Federally chartered
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8200 Jones Branch Drive
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52-0904874
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(703) 903-2000
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corporation
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McLean, Virginia 22102-3110
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(I.R.S. Employer
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(Registrant’s telephone number,
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(State or other jurisdiction of incorporation or organization)
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(Address of principal executive offices, including zip code)
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Identification No.)
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including area code)
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Large accelerated filer [ X ]
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Accelerated filer [ ]
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Non-accelerated filer (Do not check if a smaller reporting company) [ ]
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Smaller reporting company [ ]
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Table of Contents
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Page
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INTRODUCTION
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ABOUT FREDDIE MAC
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EXECUTIVE SUMMARY
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OUR BUSINESS
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FORWARD-LOOKING STATEMENTS
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SELECTED FINANCIAL DATA
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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KEY ECONOMIC INDICATORS
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CONSOLIDATED RESULTS OF OPERATIONS
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CONSOLIDATED BALANCE SHEETS ANALYSIS
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OUR BUSINESS SEGMENTS
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RISK MANAGEMENT
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SINGLE-FAMILY MORTGAGE CREDIT RISK
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MULTIFAMILY MORTGAGE CREDIT RISK
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MORTGAGE-RELATED SECURITIES CREDIT RISK
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LIQUIDITY AND CAPITAL RESOURCES
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CONSERVATORSHIP AND RELATED MATTERS
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REGULATION AND SUPERVISION
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CONTRACTUAL OBLIGATIONS
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OFF-BALANCE SHEET ARRANGEMENTS
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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RISK FACTORS
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LEGAL PROCEEDINGS
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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CONTROLS AND PROCEDURES
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DIRECTORS, CORPORATE GOVERNANCE, AND EXECUTIVE OFFICERS
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DIRECTORS
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CORPORATE GOVERNANCE
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EXECUTIVE OFFICERS
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EXECUTIVE COMPENSATION
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COMPENSATION DISCUSSION AND ANALYSIS
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COMPENSATION AND RISK
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2015 COMPENSATION INFORMATION FOR NEOs
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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SIGNATURES
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GLOSSARY
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FORM 10-K INDEX
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EXHIBIT INDEX
|
Freddie Mac 2015 Form 10-K
|
|
i
|
Introduction
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|
About Freddie Mac | Executive Summary
|
Freddie Mac 2015 Form 10-K
|
|
1
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Introduction
|
|
About Freddie Mac | Executive Summary
|
(in billions)
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Total
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Total Senior Preferred Stock Outstanding
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$
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72.3
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Less: Initial Liquidation Preference
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$
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1.0
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Treasury Draws
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$
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71.3
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(in billions)
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Total
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|
Dividend Payments as of 12/31/15
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$
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96.5
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Q1 2016 Dividend Obligation
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$
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1.7
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Total Dividend Payments
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$
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98.2
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Freddie Mac 2015 Form 10-K
|
|
2
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Introduction
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|
About Freddie Mac | Executive Summary
|
•
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Lower other income, as we did not have any significant litigation settlements in 2015 related to our investments in non-agency mortgage-related securities. By comparison, we had a number of significant litigation settlements in 2014;
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•
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We recorded fair value losses in 2015 on certain mortgage loans and mortgage-related securities that are measured at fair value due to spread widening, while in 2014 we recorded gains due to spread tightening; partially offset by
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•
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Lower derivative fair value losses in 2015 than in 2014. Longer-term interest rates declined less in 2015 than in 2014, when the yield curve also flattened, leading to lower losses.
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•
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The release of the valuation allowance on our deferred tax asset; and
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•
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Representation and warranty settlements related to our pre-conservatorship single-family loan purchases.
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Freddie Mac 2015 Form 10-K
|
|
3
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Introduction
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About Freddie Mac | Executive Summary
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•
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Interest-Rate Volatility — We hold assets and liabilities that expose us to interest-rate risk. Through our use of derivatives, we manage our exposure to interest-rate risk on an economic basis to a low level as measured by our models. However, the way we account for our financial assets and liabilities (i.e., some are measured at amortized cost, while others are measured at fair value), including derivatives, creates volatility in our earnings when interest rates fluctuate. Based upon the composition of our financial assets and liabilities, including derivatives, at December 31, 2015, we generally recognize fair value losses in earnings when interest rates decline. This volatility generally is not indicative of the underlying economics of our business. This volatility and the declining capital reserve required under the terms of the Purchase Agreement (ultimately reaching zero in 2018) will increase the risk of our having a negative net worth and being required to draw from Treasury. We are exploring ways in which we can limit or manage our exposure to this volatility. For information about the sensitivity of our financial results to interest-rate volatility, see "MD&A - Risk Management - Interest-Rate Risk and Other Market Risks."
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•
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Spread Volatility — Spread volatility (i.e., credit spreads, liquidity spreads, risk premiums, etc.), or OAS, is the risk associated with changes in interest rates in excess of benchmark rates. We hold assets and liabilities that expose us to spread volatility, which may contribute to significant earnings volatility. For financial assets and liabilities measured at fair value, we generally recognize fair value losses when spreads widen. However, we may enter into transactions or take other steps to limit or manage our exposure to spread volatility.
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•
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Non-Recurring Events — From time to time, we have experienced and will likely continue to experience significant earnings volatility from non-recurring events, including events such as settlements with counterparties and changes in certain valuation allowances.
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Freddie Mac 2015 Form 10-K
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|
4
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Introduction
|
|
About Freddie Mac | Our Business
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•
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A Better Freddie Mac; and
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•
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A Better Housing Finance System
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•
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Being a very effective operating organization;
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•
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Being a market leader through customer focus and innovation; and
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•
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Managing risk and economic capital for quality risk-adjusted returns.
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•
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Modernizing and improving the functioning of the mortgage markets;
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•
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Developing greater responsible access to housing finance; and
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•
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Reducing taxpayer exposure to mortgage risks.
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Freddie Mac 2015 Form 10-K
|
|
5
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Introduction
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About Freddie Mac | Our Business
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•
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Provide stability in the secondary market for residential loans;
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•
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Respond appropriately to the private capital market;
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•
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Provide ongoing assistance to the secondary market for residential loans (including activities relating to loans for low- and moderate-income families, involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and
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•
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Promote access to mortgage loan credit throughout the U.S. (including central cities, rural areas, and other underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.
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Freddie Mac 2015 Form 10-K
|
|
6
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Introduction
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|
About Freddie Mac | Our Business
|
Freddie Mac 2015 Form 10-K
|
|
7
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Introduction
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About Freddie Mac | Our Business
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•
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The actions the U.S. government (including FHFA, Treasury, and Congress) may take, or require us to take, including to support the housing markets or to implement FHFA’s Conservatorship Scorecards and other objectives for us;
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•
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The effect of the restrictions on our business due to the conservatorship and the Purchase Agreement, including our dividend obligation on the senior preferred stock;
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•
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Our ability to maintain adequate liquidity to fund our operations;
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•
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Changes in our Charter or in applicable legislative or regulatory requirements (including any legislation affecting the future status of our company);
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•
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Changes in the fiscal and monetary policies of the Federal Reserve, including any changes to its policy of maintaining sizable holdings of mortgage-related securities and any future sales of such securities;
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Freddie Mac 2015 Form 10-K
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8
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Introduction
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About Freddie Mac | Forward-Looking Statements
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•
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The success of our efforts to mitigate our losses on our Legacy single-family book and our investments in non-agency mortgage-related securities;
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•
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The success of our strategy to transfer mortgage credit risk through STACR debt note, ACIS, K Certificate and other credit risk transfer transactions;
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•
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Our ability to maintain the security of our operating systems and infrastructure (e.g., against cyberattacks);
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•
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Changes in economic and market conditions, including changes in employment rates, interest rates, spreads, and home prices;
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•
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Changes in the U.S. residential mortgage market, including changes in the supply and type of loan products (e.g., refinance versus purchase, and fixed-rate versus ARM);
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•
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Our ability to effectively execute our business strategies, implement new initiatives, and improve efficiency;
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•
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The adequacy of our risk management framework;
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Our ability to manage mortgage credit risks, including the effect of changes in underwriting and servicing practices;
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•
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Our ability to limit or manage our exposure to interest-rate volatility and spread volatility, including the availability of derivative financial instruments needed for interest-rate risk management purposes;
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•
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Changes or errors in the methodologies, models, assumptions, and estimates we use to prepare our financial statements, make business decisions, and manage risks;
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•
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Changes in investor demand for our debt or mortgage-related securities (e.g., single-family PCs and multifamily K Certificates);
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•
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Changes in the practices of loan originators, investors and other participants in the secondary mortgage market; and
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•
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Other factors and assumptions described in this Form 10-K, including in the “MD&A” section.
