Fannie Mae 2010 Annual Report Download - page 375

maximum potential loss recovery on single-family loans was from three lenders. As of December 31, 2009,
53% of our maximum potential loss recovery on single-family loans was from three lenders. Our maximum
potential loss recovery from lenders under these risk sharing agreements on multifamily loans was
$30.3 billion as of December 31, 2010 and $28.7 billion as of December 31, 2009. As of December 31, 2010,
41% of our maximum potential loss recovery on multifamily loans was from three lenders. As of
December 31, 2009, 51% of our maximum potential loss recovery on multifamily loans was from three
lenders.
Derivatives Counterparties. For information on credit risk associated with our derivatives transactions refer
to “Note 10, Derivative Instruments and Hedging Activities.”
Parties Associated with Our Off-Balance Sheet Transactions. We enter into financial instrument transactions
that create off-balance sheet credit risk in the normal course of our business. These transactions are designed
to meet the financial needs of our customers, and manage our credit, market or liquidity risks.
We have entered into guarantees for which we have not recognized a guaranty obligation in our consolidated
balance sheets relating to periods prior to 2003, the effective date of accounting pronouncements related to
guaranty accounting. Our maximum potential exposure under these guarantees is $10.3 billion as of
December 31, 2010 and $135.7 billion as of December 31, 2009. If we were required to make payments under
these guarantees, we would pursue recovery through our right to the collateral backing the underlying loans,
available credit enhancements and recourse with third parties that provide a maximum coverage of $3.9 billion
as of December 31, 2010 and $13.6 billion as of December 31, 2009.
The following table displays the contractual amount of off-balance sheet financial instruments as of
December 31, 2010 and 2009. Contractual or notional amounts do not necessarily represent the credit risk of
the positions.
2010 2009
As of December 31,
(Dollars in millions)
Fannie Mae MBS and other guarantees
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,299 $135,697
Loan purchase commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 486
(1)
Represents maximum exposure on guarantees not reflected in our consolidated balance sheets.
19. Fair Value
We use fair value measurements for the initial recording of certain assets and liabilities and periodic
remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.
Fair Value Measurement
Fair value measurement guidance defines fair value, establishes a framework for measuring fair value and
expands disclosures around fair value measurements. This guidance applies whenever other accounting
standards require or permit assets or liabilities to be measured at fair value. The guidance establishes a three-
level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value.
The fair value hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted
prices in active markets for identical assets or liabilities. The next highest priority, Level 2, is given to
measurements of assets and liabilities based on limited observable inputs or observable inputs for similar
assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs.
Effective March 31, 2010, we prospectively adopted a new accounting standard that requires enhanced fair
value measurement disclosures.
F-117
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)