Freddie Mac 2011 Annual Report Download - page 289

Statistically, borrowers with higher credit scores are more likely to repay or have the ability to refinance than those with
lower scores.
Presented below is a summary of the serious delinquency rates of certain higher-risk categories of single-family loans
in our single-family credit guarantee portfolio. The table includes a presentation of each higher risk category in isolation.
A single loan may fall within more than one category (for example, an interest-only loan may also have an original LTV
ratio greater than 90%). Loans with a combination of these attributes will have an even higher risk of delinquency than
those with isolated characteristics.
Table 16.2 — Certain Higher-Risk Categories in the Single-Family Credit Guarantee Portfolio
(1)
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
Percentage of Portfolio
(1)
Serious Delinquency Rate
Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 5% 17.6% 18.4%
Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ⬍1 1 20.5 21.2
Alt-A
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 11.9 12.2
Original LTV ratio greater than 90%
(3)
.................. 10 9 6.7 7.8
Lower FICO scores at origination (less than 620) . . . . . . . . . . . 3 3 12.9 13.9
(1) Based on UPB.
(2) Alt-A loans may not include those loans that were previously classified as Alt-A and that have been refinanced as either a relief refinance mortgage
or in another refinance mortgage initiative.
(3) Based on our first lien exposure on the property. Includes the credit-enhanced portion of the loan and excludes any secondary financing by third
parties. The existence of a second lien reduces the borrower’s equity in the property and, therefore, increases the risk of default.
The percentage of borrowers in our single-family credit guarantee portfolio, based on UPB, with estimated current
LTV ratios greater than 100% was 20% and 18% at December 31, 2011 and December 31, 2010, respectively. 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 is more likely
to default than other borrowers. The serious delinquency rate for single-family loans with estimated current LTV ratios
greater than 100% was 12.8% and 14.9% as of December 31, 2011 and December 31, 2010, respectively.
We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or Alt-A if the
securities were identified as such based on information provided to us when we entered into these transactions. We have
not identified option ARM, CMBS, obligations of states and political subdivisions, and manufactured housing securities as
either subprime or Alt-A securities. See “NOTE 7: INVESTMENTS IN SECURITIES” for further information on these
categories and other concentrations in our investments in securities.
Multifamily Mortgage Portfolio
The table below summarizes the concentration of multifamily mortgages in our multifamily mortgage portfolio by
certain attributes. Information presented for multifamily mortgage loans includes certain categories based on loan or
borrower characteristics present at origination. The table includes a presentation of each category in isolation. A single
loan may fall within more than one category (for example, a non-credit enhanced loan may also have an original LTV
ratio greater than 80%).
284 Freddie Mac