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FEDERAL HOME LOAN MORTGAGE CORPORATION-Continued

PORTFOLIO PROGRAMS—Continued

Unfinanced authority..
Invested capital..

-3,130,000

2,570,000

-5,982,000 -7,050,000

5,761,000 4,670,000

- 7,150,000

4,984.000

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the sale of multifamily mortgage pass-through securities. This was also the first time a mortgage passthrough security was sold exclusively to international investors.

Freddie Mac continued to pioneer the international markets throughout 1985 and into 1986 by targeting the CMOs to the special investment needs of foreign investors. With both the multifamily PC and the CMOS, Freddie Mac has successfully tapped $734 million in additional funds internationally in order to provide affordable mortgage credit to American homebuyers.

In 1986, Freddie Mac responded to another mortgage finance industry need when it introduced a mortgage pass-through security backed by adjustable rate mortgage ("ARMs"). The ARM security, along with Freddie Mac's ARMs purchase programs, provides lenders with greater flexibility in originating and selling ARMs into the secondary market.

The forecast data contained in this material have been developed on the basis of certain economic assumptions that are reviewed and revised periodically. The estimates are subject to forecast error and will normally differ from actual data when these become available. These estimates should not be construed as an official forecast of the corporation's future position.

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Revenue and Expenses

[In thousands of dollars)

70,025,000

Program by activities:
Capital investment: Issue (sales) of participation cer-

tificates (total obligations) (object class 33.0)......
Financing:
Offsetting collections from: Non-Federal sources

(mortgage loan repayments).

81,653,000

1985 actual 1986 actual

1,734,000 1,983,000 - 1,390,000 - 1,561,000

- 23,985,000 -26,388,000

Gross revenue.
Gross expenses

- 22,880,000

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Relation of obligations to outlays:

Obligations incurred, net (sale of PCs).

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Cumulative balance of direct loans outstand

ing:
1210 Outstanding, start of year.

91,989,000 146,871,000 202,136.00
4,519,000 1231 Disbursements: Direct loan disbursements (sale
of PCs).

78,867,000 81,653,000 10.025.000 1251 Repayments: Repayments and prepayments....... -23,985,000 -26,388,000 -22,860.000 700,000 1290 Outstanding, end of year.

146,871,000 202,136.000 249,281,000 700,000 13,173,000 5,034,000

According to accounting practices for private corporations, the mortgages in the pools of loans supporting

PCs are considered to be owned by the holders of these 2,883,000 547,000 securities. Consequently, on the books of Freddie Mac,

these mortgages are not shown as assets. However, the 26,856,000

budget philosophy of the United States Government includes these mortgages and mortgage pass-through se

curities as assets and liabilities, respectively, of Freddie 3,569,000 Mac. For the purposes of this document, therefore, they

35,000 978,000 228,000

1,301,000

270,000

2,424,000

400,000

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- 121

-120

176

4,392

4,216

- 1,089

3,248

are presented as assets and liabilities in the accompany

Changes in selected resources

-81 -6 ing schedules. On the Status of Direct Loans schedule Total obligations.

84.116 99,812 87,345 for mortgage pass-through securities, the items labeled Financing: "New loans" and "Recoveries: Repayments and prepay,

Offsetting collections from:
Federal funds.

-- 121 ments" are budgetary terms. However, from Freddie Non-Federal sources

- 79,779 -100,780 - 83,977 Mac's perspective, these amounts represent "Sales of Unobligated balance available, start of year

3,303

-4,392 Unobligated balance available, end of year.

- 3,303 -6,551 PCs" and "Amounts passed through to PC holders," respectively.

Budget authority
Financial Condition in thousands of dollars)

Relation of obligations to outlays:

Obligations incurred, net
1985 actual 1986 actuat 1987 est 1988 est.
Obligated balance, start of year

10,474 12,537 9,546 Obligated balance, end of year.

- 12,537

- 9,546 - 8,792 Assets: Underlying mortgages 91,989,000 146,871,000 202,136,000 249,281,000

Outlays....

