Freddie Mac 2009 Annual Report Download - page 233

mortgage loans. We will continue to recognize management and guarantee income related to our long-term standby
commitments and guarantees issued to non-consolidated entities;
• Gains (losses) on guarantee asset and income on guarantee obligation — we will no longer recognize a guarantee
asset and guarantee obligation for guarantees issued to trusts that we have consolidated; as such, we also will no
longer recognize gains (losses) on guarantee asset and income on guarantee obligation for such trusts. However, we
will continue to recognize a guarantee asset and guarantee obligation for our long-term standby commitments and
guarantees issued to non-consolidated entities;
• Losses on loans purchased — we will no longer recognize the acquisition of loans from PC and Structured
Transaction trusts that we have consolidated as a purchase with an associated loss as these loans will already be
reflected on our consolidated balance sheet. Instead, when we acquire a loan from these entities, we will reclassify the
loan from mortgage loans held-for-investment by consolidated trusts to unsecuritized mortgage loans
held-for-investment and will record the cash tendered as an extinguishment of the related PC and Structured
Transaction debt. We will continue to recognize losses on loans purchased related to our long-term standby
commitments and purchases of loans from non-consolidated entities;
• Recoveries of loans impaired upon purchase — as these acquisitions will no longer be treated as purchases for
accounting purposes, there will be no recoveries of such loans that require recognition in our consolidated statements
of operations; and
• Trust management income — we will no longer recognize trust management income from the single-family PC trusts
that we consolidate; rather, such amounts will be recognized in net interest income.
Line Items That Will Be Significantly Impacted and Still Separately Presented
Line items that will be significantly impacted and that will continue to be separately presented on our consolidated
statements of operations include:
• Interest income on mortgage loans — we will begin recognizing interest income on the mortgage loans underlying
PCs and Structured Transactions issued by trusts that we consolidate, which will include the portion of interest that
was historically recognized as management and guarantee income. Upfront, credit-related fees received in connection
with such loans historically were treated as a component of the related guarantee obligation; prospectively, these fees
will be treated as basis adjustments to the loans to be amortized over their respective lives as a component of interest
income;
• Interest income on investments in securities — we will no longer recognize interest income on our investments in PCs
and Structured Transactions issued by trusts that we consolidate;
• Interest expense — we will begin recognizing interest expense on PCs and Structured Transactions that were issued
by trusts that we consolidate and are held by third parties;
• Other gains (losses) on investments — we will no longer recognize other gains (losses) on investments for single-
family PCs and certain Structured Transactions because those securities will no longer be accounted for as
investments as a result of our consolidation of the issuing entities.
Newly Created Line Items
The line item that will be added to our consolidated statements of operations is as follows:
• Gains (losses) on extinguishment of debt securities of consolidated trusts — we will record the purchase of PCs or
single-class Structured Securities backed by PCs that were issued by our consolidated securitization trusts as an
extinguishment of outstanding debt with a gain or loss recorded to this line item. The gain or loss recognized will be
the difference between the acquisition price and the amortized cost basis of the debt security.
NOTE 2: CONSERVATORSHIP AND RELATED DEVELOPMENTS
Entry Into Conservatorship
On September 6, 2008, the Director of FHFA placed us into conservatorship. On September 7, 2008, the then Secretary
of the Treasury and the then Director of FHFA announced several actions taken by Treasury and FHFA regarding Freddie
Mac and Fannie Mae. These actions included the following:
• placing us and Fannie Mae in conservatorship;
• the execution of the Purchase Agreement, pursuant to which we issued to Treasury both senior preferred stock and a
warrant to purchase common stock; and
• the establishment of a temporary secured lending credit facility that was available to us until December 31, 2009,
which was effected through the execution of the Lending Agreement.
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