Fannie Mae 2010 Annual Report Download - page 164

conditions. In December 2010 we communicated to our lenders that we are exiting the reverse mortgage
business and will no longer acquire newly originated home equity conversion mortgages.
Problem Loan Management
Our problem loan management strategies are primarily focused on reducing defaults to avoid losses that would
otherwise occur and pursuing foreclosure alternatives to reduce the severity of the losses we incur. If a
borrower does not make required payments, we work with the servicers of our loans to offer workout solutions
to minimize the likelihood of foreclosure as well as the severity of loss. We refer to actions taken by servicers
with borrowers to resolve the problem of existing or potential delinquent loan payments as “workouts.” Our
loan workouts reflect our various types of home retention strategies and foreclosure alternatives.
Our home retention solutions are intended to help borrowers stay in their homes and include loan
modifications, repayment plans and forbearances. Because we believe that reducing delays and implementing
solutions that can be executed in a timely manner and early in the delinquency increases the likelihood that
our problem loan management strategies will be successful in avoiding a default or minimizing severity, it is
important for our servicers to work with borrowers to complete these solutions as early in their delinquency as
feasible. If the servicer cannot provide a viable home retention solution for a problem loan, the servicer will
seek to offer foreclosure alternatives, primarily preforeclosure sales and deeds-in-lieu of foreclosure. These
alternatives reduce the severity of our loss resulting from a borrower’s default while permitting the borrower to
avoid going through a foreclosure. However, the existence of a second lien may limit our ability to provide
borrowers with loan workout options, including those that are part of our foreclosure prevention efforts. We
occasionally execute third-party sales, where we sell the property to a third party immediately prior to entering
the foreclosure process. When appropriate, we seek to move to foreclosure expeditiously.
Our mortgage servicers are the primary point of contact for borrowers and perform a vital role in our efforts to
reduce defaults and pursue foreclosure alternatives. We seek to improve the servicing of our delinquent loans
through a variety of means, including improving our communications with and training of our servicers,
increasing the number of our personnel who manage our servicers, directing servicers to contact borrowers at
an earlier stage of delinquency and improve their telephone communications with borrowers, and holding our
servicers accountable for following our requirements. We continue to work with some of our servicers to test
and implement “high-touch” servicing protocols designed for managing higher-risk loans, which include lower
ratios of loans per servicer employee, beginning borrower outreach strategies earlier in the delinquency cycle
and establishing a single point of resolution for distressed borrowers. Additionally, partnering with our
servicers, civic and community leaders and housing industry partners, we have launched a series of nationwide
Mortgage Help Centers that will accelerate the response time for struggling borrowers with loans owned by us.
During 2010, we established six Mortgage Help Centers and completed approximately 900 home retention
plans that kept borrowers in their homes. We plan to open additional Mortgage Help Centers in 2011.
In the following section, we present statistics on our problem loans, describe specific efforts undertaken to
manage these loans and prevent foreclosures and provide metrics regarding the performance of our loan
workout activities. We generally define single-family problem loans as loans that have been identified as being
at imminent risk of payment default; early stage delinquent loans that are either 30 days or 60 days past due;
and seriously delinquent loans, which are loans that are three or more monthly payments past due or in the
foreclosure process. Unless otherwise noted, single-family delinquency data is calculated based on number of
loans. We include single-family conventional loans that we own and that back Fannie Mae MBS in the
calculation of the single-family delinquency rate. Percentage of book outstanding calculations are based on the
unpaid principal balance of loans for each category divided by the unpaid principal balance of our total single-
family guaranty book of business for which we have detailed loan-level information.
159