2,153 1,902 4,002 Liabilities: PC's and GMC's outstanding.. 91,989,000 146,871,000 202,136,000 249,281,000

The Federal Reserve System operates under the proAdministration-proposed legislation.—The Adminis- visions of the Federal Reserve Act of 1913, as amended, tration believes that because of Freddie Mac's govern- and other acts of Congress. ment-sponsored status, its securities enjoy an interest Program.-To carry out its responsibilities under the rate advantage in the credit markets. This gives Fred- act, the Board determines general monetary, credit, and die Mac a significant competitive advantage relative to operating policies for the System as a whole and formuprivate mortgage conduits. In 1982, the President's lates the rules and regulations necessary to carry out Housing Commission concluded that Freddie Mac and the purposes of the Federal Reserve Act. The Board's other Federal and government-sponsored housing agen- principal duties consist of exerting an influence over cies impeded the growth of private mortgage conduits credit conditions and supervising the Federal Reserve and recommended that the Administration seek to pri- banks and member banks. vatize them. In 1983, the President's Private Sector Financing.-Under the provisions of section 10 of the Survey on Cost Control (Grace Commission) reached the Federal Reserve Act, the Board of Governors levies same conclusion and made a similar recommendation. upon the Federal Reserve banks, in proportion to their The Administration supports the privatization of Fred- capital and surplus, an assessment sufficient to pay its die Mac and is studying ways of transitioning Freddie estimated expenses. The Board, under the act, deterMac to completely private status. Privatization of Fred- mines and prescribes the manner in which its obligadie Mac (and Fannie Mae) would eliminate the major tions are incurred and its expenses paid. Funds derived hurdle private mortgage conduits face in playing a sig- from assessments are deposited in the Federal Reserve nificant role in the nation's housing credit markets. Bank of Richmond, and the Act provides that such

However, while Freddie Mac continues to enjoy its funds “shall not be construed to be Government funds Federal agency status, private mortgage conduits will or appropriated moneys.” No Government appropriacontinue to have difficulty competing with it. In order tion is required to support operations of the Board. to mitigate the effects of this unfair competition, the The information presented pertains to Board operAdministration is proposing legislation to prohibit Fred- ations only. This information has been prepared in acdie Mac (and Fannie Mae) from purchasing mortgages in cordance with OMB guidelines; accordingly it may the top quartile of the home price distribution in any differ from other financial material published by the housing market (but not to exceed $153,100—an amount Board of Governors. Expenditures made on behalf of that would not be indexed). This will limit Freddie the Federal Reserve banks for production, issuance, reMac's continued encroachment on the market served by tirement, and shipment of Federal Reserve notes are private mortgage conduits for as long as Freddie Mac not included, since they are reimbursed in full by the maintains its association with the Federal government. Federal Reserve banks.

Revenue and Expense (in thousands of dollars) BOARD OF GOVERNORS OF THE FEDERAL

RESERVE SYSTEM

Calendar year

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INDEX

Page

A
Accounting Office, General.

I-A19
Accounting Principles Board, Railroad

I-A24
Acid rain, causes and effects.

.I-T2
ACTION.

I-Z1, II-41, III-5
Administration, Office of..

1-C6
Administrative Conference of the United States.

I-Z1
Administrative Office of the United States Courts.

.I-B7, 11-5
Adult Education, Office of Vocational and..

I-110, II-59
Advisory commissions, committees, and councils, see under

more specific titles.
Aeronautical research and technology

I-V2, I-V4
Aeronautics and Space Administration, National ....I-V1, II-39, II-46,

II-52, II-70, III-5
Africa, special facility for sub-Saharan

I-D7
African Development Bank .....

1-D9, II-6
African Development Foundation

I-D24
African Development Fund ....

..I-D9, I-D13, II-7
Afro-American History and Culture Commission, National ........... I-254
Aged:
Insurance

I-L1
Mass transportation facilities.

I-R33
Nutrition programs ......

1-E84
Aging, National Institute on

I-K17, 11-23
Agricultural attaches..

I-E17
Agricultural commodities:
Disaster reserve .......

I-E36
Markets, income, and supply

I-E77
Perishable.

I-E77
Sales for foreign currencies.

I-E21
Set-aside program,

.I-E34
Agricultural conservation program

I-E24
Agricultural Cooperative Service

I-E89
Agricultural credit insurance fund

I-E52
Agricultural crops, insurance...

I-E28
Agricultural Library, National.

I-E13
Agricultural loans..

I-E35
Agricultural Marketing Service..

I-E75
Agricultural Outlook Board, World

I-E16
Agricultural Research Service.

I-E7, 11-52
Agricultural Service, Foreign

I-E17, II-7
Agricultural Stabilization and Conservation Service ....I-E22, 11-7,

II-52
Agricultural Trade Development and Assistance Act (Public
Law 83-480) programs...

I-E20
Agriculture, census of.

1-F8
Agriculture, Department of .....-6, 1-E1, II-6, 11-44, II-48, 11-51, III-3,

III-7
Agriculture statistics....

1-F6
AIDS.........

I-K9
Air Carriers, payments to

I-R60
Air Force:
Active forces.

I-63
Construction

I-G42
Family housing

1-650
Industrial fund

1-G58
Management fund

..I-G59
National Guard .....

