Freddie Mac 2012 Annual Report Download - page 270

more liquid instrument, and allow us to rebalance the options in our callable debt and REMICs portfolios. We may, from
time to time, write other derivative contracts such as interest-rate futures.
Commitments
We routinely enter into commitments that include our: (a) commitments to purchase and sell investments in securities;
(b) commitments to purchase mortgage loans; and (c) commitments to purchase and extinguish or issue debt securities of our
consolidated trusts. Most of these commitments are considered derivatives and therefore are subject to the accounting
guidance for derivatives and hedging.
Swap Guarantee Derivatives
In connection with some of the guarantee arrangements pertaining to multifamily housing revenue bonds and
multifamily pass-through certificates, we may also guarantee the sponsor’s or the borrower’s obligations as a counterparty on
any related interest-rate swaps used to mitigate interest-rate risk, which are accounted for as swap guarantee derivatives.
Credit Derivatives
We entered into credit-risk sharing agreements for certain credit enhanced multifamily housing revenue bonds held by
third parties in exchange for a monthly fee. In addition, we have purchased mortgage loans containing debt cancellation
contracts, which provide for mortgage debt or payment cancellation for borrowers who experience unanticipated losses of
income dependent on a covered event. The rights and obligations under these agreements have been assigned to the servicers.
However, in the event the servicer does not perform as required by contract we would be obligated under our guarantee to
make the required contractual payments.
For a discussion of our significant accounting policies related to derivatives, see “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES — Derivatives.”
Derivative Assets and Liabilities at Fair Value
The table below presents the location and fair value of derivatives reported on our consolidated balance sheets.
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