Fannie Mae 2010 Annual Report Download - page 307

Our maximum exposure to loss generally represents the greater of our recorded investment in the entity or the
unpaid principal balance of the assets covered by our guaranty. However, our securities issued by Fannie Mae
multi-class resecuritization trusts that are not consolidated do not give rise to any additional exposure to loss
as we already consolidate the underlying collateral.
Transfers of Financial Assets
We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage
loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be
the transferor when we transfer assets from our own portfolio in a portfolio securitization transaction. For the
years ended December 31, 2010, 2009 and 2008 the unpaid principal balance of portfolio securitizations was
$120.0 billion, $216.1 billion and $41.1 billion, respectively.
Upon adoption of the new accounting standards, the majority of our portfolio securitization transactions do not
qualify for sale treatment. As a result, our continuing involvement in the form of guaranty assets and guaranty
liabilities with assets that were transferred into unconsolidated trusts has been greatly reduced and is no longer
material. We report the assets and liabilities of consolidated trusts created via portfolio securitization
transactions that do not qualify as sales in our consolidated balance sheets and in the consolidated VIEs table
above.
To determine the fair value of our securities created via portfolio securitizations, we utilize several
independent pricing services. The prices we receive from pricing services are typically based on information
they obtain on current trading activity, but may be based on models where trading activity is not observed. We
evaluate the reasonableness of fair value estimates obtained from pricing services through multiple means,
including our internal price verification group which uses alternate forms of pricing information to validate the
prices. Given that we do not base prices for the retained securities on internal models, but rather base them on
observable market inputs obtained by our pricing services, we believe it would not be meaningful to provide
sensitivities to changes in assumptions on the fair value of the retained securities.
The following table displays some key characteristics of the securities retained in unconsolidated portfolio
securitization trusts.
Fannie Mae
Single-class
MBS & Fannie
Mae Megas
REMICS &
SMBS
(Dollars in millions)
As of December 31, 2010
Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63 $ 15,771
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 16,745
Weighted-average coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.58% 6.28%
Weighted-average loan age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 years 4.4 years
Weighted-average maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.6 years 22.0 years
As of December 31, 2009
Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,260 $ 19,472
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,455 20,224
Weighted-average coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.62% 6.82%
Weighted-average loan age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 years 4.6 years
Weighted-average maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2 years 26.1 years
For the years ended December 31, 2010, 2009 and 2008, the principal and interest received on retained
interests was $3.5 billion, $9.7 billion and $7.9 billion, respectively.
F-49
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)