We have interests in various entities that are considered to be 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.

As of September 30, 2011, we consolidated certain Fannie Mae securities that were not consolidated as of December 31, 2010 because we now hold in our portfolio a substantial portion of the certificates. As a result of consolidating these securities, which had combined total assets of $2.9 billion in unpaid principal balance as of September 30, 2011, we derecognized our investment in these trusts and recognized the assets and liabilities of the consolidated trusts at their fair value.

As of September 30, 2011, we deconsolidated VIEs that were consolidated as of December 31, 2010. These VIEs were Fannie Mae securitization trusts and were deconsolidated because we no longer hold in our portfolio a substantial portion of the certificates. As a result of deconsolidating these trusts, which had combined total assets of $446 million in unpaid principal balance as of December 31, 2010, we derecognized the assets and liabilities of the trusts and recognized at fair value our retained interests as securities in our condensed consolidated balance sheet.

We also have interests in VIEs that we do not consolidate because we are not deemed to be the primary beneficiary. These 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 September 30, 2011 and December 31, 2010, as well as our maximum exposure to loss and the total assets of those unconsolidated VIEs.

			As of September 30, 2011
							Limited
			Mortgage-Backed		Asset-Backed		Partnership
			Trusts		Trusts		Investments
			(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated
	balance sheets:
	Assets:
		Available-for-sale securities⁽¹⁾	$	73,814	$	-	$	-
		Trading securities⁽¹⁾		24,862		2,465		-
		Other assets		270		-		131
	Other liabilities			1,257		-		150
	Net carrying amount		$	97,689	$	2,465	$	(19)
Maximum exposure to loss⁽¹⁾			$	104,477	$	2,465	$	117
Total assets of unconsolidated VIEs⁽¹⁾			$	674,599	$	323,035	$	13,119


			As of December 31, 2010⁽²⁾
							Limited
			Mortgage-Backed		Asset-Backed		Partnership
			Trusts		Trusts		Investments
			(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated
	balance sheets:
	Assets:
		Available-for-sale securities⁽¹⁾	$	84,770	$	-	$	-
		Trading securities⁽¹⁾		24,021		5,321		-
		Other assets		257		-		94
	Other liabilities			773		-		170
	Net carrying amount		$	108,275	$	5,321	$	(76)
Maximum exposure to loss⁽¹⁾			$	111,004	$	5,321	$	319
Total assets of unconsolidated VIEs⁽¹⁾			$	740,387	$	363,721	$	13,102

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⁽¹⁾	Contains securities exposed through consolidation which may also represent an interest in other unconsolidated VIEs.

⁽²⁾	Certain prior period amounts have been reclassified to conform to the current period presentation.

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.

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 September 30, 2011 and 2010, the unpaid principal balance of portfolio securitizations was $22.0 billion and $35.1 billion, respectively. For the nine months ended September 30, 2011 and 2010, the unpaid principal balance of portfolio securitizations was $78.7 billion and $68.0 billion, respectively.

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


		Fannie Mae
		Single-class
		MBS & Fannie			REMICS &
		Mae Megas			SMBS
	(Dollars in millions)
As of September 30, 2011
Unpaid principal balance	$	618		$	14,008
Fair value		683			15,320
Weighted-average coupon		6.21	%		5.96	%
Weighted-average loan age		5.1years			4.5years
Weighted-average maturity		23.8years			19.5years


As of December 31, 2010
Unpaid principal balance	$	63		$	15,771
Fair value		68			16,745
Weighted-average coupon		6.58	%		6.28	%
Weighted-average loan age		4.2years			4.4years
Weighted-average maturity		25.6years			22.0years

For the three months ended September 30, 2011 and 2010, the principal and interest received on retained interests was $777 million and $855 million, respectively. For the nine months ended September 30, 2011 and 2010, the principal and interest received on retained interests was $2.2 billion and $2.6 billion, respectively.

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 are delinquent as of September 30, 2011 and December 31, 2010.

		As of
		September 30, 2011				December 31, 2010
		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	$	401,610	$	124,595	$	423,686	$	141,342
	Of consolidated trusts		2,567,502		25,808		2,565,347		34,080
Loans held for sale			335		60		964		127
Securitized loans			2,219		66		2,147		78
	Total loans managed	$	2,971,666	$	150,529	$	2,992,144	$	175,627

__________
⁽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.

The majority of our portfolio securitization transactions do not qualify for sale treatment. We report the assets and liabilities of consolidated trusts created via portfolio securitization transactions that do not qualify as sales in our condensed consolidated balance sheets. Our continuing involvement in the form of guaranty assets and guaranty liabilities with assets that were transferred into unconsolidated trusts is not material.

We recognize assets obtained and liabilities incurred in a portfolio securitization at fair value. Proceeds from the initial sale of securities from portfolio securitizations were $143 million and $169 million for the three months ended September 30, 2011 and 2010, respectively. Proceeds from the initial sale of securities from portfolio securitizations were $764 million and $544 million for the nine months ended September 30, 2011 and 2010, respectively.