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Encyclopedia > Federal National Mortgage Association
Fannie Mae (Federal National Mortgage Association)
Type Public
Founded 1938
Headquarters Washington, DC
Key people Daniel Mudd, President & CEO
Industry Credit Services
Products Financial Services
Revenue $53.8 billion (2006)
Employees 5,400
Slogan Our Business Is The American Dream
Website www.fanniemae.com

income= $5.7 billion Fannie Mae logo This is a copyrighted and/or trademarked logo. ... This article does not cite any references or sources. ... Year 1938 (MCMXXXVIII) was a common year starting on Saturday (link will take you to calendar). ... Aerial photo (looking NW) of the Washington Monument and the White House in Washington, DC. Washington, D.C., officially the District of Columbia (also known as D.C.; Washington; the Nations Capital; the District; and, historically, the Federal City) is the capital city and administrative district of the United... Daniel H. Mudd is the current CEO of Fannie Mae (FNM). ... Financial services is a term used to refer to the services provided by the finance industry. ... Look up revenue in Wiktionary, the free dictionary. ... For the album by the Kaiser Chiefs see Employment (album) Employment is a contract between two parties, one being the employer and the other being the employee. ... Look up slogan in Wiktionary, the free dictionary. ... A website (alternatively, Web site or web site) is a collection of Web pages, images, videos and other digital assets that is hosted on one or several Web server(s), usually accessible via the Internet, cell phone or a LAN. A Web page is a document, typically written in HTML...


The Federal National Mortgage Association (FNMA) (NYSEFNM), commonly known as Fannie Mae, is a government sponsored enterprise (GSE) sponsored by the United States government. As a GSE, it is a privately-owned corporation authorized to make loans and loan guarantees. It is not backed or funded by the U.S. government, nor do the securities it issues benefit from any explicit government guarantee or protection. The New York Stock Exchange (NYSE), nicknamed the Big Board, is a New York City-based stock exchange. ... The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. ... The government of the United States, established by the United States Constitution, is a federal republic of 50 states, a few territories and some protectorates. ...


This secondary mortgage market helps to replenish the supply of lendable money for mortgages and ensures that money continues to be available for new home purchases. The name "Fannie Mae" is a creative acronym-portmanteau of the company's full name that has been adopted officially for ease of identification. A market in which existing mortgages and mortgage-backed securities are traded. ... It has been suggested that this article or section be merged with Backronym and Apronym (Discuss) Acronyms and initialisms are abbreviations, such as NATO, laser, and ABC, written as the initial letter or letters of words, and pronounced on the basis of this abbreviated written form. ... A portmanteau (IPA pronunciation: RP, US) is a word or morpheme that fuses two or more words or word parts to give a combined or loaded meaning. ...

Contents

History

Fannie Mae was originally founded as a government agency in 1938 as part of Franklin Delano Roosevelt's New Deal to provide liquidity to the mortgage market. For the next 30 years, Fannie Mae held a virtual monopoly on the secondary mortgage market in the United States. Franklin Delano Roosevelt (January 30, 1882–April 12, 1945), 32nd President of the United States, the longest-serving holder of the office and the only man to be elected President more than twice, was one of the central figures of 20th century history. ... The New Deal was the title President Franklin D. Roosevelt gave to the series of programs he initiated between 1933 and 1938 with the goal of providing relief, recovery, and reform (3 Rs) to the people and economy of the United States during the Great Depression. ...


In 1968, to help balance the federal budget, Fannie Mae was converted into a private corporation. Fannie Mae ceased to be the guarantor of government-issued mortgages, and that responsibility was transferred to the new Government National Mortgage Association (Ginnie Mae). Fannie Mae is now the ninth-largest business in the world according to Forbes' Rich List of top 1,000 businesses.[1] The Government National Mortgage Association (GNMA, also known as Ginnie Mae) is a U.S. government-owned corporation within the Department of Housing and Urban Development (HUD). ...


