Freddie Mac 2015 Annual Report Download - page 50

Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee
Freddie Mac 2015 Form 10-K 48
Management and Guarantee Fees
Average Portfolio Segment Earnings
Management and Guarantee Fee Rate(1) for
the Year Ended December 31,
Average Management and Guarantee Fee
Rate(1) Charged on New Acquisitions for the
Year Ended December 31,
(1) Excludes the legislated 10 basis point increase in management and guarantee fees.
Commentary
• Average portfolio Segment Earnings management and guarantee fees increased in 2015 compared
to 2014, due to higher amortization of upfront fees, driven by higher loan liquidations resulting from a
lower interest rate environment, as well as the acquisition of new loans with higher management and
guarantee fee rates.
• The difference between the average management and guarantee fee rate charged on new
acquisitions and the average portfolio Segment Earnings management and guarantee fee rate, in
basis points, reflects different methodologies for recognizing upfront delivery fee income. The average
management and guarantee fee rate charged on new acquisitions recognizes upfront delivery fee
income over the estimated life of the related loans using our expectations of prepayments and other
liquidations, whereas the average portfolio Segment Earnings management and guarantee fee rate
recognizes these amounts over the contractual life of the related loans (usually 30 years). In addition,
the average portfolio Segment Earnings management and guarantee fee rate reflects an average of
our total mortgage portfolio and is not limited to purchases in the applicable year. Loans acquired
prior to 2012 have lower contractual management and guarantee fee rates than loans we have
acquired since that time.
• Management and guarantee fees charged on new acquisitions decreased during 2015, compared to
2014, due to a combination of competitive pricing and increased market-adjusted pricing costs based
on the price performance of our PCs relative to Fannie Mae securities.