Freddie Mac 2009 Annual Report Download - page 143

among a smaller number of institutions. Certain significant developments with respect to our single-family seller/servicers,
and their effect on us, are described below:
• In July 2008, IndyMac Bancorp, Inc., or IndyMac, announced that the FDIC was appointed conservator of the bank.
In March 2009, we entered into an agreement with the FDIC with respect to the transfer of loan servicing from
IndyMac to a third party, under which we received an amount to partially recover our future losses from IndyMac’s
repurchase obligations. After the FDIC’s rejection of Freddie Mac’s remaining claims in August 2009, we declined to
pursue further collection efforts.
• In September 2008, Lehman declared bankruptcy. Lehman services single-family loans for us through an affiliate.
Lehman suspended its repurchases from us after declaring bankruptcy. On September 22, 2009, we filed proofs of
claim in the Lehman bankruptcies aggregating approximately $2.1 billion, which included an $870 million claim for
repurchase obligations. We recorded a loss of $1.1 billion in 2008, shown as securities administrator loss on
investment activity in our consolidated statements of operations. The remaining amount of our claims have been fully
provided for in our assessment of loan loss reserves as of December 31, 2009.
• In September 2008, Washington Mutual Bank was acquired by JPMorgan Chase Bank, N.A. We agreed to JPMorgan
Chase becoming the servicer of mortgages previously serviced by Washington Mutual in return for its agreement to
assume Washington Mutual’s recourse obligations to repurchase any of such mortgages that were sold to us with
recourse. With respect to mortgages that Washington Mutual sold to us without recourse, JPMorgan Chase made a
one-time payment to us in 2009 with respect to obligations of Washington Mutual to repurchase any of such
mortgages that are inconsistent with certain representations and warranties made at the time of sale.
• On August 4, 2009, we notified Taylor, Bean & Whitaker Mortgage Corp., or TBW, that we terminated its eligibility
as a seller and servicer for us effective immediately. TBW accounted for approximately 1.9% and 5.2% of our single-
family mortgage purchase volume activity for 2009 and 2008, respectively. On August 24, 2009, TBW filed for
bankruptcy and announced its plan to wind down its operations. Our estimate of potential exposure to TBW at
December 31, 2009 for loan repurchase obligations, excluding the estimated fair value of servicing rights, is
approximately $700 million. Unrelated to our potential exposure arising out of TBW loan repurchase obligations, in
its capacity as a servicer of loans owned or guaranteed by Freddie Mac, TBW received and processed certain
borrower funds that it held for the benefit of Freddie Mac. TBW maintained certain bank accounts, primarily at
Colonial Bank, to deposit such borrower funds and to provide remittance to Freddie Mac. Colonial Bank was placed
into receivership by the FDIC on or about August 14, 2009. Freddie Mac filed a proof of claim aggregating
approximately $595 million against Colonial Bank on November 18, 2009. The proof of claim relates to monies that
remain, or should remain, on deposit with Colonial Bank, or with the FDIC as its receiver, which are attributable to
mortgage loans owned or guaranteed by us and previously serviced by TBW. These monies include, among other
items, payoff funds, borrower payments of mortgage principal and interest, as well as taxes and insurance payments
related to these loans. We continue to evaluate our other potential exposures to TBW and are working with the debtor
in possession, the FDIC and other creditors to quantify these exposures. At this time, we are unable to estimate our
total potential exposure related to TBW’s bankruptcy; however, the amount of additional losses related to such
exposures could be significant.
Our loan loss reserves include estimates for collections from seller/servicers for amounts owed to us resulting from loan
repurchase obligations. Our estimates of these collections are adjusted for probable losses related to our counterparty
exposure to seller/servicers. In addition, we estimate that our total potential exposure to Indy Mac, Lehman, Washington
Mutual and TBW as discussed above, before consideration of any payments received from them, was approximately
$3.0 billion during 2009, based on the amount of losses we project to emerge over the life of the loans serviced by each
counterparty. This estimate of total potential exposure represents the sum of separate estimates we made following the
bankruptcy, acquisition or other significant event relating to each seller/servicer, as discussed above, and in many cases these
estimates have not been updated as of December 31, 2009. These estimates of our potential exposure are higher than the
estimates used in determining our loan loss reserves, since adjustments to loan loss reserves represent probable losses, not
potential losses. Our estimate of probable losses may change over time, if the indicators of potential loss change. In
determining our estimate of potential exposure with respect to the bankruptcy or other failure of a seller/servicer, we may
also consider the value we could receive by transferring the mortgage servicing rights held by the seller/servicer, which
would reduce the potential exposure.
In some cases, the ultimate amounts of recovery payments we received and may receive in the future from these seller/
servicers will be significantly less than the amount of our estimated potential exposure to losses related to repurchase
obligations. As of December 31, 2009, we had received approximately $650 million from these seller/servicers, all of which
was associated with the IndyMac servicing transfer and the JPMorgan Chase agreement.
140 Freddie Mac