Fannie Mae 2011 Annual Report Download - page 174

In February 2012, FHFA announced that it was beginning the pilot phase of an REO initiative that will allow
qualified investors to purchase pools of foreclosed properties from us with the requirement to rent the purchased
properties for a specified number of years. During the pilot phase, we will offer for sale pools of various types of
assets including rental properties, vacant properties and nonperforming loans with a focus on the hardest-hit
areas. We do not yet know whether this initiative will have a material impact on our future REO sales and REO
inventory levels.
As shown in Table 50, we have experienced a disproportionate share of foreclosures in certain states as compared
with their share of our guaranty book of business. This is primarily because these states have had significant
home price depreciation or weak economies and, in the case of California and Florida specifically, a significant
number of Alt-A loans.
Table 50: Single-Family Acquired Property Concentration Analysis
As of For the Year Ended As of For the Year Ended As of For the Year Ended
December 31, 2011 December 31, 2010 December 31, 2009
Percentage of
Book
Outstanding(1)
Percentage of
Properties
Acquired
by Foreclosure(2)
Percentage of
Book
Outstanding(1)
Percentage of
Properties
Acquired
by Foreclosure(2)
Percentage of
Book
Outstanding(1)
Percentage of
Properties
Acquired
by Foreclosure(2)
States:
Arizona, California, Florida, and
Nevada ........................ 28% 33% 28% 36% 28% 36%
Illinois, Indiana, Michigan, and Ohio . . 10 17 11 17 11 20
(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) Calculated based on the number of properties acquired through foreclosure during the period divided by the total number
of properties acquired through foreclosure.
Multifamily Mortgage Credit Risk Management
The credit risk profile of our multifamily mortgage credit book of business is influenced by the structure of the
financing, the type and location of the property, the condition and value of the property, the financial strength of
the borrower and lender, market and sub-market trends and growth, and the current and anticipated cash flows
from the property. These and other factors affect both the amount of expected credit loss on a given loan and the
sensitivity of that loss to changes in the economic environment. We provide information on our credit-related
expenses and credit losses in “Business Segment Results—Multifamily Business Results.”
While our multifamily mortgage credit book of business includes all of our multifamily mortgage-related assets,
both on- and off-balance sheet, our guaranty book of business excludes non-Fannie Mae multifamily mortgage-
related securities held in our portfolio for which we do not provide a guaranty. Our multifamily guaranty book of
business consists of: multifamily mortgage loans held in our mortgage portfolio; Fannie Mae MBS held in our
portfolio or by third parties; and other credit enhancements that we provide on mortgage assets.
Multifamily Acquisition Policy and Underwriting Standards
Our Multifamily business, with the oversight of our Enterprise Risk Management division, is responsible for
pricing and managing the credit risk on multifamily mortgage loans we purchase and on Fannie Mae MBS
backed by multifamily loans (whether held in our portfolio or held by third parties). Our primary multifamily
delivery channel is the DUS program, which is comprised of multiple lenders that span the spectrum from large
financial institutions to smaller independent multifamily lenders. Multifamily loans that we purchase or that back
Fannie Mae MBS are either underwritten by a Fannie Mae-approved lender or subject to our underwriting review
prior to closing, depending on the product type and/or loan size. Loans delivered to us by DUS lenders and their
affiliates represented 86% of our multifamily guaranty book of business as of December 31, 2011, compared
with 84% as of December 31, 2010 and 81% as of December 31, 2009.
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