Freddie Mac 2015 Annual Report Download - page 72

Management's Discussion and Analysis Our Business Segments | Investments
Freddie Mac 2015 Form 10-K 70
• Non-agency mortgage-related securities - We generally no longer purchase non-agency
mortgage-related securities, but continue to have a large portfolio of non-agency mortgage-related
securities that we acquired in prior years. We are working, in some cases in conjunction with other
investors, to mitigate or recover losses we recognized in prior years. In recent years, we and FHFA
reached settlements with a number of institutions. Lawsuits against other institutions are currently
pending. Our activities with respect to this product are primarily sales but could include other
disposition strategies in the future.
• Single-family unsecuritized loans - Single-family unsecuritized loans are classified into three
categories:
Loans acquired through our cash loan purchase program that are awaiting securitization;
Reperforming loans and performing modified loans; and
Seriously delinquent loans that we have removed from PC pools (this loan category is
managed by both the Investments and Single-family Guarantee segments, but is included in
the Single-family Guarantee segment's investment portfolio and financial results).
The strategies employed to manage each category may differ. We securitize a majority of the loans
acquired through our cash loan purchase program into Freddie Mac mortgage-related securities,
primarily PCs, which may be sold to investors or retained in our mortgage-related investments
portfolio. As part of the Retained Portfolio plan, we are reducing the balance of our reperforming and
performing modified loans through a variety of methods, including disposition through structured
transactions, with the resulting securities being sold to investors or retained in our mortgage-related
investments portfolio. In the future, we may seek to sell these loans directly or pursue other
disposition strategies. Seriously delinquent loans continue to be reduced through loss mitigation and
foreclosure activities, as well as through sales of certain non-performing loans.
• Non-mortgage-related assets - We maintain a portfolio consisting primarily of cash, Treasury
securities, and securities purchased under agreements to resell, principally for short-term liquidity
management. This portfolio also includes cash invested on behalf of our consolidated trusts and cash
pledged to us under various agreements.
We evaluate the liquidity of our mortgage-related assets based on three categories (in order of liquidity):
• Liquid: single-class and multi-class agency securities, excluding certain structured agency securities
collateralized by non-agency mortgage-related securities;
• Securitization Pipeline: performing single-family loans purchased for cash and primarily held for a
short period until securitized, with the resulting Freddie Mac issued securities being sold or retained;
and
• Less Liquid: assets that are less liquid than agency securities and loans in the securitization
pipeline (e.g., reperforming loans and performing modified loans and non-agency mortgage-related
securities).
As a well-established disposition path exists for our single-family loans included in the securitization
pipeline, we consider those assets to be more liquid than non-agency securities and reperforming loans
and performing modified loans, but less liquid than single-class and multi-class agency securities.
As part of our Retained Portfolio plan, we are focused on reducing the balance of less liquid assets that
we hold in the mortgage-related investments portfolio through a combination of pay-downs, sales and
securitizations.