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SEC Filings

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

 
Table 8:  Rate/Volume Analysis of Changes in Net Interest Income
 
                         
    For the Three Months Ended
 
    March 31, 2011 vs. 2010  
    Total
    Variance Due to:(1)  
    Variance     Volume     Rate  
    (Dollars in millions)  
 
Interest income:
                       
Mortgage loans of Fannie Mae
  $ 427     $ 1,306     $ (879 )
Mortgage loans of consolidated trusts
    (2,456 )     (1,430 )     (1,026 )
                         
Total mortgage loans
    (2,029 )     (124 )     (1,905 )
Mortgage-related securities
    (1,305 )     (1,292 )     (13 )
Elimination of Fannie Mae MBS held in portfolio
    1,006       943       63  
                         
Total mortgage-related securities, net
    (299 )     (349 )     50  
Non-mortgage securities(2)
    8       7       1  
Federal funds sold and securities purchased under agreements to resell or similar arrangements
    (14 )     (13 )     (1 )
Advances to lenders
    3       9       (6 )
                         
Total interest income
    (2,331 )     (470 )     (1,861 )
                         
Interest expense:
                       
Short-term debt
    (12 )     (32 )     20  
Long-term debt
    (885 )     554       (1,439 )
                         
Total short-term and long-term funding debt
    (897 )     522       (1,419 )
Debt securities of consolidated trusts
    (4,611 )     (1,322 )     (3,289 )
Elimination of Fannie Mae MBS held in portfolio
    1,006       943       63  
                         
Total debt securities of consolidated trusts held by third parties
    (3,605 )     (379 )     (3,226 )
                         
Total interest expense
    (4,502 )     143       (4,645 )
                         
Net interest income
  $ 2,171     $ (613 )   $ 2,784  
                         
 
 
(1) Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance.
 
(2) Includes cash equivalents.
 
Net interest income increased in the first quarter of 2011, as compared with the first quarter of 2010, due to lower interest expense on debt, which was partially offset by lower interest income on loans and securities. The primary drivers of this change were:
 
  •  a reduction in the interest expense on debt of consolidated trusts as we purchased the majority of delinquent loans from our MBS trusts after the first quarter of 2010;
 
  •  lower interest expense on funding debt as lower borrowing rates allowed us to replace higher-cost debt with lower-cost debt;
 
  •  a decrease in volume of our mortgage securities, as we continue to manage our portfolio requirements; and
 
  •  lower yields on mortgage loans as new business acquisitions continue to replace higher-yielding loans with loans issued at lower mortgage rates. The reduction in interest income on loans from lower yields was partially offset by a reduction in the amount of interest income not recognized for nonaccrual mortgage loans, due to a decline in the balance of nonaccrual loans on our condensed consolidated balance sheets as we continue to complete a high number of loan modifications and foreclosures.
 
For the first quarter of 2011, interest income that we did not recognize for nonaccrual mortgage loans, net of recoveries, was $1.6 billion, which resulted in a 20 basis point reduction in net interest yield, compared with $2.7 billion for the first quarter of 2010, which resulted in a 33 basis point reduction in net interest yield. Of


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