Fannie Mae 2009 Annual Report Download - page 190

We historically have complemented our quantitative measures with qualitative information that reflects
information more current than that available in our models or that cannot be fully captured in our models to
assess whether, and to what extent, we may need to adjust our models or risk limits. Management regularly
compares our internal model results to other metrics to validate the reasonableness of the results. Based on
management experience and judgment, we may periodically make adjustments to the methodologies used to
address the limitations inherent in our models and reflect enhancements in the underlying estimation
processes.
Although we continue to work to improve our process for model validation and review, we recognize that
models are inherently imperfect predictors of actual results because they are based on data available to us and
our assumptions about factors such as future loan demand, prepayment speeds, default rates, severity rates and
other factors that may overstate or understate future experience. Further, the turmoil in the housing and credit
markets created additional risk regarding the reliability of our models because models are less dependable
when the economic environment is outside of historical experience, as has been the case in the last two years.
See “Risk Factors” for a discussion of risks associated with our reliance on models.
IMPACT OF FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements or changes in existing accounting pronouncements may have a significant
effect on our results of operations, our financial condition, our net worth or our business operations. We
identify and discuss the expected impact on our consolidated financial statements of recently issued or
proposed accounting pronouncements in “Note 1, Summary of Significant Accounting Policies.” Also see
“Off-Balance Sheet Arrangements and Variable Interest Entities” for additional discussion of the significant
impact on our financial statements of the accounting standards we adopted effective January 1, 2010 that
eliminate the concept of QSPEs and change the consolidation model for variable interest entities.
185