Freddie Mac 2011 Annual Report Download - page 122

2011 and 2010. See “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Bond Insurers” and
“NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS — Bond Insurers” for additional information.
Our assessments concerning other-than-temporary impairment require significant judgment and the use of models,
and are subject to potentially significant change. In addition, changes in the performance of the individual securities and
in mortgage market conditions may also affect our impairment assessments. Depending on the structure of the individual
mortgage-related security and our estimate of collateral losses relative to the amount of credit support available for the
tranches we own, a change in collateral loss estimates can have a disproportionate impact on the loss estimate for the
security. Additionally, servicer performance, loan modification programs and backlogs, bankruptcy reform and other forms
of government intervention in the housing market can significantly affect the performance of these securities, including
the timing of loss recognition of the underlying loans and thus the timing of losses we recognize on our securities.
Impacts related to changes in interest rates may also affect our losses due to the structural credit enhancements on our
investments in non-agency mortgage-related securities. Foreclosure processing suspensions can also affect our losses. For
example, while defaulted loans remain in the trusts prior to completion of the foreclosure process, the subordinate classes
of securities issued by the securitization trusts may continue to receive interest payments, rather than absorbing default
losses. This may reduce the amount of funds available for the tranches we own. Given the extent of the housing and
economic downturn, it is difficult to estimate the future performance of mortgage loans and mortgage-related securities
with high assurance, and actual results could differ materially from our expectations. Furthermore, various market
participants could arrive at materially different conclusions regarding estimates of future cash shortfalls.
For more information on risks associated with the use of models, see “RISK FACTORS — Operational Risks — We
face risks and uncertainties associated with the internal models that we use for financial accounting and reporting
purposes, to make business decisions, and to manage risks. Market conditions have raised these risks and uncertainties.”
For more information on how delays in the foreclosure process, including delays related to concerns about deficiencies in
foreclosure documentation practices, could adversely affect the values of, and the losses on, the non-agency mortgage-
related securities we hold, see “RISK FACTORS — Operational Risks — We have incurred, and will continue to incur,
expenses and we may otherwise be adversely affected by delays and deficiencies in the foreclosure process.”
For information regarding our efforts to mitigate losses on our investments in non-agency mortgage-related securities,
see “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk.”
Ratings of Non-Agency Mortgage-Related Securities
The table below shows the ratings of non-agency mortgage-related securities backed by subprime, option ARM,
Alt-A and other loans, and CMBS held at December 31, 2011 based on their ratings as of December 31, 2011, as well as
those held at December 31, 2010 based on their ratings as of December 31, 2010 using the lowest rating available for
each security.
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