Glossary of Selected Monthly Volume Summary Terms
DELINQUENCIES (Table 6 of MVS) – Single-family delinquencies are based on the number of mortgages 90 days or more delinquent or in foreclosure as of period end while multifamily delinquencies are based on net carrying value of mortgages 60 days or more delinquent or in foreclosure as of period end. Excludes that portion of Structured Securities that are backed by Ginnie Mae Certificates and securities we classify as Structured Transactions as well as mortgage loans whose original contractual terms have been modified under an agreement with the borrower as long as the borrower complies with the modified contractual terms. The single-family non-credit enhanced statistics include only those loans for which Freddie Mac has assumed primary or full default risk. As a result, this statistic excludes loans covered by primary mortgage insurance, securities subject to subordinated agreements and loans for which the lender or a third party has retained the primary default risk.
DURATION GAP* (Table 8 of MVS) – Measures the difference in price sensitivity to interest rate changes between our assets and liabilities, and it is expressed in months relative to the market value of assets. A duration gap of zero implies that the duration of our assets equal the duration of our liabilities. As a result, the change in value of assets from an instantaneous move in interest rates, either up or down, will be accompanied by an equal and offsetting change in the value of liabilities, thus leaving the fair value of equity unchanged. A positive duration gap indicates that the duration of our assets exceeds the duration of our liabilities which, from a net perspective, implies that the fair value of equity will increase in value when interest rates fall and decrease in value when interest rates rise. A negative duration gap indicates that the duration of our liabilities exceeds the duration of our assets which, from a net perspective, implies that the fair value of equity will increase in value when interest rates rise and decrease in value when interest rates fall. Multiplying duration gap (expressed as a percentage of a year) by the fair value of our assets will provide an indication of the change in the fair value of our equity resulting from a one percent change in interest rates.
FOREIGN EXCHANGE TRANSLATION (Table 5 of MVS) – Represents the U.S. dollar impact of changes in spot exchange rates applied to our foreign-currency denominated debt.
MATURITIES AND REDEMPTIONS (Table 5 of MVS) – Represents all reductions to the outstanding balance of our debt with original contractual maturity greater than one year, other than Repurchases. Consequently, it includes calls and puts of our debt, as well as scheduled and unscheduled pay downs of transactions accounted for as secured borrowings under U.S. GAAP. For debt denominated in a currency other than the U.S. dollar, maturities and redemptions are reflected at the exchange rate on the maturity/redemption date.
MORTGAGE PURCHASE AND SALE AGREEMENTS (Table 2 of MVS) – Reflects trades entered into during the month and includes: (a) monthly commitments to purchase mortgage-related securities for the mortgage-related investment portfolio offset by monthly commitments to sell mortgage-related securities out of the mortgage-related investment portfolio and (b) the net amount of monthly mortgage loan purchase and sale agreements. Substantially all of these commitments are settled by delivery of a mortgage-related security or mortgage loan; the rest are net settled for cash. Mortgage purchase and sale agreements also includes the net amount of mortgage-related securities that we expect to purchase or sell pursuant to written and purchased options entered into during the month for which we expect to take or make delivery of the securities. In some instances, commitments may settle during the same period in which we have entered into the related commitment.
OTHER INVESTMENTS (Table 7 of MVS) – Consists of our cash and investments portfolio, which includes cash and cash equivalents, Federal funds sold, Euro funds sold, securities purchased under agreements to resell and non-mortgage investments. The balance is presented on a settlement date basis (i.e., excludes non-mortgage investments traded but not yet settled). Non-mortgage investments within this balance are presented at fair value.
PORTFOLIO MARKET VALUE SENSITIVITY LEVEL (PMVS-L)*
(Table 8 of MVS) – Shows the estimated loss in pre-tax portfolio market value from an immediate adverse 50 basis point parallel shift (up and down) in the level of London Interbank Offered Rates ("LIBOR") (that is, when the yield at each point on the LIBOR curve increases or decreases by 50 basis points). This disclosure reflects the average of the daily PMVS-L estimates for the given month or quarter. This estimate does not take into account any rebalancing actions that we would typically take to reduce risk exposure.
PORTFOLIO MARKET VALUE SENSITIVITY YIELD CURVE (PMVS-YC)* (Table 8 of MVS) – Shows the estimated loss in pre-tax portfolio market value from an immediate adverse 25 basis point change in the slope (up and down) of the LIBOR yield curve. This disclosure reflects the average of the daily PMVS-YC estimates for the given month or quarter.
PURCHASES AND ISSUANCES (Table 1 of MVS) – Includes, on a settlement date basis, purchases of mortgages and mortgage-related securities as part of our issuance of Guaranteed PCs and Structured Securities as well as our mortgage-related investments portfolio purchases of mortgage loans and non-Freddie Mac mortgage-related securities.
SALES, NET OF OTHER ACTIVITY (Table 2 of MVS) – Represents: (a) sales of non-Freddie Mac mortgage-related securities from our mortgage-related investments portfolio, (b) sales of multifamily mortgage loans from our mortgage-related investments portfolio, (c) net additions to the mortgage-related investments portfolio for delinquent mortgage loans purchased out of PC pools and (d) balloon reset mortgages purchased out of PC pools. Excludes the transfer of single-family mortgage loans through transactions that qualify as sales and all transfers through swap-based exchanges.
TOTAL GUARANTEED PCs and STRUCTURED SECURITIES ISSUED (Table 4 of MVS) – PCs (Participation Certificates) are securities issued by Freddie Mac where the underlying collateral is pools of mortgage loans. Structured Securities are single-class and multi-class securities issued by Freddie Mac as part of our resecuritization of previously issued Freddie Mac PCs and non-Freddie Mac mortgage-related securities. Includes PCs, Structured Securities and also tax-exempt multifamily housing revenue bonds for which we provide a guarantee, as well as credit-related commitments with respect to single-family mortgage loans held by third parties. Excludes Structured Securities where we have resecuritized PCs and other previously issued Structured Securities. These excluded Structured Securities do not increase our credit-related exposure and consist of single-class Structured Securities backed by PCs, Real Estate Mortgage Investment Conduits (REMICs) and principal-only strips. The notional balances of interest-only strips are excluded because this table is based on unpaid principal balance. Also excluded are modifiable and combinable REMIC tranches, where the holder has the option to exchange the security tranches for other predefined security tranches.
* Our PMVS and duration gap measures provide useful estimates of key interest-rate risk exposures and include the impact of our purchases and sales of derivative instruments, which we use to limit our exposure to changes in the LIBOR yield curve. While we believe that PMVS and duration gap are useful risk management tools, they should be understood as estimates rather than precise measurements. Methodologies employed to calculate interest-rate risk sensitivity disclosures are periodically changed on a prospective basis to reflect improvements in underlying estimation processes.