Fannie Mae 2006 Annual Report Download - page 144

rental payment trends and vacancy levels in local markets to identify loans or investments that merit closer
attention or loss mitigation actions. We also monitor our LIHTC investments for program compliance.
For our investments in multifamily loans, the primary asset management responsibilities are performed by our
DUS lenders. Similarly, for many of our equity investments, the primary asset management is performed by
our syndicators, our fund advisors, our joint venture partners or other third parties. We periodically evaluate
the performance of our third-party service providers for compliance with our asset management criteria.
Credit Loss Management
Single-Family
We manage problem loans to mitigate credit losses. In our experience, early intervention is critical to
controlling credit losses. If a mortgage loan does not perform, we work in partnership with the servicers of our
loans to minimize the frequency of foreclosure as well as the severity of loss. Our loan management strategy
begins with payment collection and work-out guidelines designed to minimize the number of borrowers who
fall behind on their obligations and to help borrowers who are delinquent from falling further behind on their
payments.
We require our single-family servicers to pursue various resolutions of problem loans as an alternative to
foreclosure, including:
• repayment plans in which borrowers repay past due principal and interest over a reasonable period of time
through a temporarily higher monthly payment;
• loan modifications in which past due interest amounts are added to the loan principal amount and
recovered over the remaining life of the loan, and other loan adjustments;
• forbearances in which the lender agrees to suspend or reduce borrower payments for a period of time;
• accepting deeds in lieu of foreclosure whereby the borrower signs over title to the property without the
added expense of a foreclosure proceeding; and
• preforeclosure sales in which the borrower, working with the servicer, sells the home and pays off all or
part of the outstanding loan, accrued interest and other expenses from the sale proceeds.
The table below presents statistics on the resolution of conventional single-family problem loans for the years
ended December 31, 2006, 2005 and 2004.
Table 36: Statistics on Conventional Single-Family Problem Loan Workouts
Unpaid
Principal
Balance
Number
of Loans
Unpaid
Principal
Balance
Number
of Loans
Unpaid
Principal
Balance
Number
of Loans
2006 2005 2004
As of December 31,
(Dollars in millions)
Modifications
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,173 27,607 $2,292 20,732 $2,519 22,591
Repayment plans and forbearances completed . . . . . . . . . 1,908 17,324 1,470 13,540 1,226 11,573
Pre-foreclosure sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 1,960 300 2,478 311 2,575
Deeds in lieu of foreclosure . . . . . . . . . . . . . . . . . . . . . . 52 496 38 384 35 330
Total problem loan workouts . . . . . . . . . . . . . . . . . . . $5,371 47,387 $4,100 37,134 $4,091 37,069
Percent of conventional single-family mortgage credit
book of business . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2% 0.3% 0.2% 0.2% 0.2% 0.2%
(1)
Modifications include troubled debt restructurings, which result in concessions to borrowers, and other modifications to
the contractual terms of the loan that do not result in concessions to the borrower.
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