IN THE UNITED STATES COURT OF APPEALS FAIRHOLME … · 8/14/2015 · Fairholme’s request for judicial notice fits comfortably within this Court’s precedents. This Court has long

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IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

FAIRHOLME FUNDS, INC., et al.,

Plaintiffs-Appellants,

v. FEDERAL HOUSING FINANCE AGENCY, et al.,

Defendants-Appellees.

No. 14-5254

FAIRHOLME’S PUBLIC, REDACTED MOTION FOR JUDICIAL

NOTICE AND SUPPLEMENTATION OF THE RECORD

Plaintiffs-Appellants in No. 14-5254 (“Fairholme”) respectfully move the

Court (1) to take judicial notice of the attached documents and deposition

transcripts, all of which were produced in discovery by Defendants or related

entities in a parallel action in the Court of Federal Claims (“CFC”)—Fairholme

Funds, Inc. v. United States, No. 13-465 (Fed. Cl.), and (2) to supplement the

record on appeal with those materials.1

For the reasons set out in Plaintiffs’ merits brief, this Court should hold that

the Net Worth Sweep is facially inconsistent with FHFA’s and Treasury’s statutory

1 Although disclosure of the materials produced in discovery in the CFC

action is governed by a strict protective order, that court authorized Fairholme to file the materials under seal here. See Order, Fairholme Funds, Inc. v. United States, No. 13-465 (Fed. Cl. July 21, 2015), ECF No. 212.

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authorities and order entry of judgment for Plaintiffs as a matter of law. But, even

if that were not so, the district court’s decision must be reversed. As the materials

attached to this motion demonstrate, the administrative record submitted by

Treasury and the “Document Compilation” and declaration submitted by FHFA in

lieu of an administrative record are incomplete, misleading, and, in important

respects, outright false. Thus, even if this Court is not prepared to order entry of

judgment for Plaintiffs, the Court must at a minimum remand for further

proceedings that account for this newly discovered evidence.

BACKGROUND On August 17, 2012, FHFA and Treasury changed the terms under which

Fannie Mae and Freddie Mac (the “Companies”) would compensate Treasury for

the financial support it provided them in connection with the 2008 financial crisis.

Starting January 1, 2013, rather than paying a fixed annual 10% cash or 12% in-

kind preferred stock dividend on Treasury’s investment, the Companies were

required to make quarterly payments to Treasury equal to their entire net worth,

less a small and decreasing capital reserve that would fall to zero by 2018. This

“Net Worth Sweep” effectively nationalizes the Companies and transfers to

Treasury the entire economic value of the Companies’ privately-held equity.

In this case, Fairholme has alleged that the Net Worth Sweep violates the

Administrative Procedure Act (“APA”), as well as FHFA’s fiduciary and

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contractual obligations to the Companies’ private shareholders. Fairholme also

filed a taking action against the United States in the CFC. Materials produced in

discovery reveal that Treasury’s administrative record and FHFA’s “Document

Compilation”2 are incomplete, misleading, and, in important respects, false.

ARGUMENT

I. JUDICIAL NOTICE OF THE MATERIALS PRODUCED IN THE CFC IS WARRANTED

A. The Court May Take Judicial Notice of the Existence of the Materials Produced in Discovery in the CFC Action.

This Court has broad discretion to take judicial notice of any fact that is “not

subject to reasonable dispute” and “can be accurately and readily determined from

sources whose accuracy cannot reasonably be questioned.” FED. R. EVID.

201(b)(2); see Power, Inc. v. NLRB, 40 F.3d 409, 426 n.11 (D.C. Cir. 1994);

Yellow Taxi Co. of Minneapolis v. NLRB, 721 F.2d 366, 375 n.29 (D.C. Cir. 1983).

The exercise of that discretion is necessary in this case to safeguard the integrity of

the judicial process, for the materials attached to this motion reveal that Treasury’s

2 FHFA described its submission in district court as a “Document

Compilation” and refused to certify a true administrative record. See Notice of Filing Document Compilation, Fairholme Funds, Inc. v. FHFA, No. 13-1053 (D.D.C. Dec. 17, 2013), Dkt. 24 at 1. FHFA nevertheless represented that its document compilation included all the materials that “were before it” and “were directly or indirectly considered” when it imposed the Net Worth Sweep. See FHFA, Watt, Fannie, and Freddie Combined Reply in Support of Motion to Dismiss, Fairholme Funds, Inc. v. FHFA, No. 13-1053 (D.D.C. May 2, 2014), Dkt. 46 at 52.


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administrative record and FHFA’s document compilation were at best highly

misleading. That the CFC discovery materials exist and were produced by the

Defendants, their consultant, the Companies, and the Companies’ auditors is not

subject to reasonable dispute and may be readily established from the materials

themselves. Accordingly, the Court should assure that this case is not decided on

the basis of a false factual premise and take judicial notice of the existence of the

materials in question.

Fairholme’s request for judicial notice fits comfortably within this Court’s

precedents. This Court has long been willing to take judicial notice of facts based

on the records in other cases. See, e.g., Dupree v. Jefferson, 666 F.2d 606, 608 n.1

(D.C. Cir. 1981); United States v. Hopkins, 531 F.2d 576, 581 n.38 (D.C. Cir.

1976); United States v. Dancy, 510 F.2d 779, 787 (D.C. Cir. 1975); Gomez v.

Wilson, 477 F.2d 411, 416 n.28 (D.C. Cir. 1973). It is particularly appropriate for

the Court to do so where, as here, another case concerns “the same subject matter

or questions of a related nature between the same parties.” See Veg-Mix, Inc. v.

USDA, 832 F.2d 601, 607 (D.C. Cir. 1987) (quoting Fletcher v. Evening Star

Newspaper Co., 133 F.2d 395 (D.C. Cir. 1942)). As in California Valley Miwok

Tribe v. United States, 515 F.3d 1262, 1265 n.5 (D.C. Cir. 2008), many of the

materials at issue were provided by litigants in this action. And similar to Xydas v.


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United States, 445 F.2d 660, 667 n.22 (D.C. Cir. 1971), important facts about what

Defendants knew can be inferred from the existence of these materials.

While the Court may take judicial notice of facts in any APA case, see

Nebraska v. EPA, 331 F.3d 995, 998 n.3 (D.C. Cir. 2003), it has shown a particular

willingness to look beyond the materials considered by the district court where

they reveal that the administrative record on review is incomplete. Thus, in Walter

O. Boswell Memorial Hospital v. Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984), this

Court examined materials submitted by the agency in another case when

determining that a remand was necessary to complete the administrative record.

And in NRDC v. Train, 519 F.2d 287, 291–92 (D.C. Cir. 1975), the Court

considered a document that the agency had improperly omitted from its

administrative record and remanded the case so that the administrative record

could be completed.

Finally, judicial notice is especially appropriate in this case because it is

necessary to take into account developments that occurred after the district court’s

decision and that bear on this Court’s jurisdiction. Judicial notice is favored “when

the appellate court needs to take account of developments in the case subsequent to

proceedings in the trial court.” KENNETH W. GRAHAM ET AL., 21B FEDERAL

PRACTICE & PROCEDURE: EVIDENCE § 5110.1 (2d ed. 20105); see Rothenberg v.

Sec. Mgmt. Co., 667 F.2d 958, 961 n.8 (11th Cir. 1982). And this Court routinely


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uses judicial notice to account for intervening events relevant to its jurisdiction.3

Materials that have come to light in the CFC since the district court dismissed the

complaint on jurisdictional grounds reveal that the Defendants’ jurisdictional

arguments are premised on a mischaracterization of the relevant facts.

B. The Materials Produced in the CFC Action Establish That Plaintiffs Were Prejudiced By Defendants’ Incomplete and Misleading Submissions.

The Net Worth Sweep went into effect on January 1, 2013, and within its

first year Treasury had already received more than $100 billion more in cash

dividends from the Companies than it would have received under the prior

arrangement. A large share of those dividend payments resulted from increases in

the Companies’ net worth that reflected the reversal of excessively conservative

accounting decisions that the Companies made at FHFA’s direction in 2008 and

2009. Specifically, in 2013, both Companies’ net worth increased by tens of

billions of dollars as a result of the recognition of deferred tax assets and releases

of loan loss reserves, two balance sheet adjustments that the accounting rules

mandated once it became apparent that the Companies’ were performing much

better than FHFA had assumed they would in 2008 and 2009.

3 See, e.g., LeBoeuf, Lamb, Greene & MacRae, LLP v. Abraham, 347 F.3d

315, 325 (D.C. Cir. 2003); see also Clark v. K-Mart Corp., 979 F.2d 965, 967 (3d Cir. 1992) (en banc) (“[B]ecause mootness is a jurisdictional issue, we may receive facts relevant to that issue . . . .” (citation omitted)).


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Despite the Net Worth Sweep’s timing—coming just as the Companies

began generating the largest profits in their history—Defendants have steadfastly

maintained that they had never envisioned or discussed the idea that the Net Worth

Sweep would result in a windfall of more than $100 billion for Treasury in 2013

alone. To support that narrative, FHFA submitted a declaration from Mario

Ugoletti, who as a Treasury official in 2008 was deeply involved in establishing

the terms on which Treasury provided the Companies with financial support, and

who, after later moving to FHFA, was a central player in the decisionmaking that

led to the Net Worth Sweep. Mr. Ugoletti’s declaration claims that FHFA was

“concern[ed] that the 10% annual dividend to Treasury would reduce the amount

of the Treasury commitment starting in 2013” and that the Net Worth Sweep was

not intended or expected “to increase compensation to Treasury.” Ugoletti Decl.

¶¶ 16, 19, FHFA 0008–009 (Exhibit 1, A009–10). For its part, Treasury included

in its administrative record a presentation dated June 13, 2012 including financial

projections showing Fannie and Freddie needing to make draws to pay Treasury’s

dividends and predicting that imposition of the Net Worth Sweep would result in

“materially equivalent” “net cash returned to taxpayers.” T3836, T3847–T3850,

T3861 (Exhibit 2, A016, A027–30, A041). It is now apparent that those materials,

which form the heart of Treasury’s administrative record and FHFA’s document

compilation, are in certain respects highly misleading and in others outright false.


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1. Deferred Tax Assets. Mr. Ugoletti’s sworn declaration says that “neither

the Conservator nor Treasury envisioned at the time of the [Net Worth Sweep] that

Fannie Mae’s valuation allowance on its deferred tax assets would be reversed in

early 2013, resulting in a sudden and substantial increase in Fannie Mae’s net

worth.” Ugoletti Decl. ¶ 20, FHFA 0009–10 (A010–11). But when Fairholme

deposed Susan McFarland, who was Fannie’s CFO at the time of the Net Worth

Sweep, it learned that

McFarland

Deposition Transcript 45:5–8 (Exhibit 3, A046); see also id. 158:7–10 (A055);

193:8–15 (A059).

Id. 59:14–16 (A050);

id. 59:25–60:1 (A050); see also id. 164:6–12 (A056).4 Ms. McFarland further

testified that

4 Notably,

FHFA00103596 (Exhibit 4, A062).

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See id.

55:3–17 (A049). In light of Ms. McFarland’s testimony, Mr. Ugoletti’s sworn

statement that neither agency envisioned recognition of the deferred tax assets is

not credible.

Likewise, Mr. Ugoletti’s testimony during his deposition revealed that

Ugoletti Decl. at 2,

FHFA 0002 (A003). When asked whether he had

Mr. Ugoletti responded,

Ugoletti Deposition Transcript 331:3–22 (emphases added) (“Ugoletti Tr.”)

(Exhibit 5, A074). And when asked

he responded, Id. 332:2–6 (emphasis added) (A074). Moreover, Jeff

Foster,

testified that


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Foster Deposition Transcript 256:16–257:1,

258:1–9 (Exhibit 6, A092, 93).5

Relatedly, Mr. Ugoletti’s deposition testimony demonstrates that another

statement in his declaration regarding deferred tax assets is, at a minimum,

misleading. That carefully crafted, made-for-litigation declaration reads, “[a]t the

time of the negotiation and execution of the Third Amendment, the Conservator

and the Enterprises had not yet begun to discuss whether or when the Enterprises

would be able to recognize any value to their deferred tax assets.” Ugoletti Decl.

¶ 20, FHFA 0009 (emphasis added) (A010). Regardless of what the FHFA as

Conservator and the Enterprises had begun to discuss, Mr. Ugoletti’s deposition

testimony makes clear that

Indeed, Mr. Ugoletti expressly acknowledged in his deposition that

Ugoletti Tr. 331:15 (A074), that

id. 323:10–13 (A072), and that

5 See also, e.g., GT005322 (Exhibit 7, A096) (Treasury consultant notes

).


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that

, id. 324:20–325:3 (A072).6 And, as explained

above, Ms. McFarland testified that

The deferred tax assets issue is critical because reversal of the $74 billion tax

valuation allowances alone increased Fannie’s and Freddie’s net worth by an

amount sufficient to pay Treasury’s 10% cash dividend for several years wholly

apart from the substantial profits generated by their business operations. See

Fannie Mae News Release, May 9, 2013, http://goo.gl/G1xBTU (announcing

benefit of $50.6 billion from reversal of valuation allowance); Freddie Mac News

Release, November 7, 2013, http://goo.gl/Hytc3l (announcing benefit of $23.9

billion from reversal of valuation allowance). It is not plausible that Defendants

were aware of this issue and nevertheless believed that the Net Worth Sweep was

necessary to rescue the Companies from their existing dividend obligations and

would not result in increased compensation to Treasury. The Court should take

judicial notice of the existence of these materials.

6 See also PWC-FM 00147059 (Exhibit 8, A098) (memo dated

DT-055518 (Exhibit 9, A107); DT-055488 (Exhibit 10,

A124).


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2. Financial Projections. Treasury sought to prop up its proffered rationale

for the Net Worth Sweep by including in its administrative record projections

purportedly created during the summer of 2012 that showed the Companies unable

to generate sufficient long-term profits to pay 10% cash dividends on Treasury’s

senior preferred stock without making additional draws on Treasury’s funding

commitment. See T3833–T3862 (A013–42). Those projections, included in a

presentation dated June 13, 2012, say that they were based in part on “Grant

Thornton analyses” that Treasury omitted from its administrative record. T3837

(A017). Examination of those Grant Thornton analyses reveals that Treasury’s

purported June 2012 projections were taken verbatim from reports that Grant

Thornton prepared in based on data from of that year.

Compare T3847 (A027) with GT007276 (Exhibit 11, A150); compare T3849

(A029) with GT007353 (Exhibit 12, A205); see Eberhardt Deposition Transcript

94:21–95:21, 208:22–209:11 (Exhibit 13, A238, 41) (Grant Thornton official

acknowledging that

). And by the time of the Net Worth Sweep,

those stale financial projections had proven to be woefully unreliable. For example,

they predicted that Fannie would suffer a comprehensive net loss of $13.1 billion

in fiscal year 2012. See T3847 (A027) & GT007276 (A150). But in the three

quarters leading up to the Net Worth Sweep (the first three quarters of fiscal year


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2012), Fannie actually generated comprehensive income of $6.5 billion. See T2403

(Exhibit 14, A245); T3350 (Exhibit 15, A248); T3910 (Exhibit 16, A251).

What is more, Treasury’s administrative record fails to reveal that Treasury

For example,

UST00532144 (Exhibit 17, A260); see McFarland Tr.

161:18–162:12 (A055–56); FM_Fairholme_CFC-00002532 (Exhibit 18, A270);

UST00005747 (Exhibit 19, A275) (

).7

FHFA was in possession of similar information leading up to the Net Worth

Sweep. An internal FHFA email describing

7 In addition, a presentation sent to senior Treasury officials in February

2012 indicated that

UST00380800 (Exhibit 20, A298).


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FHFA00047889 (Exhibit 21, A350). Attached to that email is a draft presentation

by Mr. Benson including

See FHFA0047893, Slide 14 (Exhibit 22, A369); see also

FHFA00060208 (Exhibit 23, A398) (

).

The Court should take judicial notice of the fact that these materials exist

and that Treasury’s administrative record and FHFA’s document compilation do

not accurately represent the true record before the agencies when the Net Worth

Sweep was announced.

