Freddie Mac 2012 Annual Report Download - page 169

Table 61 — Single-Family Impaired Loans with Specific Reserve Recorded
2012 2011
# of Loans Amount # of Loans Amount
(in millions) (in millions)
TDRs (recorded investment):
TDRs, at beginning of year ................................................ 252,749 $ 53,494 128,241 $ 28,440
New additions(1) ....................................................... 227,576 36,074 136,316 27,791
Repayments ......................................................... (10,442) (2,070) (4,655) (1,243)
Loss events(2) ......................................................... (19,376) (3,756) (7,607) (1,537)
Other .............................................................. (1,362) (258) 454 43
TDRs, at end of year ..................................................... 449,145 83,484 252,749 53,494
Other (recorded investment)(3) ............................................. 18,416 1,672 25,565 2,433
Total impaired loans with specific reserve ..................................... 467,561 85,156 278,314 55,927
Allowance for loan losses of individually impaired single-family loans ............... (17,935) (15,100)
Net investment, at December 31 ............................................ $67,221 $ 40,827
(1) 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,
regardless of the borrowers’ payment status. As a result, we newly classified approximately $19.5 billion in UPB of loans discharged in Chapter 7
bankruptcy as TDRs in the third quarter of 2012. The majority of these loans were not seriously delinquent at the time of reclassification.
(2) Consists of foreclosure transfers or foreclosure alternatives, such as a deed in lieu of foreclosure or short sale transaction.
(3) Consists of loans impaired upon purchase, which experienced further deterioration in borrower credit.
Credit Risk Sensitivity
Under a 2005 agreement with FHFA, then OFHEO, we are required to disclose the estimated increase in the NPV of
future expected credit losses for our single-family credit guarantee portfolio over a ten year period as the result of an
immediate 5% decline in home prices nationwide, followed by a stabilization period and return to the base case. This
sensitivity analysis is hypothetical and may not be indicative of our actual results. We do not use this analysis for
determination of our reported results under GAAP.
The table below presents the estimated credit loss sensitivity of our single-family credit guarantee portfolio, based on
assumptions required by FHFA, both before and after consideration of credit enhancements, measured at the end of the last
five quarterly periods.
Table 62 — Single-Family Credit Loss Sensitivity
Before Receipt of
Credit Enhancements(1)
After Receipt of
Credit Enhancements(2)
NPV(3) NPV Ratio(4) NPV(3) NPV Ratio(4)
(dollars in millions)
At:
December 31, 2012 ........................................................... $6,356 38.8 bps $5,908 36.1 bps
September 30, 2012 .......................................................... $6,479 39.2 bps $6,085 36.8 bps
June 30, 2012 ............................................................... $7,131 42.2 bps $6,713 39.7 bps
March 31, 2012 ............................................................. $8,568 49.6 bps $8,095 46.8 bps
December 31, 2011 ........................................................... $8,328 47.7 bps $7,842 44.9 bps
(1) Assumes that none of the credit enhancements currently covering our mortgage loans has any mitigating effect on our credit losses.
(2) Assumes we collect amounts due from credit enhancement providers after giving effect to certain assumptions about counterparty default rates.
(3) Based on the single-family credit guarantee portfolio, excluding REMICs and Other Structured Securities backed by Ginnie Mae Certificates.
(4) Calculated as the ratio of NPV of increase in credit losses to the single-family credit guarantee portfolio, defined in note (3) above.
Institutional Credit Risk
The concentration of our exposure to our counterparties increased beginning in 2008 due to industry consolidation and
counterparty failures. Many of our remaining counterparties were adversely affected in recent years by challenging market
and economic conditions as well as the stress on their resources to meet increased regulatory requirements and oversight.
Our exposure to single-family mortgage seller/servicers remained high during 2012 with respect to their repurchase
obligations arising from breaches of representations and warranties made to us for loans they underwrote and sold to us, or
service for us. We rely on our single-family seller/servicers to perform loan workout activities as well as foreclosures on
loans that they service for us. Our credit losses could increase to the extent that our seller/servicers do not fully perform these
obligations in a timely manner. The financial condition of the mortgage insurance industry remained weak during 2012, and
the substantial majority of our mortgage insurance exposure is concentrated with four counterparties, certain of which are
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