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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


sharing obligation. This aligns the interests of the lender and Fannie Mae from day one and throughout the life of the loan.
Our DUS model typically results in our lenders sharing on a pro-rata or tiered basis approximately one-third of the credit risk on our multifamily loans. In the first nine months of 2018, nearly 100% of our new multifamily business volume had lender risk-sharing. As of September 30, 2018, 97% of the unpaid principal balance of loans in our multifamily guaranty book of business had lender risk-sharing, compared with 96% as of December 31, 2017.
To complement our lender-risk sharing program through our DUS model, we engage in multifamily CIRT transactions, pursuant to which we transfer a portion of the mortgage credit risk on multifamily loans in our multifamily guaranty book of business to insurers or reinsurers. In August 2018, we completed our third multifamily CIRT transaction since the inception of the program, which covered multifamily loans with an unpaid principal balance of approximately $11.1 billion. We plan to continue to transfer credit risk through multifamily CIRT transactions in the future.
We and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at the asset and portfolio level. Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan characteristics. We closely monitor loans with an estimated current DSCR below 1.0, as that is an indicator of heightened default risk. The table below displays original LTV ratio and DSCR metrics for our multifamily guaranty book of business.
Multifamily Guaranty Book of Business Key Risk Characteristics
 
As of
 
September 30, 2018
 
December 31, 2017
 
September 30,
2017
Weighted average original LTV ratio
 
67
%
 
 
 
67
%
 
 
 
67
%
 
Original LTV ratio greater than 80%
 
1

 
 
 
2

 
 
 
2

 
Original DSCR less than or equal to 1.10
 
13

 
 
 
14

 
 
 
14

 
Current DSCR less than 1.0
 
2

 
 
 
2

 
 
 
1

 

Multifamily Problem Loan Management and Foreclosure Prevention
The multifamily serious delinquency rate was 0.07% as of September 30, 2018, compared with 0.11% as of December 31, 2017 and 0.03% as of September 30, 2017. We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. The decrease in the multifamily serious delinquency rate since December 31, 2017 resulted mostly from a decrease in delinquent loans subject to forbearance agreements granted to borrowers in the areas affected by the 2017 hurricanes.
REO Management
The number of multifamily foreclosed properties held for sale increased to 13 properties with a carrying value of $79 million as of September 30, 2018, compared with 11 properties with a carrying value of $66 million as of December 31, 2017.
Other Multifamily Credit Information
Multifamily Credit Losses
We had $7 million in multifamily credit losses in the third quarter of 2018 compared with a benefit for credit losses of $16 million in the third quarter of 2017. We had $15 million in multifamily credit losses in the first nine months of 2018 compared with a benefit for credit losses of $14 million in the first nine months of 2017. The benefit for credit losses for both 2017 periods was the result of recoveries of previously charged-off amounts.

Fannie Mae Third Quarter 2018 Form 10-Q
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