Freddie Mac 2012 Annual Report Download - page 311

The table below provides valuation techniques, the range, and the weighted average of significant unobservable inputs
for assets and liabilities measured at fair value on a non-recurring basis using unobservable inputs (Level 3) as of
December 31, 2012.
Table 16.5 — Quantitative Information about Non-Recurring Level 3 Fair Value Measurements
December 31, 2012
Total
Fair
Value
Level 3
Fair
Value
Predominant
Valuation
Technique(s)
Unobservable Inputs(1)
Type Range
Weighted
Average
(dollars in millions)
Non-recurring fair value
measurements
Mortgage loans
Held-for-investment .......... $711 Income capitalization Capitalization rates(2) 5% – 9% 7%
314 Third-party appraisal Property value $2 million - $43 million $21 million
Total held-for-investment .... $1,025 1,025
REO, net .................... 771 Internal model(3) Historical average sale
proceeds per property
by state(4)
$32,186 - $356,397 $102,697
5 Other
Total REO, net ............. 776 776
(1) Certain unobservable input types, range, and weighted average data are not disclosed in this table if they are associated with a class: (a) that has a
Level 3 fair value measurement that is not considered material; or (b) where we have disclosed the predominant valuation technique with related
unobservable inputs for the most significant portion of that class.
(2) The capitalization rate “Range” and “Weighted Average” represent those loans that are valued using the Income Capitalization approach, which is the
predominant valuation technique used for this population. Certain loans in this population are valued using other techniques, and the capitalization rate
for those is not represented in the “Range” or “Weighted Average” above.
(3) Represents internal models that use distressed property sales proceeds by state based on a three month average to measure the initial value of REO and
the subsequent write-down to measure the current fair value for REO properties.
(4) Represents the average of three months of REO sales proceeds by state.
Consolidated Fair Value Balance Sheets
The supplemental consolidated fair value balance sheets in the table below present our estimates of the fair value of our
financial assets and liabilities at December 31, 2012 and 2011. The valuations of financial instruments on our consolidated
fair value balance sheets are in accordance with the accounting guidance for fair value measurements and disclosures and the
accounting guidance for financial instruments. The consolidated fair value balance sheets do not purport to present our net
realizable, liquidation, or market value as a whole. Furthermore, amounts we ultimately realize from the disposition of assets
or settlement of liabilities may vary significantly from the fair values presented.
306 Freddie Mac