Fannie Mae 2004 Annual Report Download - page 159

provisions of SFAS 114. We provide additional information on the methodology used in developing our
allowance for loan losses and reserve for guaranty losses in “Notes to Consolidated Financial Statements—
Note 2, Summary of Significant Accounting Policies.” Because of the significant degree of judgment involved
in estimating the allowance for loan losses and reserve for guaranty losses, we identify it as a critical
accounting policy and discuss the assumptions involved in our estimation process in “Critical Accounting
Policies and Estimates—Allowance for Loan Losses and Reserve for Guaranty Losses.”
We report the allowance for loan losses and reserve for guaranty losses as separate line items in the
consolidated balance sheets. The provision for credit losses is reported in the consolidated statements of
income. Table 35 summarizes changes in our allowance for loan losses and reserve for guaranty losses for the
years ended December 31, 2004, 2003 and 2002.
Table 35: Allowance for Loan Losses and Reserve for Guaranty Losses
2004 2003 2002
As of December 31,
(Restated) (Restated)
(Dollars in millions)
Allowance for loan losses:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 290 $ 216 $ 168
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 187 128
Charge-offs
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (321) (270) (175)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 72 27
Increase from the reserve for guaranty losses
(2)
..................... 75 85 68
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 349 $ 290 $ 216
Reserve for guaranty losses:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 313 $ 223 $ 138
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 178 156
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24) (7) (11)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 8
Decrease to the allowance for loan losses
(2)
. . . . . . . . . . . . . . . . . . . . . . . (75) (85) (68)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 396 $ 313 $ 223
Combined allowance for loan losses and reserve for guaranty losses:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 603 $ 439 $ 306
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 365 284
Charge-offs
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (345) (277) (186)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 76 35
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 745 $ 603 $ 439
Balance at end of each period attributable to:
Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 644 $ 516 $ 374
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 87 65
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 745 $ 603 $ 439
Percent of combined allowance and reserve in each category to related
mortgage credit book of business:
(3)
Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.03% 0.02% 0.02%
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.08 0.07 0.07
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.03 0.03 0.02
(1)
Includes accrued interest of $29 million, $29 million and $24 million for the years ended December 31, 2004, 2003
and 2002, respectively.
(2)
Includes decrease in reserve for guaranty losses and increase in allowance for loan losses due to the purchase of
delinquent loans from MBS pools.
(3)
Represents ratio of combined allowance and reserve balance by loan type to mortgage credit book of business by loan
type.
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