Freddie Mac 2011 Annual Report Download - page 193

Our exposure to losses on the transactions described above would be partially mitigated by the recovery we would
receive through exercising our rights to the collateral backing the underlying loans and the available credit enhancements,
which may include recourse and primary insurance with third parties. In addition, we provide for incurred losses each
period on these guarantees within our provision for credit losses.
Other Agreements
We own interests in numerous entities that are considered to be VIEs for which we are not the primary beneficiary
and which we do not consolidate in accordance with the accounting guidance for the consolidation of VIEs. These VIEs
relate primarily to our investment activity in mortgage-related assets and non-mortgage assets, and include LIHTC
partnerships, certain Other Guarantee Transactions, and certain asset-backed investment trusts. Our consolidated balance
sheets reflect only our investment in the VIEs, rather than the full amount of the VIEs’ assets and liabilities. See
“NOTE 3: VARIABLE INTEREST ENTITIES” for additional information related to our variable interests in these VIEs.
As part of our credit guarantee business, we routinely enter into forward purchase and sale commitments for
mortgage loans and mortgage-related securities. Some of these commitments are accounted for as derivatives. Their fair
values are reported as either derivative assets, net or derivative liabilities, net on our consolidated balance sheets. For more
information, see “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Derivative Counterparties.”We
also have purchase commitments primarily related to our mortgage purchase flow business, which we principally fulfill by
issuing PCs in swap transactions, and, to a lesser extent, commitments to purchase or guarantee multifamily mortgage
loans that are not accounted for as derivatives and are not recorded on our consolidated balance sheets. These non-
derivative commitments totaled $271.8 billion, $220.7 billion and $325.9 billion, in notional value at December 31, 2011,
2010, and 2009, respectively.
In connection with the execution of the Purchase Agreement, we, through FHFA, in its capacity as Conservator,
issued a warrant to Treasury to purchase 79.9% of our common stock outstanding on a fully diluted basis on the date of
exercise. See “NOTE 12: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT)” for further information.
CONTRACTUAL OBLIGATIONS
The table below provides aggregated information about the listed categories of our contractual obligations as of
December 31, 2011. These contractual obligations affect our short- and long-term liquidity and capital resource needs.
The table includes information about undiscounted future cash payments due under these contractual obligations,
aggregated by type of contractual obligation, including the contractual maturity profile of our debt securities (other than
debt securities of consolidated trusts held by third parties). The timing of actual future payments may differ from those
presented due to a number of factors, including discretionary debt repurchases. Our contractual obligations include other
purchase obligations that are enforceable and legally binding. For purposes of this table, purchase obligations are included
through the termination date specified in the respective agreement, even if the contract is renewable. Many of our
purchase agreements for goods or services include clauses that would allow us to cancel the agreement prior to the
expiration of the contract within a specified notice period; however, this table includes these obligations without regard to
such termination clauses (unless we have provided the counterparty with actual notice of our intention to terminate the
agreement).
In the table below, the amounts of future interest payments on debt securities outstanding at December 31, 2011 are
based on the contractual terms of our debt securities at that date. These amounts were determined using the key
assumptions that: (a) variable-rate debt continues to accrue interest at the contractual rates in effect at December 31, 2011
until maturity; and (b) callable debt continues to accrue interest until its contractual maturity. The amounts of future
interest payments on debt securities presented do not reflect certain factors that will change the amounts of interest
payments on our debt securities after December 31, 2011, such as: (a) changes in interest rates; (b) the call or retirement
of any debt securities; and (c) the issuance of new debt securities. Accordingly, the amounts presented in the table do not
represent a forecast of our future cash interest payments or interest expense.
The table below excludes certain obligations that could significantly affect our short- and long-term liquidity and
capital resource needs. These items, which are listed below, have generally been excluded because the amount and timing
of the related future cash payments are uncertain:
• future payments related to debt securities of consolidated trusts held by third parties, because the amount and
timing of such payments are generally contingent upon the occurrence of future events and are therefore uncertain.
These payments generally include payments of principal and interest we make to the holders of our guaranteed
mortgage-related securities in the event a loan underlying a security becomes delinquent. We also remove
188 Freddie Mac