Fannie Mae 2004 Annual Report Download - page 156

Table 31: Nonperforming Single-Family and Multifamily Loans
2004 2003 2002 2001
As of December 31,
(Restated) (Restated) (Restated)
(Dollars in millions)
Nonperforming loans:
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,987 $7,742 $6,303 $4,664
Troubled debt restructurings
(1)
....................... 816 673 580 503
Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . $8,803 $8,415 $6,883 $5,167
Interest on nonperforming loans:
Interest income forgone
(2)
.......................... $ 188 $ 192 $ 149 $ 102
Interest income recognized during year
(3)
............... 381 376 331 265
Accruing loans past due 90 days or more
(4)
............... $ 187 $ 225 $ 251 $ 301
(1)
Troubled debt restructurings include loans whereby the contractual terms have been modified that result in concessions
to borrowers experiencing financial difficulties.
(2)
Forgone interest income represents the amount of interest income that would have been recorded during the year on
nonperforming loans as of December 31 had the loans performed according to their contractual terms.
(3)
Represents interest income recognized during the year on loans classified as nonperforming as of December 31.
(4)
Recorded investment of loans as of December 31 that are 90 days or more past due and continuing to accrue interest
include loans insured or guaranteed by the government and loans where we have recourse against the seller of the loan
in the event of a default.
Credit Losses
Credit loss performance is a significant indicator of the effectiveness of our credit risk management strategies.
Credit-related losses include charge-offs plus foreclosed property expense (income). Credit losses for the years
ended December 31, 2004, 2003 and 2002 are presented in Table 32.
Table 32: Single-Family and Multifamily Credit Loss Performance
Single-
Family Multifamily Total
Single-
Family Multifamily Total
Single-
Family Multifamily Total
2004 2003 2002
For the Year Ended December 31,
(Restated) (Restated)
(Dollars in millions)
Charge-offs, net of recoveries . . . . . ...... $189 $ 21 $210 $196 $ 5 $201 $133 $ 18 $151
Foreclosed property expense (income) . . . . . (17) 28 11 (10) (2) (12) (10) (1) (11)
Credit-related losses . ................. $172 $49 $221 $186 $ 3 $189 $123 $ 17 $140
Charge-off ratio (basis points)
(1)
.......... 0.9bp 1.7bp 0.9bp 1.0bp 0.5bp 1.0bp 0.8bp 2.1bp 0.9bp
Credit loss ratio (basis points)
(2)
.......... 0.8bp 4.0bp 1.0bp 1.0bp 0.3bp 0.9bp 0.7bp 1.9bp 0.8bp
(1)
Represents charge-offs, net of recoveries, divided by average mortgage credit book of business.
(2)
Represents credit-related losses divided by average mortgage credit book of business.
Interest forgone on nonperforming loans in our mortgage portfolio, which is presented in Table 31, reduces
our net interest income but is not reflected in our credit loss total. Other-than-temporary impairment resulting
from deterioration in credit quality of our mortgage-related securities is not included in credit-related losses.
As shown in Table 32, our credit losses for the years presented have averaged 1.0 basis point, or 0.01%, of our
average mortgage credit book of business over the periods presented. The rapid acceleration in home prices
during the period from 1999 to 2005, combined with our use of credit enhancements, helped to mitigate our
credit losses. As a result of the substantial slowdown in home price appreciation during 2006 and our belief
that home prices may decline modestly in 2007, we expect our credit losses to increase.
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