Fannie Mae 2009 Annual Report Download - page 106

Table 14: Credit Loss Concentration Analysis
2009 2008 2007 2009 2008 2007
As of December 31,
Percentage of
Single-Family
Conventional
Guaranty Book
of Business
Outstanding
(1)
For the Year Ended
December 31,
Percentage of Single-
Family Credit Losses
Geographical distribution:
Arizona, California, Florida and Nevada . . . . . . . . . . . . . . . . . . . . . . . . 28% 27% 27% 57% 49% 15%
Illinois, Indiana, Michigan and Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 12 15 21 47
All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 62 61 28 30 38
Select higher risk product features
(2)
............................ 24 28 29 69 75 58
Vintages:
2006............................................... 11 14 17 31 35 21
2007............................................... 15 20 21 36 28 2
All other vintages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 66 62 33 37 77
(1)
Calculated based on the unpaid principal balance of loans, where we have detailed loan-level information, for each
category divided by the unpaid principal balance of our single-family conventional guaranty book of business.
(2)
Includes Alt-A loans, subprime loans, interest-only loans, loans with original loan-to-value ratio greater than 90%, and
loans with FICO credit scores less than 620.
The suspension of foreclosure sales on occupied single-family properties during our foreclosure moratoria in
late 2008 and early 2009 and our directive to delay foreclosure sales until the loan servicer exhausts all other
foreclosure prevention alternatives reduced our foreclosure activity in 2009. Even with these strategies in
place, we nonetheless acquired a record number of foreclosed properties, though we believe our charge-offs
and credit losses were below what would have otherwise been recorded in 2009 had the moratoria not been in
place. While the foreclosure moratoria affected the timing of when we incurred a credit loss, they did not
necessarily affect the credit-related expenses recognized in our consolidated statements of operations, because
we estimate probable losses inherent in our guaranty book of business as of each balance sheet date in
determining our loss reserves. See “Critical Accounting Policies and Estimates—Allowance for Loan Losses
and Reserve for Guaranty Losses” for a discussion of changes we made in our loss reserve estimation process
to address the impact of the foreclosure moratoria and the change in our foreclosure requirements.
We provide more detailed credit performance information, including serious delinquency rates by geographic
region, statistics on nonperforming loans and foreclosure activity, in “Risk Management—Credit Risk
Management—Mortgage Credit Risk Management.”
Regulatory Hypothetical Stress Test Scenario
Under a September 2005 agreement with OFHEO, we are required to disclose on a quarterly basis the present
value of the change in future expected credit losses from our existing single-family guaranty book of business
from an immediate 5% decline in single-family home prices for the entire United States. Although other
provisions of the 2005 agreement were suspended on March 18, 2009 by FHFA until further notice, the
disclosure requirement was not suspended. For purposes of this calculation, we assume that, after the initial
5% shock, home price growth rates return to the average of the possible growth rate paths used in our internal
credit pricing models. The sensitivity results represent the difference between future expected credit losses
under our base case scenario, which is derived from our internal home price path forecast, and a scenario that
assumes an instantaneous nationwide 5% decline in home prices.
Table 15 compares the credit loss sensitivities for the periods indicated for first lien single-family whole loans
we own or that back Fannie Mae MBS, before and after consideration of projected credit risk sharing
proceeds, such as private mortgage insurance claims and other credit enhancement.
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