Fannie Mae 2008 Annual Report Download - page 293

VIE (including the net recorded basis of the securities we own, the guaranty arrangement and the master
servicing arrangement) becomes the basis in the consolidated assets and liabilities, and no gain or loss is
recorded.
If a consolidated VIE subsequently should not be consolidated because we cease to be deemed the primary
beneficiary or we qualify for one of the scope exceptions of FIN 46R (for example, the entity is a QSPE that
we no longer have the unilateral ability to liquidate), we deconsolidate the VIE by carrying over our net basis
in the consolidated assets and liabilities to our investment in the VIE.
Fannie Mae adopted FSP No. FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities (“FSP FAS 140-4 and FIN 46(R)-8”) as
of the year ended December 31, 2008. FSP FAS 140-4 and FIN 46(R)-8 amends the disclosure requirements
of SFAS 140 and FIN 46(R) to require public entities to provide additional disclosures about their continuing
involvement with financial assets they have transferred and their involvement with VIEs and QSPEs.
Disclosures regarding our involvement with both consolidated and unconsolidated entities are included in
“Note 3, Consolidations.” Disclosures regarding our guaranty and servicing relationships with these and other
entities are included in “Note 8, Financial Guarantees and Master Servicing.”
Portfolio Securitizations
Portfolio securitizations involve the transfer of mortgage loans or mortgage-related securities from our
consolidated balance sheets to a trust (an SPE) to create Fannie Mae MBS, real estate mortgage investment
conduits (“REMICs”) or other types of beneficial interests. We account for portfolio securitizations in
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement
No. 125) (“SFAS 140”), which requires that we evaluate a transfer of financial assets to determine if the
transfer qualifies as a sale. Transfers of financial assets for which we surrender control and receive
compensation other than beneficial interests in the transferred assets are recorded as sales.
When a transfer that qualifies as a sale is completed, we derecognize all assets transferred. The previous
carrying amount of the transferred assets is allocated between the assets sold and the retained interests, if any,
in proportion to their relative fair values at the date of transfer. A gain or loss is recorded as a component of
“Investment losses, net” in our consolidated statements of operations, which represents the difference between
the allocated carrying amount of the assets sold and the proceeds from the sale, net of any transaction costs
and liabilities incurred, which may include a recourse obligation for our financial guaranty. Retained interests
are primarily in the form of Fannie Mae MBS, REMIC certificates, guaranty assets and master servicing assets
(“MSAs”). We separately described the subsequent accounting, as well as how we determine fair value, for
our retained interests in the “Investments in Securities,” “Guaranty Accounting,” and “Master Servicing”
sections of this note. If a portfolio securitization does not meet the criteria for sale treatment, the transferred
assets remain on our consolidated balance sheets and we record a liability to the extent of any proceeds we
received in connection with such transfer.
Refer to “Note 7, Portfolio Securitizations” for additional disclosures regarding our transfers of financial assets
into securitization trusts, including such transfers that are accounted for as sales and as secured borrowings, in
accordance with FSP FAS 140-4 and FIN 46(R)-8. Note 7 also contains disclosures regarding our continuing
involvement (as defined by FSP FAS 140-4 and FIN 46(R)-8) with the assets transferred into securitization
trusts, while “Note 8, Financial Guarantees and Master Servicing” contains further disclosures regarding our
guaranty and servicing relationships with these and other entities.
We also enter into repurchase agreements, including dollar roll repurchase agreements, which are accounted
for as secured borrowings and are within the scope of FSP FAS 140-4 and FIN 46(R)-8. Refer to the
F-15
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)