Revision of the Mortgage Bankers' Financial Reporting Form (Fannie

							Announcement 08-17                                                 July 2, 2008


Amends these Guides: Selling and Servicing

Revision of the Mortgage Bankers’ Financial Reporting Form
(Fannie Mae Form 1002)


Introduction

The Mortgage Bankers' Financial Reporting Form (Form 1002) provides a common
format for mortgage bankers to report financial information that Fannie Mae, Freddie
Mac, and Ginnie Mae use to evaluate the creditworthiness and financial stability of
individual lenders with whom they do business. It also provides industrywide data that
the Mortgage Bankers Association uses to perform certain statistical trend and ratio
analyses. Fannie Mae and the other users of the information on the Form (Fannie Mae
Form 1002/Freddie Mac Form 1055/Ginnie Mae Form HUD-11750) are continuously
working together to identify improvements that will increase the usefulness of it. As a
result, the Form is being updated to incorporate many changes and additions. This
Announcement describes the revisions to the Form and reiterates Fannie Mae’s
submission requirements.

Summary of Form 1002 Changes

A significant number of changes are being made to Form 1002 that primarily reflect:

•    adoption of many new accounting pronouncements since the last update to the
     Form, including Statement of Financial Accounting Standard (FAS) 140, 142, 149,
     156, 157, 159 and 160 and Financial Accounting Standards Board Interpretation
     No. (FIN) 45;
•    adjustments to improve reporting for other accounting pronouncements, including
     FAS 5, 65, 91 and 133;
•    separation of multifamily/commercial data from “other” business activities such as
     residential portfolio management; and


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•    collection of additional origination and servicing-related revenue, expense, and
     volume data.

Fannie Mae, in conjunction with Freddie Mac, Ginnie Mae and the MBA, developed the
Attachment to this Announcement which outlines all of the key changes and additions to
the Form.


Submission Requirements

Fannie Mae’s submission requirements for Form 1002 are not being changed. Fannie
Mae requires all approved sellers and servicers that are mortgage bankers (including
mortgage banker subsidiaries of federally supervised financial institutions) to submit a
complete and accurate Form 1002 following the end of each calendar quarter. Lenders are
required to submit their reports for the first three quarters of the year within 30 days after
the end of the quarter, and the reports for the fourth quarter are due within 60 days after
December 31. Incomplete, inaccurate, or late submissions may affect a lender's ability to
conduct business with Fannie Mae. Should extenuating circumstances prevent a lender
from filing on time, it must provide timely notification to Fannie Mae.

Lenders must continue to submit the Mortgage Bankers' Financial Reporting Form
through WebMB at www.mbfrf.org. Access and setup instructions for submitting the
form can be found in the Selling and Servicing Guides, Part I, Section 303.02.

Lenders that have questions about the changes to Form 1002 or the reporting process can
e-mail the WebMB administrator at administrator@mbfrf.org, or call (877) 277-7791.

Effective Date
The updated Form 1002 is effective for entities reporting on or after October 1, 2008
(reporting for the third quarter 2008, ending September 30, 2008).


                                           *****


Lenders who have questions about Announcement 08-17 should contact their Customer
Account Team.




Michael A. Quinn
Senior Vice President
Single-Family Risk Officer

Announcement 08-17                                                                    Page 2
                                    Attachment
               Mortgage Bankers’ Financial Reporting Form
The key changes to each section of the Mortgage Bankers’ Financial Reporting Form
(Form 1002) are outlined below by each section of the Form.

Institution Profile
The following are additions to the Profile section:
●   Details about external audit reports, including the type of audit opinion;
●   Explanation of “significant events” during the reporting period, such as the sale of
    the company or a restatement;
●   Identification of “direct parent type”; and
●   Identification of third party services used for inventory/pipeline management and for
    valuation of mortgage servicing rights (MSRs), including the names of companies
    used, specific type of services, and frequency, if applicable.

Assets
The following changes and additions are being made to the Assets section:

•    Cash and Cash Equivalents are split out into “Unrestricted” and “Restricted”
     designations.

•   FAS 156 and FAS 159 allow companies to elect to report financial instruments at
    fair value. This change adds significant complexity because companies can now
    report certain items at fair value, follow pre-FAS 156/159 accounting, or use a
    combination of both fair value and pre-FAS156/159 accounting. New lines were
    added to capture certain assets at fair value, including MSRs, securities, loans and
    other financial instruments.

•   Securities are now reported on a schedule that includes more granularity, including
    security type and a distinction between investment grade and non-investment grade.

•   Property & Equipment was previously reported in total. New lines are being added
    to capture the types of property and equipment.

•   To reflect changes related to FAS 156 and to collect other data, the Rollforward of
    Mortgage Servicing Rights schedule was expanded to include additional detail. It
    now breaks out the schedule into sections that relate to
    − Rollforward of Amortized MSRs (excluding Valuation Allowance),
    − Rollforward of Amortized MSR Valuation Allowance, and
    − Rollforward of Fair Value MSRs.

•   Deferred fees, expenses and other basis adjustments relating to FAS 91, which are
    carried as contra assets, are being changed on the securities and loan schedules.

Announcement 08-17                                                                Page 1
•    Since derivative values can easily shift from positive to negative, the Derivatives
     schedule was expanded to include a column for both assets and liabilities.
     Additional details pertaining to FAS 133 and FAS 149 derivative assets and
     liabilities, including Interest Rate Lock Commitments and Other Loan Commitments
     Classified as Derivatives, are being added.

Liabilities and Equity
The following additional line items are being added to the Liabilities and Equity
schedule:

●   Collateralized Mortgage Debt Relating to Financings,
●   Collateralized Mortgage Debt – Other,
●   Trust Preferred Securities,
●   Deposits,
●   Advances from Federal Home Loan Banks,
●   Commercial Paper,
●   Guaranty Liabilities under FIN 45,
●   Other Financial Instrument Liabilities, at Fair Value,
●   Taxes Payable,
●   Deferred Tax Liability,
●   Repurchase Reserves, and
●   Noncontrolling Interest, which will be required after the adoption of FAS 160.

The Equity Rollforward schedule is being expanded to include additional line items:

●   Issuance of New Stock or Conversions of Preferred to Common,
●   Stock Repurchases,
●   Other Capital Contributions (OCI):
    −    OCI: Unrealized Gains (Losses) from Derivatives Designated as Cash Flow
         Hedges
    −    OCI: Other Changes in OCI,
•     Cumulative Effect from Adoption of FAS 156,
•     Cumulative Effect from Adoption of FAS 159,
•     Cumulative Effect Adjustments to Retained Earnings – Other,
•     Changes in the Carrying Amount of Noncontrolling Interest, which will be required
      after the adoption of FAS 160, and
•     Equity Adjustments.

Income
The multifamily/commercial column should now only reflect income or interest and
expense related directly to originations and servicing operations as well as investment
portfolio management for multifamily loans, commercial property, and farm (business)
loans. The Income schedule includes a new column to report all income or interest
expense related directly to the institution’s residential investment portfolio, if applicable.
It should also include income from ancillary business operations such as real estate sales,

Announcement 08-17                                                                    Page 2
title companies, property management, insurance sales, construction lending, tax services,
etc. Other changes on this schedule include:

●   A single section is being created for Net Interest Income, collecting both Interest
    Income and Interest Expense (which was previously in the Expense schedule).

●    The Secondary Marketing Income section was renamed “Secondary Marketing
     Gains/(Losses) on Sale” and additional line items are being added, including:
    −  Fees Paid to Brokers,
    −  Direct Fees and Expenses Reclassified as Gain on Sale in Accordance with FAS
       91,
    −  Pair-off Expenses and Other Hedge Costs,
    −  Recognition of Retained Interests (pursuant to FAS 140),
    −  Provision for Repurchases,
    −  Lower of cost or market (LOCOM) Adjustments on Loans Held for Sale
       (pursuant to FAS 65),
    −  Income Relating to Interest Rate Lock Commitments (IRLCs) (pursuant to FAS
       133),
    −  Gains/(Losses) on Derivatives Used to Hedge IRLCs and Loans Held for Sale
       (pursuant to FAS 133), and
    −  Gains/(Losses) on Changes in Fair Value of Loans Held for Sale (pursuant to FAS
       159, if applicable).

●   The section for Servicing-Related Non-Interest Income is being expanded to include
    various fields pertaining to MSR valuation including MSR amortization; other than
    temporary impairment (OTTI); valuation changes (pursuant to FAS 156); hedge-related
    changes; and net gain or loss on the sale of servicing rights and REO.

●    A section was added for Other Non-Interest Income that includes:
    −   Provision for Credit Losses on Loans Held for Investment,
    −   Other Than Temporary Impairment (not MSR-Related) & Other Credit-Related
        Losses,
    −   Net Gain (Loss) from Sale of Securities,
    −   Unrealized Gains/(Losses) on Trading Securities,
    −   Gains/(Losses) on Other Derivatives or Other Financial Instruments,
    −   Gains/(Losses) on Changes in Fair Value of Loans Held for Investment, and
    −   Pre-Tax Income/(Loss) from Investments in JVs, Partnerships, and Other Entities.

●   Contra income accounts are being added to capture revenues deferred under FAS 91
    in several income schedules.

