Freddie Mac 2010 Annual Report Download - page 208

PCs or previously issued REMICs and Other Structured Securities as collateral. Our involvement with the resecuritization
trusts that issue these securities does not provide us with rights to receive benefits or obligations to absorb losses nor does it
provide any power that would enable us to direct the most significant activities of these VIEs because the ultimate
underlying assets are PCs for which we have already provided a guarantee (i.e., all significant rights, obligations and powers
are associated with the underlying PC trusts). As a result, we have concluded that we are not the primary beneficiary of these
resecuritization trusts.
In Other Guarantee Transactions, non-Freddie Mac mortgage-related securities are used as collateral. At December 31,
2010, our involvement with certain Other Guarantee Transactions does not provide us with the power to direct the activities
that most significantly impact the economic performance of these VIEs. As a result, we hold a variable interest in, but are
not the primary beneficiary of, certain Other Guarantee Transactions.
For non-consolidated REMICs and Other Structured Securities and Other Guarantee Transactions, our investments are
primarily included in either available-for-sale securities or trading securities on our consolidated balance sheets. See
“NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Securitization Activities through Issuances of
Freddie Mac Mortgage-Related Securities” for additional information on accounting for purchases of PCs and beneficial
interests issued by resecuritization trusts. Our investments in these trusts are funded through the issuance of unsecured debt,
which is recorded as other debt on our consolidated balance sheets.
Non-Freddie Mac Securities
We invest in a variety of mortgage-related securities issued by third-parties, including non-Freddie Mac agency
securities, CMBS, other private-label securities backed by various mortgage-related assets, and obligations of states and
political subdivisions. These investments typically represent interests in trusts that consist of a pool of mortgage-related
assets and act as vehicles to allow originators to securitize those assets. Securities are structured from the underlying pool of
assets to provide for varying degrees of risk. Primary risks include potential loss from the credit risk and interest-rate risk of
the underlying pool. The originators of the financial assets or the underwriters of the deal create the trusts and typically own
the residual interest in the trust assets. See “NOTE 8: INVESTMENTS IN SECURITIES” for additional information
regarding our non-Freddie Mac securities.
Our investments in these non-Freddie Mac securities were made between 1994 and 2010. At December 31, 2010, we
were not the primary beneficiary of any such trusts because our investments are passive in nature and do not provide us with
the power to direct the activities of the trusts that most significantly impact their economic performance. As such, our
investments in these non-Freddie Mac mortgage-related securities are accounted for as investment securities as described in
“NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.” At December 31, 2010 and 2009, we did not
guarantee any obligations of these investment trusts and our exposure was limited to the amount of our investment. Our
investments in these trusts are funded through the issuance of unsecured debt, which is recorded as other debt on our
consolidated balance sheets.
Unsecuritized Multifamily Loans
We purchase from originators loans made to various multifamily real estate entities, and hold such loans for investment
purposes or for securitization. While we primarily purchase such loans for investment purposes or for securitization, they
also help us to fulfill our affordable housing goals. These real estate entities are primarily single-asset entities (typically
partnerships or limited liability companies) established to acquire, construct, or rehabilitate residential properties, and
subsequently to operate the properties as residential rental real estate. The loans we acquire usually make up 80% or less of
the value of the related underlying property at origination. The remaining 20% of value is typically funded through equity
contributions by the partners of the borrower entity. In certain cases, the 20% not funded through the loan we acquire also
includes subordinate loans or mezzanine financing from third-party lenders. There were more than 7,000 unsecuritized loans
in our mortgage-related investments portfolio as of December 31, 2010.
The UPB of our investments in these loans was $85.9 billion and $83.9 billion as of December 31, 2010 and 2009,
respectively, and was included in unsecuritized held-for-investment mortgage loans, at amortized cost, and held-for-sale
mortgage loans at fair value on our consolidated balance sheets. At December 31, 2010, we were not the primary beneficiary
of any such entities because the loans we acquire are passive in nature and do not provide us with the power to direct the
activities of these entities that most significantly impact their economic performance. See “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES — Mortgage Loans” and “NOTE 5: MORTGAGE LOANS AND LOAN LOSS
RESERVES” for more information.
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