Fannie Mae 2014 Annual Report Download - page 122

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Table 34: Representation and Warranty Status of Single-Family Conventional Loans Acquired in 2013-2014
As of December 31, 2014
Refi Plus Non-Refi Plus Total
Unpaid
Principal
Balance Number of Loans
Unpaid
Principal
Balance Number of Loans
Unpaid
Principal
Balance Number of Loans
(Dollars in millions)
Single-family conventional loans that:
Obtained relief . . . . . . . . . . . . . . . . . . . . . $ 141,393 927,345 $ — — $ 141,393 927,345
Remain eligible for relief . . . . . . . . . . . . . 47,154 319,830 781,590 3,733,863 828,744 4,053,693
Are not eligible for relief . . . . . . . . . . . . . 2,686 16,890 9,043 44,387 11,729 61,277
Total outstanding loans acquired under the
new representation and warranty
framework. . . . . . . . . . . . . . . . . . . . . . . . $ 191,233 1,264,065 $ 790,633 3,778,250 $ 981,866 5,042,315
As of December 31, 2013
Refi Plus Non-Refi Plus Total
Unpaid
Principal
Balance Number of Loans
Unpaid
Principal
Balance Number of Loans
Unpaid
Principal
Balance Number of Loans
(Dollars in millions)
Single-family conventional loans that:
Obtained relief . . . . . . . . . . . . . . . . . . . . . $ — — $ — — $ — —
Remain eligible for relief . . . . . . . . . . . . . 158,025 1,000,147 537,887 2,460,012 695,912 3,460,159
Are not eligible for relief . . . . . . . . . . . . . 802 4,844 515 2,582 1,317 7,426
Total outstanding loans acquired under the
new representation and warranty
framework. . . . . . . . . . . . . . . . . . . . . . . . $ 158,827 1,004,991 $ 538,402 2,462,594 $ 697,229 3,467,585
As of December 31, 2014, approximately 18% of loans acquired under the new representation and warranty framework had
obtained relief. Providing lenders with relief from repurchasing loans for breaches of certain representations and warranties
on loans acquired beginning in 2013 that meet specified eligibility requirements shifts some of the risk of non-compliance
with our requirements back to us. However, we believe that we have taken appropriate steps to mitigate this risk, including
moving the primary focus of our quality control reviews to shortly after the time the loans are delivered to us. We also retain
the right to review any defaulted loans that were not previously reviewed and have not obtained relief, in addition to retaining
the right to review all loans for any violations of life of loan representations and warranties.
Credit Enhancements
As discussed in “Business—Our Charter and Regulation of Our Activities—Charter Act,” our charter generally requires
credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio
over 80% at the time of purchase. However, under HARP, we allow our borrowers who have mortgage loans with current
LTV ratios above 80% to refinance their mortgages without obtaining new mortgage insurance in excess of what was already
in place. See “Credit Profile Summary—HARP and Refi Plus Loans” below for more discussion of HARP and its impact on
our single-family conventional business volume and guaranty book of business.
Borrower-paid primary mortgage insurance is the most common type of credit enhancement in our single-family guaranty
book of business. Primary mortgage insurance transfers varying portions of the credit risk associated with a mortgage loan to
a third-party insurer. In order for us to receive a payment in settlement of a claim under a primary mortgage insurance policy,
the insured loan must be in default and the borrower’s interest in the property that secured the loan must have been
extinguished, generally in a foreclosure action. The claims process for primary mortgage insurance typically takes three to six
months after title to the property has been transferred.
Mortgage insurers may also provide pool mortgage insurance, which is insurance that applies to a defined group of loans.
Pool mortgage insurance benefits typically are based on actual loss incurred and are subject to an aggregate loss limit. Under
some of our pool mortgage insurance policies, we are required to meet specified loss deductibles before we can recover under