Freddie Mac 2015 Annual Report Download - page 115

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 113
The table below contains information about the payment performance of modified loans in our single-
family credit guarantee portfolio, based on the number of loans that were current or paid off one year and,
if applicable, two years after modification.
Quarter of Loan Modification Completion
4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013 3Q 2013 2Q 2013 1Q 2013
Current or paid off
one year after modification:
HAMP 80% 80% 79% 82% 81% 80% 80% 82%
Non-HAMP 65% 66% 68% 71% 70% 73% 74% 76%
Total 67% 69% 70% 74% 72% 75% 76% 78%
Current or paid off
two years after modification:
HAMP N/A N/A N/A N/A 79% 78% 78% 79%
Non-HAMP N/A N/A N/A N/A 68% 71% 71% 72%
Total N/A N/A N/A N/A 70% 73% 73% 74%
Our HAMP modifications continue to perform better than our non-HAMP modifications. As shown in the
table above, the one-year performance of our non-HAMP modified loans has declined in comparison to
the performance of our HAMP modified loans. This decline in performance may be attributable to features
of our streamlined modification, which in contrast to our other types of loan modifications include no
documentation requirements, and include borrowers who may have previously defaulted on a HAMP
modification.
Servicing Transfers and Sales of Non-Performing Loans
From time to time, we facilitate the transfer of servicing for certain groups of loans that are delinquent or
are deemed at risk of default to servicers that we believe have capabilities and resources necessary to
improve the loss mitigation associated with the loans. See "Sellers and Servicers" in Institutional Credit
Risk below for additional information on these activities.
During 2015 and 2014, we completed sales of $2.9 billion and $0.6 billion, respectively, in UPB of
seriously delinquent single-family loans. Of the $7.7 billion in UPB of single-family loans classified as
held-for-sale at December 31, 2015, $5.7 billion related to loans that were seriously delinquent. We
believe the sale of these loans provides better economic returns than continuing to hold them. The FHFA
requirements guiding these transactions, including bidder qualifications, loan modifications, and
performance reporting, are designed to improve borrower outcomes.
Managing Foreclosure and REO Activities
In a foreclosure, we may acquire the underlying property and later sell it, using the proceeds of the sale to
reduce our losses.
We typically acquire properties as a result of borrower defaults and subsequent foreclosures on loans that
we own or guarantee. We evaluate the condition of, and market for, newly acquired REO properties to
determine if repairs are needed, determine occupancy status and whether there are legal or other issues
to be addressed, and determine our sale or disposition strategy. When we sell an REO property, we
typically provide an initial period where we consider offers by owner occupants and others before offers
by investors. We also consider alternative disposition processes, such as REO auctions, bulk sales