Fannie Mae 2008 Annual Report Download - page 190

Problem Loan Workout Metrics
Table 49 presents statistics on conventional single-family problem loan workouts, by type, for 2008, 2007 and
2006.
Table 49: Statistics on Conventional Single-Family Problem Loan Workouts
Unpaid
Principal
Balance
Number
of Loans
Unpaid
Principal
Balance
Number
of Loans
Unpaid
Principal
Balance
Number
of Loans
2008 2007 2006
For the Year Ended December 31,
(Dollars in millions)
Home retention strategies:
Modifications
(1)
. . . . . . . . . . . . . . . . . . . . . . . . $ 5,108 33,249 $3,339 26,421 $3,173 27,607
Repayment plans and forbearances completed
(2)
. . 947 7,875 898 7,871 1,908 17,324
HomeSaver Advance first-lien loans
(3)
. . . . . . . . 11,194 70,943 — — — —
$17,249 112,067 $4,237 34,292 $5,081 44,931
Foreclosure alternatives:
Preforeclosure sales . . . . . . . . . . . . . . . . . . . . . 2,210 10,349 415 2,718 238 1,960
Deeds in lieu of foreclosure . . . . . . . . . . . . . . . . 251 1,333 97 663 52 496
$ 2,461 11,682 $ 512 3,381 $ 290 2,456
Total problem loan workouts . . . . . . . . . . . . . . . . . $19,710 123,749 $4,749 37,673 $5,371 47,387
Problem loan workouts as a percent of single-family
guaranty book of business
(4)
. . . . . . . . . . . . . . . 0.72% 0.67% 0.19% 0.21% 0.24% 0.29%
(1)
Modifications include troubled debt restructurings and other modifications to the contractual terms of the loan that do
not result in concessions to the borrower. A troubled debt restructuring involves some economic concession to the
borrower, and is the only form of modification in which we do not expect to collect the full original contractual
principal and interest due under the loan. Other resolutions and modifications may result in our receiving the full
amount due, or certain installments due, under the loan over a period of time that is longer than the period of time
originally provided for under the loan.
(2)
Repayment plans reflect only those plans associated with loans that were 90 days or more delinquent. Repayment
plans related to loans less than 90 days delinquent are not presented in this table.
(3)
Reflects unpaid principal balance and the number of first-lien loans associated with unsecured HomeSaver Advance
loans.
(4)
Represents total problem loan workouts during the period as a percent of our conventional single-family guaranty book
of business as of the end of each year.
As shown in Table 49, we significantly increased the number of problem loan workouts in 2008 to 0.67% of
our single-family guaranty book of business, from 0.21% of our single-family guaranty book of business in
2007. In addition, we initiated a significant number of repayment plans in 2008 that are scheduled to be
completed in 2009. These repayment plans are not reflected in Table 49 above. It is difficult to predict how
many of the repayment plans initiated in 2008 will be completed.
Although HomeSaver Advances were the predominant form of problem loan workouts during 2008,
modifications continue to represent a significant portion of our workouts. Prior to 2008, the majority of our
loan modifications did not result in economic concessions to the borrower. Accordingly, we generally expected
to collect the contractual principal and interest specified in the original loan, although in some cases our
modifications resulted in our receiving these payments over a longer period of time than the original specified
contractual time period. During 2008, we experienced a significant shift in loan modification types. The
majority of the modifications we made in 2008 were designed to help distressed borrowers by reducing the
monthly mortgage payments either by extending the term of the mortgage loan or reducing the interest rate.
The proportion of modifications pertaining to term extensions or rate reductions increased to 90% in the fourth
quarter of 2008, from 58% in the first quarter of 2008, and 53% during 2007. Moreover, because of the
substantial decline in home prices, approximately 22% of the modifications that we made in 2008 related to
loans that had a mark-to-market LTV ratio greater than 100%, compared with 8% in 2007. Because these
modifications generally resulted in economic concessions to the borrower, we expect to collect less than the
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