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Freddie Mac 2015 Form 10-K
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|
9
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Selected Financial Data
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At or For the Year Ended December 31,
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||||||||||||||
(dollars in millions, except share-related amounts)
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2015
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2014
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2013
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2012
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2011
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||||||||||
Statements of Comprehensive Income Data
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||||||||||
Net interest income
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$
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14,946
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$
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14,263
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$
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16,468
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$
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17,611
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$
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18,397
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(Provision) benefit for credit losses
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2,665
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(58
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)
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2,465
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(1,890
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)
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(10,702
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)
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|||||
Non-interest income (loss)
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(3,599
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)
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(113
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)
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8,519
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(4,083
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)
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(10,878
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)
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|||||
Non-interest expense
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(4,738
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)
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(3,090
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)
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(2,089
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)
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(2,193
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)
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(2,483
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)
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|||||
Income tax (expense) benefit
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(2,898
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)
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(3,312
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)
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23,305
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|
1,537
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|
400
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|
|||||
Net income (loss)
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6,376
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|
7,690
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|
48,668
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10,982
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(5,266
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)
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|||||
Comprehensive income (loss)
|
5,799
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|
9,426
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|
51,600
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|
16,039
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|
(1,230
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)
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|||||
Net loss attributable to common stockholders
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(23
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)
|
(2,336
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)
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(3,531
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)
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(2,074
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)
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(11,764
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)
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|||||
Net loss per common share - basic and diluted
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(0.01
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)
|
(0.72
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)
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(1.09
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)
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(0.64
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)
|
(3.63
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)
|
|||||
Cash dividends per common share
|
—
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|
—
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|
—
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|
—
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|
—
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|
|||||
Weighted average common shares outstanding - basic and diluted (in millions)
|
3,235
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|
3,236
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|
3,238
|
|
3,240
|
|
3,245
|
|
|||||
|
|
|
|
|
|
||||||||||
Balance Sheets Data
|
|
|
|
|
|
||||||||||
Loans held-for-investment, at amortized cost by consolidated trusts (net of allowances for loan losses)
|
$
|
1,625,184
|
|
$
|
1,558,094
|
|
$
|
1,529,905
|
|
$
|
1,495,932
|
|
$
|
1,564,131
|
|
Total assets
|
1,986,050
|
|
1,945,539
|
|
1,966,061
|
|
1,989,856
|
|
2,147,216
|
|
|||||
Debt securities of consolidated trusts held by third parties
|
1,556,121
|
|
1,479,473
|
|
1,433,984
|
|
1,419,524
|
|
1,471,437
|
|
|||||
Other Debt
|
414,306
|
|
450,069
|
|
506,767
|
|
547,518
|
|
660,546
|
|
|||||
All other liabilities
|
12,683
|
|
13,346
|
|
12,475
|
|
13,987
|
|
15,379
|
|
|||||
Total stockholders' equity (deficit)
|
2,940
|
|
2,651
|
|
12,835
|
|
8,827
|
|
(146
|
)
|
|||||
|
|
|
|
|
|
||||||||||
Portfolio Balances - UPB
|
|
|
|
|
|
||||||||||
Mortgage-related investments portfolio
|
$
|
346,911
|
|
$
|
408,414
|
|
$
|
461,024
|
|
$
|
557,544
|
|
$
|
653,313
|
|
Total Freddie Mac mortgage-related securities
|
1,729,493
|
|
1,637,086
|
|
1,592,511
|
|
1,562,040
|
|
1,624,684
|
|
|||||
Total mortgage portfolio
|
1,941,587
|
|
1,910,106
|
|
1,914,661
|
|
1,956,276
|
|
2,075,394
|
|
|||||
TDRs on accrual status
|
82,347
|
|
82,908
|
|
78,708
|
|
66,590
|
|
45,254
|
|
|||||
Non-accrual loans
|
22,649
|
|
33,130
|
|
43,457
|
|
63,005
|
|
76,575
|
|
|||||
|
|
|
|
|
|
||||||||||
Ratios
|
|
|
|
|
|
||||||||||
Return on average assets
|
0.3
|
%
|
0.4
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%
|
2.5
|
%
|
0.5
|
%
|
(0.2
|
)%
|
|||||
Allowance for loan losses as percentage of loans, held-for-investment
|
0.9
|
|
1.3
|
|
1.4
|
|
1.8
|
|
2.2
|
|
|||||
Equity to assets
|
0.1
|
|
0.4
|
|
0.5
|
|
0.2
|
|
—
|
|
Freddie Mac 2015 Form 10-K
|
|
10
|
Management's Discussion and Analysis
|
|
Key Economic Indicators | Single-family Home Prices
|
•
|
Changes in home prices affect the amount of equity that borrowers have in their homes. Borrowers with less equity typically have higher delinquency rates.
|
•
|
As home prices decline, the severity of losses we incur on defaulted loans that we hold or guarantee increases because the amount we can recover from the property securing the loan decreases.
|
•
|
Declines in home prices typically result in increases in expected credit losses on the mortgage-related securities we hold.
|
•
|
Declines in home prices may result in declines in the value of our non-agency mortgage-related securities as lower home values may increase default rates and affect the prepayment activities of the borrowers.
|
•
|
Home prices continued to appreciate during 2015, increasing
6.2%
, compared to an increase of 5.2% during 2014, based on our own non-seasonally adjusted price index of single-family homes funded by loans owned or guaranteed by us or Fannie Mae.
|
•
|
National home prices at the end of 2015 remained approximately
6%
below their June 2006 peak levels, based on our index.
|
•
|
We expect near-term home price growth rates to moderate gradually and return to growth rates consistent with long-term historical averages of approximately 2% to 5% per year.
|
Freddie Mac 2015 Form 10-K
|
|
11
|
Management's Discussion and Analysis
|
|
Key Economic Indicators | Interest Rates
|
•
|
The 30-year Primary Mortgage Market Survey ("PMMS") interest rate represents the national average of mortgage rates on new 30-year fixed-rate mortgages. Declines in the PMMS rate typically result in increases in refinancing activity and originations.
|
•
|
Changes in interest rates affect the fair value of certain of our assets and liabilities, including derivatives, on our consolidated balance sheets measured at fair value on a recurring basis.
|
•
|
For additional information on the effect of LIBOR swap rates on our financial results, see "Our Business Segments - Investments - Market Conditions."
|
•
|
Mortgage interest rates for 30-year fixed-rate loans are typically closely related to other long-term interest rates such as the 10-year Treasury rate and the 10-year LIBOR rate. When these rates decline, mortgage interest rates for 30-year fixed-rate loans usually also decline.
|
•
|
Mortgage interest rates, as indicated by the 30-year PMMS rate, increased at the end of 2015. However, the average 30-year PMMS rate was 3.85% in 2015 compared to 4.17% in 2014, resulting in higher refinancing activity and higher overall origination activity during 2015.
|
•
|
Longer-term interest rates, as indicated by the 10-year LIBOR rate and the 10-year Treasury rate, declined sharply in 2014 but moderated in 2015.
|
•
|
The Federal Reserve decided in December 2015 to begin raising short-term interest rates but committed to a measured pace of monetary tightening. However, the magnitude and timing of the impact of the Federal Reserve’s action on mortgage and other longer-term rates is uncertain.
|
Freddie Mac 2015 Form 10-K
|
|
12
|
Management's Discussion and Analysis
|
|
Key Economic Indicators | Unemployment Rate
|
•
|
Changes in the unemployment rate can affect several market factors, including the demand for both single-family and multifamily housing and the level of loan delinquencies.
|
•
|
Increases in the unemployment rate typically result in higher levels of delinquencies, which often result in an increase in expected credit losses on our total mortgage portfolio.
|
•
|
Decreases in the unemployment rate typically result in lower levels of delinquencies, which often result in a decrease in expected credit losses on our total mortgage portfolio.
|
•
|
Monthly net new job growth decreased during 2015, but remained above 200,000 per month on average.
|
•
|
The unemployment rate continued to decline from the peak of
10.0%
reached in October 2009.
|
•
|
We expect the unemployment rate to decline slightly throughout 2016 and 2017.
