Freddie Mac 2006 Annual Report Download - page 129

Consolidated VIEs
Table 3.1 represents the carrying amounts and classiÑcation of consolidated assets that are collateral for the
consolidated VIEs.
Table 3.1 Ì Assets of Consolidated VIEs
December 31,
Consolidated Balance Sheets Line Item 2006 2005
(in millions)
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 44 $ 45
Accounts and other receivables, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173 167
Total assets of consolidated VIEs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $217 $212
VIEs Not Consolidated
Low-Income Housing Tax Credit Partnerships
At December 31, 2006 and 2005, we had unconsolidated investments in 179 and 168 LIHTC partnerships, respectively,
in which we had a signiÑcant variable interest. The size of these partnerships at December 31, 2006 and 2005, as measured
in total assets, was $8.9 billion and $8.1 billion, respectively. These partnerships are accounted for using the equity method,
as described in ""NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.'' As a limited partner, our
maximum exposure to loss equals the undiscounted book value of our equity investment. At December 31, 2006 and 2005,
our maximum exposure to loss on unconsolidated LIHTC partnerships, in which we had a signiÑcant variable interest, was
$3.7 billion and $3.7 billion, respectively.
Asset-Backed Investment Trusts
We invest in a variety of non-mortgage-related, asset-backed investment trusts. These investments represent interests in
trusts consisting of a pool of receivables or other Ñnancial assets, typically credit card receivables, auto loans or student
loans. These trusts act as vehicles to allow originators to securitize assets. Securities are structured from the underlying pool
of assets to provide for varying degrees of risk. Primary risks include potential loss from the credit risk and interest-rate risk
of the underlying pool. The originators of the Ñnancial assets or the underwriters of the deal create the trusts and typically
own the residual interest in the trust assets. At December 31, 2006 and 2005, we did not have a signiÑcant variable interest
in and were not the primary beneÑciary of any asset-backed investment trusts.
Structured Transactions
We issue securities in Structured Transactions, which are backed by mortgage loans or mortgage-related securities using
collateral pools transferred to a trust speciÑcally created for the purpose of issuing securities. These trusts issue various
senior interests, subordinated interests or both. We purchase certain senior interests of the trusts and simultaneously issue
and guarantee Structured securities backed by these interests. The subordinated interests are generally either held by the
seller or other party or sold in the capital markets. Generally, the structure of the transactions and the trusts as qualifying
special purpose entities exempts them from the scope of FASB Interpretation No. 46 (Revised December 2003),
""Consolidation of Variable Interest Entities,'' or FIN 46(R). However, at both December 31, 2006 and 2005, we had
investments or guarantees related to two Structured Transactions that did not fall within this scope exception and in which
we had a signiÑcant variable interest. At December 31, 2006 and 2005, we were not the primary beneÑciary of any such
transactions.
Our involvement in the two Structured Transactions, mentioned above, began in 1996 and 2002, respectively. The size
of these two transactions at December 31, 2006 and 2005, as measured in total assets, was $67 million and $105 million,
respectively. At December 31, 2006 and 2005, our maximum exposure to loss on these transactions, in which we had a
signiÑcant variable interest, was $55 million and $88 million, respectively, consisting of the book value of our investments
plus incremental guarantees of the senior interests that are held by third parties.
117 Freddie Mac