Freddie Mac 2011 Annual Report Download - page 238

The table below summarizes the types of loans on our consolidated balance sheets as of December 31, 2011 and
2010.
Table 4.1 — Mortgage Loans
Unsecuritized
Held by
Consolidated
Trusts Total Unsecuritized
Held by
Consolidated
Trusts Total
December 31, 2011 December 31, 2010
(in millions)
Single-family:
(1)
Fixed-rate
Amortizing . . . . . . . . . . . . . . . . . . . . . . . . . . . $153,177 $1,418,751 $1,571,928 $126,561 $1,493,206 $1,619,767
Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . 3,184 14,758 17,942 4,161 19,616 23,777
Total fixed-rate. . . . . . . . . . . . . . . . . . . . . . . 156,361 1,433,509 1,589,870 130,722 1,512,822 1,643,544
Adjustable-rate
Amortizing . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,428 68,362 71,790 3,625 59,851 63,476
Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . 10,376 43,655 54,031 13,018 58,792 71,810
Total adjustable-rate . . . . . . . . . . . . . . . . . . . 13,804 112,017 125,821 16,643 118,643 135,286
Other Guarantee Transactions backed by non-Freddie
Mac securities . . . . . . . . . . . . . . . . . . . . . . . . . — 12,776 12,776 — 15,580 15,580
FHA/VA and other governmental . . . . . . . . . . . . . . 1,494 3,254 4,748 1,498 3,348 4,846
Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . 171,659 1,561,556 1,733,215 148,863 1,650,393 1,799,256
Multifamily:
(1)
Fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,647 — 69,647 72,679 — 72,679
Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . 12,661 — 12,661 13,201 — 13,201
Other governmental . . . . . . . . . . . . . . . . . . . . . . . 3 — 3 3 — 3
Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . 82,311 — 82,311 85,883 — 85,883
Total UPB of mortgage loans . . . . . . . . . . . . . . . . . . 253,970 1,561,556 1,815,526 234,746 1,650,393 1,885,139
Deferred fees, unamortized premiums, discounts and
other cost basis adjustments. . . . . . . . . . . . . . . . (6,125) 10,926 4,801 (7,665) 7,423 (242)
Lower of cost or fair value adjustments on loans
held-for-sale
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . 195 — 195 (311) — (311)
Allowance for loan losses on mortgage loans held-
for-investment . . . . . . . . . . . . . . . . . . . . . . . . . (30,912) (8,351) (39,263) (28,047) (11,644) (39,691)
Total mortgage loans, net . . . . . . . . . . . . . . . . . . . . . $217,128 $1,564,131 $1,781,259 $198,723 $1,646,172 $1,844,895
Mortgage loans, net:
Held-for-investment . . . . . . . . . . . . . . . . . . . . . . . $207,418 $1,564,131 $1,771,549 $192,310 $1,646,172 $1,838,482
Held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,710 — 9,710 6,413 — 6,413
Total mortgage loans, net . . . . . . . . . . . . . . . . . . . . . $217,128 $1,564,131 $1,781,259 $198,723 $1,646,172 $1,844,895
(1) Based on UPB and excluding mortgage loans traded, but not yet settled.
(2) Consists of fair value adjustments associated with mortgage loans for which we have made a fair value election.
During 2011 and 2010, we purchased $316.3 billion and $380.7 billion, respectively, in UPB of single-family
mortgage loans and $2.7 billion and $3.2 billion, respectively, in UPB of multifamily loans that were classified as held-
for-investment at purchase. Our sales of multifamily mortgage loans occur primarily through the issuance of multifamily
Other Guarantee Transactions. See “NOTE 9: FINANCIAL GUARANTEES” for more information. We did not sell a
significant amount of held-for-investment loans during 2011. We did not have significant reclassifications of mortgage
loans into held-for-sale in 2011.
Credit Quality of Mortgage Loans
We evaluate the credit quality of single-family loans using different criteria than the criteria we use to evaluate
multifamily loans. The current LTV ratio is one key factor we consider when estimating our loan loss reserves for single-
family loans. As estimated current LTV ratios increase, the borrower’s equity in the home decreases, which negatively
affects the borrower’s ability to refinance or to sell the property for an amount at or above the balance of the outstanding
mortgage loan. If a borrower has an estimated current LTV ratio greater than 100%, the borrower is “underwater” and,
based upon historical information, is more likely to default than other borrowers due to limits in the ability to sell or
refinance. A second lien mortgage also reduces the borrower’s equity in the home, and has a similar negative effect on the
borrower’s ability to refinance or sell the property for an amount at or above the combined balances of the first and
second mortgages. As of December 31, 2011 and 2010, approximately 15% and 14%, respectively, of loans in our single-
family credit guarantee portfolio had second lien financing by third parties at the time of origination of the first mortgage,
and we estimate that these loans comprised 17% and 19%, respectively, of our seriously delinquent loans, based on UPB.
However, borrowers are free to obtain second lien financing after origination, and we are not entitled to receive
notification when a borrower does so. Therefore, it is likely that additional borrowers have post-origination second lien
233 Freddie Mac