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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 6, 2008
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
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| Federally chartered corporation
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000-50231
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52-0883107 |
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(Commission
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(IRS Employer |
| of incorporation)
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File Number)
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Identification Number) |
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| 3900 Wisconsin Avenue, NW
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20016 |
| Washington, DC
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(Zip Code) |
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Registrant’s telephone number, including area code: 202-752-7000
(Former Name or Former Address, if Changed Since Last Report):
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Item 1.01 |
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Entry into a Material Definitive Agreement. |
The information required by this Item is incorporated into this Item 1.01 by reference to the
section captioned “Treasury Senior Preferred Stock Purchase Agreement and Related Issuance of
Senior Preferred Stock and Common Stock Warrant” under Item 8.01 below.
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| Item 1.03 |
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Bankruptcy or Receivership. |
The information required by this Item is incorporated into this Item 1.03 by reference to Item 3.03
and the section captioned “Conservatorship” under Item 8.01 below.
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| Item 3.01 |
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Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer
of Listing. |
The information required by this Item is incorporated into this Item 3.01 by reference to the
section captioned “New York Stock Exchange Matters” under Item 8.01 below.
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| Item 3.02 |
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Unregistered Sales of Equity Securities. |
The information required by this Item is incorporated into this Item 3.02 by reference to the
section captioned “Treasury Senior Preferred Stock Purchase Agreement and Related Issuance of
Senior Preferred Stock and Common Stock Warrant” under Item 8.01 below.
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| Item 3.03 |
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Material Modifications to Rights of Security Holders. |
The rights
of holders of our common and preferred stock have been materially
limited
by the entry of Fannie Mae (formally, the Federal National Mortgage Association) into
conservatorship on September 6, 2008. The rights of holders of our common and preferred stock also
have been materially limited by the Senior Preferred Stock Purchase Agreement
entered into by Fannie Mae, through the Federal Housing Finance Agency (“FHFA”), in its capacity as
Conservator, on September 7, 2008, as well as by Fannie Mae’s issuance pursuant to such agreement
of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2 (the “Senior Preferred
Stock”) and a warrant for the purchase of Fannie Mae common stock (the “Warrant”). The outstanding
series of Fannie Mae preferred stock that have been materially
limited are the
following: (i) 5.25% Non-Cumulative Preferred Stock, Series D; (ii) 5.10% Non-Cumulative Preferred
Stock, Series E, (iii) Variable Rate Non-Cumulative Preferred Stock, Series F; (iv) Variable Rate
Non-Cumulative Preferred Stock,
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Series G; (v) 5.81% Non-Cumulative Preferred Stock, Series H; (vi) 5.375% Non-Cumulative Preferred
Stock, Series I, (vii) 5.125% Non-Cumulative Preferred Stock, Series L, (viii) 4.75% Non-Cumulative
Preferred Stock, Series M; (ix) 5.50% Non-Cumulative Preferred Stock, Series N, (x) Non-Cumulative
Preferred Stock, Series O; (xi) Non-Cumulative Convertible Preferred Stock, Series 2004-1; (xii)
Variable Rate Non-Cumulative Preferred Stock, Series P; (xiii) 6.75% Non-Cumulative Preferred
Stock, Series Q; (xiv) 7.625% Non-Cumulative Preferred Stock, Series R; (xv) Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series S; (xvi) 8.25% Non-Cumulative Preferred Stock, Series T; and
(xvii) 8.75% Non-Cumulative Mandatory Convertible Preferred Stock, Series 2008-1.
Impact of Conservatorship
The conservatorship does not eliminate Fannie Mae’s outstanding common stock or preferred stock;
however, in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 (the
“Regulatory Reform Act”), FHFA, as Conservator and by operation of law, immediately succeeded to
all rights, titles, powers and privileges of Fannie Mae’s stockholders with respect to Fannie Mae
and its assets. As Conservator, FHFA announced on September 7, 2008 that Fannie Mae would not pay
any dividends on the common stock or on any series of preferred stock. Additional information
describing the impact of conservatorship on the rights of holders of Fannie Mae’s common and
preferred stock is incorporated into this Item 3.03 by reference to the section captioned
“Conservatorship” under Item 8.01 below.
