UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 21, 2014
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
Federally chartered corporation | 000-50231 | 52-0883107 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||
3900 Wisconsin Avenue, NW Washington, DC | 20016 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: 202-752-7000
(Former Name or Former Address, if Changed Since Last Report): ______________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
The information in this report, including information in the exhibits submitted herewith, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference into any disclosure document relating to Fannie Mae (formally known as the Federal National Mortgage Association), except to the extent, if any, expressly incorporated by specific reference in that document.
Item 2.02 Results of Operations and Financial Condition.
On February 21, 2014, Fannie Mae filed its annual report on Form 10-K for the year ended December 31, 2013 and issued a news release reporting its financial results for the periods covered by the Form 10-K. The news release, a copy of which is furnished as Exhibit 99.1 to this report, is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On February 21, 2014, Fannie Mae posted to its Web site a 2013 Credit Supplement presentation consisting primarily of information about Fannie Mae’s guaranty book of business. The presentation, a copy of which is furnished as Exhibit 99.2 to this report, is incorporated herein by reference. Fannie Mae’s Web site address is www.fanniemae.com. Information appearing on the company’s Web site is not incorporated into this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The exhibit index filed herewith is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FEDERAL NATIONAL MORTGAGE ASSOCIATION | ||
By | /s/ David C. Benson | |
David C. Benson | ||
Executive Vice President and Chief Financial Officer | ||
Date: February 21, 2014
EXHIBIT INDEX
The following exhibits are submitted herewith:
Exhibit Number | Description of Exhibit | ||
99.1 | News release, dated February 21, 2014 | ||
99.2 | 2013 Credit Supplement presentation, dated February 21, 2014 | ||
Resource Center: 1-800-732-6643
Exhibit 99.1
Contact: Pete Bakel
202-752-2034
Date: February 21, 2014
Fannie Mae Reports Comprehensive Income of $84.8 Billion for 2013 and $6.6 Billion for Fourth Quarter 2013
Fannie Mae Paid Treasury $82.5 Billion in Dividends in 2013
• | Fannie Mae reported annual net income for 2013 of $84.0 billion, which includes the release of the company’s valuation allowance against its deferred tax assets, and annual pre-tax income for 2013 of $38.6 billion. |
• | Fannie Mae reported net income of $6.5 billion for the fourth quarter of 2013, the company’s eighth consecutive quarterly profit, and pre-tax income of $8.3 billion for the fourth quarter of 2013. |
• | Fannie Mae will pay Treasury $7.2 billion in dividends in March 2014. With the March dividend payment, Fannie Mae will have paid a total of $121.1 billion in dividends to Treasury in comparison to $116.1 billion in draw requests since 2008. Dividend payments do not offset prior Treasury draws. |
• | Fannie Mae has funded the mortgage market with approximately $4.1 trillion in liquidity since 2009, enabling families to buy, refinance, or rent a home. |
• | Fannie Mae is supporting the housing recovery by providing access to affordable mortgages and by helping to build a safer, transparent, and sustainable housing finance system. |
• | While Fannie Mae expects to be profitable for the foreseeable future, the company does not expect to repeat its 2013 financial results, as those results were positively affected by the release of the company’s valuation allowance against its deferred tax assets, a significant increase in home prices during the year, and the large number of resolutions the company reached relating to representation and warranty matters and servicing matters. |
WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported annual net income of $84.0 billion and annual pre-tax income of $38.6 billion in 2013. This compares to net income of $17.2 billion and pre-tax income of $17.2 billion in 2012. Fannie Mae reported net income of $6.5 billion for the fourth quarter of 2013, the company’s eighth consecutive quarterly profit, and pre-tax income of $8.3 billion for the fourth quarter of 2013. The company’s comprehensive income of $6.6 billion for the fourth quarter of 2013 contributed to Fannie Mae’s positive net worth of $9.6 billion as of December 31, 2013.
Fannie Mae will pay Treasury $7.2 billion in March 2014 as a dividend on the senior preferred stock, marking the first time in which the company’s cumulative dividend payments to Treasury will exceed its total draws. Under the senior preferred stock purchase agreement, the payment of dividends does not offset prior draws.
Fannie Mae’s strong 2013 pre-tax results were driven by continued stable revenues, credit-related income, and fair value gains. Credit-related income was positively affected by an increase in home prices, a decline
Fourth Quarter and Full Year 2013 Results | 1 |
in serious delinquency rates, and updated assumptions and data used to estimate the company’s allowance for loan losses in 2013. Fannie Mae’s 2013 financial results also were positively affected by the release of the company’s valuation allowance against its deferred tax assets and the large number of resolutions the company entered into during the year relating to representation and warranty matters and servicing matters.
While Fannie Mae remains under conservatorship and subject to the restrictions of the senior preferred stock purchase agreement with Treasury, the company has undergone significant changes over the past several years resulting in improved financial performance and a stronger book of business. Fannie Mae expects to remain profitable for the foreseeable future. While the company expects its annual earnings to remain strong over the next few years, it expects its net income in future years will be substantially lower than its net income for 2013. For more information about Fannie Mae’s expectations for its future financial performance, see the company’s annual report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014.
ABOUT FANNIE MAE’S CONSERVATORSHIP
Fannie Mae has operated under the conservatorship of the Federal Housing Finance Agency (“FHFA”) since September 6, 2008. Fannie Mae has not received funds from Treasury since the first quarter of 2012. The funding the company has received under its senior preferred stock purchase agreement with the U.S. Treasury has provided the company with the capital and liquidity needed to fulfill its mission of providing liquidity and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory Reform Act of 2008. For periods through December 31, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion and paid $113.9 billion in dividends to Treasury. Following the company’s March 2014 dividend payment of $7.2 billion to Treasury, Fannie Mae’s cumulative dividend payments to Treasury will exceed total draws from Treasury. Under the senior preferred stock purchase agreement, the payment of dividends does not offset prior draws. As a result, Treasury maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock.
Treasury Draws and Dividend Payments
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(1) | Treasury draw requests are shown in the period for which requested and do not include the initial $1.0 billion liquidation preference of Fannie Mae’s senior preferred stock, for which Fannie Mae did not receive any cash proceeds. The payment of dividends does not offset prior Treasury draws. |
(2) | The company’s dividend for the first quarter of 2014 is calculated based on the company’s net worth of $9.6 billion as of December 31, 2013 less the applicable capital reserve amount of $2.4 billion. |
(3) | Amounts may not sum due to rounding. |
In August 2012, the terms governing the company’s dividend obligations on the senior preferred stock were amended. The amended senior preferred stock purchase agreement does not allow the company to build a capital reserve. Beginning in 2013, the required senior preferred stock dividends each quarter equal the amount, if any, by which the company’s net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. The capital reserve amount was $3.0 billion for each quarterly dividend period in 2013, decreased to $2.4 billion for dividend periods in 2014 and will continue to be reduced by $600 million each year until it reaches zero on January 1, 2018.
The amount of remaining funding available to Fannie Mae under the senior preferred stock purchase agreement with Treasury is currently $117.6 billion.
Fannie Mae is not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment under the senior preferred stock purchase agreement. The limited circumstances under which Treasury’s funding commitment will terminate are described in “Business—Conservatorship and Treasury Agreements” in the company’s annual report on Form 10-K for the year ended December 31, 2013.
PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET
Fannie Mae provided approximately $4.1 trillion in liquidity to the mortgage market from January 1, 2009 through December 31, 2013 through its purchases and guarantees of loans, which enabled borrowers to complete 12.3 million mortgage refinancings and 3.7 million home purchases, and provided financing for 2.2 million units of multifamily housing.
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Fannie Mae’s market share remained high in 2013 as the company has continued to meet the needs of the single-family mortgage market in the absence of substantial issuances of mortgage-related securities by private institutions during the year. The company remained the largest single issuer of single-family mortgage-related securities in the secondary market during the fourth quarter of 2013, with an estimated market share of new single-family mortgage-related securities issuances of 46 percent, compared with 48 percent in the fourth quarter of 2012 and 47 percent for all of 2013.
Fannie Mae also remained a continuous source of liquidity in the multifamily market in 2013. As of September 30, 2013 (the latest date for which information is available), the company owned or guaranteed approximately 21 percent of the outstanding debt on multifamily properties.
HELPING TO BUILD A SUSTAINABLE HOUSING FINANCE SYSTEM
In addition to continuing to provide liquidity and support to the mortgage market, Fannie Mae has devoted significant resources toward helping to build a sustainable housing finance system for the future, primarily through pursuing the strategic goals identified by its conservator, FHFA. These strategic goals are: build a new infrastructure for the secondary mortgage market; gradually contract the company’s dominant presence in the marketplace while simplifying and shrinking its operations; and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
CREDIT QUALITY
New Single-Family Book of Business: While continuing to make it possible for families to purchase, refinance, or rent a home, Fannie Mae has established responsible credit standards. Since 2009, Fannie Mae has seen the effect of actions it took, beginning in 2008, to significantly strengthen its underwriting and eligibility standards and change its pricing to promote sustainable homeownership and stability in the housing market. As of December 31, 2013, 77 percent of Fannie Mae’s single-family guaranty book of business consisted of loans it had purchased or guaranteed since the beginning of 2009. Given their strong credit risk profile and based on their performance so far, the company expects that in the aggregate these loans will be profitable over their lifetime, meaning the company’s fee income on these loans will exceed the company’s credit losses and administrative costs for them.
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Single-family conventional loans acquired by Fannie Mae in 2013 had a weighted average borrower FICO credit score at origination of 753 and an average original loan-to-value (“LTV”) ratio of 76 percent.
Loss Reserves: The company’s total loss reserves decreased to $47.3 billion as of December 31, 2013 from $62.6 billion as of December 31, 2012. The company’s total loss reserves peaked at $76.9 billion as of December 31, 2011.
Fannie Mae’s single-family serious delinquency rate has declined each quarter since the first quarter of 2010, and was 2.38 percent as of December 31, 2013, compared with 5.47 percent as of March 31, 2010. This decrease is primarily the result of home retention solutions, foreclosure alternatives, and completed foreclosures, as well as the company’s acquisition of loans with stronger credit profiles since the beginning of 2009.
Fourth Quarter and Full Year 2013 Results | 5 |
HOME RETENTION SOLUTIONS AND FORECLOSURE ALTERNATIVES
To reduce the credit losses Fannie Mae ultimately incurs on its legacy book of business, the company has been focusing its efforts on several strategies, including reducing defaults by offering home retention solutions, such as loan modifications. Fannie Mae completed approximately 39,000 loan modifications during the fourth quarter of 2013 and approximately 160,000 for the full year of 2013.
Fannie Mae views foreclosure as a last resort. For homeowners and communities in need, the company offers alternatives to foreclosure. We provided approximately 234,000 loan workouts in 2013 to help homeowners stay in their homes or otherwise avoid foreclosure. These efforts helped to stabilize neighborhoods, home prices and the housing market. In dealing with homeowners in distress, the company first seeks home retention solutions, which enable borrowers to stay in their homes, before turning to foreclosure alternatives. When there is no viable home retention solution or foreclosure alternative that can be applied, the company seeks to move to foreclosure expeditiously in an effort to minimize prolonged delinquencies that can hurt local home values and destabilize communities.
For the Year Ended December 31, | |||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||
Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | Unpaid Principal Balance | Number of Loans | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||
Home retention strategies: | |||||||||||||||||||||||||||
Modifications | $ | 28,801 | 160,007 | $ | 30,640 | 163,412 | $ | 42,793 | 213,340 | $ | 82,826 | 403,506 | |||||||||||||||
Repayment plans and forbearances completed | 1,594 | 12,022 | 3,298 | 23,329 | 5,042 | 35,318 | 4,385 | 31,579 | |||||||||||||||||||
HomeSaver Advance first-lien loans | — | — | — | — | — | — | 688 | 5,191 | |||||||||||||||||||
Total home retention strategies | 30,395 | 172,029 | 33,938 | 186,741 | 47,835 | 248,658 | 87,899 | 440,276 | |||||||||||||||||||
Foreclosure alternatives: | |||||||||||||||||||||||||||
Short sales | 9,786 | 46,570 | 15,916 | 73,528 | 15,412 | 70,275 | 15,899 | 69,634 | |||||||||||||||||||
Deeds-in-lieu of foreclosure | 2,504 | 15,379 | 2,590 | 15,204 | 1,679 | 9,558 | 1,053 | 5,757 | |||||||||||||||||||
Total foreclosure alternatives | 12,290 | 61,949 | 18,506 | 88,732 | 17,091 | 79,833 | 16,952 | 75,391 | |||||||||||||||||||
Total loan workouts | $ | 42,685 | 233,978 | $ | 52,444 | 275,473 | $ | 64,926 | 328,491 | $ | 104,851 | 515,667 | |||||||||||||||
Loan workouts as a percentage of single-family guaranty book of business | 1.48 | % | 1.33 | % | 1.85 | % | 1.57 | % | 2.29 | % | 1.85 | % | 3.66 | % | 2.87 | % | |||||||||||
Fourth Quarter and Full Year 2013 Results | 6 |
REFINANCING INITIATIVES
Through the company’s Refi Plus™ initiative, which offers refinancing flexibility to eligible Fannie Mae borrowers and includes HARP, the company acquired approximately 139,000 loans in the fourth quarter of 2013 and approximately 1 million loans for the full year of 2013. Some borrowers’ monthly payments increased as they took advantage of the ability to refinance through Refi Plus to reduce the term of their loan, to switch from an adjustable-rate mortgage to a fixed-rate mortgage, or to switch from an interest-only mortgage to a fully amortizing mortgage. Even taking these into account, refinancings delivered to Fannie Mae through Refi Plus in 2013 reduced borrowers’ monthly mortgage payments by an average of $223.
