Freddie Mac 2004 Annual Report Download - page 191

than temporary in nature. Management conducts periodic reviews to identify and evaluate investments that
have indications of impairment. Impairment losses related to investments are recognized in earnings if fair
value is less than amortized cost and the decline is considered other than temporary. See ""NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES'' for additional information about the
company's impairment accounting policies.
Table 5.2 below shows the fair value of available-for-sale securities in a gross unrealized loss position at
December 31, 2004 and how long they have been in that position.
Table 5.2 Ì Available-For-Sale Securities in a Gross Unrealized Loss Position at December 31, 2004
Less than 12 months 12 months or Greater Total
Gross Gross Gross
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
(dollars in millions)
Retained portfolio
Mortgage-related securities issued by:
Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $103,976 $ (713) $34,161 $ (725) $138,137 $(1,438)
Fannie Mae ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,727 (134) 9,913 (219) 30,640 (353)
Ginnie Mae ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77 Ì 52 (1) 129 (1)
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,398 (268) 4,323 (112) 59,721 (380)
Obligations of states and political
subdivisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,025 (17) 591 (15) 1,616 (32)
Total mortgage related-securities ÏÏÏÏÏÏ 181,203 (1,132) 49,040 (1,072) 230,243 (2,204)
Cash and investments portfolio
Non-mortgage related securities:
Asset-backed securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,242 (51) 205 (4) 9,447 (55)
Obligations of states and political
subdivisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 582 (1) 7 Ì 589 (1)
Total non-mortgage related securitiesÏÏÏ 9,824 (52) 212 (4) 10,036 (56)
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $191,027 $(1,184) $49,252 $(1,076) $240,279 $(2,260)
At December 31, 2004, gross unrealized losses on available-for-sale securities were $2,260 million, or
approximately one percent of the fair value of such securities in an unrealized loss position, as noted in
Table 5.1 and Table 5.2. The gross unrealized losses relate to approximately 54 thousand individual lots
representing approximately 10 thousand separate securities. Freddie Mac routinely purchases multiple lots of
individual securities at diÅerent times and at diÅerent costs. The company determines gross unrealized gains
and gross unrealized losses by speciÑcally identifying investment positions at the lot level; therefore, Freddie
Mac often holds several lots of one security including both unrealized gain and unrealized loss positions,
depending upon the amortized cost of the speciÑc lot.
The following is a summary of management's analysis of why available-for-sale securities in an unrealized
loss position are not considered other than temporarily impaired:
‚Freddie Mac securities. The unrealized losses on Freddie Mac securities are primarily a result of
movements in interest rates. The extent and duration of the decline in fair value relative to the
amortized cost have not met the company's criteria that are used to indicate other-than-temporary
impairment as described in ""NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.'' The company reviews the estimated credit exposure of the mortgages underlying
these securities. As a result of this review, management has determined that these securities are
not other than temporarily impaired. See ""NOTE 2: TRANSFERS OF SECURITIZED
INTERESTS IN MORTGAGE-RELATED ASSETS'' for further information on Freddie
Mac's estimates of credit exposure and credit support.
‚Fannie Mae securities and Obligations of states and political subdivisions. The unrealized
losses on Fannie Mae securities and Obligations of states and political subdivisions are primarily a
result of movements in interest rates. The extent and duration of the decline in fair value relative
to the amortized cost have not met the company's criteria that are used to indicate other-than-
temporary impairment and no other facts or circumstances existed to suggest that the decline was
other than temporary. The issuer guarantees related to these securities have led management to
conclude that any credit risk is minimal.
Freddie Mac
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