Fannie Mae 2005 Annual Report Download - page 262

The following table displays the carrying amount and classification of consolidated assets of VIEs as of
December 31, 2005 and 2004.
2005 2004
As of December 31,
(Dollars in millions)
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,544 $143,800
Securities
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,644 4,139
Partnership investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,555 3,689
Cash and cash equivalents
(2)
........................................... 149 106
Total assets of consolidated VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $117,892 $151,734
(1)
Includes consolidated MBS trusts and consolidated mortgage revenue bond trusts.
(2)
Includes restricted cash.
In general, the investors in the obligations of consolidated VIEs have recourse only to the assets of those VIEs
and do not have recourse to us, except where we provide a guaranty to the VIE.
Non-consolidated VIEs
We also have investments in VIEs that we do not consolidate because we are not deemed to be the primary
beneficiary. These VIEs include the securitization trusts and LIHTC partnerships described above where our
ownership represents a significant variable interest in the entity, including our investments in certain Fannie
Mae securitization trusts, private-label trusts, LIHTC partnerships, other tax partnerships and other entities that
meet the VIE criteria.
We consolidated our investments in certain LIHTC funds that were structured as limited partnerships. Such
consolidated investments had recorded assets of $3.3 billion as of December 31, 2005. The funds that were
consolidated own a majority of the limited partnership interests in LIHTC operating partnerships. These
consolidated funds invest in such operating partnerships, which did not require consolidation under FIN 46R.
We accounted for these funds, which totaled $3.0 billion, using the equity method. In addition, such
unconsolidated operating partnerships had $204 million in mortgage debt that we own or guarantee.
The total assets of unconsolidated VIEs where we have significant involvement, exclusive of the unconsoli-
dated LIHTC operating partnerships described above, was $54.8 billion and $33.8 billion as of December 31,
2005 and 2004, respectively. These amounts include $43.7 billion and $25.0 billion in mortgage-backed trust
transactions, $4.4 billion and $3.7 billion in asset-backed trust transactions and $6.7 billion and $5.1 billion in
limited partnership investments, respectively.
In the aggregate, as of December 31, 2005, our maximum exposure to loss from our unconsolidated VIEs
(inclusive of the unconsolidated LIHTC operating partnerships) approximated $25.7 billion, which represents
the greater of our recorded investment in the entity or the unpaid principal balance of the assets that are
covered by our guaranty. If a payment was required for certificates that received the benefit of our guaranty,
our maximum loss would also include the interest that was accrued but had not been paid.
3. Mortgage Loans
We own both single-family mortgage loans, which are secured by four or fewer residential dwelling units, and
multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these
loans as either HFI or HFS. We report HFI loans at the unpaid principal amount outstanding, net of
unamortized premiums and discounts, cost basis adjustments, and an allowance for loan losses. We report HFS
loans at the lower of cost or market determined on a pooled basis, and record valuation changes in the
consolidated statements of income.
F-33
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)