Freddie Mac 2012 Annual Report Download - page 162

activities that we have classified as TDRs and subsequent performance information of these loans. As a result of the positive
market fundamentals and continued strong portfolio performance, we expect our multifamily credit losses and delinquency
rate to remain relatively low in 2013.
Non-Performing Assets
Non-performing assets consist of single-family and multifamily loans that have undergone a TDR, single-family
seriously delinquent loans, multifamily loans that are three or more payments past due or in the process of foreclosure, and
REO assets, net. Non-performing assets also include multifamily loans that are deemed impaired based on management
judgment. We place non-performing loans on non-accrual status when we believe the collectability of interest and principal
on a loan is not reasonably assured, unless the loan is well secured and in the process of collection. When a loan is placed on
non-accrual status, any interest income accrued but uncollected is reversed. Thereafter, interest income is recognized only
upon receipt of cash payments. We did not accrue interest on any loans three monthly payments or more past due in 2012
and 2011.
We classify TDRs as those loans where we have granted a concession to a borrower that is experiencing financial
difficulties. Modified loans that have been classified as TDRs remain categorized as non-performing throughout the
remaining life of the loan regardless of whether the borrower makes payments which return the loan to a current payment
status. See “NOTE 5: INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS” for further information about
our TDRs.
The table below provides detail on non-performing loans and REO assets on our consolidated balance sheets and non-
performing loans underlying our financial guarantees.
Table 55 — Non-Performing Assets(1)
December 31,
2012 2011 2010 2009 2008
(dollars in millions)
Non-performing mortgage loans — on balance sheet:
Single-family TDRs:(2)
Less than three monthly payments past due ............................ $ 65,784 $ 44,440 $ 26,612 $ 711 $ 484
Seriously delinquent ............................................. 22,008 11,639 3,144 477 163
Multifamily TDRs(3) ............................................... 815 893 911 229 150
Total TDRs ................................................... 88,607 56,972 30,667 1,417 797
Other seriously delinquent single-family loans(4) ........................... 39,711 63,205 84,272 12,106 5,590
Other multifamily loans(5) ........................................... 1,411 1,819 1,750 1,196 197
Total non-performing mortgage loans — on balance sheet ................. 129,729 121,996 116,689 14,719 6,584
Non-performing mortgage loans — off-balance sheet:
Single-family loans ............................................... 1,096 1,230 1,450 85,395 36,718
Multifamily loans ................................................ 474 246 198 178 63
Total non-performing mortgage loans — off-balance sheet ................. 1,570 1,476 1,648 85,573 36,781
Real estate owned, net ............................................... 4,378 5,680 7,068 4,692 3,255
Total non-performing assets ......................................... $135,677 $129,152 $125,405 $104,984 $46,620
Loan loss reserves as a percentage of our non-performing mortgage loans ...... 23.5% 32.0% 33.7% 33.8% 36.0%
Total non-performing assets as a percentage of the total mortgage portfolio,
excluding non-Freddie Mac securities ................................ 7.5% 6.8% 6.4% 5.2% 2.4%
(1) Mortgage loan amounts are based on UPB and REO, net is based on carrying values.
(2) In the third quarter of 2012, we changed the treatment of single-family loans discharged in Chapter 7 bankruptcy to classify these loans as TDRs (unless
they were already classified as TDRs for other reasons), regardless of the borrowers’ payment status. The majority of these loans were not seriously
delinquent at the time of reclassification. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Basis of Presentation” for
further information about our TDR classification of loans discharged in Chapter 7 bankruptcy.
(3) As of December 31, 2012, approximately $806 million in UPB of these loans were current.
(4) Represents loans recognized by us on our consolidated balance sheets, including loans removed from PC trusts due to the borrower’s serious
delinquency.
(5) Of this amount, $1.4 billion, $1.8 billion, $1.6 billion, and $1.1 billion of UPB were current at December 31, 2012, 2011, 2010, and 2009, respectively.
Our loan loss reserves as a percentage of our non-performing mortgage loans declined at December 31, 2012 compared
to December 31, 2011 primarily due to the increase in non-performing assets combined with an improvement in borrower
payment performance within our single-family credit guarantee portfolio, which led to a decline in the level of our loan loss
reserves in 2012. The amount of non-performing assets increased to $135.7 billion as of December 31, 2012, from $129.2
157 Freddie Mac