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FNM » Topics » A decrease in our current credit ratings would have an adverse effect on our ability to issue debt on acceptable terms, which would reduce our earnings and materially adversely affect our ability to conduct our normal business operations and our liquidityThis excerpt taken from the FNM 10-Q filed Aug 8, 2008. A
decrease in our current credit ratings would have an adverse
effect on our ability to issue debt on acceptable terms, which
would reduce our earnings and materially adversely affect our
ability to conduct our normal business operations and our
liquidity and financial condition.
Our borrowing costs and our broad access to the debt capital
markets depend in large part on our high credit ratings,
particularly on our senior unsecured debt. Our ratings are
subject to revision or withdrawal at any time by the rating
agencies. Factors such as the amount of our net losses,
deterioration in our capital levels, actions by governmental
entities or others, and sustained declines in our long-term
profitability could adversely affect our credit ratings. A
reduction in our credit ratings could increase our borrowing
costs, limit our access to the
capital markets and trigger additional collateral requirements
under our derivatives contracts and other borrowing
arrangements. A substantial reduction in our credit ratings
would reduce our earnings and materially adversely affect our
liquidity, our ability to conduct our normal business operations
and our financial condition. Our credit ratings and ratings
outlook is included in
“Part I—Item 2—MD&A—Liquidity
and Capital Management—Liquidity—Credit Ratings.”
This excerpt taken from the FNM 10-K filed Feb 27, 2008. A
decrease in our current credit ratings would have an adverse
effect on our ability to issue debt on acceptable terms, which
would reduce our earnings and materially adversely affect our
ability to conduct our normal business operations and our
liquidity and financial condition.
Our borrowing costs and our broad access to the debt capital
markets depend in large part on our high credit ratings,
particularly on our senior unsecured debt. Our ratings are
subject to revision or withdrawal at any time by the rating
agencies. Any reduction in our credit ratings could increase our
borrowing costs, limit our access to the capital markets and
trigger additional collateral requirements under our derivatives
contracts and other borrowing arrangements. A substantial
reduction in our credit ratings would reduce our earnings and
materially adversely affect our liquidity, our ability to
conduct our normal business operations and our financial
condition. Our credit ratings and ratings outlook is included in
“Part II—Item 7—MD&A—Liquidity
and Capital Management—Liquidity—Credit Ratings and
Risk Ratings.”
This excerpt taken from the FNM 10-K filed Aug 16, 2007. A
decrease in our current credit ratings would have an adverse
effect on our ability to issue debt on acceptable terms, which
would reduce our liquidity and our earnings.
Our borrowing costs and our broad access to the debt capital
markets depend in large part on our high credit ratings,
particularly on our senior unsecured debt. Our ratings are
subject to revision or withdrawal at any time by the rating
agencies. Any reduction in our credit ratings could increase our
borrowing costs, limit our access to the capital markets and
trigger additional collateral requirements in derivative
contracts and other borrowing arrangements. A substantial
reduction in our credit ratings would reduce our earnings and
materially adversely affect our liquidity, our ability to
conduct our normal business operations and our competitive
position. A description of our credit ratings and current
ratings outlook is included in
“Item 7—MD&A—Liquidity and Capital
Management—Liquidity—Credit Ratings and Risk
Ratings.”
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This excerpt taken from the FNM 10-K filed May 2, 2007. A
decrease in our current credit ratings would have an adverse
effect on our ability to issue debt on acceptable terms, which
would adversely affect our liquidity and our results of
operations.
Our borrowing costs and our broad access to the debt capital
markets depend in large part on our high credit ratings. Our
senior unsecured debt currently has the highest credit rating
available from Moody’s Investors Service
(“Moody’s”), Standard & Poor’s, a
division of The McGraw-Hill Companies (“Standard &
Poor’s”),
Table of Contents
and Fitch Ratings (“Fitch”). These ratings are subject
to revision or withdrawal at any time by the rating agencies.
Any reduction in our credit ratings could increase our borrowing
costs, limit our access to the capital markets and trigger
additional collateral requirements in derivative contracts and
other borrowing arrangements. A substantial reduction in our
credit ratings would reduce our earnings and materially
adversely affect our liquidity, our ability to conduct our
normal business operations and our competitive position. A
description of our credit ratings and current ratings outlook is
included in “Item 7—MD&A—Liquidity and
Capital Management—Liquidity—Credit Ratings and Risk
Ratings.”
This excerpt taken from the FNM 10-K filed Dec 6, 2006. A
decrease in our current credit ratings would have an adverse
effect on our ability to issue debt on acceptable terms, which
could adversely affect our liquidity and our results of
operations.
Our borrowing costs and our broad access to the debt capital
markets depends in large part on our high credit ratings. Our
senior unsecured debt currently has the highest credit rating
available from Moody’s Investors Service
(“Moody’s”), Standard & Poor’s, a
division of The McGraw-Hill Companies (“Standard &
Poor’s”), and Fitch Ratings (“Fitch”). These
ratings are subject to revision or withdrawal at any time by the
rating agencies. Any reduction in our credit ratings could
increase our borrowing costs, limit our access to the capital
markets and trigger additional collateral requirements in
derivative contracts and other borrowing arrangements. A
substantial reduction in our credit ratings would reduce our
earnings and materially adversely affect our liquidity, our
ability to conduct our normal business operations and our
competitive position. A description of our credit ratings and
current ratings outlook is included in
“Item 7—MD&A—Liquidity and Capital
Management—Liquidity—Credit Ratings and Risk
Ratings.”
