Freddie Mac 2012 Annual Report Download - page 91

confidence measures, while up from recession lows of 2009, remain below long-term averages and suggest that households
will likely continue to be cautious in home buying. We also expect to continue to experience high levels of refinancing
activity in the near term, due to the impact of the expanded HARP initiative as well as the historically low interest rates on
fixed-rate single-family mortgages. For information on the HARP initiative, see “RISK MANAGEMENT — Credit Risk —
Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program.”
While home prices remained at significantly lower levels from their peak in most areas during 2012, declines in the
market’s inventory of vacant housing have supported stabilization in home prices in a number of metropolitan areas.
However, to the extent a large volume of loans complete the foreclosure process in a short period, the resulting increase in
the market’s inventory of homes for sale could have a negative effect on home prices. Our expectation is that national
average home prices will experience a modest increase in 2013.
Single-Family
Our charge-offs remained elevated during 2012 and we expect they will remain elevated during 2013. This is in part due
to the substantial number of underwater mortgage loans in our single-family credit guarantee portfolio. For the near term, we
also expect:
• REO disposition severity ratios and losses on short sale transactions to remain high. However, our recovery rates have
been positively impacted by recent improvements in home prices and home sales, as well as, to a lesser extent, by
recent changes in our process for determining our estimate of market values for properties, which we use to determine
the list price for our REO;
• the amount of non-performing assets and the volume of our loan workouts to remain high;
• continued high volume of loans in the foreclosure process as well as prolonged foreclosure timelines; and
• continued high rates of rescission and reduced payments for mortgage insurance coverage compared to periods before
2008.
Multifamily
During 2012, we continued to serve as a stable source of liquidity and continued our support of the multifamily market
and the nation’s renters, as evidenced by our $28.8 billion of multifamily loan purchases and issuance of other guarantee
commitments in 2012, which provided financing for more than 1,600 properties amounting to more than 435,000 apartment
units. The majority of these apartments were affordable to low and moderate income families. We expect similar purchase
and guarantee volumes for 2013, as demand for multifamily financing is expected to remain strong.
We expect continued strength in the multifamily market during 2013. As a result of the positive market fundamentals
and continuing strong portfolio performance, we expect our credit losses and delinquency rates to remain low in 2013. We
believe that the supply of multifamily housing will remain relatively low in the near term and that new construction, while
increasing, will continue to be constrained by the availability of financing and rising construction costs.
CONSOLIDATED RESULTS OF OPERATIONS
The following discussion of our consolidated results of operations should be read in conjunction with our consolidated
financial statements, including the accompanying notes. Also see “CRITICAL ACCOUNTING POLICIES AND
ESTIMATES” for information concerning certain significant accounting policies and estimates applied in determining our
reported results of operations.
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