Fannie Mae 2011 Annual Report Download - page 182

deliver to us. Bank of America can continue delivering loans to us under our Refi Plus initiative, including
HARP loans. Bank of America’s failure to honor repurchase obligations in a timely manner has not caused us to
change our estimate of the amounts we expect to collect from them ultimately, and we continue to work with
Bank of America to resolve these issues. If we collect less than the amount we expect from Bank of America, we
may be required to seek additional funds from Treasury under our senior preferred stock purchase agreement.
Table 55 displays our top five mortgage seller/servicers by outstanding repurchase requests based on the unpaid
principal balance of the loans underlying repurchase requests issued as of December 31, 2011. We do not expect
the change in our agreement with Bank of America to be material to our business or results of operations as Bank
of America represented less than 5% of our loan delivery volume in the quarter ended December 31, 2011.
In June 2011, we issued an announcement that (1) reminded lenders of their existing obligations with respect to
mortgage insurance; (2) required lenders to report to us mortgage insurance rescissions, mortgage insurer-
initiated cancellations, and claim denials; (3) confirmed our repurchase policies with respect to these actions;
(4) temporarily extended from 30 to 90 days our timeframe within which lenders must repurchase loans and
provided an appeal process; (5) required that all outstanding mortgage insurance-related repurchase demands as
of April 30, 2011 be satisfactorily resolved by September 30, 2011; (6) reiterated our process for the redelivery
of certain repurchased loans; and (7) reiterated our remedies if a lender fails to meet our repurchase requirements.
Not all outstanding mortgage insurance related repurchase demands as of April 30, 2011 were resolved by
September 30, 2011. We entered into “tolling agreements” with several of our major lenders that required these
lenders to post collateral based on their maximum exposure in exchange for an extension until June 2012 to
resolve their outstanding mortgage insurance related repurchase demands. Bank of America has disputed many of
these demands and accounts for nearly half of these unresolved mortgage insurance related requests.
We continue to aggressively pursue our contractual rights associated with these repurchase requests, including
the repurchase requests we have made to Bank of America. Failure by a seller/servicer to repurchase a loan or to
otherwise make us whole for our losses, may result in the imposition of certain sanctions including, but not
limited to:
• requiring the posting of collateral,
• denying transfer of servicing requests or denying pledged servicing requests,
• modifying or suspending any contract or agreement with a lender, or
• suspending or terminating a lender or imposing some other formal sanction on a lender.
If we are unable to resolve these matters to our satisfaction, we may seek additional remedies. If we are unable to
resolve our repurchase requests, either through collection or additional remedies, we will not recover the losses
we have recognized from the associated loans.
We continue to work with our mortgage seller/servicers to fulfill outstanding repurchase requests. Failure by a
significant seller/servicer counterparty, or a number of seller/servicers, to fulfill repurchase obligations to us
could result in a significant increase in our credit losses and have a material adverse effect on our results of
operations and financial condition. In addition, actions we take to pursue our contractual remedies could increase
our costs, reduce our revenues, or otherwise have a material, adverse effect on our results of operations or
financial condition. We estimate our allowance for loan losses assuming the benefit of repurchase demands only
from those counterparties we determine have the financial capacity to fulfill this obligation. Accordingly, as of
December 31, 2011, in estimating our allowance for loan loss we assumed no benefit from repurchase demands
due to us from seller/servicers that lacked the financial capacity to honor their contractual obligations.
Mortgage Insurers
We use several types of credit enhancement to manage our single-family mortgage credit risk, including primary
and pool mortgage insurance coverage. Table 56 displays our maximum potential loss recovery for the primary and
pool mortgage insurance coverage on single-family loans in our guaranty book of business and our unpaid principal
balance covered by insurance for our mortgage insurer counterparties as of December 31, 2011 and 2010. The table
includes our top nine mortgage insurer counterparties, which provided over 99% of our total mortgage insurance
coverage on single-family loans in our guaranty book of business as of December 31, 2011 and 2010.
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