Freddie Mac 2012 Annual Report Download - page 281

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 securities, primarily CMBS,
and held-for-sale loans 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 short-term 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, 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
securities 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, inclusive of up-
front credit delivery fees
• Recognition and remittance to Treasury of guarantee
fees resulting from the 10 basis point legislated increase
• Adjustments for security performance
• Credit losses on all single-family assets
• Guarantee buy-downs
• 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. Our
primary business model is to purchase held-for-sale
multifamily loans for aggregation and then securitization
through multifamily K Certificates, which are considered
Other Guarantee Transactions. To a lesser extent, we provide
guarantees of the payment of principal and interest on tax-
exempt multifamily pass-through certificates backed by
multifamily housing revenue bonds. In addition, we guarantee
the payment of principal and interest on tax-exempt
multifamily housing revenue bonds secured by low- and
moderate-income multifamily mortgage loans. 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
our investment securities and held-for-sale loans associated
with market 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 housing
revenue bonds
• LIHTC and valuation allowance
• Deferred tax asset valuation allowance
All Other The All Other category consists of material corporate-
level activities that are: (a) infrequent in nature; and (b)
based on decisions outside the control of the management
of our reportable segments.
• 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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