Freddie Mac 2008 Annual Report Download - page 109

“NOTE 18: CONCENTRATION OF CREDIT AND OTHER RISKS” to our consolidated financial statements for additional
information regarding our credit risks to our counterparties and how we seek to manage them.
Table 31 shows our non-agency mortgage-related securities covered by monoline bond insurance at December 31, 2008.
Table 31 — Non-Agency Mortgage-Related Securities Covered by Monoline Bond Insurance at December 31, 2008
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Unpaid
Principal
Balance
(2)
Gross
Unrealized
Losses
(3)
Financial Guaranty
Insurance Company
Syncora
Guarantee Inc.
AMBAC Assurance
Corporation
Financial Security
Assurance Inc.
MBIA Insurance
Corp. Other
(1)
Total
(in millions)
First lien subprime . . . . . . . . $1,290 $(340) $ 220 $ (2) $ 837 $ (280) $ 510 $ (66) $ 26 $ (2) $— $— $ 2,883 $ (690)
Second lien subprime . . . . . . . 362 (113) 72 — 52 (35) — — 15 — — — 501 (148)
Alt-A and other
(4)
. . . . . . . . . 1,096 (123) 450 (30) 1,573 (980) 522 (272) 632 — — — 4,273 (1,405)
MTA . . . . . . . . . . . . . . . . — — 367 (48) 179 (123) 187 (127) — — — — 733 (298)
Manufactured Housing . . . . . . — — — — 114 (63) — — 188 — — — 302 (63)
CMBS . . . . . . . . . . . . . . . — — — — 2,219 (399) — — 1,167 (368) 30 (7) 3,416 (774)
Obligations of states and
political subdivisions . . . . . . 38 (7) — — 467 (94) 397 (74) 354 (44) 17 (2) 1,273 (221)
Total . . . . . . . . . . . . . . . $2,786 $(583) $1,109 $(80) $5,441 $(1,974) $1,616 $(539) $2,382 $(414) $47 $ (9) $13,381 $(3,599)
(1) Other represents monoline insurance provided by Radian Group Inc. and CIFG Holdings Ltd.
(2) Represents the amount of unpaid principal balance covered by monoline insurance coverage. This amount does not represent the maximum amount of
losses we could recover, as the monoline insurance also covers interest.
(3) Represents the amount of gross unrealized losses at December 31, 2008 on the securities with monoline insurance.
(4) The majority of the Alt-A and other loans covered by monoline bond insurance are securities backed by home equity lines of credit.
Included in Table 31 is $4.3 billion of unpaid principal balance that was impaired due to our determination that it was
both probable that a principal and interest shortfall would occur on the insured securities and that in such a case there is
substantial uncertainty surrounding the primary monoline insurers’ ability to pay all future claims, as previously discussed.
For the remaining securities covered by these insurers, we do not currently believe that it is probable that a contractual cash
shortfall will occur on these securities. This assessment requires significant judgment and is subject to change as our
assessments of future performance are updated.
See “CREDIT RISKS — Institutional Credit Risk — Mortgage Insurers” for a discussion of our expectations regarding
the claims paying abilities of these insurers and “CREDIT RISKS — Institutional Credit Risk — Non-Freddie Mac
Securities — Table 73 — Monoline Bond Insurance by Counterparty” for the ratings of these insurers as of March 2, 2009.
Ratings of Available-For-Sale Non-Agency Mortgage-Related Securities
Table 32 shows the ratings of available-for-sale non-agency mortgage-related securities backed by subprime loans held
at December 31, 2008 based on their ratings as of December 31, 2008. Tables 32 through 35 use the lowest rating available
for each security.
Table 32 — Ratings of Available-For-Sale Non-Agency Mortgage-Related Securities backed by Subprime Loans at
December 31, 2008
Credit Rating as of
December 31, 2008
Unpaid
Principal
Balance
Amortized
Cost
Gross
Unrealized
Losses
Monoline
Insurance
Coverage
(1)
(in millions)
AAA-rated . . . . . . . .................................................... $21,267 $21,224 $ (4,821) $ 40
Other investment grade . . ................................................ 22,502 22,418 (6,302) 1,493
Below investment grade . . ................................................ 31,070 27,757 (8,022) 1,851
Total. . . . . . . . .................................................... $74,839 $71,399 $(19,145) $3,384
(1) Represents the amount of unpaid principal balance covered by monoline insurance coverage. This amount does not represent the maximum amount of
losses we could recover, as the monoline insurance also covers interest.
Table 33 shows the percentage of unpaid principal balance at December 31, 2008 based on the rating of available-for-
sale non-agency mortgage-related securities backed by subprime loans as of December 31, 2008 and March 2, 2009.
Table 33 — Ratings of Available-For-Sale Non-Agency Mortgage-Related Securities backed by Subprime Loans at
December 31, 2008 and March 2, 2009
Percentage of Unpaid Principal Balance at December 31, 2008 December 31, 2008 March 2, 2009
Credit Rating as of
AAA-rated . .................................................................... 28% 28%
Other investment grade ............................................................ 30 27
Below investment grade ............................................................ 42 45
Total. . .................................................................... 100% 100%
Table 34 shows the ratings of available-for-sale non-agency mortgage-related securities backed by Alt-A and other loans
and MTA loans held at December 31, 2008 based on their ratings as of December 31, 2008.
106 Freddie Mac