Fannie Mae 2013 Annual Report Download - page 132

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made the benefits of HARP available to a greater number of borrowers. The loans we acquire under HARP have higher LTV
ratios than we would otherwise permit, greater than 100% in some cases. In addition to the high LTV ratios that characterize
HARP loans, some borrowers for HARP and Refi Plus loans also have lower FICO credit scores and/or may provide less
documentation than we would otherwise require. In April 2013, FHFA announced the extension of the ending date for HARP
to December 31, 2015.
Loans we acquire under Refi Plus and HARP represent refinancings of loans that are already in our guaranty book of
business. The credit risk associated with the acquired loans essentially replaces the credit risk that we already held prior to the
refinancing. These loans have higher risk profiles and higher serious delinquency rates and may not perform as well as the
other loans we have acquired since the beginning of 2009. However, we expect these loans will perform better than the loans
they replace, because HARP and Refi Plus loans should either reduce the borrowers’ monthly payments or provide more
stable terms than the borrowers’ old loans (for example, by refinancing into a mortgage with a fixed interest rate instead of an
adjustable rate).
Although mortgage rates remain low by historical standards, they have increased in recent months. As a result, the percentage
of acquisitions that are refinanced loans, including loans acquired under our Refi Plus initiative, which includes HARP, has
started to decline. HARP loans constituted approximately 14% of our total single-family acquisitions in 2013, compared with
approximately 16% of total single-family acquisitions in 2012 and 10% in 2011. Due to the increase in the volume of HARP
loans with higher LTV ratios, the weighted average LTV ratio at origination for our acquisitions in 2013 and 2012 was higher
than for our acquisitions in 2011. We expect the volume of refinancings under HARP to continue to decline, due to the
increase in interest rates and a decrease in the population of borrowers with loans that have high LTV ratios who are willing
to refinance and would benefit from refinancing. Approximately 3% of our total single-family conventional business volume
for 2013 consisted of refinanced loans with LTV ratios greater than 125% at the time of acquisition. In addition,
approximately 2% of our single-family conventional guaranty book of business consisted of loans with an estimated mark-to-
market LTV ratio greater than 125% as of December 31, 2013.
Table 40 displays the serious delinquency rates and current mark-to-market LTV ratios as of December 31, 2013 of single-
family loans we acquired under HARP and Refi Plus compared with the other single-family loans we acquired since the
beginning of 2009.
Table 40: Selected Credit Characteristics of Single-Family Conventional Loans Acquired under HARP and Refi Plus
As of December 31, 2013
Percentage
of New
Book
Current
Mark-to-Market
LTV Ratio
> 100%
FICO Credit
Score at
Origination(1)
Serious
Delinquency
Rate
HARP(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 % 25% 734 0.84%
Other Refi Plus(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 * 749 0.31
Total Refi Plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 14 741 0.58
Non-Refi Plus(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 * 761 0.23
Total new book of business(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 4% 756 0.33%
__________
* Represents less than 0.5%.
(1) In the case of refinancings, represents FICO credit score at the time of the refinancing.
(2) HARP loans have LTV ratios at origination in excess of 80%. In the fourth quarter of 2012, we revised our presentation of the data to
reflect all loans under our Refi Plus program with LTV ratios at origination in excess of 80% as HARP loans. Previously we did not
reflect loans that were backed by second homes or investor properties as HARP loans.
(3) Other Refi Plus includes all other Refi Plus loans that are not HARP loans.
(4) Includes primarily other refinancings and home purchase mortgages.
(5) Refers to single-family mortgage loans we have acquired since the beginning of 2009.
Alt-A and Subprime Loans
We classify certain loans as subprime or Alt-A so that we can discuss our exposure to subprime and Alt-A loans in this
Form 10-K and elsewhere. However, there is no universally accepted definition of subprime or Alt-A loans. Our single-family
conventional guaranty book of business includes loans with some features that are similar to Alt-A loans or subprime loans
that we have not classified as Alt-A or subprime because they do not meet our classification criteria.