Freddie Mac 2008 Annual Report Download - page 66

of foreclosure sales discussed below. California and Florida were the states where we experienced the highest credit losses
during 2008; these states comprised 41% of our single-family credit losses on a combined basis. These and other factors
caused us to significantly increase our estimate for loan loss reserves during 2008.
We have taken several steps during 2008 and continuing in 2009 designed to support homeowners in the U.S. and
mitigate the continued growth of our non-performing assets, some of which were undertaken at the direction of FHFA. We
continue to expand our efforts to increase our use of foreclosure alternatives, and have expanded our staff to assist our seller/
servicers in completing loan modifications and other outreach programs with the objective of keeping more borrowers in
their homes. We expect that many of these efforts will have a negative impact on our financial results. Some of these
initiatives during 2008 and 2009 include:
• approving approximately 81,000 workout plans and agreements with borrowers for the estimated 400,000 single-
family loans in our single-family mortgage portfolio that were or became delinquent (90 days or more past due or
were in foreclosure) during 2008;
• delegating expanded workout authority to our seller/servicers and doubling the amount of compensation we provide to
seller/servicers for successful workouts of delinquent loans;
• assisting our seller/servicers in efforts to reach out to delinquent borrowers earlier and developing programs to do so
on a broad scale;
• in conjunction with FHFA, the HOPE NOW Alliance and other industry participants, initiating implementation of the
Streamlined Modification Program;
• temporarily suspending all foreclosure sales of occupied homes from November 26, 2008 through January 31, 2009
and from February 14, 2009 through March 6, 2009 to allow for implementation of the Streamlined Modification
Program by our seller/servicers; and
• the HASP announced by the Obama Administration, under which we and our servicers will increase loan modification
and refinancing efforts. We expect our efforts under HASP will replace the Streamlined Modification Program.
Beginning March 7, 2009, we will suspend foreclosure sales for those loans that are eligible for modification under
the HASP until our servicers determine that the borrower of such a loan is not responsive or that the loan does not
qualify for a modification under HASP or any of our other alternatives to foreclosure.
These activities will create fluctuations in our credit statistics. For example, the suspension of foreclosure sales for
occupied homes has temporarily reduced the rate of growth of our REO inventory and credit losses since November 2008;
however, this also has created a temporary increase in the number of delinquent loans that remain in our single-family
mortgage portfolio, which results in higher reported delinquency rates than without our suspension of foreclosures. In
addition, the implementation of the Streamlined Modification Program and the HASP will cause the number of our
forbearance agreements, troubled debt restructurings and related losses, such as losses on loans purchased, to rise.
Our investments in non-agency mortgage-related securities, which are primarily backed by subprime, Alt-A and MTA
mortgage loans, also were affected by the deteriorating credit conditions during 2008. The table below illustrates the
increases in delinquency rates for subprime, Alt-A and MTA loans that back the non-agency mortgage-related securities we
own. Given the recent substantial deterioration in the economic outlook and the renewed acceleration of housing price
declines, the performance of the loans backing these securities could continue to deteriorate. See “CONSOLIDATED
BALANCE SHEETS ANALYSIS — Mortgage-Related Investments Portfolio” for additional information regarding our
investments in mortgage-related securities backed by subprime, Alt-A and MTA loans.
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