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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

Fair Value Gains (Losses), Net
 
Table 10 presents the components of our fair value gains and losses.
 
Table 10:  Fair Value Gains (Losses), Net
 
                                 
    For the Three Months
    For the Six Months
 
    Ended June 30,     Ended June 30,  
    2011     2010     2011     2010  
    (Dollars in millions)  
 
Risk management derivatives fair value gains (losses) attributable to:
                               
Net contractual interest expense accruals on interest rate swaps
  $ (658 )   $ (756 )   $ (1,293 )   $ (1,591 )
Net change in fair value during the period
    (958 )     936       (207 )     (390 )
                                 
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 )
                                 
Trading securities gains, net
    135       640       360       1,698  
Other, net
    (92 )     60       (167 )     59  
                                 
Fair value gains (losses), net
  $ (1,634 )   $ 303     $ (1,345 )   $ (1,402 )
                                 
                                 
                                 
                2011     2010  
 
5-year swap interest rate:
                               
As of January 1
                    2.18 %     2.98 %
As of March 31
                    2.47       2.73  
As of June 30
                    2.03       2.06  
 
Risk Management Derivatives Fair Value Gains (Losses), Net
 
We supplement our issuance of debt securities with derivative instruments to further reduce duration and prepayment risks. We recorded risk management derivative fair value losses in the second quarter and first half of 2011 primarily as a result of a decrease in the fair value of our pay-fixed derivatives due to a decline in swap interest rates during the period.
 
We recorded risk management derivative gains in the second quarter of 2010 primarily as a result of changes in implied interest rate volatility, partially offset by time decay on our purchased options.
 
We recorded risk management derivative losses in the first half of 2010 as a result of: (1) time decay on our purchased options; (2) a decrease in the fair value of our pay-fixed derivatives due to a decline in swap interest rates; and (3) a decrease in implied interest rate volatility, which reduced the fair value of our purchased options.
 
We present, by derivative instrument type, the fair value gains and losses on our derivatives for the three and six months ended June 30, 2011 and 2010 in “Note 9, Derivative Instruments.”
 
Mortgage Commitment Derivatives Fair Value Gains (Losses), Net
 
Commitments to purchase or sell some mortgage-related securities and to purchase single-family mortgage loans are generally accounted for as derivatives. For open mortgage commitment derivatives, we include changes in their fair value in our condensed consolidated statements of operations and comprehensive loss. When derivative purchase commitments settle, we include the fair value of the commitment on the settlement date in the cost basis of the loan or security we purchase. When derivative commitments to sell securities settle, we include the fair value of the commitment on the settlement date in the cost basis of the security we sell. Purchases of securities issued by our consolidated MBS trusts are treated as extinguishments of debt; we recognize the fair value of the commitment on the settlement date as a component of debt extinguishment gains and losses. Sales of securities issued by our consolidated MBS trusts are treated as issuances of


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