Freddie Mac 2009 Annual Report Download - page 303

Table 18.2 provides a reconciliation of the beginning and ending balances for assets and liabilities measured at fair
value using significant unobservable inputs (Level 3).
Table 18.2 — Fair Value Measurements of Assets and Liabilities Using Significant Unobservable Inputs
Balance,
January 1,
2009
Included in
earnings
(1)(2)(3)(4)
Included in other
comprehensive
income
(1)(2)
Total
Purchases,
issuances, sales and
settlements, net
(5)
Net transfers in
and/or out of
Level 3
(6)
Balance,
December 31,
2009
Unrealized
gains (losses)
still held
(7)
Realized and unrealized gains (losses)
For The Year Ended December 31, 2009
(in millions)
Investments in securities:
Available-for-sale, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . $ 18,320 $ (2) $ 1,833 $ 1,831 $ 1,035 $ (379) $ 20,807 $ —
Subprime . . . . . . . . . . . . . . . . . . . . . . . . . 52,266 (6,526) 2,958 (3,568) (12,977) — 35,721 (6,526)
Commercial mortgage-backed securities . . . . . . . 2,861 (137) 6,940 6,803 (2,284) 46,639 54,019 (137)
Option ARM . . . . . . . . . . . . . . . . . . . . . . . 7,378 (1,726) 3,416 1,690 (1,832) — 7,236 (1,726)
Alt-A and other . . . . . . . . . . . . . . . . . . . . . 13,236 (2,572) 6,130 3,558 (3,404) 1 13,391 (2,572)
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . 396 — 6 6 (42) (22) 338 —
Obligations of states and political subdivisions . . . . 10,528 2 1,955 1,957 (1,008) — 11,477 —
Manufactured housing . . . . . . . . . . . . . . . . . . 743 (51) 336 285 (117) — 911 (51)
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . 12 — — — (2) (6) 4 —
Total mortgage-related securities . . . . . . . . . . 105,740 (11,012) 23,574 12,562 (20,631) 46,233 143,904 (11,012)
Non-mortgage-related securities:
Asset-backed securities . . . . . . . . . . . . . . . . . — (7) 8 1 (1) — — —
Total available-for-sale securities, at fair
value . . . . . . . . . . . . . . . . . . . . . . . 105,740 (11,019) 23,582 12,563 (20,632) 46,233 143,904 (11,012)
Trading, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . 1,575 971 — 971 (90) 349 2,805 962
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . 582 514 — 514 187 60 1,343 514
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . 14 2 — 2 (2) 13 27 2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (1) — (1) (3) 3 28 —
Total mortgage-related securities . . . . . . . . . . 2,200 1,486 — 1,486 92 425 4,203 1,478
Non-mortgage-related securities:
FDIC-guaranteed corporate medium-term notes . . . — — — — 250 (250) — —
Total trading securities, at fair value . . . . . . . 2,200 1,486 — 1,486 342 175 4,203 1,478
Mortgage loans:
Held-for-sale, at fair value . . . . . . . . . . . . . . . . . . 401 (81) — (81) 2,479 — 2,799 (96)
Guarantee asset
(8)
. . . . . . . . . . . . . . . . . . . . . . . . . 4,847 5,298 — 5,298 299 — 10,444 5,298
Net derivatives
(9)
. . . . . . . . . . . . . . . . . . . . . . . . . 100 (388) — (388) (142) — (430) (404)
Balance,
December 31,
2007
Cumulative
effect of
change in
accounting
principle
(10)
Balance,
January 1,
2008
Included in
earnings
(1)(2)(3)(4)
Included
in other
comprehensive
income
(1)(2)
Total
Purchases,
issuances,
sales and
settlements, net
(5)
Net transfers
in and/or out
of Level 3
(6)
Balance,
December 31,
2008
Unrealized
gains
(losses)
still held
(7)
Realized and unrealized gains (losses)
For The Year Ended December 31, 2008
(in millions)
Investments in securities:
Available-for-sale, at fair value:
Mortgage-related securities . . . . $19,859 $(443) $19,416 $(16,589) $(25,020) $(41,609) $(28,232) $156,165 $105,740 $(16,660)
Trading, at fair value:
Mortgage-related securities . . . . 2,710 443 3,153 (2,267) — (2,267) 1,325 (11) 2,200 (2,278)
Mortgage loans:
Held-for-sale, at fair value . . . . . . — — — (14) — (14) 415 — 401 (14)
Guarantee asset
(8)
. . . . . . . . . . . . 9,591 — 9,591 (5,341) — (5,341) 597 — 4,847 (5,341)
Net derivatives
(9)
. . . . . . . . . . . . . (216) — (216) 392 3 395 (79) — 100 196
(1) Changes in fair value for available-for-sale investments are recorded in AOCI, net of taxes while gains and losses from sales are recorded in other gains (losses)
on investments on our consolidated statements of operations. For mortgage-related securities classified as trading, the realized and unrealized gains (losses) are
recorded in other gains (losses) on investments on our consolidated statements of operations. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES” for additional information about our assessment of other-than-temporary impairment for unrealized losses on available-for-sale securities.
(2) Changes in fair value of derivatives are recorded in derivative gains (losses) on our consolidated statements of operations for those not designated as accounting
hedges, and AOCI, net of taxes for those accounted for as a cash flow hedge to the extent the hedge is effective. See “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES” for additional information.
(3) Changes in fair value of the guarantee asset are recorded in gains (losses) on guarantee asset on our consolidated statements of operations. See “NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for additional information.
(4) For held-for-sale mortgage loans with fair value option elected, gains (losses) on fair value changes and sale of mortgage loans are recorded in gains (losses) on
investments on our consolidated statements of operations.
(5) For non-agency mortgage-related securities, primarily represents principal repayments.
(6) Transfer in and/or out of Level 3 during the period is disclosed as if the transfer occurred at the beginning of the period.
(7) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) related to assets and
liabilities classified as Level 3 that are still held at December 31, 2009 and 2008, respectively. Included in these amounts are credit-related other-than-temporary
impairments recorded on available-for-sale securities.
(8) We estimate that all amounts recorded for unrealized gains and losses on our guarantee asset relate to those amounts still in position. Cash received on our
guarantee asset is presented as settlements in the table. The amounts reflected as included in earnings represent the periodic mark-to-fair value of our guarantee
asset.
(9) Net derivatives include derivative assets and derivative liabilities prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable and
net derivative interest receivable or payable.
(10) Represents adjustment to initially apply the accounting standards on the fair value option for financial assets and financial liabilities.
Nonrecurring Fair Value Changes
Certain assets are measured at fair value on our consolidated balance sheets only if certain conditions exist as of the
balance sheet date. We consider the fair value measurement related to these assets to be nonrecurring. These assets include
low-income housing tax credit partnership equity investments, single-family held-for-sale mortgage loans and REO net, as
well as impaired held-for-investment multifamily mortgage loans. These assets are not measured at fair value on an ongoing
300 Freddie Mac