Fannie Mae 2010 Annual Report Download - page 316

Historically, this estimate was based significantly on historical cash collections. In the fourth quarter of 2010,
the following factors impacted this estimate:
• we revised our methodology to take into account trends in management actions taken before cash
collections, which resulted in our allowance for loan losses being $1.1 billion higher than it would have
been under the previous methodology; and
• agreements with seller/servicers that addressed their loan repurchase and other obligations to us impacted
our expectation of future make-whole payments, resulting in a decrease in our allowance for loan losses
of approximately $700 million.
In the three month period ended June 30, 2010, we identified that for a portion of our delinquent loans we had
not estimated and recorded our obligation to reimburse servicers for advances they made on our behalf for
preforeclosure property taxes and insurance. We previously recognized these expenses when we reimbursed
servicers. We also did not record a receivable from borrowers for these payments or assess the collectibility of
that receivable. As such, our allowance did not include an estimation of uncollectable amounts from those
borrowers. We evaluated the effects of this misstatement, both quantitatively and qualitatively and concluded
that the misstatement is not material to our 2010 loss or any prior consolidated financial statements.
The year ended December 31, 2010 includes an out-of-period adjustment of $1.1 billion to our consolidated
statement of operations reflecting our assessment of the collectibility of the receivable from the borrowers.
Reserve for Guaranty Losses
The following table displays changes in the reserve for guaranty losses for the years ended December 31,
2010, 2009 and 2008.
2010 2009 2008
For the Year Ended December 31,
(Dollars in millions)
Reserve for guaranty losses:
Beginning balance, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,430 $ 21,830 $ 2,693
Adoption of new accounting standards . . . . . . . . . . . . . . . . . . . . . . . . (54,103) — —
Provision for guaranty losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 63,057 23,929
Charge-offs
(1)(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203) (31,142) (4,986)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 685 194
Ending balance, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 323 $ 54,430 $21,830
(1)
Includes charges of $228 million and $333 million for the years ended December 31, 2009 and 2008, respectively,
related to unsecured HomeSaver Advance loans. There were no charges related to unsecured HomeSaver Advance
loans for the year ended December 31, 2010.
(2)
Includes charges recorded at the date of acquisition of $180 million, $20.3 billion and $2.1 billion for the years ended
December 31, 2010, 2009 and 2008, respectively, for acquired credit-impaired loans where the acquisition cost
exceeded the fair value of the acquired loan.
F-58
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)