Fannie Mae 2013 Annual Report Download - page 10

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insurers and the Federal Housing Administration (“FHA”), the percentage of loan originations representing refinancings, our
future objectives, government policy, market and competitive conditions, and the volume and characteristics of HARP loans
we acquire in the future.
Guaranty Fees on Recently Acquired Single-Family Loans
Table 1 below displays information regarding our average charged guaranty fee on single-family loans we acquired in each of
the last three years, as well as the volume of our single-family Fannie Mae MBS issuances, which is indicative of the volume
of single-family loans we acquired.
Table 1: Single-Family Acquisitions Statistics
For the Year Ended December 31,
2013 2012 2011
(Dollars in millions)
Single-family average charged guaranty fee on new acquisitions (in basis
points)(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.4 39.9 28.8
Single-family Fannie Mae MBS issuances (3). . . . . . . . . . . . . . . . . . . . . . . . $ 733,111 $ 827,749 $ 564,606
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(1) Pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 (the “TCCA”), effective April 1, 2012, we increased the guaranty
fee on all single-family residential mortgages delivered to us on or after that date by 10 basis points, and the incremental revenue must
be remitted to Treasury. The resulting revenue is included in guaranty fee income and the expense is recognized as “TCCA fees.” This
increase in guaranty fee is included in the single-family average charged guaranty fee.
(2) Calculated based on the average contractual fee rate for our single-family guaranty arrangements entered into during the period plus the
recognition of any upfront cash payments ratably over an estimated average life, expressed in basis points.
(3) Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by the Single-Family segment during the period.
The revenue we receive from single-family guaranty fees depends on the volume of our acquisitions, the charged guaranty
fee at acquisition and the life of the loans. Because we increased our guaranty fees in 2012, we expect to benefit from
receiving significantly more revenue from guaranty fees in future periods than we have in prior periods, even after we remit
some of this revenue to Treasury as we are required to do under the Temporary Payroll Tax Cut Continuation Act of 2011 (the
“TCCA”).
Several factors contributed to the increase in our average charged guaranty fee on newly acquired single-family loans in 2013
as compared with 2012, including: (1) an average guaranty fee increase of 10 basis points implemented during the fourth
quarter of 2012; (2) an increase in total loan level price adjustments charged on our 2013 acquisitions, as the credit profile of
our 2013 acquisitions included a higher proportion of loans with higher loan-to-value (“LTV”) ratios and a higher proportion
of loans with lower FICO credit scores than our 2012 acquisitions; and (3) the 10 basis point guaranty fee increase
implemented on April 1, 2012 pursuant to the TCCA, from which the incremental revenue is remitted to Treasury. Loan level
price adjustments refer to one-time cash fees that we charge at the time we initially acquire a loan based on the credit
characteristics of the loan. Although there was a shift in the credit risk profile of our 2013 acquisitions to include a greater
proportion of loans with higher LTV ratios and lower FICO credit scores than our 2012 acquisitions, the single-family loans
we purchased or guaranteed in 2013 continued to have a strong credit profile with a weighted average original LTV ratio of
76%, a weighted average FICO credit score of 753, and a product mix with a significant percentage of fully amortizing fixed-
rate mortgage loans. For more information on the credit risk profile of our 2013 single-family conventional loan acquisitions,
see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management,” including “Table
39: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” in that section.
In December 2013, FHFA directed us to further increase our base single-family guaranty fees by 10 basis points and to make
changes to our single-family loan level price adjustments. In January 2014, however, FHFA directed us to delay
implementation of these guaranty fee changes. FHFA Director Melvin L. Watt, who was sworn in as Director in January
2014, stated that he intends to conduct a thorough evaluation of the proposed changes and their likely impact as expeditiously
as possible. See “Our Charter and Regulation of Our Activities—Potential Changes to Our Single-Family Guaranty Fee
Pricing” for more information on the potential changes to our guaranty fee pricing.
Expectations Regarding Future Revenues
We currently have two primary sources of revenues: (1) the difference between interest income earned on the assets in our
retained mortgage portfolio and the interest expense associated with the debt that funds those assets; and (2) the guaranty fees