Freddie Mac 2014 Annual Report Download - page 70

65 Freddie Mac
Table 19 — Non-Interest Expense
Year Ended December 31,
2014 2013 2012
(in millions)
Administrative expense:
Salaries and employee benefits $ 914 $ 833 $ 810
Professional services 527 543 361
Occupancy expense 58 54 57
Other administrative expense 382 375 333
Total administrative expense 1,881 1,805 1,561
REO operations expense (income) 196 (140) 59
Temporary Payroll Tax Cut Continuation Act of 2011 expense 775 533 108
Other expense (income) 238 (109) 465
Total non-interest expense $ 3,090 $ 2,089 $ 2,193
Administrative Expense
Administrative expense increased in 2014 due to increases in salaries and employee benefits expense, mainly due to
expenses associated with our terminated retirement plans, partially offset by declines in professional services expense related
to: (a) FHFA-led lawsuits regarding our investments in certain non-agency mortgage-related securities; and (b) quality control
reviews for single-family loans we acquired prior to being placed in conservatorship. Administrative expense increased in 2013
primarily due to an increase in professional services expense related to: (a) FHFA-led lawsuits; (b) quality control reviews; (c)
Conservatorship Scorecard initiatives, including development of the common securitization platform; and (d) infrastructure
improvement projects, including establishment of an off-site, back-up data facility.
REO Operations (Income) Expense
The table below presents the components of our REO operations (income) expense.
Table 20 — REO Operations (Income) Expense
Year Ended December 31,
2014 2013 2012
(in millions)
REO operations (income) expense:
Single-family:
REO property expenses $ 829 $ 962 $ 1,203
Disposition gains, net (454) (746) (682)
Change in valuation allowance 75 23 (117)
Recoveries (245) (363) (342)
Total single-family REO operations (income) expense 205 (124) 62
Multifamily REO operations (income) expense (9) (16) (3)
Total REO operations (income) expense $ 196 $ (140) $ 59
REO operations (income) expense was $196 million in 2014, as compared to $(140) million in 2013, and $59 million in
2012. The change from REO operations income in 2013 to REO operations expense in 2014 was primarily due to lower gains
on the disposition of REO properties associated with a lower volume of REO sales. The improvement in 2013 compared to
2012 was primarily due to: (a) a decline in REO property expenses associated with a lower number of REO properties; and
(b) improving home prices in certain geographic areas with significant REO activity. For more information on our REO
activity, see “Segment Earnings — Segment Earnings — Results — Single-Family Guarantee,” “CONSOLIDATED
BALANCE SHEETS ANALYSIS — REO, Net,” and “RISK MANAGEMENT — Credit Risk Overview — Single-Family
Mortgage Credit Risk Framework and Profile — Managing REO Activity.”
Temporary Payroll Tax Cut Continuation Act of 2011 Expense
Pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011, we increased the guarantee fee on single-family
mortgages sold to us by 10 basis points in April 2012. We pay these fees to Treasury on a quarterly basis. We refer to this fee
increase as the legislated 10 basis point increase in guarantee fees.
Expenses related to the legislated 10 basis point increase in guarantee fees were $775 million, $533 million, and $108
million during 2014, 2013, and 2012, respectively. As of December 31, 2014, loans with an aggregate UPB of $866.7 billion
were subject to these fees, and the cumulative total of the amounts paid and due to Treasury for these fees was $1.4 billion. We
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