Fannie Mae 2012 Annual Report Download - page 98

93
2012 compared with 2011
Net income in 2012 compared with net loss in 2011 was primarily due to credit-related income in 2012 compared with credit-
related expenses in 2011, driven primarily by a significant improvement in the profile of our single-family book of business
resulting from an increase in actual home prices. Our single-family credit-related income represents the substantial majority
of our consolidated activity. We provide a discussion of our credit-related income (expenses) and credit losses in
“Consolidated Results of Operations—Credit-Related (Income) Expenses.”
Net interest loss decreased in 2012 compared with 2011 primarily due to a reduction in the amount of interest income not
recognized for nonaccrual mortgage loans in our consolidated balance sheet as we continued to complete a high number of
loan workouts and foreclosures. In addition, as loans with stronger credit profiles become a larger portion of our single-
family guaranty book of business, a smaller percentage of our loans are becoming seriously delinquent.
Guaranty fee income increased in 2012 compared with 2011 due to an increase in the amortization of risk-based fees.
Additionally, as described in “Business—Legislative and Regulatory Developments—Changes to Our Single-Family
Guaranty Fee Pricing and Revenue,” in December 2011, Congress enacted the TCCA which, among other provisions,
required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase to Treasury, rather
than retaining the incremental revenue. Effective April 1, 2012, the guaranty fee on all single-family residential mortgages
delivered to Fannie Mae and Freddie Mac on or after that date for securitization was increased by 10 basis points;
accordingly, the single-family average charged guaranty fee increased. The resulting revenue is included in guaranty fee
income, and the expense is included in other expenses. We recorded other expenses of $238 million for 2012 for this
obligation due to Treasury. We expect the guaranty fees collected and expenses incurred to increase in the future.
The single-family average charged guaranty fee on new Fannie Mae acquisitions increased 25.2 basis points over the course
of 2012, from 27.9 basis points for the month of December 2011 to 53.1 basis points for the month of December 2012. The
increase was primarily due to the 10 basis point TCCA increase noted above. An additional average increase of 10 basis
points implemented during the fourth quarter of 2012, as well as lender specific contractual fee increases implemented
throughout 2012, also contributed to the increased average charged guaranty fee. Some of these increases to guaranty fee
pricing represent a step towards reducing our dominant presence in the marketplace by encouraging greater participation by
private firms, a goal set forth in FHFA’s strategic plan, as well as to more appropriately price for the credit risk taken. We
expect that future increases to guaranty fee pricing will further increase our guaranty fee revenue.
In addition, single-family net income increased as a result of our resolution agreement with Bank of America. See “Note 20,
Subsequent Events” for additional information on this agreement.
Our estimated market share of new single-family mortgage-related securities issuances, which excludes previously
securitized mortgages, remained high at 49% for 2012. Despite our continued high market share, our average single-family
guaranty book of business was flat in 2012 compared with 2011, primarily due to the decline in U.S. residential mortgage
debt outstanding.
2011 compared with 2010
Net loss decreased in 2011 compared with 2010, primarily due to a decrease in net interest loss and an increase in guaranty
fee income, partially offset by an increase in credit-related expenses.
The decrease in net interest loss in 2011 compared with 2010 was primarily due to a reduction in the amount of interest
income not recognized for nonaccrual mortgage loans in our consolidated balance sheet as we continued to complete a high
number of loan workouts and foreclosures.
Guaranty fee income increased in 2011 compared with 2010 due to an increase in the amortization of risk-based fees,
reflecting the impact of higher risk based pricing associated with our more recent acquisition vintages. Our estimated market
share of new single-family mortgage-related securities issuances was 48% for 2011 compared with 44% for 2010.
Single-family credit-related expenses represent the substantial majority of our consolidated activity. We provide a discussion
of our credit-related expenses and credit losses in “Consolidated Results of Operations—Credit-Related (Income) Expenses.”