Freddie Mac 2015 Annual Report Download - page 298

Financial Statements Notes to the Consolidated Financial Statements | Note 13
Freddie Mac 2015 Form 10-K 296
appropriate controls, experience a failure in their controls, or experience an operating disruption in their
ability to service loans, our business and financial results could be adversely affected.
A significant portion of our single-family loans is serviced by several large servicers. Our top two single-
family loan servicers, Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A., serviced approximately
20% and 10%, respectively, of our single-family loans, and were the only servicers that serviced more
than 10% of our loans, as of December 31, 2015. In recent years, there has been a shift in our servicing
from depository institutions to non-depository servicers. Some of these non-depository servicers have
grown rapidly in recent years and now service a large share of our loans. As of both December 31, 2015
and 2014, approximately 10% of our single-family credit guarantee portfolio was serviced by our three
largest non-depository servicers, on a combined basis. Several of these non-depository servicers also
service a large share of the loans underlying our investments in non-agency mortgage-related securities.
Ocwen Financial Corp. (Ocwen) is one of our significant non-depository servicers. Ocwen and its
subsidiaries and/or affiliates have recently been the subject of significant adverse regulatory scrutiny, and
we have taken steps to reduce our exposure to them. We reduced the UPB of Freddie Mac loans
serviced by Ocwen to $26.4 billion as of December 31, 2015 from $50.9 billion as of December 31, 2014,
a decrease of approximately 48%. We continue to closely monitor Ocwen’s performance.
We acquire our multifamily loans from a network of approved sellers. Our top four multifamily sellers,
CBRE Capital Markets, Inc., Berkadia Commercial Mortgage LLC, Holiday Fenoglio Fowler L.P., and
Walker & Dunlop, LLC, provided approximately 15%, 13%, 11%, and 11%, respectively, of our multifamily
new business volume for 2015. Our top ten multifamily sellers represented an aggregate of approximately
78% of our multifamily new business volume for 2015.
A significant portion of our multifamily loans is serviced by several of our large customers. As of
December 31, 2015 our top three multifamily servicers, Wells Fargo Bank, N.A., Berkadia Commercial
Mortgage LLC, and CBRE Capital Markets, Inc., each serviced more than 10% of our multifamily
mortgage portfolio, excluding loans underlying K Certificates, and together serviced approximately 40% of
this portfolio.
In our multifamily business, we are exposed to the risk that multifamily seller/servicers could come under
financial pressure, which could potentially cause degradation in the quality of the servicing they provide
us, including their monitoring of each property’s financial performance and physical condition. This could
also, in certain cases, reduce the likelihood that we could recover losses through lender repurchases,
recourse agreements, or other credit enhancements, where applicable. This risk primarily relates to
multifamily loans that we hold on our consolidated balance sheets where we retain all of the related credit
risk. We monitor the status of all our multifamily seller/servicers in accordance with our counterparty credit
risk management framework.