Freddie Mac 2012 Annual Report Download - page 108

Single-Family Guarantee
The table below presents the Segment Earnings of our Single-family Guarantee segment.
Table 18 — Segment Earnings and Key Metrics — Single-Family Guarantee(1)
Year Ended December 31,
2012 2011 2010
(dollars in millions)
Segment Earnings:
Net interest income (expense) .......................................................... $ (147) $ (23) $ 72
Provision for credit losses ............................................................. (3,168) (12,294) (18,785)
Non-interest income:
Management and guarantee income .................................................... 4,389 3,647 3,635
Other non-interest income ........................................................... 931 1,216 1,351
Total non-interest income .......................................................... 5,320 4,863 4,986
Non-interest expense:
Administrative expenses ............................................................ (890) (888) (930)
REO operations expense ............................................................ (62) (596) (676)
Other non-interest expense ........................................................... (393) (321) (578)
Total non-interest expense ......................................................... (1,345) (1,805) (2,184)
Segment adjustments(2) ................................................................ (832) (699) (953)
Segment Earnings (loss) before income tax (expense) benefit ................................... (172) (9,958) (16,864)
Income tax (expense) benefit ........................................................... 8 (42) 608
Segment Earnings (loss), net of taxes ..................................................... (164) (10,000) (16,256)
Total other comprehensive income (loss), net of taxes ........................................... (63) 30 6
Total comprehensive income (loss) attributable to Freddie Mac .................................... $ (227) $ (9,970) $(16,250)
Key metrics:
Balances and Volume (in billions, except rate):
Average balance of single-family credit guarantee portfolio and HFA guarantees ..................... $ 1,692 $ 1,801 $ 1,861
Issuance — Single-family credit guarantees(3) ............................................... $ 446 $ 305 $ 385
Fixed-rate products — Percentage of purchases(4) ............................................. 96% 92% 95%
Liquidation rate — Single-family credit guarantees(5) .......................................... 33% 24% 29%
Management and Guarantee Fee Rate (in bps):
Contractual management and guarantee fees(6) ............................................... 14.7 13.7 13.5
Amortization of delivery fees(7) .......................................................... 11.2 6.5 6.0
Segment Earnings management and guarantee income ........................................ 25.9 20.2 19.5
Credit:
Serious delinquency rate, at end of period .................................................. 3.25% 3.58% 3.84%
REO inventory, at end of period (number of properties) ....................................... 49,071 60,535 72,079
Single-family credit losses, in bps(8) ...................................................... 68.3 72.0 75.8
Market:
Single-family mortgage debt outstanding (total U.S. market, in billions)(9) ........................... $ 9,926 $ 10,158 $ 10,413
30-year fixed mortgage rate(10) .......................................................... 3.4% 4.0% 4.9%
(1) For reconciliations of the Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance
with GAAP, see “NOTE 13: SEGMENT REPORTING — Table 13.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) For a description of our segment adjustments, see “NOTE 13: SEGMENT REPORTING — Segment Earnings.”
(3) Based on UPB.
(4) Excludes Other Guarantee Transactions.
(5) Represents principal repayments relating to loans underlying Freddie Mac mortgage-related securities and other guarantee commitments, including
those related to our removal of seriously delinquent and modified mortgage loans and balloon/reset mortgage loans out of PC pools.
(6) Results for the 2012 periods include the effect of the legislated 10 basis point increase in guarantee fees that became effective April 1, 2012.
(7) Beginning in the fourth quarter of 2012, includes the amortization of buy-down fees.
(8) Calculated as the amount of single-family credit losses divided by the sum of the average carrying value of our single-family credit guarantee portfolio
and the average balance of our single-family HFA initiative guarantees.
(9) Source: Federal Reserve Flow of Funds Accounts of the United States of America dated December 6, 2012. The outstanding amount for December 31,
2012 reflects the balance as of September 30, 2012.
(10) Based on Freddie Mac’s Primary Mortgage Market Survey rate for the last week in the period, which represents the national average mortgage
commitment rate to a qualified borrower exclusive of any fees and points required by the lender. This commitment rate applies only to financing on
conforming mortgages with LTV ratios of 80%.
Segment Earnings (loss) for our Single-family Guarantee segment improved to $(0.2) billion in 2012 compared to
$(10.0) billion in 2011 and $(16.3) billion in 2010. Segment Earnings (loss) for the Single-family Guarantee segment is
largely driven by management and guarantee fee income, offset by the provision for credit losses. The improvement in both
2012 and 2011, compared to the respective prior year, was primarily due to a significant decline in Segment Earnings
provision for credit losses.
103 Freddie Mac