Freddie Mac 2011 Annual Report Download - page 376

HAFA — Home Affordable Foreclosures Alternative program — In 2009, the Treasury Department introduced the HAFA
program to provide an option for HAMP-eligible homeowners who are unable to keep their homes. The HAFA program
took effect on April 5, 2010 and we implemented it effective August 1, 2010.
HAMP — Home Affordable Modification Program — Refers to the effort under the MHA Program whereby the
U.S. government, Freddie Mac and Fannie Mae commit funds to help eligible homeowners avoid foreclosure and keep
their homes through mortgage modifications.
HARP — Home Affordable Refinance Program — Refers to the effort under the MHA Program that seeks to help eligible
borrowers (whose monthly payments are current) with existing loans that are guaranteed by us or Fannie Mae to refinance
into loans with more affordable monthly payments and/or fixed-rate terms. Through December 2011, under HARP,
eligible borrowers who had mortgages with current LTV ratios above 80% and up to 125% were allowed to refinance
their mortgages without obtaining new mortgage insurance in excess of what is already in place. Beginning December
2011, HARP was expanded to allow eligible borrowers who have mortgages with current LTV ratios above 125% to
refinance under the program. The relief refinance initiative, under which we also allow borrowers with LTV ratios of 80%
and below to participate, is our implementation of HARP for our loans.
HFA — State or local Housing Finance Agency
HUD — U.S. Department of Housing and Urban Development — Prior to the enactment of the Reform Act, HUD had
general regulatory authority over Freddie Mac, including authority over our affordable housing goals and new programs.
Under the Reform Act, FHFA now has general regulatory authority over us, though HUD still has authority over Freddie
Mac with respect to fair lending.
Implied volatility — A measurement of how the value of a financial instrument changes due to changes in the market’s
expectation of potential changes in future interest rates. A decrease in implied volatility generally increases the estimated
fair value of our mortgage assets and decreases the estimated fair value of our callable debt and options-based derivatives,
while an increase in implied volatility generally has the opposite effect.
Interest-only loan — A mortgage loan that allows the borrower to pay only interest (either fixed-rate or adjustable-rate)
for a fixed period of time before principal amortization payments are required to begin. After the end of the interest-only
period, the borrower can choose to refinance the loan, pay the principal balance in total, or begin paying the monthly
scheduled principal due on the loan.
IRS — Internal Revenue Service
LIBOR — London Interbank Offered Rate
LIHTC partnerships — Low-income housing tax credit partnerships — Prior to 2008, we invested as a limited partner in
LIHTC partnerships, which are formed for the purpose of providing funding for affordable multifamily rental properties.
These LIHTC partnerships invest directly in limited partnerships that own and operate multifamily rental properties that
generate federal income tax credits and deductible operating losses.
Liquidation preference — Generally refers to an amount that holders of preferred securities are entitled to receive out of
available assets, upon liquidation of a company. The initial liquidation preference of our senior preferred stock was
$1.0 billion. The aggregate liquidation preference of our senior preferred stock includes the initial liquidation preference
plus amounts funded by Treasury under the Purchase Agreement. In addition, dividends and periodic commitment fees not
paid in cash are added to the liquidation preference of the senior preferred stock. We may make payments to reduce the
liquidation preference of the senior preferred stock only in limited circumstances.
LTV ratio — Loan-to-value ratio — The ratio of the unpaid principal amount of a mortgage loan to the value of the
property that serves as collateral for the loan, expressed as a percentage. Loans with high LTV ratios generally tend to
have a higher risk of default and, if a default occurs, a greater risk that the amount of the gross loss will be high
compared to loans with lower LTV ratios. We report LTV ratios based solely on the amount of the loan purchased or
guaranteed by us, generally excluding any second lien mortgages (unless we own or guarantee the second lien).
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations
MHA Program — Making Home Affordable Program — Formerly known as the Housing Affordability and Stability
Plan, the MHA Program was announced by the Obama Administration in February 2009. The MHA Program is designed
to help in the housing recovery, promote liquidity and housing affordability, expand foreclosure prevention efforts and set
market standards. The MHA Program includes HARP and HAMP.
371 Freddie Mac