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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 05/07/2015
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Fair Value Losses, Net
Table 6 displays the components of our fair value gains and losses.
Table 6: Fair Value Losses, Net
 
For the Three Months Ended March 31,
 
2015
 
2014
 
(Dollars in millions)
Risk management derivatives fair value losses attributable to:
 
 
 
Net contractual interest expense accruals on interest rate swaps
$
(229
)
 
$
(199
)
Net change in fair value during the period
(1,285
)
 
(741
)
Total risk management derivatives fair value losses, net
(1,514
)
 
(940
)
Mortgage commitment derivatives fair value losses, net
(239
)
 
(345
)
Total derivatives fair value losses, net
(1,753
)
 
(1,285
)
Trading securities gains, net
36

 
145

Other, net(1)
(202
)
 
(50
)
Fair value losses, net
$
(1,919
)
 
$
(1,190
)
__________
(1) 
Consists of debt fair value gains (losses), net, which includes gains (losses) on CAS; debt foreign exchange gains (losses), net; and mortgage loans fair value gains (losses), net.
Risk Management Derivatives Fair Value Losses, Net
Risk management derivative instruments are an integral part of our interest rate risk management strategy. We supplement our issuance of debt securities with derivative instruments to further reduce interest rate risk. Risk management derivative fair value losses increased in the first quarter of 2015 compared with the first quarter of 2014 primarily as a result of larger declines in longer-term swap rates, which caused larger decreases in the fair value of our pay-fixed derivatives.
We present, by derivative instrument type, the fair value gains and losses, net on our derivatives for the three months ended March 31, 2015 and 2014 in “Note 9, Derivative Instruments.”
Mortgage Commitment Derivatives Fair Value Losses, Net
We recognized fair value losses on our mortgage commitments in the first quarter of 2015 and 2014 primarily due to losses on commitments to sell mortgage-related securities driven by an increase in prices as interest rates decreased during the commitment periods.
Credit-Related Income
We refer to our benefit (expense) for loan losses and guaranty losses collectively as our “benefit for credit losses.” Credit-related income consists of our benefit for credit losses and foreclosed property expense (income).
Benefit for Credit Losses
Table 7 displays the components of our total loss reserves and our total fair value losses previously recognized on loans purchased out of unconsolidated MBS trusts reflected in our condensed consolidated balance sheets. Because these fair value losses lowered our recorded loan balances, we have fewer inherent losses in our guaranty book of business and consequently require lower total loss reserves. For these reasons, we consider these fair value losses as an “effective reserve,” apart from our total loss reserves, to the extent that we expect to realize these amounts as credit losses on the acquired loans in the future. The fair value losses shown in Table 7 represent credit losses we expect to realize in the future or that will eventually be recovered, either through net interest income for loans that cure or through foreclosed property income for loans where the sale of the collateral exceeds our recorded investment in the loan. We exclude these fair value losses from our credit loss calculation as described in “Credit Loss Performance Metrics.”

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