Fannie Mae 2006 Annual Report Download - page 142

loan-level statistics only on conventional single-family mortgage loans held in our portfolio and backing Fannie MBS
(whether held in our portfolio or held by third parties).
(2)
Percentages calculated based on unpaid principal balance of loans at time of acquisition.
(3)
Percentages calculated based on unpaid principal balance of loans as of the end of each period.
(4)
The original LTV ratio generally is based on the appraised property value reported to us at the time of acquisition of the
loan and the original unpaid principal balance of the loan. Excludes loans for which this information is not readily available.
(5)
The aggregate estimated mark-to-market LTV ratio is based on the estimated current value of the property, calculated
using an internal valuation model that estimates periodic changes in home value, and the unpaid principal balance of
the loan as of the date of each reported period. Excludes loans for which this information is not readily available.
(6)
Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-
rate have maturities equal to or less than 15 years. Fixed-rate mortgage loans and ARMs represented an estimated 90%
and 10%, respectively, of our single-family business volume for the first six months of 2007.
(7)
Reflects Fair Isaac Corporation credit score, referred to as FICO»score, which is a commonly used credit score that
ranges from a low of 300 to a high of 850. We obtain borrower credit scores on the majority of single-family
mortgage loans that we purchase or that back Fannie Mae MBS.
(8)
Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast includes CT, DE, ME, MA, NH, NJ,
NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV.
Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT,
NV, OR, WA and WY.
While we expect the substantial slowdown in the housing market to increase our future credit losses, we
believe the overall credit quality of the mortgage loans in our conventional single-family mortgage credit book
of business continued to remain strong as of December 31, 2006, as evidenced by the risk characteristics
presented above in Table 35. Our mortgage credit book of business continues to consist mostly of traditional
fixed-rate mortgage loans. Over 95% of our conventional single-family mortgage credit book of business
consists of loans secured by one-unit properties. The weighted average credit score within our single-family
mortgage credit book of business remained high and the estimated mark-to-market LTV ratio remained below
60%. Approximately 10% of our conventional single-family mortgage credit book of business had an
estimated mark-to-market LTV ratio greater than 80% as of December 31, 2006. Of that 10% portion, over
76% of the loans were covered by credit enhancement. The remainder of these loans, which would have
required credit enhancement at acquisition if the original LTV ratios had been above 80%, were not covered
by credit enhancement as of December 31, 2006. While the LTV ratios of these loans were at or below 80% at
the time of acquisition, they increased above 80% subsequent to acquisition due to declines in home price
appreciation over time, partially offset by loan principal payments. In examining the geographic concentration
of these high LTV loans, there was no metropolitan statistical area with more than 5% of this segment of our
conventional single-family mortgage credit book of business. The three largest metropolitan statistical area
concentrations were in Atlanta, Chicago and Detroit.
As of June 30, 2007, the weighted average credit score, the original LTV ratio and the weighted average estimated
mark-to-market LTV ratio for our conventional single-family book of business were 722, 71% and 57%,
respectively. Approximately 13% of our conventional single-family mortgage credit book of business had an
estimated mark-to-market LTV ratio greater than 80% as of June 30, 2007. The portion of our conventional single-
family mortgage credit book of business for which we have access to detailed loan-level information represented
approximately 95% of our total conventional single-family mortgage credit book of business as of June 30, 2007.
The acquisition of mortgage loans with features that make it easier for borrowers to obtain a mortgage loan
has produced the most notable change in the overall risk profile of our single-family mortgage credit book of
business in recent years. We have worked closely with our lender customers to provide liquidity for loans with
these features, including the following:
Interest-Only and Negative Amortization Loans: Interest-only mortgage loans (that are available with both
fixed-rate and adjustable-rate terms) and ARMs that have the potential for negative amortization offer lower
initial monthly payments by allowing borrowers to defer repayment of principal or interest. As a result of the
shift in the product profile of new business, interest-only ARMs and negative-amortizing ARMs increased to
approximately 12% of our conventional single-family business volume in 2006 and 2005, compared with
approximately 7% in 2004. Interest-only ARMs and negative amortizing ARMs together represented
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