Freddie Mac 2010 Annual Report Download - page 281

Multifamily Loans
For a discussion of the techniques used to determine the fair value of held-for-sale, and both impaired and non-impaired
held-for-investment multifamily loans, see “Valuation Methods and Assumptions Subject to Fair Value Hierarchy —
Mortgage Loans, Held-for-Investment” and “— Mortgage Loans, Held-for-Sale,” respectively.
Other Assets
Our other assets are not financial instruments required to be valued at fair value under the accounting standards for
disclosures about the fair value of financial instruments, such as property and equipment. For most of these non-financial
instruments in other assets, we use the carrying amounts from our GAAP consolidated balance sheets as the reported values
on our consolidated fair value balance sheets, without any adjustment. These assets represent an insignificant portion of our
GAAP consolidated balance sheets. Certain non-financial assets in other assets on our GAAP consolidated balance sheets are
assigned a zero value on our consolidated fair value balance sheets. This treatment is applied to deferred items such as
deferred debt issuance costs.
We adjust the GAAP-basis deferred taxes reflected on our consolidated fair value balance sheets to include estimated
income taxes on the difference between our consolidated fair value balance sheets net assets attributable to common
stockholders, including deferred taxes from our GAAP consolidated balance sheets, and our GAAP consolidated balance
sheets equity attributable to common stockholders. To the extent the adjusted deferred taxes are a net asset, this amount is
included in other assets. In addition, if our net deferred tax assets on our consolidated fair value balance sheets, calculated as
described above, exceed our net deferred tax assets on our GAAP consolidated balance sheets that have been reduced by a
valuation allowance, our net deferred tax assets on our consolidated fair value balance sheets are limited to the amount of
our net deferred tax assets on our GAAP consolidated balance sheets. If the adjusted deferred taxes are a net liability, this
amount is included in other liabilities.
Accrued interest receivable is one of the components included within other assets on our consolidated fair value balance
sheets. On our GAAP consolidated balance sheets, we reverse accrued but uncollected interest income when a loan is placed
on non-accrual status. There is no such reversal performed for the fair value of accrued interest receivable disclosed on our
consolidated fair value balance sheets. Rather, the mechanism by which we consider the loan’s non-accrual status is through
our internally-modeled credit cost component of the loan’s fair value. As a result, there is a difference between the accrued
interest receivable GAAP-basis carrying amount and its fair value disclosed on our consolidated fair value balance sheets.
Total Debt, Net
Total debt, net represents debt securities of consolidated trusts held by third parties and other debt that we issued to
finance our assets. On our consolidated GAAP balance sheets, total debt, net, excluding debt securities for which the fair
value option has been elected, is reported at amortized cost, which is net of deferred items, including premiums, discounts,
and hedging-related basis adjustments.
For fair value balance sheet purposes, we use the dealer-published quotes for a base TBA security, adjusted for the carry
and pay-up price adjustments, to determine the fair value of the debt securities of consolidated trusts held by third parties.
The valuation techniques we use are similar to the approach we use to value our investments in agency securities for GAAP
purposes. See “Valuation Methods and Assumptions Subject to Fair Value Hierarchy — Investment in Securities — Agency
Securities” for additional information regarding the valuation techniques we use.
Other debt includes both non-callable and callable debt, as well as short-term zero-coupon discount notes. The fair value
of the short-term zero-coupon discount notes is based on a discounted cash flow model with market inputs. The valuation of
other debt securities represents the proceeds that we would receive from the issuance of debt and is generally based on
market prices obtained from broker/dealers, reliable third-party pricing service providers or direct market observations. We
elected the fair value option for foreign-currency denominated debt and certain other debt securities and reported them at fair
value on our GAAP consolidated balance sheets. See “Valuation Methods and Assumptions Subject to Fair Value
Hierarchy — Debt Securities Recorded at Fair Value” for additional information.
Other Liabilities
Other liabilities consist of accrued interest payable on debt securities, the guarantee obligation for our other guarantee
commitments and guarantees issued to non-consolidated entities, the reserve for guarantee losses on non-consolidated trusts,
servicer advanced interest payable and certain other servicer liabilities, accounts payable and accrued expenses, payables
related to securities, and other miscellaneous liabilities. We believe the carrying amount of these liabilities is a reasonable
approximation of their fair value, except for the guarantee obligation for our other guarantee commitments and guarantees
issued to non-consolidated entities. The technique for estimating the fair value of our guarantee obligation related to the
credit component of the loan’s fair value is described in the “Mortgage Loans — Single-Family Loans” section.
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