|
Freddie Mac 2015 Form 10-K
|
|
13
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Comparison
|
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net interest income
|
|
$
|
14,946
|
|
|
$
|
14,263
|
|
|
$
|
16,468
|
|
|
$
|
683
|
|
|
5
|
%
|
|
$
|
(2,205
|
)
|
|
(13
|
)%
|
Benefit (provision) for credit losses
|
|
2,665
|
|
|
(58
|
)
|
|
2,465
|
|
|
2,723
|
|
|
(4,695
|
)%
|
|
(2,523
|
)
|
|
(102
|
)%
|
|||||
Net interest income after benefit (provision) for credit losses
|
|
17,611
|
|
|
14,205
|
|
|
18,933
|
|
|
3,406
|
|
|
24
|
%
|
|
(4,728
|
)
|
|
(25
|
)%
|
|||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gains (losses) on extinguishment of debt
|
|
(240
|
)
|
|
(422
|
)
|
|
446
|
|
|
182
|
|
|
(43
|
)%
|
|
(868
|
)
|
|
(195
|
)%
|
|||||
Derivative gains (losses)
|
|
(2,696
|
)
|
|
(8,291
|
)
|
|
2,632
|
|
|
5,595
|
|
|
(67
|
)%
|
|
(10,923
|
)
|
|
(415
|
)%
|
|||||
Net impairment of available-for-sale securities recognized in earnings
|
|
(292
|
)
|
|
(938
|
)
|
|
(1,510
|
)
|
|
646
|
|
|
(69
|
)%
|
|
572
|
|
|
(38
|
)%
|
|||||
Other gains (losses) on investment securities recognized in earnings
|
|
508
|
|
|
1,494
|
|
|
301
|
|
|
(986
|
)
|
|
(66
|
)%
|
|
1,193
|
|
|
396
|
%
|
|||||
Other income (loss)
|
|
(879
|
)
|
|
8,044
|
|
|
6,650
|
|
|
(8,923
|
)
|
|
(111
|
)%
|
|
1,394
|
|
|
21
|
%
|
|||||
Total non-interest income (loss)
|
|
(3,599
|
)
|
|
(113
|
)
|
|
8,519
|
|
|
(3,486
|
)
|
|
3,085
|
%
|
|
(8,632
|
)
|
|
(101
|
)%
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Administrative expense
|
|
(1,927
|
)
|
|
(1,881
|
)
|
|
(1,805
|
)
|
|
(46
|
)
|
|
2
|
%
|
|
(76
|
)
|
|
4
|
%
|
|||||
REO operations (expense) income
|
|
(338
|
)
|
|
(196
|
)
|
|
140
|
|
|
(142
|
)
|
|
72
|
%
|
|
(336
|
)
|
|
(240
|
)%
|
|||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
|
(967
|
)
|
|
(775
|
)
|
|
(533
|
)
|
|
(192
|
)
|
|
25
|
%
|
|
(242
|
)
|
|
45
|
%
|
|||||
Other (expense) income
|
|
(1,506
|
)
|
|
(238
|
)
|
|
109
|
|
|
(1,268
|
)
|
|
533
|
%
|
|
(347
|
)
|
|
(318
|
)%
|
|||||
Total non-interest expense
|
|
(4,738
|
)
|
|
(3,090
|
)
|
|
(2,089
|
)
|
|
(1,648
|
)
|
|
53
|
%
|
|
(1,001
|
)
|
|
48
|
%
|
|||||
Income before income tax (expense) benefit
|
|
9,274
|
|
|
11,002
|
|
|
25,363
|
|
|
(1,728
|
)
|
|
(16
|
)%
|
|
(14,361
|
)
|
|
(57
|
)%
|
|||||
Income tax (expense) benefit
|
|
(2,898
|
)
|
|
(3,312
|
)
|
|
23,305
|
|
|
414
|
|
|
(13
|
)%
|
|
(26,617
|
)
|
|
(114
|
)%
|
|||||
Net income
|
|
6,376
|
|
|
7,690
|
|
|
48,668
|
|
|
(1,314
|
)
|
|
(17
|
)%
|
|
(40,978
|
)
|
|
(84
|
)%
|
|||||
Total other comprehensive income (loss), net of taxes and reclassification adjustments
|
|
(577
|
)
|
|
1,736
|
|
|
2,932
|
|
|
(2,313
|
)
|
|
(133
|
)%
|
|
(1,196
|
)
|
|
(41
|
)%
|
|||||
Comprehensive income
|
|
$
|
5,799
|
|
|
$
|
9,426
|
|
|
$
|
51,600
|
|
|
$
|
(3,627
|
)
|
|
(38
|
)%
|
|
$
|
(42,174
|
)
|
|
(82
|
)%
|
•
|
Net interest income
increased in 2015 compared to 2014, primarily due to an increase in management and guarantee fee income and amortization of upfront fees and basis adjustments as a result of higher prepayment rates. This increase was partially offset by a reduction in the amount of contractual net interest income derived from our mortgage-related investments portfolio, as this portfolio has continued to decline pursuant to the portfolio limits established by the Purchase Agreement and by
FHFA.
Net interest income
decreased in 2014 compared to 2013, primarily due to a reduction in our mortgage-related investments portfolio and less amortization of upfront fees and basis adjustments as a result of lower prepayment rates. See “Net Interest Income” for more information.
|
•
|
Benefit (provision) for credit losses
was a benefit in 2015 and was driven by the reclassification of loans from held-for-investment to held-for-sale. Excluding the effect of the reclassification of loans,
|
Freddie Mac 2015 Form 10-K
|
|
14
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Comparison
|
•
|
Gains (losses) on extinguishment of debt
in 2015, 2014, and 2013 primarily resulted from purchases of single-family PCs (which are accounted for as the extinguishment of debt). We extinguished debt securities of consolidated trusts with a UPB of $54.6 billion, $49.2 billion, and $44.4 billion in 2015, 2014, and 2013, respectively. Losses in 2015 and 2014 were driven by interest rate declines between the time of issuance and the time of repurchase of these debt securities.
|
•
|
Changes in
derivative gains (losses)
primarily resulted from changes in interest rates. In 2015, longer-term interest rates declined less than they did in 2014, and resulted in lower fair value losses. Derivative losses also include the accrual of periodic cash settlements, which is the net amount we accrued during the period for interest-rate swap payments that we will make. In 2014, derivative losses primarily resulted from the effect of a flattening of the yield curve on the fair value of our interest-rate swaps. See "Derivative Gains (Losses)" for more information.
|
•
|
Net impairments of available-for-sale securities recognized in earnings
declined in 2015 compared to 2014 because the unrealized losses associated with securities we intend to sell were lower due to improvements in forecasted home prices, declines in market interest rates, and continued tightening of credit spreads for our non-agency mortgage-related securities. Net impairments of available-for-sale securities recognized in earnings declined in 2014 compared to 2013 primarily as a result of increased impairments in 2013 due to the availability of more detailed information which enhanced the assumptions used to estimate the contractual loan terms for certain modified loans collateralizing our non-agency mortgage-related securities. See "Conservatorship And Related Matters - Limits On Our Mortgage-Related Investments Portfolio And Indebtedness" for additional information concerning our efforts to reduce our less liquid assets.
|
•
|
Other gains (losses) on investment securities recognized in earnings.
The decrease in gains in 2015 compared to 2014 was primarily due to a decrease in sales of agency mortgage-related securities. The increase in gains in 2014 compared to 2013 was primarily the result of the effect of a decline in longer-term interest rates on the fair values of our trading securities.
|
•
|
Changes in
other income (loss)
were primarily driven by non-agency mortgage-related securities settlements, lower-of-cost-or-fair-value adjustments for mortgage loans transferred to held-for-sale, and changes in fair value of multifamily mortgage loans for which we have elected the fair value option, as discussed below.
|
◦
|
$6.0 billion decline in income from non-agency mortgage-related securities litigation settlements, as there was only one settlement in 2015;
|
◦
|
$2.0 billion increase in write-downs due to lower-of-cost-or-fair-value adjustments for mortgage loans transferred from held-for-investment to held-for-sale (see "Effect of Loan Reclassifications" for more information); and
|
◦
|
$0.7 billion decline in the fair value of these multifamily mortgage loans, due to the widening of K Certificate benchmark spreads observed in the market.
|
Freddie Mac 2015 Form 10-K
|
|
15
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Comparison
|
◦
|
$0.6 billion increase in income from non-agency mortgage-related securities settlements, as the majority of such settlements occurred in 2014;
|
◦
|
$1.6 billion increase in the fair value of these multifamily mortgage loans, due to the tightening of K Certificate benchmark spreads observed in the market; and
|
◦
|
$0.2 billion increase in write-downs due to lower-of-cost-or-fair-value adjustments for mortgage loans transferred from held-for-investment to held-for-sale.
|
•
|
Administrative expense
increased in 2015 and 2014 primarily because of costs associated with the FHFA-mandated termination of our pension plans. This increase was partially offset by lower professional services expense driven by lower expenses associated with FHFA-led lawsuits regarding our investments in certain non-agency mortgage-related securities.
|
•
|
REO operations expense
increased in 2015 and 2014 compared to the respective prior year. REO property expenses declined in 2015 and 2014, consistent with a decline in REO inventory in each year. However, the REO property expenses were offset to a lesser extent by gains on the disposition of REO properties and recoveries from mortgage insurance, compared to the respective prior year.
|
•
|
Temporary Payroll Tax Cut Continuation Act of 2011 expense
continued to increase as a result of the increase in the population of loans subject to this expense. As of December 31, 2015,
$1.1 trillion
of loans (or
63%
of the single-family credit guarantee portfolio) were subject to these fees. We expect the amount of these fees will continue to increase in the future as we add new business and the population of loans subject to these fees increases.
|
•
|
Other expense
increased during 2015 compared to 2014, primarily driven by property taxes and insurance costs associated with loans reclassified from held-for-investment to held-for-sale. These costs are considered part of the loan loss reserves while the loans are classified as held-for-investment. See "Effect of Loan Reclassifications" for more information. In addition, beginning January 1, 2015, FHFA directed us to allocate funds that will be distributed to certain housing funds pursuant to the GSE Act. During 2015, we completed
$393.8 billion
of new business purchases subject to this allocation and accrued $165 million of related expense. We expect to pay these amounts in February 2016.