As described below under the section captioned “Treasury Senior Preferred Stock Purchase Agreement
and Related Issuance of Senior Preferred Stock and Common Stock Warrant” under Item 8.01, Fannie
Mae may not declare or pay dividends on Fannie Mae equity securities without the prior written
consent of the U.S. Department of the Treasury (“Treasury”). Fannie Mae has received the consent
of Treasury and FHFA to pay the declared but unpaid dividends on all of our outstanding series of
preferred stock on September 30, 2008 as scheduled. A copy of the news release announcing that
consent is attached as Exhibit 99.1 to this report and incorporated herein by reference.
Impact of Senior Preferred Stock Purchase Agreement, Senior Preferred Stock and Common Stock
Warrant
Information describing the impact of the Senior Preferred Stock Purchase Agreement, Senior
Preferred Stock and Warrant on the rights of holders of Fannie Mae’s common and preferred stock is
incorporated into this Item 3.03 by reference to the section captioned “Treasury Senior Preferred
Stock Purchase Agreement and Related Issuance of Senior Preferred Stock and Common Stock Warrant”
under Item 8.01 below.
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| Item 5.01 |
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Changes in Control of Registrant. |
The information required by this Item is incorporated into this Item 5.01 by reference to the
section captioned “Conservatorship” under Item 8.01 below.
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Item 5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
The information required by this Item is incorporated into this Item 5.02 by reference to the
section captioned “Company Management” under Item 8.01 below.
On September 7, 2008, Henry M. Paulson, Jr., Treasury Secretary, and James B. Lockhart, Director of
FHFA, Fannie Mae’s safety, soundness and mission regulator, announced several actions taken by FHFA
and Treasury “in an effort to help restore confidence in Fannie Mae and Freddie Mac, enhance their
capacity to fulfill their mission, and mitigate the systemic risk that has contributed directly to
the instability in the current market.” These actions include (1) FHFA’s decision to place both
Fannie Mae and Freddie Mac in conservatorship, (2) the establishment by Treasury and FHFA of
preferred stock purchase agreements between Treasury and the conserved entities, (3) the
establishment of a new secured lending credit facility that is available to Fannie Mae, Freddie Mac
and the Federal Home Loan Banks and (4) the initiation by Treasury of a temporary program to
purchase GSE mortgage backed securities (“MBS”).
CONSERVATORSHIP
On September 7, 2008, James B. Lockhart, Director of FHFA issued a statement announcing the
appointment of FHFA as Conservator of Fannie Mae. The statement is attached as Exhibit 99.2 to
this report. In accordance with the Regulatory Reform Act, FHFA, as Conservator and by operation
of law, immediately succeeded to (1) all rights, titles, powers and privileges of Fannie Mae, and
of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets,
and (2) title to all books, records and assets of Fannie Mae held by any other legal custodian or
third party.
In addition, under the Regulatory Reform Act, FHFA, as Conservator, has the power to repudiate
contracts entered into by Fannie Mae prior to the appointment of FHFA as Conservator if FHFA
determines, in its sole discretion, that performance of the contract is burdensome and that
repudiation of the contract promotes the orderly administration of Fannie Mae’s affairs. FHFA’s
right to repudiate any contract must be exercised within a reasonable period of time after its
appointment as Conservator. Further, FHFA, as Conservator, has the power to transfer or sell any
asset or liability of Fannie Mae and may do so without any approval, assignment or consent. The
Regulatory Reform Act also may prevent the enforcement of any contract right of third parties under
such contracts providing for termination, default, acceleration or exercise of rights solely by
reason of the appointment of FHFA as Conservator. In addition, the Regulatory Reform Act provides
that no person may exercise any right or power to terminate, accelerate or declare an event of
default under any contract to which Fannie Mae is a party, or obtain possession of or exercise
control over any property of Fannie Mae, or affect any contractual rights of Fannie Mae, without
the approval of FHFA as Conservator for a period of 45 days following the appointment of FHFA as
Conservator.
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According to the “Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing
Finance Agency Action to Protect Financial Markets and Taxpayers” published by Treasury on
September 7, 2008, “[b]ecause the GSEs are in conservatorship, they will no longer be managed with
a strategy to maximize shareholder returns.”
