Fannie Mae 2009 Annual Report Download - page 307

(1)
Includes $5.0 billion and $1.1 billion of acquired credit-impaired mortgage loans for which we recorded a loss
allowance subsequent to acquisition as of December 31, 2009 and 2008, respectively.
(2)
The discounted cash flows, collateral value or fair value equals or exceeds the carrying value of the loan, and as such,
no allowance is required.
(3)
Includes single-family loans individually impaired and restructured in a TDR of $19.0 billion and $5.2 billion as of
December 31, 2009 and 2008, respectively. Includes multifamily loans that were both individually impaired and
restructured in a TDR of $51 million as of December 31, 2009. We had no multifamily loans individually impaired
and restructured in a TDR as of December 31, 2008. Includes a carrying value of $156 million and $164 million for
delinquent loans held in MBS trusts consolidated in our balance sheet related to our HomeSaver Advance initiative as
of December 31, 2009 and 2008, respectively.
The following table displays the interest income recognized and average recorded investment in the other
impaired loans for the years ended December 31, 2009, 2008 and 2007.
2009 2008 2007
For the Year Ended
December 31,
(Dollars in millions)
Interest income recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 532 $ 251 $ 92
Average recorded investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,339 4,782 2,635
Other Loans
In 2008, we implemented HomeSaver Advance to permit servicers to provide qualified borrowers with a
15-year unsecured personal loan in an amount equal to all past due payments on their first mortgage loan. We
limit each loan to a maximum amount generally up to the lesser of $15,000 or 15% of the unpaid principal
balance of the delinquent first mortgage loan. This program allows borrowers to cure their payment defaults
without requiring modification of their first mortgage loans.
The following table displays the unpaid principal balance and carrying value of our HomeSaver Advance loans
as of December 31, 2009 and 2008.
2009 2008
As of December 31,
(Dollars in millions)
Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $324 $461
Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8
The difference between the unpaid principal balance and fair value at acquisition is recorded as either a
charge-off to the “Reserve for guaranty losses” or a provision to the “Allowance for loan losses,” based on the
status of first mortgage loan. We include these loans in our consolidated balance sheet as a component of
“Other assets.” We recorded a fair value loss and impairment at acquisition of $286 million and $453 million
for the years ended December 31, 2009 and 2008, respectively, for these loans. While the loan is performing,
the fair value discount on these loans will accrete into income based on the contractual term of the loan.
4. Allowance for Loan Losses and Reserve for Guaranty Losses
We maintain an allowance for loan losses for loans held for investment in our mortgage portfolio and a
reserve for guaranty losses related to loans backing Fannie Mae MBS and loans that we have guaranteed under
long-term standby commitments. We calculate the allowance and reserve based on our estimate of incurred
losses as of the balance sheet date. Determining the adequacy of our allowance for loan losses and reserve for
guaranty losses is complex and requires judgment about the effect of matters that are inherently uncertain.
Although our loss models include extensive historical loan performance data, our loss reserve process is
F-49
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)