FORECLOSURES AND REO
Fannie Mae acquired 32,208 single-family REO properties, primarily through foreclosure, in the fourth quarter of 2013, compared with 37,353 in the third quarter of 2013. As of December 31, 2013, the company’s inventory of single-family REO properties was 103,229, compared with 100,941 as of September 30, 2013. The carrying value of the company’s single-family REO was $10.3 billion as of December 31, 2013.
The company’s single-family foreclosure rate was 0.82 percent for the full year of 2013. This reflects the number of single-family properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in Fannie Mae’s single-family guaranty book of business.
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For the Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Single-family foreclosed properties (number of properties): | ||||||||||||
Beginning of period inventory of single-family foreclosed properties (REO) | 105,666 | 118,528 | 162,489 | |||||||||
Total properties acquired through foreclosure | 144,384 | 174,479 | 199,696 | |||||||||
Dispositions of REO | (146,821 | ) | (187,341 | ) | (243,657 | ) | ||||||
End of period inventory of single-family foreclosed properties (REO) | 103,229 | 105,666 | 118,528 | |||||||||
Carrying value of single-family foreclosed properties (dollars in millions) | $ | 10,334 | $ | 9,505 | $ | 9,692 | ||||||
Single-family foreclosure rate | 0.82 | % | 0.99 | % | 1.13 | % | ||||||
The company provides further discussion of its financial results and condition, credit performance, fair value balance sheets, and other matters in its annual report on Form 10-K for the year ended December 31, 2013, which was filed today with the Securities and Exchange Commission. Additional information about the company’s credit performance, the characteristics of its guaranty book of business, its foreclosure-prevention efforts, and other measures is contained in the “2013 Credit Supplement” at www.fanniemae.com.
# # #
In this release and the accompanying Appendix, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the company’s future earnings and financial results, including its profitability; the company’s future loss reserves; the profitability of its loans; its future dividend payments to Treasury; and the impact of the company’s actions to reduce credit losses. These estimates, forecasts, expectations, and statements are forward looking statements based on the company’s current assumptions regarding numerous factors, including future home prices and the future performance of its loans. Actual results, and future projections, could be materially different from what is set forth in the forward-looking statements as a result of home price changes, interest rate changes, unemployment rates, other macroeconomic and housing market variables, the company’s future serious delinquency rates, government policy, credit availability, borrower behavior, including increases in the number of underwater borrowers who strategically default on their mortgage loan, the volume of loans it modifies, the nature, volume and effectiveness of its loss mitigation strategies and activities, significant changes in modification and foreclosure activity, management of its real estate owned inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, impairments of its assets, future legislative or regulatory requirements that have a significant impact on the company’s business such as a requirement that the company implement a principal forgiveness program, future updates to the company’s models relating to loss reserves, including the assumptions used by these models, changes in generally accepted accounting principles, changes to the company’s accounting policies, failures by its mortgage seller-servicers to fulfill their repurchase obligations to it, effects from activities the company takes to support the mortgage market and help borrowers, the conservatorship and its effect on the company’s business, the investment by Treasury and its effect on the company’s business, the uncertainty of the company’s future, the company’s future guaranty fee pricing and the impact of that pricing on the company’s competitive environment, challenges the company faces in retaining and hiring qualified employees, the deteriorated credit performance of many loans in the company’s guaranty book of business, a decrease in the company’s credit ratings, defaults by one or more institutional counterparties, resolution or settlement agreements the company may enter into with its counterparties, operational control weaknesses, changes in the structure and regulation of the financial services industry, the company’s ability to access the debt markets, disruptions in the housing, credit, and stock markets, government investigations and litigation, the performance of the company’s servicers, conditions in the foreclosure environment, natural or other disasters, and many other factors, including those discussed in the “Risk Factors” section of and elsewhere in the company’s annual report on Form 10-K for the year ended December 31, 2013, and elsewhere in this release.
Fannie Mae provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is not part of this release.
Fannie Mae enables people to buy, refinance, or rent a home.
Visit us at: www.fanniemae.com/progress
Follow us on Twitter: http://twitter.com/FannieMae
Fourth Quarter and Full Year 2013 Results | 8 |
APPENDIX
SUMMARY OF FOURTH QUARTER AND FULL YEAR 2013 RESULTS
Fannie Mae reported net income of $6.5 billion for the fourth quarter of 2013, compared with net income of $8.7 billion for the third quarter of 2013 and net income of $7.6 billion for the fourth quarter of 2012. The company reported net income of $84.0 billion for 2013, compared with net income of $17.2 billion for 2012.
(Dollars in millions) | 4Q13 | 3Q13 | Variance | FY 2013 | FY 2012 | Variance | ||||||||||||||||||
Net interest income | $ | 4,851 | $ | 5,582 | $ | (731 | ) | $ | 22,404 | $ | 21,501 | $ | 903 | |||||||||||
Fee and other income | 2,136 | 741 | 1,395 | 3,930 | 1,487 | 2,443 | ||||||||||||||||||
Net revenues | 6,987 | 6,323 | 664 | 26,334 | 22,988 | 3,346 | ||||||||||||||||||
Investment gains, net | 135 | 648 | (513 | ) | 1,191 | 487 | 704 | |||||||||||||||||
Net other-than-temporary impairments | (22 | ) | (27 | ) | 5 | (64 | ) | (713 | ) | 649 | ||||||||||||||
Fair value gains (losses), net | 961 | 335 | 626 | 2,959 | (2,977 | ) | 5,936 | |||||||||||||||||
Administrative expenses | (632 | ) | (646 | ) | 14 | (2,545 | ) | (2,367 | ) | (178 | ) | |||||||||||||
Credit-related income | ||||||||||||||||||||||||
Benefit for credit losses | — | 2,609 | (2,609 | ) | 8,949 | 852 | 8,097 | |||||||||||||||||
Foreclosed property income | 1,082 | 1,165 | (83 | ) | 2,839 | 254 | 2,585 | |||||||||||||||||
Total credit-related income | 1,082 | 3,774 | (2,692 | ) | 11,788 | 1,106 | 10,682 | |||||||||||||||||
Other non-interest expenses(1) | (237 | ) | (308 | ) | 71 | (1,096 | ) | (1,304 | ) | 208 | ||||||||||||||
Net gains (losses) and income (expenses) | 1,287 | 3,776 | (2,489 | ) | 12,233 | (5,768 | ) | 18,001 | ||||||||||||||||
Income before federal income taxes | 8,274 | 10,099 | (1,825 | ) | 38,567 | 17,220 | 21,347 | |||||||||||||||||
(Provision) benefit for federal income taxes | (1,816 | ) | (1,355 | ) | (461 | ) | 45,415 | — | 45,415 | |||||||||||||||
Net income | 6,458 | 8,744 | (2,286 | ) | 83,982 | 17,220 | 66,762 | |||||||||||||||||
Less: Net (income) loss attributable to the noncontrolling interest | (1 | ) | (7 | ) | 6 | (19 | ) | 4 | (23 | ) | ||||||||||||||
Net income attributable to Fannie Mae | $ | 6,457 | $ | 8,737 | $ | (2,280 | ) | $ | 83,963 | $ | 17,224 | $ | 66,739 | |||||||||||
Total comprehensive income attributable to Fannie Mae | $ | 6,590 | $ | 8,603 | $ | (2,013 | ) | $ | 84,782 | $ | 18,843 | $ | 65,939 | |||||||||||
Preferred stock dividends | $ | (7,191 | ) | $ | (8,617 | ) | $ | 1,426 | $ | (85,419 | ) | $ | (15,827 | ) | $ | (69,592 | ) | |||||||
(1) | Consists of debt extinguishment gains (losses), net, TCCA fees and other expenses. |
Net revenues were $7.0 billion for the fourth quarter of 2013, compared with $6.3 billion for the third quarter of 2013. For the year, net revenues were $26.3 billion, up from $23.0 billion in 2012.
Net interest income was $4.9 billion for the fourth quarter of 2013, compared with $5.6 billion for the third quarter of 2013. The decrease in net interest income compared to the third quarter of 2013 was due to lower amortization driven by prepayment volumes and lower interest income from retained mortgage portfolio assets due to a decline in the company’s retained mortgage portfolio. For the year, net interest income was $22.4 billion for 2013, compared with net interest income of $21.5 billion for 2012. The increase in net interest income compared to 2012 was due primarily to higher amortization driven by prepayment volumes and an increase in guaranty fees, partially offset by lower interest income from retained mortgage portfolio assets due to a decline in the company’s retained mortgage portfolio.
Fourth Quarter and Full Year 2013 Results | 9 |
Fee and other income was $2.1 billion for the fourth quarter of 2013, compared with $741 million for the third quarter of 2013. For the year, fee and other income was $3.9 billion for 2013, compared with $1.5 billion for 2012. The increases in fee and other income were due primarily to funds the company received in 2013 pursuant to settlement agreements resolving certain lawsuits relating to private-label mortgage-related securities sold to Fannie Mae.
Credit-related income, which consists of recognition of a benefit for credit losses and foreclosed property income, was $1.1 billion in the fourth quarter of 2013, compared with $3.8 billion in the third quarter of 2013. Credit-related income decreased in the fourth quarter of 2013 compared with the third quarter of 2013 due primarily to slower home price improvement in the quarter. For the year, credit-related income was $11.8 billion, compared with credit-related income of $1.1 billion in 2012. The company’s credit results for 2013 and 2012 were positively impacted by increases in home prices, which resulted in reductions in our loss reserves. Credit-related income improved year over year due primarily to a decline in the number of delinquent loans in the company’s single-family guaranty book of business; recognition of compensatory fee income in 2013 related to servicing matters and gains resulting from resolution agreements reached in 2013 related to representation and warranty matters; and updates to assumptions and data used to estimate the company’s allowance for loan losses of individually impaired single-family loans, which resulted in a decrease to the company’s allowance for loan losses.
Fourth Quarter and Full Year 2013 Results | 10 |
Credit losses, which the company defines as net charge-offs plus foreclosed property expense, excluding the effect of certain fair-value losses, were $260 million in the fourth quarter of 2013, compared with $1.1 billion in the third quarter of 2013. For the year, credit losses were $4.5 billion compared with $14.6 billion in 2012. Credit losses decreased in 2013 compared with 2012 due primarily to the recognition of compensatory fee income in 2013 related to servicing matters and gains resulting from resolution agreements reached in 2013 related to representation and warranty matters. Also contributing to the decrease in credit losses in 2013 was an improvement in sales prices on Fannie Mae-owned properties and lower REO acquisitions driven primarily by lower delinquencies.
Total loss reserves, which reflect the company’s estimate of the probable losses the company has incurred in its guaranty book of business, including concessions it granted borrowers upon modification of their loans, were $47.3 billion as of December 31, 2013, compared with $48.4 billion as of September 30, 2013 and $62.6 billion as of December 31, 2012. The total loss reserve coverage to total nonaccrual loans was 57 percent as of December 31, 2013, compared with 55 percent as of December 31, 2012 and 54 percent as of December 31, 2011.
Net fair value gains were $1.0 billion in the fourth quarter of 2013, compared with $335 million in the third quarter of 2013. For the year, net fair value gains were $3.0 billion, compared with net fair value losses of $3.0 billion in 2012. The company recorded fair value gains in the fourth quarter of 2013 and for the full year of 2013 due primarily to fair value gains on risk management derivatives as interest rates increased during the year.
Fourth Quarter and Full Year 2013 Results | 11 |
BUSINESS SEGMENT RESULTS
The business groups running Fannie Mae’s three reporting segments – its Single-Family business, its Multifamily business, and its Capital Markets group – engage in complementary business activities in pursuing the company’s mission of providing liquidity, stability, and affordability to the U.S. housing market. The company’s Single-Family and Multifamily businesses work with Fannie Mae’s lender customers, who deliver mortgage loans that the company purchases and securitizes into Fannie Mae MBS. The Capital Markets group manages the company’s mortgage-related assets and other interest-earning non-mortgage investments, funding purchases of mortgage-related assets primarily with proceeds received from the issuance of Fannie Mae debt securities in the domestic and international capital markets. The Capital Markets group also provides liquidity to the mortgage market through short-term financing and other activities.
