Freddie Mac 2011 Annual Report Download - page 288

Table 16.1 — Concentration of Credit Risk — Single-Family Credit Guarantee Portfolio
Percentage of
Portfolio
(2)
Serious
Delinquency
Rate
(3)
Percentage of
Portfolio
(2)
Serious
Delinquency
Rate
(3)
December 31,
2011
December 31,
2010
December 31, 2011 December 31, 2010 Percent of Credit Losses
(1)
Year Ended
Year of Origination
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14% 0.1% N/A N/A — N/A
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 0.3 18% 0.1% ⬍1% —
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 0.5 21 0.3 1 ⬍1%
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.7 9 4.9 8 7
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11.6 11 11.6 36 34
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10.8 9 10.5 28 30
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.5 10 6.0 18 20
2004 and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.8 22 2.5 9 9
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 3.6% 100% 3.8% 100% 100%
Region
(4)
West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28% 3.6% 27% 4.7% 53% 48%
Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.4 25 3.2 7 8
North Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.9 18 3.1 16 15
Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5.5 18 5.6 20 25
Southwest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.8 12 2.1 4 4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 3.6% 100% 3.8% 100% 100%
State
(5)
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16% 3.4% 16% 4.9% 29% 26%
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10.9 6 10.5 13 19
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.7 5 4.6 5 5
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.3 3 4.1 4 3
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.3 3 3.0 4 5
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4.3 3 6.1 11 11
Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9.8 1 11.9 7 6
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 2.8 63 2.8 27 25
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 3.6% 100% 3.8% 100% 100%
(1) Credit losses consist of the aggregate amount of charge-offs, net of recoveries, and REO operations expense in each of the respective periods and
exclude foregone interest on non-performing loans and other market-based losses recognized on our consolidated statements of income and
comprehensive income.
(2) Based on the UPB of our single-family credit guarantee portfolio, which includes unsecuritized single-family mortgage loans held by us on our
consolidated balance sheets and those underlying Freddie Mac mortgage-related securities, or covered by our other guarantee commitments.
(3) Serious delinquencies on mortgage loans underlying certain REMICs and Other Structured Securities, Other Guarantee Transactions, and other
guarantee commitments may be reported on a different schedule due to variances in industry practice.
(4) Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA,
WV); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA,
MO, NE, NM, OK, TX, WY).
(5) States presented based on those with the highest percentage of credit losses during the year ended December 31, 2011. Our top seven states based on
the highest percentage of UPB as of December 31, 2011 are: California (16%), Florida (6%), Illinois (5%), New York (5%), Texas (4%), New Jersey
(4%), and Virginia (4%), and comprised 44% of our single-family credit guarantee portfolio as of December 31, 2011.
Credit Performance of Certain Higher Risk Single-Family Loan Categories
Participants in the mortgage market often characterize single-family loans based upon their overall credit quality at
the time of origination, generally considering them to be prime or subprime. Many mortgage market participants classify
single-family loans with credit characteristics that range between their prime and subprime categories as Alt-A because
these loans have a combination of characteristics of each category, may be underwritten with lower or alternative income
or asset documentation requirements compared to a full documentation mortgage loan, or both. However, there is no
universally accepted definition of subprime or Alt-A. Although we discontinued new purchases of mortgage loans with
lower documentation standards for assets or income beginning March 1, 2009 (or later, as our customers’ contracts
permitted), we continued to purchase certain amounts of these mortgages in cases where the loan was either:
(a) purchased pursuant to a previously issued other guarantee commitment; (b) part of our relief refinance mortgage
initiative; or (c) in another refinance mortgage initiative and the pre-existing mortgage (including Alt-A loans) was
originated under less than full documentation standards. In the event we purchase a refinance mortgage in either our relief
refinance mortgage initiative or in another mortgage refinance initiative and the original loan had been previously
identified as Alt-A, such refinance loan may no longer be categorized or reported as Alt-A in the table below because the
new refinance loan replacing the original loan would not be identified by the seller/servicer as an Alt-A loan. As a result,
our reported Alt-A balances may be lower than would otherwise be the case had such refinancing not occurred.
Although we do not categorize single-family mortgage loans we purchase or guarantee as prime or subprime, we
recognize that there are a number of mortgage loan types with certain characteristics that indicate a higher degree of
credit risk. For example, a borrower’s credit score is a useful measure for assessing the credit quality of the borrower.
283 Freddie Mac