Fannie Mae 2012 Annual Report Download - page 165

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continue to enhance our risk-conscious culture, in which all employees are expected to identify, discuss, manage and
remediate potential and actual operational risk.
Our corporate operational risk framework is based on the OFHEO/FHFA Enterprise Guidance on Operational Risk
Management, published September 23, 2008. We have made a number of enhancements to our operational risk management
efforts including our business process focus, policies and framework. Our framework is intended to provide a methodology to
identify, assess, mitigate, control and monitor operational risks by embedding the concepts of operational risk in the day-to-
day activities of individuals across the company. Included in this framework is a requirement for a system to track and report
operational risk incidents. The framework also includes a methodology for business owners to conduct risk and control self
assessments to self identify potential operational risks and points of execution failure, the effectiveness of associated controls,
and document corrective action plans to close identified deficiencies. The success of our operational risk effort will depend
on the consistent execution of the operational risk programs and the timely remediation of high operational risk issues. To
quantify our operational risk exposure, we rely on the Basel Standardized approach, which is based on a percentage of gross
income.
While each business unit is responsible for managing its operational risk, our Operational Risk Management group provides
the business units and process owners with the tools, techniques, expertise and guiding principles to assist them in prudent
management of their operational risk exposure. Operational risk lead teams, comprised of centralized resources within our
Enterprise Risk Management division, are aligned with each of our primary business units as well as with our corporate
functions such as finance and legal. Each risk lead reports to the Vice President and Chief Risk Officer of Operational Risk,
who reports directly to the Executive Vice President and Chief Risk Officer. The Operational Risk Committee provides an
additional governance forum for managing operational risk.
See “Risk Factors” for more information regarding our operational risk and “Risk Management” for more information
regarding our governance of operational risk.
Management of Business Resiliency
Our business resiliency program is designed to provide reasonable assurance for continuity of critical business operations in
the event of disruptions caused by the loss of facilities, technology or personnel. Despite the planning, testing and continuous
preparation of back up venues that we engage in, a catastrophic event may still result in a significant business disruption.
Non-Mortgage Related Fraud Risk
Our anti-fraud program provides a framework for managing non-mortgage related fraud risk. The program is designed to
provide reasonable assurance for the prevention and detection of non-mortgage related fraudulent activity. However, because
fraudulent activity requires the intentional circumvention of the internal control structure, the efforts of the program may not
always prevent, or immediately detect, instances of such activity.
See “Risk Factors” for a discussion on our operational risk.
IMPACT OF FUTURE ADOPTION OF NEW ACCOUNTING GUIDANCE
We identify and discuss the expected impact on our consolidated financial statements of recently issued accounting guidance
in “Note 1, Summary of Significant Accounting Policies.”
GLOSSARY OF TERMS USED IN THIS REPORT
Terms used in this report have the following meanings, unless the context indicates otherwise.
An “Acquired credit-impaired loan” refers to a loan we have acquired for which there is evidence of credit deterioration
since origination and for which it is probable we will not be able to collect all of the contractually due cash flows. We record
our net investment in such loans at the lower of the acquisition cost of the loan or the estimated fair value of the loan at the
date of acquisition. Typically, loans we acquire from our unconsolidated MBS trusts pursuant to our option to purchase upon
default meet these criteria. Because we acquire these loans from our MBS trusts at par value plus accrued interest, to the
extent the par value of a loan exceeds the estimated fair value at the time we acquire the loan, we record the related fair value
loss as a charge against the “Reserve for guaranty losses.”
“Alt-A mortgage loan” or “Alt-A loan” generally refers to a mortgage loan originated under a lender’s program offering
reduced or alternative documentation than that required for a full documentation mortgage loan but may also include other
alternative product features. As a result, Alt-A mortgage loans have a higher risk of default than non-Alt-A mortgage loans.