Freddie Mac 2008 Annual Report Download - page 154

lender that delivers them to us has classified the loans as Alt-A, or if the loans had reduced documentation requirements,
which indicate that the loan should be classified as Alt-A. We estimate that approximately $183 billion, or 10%, and
$186 billion, or 11%, of the loans underlying our single-family PCs and Structured Securities at December 31, 2008 and
2007, respectively, were classified as Alt-A mortgage loans. In addition, we estimate that approximately $2 billion, or 6%,
and $2 billion, or 9%, of our investments in single-family mortgage loans in our mortgage-related investments portfolio were
classified as Alt-A at December 31, 2008 and 2007, respectively. For all of these Alt-A loans combined, the average credit
score was 724, and the estimated current average LTV ratio, based on our first-lien exposure, was 85%. The delinquency rate
for these Alt-A loans was 5.61% and 1.86% at December 31, 2008 and 2007, respectively. We implemented several changes
in our underwriting and eligibility criteria in 2008 to reduce our acquisition of certain higher-risk loan products, including
Alt-A loans. As a result, our purchases of single-family Alt-A mortgage loans for our total mortgage portfolio totalled
$26 billion in 2008 as compared to $106 billion in 2007. Beginning March 1, 2009, we are no longer purchasing loans
underwritten using reduced documentation requirements.
We also invest in non-agency mortgage-related securities backed by single-family Alt-A loans in our mortgage-related
investments portfolio. We have classified these securities as Alt-A if the securities were labeled as Alt-A when sold to us or
if we believe the underlying collateral includes a significant amount of Alt-A loans. A total of $25 billion and $30 billion of
our single-family non-agency mortgage-related securities were backed by Alt-A and other mortgage loans at December 31,
2008 and 2007, respectively. See “CONSOLIDATED BALANCE SHEET ANALYSIS — Mortgage-Related Investments
Portfolio” for credit statistics and other information, including discussion of our evaluation of these securities for impairment.
Delinquencies
We report single-family delinquency rate information based on the number of loans that are 90 days or more past due
and those in the process of foreclosure. For multifamily loans, we report delinquency rates based on net carrying values of
mortgage loans 90 days or more past due and those in the process of foreclosure. Mortgage loans whose contractual terms
have been modified under agreement with the borrower are not counted as delinquent for purposes of reporting delinquency
rates if the borrower is less than 90 days delinquent under the modified terms. For purposes of reporting delinquency rates,
we include all the single-family loans that we own and those that back our PCs and Structured Securities for which we
actively manage the credit risk. Consequently, we exclude that portion of our Structured Securities that are backed by Ginnie
Mae Certificates and our Structured Transactions. We exclude Structured Securities backed by Ginnie Mae Certificates
because these securities do not expose us to meaningful amounts of credit risk due to the guarantee provided on these
securities by the U.S. government. We exclude Structured Transactions because these securities are backed by non-Freddie
Mac securities and consequently, we do not service the underlying loans and do not perform primary loss mitigation. Many
of these securities are significantly credit enhanced through subordination and are not representative of the loans for which
we have primary, or first loss, exposure. Structured Transactions represented approximately 1% of our total mortgage
portfolio at both December 31, 2008 and 2007. See “NOTE 6: MORTGAGE LOANS AND LOAN LOSS RESERVES —
Table 6.6 — Delinquency Performance” to our consolidated financial statements for the delinquency performance of our
single-family and multifamily mortgage portfolios, including Structured Transactions. Table 60 presents regional single-
family delinquency rates for non-credit enhanced loans, excluding those underlying our Structured Transactions.
Table 60 — Single-Family — Delinquency Rates, Excluding Structured Transactions — by Region
(1)
Percent of
Unpaid Principal
Balance
(2)
Delinquency
Rate
Percent of
Unpaid Principal
Balance
(2)
Delinquency
Rate
Percent of
Unpaid Principal
Balance
(2)
Delinquency
Rate
December 31, 2008 December 31, 2007 December 31, 2006
Northeast
(1)
.......................... 24% 0.96% 24% 0.39% 24% 0.24%
Southeast
(1)
.......................... 18 1.87 18 0.59 18 0.30
North Central
(1)
....................... 19 0.98 20 0.48 21 0.32
Southwest
(1)
......................... 13 0.68 13 0.32 13 0.26
West
(1)
............................. 26 1.67 25 0.42 24 0.12
100% 100% 100%
Total non-credit-enhanced — all regions. ...... 1.26 0.45 0.25
Total credit-enhanced — all regions . . . . ...... 3.79 1.62 1.30
Total single-family portfolio, excluding
Structured Transactions . . . . ............ 1.72 0.65 0.42
(1) Presentation of non-credit-enhanced delinquency rates with the following regional designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA);
Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL,
GA, KY, MS, NC, PR, SC, TN, VI); and Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).
(2) Based on mortgage loans in our mortgage-related investments portfolio and PCs and Structured Securities issued, excluding that portion of Structured
Securities that is backed by Ginnie Mae Certificates.
The impact of the weak housing market was first evident during 2007 in areas of the country where unemployment rates
had been relatively high, such as the North Central region. However, during 2008, home prices declined broadly across the
U.S. and in many geographical areas, particularly in parts of the West, Southeast and North Central regions, where these
151 Freddie Mac