Freddie Mac 2010 Annual Report Download - page 212

Table 5.3 summarizes loan loss reserve activity.
Table 5.3 — Detail of Loan Loss Reserves
Unsecuritized
Held By
Consolidated
Trusts
Reserve for
Guarantee
Losses
(1)
Total
Allowance for
Loan Losses
Reserve for
Guarantee
Losses Total
Allowance for Loan Losses
2010 2009
Year Ended December 31,
(in millions)
Single-family:
Beginning balance . . . ................. $ 693 $ — $32,333 $ 33,026 $ 454 $14,887 $15,341
Adjustments to beginning balance
(2)
. . . . . . . . — 32,006 (32,192) (186) — — —
Provision for credit losses ............... 7,532 9,540 47 17,119 524 28,432 28,956
Charge-offs
(3)
........................ (12,856) (3,351) (11) (16,218) (507) (8,874) (9,381)
Recoveries
(3)
........................ 2,647 715 — 3,362 222 1,866 2,088
Transfers, net
(4)(5)
..................... 29,301 (27,266) (40) 1,995 — (3,978) (3,978)
Ending balance....................... $27,317 $ 11,644 $ 137 $ 39,098 $ 693 $32,333 $33,026
Multifamily:
Beginning balance . . . ................. $ 748 $ — $ 83 $ 831 $ 236 $ 41 $ 277
Provision for credit losses ............... 84 — 15 99 533 41 574
Charge-offs
(3)
........................ (103) — (1) (104) (21) — (21)
Recoveries
(3)
........................ 1 — — 1 — — —
Transfers, net
(5)
...................... — — 1 1 — 1 1
Ending balance....................... $ 730 $ — $ 98 $ 828 $ 748 $ 83 $ 831
Total:
Beginning balance . . . ................. $ 1,441 $ — $ 32,416 $ 33,857 $ 690 $14,928 $15,618
Adjustments to beginning balance
(2)
. . . . . . . . — 32,006 (32,192) (186) — — —
Provision for credit losses ............... 7,616 9,540 62 17,218 1,057 28,473 29,530
Charge-offs
(3)
........................ (12,959) (3,351) (12) (16,322) (528) (8,874) (9,402)
Recoveries
(3)
........................ 2,648 715 — 3,363 222 1,866 2,088
Transfers, net
(4)(5)
..................... 29,301 (27,266) (39) 1,996 — (3,977) (3,977)
Ending balance....................... $28,047 $ 11,644 $ 235 $ 39,926 $1,441 $32,416 $33,857
(1) All of these loans are collectively evaluated for impairments. Beginning January 1, 2010, our reserve for guarantee losses is included in other liabilities.
See “NOTE 23: SELECTED FINANCIAL STATEMENT LINE ITEMS” for further information.
(2) Adjustments relate to the adoption of the accounting standards for transfers of financial assets and consolidation of VIEs. See “NOTE 2: CHANGE IN
ACCOUNTING PRINCIPLES” for further information.
(3) Charge-offs represent the amount of the UPB of a loan that has been discharged to remove the loan from our consolidated balance sheet due to either
foreclosure, short sales or deed-in-lieu transactions. Charge-offs exclude $528 million and $280 million for the years ended December 31, 2010 and
2009, respectively, related to certain loans purchased under financial guarantees and recorded as losses on loans purchased within other expenses on our
consolidated statements of operations. Recoveries of charge-offs primarily result from foreclosure alternatives and REO acquisitions on loans where a
share of default risk has been assumed by mortgage insurers, servicers or other third parties through credit enhancements.
(4) In February 2010, we announced that we would purchase substantially all single-family mortgage loans that are 120 days or more delinquent from our
PC trusts. We purchased $127.5 billion in UPB of loans from PC trusts during 2010. As a result of these purchases, related amounts of our loan loss
reserves were transferred from the allowance for loan losses — held by consolidated trusts and the reserve for guarantee losses into the allowance for
loan losses — unsecuritized.
(5) Consist primarily of: (a) approximately $27.5 billion of reclassified single-family reserves during 2010 related to our purchases during the period of
loans previously held by consolidated trusts (as discussed in endnote (3) above); (b) amounts related to agreements with seller/servicers where the
transfer represents recoveries received under these agreements to compensate us for previously incurred and recognized losses; (c) the transfer of a
proportional amount of the recognized reserves for guarantee losses associated with loans purchased from non-consolidated Freddie Mac mortgage-
related securities and other guarantee commitments; and (d) net amounts attributable to recapitalization of past due interest on modified mortgage loans.
See “NOTE 19: CONCENTRATIONS OF CREDIT AND OTHER RISKS — Mortgage Seller/Servicers” for more information about recovery
agreements with our seller/servicers in 2010, including GMAC Mortgage, LLC, Bank of America, N.A., and certain of their affiliates.
For delinquent loans placed on non-accrual status on our consolidated balance sheets, we reverse all past due interest. In
most cases, when we modify a non-accrual loan, the past due interest on the original loan is recapitalized, or added to the
principal of the new loan and reflected as a transfer into the reserve balance. Transfers, net in the table above, included
$1.1 billion in 2010 associated with recapitalization of past due interest.
209 Freddie Mac