Freddie Mac 2010 Annual Report Download - page 80

impaired loans where the borrower has made required payments that return the loan to less than three months past due, the
recovery amounts are instead recognized as interest income over time as periodic payments are received.
During 2010, 2009, and 2008, we recognized recoveries on loans impaired upon purchase of $806 million, $379 million
and $495 million, respectively. Our recoveries on loans impaired upon purchase increased in 2010, compared to 2009, due to
a higher volume of short sales and foreclosure transfers, combined with improvements in home prices in certain geographical
areas during 2010. Recoveries on impaired loans decreased in 2009, compared to 2008, because a greater percentage of loans
purchased from PCs were modified instead of being repaid in full or proceeding to foreclosure. Modifications on seriously
delinquent loans can delay the ultimate resolution of losses and consequently extend the timeframe for the recognition of our
recoveries, if any, on loans impaired upon purchase. Our recoveries on these loans may be volatile in the short-term due to
the effects of changes in home prices, among other factors.
Commencing January 1, 2010, we no longer recognize losses on loans purchased from PC pools related to our single-
family PC trusts and certain Other Guarantee Transactions due to adoption of the amendments to the accounting standards
for transfers of financial assets and consolidation of VIEs, as these loans are already recognized on our balance sheets.
Consequently, our recoveries on loans impaired upon purchase will decrease over time since we can only recognize
recoveries on impaired loans purchased prior to January 1, 2010. See “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES” for further information about the impact of adoption of these amendments.
Low-Income Housing Tax Credit Partnerships
We wrote down the carrying value of our LIHTC investments to zero in the fourth quarter of 2009, as we will not be
able to realize any value either through reductions to our taxable income and related tax liabilities or through a sale to a third
party. See “NOTE 14: INCOME TAXES” for information on the availability of unexpired tax credits.
Non-Interest Expense
Table 14 summarizes the components of non-interest expense.
Table 14 — Non-Interest Expense
2010 2009 2008
Year Ended December 31,
(in millions)
Administrative expenses:
Salaries and employee benefits ......................................................... $ 895 $ 912 $ 828
Professional services ................................................................ 246 310 262
Occupancy expense ................................................................. 64 68 67
Other administrative expenses .......................................................... 341 361 348
Total administrative expenses ........................................................ 1,546 1,651 1,505
REO operations expense ............................................................... 673 307 1,097
Other expenses . . . . ................................................................. 713 5,237 3,151
Total non-interest expense . . . ........................................................... $2,932 $7,195 $5,753
Administrative Expenses
Administrative expenses decreased in 2010 compared to 2009, in part due to our focus on cost reduction measures in
2010, particularly on professional services costs. Administrative expenses increased in 2009 compared to 2008, in part due to
higher professional services costs to support corporate initiatives, including our efforts under MHA Programs, and higher
legal fees.
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