FEDERAL HOME LOAN MORTGAGE CORP | 2013 | FY | 3

NOTE 7: INVESTMENTS IN SECURITIES
The table below summarizes amortized cost, estimated fair values, and corresponding gross unrealized gains and gross unrealized losses for available-for-sale securities by major security type. At December 31, 2013 and 2012, all available-for-sale securities are mortgage-related securities.
Table 7.1 — Available-For-Sale Securities
 
December 31, 2013
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in millions)
Available-for-sale securities:
 
 
 
 
 
 
 
Freddie Mac
$
39,001

 
$
1,847

 
$
(189
)
 
$
40,659

Fannie Mae
10,140

 
660

 
(3
)
 
10,797

Ginnie Mae
149

 
18

 
—

 
167

CMBS
29,151

 
1,524

 
(337
)
 
30,338

Subprime
29,897

 
382

 
(2,780
)
 
27,499

Option ARM
6,617

 
338

 
(381
)
 
6,574

Alt-A and other
8,322

 
526

 
(142
)
 
8,706

Obligations of states and political subdivisions
3,533

 
23

 
(61
)
 
3,495

Manufactured housing
629

 
61

 
(6
)
 
684

Total available-for-sale securities
$
127,439

 
$
5,379

 
$
(3,899
)
 
$
128,919

 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Freddie Mac
$
53,965

 
$
4,602

 
$
(52
)
 
$
58,515

Fannie Mae
14,183

 
1,099

 
(2
)
 
15,280

Ginnie Mae
183

 
26

 
—

 
209

CMBS
47,606

 
3,882

 
(181
)
 
51,307

Subprime
35,503

 
83

 
(9,129
)
 
26,457

Option ARM
7,454

 
48

 
(1,785
)
 
5,717

Alt-A and other
11,861

 
244

 
(1,201
)
 
10,904

Obligations of states and political subdivisions
5,647

 
154

 
(3
)
 
5,798

Manufactured housing
716

 
24

 
(31
)
 
709

Total available-for-sale securities
$
177,118

 
$
10,162

 
$
(12,384
)
 
$
174,896

Available-For-Sale Securities in a Gross Unrealized Loss Position
The table below shows the fair value of available-for-sale securities in a gross unrealized loss position, and whether they have been in that position less than 12 months, or 12 months or greater, including the non-credit-related portion of other-than-temporary impairments, which have been recognized in AOCI.
Table 7.2 — Available-For-Sale Securities in a Gross Unrealized Loss Position
 
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
 
 
Gross Unrealized Losses
 
 
 
Gross Unrealized Losses
 
 
 
Gross Unrealized Losses
December 31, 2013
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
(in millions)
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freddie Mac
$
7,957

 
$
—

 
$
(144
)
 
$
(144
)
 
$
649

 
$
—

 
$
(45
)
 
$
(45
)
 
$
8,606

 
$
—

 
$
(189
)
 
$
(189
)
Fannie Mae
248

 
—

 
(2
)
 
(2
)
 
19

 
—

 
(1
)
 
(1
)
 
267

 
—

 
(3
)
 
(3
)
CMBS
1,147

 
(7
)
 
(78
)
 
(85
)
 
1,992

 
(16
)
 
(236
)
 
(252
)
 
3,139

 
(23
)
 
(314
)
 
(337
)
Subprime
472

 
(19
)
 
—

 
(19
)
 
19,103

 
(2,448
)
 
(313
)
 
(2,761
)
 
19,575

 
(2,467
)
 
(313
)
 
(2,780
)
Option ARM
77

 
(2
)
 
—

 
(2
)
 
2,608

 
(374
)
 
(5
)
 
(379
)
 
2,685

 
(376
)
 
(5
)
 
(381
)
Alt-A and other
262

 
(5
)
 
—

 
(5
)
 
1,854

 
(113
)
 
(24
)
 
(137
)
 
2,116

 
(118
)
 
(24
)
 
(142
)
Obligations of states and political subdivisions
1,885

 
(7
)
 