The conservatorship has no termination date. In a Fact Sheet entitled “Questions and Answers on
Conservatorship” published by FHFA on September 7, 2008, FHFA stated that, upon the Director’s
determination that the Conservator’s plan to restore the company to a safe and solvent condition
has been completed successfully, the Director will issue an order terminating the conservatorship.
TREASURY SENIOR PREFERRED STOCK PURCHASE AGREEMENT AND RELATED ISSUANCE OF SENIOR PREFERRED STOCK
AND COMMON STOCK WARRANT
Treasury Senior Preferred Stock Purchase Agreement
On September 7, 2008, Fannie Mae, through FHFA, in its capacity as Conservator, and Treasury,
entered into a Senior Preferred Stock Purchase Agreement. Pursuant to the agreement, Fannie Mae
agreed to sell and issue to Treasury one million shares of Variable Liquidation Preference Senior
Preferred Stock, Series 2008-2 (the “Senior Preferred Stock”), with an initial liquidation
preference equal to $1,000 per share (for an aggregate of $1 billion), and a warrant for the
purchase of Fannie Mae common stock (the “Warrant”). The terms of the Senior Preferred Stock and
Warrant are summarized in separate sections below.
The Senior Preferred Stock and Warrant were sold and issued to Treasury as an initial commitment
fee in consideration of the commitment from Treasury (the “Commitment”) to provide funds to Fannie
Mae under the terms and conditions set forth in the Senior Preferred Stock Purchase Agreement. In
addition to the issuance of the Senior Preferred Stock and Warrant, beginning on March 31, 2010,
Fannie Mae will pay a periodic commitment fee to Treasury on a quarterly basis. This periodic
commitment fee will accrue from January 1, 2010. The fee, to be mutually agreed upon by Fannie Mae
and Treasury and to be determined with reference to the market value of the Commitment as then in
effect, will be determined by or before December 31, 2009, and will be reset every five years.
Treasury may waive the periodic commitment fee for up to one year at a time, in its sole
discretion, based on adverse conditions in the U.S. mortgage market. Fannie Mae may elect to pay
the periodic commitment fee in cash or add the amount of the fee to the liquidation preference of
the Senior Preferred Stock.
The Senior Preferred Stock Purchase Agreement provides that, on a quarterly basis, we generally may
draw funds under the Commitment up to the amount, if any, by which our total liabilities exceed our
total assets for the applicable fiscal quarter (referred to as the “Deficiency Amount”), provided
that the aggregate amount funded under the Commitment may not exceed $100 billion. The Senior
Preferred Stock Purchase Agreement provides that the Deficiency Amount will be calculated
differently in the event that Fannie Mae becomes subject to receivership or other liquidation
process. In addition, the Deficiency Amount may be increased above the otherwise applicable amount
upon mutual written agreement of Treasury and Fannie Mae. In addition, the Senior Preferred Stock
Purchase Agreement provides that, if the Director of FHFA determines
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that the Director will be mandated by law to appoint a receiver for Fannie Mae unless our capital
is increased by an amount up to, but not in excess of, the Deficiency Amount (subject to the $100
billion maximum amount that may be funded under the Commitment), then FHFA, in its capacity as our
Conservator, may request that Treasury provide funds to us under the Commitment in such amount.
The Senior Preferred Stock Purchase Agreement also provides that, if we have a Deficiency Amount as
of the date of completion of the liquidation of our assets, we may request funds from Treasury in
an amount up to the Deficiency Amount (subject to the $100 billion maximum amount that may be
funded under the Commitment). Any amounts drawn by Fannie Mae under the Commitment will be added to
the liquidation preference of the Senior Preferred Stock. As of September 11, 2008, Fannie Mae has
not drawn any amounts under the Commitment.
