13.8%        19.0%         9.3%





      Expense Ratios:


      Ratio of administrative


       expense to average


       book-of-business           0.072%     0.072%       0.071%       0.072%


      Efficiency ratio (2)         10.5%      11.3%        10.0%        11.6%











      Credit-related:





      Single-family properties


       acquired                    3,593      3,398       14,486       14,351


      Single-family serious


       delinquency rate at


       period end                  0.44%      0.45%        0.47% (3)    0.45%


      Multifamily serious


       delinquency rate at


       period end                  0.05%      0.05%        0.33% (3)    0.05%


      Charge-offs


       (Recoveries):


       Single-family              $(25.6)    $(28.1)     $(112.0)     $(126.8)


       Multifamily                   0.1        0.0          0.6          1.9


       Total                       (25.5)     (28.1)      (111.4)      (124.9)


      Foreclosed property


       expenses:


       Single-family                54.5       49.7        188.4        212.6


       Multifamily                  (0.1)       1.4          4.3          1.4


       Total                        54.4       51.1        192.7        214.0





      Credit-related losses         28.9       23.0         81.3         89.1


      Allowance for losses         809.8      809.3        805.7        809.3


      Provision for losses         (25.0)     (30.0)      (115.0)      (120.0)


      Credit-related expenses       29.4       21.1         77.7         94.0


      Credit-related losses as


       a percentage


       of average net


        portfolio and net MBS


        (annualized)              0.009%     0.007%       0.006%       0.007%





      (1)  MBS held by investors other than Fannie Mae's portfolio.


      (2)  Administrative expense divided by taxable-equivalent revenue.


      (3)  As of November 30, 2001, most recent data available.











                                  Fannie Mae


                        Selected Financial Information





    (Dollars in millions, except per share amounts)





                                              Quarter Ended


                           12/31/2001 9/30/2001 6/30/2001 3/31/2001 12/31/2000


    Net Interest Margin:





      Average balances:


       Net mortgage


        investment           $689,354  $673,170  $647,493  $622,763  $587,996


       Liquid investments      65,173    57,586    56,764    55,721    60,157


       Total net investment  $754,527  $730,756  $704,257  $678,484  $648,153





      Average investment


       yield, taxable-


       equivalent basis         6.66%     6.87%     6.98%     7.13%     7.19%


      Average borrowing


       cost                     5.66%     5.96%     6.12%     6.32%     6.45%


      Net interest margin,


       taxable-equivalent


       basis                    1.21%     1.10%     1.09%     1.03%      .99%








      Adjusted net interest


       income (1)            $2,165.3  $1,892.2  $1,799.3  $1,643.2  $1,485.5





      Taxable-equivalent


       adjustment (2)           125.6     119.7     113.7     110.7     111.5








    Fee and Other Income


     (Expense):





      Transaction fees          $49.2     $29.0     $27.2     $22.5     $20.3


      Technology fees            49.6      38.7      37.7      37.3      18.9


      Multifamily fees           17.2      16.6      15.1      14.0      12.2


      Tax-advantaged


       investments              (41.5)    (63.6)    (60.2)    (57.1)    (52.6)


      Other                     (24.3)     28.3       4.7      10.6       2.0





         Total                  $50.2     $49.0     $24.5     $27.3       $.8











                                  Fannie Mae


                        Selected Financial Information





    (Dollars in millions, except per share amounts)





                                              Twelve Months Ended December 31,


                                                     2001             2000


    Net Interest Margin:





       Average balances:


         Net mortgage investment                   $658,195         $553,531


         Liquid investments                          58,811           51,490


         Total net investment                      $717,006         $605,021





       Average investment yield, taxable-


        equivalent basis                              6.90%            7.11%


       Average borrowing cost                         6.00%            6.35%


       Net interest margin, taxable-


        equivalent basis                              1.11%            1.01%








       Adjusted net interest income (1)            $7,500.0         $5,673.9





       Taxable-equivalent adjustment (2)              469.7            413.8








    Fee and Other Income (Expense):