Single-Family business had net income of $2.1 billion in the fourth quarter of 2013, compared with net income of $4.7 billion in the third quarter of 2013. The decrease in net income in the fourth quarter compared to the third quarter was driven by lower credit-related income due primarily to slower home price improvement in the quarter. For the year, the Single-Family business had net income of $48.3 billion, compared with net income of $6.3 billion in 2012. The improvement in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets, as well as an increase in credit-related income. In addition, guaranty fee income increased in 2013 compared with 2012 due to the impact of guaranty fee increases. The single-family guaranty book of business was $2.89 trillion as of December 31, 2013, compared with $2.88 trillion as of September 30, 2013 and $2.83 trillion as of December 31, 2012.
Multifamily business had net income of $706 million in the fourth quarter of 2013, compared with $478 million in the third quarter of 2013. The increase in net income in the fourth quarter compared to the third quarter was driven primarily by increased credit-related income due to improvements in property valuations, as well as increased gains from partnership investments as the continued strength of national multifamily market fundamentals resulted in improved property-level operating performance and increased gains on the sale of investments. For the year, Multifamily had net income of $10.1 billion, compared with $1.5 billion in 2012. The improvement in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets, as well as increased credit-related income due to improvements in default and loss severity trends and improvements in property
Fourth Quarter and Full Year 2013 Results | 12 |
valuations. The Multifamily guaranty book of business was $200.6 billion as of December 31, 2013, compared with $203.7 billion as of September 30, 2013 and $206.2 billion as of December 31, 2012.
Capital Markets group had net income of $4.5 billion in the fourth quarter of 2013, compared with $3.8 billion in the third quarter of 2013. The increase in quarterly net income was due primarily to settlement agreements resolving certain lawsuits relating to private-label mortgage-related securities sold to Fannie Mae and fair value gains on the company’s risk management derivatives as interest rates increased during the quarter. The group had net income of $27.5 billion for the year, compared with $14.2 billion for 2012. The improvement in annual net income was due primarily to the release of the company’s valuation allowance against its deferred tax assets, the recognition of fair value gains in 2013 compared with fair value losses in 2012, and the increase in fee and other income as a result of funds the company received pursuant to settlement agreements resolving certain lawsuits relating to private-label mortgage-related securities sold to Fannie Mae. The improvement in net income was partially offset by a decline in net interest income due to a decline in the company’s retained mortgage portfolio. The Capital Markets retained mortgage portfolio balance decreased to $490.7 billion as of December 31, 2013, compared with $633.1 billion as of December 31, 2012, resulting from purchases of $269.4 billion and liquidations and sales of $411.8 billion during the year.
(Dollars in millions) | 4Q13 | 3Q13 | Variance | 2013 | 2012 | Variance | |||||||||||||||||
Single-Family Segment: | |||||||||||||||||||||||
Guaranty fee income | $ | 2,830 | $ | 2,719 | $ | 111 | $ | 10,468 | $ | 8,151 | $ | 2,317 | |||||||||||
Credit-related income | 848 | 3,642 | (2,794 | ) | 11,205 | 919 | 10,286 | ||||||||||||||||
Other | (877 | ) | (865 | ) | (12 | ) | (2,507 | ) | (2,700 | ) | 193 | ||||||||||||
Income before federal income taxes | 2,801 | 5,496 | (2,695 | ) | 19,166 | 6,370 | 12,796 | ||||||||||||||||
(Provision) benefit for federal income taxes | (667 | ) | (751 | ) | 84 | 29,110 | (80 | ) | 29,190 | ||||||||||||||
Net income | $ | 2,134 | $ | 4,745 | $ | (2,611 | ) | $ | 48,276 | $ | 6,290 | $ | 41,986 | ||||||||||
Multifamily Segment: | |||||||||||||||||||||||
Guaranty fee income | $ | 315 | $ | 311 | $ | 4 | $ | 1,217 | $ | 1,040 | $ | 177 | |||||||||||
Credit-related income | 234 | 132 | 102 | 583 | 187 | 396 | |||||||||||||||||
Other | 203 | 43 | 160 | 345 | 80 | 265 | |||||||||||||||||
Income before federal income taxes | 752 | 486 | 266 | 2,145 | 1,307 | 838 | |||||||||||||||||
(Provision) benefit for federal income taxes | (46 | ) | (8 | ) | (38 | ) | 7,924 | 204 | 7,720 | ||||||||||||||
Net income | $ | 706 | $ | 478 | $ | 228 | $ | 10,069 | $ | 1,511 | $ | 8,558 | |||||||||||
Capital Markets Segment: | |||||||||||||||||||||||
Net interest income | $ | 2,031 | $ | 2,311 | $ | (280 | ) | $ | 9,764 | $ | 13,241 | $ | (3,477 | ) | |||||||||
Investment gains, net | 1,074 | 1,590 | (516 | ) | 4,911 | 6,217 | (1,306 | ) | |||||||||||||||
Fair value gains (losses), net | 1,061 | 371 | 690 | 3,148 | (3,041 | ) | 6,189 | ||||||||||||||||
Other | 1,461 | 123 | 1,338 | 1,319 | (2,092 | ) | 3,411 | ||||||||||||||||
Income before federal income taxes | 5,627 | 4,395 | 1,232 | 19,142 | 14,325 | 4,817 | |||||||||||||||||
(Provision) benefit for federal income taxes | (1,103 | ) | (596 | ) | (507 | ) | 8,381 | (124 | ) | 8,505 | |||||||||||||
Net income | $ | 4,524 | $ | 3,799 | $ | 725 | $ | 27,523 | $ | 14,201 | $ | 13,322 | |||||||||||
Fourth Quarter and Full Year 2013 Results | 13 |
ANNEX I
FANNIE MAE
(In conservatorship)
Consolidated Balance Sheets
(Dollars in millions, except share amounts)
As of December 31, | |||||||||||
2013 | 2012 | ||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 19,228 | $ | 21,117 | |||||||
Restricted cash (includes $23,982 and $61,976, respectively, related to consolidated trusts) | 28,995 | 67,919 | |||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 38,975 | 32,500 | |||||||||
Investments in securities: | |||||||||||
Trading, at fair value | 30,768 | 40,695 | |||||||||
Available-for-sale, at fair value (includes $998 and $935, respectively, related to consolidated trusts) | 38,171 | 63,181 | |||||||||
Total investments in securities | 68,939 | 103,876 | |||||||||
Mortgage loans: | |||||||||||
Loans held for sale, at lower of cost or fair value (includes $31 and $72, respectively, related to consolidated trusts) | 380 | 464 | |||||||||
Loans held for investment, at amortized cost: | |||||||||||
Of Fannie Mae | 300,159 | 355,544 | |||||||||
Of consolidated trusts (includes $14,268 and $10,800, respectively, at fair value and loans pledged as collateral that may be sold or repledged of $442 and $943, respectively) | 2,769,547 | 2,652,193 | |||||||||
Total loans held for investment | 3,069,706 | 3,007,737 | |||||||||
Allowance for loan losses | (43,846 | ) | (58,795 | ) | |||||||
Total loans held for investment, net of allowance | 3,025,860 | 2,948,942 | |||||||||
Total mortgage loans | 3,026,240 | 2,949,406 | |||||||||
Accrued interest receivable, net (includes $7,271 and $7,567, respectively, related to consolidated trusts) | 8,319 | 9,176 | |||||||||
Acquired property, net | 11,621 | 10,489 | |||||||||
Deferred tax assets, net | 47,560 | — | |||||||||
Other assets (includes cash pledged as collateral of $1,590 and $1,222, respectively) | 20,231 | 27,939 | |||||||||
Total assets | $ | 3,270,108 | $ | 3,222,422 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Liabilities: | |||||||||||
Accrued interest payable (includes $8,276 and $8,645, respectively, related to consolidated trusts) | $ | 10,553 | $ | 11,303 | |||||||
Debt: | |||||||||||
Of Fannie Mae (includes $1,308 and $793, respectively, at fair value) | 529,434 | 615,864 | |||||||||
Of consolidated trusts (includes $14,976 and $11,647, respectively, at fair value) | 2,705,089 | 2,573,653 | |||||||||
Other liabilities (includes $488 and $1,059, respectively, related to consolidated trusts) | 15,441 | 14,378 | |||||||||
Total liabilities | 3,260,517 | 3,215,198 | |||||||||
Commitments and contingencies (Note 19) | — | — | |||||||||
Fannie Mae stockholders’ equity: | |||||||||||
Senior preferred stock, 1,000,000 shares issued and outstanding | 117,149 | 117,149 | |||||||||
Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding | 19,130 | 19,130 | |||||||||
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued, 1,158,080,657 and 1,158,077,970 shares outstanding, respectively | 687 | 687 | |||||||||
Accumulated deficit | (121,227 | ) | (122,766 | ) | |||||||
Accumulated other comprehensive income | 1,203 | 384 | |||||||||
Treasury stock, at cost, 150,682,046 and 150,684,733 shares, respectively | (7,401 | ) | (7,401 | ) | |||||||
Total Fannie Mae stockholders’ equity | 9,541 | 7,183 | |||||||||
Noncontrolling interest | 50 | 41 | |||||||||
Total equity (See Note 1: Impact of U.S. Government Support and (Loss) Earnings per Share for information on our dividend obligation to Treasury) | 9,591 | 7,224 | |||||||||
Total liabilities and equity | $ | 3,270,108 | $ | 3,222,422 | |||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2013 Results | 14 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars and shares in millions, except per share amounts)
For the Year Ended December 31, | |||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||
Interest income: | |||||||||||||||||
Trading securities | $ | 779 | $ | 989 | $ | 1,087 | |||||||||||
Available-for-sale securities | 2,357 | 3,299 | 3,277 | ||||||||||||||
Mortgage loans (includes $101,448, $110,451, and $123,633, respectively, related to consolidated trusts) | 114,238 | 124,706 | 138,462 | ||||||||||||||
Other | 175 | 196 | 117 | ||||||||||||||
Total interest income | 117,549 | 129,190 | 142,943 | ||||||||||||||
Interest expense: | |||||||||||||||||
Short-term debt | 131 | 152 | 310 | ||||||||||||||
Long-term debt (includes $84,751, $95,612, and $108,641, respectively, related to consolidated trusts) | 95,014 | 107,537 | 123,352 | ||||||||||||||
Total interest expense | 95,145 | 107,689 | 123,662 | ||||||||||||||
Net interest income | 22,404 | 21,501 | 19,281 | ||||||||||||||
Benefit (provision) for credit losses | 8,949 | 852 | (26,718 | ) | |||||||||||||
Net interest income (loss) after benefit (provision) for credit losses | 31,353 | 22,353 | (7,437 | ) | |||||||||||||
Investment gains, net | 1,191 | 487 | 506 | ||||||||||||||
Net other-than-temporary impairments | (64 | ) | (713 | ) | (308 | ) | |||||||||||
Fair value gains (losses), net | 2,959 | (2,977 | ) | (6,621 | ) | ||||||||||||
Debt extinguishment gains (losses), net | 131 | (244 | ) | (232 | ) | ||||||||||||
Fee and other income | 3,930 | 1,487 | 1,163 | ||||||||||||||
Non-interest income (loss) | 8,147 | (1,960 | ) | (5,492 | ) | ||||||||||||
Administrative expenses: | |||||||||||||||||
Salaries and employee benefits | 1,218 | 1,195 | 1,236 | ||||||||||||||
Professional services | 910 | 766 | 736 | ||||||||||||||
Occupancy expenses | 189 | 188 | 179 | ||||||||||||||
Other administrative expenses | 228 | 218 | 219 | ||||||||||||||
Total administrative expenses | 2,545 | 2,367 | 2,370 | ||||||||||||||
Foreclosed property (income) expense | (2,839 | ) | (254 | ) | 780 | ||||||||||||
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees | 1,001 | 238 | — | ||||||||||||||
