Freddie Mac 2014 Annual Report Download - page 110

105 Freddie Mac
performance of loans underlying these securities deteriorated significantly since 2008. For information on our exposure to
subprime loans through our holdings of non-agency mortgage-related securities, see “CONSOLIDATED BALANCE SHEETS
ANALYSIS — Investments in Securities.”
Alt-A Loans
Although there is no universally accepted definition of Alt-A, many mortgage market participants classify single-family
loans with credit characteristics that range between their prime and subprime categories as Alt-A because these loans have a
combination of characteristics of each category, may be underwritten with lower or alternative income or asset documentation
requirements compared to a full documentation mortgage loan, or both. Although we discontinued new purchases of mortgage
loans with lower documentation standards for assets or income beginning March 1, 2009, we continued to purchase certain
amounts of these mortgages in cases where the loan was either: (a) purchased pursuant to a previously issued other guarantee
commitment; (b) part of our relief refinance initiative; or (c) part of another refinance mortgage initiative and the pre-existing
mortgage (including Alt-A loans) was originated under less than full documentation standards. In the event we purchase a
refinance mortgage and the original loan had been previously identified as Alt-A, such refinance loan may no longer be
categorized or reported as an Alt-A mortgage in this Form 10-K and our other financial reports because the new refinance loan
replacing the original loan would not be identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A
balances may be lower than would otherwise be the case had such refinancing not occurred. From the time the relief refinance
initiative began in 2009 to December 31, 2014, we have purchased approximately $31.2 billion of relief refinance mortgages
that were previously categorized as Alt-A loans in our portfolio, including $2.4 billion in 2014.
The UPB of Alt-A loans in our single-family credit guarantee portfolio declined to $48.3 billion as of December 31, 2014
from $56.9 billion as of December 31, 2013 primarily due to borrowers refinancing into other mortgage products, foreclosure
transfers, and other liquidation events. For reporting purposes, loans within the Alt-A category continue to be reported in that
category following a modification of the loan, even though the borrower may have provided full documentation of assets and
income before completing the modification. As of December 31, 2014 and 2013, approximately 19.9% and 16.3%, respectively,
of the Alt-A loans within our single-family credit guarantee portfolio had completed a modification. As of December 31, 2014,
for Alt-A loans in our single-family credit guarantee portfolio, the average credit score at origination was 709. Although Alt-A
mortgage loans comprised approximately 3% of our single-family credit guarantee portfolio as of December 31, 2014, these
loans represented approximately 16% of our credit losses during 2014.
The table below presents credit loss and portfolio concentration information and indicates that certain concentrations of
loans, including Alt-A loans, have been more adversely affected by declines in home prices and weak economic conditions
during the housing crisis that began in 2006.
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