3. Purpose of the Net Worth Sweep.

Indeed, the testimony of both Edward

DeMarco—who agreed to the Net Worth Sweep in his capacity as FHFA’s Acting

Director—and Mr. Ugoletti indicates that

See Institutional Pls.’ Br. 29–48. Mr. DeMarco, for example, said

that


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Transcript of DeMarco Deposition 146:17–21 (“DeMarco Tr.”) (Exhibit

24, A436). And the reason he reneged on his predecessor’s (Mr. Lockhart’s)

repeated public assurances that the central purpose of the conservatorships was to

rehabilitate Fannie and Freddie and return them to private control under their

existing charters was that Mr. DeMarco

See id. 147:10–148:4 (A436).

Similarly, Mr. Ugoletti said that

Ugoletti Tr. 308:7–9 (A069).

Treasury, of course, was also committed to winding down Fannie and

Freddie. Indeed, communications between FHFA and Treasury indicate that

FHFA00025815–16 (Exhibit 25, A439, 40).8 Documents produced in the CFC

indicate that

8 See also Bowler Deposition Transcript 53:10–16 (Exhibit 26, A444) (

) (“Bowler Tr.”); UST00508176 (Exhibit 27, A456).

9 For example, a

UST00480703

(Exhibit 28, A460).


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See

UST00503991 (Exhibit 29, A476); UST00517664 (Exhibit 30, A480).10

Foster Tr. 240:10–241:5 (A089); see also id. 230:1–7 (A087); id. 239:5–14

(A089); Bowler Tr. 88:22–89:3 (A447); id. 255:8–256:8 (A453).

The Court should take judicial notice of the existence of documents

demonstrating

UST00480714 (A471)—

10 Treasury officials communicated with the White House about the Net Worth Sweep during the time leading up to its adoption. See, e.g., Foster Tr. 112:15–113:9 (A079); Bowler Tr. 152:16–153:13 (A450); UST00503874 (Exhibit 31, A483).


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which Defendants improperly concealed

by submitting manifestly incomplete and misleading materials in the district court.

4. Agencies’ Understanding of the Purchase Agreements. Documents

produced in discovery also confirm that the central defense of the Net Worth

Sweep—a purported concern that the Companies’ cash dividend payments would

exhaust the government funding commitment—was based on a false premise.

See, e.g.,

FHFA00083260 (Exhibit 32, A487); UST00500869 (Exhibit 33, A490). Indeed,

Mr. Foster

Foster Tr. 161:17–162:4 (A083–84); see also id. 154:9

(A082) (acknowledging that

). The Court should take judicial notice of the existence of materials

indicating that the government understood that the PSPAs provided for Fannie and

Freddie to pay their dividend obligations in kind.11

11 In a similar vein, the CFC discovery materials contradict Defendants’

litigation-driven construction of a provision of the Companies’ agreements with Treasury providing for payment of a periodic commitment fee (“PCF”). In his declaration, Mr. Ugoletti asserted that, “It was clear by [some time before the Net


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II. SUPPLEMENTATION OF THE RECORD WITH THE CFC DISCOVERY MATERIALS IS WARRANTED

Apart from, or in addition to taking judicial notice of the existence of the

CFC discovery materials, the Court should add them to the record on appeal.

Although the record on appeal is ordinarily limited to the record that was created

before the district court, In re AOV Indus., Inc., 797 F.2d 1004, 1012 (D.C. Cir.

1986), this Court nevertheless has broad discretion to supplement the record itself

when “injustice might otherwise result,” Singleton v. Wulff, 428 U.S. 106, 121

(1976); see also Colbert v. Potter, 471 F.3d 158, 165–66 (D.C. Cir. 2006)

(acknowledging this Court’s “inherent equitable power to allow supplementation

of the appellate record if it is in the interests of justice.”). The exercise of that

Worth Sweep] that, given the risks of the Enterprises and the enormity of the Treasury commitment, the value of the PCF was incalculably large,” Ugoletti Decl. ¶ 9, FHFA 0005 (A006)—the inference being that this was clear to people other than Mr. Ugoletti himself. But Mr. Ugoletti testified that

Ugoletti Tr. 170:7–13 (A066); 171:10–20 (A066). And Freddie’s own internal projections showed that

FHFA00102167, Slide 27 (Exhibit 34, A519)

; cf. McFarland Tr. 65:16–66:19 (A051–52). The Court should take judicial notice of the existence of materials produced in the CFC action that contradict the discussion of the PCF in Mr. Ugoletti’s declaration.


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power is particularly appropriate when the material sought to be introduced “go[es]

to the heart of the contested issue.” In re AOV Indus., Inc., 797 F.2d at 1013.

As the foregoing discussion of the materials attached to this motion

demonstrates, Treasury’s administrative record and FHFA’s document compilation

and declaration were misleading and, in certain important respects, false, and they

obscured the true rationale for the Net Worth Sweep and what the Defendants

considered and understood when they imposed it. It is difficult to imagine

materials that go more directly the heart of the matter in dispute in this case, and “it

would be inconsistent with this court’s own equitable obligations . . . to pretend

that [the materials] do not exist.” Id. Accord United States ex rel. Davis v. District

of Columbia, 679 F.3d 832, 837 & n.3 (D.C. Cir. 2012). It is therefore appropriate

for this Court to exercise its discretion and add the materials to the record.12

Finally, even if the Court chooses not to consider the attached CFC

discovery materials when deciding the merits of this appeal, it should at an

absolute minimum remand this case so that (1) Fairholme can amend its complaint

12 While this Court’s precedents make clear that it has authority to

supplement the record on appeal, it has at times required litigants to introduce newly-discovered evidence by filing a motion in the district court under Federal Rule of Civil Procedure 60(b). See United States ex rel. Oliver v. Philip Morris USA Inc., 763 F.3d 36, 44 (D.C. Cir. 2014). Fairholme believes that use of that procedure in this case would only further delay resolution of this action, but it will move to introduce the evidence in the district court if this Court disagrees.


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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing was filed with

the Clerk's office this 29th day of July, 2015, apd was served upon counsel for

Defendants listed below via First Class U.S. Mail:

Gerard Joseph Sinzdak U.S. Department of Justice, Civil Division 950 Pennsylvania Avenue, N. W. Washington, D.C. 20530

Howard Neil Cayne ARNOLD & PORTER LLP

555 12th Street, N.W. Washington, D.C. 20004

Courtesy copies were also sent via First Class U.S. Mail to the following counsel:

D. Zachary Hudson BANCROFT PLLC 500 New Jersey Avenue, N.W. Seventh Floor Washington, D.C. 20001

Michael Joseph Ciatti KING & SPALDING LLP 1700 Pennsylvania Avenue, N.W. Washington, D.C. 20006

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ORAL ARGUMENT NOT YET SCHEDULED

No. 14-5254 __________________________________________________________________




v.

FEDERAL HOUSING FINANCE AGENCY, et al.,

Defendants-Appellees. __________________________________________________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF COLUMBIA (NO. 1:13-CV-1053-RCL) __________________________________________________________________

PUBLIC, REDACTED APPENDIX TO SEALED MOTION FOR JUDICIAL NOTICE AND SUPPLEMENTATION OF

THE RECORD – VOLUME 1 __________________________________________________________________

CHARLES J. COOPER DAVID H. THOMPSON VINCENT J. COLATRIANO PETER A. PATTERSON BRIAN W. BARNES COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C. 20036 Telephone: 202.220.9600 Facsimile: 202.220.9601

Counsel for Appellants Fairholme Funds, Inc., et al.

Redacted VersionPublic Appendix – Sealed Material in Separate Supplement USCA Case #14-5254 Document #1568780 Filed: 08/19/2015 Page 1 of 65

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APPENDIX VOLUME 1 TABLE OF CONTENTS

Exhibit 1: FHFA-0001 – Administrative Record Declaration of Mario Ugoletti (Dec. 17, 2013) ................................................................. A001 Exhibit 2: T-3833 – Administrative Record Treasury Projections (June 13, 2012) ............................................................................................... A012 Exhibit 3: Transcript of Deposition of Susan McFarland (July 15, 2015)

(excerpts) ........................................................................................ A043 Exhibit 4: FHFA000103596 – Email from Mario Ugoletti (Aug. 9, 2012) ............................................................................................... A061 Exhibit 5: Transcript of Deposition of Mario Ugoletti (May 15, 2015)

(excerpts) ........................................................................................ A063 Exhibit 6: Transcript of Deposition of Jeff Foster (July 14, 2015) (excerpts) ........................................................................................ A076 Exhibit 7: GT005322 – Grant Thornton Deferred Tax Asset Notes ............... A095 Exhibit 8: PWC-FM 00147059 – Freddie Mac Deferred Tax Asset Valuation Allowance Memo (June 30, 2012) ................................ A097 Exhibit 9: DT-055518 – Fannie Mae Deferred Tax Asset Valuation Allowance Memo (Feb. 2013) ...................................................... A104 Exhibit 10: DT-055488 – Fannie Mae Deferred Tax Asset Valuation Allowance Memo (March 25, 2013) .............................................. A119 Exhibit 11: GT007276 – Grant Thornton Valuation of Treasury’s Fannie

Mae Senior Preferred Stock (Sept. 30, 2011) ............................... A125 Exhibit 12: GT007353 – Grant Thornton Valuation of Treasury’s Freddie

Mac Senior Preferred Stock (Sept. 30, 2011) ................................ A179 Exhibit 13: Transcript of Deposition of Anne Eberhardt (July 8, 2015)

(excerpts) ........................................................................................ A235 Exhibit 14: T-2403 – Fannie Mae 2011 10-K (excerpts) .................................. A243 Exhibit 15: T-3350 – Fannie Mae First Quarter 2012 10-Q (excerpts) ............ A246 Exhibit 16: T-3910 – Fannie Mae Second Quarter 2012 10-Q (excerpts) ........ A249 Exhibit 17: UST00532144 – Fannie Mae Presentation to Treasury (Aug. 9, 2012) ................................................................................ A252


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EXHIBIT 1


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FHFA 0001

Case 1:13-cv-01053-RLW Document 24-2 Filed 12/17/13 Page 2 of 170

UNITED STATES DISTRICT COURT DISTRICT OF COLUMBIA

PERRY CAPITAL LLC,

Plaintiff,

v.

JACOB J. LEW, et al.,

Defendants.

F AIRHOLME FUNDS, INC., et al.

Plaintiffs,

v.

FEDERAL HOUSING FINANCE AGENCY, et al. ,

Defendants.

ARROWOOD INDEMNITY COMPANY, et al.,

Plaintiffs,

v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION, etal.,

Defendants.

Civil Action No. 13-cv-1025 (RLW)



DECLARATION OF MARIO UGOLETTI

A002


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FHFA 0002


I, Mario Ugoletti, hereby declare, based on personal knowledge of the facts, as follows:

1. I am Special Advisor to the Office of the Director of the Federal Housing Finance

Agency ("FHF A"), a role I assumed in September 2009. As Special Advisor, my responsibilities

include advising FHF A' s Acting Director Edward DeMarco concerning the Senior Preferred

Stock Purchase Agreements ("PSPAs"), described infra. Additionally, I serve as the primary

liaison with Treasury concerning the PSP As and any amendments to the PSP As.

2. I was employed at Treasury from 1995 to 2009, serving as Director of the Office

of Financial Institutions Policy from 2004-2009. In that capacity, I participated in the creation

and implementation of the PSP As.

3. FHFA is an independent federal agency with regulatory authority over the Federal

National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation

("Freddie Mac") (together, the "Enterprises") and the twelve Federal Home Loan Banks

("Banks"). 12 U.S.C. § 4511.

4. On September 6, 2008, FHFA' s Director appointed FHFA as Conservator ofthe

Enterprises, and on September 7, 2008 FHF A as Conservator of the Enterprises entered into two

materially identical Senior Preferred Stock Purchase Agreements (together, the "PSP As") with

the United States Treasury ("Treasury")-one for Fannie Mae and one for Freddie Mac. The

Amended and Restated Agreements dated September 26, 2008 and subsequent amendments are

currently available at http://www.fhfa.gov/Default.aspx?Page=364.

5. The PSPAs were a last resort after it became apparent that no infusions of capital

from the private sector were forthcoming to save the Enterprises. See Oversight Hearing to

Examine Recent Treasury and FHF A Actions Regarding the Housing GSEs Before the H Comm.

on Financial Services, 110th Cong., at 5 (Sep. 25, 2008) (statement of James B. Lockhart III,

2

A003


(Page 26 of Total)

FHFA 0003


Director, Federal Housing Finance Agency), currently available at

http://archives.financialservices.house.gov/hearing II O/lockhart092508.pdf ("After substantial

effort and communication with market participants, each company reported to FHF A and to

Treasury that it was unable to access capital markets to bolster its capital position without

Treasury financing. FHFA's and Treasury's own discussions with investment bankers and

investors corroborated this conclusion."). The PSPAs provided the market with assurances that

Treasury would provide a backstop to the Enterprises. Absent the commitments of Treasury, the

Enterprises would have collapsed. See id. at 5-6 ("In the absence of access to new capital, the only

alternative left to the firms was to cease new business and shed assets in a weak market. That would

have been disastrous for the mortgage markets as mortgage rates would have continued to move

higher and, in tum, disastrous for the Enterprises as the prices of their securities would have fallen

and credit losses would have increased."); Timothy F. Geithner, Secretary, U.S. Dep't ofthe

Treasury, Written Testimony Before the H. Comm. on Financial Services (Mar. 23, 2010),

current} y available at http://www .treasury.gov/press-center/press-releases/Pages/tg603 .aspx ("In

2007, the GSEs reported combined losses of over $5 billion ... The GSEs ultimately reported

combined 2008 losses in excess of $108 billion .... Both companies were severely

undercapitalized and would not have been able to meet their obligations without the intervention

and financial support of the government."). With the PSP As and the market assurance they

provided, the Enterprises were able to remain in operation.

6. The PSP As provided that the Enterprises would draw funds from Treasury against

the Treasury commitment if the Enterprises exhausted all of their stockholder equity and had a

negative net worth (defined as liabilities exceeding assets). If Enterprise liabilities exceeded

assets, the provision for mandatory receivership in the Housing and Economic Recovery Act of

2008 ("HERA") would be triggered. The PSP As were designed so that the Enterprises could

3

A004


(Page 27 of Total)

FHFA 0004


draw funds from Treasury in amounts necessary to cure their negative net worth and bring their

capital to zero. By the end of2008, all shareholder equity had been exhausted and the

Enterprises drew on the Treasury commitment to avoid mandatory receivership. See FHF A Data

as ofNovember 14, 2013 on Treasury and Federal Reserve Purchase Programs for GSE &

Mortgage-Related Securities at 2, currently available at

http://www.fhfa.gov/webfiles/25784/TSYSupport%202013-ll-13 .pdf (Freddie Mac draw of

$13.8 billion for third quarter 2008; Fannie Mae draw of$15.2 billion for fourth quarter 2008).

7. The PSPAs gave Treasury an expansive bundle of rights and entitlements in

exchange for the lifeline that Treasury provided, without which the Enterprises would have gone

out ofbusiness. For example, Treasury received warrants to acquire 79.9% of the common stock

ofthe Enterprises for a nominal payment. In addition, under the PSPAs, Treasury obtained

Senior Preferred Stock that is senior in priority over all other series of preferred stock. The

Treasury Senior Preferred Stock in each Enterprise had an initial face value of$1 billion, which

increases by any amount that the Enterprises draw from Treasury under the Treasury

Commitment. Further, the Treasury Senior Preferred Stock has a liquidation preference so that

Treasury has priority over any other preferred or common shareholders in the event of a

liquidation- that is, Treasury is entitled to the value of its Senior Preferred Stock (face value

plus any amounts drawn from Treasury by the Enterprises, without reduction for dividends or

other amounts that the Enterprises might pay to Treasury) before any other shareholders

preferred or common - are paid anything in liquidation.

