Freddie Mac 2014 Annual Report Download - page 65

60 Freddie Mac
Table 14 — Credit Loss Performance
Year Ended December 31,
2014 2013 2012
(dollars in millions)
REO
REO balances, net:
Single-family $ 2,558 $ 4,541 $ 4,314
Multifamily — 10 64
Total $ 2,558 $ 4,551 $ 4,378
REO operations (income) expense:
Single-family $ 205 $ (124) $ 62
Multifamily (9) (16) (3)
Total $ 196 $ (140) $ 59
Charge-offs
Single-family:
Charge-offs, gross(1) (including $4.9 billion, $9.0 billion, and $13.5 billion
relating to loan loss reserves, respectively) $ 4,972 $ 9,225 $ 13,825
Recoveries(2) (1,258) (4,313) (2,262)
Single-family, net $ 3,714 $ 4,912 $ 11,563
Multifamily:
Charge-offs, gross(1) (including $3 million, $7 million, and $36 million relating
to loan loss reserves, respectively) $ 3 $ 29 $ 39
Recoveries(2) (1) (1) (2)
Multifamily, net $ 2 $ 28 $ 37
Total Charge-offs:
Charge-offs, gross(1) (including $4.9 billion, $9.0 billion, and $13.6 billion
relating to loan loss reserves, respectively) $ 4,975 $ 9,254 $ 13,864
Recoveries(2) (1,259) (4,314) (2,264)
Total Charge-offs, net $ 3,716 $ 4,940 $ 11,600
Credit Losses:
Single-family $ 3,919 $ 4,788 $ 11,625
Multifamily (7) 12 34
Total $ 3,912 $ 4,800 $ 11,659
Total (in bps) 21.6 26.7 63.8
Ratio of total loan loss reserves (excluding reserves for TDR concessions) to net
charge-offs for single-family loans(3) 2.5 1.9 2.1
Ratio of total loan loss reserves to net charge-offs for single-family loans(3) 5.2 3.5 2.7
(1) Charge-offs include $80 million, $252 million, and $308 million for the years ended December 31, 2014, 2013 and 2012, respectively, related to: (a)
losses on loans purchased that were recorded within other expenses on our consolidated statements of comprehensive income, which relate to certain
loans purchased under financial guarantees; and (b) cumulative fair value losses recognized through the date of foreclosure for Multifamily loans we
elected to carry at fair value at the time of our purchase.
(2) Includes $0.5 billion, $2.8 billion, and $0.7 billion in 2014, 2013, and 2012, respectively, related to repurchase requests made to our seller/servicers
(including $0.3 billion, $2.1 billion, and $0 in 2014, 2013, and 2012, respectively, related to settlement agreements with certain sellers to release
specified loans from certain repurchase obligations in exchange for one-time cash payments).
(3) Excludes amounts associated with loans acquired with deteriorated credit quality (at the time of acquisition) and recoveries related to settlements.
Our 2005-2008 Legacy single-family book comprised approximately 13% of our single-family credit guarantee portfolio,
based on UPB at December 31, 2014; however, these loans accounted for approximately 81% of our credit losses during 2014.
Our single-family credit losses during 2014 were highest in Florida and Illinois. Collectively, these two states comprised
approximately 38% of our total credit losses in 2014.
At December 31, 2014, loans in states with a judicial foreclosure process comprised 40% of our single-family credit
guarantee portfolio, based on UPB, while loans in these states contributed to approximately 68% of our credit losses recognized
in 2014. Foreclosures generally take longer to complete in states where a judicial foreclosure is required, compared to other
states. We expect the portion of our credit losses related to loans in states with judicial foreclosure processes will remain high in
the near term as the substantial backlog of loans awaiting court proceedings in those states transitions to REO or other loss
events.
The table below provides information on the severity of losses we experienced on loans in our single-family credit
guarantee portfolio.
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