Freddie Mac 2004 Annual Report Download - page 136

Table 63 Ì Non-Performing Assets
December 31,
2004 2003 2002 2001 2000
(dollars in millions)
Troubled debt restructurings, or TDRs(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,297 $ 2,370 $2,164 $1,617 $1,389
Serious delinquencies(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,318 7,470 6,830 5,070 3,546
Non-accrual loans(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27 21 47 44 9
Subtotal(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,642 9,861 9,041 6,731 4,944
REO, net(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 741 795 594 447 358
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $9,383 $10,656 $9,635 $7,178 $5,302
(1) Includes previously delinquent loans whose terms have been modiÑed. Some of these loans may be performing as a result of the
modiÑed terms. TDRs are considered part of our impaired loan population. Figures presented are based on unpaid principal balances
of mortgage loans. See ""NOTE 6: LOAN LOSS RESERVES'' to the consolidated Ñnancial statements for additional information
on impaired loans.
(2) Includes single-family loans 90 days or more delinquent. For multifamily loans, the population includes all loans 60 days or more
delinquent, but less than 90 days delinquent. Also included within this population are multifamily loans greater than 90 days past due
but where principal and interest are being paid to us under the terms of a credit enhancement agreement. Also includes seriously
delinquent loans in alternative collateral deals which totaled $2,234 million, $2,793 million, $2,290 million, $1,052 million and
$529 million at December 31, 2004, 2003, 2002, 2001 and 2000, respectively. See the discussion related to alternative collateral deal
delinquencies following ""Table 65 Ì Delinquency Performance.''
(3) Non-accrual mortgage loans are loans for which interest income is recognized only on a cash basis and only includes multifamily
loans that are 90 days or more delinquent. Balance represents 2, 2, 3, 5 and 10 properties at December 31, 2004, 2003, 2002, 2001 and
2000, respectively. No single-family mortgage loans are classiÑed as non-accrual. For single-family mortgages we recognize interest
income on an accrual basis for all such loans, regardless of delinquency. We establish reserves for uncollectible interest that are
estimated using statistical models which quantify accrued but unpaid interest at the consolidated balance sheet date. Mortgage loans
placed on non-accrual status are considered part of our impaired loan population.
(4) For the year ended December 31, 2004, $443 million was included in net interest income and management and guarantee income
related to these mortgage loans (excluding interest income related to alternative collateral deals). The amount of forgone net interest
income and additional management and guarantee income that we would have recorded had these loans been current is $65 million
for the year ended December 31, 2004.
(5) For more information about REO balances, see ""NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES'' and
""NOTE 7: REAL ESTATE OWNED'' to the consolidated financial statements.
Loss mitigation activities are a key component of our strategy for managing and resolving troubled assets
and lowering credit losses. Our loss mitigation strategy emphasizes early intervention in delinquent mortgages
and alternatives to foreclosure. Foreclosure alternatives are intended to reduce the number of delinquent
mortgages that proceed to foreclosure and, ultimately, mitigate our total credit losses by eliminating a portion
of the costs related to foreclosed properties. Table 64 summarizes the number of loans involved in diÅerent
types of single-family foreclosure alternatives.
Table 64 Ì Single-Family Foreclosure Alternatives(1)
December 31,
2004 2003 2002
(number of loans)
Foreclosure Alternatives(2)
Repayment plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,406 34,458 32,672
Loan modiÑcations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,789 8,508 7,951
Forbearance agreementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,105 2,226 2,798
Pre-foreclosure sales(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,010 1,755 1,531
Foreclosure alternatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,310 46,947 44,952
(1) Based on the single-family Total mortgage portfolio, excluding non-Freddie Mac mortgage-related securities, alternative collateral
deals and that portion of Structured Securities that is backed by non-Freddie Mac mortgage-related securities.
(2) Some mortgage loans may go through a foreclosure alternative more than once or may go through more than one type of foreclosure
alternative. Additionally, the table represents only instances that successfully return the borrower to a current payment status, with
the exception of pre-foreclosure sales, where the relationship with the borrower has concluded.
(3) This amount includes third party sales and other foreclosure alternatives.
The increase in foreclosure alternatives from 2002 through 2004 was primarily driven by an enhanced
eÅort by us and servicers to pursue loss mitigation for homeownership preservation and a favorable interest
rate environment that facilitated the foreclosure alternatives. Repayment plans, the most common type of
foreclosure alternative, mitigate our credit losses because they assist borrowers in returning to compliance with
Freddie Mac
124