Other expenses, net | 226 | 822 | 866 | ||||||||||||||
Total expenses | 933 | 3,173 | 4,016 | ||||||||||||||
Income (loss) before federal income taxes | 38,567 | 17,220 | (16,945 | ) | |||||||||||||
Benefit for federal income taxes | 45,415 | — | 90 | ||||||||||||||
Net income (loss) | 83,982 | 17,220 | (16,855 | ) | |||||||||||||
Other comprehensive income: | |||||||||||||||||
Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes | 693 | 1,735 | 622 | ||||||||||||||
Other | 126 | (116 | ) | (175 | ) | ||||||||||||
Total other comprehensive income | 819 | 1,619 | 447 | ||||||||||||||
Total comprehensive income (loss) | 84,801 | 18,839 | (16,408 | ) | |||||||||||||
Less: Comprehensive (income) loss attributable to noncontrolling interest | (19 | ) | 4 | — | |||||||||||||
Total comprehensive income (loss) attributable to Fannie Mae | $ | 84,782 | $ | 18,843 | $ | (16,408 | ) | ||||||||||
Net income (loss) | $ | 83,982 | $ | 17,220 | $ | (16,855 | ) | ||||||||||
Less: Net (income) loss attributable to noncontrolling interest | (19 | ) | 4 | — | |||||||||||||
Net income (loss) attributable to Fannie Mae | $ | 83,963 | $ | 17,224 | $ | (16,855 | ) | ||||||||||
Dividends distributed or available for distribution to senior preferred stockholder (Note 11) | (85,419 | ) | (15,827 | ) | (9,614 | ) | |||||||||||
Net (loss) income attributable to common stockholders (Note 11) | $ | (1,456 | ) | $ | 1,397 | $ | (26,469 | ) | |||||||||
(Loss) earnings per share: | |||||||||||||||||
Basic | $ | (0.25 | ) | $ | 0.24 | $ | (4.61 | ) | |||||||||
Diluted | (0.25 | ) | 0.24 | (4.61 | ) | ||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||
Basic | 5,762 | 5,762 | 5,737 | ||||||||||||||
Diluted | 5,762 | 5,893 | 5,737 | ||||||||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2013 Results | 15 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Cash Flows
(Dollars in millions)
For the Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Cash flows provided by (used in) operating activities: | |||||||||||
Net income (loss) | $ | 83,982 | $ | 17,220 | $ | (16,855 | ) | ||||
Reconciliation of net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
Amortization of cost basis adjustments | (5,104 | ) | (2,335 | ) | (369 | ) | |||||
(Benefit) provision for credit losses | (8,949 | ) | (852 | ) | 26,718 | ||||||
Current and deferred federal income taxes | (47,766 | ) | 10 | 1,044 | |||||||
Net change in trading securities | 1,575 | 31,972 | (17,048 | ) | |||||||
Net gains related to the disposition of acquired property and preforeclosure sales, including credit enhancements | (6,024 | ) | (6,009 | ) | (5,109 | ) | |||||
Other, net | (4,811 | ) | (3,005 | ) | (3,619 | ) | |||||
Net cash provided by (used in) operating activities | 12,903 | 37,001 | (15,238 | ) | |||||||
Cash flows provided by investing activities: | |||||||||||
Purchases of trading securities held for investment | (7,521 | ) | (3,216 | ) | (2,951 | ) | |||||
Proceeds from maturities and paydowns of trading securities held for investment | 2,491 | 3,508 | 2,591 | ||||||||
Proceeds from sales of trading securities held for investment | 14,585 | 3,861 | 1,526 | ||||||||
Purchases of available-for-sale securities | — | (34 | ) | (192 | ) | ||||||
Proceeds from maturities and paydowns of available-for-sale securities | 10,116 | 12,636 | 13,552 | ||||||||
Proceeds from sales of available-for-sale securities | 15,497 | 1,306 | 3,192 | ||||||||
Purchases of loans held for investment | (195,386 | ) | (210,488 | ) | (78,099 | ) | |||||
Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae | 48,875 | 31,322 | 25,190 | ||||||||
Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts | 631,088 | 797,331 | 544,145 | ||||||||
Net change in restricted cash | 38,924 | (17,122 | ) | 12,881 | |||||||
Advances to lenders | (139,162 | ) | (144,064 | ) | (70,914 | ) | |||||
Proceeds from disposition of acquired property and preforeclosure sales | 38,349 | 38,685 | 47,248 | ||||||||
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements | (6,475 | ) | 13,500 | (34,249 | ) | ||||||
Other, net | 1,373 | 468 | 468 | ||||||||
Net cash provided by investing activities | 452,754 | 527,693 | 464,388 | ||||||||
Cash flows used in financing activities: | |||||||||||
Proceeds from issuance of debt of Fannie Mae | 372,361 | 736,065 | 766,598 | ||||||||
Payments to redeem debt of Fannie Mae | (459,745 | ) | (854,111 | ) | (815,838 | ) | |||||
Proceeds from issuance of debt of consolidated trusts | 409,979 | 396,513 | 233,516 | ||||||||
Payments to redeem debt of consolidated trusts | (707,544 | ) | (832,537 | ) | (647,695 | ) | |||||
Payments of cash dividends on senior preferred stock to Treasury | (82,452 | ) | (11,608 | ) | (9,613 | ) | |||||
Proceeds from senior preferred stock purchase agreement with Treasury | — | 4,571 | 23,978 | ||||||||
Other, net | (145 | ) | (9 | ) | 146 | ||||||
Net cash used in financing activities | (467,546 | ) | (561,116 | ) | (448,908 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (1,889 | ) | 3,578 | 242 | |||||||
Cash and cash equivalents at beginning of period | 21,117 | 17,539 | 17,297 | ||||||||
Cash and cash equivalents at end of period | $ | 19,228 | $ | 21,117 | $ | 17,539 | |||||
Cash paid during the period for: | |||||||||||
Interest | $ | 109,240 | $ | 119,259 | $ | 128,806 | |||||
Income taxes | 2,350 | — | — | ||||||||
Non-cash activities: | |||||||||||
Net mortgage loans acquired by assuming debt | $ | 433,007 | $ | 537,862 | $ | 448,437 | |||||
Net transfers from mortgage loans of Fannie Mae to mortgage loans of consolidated trusts | 179,097 | 165,272 | 33,859 | ||||||||
Transfers from advances to lenders to loans held for investment of consolidated trusts | 137,074 | 133,554 | 69,223 | ||||||||
Net transfers from mortgage loans to acquired property | 34,024 | 46,981 | 56,517 | ||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2013 Results | 16 |
FANNIE MAE
(In conservatorship)
Consolidated Statements of Changes in Equity (Deficit)
(Dollars and shares in millions)
Fannie Mae Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Senior Preferred Stock | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Non Controlling Interest | Total Equity (Deficit) | |||||||||||||||||||||||||||||||||||
Senior Preferred | Preferred | Common | ||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2011 | 1 | 577 | 1,119 | $ | 88,600 | $ | 20,204 | $ | 667 | $ | — | $ | (102,986 | ) | $ | (1,682 | ) | $ | (7,402 | ) | $ | 82 | $ | (2,517 | ) | |||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (29 | ) | (29 | ) | ||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (16,855 | ) | — | — | — | (16,855 | ) | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on available-for-sale securities (net of tax of $250) | — | — | — | — | — | — | — | — | 465 | — | — | 465 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net loss (net of tax of $99) | — | — | — | — | — | — | — | — | 209 | — | — | 209 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $28) | — | — | — | — | — | — | — | — | (52 | ) | — | — | (52 | ) | ||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (175 | ) | — | — | (175 | ) | ||||||||||||||||||||||||||||||
Total comprehensive loss | (16,408 | ) | ||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (1,072 | ) | (8,541 | ) | — | — | — | (9,613 | ) | |||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 23,978 | — | — | — | — | — | — | — | 23,978 | ||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (21 | ) | 39 | — | (1,074 | ) | 20 | 1,054 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | 18 | 1 | — | (1 | ) | — | 18 | |||||||||||||||||||||||||||||||
Balance as of December 31, 2011 | 1 | 556 | 1,158 | 112,578 | 19,130 | 687 | — | (128,381 | ) | (1,235 | ) | (7,403 | ) | 53 | (4,571 | ) | ||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 17,224 | — | — | (4 | ) | 17,220 | |||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on available-for-sale securities (net of tax of $702) | — | — | — | — | — | — | — | — | 1,289 | — | — | 1,289 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net income (net of tax of $250) | — | — | — | — | — | — | — | — | 463 | — | — | 463 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net income (net of tax of $9) | — | — | — | — | — | — | — | — | (17 | ) | — | — | (17 | ) | ||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (116 | ) | — | — | (116 | ) | ||||||||||||||||||||||||||||||
Total comprehensive income | 18,839 | |||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | 1 | (11,609 | ) | — | — | — | (11,608 | ) | ||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 4,571 | — | — | — | — | — | — | — | 4,571 | ||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | (1 | ) | — | — | 2 | — | 1 | |||||||||||||||||||||||||||||||
Balance as of December 31, 2012 | 1 | 556 | 1,158 | 117,149 | 19,130 | 687 | — | (122,766 | ) | 384 | (7,401 | ) | 41 | 7,224 | ||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (10 | ) | (10 | ) | ||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 83,963 | — | — | 19 | 83,982 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized gains on available-for-sale securities (net of tax of $529) | — | — | — | — | — | — | — | — | 983 | — | — | 983 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net income (net of tax of $22) | — | — | — | — | — | — | — | — | 42 | — | — | 42 | ||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net income (net of tax of $179) | — | — | — | — | — | — | — | — | (332 | ) | — | — | (332 | ) | ||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans (net of tax of $68) | — | — | — | — | — | — | — | — | 126 | — | — | 126 | ||||||||||||||||||||||||||||||||
Total comprehensive income | 84,801 | |||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | — | (82,452 | ) | — | — | — | (82,452 | ) | ||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 28 | — | — | — | 28 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2013 | 1 | 556 | 1,158 | $ | 117,149 | $ | 19,130 | $ | 687 | $ | — | $ | (121,227 | ) | $ | 1,203 | $ | (7,401 | ) | $ | 50 | $ | 9,591 | |||||||||||||||||||||
See Notes to Consolidated Financial Statements
Fourth Quarter and Full Year 2013 Results | 17 |
February 21, 2014 Fannie Mae 2013 Credit Supplement Exhibit 99.2
1 This presentation includes information about Fannie Mae, including information contained in Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2013, the “2013 Form 10-K.” Some of the terms used in these materials are defined and discussed more fully in the 2013 Form 10-K. These materials should be reviewed together with the 2013 Form 10-K, which is available on the “SEC Filings” page in the “Investor Relations” section of Fannie Mae’s web site at www.fanniemae.com. Some of the information in this presentation is based upon information that we received from third-party sources such as sellers and servicers of mortgage loans. Although we generally consider this information reliable, we do not independently verify all reported information. Due to rounding, amounts reported in this presentation may not add to totals indicated (or 100%). A zero indicates less than one half of one percent. A dash indicates a null value. Unless otherwise indicated data labeled as “2013” is as of December 31, 2013 or for the full year of 2013.
