Fannie Mae 2013 Annual Report Download - page 272

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-48
Debt of Consolidated Trusts
Debt of consolidated trusts represents the amount of Fannie Mae MBS issued from consolidated trusts and held by third-party
certificateholders.
Characteristics of Debt
As of December 31, 2013 and 2012, the face amount of our debt securities of Fannie Mae was $534.3 billion and $621.8
billion, respectively. As of December 31, 2013 and 2012, we had zero-coupon debt with a face amount of $86.8 billion and
$120.7 billion, respectively, which had an effective interest rate of 1.29% and 0.93%, respectively.
We issue callable debt instruments to manage the duration and prepayment risk of expected cash flows of the mortgage assets
we own. Our outstanding debt as of December 31, 2013 and 2012 included $168.4 billion and $177.8 billion, respectively, of
callable debt that could be redeemed in whole or in part at our option or the option of the investor any time on or after a
specified date.
The following table displays the amount of our long-term debt as of December 31, 2013 by year of maturity for each of the
years 2014 through 2018 and thereafter. The first column assumes that we pay off this debt at maturity or on the call date if
the call has been announced, while the second column assumes that we redeem our callable debt at the next available call
date.
Long-Term Debt by
Year of Maturity
Assuming Callable Debt
Redeemed at Next
Available Call Date
(Dollars in millions)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,844 $ 246,234
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,896 73,214
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,015 48,931
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,896 44,430
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,098 20,813
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,390 23,517
Total debt of Fannie Mae(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,139 457,139
Debt of consolidated trusts(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,702,935 2,702,935
Total long-term debt(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,160,074 $ 3,160,074
__________
(1) Reported amount includes a net unamortized discount, fair value adjustments and other cost basis adjustments of $4.8 billion.
(2) Contractual maturity of debt of consolidated trusts is not a reliable indicator of expected maturity because borrowers of the underlying
loans generally have the right to prepay their obligations at any time.
(3) Includes a portion of structured debt instruments that is reported at fair value.
9. Derivative Instruments
Derivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments may be
privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative
transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our derivative
transactions accepted for clearing by a derivatives clearing organization as our OTC-cleared derivative transactions. We
typically do not settle the notional amount of our risk management derivatives; rather, notional amounts provide the basis for
calculating actual payments or settlement amounts. The derivatives we use for interest rate risk management purposes consist
primarily of interest rate swaps and interest rate options.
• Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each party agrees to
exchange payments tied to different interest rates or indices for a specified period of time, generally based on a
notional amount of principal. The types of interest rate swaps we use include pay-fixed swaps, receive-fixed swaps and
basis swaps.
• Interest rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions,
cancelable swaps and interest rate caps. A swaption is an option contract that allows us or a counterparty to enter into a
pay-fixed or receive-fixed swap at some point in the future.