Freddie Mac 2012 Annual Report Download - page 195

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. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES — Recently Adopted Accounting Guidance,” “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS —
Housing Finance Agency Initiative,” and “NOTE 9: FINANCIAL GUARANTEES” for more information on our off-balance
sheet securitization activities and other guarantee commitments.
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 enter into
purchase commitments primarily related to future guarantor swap transactions for single-family loans, and, to a lesser extent,
commitments to purchase or guarantee multifamily mortgage loans. These non-derivative commitments totaled
$291.5 billion and $271.8 billion, in notional value at December 31, 2012 and 2011, 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 11: 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, 2012. 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, and exclude contracts that we may cancel at will without penalty. For purposes of
this table, purchase obligations are included through the termination date specified in the respective agreement, even if the
contract is renewable.
In the table below, the amounts of future interest payments on debt securities outstanding at December 31, 2012 are
based on the contractual terms of our debt securities at that date. These amounts were determined using certain assumptions
including, that: (a) variable-rate debt continues to accrue interest at the contractual rates in effect at December 31, 2012 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, 2012, 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-
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