Fannie Mae 2007 Annual Report Download - page 226

(2)
Represents changes in expected cash flows due to changes in prepayment assumptions for SOP 03-3 loans.
(3)
Represents changes in expected cash flows due to changes in credit quality or credit assumptions for SOP 03-3 loans.
The table above only includes accreted effective interest for those loans which are still being accounted for
under SOP 03-3 and not SOP 03-3 loans that were modified as TDRs subsequent to their acquisition from
MBS trusts. For the years ended December 31, 2007, 2006 and 2005, we recorded interest income of
$496 million, $361 million and $123 million, respectively, related to interest income from SOP 03-3 loans that
have been returned to accrual status, accretion of the fair value discount taken upon acquisition of SOP 03-3
loans and interest for loans originally acquired as an SOP 03-3 loan that were subsequently modified as TDRs.
Of the amount recognized into interest income, $80 million, $43 million and $15 million in 2007, 2006 and
2005, respectively, related to the accretion of the fair value discount recorded upon acquisition of SOP 03-3
loans.
Subsequent to the acquisition of these loans, we recognized an increase in “Provision for credit losses” of
$76 million, $58 million and $50 million in the consolidated statements of operations for the years ended
December 31, 2007, 2006 and 2005, respectively, resulting from subsequent decreases in expected cash flows
for these acquired loans.
Nonaccrual Loans
We have single-family and multifamily loans in our mortgage portfolio, including those loans accounted for
under SOP 03-3, that are subject to our nonaccrual policy. The following table displays information about
nonaccrual loans in our portfolio as of December 31, 2007 and 2006.
2007 2006
As of December 31,
(Dollars in millions)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,343 $ 5,961
Accrued interest recorded on nonaccrual loans
(1)
.............................. 234 145
Accruing loans past due 90 days or more. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 147
Nonaccrual loans in portfolio (number of loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,810 57,392
(1)
Reflects accrued interest on nonaccrual loans that was recorded prior to their placement on nonaccrual status.
Forgone interest on nonaccrual loans, which represents the amount of income contractually due that we would
have reported had the loans performed according to their contractual terms, was $200 million, $141 million
and $169 million for the years ended December 31, 2007, 2006 and 2005, respectively.
Impaired Loans
Impaired loans include single-family and multifamily TDRs, certain single-family and multifamily loans that
are individually impaired as a result of Hurricane Katrina and SOP 03-3, and other multifamily loans.
SOP 03-3 Impaired Loans without a Loss Allowance
The total recorded investment of impaired loans acquired under SOP 03-3 for which we did not recognize a
loss allowance subsequent to acquisition was $1.8 billion and $1.1 billion as of December 31, 2007 and 2006,
respectively. The amount of interest income recognized on these impaired loans during the year was $8 million,
$5 million and $2 million for the years ended December 31, 2007, 2006 and 2005, respectively. We do not
recognize interest income when these loans are placed on nonaccrual status. Our average recorded investment
in these loans was $1.4 billion for each of the years ended December 31, 2007 and 2006.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)