Freddie Mac 2014 Annual Report Download - page 174

169 Freddie Mac
Allowance for Loan Losses and Reserve for Guarantee Losses, or Loan Loss Reserves
Our loan loss reserves consist of our: (a) allowance for loan losses on mortgage loans that we classify as held-for-
investment on our consolidated balance sheets; and (b) reserve for guarantee losses associated with Freddie Mac mortgage-
related securities backed by multifamily loans, certain single-family Other Guarantee Transactions, and other guarantee
commitments, for which we have incremental credit risk.
A significant portion of the unsecuritized single-family loans on our consolidated balance sheets are seriously delinquent
and/or TDR loans that we previously removed from our PC pools. These seriously delinquent and TDR loans typically have a
higher associated allowance for loan loss than loans that remain in consolidated trusts.
The table below presents our loan loss reserves activity for the single-family and multifamily loans that we own or
guarantee.
Table 4.3 — Detail of Loan Loss Reserves
Year Ended December 31,
2014 2013
Allowance for Loan Losses Reserve
for
Guarantee
Losses
Allowance for Loan Losses Reserve
for
Guarantee
Losses
Unsecuritized
Held By
Consolidated
Trusts Total Unsecuritized
Held By
Consolidated
Trusts Total
(in millions)
Single-family:
Beginning balance $ 21,487 $ 3,006 $ 85 $ 24,578 $ 25,449 $ 4,918 $ 141 $ 30,508
Provision (benefit) for credit
losses (864) 947 30 113 (3,995) 1,790 (42) (2,247)
Charge-offs (4,510) (376) (6) (4,892) (8,181) (804) (10) (8,995)
Recoveries 998 260 — 1,258 3,810 503 — 4,313
Transfers, net(1) 1,689 (953) — 736 4,404 (3,401) (4) 999
Ending balance $ 18,800 $ 2,884 $ 109 $ 21,793 $ 21,487 $ 3,006 $ 85 $ 24,578
Multifamily:
Beginning balance $ 125 $ — $ 26 $ 151 $ 339 $ 1 $ 42 $ 382
Provision (benefit) for credit
losses (46) — (9) (55) (208) (1) (9) (218)
Charge-offs (3) — — (3) (7) — — (7)
Recoveries 1 — — 1 1 — — 1
Transfers, net(1) — — — — — — (7) (7)
Ending balance $ 77 $ — $ 17 $ 94 $ 125 $ — $ 26 $ 151
Total:
Beginning balance $ 21,612 $ 3,006 $ 111 $ 24,729 $ 25,788 $ 4,919 $ 183 $ 30,890
Provision (benefit) for credit
losses (910) 947 21 58 (4,203) 1,789 (51) (2,465)
Charge-offs (4,513) (376) (6) (4,895) (8,188) (804) (10) (9,002)
Recoveries 999 260 — 1,259 3,811 503 — 4,314
Transfers, net(1) 1,689 (953) — 736 4,404 (3,401) (11) 992
Ending balance $ 18,877 $ 2,884 $ 126 $ 21,887 $ 21,612 $ 3,006 $ 111 $ 24,729
Ratio of total loan loss reserves (excluding TDR concessions) to net charge-offs
for single-family loans(2) 2.5 1.9
Ratio of total loan loss reserves to net charge-offs for single-family loans(2) 5.2 3.5
(1) For the years ended December 31, 2014 and 2013, consists of: (a) approximately $1.0 billion and $3.4 billion, respectively, of reclassified single-family
reserves related to our removal of loans previously held by consolidated trusts, net of reclassifications for single-family loans subsequently
resecuritized after such removal; and (b) approximately $0.7 billion and $1.0 billion, respectively, attributable to capitalization of past due interest on
modified mortgage loans.
(2) Excludes amounts associated with loans acquired with deteriorated credit quality (at the time of our acquisition) and recoveries related to settlements.
The table below presents our allowance for loan losses and our recorded investment in mortgage loans, held-for-
investment, by impairment evaluation methodology.
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