Fannie Mae 2010 Annual Report Download - page 197

“Receive-fixed swap” refers to an agreement under which we make a variable interest payment based upon a
stated index, with the index resetting at regular intervals, and receive a predetermined fixed rate of interest
based upon a set notional amount and over a specified period of time. These contracts generally increase in
value as interest rates fall and decrease in value as interest rates rise.
“REMIC” or “Real Estate Mortgage Investment Conduit” refers to a type of mortgage-related security in
which interest and principal payments from mortgages or mortgage-related securities are structured into
separately traded securities.
“REO” refers to real-estate owned by Fannie Mae because we have foreclosed on the property or obtained the
property through a deed-in-lieu of foreclosure.
“Severity rate” or “loss severity rate” refers to the percentage of our total loss, which includes the unpaid
principal balance of a loan, purchased interest, and selling costs if applicable, that we believe will not be
recovered in the event of default.
“Single-class Fannie Mae MBS” refers to Fannie Mae MBS where the investors receive principal and interest
payments in proportion to their percentage ownership of the MBS issue.
“Single-family mortgage loan” refers to a mortgage loan secured by a property containing four or fewer
residential dwelling units.
“Small balance loans” refers to multifamily loans with an original balance of less than $3 million nationwide
or $5 million in high cost markets.
“Subprime mortgage loan” generally refers to a mortgage loan made to a borrower with a weaker credit
profile than that of a prime borrower. As a result of the weaker credit profile, subprime borrowers have a
higher likelihood of default than prime borrowers. Subprime mortgage loans were typically originated by
lenders specializing in this type of business or by subprime divisions of large lenders, using processes unique
to subprime loans. In reporting our subprime exposure, we have classified mortgage loans as subprime if the
mortgage loans were originated by one of these specialty lenders or a subprime division of a large lender. We
exclude loans originated by these lenders if we acquired the loans in accordance with our standard
underwriting criteria, which typically require compliance by the seller with our Selling Guide (including
standard representations and warranties) and/or evaluation of the loans through our Desktop Underwriter
system. We have classified private-label mortgage-related securities held in our investment portfolio as
subprime if the securities were labeled as such when issued.
“Structured Fannie Mae MBS” refers to Fannie Mae MBS that are resecuritizations of other Fannie Mae
MBS.
“Swaptions” refers to options on interest rate swaps in the form of contracts granting an option to one party
and creating a corresponding commitment from the counterparty to enter into specified interest rate swaps in
the future. Swaptions are traded in the over-the-counter market and not through an exchange.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosure about market risk is set forth in “MD&A—Risk Management—Market
Risk Management, including Interest Rate Risk Management.”
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and notes thereto are included elsewhere in this annual report on
Form 10-K as described below in “Exhibits and Financial Statement Schedules.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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