8. The Treasury Senior Preferred Stock also included payment obligations from the

Enterprises to Treasury, commensurate with the enormous risks and financial commitments that

Treasury assumed. The Enterprises were obligated to pay a 10% annual dividend together with a

4

A005


(Page 28 of Total)

FHFA 0005


Periodic Commitment Fee ("PCF") that was " intended to fully compensate [Treasury] for the

support provided by the ongoing Commitment." Amended and Restated Agreements, § 3.2(b)

(Sept. 26, 2008). The PSP As provided that the amount of the PCF to be imposed beginning

January 2010 "shall be determined with reference to the market value of the Commitment as then

in effect." Id.

9. The PSPA gave Treasury the right, in its sole discretion, to waive the PCF for a

year at a time "based on adverse conditions in the United States mortgage market." Treasury

exercised this right to waive the PCF for 2010 and 2011 , years in which the Enterprises had

insufficient funds to pay even the 10% dividend, let alone an additional PCF, stating that "the

imposition of the PCF at this time would not fulfill its intended purpose of generating increased

compensation to the American taxpayer." Periodic Commitment Fee Waiver Letters from Dept.

ofTreasury to FHFA (Dec. 29, 2010; Mar. 31 , 2011; Jun. 30, 2011; Sept. 30, 2011; Dec. 21,

2011). It was clear by this time that, given the risks of the Enterprises and the enormity of the

Treasury commitment, the value of the PCF was incalculably large.

10. Under the Second Amendment to the PSPAs (executed December 24, 2009),

Treasury was obligated to commit any amount of funds necessary to maintain the Enterprises'

positive net worth through December 31, 2012, subject to an initial cap of$200 billion for each

ofthe Enterprises plus the amount of draws between January 1, 2010 and December 31,2012.

As of January 1, 2013, however, Treasury 's financial commitment cap became fixed: the amount

5

A006


(Page 29 of Total)

FHFA 0006


remaining available to Fannie Mae under the cap was $117.6 billion, and the amount remaining

available to Freddie Mac under the cap was $140.5 billion. 1

11. By late 2011, analysts and key stakeholders, including institutional and Asian

investors in the Enterprises' debt and mortgage backed securities (MBS), began expressing

concerns about the adequacy of Treasury' s financial commitment to the Enterprises after January

1, 2013, when the cap on Treasury's funding commitment would become fixed.

12. The principal driver of these concerns about the adequacy of Treasury's capital

commitment were questions about the Enterprises ' ability to pay the 10% annual dividend to

Treasury without having to draw additional funds from Treasury, thereby eating away at the

amount remaining available under the capped Treasury commitment. From the outset of the

PSP As, the Enterprises could not at times generate enough income to make these dividend

payments.

13. The Enterprises drew funds from Treasury to pay the required 10% dividend back

to Treasury. Of the $188 billion the Enterprises drew from Treasury from the outset of the

PSPAs (September 2008) to the execution ofthe Third Amendment (August 2012), $45.7 billion

was drawn solely to pay the 10% annual dividend back to Treasury. See FHF A, Data as of

November 14, 2013 on Treasury and Federal Reserve Purchase Programs for GSE and

Under the Second Amendment to the PSP As, Treasury committed to provide each Enterprise the greater of: (i) $200 billion or (ii) $200 billion plus the Enterprise's cumulative draws for 2010, 2011 , and 2012, less the Enterprise's positive net worth, if any, on December 31 , 2012. Second Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, at 3.

For Fannie Mae, alternative (ii) provided the greater amount: $200 billion + $40.9 billion (cumulative draws for 2010-20 12)- $7.2 billion (positive net worth on December 31 , 20 12)$116.1 billion (total draws from 2008-201 2) = $1 17.6 billion.

For Freddie Mac, alternative (ii) provided the greater amount: $200 billion + $20.6 billion (cumulative draws for 2010-2012) - $8.8 billion (positive net worth on December 31, 2012) $71.3 (total draws from 2008-2012) = $140.5 billion.

6

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(Page 30 of Total)

FHFA 0007


Mortgage-Related Securities at 2, 3. Additionally, each time the Enterprises drew funds to pay

the 1 0% dividend, the total amount of the Treasury draw increased, in turn increasing the amount

of the next 10% dividend payment.

14. By mid-2012, the amount ofthe annual 10% dividend had grown so large-$11.7

billion for Fannie Mae and $7.2 billion for Freddie Mac- that it appeared unlikely that either of

the Enterprises would be able to meet that amount consistently without drawing additional funds

from Treasury. See Freddie Mac, Quarterly Report (Form 10-Q) at 10, 85 (May 3, 2012),

currently available at http://www.freddiemac.com/investors/sec _filings/index.html ("Over time,

our dividend obligation to Treasury will increasingly drive future draws. Although we may

experience period-to-period variability in earnings and comprehensive income, it is unlikely that

we will generate net income or comprehensive income in excess of our annual dividends payable

to Treasury over the long term."); Freddie Mac, Quarterly Report (Form 10-Q) at 10, 92 (Aug. 7,

2012), currently available at http://www.freddiemac.com/investors/sec _ filings/index.html

(same); Fannie Mae, Quarterly Report (Form 10-Q) at 11 , 81 (May 9, 2012), currently available

at http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2012/q12012.pdf

("Although we may experience period-to-period volatility in earnings and comprehensive

income, we do not expect to generate net income or comprehensive income in excess of our

annual dividend obligation to Treasury over the long term."); Fannie Mae, Quarterly Report

(Form 10-Q) at 12-13, 83 (Aug. 8, 2012), currently available at

http://www.fanniemae.com/resources/file/ir/pd£'quarterly-annual-results/2012/q22012.pdf

(same). Because the cap on the Treasury commitment became fixed on January 1, 2013, each

dollar drawn from Treasury merely to repay the Treasury dividend was one less dollar available

7

A008


(Page 31 of Total)

FHFA 0008


to the Enterprises to draw in the event the Enterprise suffered losses due, for example, to a

decline in the housing market or broader economic turbulence.

15. Market forecasts-which FHFA monitored-predicted that the Enterprises '

ongoing payment ofthe 10% dividend would completely exhaust Treasury's funding

commitment within ten years, leading to potential downgrades in the Enterprises' credit ratings.

Moody' s rating service opined that the 10% dividend payments would "eliminate Fannie Mae 's

contingent capital by 2019 and Freddie Mac's by 2022 . . . [even] assum[ing] that the GSEs are

able to fully offset credit losses, which we believe is unlikely." Moody's, Sector Comment,

"Plan To Raise Fannie Mae and Freddie Mac Guarantee Fees Raises Question of Support," at 2

(Sept. 26, 2011). Moody's stated that this "would be credit negative and prompt a review of [the

Enterprises'] Aaa ratings." !d. Likewise, Deutsche Bank observed that "diminishing Treasury

support raises the risk that the agencies one day might face challenges in covering MBS losses"

and that such a risk "becomes greater in a housing market catastrophe, such as the one that

started in the US after 2006." Deutsche Bank, The Path of US Support for Fannie Mae, Freddie

Mac, THE OUTLOOK, Mar. 14, 2012, at 6.

16. FHF A shared the concerns that the 10% annual dividend to Treasury would

reduce the amount of the Treasury commitment starting in 2013. Treasury also generated and

provided certain forecasts to FHF A that were similar to those prepared by market participants.

17. These concerns about the adequacy of Treasury' s financial commitment

undermined the purpose of the PSP As to express financial support to holders of Enterprise debt

(i.e., bondholders) and mortgage backed securities. See FHF A Mortgage Market Note (Dec. 5,

2008), currently available at http://www.fhfa.gov/webfiles/1241/mmnote084.pdf. The strength

of that support depends upon the Enterprises having a sufficiently large pool of available funds

8

A009


(Page 32 of Total)

FHFA 0009


from Treasury that will permit the Enterprises to continue to operate under adverse market

conditions that may arise in the coming years.

18. To resolve these concerns, FHF A and Treasury agreed on the provisions that were

incorporated into the Third Amendment, executed on August 17, 2012. The Third Amendment

(1) eliminated the 10% annual dividend, (2) added a quarterly variable dividend in the amount (if

any) of each Enterprises' positive net worth (above net worth values that were specified in the

Third Amendment), and (3) suspended the PCF for as long as the quarterly variable dividend is

in effect. The new dividend structure eliminated the risk that borrowings to make fixed dividend

payments would lead to the exhaustion of the Treasury commitment.

19. These changes in structure did not change the underlying economics of the

PSP As. It was my belief at this time, given the size and importance of the Treasury

commitment, that through the liquidation preference, fixed dividends, and the market value of

the PCF, Treasury would receive as much from the Enterprises under the Second Amendment as

it would under the Third Amendment. Thus, the intention of the Third Amendment was not to

increase compensation to Treasury - the Amendment would not do that - but to protect the

Enterprises from the erosion of the Treasury commitment that was threatened by the fixed

dividend. The Third Amendment was therefore consistent with the intent of the original PSPAs

to (1) fully compensate Treasury for the value of its financial support, without which the

Enterprises would have been forced into receivership, and (2) protect the Enterprises and the

national housing market.

20. At the time of the negotiation and execution of the Third Amendment, the

Conservator and the Enterprises had not yet begun to discuss whether or when the Enterprises

would be able to recognize any value to their deferred tax assets. Thus, neither the Conservator

9

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(Page 33 of Total)

FHFA 0010


nor Treasury envisioned at the time of the Third Amendment that Fannie Mae's valuation

allowance on its deferred tax assets would be reversed in early 2013, resulting in a sudden and

substantial increase in Fannie Mae's net worth, which was paid to Treasury in mid-2013 by

virtue of the net worth dividend.

I declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct.

Executed this ll__ day of \)E..C..EN\~0\.. 2013 at Washington, D.C.

By:~~

10

MARIO UGOLETTI

Special Advisor to the Office of the Director, Federal Housing Finance Agency

A011


(Page 34 of Total)

EXHIBIT 2


(Page 35 of Total)


i ;

***H

IGH

LY

CO

NFI

DE

NTI

AL **

* D

O N

OT

DIS

TRIB

UTE

OR

SH

AR

E W

ITH

OTH

ER

PA

RTI

ES

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(P

SP

A)

Ove

rvie

w a

nd

Key

Co

nsi

de

rati

on

s

Sen

sitiv

e an

d P

re-D

ecis

iona

l

June

13,

201

2

A013


(Page 36 of Total)


1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed S

tock

Pur

chas

e A

gre

em

en

ts (

PS

PA

s)

3) K

ey C

on

sid

era

tion

s W

ith

Exi

stin

g P

SPAs

4) G

SE F

inan

cial

Pro

ject

ion

s

• B

ase

Cas

e

~ ~ •

Str

ess

Cas

e c ~ ~

5) T

reas

ury'

s PS

PA M

od

ific

ati

on

Pro

posa

l ~

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

2

A014


(Page 37 of Total)


1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(P

SP

As)

3) K

ey C

on

sid

era

tion

s W

ith

Exi

stin

g PS

PAs

4) G

SE F

inan

cial

Pro

ject

ion

s

• B

ase

Cas

e

~ ~ •

Str

ess

Cas

e c ~ ~

5) T

reas

ury'

s PS

PA M

od

ific

ati

on

Pro

posa

l ~

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

3

A015


(Page 38 of Total)


i ;

• u.

s. D

ep

art

me

nt o

f Tre

asur

y (T

reas

ury)

pro

vide

s ca

pita

l su

pp

ort

to

Fan

nie

Mae

and

Fre

ddie

Ma

c (t

he

G

SEs)

, p

urs

ua

nt t

o t

he

Pre

ferr

ed S

tock

Pur

cha

se A

gree

men

ts (

PSPA

s).

• F

inan

cial

mo

de

ling

by

the

GSE

s, t

he

Fed

eral

Hou

sing

Fin

ance

Age

ncy

(FH

FA)

and

Trea

sury

hig

hlig

hts

tha

t a

ma

jori

ty o

f fu

ture

dra

ws

will

lik

ely

be n

ece

ssa

ry t

o c

over

div

ide

nd

pa

yme

nts

to T

rea

sury

.

• T

his

circ

ula

rity

(i.e

. th

e G

SEs

dra

win

g fr

om

Tre

asu

ry t

o p

ay d

ivid

en

ds

to T

rea

sury

) re

duce

s Tr

easu

ry's

a

bili

ty t

o s

up

po

rt th

e c

apita

l ne

eds

of t

he

GSE

s o

nce

th

e f

inal

lev

el o

f th

e c

aps

are

fixed

as

of t

he

D

ecem

ber

31,

2012

fin

anci

als.

• C

onse

quen

tly, T

reas

ury

prop

oses

to

mo

dif

y th

e P

SPAs

to

pro

tect

the

sol

venc

y o

f th

e G

SEs.

• R

epla

ce t

he

fixe

d 10

pe

rce

nt q

ua

rte

rly

cash

div

ide

nd

pai

d by

eac

h G

SE t

o T

rea

sury

wit

h a

va

riab

le q

ua

rte

rly

div

ide

nd

equ

al t

o a

ny n

et w

ort

h a

bove

a c

ert

ain

do

llar

thre

sho

ld (

a n

et w

ort

h

swee

p) o

the

rwis

e t

he

qu

art

erl

y d

ivid

en

d is

zer

o.

• O

ver

tim

e a

nd b

ase

d on

ear

ning

s p

roje

ctio

ns

of t

he

GSE

s, t

he

re s

ho

uld

be

no

ma

teri

al d

iffe

ren

ce in

th

e n

et c

ash

retu

rne

d t

o ta

xpay

ers

(i.e.

, th

e d

iffe

ren

ce b

etw

ee

n d

raw

s ta

ken

and

divi

dend

s re

ceiv

ed)

as w

ou

ld b

e ex

pect

ed w

ith

th

e fi

xed

ten

pe

rce

nt d

ivid

en

d.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

4

A016


(Page 39 of Total)


;d

• A

s co

nser

vato

r, F

HFA

eva

lua

ted

th

e G

SEs

finan

cial

fu

ture

by

pe

rfo

rmin

g s

en

sitiv

ity a

naly

ses,

co

mm

on

ly r

efe

rre

d t

o a

s th

e "

stre

ss t

ests

."

• T

he s

en

sitiv

ity a

naly

ses

incl

ud

ed

a b

ase

and

do

wn

sid

e c

ase

and

we

re p

roje

cte

d o

ut t

o y

ea

r 20

14.

• T

he s

en

sitiv

ity a

naly

ses

we

re b

ased

on

ass

umpt

ions

ab

ou

t GSE

op

era

tion

s, l

oan

pe

rfo

rma

nce

, m

acr

oe

con

om

ic a

nd f

inan

cial

ma

rke

t co

nd

itio

ns,

and

hou

se p

rices

.

~ •

Tre

asur

y al

so e

valu

ated

th

e fi

nanc

ial

pros

pect

s o

f th

e G

SEs.

::0

-;<

§ •

Gra

nt T

ho

rnto

n w

as e

ngag

ed a

s an

ind

ep

en

de

nt,

th

ird

-pa

rty

con

sulta

nt t

o p

erf

orm

a v

alu

atio

n

of t

he

en

titi

es

for

the

Tre

asur

y F

inan

cial

Re

po

rt a

nd O

M B

bu

dg

et e

stim

ati

on

figu

res.

• G

ran

t Th

orn

ton

de

velo

pe

d t

he

ir o

wn

for

ecas

ts b

ased

, in

pa

rt,

on

th

e fo

reca

sts

pre

pa

red

by

each

G

SE b

ased

on

a c

on

sist

en

t se

t of

assu

mpt

ions

pro

vid

ed

by

FHFA

.

• T

he G

rant

Th

orn

ton

mod

els

we

re p

roje

cte

d o

ut

un

til

each

GSE

de

ple

ted

its

PSPA

ca

pa

city

.

• B

oth

the

FH

FA a

nd G

ran

t Th

orn

ton

ana

lyse

s w

ere

use

d to

gen

erat

e th

e fo

reca

st e

stim

ates

on

th

e

sub

seq

ue

nt p

ages

.

