NOTE 8: DEBT SECURITIES AND SUBORDINATED BORROWINGS Debt securities that we issue are classified on our consolidated balance sheets as either debt securities of consolidated trusts held by third parties or other debt. We issue other debt to fund our operations. Under the Purchase Agreement, without the prior written consent of Treasury, we may not incur indebtedness that would result in the par value of our aggregate indebtedness exceeding 120% of the amount of mortgage assets we are allowed to own on December 31 of the immediately preceding calendar year. Because of this debt limit, we may be restricted in the amount of debt we are allowed to issue to fund our operations. Under the Purchase Agreement, the amount of our “indebtedness” is determined without giving effect to the January 1, 2010 change in the accounting guidance related to transfers of financial assets and consolidation of VIEs. Therefore, “indebtedness” does not include debt securities of consolidated trusts held by third parties. We also cannot become liable for any subordinated indebtedness without the prior consent of Treasury. See “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS” for information regarding restrictions on the amount of mortgage-related securities that we may own. Our debt cap under the Purchase Agreement was $780.0 billion in 2013 and declined to $663.0 billion on January 1, 2014. As of December 31, 2013, we estimate that our aggregate indebtedness was $511.3 billion, or $268.7 billion below the applicable debt cap. Our aggregate indebtedness is calculated as the par value of other debt. In the tables below, the categories of short-term debt (due within one year) and long-term debt (due after one year) are based on the original contractual maturity of the debt instruments classified as other debt. During 2013, 2012, and 2011, we recognized fair value gains (losses) of $(11) million, $16 million, and $91 million, respectively, on our foreign-currency denominated debt, of which $(31) million, $(7) million, and $40 million, respectively, were gains (losses) related to foreign-currency translation. Other Short-Term Debt As indicated in "Table 8.1 — Other Short-Term Debt", a majority of other short-term debt consisted of Reference Bills® securities and discount notes, paying only principal at maturity. Reference Bills® securities, discount notes, and medium-term notes are unsecured general corporate obligations. Certain medium-term notes that have original maturities of one year or less are classified as other short-term debt for purposes of this presentation. The table below summarizes the balances and effective interest rates for other short-term debt. Table 8.1 — Other Short-Term Debt | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | December 31, 2012 | | Par Value | | Balance, Net(1) | | Weighted Average Effective Rate(2) | | Par Value | | Balance, Net(1) | | Weighted Average Effective Rate(2) | | (dollars in millions) | Other short-term debt: | | | | | | | | | | | | Reference Bills® securities and discount notes | $ | 137,767 |
| | $ | 137,712 |
| | 0.13 | % | | $ | 117,930 |
| | $ | 117,889 |
| | 0.15 | % | Medium-term notes | 4,000 |
| | 4,000 |
| | 0.16 |
| | — |
| | — |
| | — |
| Total other short-term debt | $ | 141,767 |
| | $ | 141,712 |
| | 0.13 |
| | $ | 117,930 |
| | $ | 117,889 |
| | 0.15 |
|
| | (1) | Represents par value, net of associated discounts or premiums. |
| | (2) | Represents the weighted average effective rate that remains constant over the life of the instrument, which includes the amortization of discounts or premiums, and issuance costs. |
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase are effectively collateralized borrowing transactions where we sell securities with an agreement to repurchase such securities. These agreements require the underlying securities to be delivered to the dealers who are the counterparties to the transactions. Federal funds purchased are unsecuritized borrowings from commercial banks that are members of the Federal Reserve System. We had no balances in federal funds purchased and securities sold under agreements to repurchase at either December 31, 2013 or 2012. Other Long-Term Debt The table below summarizes our other long-term debt. Table 8.2 — Other Long-Term Debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | December 31, 2012 | | Contractual Maturity(1) | | Par Value | | Balance, Net(2) | | Weighted Average Effective Rate(3) | | Par Value | | Balance, Net(2) | | Weighted Average Effective Rate(3) | | (dollars in millions) | Other long-term debt: | | | | | | | | | | | | | | Other senior debt:(4) | | | | | | | | | | | | | | Fixed-rate: | | | | | | | | | | | | | | Medium-term notes — callable(5) | 2014 - 2037 | | $ | 101,190 |
