Freddie Mac 2010 Annual Report Download - page 133

received permanent modifications or are in trial plans. Investors will not be required to agree to a reduction of
principal, but servicers must have a process for considering the approach.
Home Affordable Refinance Program. The Home Affordable Refinance Program gives eligible homeowners with loans
owned or guaranteed by us or Fannie Mae an opportunity to refinance into loans with more affordable monthly payments
and/or fixed-rate terms and is available until June 2011. Under the Home Affordable Refinance Program, we allow eligible
borrowers who have mortgages with high current LTV ratios to refinance their mortgages without obtaining new mortgage
insurance in excess of what was already in place.
The relief refinance mortgage initiative, which we announced in March 2009, is our implementation of the Home
Affordable Refinance Program. We have worked with FHFA to provide us the flexibility to implement this element of the
MHA Program. The Home Affordable Refinance Program is targeted at borrowers with current LTV ratios above 80%;
however, our program also allows borrowers with LTV ratios below 80% to participate. On July 1, 2009, we announced that
the current LTV ratio limit would be increased from 105% to 125%. We began purchasing mortgages that refinance such
higher-LTV ratio loans on October 1, 2009. We also increased the amount of closing costs that can be included in the new
refinance mortgage to up to $5,000. Through our program, we offer this refinancing option only for qualifying mortgage
loans that we hold or guarantee. We will continue to bear the credit risk for refinanced loans under this program, to the
extent that such risk is not covered by existing mortgage insurance or other existing credit enhancements.
The implementation of the relief refinance mortgage product will result in a higher volume of purchases and increased
delivery fees from the new loans. However, the net effect of the refinance activity on our financial results is not expected to
be significant.
Table 47 below presents the composition of our purchases of refinanced single-family loans during the years ended
December 31, 2010 and 2009.
Table 47 — Single-Family Refinance Loan Volume
(1)
Amount Number of Loans Percent Amount Number of Loans Percent
Year Ended December 31, 2010 Year Ended December 31, 2009
(dollars in millions) (dollars in millions)
Relief refinance mortgages:
Above 105% LTV Ratio. . . . ...................... $ 3,977 16,667 1.1% $ 219 953 0.1%
80% to 105% LTV Ratio . . . ...................... 43,906 192,650 13.1 19,380 85,110 4.8
Below 80% LTV Ratio . . . . ...................... 57,766 323,851 22.0 15,119 83,155 4.7
Total relief refinance mortgages ...................... $105,649 533,168 36.2% $ 34,718 169,218 9.6%
Total refinance loan volume
(2)
....................... $303,060 1,470,786 100% $379,035 1,757,500 100%
(1) Consists of all single-family refinance mortgage loans that we either purchased or guaranteed during the period, excluding those associated with other
guarantee commitments and Other Guarantee Transactions.
(2) Consists of relief refinance mortgages and other refinance mortgages.
Relief refinance mortgages comprised approximately 36% and 10% of our total refinance volume in 2010 and 2009,
respectively. Relief refinance mortgages with LTV ratios of 80% and above represented approximately 12% and 4% of our
total single-family credit guarantee portfolio purchases in 2010 and 2009, respectively. It is uncertain how relief refinance
mortgages with LTV ratios of 80% and above will perform in the future, as only a short period of time has elapsed since
these loans were originated. These mortgages comprised approximately 4% of our total single-family credit guarantee
portfolio at December 31, 2010.
Home Affordable Foreclosure Alternatives Program. In May 2009, the Obama Administration announced HAFA,
which is designed to permit borrowers who meet basic HAMP eligibility requirements to sell their homes in short sales, if
such borrowers did not qualify for or participate in a trial period or if they defaulted on their HAMP modification. HAFA
also provides a process for borrowers to convey title to their homes through a deed in lieu of foreclosure. HAFA took effect
in April 2010 and we began our implementation of this program in August 2010. Under HAFA, we will pay certain incentive
fees to borrowers and servicers of mortgages that we own or guarantee that become the subject of HAFA short sales or
deed-in-lieu transactions. We will not receive reimbursement of these fees from Treasury. In December 2010, Treasury
announced changes to HAFA intended to expand eligibility of borrowers and to eliminate the percentage cap on amounts
payable to subordinate lienholders. We will work with FHFA to determine the extent to which we will implement such
changes. We also allow for non-HAFA short sale or deed in lieu transactions. We historically paid and may continue to pay
incentive fees for non-HAFA short sales and deed-in-lieu transactions.
Hardest Hit Fund. In 2010, the federal government created the Hardest Hit Fund, which provides funding for state
HFAs to create programs to assist homeowners in those states that have been hit hardest by the housing crisis and economic
downturn. In August 2010, Treasury issued guidelines on how the MHA Program should operate in conjunction with these
HFA programs. These HFA programs include, among others, unemployment assistance and mortgage reinstatement assistance
130 Freddie Mac