PRE

-DE

CIS

ION

AL

-M

AR

KET

SE

NSI

TIV

E-

PLEA

SE D

O N

OT

DIS

TRIB

UTE

5

A017


(Page 40 of Total)


Sec

tio

n 2

: O

ve

rvie

w o

f th

e G

SE P

refe

rred

Sto

ck P

urc

has

e A

re

emen

ts

1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of t

he

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(P

SP

As)

3)

Key

Co

nsi

de

rati

on

s W

ith

Exi

stin

g PS

PAs

4) G

SE

Fin

anc

ial

Pro

ject

ion

s

• Ba

se C

ase

~ ~ •

Stre

ss C

ase

c ~ ~

5) T

reas

ury

's P

SPA

Mo

dif

ica

tio

n P

rop

osa

l ~

PRE

·DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

Sen

sitiv

e /

Pre

·Dec

isio

nal 6

A018


(Page 41 of Total)


i ;

• In

Se

pte

mb

er

2008

, th

e F

HFA

pla

ced

Fan

nie

Ma

e a

nd F

redd

ie M

ac

into

con

serv

ator

ship

.

• A

s st

ate

d b

y FH

FA,

the

goa

ls o

f con

serv

ator

ship

inc

lude

: (1

) h

elp

ing

re

sto

re c

on

fide

nce

in t

he

G

SEs,

(2)

enh

anci

ng t

he

GS

Es'

capa

city

to

fu

lfill

the

ir r

ole

in t

he

hou

sing

ma

rke

t, a

nd (

3)

miti

ga

ting

th

e s

yste

mic

risk

th

at

has

con

trib

ute

d t

o m

ark

et

inst

ab

ility

.

• W

he

n t

he

GSE

s e

nte

red

con

serv

ator

ship

, ea

ch G

SE r

ecei

ved

capi

tal s

up

po

rt th

rou

gh

PSP

As

wit

h t

he

Tr

easu

ry.

• T

he P

SPA

s w

ere

de

sign

ed t

o p

rovi

de

co

nfid

en

ce t

o t

he

ma

rke

t th

at

the

GSE

s w

ou

ld r

emai

n so

lven

t.

• U

nd

er

the

PSP

As,

Tre

asu

ry c

om

mit

ted

to

mak

e ad

vanc

es o

f fu

nd

s to

eac

h G

SE f

or

each

cal

enda

r q

ua

rte

r in

wh

ich

th

e li

ab

ilitie

s o

f th

e r

espe

ctiv

e G

SE e

xcee

ded

its a

sset

s in

ord

er

to m

ain

tain

so

lven

cy (

i.e. m

ain

tain

po

sitiv

e n

et

wo

rth

).

• O

pera

tiona

lly,

the

re is

a o

ne q

ua

rte

r la

g b

etw

ee

n t

he

ne

t w

ort

h d

efi

cit

bein

g m

easu

red

and

subs

eque

ntly

cur

ed b

y a

PSPA

dra

w.

(I.e

., a

on

e-q

ua

rte

r de

laye

d pa

ymen

t)

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

7

A019


(Page 42 of Total)


i i

• T

he i

nitia

l cap

on

the

Tre

asu

ry S

enio

r P

refe

rred

Sto

ck fu

nd

ing

co

mm

itm

en

t to

eac

h G

SE w

as

$100

b

illio

n.

In r

etu

rn f

or

the

co

mm

itme

nts

, Tr

easu

ry r

ecei

ved

a pr

efer

red

sto

ck c

ert

ifica

te f

rom

eac

h G

SE a

nd a

n in

itia

l $1

bill

ion

liq

uid

atio

n p

refe

renc

e. T

reas

ury

also

rec

eive

d w

arra

nts

wit

h t

he

rig

ht

to p

urch

ase

up

to 7

9.9

per

cent

of t

he

co

mm

on

eq

uit

y o

f eac

h G

SE.

• U

nder

th

e t

erm

s o

f eac

h pr

efer

red

stoc

k ce

rtifi

cate

, th

e "

liqu

ida

tion

pre

fere

nce"

val

ue

incr

ease

s d

olla

r-fo

r-d

olla

r by

th

e a

mo

un

t of

each

adv

ance

of f

un

ds

mad

e by

Tre

asu

ry t

o t

he

re

spec

tive

GSE

un

de

r th

e c

om

mitm

en

t.

• T

he c

ash

divi

dend

rat

e on

th

e p

refe

rred

sto

ck u

nd

er

the

PSP

As w

as s

et a

t 10

per

cent

of t

he

cu

mu

lativ

e li

qu

ida

tion

pre

fere

nce

.

• S

ince

th

ey

wer

e in

itia

lly e

stab

lishe

d, t

he

PSP

As

have

bee

n am

ende

d tw

ice:

• Fi

rst,

in M

ay 2

009,

wh

en

th

e c

om

mit

me

nt c

aps

wer

e in

crea

sed

to $

200

bill

ion

fo

r ea

ch G

SE;

• R

etai

ned

po

rtfo

lio c

ap i

ncre

ase

d to

$90

0 bi

llion

(fr

om

$85

0 bi

llion

) a

t D

ecem

ber

31,

2009

wit

h 1

0% a

nnua

l dec

lines

bas

ed o

n th

e c

ap (

in p

lace

of t

he

yea

r-en

d ba

lanc

e).

• S

econ

d, i

n D

ecem

ber

2009

, w

he

n t

he

fixe

d $2

00 b

illio

n c

ap w

as a

men

ded

to in

crea

se b

y th

e

am

ou

nt o

f dra

ws

be

twe

en

Jan

uary

1,

2010

and

Dec

embe

r 3

1,2

01

2.

• A

fte

r D

ecem

ber

31

,20

12

, th

e c

om

mit

me

nt c

ap b

ecom

es

fixed

aga

in a

nd t

he

unu

sed

bala

nce

of t

he

co

mm

itm

en

t w

ill b

e av

aila

ble

to b

e d

raw

n u

nd

er

the

exi

stin

g te

rms

of t

he

PSP

As.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

8

A020


(Page 43 of Total)


As

of D

ecem

ber

31

2011

Cor

e T

erm

s

Am

ende

d &

Res

tate

d PS

PAs

Am

en

dm

en

ts D

ated

Liqu

idat

ion

Pre

fere

nce

Div

iden

d R

ate

Sen

iori

ty o

f Sen

ior

Pre

ferr

ed S

tock

Cov

enan

ts

Ret

aine

d In

vest

me

nt P

ort

folio

Div

iden

d P

aym

ents

to

Oth

er P

artie

s

Ass

et S

ales

Leve

rage

Lim

itatio

n

Oth

er T

erm

s

War

rant

s

Sig

ned

on

Sep

tem

ber

26

, 2

00

8.

1st

Am

en

dm

en

t -M

ay

61

20

09

; 2

nd

Am

en

dm

en

t -D

ecem

ber

24

, 2

00

9.

Incr

ease

s w

ith

dra

ws

un

de

r th

e fu

nd

ing

co

mm

itm

en

t.Ill

Cas

h 1

0%

; if

ele

cted

to

be

paid

in k

ind

("P

IK")

12

%.

Sen

ior

Pre

ferr

ed S

tock

is s

enio

r to

the

exi

stin

g p

refe

rre

d s

tock

issu

ed p

rio

r to

co

nser

vato

rshi

p an

d co

mm

on

eq

uit

y b

ut i

s ju

nio

r to

all

debt

cla

ims

and

oblig

atio

ns.

Red

uce

by 1

0%

pe

r ye

ar u

ntil

th

e G

SEs'

reta

ined

po

rtfo

lios

each

rea

ch $

25

0 b

illio

n.

Non

e p

erm

itte

d u

nti

l sen

ior

pref

erre

d st

ock

is r

epai

d in

ful

l.

No

sale

, tr

ansf

er, o

r di

spos

ition

of a

ny a

sset

s o

the

r th

an

dis

posi

tions

for

fair

val

ue

in t

he

ord

ina

ry c

ours

e o

f bus

ines

s.

No

t p

erm

itte

d t

o in

crea

se d

eb

t to

mo

re th

an

12

0%

of t

he

tota

l am

ou

nt o

f m

ortg

ages

and

mor

tgag

e-ba

cked

sec

uriti

es o

wn

ed

by

each

ent

erpr

ise.

Rig

ht t

o p

urch

ase

up t

o 7

9.9

per

cent

of t

he

com

mon

eq

uity

at o

ne

-th

ou

san

dth

of

one

cent

($

0.0

00

01

) pe

r sh

are,

fu

lly d

ilute

d.

War

rant

s ex

pire

Sep

t. 7,

20

28

.

!ti A

s am

ende

d on

Dec

embe

r 2

4 .• 20

09, e

ach

PSPA

com

mits

Tre

asur

y to

pro

vide

add

itio

nal

supp

ort t

o e

ach

Ent

erpr

ise

thro

ugh

the

end

of 2

012

in e

xcha

nge

for

a gr

eate

r liq

uida

tion

pre

fere

nce.

Tre

asur

y's

fina

ncia

l co

mm

itm

ent n

ow e

qual

s th

e gr

eate

r of $

200

billi

on o

r $20

0 bi

llion

plu

s cu

mul

ativ

e ne

t wor

th d

efic

its

expe

rien

ced

duri

ng 2

010,

201

1, a

nd 2

012,

less

any

sur

plu

s re

mai

ning

as

of D

ecem

ber 3

1,

2012

. B

egin

ning

in 2

013,

the

cap

acit

y av

aila

ble

beco

mes

fixe

d an

d th

e re

mai

ning

cap

acit

y de

clin

es a

s th

ere

are

furt

her

draw

s.

PRE

-DE

CIS

ION

AL

-M

AR

KET

SE

NSI

TIV

E-

PLEA

SE D

O N

OT

DIS

TRIB

UTE

9

A021


(Page 44 of Total)


i ~ ~

Fan

nie

Ma

e:

S in

Bill

ions

$35

$30

$25

$20

$ 'S

$.0

$S

$0

Fre

ddie

Mac

: S

in B

illio

ns

$3S

$30

$2S

$20

$'S

$.0

$S

$0

3Q

4Q

lQ

2Q

3Q

4Q

lQ

2Q

3Q

4Q

lQ

2Q

3Q

4Q

lQ

'OS

'08

'09

'09

'09

'09

'10

'1

0 '1

0 '1

0 '1

1 '1

1 '1

1 '1

1 '1

2 3Q

4Q

lQ

2Q

3Q

4Q

lQ

2Q

3Q

4Q

lQ

2Q

3Q

4Q

lQ

'0

8 '0

8 '0

9 '0

9 '0

9 '0

9 '1

0 '1

0 '1

0 '1

0 '1

1 '1

1 '1

1 '1

1 '1

2 •

Dra

ws f

or D

ivid

end

Pay

men

ts

• D

raw

s for

Net

loss

es

• D

raw

s fo

r D

ivid

end

Pay

men

ts

• D

raw

s fo

r N

et lo

sses

• C

umul

ativ

e gr

oss

draw

s by

Fan

nie

Mae

thro

ug

h M

arch

31,

201

2 to

tal $

117.

2 b

illio

n (

incl

udin

g th

e in

itial

$1.0

bill

ion

liq

uid

atio

n p

refe

renc

e),

of w

hich

$19

.4 b

illio

n w

ere

dra

wn

to

fund

sen

ior

pref

erre

d st

ock

divi

dend

s pa

id t

o T

rea

sury

.

• C

umul

ativ

e gr

oss

dra

ws

by F

redd

ie M

ac th

rou

gh

Mar

ch 3

1, 2

012

tota

l $7

2.3

bill

ion

(in

clud

ing

the

initi

al

$1.0

bill

ion

liq

uid

atio

n p

refe

renc

e),

of w

hich

$7

.0 b

illio

n w

ere

dra

wn

to

fun

d se

nio

r pr

efer

red

sto

ck

divi

dend

s pa

id t

o T

reas

ury.

• S

ince

200

8, n

earl

y 17

% o

f th

e to

tal

PSPA

dra

ws

by F

anni

e M

ae a

nd n

earl

y 10

% o

f th

e to

tal

PSPA

dra

ws

by

Fre

ddie

Mac

hav

e be

en u

sed

to p

ay s

en

ior

pref

erre

d st

ock

divi

dend

s ba

ck t

o T

rea

sury

.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

10

A022


(Page 45 of Total)


i ~ ~

• In

itial

Pur

chas

e A

gree

men

t ha

d a

spec

ifie

d fu

ndin

g co

mm

itm

ent

cap

of $

100

billi

on f

or e

ach

GSE

.

• Th

e M

ay 2

009

amen

dm

ent

incr

ease

d th

e sp

ecif

ied

cap

for

each

ins

titu

tion

to

a f

ixed

$20

0 bi

llion

.

• T

he D

ec.

2009

am

end

men

t m

odif

ied

the

fixe

d ca

p an

d al

low

ed t

he

cap

to i

ncre

ase

doll

ar f

or d

olla

r fo

r an

y dr

aws

b etw

een

Jan.

1, 2

010

and

Dec

. 3

1,2

01

2.

• A

t th

e en

d o

f 20

09,

Fan

nie

Mae

had

dra

wn

$75.

2 bi

llion

and

Fre

ddie

Mac

had

dra

wn

$50.

7 bi

llion

, ex

clud

ing

the

initi

al $

1.0

billi

on

liqu

idat

ion

pref

eren

ce f

or w

hich

th

e G

SEs

did

not

rece

ive

cash

pro

ceed

s.

• A

t th

e en

d o

f 20

12,

thes

e ca

ps b

eco

me

fixe

d an

d th

ere

will

be

N$1

2S b

illio

n o

f cap

acit

y re

mai

ning

for

F

anni

e M

ae a

nd N

$1

49

bill

ion

for

Fre

ddie

Mac

.

• Th

is r

emai

nin

g ca

pac

ity

will

dec

line

to t

he

exte

nt

ther

e ar

e fu

rthe

r dr

aws

from

201

3 o

nw

ard

.

Fan

nie

Mae

: PS

PA c

ap a

s o

f 12

/241

09 a

men

dmen

t $2

00 b

illi

on

+ E

st.

PS

PA d

raw

s' J

an.

'10

-D

ec.

'12

+ $

65.9

bil

lion

Tot

al e

s t.

PSPA

cap

on

Dec

. 3

1,20

12

$265

.9 b

illi

on

-P

SPA

dra

ws

thro

ugh

Dec

. 3

1,20

09

-$7

5.2

bill

ion

-E

st.

PSPA

dra

ws'

Jan

. '1

0 -

Dec

. '1

2 -

$65.

9 bi

llio

n

= R

emai

ning

cap

acity

Dec

. 31

,20

12

$

124.

8 bi

llio

n (l

ess

any

posi

tive

net

wor

th o

n D

ec.

31,2

012)

Fre

ddie

Mac

: P

SP

Aca

p as

of

12/2

4109

am

endm

ent

$200

bil

lion

+ E

st.

PSPA

dra

ws'

Jan

. '1

0 -

Dec

. '1

2 +

$25

.1 bi

llio

n

Tot

al e

s t.

PSPA

cap

on

Dec

. 3

1,2

012

$2

25.1

bill

ion

-PS

PA d

raw

s th

rou

gh D

ec.

31

,20

09

-

$50

.7 b

illi

on

-E

s t.

PSP

A d

raw

s' J

an.

'10

-D

ec.

'12

-$2

5.1

bill

ion

= R

emai

nin

g ca

paci

ly D

ec.

31,

2012

(l

ess

any

posi

tive

net

wor

th o

n D

ec.

31,

201

2)

$14

9.3

bill

ion

I A

ctua

l dra

ws

betw

een

Janu

ary

I, 2

0 I 0

and

Mar

ch 3

1, 2

012

, for

ecas

ted

draw

s the

reaf

ter.

For

ecas

ted

draw

s th

roug

h D

ecem

ber

31,

20

12 a

s es

timat

ed b

y th

e ba

se

case

for

ecas

t in

the

Fed

eral

Hou

sing

Fin

ance

Age

ncy'

s an

nual

"Pr

ojec

tion

s of t

he E

nter

pris

es' F

inan

cial

Per

form

ance

" re

port

, rel

ease

d O

ctob

er 2

0 II

.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

11

A023


(Page 46 of Total)


1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(PS

PA

s)

3) K

ey C

on

sid

era

tio

ns

Wit

h E

xist

ing

PS

PA

s

4) G

SE F

inan

cial

Pro

ject

ion

s

• Ba

se C

ase

~ ~ •

Str

ess

Cas

e c ~ i

s) Tre

asu

ry's

PSP

A M

od

ific

ati

on

Pro

po

sal

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

12

A024


(Page 47 of Total)


i ~ ~

• A

larg

e pe

rcen

tage

of

rece

nt

dra

ws

has

been

use

d to

fun

d d

ivid

en

d p

aym

en

ts.

