Freddie Mac 2009 Annual Report Download - page 171

At December 31, 2009, approximately 37% of our single-family mortgage portfolio consisted of mortgage loans
originated in 2008, 2007 or 2006, which experienced higher delinquency rates in the earlier years of their terms as compared
to our historical experience. We attribute this increase to a number of factors, including: (a) the expansion of credit terms
under which loans were underwritten during these years, (b) an increase in the origination and our purchase of interest-only
and Alt-A mortgage products in 2006 through 2008 and (c) an environment of decreasing home sales and broadly declining
home prices. Interest-only and Alt-A products have higher inherent credit risk than traditional fixed-rate mortgage products.
Our single-family mortgage portfolio was positively affected by refinance activity in 2009 as the volume of originations for
2009 comprised 23% of the unpaid principal balance outstanding as of December 31, 2009 and 99% percent of these loans
were amortizing fixed-rate mortgage products where the weighted average credit score of borrowers at origination was 756.
Increases in delinquency rates occurred for all single-family mortgage product types during 2009, but were most
significant for loans in certain higher risk categories. See “Table 60 — Credit Performance of Certain Higher Risk Categories
in the Single-Family Mortgage Portfolio” for additional information. Reflecting the expansion of the housing and economic
downturn to a broader group of borrowers, the delinquency rate for 30-year fixed-rate amortizing loans, a more traditional
loan product, in our single-family mortgage portfolio increased to 4.00% at December 31, 2009 as compared to 1.69% at
December 31, 2008. We also continue to experience higher rates of delinquency on loans originated after 2005, since those
borrowers are more susceptible to the declines in home prices that began in 2006 than homeowners that have built equity
over longer periods of time.
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