Fannie Mae 2007 Annual Report Download - page 177

“REMIC” or “Real Estate Mortgage Investment Conduit” refers to a type of multi-class mortgage-related
security in which interest and principal payments from mortgages or mortgage-related securities are structured
into separately traded securities.
“REO” refers to real-estate owned by Fannie Mae, generally because we have foreclosed on the property or
obtained the property through a deed in lieu of foreclosure.
“Risk-based capital requirement” refers to the amount of capital necessary to absorb losses throughout a
hypothetical ten-year period marked by severely adverse circumstances. Refer to “Part I—Item 1—Business—
Our Charter and Regulation of Our Activities—OFHEO Regulation—Capital Adequacy Requirements—
Statutory Risk-Based Capital Requirement” for a detailed definition of our statutory risk-based capital
requirement.
“Single-class Fannie Mae MBS” refers to Fannie Mae MBS where the investors receives principal and interest
payments in proportion to their percentage ownership of the MBS issue.
“Single-family business volume” refers to the sum in any given period of the unpaid principal balance of:
(1) the single-family mortgage loans that we purchase for our investment portfolio; and (2) the single-family
mortgage loans that we securitize into Fannie Mae MBS.
“Single-family guaranty book of business” refers to the sum of the unpaid principal balance of: (1) single-
family mortgage loans held in our mortgage portfolio; (2) single-family Fannie Mae MBS held in our
mortgage portfolio; (3) single-family Fannie Mae MBS held by third parties; and (4) other credit
enhancements that we provide on single-family mortgage assets. Excludes non-Fannie Mae mortgage-related
securities held in our investment portfolio for which we do not provide a guaranty.
“Single-family mortgage loan” refers to a mortgage loan secured by a property containing four or fewer
residential dwelling units.
“Single-family mortgage credit book of business” refers to the sum of the unpaid principal balance of:
(1) single-family mortgage loans held in our mortgage portfolio; (2) single-family Fannie Mae MBS held in
our mortgage portfolio; (3) single-family non-Fannie Mae mortgage-related securities held in our investment
portfolio; (4) single-family Fannie Mae MBS held by third parties; and (5) other credit enhancements that we
provide on single-family mortgage assets.
“Structured Fannie Mae MBS” refers to multi-class Fannie Mae MBS and single-class Fannie Mae MBS that
are resecuritizations of other single-class Fannie Mae MBS.
“Subprime mortgage loan” generally refers to a mortgage loan made to a borrower with a weaker credit
profile than that of a prime borrower. As a result of the weaker credit profile, subprime borrowers have a
higher likelihood of default than prime borrowers. Subprime mortgage loans are typically originated by
lenders specializing in this type of business or by subprime divisions of large lenders, using processes unique
to subprime loans. In reporting our subprime exposure, we have classified mortgage loans as subprime if the
mortgage loans are originated by one of these specialty lenders or a subprime division of a large lender. We
have classified private-label mortgage-related securities held in our investment portfolio as subprime if the
securities were labeled as such when issued.
“Swaptions” refers to options on interest rate swaps in the form of contracts granting an option to one party
and creating a corresponding commitment from the counterparty to enter into specified interest rate swaps in
the future. Swaptions are usually traded in the over-the-counter market and not through an exchange.
“Total capital” refers to a statutory measure of our capital that is the sum of core capital plus the total
allowance for loan losses and reserve for guaranty losses in connection with Fannie Mae MBS, less the
specific loss allowance (that is, the allowance required on individually-impaired loans).
“Yield curve” or “shape of the yield curve” refers to a graph showing the relationship between the yields on
bonds of the same credit quality with different maturities. For example, a “normal” or positive sloping yield
curve exists when long-term bonds have higher yields than short-term bonds. A “flat” yield curve exists when
yields are relatively the same for short-term and long-term bonds. A “steep” yield curve exists when yields on
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