Freddie Mac 2010 Annual Report Download - page 219

Available-For-Sale Securities in a Gross Unrealized Loss Position
Table 8.2 shows the fair value of available-for-sale securities in a gross unrealized loss position, and whether they have
been in that position less than 12 months or 12 months or greater, including the non-credit-related portion of other-than-
temporary impairments which have been recognized in AOCI.
Table 8.2 — Available-For-Sale Securities in a Gross Unrealized Loss Position
December 31, 2010
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Gross Unrealized Losses Gross Unrealized Losses Gross Unrealized Losses
Less than 12 Months 12 Months or Greater Total
(in millions)
Mortgage-related securities:
Freddie Mac . . . . . . . . . . $ 2,494 $ — $ (70) $ (70) $ 1,880 $ — $ (125) $ (125) $ 4,374 $ — $ (195) $ (195)
Subprime . . . . . . . . . . . 6 — — — 33,839 (10,041) (4,015) (14,056) 33,845 (10,041) (4,015) (14,056)
CMBS . . . . . . . . . . . . . 2,950 — (51) (51) 8,894 (844) (1,024) (1,868) 11,844 (844) (1,075) (1,919)
Option ARM . . . . . . . . . 3 (1) — (1) 6,838 (3,744) (108) (3,852) 6,841 (3,745) (108) (3,853)
Alt-A and other . . . . . . . . 42 — (3) (3) 12,025 (1,846) (602) (2,448) 12,067 (1,846) (605) (2,451)
Fannie Mae . . . . . . . . . . 54 — — — 14 — (3) (3) 68 — (3) (3)
Obligations of states and
political subdivisions . . . 3,953 — (163) (163) 3,402 — (376) (376) 7,355 — (539) (539)
Manufactured housing . . . . 8 (1) — (1) 507 (45) (15) (60) 515 (46) (15) (61)
Total mortgage-related
securities . . . . . . . . . . 9,510 (2) (287) (289) 67,399 (16,520) (6,268) (22,788) 76,909 (16,522) (6,555) (23,077)
Total available-for-sale
securities in a gross
unrealized loss position . . . $ 9,510 $ (2) $(287) $ (289) $ 67,399 $(16,520) $ (6,268) $(22,788) $ 76,909 $(16,522) $ (6,555) $(23,077)
December 31, 2009
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Gross Unrealized Losses Gross Unrealized Losses Gross Unrealized Losses
Less than 12 Months 12 Months or Greater Total
(in millions)
Mortgage-related securities:
Freddie Mac . . . . . . . . . . $ 4,219 $ — $ (52) $ (52) $ 11,068 $ — $ (1,089) $ (1,089) $ 15,287 $ — $ (1,141) $ (1,141)
Subprime . . . . . . . . . . . 6,173 (4,219) (62) (4,281) 29,540 (9,238) (7,583) (16,821) 35,713 (13,457) (7,645) (21,102)
CMBS . . . . . . . . . . . . . 3,580 — (56) (56) 48,067 (1,017) (6,715) (7,732) 51,647 (1,017) (6,771) (7,788)
Option ARM . . . . . . . . . 2,457 (2,165) (36) (2,201) 4,712 (3,784) (490) (4,274) 7,169 (5,949) (526) (6,475)
Alt-A and other . . . . . . . . 4,268 (2,162) (43) (2,205) 8,954 (1,833) (1,509) (3,342) 13,222 (3,995) (1,552) (5,547)
Fannie Mae . . . . . . . . . . 473 — (2) (2) 124 — (6) (6) 597 — (8) (8)
Obligations of states and
political subdivisions . . . 949 — (14) (14) 6,996 — (426) (426) 7,945 — (440) (440)
Manufactured housing . . . . 212 (58) — (58) 685 (57) (59) (116) 897 (115) (59) (174)
GinnieMae.......... 17 — — — — — — — 17 — — —
Total mortgage-related
securities . . . . . . . . . . 22,348 (8,604) (265) (8,869) 110,146 (15,929) (17,877) (33,806) 132,494 (24,533) (18,142) (42,675)
Total available-for-sale
securities in a gross
unrealized loss position . . . $22,348 $(8,604) $(265) $(8,869) $110,146 $(15,929) $(17,877) $(33,806) $132,494 $(24,533) $(18,142) $(42,675)
(1) Represents the pre-tax amount of non-credit-related other-than-temporary impairments on available-for-sale securities not expected to be sold which are
recognized in AOCI.
(2) Represents the pre-tax amount of temporary impairments on available-for-sale securities recognized in AOCI.
At December 31, 2010, total gross unrealized losses on available-for-sale securities were $23.1 billion, as noted in
Table 8.2. The gross unrealized losses relate to 2,496 individual lots representing 2,403 separate securities, including
securities with non-credit-related other-than-temporary impairments recognized in AOCI. We routinely purchase multiple lots
of individual securities at different times and at different costs. We determine gross unrealized gains and gross unrealized
losses by specifically identifying investment positions at the lot level; therefore, some of the lots we hold for a single
security may be in an unrealized gain position while other lots for that security may be in an unrealized loss position,
depending upon the amortized cost of the specific lot.
Impairment Recognition on Investments in Securities
We recognize impairment losses on available-for-sale securities within our consolidated statements of operations as net
impairment of available-for-sale securities recognized in earnings when we conclude that a decrease in the fair value of a
security is other-than-temporary. We prospectively adopted an amendment to the accounting standards for investments in debt
and equity securities on April 1, 2009. This amendment changed the recognition, measurement and presentation of other-
than-temporary impairment for debt securities. See “NOTE 2: CHANGE IN ACCOUNTING PRINCIPLES — Other Changes
in Accounting Principles — Change in the Impairment Model for Debt Securities” for further information regarding the
impact of this amendment on our consolidated financial statements.
We conduct quarterly reviews to evaluate each available-for-sale security that has an unrealized loss for other-than-
temporary impairment. An unrealized loss exists when the current fair value of an individual security is less than its
amortized cost basis. We recognize other-than-temporary impairment in earnings if one of the following conditions exists:
(a) we have the intent to sell the security; (b) it is more likely than not that we will be required to sell the security before
216 Freddie Mac