Consolidations and Transfers of Financial Assets

6 Months Ended

Jun. 30, 2012

Consolidations and Transfers of Financial Assets [Abstract]

Consolidations and Transfers of Financial Assets [Text Block]

Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization trusts guaranteed by us via lender swap and portfolio securitization transactions, mortgage and asset-backed trusts that were not created by us, as well as housing partnerships that are established to finance the acquisition, construction, development or rehabilitation of affordable multifamily and single-family housing. These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the power to direct these activities.

As of June 30, 2012, we consolidated certain VIEs that were not consolidated as of December 31, 2011, generally due to increases in the amount of the certificates issued by the entity that are held in our portfolio (for example, when we hold a substantial portion of the securities issued by Fannie Mae multi-class resecuritization trusts). As a result of consolidating these entities, which had combined total assets of $2.8 billion in unpaid principal balance as of June 30, 2012, we derecognized our investment in these entities and recognized the assets and liabilities of the consolidated entities at fair value.

As of June 30, 2012, we also deconsolidated certain VIEs that were consolidated as of December 31, 2011, generally due to decreases in the amount of the certificates issued by the entity that are held in our portfolio. As a result of deconsolidating these entities, which had combined total assets of $102 million in unpaid principal balance as of December 31, 2011, we derecognized the assets and liabilities of the entities and recognized at fair value our retained interests as securities in our condensed consolidated balance sheets.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization trusts, as well as other investment entities. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated VIEs as of June 30, 2012 and December 31, 2011, as well as our maximum exposure to loss and the total assets of those unconsolidated VIEs.



	As of June 30, 2012
	Mortgage-Backed Trusts			Asset-Backed Trusts		Limited Partnership Investments
	(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets:
Assets:
Available-for-sale securities ⁽¹⁾	$	62,010		$	—		$	—
Trading securities ⁽¹⁾	23,285			537			—
Other assets	272			—			116
Other liabilities	(1,695		)	—			(138		)
Net carrying amount	$	83,872		$	537		$	(22	)
Maximum exposure to loss ⁽¹⁾	$	93,272		$	537		$	109
Total assets of unconsolidated VIEs ⁽¹⁾	$	636,023		$	78,306		$	11,336


	As of December 31, 2011
	Mortgage-Backed Trusts			Asset-Backed Trusts		Limited Partnership Investments
	(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets:
Assets:
Available-for-sale securities ⁽¹⁾	$	69,101		$	—		$	—
Trading securities ⁽¹⁾	24,292			2,111			—
Other assets	271			—			145
Other liabilities	(1,347		)	—			(153		)
Net carrying amount	$	92,317		$	2,111		$	(8	)
Maximum exposure to loss ⁽¹⁾	$	100,146		$	2,111		$	137
Total assets of unconsolidated VIEs ⁽¹⁾	$	641,346		$	256,845		$	12,256

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⁽¹⁾	Contains securities recognized in our condensed consolidated balance sheets due to consolidation of certain multi-class resecuritization trusts.

Our maximum exposure to loss generally represents the greater of our recorded investment in the entity or the unpaid principal balance of the assets covered by our guaranty. However, our securities issued by Fannie Mae multi-class resecuritization trusts that are not consolidated do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own portfolio in a portfolio securitization transaction. For the three months ended June 30, 2012 and 2011, the unpaid principal balance of portfolio securitizations was $46.4 billion and $27.3 billion, respectively. For the six months ended June 30, 2012 and 2011, the unpaid principal balance of portfolio securitizations was $88.1 billion and $56.6 billion, respectively.

The following table displays some key characteristics of the securities retained in unconsolidated portfolio securitization trusts.



	Fannie Mae Single-class MBS & Fannie Mae Megas			REMICS & SMBS⁽¹⁾
	(Dollars in millions)
As of June 30, 2012
Unpaid principal balance	$	526		$	10,407
Fair value	585			11,679
Weighted-average coupon	6.21		%	5.67		%
Weighted-average loan age	5.9		years	4.3		years
Weighted-average maturity	23.0		years	16.1		years

As of December 31, 2011
Unpaid principal balance	$	588		$	12,697
Fair value	654			14,043
Weighted-average coupon	6.21		%	5.86		%
Weighted-average loan age	5.4		years	4.5		years
Weighted-average maturity	23.5		years	18.6		years

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⁽¹⁾	Consists of Real Estate Mortgage Investment Conduits (“REMICs”) and stripped mortgage-backed securities (“SMBS”).

For the three months ended June 30, 2012 and 2011, the principal and interest received on retained interests was $636 million and $715 million, respectively. For the six months ended June 30, 2012 and 2011, the principal and interest received on retained interests was $1.3 billion and $1.5 billion, respectively.

Managed Loans

We define “managed loans” as on-balance sheet mortgage loans as well as mortgage loans that we have securitized in unconsolidated portfolio securitization trusts. The following table displays the unpaid principal balances of managed loans, including those managed loans that were delinquent as of June 30, 2012 and December 31, 2011.



	As of
	June 30, 2012						December 31, 2011
	Unpaid Principal Balance			Principal Amount of Delinquent Loans⁽¹⁾			Unpaid Principal Balance			Principal Amount of Delinquent Loans⁽¹⁾
		(Dollars in millions)
Loans held for investment:
Of Fannie Mae		$	385,172		$	111,800		$	396,276		$	122,392
Of consolidated trusts		2,586,317			18,793			2,570,339			24,893
Loans held for sale		453			127			312			57
Securitized loans		2,196			2			2,273			71
Total loans managed		$	2,974,138		$	130,722		$	2,969,200		$	147,413

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⁽¹⁾	Represents the unpaid principal balance of loans held for investment, loans held for sale and securitized loans for which we are no longer accruing interest and loans 90 days or more delinquent which are continuing to accrue interest.

Qualifying Sales of Portfolio Securitizations

The majority of our portfolio securitization transactions do not qualify for sale treatment as we consolidate the substantial majority of our single-class MBS trusts. We report assets and liabilities of consolidated trusts created via portfolio securitization transactions that do not qualify as sales in our condensed consolidated balance sheets.

We recognize assets obtained and liabilities incurred in qualifying sales of portfolio securitizations at fair value. Proceeds from the initial sale of securities from portfolio securitizations were $163 million and $513 million for the three months ended June 30, 2012 and 2011, respectively. Proceeds from the initial sale of securities from portfolio securitizations were $296 million and $621 million for the six months ended June 30, 2012 and 2011, respectively. Our continuing involvement in the form of guaranty assets and guaranty liabilities with assets that were transferred into unconsolidated trusts is not material to our condensed consolidated financial statements.

Other Securitizations

We also completed other portfolio securitization transactions that did not qualify as sales during the six months ended June 30, 2012 and were accounted for as secured borrowings. Proceeds from these transactions were $421 million and were recorded as long-term debt of Fannie Mae in our condensed consolidated balance sheet. As of June 30, 2012, the fair value of trading securities underlying these transactions was $201 million, and the unpaid principal balance of mortgage loans of consolidated trusts underlying these transactions was $227 million. The related assets have been transferred to MBS trusts and are restricted solely for the purpose of servicing the related MBS. We did not complete any securitizations of this type during the six months ended June 30, 2011.

- Definition

The entire disclosure for consolidation of the reporting entity. Provides users with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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