Freddie Mac 2010 Annual Report Download - page 115

In November 2009, the New York State Insurance Department ordered FGIC to restructure in order to improve its
financial condition and to suspend paying any and all claims effective immediately. On March 25, 2010, FGIC made an
exchange offer to the holders of various residential mortgage-backed securities insured by FGIC. The offer was terminated
due to insufficient participation by security holders. On August 4, 2010, FGIC Corporation, the parent company of FGIC,
announced that it had filed for bankruptcy. We continue to monitor FGIC’s efforts to restructure and assess the impact on our
investments.
In March 2010, Ambac established a segregated account for certain Ambac-insured securities, including those held by
Freddie Mac, and consented to the rehabilitation of the segregated account requested by the Wisconsin Office of the
Commissioner of Insurance. On March 24, 2010, a Wisconsin state circuit court issued an order for rehabilitation and an
order for temporary injunctive relief regarding the segregated account. Among other things, no claims arising under the
segregated account will be paid, and policyholders are enjoined from taking certain actions until the plan of rehabilitation is
approved by the circuit court. The plan of rehabilitation was filed with the circuit court by the Office of the Commissioner of
Insurance on October 8, 2010, and approved on January 24, 2011. On November 8, 2010, Ambac Financial Group Inc, the
parent company of Ambac, filed for bankruptcy. We continue to monitor these developments and assess the impact on our
investments.
In accordance with our risk management policies we will continue to actively monitor the financial strength of our bond
insurers. We believe that, in addition to FGIC and Ambac, some of our bond insurers lack sufficient ability to fully meet all
of their expected lifetime claims-paying obligations to us as such claims emerge. In the event one or more of these bond
insurers were to become insolvent, it is likely that we would not collect all of our claims from the affected insurer as they
emerge, and it would impact our ability to recover certain unrealized losses on our mortgage-related securities, which may
result in further impairment losses on our investments in securities. We considered the expected impact of the FGIC and
Ambac developments, as well as our expectations regarding our other bond insurers’ ability to meet their obligations, in
making our impairment determinations at December 31, 2010 and 2009. See “NOTE 8: INVESTMENTS IN
SECURITIES — Other-Than-Temporary Impairments on Available-For-Sale Securities” for additional information regarding
impairment losses on securities covered by monoline bond insurers.
Table 39 shows the non-agency mortgage-related securities we hold that were covered by primary monoline bond
insurance at December 31, 2010 and December 31, 2009.
Table 39 — Non-Agency Mortgage-Related Securities Covered by Primary Monoline Bond Insurance at December 31,
2010 and December 31, 2009
UPB
(3)
Gross
Unrealized
Losses
(4)
UPB
(3)
Gross
Unrealized
Losses
(4)
UPB
(3)
Gross
Unrealized
Losses
(4)
UPB
(3)
Gross
Unrealized
Losses
(4)
UPB
(3)
Gross
Unrealized
Losses
(4)
UPB
(3)
Gross
Unrealized
Losses
(4)
Ambac FGIC
MBIA Insurance
Corp. AGMC
(1)
Other
(2)
Total
(in millions)
At December 31, 2010:
First lien subprime ................. $ 676 $ (207) $ 924 $(322) $ 12 $ (1) $ 427 $ (99) $ 3 $ — $ 2,042 $ (629)
Second lien subprime . . ............. — — 227 (12) — — — — — — 227 (12)
Option ARM..................... 50 — — — — — 129 (16) — — 179 (16)
Alt-A and other
(5)
.................. 1,150 (186) 832 (93) 425 (29) 340 (82) 71 (1) 2,818 (391)
Manufactured housing . . ............. 97 (11) — — 154 (15) — — — — 251 (26)
CMBS . . ...................... 2,206 (277) — — — — — — 1,195 (159) 3,401 (436)
Obligations of states and political
subdivisions . . . ................. 419 (44) 38 (2) 234 (19) 366 (18) 17 (3) 1,074 (86)
Total . . . ...................... $4,598 $ (725) $2,021 $(429) $825 $ (64) $1,262 $(215) $1,286 $(163) $ 9,992 $(1,596)
At December 31, 2009:
First lien subprime ................. $ 737 $ (325) $1,061 $(432) $ 18 $ (3) $ 452 $(160) $ 6 $ — $ 2,274 $ (920)
Second lien subprime . . ............. — — 280 (70) — — — — — — 280 (70)
Option ARM..................... 163 (47) — — — — 166 (65) — — 329 (112)
Alt-A and other
(5)
.................. 1,340 (657) 927 (430) 522 (265) 422 (136) 80 (38) 3,291 (1,526)
Manufactured housing . . ............. 105 (24) — — 171 (30) — — — — 276 (54)
CMBS . . ...................... 2,206 (495) — — — — — — 1,196 (307) 3,402 (802)
Obligations of states and political
subdivisions . . . ................. 459 (33) 38 (3) 247 (13) 390 (13) 17 (3) 1,151 (65)
Total . . . ...................... $5,010 $(1,581) $2,306 $(935) $958 $(311) $1,430 $(374) $1,299 $(348) $11,003 $(3,549)
(1) Assured Guaranty Municipal Corp. was formerly known as Financial Security Assurance.
(2) Represents monoline insurance provided by Syncora Guarantee Inc., Radian Group, Inc., and CIFG Holdings Ltd, and includes certain exposures to
bonds insured by NPFGC, formerly known as MBIA Insurance Corp. of Illinois, which is a subsidiary of MBIA Inc., the parent company of MBIA
Insurance Corp.
(3) Represents the amount of UPB covered by monoline insurance coverage. This amount does not represent the maximum amount of losses we could
recover, as the monoline insurance also covers unpaid interest.
(4) Represents the amount of gross unrealized losses at the respective reporting date on the securities with monoline insurance.
(5) The majority of the Alt-A and other loans covered by monoline bond insurance are securities backed by home equity lines of credit.
112 Freddie Mac