2 Home Prices Home Price Growth/Decline Rates in the U.S. 3 One Year Home Price Change as of 2013 Q4 4 Home Price Change Peak-to-Current as of 2013 Q4 5 Credit Profile of Fannie Mae Single-Family Loans Credit Characteristics of Single-Family Business Acquisitions 6 Credit Characteristics of Single-Family Business Acquisitions under the Refi Plus™ Initiative 7 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Key Product Features 8 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year 9 Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Select States 10 Credit Characteristics of Alt-A Loans in the Single-Family Conventional Guaranty Book of Business 11 Credit Characteristics of Refi Plus Loans in the Single-Family Conventional Guaranty Book of Business 12 Serious Delinquency Rates by Select States and Region of Single-Family Conventional Guaranty Book of Business 13 Workouts of Fannie Mae Single-Family Loans Single-Family Completed Workouts by Type 14 Re-performance Rates of Modified Single-Family Loans 15 Additional Credit Information for Fannie Mae Single-Family Loans Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year 16 Single-Family Real Estate Owned (REO) in Select States 17 Single-Family Short Sales and REO Sales Price / UPB of Mortgage Loans 18 Credit Profile of Fannie Mae Multifamily Loans Multifamily Credit Profile by Loan Attributes 19 Multifamily Credit Profile by Acquisition Year 20 Multifamily Credit Profile 21 Multifamily 2013 Credit Losses by State 22 Table of Contents
3 7.5% 7.6% 10.6% 11.3% 2.7% -3.5% -9.1% -4.8% -4.3% -3.6% 4.2% 8.8% -15% -10% -5% 0% 5% 10% 15% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 10.6% 10.7% 14.6% 14.7% -0.3% -8.4% -18.4% -2.5% -3.8% -3.7% 7.2% 11.7% Home Price Growth/Decline Rates in the U.S. Fannie Mae Home Price Index Growth rates are from period-end to period-end. *Estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2014. Including subsequent data may lead to materially different results. **Year-to-date as of Q3-2013. As comparison, Fannie Mae’s index for the same period is 8.7%. S&P/Case-Shiller Index * Based on our home price index, we estimate that home prices on a national basis increased by 8.8% in 2013, following an increase of 4.2% in 2012. Despite the recent increases in home prices, we estimate that, through December 31, 2013, home prices on a national basis remained 13.5% below their peak in the third quarter of 2006. Our home price estimates are based on preliminary data and are subject to change as additional data become available. We estimate that home prices on a national basis increased by 0.2% in the fourth quarter of 2013. **
4 T X 6 . 8 % 5 . 4 % M T 7 . 3 % 0 . 3 % C A 2 5 . 4 % 1 9 . 6 % N M 3 . 0 % 0 . 5 % C O 9 . 3 % 2 . 6 % W Y 2 . 6 % 0 . 2 % A Z 1 8 . 9 % 2 . 4 % N V 2 7 . 2 % 1 . 0 % U T 9 . 4 % 1 . 0 % M N 7 . 3 % 1 . 9 %I D 8 . 9 % 0 . 5 % K S 3 . 2 % 0 . 5 % O R 1 1 . 9 % 1 . 7 % N E 5 . 3 % 0 . 4 % S D 4 . 3 % 0 . 2 % N D 7 . 7 % 0 . 1 % O K 3 . 2 % 0 . 6 % M O 4 . 1 % 1 . 3 % I L 7 . 8 % 4 . 1 % I A 2 . 9 % 0 . 7 % W I 2 . 7 % 1 . 8 % W A 1 0 . 9 % 3 . 5 % A R 1 . 7 % 0 . 5 % A L 2 . 5 % 1 . 0 % M S 2 . 4 % 0 . 4 % G A 1 4 . 6 % 2 . 7 % P A 3 . 1 % 3 . 1 %O H 4 . 3 % 2 . 1 % N C 3 . 9 % 2 . 5 % N Y 4 . 8 % 5 . 6 % L A 2 . 8 % 0 . 9 % F L 1 7 . 0 % 5. 7 % T N 3 . 3 % 1 . 3 % K Y 2 . 7 % 0 . 6 % V A 4 . 6 % 3 . 6 % I N 3 . 4 % 1 . 2 % M I 1 2 . 0 % 2 . 4 % M E 4 . 1 % 0 . 3 % S C 4 . 6 % 1 . 2 % W V 1 . 1 % 0 . 2 % M D 7 . 0 % 2 . 8 % V T 1 . 9 % 0 . 2 % N H 7 . 1 % 0 . 5 % M A 7 . 7 % 3 . 1 % N J 4 . 7 % 4 . 0 % C T 2 . 7 % 1 . 4 % D E 2 . 7 % 0 . 4 % R I 4 . 0 % 0 . 3 % D C 9 . 3 % 0 . 4 % *Source: Fannie Mae. Home price estimates are based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2014. UPB estimates are based on data available through the end of December 2013. Including subsequent data may lead to materially different results. One Year Home Price Change as of 2013 Q4* United States 8.8% 0% to 5% 5% to 10% 10% and above State Growth Rate State: NM Growth Rate: 3.0% UPB %: 0.5% Example A K 4 . 0 % 0 . 2 % H I 9 . 0 % 0 . 8 %
5 T X 0 . 0 % 5 . 4 % M T - 1 . 3 % 0 . 3 % C A - 2 8 . 5 % 1 9 . 6 % C O 0 . 0 % 2 . 6 % N M - 1 3 . 3 % 0 . 5 % W Y - 1 . 5 % 0 . 2 % A Z - 3 3 . 4 % 2 . 4 % N E 0 . 0 % 0 . 4 %N V - 4 3 . 7 % 1 . 0 % N D 0 . 0 % 0 . 1 % O K 0 . 0 % 0 . 6 % K S - 0 . 6 % 0 . 5 % O R - 1 6 . 9 % 1 . 7 % S D - 0 . 5 % 0 . 2 % U T - 1 1 . 8 % 1 . 0 % M O - 8 . 3 % 1 . 3 % I A - 0 . 6 % 0 . 7 % W A - 1 8 . 0 % 3 . 5 % A R - 3 . 2 % 0 . 5 % A L - 8 . 8 % 1 . 0 % O H - 9 . 9 % 2 . 1 % M N - 1 3 . 9 % 1 . 9 %I D - 1 8 . 5 % 0 . 5 % W I - 9 . 9 % 1 . 8 % L A 0 . 0 % 0 . 9 % N C - 8 . 1 % 2 . 5 % G A - 1 8 . 6 % 2 . 7 % M S - 8 . 8 % 0 . 4 % N Y - 8 . 2 % 5 . 6 % I L - 2 0 . 6 % 4 . 1 % F L - 3 9 . 3 % 5. 7 % P A - 4 . 2 % 3 . 1 % T N - 5 . 8 % 1 . 3 % K Y - 1 . 0 % 0 . 6 % I N - 2 . 0 % 1 . 2 % M I - 2 1 . 8 % 2 . 4 % V A - 1 5 . 5 % 3 . 6 % M E - 9 . 5 % 0 . 3 % S C - 9 . 9 % 1 . 2 % W V 0 . 0 % 0 . 2 % V T - 7 . 6 % 0 . 2 % M D - 2 3 . 4 % 2 . 8 % N H - 1 7 . 5 % 0 . 5 % M A - 1 2 . 8 % 3 . 1 % N J - 2 3 . 5 % 4 . 0 % C T - 1 9 . 6 % 1 . 4 % D E - 1 8 . 3 % 0 . 4 % R I - 2 9 . 8 % 0 . 3 % D C - 1 . 5 % 0 . 4 % Home Price Change Peak-to-Current as of 2013 Q4* United States -13.5% Below -30% -30% to -15% -15% to -5% -5% to 0% 0% State Growth Rate State: NM Growth Rate: -13.3% UPB %: 0.5% Example *Source: Fannie Mae. Home price estimates are based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2014. UPB estimates are based on data available through the end of December 2013. Including subsequent data may lead to materially different results. Note: Date of peak is determined for each state individually. States currently at peak prices show 0.0% change. H I - 1 0 . 3 % 0 . 8 % A K - 1 . 3 % 0 . 2 %
6 Acquisition Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Unpaid Principal Balance (billions) $728.4 $832.2 $562.3 $595.0 $684.7 $557.2 $643.8 $515.8 $524.2 $568.8 Weighted Average Origination Note Rate 3.78% 3.78% 4.35% 4.64% 4.93% 6.00% 6.51% 6.45% 5.73% 5.63% Origination Loan-to-Value Ratio <= 60% 22.0% 25.3% 29.1% 30.3% 32.6% 22.7% 16.7% 18.6% 21.4% 23.1% >60% and <= 70% 13.9% 14.4% 15.5% 15.9% 17.0% 16.1% 13.5% 15.1% 16.3% 16.2% >70% and <= 80% 34.9% 34.4% 37.3% 38.5% 39.9% 39.5% 44.7% 49.6% 46.2% 43.1% >80% and <= 90% 10.5% 9.1% 8.9% 8.6% 6.9% 11.7% 9.1% 6.8% 7.4% 8.2% >90% and <= 100% (2) 11.5% 8.4% 6.8% 5.2% 3.3% 10.0% 15.8% 9.7% 8.5% 9.3% > 100% (2) 7.1% 8.3% 2.3% 1.6% 0.4% 0.1% 0.1% 0.2% 0.2% 0.2% Weighted Average Origination Loan-to-Value Ratio 75.7% 74.5% 69.3% 68.4% 66.8% 72.0% 75.5% 73.4% 72.0% 71.4% Weighted Average Origination Loan-to-Value Ratio Excluding HARP (3) 70.3% 67.8% 66.6% 65.8% 65.8% FICO Credit Scores (4) 0 to < 620 1.4% 0.8% 0.5% 0.4% 0.4% 2.8% 6.4% 6.2% 5.4% 5.6% >=620 and < 660 3.4% 2.2% 1.8% 1.6% 1.5% 5.7% 11.5% 11.2% 10.7% 11.5% >=660 and < 700 9.7% 7.2% 7.0% 6.6% 6.5% 13.9% 19.2% 19.6% 18.9% 19.4% >=700 and < 740 18.2% 15.6% 16.2% 16.1% 17.2% 21.7% 22.6% 23.0% 23.2% 23.9% >=740 67.3% 74.1% 74.5% 75.1% 74.4% 55.8% 40.1% 39.7% 41.5% 39.2% Missing 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.3% 0.4% Weighted Average FICO Credit Score 753 761 762 762 761 738 716 716 719 715 Product Distribution Fixed-rate 97.6% 96.7% 93.5% 93.7% 96.6% 91.7% 90.1% 83.4% 78.7% 78.8% Adjustable-rate 2.4% 3.3% 6.5% 6.3% 3.4% 8.3% 9.9% 16.6% 21.3% 21.2% Alt-A (5) 1.3% 0.8% 1.2% 0.9% 0.2% 3.1% 16.7% 21.8% 16.1% 11.9% Subprime 0.3% 0.7% 0.7% 0.0% Interest Only 0.2% 0.3% 0.7% 1.3% 1.0% 5.6% 15.2% 15.2% 10.1% 5.0% Negative Amortizing 0.0% 0.3% 3.1% 3.2% 1.9% Investor 9.3% 7.2% 6.5% 4.6% 2.5% 5.6% 6.5% 7.0% 6.4% 5.4% Condo/Co-op 10.4% 9.1% 8.8% 8.6% 8.2% 10.3% 10.4% 10.5% 9.8% 8.8% Refinance 70.2% 79.4% 76.5% 77.4% 79.9% 58.6% 50.4% 48.3% 53.1% 57.3% Total Refi Plus Initiative (3) 22.5% 24.5% 24.3% 23.4% 10.6% HARP 13.7% 15.6% 9.9% 9.8% 4.1% Origination Loan-to-Value Ratio: >80% and <=105% 58.4% 57.2% 88.1% 94.4% 99.1% >105% and <=125% 21.5% 22.1% 11.9% 5.6% 0.9% >125% 20.1% 20.7% HARP Weighted Average Origination Loan-to-Value Ratio 109.8% 111.0% 94.3% 92.2% 90.7% Credit Characteristics of Single-Family Business Acquisitions(1) (1) Percentage calculated based on unpaid principal balance of loans at time of acquisition. Single-family business acquisitions refer to single-family mortgage loans we acquire through purchase or securitization transactions. (2) The increase after 2009 is the result of the Home Affordable Refinance Program (“HARP”), which involves the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (3) Our Refi Plus initiative, which includes HARP, started in April 2009. Our Refi Plus initiative provides expanded refinance opportunities for eligible Fannie Mae borrowers. (4) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (5) Newly originated Alt-A loans acquired after 2008 consist of the refinance of existing loans under our Refi Plus initiative.
