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SEC Filings

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


During the first nine months of 2018, pursuant to our credit risk transfer transactions, we transferred a portion of the mortgage credit risk on single-family mortgages with an unpaid principal balance of over $250 billion at the time of the transactions.
Because a larger portion of our single-family book of business was covered by CAS and CIRT transactions in the first nine months of 2018 than in the first nine months of 2017, the expenses related to these transactions increased:
For the first nine months of 2018, we paid approximately $655 million in interest expense, net of LIBOR, on our outstanding CAS and approximately $205 million in CIRT premiums.
Comparatively, we paid approximately $568 million in interest expense, net of LIBOR, on our outstanding CAS and approximately $127 million in CIRT premiums for the first nine months of 2017.
As a part of our continued effort to innovate and improve our credit risk transfer programs, we are in the process of executing an enhancement to our credit risk transfer securities that will structure our CAS offerings as notes issued by a trust that qualifies as a Real Estate Mortgage Investment Conduit (“REMIC”), enabling expanded participation by real estate investment trusts and international investors. The new REMIC structure will differ from the prior CAS notes that were issued as Fannie Mae corporate debt. Under the prior CAS structure, there can be a significant lag between the time when we recognize a provision for credit losses and when we recognize the related recovery from the CAS transaction. Under current accounting rules, while a credit expense on a loan in a reference pool for a CAS transaction is recorded when it is probable that we have incurred a loss, for our CAS issued beginning in 2016, a recovery is recorded only when an actual loss event occurs, which is typically several months after the collateral has been liquidated. The new CAS structure will eliminate this timing mismatch, allowing us to recognize the expected credit loss protection benefit at the same time the credit loss is recognized in our consolidated financial statements. We will continue to record the expected benefit and the loss in the same period upon our adoption of Accounting Standards Update 2016-13, Financial Instruments—Credit Losses, in January 2020.
The enhancement to our CAS program is designed to promote the continued growth of the market by expanding the potential investor base for these securities and limiting investor exposure to Fannie Mae counterparty risk, without disrupting the TBA MBS market. We expect to issue CAS under the new REMIC structure in November 2018.

Fannie Mae Third Quarter 2018 Form 10-Q
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