(49
)
 
(56
)
 
24

 
—

 
(5
)
 
(5
)
 
1,909

 
(7
)
 
(54
)
 
(61
)
Manufactured housing
—

 
—

 
—

 
—

 
65

 
(4
)
 
(2
)
 
(6
)
 
65

 
(4
)
 
(2
)
 
(6
)
Total available-for-sale securities in a gross unrealized loss position
$
12,048

 
$
(40
)
 
$
(273
)
 
$
(313
)
 
$
26,314

 
$
(2,955
)
 
$
(631
)
 
$
(3,586
)
 
$
38,362

 
$
(2,995
)
 
$
(904
)
 
$
(3,899
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
 
 
Gross Unrealized Losses
 
 
 
Gross Unrealized Losses
 
 
 
Gross Unrealized Losses
December 31, 2012
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
Fair
Value
 
Other-Than-
Temporary
Impairment(1)
 
Temporary
Impairment(2)
 
Total
 
(in millions)
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freddie Mac
$
1,811

 
$
—

 
$
(25
)
 
$
(25
)
 
$
1,872

 
$
—

 
$
(27
)
 
$
(27
)
 
$
3,683

 
$
—

 
$
(52
)
 
$
(52
)
Fannie Mae
170

 
—

 
—

 
—

 
55

 
—

 
(2
)
 
(2
)
 
225

 
—

 
(2
)
 
(2
)
CMBS
340

 
—

 
(3
)
 
(3
)
 
3,425

 
(22
)
 
(156
)
 
(178
)
 
3,765

 
(22
)
 
(159
)
 
(181
)
Subprime
298

 
(23
)
 
—

 
(23
)
 
25,676

 
(7,830
)
 
(1,276
)
 
(9,106
)
 
25,974

 
(7,853
)
 
(1,276
)
 
(9,129
)
Option ARM
82

 
(3
)
 
—

 
(3
)
 
5,182

 
(1,759
)
 
(23
)
 
(1,782
)
 
5,264

 
(1,762
)
 
(23
)
 
(1,785
)
Alt-A and other
50

 
(4
)
 
—

 
(4
)
 
7,938

 
(961
)
 
(236
)
 
(1,197
)
 
7,988

 
(965
)
 
(236
)
 
(1,201
)
Obligations of states and political subdivisions
37

 
—

 
(1
)
 
(1
)
 
45

 
—

 
(2
)
 
(2
)
 
82

 
—

 
(3
)
 
(3
)
Manufactured housing
46

 
—

 
—

 
—

 
222

 
(26
)
 
(5
)
 
(31
)
 
268

 
(26
)
 
(5
)
 
(31
)
Total available-for-sale securities in a gross unrealized loss position
$
2,834

 
$
(30
)
 
$
(29
)
 
$
(59
)
 
$
44,415

 
$
(10,598
)
 
$
(1,727
)
 
$
(12,325
)
 
$
47,249

 
$
(10,628
)
 
$
(1,756
)
 
$
(12,384
)
 