7 Credit Characteristics of Single-Family Business Acquisitions under the Refi Plus Initiative (1) Our Refi Plus initiative, under which we acquire HARP loans, started in April 2009. HARP loans have LTV ratios at origination in excess of 80%, while Other Refi Plus loans have LTV ratios at origination of up to 80%. (2) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 Unpaid Principal Balance (billions) $99.5 $129.9 $55.6 $59.0 $27.9 $64.4 $73.8 $81.2 $80.5 $44.7 Weighted Average Origination Note Rate 4.04% 4.14% 4.78% 5.00% 5.05% 3.80% 3.89% 4.44% 4.68% 4.85% Origination Loan-to-Value Ratio <= 80% 100.00% 100.00% 100.00% 100.00% 100.00% >80% and <= 105% 58.4% 57.2% 88.1% 94.4% 99.1% >105% and <= 125% 21.5% 22.1% 11.9% 5.6% 0.9% >125% 20.1% 20.7% Weighted Average Origination Loan-to-Value Ratio 109.8% 111.0% 94.3% 92.2% 90.7% 60.2% 61.1% 60.2% 62.3% 63.3% FICO Credit Scores (2) 0 to < 620 6.7% 3.7% 2.1% 2.0% 1.2% 5.3% 2.9% 1.7% 1.4% 0.8% >= 620 and < 660 9.5% 6.0% 3.8% 3.6% 2.5% 6.9% 4.2% 2.8% 2.4% 1.7% >=660 and < 700 17.5% 13.4% 11.6% 11.6% 9.6% 13.5% 9.8% 8.8% 8.0% 6.7% >=700 and < 740 21.2% 20.3% 21.0% 21.4% 22.3% 18.4% 16.2% 16.7% 15.9% 16.3% >=740 45.1% 56.6% 61.5% 61.2% 64.4% 55.8% 66.9% 70.0% 72.3% 74.5% Weighted Average FICO Credit Score 722 738 746 746 749 737 753 758 760 762 P oduct D stribution Fixed-rate 99.6% 99.3% 96.8% 97.2% 97.9% 99.3% 98.9% 97.6% 97.3% 98.1% Adjustable-rate 0.4% 0.7% 3.2% 2.8% 2.1% 0.7% 1.1% 2.4% 2.7% 1.9% Owner Occupied 78.6% 85.7% 86.3% 91.1% 95.2% 81.6% 87.2% 89.2% 91.8% 93.5% Second/Vacation Home 3.1% 2.8% 3.6% 3.5% 3.3% 3.5% 3.2% 3.6% 3.5% 4.2% Investor 18.3% 11.5% 10.1% 5.4% 1.6% 14.9% 9.6% 7.3% 4.7% 2.3% Condo/Co-op 13.2% 10.9% 10.5% 10.1% 8.3% 9.3% 7.6% 5.8% 6.0% 6.8% Acquisition Year HARP (1) Other Refi Plus (1)
8 As of December 31, 2013 Negative Amortizing Loans Interest Only Loans Loans with FICO < 620 (3) Loans with FICO ≥ 620 and < 660 (3) Loans with Origination LTV Ratio > 90% Loans with FICO < 620 and Origination LTV Ratio > 90% (3) Alt-A Loans Subprime Loans (6) Subtotal of Key Product Features (1) Overall Book Unpaid Principal Balance (billions) (2) $6.4 $80.7 $74.3 $155.0 $425.7 $21.1 $131.3 $4.2 $739.4 $2,820.4 Share of Single-Family Conventional Guaranty Book 0.2% 2.9% 2.6% 5.5% 15.1% 0.7% 4.7% 0.1% 26.2% 100.0% Average Unpaid Principal Balance (2) $100,587 $234,819 $119,637 $131,294 $171,735 $131,430 $152,326 $142,220 $156,043 $160,357 Serious Delinquency Rate 4.95% 11.77% 9.91% 7.28% 3.48% 10.90% 9.23% 16.93% 5.67% 2.38% Origination Years 2005-2008 54.6% 78.7% 46.0% 40.0% 14.3% 36.5% 61.1% 85.3% 31.0% 14.7% Weighted Average Origination Loan-to-Value Ratio 70.5% 74.0% 80.8% 79.3% 105.3% 106.9% 77.1% 76.8% 90.7% 74.1% Origination Loan-to-Value Ratio > 90% 0.3% 7.9% 28.4% 23.4% 100.0% 100.0% 13.2% 6.5% 57.6% 15.1% Weighted Average Mark-to-Market Loan-to-Value Ratio 70.7% 91.8% 79.9% 77.3% 95.2% 103.3% 83.3% 94.7% 86.3% 66.7% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 15.5% 23.4% 14.5% 12.3% 18.6% 29.3% 17.4% 23.1% 15.6% 5.0% Mark-to-Market Loan-to-Value Ratio > 125% 11.9% 13.6% 7.5% 6.5% 8.7% 17.4% 10.1% 16.0% 7.3% 2.2% Weighted Average FICO (3) 706 724 584 642 728 585 714 618 704 744 FICO < 620 (3) 6.8% 1.5% 100.0% 5.0% 100.0% 2.0% 51.5% 10.1% 2.6% Fixed-rate 4.0% 24.5% 81.5% 83.5% 94.2% 85.6% 65.2% 63.0% 82.8% 91.5% Primary Residence 68.6% 85.2% 95.2% 93.1% 91.0% 95.3% 76.9% 96.9% 89.3% 88.2% Condo/Co-op 12.8% 15.3% 4.8% 6.2% 10.4% 5.9% 10.1% 3.9% 9.6% 9.5% Credit Enhanced (4) 38.8% 14.3% 25.2% 22.2% 57.4% 61.5% 12.8% 56.1% 37.1% 15.1% % of 2009 Credit Losses (5) 2.0% 32.6% 8.8% 15.5% 19.2% 3.4% 39.6% 1.5% 75.0% 100.0% % of 2010 Credit Losses (5) 1.9% 28.6% 8.0% 15.1% 15.9% 2.7% 33.2% 1.1% 68.4% 100.0% % of 2011 Credit Losses (5) 1.2% 25.8% 7.9% 14.7% 14.0% 2.2% 27.3% 0.6% 63.4% 100.0% % of 2012 Credit Losses (5) 0.5% 21.8% 7.8% 14.2% 16.8% 2.3% 23.7% 1.1% 61.2% 100.0% % of 2013 Credit Losses (5)(6) 0.8% 18.7% 7.0% 15.7% 20.8% 2.0% 26.0% -0.2% 63.4% 100.0% Categories Not Mutually Exclusive (1) (1) Loans with multiple product features are included in all applicable categories. The subtotal is calculated by counting a loan only once even if it is included in multiple categories. (2) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2013. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae had access to loan-level information. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. Does not reflect the impact of recoveries that have not been allocated to specific loans. For information on total credit losses, refer to Fannie Mae’s 2013 Form 10-K. (6) Credit losses are negative due to recoveries recognized in the fourth quarter of 2013. Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Key Product Features
9 As of December 31, 2013 Overall Book 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 and Earlier Unpaid Principal Balance (billions) (1) $2,820.4 $609.9 $728.0 $320.8 $280.2 $209.0 $80.3 $137.2 $98.7 $99.6 $256.7 Share of Single-Family Conventional Guaranty Book 100.0% 21.6% 25.8% 11.4% 9.9% 7.4% 2.8% 4.9% 3.5% 3.5% 9.1% Average Unpaid Principal Balance (1) $160,357 $199,516 $199,440 $171,471 $170,319 $164,285 $152,148 $163,511 $148,107 $129,790 $77,966 Serious Delinquency Rate 2.38% 0.04% 0.17% 0.34% 0.56% 0.98% 6.69% 12.18% 11.26% 7.26% 3.50% Weighted Average Origination Loan-to-Value Ratio 74.1% 76.1% 76.0% 71.4% 71.2% 69.8% 74.7% 78.3% 75.3% 73.5% 71.7% Origination Loan-to-Value Ratio > 90% (2) 15.1% 19.4% 18.7% 12.7% 10.4% 6.6% 12.7% 20.9% 12.6% 9.8% 10.5% Weighted Average Mark-to-Market Loan-to-Value Ratio 66.7% 71.1% 64.3% 59.2% 60.6% 62.5% 77.2% 94.2% 92.0% 78.0% 50.9% Mark-to-Market Loan-to-Value Ratio > 100% and <= 125% 5.0% 3.7% 3.6% 0.8% 1.1% 1.4% 11.8% 24.0% 22.0% 13.2% 2.1% Mark-to-Market Loan-to-Value Ratio > 125% 2.2% 1.7% 1.4% 0.0% 0.1% 0.1% 2.8% 13.2% 13.2% 5.2% 0.7% Weighted Average FICO (3) 744 751 759 758 757 754 718 694 699 708 709 FICO < 620 (3) 2.6% 1.5% 1.0% 0.7% 0.7% 0.7% 5.4% 10.8% 8.6% 6.5% 7.2% Interest Only 2.9% 0.2% 0.3% 0.6% 1.0% 1.0% 7.5% 18.1% 20.0% 13.1% 2.8% Negative Amortizing 0.2% 0.1% 1.6% 1.8% 1.1% Fixed-rate 91.5% 97.6% 97.4% 94.5% 95.4% 97.2% 77.8% 67.7% 66.5% 70.3% 82.5% Primary Residence 88.2% 86.4% 88.6% 87.3% 89.3% 90.8% 87.0% 89.1% 87.0% 86.5% 90.0% Condo/Co-op 9.5% 10.4% 9.2% 8.8% 8.6% 9.0% 11.3% 10.1% 11.0% 10.9% 8.0% Credit Enhanced (4) 15.1% 19.9% 15.1% 10.2% 7.4% 6.9% 26.3% 31.0% 19.9% 15.2% 11.2% % of 2009 Credit Losses (5) 100.0% 4.8% 36.0% 30.9% 16.4% 11.9% % of 2010 Credit Losses (5) 100.0% 0.4% 7.0% 35.8% 29.2% 15.9% 11.7% % of 2011 Credit Losses (5) 100.0% 0.7% 1.6% 5.7% 30.3% 27.7% 19.2% 14.8% % of 2012 Credit Losses (5) 100.0% 0.1% 0.6% 1.9% 2.5% 7.7% 31.5% 26.3% 16.3% 13.1% % of 2013 Credit Losses (5) 100.0% 0.1% 1.9% 1.7% 2.9% 3.4% 7.1% 30.2% 24.6% 15.8% 12.4% Cumulative Default Rate (6) 0.0% 0.1% 0.2% 0.3% 0.5% 4.1% 12.7% 11.6% 7.0% Origination Year Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Origination Year (1) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2013. (2) The increase after 2009 is the result of the Home Affordable Refinance Program (“HARP”), which involves the refinance of existing Fannie Mae loans with high loan-to-value ratios, including loans with loan-to-value ratios in excess of 100%. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. Does not reflect the impact of recoveries that have not been allocated to specific loans. For information on total credit losses, refer to Fannie Mae’s 2013 Form 10-K. (6) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deeds-in-lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. For 2003 and 2004 cumulative default rates, refer to slide 16.
10 As of December 31, 2013 Overall Book AZ CA FL NV Select Midwest States (1) Unpaid Principal Balance (billions) (2) $2,820.4 $67.9 $551.4 $160.4 $27.1 $276.8 Share of Single-Family Conventional Guaranty Book 100.0% 2.4% 19.6% 5.7% 1.0% 9.8% Average Unpaid Principal Balance (2) $160,357 $149,802 $226,815 $138,769 $155,002 $124,126 Serious Delinquency Rate 2.38% 1.12% 0.98% 6.89% 4.19% 2.43% Origination Years 2005-2008 14.7% 18.2% 11.5% 30.0% 25.5% 14.1% Weighted Average Origination Loan-to-Value Ratio 74.1% 83.1% 68.7% 80.9% 88.8% 78.5% Origination Loan-to-Value Ratio > 90% 15.1% 25.6% 10.1% 22.2% 27.5% 20.5% Weighted Average Mark-to-Market Loan-to-Value Ratio 66.7% 72.9% 57.6% 80.4% 84.7% 73.7% Mark-to-Market Loan-to-Value Ratio >100% and <=125% 5.0% 10.6% 3.9% 13.6% 15.4% 7.2% Mark-to-Market Loan-to-Value Ratio >125% 2.2% 4.8% 1.8% 11.6% 15.3% 3.5% Weighted Average FICO (3) 744 745 753 731 740 739 FICO < 620 (3) 2.6% 2.3% 1.5% 4.4% 2.4% 3.5% Interest Only 2.9% 5.2% 4.0% 5.8% 8.4% 1.8% Negative Amortizing 0.2% 0.3% 0.6% 0.6% 0.8% 0.1% Fixed-rate 91.5% 88.2% 90.0% 85.9% 83.2% 91.1% Primary Residence 88.2% 79.1% 85.0% 81.3% 75.5% 92.5% Condo/Co-op 9.5% 4.2% 12.6% 13.3% 5.3% 11.4% Credit Enhanced (4) 15.1% 14.9% 7.4% 14.2% 13.9% 19.0% % of 2009 Credit Losses (5) 100.0% 10.8% 24.4% 15.5% 6.5% 14.8% % of 2010 Credit Losses (5) 100.0% 10.0% 22.6% 17.5% 6.1% 13.6% % of 2011 Credit Losses (5) 100.0% 11.7% 27.0% 11.0% 7.9% 12.0% % of 2012 Credit Losses (5) 100.0% 6.3% 18.4% 21.4% 4.8% 18.7% % of 2013 Credit Losses (5) 100.0% 1.4% 5.1% 28.9% 3.8% 21.8% Credit Characteristics of Single-Family Conventional Guaranty Book of Business by Select States (1) Select Midwest states are Illinois, Indiana, Michigan, and Ohio. (2) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2013. (3) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (4) Unpaid principal balance of all loans with credit enhancement as a percentage of unpaid principal balance of single-family conventional guaranty book of business for which Fannie Mae has access to loan-level information. (5) Expressed as a percentage of credit losses for the single-family guaranty book of business. Does not reflect the impact of recoveries that have not been allocated to specific loans. For information on total credit losses, refer to Fannie Mae’s 2013 Form 10-K.
