Federal National Mortgage Association Fannie Mae: Form 10-Q for the period ended Mar 31, 2025

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with our unaudited condensed consolidated financial statements and related notes in this report and the more detailed information in our annual report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”). You can find a “Glossary of Terms Used in This Report” in MD&A in our 2024 Form 10-K.

This report includes forward-looking statements based on management’s current expectations that are subject to significant uncertainties. Future events and our results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in “Forward-Looking Statements,” “Risk Factors” and elsewhere in this report and in our 2024 Form 10-K.

About Fannie Mae

Fannie Mae is a leading source of financing for residential mortgages in the United States. We provided $76.1 billion in liquidity to the mortgage market in the first quarter of 2025, which enabled the financing of approximately 287,000 home purchases, refinancings, and rental units.

We are a government-sponsored, stockholder-owned corporation, chartered by Congress to provide liquidity and stability to the U.S. housing market and to promote access to mortgage credit. We primarily do this by buying residential mortgage loans that are originated by lenders. We place these loans into trusts and issue guaranteed mortgage-backed securities (“MBS” or “Fannie Mae MBS”) that global investors buy from us. We do not originate mortgage loans or lend money directly to borrowers.

We provide a guaranty on the MBS that we issue. If a borrower fails to make a payment on a mortgage loan that is included in a Fannie Mae MBS, we pay the shortfall amount to the MBS investor. In exchange for providing this guaranty, we receive a guaranty fee. Guaranty fees are the primary source of our revenues.

Because we assume the credit risk for mortgage loans in our MBS, our earnings are affected by the credit performance of these loans. Credit risk management is therefore key to our business and financial results. To help manage our mortgage credit risk exposure, and in response to capital and other requirements, we transfer some of our credit risk exposure to third parties through credit risk transfer and mortgage insurance. For a discussion of how we manage credit risk, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” and “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” in this report and in our 2024 Form 10-K.

We support both single-family and multifamily housing. Our Single-Family business provides financing for properties that have four or fewer residential units. Our Multifamily business provides financing for residential buildings with five or more units. As of December 31, 2024 (the latest date for which information is available), Fannie Mae owned or guaranteed an estimated 25% of single-family mortgage debt outstanding and an estimated 21% of multifamily mortgage debt outstanding in the United States.

We have been in conservatorship since 2008. The Federal Housing Finance Agency (“FHFA”) is our conservator. During conservatorship, our Board has no fiduciary duties to the company or its stockholders, as they owe their fiduciary duties of care and loyalty solely to FHFA as conservator. Since March 17, 2025, the FHFA Director has served as the Chairman of our Board, and FHFA’s General Counsel has also served as a member of our Board. Conservatorship and our agreements with the U.S. Department of the Treasury (“Treasury”) significantly restrict our business activities and stockholder rights. For more information about the impact of conservatorship and these agreements on our business, stockholders, and our uncertain future, see “Business—Conservatorship and Treasury Agreements” and “Risk Factors—GSE and Conservatorship Risk” in our 2024 Form 10-K.

MD&A | Executive Summary

Financial Results Summary

Please read this summary together with our MD&A, our condensed consolidated financial statements as of March 31, 2025 and the accompanying notes.

Overview of Financial Results

Summary of Financial Results

• Net revenues remained flat at $7.1 billion in the first quarter of 2025 compared with the first quarter of 2024. Net revenues consist of net interest income and fee and other income.
• Provision for credit losses of $24 million for the first quarter of 2025 related to our Single-Family business segment, which reflected the impact of recent economic uncertainty and improvements in actual and forecasted home price growth.
• Net income of $3.7 billion in the first quarter of 2025 decreased by $659 million compared with the first quarter of 2024, primarily driven by a decrease in fair value gains and a shift from benefit for credit losses to provision for credit losses.
• Net worth increased by $3.7 billion in the first quarter of 2025 to $98.3 billion as of March 31, 2025.

For more information on the drivers of our financial results, see “Consolidated Results of Operations.”

Legislation and Regulation

This section updates and supplements information regarding legislative, regulatory, conservatorship and other matters affecting our business set forth in “Business—Conservatorship and Treasury Agreements” and “Business—Legislation and Regulation” in our 2024 Form 10-K. Also see “Risk Factors” in our 2024 Form 10-K for discussions of risks relating to legislative and regulatory matters.

Withdrawal of Prior Guidance, Policies, Regulatory Requirements, and Directives

The new FHFA Director, who was sworn in on March 14, 2025, has rescinded, waived, suspended, or otherwise withdrawn certain guidance, policies, regulatory requirements, and directives affecting Fannie Mae and Freddie Mac, including the multifamily residential lease standards policy, some requirements relating to FHFA’s fair lending rule, and certain corporate governance requirements. These actions were effective immediately. See “Conservatorship and Treasury Agreements—Conservatorship” and “Risk Factors—GSE and Conservatorship Risk” in our 2024 Form 10-K for a discussion of FHFA’s authority as our conservator and how FHFA, as our conservator, controls our business activities.

MD&A | Legislation and Regulation

Fannie Mae Board of Directors and Committees

As of April 29, 2025, the members of our Board of Directors are FHFA Director and Board Chairman William J. Pulte, FHFA General Counsel Clinton Jones, Fannie Mae President and Chief Executive Officer Priscilla Almodovar, Omeed Malik, and the following directors, each of whom has been determined by the Board to be independent: Renée L. Glover, Karin J. Kimbrough, Manuel “Manolo” Sánchez Rodriguez, Scott D. Stowell and Vice Chair Michael Stucky. As of April 29, 2025, our Board committees are as follows:

• Audit Committee – Renée Glover, Manolo Sánchez (Chair) and Michael Stucky;
• Compensation and Human Capital Committee – Clinton Jones, Scott Stowell and Michael Stucky (Chair);
• Nominating and Corporate Governance Committee – Renée Glover, Karin Kimbrough, William Pulte (Chair) and Scott Stowell; and
• Risk Policy and Capital Committee – Clinton Jones, Karin Kimbrough (Chair) and Manolo Sánchez.

Our Board of Directors has not yet considered the independence of or committee assignments for Mr. Malik, who joined the Board on April 14, 2025.

MD&A | Key Market Economic Indicators

Key Market Economic Indicators

In “MD&A—Key Market Economic Indicators” in our 2024 Form 10-K, we discuss how varying macroeconomic conditions can influence our financial results across different business and economic environments, and we provide forecasts and expectations with respect to some of these macroeconomic conditions. Below we provide an update to these forecasts and expectations, as well as updates to certain macroeconomic information. Our forecasts and expectations are based on many assumptions, subject to many uncertainties and may change, perhaps substantially, from our current forecasts and expectations. See “Risk Factors” and “Forward-Looking Statements” in our 2024 Form 10-K and in this report for a discussion of factors that could cause actual results to differ materially from our current forecasts and expectations.

Market Interest Rates

Selected Market Interest Rates

(1) Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac’s Primary Mortgage Market Survey®. These rates are reported using the latest available data for a given period.

(2) According to Bloomberg.

(3) Refers to the daily rate per the Federal Reserve Bank of New York.

The U.S. weekly average 30-year fixed-rate mortgage rate decreased to 6.65% at the end of the first quarter of 2025, compared to 6.85% at the end of the fourth quarter of 2024.

Home Prices

Single-Family Quarterly Home Price Growth (Decline) Rate(1)

(1) Calculated internally using property data on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s home price index is a weighted repeat-transactions index, measuring average price changes in repeat sales on the same properties. Fannie Mae’s home price index excludes prices on properties sold in foreclosure. Fannie Mae’s home price growth rates represent estimates based on non-seasonally adjusted preliminary data and are subject to change as additional data becomes available.

Home prices on a national basis grew by an estimated 1.4% in the first quarter of 2025. We expect home price growth of 4.1% on a national basis in 2025. We also expect regional variation in the timing and rate of home price changes.

MD&A | Key Market Economic Indicators

Economic Activity

GDP and Unemployment Rate

(1) Real GDP growth is based on the quarterly series calculated by the Bureau of Economic Analysis and is subject to revision.

(2) According to the U.S. Bureau of Labor Statistics and subject to revision.

U.S. gross domestic product (“GDP”) increased in 2024. Bureau of Economic Analysis GDP data for the first quarter of 2025 was not available at the time of filing this report. We expect GDP will continue to grow for the full year of 2025, but at a slower pace than 2024. The unemployment rate increased to 4.2% in the first quarter of 2025 as compared to 4.1% in the fourth quarter of 2024. We expect the unemployment rate to continue to increase modestly in the remainder of 2025.

The impact of trade, fiscal, regulatory and immigration policies is uncertain and could materially impact our outlook for interest rates, home price growth and economic growth. See “Risk Factors—Market and Industry Risk” and “Risk Factors—Credit Risk” in our 2024 Form 10-K for further discussion of risks to our business and financial results associated with these factors.

Consolidated Results of Operations

This section discusses our condensed consolidated results of operations and should be read together with our condensed consolidated financial statements and the accompanying notes.

Summary of Condensed Consolidated Results of Operations

(Dollars in millions)

(1) Includes net interest income generated by the 10 basis point guaranty fee increase we implemented pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”), and as extended by the Infrastructure Investment and Jobs Act, which is paid to Treasury and not retained by us. We refer to this as TCCA fees, or income related to TCCA.

(2) Consists of salaries and employee benefits and professional services, technology and occupancy expenses.

(3) Consists of TCCA fees, affordable housing allocations and FHFA assessments.

(4) Single-family credit enhancement expense consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk Transfer™ (“CIRTTM”) programs, enterprise-paid mortgage insurance (“EPMI”) and certain lender risk-sharing programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and Multifamily CAS (“MCASTM”) programs as well as amortization expense for certain lender risk-sharing programs. Excludes CAS transactions accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments.

(5) Primarily consists of foreclosed property income (expense), change in the expected benefits from our freestanding credit enhancements, and gains and losses from partnership investments.

Net Interest Income

Overview

Our primary source of net interest income is guaranty fees we receive for assuming the credit risk on mortgage loans underlying Fannie Mae MBS held by third parties in our guaranty book of business. We also recognize net interest income on the difference between interest income earned on the assets in our retained mortgage portfolio and our corporate liquidity portfolio (collectively, our “portfolios”) and the interest expense associated with our funding debt. In addition, income or expense from hedge accounting is a component of our net interest income. See “MD&A—Consolidated Results of Operations—Net Interest Income” in our 2024 Form 10-K for information about the sources of our net interest income.

Components of Net Interest Income

The table below displays the components of our net interest income from our guaranty book of business, from our portfolios, as well as from hedge accounting.

Components of Net Interest Income

(Dollars in millions)

(1) Includes interest income from assets held in our retained mortgage portfolio and our corporate liquidity portfolio, as well as other assets used to support lender liquidity. Also includes interest expense on our funding debt, including outstanding CAS debt.

(2) For more information about our hedge accounting program, see “Note 9, Derivative Instruments.”

Net interest income remained relatively flat in the first quarter of 2025 compared with the first quarter of 2024. Lower net interest income from portfolios was largely offset by higher income from base guaranty fees and lower expense from hedge accounting.

• Lower net interest income from portfolios. Lower net interest income from portfolios in the first quarter of 2025 compared with the first quarter of 2024 was primarily driven by a higher average balance and higher average rates of our long-term funding debt.
• Higher base guaranty fee income. Higher base guaranty income was primarily driven by higher average guaranty fees on recent single-family acquisitions.
• Lower expense from hedge accounting. We had lower expense from hedge accounting in the first quarter of 2025 compared with the first quarter of 2024, primarily driven by lower interest expense on derivatives in hedging relationships.

