Freddie Mac 2009 Annual Report Download - page 177

obtain modifications with concessions of past due principal or interest amounts, including legislative changes to bankruptcy
laws, could also lead to higher charge-offs and increased credit losses.
Table 72 provides detail by region for charge-offs. Regional charge-off trends generally follow a pattern that is similar
to, but lags, that of regional delinquency trends.
Table 72 — Single-Family Charge-offs and Recoveries by Region
(1)
Charge-offs,
gross Recoveries
(2)
Charge-offs,
net
Charge-offs,
gross Recoveries
(2)
Charge-offs,
net
Charge-offs,
gross Recoveries
(2)
Charge-offs,
net
2009 2008 2007
Year Ended December 31,
(in millions)
Northeast . . . . . . $ 854 $ (194) $ 660 $ 353 $ (86) $ 267 $ 50 $ (21) $ 29
Southeast . . . . . . 2,124 (557) 1,567 693 (193) 500 112 (60) 52
North Central . . . 1,502 (393) 1,109 689 (191) 498 219 (92) 127
Southwest . . . . . . 484 (169) 315 234 (82) 152 90 (45) 45
West ......... 4,697 (775) 3,922 1,472 (227) 1,245 57 (20) 37
Total ......... $9,661 $(2,088) $7,573 $3,441 $(779) $2,662 $528 $(238) $290
(1) See “Table 65 — Delinquency Rates” for a description of these regions.
(2) Recoveries of charge-offs primarily result from foreclosure alternatives and REO acquisitions on loans where a share of default risk has been assumed
by mortgage insurers, servicers or other third parties through credit enhancements. Recoveries of charge-offs through credit enhancements are limited in
many instances to amounts less than the full amount of the loss.
Single-family charge-offs, gross, for 2009 increased to $9.7 billion compared to $3.4 billion for 2008, primarily due to
an increase in the volume of REO properties acquired at foreclosure and continued deterioration of residential real estate
markets. The severity of charge-offs increased in 2009 due to overall declines in housing markets resulting in higher per-
property losses. Our per-property loss severity during 2009 has been greatest in those states that experienced significant
increases in property values during 2000 through 2006, such as California, Florida, Nevada and Arizona. Our average
severity rates on REO dispositions during 2009 in California, Florida, Arizona and Nevada were 44%, 50%, 43% and 46%,
respectively compared to 38.5% nationally. California also accounted for a significant amount of our credit losses and
comprised approximately 32% of our total credit losses in 2009. In addition, although Alt-A loans comprised approximately
8% and 10% of our single-family mortgage portfolio as of December 31, 2009 and 2008, respectively, these loans have
contributed approximately 44% and 50% of our credit losses during 2009 and 2008, respectively.
Table 73 presents data concerning the credit loss concentrations in our single-family mortgage portfolio as of
December 31, 2009 and 2008, respectively.
Table 73 — Single-Family Credit Loss Concentration Analysis
(1)
Composition Alt-A Non Alt-A Alt-A Non Alt-A Alt-A Non Alt-A Alt-A Non Alt-A
2009 2008 2009 2008
Unpaid Principal Balance
As of December 31,
Credit Losses
(2)
As of December 31,
(in billions) (in millions)
Year of loan origination
2009 . . . . . . . . . . . . . . . ...................... $ — $ 438 $ — $ — $ — $ 2 $ — $ —
2008 . . . . . . . . . . . . . . . ...................... 13 214 15 261 67 291 3 12
2007 . . . . . . . . . . . . . . . ...................... 46 227 57 291 1,438 1,384 583 369
2006 . . . . . . . . . . . . . . . ...................... 40 167 52 222 1,556 1,178 1,058 501
All Other . . . . . . . . . . . . ...................... 49 709 61 890 416 1,528 234 999
Total . . . . . . . . . . . . . . . ...................... $148 $1,755 $185 $1,664 $3,477 $4,383 $1,878 $1,881
State
California . . . . . . . . . . . . ...................... $ 34 $ 250 $ 41 $ 218 $1,451 $1,087 $ 800 $ 343
Florida . . . . . . . . . . . . . . ...................... 15 107 18 107 533 610 207 174
Arizona . . . . . . . . . . . . . ...................... 6 46 7 45 373 475 203 139
Nevada.................................... 4 18 4 19 263 212 111 41
Michigan . . . . . . . . . . . . ...................... 2 57 3 58 61 428 49 331
Illinois . . . . . . . . . . . . . . ...................... 6 90 8 86 94 165 32 46
Georgia . . . . . . . . . . . . . ...................... 5 57 6 55 76 169 72 106
Subtotal................................... $ 72 $ 625 $ 87 $ 588 $2,851 $3,146 $1,474 $1,180
All other States . . . . . . . . ...................... 76 1,130 98 1,076 626 1,237 404 701
Total . . . . . . . . . . . . . . . ...................... $148 $1,755 $185 $1,664 $3,477 $4,383 $1,878 $1,881
(1) Based on the single-family mortgage loans held by us and those underlying our issued PCs and Structured Securities less Structured Securities backed
by Ginnie Mae Certificates and other guarantees of HFA bonds.
(2) Credit losses consist of the aggregate amount of charge-offs, net of recoveries, and the amount of REO operations expense in each of the respective
periods and exclude interest foregone on nonperforming loans and other market-based credit losses recognized on our consolidated statements of
operations.
174 Freddie Mac