11 As of December 31, 2013 Alt-A (1) 2013(2) 2012(2) 2011 (2) 2010 (2) 2009 (2) 2008 2007 2006 2005 2004 and Earlier Unpaid principal balance (billions) (3) $131.3 $8.2 $7.8 $5.7 $2.8 $1.1 $2.6 $27.4 $29.4 $20.8 $25.5 Share of Alt-A 100.0% 6.2% 5.9% 4.4% 2.1% 0.8% 2.0% 20.9% 22.4% 15.8% 19.5% Weighted Average Origination Loan-to-Value Ratio 77.1% 96.9% 105.3% 75.3% 81.3% 76.7% 69.0% 75.1% 74.2% 73.1% 71.9% Origination Loan-to-Value Ratio > 90% (4) 13.2% 52.4% 59.0% 26.4% 31.8% 23.0% 2.4% 8.6% 4.7% 3.3% 5.3% Weighted Average Mark-to-Market Loan-to-Value Ratio 83.3% 89.2% 86.7% 62.8% 72.8% 71.5% 75.0% 96.7% 96.5% 84.2% 57.1% Mark-to-Market Loan-to-Value Ratio > 100% and <=125% 17.4% 19.3% 19.7% 2.5% 4.8% 6.1% 11.2% 25.5% 25.3% 17.7% 3.8% Mark-to-Market Loan-to-Value Ratio > 125% 10.1% 12.2% 11.7% 0.1% 0.2% 0.5% 2.9% 15.8% 16.8% 8.3% 0.9% Weighted Average FICO (5) 714 710 721 740 727 729 719 705 708 719 715 FICO < 620 (5) 2.0% 9.6% 7.4% 3.1% 3.9% 4.4% 0.3% 0.7% 0.6% 0.5% 1.8% Adjustable-rate 34.8% 0.4% 0.7% 2.5% 4.0% 3.7% 29.2% 41.6% 46.3% 50.5% 35.6% Interest Only 25.6% 0.1% 8.1% 38.8% 39.6% 32.8% 16.6% Negative Amortizing 2.6% 4.3% 6.7% 2.8% Investor 18.9% 35.3% 29.8% 25.0% 13.0% 5.7% 17.3% 17.0% 15.2% 18.8% 16.7% Condo/Co-op 10.1% 12.0% 11.1% 7.2% 8.9% 8.6% 6.3% 8.3% 10.5% 12.7% 9.7% California 21.1% 23.9% 25.3% 25.5% 14.6% 13.9% 19.1% 21.0% 18.8% 19.5% 23.2% Florida 11.5% 9.8% 11.6% 4.0% 3.3% 3.5% 10.0% 12.9% 13.6% 13.4% 9.4% Credit Enhanced (6) 12.8% 7.9% 7.8% 2.1% 2.2% 1.4% 14.3% 16.5% 12.0% 11.1% 17.8% Serious Delinquency Rate at December 31, 2012 11.36% 0.21% 1.05% 3.30% 4.89% 10.71% 17.41% 16.59% 11.76% 6.74% Serious Delinquency Rate at December 31, 2013 9.23% 0.26% 0.82% 1.31% 3.47% 4.55% 10.35% 15.41% 14.63% 10.06% 6.07% % of 2009 Credit Losses (7) 39.6% 0.4% 13.4% 15.8% 7.3% 2.6% % of 2010 Credit Losses (7) 33.2% 0.0% 0.0% 0.5% 11.8% 12.8% 5.7% 2.3% % of 2011 Credit Losses (7) 27.3% 0.1% 0.1% 0.3% 8.5% 10.1% 5.9% 2.5% % of 2012 Credit Losses (7) 23.7% 0.0% 0.0% 0.1% 0.1% 0.3% 7.9% 8.9% 4.3% 1.9% % of 2013 Credit Losses (7) 26.0% 0.0% 0.1% 0.2% 0.2% 0.1% 0.2% 9.1% 9.6% 4.7% 1.9% Cumulative Default Rate (8) 0.0% 0.3% 0.7% 3.1% 4.3% 10.2% 22.7% 20.9% 13.5% Origination Year Credit Characteristics of Alt-A Loans in the Single-Family Conventional Guaranty Book of Business (1) In reporting our Alt-A exposure, we have classified mortgage loans as Alt-A if and only if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation or other product features. We have loans with some features that are similar to Alt-A mortgage loans that we have not classified as Alt-A because they do not meet our classification criteria. (2) Newly originated Alt-A loans acquired after 2008 consist of the refinance of existing loans under our Refi Plus initiative. (3) Excludes non-Fannie Mae securities held in portfolio and those Alt-A and subprime wraps for which Fannie Mae does not have loan-level information. Fannie Mae had access to detailed loan-level information for approximately 99% of its single-family conventional guaranty book of business as of December 31, 2013. (4) The increase after 2008 is the result of our HARP loans, which we began acquiring in April 2009 and which involve the refinance of existing Fannie Mae loans with high loan-to- value ratios, including loans with loan-to-value ratios in excess of 100%. (5) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan. (6) Defined as unpaid principal balance of Alt-A loans with credit enhancement as a percentage of unpaid principal balance of all Alt-A loans for which Fannie Mae has access to loan-level information. (7) Expressed as a percentage of credit losses for the single-family guaranty book of business. Does not reflect the impact of recoveries that have not been allocated to specific loans. For information on total credit losses, refer to Fannie Mae’s 2013 Form 10-K. (8) Defaults include loan liquidations other than through voluntary pay-off or repurchase by lenders and includes loan foreclosures, short sales, sales to third parties and deeds-in- lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year.
12 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 Unpaid Principal Balance (billions) $84.5 $124.8 $44.5 $41.6 $19.4 $54.2 $65.3 $52.9 $43.0 $19.0 Share of Single-Family Conventional Guaranty Book 3.0% 4.4% 1.6% 1.5% 0.7% 1.9% 2.3% 1.9% 1.5% 0.7% Average Unpaid Principal Balance $175,880 $193,343 $201,448 $213,750 $220,796 $134,704 $141,962 $145,173 $155,763 $160,086 Share of Total Refinances 4.2% 6.1% 2.2% 2.0% 1.0% 2.7% 3.2% 2.6% 2.1% 0.9% Weighted Average Origination Loan-to-Value Ratio 109.4% 112.7% 95.0% 93.1% 91.5% 60.3% 61.3% 60.7% 63.0% 65.0% Origination Loan-to-Value Ratio > 90% 75.0% 77.9% 58.7% 53.7% 48.8% Weighted Average Mark-to-Market Loan-to-Value Ratio 100.7% 93.4% 79.6% 81.5% 84.4% 56.3% 52.3% 50.2% 53.6% 58.1% Weighted Average FICO (2) 721 736 744 742 744 735 750 754 755 753 FICO < 620 (2) 7.0% 4.0% 2.3% 2.4% 1.8% 5.6% 3.3% 2.1% 1.9% 1.7% Fixed-rate 99.6% 99.5% 97.2% 97.5% 97.8% 99.3% 99.1% 97.8% 97.7% 98.1% Primary Residence 78.2% 85.0% 85.8% 90.2% 94.5% 81.1% 86.7% 88.1% 90.5% 92.0% Second/Vacation Home 3.1% 2.8% 3.4% 3.5% 3.2% 3.5% 3.1% 3.6% 3.6% 4.6% Investor 18.6% 12.2% 10.8% 6.3% 2.2% 15.4% 10.2% 8.4% 5.9% 3.4% Condo/Co-op 13.2% 11.0% 10.3% 9.8% 8.2% 9.5% 7.7% 5.9% 6.2% 7.3% Serious Delinquency Rate Overall Serious Delinquency Rate 0.19% 0.63% 1.18% 1.90% 2.73% 0.05% 0.16% 0.34% 0.62% 1.00% Serious Delinquency Rate by MTMLTV Ratio: <=80% 0.09% 0.23% 0.63% 0.78% 1.08% 0.05% 0.16% 0.33% 0.56% 0.83% 80% and <=105% 0.14% 0.60% 1.72% 2.69% 3.29% 0.05% 0.37% 2.85% 4.25% 3.87% 105% and <=125% 0.28% 1.03% 3.29% 5.48% 7.82% 0.00% 2.56% 4.88% >125% 0.42% 1.57% 4.42% 6.80% 8.76% 0.00% 3.45% Mark-to-Market Loan-to-Value Ratio <=80% 12.8% 29.7% 54.1% 47.6% 37.3% 99.5% 99.8% 99.7% 98.2% 93.4% 80% and <=105% 56.4% 47.1% 42.7% 48.3% 57.1% 0.5% 0.2% 0.3% 1.8% 6.5% 105% and <=125% 18.2% 14.7% 3.0% 3.7% 5.1% 0.0% 0.0% 0.1% >125% 12.5% 8.4% 0.2% 0.4% 0.6% 0.0% 0.0% As of December 31, 2013 Origination Year HARP (1) Other Refi Plus (1) Credit Characteristics of Refi Plus Loans in the Single-Family Conventional Guaranty Book of Business (1) Our Refi Plus initiative, under which we acquire HARP loans, started in April 2009. HARP loans have LTV ratios at origination in excess of 80%, while Other Refi Plus loans have LTV ratios at origination of up to 80%. (2) FICO credit score is as of loan origination, as reported by the seller of the mortgage loan.
13 0% 1% 2% 3% 4% 5% 6% 7% 2013 Q42013 Q32013 Q2 2013 Q1 2012 Q42012 Q32012 Q22012 Q12011 Q42011 Q32011 Q22011 Q12010 Q4 Serious Delinquency Rate by Region (3) Midwest Northeast Southeast Southwest West 0% 2% 4% 6% 8% 10% 12% 14% 2013 Q42013 Q32013 Q2 2013 Q1 2012 Q42012 Q32012 Q22012 Q12011 Q42011 Q32011 Q22011 Q12010 Q4 Serious Delinquency Rate by Select States AZ CA FL NV Select Midwest States All Serious Delinquency Rates by Select States and Region of Single-Family Conventional Guaranty Book of Business(1) (1) Calculated based on the number of loans in Fannie Mae’s single-family conventional guaranty book of business within each specified category. (2) Select Midwest states are Illinois, Indiana, Michigan, and Ohio. (3) For information on which states are included in each region, refer to footnote 9 to Table 39 in Fannie Mae’s 2013 Form 10-K. (2)
14 63,228 63,761 61,492 54,651 54,074 0 25,000 50,000 75,000 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Nu mb er o f Lo an s Modifications Repayment Plans and Forbearances Completed Short Sales and Deeds-in-Lieu Single-Family Completed Workouts by Type Modifications involve changes to the original mortgage loan terms, which may include a change to the product type, interest rate, amortization term, maturity date and/or unpaid principal balance. Modifications include both completed modifications under the Administration’s Home Affordable Modification Program (HAMP) and completed non-HAMP modifications, and do not reflect loans currently in trial modifications. Repayment plans involve plans to repay past due principal and interest over a reasonable period of time through temporarily higher monthly payments. Loans with completed repayment plans are included for loans that were at least 60 days delinquent at initiation. Forbearances involve an agreement to suspend or reduce borrower payments for a period of time. Loans with forbearance plans are included for loans that were at least 90 days delinquent at initiation. Deeds-in-lieu of foreclosure involve the borrower’s voluntarily signing over title to the property. In a short sale, the borrower, working with the servicer and Fannie Mae, sells the home prior to foreclosure for less than the amount owed to pay off the loan, accrued interest and other expenses from the sale proceeds.
15 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 3 months post modification 81% 84% 84% 83% 84% 85% 84% 84% 85% 86% 83% 83% 6 months post modification 77% 78% 79% 79% 79% 78% 77% 80% 82% 79% 77% n/a 9 months post modification 72% 75% 77% 76% 74% 73% 76% 78% 78% 76% n/a n/a 12 months post modification 69% 74% 75% 72% 71% 73% 75% 76% 76% n/a n/a n/a 15 months post modification 68% 73% 72% 70% 71% 73% 74% 74% n/a n/a n/a n/a 18 months post modification 68% 71% 71% 70% 71% 72% 73% n/a n/a n/a n/a n/a 21 months post modification 66% 70% 72% 71% 71% 72% n/a n/a n/a n/a n/a n/a 24 months post modification 65% 71% 73% 71% 71% n/a n/a n/a n/a n/a n/a n/a % Current or Paid Off Re-performance Rates of Modified Single-Family Loans(1) (1) Excludes loans that were classified as subprime adjustable rate mortgages that were modified into fixed rate mortgages. Modifications include permanent modifications, but do not reflect loans currently in trial modifications.
16 2003 2004 2005 20062007 2008 20092010 2013 20112012 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% Yr1-Q1 Yr2-Q1 Yr3-Q1 Yr4-Q1 Yr5-Q1 Yr6-Q1 Yr7-Q1 Yr8-Q1 Yr9-Q1 Yr10-Q1 Yr11-Q1 Cu mu lat ive D efa ult R ate Time Since Beginning of Origination Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Note: Defaults consist of loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deeds-in-lieu of foreclosure. Cumulative Default Rate is the total number of single-family conventional loans in the guaranty book of business originated in the identified year that have defaulted, divided by the total number of single-family conventional loans in the guaranty book of business originated in the identified year. Data as of December 31, 2013 is not necessarily indicative of the ultimate performance of the loans and performance is likely to change, perhaps materially, in future periods. Cumulative Default Rates of Single-Family Conventional Guaranty Book of Business by Origination Year
17 2013 2012 2011 2010 2009 2008 Beginning Balance N/A 105,666 118,528 162,489 86,155 63,538 33,729 N/A N/A Arizona 431 4,310 8,133 16,172 20,691 12,854 5,532 2,189 3,497 California 560 6,382 14,980 27,589 34,051 19,565 10,624 4,931 8,909 Florida 1,226 30,298 23,586 13,748 29,628 13,282 6,159 19,876 13,838 Nevada 638 2,233 3,014 8,406 9,418 6,075 2,906 1,360 1,379 Select Midwest States (1) 724 31,830 40,070 33,777 45,411 28,464 23,668 26,252 29,148 All other States 679 69,331 84,696 100,004 122,879 65,377 45,763 48,621 48,895 Total Acquisitions N/A 144,384 174,479 199,696 262,078 145,617 94,652 N/A N/A Total Dispositions N/A (146,821) (187,341) (243,657) (185,744) (123,000) (64,843) N/A N/A Ending Inventory N/A 103,229 105,666 118,528 162,489 86,155 63,538 N/A N/A State REO Inventory as of December 31, 2013 REO Inventory as of December 31, 2012 Average Days From Last Paid Installment to Foreclosure For Full Year 2013 (2) (3) (4) REO Acquisitions and Dispositions (Number of Properties) Single-Family Real Estate Owned (REO) in Select States (1) Select Midwest States are Illinois, Indiana, Michigan, and Ohio. (2) Measured from the borrowers’ last paid installment on their mortgages to when the related properties were added to our REO inventory for foreclosures completed during full year of 2013. (3) Fannie Mae incurs additional costs associated with property taxes, hazard insurance, and legal fees while a delinquent loan remains in the foreclosure process. Additionally, the longer a loan remains in the foreclosure process, the longer it remains in our guaranty book of business as a seriously delinquent loan. The average number of days from last paid installment to foreclosure for all states combined were 325, 407, 479, 529, 655, and 793 in each of the years 2008 through 2013, respectively. (4) Home Equity Conversion Mortgages (HECMs) excluded from calculation.