Other expense
increased during 2014 compared to 2013, due to a settlement with Lehman Brothers Holdings Inc. to resolve our claims related to Lehman’s bankruptcy which reduced other expenses in 2013.
|
•
|
Income tax expense
decreased in 2015 due to a decrease in pre-tax income.
Income tax expense
in 2014 reflects our return to a normal income tax recognition environment after the release of the valuation allowance against our net deferred tax asset in 2013.
|
•
|
Other comprehensive income
was a loss in 2015 compared to income in 2014, primarily due to less spread tightening for our non-agency mortgage-related securities and less impairment reclassifications from AOCI into earnings. These factors were partially offset by a lower amount of accretion being recognized during 2015 compared to 2014.
Other comprehensive income
decreased during 2014 compared to 2013, primarily due to less spread tightening for our non-agency mortgage-related securities, partially offset by a flattening of the yield curve during 2014.
|
Freddie Mac 2015 Form 10-K
|
|
16
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Comparison
|
|
|
Year Ended December 31,
|
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Benefit for credit losses
|
|
$
|
2,314
|
|
|
$
|
147
|
|
Other income (loss) - lower-of-cost-or-fair-value adjustment
|
|
(2,193
|
)
|
|
(195
|
)
|
||
Other (expense) income - property taxes and insurance associated with these loans
|
|
(1,178
|
)
|
|
(62
|
)
|
||
Effect on income before income tax (expense) benefit
|
|
$
|
(1,057
|
)
|
|
$
|
(110
|
)
|
Freddie Mac 2015 Form 10-K
|
|
17
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Comparison
|
|
Year Ended December 31,
|
||||||||||
(in billions)
|
2015
|
|
2014
|
|
2013
|
||||||
Components of derivative gains (losses)
|
|
|
|
|
|
||||||
Derivative gains (losses)
|
$
|
(2.7
|
)
|
|
$
|
(8.3
|
)
|
|
$
|
2.6
|
|
Less: Accrual of periodic cash settlements
|
(2.2
|
)
|
|
(2.6
|
)
|
|
(3.5
|
)
|
|||
Derivative fair value changes
|
$
|
(0.5
|
)
|
|
$
|
(5.7
|
)
|
|
$
|
6.1
|
|
Estimated Net Interest Rate Effect
|
|
|
|
|
|
||||||
Interest rate effect on derivative fair values
|
$
|
(0.5
|
)
|
|
$
|
(5.5
|
)
|
|
$
|
5.9
|
|
Estimate of offsetting interest rate effect related to financial instruments measured at fair value
|
0.2
|
|
|
2.0
|
|
|
(4.0
|
)
|
|||
Income tax benefit (expense)
|
0.1
|
|
|
1.2
|
|
|
(0.7
|
)
|
|||
Estimated Net Interest Rate Effect on Comprehensive income
|
$
|
(0.2
|
)
|
|
$
|
(2.3
|
)
|
|
$
|
1.2
|
|
Freddie Mac 2015 Form 10-K
|
|
18
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Net Interest Income
|
•
|
Contractual net interest income
- consists of two primary components:
|
◦
|
The difference between the interest income earned on the assets in our investments portfolio
and the interest expense incurred on the liabilities used to fund those assets; and
|
◦
|
Management and guarantee fees on loans held by consolidated trusts. We record interest income on loans held by consolidated trusts and interest expense on the debt securities issued by the trusts. The difference between the interest income on the loans and the interest expense on the debt represents the management and guarantee fee income we receive as compensation for our guarantee of the principal and interest payments of the issued debt securities. This difference includes the legislated 10 basis point increase in management and guarantee fees that is remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011.
|
•
|
Amortization of cost basis adjustments
- consists of cost basis adjustments, such as premiums and discounts on loans, investment securities, and debt that are amortized into interest income or interest expense based on the effective yield over the contractual life of the associated financial instrument.
|
•
|
Expense related to derivatives -
consists of deferred gains and losses on closed cash flow hedges related to forecasted debt issuances that are reclassified from AOCI to net interest income when the related forecasted transaction affects net interest income.
|
Freddie Mac 2015 Form 10-K
|
|
19
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Net Interest Income
|
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2015
|
|
2014
|
|
2013
|
|||||||||||||||||||||||||||
(dollars in millions)
|
Average
Balance
|
|
Interest
Income
(Expense)
|
|
Average
Rate
|
|
Average
Balance
|
|
Interest
Income
(Expense)
|
|
Average
Rate
|
|
Average
Balance
|
|
Interest
Income
(Expense)
|
|
Average
Rate
|
|||||||||||||||
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cash and cash equivalents
|
$
|
12,482
|
|
|
$
|
8
|
|
|
0.06
|
%
|
|
$
|
13,889
|
|
|
$
|
4
|
|
|
0.03
|
%
|
|
$
|
31,087
|
|
|
$
|
15
|
|
|
0.05
|
%
|
Securities purchased under agreements to resell
|
51,380
|
|
|
62
|
|
|
0.12
|
|
|
42,905
|
|
|
28
|
|
|
0.06
|
|
|
44,897
|
|
|
36
|
|
|
0.08
|
|
||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mortgage-related securities
|
226,162
|
|
|
8,706
|
|
|
3.85
|
|
|
256,548
|
|
|
10,027
|
|
|
3.91
|
|
|
313,707
|
|
|
12,787
|
|
|
4.08
|
|
||||||
Extinguishment of PCs held by Freddie Mac
|
(107,986
|
)
|
|
(3,929
|
)
|
|
(3.64
|
)
|
|
(111,545
|
)
|
|
(4,190
|
)
|
|
(3.76
|
)
|
|
(127,999
|
)
|
|
(5,045
|
)
|
|
(3.94
|
)
|
||||||
Total mortgage-related securities, net
|
118,176
|
|
|
4,777
|
|
|
4.04
|
|
|
145,003
|
|
|
5,837
|
|
|
4.03
|
|
|
185,708
|
|
|
7,742
|
|
|
4.17
|
|
||||||
Non-mortgage-related securities
|
10,699
|
|
|
17
|
|
|
0.16
|
|
|
9,983
|
|
|
6
|
|
|
0.06
|
|
|
21,385
|
|
|
26
|
|
|
0.12
|
|
||||||
Loans held by consolidated trusts
(1)
|
1,590,768
|
|
|
55,867
|
|
|
3.51
|
|
|
1,540,570
|
|
|
57,036
|
|
|
3.70
|
|
|
1,511,128
|
|
|
57,189
|
|
|
3.78
|
|
||||||
Loans held by Freddie Mac
(1)
|
157,261
|
|
|
6,359
|
|
|
4.04
|
|
|
170,017
|
|
|
6,569
|
|
|
3.86
|
|
|
203,760
|
|
|
7,694
|
|
|
3.78
|
|
||||||
Total interest-earning assets
|
$
|
1,940,766
|
|
|
$
|
67,090
|
|
|
3.46
|
|
|
$
|
1,922,367
|
|
|
$
|
69,480
|
|
|
3.61
|
|
|
$
|
1,997,965
|
|
|
$
|
72,702
|
|
|
3.63
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Debt securities of consolidated trusts including PCs held by Freddie Mac
|
$
|
1,611,388
|
|
|
$
|
(49,465
|
)
|
|
(3.07
|
)
|
|
$
|
1,557,895
|
|
|
$
|
(52,193
|
)
|
|
(3.35
|
)
|
|
$
|
1,532,032
|
|
|
$
|
(52,395
|
)
|
|
(3.42
|
)
|
Extinguishment of PCs held by Freddie Mac
|
(107,986
|
)
|
|
3,929
|
|
|
3.64
|
|
|
(111,545
|
)
|
|
4,190
|
|
|
3.76
|
|
|
(127,999
|
)
|
|
5,045
|
|
|
3.94
|
|
||||||
Total debt securities of consolidated trusts held by third parties
|
1,503,402
|
|
|
(45,536
|
)
|
|
(3.03
|
)
|
|
1,446,350
|
|
|
(48,003
|
)
|
|
(3.32
|
)
|
|
1,404,033
|
|
|
(47,350
|
)
|
|
(3.37
|
)
|
||||||
Other debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Short-term debt
|
108,096
|
|
|
(173
|
)
|
|
(0.16
|
)
|
|
118,211
|
|
|
(145
|
)
|
|
(0.12
|
)
|
|
132,674
|
|
|
(178
|
)
|
|
(0.13
|
)
|
||||||
Long-term debt
|
313,502
|
|
|
(6,207
|
)
|
|
(1.98
|
)
|
|
331,887
|
|
|
(6,768
|
)
|
|
(2.04
|
)
|
|
393,094
|
|
|
(8,251
|
)
|
|
(2.10
|
)
|
||||||
Total other debt
|
421,598
|
|
|
(6,380
|
)
|
|
(1.51
|
)
|
|
450,098
|
|
|
(6,913
|
)
|
|
(1.54
|
)
|
|
525,768
|
|
|
(8,429
|
)
|
|
(1.60
|
)
|
||||||
Total interest-bearing liabilities
|
1,925,000
|
|
|
(51,916
|
)
|
|
(2.70
|
)
|
|
1,896,448
|
|
|
(54,916
|
)
|
|
(2.89
|
)
|
|
1,929,801
|
|
|
(55,779
|
)
|
|
(2.89
|
)
|
||||||
Expense related to derivatives
|
—
|
|
|
(228
|
)
|
|
(0.01
|
)
|
|
—
|
|
|
(301
|
)
|
|
(0.02
|
)
|
|
—
|
|
|
(455
|
)
|
|
(0.02
|
)
|
||||||
Impact of net non-interest-bearing funding
|
15,766
|
|
|
—
|
|
|
0.02
|
|
|
25,919
|
|
|
—
|
|
|
0.04
|
|
|
68,164
|
|
|
—
|
|
|
0.10
|
|
||||||
Total funding of interest-earning assets
|
$
|
1,940,766
|
|
|
$
|
(52,144
|
)
|
|
(2.69
|
)
|
|
$
|
1,922,367
|
|
|
$
|
(55,217
|
)
|
|
(2.87
|
)
|
|
$
|
1,997,965
|
|
|
$
|
(56,234
|
)
|
|
(2.81
|
)
|
Net interest income/yield
|
|
|
$
|
14,946
|
|
|
0.77
|
%
|
|
|
|
$
|
14,263
|
|
|
0.74
|
%
|
|
|
|
$
|
16,468
|
|
|
0.82
|
%
|
(1)
|
Loan fees, primarily consisting of amortization of delivery fees, included in interest income for loans held by consolidated trusts were $2.0 billion, $1.4 billion, and $1.2 billion, respectively, and were $383 million, $373 million, and $294 million in 2015, 2014, and 2013, respectively, for loans held by Freddie Mac.
