Freddie Mac 2012 Annual Report Download - page 164

excluding those underlying our Other Guarantee Transactions, was 611 days and 506 days, respectively, which included:
(a) an average of 769 days and 633 days, respectively, for foreclosures completed in states that require a judicial foreclosure
process; and (b) an average of 467 days and 449 days, respectively, for foreclosures completed in states that do not require a
judicial foreclosure process. We continue to experience significant variability in the average time for foreclosure by state.
For example, during 2012, the average time for completion of foreclosures associated with loans in our single-family credit
guarantee portfolio, excluding Other Guarantee Transactions, ranged from 390 days in Michigan to 1,026 days in Florida. As
of December 31, 2012, our serious delinquency rate for the aggregate of those states that require a judicial foreclosure and all
other states was 4.25% and 2.24%, respectively, compared to 4.47% and 2.74%, respectively, as of December 31, 2011.
We expect the pace of our REO acquisitions will continue to be negatively affected in 2013 by the length of the
foreclosure process, particularly in states with a judicial foreclosure process. However, we expect the volume of our REO
acquisitions will likely remain elevated, as we have a large inventory of seriously delinquent loans in our single-family credit
guarantee portfolio. This large inventory of seriously delinquent loans arose due to various factors and events that have
lengthened the problem loan resolution process and delayed the transition of such loans to a workout or foreclosure transfer
(and then, to REO).
Our single-family REO acquisitions during 2012 were most significant in the states of Florida, Illinois, Michigan,
California and Ohio, which collectively represented 42% of total REO acquisitions based on the number of properties. The
North Central region comprised 42% and 35% of our REO property inventory, based on the number of properties, as of
December 31, 2012 and 2011, respectively. The states with the most properties in our REO inventory as of December 31,
2012 were Michigan and Illinois, which are states in this region that have experienced the greatest cumulative decline in
home prices since 2006. As of December 31, 2012, Michigan and Illinois each comprised 12% of total REO property
inventory, based on the number of properties, compared to 12% and 8%, respectively, of the inventory at December 31,
2011. During 2012, our REO property inventory declined most in the West region, which comprised 13% and 22% of our
total REO property inventory as of December 31, 2012 and 2011, respectively. California experienced an approximately 13%
increase in home prices during 2012, based on our own home price index, and comprised approximately 6% and 10% of our
REO property inventory as of December 31, 2012 and 2011, respectively.
The percentage of interest-only and Alt-A loans in our single-family credit guarantee portfolio, based on UPB, was
approximately 3% and 5%, respectively, at December 31, 2012 and was 6% on a combined basis. The percentage of our REO
acquisitions in 2012 that had been financed by either of these loan types represented approximately 24% of our total REO
acquisitions, based on loan amount prior to acquisition.
We have a variety of alternative methods and tools for REO dispositions that we may employ, as appropriate, including
auction sales, bulk sales, and financing options. Our aggregate REO dispositions through these methods represented an
insignificant portion of our REO dispositions during 2012. In June 2012, we implemented a streamlined bulk sale process
and expect to see increased sales of our REO properties through this channel in 2013; however, the volume of our bulk sales
is likely to remain modest relative to individual property sales. We also developed and implemented a new financing option
during the third quarter of 2012 for both owner-occupied and investor purchases of REO properties in a few states. Although
this initiative did not significantly impact our results in 2012, we expect to expand this initiative nationally in 2013 and we
believe that it may help reduce our REO inventory in the future.
A significant portion of our REO property inventory is unmarketable at any given time, which can increase the aging of
our inventory. For example, some jurisdictions require a period of time after foreclosure during which the borrower may
reclaim the property. During this period, we are not able to sell the property. As of December 31, 2012 and 2011, the
percentage of our single-family REO property inventory that had been held for sale longer than one year was 5.8% and 7.1%,
respectively. Though it varied significantly in different states, the average holding period of our single-family REO
properties was little changed during 2012. Excluding any post-foreclosure period during which borrowers may reclaim a
foreclosed property, the average holding period associated with our single-family REO dispositions during the years ended
December 31, 2012 and 2011 was 200 days and 197 days, respectively.
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