Fannie Mae 2001 Annual Report Download - page 35

loan balance in homes underlying mortgages, the lower the
incidence and severity of default. Fannie Mae’s conventional
single-family book of business is predominantly composed
of long-term and intermediate-term fixed-rate loans, which
have a lower incidence of default than adjustable-rate
mortgages. At year-end 2001, 94 percent of Fannie Mae’s
conventional single-family book of business was long-term
or intermediate-term fixed-rate loans, compared with
93 percent at year-end 2000. Table 8 provides a detailed
overview of the distribution of Fannie Mae’s conventional
single-family mortgages by product type and loan-to-value
ratios.
{ 33 } Fannie Mae 2001 Annual Report
TABLE 8: DISTRIBUTION OF CONVENTIONAL SINGLE-FAMILY LOANS
Outstanding at December 31, Business Volumes
2001 2000 2001 2000 1999
Product:
Long-term, fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75% 74% 76% 73% 76%
Intermediate-term, fixed-rate1 . . . . . . . . . . . . . . . . . . . . . 19 19 19 11 19
Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67516 5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100% 100% 100%
Original loan-to-value ratio:
Greater than 90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13% 14% 13% 17% 15%
81% to 90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 13 15 14
71% to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 41 44 44 42
61% to 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 14 13 11 14
Less than 61% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 16 17 13 15
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100% 100% 100%
Average original loan-to-value ratio . . . . . . . . . . . . . . . . . . . 74% 75% 74% 77% 75%
Current loan-to-value ratio2:
Greater than 90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 3%
81% to 90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
71% to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 17
61% to 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 23
Less than 61% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 51
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100%
Average current loan-to-value ratio . . . . . . . . . . . . . . . . . . . 59% 58%
Average loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,813 $92,800 $134,718 $118,100 $115,700
(Maximum loan amount $275,000 in 2001)
1Contractual maturities of 20 years or less at purchase for portfolio loans and 15 years or less at issue date for MBS issuances.
2Includes only Fannie Mae primary risk loans.
Multifamily Credit Risk Management
Fannie Mae has dedicated multifamily underwriting and due
diligence teams that evaluate certain loans prior to acquisition and
portfolio monitoring and loss mitigation teams that manage credit risk
throughout the life of multifamily loans.
There are two primary sources of risk from a mortgage on
a multifamily property. First, the underlying property cash
flows may be insufficient to service the loan. Second, the
proceeds from the sale or refinancing of a property may
be insufficient to repay the loan at maturity.
To manage these risks, Fannie Mae centralizes responsibility
for managing credit risk in the multifamily portfolio within
the multifamily business unit. The business unit ensures that
the aggregate risk is properly identified and managed and
promotes consistent application of risk management policies
and procedures. Specific areas of responsibility, which are
subject to review and oversight by the Chief Credit Officer
and Credit Risk Policy Committee, include portfolio credit
risk management, lender assessment, counterparty risk
evaluation, regular asset management of earning assets,
special asset management of problem transactions, and
contract compliance monitoring for structured transactions.
Fannie Mae maintains rigorous loan underwriting guidelines
and extensive real estate due diligence examinations for the
loans it acquires or guarantees. The loan underwriting
guidelines include specific occupancy rate, loan-to-value,
and debt service coverage criteria. The due diligence
examinations typically include property condition and
property valuation reviews as well as investigations into the
quality of property management. Because of the size of
multifamily loans, management generally requires servicers