Analysis of Unamortized Deferred Guaranty Fees

The following charts present information about the interest rates of the loans in our single-family conventional guaranty book of business as well as information about our deferred guaranty fees.

As shown in the chart below (on the left), most of our single-family conventional guaranty book of business as of March 31, 2025 had an interest rate lower than the U.S. weekly average 30-year fixed-rate mortgage rate. Per Freddie Mac’s Primary Mortgage Market Survey®, as of March 27, 2025, the U.S. weekly average interest rate for a single-family 30-year fixed-rate mortgage was 6.65%. Accordingly, even if interest rates decline meaningfully, most of the borrowers whose mortgage loans are in our single-family conventional guaranty book of business still would not be incentivized to refinance.

The other chart below (on the right) presents guaranty fees that will be amortized into deferred guaranty fee income in future periods, which we refer to as “unamortized deferred guaranty fees,” as described in “MD&A—Consolidated Results of Operations—Net Interest Income—Analysis of Unamortized Deferred Guaranty Fees” in our 2024 Form 10-K.

The amount of deferred guaranty fee income we record can vary and is primarily impacted by: (1) the amount of upfront fees we charge on single-family mortgage loans, (2) changes in interest rates, which affect the premiums and discounts we record on newly acquired mortgage loans and newly created debt of consolidated trusts, and (3) the amount by which premiums and discounts on existing loans and debt of consolidated trust are different compared to newly acquired loans and debt. The balance of our unamortized deferred guaranty fees decreased as of March 31, 2025, compared with December 31, 2024, largely as a result of amortization of existing upfront fees on single-family loans. In addition, interest-rate-driven pricing changes in the first quarter of 2025 resulted in net discounts on newly issued MBS debt as prices declined, which further reduced the balance of unamortized deferred guaranty fees.

Analysis of Net Interest Income

The table below displays an analysis of our net interest income, average balances and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages.

Analysis of Net Interest Income and Yield(1)

(Dollars in millions)

(1) Includes the effects of discounts, premiums and other cost basis adjustments, including basis adjustments related to hedge accounting.

(2) Cash equivalents are composed of overnight reverse repurchase agreements and U.S. Treasuries, if any, that have a maturity at the date of acquisition of three months or less.

(3) Consists of U.S. Treasuries not classified as cash equivalents and mortgage-related securities.

(4) Average balance includes mortgage loans on nonaccrual status. Interest income includes loan fees of $645 million for the first quarter of 2025, compared with $669 million for the first quarter of 2024. Loan fees primarily consist of yield maintenance revenue we recognized on the prepayment of multifamily mortgage loans and the amortization of upfront cash fees exchanged when we acquire the mortgage loan.

(Provision) Benefit for Credit Losses

The table below presents our single-family and multifamily benefit or provision for credit losses and the change in expected credit enhancement recoveries. The benefit or provision for credit losses includes our benefit or provision for loan losses, accrued interest receivable losses, our guaranty loss reserves, and credit losses on our available-for-sale (“AFS”) debt securities.

(Provision) Benefit for Credit Losses and Change in Expected Credit Enhancement Recoveries by Segment

(Dollars in millions)

(1) Consists of estimated changes in benefits from our freestanding credit enhancements, which are recognized as a component of “Other income (expenses), net” in our condensed consolidated statements of operations and comprehensive income.

Single-Family (Provision) Benefit for Credit Losses

Our single-family provision for credit losses of $24 million in the first quarter of 2025 reflected the impact of recent economic uncertainty and improvements in actual and forecasted home price growth.

More specifically, the provision from economic uncertainty was offset by a benefit from actual and forecasted home price growth as described below:

• Provision from economic uncertainty. During the first quarter of 2025, the impact of economic uncertainty associated with recent trade and fiscal policies led to market volatility, which increased our estimate for credit losses and resulted in a provision.
• Benefit from actual and forecasted home price growth. During the first quarter of 2025, actual home prices appreciated more than originally projected and our forecast of future home prices also improved. Higher home prices decrease the likelihood that loans will default and reduce the amount of losses on loans that default, which impacts our estimate of losses and ultimately reduces our loss reserves and provision for credit losses.

See “Key Market Economic Indicators” in our 2024 Form 10-K for additional information about how home prices affect our credit loss estimates. See “Key Market Economic Indicators” in this report for a discussion of home price growth and our home price forecast. Also see “Critical Accounting Estimates” in this report for more information about our home price and interest rate forecasts and how they can impact our single-family (provision) benefit for credit losses.

Our single-family benefit for credit losses in the first quarter of 2024 was primarily driven by a benefit from forecasted home price growth, partially offset by a provision from changes in loan activity and a provision from actual and projected interest rates, as described below:

• Benefit from actual and forecasted home price growth. During the first quarter of 2024, we observed stronger-than-expected forecasted home price appreciation.
• Provision from changes in loan activity. This includes provision on newly acquired loans and was primarily driven by the credit risk profile of our first quarter 2024 single-family acquisitions, which primarily consisted of purchase loans. Purchase loans generally have higher original loan-to-value (“LTV”) ratios than refinance loans; therefore, purchase loans have a higher estimated risk of default and loss severity in the allowance than refinance loans and a correspondingly higher credit loss provision at the time of acquisition.
• Provision from actual and projected interest rates. Actual and projected interest rates increased in the first quarter of 2024 compared with our prior forecast. As mortgage rates increase, we expect a decrease in future

prepayments on single-family loans. Lower expected prepayments extend the expected life of the loan, which increases our expectation of credit losses.

Multifamily (Provision) Benefit for Credit Losses

Our multifamily (provision) benefit for credit losses in the first quarter of 2025 was neutral. Our multifamily allowance for credit losses as of March 31, 2025 includes a component related to economic uncertainty, particularly uncertainty related to multifamily property values.

Our multifamily provision for credit losses in the first quarter of 2024 was primarily driven by continued declines in actual and projected multifamily property values, which included provision attributable to property value uncertainty, as well as provision due to increases in actual and projected interest rates compared to our prior forecast. Actual multifamily property valuations decreased in the first quarter of 2024 driven by elevated interest rates and higher investor yield requirements. Our forecast of multifamily property value estimated further declines in the near term offset by a long-term improvement. In addition, reduced multifamily market transactions in the first quarter of 2024 had increased uncertainty around multifamily property valuations.

Fair Value Gains (Losses), Net

The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and implied volatility, as well as activity related to these financial instruments.

The table below displays the components of our fair value gains and losses.

Fair Value Gains (Losses), Net

(Dollars in millions)

(1) “Net contractual interest income (expense) on interest-rate swaps” is primarily impacted by changes in interest rates and changes in the composition of our interest-rate swaps portfolio.

(2) The “Impact of hedge accounting” reflected in this table shows the net gain or loss from swaps in hedging relationships plus any accrued interest during the applicable periods that are recognized in “Net interest income.”

(3) Consists primarily of fair value gains and losses on mortgage loans held at fair value.

Fair value gains, net in the first quarter of 2025 were driven by gains on fixed-rate trading securities, which were substantially offset by losses on long-term debt of consolidated trusts held at fair value, mortgage commitment derivatives, and risk management derivatives, all of which were primarily due to declining interest rates in the first quarter of 2025. Our hedge accounting program is designed to hedge our exposure to changes in benchmark interest rates and, therefore, offsets a portion of the fair value volatility we would otherwise experience. The fair value gains and losses after the impact of hedge accounting primarily relate to spreads, convexity, and other components that are not effectively captured by our hedge accounting program.

Fair value gains, net in the first quarter of 2024 were primarily driven by gains on risk management derivatives, mortgage commitment derivatives, and long-term debt of consolidated trusts held at fair value, primarily due to increases in interest rates. These gains were partially offset by the impact of declining prices of fixed-rate trading securities, also primarily driven by increasing interest rates.

Legislative Assessments

The table below displays the components of our legislative assessments.

Legislative Assessments

(Dollars in millions)

(1) TCCA fees are expenses recognized as a result of the 10 basis point increase in guaranty fees on all single-family mortgages delivered to us on or after April 1, 2012 pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 and as extended by the Infrastructure Investment and Jobs Act, which we pay to Treasury.

(2) FHFA assessments are expenses relating to our obligation under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended (the “GSE Act”) to pay FHFA to cover a portion of its costs, expenses and working capital.

(3) Affordable housing allocations relates to the GSE Act requirement to set aside each year an amount equal to 4.2 basis points of the unpaid principal balance of our new business purchases and to pay this amount to specified U.S. Department of Housing and Urban Development (“HUD”) and Treasury funds in support of affordable housing. In March 2025, we paid $160 million to the funds based on our new business purchases in 2024. For the first quarter of 2025, we recognized an expense of $32 million related to this obligation based on $76.0 billion in new business purchases during the period. We expect to pay this amount to the funds in 2026, plus additional amounts to be accrued based on our new business purchases in the remaining nine months of 2025.

MD&A | Consolidated Balance Sheet Analysis

Consolidated Balance Sheet Analysis

This section discusses our condensed consolidated balance sheets and should be read together with our condensed consolidated financial statements and the accompanying notes.

Summary of Condensed Consolidated Balance Sheets

(Dollars in millions)

Securities Purchased Under Agreements to Resell

The increase in securities purchased under agreements to resell, from December 31, 2024 to March 31, 2025, was primarily due to the reinvestment of proceeds from sales of MBS securities held in our retained mortgage portfolio. See “Liquidity and Capital Management—Liquidity Management—Corporate Liquidity Portfolio” for additional information.

Mortgage Loans, Net of Allowance for Loan Losses

The mortgage loans reported in our condensed consolidated balance sheets are classified as either held for sale (“HFS”) or held for investment (“HFI”) and include loans owned by Fannie Mae and loans held in consolidated trusts.

Mortgage loans, net of allowance for loan losses decreased from December 31, 2024 to March 31, 2025, driven primarily by loan paydowns and liquidations outpacing acquisitions during the first quarter of 2025.

For additional information on our mortgage loans, see “Note 4, Mortgage Loans,” and for additional information on changes in our allowance for loan losses, see “Note 5, Allowance for Loan Losses.”

Debt

The decrease in debt of Fannie Mae from December 31, 2024 to March 31, 2025 was due to redemptions outpacing new issuances. The increase in debt of consolidated trusts from December 31, 2024 to March 31, 2025 was primarily driven by sales of Fannie Mae MBS held in our retained mortgage portfolio. See “Liquidity and Capital Management—Liquidity Management—Debt Funding” for a summary of activity in debt of Fannie Mae and information on our outstanding short-term and long-term debt. Also see “Note 8, Short-Term and Long-Term Debt” for additional information on our total outstanding debt.

MD&A | Retained Mortgage Portfolio

Retained Mortgage Portfolio

Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back mortgage-related securities owned by third parties are not included in our retained mortgage portfolio.

We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market through portfolio securitization transactions and to support our loss mitigation activities.

We classify our retained mortgage portfolio into three categories:

• Lender liquidity includes balances related to our portfolio securitization activity, which supports our efforts to provide liquidity to the single-family and multifamily mortgage markets.
• Loss mitigation includes delinquent mortgage loans from our MBS trusts, which enables us to initiate certain loss mitigation efforts.
• Other represents assets that we previously purchased for investment purposes.

