Freddie Mac 2011 Annual Report Download - page 124

Mortgage Loans
The UPB of mortgage loans on our consolidated balance sheet declined to $1.8 trillion as of December 31, 2011
from $1.9 trillion as of December 31, 2010. This decline reflects that the amount of single-family loan liquidations has
exceeded new loan purchase and guarantee activity in 2011, which we believe is due, in part, to declines in the amount of
single-family mortgage debt outstanding in the market and increased competition from Ginnie Mae and FHA/VA. Our
single-family loan purchase and guarantee activity in 2011 was at the lowest level we have experienced in the last several
years. See “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES” for further detail about the mortgage loans
on our consolidated balance sheets.
The UPB of unsecuritized single-family mortgage loans increased by $22.8 billion to $171.7 billion at December 31,
2011 from $148.9 billion at December 31, 2010, primarily due to our continued removal of seriously delinquent and
modified loans from the mortgage pools underlying our PCs. Based on the amount of the recorded investment of these
loans, approximately $72.4 billion, or 4.2%, of the single-family mortgage loans on our consolidated balance sheet as of
December 31, 2011 were seriously delinquent, as compared to $84.2 billion, or 4.7%, as of December 31, 2010. This
decline was primarily due to modifications, foreclosure transfers, and short sale activity. The majority of these seriously
delinquent loans are unsecuritized, and were removed by us from our PC trusts. As guarantor, we have the right to remove
mortgages that back our PCs from the underlying loan pools under certain circumstances. See “NOTE 5:
INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS” for more information on our removal of single-family
loans from PC trusts. We expect that our holdings of unsecuritized single-family loans will continue to increase in 2012
due to the recent revisions to HARP, which will result in our purchase of mortgages with LTV ratios greater than 125%,
as we have not yet implemented a securitization process for such loans. See “RISK MANAGEMENT — Credit Risk —
Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program” for
additional information on HARP.
The UPB of unsecuritized multifamily mortgage loans was $82.3 billion at December 31, 2011 and $85.9 billion at
December 31, 2010. Our multifamily loan activity in 2011 primarily consisted of purchases of loans intended for
securitization and subsequently sold through Other Guarantee Transactions. We expect to continue to purchase and
subsequently securitize multifamily loans, which supports liquidity for the multifamily market and affordability for
multifamily rental housing, as our primary multifamily business strategy.
We maintain an allowance for loan losses on mortgage loans that we classify as held-for-investment on our
consolidated balance sheets. Our reserve for guarantee losses is associated with Freddie Mac mortgage-related securities
backed by multifamily loans, certain single-family Other Guarantee Transactions, and other guarantee commitments, for
which we have incremental credit risk. Collectively, we refer to our allowance for loan losses and our reserve for
guarantee losses as our loan loss reserves. Our loan loss reserves were $39.5 billion and $39.9 billion at December 31,
2011 and 2010, respectively, including $38.9 billion and $39.1 billion, respectively, related to single-family loans. At
December 31, 2011 and 2010, our loan loss reserves, as a percentage of our total mortgage portfolio, excluding non-
Freddie Mac securities, was 2.1% and 2.0%, respectively, and as a percentage of the UPB associated with our non-
performing loans was 32.0% and 33.7%, respectively. See “RISK MANAGEMENT — Credit Risk — Mortgage Credit
Risk — Loan Loss Reserves” for more information about our loan loss reserves.
The table below summarizes our purchase and guarantee activity in mortgage loans. This activity consists of:
(a) mortgage loans underlying consolidated single-family PCs issued in the period (regardless of whether such securities
are held by us or third parties); (b) single-family and multifamily mortgage loans purchased, but not securitized, in the
period; and (c) mortgage loans underlying our mortgage-related financial guarantees issued in the period, which are not
consolidated on our balance sheets.
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