Fannie Mae 2008 Annual Report Download - page 216

“Credit enhancement” refers to an agreement used to reduce credit risk by requiring collateral, letters of
credit, mortgage insurance, corporate guaranties, or other agreements to provide an entity with some assurance
that it will be compensated to some degree in the event of a financial loss.
“Default rate” refers to the percentage of mortgage loans in our mortgage credit book of business that have
been extinguished during a specified period of time through foreclosure, preforeclosure sales and deeds in lieu
of foreclosure.
“Delinquency” refers to an instance in which a principal or interest payment on a mortgage loan has not been
made in full by the due date.
“Derivative” refers to a financial instrument that derives its value based on changes in an underlying factor,
such as security or commodity prices, interest rates, currency rates or other financial indices. Examples of
derivatives include futures, options and swaps.
“Duration” refers to the sensitivity of the value of a security to changes in interest rates. The duration of a
financial instrument is the expected percentage change in its value in the event of a change in interest rates of
100 basis points.
“Duration gap” describes the extent to which estimated cash flows for assets and liabilities are matched, on
average, over time and across interest rate scenarios. We typically measure duration gap in months. A positive
duration gap signals a greater exposure to rising interest rates because it indicates that the duration of our
assets exceeds the duration of our liabilities.
“Fannie Mae MBS” generally refer to those mortgage-related securities that we issue and with respect to
which we guarantee to the related trusts that we will supplement amounts received by the MBS trust as
required to permit timely payment of principal and interest on the related Fannie Mae MBS. We also issue
some forms of mortgage-related securities for which we do not provide this guaranty. The term “Fannie Mae
MBS” refers to all forms of mortgage-related securities that we issue, including single-class Fannie Mae MBS
and structured Fannie Mae MBS.
“FHFA” refers to the Federal Housing Finance Agency. Following the enactment of the Federal Housing
Finance Regulatory Reform Act of 2008 on July 30, 2008, FHFA assumed the duties of our former regulators,
the Office of Federal Housing Enterprise Oversight and the Department of Housing and Urban Development,
with respect to safety, soundness and mission oversight of Fannie Mae and Freddie Mac.
“Fixed-rate mortgage” refers to a mortgage loan with an interest rate that does not change during the entire
term of the loan.
“GAAP” refers to accounting principles generally accepted in the United States of America.
“GSEs” refers to government-sponsored enterprises such as Fannie Mae, Freddie Mac and the Federal Home
Loan Banks.
“Guaranty book of business” refers to the sum of the unpaid principal balance of: (1) mortgage loans held in
our mortgage portfolio; (2) Fannie Mae MBS held in our mortgage portfolio; (3) Fannie Mae MBS held by
third parties; and (4) other credit enhancements that we provide on mortgage assets. It excludes non-Fannie
Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty.
“HASP” refers to the Homeowner Affordability and Stability Plan announced by the Obama Administration
on February 18, 2009, which is described in “Part I — Item 1 — Business — Executive Summary.”
“HomeSaver Advance” is a foreclosure prevention tool that Fannie Mae introduced in the first quarter of
2008. A HomeSaver Advance loan is a 15-year unsecured personal loan in an amount equal to all past due
payments relating to a borrower’s first lien mortgage loan, generally up to the lesser of $15,000 or 15% of the
unpaid principal balance of the delinquent first lien loan. The advance is used to bring the first lien mortgage
loan current.
“HomeSaver Advance fair value losses” refer to losses recorded at the time we make a HomeSaver Advance
loan to a borrower, which result from our recording HomeSaver Advance loans at their estimated fair value at
the date of purchase from the servicers.
“Implied volatility” refers to the market’s expectation of potential changes in interest rates.
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