Fannie Mae 2010 Annual Report Download - page 355

The section below provides a discussion of the three business segments and how each segment’s financial
information reconciles to our consolidated financial statements for those line items that were impacted
significantly as a result of changes to our segment presentation.
Single-Family
Revenue drivers for Single-Family did not change under our current method of segment reporting. Revenue for
our Single-Family business is from the guaranty fees the segment receives as compensation for assuming the
credit risk on the mortgage loans underlying single-family Fannie Mae MBS, most of which are held within
consolidated trusts, and on the single-family mortgage loans held in our mortgage portfolio. The primary
source of profit for the Single-Family segment is the difference between the guaranty fees earned and the costs
of providing the guaranty, including credit-related losses.
Our current segment reporting presentation differs from our consolidated balance sheets and statements of
operations in order to reflect the activities and results of the Single-Family segment. The significant
differences from the consolidated statements of operations are as follows:
•Guaranty fee income—Guaranty fee income reflects (1) the cash guaranty fees paid by MBS trusts to
Single-Family, (2) the amortization of deferred cash fees (both the previously recorded deferred cash fees
that were eliminated from our consolidated balance sheets at transition and deferred guaranty fees
received subsequent to transition that are currently recognized in our consolidated financial statements
through interest income), such as buy-ups, buy-downs, and risk-based pricing adjustments, and (3) the
guaranty fees from the Capital Markets group on single-family loans in our mortgage portfolio. To
reconcile to our consolidated statements of operations, we eliminate guaranty fees and the amortization of
deferred cash fees related to consolidated trusts as they are now reflected as a component of interest
income. However, such accounting continues to be reflected for the segment reporting presentation.
•Net interest income (expense)—Net interest expense within the Single-Family segment reflects interest
expense to reimburse Capital Markets and consolidated trusts for contractual interest not received on
mortgage loans, when interest income is no longer recognized in accordance with our nonaccrual
accounting policy in our consolidated statements of operations. Net interest income (expense), also
includes an allocated cost of capital charge among the three segments that is not included in net interest
income in the consolidated statement of operations.
Multifamily
Revenue drivers for Multifamily did not change under our current method of segment reporting. The primary
sources of revenue for our Multifamily business are (1) guaranty fees the segment receives as compensation
for assuming the credit risk on the mortgage loans underlying multifamily Fannie Mae MBS, most of which
are held within consolidated trusts, (2) guaranty fees on the multifamily mortgage loans held in our mortgage
portfolio, (3) transaction fees associated with the multifamily business and (4) bond credit enhancement fees.
Investments in rental and for-sale housing generate revenue and losses from operations and the eventual sale
of the assets. In the fourth quarter of 2009, we reduced the carrying value of our LIHTC investments to zero.
As a result, we no longer recognize net operating losses or other-than-temporary impairment on our LIHTC
investments. While the Multifamily guaranty business is similar to our Single-Family business, neither the
economic return nor the nature of the credit risk is similar to that of Single-Family.
F-97
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)