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comprehensive loss through our provision for guaranty losses. We consider these fair value losses as an “effective reserve,” apart from our total loss reserves, to the extent that we expect to realize credit losses on the acquired loans in the future.
Our Strategies and Actions to Reduce Credit Losses on Loans in Our Legacy Book of Business
To reduce the credit losses we ultimately incur on our legacy book of business, we have been focusing our efforts on the following strategies:
  •  Reducing defaults;
  •  Efficiently managing timelines for home retention solutions, foreclosure alternatives, and foreclosures;
  •  Pursuing foreclosure alternatives to reduce the severity of the losses we incur;
  •  Managing our REO inventory to reduce costs and maximize sales proceeds; and
  •  Pursuing contractual remedies from lenders and providers of credit enhancement.
Pursuing home retention solutions, such as loan modifications, is a key aspect of our strategy to reduce defaults. We have completed over 603,000 loan modifications since January 1, 2009. Although the high number of modifications we have completed in recent periods has contributed to our credit-related expenses, we believe that, if these modifications are successful in reducing foreclosures and keeping borrowers in their homes, they may benefit the housing market and may help reduce our long-term credit losses from what they otherwise would have been if we had foreclosed on the loans. The ultimate long-term success of our current modification efforts is uncertain and will be highly dependent on economic factors, such as unemployment rates, household wealth and income, and home prices. See “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—Problem Loan Management—Loan Workout Metrics” for a description of our modification and other home retention efforts. For a description of the impact of modifications on our credit-related expenses, see “Consolidated Results of Operations—Credit-Related Expenses—Provision for Credit Losses.”
Improving servicing standards is another key aspect of our strategy to reduce defaults. As described in “New Servicing Standards for Delinquent Loans,” in June 2011, we issued new servicing standards for delinquent loans pursuant to FHFA’s Servicing Alignment Initiative.
For more information on the strategies and actions we are taking to minimize our credit losses, see “Business—Executive Summary—Our Strategies and Actions to Reduce Credit Losses on Loans in our Single-Family Guaranty Book of Business” in our 2010 Form 10-K and “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management” in our 2010 Form 10-K and in this report.
New Servicing Standards for Delinquent Loans
Our mortgage servicers are the primary point of contact for borrowers and perform a vital role in our efforts to reduce defaults and pursue foreclosure alternatives. In June, we issued new standards for mortgage servicers regarding the management of delinquent loans, default prevention and foreclosure time frames under FHFA’s Servicing Alignment Initiative. The Servicing Alignment Initiative is a FHFA-directed effort to establish consistent policies and processes for the servicing of delinquent loans owned or guaranteed by Fannie Mae and Freddie Mac.
These new servicing standards require servicers to take a more consistent approach to borrower communications, loan modifications and other workouts, and, when necessary, foreclosures. The new servicing standards are designed to:
  •  achieve earlier, more frequent and more effective contact with borrowers, including creating a uniform standard for communicating with borrowers;
  •  set clear timelines for the foreclosure process; and