Freddie Mac 2014 Annual Report Download - page 79

74 Freddie Mac
We incurred derivative gains for this segment of $5.5 billion during 2013 compared to $1.0 billion during 2012. The
increase in derivative gains was primarily due to an increase in longer-term interest rates during 2013, compared to a decrease
in longer-term interest rates during 2012, coupled with a change in the mix of our derivatives. See “Non-Interest Income (Loss)
— Derivative Gains (Losses)” for additional information on our derivatives.
Income from settlements associated with our investments in certain non-agency mortgage-related securities was $5.5
billion in 2013 compared to $0 million during 2012.
Net impairment of available-for-sale securities recognized in earnings in our Investments segment was $1.0 billion during
2013 compared to $1.8 billion during 2012. The decrease in net impairments was primarily due to improvements in forecasted
home prices over the expected life of the available-for-sale securities during 2013. During 2013, benefits from improvements in
forecasted home prices were offset primarily by the impact of two changes: (a) the incorporation in the fourth quarter of 2013
of new information, which enhanced the assumptions used to estimate the contractual loan terms for certain modified loans
collateralizing non-agency mortgage-related securities for which actual data about those terms was unavailable to the market;
and (b) an increase in the population of available-for-sale securities in an unrealized loss position which we intend to sell. In the
fourth quarter of 2012, we implemented the use of a third-party model, which enhanced our approach to estimating other-than-
temporary impairments of our single-family non-agency mortgage-related securities. The decision to transition to a third-party
model was made to increase the level of disaggregation for certain assumptions used in projecting cash flow estimates of these
securities. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities — Mortgage-Related
Securities — Other-Than-Temporary Impairments on Available-For-Sale Mortgage-Related Securities,” as well as “NOTE 7:
INVESTMENTS IN SECURITIES” for additional information on our impairments.
Our Investments segment’s other comprehensive income was $4.4 billion during 2013 compared to $4.0 billion during
2012. The increase in other comprehensive income was primarily due to higher fair values on our single-family non-agency
mortgage-related securities, as these securities were affected by spread tightening in 2013, partially offset by losses on our
agency mortgage-related securities resulting from the increase in longer-term interest rates.
For a discussion of items that have affected our Investments segment net interest income over time, and can be expected
to continue to do so, see “BUSINESS — Conservatorship and Related Matters — Limits on Investment Activity and Our
Mortgage-Related Investments Portfolio.”
Multifamily
The table below presents the Segment Earnings of our Multifamily segment. In the first quarter of 2014, we revised our
inter-segment allocations between the Multifamily and the Investments segments for the Multifamily segment's investment
securities and held-for-sale loans. Prior period results have been revised to conform with the current period presentation. For
additional information about this change, see “NOTE 13: SEGMENT REPORTING — Segment Earnings" and "Table 13.2 —
Segment Earnings and Reconciliation to GAAP Results.”
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