Fannie Making Progress on Legacy alt-A Loans, But…


Fannie Mae is making progress on cleaning up its massive alt-A portfolio, but the $182 billion of guarantees had an average LTV ratio of 101% at yearend, according to supplemental documents the GSE filed with the Securities and Exchange Commission.

The LTV measurement is based on mark-to-market values. When the loans were originally funded the average LTV (based on market values) was a benign 73%.

Fannie-backed alt-A loans had a seriously delinquent ratio of 12.43% at yearend 2011 compared to 13.87% at Dec. 31, 2010.

Fannie guarantees roughly $2.76 trillion of mortgages with alt-A accounting for its largest nonconforming product type. At Dec. 31, its subprime guarantees amounted to just $6 billion.

In 2011 alt-A accounted for 24% of all the GSE’s credit losses compared to 33% the year before. But in 2008 – at the height of the housing crisis – alt-A losses accounted for almost half of Fannie’s losses.

For years, the GSE’s top customer in terms of loan sales was Countrywide Financial Corp., one of the nation’s large originators of alt-A loans.

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