Businessmodel of Fannie Mae

Customer Segments

Fannie Mae provides a range of products and services that support stability in the secondary mortgage market, with the Company’s customers principally comprising financial institutions with mortgage lending operations within the primary mortgage market where mortgage loans are originated and funds are loaned to borrowers. This includes:

• Mortgage banking companies;
• Savings and loan associations;
• Savings banks;
• Commercial banks;
• Credit unions;
• Community banks;
• Specialty servicers;
• Insurance companies; and
• State and local housing finance agencies. In 2015 approximately 1,200 lenders delivered single-family mortgage loans to Fannie Mae, either for securitisation or for purchase. The Company acquires a significant portion of our single-family mortgage loans from several large mortgage lenders. In 2015 the Company’s top five lender customers accounted for approximately 29% of total single-family business volume, with Wells Fargo Bank and its affiliates, being the only customer that accounted for 10% or more of the Company’s total single-family business volume, with approximately 13%.

Fannie Mae also sells mortgage-backed securities to a range of institutions, including fund managers, commercial banks, pension funds, insurance companies, foreign central banks, corporations, state and local governments, and other municipal authorities.

Value Propositions

Fannie Mae provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as a reliable provider of mortgage market stability and liquidity, assuming a unique position in the US market, and working with a number of high-profile financial institutions, such as Wells Fargo Bank;
• Its government backing, with the Company operating as a government-sponsored entity, which sees its receive an annual subsidy and reduced local and registration taxes, and makes it easier for the Company to access market capital;
• Its financial strength, with the Company maintaining significant reserves and having the backing of the US Government;
• Its lender relationships, with the Company having established positive working relationships with many large lending institutions over a period of many years, making it easier for the Company to attract and conduct business; and
• Its expertise and experience, with the Company employing specialist personnel across its three operating segments, as well as a team of experienced industry executives. ### Channels

Fannie Mae operates a website at www.fanniemae.com, through which it provides information on its various activities, services, research, and industry analysis. The Company does not operate an online sales channel, and does not provide an online customer portal.

Fannie Mae operates dedicated teams organised by operating segment and geographic regions that work directly with lender customers across the US. The Company operates specialist single-family and multifamily units that help provide funds to the mortgage market by acquiring loans primarily through lender swap transactions or through loan purchases. Fannie Mae’s personnel operate out of the Company’s headquarters in Washington DC, and its network of six regional offices across Atlanta, Pasadena, Chicago, Philadelphia, Virginia, and Dallas.

The servicing of mortgage loans held in Fannie Mae’s retained mortgage portfolio is typically performed by third party mortgage servicers on the Company’s behalf. Some loans are also serviced for the Company by the lenders that initially sold the loans. For loans owned or guaranteed by Fannie Mae, however, the lender or servicer must obtain the Company’s approval before selling servicing rights to another servicer.

Customer Relationships

Fannie Mae does not provide any products or services to its customers on a self-service basis. The Company’s operations are built largely on strong and longstanding relationships with its lender customers, notably large established lenders such as Wells Fargo Bank. Fannie Mae works closely with these customers, consulting with them directly over a period of time to ensure a positive result for the lender, Fannie Mae, and the overall mortgage market.

Each of Fannie Mae’s largest customers have their own dedicated account management team, which are able to provide ongoing support and advice. New and existing customers can alternatively contact the Company’s customers support and service teams over the phone, or email the Company’s resource centre, to receive personalised responses to queries and enquiries. The Company also provides contact details for its various operating units and departments for more targeted enquires.

Fannie Mae provides a range of online resources to its customers, including industry research and analysis, news articles, and guides, through its website. It also operates websites at www.knowyouroptions.com and www.homepath.com, which provide housing information and advice to consumers and businesses. Customers can also interact with Fannie Mae through its social media accounts, including with Facebook, Twitter, LinkedIn, and YouTube.

Key Activities

Fannie Mae is a government-sponsored enterprise chartered by the US Congress. It is designed to support liquidity and stability in the secondary US mortgage market, where mortgage related assets are purchased and sold.

The Company is primarily engaged in the securitization of mortgage loans originated by lenders into Fannie Mae mortgage backed securities. Fannie Mae aligns its operations into three reportable business segments: Single-Family Credit Guaranty, Multifamily and Capital Markets.

The Company’s Single-Family Credit Guaranty and Multifamily segments work closely with lenders across the US – including commercial banks, credit unions, and insurance companies –to purchase and securitise mortgage loans, primarily through lender swap transactions and direct loan purchases. It generates funds to support business activities by issuing a range of debt securities in various capital markets.

Key Partners

Fannie Mae works in conjunction with a range of companies and organisations across its three operating segments. These partners can be categorised broadly as:

• Servicing Partners, comprising various third party mortgage servicers and other intermediaries that service the Company’s mortgage portfolio and purchased loans on its behalf;
• Supplier and Vendor Partners, comprising suppliers of products, services and technologies that are utilised across the Company’s three operating segments, as well as companies to which certain functions can be outsourced;
• Lender Partners, comprising the Company’s network of lending partners, including commercial banks, credit unions, insurance companies, savings and loan associations, that work closely with the Company on its mortgage buying and loan servicing activities; and
• Industry Partners, comprising a range of industry associations and professional bodies, which work closely with the Company to manage, promote, and develop the mortgage lending and servicing industry. Fannie Mae’s industry partners include the American Bankers Association, the Mortgage Bankers Association, Independent Community Bankers of America, and Capital Markets Cooperative.

Key Resources

Fannie Mae’s key resources are its financial reserves, its access to capital markets, its IT and communications infrastructure, its lender partnerships, its relationship with the US Government, and its personnel.

Fannie Mae does not own any patents or technologies that are key to its activities. The Company, however, does own and or lease a number of physical properties that are important to its operations, namely its network of regional offices across the US.

Cost Structure

Fannie Mae incurs costs in relation to the purchase of loans and assets, the management of its lender partnerships, the management of it other partnerships and relationships, the accrual of credit expenses, the maintenance of its IT and communications infrastructure, and the retention of its personnel. In 2015 Fannie accrued administrative expenses of $3.05 billion, and total credit expenses in the amount of $834 million.

Revenue Streams

Fannie Mae generates revenue through the collection of guaranty fees form its lender customers, comprising compensation for assuming and managing the credit risk on the Company’s single-family and multifamily guaranty books. The Company also collects fees received for engaging in structured transactions and providing other lender services.

In 2015 Fannie Mae generated annual revenue of $22.76 billion, down on the $25.86 billion recorded by the Company in 2014. The majority of this revenue, around $13.33 billion, was generated by the Company’s Single-Family Credit Guaranty segment. This was followed by the Capital Markets segment which generated annual revenue of $5.17 billion, with the Multifamily segment recorded revenue for the year of $1.61 billion.