Freddie Mac 2015 Annual Report Download - page 117

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 115
the timeliness of foreclosure completion by our servicers based on the state where the property is
located. In September 2015, we announced an extension of foreclosure timelines in our guidelines for 34
states or other jurisdictions. Our servicing guide provides for instances of allowable foreclosure delays in
excess of the expected timelines for specific situations involving delinquent loans, such as when the
borrower files for bankruptcy or appeals a denial of a loan modification.
During 2015, a significant number of loans that had been subject to delays and that had been delinquent
for more than a year completed the foreclosure process, which caused the total average time for
foreclosure completions to increase compared to 2014, as shown in the table below.
The table presents average completion times for foreclosures of our single-family loans.
Year Ended December 31,
(average days) 2015 2014 2013
Judicial states:
Florida 1,332 1,311 1,226
New Jersey 1,602 1,372 1,228
New York 1,553 1,325 1,120
All other judicial states 828 796 772
Judicial states, in aggregate 1,076 1,031 952
Non-judicial states, in aggregate 637 636 575
Total 892 867 774
We believe that our average foreclosure timeline is likely to remain elevated in the near term due to the
backlog of loans that have been delinquent for more than one year, particularly in the judicial states of
Florida, New Jersey, and New York.
In recent periods, third-party sales at foreclosure auction comprised a higher proportion of our foreclosure
transfers. Third-party sales at foreclosure auction allow us to avoid the REO property expenses that we
would have otherwise incurred if we held the property in our REO inventory until disposition.
Our REO inventory declined in 2015 primarily due to REO dispositions exceeding our acquisitions. REO
acquisitions continue to decline due to a declining number of seriously delinquent loans and a larger
proportion of property sales to third parties at foreclosure.
We expect the rate of decline in our REO inventory will slow as a larger portion of newly acquired REO
properties are older, low value, and rural properties which are more challenging to market and sell. In
addition, legal-related delays (i.e., redemption periods and eviction procedures) and a business strategy
to repair more homes affect significant portions of our REO inventory, resulting in extended holding
periods. As our REO inventory declines, we would expect REO dispositions to decline as well.
The table below shows our single-family REO activity.
Year Ended December 31,
(number of properties) 2015 2014 2013
Inventory, beginning of the period 25,768 47,307 49,071
Acquisitions 23,171 42,265 70,681
Dispositions (31,935) (63,804) (72,445)
Inventory, end of the period 17,004 25,768 47,307