|FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 08/05/2011|
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:
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 ManagementCredit Risk ManagementSingle-Family Mortgage Credit Risk ManagementProblem Loan ManagementLoan 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 OperationsCredit-Related ExpensesProvision 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 FHFAs Servicing Alignment Initiative.
For more information on the strategies and actions we are taking to minimize our credit losses, see BusinessExecutive SummaryOur 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 ManagementCredit Risk ManagementSingle-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 FHFAs 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: