Freddie Mac 2009 Annual Report Download - page 193

Table 81 below summarizes our assets and liabilities measured at fair value on a recurring basis by level in the
valuation hierarchy at December 31, 2009.
Table 81 — Summary of Assets and Liabilities at Fair Value on a Recurring Basis
Total GAAP
Fair Value Level 1 Level 2 Level 3
At December 31, 2009
(dollars in millions)
Assets:
Investments in securities:
Available-for-sale, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . ................................................... $223,467 —% 91% 9%
Subprime . . . . . . . . ................................................... 35,721 — — 100
Commercial mortgage-backed securities ...................................... 54,019 — — 100
Option ARM . . . . . . ................................................... 7,236 — — 100
Alt-A and other . . . . ................................................... 13,407 — — 100
Fannie Mae . . . . . . . ................................................... 35,546 — 99 1
Obligations of states and political subdivisions . . ................................ 11,477 — — 100
Manufactured housing .................................................. 911 — — 100
Ginnie Mae. . . . . . . ................................................... 347 — 99 1
Total mortgage-related securities .......................................... 382,131 — 62 38
Non-mortgage-related securities:
Asset-backed securities .................................................. 2,553 — 100 —
Total available-for-sale securities, at fair value ............................... 384,684 — 63 37
Trading, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . ................................................... 170,955 — 98 2
Fannie Mae . . . . . . . ................................................... 34,364 — 96 4
Ginnie Mae. . . . . . . ................................................... 185 — 85 15
Other .............................................................. 28 — — 100
Total mortgage-related securities .......................................... 205,532 — 98 2
Non-mortgage-related securities:
Asset-backed securities .................................................. 1,492 — 100 —
Treasury Bills . . . . . ................................................... 14,787 100 — —
FDIC-guaranteed corporate medium-term notes . ................................ 439 — 100 —
Total non-mortgage-related securities . ...................................... 16,718 88 12 —
Total trading securities, at fair value...................................... 222,250 7 91 2
Total investments in securities . . ...................................... 606,934 3 73 24
Mortgage Loans:
Held-for-sale, at fair value ................................................... 2,799 — — 100
Derivative assets, net
(1)
....................................................... 215 — 99 1
Guarantee asset, at fair value ................................................... 10,444 — — 100
Total assets carried at fair value on a recurring basis
(1)
........................... $620,392 2 73 25
Liabilities:
Debt securities recorded at fair value ............................................. $ 8,918 — 100 —
Derivative liabilities, net
(1)
.................................................... 589 — 97 3
Total liabilities carried at fair value on a recurring basis
(1)
......................... $ 9,507 — 98 2
(1) Percentages by level are based on gross fair value of derivative assets and derivative liabilities before counterparty netting, cash collateral netting, net
trade/settle receivable or payable and net derivative interest receivable or payable.
Changes in Level 3 Recurring Fair Value Measurements
At December 31, 2009 and 2008, we measured and recorded on a recurring basis $161.5 billion and $113.3 billion, or
approximately 25% and 16% of total assets, respectively, at fair value using significant unobservable inputs (Level 3), before
the impact of counterparty and cash collateral netting across the levels of the fair value hierarchy. Our Level 3 assets at
December 31, 2009 primarily consist of non-agency residential mortgage-related securities, CMBS and our guarantee asset.
We also measured and recorded on a recurring basis $554 million and $37 million, or 2% and less than 1% of total liabilities
at December 31, 2009 and 2008, respectively, at fair value using significant unobservable inputs, before the impact of
counterparty and cash collateral netting across the levels of the fair value hierarchy. Our Level 3 liabilities consist of
derivative liabilities, net.
During 2009, our Level 3 assets increased by $48.1 billion primarily due to the transfer of CMBS securities from
Level 2 to Level 3 given the continued weakness in the market for non-agency CMBS, as evidenced by low transaction
volumes and wide spreads, as investor demand for these assets remained limited. As a result, we continued to observe
significant variability in the quotes received from dealers and third-party pricing services. Consequently, we transferred
$46.4 billion of Level 2 assets to Level 3 during 2009. These transfers were primarily within non-agency CMBS in the first
quarter of 2009 where inputs that are significant to their valuation became limited or unavailable, as previously discussed.
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