Freddie Mac 2011 Annual Report Download - page 341

The table below presents the performance measures and management’s assessment of our achievement against those
performance objectives.
Table 78 — Achievement of Performance Measures for the Performance-Based Portion of Deferred Base Salary
Performance Measure Weighting Key Factors Impacting Achievement Assessment
Mission
• Support loss mitigation and
foreclosure prevention activities,
including the Obama Administration’s
Making Home Affordable Program, as
measured by the number of completed
modifications and workouts of 60-day
delinquencies;
• Provide a “satisfactory” Duty to Serve
underserved markets and achieve an
“in compliance” execution rating.
Additionally, meet the 2011 affordable
goals and subgoals (if feasible, as
determined by FHFA); and
• Provide market support through
Single-Family cash and guarantee
purchases
30% • We completed over 109,000 HAMP and non-HAMP modifications, at the high
end of the target range of 80,000 - 120,000. Additionally, we achieved the
borrower outreach measure, which measures the number of workouts each
month for 60-day delinquencies as a percent of the total 60-day delinquent
population. We entered into workouts for 3.2% of such mortgages, above the
high end of the target range of 2.5%-3.0%.
• With respect to the 2011 affordable goals, based on preliminary information, we
believe we met the single-family refinance low-income goal and both
multifamily goals. We did not meet the FHFA benchmark level for single-family
purchase-money goals or subgoals for 2011.
• Single-family purchases as a percentage of agency volume were 28%, which
was above plan (the target range was 23%-27%) due in part to increased
refinance volumes during the low interest rate environment that existed
throughout 2011. Our share of purchase volume tends to increase during periods
when refinancing activity is high.
Financial and Risk
Meet targets for:
• Segment Earnings or Total
Comprehensive Income;
• Internal return on economic capital on
all new purchases;
• Underwriting quality on new single-
family and multifamily purchases;
• Volume of short sales and deeds-in
lieu of foreclosure; and
• Efficiency/administrative expenses
30% • For the segment earnings objective:
– Single-Family: The loss of just under $10.0 billion for 2011 was within the
target range of losses of $4 billion to $10 billion due to higher than
anticipated credit-related expenses
– Multifamily: Segment earnings of $1.3 billion were above the high end of
the target range of $0.6 billion to $1.0 billion
– Investments: Segment total comprehensive income of $6.5 billion was
below the target range of $8 billion to $10 billion due primarily to higher
than forecast mark-to-market losses on derivatives and available-for-sale
mortgage securities;
• For the internal return on economic capital on new purchase objective:
– Single-Family: The 17% internal return on economic capital exceeded the
target range of 10%-14%
– Multifamily: The 17% internal return on economic capital was within the
target range of 16%-20%
– Investments: Internal return on economic capital of 6% was below the
target range of 10%-14% due to purchases made to improve PC
performance;
• For the underwriting quality on new purchases:
– Single-Family: Performance against this objective is measured using the
cumulative default rate for the worst quintile of new purchases, which was
1.45%, easily achieving the target of 5% or less.
– Multifamily: The weighted average amortizing debt coverage ratio on the
worst 10% of new multifamily purchases of 1.25x slightly exceeded the
target range of 1.20x-1.23x.
• We completed over 46,000 short sales and deeds-in-lieu of foreclosure during
2011, within the target range of 35,000-50,000.
• We met the objective of limiting 2011 administrative expenses - excluding costs
associated with special policy and housing initiatives such as the Making Home
Affordable program — to no more than $1.4 billion. Administrative expenses
measured on this basis totaled $1.34 billion.
Business Infrastructure
• Maintain normal service and quality
standards for existing technology and
operations infrastructure;
• Complete deployment of all planned
business infrastructure enhancements;
and
• Complete all other planned
information technology initiatives
30% • Performance indicators used to monitor service and quality standards
demonstrate that those standards were met throughout 2011.
• All work was completed as planned for projects involving multifamily and
finance transaction accounting. For single-family, many projects were completed
as planned, but some were either canceled or were not completed during 2011.
The high-cost, high-risk Single-Family Master Servicing projects were canceled
to enable resources to address the Servicing Alignment Initiative.
• Achieved milestones and/or completed all other planned information technology
initiatives.
Accounting and Controls
• Complete all planned controls
remediation activities;
• Execute the 2011 internal audit plan;
and
• Maintain effective controls over
financial reporting (excluding the
material weakness related to our
disclosure controls and procedures)
10% • Many planned remediation activities were completed. Indicators of the progress
made during 2011 include remediation of all Significant Deficiencies targeted at
the beginning of the performance year, and reliance being placed on the work of
our Internal Audit organization by our Conservator and our external auditors.
• Successfully completed 11 of the 12 objectives - including the three highest
weighted objectives - in the annual internal audit plan.
• See the discussion below for information about events that occurred subsequent
to the initial assessments by management and the Compensation Committee.
336 Freddie Mac