Fannie Mae 2002 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2002 Fannie Mae annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 134

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134

75
FANNIE MAE 2002 ANNUAL REPORT
•Serious Delinquency
A key measure of credit performance and future defaults
for the single-family mortgage credit book is the serious
delinquency rate, although not all loans that become
seriously delinquent result in a default. A serious delinquency
occurs when a borrower has missed three or more
consecutive monthly payments, and the loan has not yet been
brought current or been extinguished through foreclosure,
payoff, or other resolution. A loan referred to foreclosure
but not yet foreclosed is also considered seriously delinquent.
The serious delinquency rate is the number of mortgages
that are seriously delinquent divided by the total number of
loans outstanding. The rate at which new loans become
seriously delinquent and the rate at which existing seriously
delinquent loans are resolved significantly affects the level
of future credit losses.
Effective December 31, 2002, we changed how we report our
single-family serious delinquency rate to be more consistent
with our current business and credit risk management
practices. Traditionally, we reported our single-family serious
delinquency rate for those loans where we have the primary
risk of default. For example, we did not include loans that had
substantial recourse to lenders or were covered by significant
supplemental pool insurance from mortgage insurance
companies in our serious delinquency statistics. A significant
portion of our business represents loans where we bear some
risk, but share a portion of that risk with others. As a result,
we believe it is more meaningful to report our single-family
delinquency rate on all of our conventional loans and
distinguish between loans on which we benefit from credit
enhancement and loans on which we do not benefit from
credit enhancement. We have reclassified prior period
statistics to conform to the current year’s presentation.
Table 36 compares the serious delinquency rates for
conventional single-family loans with credit enhancements
and without credit enhancements.
TABLE 35: CONVENTIONAL SINGLE-FAMILY MORTGAGE CREDIT BOOK CHARACTERISTICS
Weighted Average Credit Characteristics Based on UPB1
2002 2001 2000
Credit Non-Credit Credit Non-Credit Credit Non-Credit
Enhanced Enhanced Total Enhanced Enhanced Total Enhanced Enhanced Total
Weighted average original LTV . . . . . . . . . . . . 87% 67% 73% 87% 68% 74% 86% 68% 75%
Weighted average current LTV . . . . . . . . . . . . . 75 58 62 71 55 60 72 53 60
Weighted average credit score . . . . . . . . . . . . . . 694 721 714 699 719 713 702 720 713
1Indicates the principal amount of loans that have credit enhancement but does not reflect the level of credit enhancement. Excludes assets for which loan-level data is not available.
TABLE 36: CONVENTIONAL SINGLE-FAMILY SERIOUS DELINQUENCY RATES
2002 2001 2000
Book Serious Book Serious Book Serious
Outstanding1Delinquency Rate2Outstanding1Delinquency Rate2Outstanding1Delinquency Rate2
Credit enhanced . . . . . . . . . . . . . . . . . . . . . . . . . 27% 1.29% 32% 1.05% 38% .77%
Non-credit enhanced . . . . . . . . . . . . . . . . . . . . . . . 73 .31 68 .33 62 .29
Total conventional loans . . . . . . . . . . . . . . . . . 100% .57% 100% .55% 100% .45%
1Reported based on unpaid principal balance.
2Reported based on number of loans.
For conventional loans in our single-family mortgage credit
book, our total serious delinquency rate increased modestly
to .57 percent at December 31, 2002, from .55 percent at
December 31, 2001. This increase was primarily due to an
increase in the serious delinquency rate of our credit-
enhanced book. The serious delinquency rate for
conventional loans in our single-family mortgage credit book
without credit enhancement declined to .31 percent at
December 31, 2002, from .33 percent at December 31, 2001,
a level more consistent with our delinquency rates prior to
the September 11 terrorist attacks and reflective of the low
risk profile of these loans. The serious delinquency rate for
conventional loans in our single-family mortgage credit
book with credit enhancement increased to 1.29 percent
from 1.05 percent in 2001. These loans have a higher risk
profile and tend to be more sensitive to changes in the
economy than loans without credit enhancement.