Freddie Mac 2015 Annual Report Download - page 105

Management's Discussion and Analysis Risk Management | SF Credit Risk
Freddie Mac 2015 Form 10-K 103
The table below provides credit characteristic information on higher risk loan product types.
December 31, 2015
(dollars in billions) UPB CLTV % Modified SDQ Rate
Amortizing ARM and option ARM(1) $71.5 56% 1.6% 1.61%
Interest-only $ 22.0 80% 0.1% 6.02%
Step-rate modified $ 38.3 85% 100%7.34%
December 31, 2014
(dollars in billions) UPB CLTV % Modified SDQ Rate
Amortizing ARM and option ARM(1) $75.3 60% 1.5% 2.28%
Interest-only $ 27.8 87% 0.2% 9.36%
Step-rate modified $ 42.3 93% 100%9.20%
(1) Includes $5.0 billion and $5.7 billion in UPB of option ARM loans as of December 31, 2015 and 2014, respectively. As of
December 31, 2015 and 2014, the option ARM loans had: (a) current LTV ratios of 71% and 79%, (b) loan modification
percentages of 14.0% and 12.5%; and (c) serious delinquency rates of 8.01% and 9.87%, respectively.
The table below shows the timing of scheduled payment changes for certain types of loans within our
single-family credit guarantee portfolio. The amounts in the table below are aggregated by product type
and categorized by the year in which the loan will experience a payment change. The timing of the actual
payment change may differ from that presented in the table due to a number of factors, including if the
borrower refinances the loan. Loans where the year of first payment change is 2015 or prior have already
had one or more payment changes as of December 31, 2015; loans where the year of first payment
change is 2016 or later have not had a payment change as of December 31, 2015 and will not experience
a payment change until a future period. Step-rate modified loans are shown in each year that the
borrower will experience a scheduled interest-rate increase; therefore, a single loan may be included in
multiple periods. However, the total of step-rate loans in the table reflects the ending UPB of such loans
as of December 31, 2015.
December 31, 2015
(in millions) 2015 and Prior 2016 2017 2018 2019 2020 Thereafter Total(1)
ARM/amortizing $ 16,451 $ 3,505 $ 3,984 $4,712 $8,297 $9,653 $19,436 $66,038
ARM/interest-only 9,291 2,938 4,697 1,916 110 254 —19,206
Fixed/interest-only 80 399 1,817 395 6 4 120 2,821
Step-rate modified 16,926 24,318 25,895 17,184 6,151 4,431 2,616 38,343
Total $ 42,748 $ 31,160 $ 36,393 $ 24,207 $14,564 $14,342 $22,172 $126,408
(1) Excludes mortgage loans underlying certain other securitization products, since the payment change information is not
available to us for these loans.
We believe that the performance of these types of loans has been more affected by macroeconomic
conditions, such as unemployment rates and cumulative home price declines in many geographic areas
since 2006, than by the increase in the borrower’s monthly payment. However, we continue to monitor the
performance of these loans as many have experienced a payment change or are scheduled to have a
payment change in 2016 or 2017, which is likely to subject the borrowers to higher monthly payments.
Since a substantial portion of these loans were originated in 2005 through 2008 and are located in
geographic areas that were most affected by declines in home prices that began in 2006, we believe that
the serious delinquency rate for these types of loans will remain high in 2016.