Freddie Mac 2014 Annual Report Download - page 215

210 Freddie Mac
Table 15.3 — Concentration of Credit Risk — Multifamily Mortgage Portfolio
December 31, 2014 December 31, 2013
UPB Delinquency
Rate(1) UPB Delinquency Rate(1)
(dollars in billions)
State(2)
California $ 23.2 —% $ 22.4 0.03%
Texas 18.3 0.06 16.7 0.02
New York 12.1 — 11.4 0.12
Florida 10.0 — 9.3 0.28
Virginia 7.3 — 7.0 0.37
Maryland 7.2 — 6.7 —
All other states 65.2 0.07 59.3 0.08
Total $ 143.3 0.04% $ 132.8 0.09%
Region(3)
Northeast $ 39.0 —% $ 37.5 0.10%
West 36.3 — 33.8 0.07
Southwest 29.1 0.07 26.2 0.05
Southeast 26.7 0.09 24.1 0.16
North Central 12.2 0.06 11.2 0.07
Total $ 143.3 0.04% $ 132.8 0.09%
Other Categories(4)
Original LTV ratio greater than 80% $ 6.1 0.04% $ 5.6 0.19%
Original DSCR below 1.10 2.1 — 2.2 —
(1) Based on mortgages two monthly payments or more delinquent or in foreclosure.
(2) States presented have the highest aggregate UPB at December 31, 2014.
(3) See endnote (3) to “Table 15.1 — Concentration of Credit Risk — Single-Family Credit Guarantee Portfolio” for a description of these regions.
(4) These categories are not mutually exclusive and a loan in one category may also be included within another category.
The amount of a borrower’s equity in the underlying property is one indicator of risk for mortgage loans in our
multifamily mortgage portfolio. A borrower’s equity in a property decreases as the LTV ratio increases. Higher LTV ratios
negatively affect a borrower’s ability to refinance or sell a property for an amount at or above the balance of the outstanding
mortgage. The DSCR is another indicator of future credit performance. 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 it is that a multifamily borrower will be able to continue servicing its mortgage
obligation.
We estimate that the percentage of loans in our multifamily mortgage portfolio with a current LTV ratio greater than
100% was approximately 1% and 2% at December 31, 2014 and 2013, respectively, and our estimate of the current average
DSCR for these loans was 1.05 and 0.95, respectively. We estimate that the percentage of loans in our multifamily mortgage
portfolio with a current DSCR less than 1.0 was 2% and 3% at December 31, 2014 and 2013, respectively, and the average
current LTV ratio of these loans was 91% and 95%, respectively. Our estimates of current DSCRs are based on the latest
reported net operating income for these properties. Our estimates of the current LTV ratios are based on either values we
receive from a third-party service provider or our internal estimates of property value, for which we may use changes in tax
assessments, market vacancy rates, rent growth and comparable property sales in local areas as well as third-party appraisals
for a portion of the portfolio. We periodically perform our own valuations or obtain third-party appraisals in cases where a
significant deterioration in a borrower’s financial condition has occurred, the borrower has applied for refinancing, or in certain
other circumstances where we deem it appropriate to reassess the property value. Although we use the latest reported financial
results of our multifamily borrowers to estimate a property’s value, there may be a significant lag in reporting, which could be
six months or more, as they complete their financial results in the normal course of business. Our internal estimates of property
valuation are derived using techniques that include income capitalization, discounted cash flows, comparable sales, or
replacement costs.
Seller/Servicers
We acquire a significant portion of our single-family mortgage purchase volume from several large sellers and we are
exposed to the risk that we could lose purchase volume to the extent certain arrangements with these sellers are terminated. Our
top 10 single-family sellers provided approximately 50% of our single-family purchase volume during 2014. Wells Fargo
Bank, N.A. accounted for 13% of our single-family mortgage purchase volume and was the only single-family seller that
comprised 10% or more of our purchase volume during 2014.
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