Freddie Mac 2008 Annual Report Download - page 215

Available-For-Sale Securities in a Gross Unrealized Loss Position
Table 5.2 shows the fair value of available-for-sale securities in a gross unrealized loss position and whether they have
been in that position less than 12 months or 12 months or greater.
Table 5.2 — Available-For-Sale Securities in a Gross Unrealized Loss Position
December 31, 2008 Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses
Less than 12 months 12 months or Greater Total
(in millions)
Mortgage-related investments portfolio:
Mortgage-related securities:
Freddie Mac .................................... $ 14,423 $ (425) $ 15,466 $ (2,496) $ 29,889 $ (2,921)
Subprime . . .................................... 3,040 (862) 46,585 (18,283) 49,625 (19,145)
Commercial mortgage-backed securities ................. 24,783 (8,226) 24,479 (6,490) 49,262 (14,716)
Alt-A and other .................................. 3,444 (1,526) 7,159 (5,261) 10,603 (6,787)
MTA ......................................... 4,186 (2,919) 1,299 (1,820) 5,485 (4,739)
Fannie Mae . .................................... 5,977 (75) 971 (13) 6,948 (88)
Obligations of states and political subdivisions . . . .......... 5,302 (743) 5,077 (1,606) 10,379 (2,349)
Manufactured housing. . . ........................... 498 (110) 73 (73) 571 (183)
Ginnie Mae . .................................... 18 — 1 — 19 —
Total mortgage-related securities ..................... 61,671 (14,886) 101,110 (36,042) 162,781 (50,928)
Total available-for-sale securities in a gross unrealized loss position . . $ 61,671 $(14,886) $101,110 $(36,042) $162,781 $(50,928)
December 31, 2007
Mortgage-related investments portfolio:
Mortgage-related securities:
Freddie Mac .................................... $ 22,546 $ (254) $135,966 $ (2,329) $158,512 $ (2,583)
Subprime . . .................................... 87,004 (8,021) 5,213 (563) 92,217 (8,584)
Commercial mortgage-backed securities ................. 8,652 (154) 26,207 (527) 34,859 (681)
Alt-A and other .................................. 14,136 (805) 13,905 (462) 28,041 (1,267)
MTA ......................................... 19,373 (1,224) 620 (52) 19,993 (1,276)
Fannie Mae . .................................... 4,728 (17) 15,214 (327) 19,942 (344)
Obligations of states and political subdivisions . . . .......... 7,735 (264) 1,286 (87) 9,021 (351)
Manufactured housing. . . ........................... 435 (11) 24 (1) 459 (12)
Ginnie Mae . .................................... 2 — 74 (2) 76 (2)
Total mortgage-related securities ..................... 164,611 (10,750) 198,509 (4,350) 363,120 (15,100)
Cash and other investments portfolio:
Non-mortgage-related securities:
Asset-backed securities . . ........................... 8,236 (63) 3,222 (18) 11,458 (81)
Total non-mortgage-related securities . ................. 8,236 (63) 3,222 (18) 11,458 (81)
Total available-for-sale securities in a gross unrealized loss position . . $172,847 $(10,813) $201,731 $ (4,368) $374,578 $(15,181)
At December 31, 2008, gross unrealized losses on available-for-sale securities were $50.9 billion, as noted in Table 5.2.
The gross unrealized losses relate to approximately 8 thousand individual lots representing approximately 5 thousand
separate securities. We routinely purchase multiple lots of individual securities at different times and at different costs. We
determine gross unrealized gains and gross unrealized losses by specifically identifying investment positions at the lot level;
therefore, some of the lots we hold for a single security may be in an unrealized gain position while other lots for that
security are in an unrealized loss position, depending upon the amortized cost of the specific lot.
Evaluation of Other-Than-Temporary Impairments
The evaluation of unrealized losses on our available-for-sale portfolio for other-than-temporary impairment contemplates
numerous factors. We perform an evaluation on a security-by-security basis considering available information. Important
factors include the length of time and extent to which the fair value of the security has been less than the book value; the
impact of changes in credit ratings (i.e., rating agency downgrades); our intent and ability to retain the security in order to
allow for a recovery in fair value; loan level default modeling; and an analysis of the performance of the underlying
collateral relative to its credit enhancements using techniques that require assumptions about future loss severity, default,
prepayment and other borrower behavior. Implicit in this analysis is information relevant to expected cash flows (such as
collateral performance and characteristics) that also underlies the other impairment factors mentioned above, and we
qualitatively consider available information when assessing whether an impairment is other-than-temporary. The relative
importance of this information varies based on the facts and circumstances surrounding each security, as well as the
economic environment at the time of assessment. Based on the results of this evaluation, if it is determined that the
impairment is other-than-temporary, the carrying value of the security is written down to fair value, and a loss is recognized
through earnings. We consider available information in determining the recovery period and anticipated holding periods for
our available-for-sale securities. An important underlying factor we consider in determining the period to recover unrealized
212 Freddie Mac