Freddie Mac 2015 Annual Report Download - page 104

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 102
As of December 31, 2014
CLTV > 80 to 100 CLTV > 100 All Loans
(credit score) % Portfolio SDQ Rate % Portfolio SDQ Rate % Portfolio SDQ Rate % Portfolio SDQ Rate % Modified
Core single-family book:
< 620 0.2% 2.77% —% 5.05% —% 16.43% 0.2% 3.34% 2.5%
620 to 659 1.0 1.21% 0.2 2.11% — 7.48% 1.2 1.38% 1.1%
50.3 0.16% 7.9 0.39% 0.1 2.14%58.3 0.19% 0.1%
Not available 0.1 1.64% — 3.93% — 10.06% 0.1 3.77% 2.1%
Total 51.6% 0.19% 8.1% 0.47% 0.1% 3.75%59.8%0.24% 0.2%
Relief refinance book:
< 620 0.4% 1.85% 0.3% 3.10% 0.2% 4.15% 0.9% 2.63% 2.3%
620 to 659 0.7 1.12% 0.4 2.02% 0.3 2.86% 1.4 1.71% 1.3%
10.5 0.28% 4.5 0.90% 2.6 1.53%17.6 0.58% 0.4%
Not available — 1.79% — —% — 1.04% — 1.25% 0.4%
Total 11.6% 0.38% 5.2% 1.11% 3.1% 1.83%19.9%0.75% 0.5%
Legacy single-family
book
< 620 0.8% 7.93% 0.4% 15.58% 0.4% 23.56% 1.6% 11.29%27.1%
620 to 659 1.6 5.71% 0.7 12.36% 0.6 20.05% 2.9 8.66%21.7%
10.2 2.26% 3.2 8.11% 2.2 14.31%15.6 3.90% 9.6%
Not available 0.2 5.75% — 18.51% — 25.47% 0.2 6.96%11.4%
Total 12.8% 3.13% 4.3% 9.62% 3.2% 16.56%20.3%5.13%12.5%
Higher Risk Loan Product Types
There are several types of loan products that contain terms which result in scheduled changes in the
borrower’s monthly payments after specified initial periods, such as interest-only and option ARM loans.
These products may result in higher credit risk because the payment changes typically increase the
borrower’s monthly payment, resulting in a higher risk of default. The majority of these loans are in our
Legacy single-family book. Only a small percentage of our Core single-family book consists of ARM loans.
The balance of interest-only and option ARM loans declined significantly in recent years as many of these
borrowers have repaid or refinanced their loans, received loan modifications, or completed foreclosure
alternatives or foreclosure transfers.
While we have not categorized option ARM loans as either subprime or Alt-A for presentation in this Form
10-K and elsewhere in our reporting, they could exhibit similar credit performance to collateral identified
as subprime or Alt-A. For reporting purposes, loans within the option ARM category continue to be
presented in that category following a modification of the loan, even though the modified loan no longer
provides for optional payment provisions.