Fannie Mae 2004 Annual Report Download - page 153

use analytical models and work rules to determine which alternative resolution, if any, may be appropriate for
each problem loan.
We track the ultimate performance of alternative resolutions in absolute terms and in relation to estimated
losses in the event of a traditional single-family loan foreclosure. We adjust our loss mitigation policies as
appropriate to be consistent with our risk management objectives. In the case of repayment plans and loan
modifications, we focus in particular on the performance of the loans subsequent to our intervention. Of the
conventional loans that recover through modifications, long-term forbearances and repayment plans, our
performance experience after 36 months following the inception of all such plans, based on the period 1998 to
2002, has been that approximately 65% of these loans remain current or have been paid in full. Approximately
11% have terminated through foreclosure. The remaining loans once again reached a delinquent status.
In those cases when a foreclosure avoidance effort is not successful, we foreclose and acquire the property.
Our property management and sale operation consists of several strategies designed to shorten our holding
time, minimize the impact on the neighborhood, maximize our recovery and mitigate credit losses. These
strategies include prompt assessment of the property condition, partnering with qualified local real estate
brokers and refurbishing the property to appeal to the broadest market of homebuyers, particularly buyers who
plan to live in the home.
The table below presents statistics on the resolution of conventional single-family problem loans for the years
ended December 31, 2004, 2003 and 2002.
Table 29: Statistics on Conventional Single-Family Problem Loan Workouts
2004 2003 2002
(Restated) (Restated)
(Number of loans)
For the Year Ended December 31,
Modifications
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,591 17,119 14,298
Repayment plans and long-term forbearances . . . . . . . . . . . . . . . . . . . . . . . 11,001 10,521 6,779
Pre-foreclosure sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,575 2,052 1,513
Deeds in lieu of foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 320 192
Total number of problem loan workouts
(2)
. . . . . . . . . . . . . . . . . . . . . . . . 36,497 30,012 22,782
(1)
Modifications include troubled debt restructurings, which result in concessions to borrowers, and other modifications to
the contractual terms of the loan that do not result in concessions to the borrower.
(2)
For each of the years ended December 31, 2004, 2003 and 2002, represents approximately 0.2% of the total number of
loans in our conventional single-family mortgage credit book.
Housing and Community Development
When a multifamily loan does not perform, we work closely with our loan servicers to minimize the severity
of loss by taking appropriate loss mitigation steps. We permit our multifamily servicers to pursue various
options as an alternative to foreclosure, including modifying the terms of the loan, selling the loan, and
preforeclosure sales. The resolution strategy depends in part on the borrower’s level of cooperation, the
performance of the market or submarket, the value of the property, the condition of the property, any
remaining equity in the property and the borrower’s ability to infuse additional equity into the property. The
unpaid principal balance of multifamily loan modifications totaled $224 million, $196 million and $184 million
for the years ended December 31, 2004, 2003 and 2002, respectively, which represented 0.18%, 0.16% and
0.19% of our multifamily mortgage credit book of business as of the end of each respective period.
When a non-guaranteed LIHTC investment does not perform, we work closely with our syndicator partner.
The resolution strategy depends on:
• the local general partner’s ability to meet obligations;
• the value of the property;
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