Freddie Mac 2006 Annual Report Download - page 133

At December 31, 2006, gross unrealized losses on available-for-sale securities were $7,236 million, or approximately
2 percent of the fair value of such securities in an unrealized loss position, as noted in Table 5.2. The gross unrealized losses
relate to approximately 84 thousand individual lots representing approximately 16 thousand separate securities. We
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 these 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.
Because 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.
‚Federal National Mortgage Association, or 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 investments 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. Most of
these securities are investment grade (i.e., rated BBB¿ or better on a Standard & Poor's, or S&P, or 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,
2006 2005 2004
(in millions)
Gross realized gainsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 440 $ 891 $ 787
Gross realized (losses) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (418) (345) (203)
Net realized gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 22 $ 546 $ 584
For the years ended December 31, 2006, 2005 and 2004, we recorded impairments related to investments in securities of
$540 million, $371 million and $126 million, respectively.
121 Freddie Mac