Fannie Mae 2014 Annual Report Download - page 127

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(7) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported
period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates
periodic changes in home value. Excludes loans for which this information is not readily available.
(8) Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have
maturities equal to or less than 15 years. Loans with interest-only terms are included in the interest-only category regardless of their
maturities.
(9) Loans acquired after 2009 with FICO credit scores below 620 consist primarily of the refinance of existing loans under our Refi Plus
initiative.
(10) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI,
VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS,
LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.
Credit Profile Summary
Overview
Our acquisition of loans with original LTV ratios over 80% increased to 32% in 2014, compared with 29% in 2013. This
increase was primarily due to an increase in our acquisitions of home purchase mortgage loans, which increased to 52% in
2014, compared with 30% in 2013, and a corresponding decline in our acquisitions of refinance loans. Our acquisitions of
loans with FICO credit scores at origination of 740 or above decreased to 59% in 2014, compared with 67% in 2013. Our
acquisition of loans with FICO credit scores at origination of less than 700 increased to 20% in 2014, compared with 15% in
2013. The weighted average FICO credit score at origination of our acquisitions decreased to 744 in 2014, compared with
753 in 2013.
Although our acquisitions in 2014 included a greater proportion of loans with higher LTV ratios or lower FICO credit scores
compared with our acquisitions in 2013, our acquisitions in 2014 continued to have a strong credit profile with a weighted
average original LTV ratio of 77% and a weighted average FICO credit score of 744. The average original LTV ratio of
single-family loans we acquired in 2014, excluding HARP loans, was 75%, compared with 102% for HARP loans. The
weighted average FICO credit score at origination of the single-family mortgage loans we acquired in 2014, excluding HARP
loans, was 746, compared with 704 for HARP loans.
The credit profile of our future acquisitions will depend on many factors, including our future pricing and eligibility
standards and those of mortgage insurers, FHA and VA, the percentage of loan originations representing refinancings,
changes in interest rates, our future objectives and activities in support of those objectives, including actions we may take to
reach additional underserved creditworthy borrowers, government policy, market and competitive conditions, and the volume
and characteristics of HARP loans we acquire in the future. We expect the ultimate performance of all our loans will be
affected by borrower behavior, public policy and macroeconomic trends, including unemployment, the economy and home
prices. In addition, if lender customers retain more of the higher-quality loans they originate, it could negatively affect the
credit profile of our new single-family acquisitions. We discuss our efforts to increase access to mortgage credit for
creditworthy borrowers in “Business—Executive Summary—Single-Family Guaranty Book of Business—Recently Acquired
Single-Family Loans.”
HARP and Refi Plus Loans
Since 2009, we have offered HARP under our Refi Plus initiative, which was designed to expand refinancing opportunities
for borrowers who may otherwise be unable to refinance their mortgage loans due to a decline in home values. HARP offers
additional refinancing flexibility to eligible borrowers who are current on their loans and whose loans are owned or
guaranteed by us and meet certain additional criteria. Under HARP, we allow our borrowers who have mortgage loans that
have note dates prior to June 2009 with current LTV ratios greater than 80% to refinance their mortgages without obtaining
new mortgage insurance in excess of what is already in place. Accordingly, HARP loans have LTV ratios at origination in
excess of 80%. HARP loans cannot (1) be an adjustable-rate mortgage loan, if the initial fixed period is less than five years;
(2) have an interest only feature, which permits the payment of interest without a payment of principal; (3) be a balloon
mortgage loan; or (4) have the potential for negative amortization. In April 2013, FHFA announced the extension of the
ending date for HARP to December 31, 2015.
The loans we acquire under HARP have higher LTV ratios than we would otherwise permit, greater than 100% in some cases.
Since 2012, we have permitted HARP loans with LTV ratios greater than 125% for fixed-rate loans of eligible borrowers. In
addition to the high LTV ratios that characterize HARP loans, some borrowers for HARP and Refi Plus loans may also have
lower FICO credit scores and may provide less documentation than we would otherwise require. As of December 31, 2014,