Fannie Mae Chairman Retires Rich : Compensation: David Maxwell gets a $20-million lump-sum pension. His pay was linked to the profitability of the firm and the rise in its stock.

David O. Maxwell, who came to Washington 10 years ago at a salary of $225,000 to run the company that guarantees mortgages for millions of Americans, is leaving as a rich man, with a lump-sum pension payment of $20 million.

Maxwell retired Jan. 31 as chairman of the Federal National Mortgage Assn. (Fannie Mae), and his pension, along with his 1990 earnings of $7 million, were disclosed in a proxy statement issued to shareholders.

Maxwell’s generous benefits are a reward for his performance as head of the firm during a time of turbulence in the financial world, David R. Jeffers, Fannie Mae’s vice president of corporate relations, said Tuesday.

Maxwell “put an enormous amount of his compensation and ultimate retirement at risk” when he agreed to a link between his pay and the profitability of Fannie Mae and the rise in its stock, Jeffers said. The executive incentive plan, linking rewards with stock prices and corporate performance, is a “fairly standard type of structure in the business world,” he said.

The firm’s compensation policy “has been to reward performance and thanks to Maxwell, Fannie Mae’s financial performance has been extraordinary,” Jeffers said. “The stronger the company is, the more able we are to carry out our purpose of encouraging housing. No taxpayer money was spent.”

Maxwell, 60, would have been entitled to an annual retirement income of $1.4 million, but chose to take the money in a $20-million lump sum.

The market value of Fannie Mae’s shares rose from $525 million in 1981 when Maxwell began his tenure to $10.5 billion when he retired.

The firm had profits of $1.2 billion last year, and now has total capital of $4.5 billion.

Fannie Mae was created by the federal government in the 1930s to provide a market for home mortgages. In 1968, Congress converted it to a private corporation, although five of the 15 directors are selected by the President.

Its special role is to provide a smoothly functioning source of funds for the nation’s housing markets. Mortgages issued by banks and savings and loan associations are grouped into packages and sold as securities.

Fannie Mae provides guarantees that the securities will be paid off even if the homeowners default on their mortgages. The sale of the securities from the banks and S&Ls; clears the mortgages from their books, enabling them to make additional home loans.

Fannie Mae also buys and holds billions of dollars worth of mortgages for its own investment portfolio.

The firm has helped the financing of more than 8 million homes, and now provides backing for $400 billion worth of mortgages.

Maxwell steered the firm through the perilous economic waters of the early 1980s when it was suffering a severe fiscal imbalance, paying more to raise money than it was receiving from its holdings of low-interest-rate mortgages.

He came from Ticor Mortgage Insurance Co. in Los Angeles and received a salary of $225,000 without any special incentives.

He received regular raises, but by the middle of the 1980s, the Fannie Mae board decided that he had to receive rewards linked to long-term financial goals for the company, said Jeffers. “He was extremely underpaid compared to the leaders of other large financial institutions.”

Maxwell will establish the Jovid Foundation, named for himself and his wife, Joan, to concentrate on helping poor people.