Fannie Mae 2006 Annual Report Download - page 96

Table 13 summarizes our mortgage portfolio activity for 2006, 2005 and 2004.
Table 13: Mortgage Portfolio Activity
(1)
2006 2005 2004 2006 2005 2004 2006 2005 2004
Purchases
(2)
Sales Liquidations
(3)
(Dollars in millions)
Mortgage loans:
Fixed-rate:
Long-term . . . . . . . . . . . $ 65,680 $ 60,267 $ 53,305 $ — $ 1 $ — $ 35,336 $ 55,427 $ 69,182
Intermediate-term
(4)
. . . . . 16,044 18,824 23,470 — 9 — 28,009 38,603 31,446
Total fixed-rate loans . . . . . 81,724 79,091 76,775 — 10 — 63,345 94,030 100,628
Adjustable-rate loans . . . . . 9,431 5,515 9,118 — 41 66 10,003 11,392 7,640
Total mortgage loans . . . . . . . 91,155 84,606 85,893 — 51 66 73,348 105,422 108,268
Mortgage securities:
Fixed-rate:
Long-term . . . . . . . . . . . 18,948 13,630 58,412 42,538 93,910 14,691 37,254 83,861 107,309
Intermediate-term
(5)
. . . . . . . . 6,945 832 4,834 4,977 12,117 3,460 4,354 6,670 8,097
Total fixed-rate securities. . . 25,893 14,462 63,246 47,515 106,027 18,151 41,608 90,531 115,406
Adjustable-rate securities . . . 64,718 46,359 109,339 5,160 7,562 161 38,442 51,165 24,785
Total mortgage securities . . . . 90,611 60,821 172,585 52,675 113,589 18,312 80,050 141,696 140,191
Total mortgage portfolio . . . . . $181,766 $145,427 $258,478 $52,675 $113,640 $18,378 $153,398 $247,118 $248,459
Annual liquidation rate . . . . . . 21.0% 30.7% 27.9%
(1)
Excludes unamortized premiums, discounts and other cost basis adjustments.
(2)
Excludes advances to lenders and mortgage-related securities acquired through the extinguishment of debt.
(3)
Includes scheduled repayments, prepayments and foreclosures.
(4)
Consists of mortgage loans with contractual maturities at purchase equal to or less than 15 years.
(5)
Consists of mortgage securities with maturities of 15 years or less at issue date.
The changing product mix of originations in our underlying market had a pronounced effect on the
composition of mortgage assets purchased for our portfolio during 2006, 2005 and 2004. Due to a higher
percentage of adjustable-rate mortgage originations in the primary mortgage market during these years, a
larger proportion of our purchases consisted of ARMs and floating-rate mortgage-related securities and a
lower proportion of 30-year fixed-rate assets relative to historical norms.
As indicated above in Table 13, portfolio purchases were significantly lower in 2006 and 2005 than in 2004,
due to narrowing mortgage-to-debt spreads, as well as our focus on managing the size of our balance sheet to
achieve our capital plan objectives. We also experienced a considerable decline in the level of portfolio sales
and liquidations for 2006 relative to 2005. During 2006, the timing of certain portfolio sales was affected by
our portfolio limit. However, we believe that sales from our portfolio in 2006, consisting primarily of 30-year
fixed-rate Fannie Mae MBS, were attractive economically and contributed to our total return objectives.
While portfolio liquidations in 2005 were comparable to 2004, we experienced a significant increase in
portfolio sales in 2005. This increase was due in part to the intense competition for mortgage assets, which
increased the number of economically attractive opportunities to sell certain mortgage assets, particularly
15-year and 30-year fixed-rate mortgage-related securities. These sales were aligned with our need to lower
portfolio balances to achieve our capital plan objectives. The higher level of sales of fixed-rate securities in
2005 contributed to the shift in the product mix of our portfolio.
For the first six months of 2007, portfolio purchases decreased by approximately 14% from the same prior
year period to $85.2 billion. Portfolio sales increased by approximately 1% to $25.1 billion, and portfolio
liquidations decreased by approximately 12% to $62.0 billion.
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