Business

Fannie Mae's primary method for making money is by charging a guarantee fee on loans that they have securitized into mortgage-backed security bonds. Investors, or purchasers of Fannie Mae MBSs, are willing to let Fannie Mae keep this fee in exchange for assuming the credit risk, that is, Fannie Mae's guarantee that the principal and interest on the underlying loan will be paid regardless of whether the borrower actually repays. A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. ...


Fannie Mae receives no direct government funding or backing, and it has looser restrictions placed on its activities than normal financial institutions. For example, it is allowed to sell mortgage-backed securities with half as much capital backing them up as would be required of other financial institutions.


Fannie Mae securities carry no government guarantee of being repaid. This is explicitly stated in the law that authorizes GSEs, on the securities themselves, and in many public communications issued by Fannie Mae. Despite this, there is a wide misperception that these notes carry an implied government guarantee, and the vast majority of investors believe that the government would prevent them from defaulting on their debt.


Neither the certificates nor payments of principal and interest on the certificates are guaranteed by the United States government. The certificates do not constitute a debt or obligation of the United States or any of its agencies or instrumentalities other than Fannie Mae.


Alan Greenspan and Ben Bernanke have spoken publicly in favor of greater regulation of the GSEs, due the size of their holdings and the public belief in a government guarantee that does not exist.[2] [3]. Alan Greenspan (born March 6, 1926 in New York City) is an American economist and was Chairman of the Board of Governors of the Federal Reserve of the United States from 1987 to 2006. ... Ben Shalom Bernanke[1] (born December 13, 1953) (pronounced ber-NAN-kee, bər-nan-kē or ), is an American economist and current Chairman of the Board of Governors of the United States Federal Reserve. ...


Conforming loans

Fannie Mae (along with Freddie Mac) annually sets the limit of the size of a conforming loan based on the October to October changes in mean home price, above which a mortgage is considered a non-conforming jumbo loan. The GSEs only buy loans that are conforming, to repackage into the secondary market, making the demand for non-conforming loans lower. By virtue of the laws of supply and demand, then, it is harder for lenders to sell the loans, thus it would cost more to the consumers (typically 1/4 to 1/2 of a percent.) The conforming loan limit is 50 percent higher in Alaska, Hawaii, Guam and the US Virgin Islands. The Federal Home Loan Mortgage Corporation (Freddie Mac) (NYSE: FRE) is a stockholder-owned, publicly-traded company chartered by the United States federal government in 1970 to purchase mortgages and related securities, and then issues securities and bonds in financial markets backed by those mortgages in secondary markets. ... Conforming Loan Because of its stake in the mortgage market and because of its history, Fannie Mae and Freddie Mac set the limit each year on the size of a conforming loan based on the October-to-October changes in mean home price, above which a mortgage is considered a... A jumbo mortgage is a mortgage with a loan amount above conventional conforming loan limits. ... Official language(s) None[1] Spoken language(s) English 85. ... Official language(s) English, Hawaiian Capital Honolulu Largest city Honolulu Area  Ranked 43rd  - Total 10,931 sq mi (29,311 km²)  - Width n/a miles (n/a km)  - Length 1,522 miles (2,450 km)  - % water 41. ...


Financials

FNMA is a financial corporation which uses derivatives to "hedge" its cash flow. Derivative products it uses include interest rate swaps and options to enter interest rate swaps ("pay-fixed swaps", "receive-fixed swaps", "basis swaps", "interest rate caps and swaptions", "forward starting swaps"). Here's a guide through some of its financials and accounting. Image File history File links Broom_icon. ... Derivatives traders at the Chicago Board of Trade. ... In the field of derivatives trading, a popular form of swap is the interest rate swap, in which one party exchanges a stream of interest for another stream. ... In the field of derivatives trading, a popular form of swap is the interest rate swap, in which one party exchanges a stream of interest for another stream. ... A basis swap is an interest rate swap which involving exchange of two floating rate financial instruments denominated in the same currency. ... Interest rate cap An interest rate cap is a series of European call options or caplets on a specified interest rate, usually the LIBOR interest rate. ... A swaption is a financial instrument granting the owner an option to enter an interest rate swap. ... A forward-starting swap is a forward security which lock in the rate today for an interest rate swap asset or liability to be created or sold in the future. ...

