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deterioration in the credit quality of our mortgage-related securities and accretion of interest income on acquired credit-impaired loans from credit losses.
Historically, management viewed our credit loss performance metrics, which include our historical credit losses and our credit loss ratio, as indicators of the effectiveness of our credit risk management strategies. As our credit losses are now at such high levels, management has shifted focus to our loss mitigation strategies and the reduction of our total credit losses and away from the credit loss ratio to measure performance. However, we believe that credit loss performance metrics may be useful to investors as the losses are presented as a percentage of our book of business and have historically been used by analysts, investors and other companies within the financial services industry. They also provide a consistent treatment of credit losses for on- and off-balance sheet loans. Moreover, by presenting credit losses with and without the effect of fair value losses associated with the acquisition of credit-impaired loans, investors are able to evaluate our credit performance on a more consistent basis among periods. Table 13 details the components of our credit loss performance metrics as well as our average single-family and multifamily default rate and initial charge-off severity rate.
Table 13:  Credit Loss Performance Metrics
    For the Three Months Ended March 31,  
    2011     2010  
    Amount     Ratio(1)     Amount     Ratio(1)  
    (Dollars in millions)  
Charge-offs, net of recoveries(2)
  $ 4,704       61.2 bp   $ 4,844       62.9 bp
Foreclosed property (income) expense(2)
    488       6.4       (19 )     (0.2 )
Credit losses including the effect of fair value losses on acquired credit-impaired loans
    5,192       67.6       4,825       62.7  
Less: Fair value losses resulting from acquired credit-impaired loans
    (31 )     (0.4 )     (58 )     (0.8 )
Plus: Impact of acquired credit-impaired loans on charge-offs and foreclosed property expense
    525       6.9       380       4.9  
Credit losses and credit loss ratio
  $ 5,686       74.1 bp   $ 5,147       66.8 bp
Credit losses attributable to:
  $ 5,604             $ 5,062          
    82               85          
  $ 5,686             $ 5,147          
Average single-family default rate
            0.44 %             0.46 %
Average single-family initial charge-off severity rate(3)
            35.93 %             35.40 %
Average multifamily default rate
            0.12 %             0.09 %
Average multifamily initial charge-off severity rate(3)
            36.85 %             40.25 %
(1) Basis points are based on the annualized amount for each line item presented divided by the average guaranty book of business during the period.
(2) In the first quarter of 2011, expenses relating to preforeclosure taxes and insurance were recorded as charge-offs. These expenses were recorded as foreclosed property expense in the first quarter of 2010. The impact of including these costs in charge-offs for the first quarter of 2011 was 5.7 basis points.
(3) Single-family and multifamily rates exclude fair value losses on credit-impaired loans acquired from MBS trusts and any costs, gains or losses associated with REO after initial acquisition through final disposition; single-family rate excludes charge-offs from preforeclosure sales.
The increase in our credit losses is primarily due to an increase in foreclosed property expense. During the first quarter of 2010, we recognized $562 million of fees from the cancellation and restructuring of some of our mortgage insurance as a reduction to foreclosed property expense; no such fees were received in the first quarter of 2011. In addition, while defaults remain high, defaults in the first quarter of 2011 were lower than