Freddie Mac 2009 Annual Report Download - page 139

documents for the securities. The remainder of the monthly payment reductions will be absorbed by subordinated investors
or by other credit enhancement, if any, that is part of the structure for the securities.
Home Affordable Refinance Program. The Home Affordable Refinance Program gives eligible homeowners with loans
owned or guaranteed by us or Fannie Mae an opportunity to refinance into loans with more affordable monthly payments
and fixed-rate terms. Under the Home Affordable Refinance Program, we allow eligible borrowers who have mortgages with
high current LTV ratios to refinance their mortgages without obtaining new mortgage insurance in excess of what was
already in place.
The Freddie Mac Relief Refinance Mortgage
SM
, which we announced in March 2009, is our implementation of the
Home Affordable Refinance Program. We have worked with FHFA to provide us the flexibility to implement this element of
the MHA Program. The Home Affordable Refinance Program is targeted at borrowers with current LTV ratios above 80%;
however, our program also allows borrowers with LTV ratios below 80% to participate. On July 1, 2009, we announced that
the current LTV ratio limit would be increased from 105% to 125%. We began purchasing mortgages that refinance such
higher-LTV loans on October 1, 2009. We also increased the amount of closing costs that can be included in the new
refinance mortgage up to $5,000. Through our program, we offer this refinancing option only for qualifying mortgage loans
that we hold or that we guarantee. We will continue to bear the credit risk for refinanced loans under this program, to the
extent that such risk is not covered by existing mortgage insurance or other existing credit enhancements. As of
December 31, 2009, we purchased mortgages with approximately $34.7 billion of aggregate unpaid principal balance under
the program.
Although the implementation of the Freddie Mac Relief Refinance Mortgage product will result in a higher volume of
purchases and increased delivery fees from the new loans, the net effect of the refinance activity on our business results is
not expected to be significant. The net impact of this refinance activity is affected primarily by the amount of: (a) delivery
fees on the new loan, which are dependent upon the characteristics of the borrower and the LTV ratio of the new loan;
(b) the management and guarantee fee rates on the new loan versus those on the old loan; and (c) the relative size of the
guarantee asset and guarantee obligation associated with the loan at the time of the refinance. However, borrowers that
participate in this program will have lowered their monthly mortgage payments and may be less likely to default, which
could ultimately result in fewer foreclosures of loans within our single-family mortgage portfolio.
Table 50 below presents the composition of our purchases of refinanced single-family loans during the three and twelve
months ended December 31, 2009.
Table 50 — Single-Family Refinance Loan Volume
(1)
Amount Number of Loans Percent Amount Number of Loans Percent
Three Months Ended December 31, 2009 Twelve Months Ended December 31, 2009
(dollars in millions) (dollars in millions)
Freddie Mac Relief Refinance Mortgage
SM
:
Above 105% LTV . . . ............................. $ 219 953 0.3% $ 219 953 0.1%
80% to 105% LTV. . . ............................. 7,161 30,799 10.1 19,380 85,110 4.8
Below 80% LTV ................................. 7,295 39,795 13.0 15,119 83,155 4.7
Total Freddie Mac Relief Refinance Mortgage
SM
............ $14,675 71,547 23.4% $ 34,718 169,218 9.6%
Total refinance loan volume
(2)
........................ $63,989 305,428 100% $379,035 1,757,500 100%
(1) Consists of all single-family mortgage loans that we either purchased or guaranteed during the period, excluding those underlying long-term standby
commitments and Structured Transactions.
(2) Includes Freddie Mac Relief Refinance Mortgages
SM
and other refinance mortgages.
Home Affordable Foreclosure Alternatives Program (HAFA). On May 14, 2009, the Obama Administration announced
the Home Affordable Foreclosure Alternatives Program, which is designed to permit borrowers who meet basic HAMP
eligibility requirements to sell their homes in “short sales,” if such borrowers did not participate in trial periods, failed to
complete their trial period or defaulted on their modified loan. In a short sale, the owner sells the home and the lender
accepts proceeds that are less than the outstanding mortgage indebtedness. The program also provides a process for
borrowers to convey title to their homes through a deed-in-lieu of foreclosure. In both cases, the program will offer
incentives to the servicer and the borrower. On November 30, 2009, the Obama Administration released details for
implementation of this program by April 5, 2010; however, eligible servicers could begin participating in December 2009.
We will be responsible for paying certain incentive fees to servicers of and borrowers under mortgages that we own or
guarantee that become the subject of HAFA short sales. We will not receive reimbursement of these fees from Treasury. We
anticipate implementing HAFA in the second quarter of 2010.
Second Lien Program (2MP). On April 28, 2009, the Obama Administration announced new efforts under the MHA
Program to achieve greater affordability for homeowners by lowering payments on second mortgages through modifications.
The program was implemented on August 13, 2009 and is designed to work in tandem with HAMP. Together, HAMP and
136 Freddie Mac