Fannie Mae 2008 Annual Report Download - page 142

(1)
Reported based on half-year vintages for 2005, 2006, 2007 and 2008, with each half-year vintage stratified based on
credit enhancement quartiles. We did not have any exposure as of December 31, 2008 to Alt-A private-label wraps
issued in the second half of 2005, in 2006 or in the second half of 2008. We did not have any exposure as of
December 31, 2008 to subprime private wraps issued in 2006 or in the second half of 2008.
(2)
We recognized net fair value gains of $234 million in 2008 and net fair value losses of $570 million in 2007 on our
investments in subprime private-label wraps that were classified as trading and held in our portfolio as of the end of
each respective year. We recognized net fair value gains of $257 million in 2008 and net fair value losses of
$570 million in 2007 on our investments in subprime private-label wraps that were classified as trading during each
year. We did not recognize any fair value gains or losses on our investments in Alt-A private-label wraps that were
classified as trading during 2008 or during 2007. Gross unrealized losses as of December 31, 2008 related to our
investments in subprime private-label wraps classified as available for sale totaled $18 million. We did not have any
gross unrealized losses as of December 31, 2008 or December 31, 2007 on our investments in Alt-A private-label
wraps classified as available for sale.
(3)
Reflects the percentage of the current amount of the securities that will incur losses in the securitization structure
before any losses are allocated to securities that we own, taking into consideration subordination and financial
guarantees. Percentage calculated based on the quotient of the total unpaid principal balance of all credit enhancement
in the form of subordination or financial guaranty of the security divided by the total unpaid principal balance of all of
the tranches of collateral pools from which credit support is drawn for the security that we own.
(4)
Reflects amount of unpaid principal balance supported by financial guarantees from monoline financial guarantors.
(5)
Reflects the present value of projected losses based on the disclosed hypothetical cumulative default and loss severity
rates against the outstanding collateral balance.
Debt Instruments
We issue debt instruments as the primary means to fund our mortgage investments and manage our interest
rate risk exposure. Our total outstanding debt, which includes federal funds purchased and securities sold
under agreements to repurchase, short-term debt and long-term debt increased to $870.5 billion as of
December 31, 2008, from $797.2 billion as of December 31, 2007. We provide a summary of our debt activity
for 2008, 2007 and 2006 and a comparison of the mix between our outstanding short-term and long-term debt
as of December 31, 2008 and 2007 in “Liquidity and Capital Management—Liquidity Management—Debt
Funding—Debt Funding Activity.” Also see “Notes to Consolidated Financial Statements—Note 10, Short-
Term Borrowings and Long-Term Debt” for additional detail on our outstanding debt.
Derivative Instruments
We supplement our issuance of debt with interest rate-related derivatives to manage the prepayment and
duration risk inherent in our mortgage investments. We report derivatives at fair value as either assets or
liabilities, net for each counterparty inclusive of cash collateral paid or received in our consolidated balance
sheets. Table 29 presents, by derivative instrument type, the estimated fair value of derivatives recorded in our
consolidated balance sheets and the related outstanding notional amount as of December 31, 2008 and 2007.
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