Freddie Mac 2012 Annual Report Download - page 99

Table 13 — Other Income
Year Ended December 31,
2012 2011 2010
(in millions)
Other income:
Gains (losses) on sale of mortgage loans ....................................................... $ 275 $ 411 $ 267
Gains (losses) on mortgage loans recorded at fair value ............................................ 735 418 (249)
Recoveries on loans impaired upon purchase ................................................... 380 473 806
Guarantee-related income, net(1) ............................................................. 343 245 217
All other .............................................................................. 441 608 819
Total other income ........................................................................ $2,174 $2,155 $1,860
(1) Most of our guarantee-related income relates to securitized multifamily mortgage loans where we have not consolidated the securitization trusts on our
consolidated balance sheets.
Gains (Losses) on Sale of Mortgage Loans
In 2012, 2011, and 2010, we recognized $275 million, $411 million, and $267 million, respectively, of gains on sale of
mortgage loans with associated UPB of $21.2 billion, $13.7 billion, and $6.6 billion, respectively. All such amounts relate to
our securitizations of multifamily loans on our consolidated balance sheets, which we elected to carry at fair value. We
recognized lower gains on sale of mortgage loans in 2012, compared to 2011, as a significant portion of the improved fair
value of the loans was recognized within gains (losses) on mortgage loans recorded at fair value during periods prior to the
loans’ securitization. We recognized higher gains on sale of mortgage loans in 2011, compared to 2010, primarily due to a
higher volume of securitizations during 2011.
Gains (Losses) on Mortgage Loans Recorded at Fair Value
In 2012, 2011, and 2010, we recognized $735 million, $418 million, and $(249) million, respectively, of gains (losses)
on mortgage loans recorded at fair value. These amounts relate to multifamily loans which we had elected to carry at fair
value and were designated for securitization. We recognize changes in fair value of these loans as gains (losses) on mortgage
loans recorded at fair value while we hold them on our consolidated balance sheets. In the period we sell these multifamily
loans (e.g., through securitization), we recognize a gain or loss on sale of mortgage loans based on proceeds of the sale.
Together, these amounts represent the holding period gains or losses associated with the loans. Favorable market spread
movements, declines in interest rates, and higher balances of multifamily loans on our consolidated balance sheets during
both 2012 and 2011, resulted in higher gains in those years compared to the respective prior year.
Recoveries on Loans Impaired upon Purchase
Recoveries on loans impaired upon purchase represent the recapture into income of previously recognized losses
associated with purchases of delinquent loans from our PCs in conjunction with our guarantee activities. Recoveries
generally occur when a loan that was impaired upon purchase is repaid in full or when at the time of foreclosure the
estimated fair value of the acquired property, less costs to sell, exceeds the carrying value of the loan. For impaired loans
where the borrower has made required payments that return the loan to less than three months past due, the recovery amounts
are recognized as interest income over time as periodic payments are received.
In 2012, 2011, and 2010, we recognized recoveries on loans impaired upon purchase of $380 million, $473 million, and
$806 million, respectively. Our recoveries on loans impaired upon purchase declined in both 2012 and 2011, compared to the
prior year, due to a lower volume of foreclosure transfers and payoffs associated with loans impaired upon purchase.
Commencing January 1, 2010, we no longer recognize losses on loans purchased from PC pools related to our single-
family PC trusts and certain Other Guarantee Transactions due to adoption of the amendments to the accounting guidance for
transfers of financial assets and consolidation of VIEs. Beginning in 2010, our recoveries principally relate to impaired loans
purchased prior to January 1, 2010, due to the change in accounting guidance effective on that date. Consequently, our
recoveries on loans impaired upon purchase will generally continue to decline over time.
All Other
All other income consists primarily of transactional fees, fees assessed to our servicers for technology use and late fees
or other penalties, and other miscellaneous income. All other income decreased to $441 million in 2012, compared to $608
94 Freddie Mac