Fannie Mae 2012 Annual Report Download - page 259

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-25
will be distributed to the common shareholders. However, as a result of our conservatorship status and the terms of the senior
preferred stock purchase agreement with Treasury, no amounts will be available to distribute as dividends to common or
preferred stockholders (other than to Treasury as holder of the senior preferred stock).
Other Comprehensive Income (Loss)
Other comprehensive income (loss) is the change in equity, net of tax, resulting from certain transactions that we record
directly to stockholders’ equity (deficit). These transactions include unrealized gains and losses on certain AFS securities and
certain commitments whose underlying securities are classified as AFS. It also includes change in prior service costs and
credits and actuarial gains and losses associated with pension and postretirement benefits in other comprehensive income
(loss).
Compensatory Fees
We charge our primary servicers a compensatory fee for servicing delays within their control when they fail to comply with
established loss mitigation and foreclosure timelines per our Servicing Guide, which sets forth our policies and procedures
related to servicing our single-family mortgages. Compensatory fees are intended to compensate us for damages attributed to
such servicing delays and to emphasize the importance of servicer performance.
We recognize a compensatory fee receivable when the amounts are chargeable per our Servicing Guide and are considered
reasonably assured of collection. We subsequently establish a valuation allowance for any amounts we estimate to be
uncollectible. If such fees are not reasonably assured of collection, we recognize them on a cash basis when received. The
income associated with these fees is recognized as a component of “Foreclosed property (income) expense” in our
consolidated statements of operations and comprehensive income (loss).
Reclassifications
To conform to our current period presentation, we have reclassified certain amounts reported in our consolidated financial
statements.
New Accounting Guidance
Effective January 1, 2012, we prospectively adopted guidance issued by the Financial Accounting Standards Board (“FASB”)
related to fair value measurement. The new guidance does not expand the use of fair value; instead, it provides guidance
about how fair value should be determined where it already is required or permitted under U.S. GAAP. The new fair value
guidance changes certain fair value principles and clarifies the FASB’s intent on certain items, including a clarification that
the principal market should be determined based on the market the entity has access to with the greatest volume and level of
activity for the asset or liability. It also expands the disclosures about fair value measurements. The adoption of this guidance
did not have a material impact on our consolidated financial statements; however, it required us to expand our fair value
disclosures. See “Note 17, Fair Value,” for additional information regarding the impact upon adoption of this guidance.
In December 2011 and January 2013, the FASB issued guidance on additional disclosures about derivatives, repurchase
agreements and reverse repurchase agreements, and securities borrowing and lending transactions that are either offset on the
balance sheet or subject to a master netting arrangement or similar agreement. The additional disclosures about these
instruments are intended to enable investors to understand the effect or potential effect of those arrangements on the
company’s financial positions. The required disclosures will enhance comparability between companies that prepare their
financial statements in accordance with GAAP and those that follow international financial reporting standards. The updated
guidance does not change existing offsetting eligibility criteria or the permitted balance sheet presentation for those
instruments that meet the eligibility criteria. The new guidance became effective for us on January 1, 2013, and will be
applied retrospectively. We do not expect that the adoption of these amendments will have a material impact on our
consolidated financial statements.
2. Consolidations and Transfers of Financial Assets
We have interests in various entities that are considered to be VIEs. The primary types of entities are securitization trusts
guaranteed by us via lender swap and portfolio securitization transactions, mortgage and asset-backed trusts that were not
created by us, as well as housing partnerships that are established to finance the acquisition, construction, development or
rehabilitation of affordable multifamily and single-family housing. These interests include investments in securities issued by
VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We
consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer