Fannie Mae’s Serious Delinquency Rate Falls for Third Straight Month

The percentage of loans 90 or more days past due held by the nation's largest mortgage company has declined for three months in a row.

[IMAGE]

According to a new ""monthly summary report"":http://www.fanniemae.com/ir/pdf/monthly/2010/063010.pdf released by ""Fannie Mae"":http://www.fanniemae.com on Friday, the GSE's single-family serious delinquency rate dropped 15 basis points to 5.15 percent in May. That follows a decline of 17 basis points in April and 12 basis points in March.

As ""DSNews.com previously reported"":http://dsnews.comarticles/fannie-maes-delinquency-rate-falls-for-first-time-in-three-years-2010-05-28, the March reading was the first time Fannie's delinquency rate had dropped since March 2007, when it was a mere 0.62 percent. Since that time, the GSE's past due loans have been steadily rising, with the pace picking up considerable over the last two years â€" that is until now.

[COLUMN_BREAK]

Fannie’s fellow government-backed mortgage financier, ""Freddie Mac"":http://www.freddiemac.com is also enjoying a drop in delinquencies. Last week, ""Freddie reported"":http://dsnews.comarticles/freddie-macs-delinquency-rate-falls-below-4-2010-07-26 that its serious delinquency rate dropped below the 4 percent threshold, to 3.96 percent as of the end of June. Freddie, too, saw its first delinquency decline in three years in March of this year.

Fannie Mae’s latest monthly report also showed that the GSE’s mortgage portfolio grew at a compound annual growth rate of 6.3 percent in June to $817.8 billion, with the addition of $19 billion in 120-plus day delinquent loans that the company bought back from mortgage-backed securities (MBS) investors.

While Fannie Mae’s repurchases of these older, souring MBS loans may represent an area of credit-loss containment for the GSE, the company’s president and CEO, Michael Williams, says ""new loans picked up by Fannie"":http://dsnews.comarticles/fannie-maes-ceo-lauds-new-realism-of-better-underwriting-2010-07-29 have been borne out of tighter underwriting standards and are expected to perform much better.

Fannie Mae has “begun to build a new book of business with some of the highest-quality loans we have ever seen,” Williams told a group of industry professionals earlier this week.

The GSE issued $40.2 billion in new MBS in June, up 11 percent from May, and added $27.6 billion in new loan purchases to its portfolio during the month.

Fannie Mae's total book of business shrank by an annualized rate of 10.9 percent to $3.22 trillion in June.