Freddie Mac 2008 Annual Report Download - page 162

Table 67 — Credit Loss Performance
2008 2007 2006
December 31,
(dollars in millions)
REO
REO balances, net:
Single-family ................................................................... $3,208 $1,736 $ 734
Multifamily . ................................................................... 47 — 9
Total ....................................................................... $3,255 $1,736 $ 743
REO operations income (expense):
Single-family ................................................................... $(1,097) $ (205) $ (61)
Multifamily . ................................................................... — (1) 1
Total ....................................................................... $(1,097) $ (206) $ (60)
CHARGE-OFFS
Single-family:
Charge-offs, gross
(1)
(including $3.1 billion, $372 million and $308 million relating to loan loss reserves,
respectively) .................................................................. (3,441) (528) (308)
Recoveries
(2)
.................................................................... 779 238 166
Single-family, net .............................................................. (2,662) (290) (142)
Multifamily:
Charge-offs, gross
(1)
(including $8 million, $4 million and $5 million relating to loan loss reserves,
respectively) .................................................................. (8) (4) (5)
Recoveries
(2)
.................................................................... — 1 —
Multifamily, net ............................................................... (8) (3) (5)
Total Charge-offs:
Charge-offs, gross
(1)
(including $3.1 billion, $376 million and $313 million relating to loan loss reserves,
respectively) .................................................................. (3,449) (532) (313)
Recoveries
(2)
................................................................... 779 239 166
Total Charge-offs, net ......................................................... $(2,670) $ (293) $(147)
CREDIT LOSSES
(3)
Single-family ................................................................... $(3,759) $ (495) $(203)
Multifamily . ................................................................... (8) (4) (4)
Total...................................................................... $(3,767) $ (499) $(207)
Total in basis points
(4)
(annualized) ..................................................... (20.1) (3.0) (1.4)
(1) Represents the amount of the unpaid principal balance of a loan that has been discharged in order to remove the loan from our mortgage-related
investments portfolio at the time of resolution, regardless of when the impact of the credit loss was recorded on our consolidated statements of
operations through the provision for credit losses or losses on loans purchased. The amount of charge-offs for credit loss performance is generally
calculated as the contractual balance of a loan at the date it is discharged less the estimated value of the property acquired in disposition of the loan.
(2) Recoveries of charge-offs primarily result from foreclosure alternatives and REO acquisitions on loans where a share of default risk has been assumed
by mortgage insurers, servicers, or other third parties through credit enhancements.
(3) Equal to REO operations income (expense) plus charge-offs, net. Excludes interest foregone on nonperforming loans, which reduces our net interest
income but is not reflected in our total credit losses. In addition, excludes other market-based credit losses incurred on our mortgage-related investments
portfolio and recognized in our consolidated statements of operations, including losses on loans purchased and losses on certain credit guarantees.
(4) Calculated as annualized credit losses divided by the average total mortgage portfolio, excluding non-Freddie Mac mortgage-related securities and the
portion of Structured Securities that is backed by Ginnie Mae Certificates.
Our credit loss performance is a historic metric that measures losses at the conclusion of the loan and related collateral
resolution process. There is a significant lag in time between the implementation of loss mitigation activities and the final
resolution of delinquent mortgage loans as well as the disposition of nonperforming assets. Our credit loss performance does
not include our provision for credit losses and losses on loans purchased. We expect our credit losses to continue to increase
during 2009, as market conditions, such as home prices and the rate of home sales, continue to deteriorate. As discussed in
“Loss Mitigation Activities,” we implemented the Streamlined Modification Program in late 2008 and announced several
periods of suspensions in foreclosure sales of occupied homes. Our suspension or delay of foreclosure sales and any imposed
delay in foreclosures by regulatory or governmental agencies will cause a delay in our recognition of charge-offs and credit
losses. The execution and success of broad-based loan modification programs, and the implementation of any governmental
actions or programs that expand the ability of delinquent borrowers to refinance with concessions of past due principal or
interest amounts, including legislative changes to bankruptcy laws, could lead to higher charge-offs and increases of our
credit losses.
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