Freddie Mac 2015 Annual Report Download - page 98

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 96
addition, these estimates do not include interest expense and transaction costs we incur to issue our
STACR debt notes, and premiums we pay on ACIS transactions.
(dollars in millions) As of December 31, 2015
UPB of loans covered by STACR debt notes
and ACIS insurance policies $ 328,872
Performance Under Home Price Scenarios at December 31, 2015
Above Average Home
Price Appreciation Moderate Home Price Appreciation Severe Home Price Depreciation
Amount bps Amount bps Amount bps
Estimated credit losses $ 199 6 $ 1,431 44 $ 10,679 325
Estimated recoveries from STACR debt
notes and ACIS insurance policies $ 66 2 $ 507 15 $ 7,993 243
Loss coverage ratio 33% N/A 35% N/A 75% N/A
Monitoring Loan Performance and Characteristics for the Single-family Credit Guarantee Portfolio
and Individual Sellers and Servicers
We review loan performance, including delinquency statistics and loan characteristics in conjunction with
housing market and economic conditions, to determine if our pricing and eligibility standards reflect the
risk associated with the loans we purchase and guarantee. We review the payment performance of our
loans to facilitate early identification of potential problem loans, which could inform our loss mitigation
strategies. We also review performance metrics for additional loan characteristics that may expose us to
concentrations of credit risk, including:
• Higher risk loan attributes and attribute combinations;
• Higher risk loan product types; and
• Geographic concentrations.
We actively monitor seller and servicer performance, including compliance with our standards, and
periodically review their operational processes. We also periodically change seller/servicer guidelines
based on the results of our mortgage portfolio monitoring, if warranted.
The credit quality of our single-family loan purchases remained strong during the past several years. The
majority of our loan purchases over the last several years have been fixed-rate loans.
Single-Family Credit Guarantee Portfolio
Serious delinquency rates continued to decline across our total single-family credit guarantee portfolio in
2015 as economic conditions in many parts of the U.S. continued to improve. Improvement in home
prices in many areas of the U.S. during 2015 generally led to improved current LTV ratios of the loans in
our single-family credit guarantee portfolio as of December 31, 2015, which contributed to lower credit
losses (excluding charge-offs related to the adoption of the FHFA advisory bulletin) and an improving
overall credit profile.
The improvement in our serious delinquency rate in 2015 is primarily due to the better performance of
newly acquired loans in the Core single-family book, continued loss mitigation and foreclosure activities
for loans in the Legacy single-family book as well as sales of certain non-performing loans. The gradual
reduction of our Legacy single-family book also contributed to the improvement in the serious delinquency