Freddie Mac 2009 Annual Report Download - page 146

SGI pursued a settlement with certain policyholders. In July 2009, we agreed to terminate our rights under certain policies
with SGI, which provided credit coverage for certain bonds owned by us, in exchange for a one-time cash payment of
$113 million.
We recognized other-than-temporary impairment losses during 2008 and 2009 related to investments in non-agency
mortgage-related securities covered by bond insurance due to the probability of losses on the securities and our concerns
about the claims paying abilities of certain bond insurers in the event of a loss. See “CONSOLIDATED BALANCE
SHEETS ANALYSIS — Investments in Securities — Mortgage-Related Securities — Other-Than-Temporary Impairments on
Available-For-Sale Mortgage-Related Securities,” for additional information regarding impairment losses on securities
covered by monoline bond insurers.
Table 53 shows our non-agency mortgage-related securities covered by primary monoline bond insurance at
December 31, 2009 and December 31, 2008.
Table 53 — Non-Agency Mortgage-Related Securities Covered by Primary Monoline Bond Insurance at December 31,
2009 and December 31, 2008
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Ambac Assurance
Corporation
Financial Guaranty
Insurance Company
MBIA Insurance
Corp.
Assured Guaranty
Municipal Corp.
(5)
Other
(1)
Total
(in millions)
At December 31, 2009:
First lien subprime ......... $ 737 $ (325) $1,061 $(432) $ 18 $ (3) $ 452 $(160) $ 6 $ — $ 2,274 $ (920)
Second lien subprime . . . .... — — 280 (70) — — — — — — 280 (70)
Option ARM ............. 163 (47) — — — — 166 (65) — — 329 (112)
Alt-A and other
(4)
.......... 1,340 (657) 927 (430) 522 (265) 422 (136) 80 (38) 3,291 (1,526)
Manufactured housing . . . .... 105 (24) — — 171 (30) — — — — 276 (54)
CMBS . . .............. 2,206 (495) — — — — — — 1,196 (307) 3,402 (802)
Obligations of states and political
subdivisions . . . ......... 459 (33) 38 (3) 247 (13) 390 (13) 17 (3) 1,151 (65)
Total . . .............. $5,010 $(1,581) $2,306 $(935) $ 958 $(311) $1,430 $(374) $1,299 $(348) $11,003 $(3,549)
At December 31, 2008:
First lien subprime ......... $ 837 $ (280) $1,290 $(340) $ 26 $ (2) $ 510 $ (66) $ 220 $ (2) $ 2,883 $ (690)
Second lien subprime . . . .... 52 (35) 362 (113) 15 — — — 72 — 501 (148)
Option ARM ............. 179 (123) — — — — 187 (127) 367 (48) 733 (298)
Alt-A and other
(4)
.......... 1,573 (980) 1,096 (123) 632 — 522 (272) 450 (30) 4,273 (1,405)
Manufactured housing . . . .... 114 (63) — — 188 — — — — — 302 (63)
CMBS . . .............. 2,219 (399) — — 1,167 (368) — — 30 (7) 3,416 (774)
Obligations of states and political
subdivisions . . . ......... 467 (94) 38 (7) 354 (44) 397 (74) 17 (2) 1,273 (221)
Total . . . .............. $5,441 $(1,974) $2,786 $(583) $2,382 $(414) $1,616 $(539) $1,156 $ (89) $13,381 $(3,599)
(1) Represents monoline insurance provided by Syncora Guarantee Inc., Radian Group Inc. and CIFG Holdings Ltd. At December 31, 2009, includes
certain exposures to bonds insured by NPFGC, formerly known as MBIA Insurance Corp. of Illinois, which is a subsidiary of MBIA Inc., the parent
company of MBIA Insurance Corp. Amounts at December 31, 2008 are included under MBIA Insurance Corp.
(2) Represents the amount of unpaid principal balance covered by monoline insurance coverage. This amount does not represent the maximum amount of
losses we could recover, as the monoline insurance also covers unpaid interest.
(3) Represents the amount of gross unrealized losses at the respective reporting date on the securities with monoline insurance.
(4) The majority of the Alt-A and other loans covered by monoline bond insurance are securities backed by home equity lines of credit.
(5) Assured Guaranty Municipal Corp. was formerly known as Financial Security Assurance (FSA).
Cash and Other Investments Counterparties
We are exposed to institutional credit risk arising from the potential insolvency or non-performance of counterparties of
investment-related agreements and cash equivalent transactions. These financial instruments are investment grade at the time
of purchase and primarily short-term in nature, thereby substantially mitigating institutional credit risk for these instruments.
To minimize counterparty risk of our on-balance-sheet assets, we access government programs and initiatives designed to
support the economic environment in general and the credit and mortgage markets in particular. For example, we have
adjusted our policies and exposure measurement methodology to reflect the FDIC’s added insurance coverage on principal
and interest deposits up to $250,000 per borrower. We also manage significant cash flow for the securitization trusts that are
created in connection with our issuance of PCs and Structured Securities. See “BUSINESS — Our Business and Statutory
Mission — Our Business Segments —Single-Family Guarantee Segment — Securitization Activities” and “NOTE 19:
CONCENTRATION OF CREDIT AND OTHER RISKS” to our consolidated financial statements for further information on
these off-balance sheet transactions.
143 Freddie Mac