Freddie Mac 2011 Annual Report Download - page 291

Seller/Servicers
We acquire a significant portion of our single-family mortgage purchase volume from several large seller/servicers
with whom we have entered into mortgage purchase volume commitments that provide for the lenders to deliver us up to
a certain volume of mortgages during a specified period of time. Our top 10 single-family seller/servicers provided
approximately 82% of our single-family purchase volume during the year ended December 31, 2011. Wells Fargo Bank,
N.A. and JPMorgan Chase Bank, N.A., accounted for 28%, and 13%, respectively, of our single-family mortgage purchase
volume and were the only single-family seller/servicers that comprised 10% or more of our purchase volume during the
year ended December 31, 2011. We are exposed to the risk that we could lose purchase volume to the extent these
arrangements are terminated without replacement from other lenders.
We are exposed to institutional credit risk arising from the potential insolvency or non-performance by our seller/
servicers of their obligations to repurchase mortgages or (at our option) indemnify us in the event of: (a) breaches of the
representations and warranties they made when they sold the mortgages to us; or (b) failure to comply with our servicing
requirements. Our contracts require that a seller/servicer repurchase a mortgage after we issue a repurchase request, unless
the seller/servicer avails itself of an appeals process provided for in our contracts. As of December 31, 2011 and 2010, the
UPB of loans subject to our repurchase requests issued to our single-family seller/servicers was approximately $2.7 billion
and $3.8 billion, and approximately 39% and 34% of these requests, respectively, were outstanding for more than four
months since issuance of our initial repurchase request as measured by the UPB of the loans subject to the requests (these
figures included repurchase requests for which appeals were pending). As of December 31, 2011, two of our largest seller/
servicers had aggregate repurchase requests outstanding, based on UPB, of $1.4 billion, and approximately 48% of these
requests were outstanding for four months or more since issuance of the initial request. During 2011 and 2010, we
recovered amounts that covered losses with respect to $4.4 billion and $6.4 billion, respectively, of UPB on loans subject
to our repurchase requests.
GMAC Mortgage, LLC and Residential Funding Company, LLC (collectively GMAC), indirect subsidiaries of Ally
Financial Inc. (formerly, GMAC Inc.), are seller/servicers that together serviced and subserviced for an affiliated entity
approximately 4% of the single-family loans in our single-family credit guarantee portfolio as of December 31, 2011. In
March 2010, we entered into an agreement with GMAC, under which they made a one-time payment to us for the partial
release of repurchase obligations relating to loans sold to us prior to January 1, 2009. The partial release does not affect
any of GMAC’s potential repurchase obligations for loans sold to us by GMAC after January 1, 2009, nor does it affect
the ability to recover amounts associated with failure to comply with our servicing requirements. The agreement did not
have a material impact on our 2011 or 2010 consolidated statements of income and comprehensive income.
On December 31, 2010, we entered into an agreement with Bank of America, N.A., and two of its affiliates, BAC
Home Loans Servicing, LP and Countrywide Home Loans, Inc., to resolve our currently outstanding and future claims for
repurchases arising from the breach of representations and warranties on certain loans purchased by us from Countrywide
Home Loans, Inc. and Countrywide Bank FSB. Under the terms of the agreement, we received a $1.28 billion cash
payment in consideration for releasing Bank of America and its two affiliates from current and future repurchase requests
arising from loans sold to us by the Countrywide entities for which the first regularly scheduled monthly payments were
due on or before December 31, 2008. The UPB of the loans in this portfolio, as of December 31, 2010, was
approximately $114 billion. The agreement applies only to certain claims for repurchase based on breaches of
representations and warranties and the agreement contains specified limitations and does not cover loans sold to us or
serviced for us by other Bank of America entities. This agreement did not have a material impact on our 2011 or 2010
consolidated statements of income and comprehensive income.
On August 24, 2009, one of our single-family seller/servicers, Taylor, Bean & Whitaker Mortgage Corp., or TBW,
filed for bankruptcy and announced its plan to wind down its operations. We had exposure to TBW with respect to its
loan repurchase obligations. We also had exposure with respect to certain borrower funds that TBW held for the benefit of
Freddie Mac. TBW received and processed such funds in its capacity as a servicer of loans owned or guaranteed by
Freddie Mac. TBW maintained certain bank accounts, primarily at Colonial Bank, to deposit such borrower funds and to
provide remittance to Freddie Mac. Colonial Bank was placed into receivership by the FDIC in August 2009.
With the approval of FHFA, as Conservator, we entered into a settlement with TBW and the creditors’ committee
appointed in the TBW bankruptcy proceeding to represent the interests of the unsecured trade creditors of TBW. The
settlement was filed with the bankruptcy court on June 22, 2011. The court approved the settlement and confirmed TBW’s
proposed plan of liquidation on July 21, 2011, which became effective on August 10, 2011. See “NOTE 18: LEGAL
CONTINGENCIES” for additional information on the settlement, our claims arising from TBW’s bankruptcy, and
potential claims by Ocala Funding, LLC, which is a wholly-owned subsidiary of TBW, or Ocala’s creditors.
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