• O

f F

anni

e M

ae

's $

117.

2 b

illio

n d

raw

, $1

9.4

bill

ion

(-1

7%

) ha

s be

en u

sed

to f

un

d d

ivid

en

ds.

• O

f Fr

edd

ie M

ac's

$72

.3 b

illio

n d

raw

, $7

.0 b

illio

n (

-10

%)

has

bee

n u

sed

to fu

nd

div

ide

nd

s.

• F

inan

cial

mo

de

ling

em

plo

yed

by

the

GSE

s, F

HFA

and

Tre

asu

ry h

igh

ligh

ts th

at

a m

ajo

rity

of f

utu

re

dra

ws

will

lik

ely

be u

sed

to p

ay d

ivid

en

d p

aym

en

ts to

Tre

asu

ry.

• "O

ur

annu

al d

ivid

en

d o

blig

atio

n o

n th

e s

en

ior

pre

ferr

ed

sto

ck e

xcee

ds o

ur

annu

al h

isto

rica

l ea

rnin

gs in

all

bu

t o

ne

pe

rio

d ...

it

is u

nlik

ely

tha

t w

e w

ill r

egul

arly

gen

erat

e n

et

inco

me

... i

n ex

cess

of o

ur

annu

al d

ivid

ends

pay

able

to

Tre

asur

y. A

s a

resu

lt, t

he

re is

sig

nifi

can

t u

nce

rta

inty

as

to o

ur

lon

g-t

erm

fin

anci

al s

ust

ain

ab

ility

. C

on

tinu

ed

ca

sh p

aym

en

t of

sen

ior

pre

ferr

ed

div

ide

nd

s ...

will

hav

e an

adv

erse

imp

act

on

ou

r fu

ture

fin

anci

al c

on

diti

on

and

ne

t w

ort

h ...

" -

Fre

ddie

Ma

c 2

01

11

O-K

.

• "W

e w

ill c

on

tinu

e t

o n

eed

fund

s fr

om

Tre

asur

y as

a re

sult

of a

nu

mb

er

of f

act

ors

, in

clud

ing

the

div

iden

ds w

e ar

e re

qu

ired

to

pay

Tre

asur

y on

th

e s

en

ior

pre

ferr

ed

sto

ck ...

As

a re

sult

of

ou

r d

raw

s, w

e d

o n

ot e

xpe

ct to

ear

n p

rofi

ts in

exc

ess

of o

ur

annu

al d

ivid

en

d o

blig

atio

n t

o

Trea

sury

fo

r th

e i

nd

efi

nit

e f

utu

re ...

" -

Fan

nie

Mae

201

1 10

-K.

• T

he c

ircu

lari

ty d

escr

ibed

abo

ve (

i.e. t

he

GSE

s d

raw

ing

fro

m T

rea

sury

to p

ay d

ivid

en

d p

aym

en

ts to

Tr

easu

ry)

redu

ces

Tre

asur

y's

ab

ility

to s

up

po

rt th

e c

apita

l ne

eds

of t

he

GSE

s on

ce t

he

fina

l le

vel o

f th

e c

aps

are

fixed

as

of t

he

Dec

embe

r 31

, 20

12 f

inan

cial

s.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

13

A025


(Page 48 of Total)


1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(P

SP

As)

3) K

ey C

on

sid

era

tion

s W

ith

Exi

stin

g P

SPA

s

4) G

SE F

inan

cial

Pro

ject

ion

s

• B

ase

Cas

e

~ ~ •

Str

ess

Cas

e c ~ ~

5) T

reas

ury'

s PS

PA M

od

ific

ati

on

Pro

posa

l ~

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

14

A026


(Page 49 of Total)


Pro

·ect

ion

s: $

inb

illio

ns

FV20

12

FY20

13

FV20

14

FV20

15

FY20

16

FY20

17

FY20

18

FY20

19

FV20

20

FV20

21

FV20

22

FV20

23

Ne

t Co

mp

reh

en

sive

In

com

e (

loS

S)l

Tot

al G

ross

P5P

A D

raw

Tota

l D

ivid

en

d P

aid

Tot

al P

SP

A D

raw

Ne

t o

f PS

PA

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ide

nd

s

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ject

ed

End

of P

erio

d N

et

Wo

rth

1

Pe

rce

nt o

f D

ivid

en

ds

Fun

ded

by P

SP

A D

raw

s

Do

llar A

mt.

of D

ivid

en

ds

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nd

ed

bv

Ear

nin

Cum

ulat

ive

cash

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iden

ds F

unde

d b

y E

arnl

n,

($13

.1)

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7

($lL

8)

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9

($6.

2)

100%

SO.O

so.

o

$504

$11.

4

illi

Ql

($2.

6)

($3.

4)

81%

$2.6

$2.6

$13.

1

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~

($11

.9)

($2.

2)

20%

$1

1.9

$14.

5

$13.

5

$1.2

iill:Q

l ($

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5)

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8

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3

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l ($

8.2)

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6)

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$8

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$36.

5

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")

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9)

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$4

"

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4)

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3)

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$53.

7

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17.5

)

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1)

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4)

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$61.

7

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5)

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4

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$10.

7

($19

04)

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7)

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9)

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$8

.7

$79.

1

$B.1

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1

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($B

.5)

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3)

59%

$B

.5

$87.

6

$8.0

$13.

5 ($

21.8

)

($8.

3)

($3.

6)

62%

$8

.3

$95.

9

-I

Cum

ulat

ive

Net

Ret

urn

To

Tax

pay

ers

By F

Y20

23l

$92.

41

~ ~ ~

Be

gin

nin

g P

SP

A l

iqu

ida

tio

n P

refe

ren

ce

Tot

al G

ross

Uq

uid

ati

on

Pre

fere

nce

Cu

mu

lativ

e G

ross

liq

uid

ati

on

Pre

fere

nce

Rem

aini

ng P

5PA

Fu

nd

ing

Ca

pa

city

$112

6

$2&

7

$1

4L

3

$125

.0

$14

1.3

$110

4 $1

52.7

$120

.8

4

$152

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$2.9

$1

55.6

$117

.9

$155

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$1.2

$156

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$116

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$156

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$7.0

$163

.8

$109

. 7

$163

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$7.1

$170

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$102

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4

$179

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$1

8&5

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0

$188

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$9.8

$198

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2

$198

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.7

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5

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1

$221

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4

$221

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$13.

5

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$38.

9

Cum

ulat

ive

Net

PS

PA

Inv

estm

entS

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12.3

$1

09.7

$g

1.7

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0 $7

5.8

$67.

0 $5

8.6

$50.

5 $4

1.9

$33.

2 $2

4.7

$16.

41

Per

an

nu

m p

roje

cte

d P

SPA

dra

ws

an

d d

ivid

en

ds

$ in

bill

ion

s

$60

$20

($20

)

($60

)

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

.10

% C

ash

Div

ide

nd

•

Ne

t C

om

pre

h.

Inco

me

(1)

•

Gro

ss P

SPA

Uq

d.

Pre

f.

Pro

ject

ed P

SPA

fun

din

g c

ap

aci

ty a

s a

resu

lt o

f dra

ws

$ in

bill

ion

s

$15

0

$12

0

$9

0

$6

0

$3

0

$0

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

PS

PA

Ca

pa

city

Le

ft

(1)

Net

com

preh

ensi

ve i

ncom

e is

def

ined

as

the

sum

of

econ

omic

net

int

eres

t m

argi

n, f

f!i!s

and

oth

er in

com

e le~ a

pro

visi

on f

or c

redi

t lo

sses

, adm

inis

tr.l

tiw

eK

pens

es a

nd o

ther

non

-int

eres

t eK

pens

es.

(2)

Neg

atlw

ew

ry y

ear

beca

use

of a

one

qua

rter

tim

ing

dela

y In

pay

men

t of

PSPA

dra

w r

eque

sts.

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cula

ted

as t

he

sum

of

net

com

preh

ensl

w I

ncom

e an

d to

tal g

ross

PSP

A d

r.lw

s le

ss t

otal

div

iden

ds p

aid.

(3

) T

he c

umul

ativ

e ne

t re

turn

to

taxp

ayer

s by

FY

2023

rep

rese

nts

the

sum

of

the

cum

ulat

lw c

ash

divi

dend

s fu

nded

by

earn

ings

as

of F

Y20

23 a

nd th

e pr

olec

ted

end

of

peri

od n

et w

orth

In F

Y20

23.

(4)

Rem

aini

ng P

SPA

fund

ing

capa

city

red

uced

by

draw

s th

at o

ccur

aft

er Ja

nuar

y 1,

201

3. P

oten

tial

PSP

A d

raw

s in

4Q

201

2 ap

pear

as

FY20

13 b

ut d

o no

t re

duce

PSP

A c

apac

ity

. (S

) T

he c

umul

ativ

e ne

t PS

PA i

lM!s

tmen

t de

crea

ses

by t

he

doll

ar a

mou

nt o

f di

vide

nds

fund

ed b

y ea

rnin

gs p

aid

to th

e U

.S. O

i!pa

rtm

ent o

f th

e T

reas

ury.

PR

E-D

EC

ISIO

NA

L-

MA

RK

ET

SE

NS

ITIV

E -

PLE

AS

E 0

0 N

OT

DIS

TR

IBU

TE

15

A027


(Page 50 of Total)


Pro

ject

ions

: $

in b

illio

ns

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

FY20

21

FY20

22

FY20

23

~

Ne

t Com

preh

ensi

ve In

com

e (Io

SS

)l

Tot

al G

ross

P5P

A D

raw

Tot

al D

ivid

end

Pai

d

Tota

l P5P

A D

raw

Ne

tof P

5PA

Div

iden

ds

1$49

.0)

$58.

1 ($

U.9

)

$45.

2

Pro

ject

ed E

nd

o/ P

erio

d N

et

Wo

rth

1 (S

2a3)

Per

cent

of D

ivid

ends

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ded

by P

5PA

Dra

ws

100%

Dol

lar A

mt.

of D

ivid

ends

Fun

ded

bv E

arni

nJlS

$0

.0

Cum

ulat

ive

Cas

h D

ivid

ends

Fun

ded

bv

Ear

nin2

.s

$0.0

Cum

ulat

ive

Net

Ret

urn

To

Taxp

ayer

s By

FY2

0n

l

1$8.

8)

$34-

3 ($

lR6

)

$15.

7

($13

.4)

100%

sao

sao

$12.

9

$11.

3 ($

2U

)

($9.

8)

($10

.3)

54%

$9.8

$~8

$1&

6

54

5

($2

B)

($17

.4)

1$9.

0)

21%

$1

7.4

$27.

2

$9.3

$18.

6 ($

22.2

)

($3.

6)

1$9.

4)

84%

$3

.6

$30.

8

$8.7

$14.

5

1$23

. 7)

($9.

2)

($3.

9)

61%

$9

.2

$40.

0

$8.2

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5

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1$8.

7)

1$4.

4)

65%

$8

.7

$48.

7

$8.0

$1&

4 ($

26.9

)

1$8.

5)

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9)

68%

$8

.5

$57.

2

$8.7

$19.

9 1$

28.8

) 1$

8.9)

($5.

2)

69%

$8

.9

$<6.

2

$<0.9

1

$8.5

$8.7

1$

8. 7)

~

Beg

inni

ng P

SPA

liqu

idat

ion

Pre

fere

nce

$lU

.6

$17a

7 $2

05.0

$2

16.3

$2

20.8

$2

39.4

$2

53.9

$2

70.4

$2

88.8

$3

08.7

c T

ota

l Gro

ss U

quid

atio

n P

refe

renc

e $5

8.1

$34.

3 $1

13

$4.5

$1

8.6

$14.

5 $1

6.5

$1&

4 $1

9.9

$8.7

~ C

umu

lativ

e G

ross

Uqu

idat

ion

Pre

fere

nce

$170

.7

$205

.0

$216

.3

$220

.8

$239

.4

$253

.9

$270

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$288

.8

$303

.7

9'7

4

~ R

emai

ning

PSP

A F

undi

ng C

apac

ity

$125

.0

$lU

.4

4 $1

01.1

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0 $6

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0 $2

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(SO.Oi

:) 1

Cum

uiat

ive

Net

PS

PA

Inve

stm

en

t5 $1

40.6

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S6.

2 $1

46.4

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m.l

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0 $9

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an

nu

m p

roje

cte

d P

SPA

dra

ws

an

d d

ivid

en

ds

$ in

bill

ion

s

$60

$20

($20

)

($60

)

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

.10

% C

ash

Div

ide

nd

•

Ne

t C

om

pre

h.

lnco

me

(1

) •

Gro

ss P

SPA

Uq

d.

Pre

f.

Pro

ject

ed P

SPA

fun

ding

cap

acit

y as

a r

esul

t of

dra

ws

$ in

bill

ion

s

$15

0

$12

0

$90

$60

$30

$0

'1

1 '1

2 '1

3 '1

4 '1

5 '1

6 '1

7 '1

8 '1

9 '2

0 '2

1 '2

2 '2

3

PSP

A c

ap

aci

ty L

eft

(1)

Net

com

preh

ensi

ve i

ncom

e is

de

fine

d a

s th

e s

um o

f eco

nom

ic n

et

inte

rest

mar

gin,

fee

s a

nd

oth

er

inco

me

le~ a

pro

visi

on

fo

r cr

ed

it lo

sses

, a

dm

inis

tr.lt

ive

eK

pens

es a

nd

oth

er

no

n-i

nte

rest

eK

pens

es.

(2)

Neg

ativ

e e

very

yea

r be

caus

e of

a o

ne q

ua

rte

r tim

ing

del

ay In

pa

yme

nt o

f PSP

A dr

aw r

eque

sts.

Cal

cula

ted

as t

he

sum

of n

et c

ompr

ehen

sive

Inc

ome

an

d to

tal g

ross

PSP

A d

r.lw

s le

ss t

ota

l div

iden

ds p

aid.

(3

) Th

e cu

mu

lativ

e n

et

retu

rn to

taxp

ayer

s b

y FY

2023

rep

rese

nts

the

sum

of

the

cu

mu

lativ

e c

ash

divi

dend

s fu

nd

ed

by

earn

ings

as

of F

Y20

23 a

nd

the

pro

ject

ed

en

d o

f pe

rio

d n

et w

ort

h In

FY

2023

. (4

) R

emai

ning

PSP

A fu

nd

ing

cap

acity

red

uced

by

draw

s th

at o

ccu

r a

fte

r Jan

uary

1,

2013

. P

oten

tial P

SPA

draw

s in

4Q

201

2 ap

pear

as

FY20

13 b

ut d

o n

ot

redu

ce P

SPA

capa

city

. (5

) Th

e cu

mu

lativ

e n

et

PSPA

inve

stm

en

t de

crea

ses

by t

he

do

llar

am

ou

nt o

f div

iden

ds f

un

de

d b

y ea

rnin

gs p

aid

to th

e U

.S. D

ep

art

me

nt o

f th

e T

reas

ury

.

