Freddie Mac 2012 Annual Report Download - page 37

exceed $650 billion on December 31, 2012; and (b) on December 31 of each year thereafter, may not exceed 85% of the
aggregate amount of the UPB we were permitted to own as of December 31 of the immediately preceding calendar year, until
the portfolio reaches $250 billion. As a result, the UPB of our mortgage-related investments portfolio may not exceed
$553 billion as of December 31, 2013. FHFA has indicated that such portfolio reduction targets should be viewed as
minimum reductions and has encouraged us to reduce the mortgage-related investments portfolio at a faster rate than
required, while indicating that the pace of reducing the portfolio may be moderated by conditions in the housing and
financial markets. This strategy is designed to reduce the portfolio and provide the best return to the taxpayer while
minimizing market disruption.
The table below presents the UPB of our mortgage-related investments portfolio, for purposes of the limit imposed by
the Purchase Agreement and FHFA regulation.
Table 4 — Mortgage-Related Investments Portfolio(1)
December 31, 2012 December 31, 2011
(in millions)
Investments segment — Mortgage investments portfolio ...................................... $375,924 $449,273
Single-family Guarantee segment — Single-family unsecuritized mortgage loans(2) ................... 53,333 62,469
Multifamily segment — Mortgage investments portfolio ...................................... 128,287 141,571
Total mortgage-related investments portfolio .............................................. $557,544 $653,313
(1) Based on UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(2) Represents unsecuritized seriously delinquent single-family loans managed by the Single-family Guarantee segment.
The UPB of our mortgage-related investments portfolio at December 31, 2012 was $557.5 billion, a decline of $95.8
billion compared to $653.3 billion at December 31, 2011. The reduction in UPB resulted primarily from liquidations and is
consistent with our efforts to reduce the size of our mortgage-related investments portfolio as described above. The
mortgage-related investments portfolio is comprised of agency securities, single-family non-agency mortgage-related
securities, CMBS, housing revenue bonds, and single-family and multifamily unsecuritized mortgage loans.
We consider the liquidity of the assets in our mortgage-related investments portfolio based on three categories:
(a) agency securities; (b) assets that are less liquid than agency securities; and (c) illiquid assets. Assets that are less liquid
than agency securities include unsecuritized performing single-family mortgage loans, multifamily mortgage loans, CMBS,
and housing revenue bonds. Our less liquid assets collectively represented approximately 28% of the UPB of the portfolio at
December 31, 2012, compared to 32% as of December 31, 2011. Illiquid assets include unsecuritized seriously delinquent
and modified single-family mortgage loans which we removed from PC trusts, and our investments in non-agency mortgage-
related securities backed by subprime, option ARM, and Alt-A and other loans. Our illiquid assets collectively represented
approximately 35% of the UPB of the portfolio at December 31, 2012, as compared to 29% as of December 31, 2011. The
increase in the percentage of illiquid assets at December 31, 2012 compared to December 31, 2011 is primarily due to our
agency securities’ balance decreasing at a faster rate than our assets that are less liquid than agency securities and illiquid
assets.
Powers of the Conservator
Under the GSE Act, the conservatorship provisions applicable to Freddie Mac are based generally on federal banking
law. As discussed below, FHFA has broad powers when acting as our conservator. For more information on the GSE Act, see
“Regulation and Supervision.”
General Powers of the Conservator
Upon its appointment, the Conservator immediately succeeded to all rights, titles, powers and privileges of Freddie
Mac, and of any stockholder, officer or director of Freddie Mac with respect to Freddie Mac and its assets. The Conservator
also succeeded to the title to all books, records and assets of Freddie Mac held by any other legal custodian or third party.
Under the GSE Act, the Conservator may take any actions it determines are necessary and appropriate to carry on our
business, support public mission objectives, and preserve and conserve our assets and property. The Conservator’s powers
include the ability to transfer or sell any of our assets or liabilities (subject to certain limitations and post-transfer notice
provisions for transfers of qualified financial contracts, as defined below under “Special Powers of the Conservator —
Security Interests Protected; Exercise of Rights Under Qualified Financial Contracts”) without any approval, assignment of
32 Freddie Mac