18 70% 72% 74% 76% 78% 63% 64% 67% 68% 70% 68% 71% 75% 75% 74% 62% 65% 68% 68% 68% 58% 62% 66% 70% 74% 78% Q4 Q1 Q2 Q3 Q4 2012 2013 Short Sales Gross Sales/ UPB Short Sales Net Sales/ UPB REO Gross Sales/ UPB REO Net Sales/ UPB Q4 Q1 Q2 Q3 Q4 CA 71.1% 72.2% 75.5% 78.7% 81.4% AZ 69.9% 73.1% 76.5% 78.2% 79.2% FL 63.7% 65.8% 68.8% 71.3% 73.6% NV 59.1% 63.0% 67.1% 70.1% 73.6% IL 67.3% 66.7% 68.6% 70.5% 72.7% Top 5 67.0% 68.8% 71.7% 73.9% 76.3% All Others 76.2% 76.7% 78.6% 79.8% 80.4% Total 70.4% 71.7% 74.3% 76.2% 78.0% Short Sales Gross Sales Price/UPB 2012 2013 Q4 Q1 Q2 Q3 Q4 CA 73.2% 78.0% 85.3% 86.7% 86.8% FL 62.2% 64.5% 67.8% 70.7% 72.0% MI 56.9% 59.9% 65.1% 67.8% 66.7% IL 55.0% 57.2% 61.9% 63.2% 64.5% OH 59.2% 61.7% 62.4% 64.6% 1.9% Top 5 63.9% 66.9% 71.1% 71.7% 2.1% All Others 72.2% 73.5% 77.6% 7.8% 76.2% Total 68.5% 70.6% 74.6% 4.8% 74.2% 20132012REO Gross Sales Price/UPB Single-Family Short Sales and REO Sales Price / UPB of Mortgage Loans(1) (2) Gross Sales Price/UPB Trends on Direct Sale Dispositions(1) and Short Sales(2) Top 5 States(3) (1) Calculated as the sum of sale proceeds received on REO properties that have been sold to a third party (excluding properties that have been repurchased by the seller/servicer, acquired by a mortgage insurance company, redeemed by a borrower, or sold through the FHFA Rental Pilot) divided by the aggregate unpaid principal balance (UPB) of the related loans. Gross sales price represents the contract sale price. Net sales price represents the contract sale price less selling costs for the property and adjusted for other charges/credits paid by or due to the seller at closing. Properties disposed of in the fourth quarter of 2012 through structured rental transactions have been excluded from the Net/Gross Proceeds to UPB calculations. (2) Calculated as the sum of sales proceeds received on short sales divided by the aggregate unpaid principal balance (UPB) of the related loans. Gross sales price represents the contract sale price. Net sales price represents the contract sale price less charges/credits paid by or due to other parties at closing. (3) The states shown had the greatest volume of properties sold in 2013 in each respective category.
19 Total Multifamily Guaranty Book of Business 35,581 $198.9 100% 0.10% 100% 100% 100% 100% Credit Enhanced Loans: Credit Enhanced 32,204 $181.1 91% 0.10% 1% 73% 83% 68% Non-Credit Enhanced 3,377 $17.7 9% 0.13% 99% 27% 17% 32% Origination loan-to-value ratio: (3) Less than or equal to 70% 22,833 $110.1 56% 0.04% 46% 14% 18% 8% Greater than 70% and less than or equal to 80% 10,366 $81.9 41% 0.17% 35% 71% 70% 89% Greater than 80% 2,382 $6.9 3% 0.23% 18% 15% 12% 3% Delegated Underwriting and Servicing (DUS ®) Loans: (4) DUS ® - Small Balance Loans(5) 8,762 $16.6 8% 0.24% 5% 7% 9% 7% DUS ® - Non Small Balance Loans 12,454 $161.7 82% 0.06% -26% 71% 72% 61% DUS ® - Total 21,216 $178.3 90% 0.08% -21% 78% 81% 68% Non-DUS - Small Balance Loans(5) 13,589 $10.3 5% 0.50% 43% 16% 12% 10% Non-DUS - Non Small Balance Loans 776 $10.3 5% 0.17% 78% 6% 7% 22% Non-DUS - Total 14,365 $20.6 10% 0.34% 121% 22% 19% 32% Maturity Dates: Loans maturing in 2014 1,504 $6.8 3% 0.25% -16% 12% 5% 11% Loans maturing in 2015 2,548 $12.8 6% 0.08% -2% 8% 6% 4% Loans maturing in 2016 2,652 $14.0 7% 0.07% 33% 12% 8% 14% Loans maturing in 2017 3,764 $18.4 9% 0.29% 81% 33% 21% 12% Loans maturing in 2018 3,187 $17.9 9% 0.10% 1% 14% 21% 8% Other maturities 21,926 $129.1 65% 0.08% 3% 22% 39% 51% Loan Size Distribution: Less than or equal to $750K 8,883 $2.6 1% 0.51% 13% 5% 5% 2% Greater than $750K and less than or equal to $3M 12,262 $18.4 9% 0.38% 62% 17% 16% 16% Greater than $3M and less than or equal to $5M 4,522 $16.6 8% 0.21% 4% 12% 11% 17% Greater than $5M and less than or equal to $25M 8,559 $88.0 44% 0.10% -34% 55% 50% 48% Greater than $25M 1,355 $73.4 37% 55% 11% 18% 17% % of 2010 Multifamily Credit Losses % of 2011 Multifamily Credit Losses % of 2012 Multifamily Credit Losses As of December 31, 2013 Unpaid Principal Balance (Billions) % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) Loan Counts % of 2013 Multifamily Credit Losses (2) (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Negative values are the result of recoveries on previously charged off amounts and may also cause other percentages to be greater than 100%. (3) Weighted Average Origination loan-to-value ratio is 66% as of December 31, 2013. (4) Under the Delegated Underwriting and Servicing, or DUS ®, product line, Fannie Mae acquires individual, newly originated mortgages from specially approved DUS lenders using DUS underwriting standards and/or DUS loan documents. Because DUS lenders generally share the risk of loss with Fannie Mae, they are able to originate, underwrite, close and service certain loans without our pre-review. (5) Multifamily loans with an original unpaid balance of up to $3 million nationwide or up to $5 million in high cost markets. Multifamily Credit Profile by Loan Attributes
20 As of December 31, 2013 Unpaid Principal Balance (Billions) % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) # of Seriously Delinquent loans (1) % of 2013 Multifamily Credit Losses (2) % of 2012 Multifamily Credit Losses (2) % of 2011 Multifamily Credit Losses % of 2010 Multifamily Credit Losses Total Multifamily Guaranty Book of Business $198.9 100% 0.10% 102 100% 100% 100% 100% By Acquisition Year: 2013 $29.1 15% 2012 $33.0 17% 0% 2011 $22.5 11% -2% 0% 2010 $16.1 8% 0.02% 1 96% 0% 2009 $15.9 8% 0.02% 2 -27% 7% 6% 2% 2008 $19.7 10% 0.17% 21 -12% 23% 31% 17% 2007 $23.9 12% 0.31% 38 13% 48% 33% 38% 2006 $13.8 7% 0.21% 13 45% 10% 7% 17% 2005 $10.0 5% 0.07% 4 10% 17% 3% 2% Prior to 2005 $15.0 8% 0.38% 23 -23% -4% 20% 25% (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Negative values are the result of recoveries on previously charged off amounts and may also cause other percentages to be greater than 100%. Multifamily Credit Profile by Acquisition Year Multifamily SDQ Rate by Acquisition Year Cumulative Defaults by Acquisition Year 2010 2009 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Cu mu lat ive D ef au lt R ate 2005 2006 2007 2008 2009 2010 011 2012 2013 2005 2007 2008 2006 2012 2011 2013 2005 2006 2007 2008 2009 2011 2010 2012 .00% .20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 SDQ (%) 20 5 2006 2007 2008 2009 2010 2011 2012 2013 2013
21 Total Multifamily Guaranty Book of Business $198.9 100% 0.10% 100% 100% 100% 100% Region: (3) Midwest $17.5 9% 0.23% -38% 15% 23% 10% Northeast $39.7 20% 0.11% -8% 10% 3% 5% Southeast $42.9 21% 0.11% 12% 53% 42% 40% Southwest $37.5 19% 0.09% -32% 8% 26% 40% Western $61.3 31% 0.07% 166% 14% 6% 6% Top Five States by UPB: California $47.3 24% 0.05% 8% 1% 1% 2% New York $23.6 12% 0.08% 2% 3% 0% 1% Texas $19.5 10% 0.05% -16% 2% 19% 12% Florida $10.6 5% 0.14% 23% 36% 10% 13% Washington $7.2 4% 0.06% 1% 0% 0% 0% Asset Class: (4) Conventional/Co-op $177.6 89% 0.12% 99% 94% 96% 99% Seniors Housing $12.8 6% Manufactured Housing $5.4 3% 0% 3% 0% 0% Student Housing $3.1 2% 1% 3% 4% 1% Targeted Affordable Segment: Privately Owned with Subsidy (5) $29.4 15% 0.06% -15% 3% 14% 6% DUS & Non-DUS Lenders/Servicers: DUS: Bank (Direct, Owned Entity, or Subsidiary) $70.4 35% 0.08% 7% 21% 29% 45% DUS: Non-Bank Financial Institution $118.2 59% 0.11% 79% 70% 68% 50% Non-DUS: Bank (Direct, Owned Entity, or Subsidiary) $9.0 5% 0.18% 4% 6% 1% 4% Non-DUS: Non-Bank Financial Institution $1.1 1% 0.19% 10% 2% 1% 1% Non-DUS: Public Agency/Non Profit $0.2 0% 0% 0% 0% 0% % of 2010 Multifamily Credit Losses As of December 31, 2013 % of Multifamily Guaranty Book of Business (UPB) % Seriously Delinquent (1) % of 2011 Multifamily Credit Losses Unpaid Principal Balance (Billions) % of 2012 Multifamily Credit Losses % of 2013 Multifamily Credit Losses (2) (1) We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. (2) Negative values are the result of recoveries on previously charged off amounts and may also cause other percentages to be greater than 100%. (3) For information on which states are included in each region, refer to footnote 9 to Table 39 in Fannie Mae’s 2013 Form 10-K. (4) Conventional Multifamily/Cooperative Housing/Affordable Housing: Conventional Multifamily is a loan secured by a residential property comprised of five or more dwellings which offers market rental rates (i.e., not subsidized or subject to rent restrictions). Cooperative Housing is a multifamily loan made to a cooperative housing corporation and secured by a first or subordinated lien on a cooperative multifamily housing project that contains five or more units. Affordable Housing is a multifamily loan on a mortgaged property encumbered by a regulatory agreement or recorded restriction that limits rents, imposes income restrictions on tenants or places other restrictions on the use of the property. Manufactured Housing Communities: A multifamily loan secured by a residential development that consists of sites for manufactured homes and includes utilities, roads and other infrastructure. In some cases, landscaping and various other amenities such as a clubhouse, swimming pool, and tennis and/or sports courts are also included. Seniors Housing: A multifamily loan secured by a mortgaged property that is intended to be used for residents for whom the owner or operator provides special services that are typically associated with either “independent living” or “assisted living.” Some Alzheimer’s and skilled nursing capabilities are permitted. Dedicated Student Housing: Multifamily loans secured by residential properties in which college or graduate students make up at least 80% of the tenants. Dormitories are not included. (5) The Multifamily Affordable Business Channel focuses on financing properties that are under a regulatory agreement that provides long-term affordability, such as properties with rent subsidies or income restrictions. Multifamily Credit Profile
22 Multifamily 2013 Credit Losses by State ($ Millions)* Numbers: Represent 2013 credit losses for each state which totaled $52M as of December 31, 2013. States with no numbers had less than $500K in credit losses or less than $500K in credit-related income in 2013. Shading: Represent Unpaid Principal Balance (UPB) for each state which totaled $198.9B as of December 31, 2013. Note: Negative values are the result of recoveries on previously charged-off amounts. Portfolio UPB Concentration by State as of 12/31/2013 Example: UPB in NY is $24B and 2013 Credit Losses are $1M *Total state credit losses will not tie to total 2013 credit losses due to rounding.