Fannie Mae 2007 Annual Report Download - page 273

The table below displays the credit exposure on outstanding risk management derivative instruments by
counterparty credit ratings, as well as the notional amount outstanding and the number of counterparties, as of
December 31, 2007 and 2006.
AAA AA+/AA/AA- A+/A/A- Subtotal Other
(2)
Total
Credit Rating
(1)
As of December 31, 2007
(Dollars in millions)
Credit loss exposure
(3)
. . . . . . . . . . . . . . . . . . $ 4 $ 1,578 $ 1,004 $ 2,586 $ 74 $ 2,660
Less: Collateral held
(4)
. . . . . . . . . . . . . . . . . . — 1,130 988 2,118 — 2,118
Exposure net of collateral . . . . . . . . . . . . . . . . $ 4 $ 448 $ 16 $ 468 $ 74 $ 542
Additional information:
Notional amount . . . . . . . . . . . . . . . . . . . $1,050 $637,847 $246,860 $885,757 $707 $886,464
Number of counterparties . . . . . . . . . . . . . 1 17 3 21
AAA AA+/AA/AA- A+/A/A- Subtotal Other
(2)
Total
Credit Rating
(1)
As of December 31, 2006
(Dollars in millions)
Credit loss exposure
(3)
. . . . . . . . . . . . . . . . . . . . $ — $ 3,219 $ 1,552 $ 4,771 $ 65 $ 4,836
Less: Collateral held
(4)
. . . . . . . . . . . . . . . . . . . . — 2,598 1,510 4,108 — 4,108
Exposure net of collateral . . . . . . . . . . . . . . . . . $ — $ 621 $ 42 $ 663 $ 65 $ 728
Additional information:
Notional amount . . . . . . . . . . . . . . . . . . . . $750 $537,293 $206,881 $744,924 $469 $745,393
Number of counterparties . . . . . . . . . . . . . . 1 17 3 21
(1)
We manage collateral requirements based on the lower credit rating, as issued by Standard & Poor’s and Moody’s, of
the legal entity. The credit rating reflects the equivalent Standard & Poor’s rating for any ratings based on Moody’s
scale.
(2)
Includes MBS options, defined benefit mortgage insurance contracts, guaranteed guarantor trust swaps and swap credit
enhancements accounted for as derivatives. We did not have guaranteed guarantor trust swaps in 2006.
(3)
Represents the exposure to credit loss on derivative instruments, which is estimated by calculating the cost, on a fair
value basis, to replace all outstanding contracts in a gain position. Derivative gains and losses with the same
counterparty are netted where a legal right of offset exists under an enforceable master netting agreement. This table
excludes mortgage commitments accounted for as derivatives.
(4)
Represents the collateral held as of December 31, 2007 and 2006, adjusted for the collateral transferred subsequent to
December 31, based on credit loss exposure limits on derivative instruments as of December 31, 2007 and 2006. The
actual collateral settlement dates, which vary by counterparty, ranged from one to three business days following the
December 31, 2007 and 2006 credit loss exposure valuation dates. The value of the collateral is reduced in accordance
with counterparty agreements to help ensure recovery of any loss through the disposition of the collateral. We posted
collateral of $1.2 billion and $303 million related to our counterparties’ credit exposure to us as of December 31, 2007
and 2006, respectively.
As of December 31, 2007, all of our interest rate and foreign currency derivative transactions, consisting of
$468 million net collateral exposure and $886.5 billion notional amount, were with counterparties rated A or
better by Standard & Poor’s and Moody’s. To reduce our credit risk concentration, our interest rate and foreign
currency derivative instruments were diversified among 21 counterparties with which we had outstanding
transactions as of December 31, 2007. Of the $74 million in other derivatives as of December 31, 2007,
approximately 96% of the net exposure consisted of mortgage insurance contracts, all of which were with
counterparties rated AA- or better by any of Standard & Poor’s, Moody’s or Fitch. As of December 31, 2007,
F-85
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)