Freddie Mac 2015 Annual Report Download - page 296

Financial Statements Notes to the Consolidated Financial Statements | Note 13
Freddie Mac 2015 Form 10-K 294
Loans in our Legacy single-family book have been more affected by declines in home prices that have
occurred since 2006 than loans originated in other years. Our Legacy single-family book comprised
approximately 16% of our single-family credit guarantee portfolio, based on UPB at December 31, 2015,
and these loans accounted for approximately 89% of our credit losses during 2015.
We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or
Alt-A if the securities were identified as such based on information provided to us when we entered into
these transactions. We have not identified option ARM, CMBS, obligations of states and political
subdivisions, and manufactured housing securities as either subprime or Alt-A securities. See Note 6 for
further information on these categories and other concentrations in our investments in securities.
MULTIFAMILY MORTGAGE PORTFOLIO
Numerous factors affect a multifamily borrower’s ability to repay the loan and the value of the property
underlying the loan. The most significant factors affecting credit risk are rental rates and capitalization
rates for the mortgaged property. Rental rates vary among geographic regions of the United States. The
average UPB for multifamily loans is significantly larger than for single-family loans and, therefore,
individual defaults for multifamily borrowers can result in more significant losses.
The table below summarizes the concentration of multifamily loans in our multifamily mortgage portfolio
classified by the legal structure of the investments we hold, based on UPB.
December 31, 2015 December 31, 2014
(dollars in billions) UPB Delinquency
Rate(1) UPB Delinquency Rate(1)
Unsecuritized loans $ 49.1 0.04% $ 53.0 0.02%
K Certificates 103.1 0.02%76.0 0.01%
Other securitization products 6.7 —% 5.0 0.64%
Other mortgage-related guarantees 9.5 —% 9.3 —%
Total $ 168.4 0.02% $ 143.3 0.04%
(1) Based on loans two monthly payments or more delinquent or in foreclosure.
In the multifamily mortgage portfolio, the primary concentration of credit risk is based on the legal
structure of the investments we hold. Our exposure to credit risk in K Certificates is minimal, as the
expected credit risk is absorbed by the subordinate tranches, which are generally sold to private
investors. As a result, our multifamily credit risk is primarily related to loans that have not been
securitized.
SELLERS AND SERVICERS
We acquire a significant portion of our single-family loan purchase volume from several large sellers. Our
top 10 single-family sellers provided approximately 50% of our single-family purchase volume during
2015. Our top two single-family sellers, Wells Fargo Bank, N.A. and Bank of America, N.A., accounted for
12% and 11%, respectively, of our single-family mortgage purchase volume and were the only single-
family sellers that comprised 10% or more of our purchase volume during 2015. In recent years, there
has been a shift in our purchase volume from depository institutions to non-depository and smaller
depository financial institutions. Some of these non-depository sellers have grown rapidly in recent years