Fannie Mae 2011 Annual Report Download - page 312

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A majority of our derivative instruments contain provisions that require our senior unsecured debt to maintain a
minimum credit rating from S&P and Moody’s. If our senior unsecured debt were to fall below established
thresholds in our governing agreements, which range from A- to BBB+, we could be required to provide
additional collateral to or terminate transactions with certain counterparties. The aggregate fair value of all
derivatives with credit-risk-related contingent features that were in a net liability position as of December 31,
2011 was $7.2 billion, for which we posted collateral of $6.8 billion in the normal course of business. Had all of
the credit-risk-related contingency features underlying these agreements been triggered, an additional
$362 million of collateral would have been required to be posted as collateral or to immediately settle our
positions based on the individual agreements and our fair value position as of December 31, 2011.
The aggregate fair value of all derivatives with credit risk-related contingent features that were in a net liability
position as of December 31, 2010 was $4.4 billion, for which we posted collateral of $3.5 billion in the normal
course of business. Had all of the credit risk-related contingency features underlying these agreements been
triggered, an additional $891 million would have been required to be posted as collateral or to immediately settle
our positions based on the individual agreements and our fair value position as of December 31, 2010.
We record all derivative gains and losses, including accrued interest, in “Fair value losses, net” in our
consolidated statements of operations and comprehensive loss. The following table displays, by type of
derivative instrument, the fair value gains and losses, net on our derivatives for the years ended December 31,
2011, 2010, and 2009.
For the Year Ended December 31,
2011 2010 2009
(Dollars in millions)
Risk management derivatives:
Swaps:
Pay-fixed .................................................. $(18,040) $(17,573) $ 15,012
Receive-fixed ............................................... 7,939 14,382 (11,737)
Basis ...................................................... 86 17 96
Foreign currency ............................................ 156 157 166
Swaptions:
Pay-fixed .................................................. 860 (2,026) 453
Receive-fixed ............................................... 2,932 3,327 (8,706)
Other(1) ...................................................... (72) (91) 20
Total risk management derivatives fair value losses, net ............. (6,139) (1,807) (4,696)
Mortgage commitment derivatives fair value losses, net ............... (423) (1,193) (1,654)
Total derivatives fair value losses, net ............................ $ (6,562) $ (3,000) $ (6,350)
(1) Includes interest rate caps, futures, swap credit enhancements and mortgage insurance contracts.
Derivative Counterparty Credit Exposure
Our derivative counterparty credit exposure relates principally to interest rate and foreign currency derivative
contracts. We are exposed to the risk that a counterparty in a derivative transaction will default on payments due
to us. If there is a default, we may need to acquire a replacement derivative from a different counterparty at a
higher cost or may be unable to find a suitable replacement. We estimate our exposure to credit loss on derivative
instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all
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