The Senior Preferred Stock Purchase Agreement provides that the Commitment will terminate under any
the following circumstances: (i) the completion of a liquidation of Fannie Mae and fulfillment of
Treasury’s obligations under the Commitment at that time, (ii) the payment in full of all Fannie
Mae’s liabilities, and (iii) the funding by Treasury of $100 billion under the Commitment. In
addition, Treasury may terminate the Commitment and declare the Senior Preferred Stock Purchase
Agreement null and void if a court vacates, modifies, amends, conditions, enjoins, stays or
otherwise affects the appointment of the Conservator or otherwise curtails the Conservator’s
powers. Treasury may not terminate the Commitment solely by reason of the conservatorship,
receivership or other insolvency proceeding of Fannie Mae or Fannie Mae’s financial condition or
any adverse change in our financial condition. The Senior Preferred Stock Purchase Agreement
provides that most provisions of the agreement may be waived or amended by mutual written agreement
of the parties; however, no waiver or amendment of the agreement is permitted that would decrease
the aggregate Commitment or add conditions to funding amounts required to be funded by Treasury
under the Commitment if such amendment or waiver would adversely affect in any material respect the
holders of Fannie Mae’s debt securities or beneficiaries of guaranteed Fannie Mae MBS.
The Senior Preferred Stock Purchase Agreement includes several covenants that significantly
restrict our business activities. The Senior Preferred Stock Purchase Agreement provides that,
until the Senior Preferred Stock is repaid or redeemed in full, Fannie Mae may not, without the
prior written consent of Treasury:
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Declare or pay any dividend (preferred or otherwise) or make any other distribution
with respect to any Fannie Mae equity securities (other than with respect to the Senior
Preferred Stock or Warrant); |
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Redeem, purchase, retire or otherwise acquire any Fannie Mae equity securities (other
than the Senior Preferred Stock or Warrant); |
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Sell or issue any Fannie Mae equity securities (other than the Senior Preferred Stock,
the Warrant and the common stock issuable upon exercise of the Warrant and other than as
required by the terms of any binding agreement in effect on the date of the Senior
Preferred Stock Purchase Agreement); |
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Terminate the conservatorship (other than in connection with a receivership); |
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Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for
fair market value: (a) to a limited life regulated entity; (b) of assets and properties in
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ordinary course of business, consistent with past practice; (c) in connection with a
liquidation of Fannie Mae by a receiver; (d) of cash or cash equivalents for cash or cash
equivalents; or (e) to the extent necessary to comply with the covenant described below
relating to the reduction of our mortgage assets beginning in 2010; |
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Incur indebtedness that would result in Fannie Mae’s aggregate indebtedness exceeding
110% of our aggregate indebtedness as of June 30, 2008; |
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Issue any subordinated debt; |
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Enter into a corporate reorganization, recapitalization, merger, acquisition or
similar event; or |
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Engage in transactions with affiliates unless the transaction is (a) pursuant to the
Senior Preferred Stock Purchase Agreement, the Senior Preferred Stock or the Warrant, (b)
upon arm’s length terms or (c) a transaction undertaken in the ordinary course or pursuant
to a contractual obligation or customary employment arrangement in existence on the date of
the Senior Preferred Stock Purchase Agreement. |
The Senior Preferred Stock Purchase Agreement also provides that Fannie Mae may not own mortgage
assets in excess of (a) $850 billion on December 31, 2009, or (b) on December 31 of each year
thereafter, 90% of the aggregate amount of Fannie Mae’s mortgage assets as of December 31 of the
immediately preceding calendar year, provided that Fannie Mae is not required to own less than $250
billion in mortgage assets. In addition, the Senior Preferred Stock Purchase Agreement provides
that Fannie Mae may not enter into any new compensation arrangements or increase amounts or
benefits payable under existing compensation arrangements of any named executive officer (as
defined by Securities and Exchange Commission rules) without the consent of the Director of FHFA,
in consultation with the Secretary of the Treasury.
Fannie Mae is required under the Senior Preferred Stock Purchase Agreement to provide annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to Treasury in
accordance with the time periods specified in the SEC’s rules. In addition, the designated
representative of Fannie Mae is required to provide quarterly certifications to Treasury certifying
compliance with the covenants contained in the Senior Preferred Stock Purchase Agreement and the
accuracy of the representations made pursuant to agreement.
A copy of the Senior Preferred Stock Purchase Agreement is filed as Exhibit 4.1 to this report and
incorporated herein by reference. A copy of a Fact Sheet published by the Treasury regarding the
Senior Preferred Stock Purchase Agreement is attached as Exhibit 99.3 to this report.