PR

E·D

EC

ISIO

NA

L-M

AR

KE

T S

EN

SIT

IVE

-P

LEA

SE

DO

NO

T D

ISTR

IBU

TE

16

A028


(Page 51 of Total)


;d ~ c ::0

-;< ~ <

D

Pro

·ect

ion

s: $

in b

illio

ns

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

FY20

21

FY20

22

FY20

23

Ne

t Co

mp

reh

en

sive

In

com

e (L

oss)

1

Tot

al G

ross

PS

PA

Dra

w

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al D

ivid

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d P

aid

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al P

SP

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raw

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t o

f PS

PA

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ide

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ject

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d o

f Pe

rio

d N

et W

ort

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rce

nt o

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ivid

en

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ded

by

PS

PA

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ws

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llar A

mt.

of D

ivid

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nd

ed

b

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in

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mu

lati

ve

ca

sh D

ivid

en

ds

Fu

nd

ed

by

Ear

ning

s

Cum

ula

tive

Ne

t Ret

urn

To

Tax

paye

rs B

y FY

2023

3

Beg

inni

ng P

SP

A L

iqu

ida

tion

Pre

fere

nce

Tot

al G

ross

Liq

uid

atio

n P

refe

ren

ce

Cu

mu

lativ

e G

ross

Liq

uid

ati

on

Pre

fere

nce

Re

ma

inin

g P

SP

A F

un

din

g C

ap

aci

ty

Cu

mu

lati

ve N

et P

SP

A ln

vest

me

nt5

$6.7

$10.

5

($7.

3)

$3.2

$3.5

100%

~-

0 $0

.0

$7

22

$10.

5

$82.

7

$150

.0

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5

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($7.

7)

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7)

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00~

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7

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7

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4

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8

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6

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7)

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7)

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3

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7

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$82.

7

$150

.0

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2

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0

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7

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an

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ross

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7

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8

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0

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7

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7

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5

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7)

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2

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7

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5

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2

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6

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2

$2.5

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7

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2

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7

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9.3

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4)

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8)

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3

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3

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ject

ed P

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din

g c

ap

aci

ty a

s a

resu

lt o

f dra

ws

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bill

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s $

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0

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SP

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ap

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ty L

eft

'20

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t com

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ve in

com

e is

de

fine

d a

s th

e s

um o

f eco

nom

ic n

et i

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rest

mar

gin,

fee

s a

nd

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er i

nco

me

les

s a

pro

visi

on

fo

r cr

ed

it lo

sses

, a

dm

inis

tra

tive

exp

ense

s a

nd

oth

er

no

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st e

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ses.

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3

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6

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37

.l

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ativ

e in

som

e ye

ars

beca

use

of a

one

qu

art

er

tim

ing

del

ay In

pa

yme

nt o

f PS

PA

dra

w re

ques

ts.

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cula

ted

as t

he

sum

of n

et c

ompr

ehen

sive

inco

me

an

d to

tal g

ross

PS

PA

dra

ws

less

to

tal d

ivid

ends

pai

d.

(3)

The

cu

mu

lativ

e n

et r

etu

rn to

taxp

ayer

s b

y FY

2023

rep

rese

nts

the

sum

of t

he c

um

ula

tive

cas

h d

ivid

en

ds

fun

de

d b

y ea

rnin

gs a

s o

f FY

2023

an

d th

e p

roje

cte

d e

nd

of p

eri

od

ne

t wo

rth

In F

Y20

23.

(4)

Rem

aini

ng P

SP

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nd

ing

cap

acity

re

du

ced

by

dra

ws

tha

t occ

ur a

fte

r Jan

uary

1,

2013

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ntia

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raw

s in

4Q

201

2 a

pp

ea

r as

FY

2013

bu

t do

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t red

uce

PS

PA

cap

acity

. (5

) T

he c

um

ula

tive

ne

t PS

PA

inve

stm

en

t dec

reas

es b

y th

e d

olla

r am

ou

nt o

f div

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ds f

un

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y ea

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gs p

aid

to th

e U

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ep

art

me

nt o

f th

e T

reas

ury.

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E-D

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ISIO

NA

L-

MA

RK

ET

SE

NS

ITIV

E-

PLE

AS

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O N

OT

DIS

TR

IBU

TE

17

A029


(Page 52 of Total)


~

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e e

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r be

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tal g

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r.lw

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ss t

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e cu

mu

lativ

e n

et

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rn to

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ayer

s b

y FY

2023

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rese

nts

the

sum

of

the

cu

mu

lativ

e c

ash

divi

dend

s fu

nd

ed

by

earn

ings

as

of F

Y20

23 a

nd

the

pro

ject

ed

en

d o

f pe

rio

d n

et w

ort

h In

FY

2023

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emai

ning

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nd

ing

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uced

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ilt o

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r a

fte

r Jan

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18

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roJe

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$ In

bil

lion

s fY

2012

FY

2013

FY

2014

FY

2015

FY

2016

FY

2017

FY

2018

fY

2019

FY

2020

fY

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2023

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l

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nce

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nd

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00

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Per

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m p

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d P

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ws

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roje

cted

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sult

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ons

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lion

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0

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60

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0

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40

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0

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ft

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t com

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ive

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me

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efin

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the

sum

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cono

mic

ne

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eres

t Illi

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n, fe

es a

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the

r in

com

e le

ss a

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or

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dit

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ad

min

lstr

.lti

w e

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nses

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er

no

n.in

tere

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nses

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eg

atl

w e

wry

~ar b

ecau

se o

f a o

ne q

ua

rte

r tim

ing

del

ay In

pay

men

t of P

SPA

draw

req

uest

s. C

alcu

late

d as

the

sum

of n

et o

om

pre

he

nsl

w I

ncom

e an

d to

tal g

ross

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r.lw

s le

ss t

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l div

iden

ds p

aid.

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he c

umul

ativ

e ne

t re

turn

to

taKpa~rs b

y FY

2023

rep

rese

nts

the

sum

of

the

cum

ula

tlw

cas

h di

vide

nds

fun

de

d b

y ea

rnin

gs a

s of

FY

2023

and

the

pro

ject

ed

end

of p

erio

d ne

t wo

rth

In F

Y20

23.

(4)

Relll

ilin

ing

PSP

A fu

ndin

g ca

paci

ty r

educ

ed b

y dr

aws

tha

t occ

ur a

fte

r Jan

llilr

y 1,

201

3.

Pot

entia

l PSP

A dr

aws

In 4

Q 2

012

appe

ar a

s FY

2013

bu

tdo

no

t re

duce

PSP

A ca

paci

ty,

(5)

The

cum

ulat

ive

net

PSPA

inve

stm

en

t dec

reas

es b

y th

e d

olla

r a

mo

un

t of d

ivid

ends

fu

nd

ed

by

earn

ings

pai

d to

the

U.S

. De

pa

rtm

en

t of

the

Tre

asur

y.

PR

E-D

EC

ISIO

NA

L-

MA

RK

ET

SE

NSI

TIV

E -

PLEA

SE 0

0 N

OT

DIS

TR

IBU

TE

18

A030


(Page 53 of Total)


1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(P

SP

As)

3) K

ey C

onsi

de

rati

on

s W

ith

Exi

stin

g P

SPA

s

4) G

SE F

inan

cial

Pro

ject

ion

s

• B

ase

Cas

e

~ ~ •

Str

ess

Cas

e

~r---------

~ 5)

Tre

asu

ry's

PS

PA

Mo

dif

ica

tio

n P

rop

osa

l ~~----~------------~--

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

19

1) E

xecu

tive

Su

mm

ary

2) O

verv

iew

of

the

GSE

Pre

ferr

ed

Sto

ck P

urch

ase

Ag

ree

me

nts

(PS

PA

s)

3) K

ey C

onsi

de

rati

on

s W

ith

Exi

stin

g P

SPA

s

4) G

SE F

inan

cial

Pro

ject

ion

s

• Ba

se C

ase

i . S

tre

ss C

ase

; 5)

Tre

asu

ry's

PSP

A M

odif

icat

ion

Pro

po

sal

PRE

-OE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

19

A031


(Page 54 of Total)


i ~

• Tr

easu

ry w

ou

ld li

ke t

o m

od

ify th

e P

SPA

s gi

ven

the

cha

lleng

es

and

circ

ula

rity

em

be

dd

ed

in t

he

cu

rre

nt

stru

ctu

re .

• A

ny m

od

ifica

tion

wo

uld

nee

d to

ach

ieve

fo

ur

core

goa

ls:

1) P

rote

ct t

he

taxp

ayer

s' i

nve

stm

en

t in

th

e G

SEs.

2) T

here

sh

ou

ld b

e no

mat

eria

l diff

ere

nce

in t

he

ne

t cas

h re

turn

ed

to

taxp

ayer

s (i.

e.,

the

di

ffer

ence

be

twe

en

dra

ws

take

n an

d d

ivid

en

ds

rece

ived

) as

wo

uld

be

expe

cted

wit

h t

he

fix

ed

ten

per

cent

div

ide

nd

.

3) T

he m

axim

um f

inan

cial

ups

ide

poss

ible

sho

uld

be r

etai

ned

for

the

taxp

ayer

if/w

he

n t

he

GSE

s re

turn

to

sus

tain

ed p

rofit

ab

ility

.

4) S

houl

d be

exe

cute

d in

a tr

an

spa

ren

t m

an

ne

r th

at

ma

inta

ins

sta

keh

old

er

conf

iden

ce in

th

e

GSE

s so

th

ey

can

fulf

ill t

he

ir c

urr

en

t an

d fu

ture

mis

sion

.

PRE

-DE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

20

• T

reas

ury

wo

uld

like

to

mo

dify

th

e P

SPA

s gi

ven

the

cha

lleng

es a

nd c

ircu

lari

ty e

mb

ed

de

d in

th

e

curr

en

t st

ruct

ure

.

• A

ny m

od

ifica

tion

wo

uld

nee

d to

ach

ieve

fo

ur

core

goa

ls:

1) P

rote

ct t

he

taxp

ayer

s' i

nve

stm

en

t in

th

e G

SEs.

2) T

here

sh

ou

ld b

e no

mat

eria

l diff

ere

nce

in t

he

ne

t cas

h re

turn

ed

to

taxp

ayer

s (i.

e.,

the

di

ffer

ence

be

twe

en

dra

ws

take

n an

d d

ivid

en

ds

rece

ived

) as

wo

uld

be

expe

cted

wit

h t

he

fixe

d te

n p

erce

nt d

ivid

en

d.

3) T

he m

axim

um f

inan

cial

ups

ide

poss

ible

sho

uld

be r

etai

ned

for

the

taxp

ayer

if/w

he

n t

he

GSE

s re

turn

to

sus

tain

ed p

rofit

ab

ility

.

4) S

houl

d be

exe

cute

d in

a tr

an

spa

ren

t m

an

ne

r th

at

ma

inta

ins

sta

keh

old

er

conf

iden

ce in

th

e

GSE

s so

th

ey

can

fulf

ill t

he

ir c

urr

en

t an

d fu

ture

mis

sion

.

PRE

-OE

CIS

ION

Al-

MA

RK

ET S

ENSI

TIV

E -

PLEA

SE D

O N

OT

DIS

TRIB

UTE

20

A032


(Page 55 of Total)


i ;

• R

epla

ce t

he

fixe

d 10

per

cent

qu

art

erl

y ca

sh d

ivid

end

paid

by

each

GSE

to

Tre

asu

ry w

ith

a

vari

able

qu

art

erl

y di

vide

nd e

qual

to

a n

et w

ort

h s

wee

p ba

sed

upon

fin

anci

al r

esul

ts.

• If

qu

art

erl

y n

et w

orth

(1) i

s po

sitiv

e a

bove

a m

inim

um

am

ount

(2),

all o

f th

at

valu

e w

ou

ld b

e pa

id t

o T

reas

ury.

• If

qu

art

erl

y n

et w

ort

h(1

) is

nega

tive,

no

divi

dend

s w

ou

ld b

e pa

id t

o T

rea

sury

.

• T

he G

SEs

wo

uld

dra

w o

n th

e r

emai

ning

fun

ding

co

mm

itm

en

t ca

paci

ty t

o m

ain

tain

po

sitiv

e n

et w

ort

h .

• T

he p

rop

ose

d m

od

ifica

tion

ha

s th

e fo

llow

ing

im

pa

ct o

n PS

PA o

pera

tions

:

• E

limin

ate

s th

e c

ircu

lari

ty o

f Tre

asu

ry fu

nd

ing

div

iden

ds

paid

to

Tre

asur

y.

• A

ll fu

ture

ne

t in

com

e/p

rofi

ts a

bove

an

esta

blis

hed

thre

shol

d ar

e di

stri

bu

ted

to

Tre

asu

ry

as d

ivid

en

ds.

• F

utur

e d

raw

s ar

e o

nly

use

d to

me

et s

olv

ency

nee

ds

and

fund

act

ual o

pe

ratin

g lo

sses

to

th

e e

xte

nt

nece

ssa

ry.

(1)

Net

wor

th is

det

erm

ined

by

subt

ract

ing

the

tota

l lia

bilit

ies

from

th

e to

tal

asse

ts a

s re

flec

ted

on t

he

GSE

bal

ance

sh

eets

as

of a

n ap

plic

able

dat

e, p

repa

red

in

acco

rdan

ce w

ith G

AA

P.

(2)

Tre

asu

ry is

pro

po

sin

g a

min

imu

m n

et

wo

rth

am

ou

nt

of $

10,

00

0,0

00

,00

0 f

ort

he

qu

arte

rly

rep

ort

ing

per

iods

be

twe

en

Jan

uar

y 1,

20

13

and

Dec

emb

er 3

1,

2019

. Fo

r al

l su

bse

qu

ent p

erio

ds,

th

e m

inim

um

ne

t w

ort

h a

mo

un

t w

ill b

e $

1,0

00

,00

0.

Th

e ec

on

om

ic r

atio

nal

e b

ehin

d t

he

min

imu

m n

et w

ort

h a

mo

un

t is

to a

void

ha

ving

unn

eces

sary

PSP

A d

raw

s th

at r

esul

t fr

om

pri

ce v

ola

tilit

y in

the

GSE

s m

ortg

age

inve

stm

ent

po

rtfo

lios.

By

Janu

ary

1, 2

020,

the

se p

ortf

olio

s ne

ed t

o be

re

du

ced

to

$2

50

bill

ion

fro

m t

he

ir c

urr

ent

leve

ls o

f $

70

8 b

illio

n a

nd $

653

bill

ion

at

Fan

nie

Ma

e a

nd F

red

die

Ma

c, r

esp

ecti

vely

.

PR

E-D

EC

ISIO

NA

L-M

AR

KE

T S

EN

SIT

IVE

-PL

EASE

DO

NO

T D

ISTR

IBU

TE

21

• R

epla

ce t

he

fixe

d 10

per

cent

qu

art

erl

y ca

sh d

ivid

end

paid

by

each

GSE

to

Tre

asu

ry w

ith

a

vari

able

qu

art

erl

y di

vide

nd e

qual

to

a n

et w

ort

h s

wee

p ba

sed

upon

fin

anci

al r

esul

ts.

• If

qu

art

erl

y n

et w

orth

(1) i

s po

sitiv

e a

bove

a m

inim

um

am

ou

nt(2

), al

l of t

ha

t va

lue

wo

uld

be

paid

to

Tre

asur

y.

• If

qu

art

erl

y n

et w

orth

(1)

is n

egat

ive,

no

divi

dend

s w

ou

ld b

e pa

id t

o T

rea

sury

.

• T

he G

SEs

wo

uld

dra

w o

n th

e r

emai

ning

fun

ding

co

mm

itm

en

t ca

paci

ty t

o m

ain

tain

po

sitiv

e n

et w

ort

h .

• T

he p

rop

ose

d m

od

ifica

tion

ha

s th

e fo

llow

ing

im

pa

ct o

n PS

PA o

pera

tions

:

• E

limin

ates

th

e c

ircu

lari

ty o

f Tre

asu

ry fu

nd

ing

div

iden

ds p

aid

to T

rea

sury

.

• A

ll fu

ture

ne

t in

com

e/p

rofi

ts a

bove

an

esta

blis

hed

thre

shol

d ar

e di

stri

bu

ted

to

Tre

asu

ry

as d

ivid

en

ds.

• F

utur

e dr

aws

are

on

ly u

sed

to m

ee

t so

lven

cy n

eed

s an

d fu

nd a

ctua

l op

era

ting

loss

es t

o th

e e

xte

nt

nece

ssa

ry.

(1)

Net

wor

th is

det

erm

ined

by

subt

ract

ing

the

tota

l lia

bilit

ies

from

the

tota

l ass

ets

as r

efle

cted

on

the

GSE

bal

ance

she

ets

as o

f an

app

licab

le d

ate,

pre

pare

d in

ac

cord

ance

with

GA

AP

.

