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FEDERAL HOME LOAN MORTGAGE CORPORATION-Continued
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.
Revenue and Expenses
[In thousands of dollars)
Program by activities:
tificates (total obligations) (object class 33.0)......
(mortgage loan repayments).
1985 actual 1986 actual
1,734,000 1,983,000 - 1,390,000 - 1,561,000
- 23,985,000 -26,388,000
Relation of obligations to outlays:
Obligations incurred, net (sale of PCs).
Cumulative balance of direct loans outstand
91,989,000 146,871,000 202,136.00
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
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:
-- 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
-4,392 Unobligated balance available, end of year.
- 3,303 -6,551 PCs" and "Amounts passed through to PC holders," respectively.
Relation of obligations to outlays:
Obligations incurred, net
10,474 12,537 9,546 Obligated balance, end of year.
- 9,546 - 8,792 Assets: Underlying mortgages 91,989,000 146,871,000 202,136,000 249,281,000
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
I-Z1, II-41, III-5
more specific titles.
II-52, II-70, III-5
..I-D9, I-D13, II-7
I-E10, I-E11, I-E69
Budget authority, requests for rescission of...
..I-G7, I-G16 Budget authority for 1987, statement of amendments to and
I-G8 revisions in ..
Budget schedules, explanation.
Budget statements, business-type, explanation.
Budgets not subject to review
Building Sciences, National Institute of..
Building Service, Public....
Buildings, construction of, see Construction.
Buildings, grounds, and sites:
Environmental Protection Agency.
Federal Prison System .......
General Services Administration
Judiciary, The .....
Library of Congress..
Residence of the Vice President.
I-F15 Smithsonian Institution..
I-J1 State, Department of ............
..1-07, II-29 Supreme Court .....
I-R57 Business loan and investment fund
I-R26, II-36 Business trends, economic analysis of ...
.I-R32 Business-type budget statements, explanation
.I-R36 Buying power maintenance, State Department.
I-F20, I-R36 Cabinet Affairs, Office of ........
California grant lands..
Canada-United States, international commissions.
Canal Zone biological area fund ..
Cancer Institute, National.
Canteen service, Veterans Administration.
Capital subscriptions, limitation on callable....I-D7, 1-18, 1-D9, 1-D:
Capitol, Architect of the ........
Capitol buildings and grounds
Capitol Power Plant.
Cemeterial expenses, Army
Cemeterial operations, Veterans Administration
Cemetery System, National
Census, Bureau of the.
Centers for Disease Control.
Central America, promotion of security and stability
Central America, special assistance for ..
Central American democracies, assistance for the.
Central Intelligence Agency..
Certification services, Environmental Protection Agency
Certification services, Food and Drug Administration.
Check forgery insurance fund...
I-R38, I-R46 Chemical agents and munitions destruction, defense.
I-J18 Child Health and Human Development, National Institute
I-N17 Child support, payment to States from receipts for.
Child support enforcement program.
I-R4 Children, aid to families with dependent
I-R40 Children, crimes against.
1-26, II-41 Children, nutrition programs.
III-3 Christopher Columbus Quincentenary Jubilee Commission
.I-2 Cities program, model...
1-2 Citizen participation program.
1-C6 Civil defense ......
..I-2 Civil Rights, Commission on
Civil Rights, Office for ......
III-5 Civil Service retirement and disability fund