The following table displays the components of our retained mortgage portfolio. Based on the nature of the asset, these balances are included in either “Investments in securities, at fair value” or “Mortgage loans, net of allowance for loan losses” in our “Summary of Condensed Consolidated Balance Sheets.”

The decrease in our retained mortgage portfolio as of March 31, 2025 compared with December 31, 2024 was primarily due to a decrease in our lender liquidity portfolio driven by lower holdings in agency securities and mortgage loans.

Retained Mortgage Portfolio

(Dollars in millions)

(1) Consists of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.

(2) Includes single-family loans on nonaccrual status of $11.0 billion and $10.3 billion as of March 31, 2025 and December 31, 2024, respectively. Also includes multifamily loans on nonaccrual status of $3.1 billion and $2.9 billion as of March 31, 2025 and December 31, 2024, respectively.

(3) Includes Fannie Mae and Ginnie Mae reverse mortgage securities. We stopped acquiring newly originated reverse mortgage loans in 2010.

(4) Other mortgage loans primarily includes single-family and multifamily loans that are not included in the loss mitigation or lender liquidity categories. Other mortgage securities primarily includes private-label securities and mortgage revenue bonds.

The amount of mortgage assets that we may own is capped at $225 billion under the terms of our senior preferred stock purchase agreement with Treasury. We are also subject to specified limitations on the composition of our retained mortgage portfolio pursuant to FHFA guidance.

MD&A | Retained Mortgage Portfolio

We include 10% of the notional value of the interest-only securities we hold in calculating the size of the retained mortgage portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement mortgage assets cap and associated FHFA instructions. As of March 31, 2025, 10% of the notional value of our interest-only securities was $1.6 billion, which is not included in the table above.

Under the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS trust. FHFA has also provided us with instruction on our single-family delinquent loan buyout policy. The purchase price for these loans is the unpaid principal balance of the loans plus accrued interest. In support of our loss mitigation strategies, we purchased $3.6 billion of loans from our single-family MBS trusts in the first quarter of 2025, the substantial majority of which were delinquent, compared with $2.9 billion of loans in the first quarter of 2024.

Guaranty Book of Business

When we securitize mortgage loans originated by lenders into Fannie Mae mortgage-backed securities, we issue guarantees, taking on the credit risk for those mortgage loans. Our guaranty book of business offers insight into both the guarantees we’ve issued and the credit risk of the loans we’ve acquired that back our MBS outstanding or that are held in our retained mortgage portfolio.

Our “guaranty book of business” consists of: (1) Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by Freddie Mac securities, (2) mortgage loans of Fannie Mae held in our retained mortgage portfolio, and (3) other credit enhancements that we provide on mortgage assets.

We use the term “Fannie Mae MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including Fannie Mae-issued UMBS and structured securities such as Supers® and Real Estate Mortgage Investment Conduit securities (“REMICs”).

We and Freddie Mac each issue single-family uniform mortgage-backed securities, or “UMBS®.” In some instances, our MBS are resecuritizations of securities backed in whole or in part by Freddie Mac-issued UMBS, in which case our guaranty extends to the underlying Freddie Mac securities, shown as “Freddie Mac securities guaranteed by Fannie Mae” in the table below. The Freddie Mac securities guaranteed by Fannie Mae are excluded from our “guaranty book of business” because Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities, but included in “Total Fannie Mae guarantees” as presented in the table below.

The table below displays the composition of our guaranty book of business and our total Fannie Mae guarantees based on unpaid principal balance.

Composition of Fannie Mae Guaranty Book of Business

(Dollars in millions)

(1) Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.

(2) Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.

(3) Represents the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers and REMICs. Because we do not have the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance sheet, giving rise to off-balance sheet exposure. See “Liquidity and Capital Management—Liquidity Management—Off-Balance Sheet Arrangements” and “Note 7, Financial Guarantees for more information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.

Presentation of Guaranty Book of Business in the Single-Family Business and Multifamily Business sections

We present the guaranty book of business in this section and in our Monthly Summary reports, which are available on our website, based on the unpaid principal balance of our MBS outstanding. In the “Single-Family Business” and

MD&A | Guaranty Book of Business

“Multifamily Business” sections of this report, we present our single-family conventional guaranty book of business and our multifamily guaranty book of business, respectively, based on the unpaid principal balance of mortgage loans underlying our MBS. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been paid to the MBS holders or in instances where we have advanced missed borrower payments on mortgage loans to make required distributions to MBS holders. The difference in these measurements is less than 1%. Using these two presentations allows us to base the disclosure in this section and in our Monthly Summary reports based on the MBS measurement, and disclosures about the composition of loans in our guaranty book of business based on the loan measurement.

Business Segment Financial Results

We have two reportable business segments: Single-Family and Multifamily. This section discusses the primary components of net income for our Single-Family Business and Multifamily Business segments. This information complements the discussion of our condensed consolidated financial results in “Consolidated Results of Operations.”

Business Segment Financial Results(1)

(Dollars in millions)

(1) See “Note 10, Segment Reporting” for information about our segment allocation methodology.

(2) For single-family, includes net interest income generated by the 10 basis point guaranty fee increase we implemented pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011, and as extended by the Infrastructure Investment and Jobs Act, which is paid to Treasury and not retained by us.

(3) Consists of salaries and employee benefits and professional services, technology and occupancy expenses.

(4) For single-family, consists of the portion of our single-family guaranty fees that is paid to Treasury pursuant to the TCCA, affordable housing allocations and FHFA assessments. For multifamily, consists of the affordable housing allocations and FHFA assessments.

(5) Single-family credit enhancement expense consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance programs and certain lender risk-sharing programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and Multifamily CAS (“MCASTM”) programs as well as amortization expense for certain lender risk-sharing programs. Excludes CAS transactions accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments.

(6) Primarily consists of foreclosed property income (expense), change in the expected benefits from our freestanding credit enhancements, and gains and losses from partnership investments.

MD&A |Business Segments Financial Results

Net Interest Income

(Dollars in millions)

Single-Family

The small decrease in net interest income for the first quarter of 2025 compared with the first quarter of 2024 was driven by lower net interest income from portfolios, which was largely offset by higher income from base guaranty fees and lower expense from hedge accounting.

Multifamily

The small decrease in net interest income for the first quarter of 2025 compared with the first quarter of 2024 was driven by an increase in our multifamily nonaccrual population, which was largely offset by higher guaranty fee income as a result of an increase in the size of our multifamily guaranty book of business and higher yield maintenance income from an increase in prepayments.

(Provision) Benefit for Credit Losses

(Dollars in millions)

See “Consolidated Results of Operations—(Provision) Benefit for Credit Losses” for a discussion of our single-family and multifamily (provision) benefit for credit losses.

MD&A |Business Segments Financial Results

Fair Value Gains (Losses), Net

(Dollars in millions)

Single-Family

Fair value gains, net in the first quarter of 2025 were driven by gains on fixed-rate trading securities, which were substantially offset by losses on long-term debt of consolidated trusts held at fair value, mortgage commitment derivatives, and risk management derivatives, all of which were primarily due to declining interest rates in the first quarter of 2025. Our hedge accounting program is designed to hedge our exposure to changes in benchmark interest rates and, therefore, offsets a portion of the fair value volatility we would otherwise experience. The fair value gains and losses after the impact of hedge accounting primarily relate to spreads, convexity, and other components that are not effectively captured by our hedge accounting program.

Fair value gains, net in the first quarter of 2024 were primarily driven by gains on risk management derivatives, mortgage commitment derivatives, and long-term debt of consolidated trusts held at fair value, primarily due to increases in interest rates. These gains were partially offset by the impact of declining prices of fixed-rate trading securities, also primarily driven by increasing interest rates.

MD&A | Single-Family Business | Single-Family Mortgage Market

Single-Family Business

This section supplements and updates information regarding our Single-Family business segment in our 2024 Form 10-K. See “MD&A—Single-Family Business” in our 2024 Form 10-K for additional information regarding the primary business activities, lenders, investors and competition of our Single-Family business.

Single-Family Mortgage Market

Total housing activity modestly increased in the first quarter of 2025 compared with the fourth quarter of 2024. Existing home sales averaged 4.13 million units annualized in the first quarter of 2025, compared with 4.16 million units in the fourth quarter of 2024, according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family home sales averaged an annualized rate of approximately 684,000 units in the first quarter of 2025, compared with approximately 673,000 units in the fourth quarter of 2024.

The U.S. weekly average 30-year fixed mortgage rate was 6.65% as of March 27, 2025, compared with 6.85% as of December 26, 2024, and averaged 6.83% in the first quarter of 2025, compared with 6.63% in the fourth quarter of 2024, according to Freddie Mac’s Primary Mortgage Market Survey®.

Single-family mortgage market originations increased from an estimated $327 billion in the first quarter of 2024 to an estimated $378 billion in the first quarter of 2025. According to the April forecast from our Economic and Strategic Research Group, total originations in the U.S. single-family mortgage market in 2025 are forecasted to increase from 2024 levels by approximately 17%, from an estimated $1.69 trillion in 2024 to $1.98 trillion in 2025, and the amount of refinance originations in the U.S. single-family mortgage market are forecasted to increase from an estimated $390 billion in 2024 to $529 billion in 2025. Our Economic and Strategic Research Group’s April forecast is based on data available as of April 11, 2025. See “Key Market Economic Indicators” in our 2024 Form 10-K and this report for additional discussion of how housing activity can affect our financial results and the uncertainties that may affect our forecasts and expectations.

MD&A | Single-Family Business | Single-Family Mortgage-Related Securities Issuances Share

Single-Family Mortgage-Related Securities Issuances Share

Our single-family Fannie Mae MBS issuances were $69.0 billion for the first quarter of 2025, compared with $65.1 billion for the first quarter of 2024. Based on the latest data available, the charts below display our estimated share of single-family mortgage-related securities issuances as compared with that of our primary competitors for the issuance of single-family mortgage-related securities for the periods indicated.

Single-Family Mortgage-Related Securities Issuances Share

Our market share is influenced by various factors, including the pricing of single-family loans and the competitive market environment. When making pricing and acquisition decisions for single-family loans, we must consider a mix of often competing factors, such as competitive market dynamics, our capital requirements, our housing mission requirements and UMBS market liquidity objectives. Balancing these considerations can sometimes create challenges that impact our ability to compete effectively in the marketplace. For a discussion of factors that affect or could affect our business, our competitive environment, demand for our MBS, or the liquidity and market value of our MBS, as well as the risks associated with our conservatorship, our higher capital requirements relative to that of our primary competitor, our housing mission requirements, the UMBS market and the performance of our MBS, see “Business—Conservatorship and Treasury Agreements,” “Business—Legislation and Regulation,” “Risk Factors” and “MD&A—Single-Family Business—Single-Family Competition” in our 2024 Form 10-K, as well as “Legislation and Regulation” in this report.

MD&A | Single-Family Business | Single-Family Business Metrics

Single-Family Business Metrics

Select Business Metrics

The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional guaranty book of business and on new single-family conventional loan acquisitions, along with our average single-family conventional guaranty book of business and our single-family conventional loan acquisitions for the periods presented.

Select Single-Family Business Metrics(1)

(Dollars in billions)

(1) For information reported in this “Single-Family Business” section, our single-family conventional guaranty book of business is measured using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS outstanding.

(2) Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is paid to Treasury and not retained by us.

(3) Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our average single-family conventional guaranty book of business is based on the average of quarter-end balances.

