Freddie Mac 2010 Annual Report Download - page 272

Balance,
January 1,
2009
Included in
earnings
(2)(3)(4)(5)
Included in other
comprehensive
income
(2)(3)
Total
Purchases,
issuances, sales and
settlements, net
(6)
Net transfers in
and/or out of
Level 3
(7)
Balance,
December 31,
2009
Unrealized
gains (losses)
still held
(8)
Realized and unrealized gains (losses)
For The Year Ended December 31, 2009
(in millions)
Investments in securities:
Available-for-sale, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,320 $ (2) $ 1,833 $ 1,831 $ 1,035 $ (379) $ 20,807 $ —
Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . 52,266 (6,526) 2,958 (3,568) (12,977) — 35,721 (6,526)
CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,861 (137) 6,940 6,803 (2,284) 46,639 54,019 (137)
Option ARM . . . . . . . . . . . . . . . . . . . . . . . . 7,378 (1,726) 3,416 1,690 (1,832) — 7,236 (1,726)
Alt-A and other . . . . . . . . . . . . . . . . . . . . . . . 13,236 (2,572) 6,130 3,558 (3,404) 1 13,391 (2,572)
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . 396 — 6 6 (42) (22) 338 —
Obligations of states and political subdivisions . . . . . 10,528 2 1,955 1,957 (1,008) — 11,477 —
Manufactured housing . . . . . . . . . . . . . . . . . . . 743 (51) 336 285 (117) — 911 (51)
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . 12 — — — (2) (6) 4 —
Total mortgage-related securities . . . . . . . . . . . . 105,740 (11,012) 23,574 12,562 (20,631) 46,233 143,904 (11,012)
Non-mortgage-related securities:
Asset-backed securities . . . . . . . . . . . . . . . . . . — (7) 8 1 (1) — — —
Total available-for-sale securities, at fair value . . 105,740 (11,019) 23,582 12,563 (20,632) 46,233 143,904 (11,012)
Trading, at fair value:
Mortgage-related securities:
Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . 1,575 971 — 971 (90) 349 2,805 962
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . 582 514 — 514 187 60 1,343 514
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . 14 2 — 2 (2) 13 27 2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (1) — (1) (3) 3 28 —
Total mortgage-related securities . . . . . . . . . . . . 2,200 1,486 — 1,486 92 425 4,203 1,478
Non-mortgage-related securities:
FDIC-guaranteed corporate medium-term notes . . . . . — — — — 250 (250) — —
Total trading securities, at fair value . . . . . . . . 2,200 1,486 — 1,486 342 175 4,203 1,478
Mortgage loans:
Held-for-sale, at fair value . . . . . . . . . . . . . . . . . . . 401 (81) — (81) 2,479 — 2,799 (96)
Net derivatives
(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . 100 (388) — (388) (142) — (430) (404)
Other assets:
Guarantee asset
(10)
. . . . . . . . . . . . . . . . . . . . . . . . 4,847 5,298 — 5,298 299 — 10,444 5,298
(1) Represents adjustment to initially apply the accounting standards on accounting for transfers of financial assets and consolidation of VIEs.
(2) Changes in fair value for available-for-sale investments are recorded in AOCI, while gains and losses from sales are recorded in other gains (losses) on
investments on our consolidated statements of operations. For mortgage-related securities classified as trading, the realized and unrealized gains (losses) are
recorded in other gains (losses) on investments on our consolidated statements of operations.
(3) Changes in fair value of derivatives are recorded in derivative gains (losses) on our consolidated statements of operations for those not designated as accounting
hedges, and AOCI, for those accounted for as a cash flow hedge to the extent the hedge is effective.
(4) Changes in fair value of the guarantee asset are recorded in other income on our consolidated statements of operations.
(5) For held-for-sale mortgage loans with fair value option elected, gains (losses) on fair value changes and sale of mortgage loans are recorded in other income on
our consolidated statements of operations.
(6) For non-agency mortgage-related securities, primarily represents principal repayments.
(7) Transfer in and/or out of Level 3 during the period is disclosed as if the transfer occurred at the beginning of the period.
(8) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains (losses) related to assets and
liabilities classified as Level 3 that were still held at December 31, 2010 and 2009, respectively. Included in these amounts are credit-related other-than-temporary
impairments recorded on available-for-sale securities.
(9) Net derivatives include derivative assets and derivative liabilities prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable and
net derivative interest receivable or payable.
(10) We estimate that all amounts recorded for unrealized gains and losses on our guarantee asset relate to those amounts still in position. Cash received on our
guarantee asset is presented as settlements in the table. The amounts reflected as included in earnings represent the periodic fair value changes of our guarantee
asset.
Non-recurring Fair Value Changes
Certain assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain
circumstances. We consider the fair value measurement related to these assets to be non-recurring. These assets include REO,
net, impaired held-for-investment multifamily mortgage loans, and single-family held-for-sale mortgage loans. These fair
value measurements usually result from the write-down of individual assets to current fair value amounts due to impairments.
For a discussion related to our fair value measurement of single-family held-for-sale mortgage loans, see “Valuation
Methods and Assumptions Subject to Fair Value Hierarchy — Mortgage Loans, Held-for-Sale.” As of January 1, 2010, we
reclassified single-family loans that were historically classified as held-for-sale to unsecuritized mortgage loans held-for-
investment. Therefore, these loans were not subject to fair value measurements after this date. See “NOTE 2: CHANGE IN
ACCOUNTING PRINCIPLES” for additional information.
The fair value of impaired multifamily held-for-investment mortgage loans is generally based on the value of the
underlying property. Given the relative illiquidity in the markets for these impaired loans, and differences in contractual
terms of each loan, we classified these loans as Level 3 in the fair value hierarchy. See “Valuation Methods and Assumptions
Subject to Fair Value Hierarchy — Mortgage Loans, Held-for-Investment” for additional details.
REO is initially measured at its fair value less costs to sell. In subsequent periods, REO is reported at the lower of its
carrying amount or fair value less costs to sell. Subsequent measurements of fair value less costs to sell are estimated values
based on relevant current and historical factors, which are considered to be unobservable inputs. As a result, REO is
classified as Level 3 under the fair value hierarchy. See “Valuation Methods and Assumptions Subject to Fair Value
Hierarchy — REO, Net‘” for additional details.
269 Freddie Mac