Our
business is subject to laws and regulations that may restrict
our ability to compete optimally. In addition, legislation that
would change the regulation of our business could, if enacted,
reduce our competitiveness and adversely affect our results of
operations and financial condition. The impact of existing
regulation on our business is significant, and both existing and
future regulation may adversely affect our
business.
As a federally chartered corporation, we are subject to the
limitations imposed by the Charter Act, extensive regulation,
supervision and examination by OFHEO and HUD, and regulation by
other federal agencies, such as the U.S. Department of the
Treasury and the SEC. We are also subject to many laws and
regulations that affect our business, including those regarding
taxation and privacy. A description of the laws and regulations
that affect our business is contained in
“Item 1—Business—Our Charter and Regulation
of Our Activities.”
Regulation by OFHEO. OFHEO has broad authority
to regulate our operations and management in order to ensure our
financial safety and soundness. For example, in order to meet
our capital plan requirements in 2005, we were required to make
significant changes to our business in 2005, including reducing
the size of our mortgage portfolio and reducing our quarterly
common stock dividend by 50%. Pursuant to our May 2006 consent
order with OFHEO, we may not increase our net mortgage portfolio
assets above $727.75 billion, except in limited
circumstances at OFHEO’s discretion. We expect that this
reduction in the size of our mortgage portfolio beginning in
2005 will contribute to significantly reduced net interest
income for the years ended December 31, 2005 and 2006, as
compared to the years ended December 31, 2004 and 2003. In
addition, we have incurred and expect to continue to incur
significant administrative expenses in connection with complying
with our remediation obligations, which will reduce our earnings
for the years ended December 31, 2005 and 2006. If we fail
to comply with any of our agreements with OFHEO or with any
OFHEO regulation, we may incur penalties and could be subject to
further restrictions on our activities and operations, or to
investigation and enforcement actions by OFHEO.
Regulation by HUD and Charter Act
Limitations. HUD supervises our compliance with
the Charter Act, which defines our permissible business
activities. For example, our business is limited to the
U.S. housing finance sector and we may not purchase loans
in excess of our conforming loan limits, which are currently
$417,000 for a one-family mortgage loan in most geographic
regions and may be lower in future periods
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subsequent to 2007. As a result of these limitations on our
ability to diversify our operations, our financial condition and
earnings depend almost entirely on conditions in a single sector
of the U.S. economy, specifically, the U.S. housing
market. Our substantial reliance on conditions in the
U.S. housing market may adversely affect the investment
returns we are able to generate. In addition, the Secretary of
HUD must approve any new Fannie Mae conventional mortgage
program that is significantly different from those approved or
engaged in prior to the enactment of the 1992 Act. As a result,
we have only limited ability to respond quickly to changes in
market conditions by offering new programs in response to these
changes. These restrictions on our business operations may
negatively affect our ability to compete successfully with other
companies in the mortgage industry from time to time, which in
turn may adversely affect our market share, our earnings and our
financial condition. As described below under “To meet
HUD’s new housing goals and subgoals, we enter into
transactions that may reduce our profitability,” we are
also subject to housing goals established by HUD, which require
that a specified portion of our business relate to the purchase
or securitization of mortgages for low- and moderate-income
housing, underserved areas and special affordable housing.
Meeting these goals may adversely affect our profitability.
Legislative Proposals. Legislative proposals
currently being considered by the U.S. Congress, if enacted
into law, could materially restrict our operations and adversely
affect our business and our earnings. During 2005, several bills
were introduced in Congress that propose to change the
regulatory framework under which we, Freddie Mac and the Federal
Home Loan Banks operate. The Senate Committee on Banking,
Housing and Urban Affairs and the U.S. House of
Representatives each advanced GSE regulatory oversight
legislation in 2005 during the first session of the
109th Congress. On October 26, 2005, the House of
Representatives passed a bill and on July 28, 2005, the
Senate Committee on Banking, Housing and Urban Affairs passed a
bill, which has not yet been brought to the floor of the Senate
for a vote. While the House and Senate bills differ in a number
of respects, both bills would affect us and other GSEs by
significantly altering the scope of:
In addition, the House bill would require Fannie Mae and Freddie
Mac to contribute a portion of their profits to a fund to
support affordable housing.
This legislation could materially adversely affect our business
and earnings. We cannot predict the prospects for the enactment,
timing or content of any legislation, the form any enacted
legislation will take or its impact on our financial condition
or results of operations.
Changes in Existing Regulations or Regulatory
Practices. Our business and earnings could also
be materially affected by changes in the regulation of our
business made by any one or more of our existing regulators. A
regulator may change its current process for regulating our
business, change its current interpretations of our regulatory
requirements or exercise regulatory authority over our business
beyond current practices, and any of these changes could have a
material adverse effect on our business and earnings. For
example, on June 13, 2006, HUD announced that it will
conduct a review of specified investments and holdings to
determine whether our investment activities are consistent with
our charter authority. We cannot predict the outcome of this
review or whether HUD will seek to restrict our current business
activities as a result of this or other reviews.
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