Issuance of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2
Pursuant to the Senior Preferred Stock Purchase Agreement described above, on September 8, 2008,
Fannie Mae, through FHFA, in its capacity as Conservator, issued one million shares of Senior
Preferred Stock to Treasury. The Senior Preferred Stock was issued to Treasury in consideration of
the Commitment from Treasury to provide funds to us under the terms set forth in the Senior
Preferred Stock Purchase Agreement.
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Shares of the Senior Preferred Stock have no par value and a stated value and initial liquidation
preference per share equal to $1,000 per share. The liquidation preference of the Senior Preferred
Stock is subject to adjustment, as provided in the Certificate of Designation for the Senior
Preferred Stock. To the extent dividends are not paid for any dividend period, the dividends will
accrue and be added to the liquidation preference of the Senior Preferred Stock. In addition, any
amounts paid by Treasury to Fannie Mae pursuant to Treasury’s Commitment set forth in the Senior
Preferred Stock Purchase Agreement and any periodic commitment fees payable under the Senior
Preferred Stock Purchase Agreement that are not paid in cash to Treasury will be added to the
liquidation preference of the Senior Preferred Stock. As described below, Fannie Mae may make
payments pursuant to the terms of the Certificate of Designation to reduce the liquidation
preference of the Senior Preferred Stock.
Holders of the Senior Preferred Stock are entitled to receive, when, as and if declared by Fannie
Mae’s Board of Directors, cumulative quarterly cash dividends at the annual rate set forth below on
the then-current liquidation preference of the Senior Preferred Stock. The initial dividend, if
declared, will be payable on December 31, 2008 and will be for the period from but not including
September 8, 2008 through and including December 31, 2008. The dividend rate for the Senior
Preferred Stock is 10% per year; however, if at any time Fannie Mae fails to pay required cash
dividends in a timely manner, then immediately following such failure and for all dividend periods
thereafter until the dividend period following the date on which Fannie Mae has paid in cash full
cumulative dividends (including any unpaid dividends added to the liquidation preference), the
dividend rate will be 12% per year.
The Senior Preferred Stock ranks prior to Fannie Mae common stock and all outstanding series of
Fannie Mae preferred stock (which are listed in Item 3.03 above), as well as any Fannie Mae capital
stock issued in the future, as to both dividends and rights upon liquidation. The Certificate of
Designation for the Senior Preferred Stock provides that Fannie Mae may not, at any time, declare
or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any common stock or other securities ranking junior to the
Senior Preferred Stock unless (a) full cumulative dividends on the outstanding Senior Preferred
Stock in respect of the then-current dividend period and all past dividend periods (including any
unpaid dividends added to the liquidation preference) have been declared and paid in cash, and (b)
all amounts required to be paid with the net proceeds of any issuance of capital stock for cash
have been paid in cash. Shares of the Senior Preferred Stock are not convertible. Shares of the
Senior Preferred Stock have no general or special voting rights, other than those set forth in the
Certificate of Designation or otherwise required by law. The consent of holders of at least
two-thirds of all outstanding shares of Senior Preferred Stock is generally required to amend the
Certificate of Designation or to create any class or series of stock that ranks prior to or on
parity with the Senior Preferred Stock.
Fannie Mae is not permitted to redeem the Senior Preferred Stock prior to the termination of the
Commitment set forth in the Senior Preferred Stock Purchase Agreement; however, Fannie Mae is
permitted to pay down the liquidation preference of the outstanding shares of Senior Preferred
Stock to the extent of (i) accrued and unpaid dividends previously added to the liquidation
preference and not previously paid down; and (ii) periodic commitment fees previously added to the
liquidation preference and not previously paid down. In addition, to the extent Fannie Mae
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issues any shares of capital stock for cash at any time the Senior Preferred Stock is outstanding,
it is required to use the net proceeds of the issuance to pay down the liquidation preference of
the Senior Preferred Stock; however, the liquidation preference of each share of Senior Preferred
Stock may not be paid down below $1,000 per share prior to the termination of the Commitment.
Following the termination of the Commitment, Fannie Mae may pay down the liquidation preference of
all outstanding shares of Senior Preferred Stock at any time, in whole or in part. If after
termination of the Commitment, Fannie Mae pays down the liquidation preference of each outstanding
share of Senior Preferred Stock in full, the shares will be deemed to have been redeemed as of the
payment date.
