Freddie Mac 2012 Annual Report Download - page 244

The table below summarizes loan loss reserve activity.
Table 4.3 — Detail of Loan Loss Reserves
Year Ended December 31,
2012 2011
Allowance for Loan Losses Allowance for Loan Losses
Unsecuritized
Held By
Consolidated
Trusts
Reserve for
Guarantee
Losses(1) Total Unsecuritized
Held By
Consolidated
Trusts
Reserve for
Guarantee
Losses(1) Total
(in millions)
Single-family:
Beginning balance ............ $30,406 $ 8,351 $159 $ 38,916 $ 27,317 $ 11,644 $137 $ 39,098
Provision (benefit) for credit
losses .................... (3,186) 5,199 — 2,013 2,796 8,059 43 10,898
Charge-offs(2) ................ (12,559) (950) (11) (13,520) (13,756) (970) (9) (14,735)
Recoveries(2) ................. 2,136 126 — 2,262 2,618 146 - 2,764
Transfers, net(3) ............... 8,652 (7,808) (7) 837 11,431 (10,528) (12) 891
Ending balance ............... $25,449 $ 4,918 $141 $ 30,508 $ 30,406 $ 8,351 $159 $ 38,916
Multifamily:
Beginning balance ............ $ 506 $ — $ 39 $ 545 $ 730 $ — $ 98 $ 828
Provision (benefit) for credit
losses .................... (132) — 9 (123) (152) — (44) (196)
Charge-offs(2) ................ (34) — (2) (36) (73) — (2) (75)
Recoveries(2) ................. — — 2 2 1 — — 1
Transfers, net ................ (1) 1 (6) (6) — — (13) (13)
Ending balance ............... $ 339 $ 1 $ 42 $ 382 $ 506 $ — $ 39 $ 545
Total:
Beginning balance ............ $30,912 $ 8,351 $198 $ 39,461 $ 28,047 $ 11,644 $235 $ 39,926
Provision (benefit) for credit
losses .................... (3,318) 5,199 9 1,890 2,644 8,059 (1) 10,702
Charge-offs(2) ................ (12,593) (950) (13) (13,556) (13,829) (970) (11) (14,810)
Recoveries(2) ................. 2,136 126 2 2,264 2,619 146 — 2,765
Transfers, net(3) ............... 8,651 (7,807) (13) 831 11,431 (10,528) (25) 878
Ending balance ............... $25,788 $ 4,919 $183 $ 30,890 $ 30,912 $ 8,351 $198 $ 39,461
Total loan loss reserve as a percentage of the total mortgage portfolio,
excluding non-Freddie Mac securities .......................... 1.71% 2.08%
(1) Loans associated with our reserve for guarantee losses are those loans that underlie our non-consolidated securitization trusts and other guarantee
commitments and are evaluated for impairment on a collective basis. Our reserve for guarantee losses is included in other liabilities on our consolidated
balance sheets.
(2) Charge-offs represent the amount of a loan that has been discharged to remove the loan from our consolidated balance sheet principally due to either
foreclosure transfers or short sales. Charge-offs exclude $308 million and $422 million for the years ended December 31, 2012 and 2011, respectively,
recorded as losses on loans purchased within other expenses on our consolidated statements of comprehensive income, which relate to certain loans
purchased under financial guarantees. We record charge-offs and recoveries on loans held by consolidated trusts when a loss event (such as a foreclosure
transfer or foreclosure alternative) occurs on a loan while it remains in a consolidated trust. Recoveries of charge-offs primarily result from foreclosure
alternatives and REO acquisitions on loans where: (a) a share of default risk has been assumed by mortgage insurers, servicers, or other third parties
through credit enhancements; or (b) we received a reimbursement of our losses from a seller/servicer associated with a repurchase request on a loan that
experienced a foreclosure transfer or a foreclosure alternative.
(3) For the years ended December 31, 2012 and 2011, consists of: (a) approximately $7.8 billion and $10.5 billion, respectively, of reclassified single-family
reserves related to our removal of loans previously held by consolidated trusts; (b) approximately $0.8 billion and $1.1 billion, respectively, attributable
to recapitalization of past due interest on modified mortgage loans; (c) $0 million and $(258) million, respectively, related to agreements with seller/
servicers where the transfer relates to recoveries received under these agreements to compensate us for estimated credit losses; and (d) $1 million and
$48 million respectively, of other transfers.
239 Freddie Mac