Freddie Mac 2009 Annual Report Download - page 277

In addition, we have purchased mortgage loans containing debt cancellation contracts, which provide for mortgage debt
or payment cancellation for borrowers who experience unanticipated losses of income dependent on a covered event. The
rights and obligations under these agreements have been assigned to the servicers. However, in the event the servicer does
not perform as required by contract, under our guarantee, we would be obligated to make the required contractual payments.
Table 13.1 presents the location and fair value of derivatives reported in our consolidated balance sheets.
Table 13.1 — Derivative Assets and Liabilities at Fair Value
Notional or
Contractual
Amount Assets
(1)
Liabilities
(1)
Notional or
Contractual
Amount Assets
(1)
Liabilities
(1)
Derivatives at Fair Value Derivatives at Fair Value
At December 31, 2009 At December 31, 2008
(in millions)
Total derivative portfolio
Derivatives not designated as hedging instruments under the
accounting standards for derivatives and hedging
(2)
Interest-rate swaps:
Receive-fixed . . . ............................... $ 271,403 $ 3,466 $ (5,455) $ 279,609 $ 22,285 $ (19)
Pay-fixed ..................................... 382,259 2,274 (16,054) 404,359 104 (51,894)
Basis (floating to floating) . ........................ 52,045 1 (61) 82,190 209 (101)
Total interest-rate swaps . ........................ 705,707 5,741 (21,570) 766,158 22,598 (52,014)
Option-based:
Call swaptions
Purchased................................... 168,017 7,764 — 177,922 21,089 —
Written .................................... 1,200 — (19) — — —
Put Swaptions
Purchased................................... 91,775 2,592 — 41,550 539 —
Written .................................... — — — 6,000 — (46)
Other option-based derivatives
(3)
..................... 141,396 1,705 (12) 68,583 1,913 (49)
Total option-based ............................. 402,388 12,061 (31) 294,055 23,541 (95)
Futures . . . ..................................... 80,949 5 (89) 128,698 234 (1,105)
Foreign-currency swaps............................. 5,669 1,624 — 12,924 2,982 —
Forward purchase and sale commitments ................. 13,872 81 (70) 108,273 537 (532)
Credit derivatives . . ............................... 14,198 26 (11) 13,631 45 (7)
Swap guarantee derivatives . . ........................ 3,521 — (34) 3,281 — (11)
Total Derivatives not designated as hedging instruments . . . 1,226,304 19,538 (21,805) 1,327,020 49,937 (53,764)
Netting Adjustments
(4)
............................. (19,323) 21,216 (48,982) 51,487
Total Derivative Portfolio, net ....................... $1,226,304 $ 215 $ (589) $1,327,020 $ 955 $ (2,277)
(1) The value of derivatives on our consolidated balance sheets is reported as derivative assets, net and derivative liabilities, net.
(2) See “Use of Derivatives” for additional information about the purpose of entering into derivatives not designated as hedging instruments and our overall
risk management strategies.
(3) Primarily represents purchased interest rate caps and floors as well as certain written options, including guarantees of stated final maturity of issued
Structured Securities and written call options on agency mortgage-related securities.
(4) Represents counterparty netting, cash collateral netting, net trade/settle receivable or payable and net derivative interest receivable or payable. The net
cash collateral posted and net trade/settle receivable were $2.5 billion and $1 million, respectively, at December 31, 2009. The net cash collateral posted
and net trade/settle payable were $1.5 billion and $— million, respectively, at December 31, 2008. The net interest receivable (payable) of derivative
assets and derivative liabilities was approximately $(0.6) billion and $1.1 billion at December 31, 2009 and 2008, respectively, which was mainly
related to interest rate swaps that we have entered into.
274 Freddie Mac