Freddie Mac 2010 Annual Report Download - page 338

The conforming loan limit is determined annually based on changes in FHFA’s housing price index. Any decreases in the
housing price index are accumulated and used to offset any future increases in the housing price index so that conforming
loan limits do not decrease from year-to-year. Since 2006, the base conforming loan limit for a one-family residence has
been set at $417,000 with higher limits in certain “high-cost” areas.
Beginning in 2008, the conforming loan limits were increased for mortgages originated in certain “high-cost” areas
above the conforming loan limits. In addition, conforming loan limits for certain high-cost areas were increased temporarily
(up to $729,250 for a one-family residence). Actual loan limits are set by FHFA for each county (or equivalent) and the loan
limit for specific high-cost areas may be lower than the maximum amounts. We refer to loans that we have purchased with
UPB exceeding $417,000 as conforming jumbo loans.
Conservator — The Federal Housing Finance Agency, acting in its capacity as conservator of Freddie Mac.
Convexity — A measure of how much a financial instrument’s duration changes as interest rates change.
Core spread income — Refers to a fair value estimate of the net current period accrual of income from the spread between
mortgage-related investments and debt, calculated on an option-adjusted basis.
Covered Officer — Those executives in the following positions, each of whom are compensated pursuant to the Executive
Management Compensation Program: (a) Chief Executive Officer; (b) Chief Operating Officer; (c) Chief Financial Officer;
(d) all Executive Vice Presidents; and (e) all Senior Vice Presidents. Each of the Named Executive Officers is a Covered
Officer.
Credit enhancement — Any number of different financial arrangements that are designed to reduce credit risk by partially
or fully compensating an investor in the event of certain financial losses. Examples of credit enhancements include mortgage
insurance, overcollateralization, indemnification agreements, and government guarantees.
Credit losses — Consists of charge-offs, net of recoveries, and REO operations income (expense).
Deed in lieu of foreclosure — An alternative to foreclosure in which the borrower voluntarily conveys title to the property
to the lender and the lender accepts such title (sometimes together with an additional payment by the borrower) in full
satisfaction of the mortgage indebtedness.
Delinquency — A failure to make timely payments of principal or interest on a mortgage loan. For single-family mortgage
loans, we generally report delinquency rate information for loans that are seriously delinquent. For multifamily loans, we
report delinquency rate information based on the UPB of loans that are two monthly payments or more past due or in the
process of foreclosure.
Derivative — A financial instrument whose value depends upon the characteristics and value of an underlying financial asset
or index, such as a security or commodity price, interest or currency rates, or other financial indices.
Directors’ Plan — 1995 Directors’ Stock Compensation Plan, as amended and restated
Dodd-Frank Act — Dodd-Frank Wall Street Reform and Consumer Protection Act.
DSCR — Debt Service Coverage Ratio — An indicator of future credit performance for multifamily loans. The DSCR
estimates a multifamily borrower’s ability to service its mortgage obligation using the secured property’s cash flow, after
deducting non-mortgage expenses from income. The higher the DSCR, the more likely a multifamily borrower will be able
to continue servicing its mortgage obligation.
Duration — The weighted average maturity of a financial instrument’s cash flows. Duration is used as a measure of a
financial instrument’s price sensitivity to changes in interest rates.
Duration gap — A measure of the difference between the estimated durations of our interest rate sensitive assets and
liabilities. We present the duration gap of our financial instruments in units expressed as months. A duration gap of zero
implies that the change in value of our interest rate sensitive assets from an instantaneous change in interest rates would be
expected to be accompanied by an equal and offsetting change in the value of our debt and derivatives, thus leaving the net
fair value of equity unchanged.
EDCP — Executive Deferred Compensation Plan
Effective rent — The average rent paid by the tenant over the term of a lease. Does not include discounts for concessions, or
premiums, such as for non-standard lease terms.
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