  • Article about its accounting: Barron's: Fannie Mae faces more income issues - Banks - Financial - Real Estate - Financial Services - General

"transfer negative numbers to its balance sheet under "accumulated other comprehensive income," or AOCI." (Page 123 - "Balance Sheets" - "Stockholders? Equity" - "Accumulated other comprehensive loss") ([http://phx.corporate-ir.net/phoenix.zhtml?c=108360&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9MjY3MDAzNiZkb2M9MSZudW09MTI2dtaylor "2002 earnings of $6.4 billion would have been overwhelmed by $8.9 billion in cash-flow hedging losses." (Page 124 - "Accumulated Other Comprehensive Income (Loss)" - "Net cash flow hedging losses on derivatives hedging debt"). Accumulated other comprehensive income is a subsection in equity where other comprehensive income is accumulated (summed). ...


"$3 billion in losses that were recognized in 2002-2003" (Page 122 - "Statements of Income" - "Other expenses" - "Debt extinguishments, net").


"$19 billion paid to settle underwater interest-rate swaps in those years." (Page 125 - "Cash-Flows" - "Cash flows from (used in) financing activities" - "Net payments to purchase or settle hedge instruments").


"interest rate swaps on its books rose from $23 billion in 2002 to $149 billion in 2003." (Page 79 - Table 30 "Cash flow hedges" - "Receive-fixed swaps").


"exclude its AOCI numbers from the calculations of capital" (Page 158 - "Core capital" is "Stockholders' Equity" excluding AOCI).


Duration gap

Main article: Duration gap
  • UPDATE - Fannie Mae average duration gap widens in April

"The company said that in April its average duration gap widened to plus 3 months in April from zero in March." "The Washington-based company aims to keep its duration gap between minus 6 months to plus 6 months. From September 2003 to March, the gap has run between plus to minus one month." Image File history File links Broom_icon. ... The duration gap is the difference between the duration of assets and liabilities. ... The duration gap is the difference between the duration of assets and liabilities. ...

"last summer's 5-month ?duration mismatch? cost Fannie nearly a year of earnings."


Accounting scandal

In late 2004, Fannie Mae was under investigation for its accounting practices. The Office of Federal Housing Enterprise Oversight released [http://www.ofheo.gov/media/pdf/FNMfindingstodate17sept04.pdf this report on September 20, 2004, alleging widespread accounting errors, including shifting of losses so senior executives could earn bonuses. Year 2004 (MMIV) was a leap year starting on Thursday of the Gregorian calendar. ...


Fannie Mae is the second-largest U.S. financial institution after Citigroup Inc. yet hasn’t filed an earnings statement since late 2004, though required to do so by SEC regulations and New York Stock Exchange listing standards. Fannie Mae expected to spend more than $1 billion in 2006 alone to complete its internal audit and bring it closer to compliance. The anticipated restatement was estimated at $10.8 billion, however, after review resulted in $6.3 billion in restated earnings as listed in Fannie Mae's Annual Report on Form 10-K. Citigroup Inc. ...


Concerns with business and accounting practices at Fannie Mae predate the scandal itself. On June 15, 2000, the House Banking Subcommittee On Capital Markets, Securities And Government Sponsored Enterprises held hearings on Fannie Mae[4].


On December 18, 2006, U.S. regulators filed 101 civil charges against chief executive Franklin Raines; chief financial officer J. Timothy Howard; and the former controller Leanne G. Spencer. The three are accused of manipulating Fannie Mae earnings to maximize their bonuses. The lawsuit seeks to recoup more than $115 million in bonus payments, collectively accrued by the trio from 1998–2004, and about $100 million in penalties for their involvement in the accounting scandal. is the 352nd day of the year (353rd in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... Chief Executive Officer (CEO) is the job of having the ultimate executive responsibility or authority within an organization or corporation. ... Franklin Delano Raines (born January 14, 1949 in Seattle, Washington) is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton. ... “CFO” redirects here. ... The controller, namely in business and administration, is one of the most senior accountants in an organization. ...


See also


 
 

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