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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


Other Single-Family Credit Information
Credit Loss Performance and Concentration Metrics
The amount of credit losses we realize in a given period are driven by foreclosures, pre-foreclosure sales, REO activity, mortgage loan redesignations and charge-offs pursuant to the provisions of the Advisory Bulletin in the period. The table below displays the components of our single-family credit loss performance metrics, as well as our single-family initial charge-off severity rate. Our credit loss performance metrics are not defined terms within generally accepted accounting principles in the United States of America (“GAAP”) and may not be calculated in the same manner as similarly titled measures reported by other companies. We believe that credit loss performance metrics may be useful to investors as the losses are presented as a percentage of our guaranty book of business and have historically been used by analysts, investors and other companies within the financial services industry.
Single-Family Credit Loss Performance Metrics
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
Amount
 
Ratio(1)
 
Amount
 
Ratio(1)
 
Amount
 
Ratio(1)
 
Amount
 
Ratio(1)
 
(Dollars in millions)
Charge-offs, net of recoveries
 
$
(430
)
 
5.8

bps
 
 
$
(382
)
 
5.2

bps
 
$
(1,473
)
 
6.7

bps
 
$
(1,851
)
 
8.5

bps
Foreclosed property expense
 
(150
)
 
2.1

 
 
 
(157
)
 
2.2

 
 
(448
)
 
2.0

 
 
(405
)
 
1.9

 
Credit losses and credit loss ratio 
 
$
(580
)
 
7.9

bps
 
 
$
(539
)
 
7.4

bps
 
$
(1,921
)
 
8.7

bps
 
$
(2,256
)
 
10.4

bps
Single-family initial charge-off severity rate(2)
 
 
 
10.34
%
 
 
 
 
13.82
%
 
 
 
11.56
%
 
 
 
15.44
%
___________
(1) 
Basis points are based on the amount for each line item presented divided by the average single-family guaranty book of business during the period.
(2) 
The rate excludes any costs, gains or losses associated with REO after initial acquisition through final disposition. The rate includes charge-offs pursuant to the provisions of the Advisory Bulletin and charge-offs of property tax and insurance receivables.
Our single-family credit losses and credit loss ratio increased in the third quarter of 2018 compared with the third quarter of 2017, primarily due to higher charge-offs related to the redesignation of single-family loans from HFI to HFS, partially offset by lower charge-off expenses from reduced foreclosures and foreclosure alternatives and higher home prices in the third quarter of 2018.
Our single-family credit losses and credit loss ratio decreased in the first nine months of 2018 compared with the first nine months of 2017 primarily due to lower charge-off expenses from reduced foreclosures and foreclosure alternatives and higher home prices in 2018, as well as an expansion at the beginning of 2017 of the charge-off criteria for non-liquidated loans pursuant to the provisions of the Advisory Bulletin. The decline in single-family credit losses and credit loss ratio in the first nine months of 2018 was partially offset by higher charge-offs related to the redesignation of single-family loans from HFI to HFS.
Our single-family initial charge-off severity rates declined in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017 primarily as a result of higher home prices in 2018.

Fannie Mae Third Quarter 2018 Form 10-Q
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