       Transaction fees                              $127.9            $70.9


       Technology fees                                163.3             74.2


       Multifamily fees                                62.9             51.0


       Tax-advantaged investments                    (222.4)          (188.0)


       Other                                           19.3            (51.6)





          Total                                      $151.0           $(43.5)











                                  Fannie Mae


                        Selected Financial Information





                            Dec. 31,  Sept. 30, June 30,  March 31,  Dec. 31,


                              2001      2001      2001      2001      2000


    Selected Balance Sheet


     Data:


      Mortgage portfolio,


       net                  $705,167  $686,801  $662,998  $640,734  $607,399


      Liquid assets           76,072    59,944    59,083    44,911    55,585


      Total assets           799,791   766,650   737,151   700,977   675,072





      Debentures, notes,


       and bonds, net        763,467   726,992   702,334   666,592   642,682





    Stockholders' Equity:


      Preferred stock         $2,302    $2,302    $2,302    $1,903    $2,278


      Realized common


       equity                 22,880    21,475    20,676    19,579    18,550





      Other comprehensive


       income (OCI)


         Unrealized gains


          (losses) on


          securities, net        295       635       153       303        10


         Cash flow hedging


          results, net        (7,359)  (10,634)   (3,700)   (5,699)      -


      Total accumulated OCI   (7,064)   (9,999)   (3,547)   (5,396)       10





      Total stockholders'


       equity                $18,118   $13,778   $19,431   $16,086   $20,838





      Core capital (3)       $25,182   $23,778   $22,978   $21,482   $20,827





    (1) Includes the amortization of purchased option premiums.


    (2) Reflects pro-forma adjustments to permit comparison of yields on tax-


        advantaged and taxable assets.


    (3) Excludes other comprehensive income.











                                  Fannie Mae


                       Voluntary Initiatives Disclosure


                                December 2001





                               INTEREST RATE RISK





                          Rate Level Shock (50bp)    Rate Slope Shock (25bp)





                          1 Year        4 Year        1 Year        4 Year


                         Portfolio     Portfolio     Portfolio     Portfolio


            Effective   Net Interest  Net Interest  Net Interest  Net Interest


           Duration Gap   Income         Income       Income        Income


           (in months)    at Risk       at Risk      at Risk        at Risk





    2000


    1st Qtr      5         0.1%           4.3%         1.0%           3.0%


    2nd Qtr      4         0.6%           4.8%         1.0%           3.0%


    3rd Qtr      2         0.8%           4.3%         1.0%           3.1%


    4th Qtr     -3         0.5%           2.0%         3.0%           4.3%





    2001


    January     -3         3.9%           3.6%         3.6%           5.2%


    February    -2         3.0%           2.1%         3.2%           5.2%


    March        1         3.8%           3.2%         3.1%           4.7%


    April        7         3.2%           4.9%         2.0%           2.6%


    May          7         1.9%           4.5%         1.5%           2.2%


    June         5         1.7%           4.4%         0.9%           2.0%


    July         0         1.1%           2.9%         1.8%           3.4%


    August      -1         1.5%           2.1%         1.9%           3.7%


    September   -1         2.4%           3.6%         2.8%           4.0%


    October    -10         1.8%           6.9%         3.8%           6.0%


    November     3         4.2%           3.8%         3.1%           5.3%


    December     5         5.1%           4.5%         2.4%           4.3%








    * Effective duration gap - measures the extent the effective duration of


      the portfolio's assets and liabilities are matched.  A positive duration


      gap indicates that the effective duration of our assets exceeds the


      effective duration of our liabilities by that amount, while a negative


      duration gap indicates the opposite.





    * Net interest income at risk - compares Fannie Mae's projected change in


      portfolio net interest income under the financially more adverse of a 50


      basis point increase and decrease in interest rates.  Fannie Mae also


      compares the expected change in portfolio net interest income for the


      more adverse of a 25 basis point decrease and increase in the slope of


      the yield curve. Both measurements are done for one-year and four-year


      periods.





