Freddie Mac 2015 Annual Report Download - page 228

Financial Statements Notes to the Consolidated Financial Statements | Note 3
Freddie Mac 2015 Form 10-K 226
See Note 4 and Note 7 for additional information on loans and debt securities of consolidated trusts.
At December 31, 2015 and 2014, we were the primary beneficiary of, and therefore consolidated, single-
family PC trusts with assets totaling $1.6 trillion and $1.5 trillion, respectively. During the years ended
December 31, 2015 and 2014, we issued approximately $352.6 billion and $257.2 billion, respectively, of
guaranteed single-family PCs. Our exposure for guarantees to consolidated securitization trusts is
generally equal to the UPB of the loans recorded on our consolidated balance sheets.
Resecuritization Products
We create resecuritization products primarily by using PCs or our previously issued resecuritization
products as the underlying collateral. In a typical resecuritization transaction, previously issued PCs or
resecuritization products are transferred to a resecuritization trust that issues beneficial interests in the
underlying collateral. We establish parameters that define eligibility standards for assets that may be used
as collateral for each of our resecuritization programs. Resecuritization products can then be created
based on the parameters that we have established. Similar to our PCs, we guarantee the payment of
principal and interest to the investors in our resecuritization products. However, because we have already
guaranteed the underlying assets, we do not assume any incremental credit risk by issuing these
securities. The main types of resecuritization products we create are Giant PCs, REMICs, and Stripped
Giant PCs.
Giant PCs
Giant PCs are direct pass-throughs of the cash flows of the underlying collateral, which may be previously
issued PCs or Giant PCs. We do not consolidate Giant PCs as their resecuritization does not result in any
new or incremental risk to the holders of the securities issued by the resecuritization trust and because
we are not exposed to any incremental rights to receive benefits or obligations to absorb losses that could
be significant to the resecuritization trust.
Purchases of Giant PCs as investments in our mortgage-related investments portfolio are accounted for
as debt extinguishments of a pro-rata portion of the underlying single-family PCs because Giant PCs are
considered substantially the same as the underlying single-family PCs. Similarly, sales of Giant PCs
previously held as investments in our mortgage-related investments portfolio are accounted for as debt
issuances of a pro-rata portion of the underlying single-family PCs.
REMICs and Stripped Giant PCs
REMICs and Stripped Giant PCs are multiclass resecuritizations of the cash flows of the underlying
collateral, which may be previously issued PCs, Giant PCs, or other REMICs and Stripped Giant PCs.
The activity that most significantly impacts the economic performance of our resecuritization trusts is
typically the initial design and structuring of the trust. Substantially all resecuritization trusts are created
as part of customer-driven transactions in which an investor or dealer participates in the decisions made
during the design and establishment of the trust. As a result, we do not have the unilateral ability to direct
the activities of our resecuritization trusts that most significantly impact the economic performance of
those trusts. In addition, we do not have the right to receive benefits or the obligation to absorb losses
that could potentially be significant to the trusts because we have already provided a guarantee on the
underlying assets. As a result, we have concluded that we are not the primary beneficiary of our
resecuritization trusts and, therefore, do not consolidate those trusts.