(1)
Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairments in earnings.
(2)
Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairments in earnings.
At December 31, 2013, total gross unrealized losses on available-for-sale securities were $3.9 billion. The gross unrealized losses relate to 994 individual lots representing 956 separate securities, including securities with non-credit-related other-than-temporary impairments recognized in AOCI. We purchase multiple lots of individual securities at different times and at different costs. We determine gross unrealized gains and gross unrealized losses by specifically evaluating investment positions at the lot level; therefore, some of the lots we hold for a single security may be in an unrealized gain position while other lots for that security may be in an unrealized loss position, depending upon the amortized cost of the specific lot.
Impairment Recognition on Investments in Securities
We recognize impairment losses on available-for-sale securities within our consolidated statements of comprehensive income as net impairment of available-for-sale securities recognized in earnings when we conclude that a decrease in the fair value of a security is other-than-temporary. For information regarding our evaluation of our available-for-sale securities for impairment, see "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Investments in Securities."
The evaluation of whether unrealized losses on available-for-sale securities are other-than-temporary requires significant management judgments and assumptions and consideration of numerous factors. We perform an evaluation on a security-by-security basis considering all available information. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment. Important factors include, but are not limited to:
•
whether we intend to sell the security or it is more likely than not that we will be required to sell the security before sufficient time elapses to recover all unrealized losses;
•
the use of a third-party model for single-family non-agency mortgage-related securities that considers the credit performance of the underlying collateral, including current LTV ratio, delinquency status, servicer performance, loan modification terms and status, and borrower credit information. The model also incorporates assumptions about the economic environment, including future home prices, unemployment, and interest rates to project underlying collateral prepayment speeds, default rates, loss severities, and delinquency rates. Our estimation approach for CMBS includes the use of a separate third-party model that utilizes underlying collateral performance, current and expected credit enhancements, and incorporates assumptions about the underlying collateral cash flows; and
•
the incorporation of security-level subordination information and the priority of cash flow payments by the models to project and estimate cash flows expected to be collected for each security.
See “Table 7.2 — Available-For-Sale Securities in a Gross Unrealized Loss Position” for the length of time our available-for-sale securities have been in an unrealized loss position. Also see “Table 7.3 — Significant Modeled Attributes for Certain Available-For-Sale Non-Agency Mortgage-Related Securities” for the modeled default rates and severities that were used to determine whether our senior interests in certain non-agency mortgage-related securities would experience a cash shortfall.
As noted in “Table 7.4 — Net Impairment of Available-For-Sale Securities Recognized in Earnings,” our net impairment on available-for-sale securities during 2013 includes certain securities that we have the intent to sell prior to the recovery of the unrealized loss. In cases where we have the intent to sell or it is more likely than not that we will be required to sell the security before recovery of its amortized cost, the security’s entire decline in fair value would be deemed to be other-than-temporary and is recorded within our consolidated statements of comprehensive income as net impairment of available-for-sale securities recognized in earnings. For the remaining available-for-sale securities in an unrealized loss position at December 31, 2013, we have asserted that we have no intent to sell and that we believe it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis.
Freddie Mac and Fannie Mae Securities
We record the purchase of mortgage-related securities issued by Fannie Mae as investments in securities in accordance with the accounting guidance for investments in debt and equity securities. In contrast, our purchase of mortgage-related securities that we issued (e.g., PCs, REMICs and Other Structured Securities, and Other Guarantee Transactions) is recorded as either investments in securities or extinguishment of debt securities of consolidated trusts depending on the nature of the mortgage-related security that we purchase. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Securitization Activities through Issuances of Freddie Mac Mortgage-Related Securities” for additional information.
We hold these investments in securities that are in an unrealized loss position at least to recovery and typically to maturity. As the principal and interest on these securities are guaranteed and we do not intend to sell these securities and it is not more likely than not that we will be required to sell such securities before a recovery of the securities' amortized cost basis, we consider these unrealized losses to be temporary.
Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, Alt-A and Other Loans
We believe the unrealized losses on the non-agency mortgage-related securities we hold are a result of poor underlying collateral performance, limited liquidity, and risk premiums. Our review of the securities backed by subprime, option ARM, and Alt-A and other loans includes the third-party loan level default modeling and analyses of the individual securities based on underlying collateral performance, including the collectability of amounts from bond insurers. In evaluating collectability from bond insurers, we consider factors that affect both the bond insurers’ financial performance and ability to pay their obligations. We consider loan level information including estimated current LTV ratios, FICO scores, and other loan level characteristics. For additional information regarding bond insurers, see “NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS — Bond Insurers.”
The table below presents the modeled attributes, including default rates, prepayment rates, and severities, without regard to subordination, that are used to determine whether our interests in certain available-for-sale non-agency mortgage-related securities will experience a cash shortfall.
Table 7.3 — Significant Modeled Attributes for Certain Available-For-Sale Non-Agency Mortgage-Related Securities
 
 
December 31, 2013
 
 
 
 
 
Alt-A(1)
 
Subprime First
Lien(2)
 
