Freddie Mac 2008 Annual Report Download - page 149

affected guarantee pricing decisions by limiting our ability to adjust our fees for current expectations of credit risk, and will
likely continue to do so.
We have also entered into credit derivatives on specified mortgage-related assets that in most cases are intended to limit
our exposure to credit default losses. The fair value of these credit derivatives was not material at either December 31, 2008
or 2007. See “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — Interest-Rate Risk and
Other Market Risks — Use of Derivatives and Interest-Rate Risk Management — Types of Derivatives — Credit Derivatives”
for further discussion.
Portfolio Diversification
A key characteristic of our credit risk portfolio is diversification along a number of critical risk dimensions. We
continually monitor a variety of mortgage loan characteristics which may affect the default experience on our overall
mortgage portfolio, such as product mix, LTV ratios and geographic concentrations.
Mortgage Portfolio Characteristics
As previously noted, we seek to manage credit risk in our single-family mortgage portfolio by varying our pricing for
our management and guarantee fees based on the risk we assume and by using our underwriting and quality control
processes. Our underwriting process evaluates mortgage loans using several critical risk characteristics, such as credit score,
LTV ratio and occupancy type. Table 58 provides characteristics of our single-family new business purchases in 2008, 2007
and 2006, and of our single-family mortgage portfolio at December 31, 2008, 2007 and 2006.
146 Freddie Mac