Freddie Mac 2011 Annual Report Download - page 290

Table 16.3 — Concentration of Credit Risk — Multifamily Mortgage Portfolio
UPB
(1)
Delinquency
Rate
(2)
UPB
(1)
Delinquency
Rate
(2)
December 31, 2011 December 31, 2010
(in billions)
State
(3)
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.2 0.02% $ 19.3 0.06%
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.0 0.46 12.7 0.52
NewYork........................................................... 9.6 — 9.2 —
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 0.05 6.4 0.56
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 — 5.6 —
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 — 5.3 —
All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.2 0.35 49.9 0.35
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $116.1 0.22% $108.4 0.26%
Region
(4)
Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33.1 0.01% $ 31.1 —%
West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.9 0.07 28.3 0.07
Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.4 0.44 20.2 0.61
Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.7 0.65 19.2 0.59
North Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0 0.01 9.6 0.30
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $116.1 0.22% $108.4 0.26%
Category
(5)
Original LTV ratio greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.4 2.34% $ 6.6 2.30%
Original DSCR below 1.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 2.58 3.2 1.22
Non-credit enhanced loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.5 0.11 87.5 0.12
(1) Beginning in the second quarter of 2011, we exclude non-consolidated mortgage-related securities for which we do not provide our guarantee. The
prior period has been revised to conform to the current period presentation.
(2) Based on the UPB of multifamily mortgages two monthly payments or more delinquent or in foreclosure.
(3) Represents the six states with the highest geographic concentration by UPB at December 31, 2011.
(4) See endnote (4) to “Table 16.1 — Concentration of Credit Risk — Single-family Credit Guarantee Portfolio” for a description of these regions.
(5) These categories are not mutually exclusive and a loan in one category may also be included within another.
One indicator of risk for mortgage loans in our multifamily mortgage portfolio is the amount of a borrower’s equity
in the underlying property. A borrower’s equity in a property decreases as the LTV ratio increases. Higher LTV ratios
negatively affect a borrower’s ability to refinance or sell a property for an amount at or above the balance of the
outstanding mortgage. The DSCR is another indicator of future credit performance. The DSCR estimates a multifamily
borrower’s ability to service its mortgage obligation using the secured property’s cash flow, after deducting non-mortgage
expenses from income. The higher the DSCR, the more likely a multifamily borrower will be able to continue servicing
its mortgage obligation.
Our multifamily mortgage portfolio includes certain loans for which we have credit enhancement. Credit
enhancement significantly reduces our exposure to a potential credit loss. As of December 31, 2011, more than one-half
of the multifamily loans that were two monthly payments or more past due, measured both in terms of number of loans
and on a UPB basis, had credit enhancements that we currently believe will mitigate our expected losses on those loans.
See “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES” for additional information about credit
enhancements on multifamily loans.
We estimate that the percentage of loans in our multifamily mortgage portfolio with a current LTV ratio of greater
than 100% was approximately 5% and 8% at December 31, 2011 and December 31, 2010, respectively, and our estimate
of the current average DSCR for these loans was 1.1 at both December 31, 2011 and December 31, 2010. We estimate
that the percentage of loans in our multifamily mortgage portfolio with a current DSCR less than 1.0 was 5% and 7% at
December 31, 2011 and December 31, 2010, respectively, and the average current LTV ratio of these loans was 107% and
108%, respectively. Our estimates of current DSCRs are based on the latest available income information for these
properties and our assessments of market conditions. Our estimates of the current LTV ratios for multifamily loans are
based on values we receive from a third-party service provider as well as our internal estimates of property value, for
which we may use changes in tax assessments, market vacancy rates, rent growth and comparable property sales in local
areas as well as third-party appraisals for a portion of the portfolio. We periodically perform our own valuations or obtain
third-party appraisals in cases where a significant deterioration in a borrower’s financial condition has occurred, the
borrower has applied for refinancing, or in certain other circumstances where we deem it appropriate to reassess the
property value. Although we use the most recently available results of our multifamily borrowers to estimate a property’s
value, there may be a significant lag in reporting, which could be six months or more, as they complete their results in the
normal course of business. Our internal estimates of property valuation are derived using techniques that include income
capitalization, discounted cash flows, sales comparables, or replacement costs.
285 Freddie Mac