Option ARM
 
Fixed Rate
 
Variable Rate
 
Hybrid Rate
 
(dollars in millions)
Issuance Date
 
 
 
 
 
 
 
 
 
2004 and prior:
 
 
 
 
 
 
 
 
 
UPB
$
896

 
$
49

 
$
498

 
$
336

 
$
342

Weighted average collateral defaults(3)
37
%
 
23
 %
 
13
 %
 
31
 %
 
19
 %
Weighted average collateral severities(4)
58
%
 
46
 %
 
47
 %
 
43
 %
 
37
 %
Weighted average voluntary prepayment rates(5)
7
%
 
8
 %
 
11
 %
 
7
 %
 
8
 %
Average credit enhancements(6)
38
%
 
4
 %
 
15
 %
 
15
 %
 
12
 %
2005:
 
 
 
 
 
 
 
 
 
UPB
$
3,687

 
$
2,221

 
$
714

 
$
591

 
$
3,068

Weighted average collateral defaults(3)
46
%
 
34
 %
 
20
 %
 
40
 %
 
24
 %
Weighted average collateral severities(4)
60
%
 
51
 %
 
46
 %
 
48
 %
 
41
 %
Weighted average voluntary prepayment rates(5)
4
%
 
7
 %
 
9
 %
 
7
 %
 
9
 %
Average credit enhancements(6)
46
%
 
3
 %
 
—
 %
 
21
 %
 
2
 %
2006:
 
 
 
 
 
 
 
 
 
UPB
$
16,547

 
$
4,870

 
$
397

 
$
846

 
$
907

Weighted average collateral defaults(3)
54
%
 
44
 %
 
28
 %
 
47
 %
 
26
 %
Weighted average collateral severities(4)
61
%
 
53
 %
 
47
 %
 
53
 %
 
40
 %
Weighted average voluntary prepayment rates(5)
2
%
 
6
 %
 
8
 %
 
6
 %
 
10
 %
Average credit enhancements(6)
5
%
 
(5
)%
 
—
 %
 
(9
)%
 
(3
)%
2007:
 
 
 
 
 
 
 
 
 
UPB
$
18,287

 
$
3,286

 
$
138

 
$
1,085

 
$
225

Weighted average collateral defaults(3)
53
%
 
44
 %
 
47
 %
 
46
 %
 
43
 %
Weighted average collateral severities(4)
61
%
 
52
 %
 
52
 %
 
52
 %
 
48
 %
Weighted average voluntary prepayment rates(5)
2
%
 
6
 %
 
6
 %
 
6
 %
 
7
 %
Average credit enhancements(6)
4
%
 
4
 %
 
(1
)%
 
(20
)%
 
—
 %
Total:
 
 
 
 
 
 
 
 
 
