Freddie Mac 2011 Annual Report Download - page 240

The table below summarizes loan loss reserve activity.
Table 4.3 — Detail of Loan Loss Reserves
Unsecuritized
Held By
Consolidated
Trusts
Reserve for
Guarantee
Losses
(1)
Total Unsecuritized
Held By
Consolidated
Trusts
Reserve for
Guarantee
Losses
(1)
Total
Allowance for Loan Losses Allowance for Loan Losses
2011 2010
Year Ended December 31,
(in millions)
Single-family:
Beginning balance . . . . . . . . $ 27,317 $ 11,644 $137 $ 39,098 $ 693 $ — $ 32,333 $ 33,026
Adjustments to beginning
balance
(2)
. . . . . . . . . . . . — — — — — 32,006 (32,192) (186)
Provision for credit losses . . . 2,796 8,059 43 10,898 7,532 9,540 47 17,119
Charge-offs
(3)
. . . . . . . . . . . (13,756) (970) (9) (14,735) (12,856) (3,351) (11) (16,218)
Recoveries
(3)
. . . . . . . . . . . . 2,618 146 — 2,764 2,647 715 — 3,362
Transfers, net
(4)(5)
. . . . . . . . . 11,431 (10,528) (12) 891 29,301 (27,266) (40) 1,995
Ending balance . . . . . . . . . . $ 30,406 $ 8,351 $159 $ 38,916 $ 27,317 $ 11,644 $ 137 $ 39,098
Multifamily:
Beginning balance . . . . . . . . $ 730 $ — $ 98 $ 828 $ 748 $ — $ 83 $ 831
Provision (benefit) for credit
losses . . . . . . . . . . . . . . . (152) — (44) (196) 84 — 15 99
Charge-offs
(3)
. . . . . . . . . . . (73) — (2) (75) (103) — (1) (104)
Recoveries
(3)
............ 1 — — 1 1 — — 1
Transfers, net
(5)
. . . . . . . . . . — — (13) (13) — — 1 1
Ending balance . . . . . . . . . . $ 506 $ — $ 39 $ 545 $ 730 $ — $ 98 $ 828
Total:
Beginning balance . . . . . . . . $ 28,047 $ 11,644 $235 $ 39,926 $ 1,441 $ — $ 32,416 $ 33,857
Adjustments to beginning
balance
(2)
. . . . . . . . . . . . — — — — — 32,006 (32,192) (186)
Provision for credit losses . . . 2,644 8,059 (1) 10,702 7,616 9,540 62 17,218
Charge-offs
(3)
. . . . . . . . . . . (13,829) (970) (11) (14,810) (12,959) (3,351) (12) (16,322)
Recoveries
(3)
. . . . . . . . . . . . 2,619 146 — 2,765 2,648 715 — 3,363
Transfers, net
(4)(5)
. . . . . . . . . 11,431 (10,528) (25) 878 29,301 (27,266) (39) 1,996
Ending balance . . . . . . . . . . $ 30,912 $ 8,351 $198 $ 39,461 $ 28,047 $ 11,644 $ 235 $ 39,926
Total loan loss reserve as a
percentage of the total
mortgage portfolio, excluding
non-Freddie Mac securities . . 2.08% 2.03%
(1) All of these loans are collectively evaluated for impairments. Our reserve for guarantee losses is included in other liabilities.
(2) Adjustments relate to the adoption of amendments to the accounting guidance for transfers of financial assets and consolidation of VIEs. See
“NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Recently Adopted Accounting Guidance” for further information.
(3) Charge-offs represent the amount of a loan that has been discharged to remove the loan from our consolidated balance sheet principally due to either
foreclosure transfers or short sales. Charge-offs exclude $422 million and $528 million for the years ended December 31, 2011 and 2010,
respectively, related to certain loans purchased under financial guarantees and recorded as losses on loans purchased within other expenses on our
consolidated statements of income and comprehensive income. We record charge-offs and recoveries on loans held by consolidated trusts when a
loss event (such as a foreclosure transfer or foreclosure alternative) occurs on a loan while it remains in a consolidated trust. Recoveries of charge-
offs primarily result from foreclosure alternatives and REO acquisitions on loans where: (a) a share of default risk has been assumed by mortgage
insurers, servicers, or other third parties through credit enhancements; or (b) we received a reimbursement of our losses from a seller/servicer
associated with a repurchase request on a loan that experienced a foreclosure transfer or a foreclosure alternative.
(4) In February 2010, we began the practice of removing substantially all 120 days or more delinquent single-family mortgage loans from our PC trusts.
We removed $44.1 billion and $127.5 billion in UPB of loans from PC trusts during the years ended December 31, 2011 and 2010, respectively. As
a result, loan loss reserves associated with loans removed from PC trusts were transferred from the allowance for loan losses — held by consolidated
trusts into the allowance for loan losses — unsecuritized.
(5) For the years ended December 31, 2011 and 2010, consists of: (a) approximately $10.5 billion and $27.5 billion, respectively, of reclassified single-
family reserves related to our removal of loans previously held by consolidated trusts (as discussed in endnote (4) above); (b) approximately
$1.1 billion and $1.1 billion, respectively, attributable to recapitalization of past due interest on modified mortgage loans; (c) $(258) million and
$757 million, respectively, related to agreements with seller/servicers where the transfer relates to recoveries received under these agreements to
compensate us for estimated credit losses; and (d) $48 million and $100 million, respectively, of other transfers.
235 Freddie Mac