Fannie Mae disclosed its level of nonprime business in a filing with the Securities and Exchange Commission.
The secondary lender has acquired or guaranteed approximately $310 billion in Alt-A mortgages through June 30, 2007, according to an 8-K filing with the SEC Thursday. Alt-A loans account for 12 percent of its $2.671 trillion book of business. Private-label securities backed by Alt-A loans on the balance sheet were $34.5 billion.
Fannie said it classifies Alt-A loans as mortgages with reduced documentation requirements or other Alt-A product features. This type of business is usually guaranteed for sellers that specialize in prime loans.
The Washington, D.C.-based company said it believes its Alt-A acquisitions -- which have an average loan amount of $172,545, a weighted average FICO score of 720 and a weighted average mark-to-market loan-to-value of 64 percent -- have more favorable credit characteristics than the overall market of Alt-A loans. Adjustable-rate mortgages account for one-third of its Alt-A book, 39 percent have credit enhancement and just 5 percent have LTVs higher than 90 percent.
Serious delinquency was around 10 percent on its Alt-A book at June's end, Fannie reported.
At a $5.1 billion credit book as of June 30, subprime business, typically purchased from subprime lenders, remains just a small share of the government sponsored enterprise's book, the filing said. Private label securities backed by subprime loans were $47.2 billion, of which 99 percent were rated AAA.
Fannie noted its subprime holdings have more favorable credit characteristics than the overall subprime market because 88 percent of subprime loans are credit enhanced, the weighted average LTV is only 79 percent and more than 60 percent of the loans are fixed rate. Additionally, only 8 percent of the loans have an LTV over 90 percent and serious delinquency was 4.80 percent.
Based on its total book of business, 5 percent had credit scores under 620 and the estimated weighted average mark-to-market LTV ratio was 64 percent, the second quarter data indicated. Loans with LTVs over 90 percent were 9 percent of the total book, while the estimated weighted average mark-to-market LTV ratio was 83 percent.
Loans with LTVs over 90 percent and FICOs under 620 represented just 1 percent of the conventional single-family mortgage credit book of business, Fannie reported.
Fannie Sr. Vice President Michael A. Quinn issued a letter to approved sellers indicating a new representation and warranty will require sellers to comply with federal regulatory subprime guidance issued on June 29 as well as comparable state guidance. The modification affects loans with application dates on or after Sept. 13, 2007.
Thursday's SEC filing indicated other non-interest expenses increased by $156 million to $405 million in 2006, mostly the result of higher credit enhancement expense for Alt-A and subprime loans.