UPB
$
39,417

 
$
10,426

 
$
1,747

 
$
2,858

 
$
4,542

Weighted average collateral defaults(3)
52
%
 
42
 %
 
22
 %
 
43
 %
 
25
 %
Weighted average collateral severities(4)
61
%
 
52
 %
 
47
 %
 
51
 %
 
41
 %
Weighted average voluntary prepayment rates(5)
2
%
 
6
 %
 
9
 %
 
6
 %
 
9
 %
Average credit enhancements(6)
9
%
 
—
 %
 
4
 %
 
(4
)%
 
1
 %
 
(1)
Excludes non-agency mortgage-related securities backed by other loans, which primarily consist of securities backed by home equity lines of credit.
(2)
Excludes non-agency mortgage-related securities backed exclusively by subprime second liens. Certain securities identified as subprime first lien may be backed in part by subprime second-lien loans, as the underlying loans of these securities were permitted to include a small percentage of subprime second-lien loans.
(3)
The expected cumulative default rate is expressed as a percentage of the current collateral UPB.
(4)
The expected average loss given default is calculated as the ratio of cumulative loss over cumulative default for each security.
(5)
The security’s voluntary prepayment rate represents the average of the monthly voluntary prepayment rate weighted by the security’s outstanding UPB.
(6)
Positive values reflect the amount of subordination and other financial support (excluding credit enhancement provided by bond insurance) that will incur losses in the securitization structure before any losses are allocated to securities that we own. Percentage generally calculated based on: (a) the total UPB of securities subordinate to the securities we own; divided by (b) the total UPB of all of the securities issued by the trust (excluding notional balances). Negative values are shown when unallocated collateral losses will be allocated to the securities that we own in excess of current remaining credit enhancement, if any. The unallocated collateral losses have been considered in our assessment of other-than-temporary impairment.
In evaluating the non-agency mortgage-related securities backed by subprime, option ARM, and Alt-A and other loans for other-than-temporary impairment, we noted that the percentage of securities that were AAA-rated and the percentage that were investment grade declined significantly since acquisition. While these ratings have declined, the ratings themselves are not determinative that a loss is more or less likely. While we may consider credit ratings in our analysis, we believe that our detailed security-by-security analyses provide a more comprehensive view of the ultimate collectability of contractual amounts due to us.
Our analysis is subject to change as new information regarding delinquencies, severities, loss timing, prepayments, and other factors becomes available. While it is possible that, under certain conditions, collateral losses on our remaining available-for-sale securities for which we have not recorded an impairment charge could exceed our credit enhancement levels and a principal or interest loss could occur, we do not believe that those conditions were likely as of December 31, 2013.
Commercial Mortgage-Backed Securities
CMBS are exposed to stresses in the commercial real estate market. We use an external model to identify securities that may have an increased risk of failing to make their contractual payments. We then perform an analysis of the underlying collateral on a security-by-security basis to determine whether we will receive all of the contractual payments due to us. While it is possible that, under certain conditions, collateral losses on our CMBS for which we have not recorded an impairment charge could exceed our credit enhancement levels and a principal or interest loss could occur, we do not believe that those conditions were likely as of December 31, 2013.
Obligations of States and Political Subdivisions
These investments consist of housing revenue bonds. We believe the unrealized losses on obligations of states and political subdivisions are primarily a result of movements in interest rates and liquidity and risk premiums. We believe that any credit risk related to these securities is minimal because of the issuer guarantees provided on these securities.
Bond Insurance
We rely on bond insurance to provide credit protection on some of our non-agency mortgage-related securities. Circumstances in which: (a) it is expected that a principal and interest shortfall will occur; and (b) there is substantial uncertainty surrounding a bond insurer’s ability to pay all future claims can give rise to recognition of other-than-temporary impairment recognized in earnings. See “NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS — Bond Insurers” for additional information.
Other-Than-Temporary Impairments on Available-for-Sale Securities
The table below summarizes our net impairment of available-for-sale securities recognized in earnings by security type.
Table 7.4 — Net Impairment of Available-For-Sale Securities Recognized in Earnings
 
 
Net Impairment of Available-For-Sale Securities Recognized in Earnings For the Year Ended December 31,
 
2013
 
2012
 
2011
 
 
 
(in millions)
 
 
Available-for-sale securities:(1)
 
 
 
 
 
CMBS
$
(14
)
 
$
(138
)
 
$
(353
)
Subprime
(1,258
)
 
(1,274
)
 
(1,315
)
Option ARM
(58
)
 
(556
)
 
(424
)
Alt-A and other
(179
)
 
(196
)
 
(198
)
Manufactured housing
(1
)
 
(4
)
 
(11
)
Total net impairment of available-for-sale securities recognized in earnings
$
(1,510
)
 
$
(2,168
)
 
$
(2,301
)
 
