Fannie Mae 2007 Annual Report Download - page 231

Total
Amortized
Cost
(1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Less Than 12
Consecutive Months
12 Consecutive
Months or Longer
As of December 31, 2006
(Dollars in millions)
Fannie Mae single-class MBS . . . . . . . . . $111,521 $1,136 $(1,733) $110,924 $ (35) $ 2,747 $(1,698) $ 62,250
Non-Fannie Mae structured mortgage-
related securities . . . . . . . . . . . . . . . . . 97,458 238 (396) 97,300 (49) 15,507 (347) 21,452
Fannie Mae structured MBS . . . . . . . . . . 75,333 514 (1,163) 74,684 (8) 2,987 (1,155) 52,135
Non-Fannie Mae single-class mortgage-
related securities . . . . . . . . . . . . . . . . . 27,239 187 (280) 27,146 (1) 400 (279) 16,403
Mortgage revenue bonds . . . . . . . . . . . . . 16,956 371 (106) 17,221 (12) 604 (94) 3,266
Other mortgage-related securities . . . . . . . 3,504 246 — 3,750 — — — —
Asset-backed securities . . . . . . . . . . . . . . 18,906 12 (4) 18,914 (2) 3,190 (2) 1,753
Corporate debt securities . . . . . . . . . . . . . 17,573 22 (1) 17,594 (1) 2,358 — —
Commercial paper . . . . . . . . . . . . . . . . . 10,010 — — 10,010 — — — —
Other non-mortgage-related securities . . . . 986 69 — 1,055 — — — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . $379,486 $2,795 $(3,683) $378,598 $(108) $27,793 $(3,575) $157,259
(1)
Amortized cost includes unamortized premiums, discounts and other cost basis adjustments, as well as other-than-
temporary impairment.
The fair value of securities varies from period to period due to changes in interest rates and changes in credit
performance of the underlying issuer, among other factors. We recorded other-than-temporary impairment
related to investments in securities of $814 million, $853 million and $1.2 billion for the years ended
December 31, 2007, 2006 and 2005, respectively. Of the other-than-temporary impairment recognized in 2007,
$160 million related to certain subprime private-label securities where we concluded that it was no longer
probable that we would collect all of the contractual principal and interest amounts due. In addition, we
determined that we did not intend to hold all of our non-mortgage related securities and a portion of our
mortgage-related securities until recovery of the unrealized loss, which resulted in a $620 million other-than-
temporary impairment loss recognized as “Investment losses, net” in our consolidated statements of operations.
Included in the $4.8 billion of gross unrealized losses on AFS securities as of December 31, 2007 was
$3.2 billion of unrealized losses that have existed for a period of 12 consecutive months or longer. These
securities are predominately rated AAA and the unrealized losses are due to the widening of credit spreads
and credit deterioration in certain collateral underlying subprime and Alt-A securities. Securities with
unrealized losses aged 12 or more months have a market value as of December 31, 2007 that is on average
97% of their amortized cost basis. Aged unrealized losses may be recovered within a reasonable period of
time when market interest rates change and when we intend to hold the securities until the unrealized loss has
been recovered. Based on our review for impairments of AFS securities, which includes an evaluation of the
collectability of cash flows, we have concluded that the unrealized losses on AFS securities in our investment
portfolio as displayed above do not represent other-than-temporary impairment as of December 31, 2007.
The following table displays the amortized cost and fair value of our AFS securities by investment
classification and remaining maturity as of December 31, 2007. Contractual maturity of asset-backed securities
F-43
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)