Freddie Mac 2011 Annual Report Download - page 146

Federal Housing Finance Agency — Affordable Housing Goals” for a discussion of factors that may cause us to purchase
loans that do not meet our normal standards.
We were significantly adversely affected by deteriorating conditions in the single-family housing and mortgage
markets during 2008 and 2009. During 2005 to 2007, financial institutions substantially increased origination and
securitization of certain higher risk mortgage loans, such as subprime, option ARM, interest-only and Alt-A, and these
loans comprised a much larger proportion of origination and securitization issuance volumes during 2006 and 2007, and to
a lesser extent in 2005, as compared to prior or subsequent years. During this time, we increased our participation in the
market for these products through our purchases of non-agency mortgage-related securities and through our loan
securitization and guarantee activities. Our expanded participation in these products was driven by a combination of
competing objectives and pressures, including meeting our affordable housing goals, competition, the desire to maintain or
increase market share, and generating returns for investors. The mortgage market has changed considerably since 2007.
Financial institutions have tightened their underwriting standards, which has significantly reduced the amount of subprime,
option ARM, interest-only, and Alt-A loans being originated.
Conditions in the mortgage market continued to remain challenging during 2011. Most single-family mortgage loans,
especially those originated from 2005 through 2008, have been affected by the compounding pressures on household
wealth caused by significant declines in home values that began in 2006 and the ongoing weak employment environment.
Our serious delinquency rates remained high in 2011 compared to historical levels, as discussed in “Credit
Performance — Delinquencies.” The UPB of our single-family non-performing loans remained at high levels during 2011.
Characteristics of the Single-Family Credit Guarantee Portfolio
The average UPB of loans in our single-family credit guarantee portfolio was approximately $151,000 and $150,000
at December 31, 2011 and December 31, 2010, respectively. Our single-family mortgage purchases and other guarantee
commitment activity in 2011 decreased by 17% to $320.8 billion, as compared to $386.4 billion in 2010. Approximately
92% of the single-family mortgages we purchased in 2011 were fixed-rate amortizing mortgages, based on UPB.
Approximately 78% of the single-family mortgages we purchased in 2011 were refinance mortgages, including
approximately 26% that were relief refinance mortgages, based on UPB.
The table below provides additional characteristics of single-family mortgage loans purchased during 2011, 2010, and
2009, and of our credit guarantee portfolio at December 31, 2011, 2010, and 2009.
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