Freddie Mac 2011 Annual Report Download - page 185

Credit Ratings
Our ability to access the capital markets and other sources of funding, as well as our cost of funds, is highly
dependent upon our credit ratings. The table below indicates our credit ratings as of February 27, 2012.
Table 69 — Freddie Mac Credit Ratings
S&P Moody’s Fitch
Nationally Recognized Statistical
Rating Organization
Senior long-term debt
(1)
.......................... AA+ Aaa AAA
Short-term debt
(2)
.............................. A-1+ P-1 F1+
Subordinated debt
(3)
............................. A Aa2 AA–
Preferred stock
(4)
............................... C Ca C/RR6
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative (for senior
long-term debt and
subordinated debt)
Negative (for senior
long-term debt and
subordinated debt)
Negative (for
AAA-rated long-term
Issuer Default Rating)
(1) Consists of medium-term notes, U.S. dollar Reference Notes»securities and AReference Notes»securities.
(2) Consists of Reference Bills»securities and discount notes.
(3) Consists of Freddie SUBS»securities.
(4) Does not include senior preferred stock issued to Treasury.
Our credit ratings are primarily based on the support we receive from Treasury, and therefore are affected by changes
in the credit ratings of the U.S. government.
On November 21, 2011, the Joint Select Committee (formed as a result of the Budget and Control Act of
2011) announced that efforts to reach a deficit reduction agreement had been unsuccessful. Subsequent to this
announcement, on November 28, 2011, Fitch affirmed the U.S. government’s long-term Issuer Default Rating, or IDR, at
“AAA” and revised the rating outlook to negative from stable. On this date, Fitch also affirmed the ratings on our senior
long-term debt, short-term debt, subordinated debt, and preferred stock, while affirming our “AAA” IDR and revising the
outlook on this rating to negative from stable.
For information about other ratings actions in 2011 and factors that could lead to future ratings actions and the
potential impact of a downgrade in our credit ratings, see “RISK FACTORS — Competitive and Market Risks — Any
downgrade in the credit ratings of the U.S. government would likely be followed by a downgrade in our credit ratings. A
downgrade in the credit ratings of our debt could adversely affect our liquidity and other aspects of our business.”
A security rating is not a recommendation to buy, sell or hold securities. It may be subject to revision or withdrawal
at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Cash and Cash Equivalents, Federal Funds Sold, Securities Purchased Under Agreements to Resell, and Non-
Mortgage-Related Securities
Excluding amounts related to our consolidated VIEs, we held $67.8 billion in the aggregate of cash and cash
equivalents, securities purchased under agreements to resell, and non-mortgage-related securities at December 31, 2011.
These investments are important to our cash flow and asset and liability management and our ability to provide liquidity
and stability to the mortgage market. At December 31, 2011, our non-mortgage-related securities primarily consisted of
FDIC-guaranteed corporate medium-term notes and Treasury notes that we could sell to provide us with an additional
source of liquidity to fund our business operations. For additional information on these assets, see “CONSOLIDATED
BALANCE SHEETS ANALYSIS — Cash and Cash Equivalents, Federal Funds Sold and Securities Purchased Under
Agreements to Resell” and “— Investments in Securities — Non-Mortgage-Related Securities.”
Mortgage Loans and Mortgage-Related Securities
We invest principally in mortgage loans and mortgage-related securities, certain categories of which are largely
unencumbered and highly liquid. Our primary source of liquidity among these mortgage assets is our holdings of agency
securities. In addition, our unsecuritized performing single-family mortgage loans are also a potential source of liquidity.
Our holdings of CMBS are less liquid than agency securities. Our holdings of non-agency mortgage-related securities
backed by subprime, option ARM, and Alt-A and other loans are not liquid due to market conditions and the continued
poor credit quality of the underlying assets. Our holdings of unsecuritized seriously delinquent and modified single-family
mortgage loans are also illiquid.
We are subject to limits on the amount of mortgage assets we can sell in any calendar month without review and
approval by FHFA and, if FHFA so determines, Treasury. See “BUSINESS — Conservatorship and Related Matters —
Impact of Conservatorship and Related Actions on Our Business — Limits on Investment Activity and Our Mortgage-
Related Investments Portfolio” for more information on these limits and on the relative liquidity of our mortgage assets.
180 Freddie Mac