Print Page  |  Close Window

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)
 
The following table displays, by type of derivative instrument, the fair value gains and losses, net on our derivatives for the three and six months ended June 30, 2011 and 2010.
 
                                 
    For the
    For the
 
    Three Months
    Six Months
 
    Ended June 30,     Ended June 30,  
    2011     2010     2011     2010  
          (Dollars in millions)        
 
Risk management derivatives:
                               
Swaps:
                               
Pay-fixed
  $ (5,474 )   $ (10,898 )   $ (4,872 )   $ (16,777 )
Receive-fixed
    2,784       7,847       2,528       12,516  
Basis
    10       21       29       30  
Foreign currency
    53       (8 )     83       (11 )
Swaptions:
                               
Pay-fixed
    327       (425 )     272       (1,359 )
Receive-fixed
    733       3,655       500       3,682  
Interest rate caps
    (14 )     (43 )     (18 )     (99 )
Other(1)
    (35 )     31       (22 )     37  
                                 
Total risk management derivatives fair value gains (losses), net
    (1,616 )     180       (1,500 )     (1,981 )
Mortgage commitment derivatives fair value losses, net
    (61 )     (577 )     (38 )     (1,178 )
                                 
Total derivatives fair value losses, net
  $ (1,677 )   $ (397 )   $ (1,538 )   $ (3,159 )
                                 
 
 
(1) Includes futures, swap credit enhancements and mortgage insurance contracts.
 
Derivative Counterparty Credit Exposure
 
Our derivative counterparty credit exposure relates principally to interest rate and foreign currency derivative contracts. We are exposed to the risk that a counterparty in a derivative transaction will default on payments due to us. If there is a default, we may need to acquire a replacement derivative from a different counterparty at a higher cost or may be unable to find a suitable replacement. We estimate our exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a net gain position by counterparty where the right of legal offset exists, such as master netting agreements, and by transaction where the right of legal offset does not exist. Typically, we seek to manage credit exposure by contracting with experienced counterparties that are rated A- (or its equivalent) or better by S&P, Moody’s or Fitch. We also manage our exposure by requiring counterparties to post collateral. The collateral includes cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.


132