Fannie Mae 2011 Annual Report Download - page 313

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
outstanding derivative contracts in a net gain position at the counterparty level where the right of legal offset
exists. For derivative instruments where the right of legal offset does not exist, we calculate the replacement cost
of the outstanding derivative contracts in a gain position at the transaction level. We manage our exposure by
requiring counterparties to post collateral, which includes cash, U.S. Treasury securities, agency debt and agency
mortgage-related securities.
The table below displays our counterparty credit exposure on outstanding risk management derivative
instruments in a gain position by counterparty credit ratings, as well as the notional amount outstanding and the
number of counterparties for all risk management derivatives as of December 31, 2011 and 2010.
As of December 31, 2011
Credit Rating(1)
AA+/AA/AA- A+/A Subtotal(2) Other(3) Total
(Dollars in millions)
Credit loss exposure(4) .................. $ — $ 885 $ 885 $ 51 $ 936
Less: Collateral held(5) .................. — 840 840 — 840
Exposure net of collateral ............... $ — $ 45 $ 45 $ 51 $ 96
Additional information:
Notional amount .................... $63,294 $546,967 $610,261 $2,929 $613,190
Number of counterparties ............. 6 10 16
As of December 31, 2010
Credit Rating(1)
AA+/AA/AA- A+/A Subtotal(2) Other(3) Total
(Dollars in millions)
Credit loss exposure(4) .................. $ 350 $ 325 $ 675 $ 75 $ 750
Less: Collateral held(5) .................. 273 325 598 — 598
Exposure net of collateral ............... $ 77 $ — $ 77 $ 75 $ 152
Additional information:
Notional amount .................... $208,898 $476,766 $685,664 $1,484 $687,148
Number of counterparties ............. 7 8 15
(1) We manage collateral requirements based on the lower credit rating of the legal entity, as issued by S&P and Moody’s.
The credit rating reflects the equivalent S&P’s rating for any ratings based on Moody’s scale.
(2) We had exposure to 4 and 3 interest rate and foreign currency derivative counterparties in a net gain position as of
December 31, 2011 and 2010, respectively. Those interest rate and foreign currency derivatives had notional balances of
$127.5 billion and $106.5 billion as of December 31, 2011 and 2010, respectively.
(3) Includes defined benefit mortgage insurance contracts and swap credit enhancements accounted for as derivatives where
the right of legal offset does not exist. Also includes exchange-traded derivatives, such as futures and interest rate swaps,
which are settled daily through a clearinghouse.
(4) Represents the exposure to credit loss on derivative instruments, which we estimate using the fair value of all outstanding
derivative contracts in a gain position. We net derivative gains and losses with the same counterparty where a legal right
of offset exists under an enforceable master netting agreement. This table excludes mortgage commitments accounted for
as derivatives.
(5) Represents both cash and non-cash collateral posted by our counterparties to us. Does not include collateral held in excess
of exposure. We reduce the value of non-cash collateral in accordance with the counterparty agreements to help ensure
recovery of any loss through the disposition of the collateral.
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