The preceding summary of the terms of the Senior Preferred Stock is qualified in its entirety by
the Certificate of Designation for the Senior Preferred Stock, a copy of which is filed as Exhibit
4.2 to this report and incorporated herein by reference.
Pursuant to our Charter Act, the shares of Senior Preferred Stock are “exempted securities” within
the meaning of the Securities Act of 1933, as amended, and other laws administered by the SEC to
the same extent as securities that are obligations of, or are guaranteed as to principal and
interest by, the United States, except that, under the Regulatory Reform Act, our equity securities
are not treated as exempted securities for purposes of Section 12, 13, 14 or 16 of the Securities
Exchange Act of 1934.
Issuance of Common Stock Warrant
Pursuant to the Senior Preferred Stock Purchase Agreement described above, on September 7, 2008,
Fannie Mae, through FHFA, in its capacity as Conservator, issued a Warrant to Purchase Common Stock
to Treasury. The Warrant was issued to Treasury in consideration of the Commitment from Treasury
to provide funds to us under the terms set forth in the Senior Preferred Stock Purchase Agreement.
The Warrant provides Treasury with the ability to purchase shares of Fannie Mae common stock equal
to 79.9% of the total number of shares of Fannie Mae common stock outstanding on a fully diluted
basis on the date of exercise. The Warrant may be exercised in whole or in part at any time during
the period from September 7, 2008 through September 7, 2028, by delivery to Fannie Mae of: (a) a
notice of exercise; (b) payment of the exercise price of $0.00001 per share; and (c) the Warrant.
If the market price of one share of common stock is greater than the exercise price, in lieu of
exercising the Warrant by payment of the exercise price, Treasury may elect to receive shares equal
to the value of the Warrant (or portion thereof being canceled) pursuant to the formula specified
in the Warrant. Upon exercise of the Warrant, Treasury may assign the right to receive the shares
of common stock issuable upon exercise to any other person. As of September 11, 2008, Treasury has
not exercised the Warrant.
The preceding summary of the terms of the Warrant is qualified in its entirety by the Federal
National Mortgage Association Warrant to Purchase Common Stock, a copy of which is filed as Exhibit
4.3 to this report and incorporated herein by reference.
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Pursuant to our Charter Act, the Warrant is an “exempted security” within the meaning of the
Securities Act of 1933, as amended, and other laws administered by the SEC to the same extent as
securities that are obligations of, or are guaranteed as to principal and interest by, the United
States, except that, under the Regulatory Reform Act, our equity securities are not treated as
exempted securities for purposes of Section 12, 13, 14 or 16 of the Securities Exchange Act of
1934.
TREASURY CREDIT FACILITY
On September 7, 2008, Treasury announced a Government Sponsored Enterprise Credit Facility (the
“Facility”) that would “provide secured funding on an as needed basis” until December 31, 2009
under terms and conditions established by the Treasury Secretary. As of September 11, 2008, Fannie
Mae has not yet entered into this Facility, but expects to do so shortly. A copy of a Fact Sheet
published by Treasury regarding the Facility is attached as Exhibit 99.4 to this report.
MBS PURCHASE PROGRAM
The Regulatory Reform Act granted Treasury the authority to purchase GSE MBS and this authority
expires on December 31, 2009. On September 7, 2008, Treasury Secretary Henry M. Paulson, Jr.
announced that Treasury is initiating a temporary program to purchase GSE MBS, and that Treasury
will begin this new program later this month. A copy of a Fact Sheet published by Treasury
regarding the MBS purchase program is attached as Exhibit 99.5 to this report.
COMPANY MANAGEMENT
On September 7, 2008, pursuant to its authority as Conservator of Fannie Mae, FHFA appointed Herb
M. Allison, Jr. as President and Chief Executive Officer of Fannie Mae, effective immediately.
Prior to joining the company, Mr. Allison, age 65, served as Chairman, President and Chief
Executive Officer of Teachers Insurance and Annuity Association — College Retirement Equities Fund
(TIAA-CREF) from November 2002 to April 2008, and President and Chief Operating Officer of Alliance
for Lifelong Learning, a nonprofit distance-education company, from 2000 to 2002. Prior to that,
Mr. Allison held several positions during his employment from 1971 to 1999 at Merrill Lynch & Co.,
including President and Chief Executive Officer from 1997 to 1999. Mr. Allison is a director of
Time Warner Inc. He also serves on the Advisory Board of the Yale School of Management, the
Advisory Council of Stanford Business School, and the board of directors of The Conference Board.
