Freddie Mac 2011 Annual Report Download - page 379

SEC — Securities and Exchange Commission
Secondary mortgage market — A market consisting of institutions engaged in buying and selling mortgages in the form
of whole loans (i.e., mortgages that have not been securitized) and mortgage-related securities. We participate in the
secondary mortgage market by purchasing mortgage loans and mortgage-related securities for investment and by issuing
guaranteed mortgage-related securities, principally PCs.
Senior preferred stock — The shares of Variable Liquidation Preference Senior Preferred Stock issued to Treasury under
the Purchase Agreement.
Seriously delinquent — Single-family mortgage loans that are three monthly payments or more past due or in the process
of foreclosure as reported to us by our servicers.
SERP — Supplemental Executive Retirement Plan
Short sale — Typically an alternative to foreclosure consisting of a sale of a mortgaged property in which the homeowner
sells the home at market value and the lender accepts proceeds (sometimes together with an additional payment or
promissory note from the borrower) that are less than the outstanding mortgage indebtedness in full satisfaction of the
loan.
Single-family credit guarantee portfolio — Consists of unsecuritized single-family loans, single-family loans held by
consolidated trusts, and single-family loans underlying non-consolidated Other Guarantee Transactions and covered by
other guarantee commitments. Excludes our REMICs and Other Structured Securities that are backed by Ginnie Mae
Certificates and our guarantees under the HFA Initiative.
Single-family mortgage — A mortgage loan secured by a property containing four or fewer residential dwelling units.
Spread — The difference between the yields of two debt securities, or the difference between the yield of a debt security
and a benchmark yield, such as LIBOR.
Strips — Mortgage pass-through securities created by separating the principal and interest payments on a pool of
mortgage loans. A principal-only strip entitles the security holder to principal cash flows, but no interest cash flows, from
the underlying mortgages. An interest-only strip entitles the security holder to interest cash flows, but no principal cash
flows, from the underlying mortgages.
Subprime — Participants in the mortgage market may characterize single-family loans based upon their overall credit
quality at the time of origination, generally considering them to be prime or subprime. Subprime generally refers to the
credit risk classification of a loan. There is no universally accepted definition of subprime. The subprime segment of the
mortgage market primarily serves borrowers with poorer credit payment histories and such loans typically have a mix of
credit characteristics that indicate a higher likelihood of default and higher loss severities than prime loans. Such
characteristics might include, among other factors, a combination of high LTV ratios, low credit scores or originations
using lower underwriting standards, such as limited or no documentation of a borrower’s income. While we have not
historically characterized the loans in our single-family credit guarantee portfolio as either prime or subprime, we do
monitor the amount of loans we have guaranteed with characteristics that indicate a higher degree of credit risk.
Notwithstanding our historical characterizations of the single family credit guarantee portfolio, certain security collateral
underlying our Other Guarantee Transactions have been identified as subprime based on information provided to Freddie
Mac when the transactions were entered into. We also categorize our investments in non-agency mortgage-related
securities as subprime if they were identified as such based on information provided to us when we entered into these
transactions.
SVP — Senior Vice President
Swaption — An option contract to enter into an interest-rate swap. In exchange for an option premium, a buyer obtains
the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date.
TBA — To be announced
TCLFP — Temporary Credit and Liquidity Facility Program is a component of the Housing Finance Agency Initiative in
which we and Fannie Mae issued credit guarantees to holders of variable-rate demand obligations issued by various state
and local HFAs. Treasury is obligated to absorb any losses under the program up to a certain level before we are exposed
to any losses. The program is scheduled to expire on December 31, 2012; however, Treasury has given participants the
option to extend the program facility to December 31, 2015.
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