Freddie Mac 2009 Annual Report Download - page 114

The unpaid principal balance of multifamily mortgage loans increased from $72.7 billion at December 31, 2008 to
$83.9 billion at December 31, 2009, an increase of 15%, primarily due to limited market participation by non-GSE investors.
We expect continued growth in our investments in multifamily loans in 2010, but not as robust as 2009.
The unpaid principal balance of single-family mortgage loans increased from $38.8 billion at December 31, 2008 to
$54.9 billion at December 31, 2009, an increase of 42%, primarily due to increased purchases of delinquent and modified
loans from the mortgage pools underlying our PCs and Structured Securities and increased cash purchase activity. As
mortgage interest rates declined during 2009, single-family refinance mortgage originations increased and the volume of
deliveries of single-family mortgage loans to us for cash purchase rather than for guarantor swap transactions also increased.
Loans purchased through the cash purchase program are typically sold to investors through a cash auction of PCs, and, in the
interim, are carried as mortgage loans on our consolidated balance sheets. However, market disruptions reduced demand for
our cash auctions of PCs in early 2009 and we sold a lower amount of PCs in cash auctions than the amount of single-family
loans we purchased for securitization purposes. We expect continued growth in our investments in single-family loans during
2010 primarily due to continued purchases of delinquent and modified loans from the mortgage pools underlying our PCs
and Structured Securities.
Credit Performance of Certain Higher Risk Single-Family Mortgage Loans on our Consolidated Balance Sheets
For a description of our classifications of certain mortgage product types and other groups of loans, see “RISK
MANAGEMENT — Credit Risks — Mortgage Credit Risk.” In addition to traditional 30-year and 15-year amortizing
mortgage loans, we hold Alt-A loans as well as interest-only loans on our consolidated balance sheets, which are primarily
purchased from PCs. We generally do not classify single-family mortgage loans as either prime or subprime; however, there
are categories of mortgage loans with higher risk characteristics than other mortgage loans. For example, mortgage loans
with higher LTV ratios have a higher risk of default, especially during housing and economic downturns, such as the one the
U.S. has experienced over the past few years. Second lien mortgages and option ARM mortgages are other types of
residential mortgage loan products with traditionally higher risks of default; however, we do not purchase or hold significant
amounts of these loans on our consolidated balance sheets. Many financial institutions have classified their residential
mortgages as subprime if the FICO credit score of the borrower is below 620, without regard to any other loan
characteristics. In Table 34 below, we provide information on certain higher risk single-family mortgage loans, including
those we hold where the original FICO score of the borrower is less than 620.
Tables 34 and 35 present credit performance information about single-family mortgage loans that we hold on our
consolidated balance sheets. See “Table 60 — Credit Performance of Certain Higher Risk Categories in the Single-Family
Mortgage Portfolio” and “Table 61 — Single-family Mortgage Portfolio by Attribute Combinations at December 31, 2009”
for similar information on loans in our single-family mortgage portfolio, which generally consists of (i) single-family loans
held on our consolidated balance sheets and (ii) single-family loans underlying our issued PCs and Structured Securities.
These loans include categories based on loan product types and categories based on the characteristics present at origination.
The following table includes a presentation of each characteristic in isolation. A single loan may fall within more than one
category (for example, an interest-only loan may also have an original LTV ratio greater than 90%).
111 Freddie Mac