Fannie Mae 2002 Annual Report Download - page 42

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40 FANNIE MAE 2002 ANNUAL REPORT
The average yield on our net mortgage portfolio decreased
to 6.73 percent in 2002, from 7.11 percent in 2001, and
7.16 percent in 2000. The decrease in yield during 2002 and
2001 resulted largely from the general decline in mortgage
rates on loans originated in the primary market and sold
into the secondary market plus an increase in the level of
liquidations of older, higher-rate loans. The liquidation rate
on mortgages in portfolio (excluding sales) increased to
37 percent in 2002 from 25 percent in 2001—more than
triple the 2000 liquidation rate of 10 percent. Mortgage
liquidations in 2002, 2001, and 2000 totaled $277 billion,
$164 billion, and $57 billion, respectively. Liquidations
increased significantly in 2002 and 2001 largely because
of extensive refinancing in response to falling mortgage
interest rates.
Table 9 summarizes mortgage portfolio activity on a gross
basis and average yields from 2000 through 2002.
TABLE 9: MORTGAGE PORTFOLIO ACTIVITY1
Purchases Sales Repayments2
Dollars in millions 2002 2001 2000 2002 2001 2000 2002 2001 2000
Single-family:
Government insured or guaranteed . . . . . . . $9,493 $6,001 $ 6,940 $139 $— $521 $13,057 $8,125 $ 3,423
Conventional:
Long-term, fixed-rate . . . . . . . . . . . . . . 280,815 226,516 113,444 8,253 7,621 9,219 216,218 120,787 35,208
Intermediate-term, fixed-rate . . . . . . . . 62,102 26,146 11,607 464 442 599 37,544 23,391 13,105
Adjustable-rate . . . . . . . . . . . . . . . . . . . 10,739 3,777 17,683 347 228 374 8,806 9,937 4,293
Total conventional single-family . . . . . . . . . 353,656 256,439 142,734 9,064 8,291 10,192 262,568 154,115 52,606
Total single-family . . . . . . . . . . . . . . . . . 363,149 262,440 149,674 9,203 8,291 10,713 275,625 162,240 56,029
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,492 8,144 4,557 379 690 269 1,794 2,172 1,204
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $370,641 $270,584 $154,231 $9,582 $8,981 $10,982 $277,419 $164,412 $57,233
Average net yield . . . . . . . . . . . . . . . . . . . . . . . . 5.92% 6.56% 7.62% 6.83% 7.23% 7.18%
Repayments as a percentage of
average mortgage portfolio . . . . . . . . . . . . 37.4 24.7 10.3
1Excludes premiums, discounts, and other deferred price adjustments.
2Includes mortgage loan prepayments, scheduled amortization, and foreclosures.
We classify mortgage loans on our balance sheet as either
held-for-investment or held-for-sale. Our mortgage
portfolio also includes MBS and other mortgage-related
securities that we classify as either held-to-maturity or
available-for-sale. On September 13, 2002, concurrent with
the implementation of a new risk-based capital rule issued by
OFHEO, we reclassified $124 billion of securities in our
mortgage portfolio from held-to-maturity to available-for-
sale in accordance with Financial Accounting Standard No.
115, Accounting for Certain Investments in Debt and Equity
Securities (FAS 115). At the time of this noncash transfer,
these mortgage-related securities had gross unrealized gains
of $5.364 billion and unrealized losses of $53 million.
Table 10 shows gross unrealized gains and losses on our
MBS and mortgage-related securities at the end of 2002,
2001, and 2000.