| | $ | 101,236 |
| | 1.51 | % | | $ | 94,655 |
| | $ | 94,842 |
| | 1.62 | % | Medium-term notes — non-callable | 2014 - 2028 | | 37,878 |
| | 38,107 |
| | 0.99 |
| | 42,623 |
| | 42,877 |
| | 1.08 |
| U.S. dollar Reference Notes securities — non-callable | 2014 - 2032 | | 190,371 |
| | 190,406 |
| | 2.71 |
| | 225,857 |
| | 225,885 |
| | 2.82 |
| €Reference Notes securities — non-callable | 2014 | | 528 |
| | 529 |
| | 4.38 |
| | 1,167 |
| | 1,187 |
| | 4.58 |
| Variable-rate: | | | | | | | | | | | | | | Medium-term notes — callable | 2014 - 2028 | | 6,001 |
| | 6,001 |
| | 1.66 |
| | 6,953 |
| | 6,953 |
| | 2.57 |
| Medium-term notes — non-callable | 2014 - 2026 | | 18,533 |
| | 18,533 |
| | 0.22 |
| | 46,194 |
| | 46,197 |
| | 0.27 |
| STACR | 2023 | | 1,107 |
| | 1,155 |
| | 4.29 |
| | — |
| | — |
| | — |
| Zero-coupon: | | | | | | | | | | | | | | Medium-term notes — callable | 2037 - 2040 | | 1,200 |
| | 311 |
| | 5.82 |
| | 1,300 |
| | 324 |
| | 5.71 |
| Medium-term notes — non-callable | 2014 - 2039 | | 12,217 |
| | 8,334 |
| | 3.08 |
| | 15,240 |
| | 10,923 |
| | 4.03 |
| Hedging-related basis adjustments | | | N/A |
| | 41 |
| | | | N/A |
| | 57 |
| | | Total other senior debt | | | 369,025 |
| | 364,653 |
| | | | 433,989 |
| | 429,245 |
| | | Other subordinated debt: | | | | | | | | | | | | | | Fixed-rate | 2016 - 2018 | | 221 |
| | 218 |
| | 6.60 |
| | 221 |
| | 218 |
| | 6.59 |
| Zero-coupon | 2019 | | 332 |
| | 184 |
| | 10.51 |
| | 332 |
| | 166 |
| | 10.51 |
| Total other subordinated debt | | | 553 |
| | 402 |
| |
|
| | 553 |
| | 384 |
| |
|
| Total other long-term debt | | | $ | 369,578 |
| | $ | 365,055 |
| | 2.08 | % | | $ | 434,542 |
| | $ | 429,629 |
| | 2.15 | % |
| | (1) | Represents contractual maturities at December 31, 2013. |
| | (2) | Represents par value of long-term debt securities and subordinated borrowings, net of associated discounts or premiums and hedge-related basis adjustments, with $2.6 billion and $2.2 billion, respectively, of other long-term debt that represents the fair value of debt securities with the fair value option elected at December 31, 2013 and 2012. |
| | (3) | Represents the weighted average effective rate that remains constant over the life of the instrument, which includes the amortization of discounts or premiums, issuance costs, and hedging-related basis adjustments. |
| | (4) | For debt denominated in a currency other than the U.S. dollar, the outstanding balance is based on the exchange rate at December 31, 2013 and 2012, respectively. |
| | (5) | Includes callable FreddieNotes® securities of $0.8 billion and $1.2 billion at December 31, 2013 and 2012, respectively. |
A portion of our other long-term debt is callable. Callable debt gives us the option to redeem the debt security at par on one or more specified call dates or at any time on or after a specified call date. Debt Securities of Consolidated Trusts Held by Third Parties Debt securities of consolidated trusts held by third parties represents our liability to third parties that hold beneficial interests in our consolidated securitization trusts (i.e., single-family PC trusts and certain single-family and multifamily Other Guarantee Transactions). The table below summarizes the debt securities of consolidated trusts held by third parties based on underlying mortgage product type. Table 8.3 — Debt Securities of Consolidated Trusts Held by Third Parties | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2013 | | December 31, 2012 | | Contractual Maturity(1) | | UPB | | Balance, Net(2) | | Weighted Average Coupon(1) | | Contractual Maturity(1) | | UPB | | Balance, Net(2) | | Weighted Average Coupon(1) | | (dollars in millions) | | (dollars in millions) | Single-family:(3) | | | | | | | | | | | | | | | | 30-year or more, fixed-rate | 2014 - 2052 | | $ | 969,270 |
| | $ | 993,683 |
| | 4.14 | % | | 2013 - 2048 | | $ | 960,176 |
| | $ | 982,718 |
| | 4.53 | % | 20-year fixed-rate | 2014 - 2034 | | 75,910 |
| | 78,252 |
| | 3.81 |
