Fannie Mae 2008 Annual Report Download - page 12

many of these efforts are relatively new and are being applied more broadly and in ways that we have not
previously applied them. As a result, it will take time for us to assess and provide statistical information both on
the relative success of these efforts and their effect on our results of operations and financial condition. Our early
experience indicates that a number of our programs may not be achieving results either as rapidly as we had
expected or in the ways that we had expected, and we are working with our conservator to reassess these
programs in order to both help us best fulfill our objective of helping homeowners and the mortgage market, and
to determine their effectiveness and priority with respect to the recently announced HASP. As we assess these
programs, we may expand, eliminate or modify these programs in the future. We have included data relating to
our borrower loss mitigation activities for 2008 and prior periods in “Part II—Item 7—Risk Management—
Credit Risk Management—Mortgage Credit Risk Management.”
Because approximately 92% of our guaranty book of business is made up of single-family conventional
mortgage loans that we own or that are in guaranteed Fannie Mae MBS and because the number of seriously
delinquent loans is significantly higher for our single-family mortgage credit guaranty book, we have focused
our credit loss reduction and foreclosure prevention efforts primarily on these single-family conventional
loans. The recently announced HASP is consistent with that focus. We have developed a variety of options for
providing assistance, rather than relying on a “one size fits all” approach, in recognition that no single solution
will resolve the varied problems facing homeowners who currently need assistance or who may need
assistance in the future. As we implement these new initiatives, however, we face a variety of challenges that
have limited the early success of our initiatives.
One challenge we face is the current unpredictability of consumer behavior. As a result, in introducing new
programs, we have little historical data that we can use either as a basis for predicting consumer impact,
response and acceptance rates, or to identify consumer behavior that is not consistent with historical patterns.
To address this challenge, we monitor and assess on a regular basis both our workout initiatives and our
understanding of borrowers’ needs in the current market environment so that we will be in a position to offer
solutions designed to have the highest possible success rate.
A second challenge we face is the stress that the current market environment has placed on servicer resources.
Because we implement all of our homeowner assistance programs through servicers and depend on them to
implement our initiatives effectively, limitations on servicer capacity and capabilities can significantly limit
both the success of our initiatives and the amount of flexibility that can be offered within and among various
initiatives. We therefore are focusing our efforts on accommodating servicers’ resource constraints by creating
and offering streamlined solutions for borrowers that are relatively easy both to explain and to implement. We
also have increased the number of our own personnel that we place onsite in the offices of our largest
servicers in order to enhance the servicers’ capacity in the face of their increasingly heavy workload.
Third, we are experiencing challenges in creating initiatives that will permit homeowners who face debt
pressure from a variety of sources in addition to mortgage loan payments to manage all of their debt payments
successfully. Other types of consumer debt and obligations arise from a variety of sources, including second
mortgages, credit card debt, loans to purchase an automobile, property insurance, and real estate taxes.
Because we generally only have the ability to affect a homeowner’s obligations relating to his or her first lien
mortgage loan, we expect that, in many cases, we may not be able to offer sufficient assistance to permit the
homeowner to continue to meet all existing obligations.
Finally, we believe that, during the current crisis, one of the key elements for successfully assisting
homeowners and preventing foreclosures is to reach troubled and potentially troubled borrowers earlier in the
delinquency process. We are working to develop effective ways to achieve this earlier intervention, which we
believe is necessary to accelerate positive change in the current mortgage market.
Before the modification of a loan that is held in an MBS trust becomes effective, we generally purchase the
loan from the trust. When we do, we are required by generally accepted accounting principles (“GAAP”) to
record the loan on our consolidated balance sheet at its current market value, rather than the loan amount, and
recognize a loss for any difference between the loan amount and the market value of the loan. As we work
aggressively to assist homeowners and implement the loan modification provisions of HASP, we expect that
the number of loans we modify will increase substantially during 2009 and beyond. Some portion of the loans
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