Fannie Mae 2009 Annual Report Download - page 109

in the calculation of our provision for credit losses in our consolidated results of operations for the year ended
December 31, 2009.
Table 16: Impairments and Fair Value Losses on Loans in HAMP
(1)
For the Year
Ended
December 31,
2009
(Dollars in millions)
Impairments
(2)
.............................................................. $ 15,777
Fair value losses on credit-impaired loans acquired from MBS trusts
(3)
. . . . . . . . . . . . . . . . . . . . . . 10,637
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,414
Loans entered into a trial modification under the program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,300
Credit-impaired loans in trial modifications under the program acquired from MBS trusts . . . . . . . . . 83,700
(1)
Includes amounts for loans that entered into a trial modification under the program but that have not yet received, or
that have been determined to be ineligible for, a permanent modification under the program, including loans that
entered into a trial modification prior to December 31, 2009, but were reported from servicers to us subsequent to that
date. Some of these ineligible loans have since been modified outside of the program.
(2)
Impairments consist of (a) impairments recognized on loans accounted for as loans restructured in a troubled debt
restructuring and (b) incurred credit losses on loans in MBS trusts that have entered into a trial modification and been
individually assessed for incurred credit losses.
(3)
These fair value losses are recorded as charge-offs against the “Reserve for guaranty losses” and have the effect of
increasing the provision for credit losses in our consolidated statement of operations.
When we begin to individually assess a loan for impairment, we exclude the loan from the population of loans
on which we calculate our collective loss reserves. Amounts in the table above do not reflect the impact of
removing these individually impaired loans from this population. The collective loss reserves are reduced by
the fact that these loans are no longer included in the population for which the collective reserves are
calculated.
Effective January 1, 2010, we adopted new accounting standards for transfers of financial assets and
consolidation, which resulted in our recording on our consolidated balance sheet substantially all of the loans
held in our MBS trusts. Under the new accounting standards, the acquisition of loans from our consolidated
MBS trusts no longer triggers an accounting event because the loans underlying our MBS trusts are already
recorded on our consolidated balance sheet. Consequently, effective January 1, 2010, our consolidated
financial statements will no longer reflect the recognition of fair value losses on the acquisition of credit-
impaired loans from MBS trusts. However, we will assess these loans for probable incurred credit losses as
part of our determination of our allowance for loan losses and, to the extent necessary, recognize these losses
in our consolidated statements of operations in our “Provision for credit losses.” We believe that the amount
we initially recognize in our provision for credit losses for probable incurred credit losses on credit-impaired
loans acquired from MBS trusts will be less than the fair value losses we would have recognized under the
previously applicable accounting standard upon acquiring loans from our MBS trusts.
Servicer and Borrower Incentives
We also incurred $21 million in paid and accrued incentive fees for servicers and borrowers in connection
with loans modified under HAMP during 2009, which we recorded as part of our “Other expenses.”
Overall Impact of the Making Home Affordable Program
Because of the unprecedented nature of the circumstances that led to the Making Home Affordable Program,
we cannot quantify what the impact would have been on Fannie Mae if the Making Home Affordable Program
had not been introduced. We do not know how many loans we would have modified under alternative
programs, what the terms or costs of those modifications would have been, or how many foreclosures would
have resulted nationwide, and at what pace, and the impact on housing prices if the program had not been put
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