Freddie Mac 2010 Annual Report Download - page 252

Segment Description Activities/Items
Investments Segment Earnings for the Investments segment reflects results
from our investment, funding and hedging activities. In our
Investments segment, we invest principally in mortgage-related
securities and single-family mortgage loans funded by other debt
issuances and hedged using derivatives. Segment Earnings for
this segment consist primarily of the returns on these
investments, less the related funding, hedging, and administrative
expenses.
• Investments in mortgage-related securities and single-
family performing mortgage loans
• Investments in asset-backed securities
• All other traded instruments / securities, excluding
CMBS
• Debt issuances
• All asset / liability management returns
• Guarantee buy-ups / buy-downs, net of execution
gains / losses
• Cash and liquidity management
• Deferred tax asset valuation allowance
• Allocated administrative expenses and taxes
Single-Family Guarantee Segment Earnings for the Single-family Guarantee segment
reflects results from our single-family credit guarantee activities.
In our Single-family Guarantee segment, we purchase single-
family mortgage loans originated by our seller/servicers in the
primary mortgage market. In most instances, we use the
mortgage securitization process to package the purchased
mortgage loans into guaranteed mortgage-related securities. We
guarantee the payment of principal and interest on the mortgage-
related security in exchange for management and guarantee fees.
Segment Earnings for this segment consist primarily of
management and guarantee fee revenues, including amortization
of upfront fees, less the related credit costs (i.e., provision for
credit losses), administrative expenses, allocated funding costs,
and amounts related to net float benefits or expenses.
• Management and guarantee fees on PCs, including
those retained by us, and single-family mortgage
loans in the mortgage investments portfolio
• Up-front credit delivery fees
• Adjustments for security performance
• Credit losses on all single-family assets
• Expected net float income or expense on the single-
family credit guarantee portfolio
• Deferred tax asset valuation allowance
• Allocated debt costs, administrative expenses and
taxes
Multifamily Segment Earnings for the Multifamily segment reflects results
from our investments and guarantee activities in multifamily
mortgage loans and securities. Our new purchases of multifamily
mortgage loans are primarily made for purposes of aggregation
and then securitization, which supports the availability of
financing for multifamily properties. We also purchase CMBS for
investment; however, we have not purchased significant amounts
of non-agency CMBS for investment since 2008. The
Multifamily segment does not issue REMIC securities but does
issue Other Structured Securities, Other Guarantee Transactions,
and other guarantee commitments. Segment Earnings for this
segment also include management and guarantee fee income and
the interest earned on assets related to multifamily investment
activities, net of allocated funding costs.
• Multifamily mortgage loans and associated
securitization activities
• Investments in CMBS
• LIHTC and valuation allowance
• Deferred tax asset valuation allowance
• Allocated debt costs, administrative expenses and
taxes
• Provided other guarantee commitments on multifamily
mortgage loans
All Other The All Other category consists of corporate-level expenses that
are material and non-recurring in nature and based on
management decisions outside the control of the reportable
segments.
• LIHTC write-down
• Tax settlements, as applicable
• Legal settlements, as applicable
• The deferred tax asset valuation allowance associated
with previously recognized income tax credits carried
forward.
Segment Earnings
Beginning January 1, 2010, under the revised method of presenting Segment Earnings, the sum of Segment Earnings for
each segment and the All Other category will equal GAAP net income (loss) attributable to Freddie Mac. However, the
accounting principles we apply to present certain line items in Segment Earnings for our reportable segments, in particular
Segment Earnings net interest income and management and guarantee income, differ significantly from those applied in
preparing the comparable line items in our consolidated financial statements prepared in accordance with GAAP.
Accordingly, the results of such line items differ significantly from, and should not be used as a substitute for, the
comparable line items as determined in accordance with GAAP. For reconciliations of the Segment Earnings line items to the
comparable line items in our consolidated financial statements prepared in accordance with GAAP, see “Table 17.2 —
Segment Earnings and Reconciliation to GAAP Results.”
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