Fannie Mae 2005 Annual Report Download - page 37

• our expectation that changes in implied volatility, and relative changes between mortgage OAS and debt
OAS are the market conditions that will have the most significant impact on the fair value of our net
assets;
• our expectation that the reduction in the size of our mortgage portfolio and higher administrative expenses
will continue to negatively impact our earnings in 2006 and 2007;
• our belief that we have defenses to the claims in the lawsuits pending against us and our intention to
defend these lawsuits vigorously;
• our intention to continue to work on improving our internal controls and procedures relating to the
management of operational risk; and
• descriptions of assumptions underlying or relating to any of the foregoing.
Forward-looking statements reflect our management’s expectations or predictions of future conditions, events
or results based on various assumptions and management’s estimates of trends and economic factors in the
markets in which we are active, as well as our business plans. They are not guarantees of future performance.
By their nature, forward-looking statements are subject to risks and uncertainties. Our actual results and
financial condition may differ, possibly materially, from the anticipated results and financial condition
indicated in these forward-looking statements. There are a number of factors that could cause actual
conditions, events or results to differ materially from those described in the forward-looking statements
contained in this report. A discussion of factors that could cause actual conditions, events or results to differ
materially from those expressed in any forward-looking statements appears in “Item 1A—Risk Factors.”
Readers are cautioned not to place undue reliance on forward-looking statements in this report or that we
make from time to time, and to consider carefully the factors discussed in “Item 1A—Risk Factors” in
evaluating these forward-looking statements. These forward-looking statements are representative only as of
the date they are made, and we undertake no obligation to update any forward-looking statement as a result of
new information, future events or otherwise.
GLOSSARY OF TERMS USED IN THIS REPORT
Terms used in this report have the following meanings, unless the context indicates otherwise.
“Agency issuers” refers to the government-sponsored enterprises Fannie Mae and Freddie Mac, as well as
Ginnie Mae.
“Alt-A mortgage” generally refers to a loan underwritten with lower or alternative documentation than a full
documentation mortgage loan and may include other alternative product features. As a result, Alt-A mortgage
loans generally have a higher risk of default than full documentation mortgage loans.
“ARM” or “adjustable-rate mortgage” refers to a mortgage loan with an interest rate that adjusts periodically
over the life of the mortgage based on changes in a specified index.
“Business volume” or “new business acquisitions” refers to the sum in any given period of the unpaid
principal balance of: (1) the mortgage loans and mortgage-related securities we purchase for our investment
portfolio; and (2) the mortgage loans we securitize into Fannie Mae MBS that are acquired by third parties. It
excludes mortgage loans we securitize from our portfolio.
“Charter Act” or “our charter” refers to the Federal National Mortgage Association Charter Act, 12 U.S.C.
§1716 et seq.
“Conforming mortgage” refers to a conventional single-family mortgage loan with an original principal
balance that is equal to or less than the applicable conforming loan limit, which is the applicable maximum
original principal balance for a mortgage loan that we are permitted by our charter to purchase or securitize.
The conforming loan limit is established each year by OFHEO based on the national average price of a one-
family residence. The current conforming loan limit for a one-family residence in most geographic areas is
$417,000.
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