Freddie Mac 2010 Annual Report Download - page 142

The table below presents delinquency and default rate information for our single-family credit guarantee portfolio based
on year of origination.
Table 53 — Single-Family Credit Guarantee Portfolio by Year of Loan Origination
Year of Loan
Origination
Percentage
of Portfolio
Serious
Delinquency
Rate
Foreclosure and
Short Sale
Rate
(1)
Percentage
of Portfolio
Serious
Delinquency
Rate
Foreclosure and
Short Sale
Rate
(1)
Percentage
of Portfolio
Serious
Delinquency
Rate
Foreclosure and
Short Sale
Rate
(1)
2010 2009 2008
December 31,
2010........... 18% 0.05% —% —% —% —% —% —% —%
2009........... 21 0.26 0.04 23 0.05 — — — —
2008........... 9 4.89 1.26 12 3.38 0.37 15 0.56 0.02
2007........... 11 11.63 4.92 14 10.47 2.24 19 3.46 0.63
2006........... 9 10.46 5.00 11 9.35 2.70 15 3.50 1.14
2005........... 10 6.04 2.95 12 5.24 1.63 15 2.05 0.79
2004 and prior .... 22 2.46 0.88 28 2.20 0.69 36 1.08 0.48
Total .......... 100% 3.84% 100% 3.98% 100% 1.83%
(1) Calculated for each year of origination as the number of loans that have proceeded to foreclosure transfer or short sale and resulted in a credit loss,
excluding any subsequent recoveries during the period from origination to December 31, 2010, 2009, and 2008, respectively, divided by the number of
loans in our single-family credit guarantee portfolio.
At December 31, 2010, approximately 29% of our single-family credit guarantee portfolio consisted of mortgage loans
originated in 2008, 2007 or 2006, which experienced higher serious delinquency rates in the earlier years of their terms as
compared to our historical experience. We attribute this to a number of factors, including: (a) the expansion of credit terms
under which loans were underwritten during these years; (b) an increase in the origination and our purchase of interest-only
and Alt-A mortgage products in 2006 through 2008; and (c) an environment of decreasing home sales and broadly declining
home prices in the period shortly following the loans’ origination. Interest-only and Alt-A products have higher inherent
credit risk than traditional fixed-rate mortgage products. Our single-family credit guarantee portfolio was positively affected
by refinance activity in 2010 and 2009 as the UPB of loans originated for these years comprised 39% of this portfolio as of
December 31, 2010. Approximately 95% and 99% of the loans we purchased in our single-family credit guarantee portfolio
in 2010 and 2009, respectively, were amortizing fixed-rate mortgage products.
Our multifamily mortgage portfolio delinquency rate increased during 2010, rising to 0.26% at December 31, 2010 from
0.20% at December 31, 2009, due to weakness in certain markets. The delinquency rates for loans in our multifamily
mortgage portfolio are positively impacted to the extent we have been successful in working with troubled borrowers to
modify their loans prior to their becoming delinquent or providing temporary relief through loan modifications. While major
multifamily market fundamentals improved on a national basis during 2010, improvements in loan performance have
historically lagged improvements in broader economic and market trends during market recoveries. As a result, we may
continue to experience elevated credit losses in the first half of 2011, even if market conditions continue to improve. The
majority of multifamily loans included in our multifamily mortgage portfolio delinquency rates are credit-enhanced loans for
which we believe the credit enhancement will reduce our expected losses. Market fundamentals for multifamily properties
that we monitor in Nevada, Arizona, and Georgia continued to be challenging during 2010. For further information regarding
concentrations in our multifamily mortgage portfolio, including regional geographic composition, see “NOTE 19:
CONCENTRATION OF CREDIT AND OTHER RISKS.”
Non-Performing Assets
Non-performing assets consist of single-family and multifamily loans that have undergone a TDR, single-family
seriously delinquent loans, multifamily loans that are three or more payments past due or in the process of foreclosure, and
REO assets, net. Non-performing assets also include multifamily loans that are deemed impaired based on management
judgment. We place non-performing loans on non-accrual status when we believe the collectability of interest and principal
on a loan is not reasonably assured, unless the loan is well secured and in the process of collection. When a loan is placed
on non-accrual status, any interest income accrued but uncollected is reversed. Thereafter, interest income is recognized only
upon receipt of cash payments. There were no loans three monthly payments or more past due for which we continued to
accrue interest during the year ended December 31, 2010.
We classify TDRs as those loans in which we have modified the loan and granted the borrower a concession. TDRs
remain categorized as non-performing throughout the remaining life of the loan regardless of whether the borrower makes
payments which return the loan to a current payment status after modification.
139 Freddie Mac