Freddie Mac 2009 Annual Report Download - page 120

Table 37 shows the status of delinquent single-family loans purchased under financial guarantees during each period.
Table 37 — Status of Delinquent Single-Family Loans Purchased Under Financial Guarantees
(1)
Q4 Q3 Q2 Q1 2009 2008 2007
2009
Status as of December 31, 2009
Cured, with modifications
(2)
................................. 79% 79% 62% 51% 64% 42% 7%
Cured, without modifications:
Returned to less than 90 days past due . . . ..................... 1 1 1 2 1 2 12
Loans repaid in full or repurchased by lenders ................... 1 1 — 1 1 2 18
Total cured . . . . . . . . . . .................................. 81 81 63 54 66 46 37
90 days or more delinquent ................................. 18 19 36 43 32 45 15
Default event and REO
(3)
................................... 1 — 1 3 2 9 48
Total. . . . . . . . . . . . . . . .................................. 100% 100% 100% 100% 100% 100% 100%
Q4 Q3 Q2 Q1 2009 2008 2007
2009
Status as of the End of Each Respective Period
Cured, with modifications
(2)
................................. 79% 89% 85% 59% 64% 62% 5%
Cured, without modifications:
Returned to less than 90 days past due . . . ..................... 1 1 — 5 1 4 20
Loans repaid in full or repurchased by lenders ................... 1 — — — 1 1 9
Total cured . . . . . . . . . . .................................. 81 90 85 64 66 67 34
90 days or more delinquent ................................. 18 10 15 36 32 31 43
Default event and REO
(3)
................................... 1 — — — 2 2 23
Total. . . . . . . . . . . . . . . .................................. 100% 100% 100% 100% 100% 100% 100%
Number of delinquent or modified loans purchased
(4)
................ 13,300 7,400 11,300 25,000 57,000 31,200 58,900
(1) Percentages are based on number of single-family delinquent or modified loans purchased under our guarantee and reduced to fair value in accordance
with accounting standards for loans and debt securities acquired with deteriorated credit quality during each respective period.
(2) Consists of loans that are less than 90 days past due under modified terms.
(3) Consists of foreclosures, pre-foreclosure sales, sales of REO to third parties, and deeds in lieu of foreclosure.
(4) Rounded to hundreds of units.
As shown in Table 37 above, the status as of December 31, 2009 of loans purchased under our financial guarantees
during 2009 and 2008 reflects an increase in the cure rate and a significant decrease in the percentage of those loans with
default event and REO outcomes when compared to the status of delinquent loans purchased during 2007. The increase in
cure rate and decline in the percentage of those loans proceeding to foreclosure or foreclosure alternatives reflect the change
in our operational practice with respect to purchases of delinquent loans discussed above. We believe that a quarterly and
annual presentation of these cure rate statistics is important to illustrate the lag effect of the resolution process inherent in
delinquent loans. During 2009, for those loans modified outside of HAMP, we significantly increased our use of
modifications where we agreed to reduce the interest rate of the loan and to add delinquent amounts to the loan balance.
However, during 2009 we also experienced an increased incidence of loans returning to delinquent status, or that redefault,
on loans that had been modified in 2008, which is observable in the table above by comparing the cure rates as of the end of
each respective period (bottom half of the table) with the cure rates as of December 31, 2009. We expect that continued
pressure on home prices and the impact of rising unemployment rates during 2009, as well as the observed high propensity
of borrowers with loan modifications to redefault, will continue to negatively impact our cure rates and redefault rates on
modified loans in 2010.
Supplemental Multifamily Mortgage Loans
We adjusted our underwriting standards at the start of 2009 so that our multifamily mortgage loans are generally
underwritten using requirements that establish a maximum LTV ratio of 80% and a minimum debt service coverage ratio of
1.25. We make investments in certain second and other junior lien loans on multifamily properties on which we own the first
lien mortgage, which we refer to as supplemental loans. Beginning in 2009, supplemental loans were generally required to
have a maximum total LTV of 75% and a minimum debt service coverage ratio of 1.25 when combined with the first lien
mortgage. Supplemental loans generally provide the borrower with a lower cost option to obtain additional financing without
the added expense of refinancing the first lien mortgage. We had supplemental multifamily loans held-for-investment of
$2.7 billion and $2.5 billion as of December 31, 2009 and December 31, 2008, respectively, and these loans had maximum
total LTV ratios of 66% and 65%, respectively. None of these mortgage loans were 90 days or more delinquent or in
foreclosure at December 31, 2009 or 2008. See “RISK MANAGEMENT — Credit Risks — Mortgage Credit Risk —
Multifamily Mortgage Portfolio Diversification, Characteristics and Product Types” for further information.
117 Freddie Mac