Freddie Mac 2015 Annual Report Download - page 234

Financial Statements Notes to the Consolidated Financial Statements | Note 4
Freddie Mac 2015 Form 10-K 232
NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES
The table below provides details of the loans on our consolidated balance sheets as of December 31,
2015 and 2014.
December 31, 2015 December 31, 2014
(in millions) Held by Freddie Mac
Held by
consolidated
trusts Total Held by Freddie Mac
Held by
consolidated
trusts Total
Held-for sale:
Single-family $ 6,045 $ 1,702 $ 7,747 $ — $ — $ —
Multifamily 19,582 — 19,582 12,111 — 12,111
Total UPB 25,627 1,702 27,329 12,111 — 12,111
Cost basis and fair value
adjustments, net (2,038) (299) (2,337) 257 — 257
Total held-for-sale loans 23,589 1,403 24,992 12,368 — 12,368
Held-for-investment:
Single-family 90,532 1,597,590 1,688,122 111,516 1,534,356 1,645,872
Multifamily 29,505 1,711 31,216 40,845 524 41,369
Total UPB 120,037 1,599,301 1,719,338 152,361 1,534,880 1,687,241
Cost basis adjustments (3,465) 28,659 25,194 (3,366) 26,098 22,732
Allowance for loan losses (12,555) (2,776) (15,331) (18,877) (2,884) (21,761)
Total held-for-investment loans 104,017 1,625,184 1,729,201 130,118 1,558,094 1,688,212
Total loans, net $ 127,606 $ 1,626,587 $ 1,754,193 $ 142,486 $ 1,558,094 $ 1,700,580
We own both single-family loans, which are secured by one to four unit residential properties, and
multifamily loans, which are secured by properties with five or more residential rental units. Our single-
family loans are predominantly first lien, fixed-rate loans secured by the borrower’s primary residence.
Upon acquisition, we classify a loan as either held-for-sale or held-for-investment. Loans that we have the
ability and intent to hold for the foreseeable future are classified as held-for-investment. Loans that we
intend to securitize using an entity we will consolidate are classified as held-for-investment both prior to
and subsequent to their securitization. Otherwise, they will be classified as held-for-sale. Held-for-
investment loans are reported in our consolidated balance sheets at their outstanding UPB, net of
deferred fees and other cost basis adjustments (including unamortized premiums and discounts, delivery
fees and other pricing adjustments).
Loans not classified as held-for-investment are classified as held-for-sale. Held-for-sale loans are
reported at lower-of-cost-or-fair-value on our consolidated balance sheets. Any excess of a held-for-sale
loan’s cost over its fair value is recognized as a valuation allowance in other income on our consolidated
statements of comprehensive income, with changes in this valuation allowance also being recorded in
other income. Premiums, discounts, and other cost basis adjustments (including lower-of-cost-or-fair
value adjustments) on single-family loans classified as held-for-sale are deferred and not amortized. We
elected the fair value option for certain multifamily loans that we intend to securitize and sell to investors.
Therefore, these multifamily loans are measured at fair value on a recurring basis, with subsequent gains
or losses related to changes in fair value reported in other income in our consolidated statements of
comprehensive income.
Cash flows related to loans originally classified as held-for-investment are classified as either investing
activities (e.g., principal repayments) or operating activities (e.g., interest payments received from
borrowers included within net income (loss)). Cash flows related to loans originally classified as held-for-
sale are classified as operating activities.