Freddie Mac 2010 Annual Report Download - page 97

identified option ARM, CMBS, obligations of states and political subdivisions, and manufactured housing securities as either
subprime or Alt-A securities. Tables 25 and 26 present information about our holdings of these securities.
Table 25 — Non-Agency Mortgage-Related Securities Backed by Subprime First Lien, Option ARM, and Alt-A Loans
and Certain Related Credit Statistics
(1)
12/31/2010 09/30/2010 06/30/2010 03/31/2010 12/31/2009
As of
(dollars in millions)
UPB:
Subprime first lien . . . ........................................ $53,756 $55,250 $56,922 $58,912 $61,019
Option ARM . . . . . . . ........................................ 15,646 16,104 16,603 17,206 17,687
Alt-A
(2)
.................................................. 15,917 16,406 16,909 17,476 17,998
Gross unrealized losses, pre-tax:
(3)
Subprime first lien . . . ........................................ $14,026 $16,446 $17,757 $18,462 $20,998
Option ARM . . . . . . . ........................................ 3,853 4,815 5,770 6,147 6,475
Alt-A
(2)
.................................................. 2,096 2,542 3,335 3,539 4,032
Present value of expected credit losses:
Subprime first lien . . . ........................................ $ 5,937 $ 4.364 $ 3,311 $ 4,444 $ 4,263
Option ARM . . . . . . . ........................................ 4,850 4,208 3,534 3,769 3,700
Alt-A
(2)
.................................................. 2,469 2,101 1,653 1,635 1,845
Collateral delinquency rate:
(4)
Subprime first lien . . . ........................................ 45% 45% 46% 49% 49%
Option ARM . . . . . . . ........................................ 44 44 45 46 45
Alt-A
(2)
.................................................. 27 26 26 27 26
Cumulative collateral loss:
(5)
Subprime first lien . . . ........................................ 18% 17% 16% 15% 13%
Option ARM . . . . . . . ........................................ 13 11 10 9 7
Alt-A
(2)
.................................................. 66554
Average credit enhancement:
(6)
Subprime first lien . . . ........................................ 25% 25% 26% 28% 29%
Option ARM . . . . . . . ........................................ 12 12 13 15 16
Alt-A
(2)
.................................................. 9 9 10 10 11
(1) See “Ratings of Available-For-Sale Non-Agency Mortgage-Related Securities” for additional information about these securities.
(2) Excludes non-agency mortgage-related securities backed by other loans, which are primarily comprised of securities backed by home equity lines of
credit.
(3) Represents the aggregate of the amount by which amortized cost, after other-than-temporary impairments, exceeds fair value measured at the individual
lot level.
(4) Determined based on the number of loans that are two monthly payments or more past due that underlie the securities using information obtained from
a third-party data provider.
(5) Based on the actual losses incurred on the collateral underlying these securities. Actual losses incurred on the securities that we hold are significantly
less than the losses on the underlying collateral as presented in this table, as non-agency mortgage-related securities backed by subprime first lien,
option ARM, and Alt-A loans were structured to include credit enhancements, particularly through subordination.
(6) Reflects the ratio of the current amount of the securities that will absorb losses in the securitization structure before any losses are allocated to securities
that we own. Percentage generally calculated based on the total UPB of all credit enhancement in the form of subordination of the security divided by
the total UPB of all of the tranches of collateral pools from which credit support is drawn for the security that we own. Excludes credit enhancement
provided by monoline bond insurance.
Table 26 — Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, Alt-A and Other Loans
(1)
12/31/2010 09/30/2010 06/30/2010 03/31/2010 12/31/2009
Three Months Ended
(in millions)
Net impairment of available-for-sale securities recognized in earnings:
Subprime — first and second liens . . ............................. $1,207 $ 213 $ 17 $ 332 $ 515
Option ARM . . . . . ........................................ 668 577 48 102 15
Alt-A and other . . . ........................................ 372 296 333 19 51
Principal repayments and cash shortfalls:
(2)
Subprime — first and second liens:
Principal repayments ........................................ $1,512 $1,685 $2,001 $2,117 $2,807
Principal cash shortfalls . . . ................................... 6 8 12 13 14
Option ARM:
Principal repayments ........................................ $ 347 $ 377 $ 435 $ 449 $ 525
Principal cash shortfalls . . . ................................... 111 122 80 32 2
Alt-A and other:
Principal repayments ........................................ $ 537 $ 582 $ 653 $ 617 $ 792
Principal cash shortfalls . . . ................................... 62 56 67 22 21
(1) See “Ratings of Available-For-Sale Non-Agency Mortgage-Related Securities” for additional information about these securities.
(2) In addition to the contractual interest payments, we receive monthly remittances of principal repayments from both the recoveries of liquidated loans
and, to a lesser extent, voluntary repayments of the underlying collateral of these securities representing a partial return of our investment in these
securities.
Since the first quarter of 2008, we have not purchased any non-agency mortgage-related securities backed by subprime,
option ARM, or Alt-A loans. As discussed below, we recognized impairment on our holdings of such securities in 2010 and
2009, including during the three months ended December 31, 2010 and 2009. See “Table 27 — Net Impairment on
Available-For-Sale Mortgage-Related Securities Recognized in Earnings” for more information.
94 Freddie Mac