Freddie Mac 2010 Annual Report Download - page 264

Seller/Servicers
We acquire a significant portion of our single-family mortgage purchase volume from several large seller/servicers with
whom we have entered into mortgage purchase volume commitments that provide for the lenders to deliver us a specified
dollar amount of mortgages during a specified period of time. Our top 10 single-family seller/servicers provided
approximately 78% of our single-family purchase volume during the year ended December 31, 2010. Wells Fargo
Bank, N.A., Bank of America, N.A., and Chase Home Finance LLC accounted for 27%, 12% and 10% of our single-family
mortgage purchase volume and were the only single-family seller/servicers that comprised 10% or more of our purchase
volume during the year ended December 31, 2010. We are exposed to the risk that we could lose purchase volume to the
extent these arrangements are terminated without replacement from other lenders.
We are exposed to institutional credit risk arising from the potential insolvency or non-performance by our seller/
servicers of their obligations to repurchase mortgages or (at our option) indemnify us in the event of: (a) breaches of the
representations and warranties they made when they sold the mortgages to us; (b) failure to comply with our servicing
requirements; or (c) failure to honor their recourse and indemnification obligations to us. As of December 31, 2010 and
2009, the UPB of loans subject to our repurchase requests issued to our single-family seller/servicers was approximately
$3.8 billion and $4.2 billion, and approximately 34% and 20% of these requests, respectively, were outstanding for more than
four months since issuance of our repurchase request. Our contracts require that a seller/servicer repurchase a mortgage
within 30 days after we issue a repurchase request, unless the seller/servicer avails itself of an appeals process provided for
in our contracts, in which case the deadline for repurchase is extended until we decide the appeal. During the years ended
December 31, 2010 and 2009, we recovered amounts that covered losses with respect to $6.4 billion and $4.3 billion,
respectively, of UPB on loans associated with our repurchase requests, including amounts associated with one-time
settlement agreements.
GMAC Mortgage, LLC and Residential Funding Company, LLC (collectively GMAC), indirect subsidiaries of Ally
Financial Inc. (formerly, GMAC Inc.), are seller/servicers that together serviced and subserviced for an affiliated entity
approximately 3% of the single-family loans in our single-family credit guarantee portfolio as of December 31, 2010. In
March 2010, we entered into an agreement with GMAC, under which they made a one-time payment to us for the partial
release of repurchase obligations relating to loans sold to us prior to January 1, 2009. The partial release does not affect any
of GMAC’s potential repurchase obligations for loans sold to us by GMAC after January 1, 2009, nor does it affect the
ability to recover amounts associated with failure to comply with our servicing requirements. The agreement did not have a
material impact on our 2010 consolidated statements of operations.
On December 31, 2010, we entered into an agreement with Bank of America, N.A., and two of its affiliates, BAC Home
Loans Servicing, LP and Countrywide Home Loans, Inc., to resolve currently outstanding and future claims for repurchases
arising from the breach of representations and warranties on certain loans purchased by us from Countrywide Home
Loans, Inc. and Countrywide Bank FSB. Under the terms of the agreement, we received a $1.28 billion cash payment in
consideration for releasing Bank of America and its two affiliates from current and future repurchase requests arising from
loans sold to us by the Countrywide entities for which the first regularly scheduled monthly payments were due on or before
December 31, 2008. The UPB of the loans in this portfolio, as of December 31, 2010, was approximately $114 billion. The
agreement applies only to certain claims for repurchase based on breaches of representations and warranties and the
agreement contains specified limitations and does not cover loans sold to us or serviced for us by other Bank of America
entities. The agreement did not have a material impact on our 2010 consolidated statements of operations.
On August 24, 2009, one of our single-family seller/servicers, Taylor, Bean & Whitaker Mortgage Corp., or TBW, filed
for bankruptcy and announced its plan to wind down its operations. We have exposure to TBW with respect to its loan
repurchase obligations. We also have exposure with respect to certain borrower funds that TBW held for the benefit of
Freddie Mac. TBW received and processed such funds in its capacity as a servicer of loans owned or guaranteed by Freddie
Mac. TBW maintained certain bank accounts, primarily at Colonial Bank, to deposit such borrower funds and to provide
remittance to Freddie Mac. Colonial Bank was placed into receivership by the FDIC in August 2009.
On or about June 14, 2010, we filed a proof of claim in the TBW bankruptcy aggregating $1.78 billion. Of this amount,
approximately $1.15 billion relates to current and projected repurchase obligations and approximately $440 million relates to
funds deposited with Colonial Bank or with the FDIC as its receiver, which are attributable to mortgage loans owned or
guaranteed by us and previously serviced by TBW. The remaining $190 million represents miscellaneous costs and expenses
incurred in connection with the dissolution of TBW. On July 1, 2010, TBW filed a comprehensive final reconciliation report
in the bankruptcy court indicating, among other things, that approximately $203 million in funds held in bank accounts
maintained by TBW related to its servicing of Freddie Mac’s loans and was potentially available to pay Freddie Mac’s
claims. These assets include certain funds on deposit with Colonial Bank. We have analyzed the report and, as necessary and
appropriate, may revise the amount of our claim.
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