Fannie Mae 2013 Annual Report Download - page 90

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possible growth rate paths used in our internal credit pricing models. The sensitivity results represent the difference between
future expected credit losses under our base case scenario, which is derived from our internal home price path forecast, and a
scenario that assumes an instantaneous nationwide 5% decline in home prices.
Table 17 displays the credit loss sensitivities as of the dates indicated for first-lien single-family loans that are in our retained
mortgage portfolio or underlying Fannie Mae MBS, before and after consideration of projected credit risk sharing proceeds,
such as private mortgage insurance claims and other credit enhancements.
Table 17: Single-Family Credit Loss Sensitivity(1)
As of December 31,
2013 2012
(Dollars in millions)
Gross single-family credit loss sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,109 $ 13,508
Less: Projected credit risk sharing proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,062)(2,206)
Net single-family credit loss sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,047 $ 11,302
Single-family loans in our retained mortgage portfolio and loans underlying Fannie Mae MBS $ 2,828,395 $ 2,765,460
Single-family net credit loss sensitivity as a percentage of outstanding single-family loans in
our retained mortgage portfolio and Fannie Mae MBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28% 0.41%
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(1) Represents total economic credit losses, which consist of credit losses and forgone interest. Calculations are based on 98% of our total
single-family guaranty book of business as of December 31, 2013 and 2012. The mortgage loans and mortgage-related securities that
are included in these estimates consist of: (a) single-family Fannie Mae MBS (whether held in our retained mortgage portfolio or held
by third parties), excluding certain whole loan REMICs and private-label wraps; (b) single-family mortgage loans, excluding
mortgages secured only by second liens, subprime mortgages, manufactured housing chattel loans and reverse mortgages; and
(c) long-term standby commitments. We expect the inclusion in our estimates of the excluded products may impact the estimated
sensitivities set forth in this table.
The decrease in the projected credit loss sensitivities in 2013 compared with 2012 was the result of the increase in home
prices and lower projected default expectations for loans in our single-family guaranty book of business. Because these
sensitivities represent hypothetical scenarios, they should be used with caution. Our regulatory stress test scenario is limited
in that it assumes an instantaneous uniform 5% nationwide decline in home prices, which is not representative of the
historical pattern of changes in home prices. Changes in home prices generally vary on a regional, as well as a local, basis. In
addition, these stress test scenarios are calculated independently without considering changes in other interrelated
assumptions, such as unemployment rates or other economic factors, which are likely to have a significant impact on our
future expected credit losses.
Other Non-Interest Expenses
Other non-interest expenses decreased in 2013 compared with 2012 primarily due to increased gains from partnership
investments and debt extinguishment gains in 2013 compared with debt extinguishment losses in 2012. These decreases in
non-interest expenses were partially offset by an increase in TCCA fees in 2013.
Gains from partnership investments increased in 2013 compared with 2012 as the continued strength of national multifamily
market fundamentals resulted in improved property-level operating performance and increased gains on the sale of
investments.
Debt extinguishment gains in 2013 were primarily driven by an increase in interest rates in 2013 compared with debt
extinguishment losses in 2012 driven by a decrease in interest rates in 2012. See “Fair Value Gains (Losses), Net—Mortgage
Commitment Derivatives Fair Value Gains (Losses), Net” for additional information on how the fair value of our
commitments impacts debt extinguishments when we purchase securities.
TCCA fees increased in 2013 compared with 2012 due to an increase in the volume of loans in our single-family book of
business subject to TCCA provisions. We expect the guaranty fees collected and expenses incurred under the TCCA to
continue to increase in the future.
Other non-interest expenses increased in 2012 compared with 2011 primarily due to our obligation to pay fees to Treasury
under the TCCA, which began in 2012.