Fannie Mae 2008 Annual Report Download - page 173

efforts to promote liquidity and housing affordability, to expand our foreclosure prevention efforts and to set
market standards.
We initiated many pricing, eligibility, and underwriting changes relating to some of our higher risk
conventional loan categories that were announced or became effective in 2008 and 2009. These changes,
which are intended to more accurately reflect the current risk in the housing market and to significantly reduce
our participation in riskier loan product categories, included the following:
• Established a national down payment policy;
• Established a minimum credit score and maximum debt-to-income ratio for all loans;
• Limited or eliminated certain loan products;
• Implemented a more comprehensive risk assessment model in Desktop Underwriter 7.0», and a
comprehensive risk assessment worksheet that will assist lenders in the manual underwriting of loans;
• Implemented an adverse market delivery fee of 25 basis points for all loans delivered to us; and
• Discontinued the purchase of newly originated Alt-A loans (we may continue to selectively acquire
seasoned Alt-A loans that meet acceptable eligibility and underwriting criteria; however, we expect our
acquisitions of Alt-A mortgage loans to continue to be minimal in future periods).
In addition, we have made significant policy changes and clarifications to our appraisal standards, including
requirements to supplement the Uniform Standards of Professional Appraisal Practice that provide guidance on
the proper completion of appraisal reports. This guidance will assist underwriters in making sound
underwriting decisions related to assessing the value of the property securing the mortgage. We introduced a
Market Conditions Addendum to the Appraisal Report, which captures additional information to enhance the
transparency of the market trends and condition conclusions reached by the appraiser. In March 2008, we
entered into an agreement with OFHEO and the New York Attorney General to adopt the Home Valuation
Code of Conduct to help reinforce the independence of the appraiser. Fannie Mae, FHFA and the New York
Attorney General agreed that we would implement this code beginning May 1, 2009.
We also have made extensive updates to our condominium project standards policies and initiated a new
Project Eligibility Review Service, or PERS. PERS will be voluntary for all states except Florida, where new
condominium projects must be reviewed by us. Florida has substantially higher inventories of unsold
properties and higher concentrations of delinquent owners of units in projects compared to other geographic
locations. We believe the new measures described above will significantly improve the credit profile of our
single-family acquisitions.
To promote liquidity in the mortgage markets, we also expanded our policy related to multiple mortgages to
the same borrower by increasing the number of financed properties an investor or second home borrower can
have from four to ten financed properties if they meet certain eligibility and underwriting requirements.
In our efforts to take a more proactive approach to preventing foreclosures, we introduced a series of
initiatives in 2008 and early 2009, designed to help borrowers and loan servicers address potential mortgage
problems and prevent unnecessary home foreclosures among the more than 18 million single-family loans
owned or guaranteed by Fannie Mae. These initiatives include the following:
• HomeSaver Advance, an unsecured, personal loan designed to help a borrower bring a delinquent
mortgage loan current without having to modify the loan;
• A significant increase in our REO sales and servicing staff;
• A suspension of foreclosures for single-family properties between the periods November 26, 2008 through
January 31, 2009 and February 17, 2009 through March 6, 2009, and a suspension of evictions between
November 26, 2008 through March 6, 2009; and
• The National REO Rental Policy, which allows qualified renters in Fannie Mae-owned foreclosed
properties to stay in their homes on a month-to-month lease at market rates.
We provide additional detail on the performance of our foreclosure prevention efforts below in “Foreclosure
Prevention Strategies.” As described in “Part I—Item 1A—Risk Factors,” our foreclosure prevention efforts
may increase our expenses and may not be effective in reducing our credit-related expenses or credit losses in
the near term.
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