Fannie Mae pulled back from offering unsecured advances to delinquent homeowners and significantly increased loan modifications in the first quarter, but it also provisioned heavily for credit losses.
In a quarterly report filed Friday with the Securities and Exchange Commission, the government-sponsored enterprise said that the number of HomeSaver Advances it provided during the quarter decreased by roughly 20% from the fourth quarter, to about 20,000.
This was the first time such advances declined since Fannie started the HomeSaver program last year.
By contrast, the number of modifications of home loans in Fannie's portfolio nearly doubled from the levels in the third and fourth quarters, to 12,000.
Fannie is expected to increase the use of modifications as it implements the guidelines and policies of the Obama administration's Home Affordable Modification Program.
Brian Faith, a Fannie spokesman, said the GSE is "transitioning"” from HomeSaver Advances to loan mods.
"With the new program put in place, there is an intense effort going forward with the administration's modification efforts,”" he said.
In the HomeSaver program, a servicer makes a personal loan — $6,700, on average — to a homeowner to cover past-due amounts. The mortgage is brought current, and the advance is sold to Fannie.
Such advances still made up a majority of Fannie workouts in the quarter, including modifications. The total number of workouts has held steady for the last three quarters, at roughly 10,800 a month.
The percentage of loans in its portfolio that were 60 days or more past due nearly tripled from a year earlier and climbed 74 basis points from the fourth quarter, to 3.15% in the first quarter.
The provision for credit losses increased 85% from the fourth quarter, to $20.3 billion, and exceeded net chargeoffs by $17 billion. Fannie said rising unemployment and a continued fall in home prices caused delinquencies to rise throughout its guarantee portfolio, "including loans with lower risk characteristics."
The GSE said it revised its methods for estimating losses last quarter, because "the current state of the housing and mortgage markets is unprecedented in many respects, greatly reducing the usefulness of relying on our historical loan performance data."
All told, Fannie's first-quarter net loss grew more than tenfold from a year earlier but shrank 8.7% from the fourth quarter, to $23 billion.
Fannie, which, along with Freddie Mac, was seized by regulators last year, also said it had asked the Treasury Department for another $19 billion from its $200 billion government backstop.
So far Fannie has drawn $15.2 billion from the backstop.
Though its results generally were dismal, Fannie's default rates for alternative-A loans in the first quarter compared favorably with those of its private-label counterparts. For loans made in 2005, 2006 and 2007, Fannie's default rates ranged from 2.5% to 3.5%, significantly lower than the 5% to 8% default rates reported by its competitors, according to a slide show posted on the GSE's Web site. The risk characteristics for the comparable alt-A pools — including FICO scores, loan-to-value ratios, the percentage of loans concentrated in California and Florida and fixed versus adjustable rates — all showed Fannie having more conservative underwriting than its private-label competitors.
"What this is shows is that Fannie had far better underwriting that led to better performance," said Kevin Kanouff, a founder of Statebridge Co., a servicing start-up in Denver.