Freddie Mac 2004 Annual Report Download - page 73

fees to perform resecuritizations during 2004 in response to competitive pressures and to support the price of
our PCs, which represent most of the collateral that we resecuritize. Investors' demand for Structured
Securities remained high during 2003 and 2002 largely due to the comparatively steep yield curve during those
periods.
Other Income
Other income primarily consists of fees associated with servicing and technology-related programs,
including Loan Prospector», various fees related to multifamily loans (including application and other fees)
and various other fees received from mortgage originators and servicers. In 2004 and 2003, other income also
includes the correction of certain prior year accounting errors.
Other income totaled $230 million, $493 million and $321 million in 2004, 2003 and 2002, respectively.
Absent the Öuctuations related to the correction of certain prior year accounting errors in the Ñrst quarters of
2004 and 2003 (discussed in more detail below), Other income would have been $172 million and
$279 million in 2004 and 2003, respectively. We experienced a modest decline in fees earned associated with
Loan Prospector», our automated loan-underwriting tool, which was driven by lower usage of this tool.
In the process of reviewing our accounting policies and practices for 2004 and 2003, we identiÑed certain
errors not material to the Ñnancial statements that resulted in a cumulative net understatement of income in
previously reported periods. During 2004, we identiÑed approximately $58 million of income, net ($38 million
after-tax) of such errors aÅecting 2003 and prior periods that we recorded in the Ñrst quarter of 2004 as a
component of Other income. During 2003, we identiÑed approximately $214 million of income, net
($139 million after-tax) attributable to such errors aÅecting 2002 and prior periods that we recorded in the
Ñrst quarter of 2003 as a component of Other income.
Non-Interest Expense
Table 29 summarizes Non-interest expense for 2004, 2003 and 2002.
Table 29 Ì Non-Interest Expense
2004 vs. 2003 2003 vs. 2002
Year Ended Year Ended
December 31, December 31,
2004 2003 Change 2002 Change
(dollars in millions)
Non-interest expense
Salaries and employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (758) $ (624) $(134) $ (593) $ (31)
Professional services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (588) (311) (277) (155) (156)
Occupancy expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (60) (52) (8) (42) (10)
Other administrative expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (144) (194) 50 (184) (10)
Total administrative expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,550) (1,181) (369) (974) (207)
(Provision) beneÑt for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏ (143) 5 (148) (122) 127
REO operations income (expense)ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 (7) 10 (4) (3)
Housing tax credit partnershipsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (281) (200) (81) (160) (40)
Minority interests in earnings of consolidated
subsidiariesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (129) (157) 28 (184) 27
Other expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (271) (696) 425 (432) (264)
Total non-interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(2,371) $(2,236) $(135) $(1,876) $(360)
Administrative Expenses
Salaries and employee beneÑts, Professional services, Occupancy expense and certain other administra-
tive expenses are collectively referred to as administrative expenses. Administrative expenses are generally
incurred to conduct daily operations and support functions. Also, other administrative expenses include
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