|
Freddie Mac 2015 Form 10-K
|
|
20
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Net Interest Income
|
|
|
2015 vs. 2014 Variance Due to
|
|
2014 vs. 2013 Variance Due to
|
||||||||||||||||||||
(in millions)
|
|
Rate
|
|
Volume
|
|
Total Change
|
|
Rate
|
|
Volume
|
|
Total Change
|
||||||||||||
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
|
$
|
6
|
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
$
|
(5
|
)
|
|
$
|
(6
|
)
|
|
$
|
(11
|
)
|
Securities purchased under agreements to resell
|
|
24
|
|
|
10
|
|
|
34
|
|
|
(7
|
)
|
|
(1
|
)
|
|
(8
|
)
|
||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-related securities
|
|
(149
|
)
|
|
(1,172
|
)
|
|
(1,321
|
)
|
|
(508
|
)
|
|
(2,252
|
)
|
|
(2,760
|
)
|
||||||
Extinguishment of PCs held by Freddie Mac
|
|
129
|
|
|
132
|
|
|
261
|
|
|
229
|
|
|
626
|
|
|
855
|
|
||||||
Total mortgage-related securities, net
|
|
(20
|
)
|
|
(1,040
|
)
|
|
(1,060
|
)
|
|
(279
|
)
|
|
(1,626
|
)
|
|
(1,905
|
)
|
||||||
Non-mortgage-related securities
|
|
11
|
|
|
—
|
|
|
11
|
|
|
(10
|
)
|
|
(10
|
)
|
|
(20
|
)
|
||||||
Loans held by consolidated
trusts
|
|
(2,991
|
)
|
|
1,822
|
|
|
(1,169
|
)
|
|
(1,256
|
)
|
|
1,103
|
|
|
(153
|
)
|
||||||
Loans held by Freddie Mac
|
|
297
|
|
|
(507
|
)
|
|
(210
|
)
|
|
175
|
|
|
(1,300
|
)
|
|
(1,125
|
)
|
||||||
Total interest-earning assets
|
|
$
|
(2,673
|
)
|
|
$
|
283
|
|
|
$
|
(2,390
|
)
|
|
$
|
(1,382
|
)
|
|
$
|
(1,840
|
)
|
|
$
|
(3,222
|
)
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt securities of consolidated trusts including PCs held by Freddie Mac
|
|
$
|
4,476
|
|
|
$
|
(1,748
|
)
|
|
$
|
2,728
|
|
|
$
|
1,079
|
|
|
$
|
(877
|
)
|
|
$
|
202
|
|
Extinguishment of PCs held by Freddie Mac
|
|
(129
|
)
|
|
(132
|
)
|
|
$
|
(261
|
)
|
|
(229
|
)
|
|
(626
|
)
|
|
$
|
(855
|
)
|
||||
Total debt securities of consolidated trusts held by third parties
|
|
4,347
|
|
|
(1,880
|
)
|
|
$
|
2,467
|
|
|
850
|
|
|
(1,503
|
)
|
|
(653
|
)
|
|||||
Other debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Short-term debt
|
|
(41
|
)
|
|
13
|
|
|
(28
|
)
|
|
15
|
|
|
18
|
|
|
33
|
|
||||||
Long-term debt
|
|
193
|
|
|
368
|
|
|
561
|
|
|
229
|
|
|
1,254
|
|
|
1,483
|
|
||||||
Total other debt
|
|
152
|
|
|
381
|
|
|
533
|
|
|
244
|
|
|
1,272
|
|
|
1,516
|
|
||||||
Total interest-bearing liabilities
|
|
4,499
|
|
|
(1,499
|
)
|
|
3,000
|
|
|
1,094
|
|
|
(231
|
)
|
|
863
|
|
||||||
Expense related to derivatives
|
|
73
|
|
|
—
|
|
|
73
|
|
|
154
|
|
|
—
|
|
|
154
|
|
||||||
Total funding of interest-earning assets
|
|
$
|
4,572
|
|
|
$
|
(1,499
|
)
|
|
$
|
3,073
|
|
|
$
|
1,248
|
|
|
$
|
(231
|
)
|
|
$
|
1,017
|
|
Net interest income
|
|
$
|
1,899
|
|
|
$
|
(1,216
|
)
|
|
$
|
683
|
|
|
$
|
(134
|
)
|
|
$
|
(2,071
|
)
|
|
$
|
(2,205
|
)
|
Freddie Mac 2015 Form 10-K
|
|
21
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Net Interest Income
|
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Contractual net interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Management and guarantee fee income
|
|
$
|
2,722
|
|
|
$
|
2,399
|
|
|
$
|
2,111
|
|
|
$
|
323
|
|
|
13
|
%
|
|
$
|
288
|
|
|
14
|
%
|
Management and guarantee fee income related to the Temporary Payroll Tax Cut Continuation Act of 2011
|
|
957
|
|
|
759
|
|
|
519
|
|
|
198
|
|
|
26
|
%
|
|
240
|
|
|
46
|
%
|
|||||
Other contractual net interest income
|
|
8,106
|
|
|
9,070
|
|
|
11,484
|
|
|
(964
|
)
|
|
(11
|
)%
|
|
(2,414
|
)
|
|
(21
|
)%
|
|||||
Total contractual net interest income
|
|
11,785
|
|
|
12,228
|
|
|
14,114
|
|
|
(443
|
)
|
|
(4
|
)%
|
|
(1,886
|
)
|
|
(13
|
)%
|
|||||
Net amortization - loans and debt securities of consolidated trusts
|
|
2,883
|
|
|
1,913
|
|
|
2,791
|
|
|
970
|
|
|
51
|
%
|
|
(878
|
)
|
|
(31
|
)%
|
|||||
Net amortization - other assets and debt
|
|
506
|
|
|
423
|
|
|
18
|
|
|
83
|
|
|
20
|
%
|
|
405
|
|
|
2,250
|
%
|
|||||
Expense related to derivatives
|
|
(228
|
)
|
|
(301
|
)
|
|
(455
|
)
|
|
73
|
|
|
(24
|
)%
|
|
154
|
|
|
(34
|
)%
|
|||||
Net interest income
|
|
$
|
14,946
|
|
|
$
|
14,263
|
|
|
$
|
16,468
|
|
|
$
|
683
|
|
|
5
|
%
|
|
$
|
(2,205
|
)
|
|
(13
|
)%
|
•
|
Management and guarantee fee income
increased during 2015, compared to 2014 and 2013, as the rates and volume of our guarantee businesses increased. Specifically, management and guarantee fee rates received on new business are higher than the rates received on older vintages that continue to pay-down. Furthermore, the size of our single-family credit guarantee portfolio continues to grow as we continue to securitize single-family loans into PCs. The increase in management and guarantee fee income, combined with a decline in our other contractual net interest income, resulted in management and guarantee fee income becoming a larger component of our contractual net interest income. We expect this trend to continue in the future. See the Single-family Guarantee segment's "Business Results" section in "Our Business Segments" for additional discussion.