(2)

Tre

asu

ry is

pro

po

sin

g a

min

imu

m n

et

wo

rth

am

ou

nt

of $

10

,00

0,0

00

,00

0 f

ort

he

qu

arte

rly

rep

ort

ing

per

iod

s b

etw

ee

n J

anu

ary

I, 2

01

3 a

nd D

ecem

ber

31,

201

9.

Fo

r al

l su

bse

qu

ent p

erio

ds,

th

e m

inim

um

ne

t w

ort

h a

mo

un

t w

ill b

e $1

.00

0,0

00

. T

he

eco

no

mic

rat

ion

ale

beh

ind

th

e m

inim

um

net

wo

rth

am

ou

nt

is t

o a

void

ha

ving

unn

eces

sary

PSP

A d

raw

s th

at r

esul

t fro

m p

rice

vol

atiti

ty in

the

GSE

s m

ortg

age

inve

stm

ent

port

folio

s, B

y Ja

nuar

y I,

202

0, t

hese

por

tfol

ios

need

to

be

red

uce

d t

o $

25

0 b

illio

n f

rom

th

eir

cu

rren

t le

vels

of

$7

08

bill

ion

and

$65

3 b

illio

n a

t Fa

nnie

Ma

e a

nd F

red

die

Mac

, re

spec

tive

ly.

PR

E-D

EC

ISIO

NA

L-M

AR

KE

T S

EN

SIT

IVE

-PL

EASE

00

NO

T D

ISTR

IBU

TE

21

A033


(Page 56 of Total)


Hyp

oth

etic

al C

ashf

low

s p

rio

r to

202

0 w

he

re t

he

GSE

has

po

sitiv

e n

et

wo

rth

th

at t

ota

ls le

ss t

ha

n $

10 b

illio

n

Sen

siti

ve/P

re-D

ecis

iona

l

Cu

rre

nt

10%

An

nu

aliz

ed

Div

ide

nd

P

rol!o

sed

Ne

t W

ort

h S

we

el!

Qua

rter

wit

h P

osit

ive

Net

Wor

th

Qua

rter

wit

h P

osit

ive

Net

Wor

th

Inco

me

Sta

tem

ent

Nd

Co

mp

reh

en

siv

e In

co

me

$2

.00

In

com

e S

tate

men

t N

et C

om

pre

he

nsiv

e In

com

e

$2

.00

a§!lln,~ S

hHt

Ass

ets

$3

,202

.00

61

1!!!n

'f: S

h!:f:

t A

sse

ts

$3

,202

.00

li

abil

itie

s $

3,2

00

.00

li

abilit

ies

$3

,20

0.0

0

Net

Wor

th

$2.0

0 N

et W

orth

$

2.0

0

Div

ide

nd

Acc

rued

5

1.5

0

Div

ide

nd

Acc

rue

d

$0

.00

ca;i

h F

[Q\~

: TS

V O

ivid

end

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t $2

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ide

nd

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yme

nt

$0

.00

l.e

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crea

se i

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h to

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$1

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rter

wit

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ive

Net

Wor

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rter

wit

h N

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th

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tem

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t N

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om

pre

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ns

ive

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com

e S

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com

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1$2.

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lan

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$3,1

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ca:;:

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f.

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sh t

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om

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001

~

Bel

. Cum

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uid

ati

on

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f.

$1

00.

00

~

Bel

. Cum

. liq

uid

ati

on

Pre

f. $

10

0.0

0

End

. Cum

. liq

uid

ati

on

Pre

f. $

10

4.5

0

End

. Cum

. liq

uid

ati

on

Pre

f. $1

02.0

0

PR

E-D

EC

ISIO

NA

L-M

AR

KE

T S

EN

SIT

IVE

-P

LEA

SE

DO

NO

T D

IST

RIB

UT

E

22

Hyp

oth

etic

al C

ashf

low

s p

rio

r to

202

0 w

he

re t

he

GSE

has

po

sitiv

e n

et

wo

rth

th

at t

ota

ls le

ss t

ha

n $

10 b

illio

n

Sen

siti

ve/P

re-D

ecis

iona

l

Cu

rre

nt

10%

An

nu

aliz

ed

Div

ide

nd

P

rol!o

sed

Ne

t W

ort

h S

we

el!

Qua

rter

wit

h P

osit

ive

Net

Wor

th

Qua

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(Page 58 of Total)


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(Page 59 of Total)


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ncom

e is

def

ined

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net

int

eres

t m

argi

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ees

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oth

er in

com

e le

ss a

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visi

on f

or c

redi

t lo

sses

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inis

trat

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nd

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.

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an r

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llion

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th b

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ss to

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um t

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23 r

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sent

s th

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m o

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ded

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as o

f FY

2023

an

d th

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ted

end

of

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et w

orth

in F

Y20

23.

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ng P

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ing

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city

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uced

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at o

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aft

er J

anua

ry 1

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enti

al P

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ws

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201

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utd

o n

ot r

educ

e PS

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apac

ity.

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umul

ativ

e ne

t PS

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nves

tmen

t d

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ses

by t

he

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ar a

mo

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t of

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dend

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nded

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25

A037


(Page 60 of Total)


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ions

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ome

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ross

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ity

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ome

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sum

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orl

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ic n

et

inte

rest

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gin,

fe

es a

nd

oth

er

inco

me

less

a p

rovi

sio

n f

or

cre

dit

loss

es,

ad

min

istr

ativ

e e~penses a

nd

oth

er

no

n-i

nte

rest

e~penses.

(2)

Un

til 2

020,

th

e G

SE

scan

re

tain

S10

bill

ion

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ne

t wo

rth

be

fore

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ng r

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uir

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ivid

end!

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late

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t com

preh

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ve i

ncom

e a

nd

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l gro

ss P

SPA

draw

s le

ss t

ota

l div

ide

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s pa

id.

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cu

mu

lativ

e n

et

retu

m to

ta~payers b

y F

'l'202

3 re

pres

ents

th

e s

um o

f th

e cu

mu

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e c

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ide

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s fu

nd

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ings

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Y20

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nd

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ject

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rio

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ort

h in

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ning

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nd

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tlty

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uced

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en

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reas

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E-D

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NS

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0 N

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DIS

TR

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26

A038


(Page 61 of Total)


Pro

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illi

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FY20

13

FY20

14

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'16

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tere

st m

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ees

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othe

r in

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e le

ss a

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or c

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t lo

sses

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inis

trat

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ther

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t e~penses

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llion

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Y20

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m o

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2023

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ecte

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iod

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ng !

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tlty

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uced

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er Ja

nuar

y 1,

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ativ

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ject

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6 '1

7 '1

8 '1

9 '2

0 '2

1 '2

2 '2

3 •

Net

Wo

rth

Sw

eep

Div

iden

d (6

) .

Net

Com

pre

h. I

ncom

e (1

) •

Gro

ss P

sPA

liqd

. Pr

ef.

_PS

PA C

apac

ity

Left

(1)

Ne

t com

preh

ensi

ve i

ncom

e is

def

ined

as

the

sum

of «

orl

Om

ic n

et

inte

rest

mar

gin,

fe

es

and

oth

er

i!)C

ome

less

a p

rovi

sion

fo

r cr

ed

it lo

sses

, ad

min

istr

ativ

e e~penses a

nd o

the

r n

on

-in

tere

st e~penses.

(2)

Un

til 2

020,

the

GSE

sca

n r

etai

n S1

0 bi

llion

In

ne

t wo

rth

be

fore

bei

ng r

eq

uir

ed

to

5Wee

p di

vide

nd!;.

C

alcu

late

d as

the

sum

of

net c

ompr

ehen

sive

inc

ome

and

tota

l gro

ss P

SPA

draw

s le

ss t

ota

l div

ide

nd

s pa

id.

(3)

The

cum

ulat

ive

ne

t re

tum

to

ta~payers b

y F'

l'202

3 re

pres

ents

th

e s

um o

f th

e cu

mul

ativ

e ca

sh d

ivid

en

ds

fun

de

d b

y ea

rnin

gs a

s o

f FY

2023

and

the

pro

ject

ed

end

of p

erio

d ne

t wo

rth

in F

'l'202

3.

(4)

Rem

aini

ng P

SPA

fund

ing

cap

atlt

y re

duce

d by

dra

ws

that

otc

ur a

fte

r Ja

nuar

y 1,

20

U.

Pot

entia

l PSP

A dr

aws

in 4

Q 2

012

appe

ar a

s FY

2013

but

do

rIO

t re

duce

PSP

A c

ap

atlt

y.

(5)

The

cum

ulat

ive

net

PSPA

inve

stm

en

t de

crea

ses

by th

e d

olla

r am

ou

nt o

f div

iden

ds f

un

de

d b

y ea

rnin

gs p

aid

to th

e u

.s. D

epa

rtm

en

t of

the

Tre

asur

y.

(6)

Ne

t wo

rth

sw

eep

divi

dend

beg

ins

In F

Y20

13.

10 p

erce

nt c

ash

divi

dend

pai

d th

rou

gh

F'l'2

012.

PR

E-D

EC

ISIO

NA

L-

MA

RK

ET

SE

NS

ITIV

E -

PLE

AS

E 0

0 N

OT

DIS

TR

IBU

TE

27

A039


(Page 62 of Total)


Pro

"ect

ions

; S

in b

illi

ons

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

FY20

21

FY20

22

FY20

23

Net

Co

mp

reh

ensi

ve

Inco

me

(lo

ss)!

($

7.8)

$

06

$&

9 $

01

$5

.6

$5.6

$5

.7

$504

$5

.5

$504

$5

04

$504

Tot

al G

ross

PSP

A D

raw

$2

0.7

$0.0

$0

.0

$0.0

$

0.0

$0.0

$0

.0

$0.0

$0

.0

$0.0

$0

.0

$0.0

T

otal

Net

Wo

rth

Sw

eep

Div

iden

d ($

7.6)

$0

.0

($4.

4)

($6.

1)

($5.

6)

($5.

6)

($5.

7)

($5.

4)

($15

.5)

($5.

4)

($5.

4)

($5.

4)

Tot

al P

SPA

Dra

w N

et o

f N

et W

ort

h S

wee

p

$13.

1 $0

.0

($40

4)

($6.

1)

($S.

6)

($5.

6)

($S.

7)

($So

4)

($IS

.S)

($50

4)

($50

4)

($S.

4)

Pro

ject

ed E

nd o

f Per

iod

Net

Wo

rth

1 ($

1.1)

$

>5

$1

0.0

$lU

O

$m

o

$m

o

$m

o

$lU

O

$a0

$0

0

$0.0

$a

0

Per

cen

t of

Div

iden

ds F

un

ded

by

PSPA

Dra

ws

l(X

",

'"' '"'

'"' 0%

0%

'"'

'"' '"'

'"' '"'

'"' D

olla

r Am

t o

f D

ivid

ends

Fu

nd

ed b

y E

arni

nss

$0.0

$0

.0

$4

.' $6

.1

$5.6

$5

.6

$5.7

$5

.4

$15.

5 $5

.4

$5.4

$5

.4

Cum

ulat

ive

Cas

h D

ivid

ends

Fu

nd

ed b

y E

arn

l,.s

$<

>.0

$0.0

$4

.4

$105

$1

6.1

$21.

7 $2

7A

$32.

7 $4

8.2

$53.

7 $5

9.1

$64.

4

Cum

ula

tive

Net

Ret

urn

To

Tax

paye

rs B

y F

Y20

23'

$64.41

~

Beg

inni

ng P

SPA

liq

uid

atio

n P

refe

ren

ce

$72.

2 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

~ ~

Tot

al G

ross

liq

uid

atio

n P

refe

ren

ce

$20.

7 $0

.0

$0.0

$0

.0

$0.

0 $

0.0

$0.0

$0

.0

$0.0

$0

.0

$0.0

$0

.0

c C

umul

ativ

e G

ross

liq

uid

atio

n P

refe

ren

ce

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

~

~

Rem

aini

ng P

SPA

Fun

ding

Cap

odty

$1

50.0

$l

SU

O

• ~

$150

.0

$150

.0

$150

.0

$150

.0

$150

.0

$150

.0

$150

.0

$150

.0

$15U

O

$150

.0

iSl C

umul

ativ

e N

et P

SPA

In

ves

tmen

t'

$0.0

$7

0.4

$66-

1 $6

0.0

$54.

3 $

4U

$4

3.1

$3

7.7

$22.

2 $1

6.8

$11.

4 $&

01

Per

an

nu

m p

roje

cte

d P

SPA

dra

ws

an

d d

ivid

en

ds

$ in

bill

ions

$3

0

$20

$1

0

SO

($1

0)

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

Pro

ject

ed P

SPA

fun

ding

cap

acit

y as

a r

esul

t of

dra

ws

$ in

bill

ions

$200

$150

$100

$50 SO

'1

1 '1

2 '1

3 '1

4 '1

5 '1

6 '1

7 '1

8 '1

9 '2

0 '2

1 '2

2 '2

3 .

Net

Wo

rth

Sw

eep

Div

iden

d (

6)

.N

et C

om

pre

h.

Inco

me

(1)

• G

ross

PSP

A U

qd.

Pre

f.

_P

5P

A C

apac

ity

Left

(1)

Net c

ompr

ehen

sive

inc

ome

is de

fir.

ed a

s th

e su

m o

f ec

onom

ic n

et in

tere

st m

argi

n, f

ees

and

oth

er in

com

e le

ss a

pro

visi

on f

or c

redi

t lo

sses

, adm

inis

trat

ive e~penses a

nd o

ther

non

.int

eres

t e~penses

.

(2)

Unt

il 20

20, t

he G

SEsc

an r

etai

n S1

0 bi

llion

in

net w

orth

bef

ore

bein

g re

quir

ed to

sw

eep

divi

dend

s. C

alcu

late

d as

the

sum

of

r.et

com

preh

ensi

ve i

ncom

e an

d to

tal g

ross

PSP

A d

raw

s le

ss to

tal d

ivid

end

s pa

id.

(3)

The

ClI

mul

ativ

e ne

t re

tum

to

taxp

ayer

.; by

FY

2023

rep

rese

nts

the

sum

of

the

cum

ulat

ive

cash

div

iden

ds f

unde

d by

ear

ning

s as

of

FY20

23 a

nd th

e pr

ojec

ted

end

of

peri

od r

.et w

orth

in F

Y20

23.

(4)

Rem

aini

ng !

'SPA

fund

ing

capa

city

red

uced

by

draw

s th

at o

ccur

aft

er Ja

nuar

y 1,

201

3.

Pot

enti

al !'

SPA

dra

ws

In 4

Q 2

012

appe

ar a

s FY

2013

but

do

not

redu

ce P

SPA

cap

acit

y.

(5)

The

cum

ulat

ive

r.et

!'S

PA in

vest

men

t de

crea

ses

by t

he d

olla

r am

ount

of

divi

dend

s fu

nded

by

earn

ings

pai

d to

the

U.S

. Dep

artm

ent o

f th

e T

reas

ury.

(6

) Ne

t wor

th s

wee

p di

vide

nd b

egin

s in

FY

2013

. 10

per

cent

cas

h di

vide

nd p

aid

thro

ugh

FY20

12.

PR

E-D

EC

ISIO

NA

L-

MA

RK

ET

SE

NS

ITIV

E -

PL

EA

SE

DO

NO

T D

IST

RIB

UT

E

28

Pro

ect

lons

S

,n b

illi

ons

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

FY20

21

FY20

22

FY20

23

Net

Com

pre

hen

siv

e In

com

e (l

oss

)l

Tot

al G

ross

PSP

A D

raw

Tot

al N

et W

orth

Sw

eep

Div

iden

d

Tot

al P

SPA

Dra

w N

et o

f N

et W

orth

Sw

eep

Pro

ject

ed E

nd o

f Per

iod

Net

Wor

th1

Per

cen

t of

Div

iden

ds F

unde

d b

y PS

PA D

raw

s

Do

liar

Am

t o

f D

ivid

ends

Fun

ded

byE

arnl

n s

Cum

ulat

ive

Cas

h D

ivid

ends

Fun

ded

Ear

nl

5

Cum

ulat

ive

Net

ReW

rn T

o Ta~payers

By

FY20

23J

(S7.

