Freddie Mac 2011 Annual Report Download - page 279

Segment Description Activities/Items
Investments The Investments segment reflects results from our investment,
funding and hedging activities. In our Investments segment, we
invest principally in mortgage-related securities and single-family
performing mortgage loans, which are funded by other debt
issuances and hedged using derivatives. In our Investments
segment, we also provide funding and hedging management
services to the Single-family Guarantee and Multifamily
segments. The Investments segment reflects changes in the fair
value of the Multifamily segment assets that are associated with
changes in interest rates. Segment Earnings for this segment
consist primarily of the returns on these investments, less the
related funding, hedging, and administrative expenses.
• Investments in mortgage-related securities and
single-family performing mortgage loans
• Investments in asset-backed securities
• All other traded instruments / securities, excluding
CMBS and multifamily housing revenue bonds
• Debt issuances
• All asset / liability management returns
• Guarantee buy-ups / buy-downs, net of execution
gains / losses
• Cash and liquidity management
• Deferred tax asset valuation allowance
• Allocated administrative expenses and taxes
Single-Family Guarantee The Single-family Guarantee segment reflects results from our
single-family credit guarantee activities. In our Single-family
Guarantee segment, we purchase single-family mortgage loans
originated by our seller/servicers in the primary mortgage
market. In most instances, we use the mortgage securitization
process to package the purchased mortgage loans into guaranteed
mortgage-related securities. We guarantee the payment of
principal and interest on the mortgage-related security in
exchange for management and guarantee fees. Segment Earnings
for this segment consist primarily of management and guarantee
fee revenues, including amortization of upfront fees, less credit-
related expenses, administrative expenses, allocated funding
costs, and amounts related to net float benefits or expenses.
• Management and guarantee fees on PCs, including
those retained by us, and single-family mortgage
loans in the mortgage investments portfolio
• Up-front credit delivery fees
• Adjustments for security performance
• Credit losses on all single-family assets
• Expected net float income or expense on the single-
family credit guarantee portfolio
• Deferred tax asset valuation allowance
• Allocated debt costs, administrative expenses and
taxes
Multifamily The Multifamily segment reflects results from our investment
(both purchases and sales), securitization, and guarantee activities
in multifamily mortgage loans and securities. Although we hold
multifamily mortgage loans and non-agency CMBS that we
purchased for investment, our purchases of such multifamily
mortgage loans for investment have declined significantly since
2010, and our purchases of CMBS have declined significantly
since 2008. The only CMBS that we have purchased since 2008
have been senior, mezzanine, and interest-only tranches related to
certain of our securitization transactions, and these purchases
have not been significant. Currently, our primary business
strategy is to purchase multifamily mortgage loans for
aggregation and then securitization. We guarantee the senior
tranches of these securitizations in Other Guarantee Transactions.
Our Multifamily segment also issues Other Structured Securities,
but does not issue REMIC securities. Our Multifamily segment
also enters into other guarantee commitments for multifamily
HFA bonds and housing revenue bonds held by third parties.
Historically, we issued multifamily PCs, but this activity has
been insignificant in recent years. Segment Earnings for this
segment consist primarily of the interest earned on assets related
to multifamily investment activities and management and
guarantee fee income, less credit-related expenses, administrative
expenses, and allocated funding costs. In addition, the
Multifamily segment reflects gains on sale of mortgages and the
impact of changes in fair value of CMBS and held-for-sale loans
associated only with factors other than changes in interest rates,
such as liquidity and credit.
• Multifamily mortgage loans held-for-sale and
associated securitization activities
• Investments in CMBS, multifamily housing revenue
bonds, and multifamily mortgage loans held-for-
investment
• Allocated debt costs, administrative expenses and
taxes
• Other guarantee commitments on multifamily HFA
bonds and housing revenue bonds
• LIHTC and valuation allowance
• Deferred tax asset valuation allowance
All Other The All Other category consists of material corporate-level
expenses that are:(a) infrequent in nature; and(b) based on
management decisions outside the control of the management of
our reportable segments.
• LIHTC write-down
• Tax settlements, as applicable
• Legal settlements, as applicable
• The deferred tax asset valuation allowance associated
with previously recognized income tax credits
carried forward.
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