..I-G7, 1-G17
Operation and maintenance

1-611
Procurement.

I-G31
Research, development, test, and evaluation

1-637
Reserve forces.

I-G6, 1-614
Stock fund

1-655
Trust revolving funds

I-G61
Air management.

I-NI
Air navigation

I-R36
Air quality and pollution control.

.I-T3
Air Quality Standards, National Ambient (NAAQS).

1-T3
Air and Space Museum, National

1-Z93
Air traffic control

..I-R:27, I-R36
Aircraft, Coast Guard.

...I-R 10

Page
Aircraft procurement:
Air Force..

1-G29
Army

I-G21
Navy.

.I-G25, 1-G41
Aircraft purchase loan guarantee program

.I-R31, 11-36
Aircraft safety..

I-R28
Airmen's Home, Soldiers' and.

I-H13
Airport access demonstration project.

I-R10
Airport access highway demonstration project.

I-R10
Airport and airway trust fund

I-R32
Airport facilities and equipment..

.I-R34
Airport grants-in-aid ......

I-R33, 11-36
Airport-highway demonstration project.

I-R3
Airports, customs service at small.

I-S16
Airports, Metropolitan Washington

I-R30
Airspace System, National.

.I-R28
Alaska Native claims.

I-N1
Alaska Native escrow account

I-N46
Alaska natural gas pipeline ....

I-J8
Alaska Power Administration

.I-J17
Alaska Railroad.

I-R25
Alcohol, Drug Abuse, and Mental Health Administration ....I-K22,

II-23
Alcohol, Tobacco and Firearms, Bureau of..

I-S13, 11-69
Alcohol Fuels Commission, National

.I-296
Alcohol Safety incentive grants.

I-R15
All Volunteer Force ...

I-Y5
Allergy and Infectious Diseases, National Institute of. I-K13, II-22
American Battle Monuments Commission

.I-23, 11-41
American Folklife Center.

I-A10
American Institute in Taiwan, payment to

I-Q5
American Printing House for the Blind.

.1-19
American Revolution Bicentennial.

1-B9
American sections, international commissions.

I-Q11
Ammunition procurement, Army.

.I-G23
Anadromous fisheries

1-N28
Animal damage control

I-E70
Animal disease control

I-E10, I-E11, I-E69
Animal and Plant Health Inspection Service

I-E69, 1-E71
Animal research

I-E10
Annuities and annuity funds:
Federal employees ..

I-W1, I-W2
Judicial survivors.

I-A21, 1-B9
Secret Service.

I-S28
Antarctic program activities

1-266
Anti-terrorism assistance, international

I-Q13
Antitrust law enforcement..

1-06
Appalachian Regional Commission

1-Z42, II-71
Appeals Courts ....

1-B3, II-5
Appeals for the Federal Circuit, United States Court of..

I-B2
Appropriation, Offices of Inspectors General

III-7
Appropriation language, explanation .....

1-2
Appropriations for 1988, advance...

III-3
Appropriations for 1988, advance and forward funding.

III-3
Architect of the Capitol

I-A4
Architectural and Transportation Barriers Compliance Board. .I-ZA
Archives and Records Administration, National

1-252
Arlington National Cemetery

I-HI
Arms Control and Disarmament Agency ..

1-25
Army:
Active forces.

..I-G1
Ammunition, conventional

.1-G59
Cemeterial expenses...

I-HI
Civil functions.

I-HI
Commissary stores, surcharge collections, sales of .

I-660
Construction .....

.I-641
Corps of Engineers

I-HI
Family housing

.1-648
Industrial fund..

1-656
Management fund

1-G59

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Page
Army-Continued

Budget authority, requests for rescission of...
National Guard.

..I-G7, I-G16 Budget authority for 1987, statement of amendments to and
Operation and maintenance

I-G8 revisions in ..
Procurement..
..I-G22, I-G41 Budget Committee, House of Representatives.

.HA
Research, development, test, and evaluation

I-G35
Budget Office, Cong

nal.....
Reserve forces.
I-G4, I-G13

11

Budget schedules, explanation.
Stock fund..

Budget statements, business-type, explanation.
Trust funds.
.I-660

H

Budgets not subject to review
Art, National Gallery of..

.I-Z93
Building fund, Federal.

H-C.
Arthritis and Musculoskeletal and Skin Diseases, National

Building Sciences, National Institute of..

„I-2.
Institute of ..........

I-K17, 11-23

Building Service, Public....
Arts, Commission of Fine

1-28

Buildings, construction of, see Construction.
Arts, John F. Kennedy Center for the Performing

.I-N36

Buildings, grounds, and sites:
Arts, National Endowment for the .....

