Fannie Mae 2007 Annual Report Download - page 112

2003), Consolidation of Variable Interest Entities (an interpretation of ARB No. 51) (“FIN 46R”),and mortgage-
related securities created from securitization transactions that did not meet the sales criteria under SFAS No. 140,
Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB
Statement No. 125) (“SFAS 140”), which effectively resulted in mortgage-related securities being accounted for as
loans.
(3)
Intermediate-term, fixed-rate consists of mortgage loans with contractual maturities at purchase equal to or less than
15 years.
(4)
As of December 31, 2007, $64.5 billion of this amount consists of private-label mortgage-related securities backed by
subprime or Alt-A mortgage loans. Refer to “Available-for-Sale and Trading Securities—Investments in Alt-A and
Subprime Mortgage-Related Securities” for a description of our investments in subprime and Alt-A securities.
(5)
Includes unrealized gains and losses on mortgage-related securities and securities commitments classified as trading
and available-for-sale.
(6)
Includes the impact of other-than-temporary impairments of cost basis adjustments.
(7)
Includes consolidated mortgage-related assets acquired through the assumption of debt. Also includes $538 million and
$448 million as of December 31, 2007 and 2006, respectively, of mortgage loans and mortgage-related securities that
we have pledged as collateral and for which counterparties have the right to sell or repledge.
We experienced a decrease of less than 1% in our net mortgage portfolio during 2007, reflecting management
of the size of our portfolio during the first three quarters of 2007 to comply with the OFHEO mortgage
portfolio cap and an increase in portfolio sales during the fourth quarter of 2007 to enhance our capital
position. We have not exceeded the mortgage portfolio cap since its inception, and we will continue to manage
the size of our mortgage portfolio to meet the OFHEO-directed mortgage portfolio cap. In addition to the
mortgage portfolio cap, our investment activities may be constrained by our regulatory capital requirements,
certain operational limitations, tax classifications and our intent to hold certain temporarily impaired securities
until recovery in value, as well as risk parameters applied to the mortgage portfolio.
Liquid Investments
As discussed further in “Liquidity and Capital Management—Liquidity—Liquidity Risk Management—
Liquidity Contingency Plan,” we also purchase liquid investments. Our liquid assets consist of cash and cash
equivalents, funding agreements with our lenders, including advances to lenders and repurchase agreements,
and non-mortgage investments. Our liquid assets, net of cash equivalents pledged as collateral, totaled
approximately $102.0 billion and $69.4 billion as of December 31, 2007 and December 31, 2006, respectively.
Our non-mortgage investments primarily consist of high-quality securities that are readily marketable or have
short-term maturities. Our non-mortgage investments, which are carried at fair value in our consolidated
balance sheets, totaled $38.1 billion and $47.6 billion as of December 31, 2007 and December 31, 2006,
respectively. We present in Table 24 below the detail of our non-mortgage investments as of December 31,
2007, 2006 and 2005.
Table 24: Non-Mortgage Investments
2007 2006 2005
As of December 31,
(Dollars in millions)
Non-mortgage-related securities:
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,511 $18,914 $19,190
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,515 17,594 11,840
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,010 5,139
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,089 1,055 947
Total non-mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,115 $47,573 $37,116
We recorded $419 million as other-than-temporary impairment loss during 2007 on certain investments in our
liquid investment portfolio that were impaired because we no longer had the intent to hold these securities
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