|
•
|
Other contractual net interest income
declined in 2015 and 2014, primarily due to the reduction in the balance of our mortgage-related investments portfolio, as we continue to manage the size and composition of this portfolio pursuant to the limits established by the Purchase Agreement and by FHFA. Although we reinvested a portion of the proceeds received from pay-downs and dispositions, the new mortgage-related assets we acquired have lower yields as a result of a lower interest rate environment. We expect our other contractual net interest income to continue to decline in the near future as we reduce our mortgage-related investments portfolio. See "Conservatorship and Related Matters - Limits on Our Mortgage-Related Investments Portfolio and Indebtedness" for additional discussion of the limits on the mortgage-related investments portfolio.
|
•
|
Net amortization of loans and debt securities of consolidated trusts
increased in 2015 compared to 2014 due to an increase in the amortization of upfront fees and basis adjustments on debt securities of consolidated trusts. This increase was primarily driven by higher prepayment rates on single-family loans in 2015 compared to 2014. Conversely, net amortization of loans and debt securities of consolidated trusts was lower in 2014 compared to 2013, due to slower prepayment rates on single-family loans and timing differences between the amortization of the loan and debt securities basis adjustments.
|
Freddie Mac 2015 Form 10-K
|
|
22
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Provision for Credit Losses
|
•
|
Collectively impaired loans
- The provision for collectively impaired loans is primarily driven by the volume of newly delinquent loans and changes in estimated probabilities of default and estimated loss severities for the loans. Estimated probabilities of default and estimated loss severities are based on current conditions and historical data and are heavily influenced by changes in home prices, but are also affected by a number of other factors, such as local and regional economic conditions, changes in reperformance and default rates, and the success of our borrower assistance programs.
|
•
|
Individually impaired loans
- The provision for individually impaired loans is primarily driven by the volume of our loss mitigation activity (e.g., loan modifications) that results in loans being considered TDRs, the payment performance of our individually impaired mortgage portfolio, and changes in estimated probabilities of default and estimated loss severities, which affect the future cash flows we expect to receive from these loans. Estimated probabilities of default and estimated loss severities for individually impaired loans are based on the same current conditions and historical data and are affected by the same factors noted above for collectively impaired loans.
|
Freddie Mac 2015 Form 10-K
|
|
23
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Provision for Credit Losses
|
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(dollars in billions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for newly impaired loans
|
|
$
|
(0.9
|
)
|
|
$
|
(1.7
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
0.8
|
|
|
47
|
%
|
|
$
|
0.8
|
|
|
32
|
%
|
Amortization of interest rate concessions
|
|
1.2
|
|
|
1.4
|
|
|
1.0
|
|
|
(0.2
|
)
|
|
(14
|
)%
|
|
0.4
|
|
|
40
|
%
|
|||||
Reclassifications of held-for-investment loans to held-for-sale loans
|
|
2.3
|
|
|
0.1
|
|
|
—
|
|
|
2.2
|
|
|
2,200
|
%
|
|
0.1
|
|
|
N/A
|
|
|||||
Other, including changes in estimated default probability and loss severity
|
|
0.1
|
|
|
0.1
|
|
|
4.0
|
|
|
—
|
|
|
—
|
%
|
|
(3.9
|
)
|
|
(98
|
)%
|
|||||
Benefit (provision) for credit losses
|
|
$
|
2.7
|
|
|
$
|
(0.1
|
)
|
|
$
|
2.5
|
|
|
$
|
2.8
|
|
|
2,800
|
%
|
|
$
|
(2.6
|
)
|
|
(104
|
)%
|
•
|
The main driver of the benefit for credit losses in 2015 was the reclassifications of loans from held-for-investment to held-for sale in connection with our efforts to sell seriously delinquent single-family loans. See "Effect of Loan Reclassifications" for the effect of these loan reclassifications on pre-tax net income.
|
•
|
The provision for newly impaired loans decreased in 2015 and 2014 due to declines in the volume of newly delinquent single-family loans in both years.
|
•
|
The benefit (provision) for credit losses in 2014 and 2013 reflect benefits of $0.3 billion and $1.7 billion, respectively, related to settlement agreements with certain sellers to release specified loans from certain repurchase obligations in exchange for one-time cash payments primarily associated with our Legacy single-family book.
|
Freddie Mac 2015 Form 10-K
|
|
24
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Derivative Gains (Losses)
|
•
|
Fair value changes
- Represent changes in the fair value of our derivatives based on market conditions at the end of the period or at the time the derivative instrument is terminated. These amounts may or may not be realized over time, depending on future changes in market conditions and the terms of our derivative instruments.
|
•
|
Accrual of periodic cash settlements -
Consists of the net amount we accrue during a period for interest-rate swap payments that we will make or receive. This accrual represents the ongoing cost of our hedging activities, and is economically equivalent to interest expense.
|
•
|
Changes in interest rates
-
Our primary derivative instruments are interest-rate swaps, including pay-fixed and receive-fixed interest-rate swaps. With a pay-fixed interest-rate swap, we pay a fixed rate of interest and receive a variable rate of interest based on a specified notional balance (the notional balance is for calculation purposes only). With a pay-fixed interest-rate swap, as interest rates decline, we recognize derivative losses, as the amount of interest we pay remains fixed, and the amount of interest we receive declines. As rates rise, we recognize derivative gains, as the amount of interest we pay remains fixed, but the amount of interest we receive increases. With a receive-fixed interest-rate swap, the opposite results occur.
|
•
|
Implied volatility -
Many of our assets and liabilities have embedded prepayment options. We use option-based derivatives, including swaptions, to economically hedge the prepayment options embedded in our mortgage assets and callable debt. Fair value gains and losses on swaptions are sensitive to changes in both interest rates and implied volatility, which reflects the market’s expectation of future changes in interest rates. Assuming all other factors are unchanged, including interest rates, purchased swaptions generally become more valuable as implied volatility increases and less valuable as implied volatility decreases, with the opposite being true for written swaptions.
|
•
|
Changes in the shape of the yield curve -
We own assets and have outstanding debt with different cash flows along the yield curve. We use derivatives to hedge the yield exposure of assets and debt, resulting in derivatives with different maturities. As a result, changes in the shape of the yield curve will affect our derivative gains (losses).
|
Freddie Mac 2015 Form 10-K
|
|
25
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Derivative Gains (Losses)
|
•
|
Changes in the composition of our derivative portfolio -
The mix and balance of our derivative portfolio changes from period to period as we enter into or terminate derivative instruments to respond to changes in interest rates and changes in the balances and modeled characteristics of our assets and liabilities. Changes in the composition of our derivative portfolio will affect the derivative gains and losses we recognize in a given period, thereby affecting the volatility of comprehensive income.
|
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Fair value changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in interest-rate swaps
|
|
$
|
(778
|
)
|
|
$
|
(7,294
|
)
|
|
$
|
8,598
|
|
|
$
|
6,516
|
|
|
(89
|
)%
|
|
$
|
(15,892
|
)
|
|
(185
|
)%
|
Change in option-based derivatives
|
|
258
|
|
|
1,437
|
|
|
(2,422
|
)
|
|
(1,179
|
)
|
|
(82
|
)
|
|
3,859
|
|
|
(159
|
)
|
|||||
Accrual of periodic cash settlements
|
|
(2,198
|
)
|
|
(2,625
|
)
|
|
(3,467
|
)
|
|
427
|
|
|
(16
|
)
|
|
842
|
|
|
(24
|
)
|
|||||
Other
|
|
22
|
|
|
191
|
|
|
(77
|
)
|
|
(169
|
)
|
|
(88
|
)
|
|
268
|
|
|
(348
|
)
|
|||||
Derivative gains (losses)
|
|
$
|
(2,696
|
)
|
|
$
|
(8,291
|
)
|
|
$
|
2,632
|
|
|
$
|
5,595
|
|
|
(67
|
)%
|
|
$
|
(10,923
|
)
|
|
(415
|
)%
|
•
|
We recognized derivative losses in 2015 primarily from the accrual of periodic cash settlements. Fair value changes were less significant in 2015, as interest rates declined slightly.
|
•
|
We recognized derivative losses in 2014 primarily as a result of the impact of a flattening yield curve as shorter-term interest rates increased and longer-term interest rates declined during 2014.
|
•
|
We recognized derivative gains in 2013 primarily as a result of an increase in longer-term interest rates.
|
Freddie Mac 2015 Form 10-K
|
|
26
|
Management's Discussion and Analysis
|
|
Consolidated Results of Operations | Other Comprehensive Income
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Other comprehensive income, excluding accretion and reclassifications
|
|
$
|
374
|
|
|
$
|
2,563
|
|
|
$
|
3,167
|
|
Accretion due to significant increases in expected cash flows on previously-impaired available-for-sale securities
|
|
(449
|
)
|
|
(519
|
)
|
|
(339
|
)
|
|||
Reclassifications from AOCI
|
|
(502
|
)
|
|
(308
|
)
|
|
104
|
|
|||
Total other comprehensive income (loss)
|
|
$
|
(577
|
)
|
|
$
|
1,736
|
|
|
$
|
2,932
|
|
•
|
Other comprehensive income was a loss in 2015 compared to income in 2014, primarily due to less spread tightening for our non-agency mortgage-related securities and less impairment reclassifications from AOCI into earnings. Other comprehensive income declined during 2014 compared to 2013, primarily due to less spread tightening for our non-agency mortgage-related securities, partially offset by a flattening of the yield curve.
