Freddie Mac 2010 Annual Report Download - page 340

HFA — State or local Housing Finance Agency
HUD — U.S. Department of Housing and Urban Development — Prior to the enactment of the Reform Act, HUD had
general regulatory authority over Freddie Mac, including authority over our affordable housing goals and new programs.
Under the Reform Act, FHFA now has general regulatory authority over us, though HUD still has authority over Freddie
Mac with respect to fair lending.
Implied volatility — A measurement of how the value of a financial instrument changes due to changes in the market’s
expectation of potential changes in future interest rates. A decrease in implied volatility generally increases the estimated fair
value of our mortgage assets and decreases the estimated fair value of our callable debt and options-based derivatives, while
an increase in implied volatility generally has the opposite effect.
Interest-only loan — A mortgage loan that allows the borrower to pay only interest (either fixed-rate or adjustable-rate) for
a fixed period of time before principal amortization payments are required to begin. After the end of the interest-only period,
the borrower can choose to refinance the loan, pay the principal balance in total, or begin paying the monthly scheduled
principal due on the loan.
IRS — Internal Revenue Service
LIBOR — London Interbank Offered Rate
LIHTC partnerships — Low-income housing tax credit partnerships — Prior to 2008, we invested as a limited partner in
LIHTC partnerships, which are formed for the purpose of providing funding for affordable multifamily rental properties.
These LIHTC partnerships invest directly in limited partnerships that own and operate multifamily rental properties that
generate federal income tax credits and deductible operating losses.
Liquidation preference — Generally refers to an amount that holders of preferred securities are entitled to receive out of
available assets, upon liquidation of a company. The initial liquidation preference of our senior preferred stock was
$1.0 billion. The aggregate liquidation preference of our senior preferred stock includes the initial liquidation preference plus
amounts funded by Treasury under the Purchase Agreement. In addition, dividends and periodic commitment fees not paid in
cash are added to the liquidation preference of the senior preferred stock. We may make payments to reduce the liquidation
preference of the senior preferred stock only in limited circumstances.
LTV ratio — Loan-to-value ratio — The ratio of the unpaid principal amount of a mortgage loan to the value of the property
that serves as collateral for the loan, expressed as a percentage. Loans with high LTV ratios generally tend to have a higher
risk of default and, if a default occurs, a greater risk that the amount of the gross loss will be high compared to loans with
lower LTV ratios. We report LTV ratios based solely on the amount of the loan purchased or guaranteed by us, generally
excluding any second lien mortgages (unless we own or guarantee the second lien).
MBA — Mortgage Bankers Association of America
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations
MHA Program — Making Home Affordable Program — Formerly known as the Housing Affordability and Stability Plan,
the MHA Program was announced by the Obama Administration in February 2009. The MHA Program is designed to help
in the housing recovery, promote liquidity and housing affordability, expand foreclosure prevention efforts and set market
standards. The MHA Program includes: (a) the Home Affordable Refinance Program, which gives eligible homeowners with
loans owned or guaranteed by Freddie Mac or Fannie Mae an opportunity to refinance into loans with more affordable
monthly payments; and (b) HAMP.
Monolines — Companies that provide credit insurance principally covering securitized assets in both the primary issuance
and secondary markets.
Mortgage assets — Refers to both mortgage loans and the mortgage-related securities we hold in our mortgage-related
investments portfolio.
Mortgage-related investments portfolio — Our investment portfolio, which consists principally of mortgage-related
securities and single-family and multifamily mortgage loans. Our mortgage-related investments portfolio under the Purchase
Agreement is determined without giving effect to any change in accounting standards related to transfers of financial assets
and consolidation of VIEs or any similar accounting standard. Accordingly, for purposes of the portfolio limit, when PCs and
certain Other Guarantee Transactions are purchased into the mortgage-related investments portfolio, this is considered the
acquisition of assets rather than the reduction of debt.
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