    * A positive number indicates the percent by which net interest income


      could be reduced by the increased rate shock.  A negative number would


      indicate the percent by which net interest income could be increased by


      the shock.





                                    LIQUIDITY





    Ratio of liquid to total assets                     Ratio





    December 31, 2000                                    8.2%


    March  31, 2001                                      6.4%


    June  30, 2001                                       8.0%


    September  30, 2001                                  7.8%


    December 31, 2001                                    9.5%





    * Fannie Mae will maintain at least three months of liquidity to ensure


      the company can meet all of its obligations in any period of time in


      which it does not have access to the debt markets.  Fannie Mae also will


      comply with the Basel Committee on Banking Supervision's fourteen


      principles for sound liquidity management.





    * To fulfill its liquidity commitment, Fannie Mae will maintain more than


      five percent of its on-balance sheet assets in high-quality, liquid,


      non-mortgage securities.








                                   CREDIT RISK





                                                 Without             With


    Lifetime credit loss                          credit            credit


      sensitivity as of:                        enhancements      enhancements





    December 31, 2000                              $1,065             $295


    March 31, 2001                                 $1,061             $307


    June 30, 2001                                  $1,045             $332


    September 30, 2001  /1                         $1,349             $467








    * Lifetime credit loss sensitivity measures the sensitivity of Fannie


      Mae's expected future credit losses to an immediate five percent decline


      in home values for all single-family mortgages held in Fannie Mae's


      retained portfolio and underlying guaranteed MBS.





    * Credit loss sensitivity is reported in present value terms and measures


      expected losses in two ways:  before receipt of private mortgage


      insurance claims and any other credit enhancements and after receipt of


      expected mortgage insurance and other credit enhancements.





                              RISK-BASED CAPITAL





    Interim risk-based capital


     stress test                   Pass / Fail       Capital Cushion





    December 31, 2000                 Pass            10 % - 30 %


    March 31, 2001                    Pass              > 30 %


    June 30, 2001                     Pass              > 30 %


    September 30, 2001  /1            Pass              > 30 %





    * Fannie Mae has implemented an interim version of the risk-based capital


      stress test detailed in the Federal Housing Enterprise Financial Safety


      and Soundness Act of 1992.   The interim implementation of the risk-


      based capital test was constructed using as its basis OFHEO's Notice of


      Public Rulemaking 2, modified to reflect subsequent changes implemented


      or suggested both by OFHEO and Fannie Mae.





    * Fannie Mae will disclose whether it has passed or failed the interim


      risk-based capital test at the end of each quarter, and also give an


      indication of the amount by which capital exceeds or falls short of the


      calculated risk-based requirement.  Fannie Mae will run this interim


      version only until the risk-based capital standard is adopted by its


      regulator, the Office of Federal Housing Enterprise Oversight.

Forward-looking Statements
This release includes forward-looking statements based on management's estimates of trends and economic factors in the markets in which Fannie Mae is active as well as the company's business plans. Such estimates and plans may change without notice and future results may vary from expected results if there are significant changes in economic, regulatory, or legislative conditions affecting Fannie Mae or its competitors. Investors should review the most recent Information Statement dated March 30, 2001 and the Supplements dated May 15, 2001, August 14, 2001, and November 14, 2001 (available at http://www.fanniemae.com ) for a discussion of these factors.

Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages. Fannie Mae is working to shrink the nation's "homeownership gaps" through a $2 trillion "American Dream Commitment" to increase homeownership rates and serve 18 million targeted American families by the end of the decade. Since 1968, Fannie Mae has provided more than $3.0 trillion of mortgage financing for more than 40 million families. More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com .

Shareholder information about Fannie Mae is available 24 hours a day. Please call us toll free at 1-800-FNM-2-YOU (1-800-399-2968) or access our Web site.

hosted by USANow.net

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter

MBS

mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders