Fannie Mae 2011 Annual Report Download - page 347

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
PMI received from its regulator an order under which the regulator now has full possession, management and
control of PMI. The regulator is also seeking to place PMI into receivership. Pursuant to the order, the regulator
instituted a partial claim payment plan whereby all valid claims under PMI mortgage guaranty insurance policies
will be paid 50% in cash and 50% deferred as a policyholder claim. It is uncertain when, and if, PMI’s regulator
will allow PMI to begin paying its deferred policyholder claims and/or increase the amount of cash PMI pays on
claims.
The current weakened financial condition of our mortgage insurer counterparties creates an increased risk that
these counterparties will fail to fulfill their obligations to reimburse us for claims under insurance policies. If we
determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer
counterparties, it could result in an increase in our loss reserves, which could adversely affect our earnings,
liquidity, financial condition and net worth.
We evaluate the financial condition of our mortgage insurer counterparties and adjust the contractually due
recovery amounts to ensure that only probable losses as of the balance sheet date are included in our loss reserve
estimate. The following table displays our estimated benefit from mortgage insurers as of December 31, 2011
and 2010 that reduce our total loss reserves.
As of December 31,
2011 2010
(Dollars in millions)
Contractual mortgage insurance benefit(1) ....................................... $15,099 $17,507
Less: Collectability adjustment(2) .............................................. 2,867 1,150
Estimated benefit included in total loss reserves .................................. $12,232 $16,357
(1) Relates to loans that are individually measured for impairment and those that are collectively reserved.
(2) Represents an adjustment that reduces the contractual benefit for our assessment of our mortgage insurer counterparties’
inability to fully pay the contractual mortgage insurance claims.
We had outstanding receivables of $3.6 billion recorded in “Other assets” in our consolidated balance sheets as
of December 31, 2011 and $4.4 billion as of December 31, 2010 related to amounts claimed on insured, defaulted
loans that we have not yet received, of which $639 million as of December 31, 2011 and $648 million as of
December 31, 2010 was due from our mortgage seller/servicers. We assessed the total outstanding receivables
for collectibility, and they are recorded net of a valuation allowance of $570 million as of December 31, 2011
and $317 million as of December 31, 2010. These mortgage insurance receivables are short-term in nature,
having an average duration of approximately six months, and the valuation allowance reduces our claim
receivable to the amount which is considered probable of collection as of December 31, 2011 and 2010.
We received proceeds under our primary and pool mortgage insurance policies for single-family loans of $5.8
billion during 2011 and $6.4 billion during 2010. We negotiated the cancellation and restructurings of some of
our mortgage insurance coverage in exchange for a fee. The cash fees received of $796 million during 2010 are
included in our total insurance proceeds amount; there were no such cash fees received during 2011. These fees
represented an acceleration of, and discount on, claims to be paid pursuant to the coverage in order to reduce
future exposure to our mortgage insurers and were recorded as a reduction to our “Foreclosed property expense”
in our consolidated statements of operations and comprehensive loss.
F-108