Freddie Mac 2011 Annual Report Download - page 116

The table below provides the UPB and fair value of our investments in mortgage-related securities classified as
available-for-sale or trading on our consolidated balance sheets.
Table 24 — Additional Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets
UPB Fair Value UPB Fair Value
December 31, 2011 December 31, 2010
(in millions)
Agency pass-through securities
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,283 $ 26,193 $ 31,184 $ 33,459
Agency REMICs and Other Structured Securities:
Interest-only securities
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,863 — 3,800
Principal-only securities
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,569 3,344 4,631 4,067
Inverse floating-rate securities
(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,839 6,826 3,512 4,478
Other Structured Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,907 93,805 90,974 96,886
Total agency securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,598 133,031 130,301 142,690
Non-agency securities
(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,634 109,160 158,392 122,310
Total mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $261,232 $242,191 $288,693 $265,000
(1) Represents an undivided beneficial interest in trusts that hold pools of mortgages.
(2) Represents securities where the holder receives only the interest cash flows.
(3) Represents securities where the holder receives only the principal cash flows.
(4) Represents securities where the holder receives interest cash flows that change inversely with the reference rate (i.e. higher cash flows when interest
rates are low and lower cash flows when interest rates are high). Additionally, these securities receive a portion of principal cash flows associated
with the underlying collateral.
(5) Includes fair values of $2 million and $5 million of interest-only securities at December 31, 2011 and December 31, 2010, respectively.
The total UPB of our investments in mortgage-related securities on our consolidated balance sheets decreased from
$288.7 billion at December 31, 2010 to $261.2 billion at December 31, 2011, while the fair value of these investments
decreased from $265.0 billion at December 31, 2010 to $242.2 billion at December 31, 2011. The reduction resulted from
our purchase activity remaining less than liquidations, consistent with our efforts to reduce our mortgage-related
investments portfolio, as described in “BUSINESS — Conservatorship and Related Matters — Impact of Conservatorship
and Related Actions on Our Business — Limits on Investment Activity and Our Mortgage-Related Investments Portfolio.”
The UPB and fair value of inverse floating-rate securities increased as we created new inverse floating-rate securities from
existing mortgage-related securities that were on our consolidated balance sheets. We create inverse floating-rate securities
and other REMICs and sell tranches that are in demand by investors to reduce our asset balance, while conserving value
for the taxpayer. These securities are managed in the overall context of our interest-rate risk management strategy and
framework.
The table below summarizes our mortgage-related securities purchase activity for 2011, 2010 and 2009. The purchase
activity includes single-family PCs and certain Other Guarantee Transactions issued by trusts that we consolidated.
Effective January 1, 2010, purchases of single-family PCs and certain Other Guarantee Transactions issued by trusts that
we consolidated are recorded as an extinguishment of debt securities of consolidated trusts held by third parties on our
consolidated balance sheets.
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