Download - Fannie Mae 133
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PRESENTED BY
MD. TAZUL ISLAM
MBA 46DROLL:133
AN OVERVIEW OF A FORTUNE 500
COMPANY:FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FANNIE MAE)
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Business
Borrows at lower rate and lends at higherrate
Borrowings are from selling bonds andlendings are to mortgages and MortgageBased Security
A significant portion of income came fromguaranty fees it received as compensationfor assuming the credit risk
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Business (Contd.)
Buys loans from approved mortgage sellers, either for cash or inexchange for a MBS .Carries Fannie Mae's guarantee of timelypayment of interest and principal.
Fannie Mae may also securitize mortgages from its own loan
portfolio and sell the resultant mortgage-backed security toinvestors in the secondary mortgage market
By purchasing the mortgages, Fannie Mae provides banks andother financial institutions with fresh money to make new loans.This gives the United States housing and credit markets flexibility
and liquidity.
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Income Profile
Revenue US$ 22.9 billion (2012)
Net income US$ 17.2 billion (2012)
Total assets US$ 3.2 trillion (2012)
Total equity US$ 7.2 billion (2012) $8.1 billion in net income for the first quarter of
2013 fifth consecutive quarterly profit and the
largest quarterly pre-tax income in our history. Going to pay a dividend of $59.4 billion to its
owners
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History (Pre 2000)
Established in 1938 by amendments to theNational Housing Act after the GreatDepression
For the first thirty years following itsinception, Fannie Mae held a monopoly overthe secondary mortgage market
In 1981, Fannie Mae issued its first mortgagepass-through and called it a mortgage-backed security.
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History Contd. (Post 2000s)
The growth of private-label securitization and lack of regulationresulted in the oversupply of underpriced housing finance andconsequently more decrease of the price
Depreciation in home prices led to growing losses for the GSEslike Fannie Mae
In July 2008, The US Treasury Department and the FederalReserve took steps to bolster confidence in the corporations,including granting access to Federal Reserve low-interest loans(at similar rates as commercial banks)
On September 7, 2008, James Lockhart, director of the FederalHousing Finance Agency (FHFA), announced that Fannie Maewas placed into conservatorship. The action was "one of the mostsweeping government interventions in private financial markets indecades".
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Controversies
All the Devils are Here by Mclean &
Nocera
Accounting controversy
Conflict of interest
2011 SEC charges
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Nassim Taleb wrote in The Black Swan: "Thegovernment-sponsored institution FannieMae, when I look at its risks, seems to be
sitting on a barrel of dynamite, vulnerable tothe slightest hiccup. But not to worry: theirlarge staff of scientists deem these events
'unlikely'".
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Stock Performance
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5/25/2007 5/25/2008 5/25/2009 5/25/2010 5/25/2011 5/25/2012
Adj Close Price
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