Mortgages and Mortgage-Related Securities

Capital preservation over the long term is the guiding principle of our investment strategy in mortgage-related securities.

We emphasize maintaining sufficient liquidity in these investments to finance our portfolio through any market environment while, at the same time, seeking to limit interest rate risk and price volatility. With these objectives in mind, the mortgage-related portfolio is primarily invested in mortgaged-backed securities issued and guaranteed as to interest and principal by Ginnie Mae, a government agency, or by Freddie Mac and Fannie Mae – both AAA-rated by Standard & Poor’s. The agency-backed portfolio is not highly leveraged normally.

The mortgage-backed securities are financed through multiple counterparties and Georgetown Funding, a dedicated A1+/P1-rated commercial paper conduit we established in 2003 to enhance our overall liquidity and diversify funding sources. In addition, we seek protection against short-term interest rate swings through the use of hedging vehicles.