Fannie Mae 2013 Annual Report Download - page 149

144
insurance coverage on single-family loans in our guaranty book of business as of December 31, 2013 and 2012. Both our risk
in force and our insurance in force increased in 2013 primarily due to the increase in our acquisition of loans with LTV ratios
greater than 80%, which generally are required to carry mortgage insurance, as well as our execution of a risk transfer
transaction with National Mortgage Insurance Corporation pursuant to a FHFA 2013 conservatorship scorecard objective.
Table 56: Mortgage Insurance Coverage
Risk in Force(1) Insurance in Force(2)
As of As of
As of December 31, 2013 December 31, As of December 31, 2013 December 31,
Primary Pool Total 2012 Primary Pool Total 2012
(Dollars in millions)
Counterparty:(3)
Radian Guaranty, Inc. . . . . . . . . . . . . $ 22,308 $ 127 $ 22,435 $ 18,126 $ 89,000 $ 644 $ 89,644 $ 73,746
United Guaranty Residential
Insurance Co.. . . . . . . . . . . . . . . . . 22,049 47 22,096 17,182 86,717 219 86,936 69,185
Mortgage Guaranty Insurance Corp. .20,709 291 21,000 20,089 80,887 1,936 82,823 82,346
Genworth Mortgage Insurance Corp. 14,574 28 14,602 13,626 58,367 108 58,475 54,764
PMI Mortgage Insurance Co.(4)
. . . . . 7,061 62 7,123 8,901 28,382 652 29,034 36,743
Republic Mortgage Insurance Co.(4) .5,571 230 5,801 7,142 21,923 2,047 23,970 30,402
Essent Guaranty, Inc.. . . . . . . . . . . . . 4,394 — 4,394 1,724 17,748 — 17,748 7,148
Arch Mortgage Insurance Co.(5). . . . . 2,868 — 2,868 2,340 11,825 — 11,825 9,823
Triad Guaranty Insurance Corp.(4) . . . 1,687 221 1,908 2,368 6,263 1,260 7,523 9,895
National Mortgage Insurance Corp.. . 16 93 109 — 72 5,070 5,142 —
Others. . . . . . . . . . . . . . . . . . . . . . . . . 180 — 180 197 1,032 — 1,032 1,118
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $101,417 $1,099 $ 102,516 $ 91,695 $402,216 $11,936 $414,152 $ 375,170
Total as a percentage of single-
family guaranty book of business . 4 % 3 % 14 % 13 %
__________
(1) Risk in force is generally the maximum potential loss recovery under the applicable mortgage insurance policies in force and is
based on the loan level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified in the policy.
(2) Insurance in force represents the unpaid principal balance of single-family loans in our guaranty book of business covered under the
applicable mortgage insurance policies.
(3) Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates and subsidiaries
of the counterparty.
(4) These mortgage insurers are under various forms of supervised control by their state regulators and are in run-off.
(5) In January 2014, we approved the acquisition of CMG Mortgage Insurance Company (“CMG”) and its affiliates by Arch U.S. MI
Holdings, Inc. CMG has since changed its name to Arch Mortgage Insurance Company in Wisconsin, its state of domicile.
The continued high level of mortgage insurance claims due to higher defaults and credit losses in recent periods have
adversely affected the financial results and condition of mortgage insurers. All of our mortgage insurer counterparties that are
rated by S&P, Fitch and/or Moody’s have a current insurer financial strength rating below the “AA-” level that we require
under our qualified mortgage insurer approval requirements to be considered qualified as a “Type 1” mortgage insurer. Due to
these low credit ratings, we primarily rely on our internal credit ratings when assessing our exposure to a counterparty.
Our risk assessments involve in-depth credit reviews of each mortgage insurer, a comprehensive analysis of the mortgage
insurance sector, analyses of the insurer’s portfolio, discussions with the insurer’s management, the insurer’s plans to
maintain capital within the insuring entity and our views on macroeconomic variables which impact a mortgage insurer’s
estimated future paid losses, such as changes in home prices and changes in interest rates. From time to time, we may also
discuss a counterparty’s situation with the rating agencies.
We evaluate each of our mortgage insurer counterparties individually to determine whether or under what conditions it will
remain eligible to insure new mortgages sold to us. Based on our evaluation, we may impose additional terms and conditions
of approval on a mortgage insurer, including: (1) limiting the volume and types of loans it may insure for us; (2) requiring it
to obtain our consent prior to entering into risk sharing arrangements; (3) requiring it to meet certain financial conditions,
such as maintaining a minimum level of policyholders’ surplus, a maximum risk-to-capital ratio, a maximum combined ratio,
or a minimum amount of acceptable liquid assets; or (4) requiring that it secure a parental or other capital support agreement.