Freddie Mac 2009 Annual Report Download - page 331

Foreclosure transfer — Refers to our completion of a transaction provided for by the foreclosure laws of the applicable
state, in which a delinquent borrower’s ownership interest in a mortgaged property is terminated and title to the property is
transferred to us or to a third party. State foreclosure laws commonly refer to such transactions as foreclosure sales, sheriff’s
sales, or trustee’s sales, among other terms. When we, as mortgage holder, acquire a property in this manner, we pay for it
by extinguishing some or all of the mortgage debt.
Ginnie Mae — Government National Mortgage Association.
Government sponsored enterprises (GSEs) — Refers to certain legal entities created by the government, including Freddie
Mac, Fannie Mae and the FHLBs.
GSE Act — The Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
Guarantee fee — The fee that we receive for guaranteeing the timely payment of principal and interest to mortgage security
investors.
Higher-priced mortgage loan (HPML) — Refers to a mortgage loan meeting the criteria within the Federal Reserve
Board’s Regulation Z. This regulation classifies loans as HPML if the annual percentage rate, or APR, of the first-lien loan
is at least 1.5% higher than the average prime offer rate, or APOR, of comparable loans at the date the interest rate on the
loan is set, or locked. Second lien loans are deemed HPML if the corresponding interest rate is at least 3.5% higher than the
APOR. The APOR is calculated and published by the FRB on a weekly basis.
Home Affordable Modification Program (HAMP) — Refers to the effort under the MHA Program to help mortgage
borrowers that are either delinquent or at risk of imminent default. HAMP requires servicers to follow specified guidelines
offering a consistent regime to modify a mortgage loan. Under HAMP, we offer loan modifications to financially struggling
homeowners that reduce their monthly principal and interest payments on their mortgages.
Implied volatility — A measurement of how the value of a financial instrument changes due to changes in the market’s
expectation of the magnitude of future variations in interest rates. A decrease in implied volatility generally increases the
estimated fair value of our mortgage assets and decreases the estimated fair value of our callable debt and options-based
derivatives, while an increase in implied volatility generally has the opposite effect.
Interest-only loan / interest-only mortgage — A mortgage loan that allows the borrower to pay only interest (either fixed-
rate or adjustable-rate) for a fixed period of time before principal amortization payments are required to begin. After the end
of the interest-only period, the borrower can choose to refinance the loan, pay the principal balance in total, or begin paying
the monthly scheduled principal due on the loan.
Lending Agreement — An agreement entered into with Treasury in September 2008, which established a secured lending
facility that expired on December 31, 2009. The Lending Agreement expired on December 31, 2009.
Liquidation preference — Generally refers to an amount that holders of preferred securities are entitled to receive out of
available assets, upon liquidation of a company. The initial liquidation preference of our senior preferred stock was
$1.0 billion. The aggregate liquidation preference of our senior preferred stock includes the initial liquidation preference plus
amounts funded by Treasury under the Purchase Agreement. In addition, dividends and periodic commitment fees not paid in
cash are added to the liquidation preference of the senior preferred stock. We may make payments to reduce the liquidation
preference of the senior preferred stock only in limited circumstances.
Low-income housing tax credit (LIHTC) partnerships — Prior to 2008, we invested as a limited partner in LIHTC
partnerships, which are formed for the purpose of providing funding for affordable multifamily rental properties. These
LIHTC partnerships invest directly in limited partnerships that own and operate multifamily rental properties that generate
federal income tax credits and deductible operating losses.
Loan-to-value (LTV) ratio — The ratio of the unpaid principal amount of a mortgage loan to the value of the property that
serves as collateral for the loan, expressed as a percentage. Loans with high LTV ratios generally tend to have a higher risk
of default and, if a default occurs, a greater risk that the amount of the gross loss will be high compared to loans with lower
LTV ratios. We report LTV ratios based solely on the amount of a loan purchased or guaranteed by us, generally excluding
any second lien mortgages.
Making Home Affordable Program (MHA Program) — Formerly known as the Housing Affordability and Stability Plan,
the MHA Program was announced by the Obama Administration in February 2009. The MHA Program is designed to help
in the housing recovery by promoting liquidity and housing affordability, and expanding foreclosure prevention efforts and
setting market standards. The MHA Program includes (i) Home Affordable Refinance, which gives eligible homeowners with
loans owned or guaranteed by Freddie Mac or Fannie Mae an opportunity to refinance into more affordable monthly
payments, and (ii) the Home Affordable Modification program, which commits U.S. government, Freddie Mac and Fannie
Mae funds to keep eligible homeowners in their homes by preventing avoidable foreclosures.
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