Fannie Mae 2012 Annual Report Download - page 92

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Credit Loss Performance Metrics
Our credit-related (income) expenses should be considered in conjunction with our credit loss performance metrics. Our
credit loss performance metrics, however, are not defined terms within GAAP and may not be calculated in the same manner
as similarly titled measures reported by other companies. Because management does not view changes in the fair value of our
mortgage loans as credit losses, we adjust our credit loss performance metrics for the impact associated with our acquisition
of credit-impaired loans from unconsolidated MBS trusts. We also exclude interest forgone on nonperforming loans in our
mortgage portfolio, other-than-temporary impairment losses resulting from deterioration in the credit quality of our
mortgage-related securities and accretion of interest income on acquired credit-impaired loans from credit losses. We believe
that credit loss performance metrics may be useful to investors as the losses are presented as a percentage of our book of
business and have historically been used by analysts, investors and other companies within the financial services industry.
Moreover, by presenting credit losses with and without the effect of fair value losses associated with the acquisition of credit-
impaired loans, investors are able to evaluate our credit performance on a more consistent basis among periods. Table 18
displays the components of our credit loss performance metrics as well as our average single-family and multifamily default
rates and initial charge-off severity rates.
Table 18: Credit Loss Performance Metrics
For the Year Ended December 31,
2012 2011 2010
Amount Ratio(1) Amount Ratio(1) Amount Ratio(1)
(Dollars in millions)
Charge-offs, net of recoveries
. . . . . . . . . . . . . . . . . . . . . . $13,457 44.2 bps $16,031 52.4 bps $19,999 65.6 bps
Foreclosed property (income) expense
. . . . . . . . . . . . . . . (254) (0.8) 780 2.6 1,718 5.6
Credit losses including the effect of fair value losses on
acquired credit-impaired loans . . . . . . . . . . . . . . . . . . . 13,203 43.4 16,811 55.0 21,717 71.2
Plus: Impact of acquired credit-impaired loans on
charge-offs and foreclosed property expense(2) . . . . . . . 1,446 4.8 1,926 6.3 1,914 6.2
Credit losses and credit loss ratio . . . . . . . . . . . . . . . . . $14,649 48.2 bps $18,737 61.3 bps $23,631 77.4 bps
Credit losses attributable to:
Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,392 $18,346 $23,133
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 391 498
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,649 $18,737 $23,631
Single-family default rate . . . . . . . . . . . . . . . . . . . . . . 1.55 % 1.71 % 1.99 %
Single-family initial charge-off severity rate (3). . . . . . . . . 30.71 % 34.82 % 34.07 %
Average multifamily default rate . . . . . . . . . . . . . . . . . . . . 0.35 % 0.53 % 0.61 %
Average multifamily initial charge-off severity rate (3) . . . 37.43 % 37.10 % 39.18 %
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(1) Basis points are based on the amount for each line item presented divided by the average guaranty book of business during the period.
(2) Includes fair value losses from acquired credit-impaired loans.
(3) Single-family and multifamily rates exclude fair value losses on credit-impaired loans acquired from MBS trusts and any costs, gains or
losses associated with REO after initial acquisition through final disposition; single-family rate excludes charge-offs from short sales.
Credit losses decreased in 2012 compared with 2011 primarily due to improved actual home prices and sales prices of our
REO properties and lower REO acquisitions primarily due to the continued slow pace of foreclosures in 2012. The decrease
in credit losses in 2011 compared with 2010 was driven by delays in the foreclosure process and an increase in cash received
by us and estimated amounts due to us for repurchase requests.
Table 19 displays an analysis of our credit losses in certain higher-risk loan categories, loan vintages and loans within certain
states that have continued to account for a disproportionate share of our credit losses as compared with our other loans.