Fannie Mae 2012 Annual Report Download - page 313

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-79
which represented 3% of our single-family guaranty book of business as of December 31, 2012 and 2011. Our primary
mortgage insurance coverage risk in force was $90.5 billion and $87.3 billion as of December 31, 2012 and 2011,
respectively. Our pool mortgage insurance coverage risk in force was $1.2 billion and $3.9 billion as of December 31, 2012
and 2011, respectively. Our top six mortgage insurance companies provided 93% and 94% of our mortgage insurance as of
December 31, 2012 and 2011, respectively.
As of April 2, 2013, three of our largest primary mortgage insurers—PMI Mortgage Insurance Co. (“PMI”), Triad Guaranty
Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company (“RMIC”)—are under various forms of
supervised control by their state regulators and are in run-off; Genworth Mortgage Insurance Corporation (“Genworth”) and
Mortgage Guaranty Insurance Corporation (“MGIC”) are operating pursuant to waivers they received from their regulators of
the state regulatory capital requirements applicable to their main insurance writing entity, as the capital of each entity has
fallen below applicable state regulatory capital requirements; and Radian Guaranty, Inc. (“Radian”) has disclosed that, in the
absence of additional capital contributions to its main insurance writing entity, its capital might fall below state regulatory
capital requirements in the future. These six mortgage insurers provided a combined $70.3 billion, or 77%, of our risk in
force mortgage insurance coverage of our single-family guaranty book of business as of December 31, 2012.
The payment of claims by RMIC, PMI and Triad has been partially deferred pursuant to orders from their state
regulators. Pursuant to a new corrective order, effective December 3, 2012, RMIC is now paying 60% of all valid claims and
40% is deferred as a policyholder claim. This new order increased RMIC’s payment from 50% and is retroactive for all
claims after January 19, 2012, the date of the original order. PMI continues to pay 50% on all valid claims and 50% is
deferred as a policyholder claim. Finally, Triad continues to pay 60% on all valid claims and 40% is deferred as a
policyholder claim. It is uncertain when, or if, any of these mortgage insurers’ regulators will allow them to begin paying
their deferred policyholder claims and/or increase the amount of cash they pay on claims.
The financial condition of some of our mortgage insurer counterparties has improved during 2012 but there is still significant
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.
Our total loss reserves incorporate an estimated recovery amount from mortgage insurance coverage. We evaluate the
financial condition of our mortgage insurer counterparties and adjust the contractually due mortgage insurance benefit for
collectibility in order to ensure that our total loss reserves reflect probable losses as of the balance sheet date. The following
table displays our estimated benefit from mortgage insurers as of December 31, 2012 and 2011 that reduces our total loss
reserves.
As of December 31,
2012 2011
(Dollars in millions)
Contractual mortgage insurance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,993 $15,099
Less: Collectibility adjustment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 2,867
Estimated benefit included in total loss reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,285 $12,232
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(1) 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 $3.7 billion recorded in “Other assets” in our consolidated balance sheets as of December
31, 2012 and $3.6 billion as of December 31, 2011 related to amounts claimed on insured, defaulted loans, of which $1.1
billion as of December 31, 2012 and $639 million as of December 31, 2011 was due from our mortgage sellers/servicers. We
assessed the total outstanding receivables for collectibility, and they are recorded net of a valuation allowance of $551 million
as of December 31, 2012 and $570 million as of December 31, 2011. The valuation allowance reduces our claim receivable to
the amount which is considered probable of collection as of December 31, 2012 and 2011.
We received proceeds under our primary and pool mortgage insurance policies for single-family loans of $5.1 billion and
$5.8 billion for the years ended December 31, 2012 and 2011, respectively.
Financial Guarantors. We are the beneficiary of financial guarantees on non-agency securities held in our investment
portfolio and on non-agency securities that have been resecuritized to include a Fannie Mae guaranty and sold to third parties.