Freddie Mac 2012 Annual Report Download - page 146

documentation of assets and income before completing the modification. As of December 31, 2012 and 2011, approximately
11.8% and 8.8%, respectively, of the Alt-A loans within our single-family credit guarantee portfolio had completed a
modification. As of December 31, 2012, for Alt-A loans in our single-family credit guarantee portfolio, the average FICO
score at origination was 714. Although Alt-A mortgage loans comprised approximately 5% of our single-family credit
guarantee portfolio as of both December 31, 2012 and 2011, respectively, these loans represented approximately 23% and
28% of our credit losses during 2012 and 2011, respectively.
Although we discontinued new purchases of mortgage loans with lower documentation standards for assets or income
beginning March 1, 2009 (or later, as our customers’ contracts permitted), we continued to purchase certain amounts of these
mortgages in cases where the loan was either: (a) purchased pursuant to a previously issued other guarantee commitment;
(b) part of our relief refinance mortgage initiative; or (c) in another refinance mortgage initiative and the pre-existing
mortgage (including Alt-A loans) was originated under less than full documentation standards. In the event we purchase a
refinance mortgage and the original loan had been previously identified as Alt-A, such refinance loan may no longer be
categorized or reported as an Alt-A mortgage in this Form 10-K and our other financial reports because the new refinance
loan replacing the original loan would not be identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A
balances may be lower than would otherwise be the case had such refinancing not occurred. From the time the relief
refinance initiative began in 2009 to December 31, 2012, we purchased approximately $22.1 billion of relief refinance
mortgages that were previously categorized as Alt-A loans in our portfolio, including $6.8 billion during 2012.
We also hold investments in non-agency mortgage-related securities backed by single-family Alt-A loans. At
December 31, 2012 and 2011, we held investments of $14.8 billion and $16.8 billion, respectively, of non-agency mortgage-
related securities backed by Alt-A and other mortgage loans. Approximately 11% and 15%, respectively, of these securities
were categorized as investment grade. The credit performance of loans underlying these securities has deteriorated
significantly since 2008. We categorize our investments in non-agency mortgage-related securities as Alt-A if the securities
were identified as such based on information provided to us when we entered into these transactions. For more information
on our exposure to Alt-A mortgage loans through our investments in non-agency mortgage-related securities see
“CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities.”
Higher-Risk Loans in the Single-Family Credit Guarantee Portfolio
The table below presents information about certain categories of single-family mortgage loans within our single-family
credit guarantee portfolio that we believe have certain higher-risk characteristics. These loans include categories based on
product type and borrower characteristics present at origination. The table includes a presentation of each higher risk
category in isolation. A single loan may fall within more than one category (for example, an interest-only loan may also have
an original LTV ratio greater than 90%). Loans with a combination of these characteristics will have an even higher risk of
default than those with an individual characteristic.
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