Freddie Mac 2011 Annual Report Download - page 256

Other-Than-Temporary Impairments on Available-for-Sale Securities
The table below summarizes our net impairments of available-for-sale securities recognized in earnings by security
type.
Table 7.4 — Net Impairment of Available-For-Sale Securities Recognized in Earnings
(1)
2011 2010 2009
(in millions)
Net Impairment of Available-For-Sale
Securities Recognized in Earnings
For The Year Ended December 31,
Available-for-sale securities:
Subprime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,315) $(1,769) $ (6,526)
Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (424) (1,395) (1,726)
Alt-A and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (198) (1,020) (2,572)
CMBS
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (353) (97) (137)
Manufactured housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) (27) (51)
Total other-than-temporary impairments on mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,301) (4,308) (11,012)
Non-mortgage-related securities:
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (185)
Total other-than-temporary impairments on non-mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . — — (185)
Total other-than-temporary impairments on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,301) $(4,308) $(11,197)
(1) As a result of the adoption of an amendment to the accounting guidance for investments in debt and equity securities on April 1, 2009, net
impairment of available-for-sale securities recognized in earnings for the nine months ended December 31, 2009 (which is included in the year
ended December 31, 2009) and the years ended December 31, 2011 and 2010 includes credit-related other-than-temporary impairments and other-
than-temporary impairments on securities which we intend to sell or it is more likely than not that we will be required to sell. In contrast, net
impairment of available-for-sale securities recognized in earnings for the three months ended March 31, 2009 (which is included in the year ended
December 31, 2009) includes both credit-related and non-credit-related other-than-temporary impairments as well as other-than-temporary
impairments on securities for which we could not assert the positive intent and ability to hold until recovery of the unrealized losses.
(2) Includes $181 million of other-than-temporary impairments recognized in earnings for the year ended December 31, 2011, as we have the intent to
sell the related securities before recovery of its amortized cost basis.
The table below presents the changes in the unrealized credit-related other-than-temporary impairment component of
the amortized cost related to available-for-sale securities: (a) that we have written down for other-than-temporary
impairment; and (b) for which the credit component of the loss is recognized in earnings. The credit-related other-than-
temporary impairment component of the amortized cost represents the difference between the present value of expected
future cash flows, including the estimated proceeds from bond insurance, and the amortized cost basis of the security prior
to considering credit losses. The beginning balance represents the other-than-temporary impairment credit loss component
related to available-for-sale securities for which other-than-temporary impairment occurred prior to January 1, 2011, but
will not be realized until the securities are sold, written off, or mature. Net impairment of available-for-sale securities
recognized in earnings is presented as additions in two components based upon whether the current period is: (a) the first
time the debt security was credit-impaired; or (b) not the first time the debt security was credit-impaired. The credit loss
component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired available-
for-sale securities. Additionally, the credit loss component is reduced by the amortization resulting from significant
increases in cash flows expected to be collected that are recognized over the remaining life of the security.
251 Freddie Mac