Freddie Mac 2010 Annual Report Download - page 125

guarantee portfolio during 2010 or 2009. For information on our exposure to option ARM loans through our holdings of non-
agency mortgage-related securities, see “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities.”
Adjustable-Rate Mortgage Loans
Table 43 presents information for single-family mortgage loans in our single-family credit guarantee portfolio, excluding
Other Guarantee Transactions, at December 31, 2010 that contain adjustable payment terms. The reported balances in the
table are aggregated by adjustable-rate loan product type and categorized by year of the next scheduled contractual reset
date. At December 31, 2010, approximately 60% of these adjustable-rate loans have interest rates that are scheduled to reset
in 2011 or 2012. The timing of the actual reset dates may differ from those presented due to a number of factors, including
refinancing or exercising of other provisions within the terms of the mortgage.
Table 43 — Single-Family Scheduled Adjustable-Rate Resets by Year at December 31, 2010
(1)
2011 2012 2013 2014 2015 Thereafter Total
(in millions)
ARMs/amortizing ................................ $28,022 $ 7,418 $ 3,827 $2,758 $11,946 $ 6,594 $ 60,565
ARMs/interest-only
(2)
.............................. 25,261 18,802 10,681 5,021 3,681 8,365 71,811
Balloon/resets
(3)
.................................. 1,190 334 95 16 12 1 1,648
Total . . . ...................................... $54,473 $26,554 $14,603 $7,795 $15,639 $14,960 $134,024
(1) Based on the UPBs of mortgage products that contain adjustable-rate interest provisions. These reported balances are based on the UPB of the underlying
mortgage loans and do not reflect the publicly-available security balances we use to report the composition of our PCs and REMICs and Other Structured
Securities. Excludes mortgage loans underlying Other Guarantee Transactions since reset information was not available to us for these loans.
(2) Reflects the UPB of interest-only loans that reset and begin amortization of principal in each of the years shown.
(3) Represents the portion of the UPBs that are scheduled to reset during the period specified above.
Conforming Jumbo Loans
We purchased $23.9 billion and $26.3 billion of conforming jumbo loans during the years ended December 31, 2010
and 2009, respectively. The UPB of conforming jumbo loans in our single-family credit guarantee portfolio as of
December 31, 2010 and December 31, 2009 was $37.8 billion and $26.6 billion, respectively. The average size of these loans
was approximately $548,000 and $546,000 at December 31, 2010 and December 31, 2009, respectively.
Other Categories of Single-Family Mortgage Loans
While we classified certain loans as subprime or Alt-A for purposes of the discussion below and elsewhere in this
Form 10-K, there is no universally accepted definition of subprime or Alt-A, and our classifications of such loans may differ
from those used by other companies. For example, some financial institutions may use FICO credit scores to delineate
certain residential mortgages as subprime. In addition, we do not rely primarily on these loan classifications to evaluate the
credit risk exposure relating to such loans in our single-family credit guarantee portfolio.
Subprime Loans
Participants in the mortgage market may characterize single-family loans based upon their overall credit quality at the
time of origination, generally considering them to be prime or subprime. While we have not historically characterized the
loans in our single-family credit guarantee portfolio as either prime or subprime, we do monitor the amount of loans we have
guaranteed with characteristics that indicate a higher degree of credit risk (see “Higher Risk Loans in the Single-Family
Credit Guarantee Portfolio” and “Table 52 — Single-Family Credit Guarantee Portfolio by Attribute Combinations” for
further information).
We estimate that approximately $2.5 billion and $2.9 billion of security collateral underlying our Other Guarantee
Transactions at December 31, 2010 and 2009, respectively, were identified as subprime based on information provided to us
when we entered into these transactions. In addition, as of December 31, 2010 and 2009, we also held $1.5 billion and
$1.6 billion, respectively, of certain securities backed by FHA/VA guaranteed loans within our Other Guarantee Transactions
that we previously reported as subprime. In prior disclosures, we reported these FHA/VA loans as subprime because they
were incorrectly identified as subprime at that time.
As of December 31, 2010 and 2009, we also held $8.4 billion and $9.6 billion, respectively, of option ARM securities
underlying our Other Guarantee Transactions. We have not identified these option ARM securities as either subprime or
Alt-A securities. However, these securities could currently be exhibiting similar credit performance to collateral identified as
subprime or Alt-A.
We also categorize our investments in non-agency mortgage-related securities as subprime if they were identified as
such based on information provided to us when we entered into these transactions. At December 31, 2010 and 2009, we held
$54.2 billion and $61.6 billion, respectively, in UPB of non-agency mortgage-related securities backed by subprime loans.
These securities were structured to provide credit enhancements, particularly through subordination, and 10% and 18% of
these securities were investment grade at December 31, 2010 and 2009, respectively. The credit performance of loans
122 Freddie Mac