Non-Interest Expenses and Net Income
As described under the Income schedule above, the Non-Interest Expense schedule also
includes the new column for residential portfolio and other business. Also as noted
above, interest expense items were moved to the Net Interest Income section of the
Income schedule. The Non-Interest Expense schedule was expanded to include:

Announcement 08-17                                                                 Page 3
●    additional line items for loan production personnel compensation, reflecting a break
     out of certain functional areas;
●    additional items for Other Non-Interest Income, including Professional Fees,
     Subservicing Fees Paid, and Changes in REO Valuation Allowance;
●    contra expense accounts were added to capture expenses deferred under FAS 91; and
●    a new section to capture Corporate Administration/Overhead Allocations, including:
    −   Corporate Management, Support, and Other Corporate Personnel Expenses;
    −   Corporate Technology Costs;
    −   Goodwill Impairment; and
    −   Other Corporate Expenses or Allocations.

Full-Time Equivalent (FTE) Employees
As described under the Income schedule above, the Employees schedule also includes the
new column for residential portfolio and other business. Additional line items were
added for loan production employees, reflecting a break out of certain functional areas
and a line was added to capture corporate administration/overhead employees.

Loan Originations
Instead of requiring loan types by channel, the Form now requires reporting of only
Retail, Correspondent, and Broker channel production in aggregate. Other changes to the
Loan Originations schedule include:

●    Loans originated will be reported and broken out by several additional types of loans,
     including
    −   Prime and Non-prime,
    −   Reverse Mortgages,
    −   Multifamily,
    −   Commercial,
    −   Alt Doc,
    −   Interest-Only,
    −   Option ARM,
    −   Loans with Prepayment Penalties,
    −   Purchase versus Refinance,
    −   Loans with Private Mortgage Insurance,
    −   Owner-Occupied versus Non-Owner Occupied/Investor,
    −   Loans with Piggyback Seconds,
    −   FICO® Score Distribution, and
    −   LTV Distribution.

●   Loans Sold will be reported by investor type, servicing released, and brokered out
    categories.

●   Various metrics of origination volume will be reported including weighted average
    CLTV, weighted average coupon at origination, fall-out ratio, average days in
    warehouse, and production warehoused in excess of 90 days.

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Debt Facilities (previously titled Warehouse and Related Lines of
Credit)
This section was expanded to include the identification of various debt facilities, in
addition to warehouse lines, such as Repurchased Loan lines, Reverse Repurchase
Facilities, MSR Lines of Credit, and Asset-Backed Commercial Paper Facilities. Users
will submit details for their 10 largest debt facilities, and amounts in total, such as
Facility Provider Name, Outstanding Borrowings, Credit Facility Limit, Wet Sublimit,
Repurchase Sublimit, Weighted Average Advance Rate, Tangible Net Worth
Requirement, Covenant Violations, Waiver for Violation, and Facility Expiration Date.

Servicing Portfolio
Users will no longer need to break out loan servicing for company and non-affiliates,
servicing for affiliates, and purchased servicing. Other changes to the Servicing Portfolio
schedule include:

●    Loans serviced will be reported and broken out by several additional types of loans
     including:
    −   Prime and Non-prime,
    −   Reverse Mortgages,
    −   Multifamily,
    −   Commercial,
    −   Interest-Only,
    −   Option ARM,
    −   Loans with Prepayment Penalties,
    −   Owner-Occupied versus Non-Owner Occupied/Investor,
    −   Loans with Primary Mortgage Insurance,
    −   Loans with Piggyback Seconds,
    −   Loans by Investor Type, and
    −   Loans Removed from Servicing Portfolio during the reporting period.

●    Seriously delinquent loans are also to be broken out by type including:
    −   Government,
    −   Prime,
    −   Seconds,
    −   Reverse Mortgages,
    −   Multifamily, and
    −   Commercial.

●   The Weighted Average Loan Age and portion of loans that had bankruptcy status
    during the quarter will also be reported.

Reserves and Valuation Allowance Rollforwards
This schedule replaces the Loss Allowance schedule.           It is now structured as a
Rollforward schedule with the following sections:


Announcement 08-17                                                                  Page 5
•    Rollforward of Credit Loss Reserves on Loans Held for Investment,
•    Rollforward of Valuation Allowance on REO,
•    Rollforward of Reserve for Other Losses, and
•    Rollforward of Repurchase Reserves.

Loan Modifications
This new schedule contains a single line that will collect the unpaid principal balance and
loan count of loans modified during the reporting period.

Selected Cash Flow Data
This new schedule includes three lines that calculate a Total Increase/(Decrease) in Cash.
The line items that comprise the total are

•    Net Cash (Used)/Provided by Operating Activities,
•    Cash Flows from Investing Activities, and
•    Cash Flows from Financing Activities.

These lines are subtotals from each section of the statement of cash flows.




Announcement 08-17                                                                  Page 6