Freddie Mac 2015 Annual Report Download - page 109

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 107
certain repurchase obligations in exchange for one-time cash payments. We recognized recoveries from
primary mortgage insurance (excluding recoveries that represent reimbursements for our expenses, such
as REO operations expenses) of $0.5 billion, $0.7 billion, and $1.5 billion that reduced our charge-offs of
single-family mortgage loans during 2015, 2014, and 2013, respectively. We also recognized recoveries
from primary mortgage insurance of $76 million, $180 million, and $196 million during 2015, 2014, and
2013, respectively, as part of REO operations (expense) income.
Our credit losses and seriously delinquent loan population are concentrated in the Legacy single-family
book. In addition, our credit losses and seriously delinquent loan population are also concentrated within
loans having certain characteristics, as shown in the table below. These categories are not mutually
exclusive; for example, an Alt-A loan can be associated with a property located in a judicial foreclosure
state and/or have a current LTV ratio of greater than 100%. Additional detail on loans in judicial
foreclosure states is presented in the “Managing Foreclosure and REO Activities” section.
December 31, 2015
Year Ended
December 31,
2015 December 31, 2014
Year Ended
December 31,
2014
% of
Portfolio
Serious
Delinquency
Rate % of Credit Losses % of Portfolio
Serious
Delinquency
Rate % of Credit Losses
CLTV > 100% 4% 8.08% 49% 6% 9.06% 61%
Alt-A loans 2% 6.32% 23% 3% 8.53% 16%
Judicial foreclosure states 39% 1.84% 70% 40% 2.61% 68%
Loan Loss Reserves
Our loan loss reserves continued to decline in recent years, consistent with the decline in our serious
delinquency rate. Although the housing market continued to improve in many geographic areas in 2015,
we expect that our loan loss reserves may remain elevated for an extended period because a significant
portion of our reserves is associated with interest rate concessions related to performing TDRs, which will
decrease over time as borrowers make payments under the terms of their modified loans. Additionally, the
resolution of certain seriously delinquent loans takes considerable time, often several years in the case of
foreclosure.
The table below summarizes our single-family loan loss reserves activity.
Year Ended December 31,
(dollars in millions) 2015 2014 2013 2012 2011
Beginning balance $ 21,793 $ 24,578 $ 30,508 $ 38,916 $ 39,098
Provision (benefit) for credit losses (2,639) 113 (2,247) 2,013 10,898
Charge-offs, gross (5,071) (4,892) (8,995) (13,520) (14,735)
Recoveries 717 1,258 4,313 2,262 2,764
Transfers, net 548 736 999 837 891
Ending balance $ 15,348 $ 21,793 $ 24,578 $ 30,508 $ 38,916
As a percentage of our single-family credit
guarantee portfolio 0.90% 1.31%1.49%1.86%2.23%