Freddie Mac 2014 Annual Report Download - page 214

209 Freddie Mac
For example, a borrower’s credit score is a useful measure for assessing the credit quality of the borrower. Statistically,
borrowers with higher credit scores are more likely to repay or have the ability to refinance than those with lower scores.
Presented below is a summary of the serious delinquency rates of certain higher-risk categories (based on characteristics
of the loan at origination) of single-family loans in our single-family credit guarantee portfolio based on UPB. The table
includes a presentation of each higher-risk category in isolation. A single loan may fall within more than one category (for
example, an interest-only loan may also have an original LTV ratio greater than 90%). Loans with a combination of these
attributes will have an even higher risk of delinquency than those with an individual attribute.
Table 15.2 — Certain Higher-Risk Categories in the Single-Family Credit Guarantee Portfolio(1)
Percentage of Portfolio(2) Serious Delinquency Rate
December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Interest-only 2% 2% 9.36% 12.51%
Option ARM(3) — — 9.87 12.30
Alt-A 3 3 8.53 10.06
Original LTV ratio greater than 90%(4) 16 16 2.58 3.22
Lower credit scores at origination (less than 620) 3 3 8.57 9.99
(1) Excludes loans underlying certain Other Guarantee Transactions for which data was not available.
(2) Within these columns, "—" represents less than 0.5%.
(3) For reporting purposes, loans within the option ARM category continue to be reported in that category following modification, even though the
modified loan no longer provides for optional payment provisions.
(4) Includes HARP loans, which we are required to purchase as part of our participation in the MHA Program.
The percentage of borrowers in our single-family credit guarantee portfolio, based on UPB, with estimated current LTV
ratios greater than 100% was 6% and 10% at December 31, 2014 and 2013, respectively. An increase in the estimated current
LTV ratio of a loan indicates that the borrower’s equity in the home has declined, and can negatively affect the borrower’s
ability to refinance (outside of HARP) or to sell the property for an amount at or above the balance of the outstanding mortgage
loan. The serious delinquency rate for single-family loans with estimated current LTV ratios greater than 100% was 9.06% and
9.94% as of December 31, 2014 and 2013, respectively. Loans in our 2005-2008 Legacy single-family book have been more
affected by declines in home prices that have occurred since 2006 than loans originated in other years. Our 2005-2008 Legacy
single-family book comprised approximately 13% of our single-family credit guarantee portfolio, based on UPB at
December 31, 2014, and these loans accounted for approximately 81% of our credit losses during 2014.
We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or Alt-A if the
securities were identified as such based on information provided to us when we entered into these transactions. We have not
identified option ARM, CMBS, obligations of states and political subdivisions, and manufactured housing securities as either
subprime or Alt-A securities. See “NOTE 7: INVESTMENTS IN SECURITIES” for further information on these categories
and other concentrations in our investments in securities.
Multifamily Mortgage Portfolio
The table below summarizes the concentration of multifamily mortgages in our multifamily mortgage portfolio by certain
attributes based on UPB. Information presented for multifamily mortgage loans includes certain categories based on loan or
borrower characteristics present at origination. The table includes a presentation of each category in isolation. A single loan
may fall within more than one category (for example, a loan with an original LTV ratio greater than 80% may also have an
original DSCR below 1.10).
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