Freddie Mac 2012 Annual Report Download - page 243

The table below presents information on the estimated current LTV ratios of single-family loans on our consolidated
balance sheets, all of which are held-for-investment. Our current LTV ratio estimates are based on available data through the
end of each respective period presented.
Table 4.2 — Recorded Investment of Held-For-Investment Mortgage Loans, by LTV Ratio
As of December 31, 2012 As of December 31, 2011
Estimated Current LTV Ratio(1) Estimated Current LTV Ratio(1)
<= 80 >80 to 100 > 100(2) Total <= 80 >80 to 100 > 100(2) Total
(in millions)
Single-family loans:
20 and 30-year or more, amortizing
fixed-rate(3) .................... $ 699,386 $309,099 $188,048 $1,196,533 $641,698 $383,320 $247,468 $1,272,486
15-year amortizing fixed-rate(3) ....... 249,666 18,473 5,433 273,572 238,287 18,280 2,966 259,533
Adjustable-rate(4) ................. 50,764 10,341 4,845 65,950 43,728 13,826 9,180 66,734
Alt-A, interest-only, and option
ARM(5) ...................... 27,642 24,030 52,057 103,729 30,589 29,251 79,418 139,258
Total single-family loans ............. $1,027,458 $361,943 $250,383 1,639,784 $954,302 $444,677 $339,032 1,738,011
Multifamily loans .................. 63,032 72,801
Total recorded investment of held-for-
investment loans ................. $1,702,816 $1,810,812
(1) The current LTV ratios are management estimates, which are updated on a monthly basis. Current market values are estimated by adjusting the value of
the property at origination based on changes in the market value of homes in the same geographical area since that time. The value of a property at
origination is based on: (a) for purchase mortgages, either the lesser of the appraised value of the property at the time of mortgage origination or the
mortgage borrower’s purchase price; or (b) for refinance mortgages, a third-party appraisal. Changes in market value are derived from our internal index
which measures price changes for repeat sales and refinancing activity on the same properties using Freddie Mac and Fannie Mae single-family
mortgage acquisitions, including foreclosure sales. Estimates of the current LTV ratio include the credit-enhanced portion of the loan and exclude any
secondary financing by third parties. The existence of a second lien reduces the borrower’s equity in the property and, therefore, can increase the risk of
default.
(2) The serious delinquency rate for the total of single-family held-for-investment mortgage loans with estimated current LTV ratios in excess of 100% was
12.7% and 12.8% as of December 31, 2012 and 2011, respectively.
(3) The majority of our loan modifications result in new terms that include fixed interest rates after modification. However, our HAMP loan modifications
result in an initial interest rate that subsequently adjusts gradually after five years to a new rate that is fixed for the remaining life of the loan. We have
classified these loans as fixed-rate for purposes of this presentation even though they have a rate adjustment provision, because the future rates are
determined at the time of the modification rather than at a subsequent date.
(4) Includes balloon/reset mortgage loans and excludes option ARMs.
(5) We have discontinued our purchases of Alt-A, interest-only, and option ARM loans. For reporting purposes, loans within the Alt-A category continue to
be presented in that category following modification, even though the borrower may have provided full documentation of assets and income to complete
the modification. For reporting purposes, loans within the option ARM category continue to be presented in that category following modification, even
though the modified loan no longer provides for optional payment provisions.
For information about the payment status of single-family and multifamily mortgage loans, including the amount of
such loans we deem impaired, see “NOTE 5: INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS.” For a
discussion of certain indicators of credit quality for the multifamily loans on our consolidated balance sheets, see “NOTE 15:
CONCENTRATION OF CREDIT AND OTHER RISKS — Multifamily Mortgage Portfolio.”
Allowance for Loan Losses and Reserve for Guarantee Losses, or Loan Loss Reserve
We maintain an allowance for loan losses on mortgage loans that we classify as held-for-investment on our consolidated
balance sheets. Our reserve for guarantee losses is associated with Freddie Mac mortgage-related securities backed by
multifamily loans, certain single-family Other Guarantee Transactions, and other guarantee commitments, for which we have
incremental credit risk. A significant portion of the unsecuritized single-family loans on our consolidated balance sheets are
seriously delinquent and/or TDR loans that we previously removed from our PC pools. As a result, these seriously delinquent
and TDR loans typically have a higher associated allowance for loan loss than loans that remain in consolidated trusts.
Single-family loans that remain in consolidated trusts are generally aggregated and measured collectively for impairment
based on similar risk characteristics of the loans.
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