Freddie Mac 2010 Annual Report Download - page 135

Loan Workout Activities
Loan workout activities are a key component of our loss mitigation strategy for managing and resolving troubled assets
and lowering credit losses. Our single-family loss mitigation strategy emphasizes early intervention in seriously delinquent
mortgages and provides alternatives to foreclosure. Other single-family loss mitigation activities include providing our single-
family servicers with default management tools designed to help them manage non-performing loans more effectively and to
assist borrowers in retaining home ownership where possible, or facilitate foreclosure alternatives when continued
homeownership is not an option. Loan workouts are intended to reduce the number of seriously delinquent mortgages that
proceed to foreclosure and, ultimately, mitigate our total credit losses by reducing or eliminating a portion of the costs
related to foreclosed properties and avoiding the additional credit losses that likely would be incurred in a REO sale. See
“BUSINESS — Our Business Segments — Single-Family Guarantee Segment — Loss Mitigation and Workout Activities” for
a general description of our loan workouts.
For multifamily loans, we monitor a variety of mortgage loan characteristics such as the LTV ratio, DSCR and
geographic concentrations, among others, that help us assess the financial performance of the property and the borrower’s
ability to repay the loan. In certain cases, we may provide short-term loan extensions of up to 12 months with no changes to
the effective borrowing rate. During 2010, we extended, modified, or restructured multifamily loans totaling $816 million in
UPB, compared with $225 million in 2009. Multifamily loan modifications during 2010 included: (a) $71 million in UPB for
short-term loan extensions; and (b) $745 million in UPB for loan modifications. Where we have granted a concession to
borrowers experiencing financial difficulties, we account for these loans as TDRs. Although our loan modification activity
for multifamily loans is increasing, and we expect it may continue to increase in the near term, the majority of our workout
activities are for single-family loans.
We are currently focusing our single-family loan modification efforts on HAMP. If a borrower is not eligible for a
HAMP modification, the borrower is considered for modification under our other loan modification programs. If the
borrower is not eligible for any such programs, the loan is considered for other foreclosure alternatives, such as a short sale.
In 2010, we helped more than 275,000 borrowers either stay in their homes or sell their properties and avoid foreclosures
through our various workout programs, including HAMP, and we completed approximately 143,000 foreclosures.
The UPB of loans in our single-family credit guarantee portfolio for which we have completed a loan modification
increased to $52 billion as of December 31, 2010 from $20 billion as of December 31, 2009. The estimated current LTV
ratio for all modified loans in our single-family credit guarantee portfolio was 116% and the serious delinquency rate on
these loans was 19.1% as of December 31, 2010.
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