Freddie Mac 2011 Annual Report Download - page 161

mortgage product type (i.e., from an ARM to a fixed-rate mortgage); or (d) a reduction in amortization term. See
“BUSINESS — Our Business Segments — Single-Family Guarantee Segment — Loss Mitigation and Loan Workout
Activities“ for additional information about recent changes to HARP.
In November 2011, Freddie Mac and Fannie Mae issued guidance with operational details about the HARP changes
to mortgage lenders and servicers after receiving information from FHFA about the fees that we may charge associated
with the refinancing program. Since industry participation in HARP is not mandatory, we anticipate that implementation
schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes. It is too
early to estimate how many eligible borrowers are likely to refinance under the revised program.
The revisions to HARP will help to reduce our exposure to credit risk to the extent that HARP refinancing strengthen
the borrowers’ capacity to repay their mortgages and, in some cases, reduce the payments under their mortgages. These
revisions to HARP could also reduce our credit losses to the extent that the revised program contributes to bringing
stability to the housing market. However, we may face greater exposure to credit and other losses on these HARP loans
because we are not requiring lenders to provide us with certain representations and warranties on the refinanced HARP
loans. We could also experience declines in the fair values of certain agency security investments classified as available-
for-sale or trading resulting from changes in expectations of mortgage prepayments and lower net interest yields over time
on other mortgage-related investments. As a result, there can be no assurance that the benefits from the revised program
will exceed our costs. See “RISK FACTORS — Competitive and Market Risks — The servicing alignment initiative, MHA
Program and other efforts to reduce foreclosures, modify loan terms and refinance mortgages, including HARP, may fail
to mitigate our credit losses and may adversely affect our results of operations or financial condition” for additional
information.
Home Affordable Foreclosure Alternatives Program
HAFA is designed to permit borrowers who meet basic HAMP eligibility requirements to sell their homes in short
sales, if such borrowers did not qualify for or participate in a HAMP trial period, failed to complete their HAMP trial
period, or defaulted on their HAMP modification. HAFA also provides a process for borrowers to convey title to their
homes through a deed in lieu of foreclosure. HAFA took effect in April 2010 and ends on December 31, 2013. We began
our implementation of this program in August 2010. We completed a small number of HAFA transactions on our single-
family mortgage loans during 2011.
Hardest Hit Fund
In 2010, the federal government created the Hardest Hit Fund, which provides funding for state HFAs to create
unemployment assistance initiatives to help homeowners in those states that have been hit hardest by the housing crisis
and economic downturn. To the extent our borrowers participate in the HFA unemployment assistance programs and the
full contractual payment is made by an HFA, a borrower’s mortgage delinquency status will remain static and will not fall
into further delinquency. Based on information provided to us by our seller/servicers, we believe participation in these
programs by our borrowers has been limited through December 31, 2011.
Compliance Agent
We are the compliance agent for Treasury for certain foreclosure avoidance activities under HAMP by mortgage
holders other than Freddie Mac and Fannie Mae. Among other duties, as the program compliance agent, we conduct
examinations and review servicer compliance with the published requirements for the program. Some of these
examinations are on-site, and others involve off-site documentation reviews. We report the results of our examination
findings to Treasury. Based on the examinations, we may also provide Treasury with advice, guidance and lessons learned
to improve operation of the program.
The table below presents volumes of single-family loan workouts, serious delinquency, and foreclosures for 2011,
2010, and 2009.
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