Freddie Mac 2011 Annual Report Download - page 252

Table 7.2 — Available-For-Sale Securities in a Gross Unrealized Loss Position
December 31, 2011
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Gross Unrealized Losses Gross Unrealized Losses Gross Unrealized Losses
Less than 12 Months 12 Months or Greater Total
(in millions)
Available-for-sale securities:
Freddie Mac . . . . . . . . . . . . $2,196 $ — $ (4) $ (4) $ 1,884 $ — $ (44) $ (44) $ 4,080 $ — $ (48) $ (48)
Subprime . . . . . . . . . . . . . . 8 (1) — (1) 27,742 (10,785) (2,622) (13,407) 27,750 (10,786) (2,622) (13,408)
CMBS . . . . . . . . . . . . . . . . 997 (20) (41) (61) 3,573 (9) (478) (487) 4,570 (29) (519) (548)
Option ARM . . . . . . . . . . . . 95 (13) — (13) 5,743 (3,067) (89) (3,156) 5,838 (3,080) (89) (3,169)
Alt-A and other. . . . . . . . . . . 1,197 (114) (4) (118) 9,070 (2,088) (606) (2,694) 10,267 (2,202) (610) (2,812)
Fannie Mae . . . . . . . . . . . . . 1,144 — (2) (2) 14 — (2) (2) 1,158 — (4) (4)
Obligations of states and political
subdivisions . . . . . . . . . . . 292 — (6) (6) 2,157 — (60) (60) 2,449 — (66) (66)
Manufactured housing . . . . . . . . 197 (5) — (5) 345 (44) (11) (55) 542 (49) (11) (60)
Total available-for-sale
securities in a gross
unrealized loss position . . . . . . $6,126 $(153) $(57) $(210) $50,528 $(15,993) $(3,912) $(19,905) $56,654 $(16,146) $(3,969) $(20,115)
December 31, 2010
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Fair
Value
Other-Than-
Temporary
Impairment
(1)
Temporary
Impairment
(2)
Total
Gross Unrealized Losses Gross Unrealized Losses Gross Unrealized Losses
Less than 12 Months 12 Months or Greater Total
(in millions)
Available-for-sale securities:
Freddie Mac . . . . . . . . . . . . $2,494 $— $ (70) $ (70) $ 1,880 $ — $ (125) $ (125) $ 4,374 $ — $ (195) $ (195)
Subprime . . . . . . . . . . . . . . 6 — — — 33,839 (10,041) (4,015) (14,056) 33,845 (10,041) (4,015) (14,056)
CMBS . . . . . . . . . . . . . . . . 2,950 — (51) (51) 8,894 (844) (1,024) (1,868) 11,844 (844) (1,075) (1,919)
Option ARM . . . . . . . . . . . . 3 (1) — (1) 6,838 (3,744) (108) (3,852) 6,841 (3,745) (108) (3,853)
Alt-A and other. . . . . . . . . . . 42 — (3) (3) 12,025 (1,846) (602) (2,448) 12,067 (1,846) (605) (2,451)
FannieMae............. 54 — — — 14 — (3) (3) 68 — (3) (3)
Obligations of states and political
subdivisions . . . . . . . . . . . 3,953 — (163) (163) 3,402 — (376) (376) 7,355 — (539) (539)
Manufactured housing . . . . . . . . 8 (1) — (1) 507 (45) (15) (60) 515 (46) (15) (61)
Total available-for-sale securities in
a gross unrealized loss
position . . . . . . . . . . . . . . . $9,510 $ (2) $(287) $(289) $67,399 $(16,520) $(6,268) $(22,788) $76,909 $(16,522) $(6,555) $(23,077)
(1) Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairments in earnings.
(2) Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairments in earnings.
At December 31, 2011, total gross unrealized losses on available-for-sale securities were $20.1 billion. The gross
unrealized losses relate to 1,625 individual lots representing 1,556 separate securities, including securities with non-credit-
related other-than-temporary impairments recognized in AOCI. We purchase multiple lots of individual securities at
different times and at different costs. We determine gross unrealized gains and gross unrealized losses by specifically
evaluating investment positions at the lot level; therefore, some of the lots we hold for a single security may be in an
unrealized gain position while other lots for that security may be in an unrealized loss position, depending upon the
amortized cost of the specific lot.
Impairment Recognition on Investments in Securities
We recognize impairment losses on available-for-sale securities within our consolidated statements of income and
comprehensive income as net impairment of available-for-sale securities recognized in earnings when we conclude that a
decrease in the fair value of a security is other-than-temporary.
We conduct quarterly reviews to evaluate each available-for-sale security that has an unrealized loss for other-than-
temporary impairment. An unrealized loss exists when the current fair value of an individual security is less than its
amortized cost basis. We recognize other-than-temporary impairment in earnings if one of the following conditions exists:
(a) we have the intent to sell the security; (b) it is more likely than not that we will be required to sell the security before
recovery of its unrealized loss; or (c) we do not expect to recover the amortized cost basis of the security. If we do not
intend to sell the security and we believe it is not more likely than not that we will be required to sell prior to recovery of
its unrealized loss, we recognize only the credit component of other-than-temporary impairment in earnings and the
amounts attributable to all other factors are recognized in AOCI. The credit component represents the amount by which
the present value of expected future cash flows to be collected from the security is less than the amortized cost basis of
the security. The present value of expected future cash flows represents our estimate of future contractual cash flows that
we expect to collect, discounted at the effective interest rate implicit in the security at the date of acquisition or the
effective interest rate determined based on significantly improved cash flows subsequent to initial impairment.
Our net impairment of available-for-sale securities recognized in earnings on our consolidated statements of income
and comprehensive income for the years ended December 31, 2011, 2010, and 2009, includes amounts related to certain
securities where we have previously recognized other-than-temporary impairments through AOCI, but upon the
247 Freddie Mac