Freddie Mac 2009 Annual Report Download - page 240

issued by state and local HFAs, which are backed by both single-family and multifamily mortgage loans. As of
December 31, 2009, we had issued guarantees on HFA securities with $3.5 billion in unpaid principal balance and we had
commitments to issue an additional $4.1 billion of these guarantees in January 2010. For additional information regarding
the HFA initiative see “NOTE 2: CONSERVATORSHIP AND RELATED DEVELOPMENTS — Housing Finance Agency
Initiative.”
The assets that underlie issued PCs and Structured Securities as of December 31, 2009 consisted of approximately
$1,832.3 billion in unpaid principal balance of mortgage loans or mortgage-related securities and $22.5 billion of cash and
short-term investments, which we invest on behalf of the PC trusts until the time of payment to PC investors. As of
December 31, 2009 and 2008, there were $1,736 billion and $1,800.6 billion, respectively, of securities we issued in
resecuritization of our PCs and other previously issued Structured Securities. These resecuritized securities do not increase
our credit-related exposure and consist of single-class and multi-class Structured Securities backed by PCs, other previously
issued Structured Securities, interest-only strips, and principal-only strips. In addition, there were $30.0 billion and
$25.5 billion of Structured Transactions outstanding at December 31, 2009 and 2008, respectively, including the HFA
securities noted above. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Recently Issued
Accounting Standards, Not Yet Adopted Within These Consolidated Financial Statements” for information on how
amendments to the accounting standards for transfers of financial assets and consolidation of VIEs impacts our accounting
for PCs and Structured Securities, effective January 1, 2010.
Our guarantee obligation represents the recognized liability associated with our guarantee of PCs and Structured
Securities net of cumulative amortization. In addition to our guarantee obligation, we recognized a reserve for guarantee
losses on PCs that totaled $32.4 billion and $14.9 billion at December 31, 2009 and 2008, respectively.
At inception of an executed guarantee, we recognize a guarantee obligation at fair value. Subsequently, we amortize our
guarantee obligation under the static effective yield method. We continue to determine the fair value of our guarantee
obligation for disclosure purposes as discussed in “NOTE 18: FAIR VALUE DISCLOSURES.”
We recognize guarantee assets and guarantee obligations for PCs in conjunction with transfers accounted for as sales, as
well as, beginning on January 1, 2003, for guarantor swap transactions that do not qualify as sales, but are accounted for as
guarantees. For certain of those transfers accounted for as sales, we may sell the majority of the securities to a third party
and also retain a portion of the securities on our consolidated balance sheets. See “NOTE 4: RETAINED INTERESTS IN
MORTGAGE-RELATED SECURITIZATIONS” for further information on these retained financial assets. At December 31,
2009 and 2008, approximately 95% and 93%, respectively, of our guaranteed PCs and Structured Securities were issued
since January 1, 2003 and had a corresponding guarantee asset or guarantee obligation recognized on our consolidated
balance sheets.
Other Mortgage-Related Guarantees and Liquidity Guarantees
We provide long-term stand-by agreements to certain of our customers, which obligate us to purchase delinquent loans
that are covered by those agreements. These financial guarantees of non-securitized mortgage loans totaled $5.1 billion and
$10.6 billion at December 31, 2009 and 2008, respectively. During 2009 and 2008, several of these agreements were
terminated, in whole or in part, at the request of the counterparties to permit a significant portion of the performing loans
previously covered by the long-term standby commitments to be securitized as PCs or Structured Transactions, which totaled
$5.7 billion and $19.9 billion in issuances of these securities during 2009 and 2008, respectively. We also had outstanding
financial guarantees on multifamily housing revenue bonds that were issued by third parties of $9.2 billion at both
December 31, 2009 and 2008. In addition, as part of the HFA initiative, we provided guarantees for certain variable-rate
single-family and multifamily housing revenue bonds which totaled $0.8 billion at December 31, 2009. At December 31,
2009, we had commitments to settle $3.0 billion of additional guarantees under the HFA initiative.
As part of certain other mortgage-related guarantees, we also provide commitments to advance funds, commonly
referred to as “liquidity guarantees,” which require us to advance funds to enable third parties to purchase variable-rate
multifamily housing revenue bonds, or certificates backed by such bonds, that cannot be remarketed within five business
days after they are tendered to their holders. These amounts are included in “Table 3.1 — Financial Guarantees” within PCs
and Structured Securities and other mortgage-related guarantees depending on the type of mortgage-related guarantee to
which they relate. In addition, as part of the HFA initiative, we together with Fannie Mae provide liquidity guarantees for
certain variable-rate single-family and multifamily housing revenue bonds, under which Freddie Mac generally is obligated
to purchase 50% of any tendered bonds that cannot be remarketed within five business days. No liquidity guarantees were
outstanding at December 31, 2009 and 2008.
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