Fannie Mae 2011 Annual Report Download - page 306

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) Represents the derecognition of guaranty assets during the period due to consolidations excluding the impact of adopting
the consolidation accounting guidance.
Fannie Mae MBS Included in Investments in Securities
For Fannie Mae MBS included in “Investments in securities” in our consolidated balance sheets, we do not
eliminate or extinguish the guaranty arrangement because it is a contractual arrangement with the unconsolidated
MBS trusts. We determine the fair value of Fannie Mae MBS based on observable market prices because most
Fannie Mae MBS are actively traded. Fannie Mae MBS receive high credit quality ratings primarily because of
our guaranty. Absent our guaranty, Fannie Mae MBS would be subject to the credit risk on the underlying loans.
We continue to recognize a guaranty obligation and a reserve for guaranty losses associated with these securities
because we carry these securities in our consolidated financial statements as guaranteed Fannie Mae MBS. The
fair value of the guaranty obligation, net of deferred profit, associated with Fannie Mae MBS included in
“Investments in securities” approximates the fair value of the credit risk that exists on these Fannie Mae MBS
absent our guaranty. The fair value of our guaranty obligations associated with the Fannie Mae MBS included in
“Investments in securities” was $2.2 billion and $2.0 billion as of December 31, 2011 and 2010, respectively.
7. Acquired Property, Net
Acquired property, net consists of held for sale foreclosed property received in full satisfaction of a loan net of a
valuation allowance for declines in the fair value of foreclosed properties after initial acquisition. We classify as
held for sale those properties that we intend to sell and are actively marketed for sale. The following table
displays the activity in acquired property and the related valuation allowance for the years ended December 31,
2011, 2010 and 2009.
Acquired
Property
Valuation
Allowance(1)
Acquired
Property, Net
(Dollars in millions)
Balance, January 1, 2009 ...................................... $ 8,040 $(1,122) $ 6,918
Additions ................................................... 14,165 (79) 14,086
Disposals ................................................... (12,489) 1,379 (11,110)
Write-downs, net of recoveries .................................. — (752) (752)
Balance, December 31, 2009 ................................... 9,716 (574) 9,142
Additions ................................................... 25,982 (783) 25,199
Disposals ................................................... (17,644) 1,407 (16,237)
Write-downs, net of recoveries .................................. — (1,931) (1,931)
Balance, December 31, 2010 ................................... 18,054 (1,881) 16,173
Additions ................................................... 18,599 (550) 18,049
Disposals ................................................... (24,252) 2,635 (21,617)
Write-downs, net of recoveries .................................. — (1,232) (1,232)
Balance, December 31, 2011 ................................... $12,401 $(1,028) $ 11,373
(1) Reflects activities in the valuation allowance for acquired properties held primarily by our single-family segment.
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