Freddie Mac 2009 Annual Report Download - page 151

refinance mortgages we acquired in 2009; (iii) more of the loans originated in 2009 that had higher risk characteristics were
insured by FHA and securitized through Ginnie Mae; and (iv) changes in mortgage insurers’ underwriting practices.
The table below illustrates the size of mortgage origination and securitization activities during the past three years
relative to our own market participation.
Table 56 — Mortgage Market Share Comparison
2009 2008 2007
(in billions)
Market Data — all market participants:
Total single-family mortgage originations
(1)
.................................................. $1,815 $1,500 $2,430
Non-agency mortgage-related security issuance:
(2)
Backed by subprime mortgage loans
(3)
................................................... $ G1$ 2$219
Backed by other mortgage loans
(4)
...................................................... 5 9 430
Total ............................................................................ $ 6 $ 11 $ 649
Freddie Mac Data:
Purchases for our total mortgage portfolio:
Single-family mortgage loans
(5)
........................................................ $ 475 $ 358 $ 466
Non-agency mortgage-related securities
(6)
................................................. $ — $ 2 $ 74
(1) Source: Inside Mortgage Finance estimates of originations of single-family first- and second liens dated January 29, 2010.
(2) Source: Inside Mortgage Finance estimates. Based on unpaid principal balance of securities issued.
(3) Consists of loans categorized as subprime based solely on the credit score of the borrower at the time of origination.
(4) Includes securities backed by loans with original loan amounts above the conforming loan limits as well as Alt-A loans, and home equity second liens.
(5) Consists of our purchases of mortgage loans for investment as well as those loans that back our PCs and Structured Securities. See “OUR
PORTFOLIOS — Table 78 — Total Mortgage Portfolio Activity” for further information.
(6) Excludes our purchases of securities used for issuance of guarantees in our Structured Transactions and includes our purchases of CMBS and mortgage
revenue bonds.
As shown above, single-family mortgage loan purchases for our total mortgage portfolio comprised approximately 26%,
24% and 19% of total mortgage originations during 2009, 2008 and 2007, respectively. The trend of increasing market share
reflects the fact that GSE-conforming mortgage loan originations were a larger percentage of total originations during 2009
and 2008 due to the tightening of underwriting for mortgage credit by financial institutions, including mortgage insurers, and
the fact that most non-agency institutions sharply curtailed their securitization activities. As shown above, our purchases of
non-agency mortgage-related securities represented approximately 11% of the total issuance of these securities during 2007
and there have not been significant amounts of new issuance of these securities in 2008 or 2009.
The deterioration in mortgage performance varied considerably across different product types, particularly with respect
to loans originated in 2006 and 2007. In addition, during 2008 and 2009, deteriorating macroeconomic conditions adversely
affected the performance of all vintages and types of mortgage loans, including prime loans. These conditions included
pressures on household wealth caused by falling home values, rising rates of unemployment and other impacts of the
economic recession that began in early 2008. Certain of these macroeconomic conditions, such as unemployment, have
continued to worsen throughout 2009. Although prior to 2008 we increased our participation in the market for newer and
higher risk mortgage products, we believe our single-family mortgage portfolio has been generally subject to more consistent
underwriting standards than those of other market participants and thus, our portfolio has performed better relative to most
such participants. However, as discussed in “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in
Securities,” we are exposed to the performance of these other participants and segments through our investments in non-
agency mortgage-related securities. The table below shows the credit performance of our single-family mortgage portfolio
for the last several quarters as compared to certain industry averages.
148 Freddie Mac