|
•
|
We recognized lower unrealized gains as a result of our accretion of the increase in expected cash flows to the amortized cost basis of the previously-impaired available-for-sale securities in all periods presented. Accretion was higher during 2015 and 2014 compared to 2013, as a result of improving collateral performance and declining longer-term interest rates.
|
•
|
We reclassified unrealized gains and losses from AOCI to earnings as a result of our sales of available-for-sale mortgage-related securities in all periods presented. During 2015 and 2014, we reclassified net unrealized gains as a result of improved pricing due to declining longer-term interest rates and stabilized collateral performance. Conversely, during 2013, we reclassified net unrealized losses as a result of rising longer-term interest rates.
|
Freddie Mac 2015 Form 10-K
|
|
27
|
Management's Discussion and Analysis
|
|
Consolidated Balance Sheets Analysis
|
|
|
December 31,
|
|
|
|
|
|||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
|||||||
Cash and cash equivalents
|
|
$
|
5,595
|
|
|
$
|
10,928
|
|
|
$
|
(5,333
|
)
|
|
(49
|
)%
|
Restricted cash and cash equivalents
|
|
14,533
|
|
|
8,535
|
|
|
5,998
|
|
|
70
|
|
|||
Securities purchased under agreements to resell
|
|
63,644
|
|
|
51,903
|
|
|
11,741
|
|
|
23
|
|
|||
Investments in securities
|
|
114,215
|
|
|
136,987
|
|
|
(22,772
|
)
|
|
(17
|
)
|
|||
Mortgage loans, net
|
|
1,754,193
|
|
|
1,700,580
|
|
|
53,613
|
|
|
3
|
|
|||
Accrued interest receivable
|
|
6,074
|
|
|
6,034
|
|
|
40
|
|
|
1
|
|
|||
Derivative assets, net
|
|
395
|
|
|
822
|
|
|
(427
|
)
|
|
(52
|
)
|
|||
Real estate owned, net
|
|
1,725
|
|
|
2,558
|
|
|
(833
|
)
|
|
(33
|
)
|
|||
Deferred tax assets, net
|
|
18,205
|
|
|
19,498
|
|
|
(1,293
|
)
|
|
(7
|
)
|
|||
Other assets
|
|
7,471
|
|
|
7,694
|
|
|
(223
|
)
|
|
(3
|
)
|
|||
Total assets
|
|
$
|
1,986,050
|
|
|
$
|
1,945,539
|
|
|
$
|
40,511
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|||||||
Accrued interest payable
|
|
$
|
6,183
|
|
|
$
|
6,325
|
|
|
$
|
(142
|
)
|
|
(2
|
)%
|
Debt, net
|
|
1,970,427
|
|
|
1,929,542
|
|
|
40,885
|
|
|
2
|
|
|||
Derivative liabilities, net
|
|
1,254
|
|
|
1,963
|
|
|
(709
|
)
|
|
(36
|
)
|
|||
Other liabilities
|
|
5,246
|
|
|
5,058
|
|
|
188
|
|
|
4
|
|
|||
Total liabilities
|
|
1,983,110
|
|
|
1,942,888
|
|
|
40,222
|
|
|
2
|
|
|||
Total equity
|
|
2,940
|
|
|
2,651
|
|
|
289
|
|
|
11
|
|
|||
Total liabilities and equity
|
|
$
|
1,986,050
|
|
|
$
|
1,945,539
|
|
|
$
|
40,511
|
|
|
2
|
%
|
•
|
Cash and cash equivalents
,
restricted cash and cash equivalents
, and
securities purchased under agreements to resell
affect one another, so the changes in the balances should be viewed together. For example, cash and cash equivalents and restricted cash and cash equivalents can be invested in securities purchased under agreements to resell or other investments in securities (i.e., non-mortgage-related securities). The drivers of the increase in the combined balance are higher near-term cash needs for upcoming maturities and anticipated calls of other debt, and an increase in principal and interest payments received from servicers for unsecuritized mortgage loans owned by us.
|
•
|
Investments in securities
continued to decline as we continued to reduce the less liquid assets in our mortgage-related investments portfolio, partially offset by increases in Treasury securities for upcoming maturities and anticipated calls of other debt.
|
•
|
Mortgage loans, net
increased, driven by an increase in acquisitions of purchase money loans, which resulted from higher volumes of home sales and home price appreciation.
|
•
|
Real estate owned, net
continued to decline as we continued to sell our existing inventory and the pace of new REO acquisitions slowed as our population of seriously delinquent loans declined.
|
•
|
Deferred tax assets, net
declined primarily due to the reduction of deferred differences related to the allowance for loan losses and credit-related items.
|
Freddie Mac 2015 Form 10-K
|
|
28
|
Management's Discussion and Analysis
|
|
Consolidated Balance Sheets Analysis
|
•
|
Debt, net
increased as debt securities of consolidated trusts held by third parties rose as a result of the increase in the acquisition and securitization of mortgage loans in 2015 due to higher volumes of home sales and home price appreciation. This increase in debt securities of consolidated trusts held by third parties was partially offset by declines in other debt as we continued to reduce our indebtedness along with the decline in our mortgage-related investments portfolio.
|
•
|
Total equity
increased as a result of higher comprehensive income in the fourth quarter of 2015 compared to the fourth quarter of 2014 and was partially offset by dividends paid related to the $600 million decline in the Capital Reserve Amount in 2015.
|
Freddie Mac 2015 Form 10-K
|
|
29
|
Management's Discussion and Analysis
|
|
Our Business Segments | Segment Earnings
|
Segment
|
Description
|
Primary Income Drivers
|
Primary Expense Drivers
|
||
Single-family Guarantee
|
Reflects results from our purchase, securitization, and guarantee of single-family loans and the management of single-family mortgage credit risk
|
•
|
Management and guarantee fee income
|
•
|
Credit-related expenses
|
•
|
Administrative expenses
|
||||
Multifamily
|
Reflects results from our investment, securitization, and guarantee activities in multifamily loans and securities, and the management of multifamily mortgage credit risk
|
•
|
Net interest income
|
•
|
Gains and losses on loans
|
•
|
Management and guarantee fee income
|
•
|
Investment gains and losses
|
||
•
|
Derivative gains and losses
|
||||
•
|
Gains and losses on loans
|
•
|
Administrative expenses
|
||
|
•
|
Investment gains and losses
|
•
|
Credit-related expenses
|
|
|
•
|
Derivative gains and losses
|
|
|
|
Investments
|
Reflects results from managing the company’s mortgage-related investments portfolio (excluding Multifamily investments and single-family seriously delinquent loans), treasury function, and interest-rate risk
|
•
|
Net interest income
|
•
|
Other-than-temporary impairments on non-agency mortgage-related securities
|
•
|
Investment gains and losses
|
||||
•
|
Derivative gains and losses
|
||||
|
|
•
|
Investment gains and losses
|
||
|
|
•
|
Derivative gains and losses
|
||
|
|
•
|
Administrative expenses
|
||
All Other
|
Consists of material corporate level activities that are infrequent in nature and based on decisions outside the control of the management of our reportable segments
|
|
N/A
|
|
N/A
|
•
|
We make significant reclassifications among certain line items in our GAAP financial statements to reflect measures of management and guarantee fee income on guarantees and net interest income on investments that are in line with how we manage our business.
|
•
|
We allocate certain revenues and expenses, including certain returns on assets and funding costs, and all administrative expenses to our three reportable segments.
|
•
|
The sum of Segment Earnings for each segment and the All Other category equals GAAP net income (loss) and the sum of comprehensive income (loss) for each segment and the All Other category equals GAAP comprehensive income (loss).
|
Freddie Mac 2015 Form 10-K
|
|
30
|
Management's Discussion and Analysis
|
|
Our Business Segments | Segment Earnings
|
Freddie Mac 2015 Form 10-K
|
|
31
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Providing market leadership by delivering quality offerings, programs, and services to an increasingly diversified customer base and an evolving mortgage market;
|
•
|
Improving the customer experience through continued enhancement of our products, programs, processes, and technology; and
|
•
|
Establishing efficient risk management activities that are appropriate for the expected level of risk.
|
•
|
Developing innovative technology platforms to provide sellers and Freddie Mac with better methods of assessing and managing single-family mortgage credit risk;
|
•
|
Developing and implementing initiatives to reduce taxpayer exposure and offer private investors new and innovative ways to share in the credit risk of the Core single-family book;
|
•
|
Expanding access to mortgage credit in a responsible manner to support our Charter Mission as well as to meet specific mandated goals;
|
•
|
Working with FHFA, Fannie Mae, and Common Securitization Solutions, LLC ("CSS") on the development of a new common securitization platform; and
|
•
|
Implementing the single (common) security initiative for Freddie Mac and Fannie Mae, which is intended to reduce the disparities in trading value between our PCs and Fannie Mae's single-class mortgage-related securities.