The terms of Mr. Allison’s compensation or severance arrangement have not yet been determined.
Mr. Allison
replaces Daniel H. Mudd, who was the company’s President and Chief Executive
Officer. During a
transition period, Mr. Mudd continues as an employee of the company.
Upon the appointment of the Conservator on September 6, 2008, in accordance with the Regulatory Reform Act, FHFA, as Conservator and by operation of law, immediately succeeded to all rights, titles, powers and privileges of Fannie Mae, and of any director of Fannie Mae with respect to Fannie Mae and its assets. Accordingly, the Board of Directors no longer has the power or duty to manage, direct or oversee the business and affairs of Fannie Mae.
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NEW YORK STOCK EXCHANGE MATTERS
Since September 7, 2008, we have been in discussions with the
Staff of the New York Stock Exchange (“NYSE”)
regarding the effect of the conservatorship on our on-going compliance with the rules of the NYSE and the continued listing of our common and preferred stock on the NYSE in light of the unique circumstances of the conservatorship. To date, we
have not been informed of any non-compliance by the NYSE.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, which are statements about matters that are not
historical facts. In addition, our senior management may from time to time make forward-looking
statements 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,” “may,” or similar words.
Among the forward-looking statements in this report are statements relating to:
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whether the actions taken by FHFA and Treasury will restore confidence in us, enhance
our capacity to fulfill our mission, and mitigate the systemic risk contributing to the
instability in the mortgage and MBS markets; |
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the actions FHFA, Treasury and Fannie Mae management may take in pursuit of these
objectives; |
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the impact on us of the conservatorship, the Senior Preferred Stock Purchase Agreement,
the Senior Preferred Stock, the Warrant, the Facility, Treasury’s MBS purchase plan, the
change in our CEO and Board of Directors and the succession of the Conservator to the
rights, titles, powers and privileges of Fannie Mae and our stockholders, officers and
directors with respect to our assets; |
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our expectations as to whether, and when, the conservatorship will be terminated and the
powers of the shareholders, including voting powers, will be reinstated; |
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the amount and terms of the periodic commitment fees to Treasury; |
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whether Treasury will provide funds to us under the Senior Preferred Stock Purchase
Agreement or under the Facility; |
| • |
|
our expectations with respect to any adjustments in the liquidation preference of the
Senior Preferred Stock; |
| • |
|
the amount and timing of dividends declared on the Senior Preferred Stock in any period,
and our expectations as to the annual dividend rate on the Senior Preferred Stock; |
| • |
|
whether we will be able to declare or pay dividends on, or purchase or acquire our
common stock or preferred stock ranking junior to the Senior Preferred Stock or whether we
will be able to make distributions with respect to, or redeem or make a liquidation payment
with respect to, any class or series of preferred stock ranking junior to the Senior
Preferred Stock; |
| • |
|
whether Treasury’s Commitment will be terminated; |
| • |
|
whether Treasury will exercise its Warrant, in whole or in part, to purchase up to 79.9%
of our shares of common stock; |
| • |
|
whether Treasury will assign the right to receive shares of our common stock issuable
upon exercise of the Warrant to any other person; |
| • |
|
whether we will make loan requests pursuant to the Facility and, if so, the amount of
any such loan requests and whether they will be approved by Treasury; |
| • |
|
our expectations as to the amount of collateral that is now, or will be at any time,
available to pledge under the Facility; |
| • |
|
our expectations with respect to the interest rate on any loan request under the
Facility; |
| • |
|
our expectations as to whether, and when, Treasury will purchase Fannie Mae MBS; |
| • |
|
our expectations with respect to our ongoing compliance with NYSE
listing rules and any actions that the NYSE may take; |
| • |
|
our expectations with respect to the continued listing of our common and
preferred stock on the NYSE; |
