Freddie Mac 2011 Annual Report Download - page 101

due to lower expenses associated with transfers and terminations of mortgage servicing, primarily related to TBW,
partially offset by higher servicer incentive fees associated with HAMP during 2011. Other expenses declined significantly
from 2009 to 2010 due to reduction of losses on loans purchased, which was due to the change in accounting guidance
for consolidation of VIEs we implemented on January 1, 2010. See “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES — Recently Adopted Accounting Guidance” and “NOTE 19: SELECTED FINANCIAL
STATEMENT LINE ITEMS” for additional information.
Income Tax Benefit
For 2011, 2010, and 2009, we reported income tax benefit of $0.4 billion, $0.9 billion, and $0.8 billion, respectively,
resulting in effective tax rates of 7%, 6%, and 4%, respectively. Our effective tax rate differed from the federal statutory
tax rate of 35% primarily due to the establishment of a valuation allowance against a portion of our net deferred tax
assets. Our income tax benefits represent amounts related to the amortization of net deferred losses on pre-2008 closed
cash flow hedges, as well as the current tax benefits associated with our ability to carry back net operating tax losses
generated in 2008 and 2009. See “NOTE 13: INCOME TAXES” for additional information.
Total Comprehensive Income (Loss)
Our total comprehensive income (loss) was $(1.2) billion, $0.3 billion, and $(2.9) billion for the years ended
December 31, 2011, 2010, and 2009, respectively, consisting of: (a) $(5.3) billion, $(14.0) billion, and $(21.6) billion of
net income (loss), respectively; and (b) $4.0 billion, $14.3 billion, and $18.6 billion of total other comprehensive income,
respectively. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Total Equity (Deficit)” for additional
information regarding total other comprehensive income (loss).
Segment Earnings
Our operations consist of three reportable segments, which are based on the type of business activities each
performs — Investments, Single-family Guarantee, and Multifamily. Certain activities that are not part of a reportable
segment are included in the All Other category.
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 performing mortgage loans, which are
funded by other debt issuances and hedged using derivatives. In our Investments segment, we also provide funding and
hedging management services to the Single-family Guarantee and Multifamily segments. The Investments segment reflects
changes in the fair value of the Multifamily segment assets that are associated with changes in interest rates. Segment
Earnings for this segment consist primarily of the returns on these investments, less the related funding, hedging, and
administrative expenses.
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
securities 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 credit-related expenses,
administrative expenses, allocated funding costs, and amounts related to net float benefits or expenses.
The Multifamily segment reflects results from our investment (both purchases and sales), securitization, and
guarantee activities in multifamily mortgage loans and securities. Although we hold multifamily mortgage loans and non-
agency CMBS that we purchased for investment, our purchases of such multifamily mortgage loans for investment have
declined significantly since 2010, and our purchases of CMBS have declined significantly since 2008. The only CMBS
that we have purchased since 2008 have been senior, mezzanine, and interest-only tranches related to certain of our
securitization transactions, and these purchases have not been significant. Currently, our primary business strategy is to
purchase multifamily mortgage loans for aggregation and then securitization. We guarantee the senior tranches of these
securitizations in Other Guarantee Transactions. Our Multifamily segment also issues Other Structured Securities, but does
not issue REMIC securities. Our Multifamily segment also enters into other guarantee commitments for multifamily HFA
bonds and housing revenue bonds held by third parties. Historically, we issued multifamily PCs, but this activity has been
insignificant in recent years. Segment Earnings for this segment consist primarily of the interest earned on assets related
to multifamily investment activities and management and guarantee fee income, less credit-related expenses,
administrative expenses, and allocated funding costs. In addition, the Multifamily segment reflects gains on sale of
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