Freddie Mac 2015 Annual Report Download - page 17

Management's Discussion and Analysis Consolidated Results of Operations | Comparison
Freddie Mac 2015 Form 10-K 15
the amount of our benefit was not significant. The (provision) for credit losses in 2014 reflects a
decline in the volume of newly impaired loans and a smaller benefit from settlement agreements with
certain sellers to release specified loans from certain repurchase obligations in 2014 compared to
2013. See "Benefit (Provision) For Credit Losses" for more information.
• Gains (losses) on extinguishment of debt in 2015, 2014, and 2013 primarily resulted from
purchases of single-family PCs (which are accounted for as the extinguishment of debt). We
extinguished debt securities of consolidated trusts with a UPB of $54.6 billion, $49.2 billion, and $44.4
billion in 2015, 2014, and 2013, respectively. Losses in 2015 and 2014 were driven by interest rate
declines between the time of issuance and the time of repurchase of these debt securities.
• Changes in derivative gains (losses) primarily resulted from changes in interest rates. In 2015,
longer-term interest rates declined less than they did in 2014, and resulted in lower fair value losses.
Derivative losses also include the accrual of periodic cash settlements, which is the net amount we
accrued during the period for interest-rate swap payments that we will make. In 2014, derivative
losses primarily resulted from the effect of a flattening of the yield curve on the fair value of our
interest-rate swaps. See "Derivative Gains (Losses)" for more information.
• Net impairments of available-for-sale securities recognized in earnings declined in 2015
compared to 2014 because the unrealized losses associated with securities we intend to sell were
lower due to improvements in forecasted home prices, declines in market interest rates, and
continued tightening of credit spreads for our non-agency mortgage-related securities. Net
impairments of available-for-sale securities recognized in earnings declined in 2014 compared to
2013 primarily as a result of increased impairments in 2013 due to the availability of more detailed
information which enhanced the assumptions used to estimate the contractual loan terms for certain
modified loans collateralizing our non-agency mortgage-related securities. See "Conservatorship And
Related Matters - Limits On Our Mortgage-Related Investments Portfolio And Indebtedness" for
additional information concerning our efforts to reduce our less liquid assets.
• Other gains (losses) on investment securities recognized in earnings. The decrease in gains in
2015 compared to 2014 was primarily due to a decrease in sales of agency mortgage-related
securities. The increase in gains in 2014 compared to 2013 was primarily the result of the effect of a
decline in longer-term interest rates on the fair values of our trading securities.
• Changes in other income (loss) were primarily driven by non-agency mortgage-related securities
settlements, lower-of-cost-or-fair-value adjustments for mortgage loans transferred to held-for-sale,
and changes in fair value of multifamily mortgage loans for which we have elected the fair value
option, as discussed below.
The change between 2015 and 2014 was primarily driven by:
$6.0 billion decline in income from non-agency mortgage-related securities litigation
settlements, as there was only one settlement in 2015;
$2.0 billion increase in write-downs due to lower-of-cost-or-fair-value adjustments for
mortgage loans transferred from held-for-investment to held-for-sale (see "Effect of Loan
Reclassifications" for more information); and
$0.7 billion decline in the fair value of these multifamily mortgage loans, due to the widening
of K Certificate benchmark spreads observed in the market.
The change between 2014 and 2013 was primarily driven by: