Federal National Mortgage Association Fannie Mae (FNMA)

Risks

• The future of our company is uncertain.
• Our regulator is authorized or required to place us into receivership under specified conditions, which would result in our liquidation, and FHFA, acting as receiver, proceeding to realize on our assets. Amounts recovered by our receiver from these actions may not be sufficient to repay the liquidation preference of any series of our preferred stock or to provide any proceeds to common shareholders.
• Our business and results of operations may be materially adversely affected if we are unable to retain and recruit well-qualified executives and other employees. The conservatorship, the uncertainty of our future, and limitations on our executive and employee compensation put us at a disadvantage compared to many other companies with which we compete for talent. In addition, the improving economy and increased remote work opportunities have increased the competition we face in retaining and hiring executives and other employees.
• Pursuing our housing goals, duty to serve obligations, and Equitable Housing Finance Plan may adversely affect our business, results of operations and financial condition.
• The conservatorship and agreements with Treasury adversely affect our common and preferred shareholders.
• The liquidity and market value of our MBS could be adversely affected by negative developments in the UMBS market.
• Our issuance of UMBS and structured securities backed by Freddie Mac-issued securities exposes us to operational and counterparty credit risk.
• Our reliance on CSS and the common securitization platform exposes us to third-party risk.
• We are limited in our ability to diversify our business and may be prohibited from undertaking activities that management believes would benefit our business.
• An active trading market in our equity securities may cease to exist, which would adversely affect the market price and liquidity of our common and preferred stock.
• We may incur significant credit losses and credit-related expenses on the loans in our book of business.
• One or more of our institutional counterparties may fail to fulfill their contractual obligations to us, resulting in financial losses, business disruption and decreased ability to manage risk.
• Our financial condition or results of operations may be adversely affected if mortgage servicers fail to perform their obligations to us.
• We may incur losses as a result of claims under our mortgage insurance policies not being paid in full or at all.
• Mortgage fraud could result in significant financial losses and harm to our reputation.
• We may suffer losses if borrowers suffer property damage as a result of a hazard for which we do not require insurance, such as flooding outside of certain areas, if property or flood insurance is unobtainable or prohibitively costly, if their claims under insurance policies are not paid, or if their insurance is insufficient to cover all losses.
• The occurrence of major natural or other disasters in the United States or its territories and the impact of climate change could negatively impact our credit losses and credit-related expenses.
• A failure in our operational systems or infrastructure, or those of third parties, could materially adversely affect our business, impair our liquidity, cause financial losses and harm our reputation.
• A breach of the security of our systems or facilities, or those of third parties with which we do business, including as a result of cyber attacks, could damage or disrupt our business or result in the disclosure or misuse of confidential information, which could damage our reputation, result in regulatory sanctions and/or increase our costs and cause losses.
• Our concurrent implementation of multiple new initiatives may increase our operational risk and result in one or more material weaknesses in our internal control over financial reporting.
• Material weaknesses in our internal control over financial reporting could result in errors in our reported results or disclosures that are not complete or accurate.
• Failure of our models to produce reliable results may adversely affect our ability to manage risk and make effective business decisions.
• Limitations on our ability to access the debt capital markets could have a material adverse effect on our ability to fund our operations, and our liquidity contingency plans may be difficult or impossible to execute during a sustained liquidity crisis.
• A decrease in the credit ratings on our senior unsecured debt could have an adverse effect on our ability to issue debt on reasonable terms, particularly if such a decrease were not based on a similar action on the credit ratings of the U.S. government. A decrease in our credit ratings also could require that we post additional collateral for our derivatives contracts.
• Changes in interest rates or our loss of the ability to manage interest-rate risk successfully could adversely affect our financial results and condition, and increase interest-rate risk.
• Changes in spreads could materially impact our results of operations, net worth and the fair value of our net assets.
• Uncertainty relating to the discontinuance of LIBOR may adversely affect our results of operations, financial condition, liquidity and net worth.
• Our business and financial results are affected by general economic conditions, including home prices and employment trends, and changes in economic conditions or financial markets may materially adversely affect our business and financial condition.
• A decline in activity in the U.S. housing market or increasing interest rates could lower our business volumes or otherwise adversely affect our results of operations, net worth and financial condition.
• Regulatory changes in the financial services industry may negatively impact our business.
• Legislative, regulatory or judicial actions could negatively impact our business, results of operations, financial condition or net worth.
• The COVID-19 pandemic may continue to adversely affect our business and financial results.
• Our business and financial results could be materially adversely affected by legal or regulatory proceedings.
• Changes in accounting standards and policies can be difficult to predict and can materially impact how we record and report our financial results.
• In many cases, our accounting policies and methods, which are fundamental to how we report our financial condition and results of operations, require management to make judgments and estimates about matters that are inherently uncertain. Management also relies on models in making these estimates.