Freddie Mac 2010 Annual Report Download - page 214

the UPB of the mortgage loans covered by such policies. We also reached the maximum limit of recovery on certain of these
contracts. As a result, losses we recognized during 2010 increased on certain loans previously identified as credit enhanced.
We also have credit protection for certain of the mortgage loans on our consolidated balance sheets that are covered by
insurance or partial guarantees issued by federal agencies (such as FHA, VA, and USDA). The total UPB of these loans was
$4.8 billion and $3.1 billion as of December 31, 2010 and 2009, respectively.
NOTE 6: INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS
Individually Impaired Loans
Individually impaired single-family loans include performing and non-performing TDRs, as well as loans acquired under
our financial guarantees with deteriorated credit quality. Individually impaired multifamily loans include TDRs, loans three
monthly payments or more past due, and loans that are impaired based on management judgment. For a discussion of our
significant accounting policies regarding impaired and non-performing loans, which are applied consistently for all single-
family classes, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”
Total loan loss reserves consists of a specific valuation allowance related to individually impaired mortgage loans, and a
general reserve for other probable incurred losses. Our recorded investment in individually impaired mortgage loans and the
related specific valuation allowance are summarized in Table 6.1 by product class (for single-family loans).
Table 6.1 — Individually Impaired Loans
Single-family — UPB
Recorded
Investment
Associated
Allowance
Net
Investment
Average
Recorded
Investment
Interest
Income
Recognized
Balance at
December 31, 2010
For the Year Ended
December 31, 2010
(in millions)
With no specific allowance recorded
(1)
:
20 and 30-year or more, amortizing fixed-rate ............... $ 8,462 $ 3,721 $ — $ 3,721 $ 4,046 $ 521
15-year amortizing fixed-rate ........................... 119 50 — 50 58 7
Adjustable rate
(2)
................................... 20 9 — 9 12 1
Alt-A, interest-only, and option ARM
(3)
.................... 2,525 1,098 — 1,098 1,220 114
Total with no specific allowance recorded .................... $11,126 $ 4,878 $ — $ 4,878 $ 5,336 $ 643
With specific allowance recorded:
20 and 30-year or more, amortizing fixed-rate ............... $25,504 $24,502 $(6,283) $18,219 $15,128 $ 561
15-year amortizing fixed-rate ........................... 229 198 (17) 181 175 10
Adjustable rate
(2)
................................... 168 153 (23) 130 114 5
Alt-A, interest-only, and option ARM
(3)
.................... 7,035 6,774 (2,161) 4,613 3,753 116
Total with specific allowance recorded ...................... $32,936 $31,627 $(8,484) $23,143 $19,170 $ 692
Combined single-family:
20 and 30-year or more, amortizing fixed-rate ............... $33,966 $28,223 $(6,283) $21,940 $19,174 $1,082
15-year amortizing fixed-rate ........................... 348 248 (17) 231 233 17
Adjustable rate
(2)
................................... 188 162 (23) 139 126 6
Alt-A, interest-only, and option ARM
(3)
.................... 9,560 7,872 (2,161) 5,711 4,973 230
Total single-family . . . . . . ............................. 44,062 36,505 (8,484) 28,021 24,506 1,335
Total multifamily .................................... 2,661 2,637 (348) 2,289 2,959 107
Total single-family and multifamily . ....................... $46,723 $39,142 $(8,832) $30,310 $27,465 $1,442
(1) Individually impaired loans with no specific related valuation allowance primarily represent mortgage loans purchased out of PC pools and accounted
for in accordance with the accounting standards for loans and debt securities acquired with deteriorated credit quality that have not experienced further
deterioration.
(2) Includes balloon/reset mortgage loans and excludes option ARMs.
(3) See endnote (4) of “Table 5.2 — Recorded Investment of Held-for-Investment Mortgage Loans, by LTV Ratio.”
At December 31, 2009, we had a recorded investment of $12.5 billion of individually impaired loans. The average
recorded investment in individually impaired loans for 2009 and 2008 was approximately $10.7 billion and $7.1 billion,
respectively. At December 31, 2009, the recorded investment in individually impaired loans requiring a specific allowance
was $2.6 billion, and the related allowance was $379 million.
We recognized interest income on individually impaired loans of $818 million and $507 million for the years ended
December 31, 2009 and 2008. Interest income forgone on individually impaired loans was approximately $784 million,
$276 million, and $69 million for the years ended December 31, 2010, 2009, and 2008, respectively.
Mortgage Loan Performance
We do not accrue interest on loans three months or more past due.
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