Freddie Mac 2011 Annual Report Download - page 153

family credit guarantee portfolio, the average FICO score at origination was 718. Although Alt-A mortgage loans
comprised approximately 5% of our single-family credit guarantee portfolio as of December 31, 2011, these loans
represented approximately 28% of our credit losses during 2011.
During the first quarter of 2011, we identified approximately $0.6 billion in UPB of single-family loans underlying
certain Other Guarantee Transactions that had been previously reported in both the Alt-A and subprime categories.
Commencing March 31, 2011, we no longer report these loans as Alt-A (but continue to report them as subprime) and we
revised the prior periods to conform to the current period presentation.
We did not purchase any new single-family Alt-A mortgage loans in our single-family credit guarantee portfolio
during 2011. Although we discontinued new purchases of mortgage loans with lower documentation standards for assets
or income beginning March 1, 2009 (or later, as our customers’ contracts permitted), we continued to purchase certain
amounts of these mortgages in cases where the loan was either: (a) purchased pursuant to a previously issued other
guarantee commitment; (b) part of our relief refinance mortgage initiative; or (c) in another refinance mortgage initiative
and the pre-existing mortgage (including Alt-A loans) was originated under less than full documentation standards.
However, in the event we purchase a refinance mortgage in one of these programs and the original loan had been
previously identified as Alt-A, such refinance loan may no longer be categorized or reported as an Alt-A mortgage in this
Form 10-K and our other financial reports because the new refinance loan replacing the original loan would not be
identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A balances may be lower than would
otherwise be the case had such refinancing not occurred. From the time the relief refinance initiative began in 2009 to
December 31, 2011, we purchased approximately $15.3 billion of relief refinance mortgages that were previously
categorized as Alt-A loans in our portfolio, including $5.1 billion during 2011.
We also hold investments in non-agency mortgage-related securities backed by single-family Alt-A loans. At
December 31, 2011 and December 31, 2010, we held investments of $16.8 billion and $18.8 billion, respectively, of non-
agency mortgage-related securities backed by Alt-A and other mortgage loans and 15% and 22%, respectively, of these
securities were categorized as investment grade. The credit performance of loans underlying these securities deteriorated
significantly since the beginning of 2008 and continued to deteriorate during 2011. We categorize our investments in non-
agency mortgage-related securities as Alt-A if the securities were identified as such based on information provided to us
when we entered into these transactions. For more information on our exposure to Alt-A mortgage loans through our
investments in non-agency mortgage-related securities see “CONSOLIDATED BALANCE SHEETS ANALYSIS —
Investments in Securities.”
Higher-Risk Loans in the Single-Family Credit Guarantee Portfolio
The table below presents information about certain categories of single-family mortgage loans within our single-
family credit guarantee portfolio that we believe have certain higher-risk characteristics. These loans include categories
based on product type and borrower characteristics present at origination. The table includes a presentation of each higher
risk category in isolation. A single loan may fall within more than one category (for example, an interest-only loan may
also have an original LTV ratio greater than 90%). Mortgage loans with higher LTV ratios have a higher risk of default,
especially during housing and economic downturns, such as the one the U.S. has experienced since 2007.
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