Our single-family conventional loan acquisition volumes remained at low levels in the first quarter of 2025 and the first quarter of 2024. Housing affordability constraints and limited supply continued to put downward pressure on the volume of purchase loans we acquired. In addition, the average 30-year fixed-rate mortgage rate in first quarter of 2025 and the first quarter of 2024 remained higher than the interest rates of most outstanding single-family loans, resulting in low refinancing volumes.

Average charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to measure the amount we earn as compensation for the credit risk we manage and to assess our return. Average charged guaranty fee represents, on an annualized basis, the average of the base guaranty fees charged during the period for our single-family conventional guaranty arrangements, which we receive monthly over the life of the loan, plus the recognition of any upfront cash payments, including loan-level price adjustments, based on an estimated average life at the time of acquisition.

Our average charged guaranty fee in the first quarter of 2025 on newly acquired conventional single-family loans, net of TCCA fees increased compared with the first quarter of 2024, primarily as result of higher base guaranty fees charged on new acquisitions.

Single-Family Mortgage Credit Risk Management

This section updates our discussion of single-family mortgage credit risk management in our 2024 Form 10-K. For additional information on our single-family acquisition and servicing policies, underwriting and servicing standards, quality control process, repurchase requests, and representation and warranty framework, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” in our 2024 Form 10-K.

Single-Family Guaranty Book Diversification and Monitoring

The following table displays our single-family conventional business volumes and our single-family conventional guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family loans. For a description of the key risk characteristics of our single-family conventional guaranty book of business, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Guaranty Book Diversification and Monitoring—Overview” in our 2024 Form 10-K.

We provide additional information on the credit characteristics of our single-family loans in quarterly financial supplements, which we furnish to the Securities and Exchange Commission (the “SEC”) with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.

MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management

Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)

Fannie Mae First Quarter 2025 Form 10-Q 23

MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management

* Represents less than 0.5% of single-family conventional business volume or guaranty book of business.

(1) Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this table.

(2) Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.

(3) Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.

(5) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value. Excludes loans for which this information is not readily available.

(6) Loans with unavailable FICO credit scores represent less than 0.5% of single-family conventional business volume or guaranty book of business, and therefore are not presented separately in this table.

(7) Excludes loans for which this information is not readily available.

(8) Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have maturities equal to or less than 15 years.

(9) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

Although new business volumes remain low, the share of our single-family loan acquisitions consisting of refinance loans rather than home purchase loans increased to 22% in the first quarter of 2025 compared with 15% in the first quarter of 2024. Typically, refinance loans have lower LTV ratios than home purchase loans. This trend contributed to a decrease in the percentage of our single-family loan acquisitions with LTV ratios over 80%, from 41% in the first quarter of 2024 to 38% in the first quarter of 2025.

For a discussion of factors that may impact the volume and credit characteristics of loans we acquire in the future, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Guaranty Book Diversification and Monitoring” in our 2024 Form 10-K. In this section of our 2024 Form 10-K, we also provide more information on the credit characteristics of loans in our single-family conventional guaranty book of business, including high-balance loans and adjustable-rate mortgages.

Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk

Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio over 80% at the time of acquisition. We generally achieve this through primary mortgage insurance. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties. For a discussion of our exposure to and management of the counterparty credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Note 14, Concentrations of Credit Risk” in our 2024 Form 10-K and “Note 11, Concentrations of Credit Risk” in this report. Also see “Risk Factors—Credit Risk” in our 2024 Form 10-K.

The table below displays information about loans in our single-family conventional guaranty book of business covered by one or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. The risk in force of these transactions, which refers to the maximum amount of losses that could be absorbed by credit risk transfer investors, was approximately $41 billion as of March 31, 2025, compared with approximately $43 billion as of December 31, 2024.

Single-Family Loans with Credit Enhancement

(Dollars in billions)

Fannie Mae First Quarter 2025 Form 10-Q 25

As of March 31, 2025 and December 31, 2024, the loans in our single-family conventional guaranty book of business that were currently without credit enhancement consisted primarily of loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less. See “MD&A—Single-Family Business—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk" in our 2024 Form 10-K for more information about our single-family loans without credit enhancements.

Transfer of Mortgage Credit Risk

In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to transfer portions of our single-family mortgage credit risk to the private market. For a description of our credit risk transfer transactions, see "MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk."

In the first quarter of 2025, we transferred a portion of the mortgage credit risk on single-family mortgage loans with an unpaid principal balance of $51.0 billion at the time of the transactions. Our two primary single-family credit risk transfer programs are Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk Transfer™ (“CIRT™”).

We provide a portion of the guaranty fee to investors in our credit risk transfer transactions as compensation for their taking on a share of the credit risk of the related loans. We record the substantial majority of expenses related to our credit risk transfer transactions in “Credit enhancement expense” within our consolidated statements of operations and comprehensive income. For the first quarter of 2025, we paid $429 million in premiums on our outstanding single-family credit risk transfer transactions.

Single-Family Problem Loan Management

Overview

Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2024 Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family credit-related information. The discussion below updates some of that information. We also provide ongoing credit performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics (http://www.fanniemae.com/datadynamics). For loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics may differ from similar measures presented in our financial statements and other public disclosures for a variety of reasons, including as a result of variations in the loan population covered, timing differences in reporting and other factors.

Delinquency

The tables below display the delinquency status of loans and changes in the volume of seriously delinquent loans in our single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Our single-family serious delinquency rate is expressed as a percentage of our single-family conventional guaranty book of business based on loan count. Management monitors the single-family serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.

Delinquency Status and Activity of Single-Family Conventional Loans

Our single-family serious delinquency rate remained flat as of March 31, 2025, compared to December 31, 2024, and continues to remain low relative to historic levels. The impact of recent trade and fiscal policies are uncertain and could affect the credit performance of the loans in our single-family guaranty book of business compared to recent performance. This could lead to higher delinquencies or an increase in our single-family serious delinquency rate. For information about factors that affect our single-family serious delinquency rate, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2024 Form 10-K.

The table below displays the serious delinquency rates for, and the percentage of our seriously delinquent single-family conventional loans represented by, the specified loan categories. The reported categories are not mutually exclusive.

* Represents less than 0.5% of single-family conventional guaranty book of business.

(1) Percentage of book amounts represent the unpaid principal balance of loans for each category divided by the unpaid principal balance of our total single-family conventional guaranty book of business.

(2) Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of single-family conventional loans that were seriously delinquent.

(3) The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty book of business with some form of credit enhancement as of March 31, 2025 was 47%.

(4) Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary mortgage insurance.

(5) Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents the outstanding unpaid principal balance of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans included in our credit risk transfer transactions have all been acquired since 2009.

Forbearance Plans and Loan Workouts

As a part of our credit risk management efforts, we offer several types of loss mitigation options to help homeowners stay in their home or to otherwise avoid foreclosure. Loss mitigation options can consist of a forbearance plan or a loan workout. Our loan workouts reflect additional types of home retention solutions that help reinstate loans to current status, including repayment plans, payment deferrals, and loan modifications. Our loan workouts also include foreclosure alternatives, such as short sales and deeds-in-lieu of foreclosure.

As of March 31, 2025, the unpaid principal balance of single-family loans in forbearance was $6.7 billion, or 0.2% of our single-family conventional guaranty book of business, compared with $8.0 billion, or 0.2% of our single-family conventional guaranty book of business, as of December 31, 2024.

The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, as well as the number of loan workouts, for the first quarter of 2024 compared with the first quarter of 2025. This table does not include loans in an active forbearance arrangement, trial modifications, and repayment plans that have been initiated but not completed.

Completed Loan Workout Activity

(Dollars in billions)

(1) There were approximately 24,000 loans and 18,000 loans in a trial modification period that was not yet complete as of March 31, 2025 and 2024, respectively.

(2) Other was $158 million and $179 million for the first quarter of 2025 and the first quarter of 2024, respectively. Other includes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent.

Single-Family REO Management

If a loan defaults, we may acquire the property through foreclosure or a deed-in-lieu of foreclosure. The table below displays our REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of regional delinquency trends.

Single-Family REO Properties

(1) Consists of held-for sale and held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.”

(2) See footnote 9 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for states included in each geographic region.

(3) Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the seller at closing, and excludes the costs associated with any property repairs.

(5) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at the time of foreclosure and costs to repair the property. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the seller at closing.

(6) Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and subordinate lien(s) negotiated payoffs.

Although our REO net sales price to unpaid principal balance rose to 146% for the first three months of 2025 from 140% for the first three months of 2024, that increase was more than offset by the impact of increased costs we incurred to repair the condition of properties, which resulted in a decline in our REO net sales price to unpaid principal balance and costs to repair to 84% for the first three months of 2025 from 93% for the first three months of 2024. In March 2025, FHFA directed us to revise our approach to repairing REO properties. We expect our revised approach will result in lower costs to repair REO properties than we would have incurred under our prior approach.

Single-Family Credit Loss Performance Metrics and Loan Sale Performance

The single-family credit loss performance metrics and loan sale performance measures below present information about losses or gains we realized on our single-family loans during the periods presented. For the purposes of our single-family credit loss performance metrics, credit losses or gains represent write-offs net of recoveries and foreclosed property income or expense. The amount of these losses or gains in a given period is driven by foreclosures, pre-foreclosure sales, post-foreclosure REO activity, mortgage loan redesignations, and other events that trigger write-offs and recoveries. The single-family credit loss metrics we present are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. Management uses these measures to evaluate the effectiveness of our single-family credit risk management strategies in conjunction with leading indicators such as serious delinquency and forbearance rates, which are potential indicators of future realized single-family credit losses. We believe these measures provide useful information about our single-family credit performance and the factors that impact it.

The table below displays the components of our single-family credit loss performance metrics. Because sales of nonperforming and reperforming loans are a part of our credit loss mitigation strategy, we also provide information in the table below on our loan sale performance through the “Gains (losses) on sales and other valuation adjustments” line item.

Single-Family Credit Loss Performance Metrics and Loan Sale Performance

(Dollars in millions)

(1) Consists of the lower of cost or fair value adjustment at time of redesignation.

(2) Consists of gains or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

(3) Calculated based on the annualized amount of “Credit gains (losses)” divided by the average single-family conventional guaranty book of business during the period.

(4) Calculated based on the annualized amount of “Net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments” divided by the average single-family conventional guaranty book of business during the period.

The primary drivers of our net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments in the first quarter of 2025 were write-offs on loans for which collectability was no longer reasonably assured as well as an increase in mortgage loans redesignated from HFI to HFS resulting in an increase in write-offs on redesignations.

The primary drivers of our net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments in the first quarter of 2024 were write-offs on loans for which collectability was no longer reasonably assured as well as foreclosed property expense due to increased repairs on the REO properties we acquired.

MD&A | Multifamily Business

Multifamily Business

This section supplements and updates information regarding our Multifamily business segment in our 2024 Form 10-K. See “MD&A—Multifamily Business” in our 2024 Form 10-K for additional information regarding the primary business activities, lenders, investors and competition of our Multifamily business.

Multifamily Mortgage Market

In the multifamily market, ongoing rental demand remained strong in the first quarter of 2025 despite elevated levels of new supply entering various markets across the country.

• Vacancy rates. Based on preliminary third-party data, we estimate that the national multifamily vacancy rate for institutional investment-type apartment properties remained steady at 6.0% as of March 31, 2025, the same as of December 31, 2024, and March 31, 2024. The estimated average national multifamily vacancy rate over the last 15 years is approximately 5.8%.
• Rents. Based on preliminary third-party data, we estimate that effective rents increased approximately 0.3% during the first quarter of 2025, compared to a decrease of 0.5% during the fourth quarter of 2024, and an increase of 0.3% during the first quarter of 2024. Rents have increased 1% from the first quarter of 2024.

Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows generated by the underlying property. Several years of low vacancy rates and rising rents helped to increase property values in most metropolitan areas, but that trend reversed starting in early 2023. Based on preliminary multifamily property sales data, transaction volumes for the first quarter of 2025 remained well below the 2015 through 2019 average first-quarter level of between $30 billion and $40 billion. Multifamily property capitalization rates, the indicated rate of return on investment in a commercial property, are estimated at 5.7% in the first quarter of 2025, reflecting an increase from 5.4% in the fourth quarter of 2024 and a return to the same level as in the first quarter of 2024.

We estimate that more than 600,000 multifamily rental units were delivered to the U.S. housing market in 2024, which is well above the past 10 year average of 409,000 units delivered annually. Multifamily construction remains elevated. There were more than 860,000 rental units underway as of February 2025, and based on recent historical trends we expect between 450,000 and 500,000 units will be completed in 2025.

We believe vacancy levels could rise to 6.25% sometime in 2025, due to elevated new construction completions. Despite elevated levels of new supply, we expect rent growth in the 2.0% to 2.5% range during 2025, if job growth continues at its recent pace and elevated single-family housing prices in many places continue to keep a number of tenants renting longer. If job growth slows substantially, that could result in slower renter household demand, thereby pushing up vacancies and keeping rent growth subdued throughout the year.

During the last two years, high interest rates and investor yield requirements have reduced multifamily property sales transactions and placed downward pressure on multifamily property valuations. According to data from the MSCI RCA Commercial Property Price Index (“RCA CPPITM”), multifamily property values declined 18% from their peak in the second quarter of 2022 to the first quarter of 2025 and are down approximately 1% compared to the first quarter of 2024. Future rental household demand is dependent upon job growth and demographic trends, and some investors may pause on new acquisitions in the short term to see how the job market performs over the next few months.

MD&A | Multifamily Business | Multifamily Business Metrics

Multifamily Business Metrics

Multifamily New Business Volume

The chart below displays our new multifamily loan acquisitions by unpaid principal balance and number of units financed.

Multifamily New Business Volume

(Dollars in billions)

(1) Reflects unpaid principal balance of new multifamily loans securitized or purchased as well as credit enhancements provided during the period. These figures will not agree to Fannie Mae MBS issued during the period, as Fannie Mae MBS issued also include portfolio securitizations and certain conversions that result in a new Fannie Mae MBS issuance without a newly created loan and exclude bond or mortgage loan credit enhancements.

(2) Reflects new units financed by first liens and excludes manufactured housing rentals.

Multifamily business volumes increased by 17% in the first quarter of 2025 compared with the first quarter of 2024. For 2025, FHFA has capped our multifamily loan purchases at $73 billion.

Multifamily Guaranty Book of Business and Average Charged Guaranty Fee

The chart below displays the unpaid principal balance and average charged guaranty fee related to our multifamily guaranty book of business.

Multifamily Guaranty Book of Business and Charged Fee

(Dollars in billions)

(1) Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.

MD&A | Multifamily Business | Multifamily Business Metrics

Our multifamily guaranty book of business grew to $504.5 billion as of March 31, 2025, a 5.8% increase from March 31, 2024. The average charged guaranty fee on our multifamily guaranty book of business decreased 1.7 bps as of March 31, 2025 compared with March 31, 2024. For additional information regarding our average charged guaranty fee, see “MD&A—Multifamily Business—Multifamily Business Metrics—Multifamily Guaranty Book of Business and Average Charged Guaranty Fee” in our 2024 Form 10-K.

Multifamily Mortgage Credit Risk Management

This section supplements and updates our discussion of multifamily mortgage credit risk management in our 2024 Form 10-K in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.” For additional information on the primary components of our strategy for managing multifamily credit risk, the factors that influence the credit risk profile of our multifamily guaranty book of business, our multifamily acquisition policy and underwriting standards, our multifamily guaranty book diversification and monitoring, and our transfer of mortgage credit risk, as well as our reliance on representations from lenders and servicers regarding the accuracy of credit information on loans in our guaranty book of business, see that discussion in our 2024 Form 10-K.

Multifamily Guaranty Book Diversification and Monitoring

The following table displays our multifamily business volumes and our multifamily guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our multifamily loans. For additional information on our multifamily guaranty book diversification and monitoring see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Guaranty Book Diversification and Monitoring” in our 2024 Form 10-K.

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

We provide additional information on the credit characteristics of our multifamily loans in quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.

Key Risk Characteristics of Multifamily Business Volume and Guaranty Book of Business

* Represents less than 0.5% of multifamily business volume or guaranty book of business.

(1) Calculated based on the unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid principal balance at time of acquisition, excluding small balance loans which is calculated based on loan count rather than unpaid principal balance.

(2) Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid principal balance of loans in our multifamily guaranty book of business as of the end of each period, excluding small balance loans which is calculated based on loan count rather than unpaid principal balance.

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

(3) For our business volumes, the DSCR is calculated using the actual debt service payments for the loan. For our book of business, our estimates of current DSCRs are based on the latest available income information, including the related debt service covering a 12-month period, from quarterly and annual statements for these properties. When an annual statement is the latest statement available, it is used. When operating statement information is not available, the underwritten DSCR is used. Co-op loans are excluded from this metric.

(4) Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only period.

(5) Represents Multifamily Affordable Housing (“MAH”) loans, which are defined as financing for properties that are under an agreement that provides long-term affordability, such as properties with rent subsidies or income restrictions. MAH loans are included within the asset class categories referenced above.

(6) Small balance loans refer to multifamily loans with an original unpaid principal balance of up to $9 million. Small balance loans are included within the asset class categories referenced above. We present this metric in the table based on loan count rather than unpaid principal balance. Small balance loans comprised 10% of our multifamily guaranty book of business as of both March 31, 2025 and December 31, 2024, based on unpaid principal balance of the loan.

(7) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

Multifamily Transfer of Mortgage Credit Risk

Front-End Credit Risk Sharing

We primarily transfer credit risk on the multifamily loans we guarantee through our Delegated Underwriting and Servicing (“DUS®”) program, which delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and requirements. Loans serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of business as of March 31, 2025 and December 31, 2024. See “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Transfer of Mortgage Credit Risk” in our 2024 Form 10-K for a description of our DUS program.

Back-End Credit Risk Sharing

To complement our DUS front-end lender-risk sharing program, we also engage in back-end credit risk transfer transactions through our MCIRT and MCAS programs. Our back-end MCAS and MCIRT credit risk transfer programs transfer a portion of the credit risk associated with a reference pool of multifamily mortgage loans to insurers, reinsurers, or investors. During the first quarter of 2025, we entered into one new multifamily credit risk transfer transaction through our MCIRT program.

The table below displays the total unpaid principal balance of multifamily loans and the percentage of our multifamily guaranty book of business, based on unpaid principal balance, that is covered by a back-end credit risk transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our multifamily guaranty book of business is not covered by these arrangements.

Multifamily Loans in Back-End Credit Risk Transfer Transactions

(Dollars in millions)

Fannie Mae First Quarter 2025 Form 10-Q 36

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

Multifamily Problem Loan Management

Credit Performance Statistics on Multifamily Problem Loans

The percentage of loans in our multifamily guaranty book of business that were criticized was 6% as of March 31, 2025, compared with 7% as of December 31, 2024. Our criticized loan population remains elevated, largely driven by properties financed with adjustable-rate mortgages. The criticized loans category substantially consists of loans classified as “Substandard” and also includes loans classified as “Special Mention” or “Doubtful.” Substandard loans are loans that have a well-defined weakness that could impact their timely full repayment. While the majority of the substandard loans in our multifamily guaranty book of business are currently making timely payments, we continue to monitor the performance of our substandard loan population. For more information on our credit quality indicators, including our population of substandard loans, see “Note 4, Mortgage Loans.”

Our multifamily serious delinquency rate increased to 0.63% as of March 31, 2025, compared with 0.57% as of December 31, 2024. The new entrants to the seriously delinquent population consisted primarily of fixed-rate conventional loans. Our multifamily serious delinquency rate consists of multifamily loans that were 60 days or more past due based on unpaid principal balance, expressed as a percentage of our multifamily guaranty book of business.

Management monitors the multifamily serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Typically, higher serious delinquency rates result in a higher allowance for loan losses. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with multifamily loans in our guaranty book of business. The percentage of loans in our multifamily guaranty book of business that were 180 days or more delinquent was 0.49% as of March 31, 2025, compared with 0.44% as of December 31, 2024.

In addition to the credit performance information on our multifamily loans provided in this report, we provide additional information about the performance of our multifamily loans that back MBS and whole loan REMICs in the “Data Collections” section of our DUS Disclose® tool, available at www.fanniemae.com/dusdisclose (http://www.fanniemae.com/dusdisclose). Information on our website is not incorporated into this report. Information in Data Collections may differ from similar measures presented in our financial statements and other public disclosures for a variety of reasons, including as a result of variations in the loan population covered, timing differences in reporting and other factors.

Multifamily REO Management

As of March 31, 2025, we held 148 multifamily REO properties with a carrying value of $708 million, compared with 139 properties with a carrying value of $638 million as of December 31, 2024.

Multifamily Credit Loss Performance Metrics

The amount of multifamily credit losses or gains we realize in a given period is driven by foreclosures, pre-foreclosure sales, post-foreclosure REO activity and other events that trigger write-offs and recoveries. Our multifamily credit loss performance metrics are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. For the purposes of our multifamily credit loss performance metrics, credit losses or gains represent write-offs net of recoveries and foreclosed property income or expense. We believe our multifamily credit losses, and our multifamily credit losses net of freestanding loss-sharing arrangements, provide useful information about our multifamily credit performance because they display our multifamily credit losses in the context of our multifamily guaranty book of business, including changes to the benefit we expect to receive from loss-sharing arrangements. Management views multifamily credit losses, net of freestanding loss-sharing arrangements, as a key metric related to our multifamily business model and our strategy to share multifamily credit risk.

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily initial write-off severity rate and write-off loan count.

Multifamily Credit Loss Performance Metrics

(Dollars in millions)

(1) Represents write-offs at a liquidation event, which includes foreclosure, a deed-in-lieu of foreclosure or a short-sale, as well as write-offs prior to a liquidation event. Write-offs associated with non-REO sales are net of loss sharing.

(2) Represents changes to the benefit we expect to receive only from write-offs as a result of certain freestanding loss-sharing arrangements, primarily multifamily DUS lender risk-sharing transactions. Changes to the expected benefits we will receive are recorded in “Other income (expense), net” in our condensed consolidated statements of operations and comprehensive income.

(3) Calculated based on the annualized amount of “Credit gains (losses)” and “Credit gains (losses), net of freestanding loss-sharing arrangements,” divided by the average multifamily guaranty book of business during the period.

(4) Rate is calculated as the initial write-off amount divided by the unpaid principal balance of the loans written off.

(5) Based on write-offs associated with a liquidation event. The rate excludes any costs, gains or losses associated with REO after initial acquisition through final disposition. The rate also excludes write-offs when a loan is determined to be uncollectible prior to a liquidation event. Write-offs are net of lender loss-sharing agreements.

(6) Represents the number of loans that experienced write-offs associated with a liquidation event during the period.

Our multifamily credit losses in the first quarter of 2025 were largely driven by write-offs and foreclosed property expenses, partially offset by recoveries.

