Freddie Mac 2012 Annual Report Download - page 171

payment history of the loan; (b) the current status and outstanding UPB of the loan; (c) the estimated loss; (d) the type of
deficiency that led to the repurchase request; and (e) the customer’s current status and eligibility for an alternative remedy.
As part of our expansion of our relief refinance initiative (including HARP), we may face greater exposure to credit and other
losses on these loans because we are relieving lenders of certain representations and warranties on the original mortgage
being refinanced. For more information on HARP, see “Mortgage Credit Risk —Single-Family Mortgage Credit Risk —
Single-Family Loan Workouts and the MHA Program —Relief Refinance Mortgage Initiative and the Home Affordable
Refinance Program.”
We launched a new representation and warranty framework for conventional loans purchased on or after January 1,
2013. We may face greater exposure to credit and other losses under this new framework since it relieves lenders of certain
repurchase obligations in specific cases (such as for loans that perform for 36 consecutive months, with certain exclusions).
The new framework does not affect seller/servicers’ obligations under their contracts with us with respect to loans sold to us
prior to January 1, 2013. The new framework also does not affect their obligation to service these loans in accordance with
our servicing standards. For additional information, see “BUSINESS — Our Business Segments — Single-Family Guarantee
Segment — New Representation and Warranty Framework.”
Our contracts require that a seller/servicer repurchase a mortgage after we issue a repurchase request, unless the seller/
servicer avails itself of an appeals process provided for in our contracts, in which case the deadline for repurchase is extended
until we decide the appeal. The table below provides a summary of our repurchase request activity for 2012, 2011, and 2010.
Table 63 — Repurchase Request Activity and Counterparty Balances(1)
Year Ended December 31,
2012 2011 2010
(in millions)
Beginning balance ...................................................................... $2,716 $ 3,807 $ 4,201
New requests issued ................................................................... 9,246 9,172 16,498
Requests collected(2) ................................................................... (3,487) (4,490) (7,467)
Requests cancelled(3) ................................................................... (5,417) (5,707) (9,298)
Other(4) ............................................................................. (30) (66) (127)
Ending balance ........................................................................ $3,028 $ 2,716 $ 3,807
As of December 31,
2012 2011
(in millions)
Seller/servicer counterparty:
Bank of America, N.A. ................................................................. $1,029 $ 627
Wells Fargo Bank, N.A. ................................................................ 662 756
JPMorgan Chase Bank, N.A. ............................................................. 279 270
U.S. Bank, N.A. ...................................................................... 112 94
CitiMortgage, N.A. .................................................................... 100 159
Other counterparties ................................................................... 846 810
Total .............................................................................. $3,028 $ 2,716
(1) Amounts are based on the UPB of the loans associated with the repurchase requests.
(2) Requests collected are based on the UPB of the loans associated with the repurchase requests, which in many cases is more than the amount of payments
received for reimbursement of losses for requests associated with foreclosed mortgage loans, negotiated settlements, and other alternative remedies. For
the three years ended December 31, 2012, 2011, and 2010, approximately 35%, 31%, and 32%, respectively, of the requests collected in each period
were satisfied by reimbursement of losses associated with the request.
(3) Consists primarily of those requests that were resolved by the servicer providing missing documentation or rescinded through a successful appeal of the
request.
(4) Other includes items that affect the UPB of the loan while the repurchase request is outstanding, such as changes in UPB due to payments made on the
loan. Also includes requests deemed uncollectible due to the insolvency or other failure of the counterparty.
Historically, we have used a process of reviewing a sample of the loans we purchase to validate compliance with our
standards. In addition, we review many delinquent loans and loans that have resulted in credit losses, such as through
foreclosure or short sale. Beginning in 2012, we made revisions to our selection approach for these loans that expanded the
coverage of our loan reviews. Certain of these changes are designed to increase our loss recoveries. We expect that the
changes made to our loan review process will increase our repurchase request volumes with our seller/servicers in the future.
In addition, our new representation and warranty framework may further change the way we approach our review process in
the future.
During 2012, our increased reviews of defaulted loans that were originated prior to 2009 resulted in a slightly higher
amount of new repurchase requests in 2012 compared to 2011. The amount of new repurchase requests declined significantly
in 2011 compared to 2010, primarily as a result of: (a) a lower volume of loan reviews performed in 2011 relating to loans
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