(1)
Includes $568 million, $0 million, and $181 million of other-than-temporary impairments recognized in earnings for the years ended December 31, 2013, 2012, and 2011, respectively, as we had the intent to sell the related securities before recovery of their amortized cost basis.
The table below presents the changes in the unrealized credit-related other-than-temporary impairment component of the amortized cost related to available-for-sale securities: (a) that we have written down for other-than-temporary impairment; and (b) for which the credit component of the loss has been recognized in earnings. The credit-related other-than-temporary impairment component of the amortized cost represents the difference between the present value of expected future cash flows at the time of impairment, including the estimated proceeds from bond insurance, and the amortized cost basis of the security prior to considering credit losses. The beginning balances represent the other-than-temporary impairment credit loss components related to available-for-sale securities for which other-than-temporary impairment occurred prior to January 1, 2013 and January 1, 2012, respectively, but will not be realized until the securities are sold, written off, or mature. Net impairment of available-for-sale securities recognized in earnings is presented as additions in two components based upon whether the current period is: (a) the first time the debt security was credit-impaired; or (b) not the first time the debt security was credit-impaired. The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired available-for-sale securities. Additionally, the credit loss component is reduced by the amortization resulting from significant increases in cash flows expected to be collected that are recognized over the remaining life of the security.
Table 7.5 — Other-Than-Temporary Impairments Related to Credit Losses on Available-For-Sale Securities
 
 
Year Ended December 31,
 
2013
 
2012
 
(in millions)
Credit-related other-than-temporary impairments on available-for-sale securities recognized in earnings:
 
 
 
Beginning balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings
$
16,745

 
$
15,988

Additions:
 
 
 
Amounts related to credit losses for which an other-than-temporary impairment was not previously recognized
46

 
141

Amounts related to credit losses for which an other-than-temporary impairment was previously recognized
896

 
2,027

Reductions:
 
 
 
Amounts related to securities which were sold, written off, or matured
(1,193
)
 
(1,289
)
Amounts for which we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis
(1,536
)
 
(15
)
Amounts related to amortization resulting from significant increases in cash flows expected to be collected and/or due to the passage of time that are recognized over the remaining life of the security
(495
)
 
(107
)
Ending balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings(1)
$
14,463

 
$
16,745

 
(1)
Excludes other-than-temporary impairments on securities that we intend to sell or it is more likely than not that we will be required to sell before recovery of the unrealized losses.
Realized Gains and Losses on Sales of Available-For-Sale Securities
The table below illustrates the gross realized gains and gross realized losses from the sale of available-for-sale securities.
Table 7.6 — Gross Realized Gains and Gross Realized Losses on Sales of Available-For-Sale Securities
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(in millions)
Gross realized gains
 
 
 
 
 
Mortgage-related securities:
 
 
 
 
 
Freddie Mac
$
547

 
$
34

 
$
77

Fannie Mae
17

 
14

 
14

CMBS
1,301

 
82

 
37

Option ARM
1

 
3

 
—

Alt-A and other
70

 
—

 
—

Obligations of states and political subdivisions
13

 
19

 
11

Subprime
1

 
—

 
—

Total mortgage-related securities gross realized gains
1,950

 
152

 
139

Gross realized gains
1,950

 
152

 
139

Gross realized losses
 
 
 
 
 
Mortgage related securities:(1)
 
 
 
 
 
Freddie Mac
(25
)
 
—

 
—

CMBS
—

 
—

 
(81
)
Option ARM
(4
)
 
—

 
—

Alt-A and other
(19
)
 
—

 
—

Subprime
(3
)
 
—

 
—

Total mortgage-related securities gross realized losses
(51
)
 
—

 
(81
)
Gross realized losses
(51
)
 
—

 
(81
)
Net realized gains (losses)
$
1,899

 
$
152

 
$
58


(1)
The individual sales do not change our conclusion, at period end, that we do not intend to sell our remaining mortgage-related available-for-sale securities that are in an unrealized loss position and it is not more likely than not that we will be required to sell these securities before a sufficient time to recover all unrealized losses.
Maturities of Available-For-Sale Securities
The table below summarizes the remaining contractual maturities of available-for-sale securities.
Table 7.7 — Maturities of Available-For-Sale Securities(1) 
 
 
As of December 31, 2013
 
 
 
 
 
 
 
 
 
After One Year Through
 
After Five Years
 
 
 
 
 