Our multifamily credit losses in the first quarter of 2024 were primarily driven by the write-off of a conventional fixed-rate loan.

MD&A | Consolidated Credit Ratios and Select Credit Information

Consolidated Credit Ratios and Select Credit Information

The table below displays select credit ratios on our single-family conventional guaranty book of business and our multifamily guaranty book of business, as well as the inputs used in calculating these ratios.

(Dollars in millions)

(1) Credit loss reserves are comprised of our allowance for loan losses, allowance for accrued interest receivable, and reserve for guaranty losses.

(2) Guaranty book of business is as of period end. For single-family, represents the conventional guaranty book of business.

Our credit loss reserves decreased as of March 31, 2025 compared with December 31, 2024 primarily as a result of write-offs on loans for which collectability was no longer reasonably assured. When we record a write-off due to collectability, we reduce the amortized cost of the loan with a corresponding write-off against the allowance for loan losses. This decrease was offset by a modest provision for credit losses during the quarter.

Consolidated Write-off Ratio and Select Credit Information

(Dollars in millions)

(1) Represents write-offs when a loan is determined to be uncollectible. For single-family, also includes any write-offs upon the redesignation of mortgage loans from HFI to HFS.

(2) Average guaranty book of business is based on the average of quarter-end balances.

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity management in our 2024 Form 10-K. See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 2024 Form 10-K for additional information, including discussions of our primary sources and uses of funds, our liquidity risk management practices and contingency planning, our liquidity requirements, factors that influence our debt funding activity, factors that may impact our access to or the cost of our debt funding and factors that could adversely affect our liquidity and funding. As of March 31, 2025, we were in compliance with all four components of the liquidity requirements outlined in our 2024 Form 10-K. Also see “Risk Factors—Liquidity Risk” in our 2024 Form 10-K for a discussion of liquidity risks.

Debt Funding

The unpaid principal balance of our aggregate indebtedness was $140.1 billion as of March 31, 2025. Pursuant to the terms of the senior preferred stock purchase agreement with Treasury, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding debt limit, which is set to $270 billion. The calculation of our indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of consolidated trusts.

Outstanding Debt

Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year.

The following chart and table display information on our outstanding short-term and long-term debt based on original contractual maturity.

Debt of Fannie Mae(1)

(Dollars in billions)

Short-term debt

Long-term debt maturing within one year

Long-term debt, excluding portion maturing within one year

(1) Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value adjustments of $3.2 billion and $3.7 billion as of March 31, 2025 and December 31, 2024, respectively.

MD&A | Liquidity and Capital Management

Selected Debt Information

(Dollars in billions)

(1) Excludes the effects of fair value adjustments and hedge-related basis adjustments.

(2) Includes no short-term callable debt as of March 31, 2025 and $95 million as of December 31, 2024.

(3) Represents CAS debt issued prior to November 2018. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2024 Form 10-K for information regarding our Connecticut Avenue Securities®.

We intend to repay our short-term and long-term debt obligations as they become due primarily through cash from business operations, the sale of assets in our corporate liquidity portfolio and the issuance of additional debt securities.

For information on the maturity profile of our outstanding long-term debt, see “Note 8, Short-Term and Long-Term Debt” in this report and in our 2024 Form 10-K.

Debt Funding Activity

The table below displays activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday borrowing. The reported amounts of debt issued and paid off during each period represent the face amount of the debt at issuance and redemption.

Activity in Debt of Fannie Mae

(Dollars in millions)

(1) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face value, which does not equal the amount of actual cash payment.

(2) Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2024 Form 10-K.

Corporate Liquidity Portfolio

The chart below displays information on the composition of our corporate liquidity portfolio. The balance and composition of our corporate liquidity portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our liquidity risk management framework and practices. Our corporate liquidity portfolio increased in the first quarter of 2025, primarily due to the reinvestment of proceeds from sales of MBS securities held in our retained mortgage portfolio into securities purchased under agreements to resell.

U.S. Treasury securities

Securities purchased under agreements to resell

Cash and cash equivalents(1)

(1) Cash equivalents are composed of overnight reverse repurchase agreements and U.S. Treasuries, if any, that have a maturity at the date of acquisition of three months or less.

Off-Balance Sheet Arrangements

We enter into certain business arrangements to facilitate our statutory purpose of providing liquidity to the secondary mortgage market and to reduce our exposure to interest rate fluctuations. Some of these arrangements are not recorded in our condensed consolidated balance sheets or may be recorded in amounts different from the full contract or notional amount of the transaction, depending on the nature or structure of, and the accounting required to be applied to, the arrangement. These arrangements are commonly referred to as “off-balance sheet arrangements” and expose us to potential losses in excess of the amounts recorded in our condensed consolidated balance sheets.

Our off-balance sheet arrangements result primarily from the following:

• our guaranty of mortgage loan securitization and resecuritization transactions over which we have no control, which are reflected in our unconsolidated Fannie Mae MBS net of any beneficial ownership interest we retain, and other financial guarantees that we do not control;
• liquidity support transactions; and
• partnership interests.

The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest that we retain, and other financial guarantees was $207.5 billion as of March 31, 2025 and $211.5 billion as of December 31, 2024. The majority of the other financial guarantees consists of Freddie Mac securities backing Fannie Mae structured securities. See “Guaranty Book of Business” and “Note 7, Financial Guarantees” for more information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.

Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing revenue bonds totaled $4.0 billion as of March 31, 2025 and $4.3 billion as of December 31, 2024. These commitments require us to advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be remarketed.

We have investments in various limited partnerships and similar legal entities, which consist of LIHTC investments, community investments and investments in other entities. When we do not have a controlling financial interest in those entities, our condensed consolidated balance sheets reflect only our investment rather than the full amount of the partnership’s assets and liabilities. See “Note 3, Consolidations and Transfers of Financial Assets—Unconsolidated VIEs” for information regarding our investments in limited partnerships and similar legal entities.

Cash Flows

Three Months Ended March 31, 2025. Cash, cash equivalents and restricted cash and cash equivalents decreased from $78.8 billion as of December 31, 2024 to $77.8 billion as of March 31, 2025. The decrease was primarily driven by cash outflows from (1) payments on outstanding debt of consolidated trusts, (2) purchases of loans acquired as held for investment, (3) advances to lenders, and (4) investments in securities purchased under agreements to resell.

Partially offsetting these cash outflows were cash inflows primarily from (1) proceeds from repayments of loans and (2) the sale of Fannie Mae MBS to third parties.

Three Months Ended March 31, 2024. Cash, cash equivalents and restricted cash and cash equivalents decreased from $68.7 billion as of December 31, 2023 to $33.3 billion as of March 31, 2024. The decrease was primarily driven by cash outflows from (1) investments in securities purchased under agreements to resell, (2) redemptions of debt outpacing issuances, (3) purchases of loans held for investment and (4) advances to lenders.

Partially offsetting these cash outflows were cash inflows from proceeds from repayments of loans.

Credit Ratings

As of March 31, 2025, our credit ratings issued by the three major credit rating agencies have not changed since December 31, 2024. For information on these credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our 2024 Form 10-K.

Capital Management

Capital Requirements

For a description of our capital requirements under the enterprise regulatory capital framework, see “Business—Legislation and Regulation—Capital Requirements” in our 2024 Form 10-K. Although the enterprise regulatory capital framework went into effect in February 2021, we are not required to hold capital according to the framework’s requirements until the date of termination of our conservatorship, or such later date as may be ordered by FHFA.

The table below sets forth information about our capital requirements under the standardized approach of the enterprise regulatory capital framework. As of March 31, 2025, we had a deficit in available capital of $33 billion for purposes of the enterprise regulatory capital framework even though we had positive net worth under GAAP of $98.3 billion primarily because the $120.8 billion stated value of the senior preferred stock does not qualify as regulatory capital.

As of March 31, 2025, we had a $220 billion shortfall to our risk-based adjusted total capital requirement including buffers of $187 billion, as we had an available capital deficit of $33 billion. Our capital shortfall as of March 31, 2025 to our minimum risk-based adjusted total capital requirement excluding buffers was $140 billion. From December 31, 2024 to March 31, 2025, our capital shortfall including buffers declined by $7 billion and our capital shortfall excluding buffers declined by $6 billion. These declines were primarily driven by the increase in our retained earnings and the decrease in risk-weighted assets during first quarter of 2025.

Capital Metrics under the Enterprise Regulatory Capital Framework as of March 31, 2025(1)

(Dollars in billions)

Fannie Mae First Quarter 2025 Form 10-Q 45

MD&A | Liquidity and Capital Management

Capital Metrics under the Enterprise Regulatory Capital Framework as of December 31, 2024(1)

(Dollars in billions)

(1) Ratios are calculated as a percentage of risk-weighted assets for risk-based capital metrics and as a percentage of adjusted total assets for leverage capital metrics.

(2) Prescribed capital conservation buffer amount, or PCCBA, for risk-based capital and prescribed leverage buffer amount, or PLBA, for leverage capital.

As of March 31, 2025, our maximum payout ratio under the enterprise regulatory capital framework was 0%. See “Note 15, Regulatory Capital Requirements” for information on our capital ratios as of March 31, 2025 and December 31, 2024 under the enterprise regulatory capital framework.

The table below presents certain components of our regulatory capital.

(Dollars in millions)

The table below presents certain components of our core capital.

(Dollars in millions)

Capital Activity

Under the terms governing the senior preferred stock, no dividends were payable to Treasury for the first quarter of 2025 and none are payable for the second quarter of 2025.

Under the terms governing the senior preferred stock, through and including the capital reserve end date, any increase in our net worth during a fiscal quarter results in an increase of the same amount in the aggregate liquidation preference of the senior preferred stock in the following quarter. The capital reserve end date is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework.

As a result of these terms governing the senior preferred stock, the aggregate liquidation preference of the senior preferred stock increased to $216.2 billion as of March 31, 2025 from $212.0 billion as of December 31, 2024, due to the increase in our net worth in the fourth quarter of 2024. The aggregate liquidation preference of the senior preferred stock will further increase to $219.8 billion as of June 30, 2025, due to the increase in our net worth in the first quarter of 2025. See “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2024 Form 10-K for more information on the terms of our senior preferred stock, including how the aggregate liquidation preference is determined.

Treasury Funding Commitment

Treasury made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. As of March 31, 2025, the remaining amount of Treasury’s funding commitment to us was $113.9 billion. See “Note 2, Conservatorship, Senior Preferred Stock Purchase Agreement and Related Matters” in our 2024 Form 10-K for more information on Treasury’s funding commitment under the senior preferred stock purchase agreement.

Risk Management

We are exposed to the following principal risk categories: credit risk (including mortgage credit risk and institutional counterparty credit risk), market risk (including interest-rate risk), liquidity risk, operational risk (including cyber and other information security risk), model risk, strategic risk, compliance risk and reputational risk. See “MD&A—Risk Management,” “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management,” “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” and “MD&A—Liquidity and Capital Management” in our 2024 Form 10-K for a discussion of our management of the categories of risk we have determined present the most significant exposure. This section, “Single-Family Business—Single-Family Mortgage Credit Risk Management,” “Multifamily Business—Multifamily Mortgage Credit Risk Management” and “Liquidity and Capital Management” in this report supplement and update that discussion, but do not address all of these risk management categories.

