Fannie Mae 2007 Annual Report Download - page 275
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curves, measures of volatility and prepayment rates. If market data needed to estimate fair value is not
available, we estimate fair value using internally-developed models that employ a discounted cash flow
approach.
These estimates are based on pertinent information available to us at the time of the applicable reporting
periods. In certain cases, fair values are not subject to precise quantification or verification and may fluctuate
as economic and market factors vary, and our evaluation of those factors changes. Although we use our best
judgment in estimating the fair value of these financial instruments, there are inherent limitations in any
estimation technique. In these cases, any minor change in an assumption could result in a significant change in
our estimate of fair value, thereby increasing or decreasing consolidated assets, liabilities, stockholders’ equity
and net income or loss.
The disclosure included herein excludes certain financial instruments, such as plan obligations for pension and
other postretirement benefits, employee stock option and stock purchase plans, and also excludes all non-
financial instruments. The disclosure includes commitments to purchase multifamily mortgage loans, which
are off-balance sheet financial instruments that are not recorded in the consolidated balance sheets. The fair
value of these commitments is included as “Mortgage loans held for investment, net of allowance for loan
losses.” As a result, the fair value of our financial assets and liabilities does not represent the underlying fair
value of the total consolidated assets or liabilities.
Subsequent to the issuance of our 2006 consolidated financial statements, we identified that in our 2006
presentation of the fair value of financial instruments, we incorrectly included $97 million of fair value related
to HFS loans with the fair value of HFI loans. We have, therefore, reclassified $97 million of HFS loans fair
value from HFI loans to HFS loans in the 2006 presentation.
F-87
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)