Freddie Mac 2005 Annual Report Download - page 133

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routinely purchase multiple lots of individual securities at diÅerent times and at diÅerent costs. We determine gross
unrealized gains and gross unrealized losses by speciÑcally identifying investment positions at the lot level; therefore, some of
the lots we hold for a single security may be in an unrealized gain position while other lots for that security are in an
unrealized loss position, depending upon the amortized cost of the speciÑc lot.
We have the ability and intent to hold the available-for-sale securities in an unrealized loss position for a period of time
suÇcient to recover all unrealized losses. Based on our ability and intent to hold the available-for-sale securities and our
consideration of other factors described below, we have concluded that the impairment of these securities is temporary.
‚Freddie Mac securities. The unrealized losses on our securities are primarily a result of movements in interest
rates. Since we guarantee the payment of principal and interest on these securities, we review the estimated
credit exposure of the mortgages underlying these securities in evaluating potential impairment. The extent and
duration of the decline in fair value relative to the amortized cost have met our criteria that are used to indicate
that the impairment of these securities is temporary.
‚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 met our criteria
that are used to indicate that the impairment of these securities is temporary and no other facts or
circumstances existed to suggest that the decline was not temporary. The issuer guarantees related to these
securities have led us to conclude that any credit risk is minimal.
‚Other securities in the Retained portfolio and Asset-backed securities in the Cash and Investment portfolio.
The unrealized losses on mortgage-related securities included in Other and Asset-backed securities are
principally a result of movements in interest rates. The extent and duration of the decline in fair value relative to
the amortized cost have met our criteria that are used to indicate that the impairment of these securities is
temporary. The vast majority of these securities are investment grade (i.e., rated BBB¿ or better on a S&P
equivalent scale).
Table 5.3 below illustrates the gross realized gains and gross realized losses received from the sale of available-for-sale
securities.
Table 5.3 Ì Gross Realized Gains and Gross Realized Losses on Available-For-Sale Securities
Year Ended December 31,
2005 2004 2003
(in millions)
Gross realized gainsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 891 $ 787 $ 1,903
Gross realized (losses) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (345) (203) (1,077)
Net realized gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 546 $ 584 $ 826
117 Freddie Mac