Fannie Mae 2009 Annual Report Download - page 22

Below we discuss (1) two broad categories of securitization transactions: lender swaps and portfolio
securitizations; (2) features of our MBS trusts; (3) circumstances under which we purchase loans from MBS
trusts; and (4) single-class and multi-class Fannie Mae MBS.
Lender Swaps and Portfolio Securitizations
Our securitization transactions primarily fall within two broad categories: lender swap transactions and
portfolio securitizations.
Our most common type of securitization transaction is our “lender swap transaction.” Mortgage lenders that
operate in the primary mortgage market generally deliver pools of mortgage loans to us in exchange for
Fannie Mae MBS backed by these mortgage loans. A pool of mortgage loans is a group of mortgage loans
with similar characteristics. After receiving the mortgage loans in a lender swap transaction, we place them in
a trust that is established for the sole purpose of holding the mortgage loans separate and apart from our
assets. We deliver to the lender (or its designee) Fannie Mae MBS that are backed by the pool of mortgage
loans in the trust and that represent an undivided beneficial ownership interest in each of the mortgage loans.
We guarantee to each MBS trust 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 retain a portion of the
interest payment as the fee for providing our guaranty. Then, on behalf of the trust, we make monthly
distributions to the Fannie Mae MBS certificateholders from the principal and interest payments and other
collections on the underlying mortgage loans.
In contrast to our lender swap securitizations, in which lenders deliver pools of mortgage loans to us that we
immediately place in a trust for securitization, our “portfolio securitization transactions” involve creating and
issuing Fannie Mae MBS using mortgage loans and mortgage-related securities that we hold in our mortgage
portfolio. We currently securitize a majority of the single-family mortgage loans we purchase.
MBS Trusts
We serve as trustee for our MBS trusts, each of which is established for the sole purpose of holding mortgage
loans separate and apart from our assets. Our MBS trusts hold either single-family or multifamily mortgage
loans. Each trust operates in accordance with a trust agreement or a trust indenture. An MBS trust is also
governed by an issue supplement documenting the formation of that MBS trust and the issuance of the related
Fannie Mae MBS. The trust agreement or the trust indenture, together with the issue supplement and any
amendments, are the “trust documents” that govern an individual MBS trust.
In January 2009, we established a new multifamily master trust agreement that governs our multifamily MBS
trusts formed on or after February 1, 2009 and amended and restated our previous 2007 master trust agreement
to (1) establish specific criteria for the segregation and maintenance by our mortgage loan servicers of
collateral reserve accounts, (2) provide greater flexibility in dealing with defaulted mortgage loans held in an
MBS trust, and (3) make changes to our multifamily MBS trusts to conform with our single-family MBS
trusts.
In 2008, we established a new single-family master trust agreement that governs our single-family MBS trusts
formed on or after January 1, 2009 and amended and restated our previous single-family master trust
agreement, also effective January 1, 2009. These changes are intended to facilitate the workout process on
mortgage loans included in trusts governed by these trust documents.
Purchases of Loans from our MBS Trusts
Under the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to
purchase mortgage loans that meet specific criteria from an MBS trust. Our acquisition cost for these loans is
the unpaid principal balance of the loan plus accrued interest. We generally purchase from the MBS trust any
loan that we intend to modify prior to the time that the modification becomes effective.
In deciding whether and when to purchase a loan from a single-family MBS trust, we consider a variety of
factors, including: our legal ability or obligation to purchase loans under the terms of the trust documents; our
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