Freddie Mac 2012 Annual Report Download - page 261

Trading Securities
The table below summarizes the estimated fair values by major security type for trading securities.
Table 7.9 — Trading Securities
December 31, 2012 December 31, 2011
(in millions)
Mortgage-related securities:
Freddie Mac .................................................................... $10,354 $16,047
Fannie Mae ..................................................................... 10,338 15,165
Ginnie Mae ..................................................................... 131 156
Other ......................................................................... 156 164
Total mortgage-related securities ................................................... 20,979 31,532
Non-mortgage-related securities:
Asset-backed securities ............................................................ 292 302
Treasury bills ................................................................... 1,160 100
Treasury notes ................................................................... 19,061 24,712
FDIC-guaranteed corporate medium-term notes ........................................... — 2,184
Total non-mortgage-related securities ................................................ 20,513 27,298
Total fair value of trading securities ..................................................... $41,492 $58,830
Trading securities mainly consist of Treasury securities, agency fixed-rate and variable-rate pass-through mortgage-
related securities, and agency REMICs, including inverse floating rate, interest-only and principal-only securities. With the
exception of principal-only securities, our agency securities, classified as trading, were valued at a net premium (i.e., net fair
value was higher than UPB) as of December 31, 2012.
For the years ended December 31, 2012, 2011, and 2010, we recorded net unrealized gains (losses) on trading securities
held at those dates of $(1.7) billion, $(1.0) billion, and $(1.4) billion, respectively.
Total trading securities include $1.2 billion and $1.9 billion, respectively, of hybrid financial assets as defined by the
derivative and hedging accounting guidance regarding certain hybrid financial instruments as of December 31, 2012 and
2011. Gains (losses) on trading securities on our consolidated statements of comprehensive income include gains (losses) of
$(167) million and $(109) million, respectively, related to these hybrid financial securities for the years ended December 31,
2012 and 2011.
Collateral Pledged
Collateral Pledged to Freddie Mac
Our counterparties are required to pledge collateral for securities purchased under agreements to resell transactions, and
most derivative instruments are subject to collateral posting thresholds generally related to a counterparty’s credit rating. We
consider the types of securities being pledged to us as collateral when determining how much we lend related to securities
purchased under agreements to resell transactions. Additionally, we subsequently and regularly review the market values of
these securities compared to amounts loaned and derivative counterparty collateral posting thresholds in an effort to
minimize our exposure to losses. We had cash and cash equivalents pledged to us under master netting agreements related to
derivative instruments of $1.5 billion and $3.2 billion at December 31, 2012 and 2011, respectively. At December 31, 2012
and 2011, we had $501 million and $0 million, respectively, of collateral in the form of securities pledged to and held by us
under these master netting agreements. Although it is our practice not to repledge assets held as collateral, a portion of the
collateral may be repledged based on master netting agreements related to our derivative instruments. Also, at December 31,
2012 and 2011, we had $1.5 billion and $0 billion, respectively, of securities pledged to us for securities purchased under
agreements to resell transactions that we had the right to repledge. From time to time we may obtain pledges of collateral
from certain seller/servicers as additional security for certain of their obligations to us, including their obligations to
repurchase mortgages sold to us in breach of representations and warranties. This collateral may, at our discretion, take the
form of cash, cash equivalents, or agency securities.
In addition, we hold cash and cash equivalents as collateral in connection with certain of our multifamily guarantees and
mortgage loans as credit enhancements. The cash and cash equivalents held as collateral related to these transactions at
December 31, 2012 and 2011 was $158 million and $246 million, respectively.
256 Freddie Mac