Fannie Mae 2001 Annual Report Download - page 40

changes on projected net interest income is presented in
MD&A in the “Net Interest Income at Risk” section under
“Risk Management - Interest Rate Risk Management.”
Table 11 summarizes mortgage portfolio activity on a gross
basis and average yields from 1999 through 2001.
{ 38 } Fannie Mae 2001 Annual Report
TABLE 11: MORTGAGE PORTFOLIO ACTIVITY
Purchases Sales Repayments1
Dollars in millions 2001 2000 1999 2001 2000 1999 2001 2000 1999
Single-family:
Government insured or guaranteed . . . . . . . . $6,001 $6,940 $ 23,575 $—$521 $ 360 $ 8,125 $3,423 $ 4,092
Conventional:
Long-term, fixed-rate . . . . . . . . . . . . . . . . 226,516 113,444 146,679 7,621 9,219 5,779 120,787 35,208 52,707
Intermediate-term, fixed-rate . . . . . . . . . 26,146 11,607 15,315 442 599 9 23,391 13,105 17,878
Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . 3,777 17,683 6,073 228 374 — 9,937 4,293 3,829
Total single-family . . . . . . . . . . . . . . . . . . . . . . 262,440 149,674 191,642 8,291 10,713 6,148 162,240 56,029 78,506
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,144 4,557 3,568 690 269 — 2,172 1,204 1,244
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,584 $154,231 $195,210 $8,981 $10,982 $6,148 $164,412 $57,233 $79,750
Average net yield . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.56% 7.62% 6.88% 7.23% 7.18% 7.39%
Repayments as a percentage of
average mortgage portfolio . . . . . . . . . . . . . . 24.7 10.3 16.9
1Includes mortgage loan prepayments, scheduled amortization, and foreclosures.
Investments
Fannie Mae’s investments increased 36 percent to
$75 billion at December 31, 2001, from $55 billion at
December 31, 2000. The Liquid Investment Portfolio
accounts for the majority of Fannie Mae’s investments and
consists primarily of high-quality short-term investments in
nonmortgage assets, such as asset-backed securities,
commercial paper, and federal funds. The Liquid Investment
Portfolio serves as a source of liquidity and an investment
vehicle for Fannie Mae’s surplus capital. These investments
totaled $65 billion at December 31, 2001, compared with
$52 billion at the end of the prior year. The increase in liquid
investments at December 31, 2001 was primarily a result of
the delayed settlement of purchase commitments at year-
end, excess capital, and opportunities in the market. The
average yield on liquid investments decreased to 4.63 percent
in 2001 from 6.60 percent in 2000, as a result of the sharp
drop in average short-term interest rates.
Additional information on investment composition is
presented in the Notes to Financial Statements under
Note 4, “Investments.”
Financing Activities
Total debt outstanding increased 19 percent to $763
billion at December 31, 2001, from $643 billion at
December 31, 2000. Fluctuations in interest rate volatility
and market pricing during 2001 gave Fannie Mae a valuable
opportunity to repurchase $9 billion of debt that was trading
at historically wide spreads to other fixed-income securities.
In addition, Fannie Mae called $173 billion of debt in
response to the sharp decline in short- and intermediate-
term interest rates. Fannie Mae reissued much of this debt
with short-term maturities in anticipation of an increase in
mortgage liquidations. These asset-liability management
strategies had the following impact on the debt portfolio:
•The average cost of debt outstanding decreased to
6.00 percent in 2001 from 6.35 percent in 2000.
•Effective long-term debt, which takes into
consideration the effect of derivative instruments on
the maturity of long- and short-term debt, decreased
to 82 percent of total debt outstanding at December
31, 2001 from 85 percent at year-end 2000.
•Effective long-term debt as a percentage of the net
mortgage portfolio decreased to 89 percent at
December 31, 2001 from 90 percent at the end
of 2000.
•The weighted-average maturity of effective long-term,
fixed-rate debt outstanding decreased to 78 months at
year-end 2001 from 79 months at year-end 2000.
To hedge against future increases in interest rates,
Fannie Mae used interest rate swaps to lengthen the final
maturity of Fannie Mae’s debt by 26 months at December 31,
2001, versus 24 months at December 31, 2000.