I-259
Agriculture, Department of ......

1-ES
Arts and cultural affairs, National Capital Region ....
I-N37

-HA

Capitol ....
Arts and the Humanities, National Foundation on the .I-259, II-71

Environmental Protection Agency.
Asbestos trust fund...

.I-T8
Executive Residence at the White House

IC
Asia Foundation, payment to.

I-Q14

Federal Prison System .......
Asian Development Bank.

.I-D9
Asian Development Fund

..I-D9
Food and Drug Administration

H
Assessment, Office of Technology.

.I-A24

General Services Administration
Assessment Commission, Prospective Payment.

.I-A23

Judiciary, The .....
Assessment funds, Treasury Department..

.I-S28

Library of Congress..
Atmospheric Administration, National Oceanic and ....I-F14, II-12, National Institutes of Health.

II-56

Residence of the Vice President.
Atmospheric programs...

I-F15 Smithsonian Institution..
Atomic energy defense activities ..

I-J1 State, Department of ............
Attorneys, United States ......

..1-07, II-29 Supreme Court .....
Automotive research, cooperative.

I-R57 Business loan and investment fund
Aviation Administration, Federal

I-R26, II-36 Business trends, economic analysis of ...
Aviation insurance fund.

.I-R32 Business-type budget statements, explanation
Aviation medicine.

.I-R36 Buying power maintenance, State Department.
Aviation standards program, Federal Aviation Administra-
tion ..........

I-R28

с
Aviation weather.

I-F20, I-R36 Cabinet Affairs, Office of ........

Cadastral survey.

California grant lands..
B

Canada-United States, international commissions.
Balance of payments data ......

1-F9

Canal Zone biological area fund ..
Baltimore Washington Parkway

I-R6

Cancer Institute, National.
Bankruptcy Courts......

.I-B6

Canteen service, Veterans Administration.
Banks:

Capital subscriptions, limitation on callable....I-D7, 1-18, 1-D9, 1-D:
For cooperatives .....

IV-6
Federal financing..

.1-5, 1-511

Capitol, Architect of the ........
Federal home loan.

IV-9

Capitol buildings and grounds
Federal intermediate credit

IV-7

Capitol Police...
Federal land .....

IV-8

Capitol Power Plant.
Barry Goldwater Scholarship and Excellence in Education

Cemeterial expenses, Army
Foundation .....

1-26
Bicentennial expenses, The Judiciary.

I-B9

Cemeterial operations, Veterans Administration
Bicentennial of the United States Constitution, Commission

Cemeteries, foreign.
on the .........

I-Z39

Cemetery System, National

Census, Bureau of the.
Bilingual Education and Minority Languages Affairs, Office

Censuses, periodic......
of ..

I-16, II-58
Biomedical ethics

I-A24

Centers for Disease Control.
Birds, migratory

..I-N29

Central America, promotion of security and stability
Black lung disability trust fund

I-P6, I-P13

Central America, special assistance for ..
Blind, American Printing House for the

I-19

Central American democracies, assistance for the.
Blind, books for, Library of Congress ..

I-A13

Central Intelligence Agency..
Blind and Other Severely Handicapped, Committee for Pur-

Certification services, Environmental Protection Agency
chase from the ......

.I-Z9

Certification services, Food and Drug Administration.
Blood Institute, National Heart, Lung, and.

I-K11

Check forgery insurance fund...
Boating safety ..

I-R38, I-R46 Chemical agents and munitions destruction, defense.
Bonneville Power Administration

I-J18 Child Health and Human Development, National Institute
Botanic Garden, United States

1-A21

of .......
Boulder Canyon project..

I-N17 Child support, payment to States from receipts for.
Boundary Treaty projects ..

.I-Q10

Child support enforcement program.
Bridge emergency assistance

I-R4 Children, aid to families with dependent
Bridges, alteration of ...

I-R40 Children, crimes against.
Broadcasting, Board for International

1-26, II-41 Children, nutrition programs.
Broadcasting, Corporation for Public.

III-3 Christopher Columbus Quincentenary Jubilee Commission
Budget, basis for schedules, explanation

.I-2 Cities program, model...
Budget, form of detailed material.

1-2 Citizen participation program.
Budget, Office of Management and

1-C6 Civil defense ......
Budget arrangement, explanation ......

..I-2 Civil Rights, Commission on
Budget authority, amended and supplemental requests relat-

Civil Rights, Office for ......
ing to 1987.

III-5 Civil Service retirement and disability fund

.I-K10, 11-

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I-K15

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1-124. I-

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