Freddie Mac 2012 Annual Report Download - page 144

December 31, 2012 and 2011, respectively. While we have not categorized these option ARM securities as either subprime
or Alt-A securities for presentation within this Form 10-K and elsewhere in our reporting, they could exhibit similar credit
performance to collateral identified as subprime or Alt-A. We have not purchased option ARM loans in our single-family
credit guarantee portfolio since 2007. For reporting purposes, loans within the option ARM category continue to be presented
in that category following a modification of the loan, even though the modified loan no longer provides for optional payment
provisions. As of December 31, 2012 and 2011, approximately 8.1% and 5.5%, respectively, of the option ARM loans within
our single-family credit guarantee portfolio had completed a modification. For information on our exposure to option ARM
loans through our holdings of non-agency mortgage-related securities, see “CONSOLIDATED BALANCE SHEETS
ANALYSIS — Investments in Securities.”
Adjustable-Rate Mortgage Loans
The table below presents information for single-family mortgage loans in our single-family credit guarantee portfolio,
excluding Other Guarantee Transactions, at December 31, 2012 that contain adjustable payment terms. The reported balances
in the table below are aggregated by product type and categorized by year of the next scheduled contractual reset date. At
December 31, 2012, approximately 57% of these loans have interest rates that are scheduled to reset in 2013 or 2014. The
timing of the actual reset dates may differ from those presented due to a number of factors, including prepayments or
exercising provisions within the terms of the mortgage (certain of which could delay or accelerate the timing of the reset
date).
Table 44 — Single-Family Next Scheduled Adjustable-Rate Resets by Year at December 31, 2012(1)
2013 2014 2015 2016 2017 Thereafter Total
(in millions)
ARMs/amortizing ..................................... $26,079 $1,371 $5,550 $10,099 $ 9,013 $16,417 $ 68,529
ARMs/interest-only(2) ................................... 31,065 2,189 1,850 1,492 1,818 499 38,913
Balloon/resets ........................................ 12695—<1 1 141
Total ............................................. $57,270 $3,569 $7,405 $11,591 $10,831 $16,917 $107,583
(1) Based on the UPBs of mortgage products that contain adjustable-rate interest provisions and are scheduled to reset during the periods specified above.
These reported balances are based on the UPB of the underlying mortgage loans and do not reflect the publicly-available security balances we use to
report the composition of our PCs and REMICs and Other Structured Securities. Excludes: (a) mortgage loans underlying Other Guarantee Transactions
since rate reset information is not available to us for these loans; and (b) any amortizing ARM loans which completed a modification before the end of
the respective period and for which the terms of the loan were changed to a fixed-rate loan product.
(2) Reflects the UPB of interest-only loans that reset in each of the years shown. We report loans in the interest-only category if their original terms include
interest-only provisions for a pre-determined period of time before the monthly payment changes to include amortization of principal. Includes $13.1
billion of loans that were interest-only at origination that have converted to include amortization of principal as of December 31, 2012.
The table below presents serious delinquency information for single-family adjustable-rate mortgage loans in our single-
family credit guarantee portfolio, excluding Other Guarantee Transactions, categorized by the year in which the loan first had
an interest rate reset. Loans where the year of first interest rate reset is 2012 or prior have already had one or more interest
rate resets as of December 31, 2012; loans where the year of first interest rate reset is 2013 or later have not yet had an
interest rate reset as of December 31, 2012 and will not have an interest rate reset until a future period.
Table 45 — Serious Delinquency Rates by Year of First Rate Reset(1)
As of December 31,
Year of payment change: 2012 2011 2010
2010 and prior ............................................................................. 4.24% 4.84% 5.78%
2011 ..................................................................................... 13.16 17.50 18.00
2012 ..................................................................................... 19.45 22.70 22.70
2013 and after ............................................................................. 4.90 6.61 9.15
(1) Based on loans remaining in the single-family credit guarantee portfolio as of December 31, 2012, 2011, and 2010, rather than all loans guaranteed by us
and originated in the respective year. Excludes mortgage loans which completed a modification before the end of the respective period and for which the
terms of the loan were changed to a fixed-rate loan product.
As shown in the table above, the trend in serious delinquency rates of adjustable-rate loans that experienced an interest
rate reset during the last three years has not been significantly affected by the change in interest rate of the loan. Except for
interest-only loans that began to amortize at the reset date, there were not significant increases to the borrowers’ payments
when these loans reached their first reset dates because market interest rates have generally declined in recent years. Interest-
only loans are a higher-risk mortgage product, which feature an increase in the monthly payment at the date of first reset
which is not solely related to the contractual interest rate (i.e., when the monthly payment begins to include principal). In
139 Freddie Mac