Fannie Mae 2004 Annual Report Download - page 317

assets of corresponding trust have been included in the consolidated balance sheets and we do not own all of
the beneficial interests in the trust. Long-term debt from these transactions in the consolidated balance sheets
as of December 31, 2004 and 2003 was $5.8 billion and $5.7 billion, respectively.
Additionally, we record a secured borrowing, to the extent of proceeds received, upon the transfer of financial
assets from the consolidated balance sheets that does not qualify as a sale. Long-term debt from these
transactions in the consolidated balance sheets as of December 31, 2004 and 2003 was $2.7 billion and
$1.9 billion, respectively.
Characteristics of Debt
As of December 31, 2004 and 2003, we had zero-coupon debt with a face amount of $325.4 billion and
$347.1 billion, respectively, which had an effective interest rate of 2.2% and 1.2%, respectively.
We issue callable debt instruments to manage the duration and prepayment risk of expected cash flows of the
mortgage assets we own. Our outstanding debt as of December 31, 2004 included $212.2 billion of callable
debt that could be redeemed in whole or in part at our option any time on or after a specified date.
The table below displays the amount of our long-term debt as of December 31, 2004 by year of maturity for
each of the years 2005-2009 and thereafter. The first column assumes that we pay off this debt at maturity,
while the second column assumes that we redeem our callable debt at the next available call date.
Long-Term Debt by
Year of Maturity
Assuming Callable Debt
Redeemed at Next
Available Call Date
(Dollars in millions)
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $145,955 $301,896
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,168 92,883
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,224 62,437
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,742 39,071
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,980 30,878
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,255 97,159
Debt from consolidations
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,507 8,507
Total
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $632,831 $632,831
(1)
Contractual maturity of debt from consolidations is not a reliable indicator of expected maturity because borrowers of
the underlying loans generally have the right to prepay their obligations at any time.
(2)
Reported amount includes a net premium and deferred price adjustments of $11.2 billion.
During the year ended December 31, 2004, we called $155.6 billion of debt with a weighted average interest
rate of 2.8% and repurchased $4.3 billion of debt with a weighted average interest rate of 3.5%. During the
year ended December 31, 2003, we called $188.7 billion of debt with a weighted average interest rate of 3.3%
and repurchased $19.8 billion of debt with a weighted average interest rate of 5.6%. During the year ended
December 31, 2002, we called $121.0 billion of debt with a weighted average interest rate of 5.0% and
repurchased $7.9 billion of debt with a weighted average interest rate of 6.2%. We recorded losses from these
debt extinguishments of $152 million, $2.7 billion and $814 million for the years ended December 31, 2004,
2003 and 2002, respectively.
10. Derivative Instruments
We use derivative instruments, in combination with our debt issuances, to reduce the duration and prepayment
risk relating to the mortgage assets we own. We also enter into commitments to purchase and sell securities
and purchase loans. We account for some of these commitments as derivatives. Typically, we settle the
notional amount of our mortgage commitments; however, we do not settle the notional amount of our
derivative instruments. Notional amounts, therefore, simply provide the basis for calculating actual payments
or settlement amounts.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)