Freddie Mac 2011 Annual Report Download - page 25

short-term forbearance agreements was between two and four months. In January 2012, we announced new
unemployment forbearance terms, which permit forbearance of up to 12 months for unemployed borrowers.
• Repayment plans, which are contractual plans to make up past due amounts. They mitigate our credit losses
because they assist borrowers in returning to compliance with the original terms of their mortgages. During 2011,
the average time period granted for completed repayment plans was between two and five months.
• Loan modifications, which may involve changing the terms of the loan, or adding outstanding indebtedness, such
as delinquent interest, to the UPB of the loan, or a combination of both. We require our servicers to examine the
borrower’s capacity to make payments under the new terms by reviewing the borrower’s qualifications, including
income. During 2011, we granted principal forbearance but did not utilize principal forgiveness for our loan
modifications. Principal forbearance is a change to a loan’s terms to designate a portion of the principal as non-
interest -bearing. A borrower may only receive one HAMP modification, and loans may be modified once under
other Freddie Mac loan modification programs. However, we reserve the right to approve subsequent non-HAMP
loan modifications to the same borrower, based on the borrower’s individual facts and circumstances.
• Short sale and deed in lieu of foreclosure transactions.
In addition to these loan workout initiatives, our relief refinance opportunities, including HARP (which is the portion
of our relief refinance initiative for loans with LTV ratios above 80%), are a significant part of our effort to keep families
in their homes.
In 2009, we began participating in HARP, which gives eligible homeowners (whose monthly payments are current)
with existing loans owned or guaranteed by us or Fannie Mae an opportunity to refinance into loans with more affordable
monthly payments and/or fixed-rate terms. Only borrowers with Freddie Mac owned or guaranteed mortgages are eligible
for our relief refinance mortgage initiative, which is our implementation of HARP. Through December 2011, under HARP,
eligible borrowers who had mortgages with current LTV ratios above 80% and up to 125% were allowed to refinance
their mortgages without obtaining new mortgage insurance in excess of what is already in place. On October 24, 2011,
FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP in an effort to attract more
eligible borrowers who can benefit from refinancing their home mortgages. The revisions to HARP are available to
borrowers with loans that were sold to Freddie Mac and Fannie Mae on or before May 31, 2009 and who have current
LTV ratios above 80%. The program enhancements include:
• eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages, and lowering fees for
other borrowers;
• removing the 125% LTV ratio ceiling for fixed-rate mortgages;
• eliminating the requirement for lenders to provide us with certain representations and warranties that they would
ordinarily be required to commit to in selling loans to us;
• eliminating the need for a new property appraisal where there is a reliable automated valuation model estimate
provided by the purchasing GSE; and
• extending the end date for HARP until December 31, 2013.
See “MD&A — RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk —Single-family Mortgage Credit
Risk —Single-Family Loan Workouts and the MHA Program” for additional information on our implementation of HARP
through our relief refinance mortgage initiative. For more information regarding credit risk, see “MD&A — RISK
MANAGEMENT — Credit Risk,” “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES,” and “NOTE 5:
INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS.”
Investments Segment
The Investments segment reflects results from our investment, funding and hedging activities. In our Investments
segment, we invest principally in mortgage-related securities and single-family performing mortgage loans, which are
funded by other debt issuances and hedged using derivatives. In our Investments segment, we also provide funding and
hedging management services to the Single-family Guarantee and Multifamily segments. In the Investments segment, we
are not currently a substantial buyer or seller of mortgage assets.
Our Customers
Our customers for our debt securities predominantly include insurance companies, money managers, central banks,
depository institutions, and pension funds. Within the Investments segment, we buy securities through various market
sources. We also invest in performing single-family mortgage loans, which we intend to aggregate and securitize. We
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