Fannie Mae 2008 Annual Report Download - page 169

Table 43: On- and Off-Balance Sheet MBS and Other Guaranty Arrangements
2008 2007
As of December 31,
(Dollars in millions)
Fannie Mae MBS and other guarantees outstanding
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,546,217 $2,340,660
Less: Fannie Mae MBS held in portfolio
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228,949) (180,163)
Fannie Mae MBS held by third parties and other guarantees . . . . . . . . . . . . . . . . . . . . . . . . . $2,317,268 $2,160,497
(1)
Includes $27.8 billion and $41.6 billion in unpaid principal balance of other guarantees as of December 31, 2008 and
2007, respectively. Excludes $65.3 billion and $80.9 billion in unpaid principal balance of consolidated Fannie Mae
MBS as of December 31, 2008 and 2007, respectively.
(2)
Amounts represent unpaid principal balance and are recorded in “Investments in Securities” in the consolidated
balance sheets.
Although the unpaid principal balance of Fannie Mae MBS held by third parties is generally not reflected on
our consolidated balance sheets, we record in our consolidated balance sheets a guaranty obligation based on
an estimate of our non-contingent obligation to stand ready to perform in connection with Fannie Mae MBS
and other guarantees issued after January 1, 2003, whether held in our portfolio or held by third parties. We
also record in the consolidated balance sheets a reserve for guaranty losses based on an estimate of our
incurred credit losses on all of our guarantees.
While our guarantees relating to Fannie Mae MBS represent the substantial majority of our guaranty activity,
we also provide other financial guarantees. Our HCD business provides credit enhancements primarily for
taxable and tax-exempt bonds issued by state and local governmental entities to finance multifamily housing
for low- and moderate-income families. Under these credit enhancement arrangements, we guarantee to the
trust that we will supplement proceeds as required to permit timely payment on the related bonds, which
improves the bond ratings and thereby results in lower-cost financing for multifamily housing. We also
provide liquidity support for variable-rate demand housing bonds as part of our credit enhancement
arrangements. Our HCD business generates revenue from the fees earned on these transactions. These
transactions also contribute to our housing goals and help us meet other mission-related objectives.
Our maximum potential exposure to credit losses relating to our outstanding and unconsolidated Fannie Mae
MBS held by third parties and our other financial guarantees is significantly higher than the carrying amount
of the guaranty obligations and reserve for guaranty losses that are reflected in the consolidated balance
sheets. In the case of outstanding and unconsolidated Fannie Mae MBS held by third parties, our maximum
potential exposure arising from these guarantees is primarily represented by the unpaid principal balance of
the mortgage loans underlying these Fannie Mae MBS, which was $2.3 trillion and $2.1 trillion as of
December 31, 2008 and 2007, respectively. In the case of the other financial guarantees that we provide, our
maximum potential exposure arising from these guarantees is primarily represented by the unpaid principal
balance of the underlying bonds and loans, which totaled $27.8 billion and $41.6 billion as of December 31,
2008 and 2007, respectively.
For more information on our securitization transactions, including the interests we retain in these transactions,
cash flows from these transactions, and our accounting for these transactions, see “Notes to Consolidated
Financial Statements—Note 7, Portfolio Securitizations,” “Notes to Consolidated Financial Statements—
Note 8, Financial Guarantees and Master Servicing” and “Notes to Consolidated Financial Statements—
Note 19, Concentrations of Credit Risk.” For information on the revenues and expenses associated with our
Single-Family and HCD businesses, see “Business Segment Results.” For information regarding the mortgage
loans underlying both our on- and off-balance sheet Fannie Mae MBS, as well as whole mortgage loans that
we own, see “Risk Management—Credit Risk Management—Mortgage Credit Risk Management.”
Potential Elimination of QSPEs and Changes in the FIN 46R Consolidation Model
On September 15, 2008, the FASB issued an exposure draft of a proposed statement of financial accounting
standards, Amendments to FASB Interpretation No. 46(R), and an exposure draft of a proposed statement of
financial accounting standards, Accounting for Transfer of Financial Assets-an amendment of FASB Statement
No. 140. The proposed amendments to SFAS 140 would eliminate QSPEs. Additionally, the amendments to
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