Fannie Mae 2009 Annual Report Download - page 318

The following table displays the key assumptions we used in measuring the fair value of our continuing
involvement, excluding our MSA and MSL, which are not significant, related to portfolio securitization
transactions as of December 31, 2009 and 2008, and a sensitivity analysis showing the impact of changes in
key assumptions.
2009 2008
As of December 31,
(Dollars in millions)
Guaranty Assets
Valuation at period end:
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,414 $ 440
Weighted-average life
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 years 2.2 years
Prepayment speed assumptions:
Average 12-month CPR prepayment speed assumption
(2)
. . . . . . . . . . . . . . . . . 22.7% 59.3%
Impact on value from a 10% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (68) $ (38)
Impact on value from a 20% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . . (128) (71)
Discount rate assumptions:
Average discount rate assumption
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7% 5.7%
Impact on value from a 10% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . $ (26) $ (10)
Impact on value from a 20% adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . (52) (19)
Guaranty Obligations
Valuation at period end:
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,202 $ 2,703
Anticipated credit losses
(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,317 2,246
Weighted-average life
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 years 2.2 years
Home price assumptions:
24 month average home price assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.3)% (5.0)%
Impact on credit losses due to a 2.5% decline in home prices . . . . . . . . . . . . . . $ 273 $ 454
Impact on credit losses due to a 5% decline in home prices . . . . . . . . . . . . . . . 668 723
Loan-to-value assumptions:
Average estimated current loan-to-value ratio . . . . . . . . . . . . . . . . . . . . . . . . . 71.9% 72.3%
Impact on credit losses due to a 2.5% increase in loan-to-value . . . . . . . . . . . . . $ 327 $ 585
Impact on credit losses due to a 5% increase in loan-to-value . . . . . . . . . . . . . . 672 905
(1)
The estimated average number of years for which each dollar of unpaid principal on a loan or mortgage-related
security will remain outstanding.
(2)
Represents the 12-month average prepayment rate, which is based on the constant annualized prepayment rate for
mortgage loans.
(3)
The interest rate used in determining the present value of future cash flows, derived from the forward curve based on
interest rate swaps, excluding the option adjusted spreads.
(4)
The present value of anticipated credit losses is calculated as the average across a distribution of possible outcomes
and may not be indicative of actual future losses. Actual results may vary materially from these amounts.
The preceding sensitivity analysis is hypothetical and may not be indicative of actual results. We calculate the
effect of a variation in a particular assumption on the fair value of the interest independently of changes in any
other assumption. Changes in one factor may result in changes in another, which might magnify or counteract
the impact of the change. Further, changes in fair value based on a 10% or 20% variation in an assumption or
F-60
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)