| • |
|
our expectations with respect to returns for common and
preferred stockholders; and |
| • |
|
the effect of the conservatorship and the actions of FHFA and
Treasury on the value of our common and
outstanding series of preferred stock ranking junior to the Senior Preferred Stock. |
12
Forward-looking statements reflect our management’s expectations or predictions of future
conditions, events or results based on various assumptions and management’s estimates of trends and
economic factors in the markets in which we are active, as well as our business plans. They are not
guarantees of future performance. By their nature, forward-looking statements are subject to risks
and uncertainties. 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, many of which we have no control over, that could cause actual
conditions, events or results to differ materially from those described in the forward-looking
statements contained in this report, including, but not limited to:
| |
• |
|
the actions FHFA, Treasury and our management may take; |
| |
| |
• |
|
the impact of the restrictions and other terms of the conservatorship, the Senior
Preferred Stock Purchase Agreement, the Senior Preferred Stock and the Warrant on our
business; |
| |
| |
• |
|
any restructuring or reorganization of the form of our
company, including whether we will remain a stockholder-owned company; |
| |
| |
• |
|
conditions in the U.S. mortgage market, including the effect of the conservatorship on
mortgage interest rates and the availability of mortgages; |
| |
| |
• |
|
conditions in the global financial markets and the confidence of the financial markets
in our business; |
| |
| |
• |
|
conditions in the U.S. economy; |
| |
| |
• |
|
our ability to securitize loans in our mortgage portfolio into guaranteed Fannie Mae
MBS; |
| |
| |
• |
|
our ability to continue and expand our issuance of debt and MBS securities and our
guarantee activities; |
| |
| |
• |
|
the effect of the conservatorship on our ability to attract and retain skilled
employees; |
| |
| |
• |
|
any litigation or other proceedings pending or brought in the future by any private
parties or regulatory bodies and the effect of the conservatorship on such matters,
including any amounts we may pay in settlement of such litigation or proceedings; |
| |
| |
• |
|
our ability to pledge MBS as collateral under the Facility; |
| |
| |
• |
|
the adequacy of our loss reserves; |
| |
| |
• |
|
pending or future regulatory action, accounting pronouncements, or litigation; and |
| |
| |
• |
|
those factors described in this report and in “Part I—Item 1A—Risk Factors” of our
Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007 Form 10-K”) and
in “Part II—Item 1A—Risk Factors” of our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008 (the “Second Quarter Form 10-Q”). |
Readers are cautioned to place forward-looking statements in this report or that we make from time
to time into proper context by carefully considering the factors discussed in this report and in
“Part I—Item 1A—Risk Factors” of our 2007 Form 10-K and in “Part II—Item 1A—Risk Factors” our
Second Quarter Form 10-Q. 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.
Item 9.01 Financial Statements and Exhibits.
(d) The exhibit index filed herewith is incorporated herein by reference.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
|
|
|
|
| |
FEDERAL NATIONAL MORTGAGE ASSOCIATION
|
| |
By |
/s/
Herb M. Allison, Jr. |
|
| |
|
Herb M. Allison, Jr. |
|
| |
|
Chief Executive Officer |
|
| |
Date: September 11, 2008
14
EXHIBIT INDEX
The following exhibits are submitted herewith:
| |
|
|
| Exhibit No. |
|
Description |
4.1
|
|
Senior Preferred Stock Purchase Agreement dated as of
September 7, 2008, between the United States Department of the
Treasury and Federal National Mortgage Association, acting
through the Federal Housing Finance Agency as its duly
appointed conservator |
|
|
|
4.2
|
|
Certificate of Designation of Terms of Variable Liquidation
Preference Senior Preferred Stock, Series 2008-2 |
|
|
|
4.3
|
|
Warrant to Purchase Common Stock, dated September 7, 2008 |
|
|
|
99.1
|
|
September 10, 2008 News Release Announcing Consent to pay declared but unpaid dividends on
outstanding preferred stock |
|
|
|
99.2
|
|
September 7, 2008 Statement of FHFA Director James B. Lockhart |
|
|
|
99.3
|
|
Fact Sheet published by the U.S. Treasury Department regarding
the Senior Preferred Stock Purchase Agreement |
|
|
|
99.4
|
|
Fact Sheet published by the U.S. Treasury Department regarding
the Credit Facility |
|
|
|
99.5
|
|
Fact Sheet published by the U.S. Treasury Department regarding
the GSE Mortgage Backed Securities Purchase Program |
15