Freddie Mac 2011 Annual Report Download - page 143

lowering or withdrawal of our credit rating by S&P or Moody’s may increase our obligation to post collateral, depending
on the amount of the counterparty’s exposure to Freddie Mac with respect to the derivative transactions. At December 31,
2011, our collateral posted exceeded our collateral held. See “CONSOLIDATED BALANCE SHEETS ANALYSIS —
Derivative Assets and Liabilities, Net” and “Table 31 — Derivative Fair Values and Maturities” for a reconciliation of fair
value to the amounts presented on our consolidated balance sheets as of December 31, 2011, which includes both cash
collateral held and posted by us, net.
Table 44 — Derivative Counterparty Credit Exposure
Rating
(1)
Number of
Counterparties
(2)
Notional or
Contractual
Amount
(3)
Total
Exposure at
Fair Value
(4)
Exposure,
Net of
Collateral
(5)
Weighted Average
Contractual
Maturity
(in years)
Collateral Posting
Threshold
(6)
As of December 31, 2011
(dollars in millions)
AA– . . . . . . . . . . . . . . . . . . . . . . . . . . 5 $ 73,277 $ 536 $ 19 5.0 $10 million or less
A+ . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 337,013 2,538 1 5.8 $1 million or less
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 208,416 12 51 6.2 $1 million or less
A- . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 89,284 — — 5.5 $1 million or less
Subtotal
(7)
. . . . . . . . . . . . . . . . . . . . . . 18 707,990 3,086 71 5.8
Futures and clearinghouse-settled
derivatives . . . . . . . . . . . . . . . . . . . . 43,831 8 8
Commitments
(8)
. . . . . . . . . . . . . . . . . . 14,318 38 38
Swap guarantee derivatives . . . . . . . . . . . 3,621 — —
Other derivatives
(9)
. . . . . . . . . . . . . . . . 18,489 1 1
Total derivatives . . . . . . . . . . . . . . . . . . $788,249 $3,133 $118
Rating
(1)
Number of
Counterparties
(2)
Notional or
Contractual
Amount
(3)
Total
Exposure at
Fair Value
(4)
Exposure,
Net of
Collateral
(5)
Weighted Average
Contractual
Maturity
(in years)
Collateral Posting
Threshold
(6)
As of December 31, 2010
(dollars in millions)
AA . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $ 53,975 $ — $ — 6.8 $10 million or less
AA–. . . . . . . . . . . . . . . . . . . . . . . . . . 4 270,694 1,668 29 6.4 $10 million or less
A+. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 441,004 460 1 6.2 $1 million or less
A. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 177,277 16 2 5.2 $1 million or less
Subtotal
(7)
. . . . . . . . . . . . . . . . . . . . . . 17 942,950 2,144 32 6.1
Futures and clearinghouse-settled
derivatives . . . . . . . . . . . . . . . . . . . . 215,983 6 6
Commitments
(8)
. . . . . . . . . . . . . . . . . . 14,292 103 103
Swap guarantee derivatives . . . . . . . . . . 3,614 — —
Other derivatives
(9)
. . . . . . . . . . . . . . . . 28,657 2 2
Total derivatives. . . . . . . . . . . . . . . . . . $1,205,496 $2,255 $143
(1) We use the lower of S&P and Moody’s ratings to manage collateral requirements. In this table, the rating of the legal entity is stated in terms of the
S&P equivalent.
(2) Based on legal entities. Affiliated legal entities are reported separately.
(3) Notional or contractual amounts are used to calculate the periodic settlement amounts to be received or paid and generally do not represent actual
amounts to be exchanged.
(4) For each counterparty, this amount includes derivatives with a positive fair value (recorded as derivative assets, net), including the related accrued
interest receivable/payable, when applicable. For counterparties included in the subtotal, positions are shown netted at the counterparty level
including accrued interest receivable/payable and trade/settle fees.
(5) Calculated as Total Exposure at Fair Value less cash collateral held as determined at the counterparty level. Includes amounts related to our posting
of cash collateral in excess of our derivative liability as determined at the counterparty level. For derivatives settled through an exchange or
clearinghouse, excludes consideration of maintenance margin posted by our counterparty.
(6) Counterparties are required to post collateral when their exposure exceeds agreed-upon collateral posting thresholds. These thresholds are typically
based on the counterparty’s credit rating and are individually negotiated.
(7) Consists of OTC derivative agreements for interest-rate swaps, option-based derivatives (excluding certain written options), foreign-currency swaps,
and purchased interest-rate caps.
(8) Commitments include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and
(c) our commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
(9) Consists primarily of certain written options and certain credit derivatives. Written options do not present counterparty credit exposure, because we
receive a one-time up-front premium in exchange for giving the holder the right to execute a contract under specified terms, which generally puts us
in a liability position.
Over time, our exposure to individual counterparties for OTC interest-rate swaps, option-based derivatives, foreign-
currency swaps, and purchased interest rate caps varies depending on changes in fair values, which are affected by
changes in period-end interest rates, the implied volatility of interest rates, foreign-currency exchange rates, and the
amount of derivatives held. If all of our counterparties for these derivatives defaulted simultaneously on December 31,
2011, the combined amount of our uncollateralized and overcollateralized exposure to these counterparties, or our
maximum loss for accounting purposes after applying netting agreements and collateral, would have been approximately
138 Freddie Mac