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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 11/02/2018
Entire Document
 
 
MD&A | Business Segments


Transfer of Mortgage Credit Risk
Single-Family Credit Enhancements
Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio over 80% at the time of purchase. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties. The table below displays information on the outstanding unpaid principal balance of our single-family loans, as well as the percentage of our total single-family conventional guaranty book of business measured by unpaid principal balance, that were covered by one or more forms of credit enhancement as of the dates specified. For a description of the types of credit enhancements specified in the table, see “MD&ABusiness SegmentsSingle-Family BusinessSingle-Family Mortgage Credit Risk ManagementTransfer of Mortgage Credit Risk” in our 2017 Form 10-K. For a discussion of our exposure to and management of the institutional counterparty credit risk associated with the providers of these credit enhancements see “Risk ManagementCredit Risk ManagementInstitutional Counterparty Credit Risk Management” in our 2017 Form 10-K and “Note 11, Concentrations of Credit Risk” in this report.
Single-Family Loans with Credit Enhancement
 
As of
 
September 30, 2018
 
December 31, 2017
 
 
Unpaid Principal Balance
 
Percentage of Single-Family Conventional Guaranty Book of Business
 
Unpaid Principal Balance
 
Percentage of Single-Family Conventional Guaranty Book of Business
 
(Dollars in billions)
Primary mortgage insurance and other
 
$
601

 
21
 %
 
$
566

 
20
 %
Connecticut Avenue Securities
 
768

 
27

 
681

 
24

Credit Insurance Risk TransferTM (“CIRTTM”)
 
231

 
8

 
181

 
6

Lender risk sharing
 
94

 
3

 
65

 
2

Less: Loans covered by multiple credit enhancements
 
(379
)
 
(14
)
 
(335
)
 
(12
)
Total unpaid principal balance of single-family loans with credit enhancement
 
$
1,315

 
45
 %
 
$
1,158

 
40
 %
Credit Risk Transfer Transactions
Our Single-Family business has developed risk-sharing capabilities to transfer portions of our single-family mortgage credit risk to the private market. Our primary method of achieving this objective has been through our CAS and CIRT transactions. In most of our credit risk transfer transactions, we transfer a small portion of the expected credit losses, and a significant portion of the losses we expect would be incurred in a stressed credit environment, such as a severe or prolonged economic downturn.

Fannie Mae Third Quarter 2018 Form 10-Q
28