Institutional Counterparty Credit Risk Management

Mortgage Servicers

On March 31, 2025, Rocket Companies, Inc., the parent company of Rocket Mortgage, LLC announced a definitive agreement to acquire Mr. Cooper Group. Rocket Companies stated that the acquisition, which is subject to various closing conditions, is expected to close in the fourth quarter of 2025. If the acquisition is completed, we expect an increase in our single-family servicing concentration to entities controlled by Rocket Companies. As of March 31, 2025, Rocket Mortgage serviced approximately 7%, and Mr. Cooper serviced approximately 9%, of our single-family guaranty book of business, excluding loans they service on behalf of other servicers. Including loans serviced on behalf of other servicers, Rocket Mortgage serviced approximately 7%, and Mr. Cooper serviced approximately 16%, of our single-family guaranty book of business, as of March 31, 2025. These servicing concentrations are based on unpaid principal balance.

Market Risk Management, including Interest-Rate Risk Management

We are subject to market risk, which includes interest-rate risk and spread risk. These risks arise primarily from our mortgage asset investments. Interest-rate risk is the risk that movements in interest rates will adversely affect the value of our assets or liabilities or our future earnings or capital. Spread risk is the risk from changes in an instrument’s value that relate to factors other than changes in interest rates. We do not currently actively manage or hedge, on an economic basis, our spread risk, or the interest-rate risk arising from cost basis adjustments and float income associated with mortgage assets held by our consolidated MBS trusts. See “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” and “Risk Factors—Market and Industry Risk” in our 2024 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks posed by changes in interest rates, and our strategy for managing interest-rate risk. For additional information on the impact of interest-rate risk on our earnings, see “Earnings Exposure to Interest-Rate Risk” below.

MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

Measurement of Interest-Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the slope of the applicable yield curve as measured on the last day of each period presented. We collectively define our net portfolio as: our retained mortgage portfolio assets; our corporate liquidity portfolio; outstanding debt of Fannie Mae used to fund the retained mortgage portfolio assets and corporate liquidity portfolio; mortgage commitments; and risk management derivatives. The table below also provides the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on the net portfolio to changes in the level of interest rates and the slope of the applicable yield curve for the three months ended March 31, 2025 and 2024. Our practice is to allow interest rates to go below zero in the downward shock models unless otherwise prevented through contractual floors.

For information on how we measure our interest-rate risk, see “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” in our 2024 Form 10-K.

Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield Curve

(Dollars in millions)

(Dollars in millions)

(Dollars in millions)

(1) Computed based on changes in SOFR interest-rates swap curve.

(2) Measured on the last business day of each period presented.

(3) Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and convexity profile of our net portfolio. The market value sensitivity of the net portfolio is measured by quantifying the change in the present value of the cash flows of our financial assets and liabilities that would result from an instantaneous shock to interest rates, assuming spreads are held constant.

MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

We use derivatives to help manage the residual interest-rate risk exposure between the assets and liabilities in our net portfolio. Derivatives have enabled us to keep our economic interest-rate risk exposure at consistently low levels in a wide range of interest-rate environments. The table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel interest-rate shock. For additional information on our derivative positions, see “Note 9, Derivative Instruments” in our 2024 Form 10-K and in this report.

Derivative Impact on Interest-Rate Risk (50 Basis Points)

(Dollars in millions)

(1) Measured on the last business day of each period presented.

Earnings Exposure to Interest-Rate Risk

While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts relates to changes in our credit loss reserves and to the amortization of cost basis adjustments resulting from changes in interest rates.

We apply fair value hedge accounting to address some of the exposure to interest rates, particularly the earnings volatility related to changes in benchmark interest rates. Our hedge accounting program is specifically designed to address the volatility of our financial results associated with changes in fair value related to changes in these benchmark interest rates. As such, earnings variability driven by other factors, such as spreads or changes in cost basis amortization recognized in net interest income, remains. In addition, our ability to effectively reduce earnings volatility is dependent upon the volume and type of interest-rate swaps available for hedging, which is driven by our interest-rate risk management strategy discussed above and in our 2024 Form 10-K. As our range of available interest-rate swaps varies over time, our ability to reduce earnings volatility through hedge accounting may vary as well. When the shape of the yield curve shifts significantly from period to period, hedge accounting may be less effective. In our current program, we establish new hedging relationships each business day to provide flexibility in our overall risk management strategy.

See “Note 1, Summary of Significant Accounting Policies” in our 2024 Form 10-K and “Note 9, Derivative Instruments” in this report for additional information on our fair value hedge accounting policy and related disclosures.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2024 Form 10-K.

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. Management has discussed any significant changes in judgments and assumptions in applying our critical accounting estimates with the Audit Committee of our Board of Directors. See “Risk Factors—General Risk” in our 2024 Form 10-K for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods. We have identified one of our accounting estimates, allowance for loan losses, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different judgments and assumptions could have a material impact on our reported results of operations or financial condition.

MD&A | Critical Accounting Estimates

Allowance for Loan Losses

The allowance for loan losses is an estimate of single-family and multifamily HFI loan receivables that we expect will not be collected related to loans held by Fannie Mae or by consolidated Fannie Mae MBS trusts. The expected credit losses are deducted from the amortized cost basis of HFI loans to present the net amount expected to be received.

The allowance for loan losses involves substantial judgment on a number of matters including the development and weighting of macroeconomic forecasts, the reversion period applied, the assessment of similar risk characteristics, which determines the historic loss experience used to derive probability of loan default, the valuation of collateral, which includes judgments about the property condition at the time of foreclosure, and the determination of a loan’s remaining expected life. Our most significant judgments involved in estimating our allowance for loan losses relate to the modeled macroeconomic data used to develop reasonable and supportable forecasts for key economic drivers, which are subject to significant inherent uncertainty. Most notably, for single-family, the model uses forecasted single-family home prices as well as a range of possible future interest rate environments. For multifamily, the model uses forecasted net operating income and property valuations. In developing a reasonable and supportable forecast, the model simulates multiple paths of interest rates, rental income and property values based on current market conditions.

Quantitative Component

We use a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an undiscounted loss method to measure expected credit losses on our multifamily mortgage loans.

Our modeled loan performance is based on our historical experience of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience and our loan loss estimates capture the possibility of a multitude of events, including remote events that could result in credit losses on loans that are considered low risk. Our credit loss models, including the macroeconomic forecast data used as key inputs, are subject to our model oversight and review processes as well as other established governance and controls.

Qualitative Component

Our process for measuring expected credit losses is complex and involves significant management judgment, including a reliance on historical loss information and current economic forecasts that may not be representative of credit losses we ultimately realize. Management adjustments may be necessary to take into consideration external factors and current macroeconomic events that have occurred but are not yet reflected in the data used to derive the model outputs. Qualitative factors and events not previously observed by the models through historical loss experience may also be considered, as well as the uncertainty of their impact on credit loss estimates. In the first quarter of 2025, qualitative factors considered included economic uncertainty associated with recent trade and fiscal policies as well as the continuing uncertainty relating to multifamily property values.

Macroeconomic Variables and Sensitivities

Our benefit or provision for credit losses can vary substantially from period to period based on forecasted macroeconomic inputs. For single-family, we have determined that our most significant key macroeconomic inputs used in determining our allowance for loan losses consist of: forecasted home price growth rates and interest rates. For multifamily, we have determined that our most significant key macroeconomic inputs used in determining our allowance for loan losses consist of: net operating income and property value growth rates.

In evaluating the sensitivities of our allowance to these macroeconomic inputs, it is difficult to estimate how potential changes in any one factor or input might affect the overall credit loss estimates, because management considers a wide variety of factors and inputs in estimating the allowance for loan losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or loan types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input may offset deterioration in others. Changes in our assumptions and forecasts of economic conditions could significantly affect our estimate of expected credit losses and lead to significant changes in the estimate from one reporting period to the next.

We provide more detailed information on our accounting for the allowance for loan losses in “Note 1, Summary of Significant Accounting Policies” in our 2024 Form 10-K. See “Note 5, Allowance for Loan Losses” for additional information about our current period (provision) benefit for loan losses.

MD&A | Critical Accounting Estimates

Single-Family Sensitivities and Inputs

The table below provides information about our most significant key macroeconomic inputs used in determining our single-family allowance for loan losses: forecasted home price growth rates and interest rates. Although the model consumes a wide range of possible regional home price forecasts and interest rate scenarios that take into account inherent uncertainty, the forecasts below represent the mean path of those simulations used in determining the allowance for the quarter ended March 31, 2025, and for each quarter during the year ended December 31, 2024, and how those forecasts have changed between periods of estimate. Below we present our home price growth and interest rate estimates used in our estimate of expected credit losses. Our forecasts include estimates for periods beyond 2027 that are not presented in the table below.

* Represents less than 0.05% of home price growth (decline).

(1) These forecasts are provided solely for the purpose of providing insight into our credit loss model. Forecasts for future periods are subject to significant uncertainty, which increases for periods that are further in the future. We provide our most recent forecasts for certain macroeconomic and housing market conditions in “Key Market Economic Indicators.” In addition, each month our Economic and Strategic Research Group provides its forecast of economic and housing market conditions, which are available in the “Research & Insights” section of our website, www.fanniemae.com (http://www.fanniemae.com). Information on our website is not incorporated into this report.

(2) These estimates are based on our national home price index, which is calculated differently from the S&P CoreLogic Case-Shiller U.S. National Home Price Index and therefore results in different percentages for comparable growth. We periodically update our home price growth estimates and forecasts as new data become available. As a result, the forecast data in this table may also differ from the forecasted home price growth rate presented in “Key Market Economic Indicators,” because that section reflects our most recent forecast as of the filing date of this report, while this table reflects the quantitative forecast data we used in our model to estimate credit losses for the periods shown. Management continues to monitor macroeconomic updates to our inputs in our credit loss model from the time they are approved as part of our established governance process to ensure the reasonableness of the inputs used to calculate estimated credit losses. The forecast data excludes the impact of any qualitative adjustments.

(3) Forecasted 30-year interest rates represent the mean of possible future interest rate environments that are simulated by our interest rate model and used in the estimation of credit losses. Forecasts through the end of December 31, 2025 and 2024 represent the average forecasted rate from the quarter-end through the calendar year end of December 31st. The fourth quarter of 2024 interest rate represents the 30-year interest rate as of December 31, 2024. This table reflects the forecasted interest rate data we used in estimating credit losses for the periods shown and does not reflect changes in interest rates that occurred after the forecast date.

MD&A | Critical Accounting Estimates

As noted above, our single-family allowance for loan losses is sensitive to changes in home prices and interest rate changes. We present in the table below the impact of hypothetical changes in home prices and 30-year interest rates, with all other factors held constant.

(1) Calculated as a percentage of our single-family allowance for loan losses.

(2) Change in home price shown on a normalized basis.

The above sensitivity analyses are hypothetical and are provided solely for the purpose of providing insight into our credit loss model inputs. In addition, sensitivities for home price and interest rate changes are non-linear. As a result, changes in these estimates are not always incrementally proportional. The purpose of this analysis is to provide an indication of the impact of changes in home prices and 30-year interest rates on the estimate of the single-family allowance for credit losses. This analysis is not intended to imply management’s expectation of future changes in our forecasts or any other variables that may change as a result.

See “Key Market Economic Indicators” in our 2024 Form 10-K and in this report for additional information about how home prices and interest rates can affect our credit loss estimates, including a discussion of home price growth rates and our home price forecast. Also see “Consolidated Results of Operations—(Provision) Benefit for Credit Losses” for information on how our home price and interest rate forecasts impacted our single-family (provision) benefit for credit losses.

