Freddie Mac 2015 Annual Report Download - page 232

Financial Statements Notes to the Consolidated Financial Statements | Note 3
Freddie Mac 2015 Form 10-K 230
through other activities. We were not involved in the design or creation of these entities and our
continuing involvement is typically passive in nature and does not provide us with the power to direct the
activities that most significantly impact the economic performance of these entities. As a result, we do not
consolidate these VIEs and we account for our interests in the VIEs in the same manner that we account
for our interests in other third-party transactions. See Note 6 for additional information regarding our
investments in non-Freddie Mac mortgage-related securities. See Note 4 for more information regarding
multifamily loans.
FINANCIAL GUARANTEES
The table below shows our maximum potential exposure, recognized liability, and maximum remaining
term of our recognized financial guarantees to unconsolidated VIEs and other third parties. This table
does not include our unrecognized financial guarantees, such as guarantees to consolidated VIEs or to
resecuritization trusts that do not expose us to incremental credit risk. The maximum exposure disclosed
in the table is not representative of the actual loss we are likely to incur, based on our historical loss
experience and after consideration of proceeds from related collateral liquidation.
December 31, 2015 December 31, 2014
(dollars in millions, terms in years) Maximum Exposure(1) Recognized Liability(2)
Maximum
Remaining
Term Maximum Exposure(1) Recognized Liability(2)
Maximum
Remaining
Term
K Certificates and other securitization products $ 114,193 $ 1,136 40 $ 87,529 $ 861 39
Other mortgage-related guarantees 13,067 596 38 26,147 772 39
Derivative instruments 17,894 151 30 21,336 154 31
(1) The maximum exposure represents the contractual amounts that could be lost if counterparties or borrowers defaulted,
without consideration of possible recoveries under credit enhancement arrangements, such as recourse provisions, third-
party insurance contracts, or from collateral held or pledged.
(2) For K Certificates, other securitization products, and other mortgage-related guarantees, this amount represents the
guarantee obligation on our consolidated balance sheets. This amount excludes our reserve for guarantee losses, which
totaled $76 million and $126 million as of December 31, 2015 and 2014, respectively, and is included within other liabilities
on our consolidated balance sheets.
CREDIT ENHANCEMENTS
For many of the loans underlying our single-family PCs, other securitization products, and other mortgage
related guarantees, we obtained credit enhancements from third parties covering a portion of our credit
risk exposure. See Note 4 for information about credit enhancements on loans.