Freddie Mac 2009 Annual Report Download - page 175

Table 70 provides detail by region for REO activity. Our REO activity consists almost entirely of single-family
residential properties. Consequently, our regional REO acquisition trends generally follow a pattern that is similar to, but
lags, that of regional delinquency trends of our single-family mortgage portfolio.
Table 70 — REO Activity by Region
(1)
2009 2008 2007
December 31,
(number of properties)
REO Inventory
Beginning property inventory . . . . . . . . . . . . ............................................ 29,346 14,394 8,785
Properties acquired by region:
Northeast . . . . . ............................................................... 7,529 5,125 2,336
Southeast . . . . . ............................................................... 19,255 10,725 4,942
North Central . . ............................................................... 19,946 13,678 9,175
Southwest. . . . . ............................................................... 8,942 5,686 3,977
West ....................................................................... 29,440 15,317 2,410
Total properties acquired . . . . . . . . . . . . ............................................ 85,112 50,531 22,840
Properties disposed by region:
Northeast . . . . . ............................................................... (5,663) (3,846) (1,484)
Southeast . . . . . ............................................................... (15,678) (8,239) (4,009)
North Central . . ............................................................... (15,549) (10,548) (7,520)
Southwest. . . . . ............................................................... (7,142) (5,155) (3,488)
West ....................................................................... (25,374) (7,791) (730)
Total properties disposed . . . . . . . . . . . . ............................................ (69,406) (35,579) (17,231)
Ending property inventory . ......................................................... 45,052 29,346 14,394
(1) See “Table 65 — Delinquency Rates” for a description of these regions.
Our REO property inventory increased 54% during 2009 and more than doubled during 2008 as the impact of the
continuing declines in single-family home prices and increasing rates of unemployment lessened the alternatives to
foreclosure for homeowners exposed to temporary deterioration in their financial condition. During 2009, we experienced a
significant increase in the number of delinquent loans in our single-family mortgage portfolio. However, due to the effect of
HAMP and other programs described below, many of these loans have not yet transitioned to REO, or their transition to
REO was delayed. This resulted in a substantial backlog of non-performing loans in 2009, and also caused the rate of growth
of our REO inventory in 2009 to be less than it would have been without these programs. In 2010, we expect many of these
loans will not complete the modification process or may redefault and result in a foreclosure transfer. Consequently, we
expect our REO activity to increase in 2010.
As discussed in “MHA PROGRAM AND OTHER EFFORTS TO ASSIST THE U.S. HOUSING MARKET” and “Loss
Mitigation Activities,” we have implemented several initiatives designed to assist troubled borrowers avoid foreclosure as
well as temporary suspensions in foreclosure transfers of occupied homes that have significantly affected the volume of our
REO acquisitions during 2009. On March 7, 2009, we began suspension of foreclosure transfers on owner-occupied homes
where the borrower may be eligible to receive a loan modification under the MHA Program; however, for delinquent
borrowers, we continued with preclosing steps in the foreclosure process. The MHA Program also restricts foreclosure
activities when a borrower is being evaluated for HAMP and during a borrower’s trial period. Our suspension or delay of
foreclosure transfers and any delay in foreclosures that might be imposed by regulatory or governmental agencies result in a
temporary decline in REO acquisitions and slow the rate of growth of our REO inventory. Many of the mortgages for which
we started and then temporarily suspended the foreclosure process during 2009 did not qualify for modifications under
HAMP or any of our other programs, or were not owner-occupied, which resulted in an increase in the volume of our REO
property acquisitions during the second half of 2009.
Our single-family REO acquisitions during 2009 have been most significant in California, Florida, Arizona, Michigan
and Georgia. The West region represents approximately 35% of the new REO acquisitions during 2009, based on the number
of units, and the highest concentration in that region is in California. At December 31, 2009, our REO inventory in
California comprised 16% of total REO property inventory, based on units, and approximately 25% of our total REO
property inventory, based on loan amount prior to acquisition.
Although the composition of interest-only and Alt-A loans in our single-family mortgage portfolio was approximately
7% and 8%, respectively, at December 31, 2009, the number of our REO acquisitions that had been secured by either of
these loan types represented more than 36% of our total REO acquisitions, based on loan amount prior to acquisition.
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