Freddie Mac 2011 Annual Report Download - page 247

In the table below, we provide information about our single-family loans that were initially classified as TDRs in
2011.
Table 5.4 — Single-Family TDRs, by Type
Number of
Loans
Pre-TDR
Recorded
Investment
Percentage of
Recorded
Investment
Year Ended December 31, 2011
(in millions, except for number of loans)
Type of completed loan modification:
No change in terms
(1)(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,084 $ 674 2%
Extension of term
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,137 2,290 8
Reduction of contractual interest rate and, in certain cases, extension of term . . . . . . . . . . . . . . . . . 51,592 10,569 38
Rate reduction, extension of term, and principal forbearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,645 3,314 12
Subtotal - loan modification activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,458 16,847 60
Other activity:
Loans that entered into a modification trial period
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,513 5,353 19
Forbearance agreement
(2)(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,100 4,198 15
Repayment plan
(2)(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,787 1,699 6
Subtotal - other activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,400 11,250 40
Total single-family TDRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,858 $28,097 100%
(1) Under this modification type, past due amounts are added to the principal balance and reamortized based on the original contractual loan terms.
(2) Represents only those agreements or plans that result in more than an insignificant delay, which is generally considered by us as more than three
monthly payments under the original terms.
(3) Represents loans that entered into a trial period for modification. Beginning in the third quarter of 2011, we began to classify loans as TDRs when
they entered a trial period rather than at the time the trial period is completed. As of December 31, 2011, 15,368 of these loans had completed the
trial period and received a modification, 2,389 of these loans terminated the trial period without successful modification, and 7,756 loans remained
in a trial period.
(4) As of December 31, 2011, there were 6,615 loans that completed a forbearance agreement or began the modification process, 9,705 loans that had
experienced a loss event or returned to a delinquent payment status, and 5,780 loans that remained in forbearance.
(5) As of December 31, 2011, there were 3,220 loans that completed a repayment plan or began the modification process, 5,012 loans that experienced a
loss event or terminated their plan and remained delinquent, and 2,555 loans where the borrowers were continuing their repayment plan (actively
repaying past due amounts under the plan).
For information on how we determine our allowance for loan losses, including how payment defaults are considered
in this determination, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”
The table above presents completed loan modification activity based on the following types of modification:
• No change in terms: This involves the addition of past due amounts, including delinquent monthly principal and
interest payments, to the remaining principal balance and allows for amortization of such past due amounts over
the loan’s remaining original contractual life with no other change in terms. These modifications are considered
TDRs if they result in a delay in payment that is considered to be more than insignificant.
• Extension of term: This involves resetting the contractual life of the loan to a longer term, and the longer
amortization period generally results in a reduced monthly payment compared to the pre-modified terms. These
modifications are considered TDRs if they result in a delay in payment that is considered to be more than
insignificant.
• Reduction of contractual interest rate: These modifications are considered TDRs as they result in a concession
being granted to the borrower as we do not expect to collect all amounts due, including accrued interest at the
original contractual interest rate.
• Principal forbearance: This involves the separation of a portion of the principal balance, which is not amortized nor
used in determining the amount of monthly interest. No interest accrues on this portion of the principal and
repayment is delayed until either the final payoff of the mortgage, the maturity date, or the transfer of the property.
Accordingly, this reduces the monthly payment amount compared to the pre-modified terms. These modifications
are considered TDRs as they result in a concession being granted to the borrower as we do not expect to collect all
amounts due, including accrued interest at the original contractual interest rate.
During the year ended December 31, 2011, the average term extension was 96 months and the average interest rate
reduction was 2.7% on completed modifications classified as TDRs.
Multifamily TDRs
The assessment as to whether a multifamily loan restructuring is considered a TDR contemplates the unique facts and
circumstances of each loan. This assessment considers qualitative factors such as whether the borrower’s modified interest
242 Freddie Mac