Fannie Mae 2009 Annual Report Download - page 101

as a purchase with an associated fair value loss for the difference between the fair value of the acquired loan
and its acquisition cost, as these loans will already be reflected on our consolidated balance sheet.
During 2009, the portion of our loss reserves attributable to certain states, certain higher risk loan categories
and our 2006 and 2007 loan vintages has generally declined since the end of 2008. The Midwest accounted
for approximately 13% of our combined single-family loss reserves as of December 31, 2009, compared with
approximately 18% as of December 31, 2008. Our mortgage loans in California, Florida, Arizona and Nevada
together accounted for approximately 53% of our combined single-family loss reserves as of December 31,
2009, compared with approximately 67% as of December 31, 2008. Our Alt-A loans represented
approximately 35% of our combined single-family loss reserves as of December 31, 2009, compared with
approximately 50% as of December 31, 2008, and our 2006 and 2007 loan vintages together accounted for
approximately 69% of our combined single-family loss reserves as of December 31, 2009, compared with
approximately 90% as of December 31, 2008.
The increase in the provision for credit losses attributable to the guaranty book of business from 2007 to 2008
reflects the impact of the continued and significant national decline in home prices and the worsening
economic downturn, which resulted in higher delinquencies and defaults and an increase in average loss
severity.
For additional discussions on delinquent loans and concentrations, see “Risk Management—Mortgage Credit
Risk Management—Single-Family Mortgage Credit Risk Management—Problem Loan Management and
Foreclosure Prevention.” For additional discussions on our charge-offs, see “Credit Loss Performance Metrics.”
As discussed above, our nonperforming single-family loans increased substantially during 2009 due to both
higher delinquencies and the increase in troubled debt restructurings (“TDR”), which are a form of
restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial
difficulty. We classify conventional single-family and multifamily loans held in our mortgage portfolio,
including delinquent single-family loans purchased from MBS trusts, as nonperforming and place them on
nonaccrual status when we believe collectability of principal or interest on the loan is not reasonably assured.
During the fourth quarter of 2008, we began to place loans on nonaccrual status at an earlier stage, when two
or more payments were past due. We classify TDRs and HomeSaver Advance first-lien loans as
nonperforming loans throughout the life of the loan regardless of whether the restructured or first-lien loan
returns to a performing status after the workout intervention. We continue to accrue interest on nonperforming
loans that are federally insured or guaranteed by the U.S. government, TDRs on accrual status and HomeSaver
Advance first-lien loans on accrual status.
The composition of our nonperforming loans is shown below in Table 10. For additional discussions on the
impact of individually impaired loans on our allowance for loan losses, see “Note 3, Mortgage Loans.”
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