| | 2013 - 2033 | | 73,902 |
| | 76,079 |
| | 4.09 |
| 15-year fixed-rate | 2014 - 2029 | | 270,513 |
| | 277,018 |
| | 3.23 |
| | 2013 - 2028 | | 257,083 |
| | 263,244 |
| | 3.59 |
| Adjustable-rate | 2014 - 2047 | | 60,683 |
| | 61,830 |
| | 2.64 |
| | 2013 - 2047 | | 62,424 |
| | 63,649 |
| | 2.88 |
| Interest-only(4) | 2026 - 2041 | | 21,352 |
| | 21,390 |
| | 3.70 |
| | 2026 - 2041 | | 31,588 |
| | 31,642 |
| | 4.37 |
| FHA/VA | 2014 - 2041 | | 1,284 |
| | 1,303 |
| | 5.67 |
| | 2013 - 2041 | | 1,638 |
| | 1,663 |
| | 5.67 |
| Total single-family | | | 1,399,012 |
| | 1,433,476 |
| | | | | | 1,386,811 |
| | 1,418,995 |
| | | Multifamily(5) | 2018 - 2019 | | 444 |
| | 508 |
| | 4.96 |
| | 2018 - 2019 | | 448 |
| | 529 |
| | 4.96 |
| Total debt securities of consolidated trusts held by third parties(6) | | | $ | 1,399,456 |
| | $ | 1,433,984 |
| | | | | | $ | 1,387,259 |
| | $ | 1,419,524 |
| | |
| | (1) | Based on the contractual maturity and interest rate of debt securities of our consolidated trusts held by third parties. |
| | (2) | Represents par value, net of associated discounts, premiums, and other basis adjustments. |
| | (3) | Debt securities of consolidated trusts held by third parties are prepayable as the loans that collateralize the debt may prepay without penalty at any time. |
| | (4) | Includes interest-only securities and interest-only mortgage loans that allow the borrowers to pay only interest for a fixed period of time before the loans begin to amortize. |
| | (5) | Balance, Net includes interest-only securities recorded at fair value. |
| | (6) | The effective rate for debt securities of consolidated trusts held by third parties was 3.39% and 3.49% as of December 31, 2013 and 2012, respectively. |
The table below summarizes the contractual maturities of other long-term debt securities and debt securities of consolidated trusts held by third parties at December 31, 2013. Table 8.4 — Contractual Maturity of Other Long-Term Debt and Debt Securities of Consolidated Trusts Held by Third Parties | | | | | | | Annual Maturities | Par Value(1)(2) | | (in millions) | Other long-term debt: | | 2014 | $ | 78,115 |
| 2015 | 70,303 |
| 2016 | 63,564 |
| 2017 | 51,908 |
| 2018 | 33,418 |
| Thereafter | 72,270 |
| Debt securities of consolidated trusts held by third parties(3) | 1,399,456 |
| Total | 1,769,034 |
| Net discounts, premiums, hedge-related and other basis adjustments(4) | 30,005 |
| Total debt securities of consolidated trusts held by third parties and other long-term debt | $ | 1,799,039 |
|
| | (1) | Represents par value of long-term debt securities and subordinated borrowings and UPB of debt securities of our consolidated trusts held by third parties. |
| | (2) | For other debt denominated in a currency other than the U.S. dollar, the par value is based on the exchange rate at December 31, 2013. |
| | (3) | Contractual maturities of debt securities of consolidated trusts held by third parties may not represent expected maturity as they are prepayable at any time without penalty. |
| | (4) | Other basis adjustments primarily represent changes in fair value attributable to instrument-specific credit risk and interest-rate risk related to other foreign-currency denominated debt. |
Line of Credit At both December 31, 2013 and 2012, we had one secured, uncommitted intraday line of credit with a third party totaling $10 billion. We use this line of credit regularly to provide us with additional liquidity to fund our intraday payment activities through the Fedwire system in connection with the Federal Reserve’s payments system risk policy, which restricts or eliminates daylight overdrafts by the GSEs. No amounts were drawn on this line of credit at December 31, 2013 and 2012. We expect to continue to use the current facility to satisfy our intraday financing needs; however, as the line is uncommitted, we may not be able to draw on it if and when needed. Subordinated Debt Interest and Principal Payments The terms of certain of our subordinated debt securities provide for us to defer payments of interest in the event we fail to maintain specified capital levels. However, in a September 23, 2008 statement concerning the conservatorship, the Director of FHFA stated that we would continue to make interest and principal payments on our subordinated debt, even if we fail to maintain required capital levels. |
