Freddie Mac 2009 Annual Report Download - page 187

applicable institutional counterparties for any investment losses that are incurred in our role as the securities administrator
for the trusts. In accordance with the trust agreements, we invest the funds of the trusts in eligible short-term financial
instruments that are mainly the highest-rated debt types as classified by a nationally recognized statistical rating
organization. During 2008, we recognized $1.1 billion of losses on investment activity associated with our role as securities
administrator for the trusts as a result of the Lehman short-term transactions. See “CONSOLIDATED RESULTS OF
OPERATIONS — Non-Interest Expense — Securities Administrator Loss on Investment Activity” for further information. As
of December 31, 2009, the investments of the trusts were in cash and other financial instruments categorized as cash
equivalents.
Other
We extend other guarantees and provide indemnification to counterparties for breaches of standard representations and
warranties in contracts entered into in the normal course of business based on an assessment that the risk of loss would be
remote. See “NOTE 3: FINANCIAL GUARANTEES AND MORTGAGE SECURITIZATIONS” to our consolidated
financial statements for additional information.
We are a party to numerous entities that are considered to be VIEs in accordance with the accounting standards on the
consolidation of VIEs. These VIEs include low-income multifamily housing tax credit partnerships, certain Structured
Transactions and certain asset-backed investment trusts. See “NOTE 5: VARIABLE INTEREST ENTITIES” to our
consolidated financial statements for additional information related to our significant variable interests in these VIEs,
including those not consolidated within our financial statements.
As part of our credit guarantee business, we routinely enter into forward purchase and sale commitments for mortgage
loans and mortgage-related securities. Some of these commitments are accounted for as derivatives and their fair values are
reported as either derivative assets, net or derivative liabilities, net on our consolidated balance sheets. We also have
purchase commitments primarily related to mortgage purchase flow business which we principally fulfill by executing PC
guarantees in swap transactions and through cash purchases of loans and, to a lesser extent, commitments to purchase
multifamily mortgage loans and revenue bonds that are not accounted for as derivatives and are not recorded on our
consolidated balance sheets. These non-derivative commitments totaled $325.9 billion, $216.5 billion and $173.4 billion at
December 31, 2009, 2008 and 2007, respectively. Such commitments are not accounted for as derivatives and are not
recorded on our consolidated balance sheets. These mortgage purchase contracts contain no penalty or liquidated damages
clauses based on our inability to take delivery of mortgage loans.
On September 6, 2008, the Director of FHFA placed us into conservatorship. On September 7, 2008, the Conservator
entered into the Purchase Agreement with the Treasury for senior preferred stock and a warrant for our common stock in
return for the Treasury’s commitment in the Purchase Agreement. See “EXECUTIVE SUMMARY — Government Support
for our Business” for further information on these arrangements.
As part of the guarantee arrangements pertaining to certain multifamily housing revenue bonds and related pass-through
securities, we provided commitments to advance funds, commonly referred to as “liquidity guarantees,” totaling
$12.4 billion, $12.3 billion and $8.0 billion at December 31, 2009, 2008 and 2007, respectively. The majority of these
liquidity guarantees are in effect at December 31, 2009 and some have forward start dates. These guarantees require us to
advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be remarketed.
Any repurchased securities are pledged to us to secure funding until the securities are remarketed. We hold cash and cash
equivalents equal to the amount of these commitments that are effective as of December 31, 2009 and 2008. At
December 31, 2009, 2008 and 2007, there were no liquidity guarantee advances outstanding. Advances under our liquidity
guarantees would typically mature in 60 to 120 days. In addition, as part of the HFA initiative, we together with Fannie Mae
provide liquidity guarantees for certain variable-rate single-family and multifamily housing revenue bonds, under which
Freddie Mac generally is obligated to purchase 50% of any tendered bonds that cannot be remarketed within five business
days.
CONTRACTUAL OBLIGATIONS
Table 80 provides aggregated information about the listed categories of our contractual obligations as of December 31,
2009. These contractual obligations affect our short- and long-term liquidity and capital resource needs. The table includes
information about undiscounted future cash payments due under these contractual obligations, aggregated by type of
contractual obligation, including the contractual maturity profile of our debt securities and other liabilities reported on our
consolidated balance sheet and our operating leases at December 31, 2009. The timing of actual future payments may differ
from those presented due to a number of factors, including discretionary debt repurchases. Our contractual obligations
include other purchase obligations that are enforceable and legally binding. For purposes of this table, purchase obligations
are included through the termination date specified in the respective agreement, even if the contract is renewable. Many of
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