Freddie Mac 2006 Annual Report Download - page 136

Table 5.7 summarizes all securities pledged as collateral by us, including assets that the secured party may repledge and
those that may not be repledged.
Table 5.7 Ì Collateral in the Form of Securities Pledged
December 31,
2006 2005
(in millions)
Securities pledged with ability for secured party to repledge (parenthetically disclosed on our consolidated balance sheets)
Available-for-sale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $20,463 $168
Securities pledged without ability for secured party to repledge
Available-for-sale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 225 161
Total securities pledged ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $20,688 $329
NOTE 6: LOAN LOSS RESERVES
We maintain separate loan loss reserves for mortgage loans in the Retained portfolio that we classify as held-for-
investment and for credit-related losses associated with certain mortgage loans that underlie guaranteed PCs and Structured
Securities held by third parties.
Table 6.1 summarizes loan loss reserve activity:
Table 6.1 Ì Detail of Loan Loss Reserves
Year-Ended December 31,
2006 2005 2004
Reserves related to: Reserves related to: Reserves related to:
Total Loan Total Loan Total Loan
Retained PCs Loss Retained PCs Loss Retained PCs Loss
Mortgages Outstanding Reserves Mortgages Outstanding Reserves Mortgages Outstanding Reserves
(in millions)
Beginning balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 119 $295 $ 414 $ 114 $150 $ 264 $ 174 $125 $ 299
Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 98 117 215 106 145 251 111 32 143
Charge-oÅs(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (313) Ì (313) (294) Ì (294) (300) Ì (300)
Recoveries(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 166 Ì 166 185 Ì 185 160 Ì 160
Transfers-outÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (71) (71) Ì (11) (11) Ì (20) (20)
Other transfers, net(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 9 9 8 11 19 (31) 13 (18)
Ending balanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 70 $350 $ 420 $ 119 $295 $ 414 $ 114 $150 $ 264
(1) It is our practice to purchase mortgage loans from the pools that underlie PCs principally at the point the mortgage loan is identiÑed as being 120 days
past due. Because all credit losses related to oÅ-balance sheet PCs are preceded by the purchase of a delinquent mortgage loan from the PC pool, all
charge-oÅs or recoveries are presented in the Retained Mortgages columns above.
(2) Represents the portion of the Guarantee obligation recognized through Guarantor Swap transactions or upon the sale of PCs and Structured Securities
that corresponds to incurred credit losses reclassiÑed to reserve for guarantee losses on Participation CertiÑcates upon initial recognition of a
Guarantee obligation. In addition, the amount includes an increase (reduction) of loan loss reserves of $9 million and $(31) million in 2005 and 2004,
respectively, related to prior period adjustments for which the related income was recorded in Other income.
Impaired Loans
Total loan loss reserves, as presented in ""Table 6.1 Ì Detail of Loan Loss Reserves,'' consists of a speciÑc valuation
allowance related to impaired loans, which is presented in Table 6.2, and an additional reserve for other probable incurred
losses, which totaled $414 million, $398 million and $261 million at December 31, 2006, 2005 and 2004, respectively. Our
recorded investment in impaired loans and the related valuation allowance are summarized in Table 6.2.
Table 6.2 Ì Impaired Loans(1)
December 31,
2006 2005 2004
Recorded SpeciÑc Net Recorded SpeciÑc Net Recorded SpeciÑc Net
Investment(2) Reserve Investment Investment(2) Reserve Investment Investment(2) Reserve Investment
(in millions)
Impaired loans having:
Related-valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 86 $(6) $ 80 $ 54 $(16) $ 38 $ 46 $(3) $ 43
No related-valuation allowance(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,869 Ì 5,869 2,536 Ì 2,536 2,261 Ì 2,261
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5,955 $(6) $5,949 $2,590 $(16) $2,574 $2,307 $(3) $2,304
(1) Single-family impaired loans include performing and non-performing troubled debt restructurings. Also, in 2006, all loans purchased out of PC pools
that were 120 days delinquent were impaired. Multifamily impaired loans are deÑned as performing and non-performing troubled debt restructurings,
loans that are 60 days or more delinquent, except for certain credit-enhanced loans, and certain mortgage loans with real estate collateral values less
than the outstanding unpaid principal balances. For more details on multifamily impaired loans, see ""NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES.''
(2) Recorded Investment includes the unpaid principal balance of mortgage loans plus other amortized basis adjustments, which are modiÑcations to their
carrying value.
(3) Impaired loans with no related valuation allowance primarily represent performing single-family troubled debt restructuring loans and impaired loans
purchased out of PC pools.
124 Freddie Mac