Multifamily Sensitivities and Inputs

The table below provides information about our most significant key macroeconomic inputs used in determining our multifamily allowance for loan losses: multifamily property net operating income and property value growth rates. Although the model consumes a wide range of possible future economic scenarios, the forecasts below represent the mean path of those simulations used in determining the allowance for the quarter ended March 31, 2025, and for the quarter ended December 31, 2024, and how those forecasts have changed between periods of estimate. Our forecasts include estimates for periods beyond those presented below.

Select Multifamily Macroeconomic Model Inputs(1)

N/A Not applicable. For purposes of this disclosure, we provide the forecasted net operating income growth rate and property value growth rate for the period of estimate and the two years following the period of estimate.

(1) These forecasts are provided solely for the purpose of providing insight into our credit loss model. Forecasts for future periods are

MD&A | Critical Accounting Estimates

subject to significant uncertainty, which increases for periods that are further in the future.

As noted above, our multifamily allowance for loan losses is sensitive to changes in net operating income and property value changes. We present in the table below the impact of hypothetical changes in net operating income and property value, with all other factors held constant.

(1) Calculated as a percentage of our multifamily allowance for loan losses.

The above sensitivity analyses are hypothetical and are provided solely for the purpose of providing insight into our credit loss model inputs. In addition, sensitivities for net operating income and property value changes are non-linear. As a result, changes in these estimates are not always incrementally proportional. The purpose of this analysis is to provide an indication of the impact of net operating income and property value changes on the estimate of the multifamily allowance for credit losses. This analysis is not intended to imply management’s expectation of future changes in our forecasts or any other variables that may change as a result.

See “Consolidated Results of Operations—(Provision) Benefit for Credit Losses” for information on how our property valuations impacted our multifamily (provision) benefit for credit losses.

Impact of Future Adoption of New Accounting Guidance

We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued accounting guidance in “Note 1, Summary of Significant Accounting Policies.”

Forward-Looking Statements

This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, statements relating to our beliefs and expectations regarding the following matters:

• economic, mortgage market and housing market conditions (including expectations regarding economic growth, home price growth, multifamily property values, the unemployment rate, loan origination volumes, interest rates and multifamily property net operating income), the factors that will affect those conditions, and the impact of those conditions on our business and financial results;
• the impact of hedge accounting on the volatility of our financial results;
• the future aggregate liquidation preference of our senior preferred stock;
• our future dividend payments on the senior preferred stock;
• our business plans and strategies, and their impact;
• the credit performance of the loans in our guaranty book of business (including future loan delinquencies and foreclosures) and the factors that will affect such performance;

MD&A | Forward-Looking Statements

• the effects of our credit risk transfer transactions, as well as the factors that will affect our engagement in future credit risk transfer transactions;
• how we intend to repay our debt obligations;
• the impact on our single-family servicing concentration of Rocket Companies’ announced acquisition of Mr. Cooper;
• the impact of the adoption of new accounting guidance;
• our payments to HUD and Treasury funds under the GSE Act;
• legal and regulatory proceedings; and
• the risks to our business.

Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, events or results based on various assumptions and management’s estimates of trends and economic conditions in the markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.

There are a number of factors that could cause actual conditions, events or results to differ materially from those described in our forward-looking statements, including, among others, the following:

• growth, deterioration and the overall health and stability of the U.S. economy, including GDP, unemployment rates, personal income, inflation and other indicators thereof;
• the impact of trade, fiscal, regulatory and immigration policies;
• deterioration in a specific sector of the U.S. economy or in one or more regional areas of the United States;
• future interest rates and credit spreads;
• the timing and level of, as well as regional variation in, home price changes;
• the size and our share of the U.S. mortgage market (including the volume of mortgage originations) and the factors that affect them, including population growth and household formation;
• changes in fiscal or monetary policy of the U.S. or other countries, and the impact of such changes on domestic and international financial markets;
• domestic, regional and global political risks and uncertainties, including the impact of the Russian war in Ukraine and tensions between China and Taiwan;
• developments that may be difficult to predict, including: market conditions that result in changes in our deferred guaranty fee income or changes in net interest income from our portfolios; fluctuations in the estimated fair value of our assets and liabilities; and developments that affect our loss reserves, such as changes in interest rates or home prices;
• disruptions or instability in the housing and credit markets;
• changes in the demand for Fannie Mae MBS, our debt securities or our credit risk transfer securities, in general or from one or more major groups of investors;
• constraints on our entry into new credit risk transfer transactions;
• a decrease in our credit ratings;
• limitations on our ability to access the debt capital markets;
• the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio;
• how long loans in our guaranty book of business remain outstanding;
• our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and guaranty fee revenues;
• the competitive environment in which we operate, including the impact of legislative, regulatory or other developments on levels of competition in our industry and other factors affecting our market share;
• the impact of interdependence between the single-family mortgage securitization programs of Fannie Mae and Freddie Mac in connection with UMBS;

MD&A | Forward-Looking Statements

• significant challenges we face in retaining and hiring qualified executives and other employees;
• our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship and its effect on our business;
• the investment by Treasury, including the impact of past or potential future changes to the terms of the senior preferred stock purchase agreement, senior preferred stock and warrant, and their effect on our business, including restrictions imposed on us by the terms of the senior preferred stock purchase agreement, the senior preferred stock, and the warrant, as well as the extent that these or other restrictions on our business and activities are applied to us through other mechanisms even if we cease to be subject to these agreements and instruments;
• uncertainty regarding our future, our exit from conservatorship, and our ability to raise or earn the capital needed to meet our capital requirements;
• the impact of the enterprise regulatory capital framework on our business and financial results;
• future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit our business activities or our footprint, impose new mandates on us, or affect our ability to change our pricing;
• future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting macroeconomic conditions, such as changes to trade, fiscal, or immigration policies;
• actions by FHFA, Treasury, the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), the Commodity Futures Trading Commission (“CFTC”), HUD, the Consumer Financial Protection Bureau, the SEC or other regulators, Congress, the Executive Branch, or state or local governments that affect our business;
• changes in the structure and regulation of the financial services industry;
• the potential impact of a change in the corporate income tax rate, which we expect would affect our net income in the quarter of enactment;
• the possibility that changes in leadership at FHFA or the Administration will result in changes that affect our company or our business;
• actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as changes in the type of business we do, actions relating to UMBS or our resecuritization of Freddie Mac-issued securities, or credit risk management actions;
• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator;
• adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, lenders and servicers, including actions we may take to reach additional underserved borrowers;
• a default by the United States government on its obligations;
• a shutdown of the United States government;
• significant changes in forbearance, modification and foreclosure activity;
• the volume and pace of any future nonperforming and reperforming loan sales and their impact on our financial results and serious delinquency rates;
• changes in borrower behavior;
• actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of contractual remedies;
• environmental disasters, terrorist attacks, widespread health emergencies or pandemics, infrastructure failures, or other disruptive or catastrophic events;
• earthquakes or other natural disasters, including those for which we may be uninsured or under-insured or that may affect our counterparties or the hazard insurers insuring properties underlying our guaranty book of business;
• severe weather events, fires, floods, wind or other climate-related events or impacts, including those for which we may be uninsured or under-insured or that may affect our counterparties or the hazard insurers insuring properties underlying our guaranty book of business, and other climate-related risks;
• defaults by one or more of our counterparties or by the hazard insurers insuring properties underlying our guaranty book of business;

MD&A | Forward-Looking Statements

• resolution or settlement agreements we may enter into with our counterparties;
• our need to rely on third parties to achieve some of our corporate objectives, including our reliance on mortgage servicers;
• our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform CSS operates for a majority of our single-family securitization activities; provisions in the CSS limited liability company agreement that permit FHFA to appoint members to the CSS Board of Managers, which limit the ability of Fannie Mae and Freddie Mac to control decisions of the Board; and changes FHFA may require in our relationship with or in our support of CSS;
• the effectiveness of our risk management processes and related controls;
• the effectiveness of our business resiliency plans and systems;
• the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of CSS, our other counterparties and other third parties;
• our reliance on models and future updates we make to our models, including the data and assumptions used by these models;
• cyber attacks or other cybersecurity breaches or threats impacting us, the third parties with which we do business or our regulators;
• changes in GAAP, guidance by the Financial Accounting Standards Board (“FASB”), SEC guidance, and our accounting policies; and
• the other factors described in “Risk Factors” in this report and in our 2024 Form 10-K.

Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking statements into proper context by carefully considering the factors identified above and those discussed in “Risk Factors” in our 2024 Form 10-K and in this report. These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under the federal securities laws.

Financial Statements | Condensed Consolidated Balance Sheets

Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of March 31, 2025, the end of the period covered by this report. As a result of management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2025, or as of the date of filing this report.

Our disclosure controls and procedures were not effective as of March 31, 2025, or as of the date of filing this report because they did not adequately ensure the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of March 31, 2025, or as of the date of this filing, and we continue to have a material weakness in our internal control over financial reporting. This material weakness is described in more detail below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that we continued to have the following material weakness as of March 31, 2025, and as of the date of filing this report:

• Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 2008. Under the GSE Act, FHFA is an independent agency that currently functions as both our conservator and our regulator with respect to our safety, soundness, and mission. Because of the nature of the conservatorship under the GSE Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could be material to our stockholders and other stakeholders, and could significantly affect our financial performance or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement

Controls and Procedures

disclosure policies and procedures that would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, operate, and test effective disclosure controls and procedures. As both our regulator and our conservator under the GSE Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated entity, we are limited in our ability to design, implement, operate, and test the controls and procedures for which FHFA is responsible.

Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that adequately ensures the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and accurate disclosure as required by GAAP as of March 31, 2025, or as of the date of filing this report. Based on discussions with FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under conservatorship.

Mitigating Actions Related to Material Weakness

We and FHFA have engaged in the following practices intended to permit accumulation and communication to management of information needed to meet our disclosure obligations under the federal securities laws:

• FHFA has established a process to facilitate operation of the company under the oversight of the conservator.
• We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also have provided drafts of external press releases, statements, and speeches to FHFA personnel for their review and comment prior to release.
• FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly report on Form 10-Q for the quarter ended March 31, 2025 (“First Quarter 2025 Form 10-Q”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our First Quarter 2025 Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the First Quarter 2025 Form 10-Q, and it was not aware of any material misstatements or omissions in the First Quarter 2025 Form 10-Q and had no objection to our filing the First Quarter 2025 Form 10-Q.
• Our senior management meets regularly with senior leadership at FHFA. In addition, the FHFA Director serves as Chairman of our Board of Directors.
• FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and market risk management, external communications, and legal matters.
• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives regarding our accounting policies, practices, and procedures.

Changes in Internal Control Over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting from January 1, 2025 through March 31, 2025 that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective internal controls. Changes may include implementing new, more efficient systems, automating manual processes, changes in personnel performing controls, and updating existing systems.

Other Information

In addition to the information in this report, you should carefully consider the risks relating to our business that we identify in “Risk Factors” in our 2024 Form 10-K. Also refer to “MD&A—Risk Management,” “MD&A—Single-Family Business” and “MD&A—Multifamily Business” in our 2024 Form 10-K and in this report for more detailed descriptions of the primary risks to our business and how we seek to manage those risks.

The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and net worth, and could cause our actual results to differ materially from our past results or the results contemplated by any forward-looking statements we make. We believe the risks described in the sections of this report and our 2024 Form 10-K referenced above are the most significant we face; however, these are not the only risks we face. We face additional risks and uncertainties not currently known to us or that we currently believe are immaterial.