Fannie Mae 2010 Annual Report Download - page 179

of December 31, 2010. Primary mortgage insurance represented $91.2 billion of this total, and pool mortgage
insurance was $4.7 billion. We had total mortgage insurance coverage risk in force of $106.5 billion on the
single-family mortgage loans in our guaranty book of business as of December 31, 2009, which represented
approximately 4% of our single-family guaranty book of business as of December 31, 2009. Primary mortgage
insurance represented $99.6 billion of this total, and pool mortgage insurance was $6.9 billion of this total.
Increases in mortgage insurance claims due to higher defaults and credit losses in recent periods have
adversely affected the financial results and condition of mortgage insurers. Since January 1, 2009, Standard &
Poor’s, Fitch and Moody’s have downgraded, in some cases more than once, the insurer financial strength
ratings of each of our top seven mortgage insurer counterparties that continue to be rated. As a result of the
downgrades, these mortgage insurer counterparties’ current insurer financial strength ratings are below the
“AA-” level that we require under our qualified mortgage insurer approval requirements to be considered
qualified as a “Type 1” mortgage insurer. Due to these downgrades, we have begun to primarily rely on our
internal credit ratings when assessing our exposure to a counterparty.
Our rating structure is based on a scale of 1 to 8. A rating of 1 represents a counterparty that we view as
having excellent credit quality. We consider the credit quality of an 8 to be poor. These internal ratings, which
reflect our views of a mortgage insurer’s claims paying ability, are based primarily on an assessment of the
mortgage insurer’s capital adequacy and liquidity. These assessments conducted in making our credit quality
determinations involve in-depth credit reviews of each mortgage insurer, a comprehensive analysis of the
mortgage insurance sector, stress analyses of the insurer’s portfolio, discussions with the insurer’s
management, the insurer’s plans to maintain capital within the insuring entity and our views on
macroeconomic variables which impact a mortgage insurer’s estimated future paid losses, such as changes in
home prices and changes in interest rates. From time to time, we may also discuss its situation with the rating
agencies.
Table 51 presents our maximum potential loss recovery for the primary and pool mortgage insurance coverage
on single-family loans in our guaranty book of business by mortgage insurer for our top eight mortgage
insurer counterparties as of December 31, 2010. These mortgage insurers provided over 99% of our total
mortgage insurance coverage on single-family loans in our guaranty book of business as of December 31,
2010.
Table 51: Mortgage Insurance Coverage
Counterparty:
(1)
Primary Pool Total
Maximum Coverage
(2)
As of December 31, 2010
(Dollars in millions)
Mortgage Guaranty Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,334 $1,943 $23,277
Radian Guaranty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,002 368 15,370
Genworth Mortgage Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,250 81 14,331
United Guaranty Residential Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,831 213 14,044
PMI Mortgage Insurance Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,065 294 12,359
Republic Mortgage Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,573 993 10,566
Triad Guaranty Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,986 823 3,809
CMG Mortgage Insurance Company
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,938 — 1,938
(1)
Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates
and subsidiaries of the counterparty.
(2)
Maximum coverage refers to the aggregate dollar amount of insurance coverage (i.e., “risk in force”) on single-family
loans in our guaranty book of business and represents our maximum potential loss recovery under the applicable
mortgage insurance policies.
(3)
CMG Mortgage Insurance Company is a joint venture owned by PMI Mortgage Insurance Co. and CUNA Mutual
Insurance Society.
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