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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 08/05/2011
Entire Document
 
Table of Contents

FANNIE MAE
(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)
 
9.   Derivative Instruments
 
Derivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments may be privately negotiated contracts, which are often referred to as over-the-counter derivatives, or they may be listed and traded on an exchange. 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, interest rate options, foreign currency swaps and futures.
 
We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgage-related securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell mortgage-related securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage commitments that are accounted for as derivatives.
 
We recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a trade date basis. Fair value amounts, which are netted to the extent a legal right of offset exists and is enforceable by law at the counterparty level and are inclusive of cash collateral posted or received, are recorded in “Other assets” or “Other liabilities” in our condensed consolidated balance sheets. We record all derivative gains and losses, including accrued interest, in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive loss.
 
Notional and Fair Value Position of our Derivatives
 
The following table displays the notional amount and estimated fair value of our asset and liability derivative instruments as of June 30, 2011 and December 31, 2010.
 
                                                                 
    As of June 30, 2011     As of December 31, 2010  
    Asset Derivatives     Liability Derivatives     Asset Derivatives     Liability Derivatives  
    Notional
    Estimated
    Notional
    Estimated
    Notional
    Estimated
    Notional
    Estimated
 
    Amount     Fair Value     Amount     Fair Value     Amount     Fair Value     Amount     Fair Value  
    (Dollars in millions)  
 
Risk management derivatives:
                                                               
Swaps:
                                                               
Pay-fixed
  $ 38,027     $ 878     $ 167,057     $ (9,711 )   $ 49,085     $ 1,812     $ 228,142     $ (14,115 )
Receive-fixed
    149,566       4,989       11,585       (95 )     172,174       6,493       52,003       (578 )
Basis
    902       44       1,650       (2 )     435       29       50        
Foreign currency
    1,241       191       297       (47 )     1,274       164       286       (51 )
Swaptions:
                                                               
Pay-fixed
    71,150       471       56,050       (1,088 )     66,200       482       30,950       (1,773 )
Receive-fixed
    47,120       3,657       56,050       (1,352 )     48,340       4,992       30,275       (673 )
Interest rate caps
    7,000       6                   7,000       24              
Other(1)
    689       56       637       (3 )     909       75       25       (1 )
                                                                 
Total gross risk management derivatives
    315,695       10,292       293,326       (12,298 )     345,417       14,071       341,731       (17,191 )
Accrued interest receivable (payable)
          798             (1,392 )           1,288             (1,805 )
Netting adjustment(2)
          (10,586 )           13,345             (15,175 )           18,023  
                                                                 
Total net risk management derivatives
  $ 315,695     $ 504     $ 293,326     $ (345 )   $ 345,417     $ 184     $ 341,731     $ (973 )
                                                                 


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