Freddie Mac 2008 Annual Report Download - page 144

Derivative Counterparty Credit Exposure” and “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK” for additional information on credit derivatives.
Table 55 — Mortgage Market Share Comparison
2008 2007 2006
(in billions)
Market Data — all market participants:
Total single-family mortgage originations
(1)
.................................................. $1,485 $2,430 $2,980
Non-agency mortgage-related security issuance
(2):
Backed by subprime mortgage loans
(3)
.................................................... $ 2 $ 219 $ 483
Backed by other mortgage loans
(4)
...................................................... 9 430 585
Total . . . . ........................................................................ $ 11 $ 649 $1,068
Freddie Mac Data:
Purchases for our total mortgage portfolio:
Single-family mortgage loans
(5)
........................................................ $ 358 $ 466 $ 351
Non-agency mortgage-related securities
(6)
.................................................. $ 2 $ 74 $ 117
(1) Source: Inside Mortgage Finance estimates of originations of single-family first- and second liens dated January 30, 2009.
(2) Source: Inside Mortgage Finance estimates. Based on unpaid principal balance of securities issued.
(3) Consists of loans categorized as subprime based solely on the credit score of the borrower at the time of origination.
(4) Includes securities backed by loans with original loan amounts above the conforming loan limits as well as Alt-A loans, and home equity second liens.
(5) Consists of our purchases of mortgage loans for investment as well as those loans that back our PC’s and Structured Securities. See “PORTFOLIO
BALANCES AND ACTIVITIES — Table 51 — Total Mortgage Portfolio Activity” for further information.
(6) Excludes our purchases of securities used for issuance of guarantees in our Structured Transactions and includes our purchases of CMBS and mortgage
revenue bonds.
As shown above, single-family mortgage loan purchases for our total mortgage portfolio comprised approximately 24%,
19% and 12% of total mortgage originations during 2008, 2007 and 2006, respectively. The trend of increasing market share
reflects the greater composition of GSE-conforming mortgage loan originations during 2008 and 2007 resulting from the
tightening of underwriting for mortgage credit by financial institutions and the fact that most non-agency institutions have
sharply curtailed their securitization activities. Issuances of non-agency mortgage-related securities backed by subprime
mortgages increased significantly during 2006 and 2007, as compared to prior years. As shown above, our purchases of non-
agency mortgage-related securities represented approximately 11% of the total issuance of these securities during both 2006
and 2007. During 2008, the market for issuances of non-agency mortgage-related securities has been nearly non-existent.
As a result of greater variability in underwriting standards during 2006 and 2007, the deterioration in mortgage
performance has varied considerably across different market segments. Although prior to 2008 we increased our participation
in the market for newer and higher risk mortgage products, our single-family mortgage portfolio has been generally subject
to more consistent underwriting standards and thus, our portfolio has performed better relative to most market participants
and market segments. However, as discussed in “CONSOLIDATED BALANCE SHEETS ANALYSIS — Mortgage-Related
Investments Portfolio,” we are exposed to the performance of these other participants and segments through our investments
in non-agency mortgage-related securities. Macroeconomic conditions deteriorated during 2008, which affected the
performance of all types of mortgage loans. Both prime and non-prime borrowers have been affected by the compounding
pressures on household wealth caused by declines in home values, declines in the stock market, rising rates of
unemployment, increasing food prices and fluctuating energy prices. The table below shows the performance of our single-
family mortgage portfolio during 2008 as compared to industry averages.
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