Total
 
Total
 
One Year or Less
 
Five Years
 
Through Ten Years
 
After Ten Years
 
Amortized
 
Fair
 
Amortized
 
Fair
 
Amortized
 
Fair
 
Amortized
 
Fair
 
Amortized
 
Fair
 
Cost
 
Value
 
Cost
 
Value
 
Cost
 
Value
 
Cost
 
Value
 
Cost
 
Value
 
(dollars in millions)
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freddie Mac
$
39,001

 
$
40,659

 
$
4

 
$
4

 
$
570

 
$
599

 
$
613

 
$
654

 
$
37,814

 
$
39,402

Fannie Mae
10,140

 
10,797

 
3

 
3

 
275

 
291

 
163

 
177

 
9,699

 
10,326

Ginnie Mae
149

 
167

 
—

 
—

 
7

 
8

 
12

 
14

 
130

 
145

CMBS
29,151

 
30,338

 
—

 
—

 
677

 
735

 
—

 
—

 
28,474

 
29,603

Subprime
29,897

 
27,499

 
—

 
—

 
—

 
—

 
—

 
—

 
29,897

 
27,499

Option ARM
6,617

 
6,574

 
—

 
—

 
—

 
—

 
—

 
—

 
6,617

 
6,574

Alt-A and other
8,322

 
8,706

 
1

 
2

 
71

 
70

 
12

 
12

 
8,238

 
8,622

Obligations of states and political subdivisions
3,533

 
3,495

 
5

 
5

 
39

 
42

 
106

 
107

 
3,383

 
3,341

Manufactured housing
629

 
684

 
—

 
—

 
—

 
—

 
—

 
—

 
629

 
684

Total available-for-sale securities
$
127,439

 
$
128,919

 
$
13

 
$
14

 
$
1,639

 
$
1,745

 
$
906

 
$
964

 
$
124,881

 
$
126,196

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Yield(2)
2.99
%
 
 
 
5.62
%
 
 
 
5.19
%
 
 
 
5.16
%
 
 
 
2.95
%
 
 
 
(1)
Maturity information provided is based on contractual maturities, which may not represent the expected life as obligations underlying these securities may be prepaid at any time without penalty.
(2)
The weighted average yield is calculated based on a yield for each individual lot held at December 31, 2013 excluding any fully taxable-equivalent adjustments related to tax exempt sources of interest income. The numerator for the individual lot yield consists of the sum of: (a) the year-end interest coupon rate multiplied by the year-end UPB; and (b) the annualized amortization income or expense calculated for December 2013 (excluding the accretion of non-credit-related other-than-temporary impairments and any adjustments recorded for changes in the effective rate). The denominator for the individual lot yield consists of the year-end amortized cost of the lot excluding effects of other-than-temporary impairments on the UPB of impaired lots.
Trading Securities
The table below summarizes the estimated fair values by major security type for trading securities. Our trading securities mainly consist of Treasury securities, agency fixed-rate and variable-rate pass-through mortgage-related securities, and agency REMICs, including inverse floating rate, interest-only and principal-only securities.
Table 7.8 — Trading Securities
 
 
December 31, 2013
 
December 31, 2012
 
(in millions)
Mortgage-related securities:
 
 
 
Freddie Mac
$
9,349

 
$
10,354

Fannie Mae
7,180

 
10,338

Ginnie Mae
98

 
131

Other
141

 
156

Total mortgage-related securities
16,768

 
20,979

Non-mortgage-related securities:
 
 
 
Asset-backed securities
—

 
292

Treasury bills
2,254

 
1,160

Treasury notes
4,382

 
19,061

Total non-mortgage-related securities
6,636

 
20,513

Total fair value of trading securities
$
23,404

 
$
41,492

With the exception of principal-only securities, our agency securities, classified as trading, were valued at a net premium (i.e., net fair value was higher than UPB) as of December 31, 2013.
For the years ended December 31, 2013, 2012, and 2011, we recorded net unrealized losses on trading securities held at those dates of $(1.6) billion, $(1.7) billion and $(1.0) billion, respectively.

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