2012 PHFA Annual Report - Pennsylvania Housing Finance Agency

Pennsylvania Housing Finance Agency
Notes to Financial Statements
(in thousands of dollars) June 30, 2012 and 2011
2012 2011
Multifamily Housing Program $ 623,430 $ 639,337
Single Family Mortgage
Loan Program 3,941,622 4,243,947
HEMAP 106,288 111,087
Add:
4,671,340 4,994,371
Loan premiums 34,911 36,918
Less:
Loan discounts 2,777 2,777
Allowance for potential
loan losses 227,617 222,902
Mortgage loans
receivable, net 4,475,857 4,805,610
Less current portion 117,215 121,484
Long-term portion $ 4,358,642 $ 4,684,126
Multifamily Housing Program mortgage loans receivable are
collateralized by first mortgages on the related developments.
The federal government subsidizes certain developments
included in the Multifamily Housing Program.
Single Family Mortgage Loan Program loans receivable are
secured by first liens on the related real property. Private
mortgage insurance for the single-family mortgage loans is
provided by commercial companies, certain federal programs
or the Agency’s Insurance Fund. Private mortgage insurance
is required on all mortgage loans where the loan principal
amount exceeds 80% of the lesser of the purchase price or
the initial appraised value of the property.
HEMAP loans are generally unsecured, being in a second
or third lien position, as those loans are provided to
mortgagors facing foreclosure because of circumstances
beyond their control.
Real Estate OwnED by tHE Agency
Included in the Single Family Mortgage Loan Program loan
balances are 325 properties with a value of $20,343 for the
year ended June 30, 2012 and 252 properties with a value
of $15,896 for the year ended June 30, 2011 that the Agency
has acquired and is holding for sale because of foreclosure,
acceptance of a deed in lieu of foreclosure or other defaults of
nonperforming mortgage loans.
ALLowanCE for PotentiAL Loan Loss
The allowances for potential loan losses for the years ended
June 30 consisted of the following:
Multifamily Single Family Mortgage
Housing Program Loan Program HEMAP
2012 2011 2012 2011 2012 2011
Beginning balance $ 169,000 $ 166,973 $ 7,946 $ 5,304 $ 45,956 $ 44,101
Loss provision 3,000 3,100 5,000 5,000 10,976 11,252
Net charge-offs (3,345) (1,073) (4,546) (2,358) (6,370) (9,397)
Ending balance $ 168,655 $ 169,000 $ 8,400 $ 7,946 $ 50,562 $ 45,956
Securitizations
During the years ended June 30, 2012 and 2011, the Agency
pooled mortgage loans with a principal balance of $196,610
and $141,584, respectively, into Government National
Mortgage Association (“GNMA”) Mortgage-Backed Securities.
The securities were then purchased by private investors or
held by the Agency. The Agency earns revenue for servicing
loans in these GNMA pools, which is included as program
income and fees on the Statements of Revenues, Expenses
and Changes in Fund Net Assets. Mortgage loans that have
been securitized into pools through GNMA are not included
on the Agency’s financial statements; however the risk of loss
associated to loans sold to GNMA has been considered in
management’s evaluation of allowance for loan losses.
Insurance Fund
The Agency provides primary mortgage insurance coverage for
certain Single Family Mortgage Loan Program loan borrowers
who are unable to obtain insurance from other sources, which
ranges from 20% to 35% (depending on the loan-to-value ratio
at origination) of the unpaid principal balance. The Agency,
for insuring itself against losses that might occur because
of certain mortgages purchased under the Single Family
Mortgage Loan program, collects insurance premiums from
the borrowers. The activity of collecting premium revenues and
paying claims expenses are included in the Insurance Fund
in the accompanying financial statements. At June 30, 2012
and 2011, the total amount of mortgage loans insured by the
Insurance Fund equaled $404,500 and $338,056, respectively.
InsuranCE Fund CLAims LiABility
GASB requires the basis for estimating the liability for
unpaid claims to include the effects of specific incremental
claim adjustment expenses and estimated recoveries.
In addition, it requires disclosure of whether other allocated
or unallocated claim adjustment expenses are included.
The Agency establishes the estimated claims payable liability
for both reported and unreported insured events, which
includes estimates of both future payments of losses and
related loss adjustment expenses, based on the Agency’s past
claims experience. Claims are not discounted and are net of
estimated recoveries, if any.
Changes in the Insurance Fund’s claim liability consisted of
the following for the years ended June 30:
2012 2011
Beginning balance $ 2,511 $ 2,129
Current year estimated
claims payable 600 600
Claim payments (71) (218)
Total claim liability 3,040 2,511
Less current portion 300 300
Long-term portion $ 2,740 $ 2,211
5. Capital Assets
Capital assets activity for the year ended June 30, 2012 and a
summary of balances are shown on page 50:
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2012 Financial statements annual report 2012
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