Fannie Mae 2007 Annual Report Download - page 173

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 loan” generally refers to a mortgage loan that can be underwritten with reduced or
alternative documentation than that required for a full documentation mortgage loan but may also include
other alternative product features. As a result, Alt-A mortgage loans generally have a higher risk of default
than non-Alt-A mortgage loans. In reporting our Alt-A exposure, we have classified mortgage loans as Alt-A
if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation
or other product features. We have classified private-label mortgage-related securities held in our investment
portfolio as Alt-A if the securities were labeled as such when issued.
“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 and the purchase of Fannie Mae MBS for our
investment 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 based on the national average price of a one-family
residence. OFHEO has set the conforming loan limit for a one-family residence at $417,000 for 2007 and
2008. In February 2008, Congress passed legislation that temporarily increases the conforming loan limit in
high-cost metropolitan areas for loans originated between July 1, 2007 and December 31, 2008. For a one-
family residence, the loan limit increased to 125% of the area’s median house price, up to a maximum of
$729,750. Higher original principal balance limits apply to mortgage loans secured by two- to four-family
residences and also to loans in Alaska, Hawaii, Guam and the Virgin Islands.
“Conventional mortgage” refers to a mortgage loan that is not guaranteed or insured by the U.S. government
or its agencies, such as the VA, FHA or RHS.
“Conventional single-family mortgage credit book of business” refers to the sum of the unpaid principal
balance of: (1) conventional single-family mortgage loans held in our mortgage portfolio; (2) conventional
single-family Fannie Mae MBS held in our mortgage portfolio; (3) conventional single-family non-Fannie Mae
mortgage-related securities held in our investment portfolio; (4) conventional single-family Fannie Mae MBS
held by third parties; and (5) other credit enhancements that we provide on conventional single-family
mortgage assets.
“Core capital” refers to a statutory measure of our capital that is the sum of the stated value of our
outstanding common stock (common stock less treasury stock), the stated value of our outstanding non-
cumulative perpetual preferred stock, our paid-in capital and our retained earnings, as determined in
accordance with GAAP.
“Credit enhancement” refers to a method to reduce credit risk by requiring collateral, letters of credit,
mortgage insurance, corporate guaranties, or other agreements to provide an entity with some assurance that it
will be recompensed to some degree in the event of a financial loss.
151