Fannie Mae Ties 3Q Losses to Alt A Mortgage Market
Over 25% of Fannie Mae’s credit losses in the third quarter came from its book of guaranteed alternative A mortgages, according to the company’s president and chief executive officer, Daniel Mudd.
The giant secondary market agency has guarantees on $324.7 billion in alt A mortgage backed securities, which had a serious mortgage delinquency rate of 1.36% as of Sept. 30.
“Alt A drove about 28% of Fannie Mae’s total credit losses in the most recent period,” Mr. Mudd told a Goldman Sachs investor conference. “this book gets an awful lot of attention”.
Only 40% of its guaranteed alt A loans have credit enhancements, which suggests many are piggy backed with second liens. The weighted average credit score is 719.
Fannie took $1.2 billion in credit related expenses in the third quarter, including a $670 provision for credit losses on delinquent loans it purchased out of Fannie-guaranteed MBS.
Tags: Alt A Mortgage Market, Fannie Mae, Goldman Sachs, Mortgage Backed Securities, Mortgage Defaults, Mortgage Delinquencies
