Freddie Mac 2010 Annual Report Download - page 162

“NOTE 4: VARIABLE INTEREST ENTITIES” for additional information related to our significant variable interests in these
VIEs.
As part of our credit guarantee business, we routinely enter into forward purchase and sale commitments for mortgage
loans and mortgage-related securities. Some of these commitments are accounted for as derivatives. Their fair values are
reported as either derivative assets, net or derivative liabilities, net on our consolidated balance sheets. We also have purchase
commitments primarily related to mortgage purchase flow business, which we principally fulfill by issuing PCs in swap
transactions, and, to a lesser extent, commitments to purchase or guarantee multifamily mortgage loans that are not
accounted for as derivatives and are not recorded on our consolidated balance sheets. These non-derivative commitments
totaled $220.7 billion, $325.9 billion and $216.5 billion in notional value at December 31, 2010, 2009, and 2008,
respectively.
CONTRACTUAL OBLIGATIONS
Table 65 provides aggregated information about the listed categories of our contractual obligations as of December 31,
2010. These contractual obligations affect our short- and long-term liquidity and capital resource needs. The table includes
information about undiscounted future cash payments due under these contractual obligations, aggregated by type of
contractual obligation, including the contractual maturity profile of our debt securities (other than debt securities of
consolidated trusts held by third parties) and other liabilities reported on our consolidated balance sheet and our operating
leases at December 31, 2010. The timing of actual future payments may differ from those presented due to a number of
factors, including discretionary debt repurchases. Our contractual obligations include other purchase obligations that are
enforceable and legally binding. For purposes of this table, purchase obligations are included through the termination date
specified in the respective agreement, even if the contract is renewable. Many of our purchase agreements for goods or
services include clauses that would allow us to cancel the agreement prior to the expiration of the contract within a specified
notice period; however, this table includes these obligations without regard to such termination clauses (unless we have
provided the counterparty with actual notice of our intention to terminate the agreement).
In Table 65, the amounts of future interest payments on debt securities outstanding at December 31, 2010 are based on
the contractual terms of our debt securities at that date. These amounts were determined using the key assumptions that:
(a) variable-rate debt continues to accrue interest at the contractual rates in effect at December 31, 2010 until maturity; and
(b) callable debt continues to accrue interest until its contractual maturity. The amounts of future interest payments on debt
securities presented do not reflect certain factors that will change the amounts of interest payments on our debt securities
after December 31, 2010, such as: (a) changes in interest rates; (b) the call or retirement of any debt securities; and (c) the
issuance of new debt securities. Accordingly, the amounts presented in the table do not represent a forecast of our future
cash interest payments or interest expense.
Table 65 excludes certain obligations that significantly affect our short- and long-term liquidity and capital resource
needs. These items, which are listed below, have generally been excluded because the amount and timing of the related
future cash payments are uncertain.
• future payments related to debt securities of consolidated trusts held by third parties, because the amount and timing
of such payments are generally contingent upon the occurrence of future events and are therefore uncertain. These
payments generally include payments of principal and interest we make to the holders of our guaranteed mortgage-
related securities in the event a loan underlying a security becomes delinquent. We also purchase mortgages from
pools underlying our PCs in certain circumstances, including when loans are 120 days or more delinquent;
• any future cash payments associated with the liquidation preference of the senior preferred stock, as well as the
quarterly commitment fee and the dividends on the senior preferred stock because the timing and amount of any such
future cash payments are uncertain. As of December 31, 2010, the aggregate liquidation preference of the senior
preferred stock was $64.2 billion and our annual dividend obligation was $6.42 billion. See “BUSINESS —
Conservatorship and Related Matters — Treasury Agreements” for additional information;
• future cash settlements on derivative agreements not yet accrued, because the amount and timing of such payments
are dependent upon changes in the underlying financial instruments in response to items such as changes in interest
rates and foreign exchange rates and are therefore uncertain;
• future dividends on the preferred stock we issued, because dividends on these securities are non-cumulative;
• the guarantee arrangements pertaining to multifamily housing revenue bonds, where we provided commitments to
advance funds, commonly referred to as “liquidity guarantees,” because the amount and timing of such payments are
generally contingent upon the occurrence of future events and are therefore uncertain; and
• future contributions to our Pension Plan, as we have not yet determined whether a contribution is required in 2011.
See “NOTE 15: EMPLOYEE BENEFITS” for additional information about contributions to our Pension Plan.
159 Freddie Mac