Fannie Mae 2010 Annual Report Download - page 115

(6)
Calculated based on the average contractual fee rate for our single-family guaranty arrangements entered into during
the period plus the recognition of any upfront cash payments ratably over an estimated average life, expressed in basis
points.
(7)
Consists of single-family mortgage loans held in our mortgage portfolio, single-family mortgage loans held by
consolidated trusts, single-family Fannie Mae MBS issued from unconsolidated trusts held by either third parties or
within our retained portfolio, and other credit enhancements that we provide on single-family mortgage assets.
Excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a
guaranty.
(8)
Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by the Single-Family segment during the
period. In 2009, we entered into a memorandum of understanding with Treasury, FHFA and Freddie Mac in which we
agreed to provide assistance to state and local housing finance agencies (“HFAs”) through three separate assistance
programs: a temporary credit and liquidity facilities program, a new issue bond program and a multifamily credit
enhancement program. Includes HFA new issue bond program issuances of $3.1 billion for the year ended
December 31, 2010.
2010 compared with 2009
Key factors affecting the results of our Single-Family business for 2010 compared with 2009 included the
following:
Net Interest Income (Expense)
Net interest income (expense) for the Single-Family business segment includes the fee paid to the Capital
Markets group for the contractual interest due on the nonaccrual loans held in our portfolio under the terms of
our intracompany guarantee arrangement and in consolidated trusts. It also includes an allocated cost of capital
charge among our three business segments. The shift from net interest income in 2009 to net interest expense
in 2010 was primarily driven by an increase in interest not recorded on nonaccrual loans, which increased to
$8.4 billion in 2010 from $1.2 billion in 2009. The number of nonaccrual loans in our consolidated balance
sheets increased as a result of our adoption of the new accounting standards.
Guaranty Fee Income
Guaranty fee income decreased in 2010, compared with 2009, primarily because: (1) we now amortize our
single-family deferred cash fees under the static yield method, which resulted in lower amortization income
compared with 2009 when we amortized these fees under the prospective level yield method; (2) guaranty fee
income in 2009 included the amortization of certain non-cash deferred items, the balance of which was
eliminated upon adoption of the new accounting standards and was not re-established on Single-Family’s
balance sheet at the transition date; and (3) guaranty fee income in 2009 reflected an increase in the fair value
of buy-ups and certain guaranty assets which are no longer adjusted to fair value under the new segment
reporting.
Our average single-family guaranty book of business was relatively flat period over period despite our
continued high market share because of the decline in U.S. residential mortgage debt outstanding. There were
fewer new mortgage originations due to weakness in the housing market and an increase in liquidations due to
the high level of foreclosures. Our estimated market share of new single-family mortgage-related securities
issuances, which is based on publicly available data and excludes previously securitized mortgages, remained
high at 44.0% for 2010.
The single-family average charged guaranty fee on new acquisitions increased in 2010 compared with 2009
primarily due to an increase in acquisitions of loans with characteristics that receive risk-based pricing
adjustments.
Credit-Related Expenses
Single-family credit-related expenses decreased in 2010 compared with 2009 primarily due to the moderate
change in our total single-family loss reserves during 2010 compared with the substantial increase in our total
single-family loss reserves during 2009. The substantial increase in our single-family total loss reserves during
2009 reflected the significant growth in the number of loans that were seriously delinquent during that period,
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