Fannie Mae 2004 Annual Report Download - page 175

events specific to our business and market-wide liquidity events. Our liquidity risk policy governs our
management of liquidity risk and outlines our methods for measuring and monitoring liquidity risk. Our
liquidity risk policy, which has been approved by our Board of Directors, outlines the roles and responsibilities
for managing liquidity risk within the company. Our Capital Markets group is responsible for monitoring and
managing our liquidity risk, with oversight provided by the Chief Risk Office, several management-level
committees and the Risk Policy and Capital Committee of the Board of Directors.
We conduct our daily liquidity management activities to achieve the goals of our liquidity risk policy. The
primary tools that we employ for liquidity management include the following:
• daily monitoring and reporting of our liquidity position;
• daily forecasting of our ability to meet our liquidity needs over a 90-day period without relying upon the
issuance of unsecured debt;
• daily monitoring of market and economic factors that may impact our liquidity;
• a defined escalation process for bringing any liquidity issues or concerns that may arise to the attention of
higher levels of our management;
• routine testing of our ability to rely upon identified sources of liquidity;
• periodic reporting to management and the Board of Directors regarding our liquidity position;
• periodic review and testing of our liquidity management controls by our Internal Audit department;
• maintaining unencumbered mortgage assets that are available as collateral for secured borrowings pursuant
to repurchase agreements or for sale; and
• maintaining an investment portfolio of liquid non-mortgage assets that are readily marketable or have
short-term maturities so that we can quickly and easily convert these assets into cash.
Sources and Uses of Cash
We manage our cash position on a daily basis.
Our primary source of cash is proceeds from the issuance of our debt. Our other sources of cash currently
consist primarily of:
• principal and interest payments received on our mortgage portfolio assets;
• principal and interest payments received on our liquid investments;
• borrowings under secured and unsecured intraday funding lines of credit we have established with several
large financial institutions;
• sales of mortgage loans, mortgage-related securities and liquid assets;
• borrowings against mortgage-related securities and other investment securities we hold pursuant to
repurchase agreements and loan agreements;
• guaranty fees earned on Fannie Mae MBS;
• mortgage insurance counterparty payments; and
• net receipts on derivative instruments.
Our primary uses of cash currently consist primarily of:
• the repayment of matured, redeemed and repurchased debt;
• the purchase of mortgage loans, mortgage-related securities and other investments;
• interest payments on outstanding debt;
• net payments on derivative counterparty agreements;
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