Freddie Mac 2012 Annual Report Download - page 251

Multifamily TDRs
The assessment as to whether a multifamily loan restructuring is considered a TDR contemplates the unique facts and
circumstances of each loan. This assessment considers qualitative factors such as whether the borrower’s modified interest
rate is consistent with that of a borrower having a similar credit profile at the time of modification. In certain cases, for
maturing loans we may provide short-term loan extensions of up to one year with no changes to the effective borrowing rate.
In other cases, we may make more significant modifications of terms for borrowers experiencing financial difficulty, such as
reducing the interest rate or extending the maturity for longer than one year. In cases where we do modify the contractual
terms of the loan, the changes in terms may be similar to those of single-family loans, such as an extension of the term,
reduction of contractual rate, principal forbearance, or some combination of these features.
TDR Activity and Performance
The table below presents the volume of single-family and multifamily loans that were newly classified as TDRs during
2012 and 2011, based on the original category of the loan before the loan was classified as a TDR. Loans classified as a TDR
in one period may be subject to further action (such as a modification or remodification) in a subsequent period. In such
cases, the subsequent action would not be reflected in the table below since the loan would already have been classified as a
TDR.
Table 5.4 — TDR Activity, by Segment
Year Ended
December 31, 2012
Year Ended
December 31, 2011
# of Loans
Post-TDR
Recorded
Investment # of Loans
Post-TDR
Recorded
Investment
(dollars in millions)
Single-family(1)
20 and 30-year or more, amortizing fixed-rate .................................... 177,930 $27,076 100,948 $19,263
15-year amortizing fixed-rate ................................................ 17,549 1,176 6,529 651
Adjustable-rate(2) ......................................................... 6,496 977 3,287 657
Alt-A, interest-only, and option ARM .......................................... 35,012 7,834 31,094 8,355
Total Single-family ....................................................... 236,987 37,063 141,858 28,926
Multifamily ............................................................... 20 202 23 254
Total ................................................................... 237,007 $37,265 141,881 $29,180
(1) The pre-TDR recorded investment for single-family loans initially classified as TDR during the years ended December 31, 2012 and 2011, was
$37.0 billion and $28.1 billion, respectively.
(2) Includes balloon/reset mortgage loans.
The measurement of impairment for single-family TDRs is based on the excess of our recorded investment in the loan
over the present value of the loan’s expected future cash flows. For multifamily loans, we use an estimate of the fair value of
the loan’s collateral rather than the present value of expected future cash flows to determine the amount of impairment.
Generally, restructurings of single-family loans that are TDRs have a higher allowance for loan losses than restructurings that
are not considered TDRs because TDRs involve a concession being granted to the borrower. Our process for determining the
appropriate allowance for loan losses for both single-family and multifamily loans considers the impact that our loss
mitigation activities, such as loan restructurings, have on probabilities of default. For single-family loans evaluated
individually and collectively for impairment that have been modified, the probability of default is affected by the incidence
of redefault that we have experienced on similar loans that have completed a modification. For multifamily loans, the
incidence of redefault on loans that have been modified does not directly affect the allowance for loan losses as our
multifamily loans are generally evaluated individually for impairment based on the fair value of the underlying collateral.
The process for determining the appropriate allowance for loan losses for multifamily loans evaluated collectively for
impairment considers the incidence of redefault on loans that have completed a modification.
The table below presents the volume of payment defaults of our TDR modifications based on the original category of
the loan before modification and excludes loans subject to other loss mitigation activity that were classified as TDRs during
the period. 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 before completing 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. Substantially all
of our completed single-family loan modifications classified as a TDR during 2012 resulted in a modified loan with a fixed
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