Freddie Mac 2010 Annual Report Download - page 196

(3) We recognize federal funds sold and securities purchased under agreements to resell held by our single-family PC trusts and certain Other Guarantee
Transactions on our consolidated balance sheets. This adjustment represents amounts that may only be used to settle the obligations of our consolidated
trusts.
(4) We no longer account for the single-family PCs and certain Other Guarantee Transactions that we hold as investment securities because we consolidate
the related trusts; therefore, we eliminated UPB amounts of approximately $123.8 billion and $150.1 billion related to investment securities held byus
classified as available-for-sale and trading, respectively, and the related debt securities of the consolidated trusts. Additionally, we eliminated
$12.6 billion of basis adjustments (e.g., premiums and discounts) and changes in fair value, which adjust the carrying amount of these investments on
our consolidated balance sheet. See endnote 14, which discusses the amounts removed from AOCI relating to the available-for-sale securities.
(5) On consolidation of our single-family PCs and certain Other Guarantee Transactions, we recognized $1.8 trillion of mortgage loans held-for-investment
contained in these consolidated trusts.
(6) We no longer establish a reserve for guarantee losses on PCs and Other Guarantee Transactions issued by trusts that we have consolidated; rather, we
now recognize an allowance for loan losses against the mortgage loans that underlie those PCs and Other Guarantee Transactions. Accordingly, the
reserve for guarantee losses on PCs and Other Guarantee Transactions that were consolidated was reclassified to the allowance for loan losses related
to mortgage loans held-for-investment by consolidated trusts. We continue to recognize a reserve for guarantee losses related to our other guarantee
commitments and guarantees issued to non-consolidated entities within other liabilities.
(7) We reclassified all unsecuritized single-family mortgage loans held-for-sale with a carrying amount of $13.4 billion to held-for-investment on
January 1, 2010, as these loans will either be held by us as unsecuritized, or will be transferred to securitization trusts that we would consolidate.
Additionally, we eliminated $1.8 billion of unsecuritized mortgage loans held-for-investment that relate to loans that were eligible to be repurchased
from single-family PC trusts prior to consolidation, but had not yet been purchased. We were previously required to recognize these loans as assets
even though they had not yet been purchased from the securitization trusts because our right to repurchase these loans provided us with effective
control over these loans. Lastly, there were miscellaneous adjustments of $18 million related to unsecuritized loans held-for-investment and $81 million
related to loans held-for-sale at transition. As of January 1, 2010, all held-for-sale loans are multifamily mortgage loans.
(8) The consolidation of VIEs includes $8.9 billion of accrued interest, which represents the aggregate amount of interest receivable on the mortgage loans
held by these consolidated entities. Additionally, we eliminated $1.4 billion of interest receivable related to investment securities issued by these
consolidated entities and held by us as of December 31, 2009 (see endnote 4 above) that were eliminated in consolidation, and $1.3 billion related to
the initial application of our corporate non-accrual policy to these newly consolidated mortgage loans.
(9) We eliminated the guarantee asset and guarantee obligation for guarantees issued to trusts that we have consolidated. We continue to recognize a
guarantee asset and guarantee obligation for our other guarantee commitments and guarantees issued to non-consolidated entities.
(10) The consolidation of VIEs includes $5.1 billion of receivables from servicers for payments received from the loans they service on our behalf that have
not yet been remitted to the trust, $1.8 billion in receivables from us relating to loans we are required to record on our consolidated balance sheets, but
for which the related cash receipts are still a contractual asset of the trust (see endnote 7, above), and $0.6 billion in other receivables from us in our
capacity as guarantor. We eliminated the $2.4 billion in aggregate receivables from us mentioned in the preceding sentence as, upon consolidation, this
amount represents an intercompany transaction, $1.0 billion of receivables for principal payments related to investment securities issued by these
consolidated entities and held by us as of December 31, 2009 (see endnote 4 above) that were eliminated in consolidation, $353 million of guarantee-
related credit enhancements with the consolidated VIEs, and $2 million of other receivables and assets related to LIHTC partnerships that were
deconsolidated.
(11) The consolidation of VIEs includes $8.6 billion of accrued interest payable related to the debt securities issued by these consolidated securitization
trusts. We then eliminated in consolidation $1.4 billion of interest payable related to investment securities issued by these consolidated entities and held
by us as of December 31, 2009 (see endnote 4 above).
(12) On consolidation of our single-family PCs and certain Other Guarantee Transactions, we recognized $1.8 trillion of debt securities issued by these
securitization trusts. We eliminated the UPB of $273.9 billion of these securities that were held by us (see endnote 4 above) and $1.0 billion of
principal repayments that were due but not yet paid related to the securities held by us at December 31, 2009.
(13) We recorded a decrease to retained earnings (accumulated deficit), driven principally by: (a) the elimination of unrealized gains resulting from the
extinguishment of PCs held as investment securities upon consolidation of the PC trusts, representing the difference between the UPB of the loans
underlying the PC trusts upon consolidation and the fair value of the PCs, including premiums, discounts, and other basis adjustments; (b) the
elimination of the guarantee asset and guarantee obligation established for guarantees issued to securitization trusts we consolidated; and (c) the
application of our non-accrual policy to seriously delinquent single-family mortgage loans consolidated as of January 1, 2010.
(14) We eliminated unrealized gains (inclusive of deferred tax amounts) previously recorded in AOCI related to available-for-sale securities issued by
securitization trusts we have consolidated.
Impacts on Consolidated Statements of Operations
Prospective adoption of these changes in accounting principles also significantly impacted the presentation of our
consolidated statements of operations. These impacts are discussed below:
Line Items No Longer Separately Presented:
Line items that are no longer separately presented on our consolidated statements of operations include:
• Management and guarantee income — we no longer recognize management and guarantee income on PCs and Other
Guarantee Transactions issued by trusts that we have consolidated; rather, the portion of the interest collected on the
underlying loans that represents our management and guarantee fee is recognized as part of interest income on
mortgage loans. We continue to recognize management and guarantee income related to our other guarantee
commitments and guarantees issued to non-consolidated entities in other income;
• Gains (losses) on guarantee asset and income on guarantee obligation — we no longer recognize a guarantee asset and
a guarantee obligation for guarantees issued to trusts that we have consolidated; therefore, we also no longer
recognize gains (losses) on guarantee asset and income on guarantee obligation for such trusts. However, we continue
to recognize a guarantee asset and a guarantee obligation for our other guarantee commitments and guarantees issued
to non-consolidated entities and the corresponding gains (losses) on guarantee asset and income on guarantee
obligation, which are recorded in other income;
• Losses on loans purchased — we no longer recognize the acquisition of loans from PC trusts that we have
consolidated as a purchase with an associated loss, as these loans are already reflected on our consolidated balance
sheet. Instead, when we acquire a loan from these entities, we reclassify the loan from mortgage loans
held-for-investment by consolidated trusts to unsecuritized mortgage loans held-for-investment and record the cash
tendered as an extinguishment of the related PC debt within debt securities of consolidated trusts held by third parties.
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