8)

$20.

7

($7

.6)

$13.

1

($1.

1)

l(X

'"

$0.0

$0

.0

$6

.'

$0.0

$0

.0

$0.0

"" $0

.0

$0.0

sa.

$0.0

($

4.41

($4.

4)

$10.

0 "" $4

.4

$4.4

$61

$0.0

($

6.11

($6

.1)

$la

O ""

$6.1

$1

0.5

$5.6

$0.0

($5.

6)

($5.

6)

$la

O '"'

$5.6

$16.

1

$5.6

$0.0

($

5.6)

($5.

6)

$10.

0 '"' $5

.6

$21.

7

$5.7

$0.0

($

5.7)

($S.

7)

$10.

0 "" $5

.7

$27A

$5.4

$0.0

($

5.4)

($5.

4)

$10.

0 "" $5

.4

$32.

7

$5.5

$0.0

($

15.5

)

($15

.5)

$0

0 ""

$15.

5

$48.

'

$5.4

$0.0

($

5.41

($5.

4)

$0.0

"" $5

.4

$53.

7

$5.4

$0.0

($

5.4)

($5.

4)

so.o 0%

$5.4

$59.

1

S5.4

$0.0

($

5A)

($5.

4)

$0

0 ""

$5.4

$'4.

4

$64.41

;d

Beg

inni

ng P

SPA

liq

uida

tion

Pre

fere

nce

$7

2.2

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92

.9

$92.

9 $9

2.9

$92.

9 $9

2.9

C~ T

otal

Gro

ss U

quld

atlo

n P

refe

ren

ce

$20.

7 $0

.0

SO·O

SO·O

$0.0

$0

.0

SO·O

SO·O

SO·O

$0.0

SO

·O SO

·O C

umul

ativ

e G

ross

liq

uida

tion

Pre

fere

nce

$9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9 $9

2.9

$92.

9

~ R

emai

ning

PSP

A F

undi

ng C

op

ad

ty

$1.5

0.0

$1

5a

o·

$150

.0

$1.5

0.0

$150

.0

$150

.0

$150

.0

$150

.0

$150

.0

$1.5

0.0

$15a

O

$150

.0

~!rl-

c-"-

m-"-

IM-'

-W--

"'-t

-.w-

-A-m

--w-

.-tm

o--"

~iC-

----

----

--$O

.C-o

----

-$~"

--4-

---~

~--1

----

-$~~

-.-0----~~------~$48C-B----~$43~.-

'----~~-7-.7

----

-~~-

,---

-~$-

1~-8

----

-$~1

-,.-4----~$6-0~1

Per

an

nu

m p

roje

cte

d P

SPA

dra

ws

an

d d

ivid

en

ds

$ in

bill

ions

$3

0

$20

$to

$0

($10

) '1

1 '1

2 '1

3 '1

4 '1

5 '1

6 '1

7 '1

8 '1

9 'W

'2

1 '2

2 '2

3

Pro

ject

ed P

SPA

fun

ding

cap

acit

y as

a r

esul

t of

dra

ws

$ in

bill

ions

$200

$150

$100

$50 $0

'11

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

.N

et

Wo

rth

Sw

eep

Div

iden

d (

6)

.N

et C

ompr

eh

. In

com

e (1

) •

Gro

ss P

SPA

Uqd

. Pr

ef.

_P

SPA

Cap

acit

y L

eft

(11

Net c

ompr

eheo

sive

inc

ome

is de

fine

d as

the

sum

of

«orl

Om

ic n

et in

tere

st m

argi

n, f

ees

and

othe

r in

com

e le

ss a

pro

visi

on f

or c

redi

t lo

sses

, adm

inis

trat

ive e~penses a

nd o

ther

non

-int

eres

t e~penses

.

(2)

Unt

il 20

20, t

he G

SEsc

an r

etai

n S1

0 bi

llion

In

net w

orth

bef

ore

bein

g re

quir

ed to

5W

eep

divi

dend

s. C

alcu

late

d as

the

sum

of

net c

ompr

ehen

sive

inc

ome

and

tota

l gro

ss P

SPA

dra

ws

less

tota

l div

iden

ds p

aid.

(3

) Th

e cu

mul

ativ

e ne

t re

tum

to

ta~payers b

y F'

l'202

3 re

pres

ents

the

sum

of

the

cum

ulat

ive

cash

div

iden

ds f

unde

d by

ear

ning

s as

of

FYZ0

23 a

nd t

he p

roje

cted

end

of

peri

od n

et w

orth

in F

'l'202

3.

(41

Rem

aini

ng P

SPA

fund

ing

capa

tlty

red

lKed

by

draw

s th

at O

I;Cl,l

r aft

er J

anua

ry 1

, 201

3.

Pote

ntia

l PS

PA d

raw

s in

4Q

201

2 ap

pear

as

FYZ0

13 b

ut d

o rIO

t re

dlK

e PS

PA ca

patl

ty.

(SI

The

cum

ulat

ive

net

PSPA

inve

stm

ent

decr

ease

s by

the

dol

lar a

mou

nt o

f di

vide

nds

fund

ed b

y ea

rnin

gs p

aid

to th

e u.

s. D

epar

tmen

t of

the

Tre

asur

y.

(61

Net w

orth

sw

eep

divi

dend

beg

ins

In F

YZ01

3.

10 p

erce

nt c

ash

divi

dend

pai

d th

roug

h F'

l'201

2.

PR

E-D

EC

ISIO

NA

L-

MA

RK

ET

SE

NS

ITIV

E -

PLE

ASE

00

NO

T D

IST

RIB

UT

E

28

A040


(Page 63 of Total)


i ; o T

he n

et

cash

re

turn

ed

to

taxp

ayer

s po

st t

he

div

ide

nd

mo

difi

catio

n is

ma

teri

ally

eq

uiv

ale

nt

un

de

r th

e p

rop

osa

l as

wit

h t

he

10

pe

rce

nt

fixed

div

iden

d.

o T

he a

ggre

gate

ne

t ca

sh r

etu

rne

d b

y th

e G

SEs

rem

ain

s m

ate

ria

lly th

e s

am

e.

Fann

ie M

ae B

ase

Cas

e N

et C

ash

Ret

urne

d to

Tax

paye

rs

(S in

bill

ion

s)

$100

$80

$60

$40

$20 $0

'13

'14

'15

'16

'17

'18

'19

'20

'21

'22

'23

-10

% c

ash

Ne

t Div

iden

d -

Net

Wo

rth

Sw

eep

Div

iden

d

Fre

dd

ie M

ac

Bas

e C

ase

Ne

t Cas

h R

etu

rne

d t

o T

axpa

yers

($

in b

illio

ns)

$80

$60

$40

$20 $0

'1

3 '1

4 '1

5 '1

6 '1

7 '1

8 '1

9 '2

0 '2

1 '2

2 '2

3 -

10%

Cas

h N

et D

ivid

end

-N

et W

ort

h S

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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2011

Commission File No.: 0-50231

Federal National Mortgage Association(Exact name of registrant as specified in its charter)

Fannie MaeFederally chartered corporation 52-0883107

(State or other jurisdiction ofincorporation or organization)

(I.R.S. EmployerIdentification No.)

3900 Wisconsin Avenue, 20016NW Washington, DC

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code:(202) 752-7000

Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which Registered

NoneSecurities registered pursuant to Section 12(g) of the Act:

Common Stock, without par value(Title of class)

8.25% Non-Cumulative Preferred Stock, Series T, stated value $25 per share(Title of class)

8.75% Non-Cumulative Mandatory Convertible Preferred Stock, Series 2008-1 stated value $50 per share(Title of class)

Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S, stated value $25 per share(Title of class)

7.625% Non-Cumulative Preferred Stock, Series R, stated value $25 per share(Title of class)

6.75% Non-Cumulative Preferred Stock, Series Q, stated value $25 per share(Title of class)

Variable Rate Non-Cumulative Preferred Stock, Series P, stated value $25 per share(Title of class)

Variable Rate Non-Cumulative Preferred Stock, Series O, stated value $50 per share(Title of class)

5.375% Non-Cumulative Convertible Series 2004-1 Preferred Stock, stated value $100,000 per share(Title of class)

5.50% Non-Cumulative Preferred Stock, Series N, stated value $50 per share(Title of class)

4.75% Non-Cumulative Preferred Stock, Series M, stated value $50 per share(Title of class)

5.125% Non-Cumulative Preferred Stock, Series L, stated value $50 per share(Title of class)

5.375% Non-Cumulative Preferred Stock, Series I, stated value $50 per share(Title of class)

5.81% Non-Cumulative Preferred Stock, Series H, stated value $50 per share(Title of class)

Variable Rate Non-Cumulative Preferred Stock, Series G, stated value $50 per share(Title of class)

Variable Rate Non-Cumulative Preferred Stock, Series F, stated value $50 per share(Title of class)

5.10% Non-Cumulative Preferred Stock, Series E, stated value $50 per share(Title of class)

5.25% Non-Cumulative Preferred Stock, Series D, stated value $50 per share(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No ÍIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No ÍIndicate 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 preceding12 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 past90 days. Yes Í No ‘Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted 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 andpost such files). Yes Í No ‘Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ÍIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ‘ Accelerated filer Í Non-accelerated filer ‘

(Do not check if a smaller reporting company)Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No ÍThe aggregate market value of the common stock held by non-affiliates of the registrant computed by reference to the last reported sale price of the common stock quoted on theOTC Bulletin Board on June 30, 2011 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $383 million.As of January 31, 2012, there were 1,158,072,058 shares of common stock of the registrant outstanding.DOCUMENTS INCORPORATED BY REFERENCE: The information required by Item 11 in Part III will be included in an amendment to this annual report onForm 10-K filed on or before April 30, 2012.

TREASURY-2391


A244


(Page 78 of Total)

We remained a constant source of liquidity in the multifamily market. We owned or guaranteed approximately21% of the outstanding debt on multifamily properties as of September 30, 2011 (the latest date for whichinformation was available).

Summary of Our Financial Performance for 2011

Our financial results for 2011 reflect the continued weakness in the housing and mortgage markets, which remainunder pressure from high levels of unemployment and underemployment, and the prolonged decline in homeprices since their peak in the third quarter of 2006. Our credit-related expenses continue to be a key driver of ournet losses for each period presented. The substantial majority of our credit-related expenses are from single-family loans we acquired prior to 2009, which decreased as a percentage of our single-family guaranty book ofbusiness to 47% as of December 31, 2011 from 60% as of December 31, 2010. Our credit-related expenses varyfrom period to period primarily based on changes in home prices, borrower payment behavior, the types andvolumes of loss mitigation activities completed, and actual and estimated recoveries from our lender andmortgage insurer counterparties.

In addition, the decline in interest rates during 2011 resulted in significant fair value losses on ourderivatives. These fair value losses on our derivatives were offset by fair value gains during 2011 related to ourmortgage investments; however, only a portion of these investments is recorded at fair value in our financialstatements. Derivative instruments are an integral part of how we manage interest rate risk and an inherent part ofthe cost of funding and hedging our mortgage investments. We expect high levels of period-to-period volatility inour results because our derivatives are recorded at fair value in our financial statements while some of theinstruments they hedge are not recorded at fair value in our financial statements.

Total Comprehensive Loss

We recognized a total comprehensive loss of $16.4 billion for 2011, consisting of a net loss of $16.9 billion andother comprehensive income of $447 million. In comparison, our total comprehensive loss for 2010 was $10.6billion, consisting of a net loss of $14.0 billion and other comprehensive income of $3.4 billion.

The increase in our net loss in 2011, as compared with 2010, was primarily due to an increase in net fair valuelosses and credit-related expenses, which were partially offset by an increase in net interest income. The primarydrivers of these changes were:

• a $6.1 billion increase in net fair value losses primarily driven by losses on our risk management derivativesin 2011 due to a significant decline in swap rates during the period;

• a $2.9 billion increase in net interest income driven by lower interest expense on debt, which was partiallyoffset by lower interest income on loans and securities;

• an $884 million increase in credit-related expenses primarily driven by a decline in actual and projectedhome prices.

The $3.0 billion decline in our other comprehensive income was primarily driven by lower gains on the fair value ofour available-for-sale securities due to widening credit spreads in 2011 compared with narrowing spreads in 2010.

See “Consolidated Results of Operations” for more information on our results.

Net Worth

Our net worth deficit of $4.6 billion as of December 31, 2011 reflects the recognition of our total comprehensiveloss of $1.9 billion and our payment to Treasury of $2.6 billion in senior preferred stock dividends during thefourth quarter of 2011. The Acting Director of FHFA will submit a request to Treasury on our behalf for $4.6billion to eliminate our net worth deficit.

In the fourth quarter of 2011, we received $7.8 billion in funds from Treasury to eliminate our net worth deficitas of September 30, 2011. Upon receipt of the additional funds requested to eliminate our net worth deficit as of

- 8 -

TREASURY-2403


A245


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ORAL ARGUMENT NOT YET SCHEDULED

No. 14-5254 __________________________________________________________________




v.

FEDERAL HOUSING FINANCE AGENCY, et al.,

Defendants-Appellees. __________________________________________________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF COLUMBIA (NO. 1:13-CV-1053-RCL) __________________________________________________________________

PUBLIC, REDACTED APPENDIX TO SEALED MOTION FOR JUDICIAL NOTICE AND SUPPLEMENTATION OF

THE RECORD ï VOLUME 2 __________________________________________________________________

CHARLES J. COOPER DAVID H. THOMPSON VINCENT J. COLATRIANO PETER A. PATTERSON BRIAN W. BARNES COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C. 20036 Telephone: 202.220.9600 Facsimile: 202.220.9601

Counsel for Appellants Fairholme Funds, Inc., et al.

Public Appendix—Sealed Material in Separate Supplement Redacted Version


(Page 87 of Total)

APPENDIX VOLUME 2 TABLE OF CONTENTS Exhibit 18: FM_Fairholme_CFC-00002532 – Updated Fannie Mae Presentation to Treasury (Aug. 15, 2012) ...................................... A263 Exhibit 19: UST00005747 – Fannie Mae Projections Sent to Treasury (Aug. 11, 2012) .............................................................................. A274 Exhibit 20: UST00380800 – Millstein and Co. Presentation sent to Treasury (Feb. 27, 2012) ................................................................ A280 Exhibit 21: FHFA00047889 – Email from Bradford Martin (July 13, 2012) ............................................................................................... A349 Exhibit 22: FHFA00047893 – Fannie Mae Strategic Planning Presentation (July 6, 2012) .................................................................................. A353 Exhibit 23: FHFA00060208 – Fannie Mae Strategic Planning Presentation (July 19, 2012) ................................................................................ A383 Exhibit 24: Transcript of Deposition of Edward DeMarco (May 7, 2015)

(excerpts) ........................................................................................ A433 Exhibit 25: FHFA00025815–16 – Meeting Agenda for FHFA and Treasury (Jan. 4, 2012) .................................................................................. A438 Exhibit 26: Transcript of Deposition of Timothy Bowler (July 1, 2015)

(excerpts) ........................................................................................ A441 Exhibit 27: UST00508176 – Briefing Memorandum for Secretary Geithner (Jan. 6, 2012) .................................................................................. A455 Exhibit 28: UST00480703, UST00480714 – Housing Reform Proposal (Feb. 6, 2012) ................................................................................. A459 Exhibit 29: UST00503991 – Emails from Timothy Bowler and Jim Parrott (Aug 17, 2012) ............................................................................... A475 Exhibit 30: UST00517664 – Emails from Jim Parrott and Mary Goodman (Aug. 17, 2012) .............................................................................. A479 Exhibit 31: UST00503874 – Emails from Timothy Bowler and Autumn Lynch (Aug. 10, 2012) ................................................................... A482 Exhibit 32: FHFA00083260 – Email from Wanda DeLeo (Oct. 14, 2008) ..... A485 Exhibit 33: UST00500869 – Email from James Lingebach (Oct. 15, 2008) .... A489 Exhibit 34: FHFA00102167 – Freddie Mac Financial Projections (March 8, 2012) ............................................................................................... A491


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