Federal National Mortgage Association · OTC:FNMA
Federal National Mortgage Association — Fannie Mae — Non-Deal Roadshow (December 2007)
23 slides from Federal National Mortgage Association's roadshow presentation, Dec 5, 2007
Slide 1: Fannie Mae Preferred Offering Roadshow
Fannie Mae Preferred Offering Roadshow December 5, 2007
Slide 2: Disclaimer/Safe Harbor
Disclaimer/Safe Harbor This presentation includes forward-looking statements, including statements relating to our future financial performance and condition, capital position, ability to take advantage of business opportunities, market share and credit losses; our strategy; and our expectations reg
Slide 3: Highlights
Highlights $7 billion capital raise addresses the following: • Capital cushion over regulatory requirements in this difficult environment • Additional capital to take advantage of select business growth opportunities Fannie Mae has experience to manage through credit cycles • Delinquencies are lower
Slide 4: Market Environment Changes in 2007
Market Environment Changes in 2007 Market disruptions • Following a period of extended strength (2000–2007), liquidity has declined substantially, starting with subprime • From the end of June to date, AAA-rated subprime ABS spreads have widened about 175 bps and AAA-rated CMBS spreads have widened
Slide 5: Implications for Fannie Mae
Implications for Fannie Mae Negative implications • Single-family serious delinquency rate of 78 bps in September 2007, vs 61 bps in September 2006 • Increased credit losses – forecast 4-6 bps for 2007, increasing to 8-10 bps in 2008 • Negative credit mark-to-market impacts • Earnings and capital pr
Slide 6: Strategy
Strategy Minimize credit losses • Stricter eligibility and tightened underwriting • Work servicing relationships with intent to increase workouts to over 50% • Increased focus on counterparty risk management Increase fees and maintain share Capitalize on business opportunities Deliver on mission: af
Slide 7: Credit
Credit 7
Slide 8: 2008 Credit Loss Outlook
2008 Credit Loss Outlook Expect 2008 credit losses to be in the 8-10 bps range, up from 4-6 bps in 2007, reflecting the following key assumptions and observations: • A peak-to-trough decline of 10-12%; 3% decline in home prices through the end of 2007 and 4-5% in 2008, although the precise timing of
Slide 9: Credit - Market Environment: Serious delinquency rates
Credit - Market Environment Fannie Mae single-family serious delinquency rates are increasing, but remain below industry averages Serious Delinquency Rate (bps) 1 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 Q1 2007 Q2 2007 Q3 Fannie Mae - Single-family Industry- Prime Conv - MBA 1 Loans 90 or mor
Slide 10: Fannie Mae Credit Loss: concentrated in Midwest, Alt-A and Affordable Housing
Fannie Mae Credit Loss Losses concentrated in a few key areas: Midwest, Alt-A and Affordable Housing (For the nine months ended September 30, 2007) Top Single-Family Credit Losses* by State Single-Family Credit Losses* by Vintage 2007 (15.4% of BoB)** 2000 and Prior (3.1% of 0% BoB) 2006 (18.4% of
Slide 11: Fannie Mae Credit Profile by Key Product Features
Fannie Mae Credit Profile by Key Product Features Credit Characteristics of Single-Family Mortgage Credit Book of Business (As of September 30, 2007) Fixed Rate OLTV<80% Interest FICO<620 and Subprime Book Profile Overall Book NegAm FICO<620 OLTV>90% Alt-A Loans and FICO>=680 Only OLTV >90% Loans (1
Slide 12: Management Actions on Credit
Management Actions on Credit • Tightening underwriting standards / reduced participation in riskier segments • Stricter eligibility on riskier business • Increased FICO, LTV and documentation requirements • Increased loss mitigation efforts • Increased focus on work-outs • More aggressive in early b
Slide 13: Businesses
Businesses 13
Slide 14: Single-family Business
Single-family Business • #1 market position reestablished Market share gains – over 40% market share on new acquisitions • Increased pricing • MBS retains significant liquidity advantage • Total book of business grew at a 13.3%1 annualized rate through October 2007 • Guaranty fees on new business in
Slide 15: Housing and Community Development (HCD)
Housing and Community Development (HCD) • Multifamily business having a good year • Rental markets remain strong • Gaining share back • Improving pricing on new business • Wider spreads on portfolio acquisitions • Guaranty book growth 10% year-to-date to $134B • Serious delinquencies remain low – 8
Slide 16: Capital Markets Group
Capital Markets Group • Estimated $723 billion mortgage portfolio for November 2007 • Net interest yield stabilizing in the mid-50 bps range • 99% of subprime and 100% of Alt-A private label securities currently rated AAA Mortgage Portfolio Composition (As of September 30, 2007) No n-FNM A gency Sec
Slide 17: Exposure to Subprime and Alt-A Securities
Exposure to Subprime and Alt-A Securities Subprime Alt-A (Data as of September 30, 2007) Securities Wraps Securities Wraps Balance (UPB $ billion) $ 42.4 $ 6.2 $ 33.8 $ 0.6 Share of Total SF Credit Book 1.6% 0.2% 1.3% 0.0% % AAA 99% 92% 100% 100% % AA or below 1% 8% 0% 0% Weighted Average Subordinat
Slide 18: Financials
Financials 18
Slide 19: GAAP Financials – Historical Income Statement
GAAP Financials – Historical Income Statement (Dollars in millions) 2007 Q1-Q3 2007 Q3 2006 Q1-Q3 2006 Q3 Net Interest Income $ 3,445 $ 1,058 $ 5,407 $ 1,528 Net Interest Yield (bps) 57 52 90 77 Guaranty fee income 3,450 1,232 2,968 1,084 Effective g-fee rate (bps) 22 23 21 23 Trust Management Incom
Slide 20: Fair Value Balance Sheets
Fair Value Balance Sheets Non-GAAP Supplemental Consolidated Fair Value Balance Sheets As of September 30, 2007 As of December 31, 2006 GAAP GAAP Carrying Fair Value Estimated Carrying Fair Value Estimated Value Adjustment(1) Fair Value Value Adjustment(1) Fair Value (Dollars in millions) Assets: Ca
Slide 21: Losses on Loans Purchased from Trusts
Losses on Loans Purchased from Trusts • The average market price of loans purchased from pools in Q3 2007 was 71%1 of UPB • If market conditions deteriorate, cure rates are expected to decline Years loans purchased from MBS 2003 2004 2005 2006 2 Cured 59% 58% 61% 66% 3 Defaults 37% 36% 30% 19% 90 Da
Slide 22: Conclusion
Conclusion $7 billion capital raise addresses the following: • Capital cushion over regulatory requirements in this difficult environment • Additional capital to take advantage of select business growth opportunities Fannie Mae has experience to manage through credit cycles • Delinquencies are lower
Slide 23: Appendix: Reconciliation of Non-GAAP Measures
Appendix Explanation and Reconciliation of Non-GAAP Measures Included in Fair Value Balance Sheets to GAAP Measures: 1 Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our GAAP condensed consolidated balance sheets and our best