Freddie Mac 2014 Annual Report Download - page 288

283 Freddie Mac
HAMP — Home Affordable Modification Program — Refers to the effort under the MHA Program whereby the
U.S. government, Freddie Mac and Fannie Mae commit funds to help eligible homeowners avoid foreclosure and keep their
homes through mortgage modifications.
HARP — Home Affordable Refinance Program — Refers to the effort under the MHA Program that seeks to help eligible
borrowers with existing loans that are guaranteed by us or Fannie Mae to refinance into loans with more affordable monthly
payments and/or fixed-rate terms without obtaining new mortgage insurance in excess of the insurance coverage, if any, that
was already in place. Originally, only borrowers who had mortgages sold to Freddie Mac or Fannie Mae with note dates on or
before May 31, 2009 with current LTV ratios above 80% (and up to 125%) were eligible to refinance their mortgages under the
program. In October 2011, HARP was expanded to allow eligible borrowers who have mortgages with current LTV ratios
above 125% to refinance under the program. The relief refinance initiative, under which we also allow borrowers with LTV
ratios of 80% and below to participate, is our implementation of HARP for our loans.
HFA — State or local Housing Finance Agency
HFA initiative — An initiative among Treasury, FHFA, Freddie Mac, and Fannie Mae that commenced in 2009. Under the
HFA initiative, we and Fannie Mae provide assistance to state and local HFAs so that the HFAs can continue to meet their
mission of providing affordable financing for both single-family and multifamily housing. The HFA initiative includes the
NIBP and the TCLFP.
HUD — U.S. Department of Housing and Urban Development —HUD has authority over Freddie Mac with respect to fair
lending.
Implied volatility — A measurement of how the value of a financial instrument changes due to changes in the market’s
expectation of potential changes in future interest rates. A decrease in implied volatility generally increases the estimated fair
value of our mortgage assets and decreases the estimated fair value of our callable debt and options-based derivatives, while an
increase in implied volatility generally has the opposite effect.
Initial margin — The collateral that we post with a derivatives clearinghouse in order to do business with such clearinghouse.
The amount of initial margin varies over time.
Interest-only loan — A mortgage loan that allows the borrower to pay only interest (either fixed-rate or adjustable-rate) for a
fixed period of time before principal amortization payments are required to begin. After the end of the interest-only period, the
borrower can choose to refinance the loan, pay the principal balance in total, or begin paying the monthly scheduled principal
due on the loan.
IRS — Internal Revenue Service
K Certificates — Multifamily regularly-issued, structured pass-through securities backed primarily by recently originated
multifamily mortgage loans purchased by Freddie Mac. We categorize K Certificates that we guarantee as Other Guarantee
Transactions. See “Other Guarantee Transactions” for more information.
Legacy single-family books — Comprised of our 2005-2008 Legacy single-family book and our Pre-2005 Legacy single-
family book.
LIBOR — London Interbank Offered Rate
LIHTC partnerships — Low-income housing tax credit partnerships — Prior to 2008, we invested as a limited partner in
LIHTC partnerships, which are formed for the purpose of providing funding for affordable multifamily rental properties. These
LIHTC partnerships invest directly in limited partnerships that own and operate multifamily rental properties that generate
federal income tax credits and deductible operating losses.
Liquidation preference — Generally refers to an amount that holders of preferred securities are entitled to receive out of
available assets, upon liquidation of a company. The initial liquidation preference of our senior preferred stock was $1.0 billion.
The aggregate liquidation preference of our senior preferred stock includes the initial liquidation preference plus amounts
funded by Treasury under the Purchase Agreement. In addition, dividends not paid in cash are added to the liquidation
preference of the senior preferred stock. We may make payments to reduce the liquidation preference of the senior preferred
stock only in limited circumstances.
Liquidity and contingency operating portfolio — Highly liquid non-mortgage assets generally consisting of cash and cash
equivalents, federal funds sold and securities purchased under agreements to resell, and non-mortgage-related securities.
LTV ratio — Loan-to-value ratio — The ratio of the unpaid principal amount of a mortgage loan to the value of the property
that serves as collateral for the loan, expressed as a percentage. Loans with high LTV ratios generally tend to have a higher risk
of default and, if a default occurs, a greater risk that the amount of the gross loss will be high compared to loans with lower
LTV ratios. We report LTV ratios based solely on the amount of the loan purchased or guaranteed by us, generally excluding
any second-lien mortgages (unless we own or guarantee the second lien).
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations
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