Freddie Mac 2010 Annual Report Download - page 112

Our estimate of probable incurred losses for exposure to seller/servicers for their repurchase obligations to us is a
component of our allowance for loan losses as of December 31, 2010 and 2009. See “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES — Allowance for Loan Losses and Reserve for Guarantee Losses” for further
information. We believe we have adequately provided for these exposures, based upon our estimates of incurred losses, in
our loan loss reserves at December 31, 2010 and December 31, 2009; however, our actual losses may exceed our estimates.
GMAC Mortgage, LLC and Residential Funding Company, LLC (collectively, GMAC), indirect subsidiaries of Ally
Financial Inc. (formerly, GMAC Inc.), are seller/servicers that together serviced and subserviced for an affiliated entity
approximately 3% of the single-family loans in our single-family credit guarantee portfolio as of December 31, 2010. In
March 2010, we entered into an agreement with GMAC under which they made a one-time payment to us for the partial
release of repurchase obligations relating to loans sold to us prior to January 1, 2009. The partial release does not affect any
of GMAC’s potential repurchase obligations for loans sold to us by GMAC after January 1, 2009, nor does it affect the
ability to recover amounts associated with failure to comply with our servicing requirements. The agreement did not have a
material impact on our 2010 consolidated statements of operations.
On December 31, 2010, we entered into an agreement with Bank of America, N.A., and two of its affiliates, BAC Home
Loans Servicing, LP and Countrywide Home Loans, Inc., to resolve currently outstanding and future claims for repurchases
arising from the breach of representations and warranties on certain loans purchased by us from Countrywide Home
Loans, Inc. and Countrywide Bank FSB. Under the terms of the agreement, we received a $1.28 billion cash payment in
consideration for releasing Bank of America and its two affiliates from current and future repurchase requests arising from
loans sold to us by the Countrywide entities for which the first regularly scheduled monthly payments were due on or before
December 31, 2008. The UPB of the loans in this portfolio, as of December 31, 2010, was approximately $114 billion. The
agreement applies only to certain claims for repurchase based on breaches of representations and warranties and the
agreement contains specified limitations and does not cover loans sold to us or serviced for us by other Bank of America
entities. The agreement did not have a material impact on our 2010 consolidated statements of operations.
On August 24, 2009, Taylor, Bean & Whitaker Mortgage Corp., or TBW, filed for bankruptcy. TBW accounted for
approximately 2% of our single-family mortgage purchase volume activity for the year ended December 31, 2009. We have
exposure to TBW with respect to its loan repurchase obligations. We also have exposure with respect to certain borrower
funds that TBW held for the benefit of Freddie Mac. TBW received and processed such funds in its capacity as a servicer of
loans owned or guaranteed by Freddie Mac. TBW maintained certain bank accounts, primarily at Colonial Bank, to deposit
such borrower funds and to provide remittance to Freddie Mac. Colonial Bank was placed into receivership by the FDIC in
August 2009.
On or about June 14, 2010, we filed a proof of claim in the TBW bankruptcy aggregating $1.78 billion. Of this amount,
approximately $1.15 billion relates to current and projected repurchase obligations and approximately $440 million relates to
funds deposited with Colonial Bank, or with the FDIC as its receiver, which are attributable to mortgage loans owned or
guaranteed by us and previously serviced by TBW. The remaining $190 million represents miscellaneous costs and expenses
incurred in connection with the dissolution of TBW. On July 1, 2010, TBW filed a comprehensive final reconciliation report
in the bankruptcy court indicating, among other things, that approximately $203 million in funds held in bank accounts
maintained by TBW related to its servicing of Freddie Mac’s loans and was potentially available to pay Freddie Mac’s
claims. These assets include certain funds on deposit with Colonial Bank. We have analyzed the report and, as necessary and
appropriate, may revise the amount of our claim.
No actions against Freddie Mac related to TBW have been initiated in bankruptcy court or elsewhere to recover assets.
However, TBW and Bank of America, N.A., which is also a claimant in the TBW bankruptcy, have indicated that they wish
to determine whether the bankruptcy estate of TBW has any potential rights to seek to recover assets transferred by TBW to
Freddie Mac prior to bankruptcy. TBW has indicated to us that it may file an action to recover certain funds paid to us prior
to the bankruptcy. At this time, we are unable to estimate our potential exposure, if any, to such claims. On or about May 14,
2010, certain underwriters of Lloyds of London brought an adversary proceeding in bankruptcy court against TBW, Freddie
Mac and other parties seeking a declaration rescinding mortgage bankers bonds insuring against loss resulting from dishonest
acts by TBW’s officers and directors. Freddie Mac has filed a proof of loss under the bonds, but we are unable to estimate
our potential recovery, if any, thereunder. Discovery in the proceeding has been stayed at the request of the U.S. Department
of Justice, pending completion of a criminal trial involving the former chief executive officer of TBW. See “NOTE 21:
LEGAL CONTINGENCIES” for additional information on our claim arising from TBW’s bankruptcy.
Our seller/servicers also have an active role in our loan workout efforts, including under the MHA Program, and
therefore we also have exposure to them to the extent a decline in their performance results in a failure to realize the
anticipated benefits of our loss mitigation plans. A significant portion of our single-family mortgage loans are serviced by
several large seller/servicers. Our top five single-family loan servicers, Wells Fargo Bank N.A., Bank of America N.A.,
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