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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 05/06/2011
Entire Document
 
Table of Contents

FANNIE MAE
(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
 
 
The following tables display realized and unrealized gains and losses included in our condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2011 and 2010, for our Level 3 assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis.
 
                                         
    For the Three Months Ended March 31, 2011  
                Net
             
          Fair Value
    Other-than-
             
    Interest
    Gains
    Temporary
             
    Income     (Losses), net     Impairments     Other     Total  
    (Dollars in millions)  
 
Total realized and unrealized gains (losses) included in net loss
  $ 135     $ (24 )   $ (17 )   $ 3     $ 97  
Net unrealized losses related to Level 3 assets and liabilities still held as of March 31, 2011
  $     $ (33 )   $     $     $ (33 )
 
                                         
    For the Three Months Ended March 31, 2010  
                Net
             
          Fair Value
    Other-than-
             
    Interest
    Gains
    Temporary
             
    Income     (Losses), net     Impairments     Other     Total  
    (Dollars in millions)  
 
Total realized and unrealized gains (losses) included in net loss
  $ 111     $ 133     $ (212 )   $ 5     $ 37  
Net unrealized gains related to Level 3 assets and liabilities still held as of March 31, 2010
  $     $ 83     $     $ 1     $ 84  
 
We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation techniques we use for assets and liabilities measured at fair value on a recurring basis, as well as our basis for classifying these assets and liabilities as Level 1, Level 2 or Level 3. These valuation techniques are also used to estimate the fair value of financial instruments not carried at fair value but disclosed as part of the fair value of financial instruments.
 
Cash Equivalents, Trading Securities and Available-for-Sale Securities—These securities are recorded in our condensed consolidated balance sheets at fair value on a recurring basis. Fair value is measured using quoted market prices in active markets for identical assets, when available. Securities, such as U.S. Treasuries, whose value is based on quoted market prices in active markets for identical assets are classified as Level 1. If quoted market prices in active markets for identical assets are not available, we use prices provided by up to four third-party pricing services that are calibrated to the quoted market prices in active markets for similar securities, and assets valued in this manner are classified as Level 2. In the absence of prices provided by third-party pricing services supported by observable market data, fair values are estimated using quoted prices of securities with similar characteristics or discounted cash flow models that use inputs such as spread, prepayment speed, yield, and loss severity based on market assumptions where available. Such instruments are generally classified as Level 2. Where there is limited activity or less transparency around inputs to the valuation, securities are classified as Level 3.
 
Mortgage Loans Held for Investment “HFI”—The majority of HFI performing loans and nonperforming loans that are not individually impaired are reported in our condensed consolidated balance sheets at the principal amount outstanding, net of cost basis adjustments and an allowance for loan losses. We elected the fair value option for certain loans containing embedded derivatives that would otherwise require bifurcation and consolidated loans of senior-subordinate trust structures, which are recorded in our condensed consolidated balance sheets at fair value on a recurring basis.


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