Freddie Mac 2014 Annual Report Download - page 66

61 Freddie Mac
Table 15 — Severity Ratios for Single-Family Loans
Year Ended December 31,
2014 2013 2012
REO disposition severity ratio:(1)
Florida 37.4% 41.9% 48.9%
Illinois 40.2 46.2 51.3
New Jersey 41.8 45.6 48.6
Maryland 36.9 38.7 47.6
California 25.2 30.4 44.0
Total U.S. 34.7 36.5 41.8
Short sale severity ratio 31.6 36.0 39.9
(1) States presented represent the five states where our credit losses were greatest during 2014.
As shown in the table above, our severity ratios associated with REO dispositions and short sales improved in 2014 and
2013, compared to the respective prior year, but remained high in several states. We believe this improvement was the result of:
(a) improvements in home prices; (b) changes to our process for evaluating the market value of the property underlying our
impaired loans; and (c) repairing a significant portion of our REO properties prior to listing them for sale.
The table below provides detail by region for charge-offs and recoveries.
Table 16 — Single-Family Charge-offs and Recoveries by Region(1)
Year Ended December 31,
2014 2013 2012
Charge-offs,
gross Recoveries Charge-offs, net Charge-offs, gross Recoveries Charge-offs, net Charge-offs, gross Recoveries Charge-offs, net
(in millions)
Northeast $ 1,138 $ (238) $ 900 $ 1,357 $ (656) $ 701 $ 1,180 $ (249) $ 931
Southeast 1,703 (393) 1,310 3,015 (1,331) 1,684 3,530 (694) 2,836
North Central 1,018 (259) 759 1,870 (810) 1,060 2,726 (526) 2,200
Southwest 238 (85) 153 394 (245) 149 647 (160) 487
West 875 (283) 592 2,589 (1,271) 1,318 5,742 (633) 5,109
Total $ 4,972 $ (1,258) $ 3,714 $ 9,225 $ (4,313) $ 4,912 $ 13,825 $ (2,262) $ 11,563
(1) Presentation with the following regional designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD,
NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI);
and Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).
As shown in the table above, our charge-offs declined in all regions of the U.S during 2014 compared to 2013. Charge-
offs remained elevated in most regions during 2014 as we continued to experience a high volume of foreclosure activity,
particularly in Florida, Illinois and Ohio. See “NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS” for
additional information about our credit losses.
Non-Interest Income (Loss)
Gains (Losses) on Extinguishment of Debt Securities of Consolidated Trusts
When we purchase PCs that have been issued by consolidated PC trusts, we extinguish a pro rata portion of the
outstanding debt securities of the related consolidated trusts. We recognize a gain (loss) on extinguishment of the debt securities
to the extent the amount paid to extinguish the debt security (i.e., the PC) differs from its carrying value.
During 2014, 2013, and 2012, we extinguished debt securities of consolidated trusts with a UPB of $49.2 billion, $44.4
billion, and $13.5 billion, respectively (representing our purchase of single-family PCs with a corresponding UPB amount).
Gains (losses) on extinguishment of these debt securities of consolidated trusts were $(451) million, $314 million, and $(58)
million during 2014, 2013, and 2012, respectively.
We recognized losses in 2014 and 2012 because interest rates decreased between the time of issuance and repurchase of
these debt securities. Losses increased in 2014 because we repurchased, at premiums, seasoned debt securities of consolidated
trusts with carrying values at par. We recognized gains in 2013 because interest rates increased between the time of issuance
and repurchase of these debt securities.
See “Table 29 — Mortgage-Related Securities Purchase Activity” for additional information regarding purchases of
mortgage-related securities, including those issued by consolidated PC trusts.
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