|
Freddie Mac 2015 Form 10-K
|
|
32
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2015 Form 10-K
|
|
33
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
PCs -
our primary single-family mortgage securitization and guarantee process involves our issuance of single-class PCs, which are pass-through securities that represent undivided beneficial interests in trusts that hold pools of loans. For our fixed-rate PCs, we guarantee the timely payment of principal and interest. For our ARM PCs, we guarantee the timely payment of the weighted average coupon interest rate for the underlying loans. We also guarantee the full and final payment of principal, but not the timely payment of principal, on ARM PCs.
|
•
|
Guarantor Swap PCs -
we issue most of our PCs in guarantor swap transactions in which our customers provide us with loans in exchange for PCs, as shown in the diagram below:
|
•
|
Cash PCs -
we also issue PCs in transactions in which we purchase performing loans (which we sometimes refer to as a securitization pipeline) and securitize them for retention in our mortgage-related investments portfolio or for sale to third parties, as shown in the diagram below. We also use this process to securitize reperforming loans.
|
Freddie Mac 2015 Form 10-K
|
|
34
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2015 Form 10-K
|
|
35
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Giant PCs -
Giant PCs are resecuritizations of previously issued PCs or Giant PCs. Giant PCs are single-class securities that involve the straight pass through of all of the cash flows of the underlying collateral to holders of the beneficial interests.
|
•
|
Stripped Giant PCs -
Stripped Giant PCs are multiclass securities that are formed by resecuritizing previously issued PCs or Giant PCs and issuing principal-only and interest-only securities backed by the cash flows from the underlying collateral.
|
•
|
REMICs -
REMICs are resecuritizations of previously issued PCs, Giant PCs, Stripped Giant PCs, or REMICs. REMICs are multiclass securities that divide all of the cash flows of the underlying collateral into two or more classes with varying maturities, payment priorities and coupons.
|
•
|
Other securitization products
- From time to time, we issue guaranteed mortgage-related securities collateralized by non-Freddie Mac mortgage-related securities. However, we have not entered into these types of transactions as part of our Single-family Guarantee business in several years. In 2009 and 2010, we entered into transactions under Treasury’s NIBP with HFAs. See Note 2 for further information.
|
Freddie Mac 2015 Form 10-K
|
|
36
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Repeatable and scalable execution with a broad appeal to diversified investors;
|
•
|
Execution at a cost that is economically sensible;
|
•
|
Minimal effect on the TBA market;
|
•
|
Minimize changes required of, and effects on, sellers and servicers by having Freddie Mac serve as the credit manager for investors; and
|
•
|
Avoid or seek to mitigate the risk that our losses are not reimbursed timely and in full.
|
•
|
STACR debt notes
- In this transaction, we create a reference pool of loans from our Core single-family book and an associated securitization structure with notional credit risk positions (e.g., first loss, mezzanine, and senior positions). The notional amounts of the credit risk positions are reduced when certain specified credit events occur on the loans in the reference pool. The notional amounts of the credit risk positions may also be reduced based on scheduled and unscheduled principal payments that occur on the loans in the reference pool.
|
Freddie Mac 2015 Form 10-K
|
|
37
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
ACIS insurance policies
- In this transaction, we purchase insurance policies, typically underwritten by a group of insurers and reinsurers, that provide credit protection for certain specified credit events that occur and are allocated to the non-issued notional credit risk positions of a STACR debt note transaction (i.e., the risk positions that Freddie Mac retains). Under each insurance policy, we pay monthly premiums that are determined based on the outstanding balance of the STACR debt note reference pool. When specific credit events occur, we receive compensation from the insurance policy up to an aggregate limit based on a predefined formula or based on actual losses. We require insurers and reinsurers to partially collateralize their exposure to reduce the risk that we will not be reimbursed for our claims under the policies.
|
•
|
Whole loan securities
- In this transaction, we issue guaranteed senior securities and unguaranteed subordinated securities backed by single-family loans. The unguaranteed subordinated securities will absorb first losses on the related loans.
|
•
|
Seller indemnification agreement
- In this transaction, we enter into an agreement upon loan acquisition with a seller under which the seller will absorb a portion of losses on the related single-family loans in exchange for a fee or a reduction in our management and guarantee fee. The indemnification amount may be fully or partially collateralized.
|
Freddie Mac 2015 Form 10-K
|
|
38
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2015 Form 10-K
|
|
39
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2015 Form 10-K
|
|
40
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Resecuritizing PCs;
|
•
|
Encouraging sellers to pool loans that they deliver to us into PC pools with a larger and more diverse population of loans; and
|
•
|
Influencing the volume and characteristics of loans delivered to us by tailoring our loan eligibility guidelines and by other means.
|
Freddie Mac 2015 Form 10-K
|
|
41
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
There was a significant increase in single-family loan origination volumes in the U.S. in 2015, driven by an increase in refinancing activity as a result of lower average mortgage interest rates.
|
•
|
We expect the volume of home sales in 2016 to grow slightly from 2015.
|
Freddie Mac 2015 Form 10-K
|
|
42
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Single-family serious delinquency rates in the U.S. continued to decline due to macroeconomic factors, such as decreased unemployment rates and continued home price appreciation.
|
•
|
The U.S. single-family mortgage debt outstanding increased in 2015 compared to 2014, which resulted in an increase in the supply of loans available for us to purchase.
|
•
|
As reported by the U.S. Census Bureau, the U.S. homeownership rate was 63.8% in the fourth quarter of 2015, compared to a high point of 69.2% in the fourth quarter of 2004, and the average of 66.2% since 1990.
|
Freddie Mac 2015 Form 10-K
|
|
43
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
We maintain a consistent market presence by providing lenders with a constant source of liquidity for conforming loan products. We funded approximately
12.5 million
single-family homes since 2009 and purchased nearly
1.4 million
HARP loans since the initiative began in 2009, including nearly 45,000 during 2015.
|
•
|
Our loan purchase activity increased significantly in 2015 compared to 2014, due to acquisitions of purchase money loans resulting from higher volumes of home sales and home price appreciation. Our loan purchase activity declined in 2014 to its lowest level since 2000. The decrease in our loan purchase activity in 2014 compared to 2013 was due to decreased refinancing activity driven by higher average mortgage interest rates in 2014.
|
Freddie Mac 2015 Form 10-K
|
|
44
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
We continued working to improve access to affordable mortgage credit, including the introduction of a new loan initiative in March 2015 with a down payment option as low as three percent to help qualified borrowers with limited savings buy a home. We also continue to explore the feasibility of:
|
◦
|
Increasing our purchases of loans securitized by permanently affixed manufactured housing;
|
◦
|
Improving the effectiveness of pre-purchase and early delinquency counseling for borrowers;
|
◦
|
Utilizing alternative credit score models and credit history standards in loan eligibility decisions; and
|
◦
|
Increasing support for first-time home buyers.
|
•
|
We expect our purchase volume in 2016 to be similar to 2015, with HARP activity remaining low during 2016 since the pool of borrowers eligible to participate in the program has declined.
|
Freddie Mac 2015 Form 10-K
|
|
45
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
The Core single-family book grew to
66%
of the single-family credit guarantee portfolio at December 31, 2015. We exclude HARP and other relief refinance loans from the Core single-family book because such loans generally reflect credit risk attributes of the original loans (many of which were originated between 2005 and 2008).
|
Freddie Mac 2015 Form 10-K
|
|
46
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
The HARP and other relief refinance book represented an additional
18%
of the single-family credit guarantee portfolio at
December 31, 2015
.
|
•
|
The Legacy single-family book declined to
16%
of the single-family credit guarantee portfolio at
December 31, 2015
.
|
Freddie Mac 2015 Form 10-K
|
|
47
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Average portfolio Segment Earnings management and guarantee fees increased in 2015 compared to 2014, due to higher amortization of upfront fees, driven by higher loan liquidations resulting from a lower interest rate environment, as well as the acquisition of new loans with higher management and guarantee fee rates.
|
•
|
The difference between the average management and guarantee fee rate charged on new acquisitions and the average portfolio Segment Earnings management and guarantee fee rate, in basis points, reflects different methodologies for recognizing upfront delivery fee income. The average management and guarantee fee rate charged on new acquisitions recognizes upfront delivery fee income over the estimated life of the related loans using our expectations of prepayments and other liquidations, whereas the average portfolio Segment Earnings management and guarantee fee rate recognizes these amounts over the contractual life of the related loans (usually 30 years). In addition, the average portfolio Segment Earnings management and guarantee fee rate reflects an average of our total mortgage portfolio and is not limited to purchases in the applicable year. Loans acquired prior to 2012 have lower contractual management and guarantee fee rates than loans we have acquired since that time.
|
•
|
Management and guarantee fees charged on new acquisitions decreased during 2015, compared to 2014, due to a combination of competitive pricing and increased market-adjusted pricing costs based on the price performance of our PCs relative to Fannie Mae securities.
|
Freddie Mac 2015 Form 10-K
|
|
48
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
|
|
(In billions)
|
|
|
||||||
Senior
|
|
Freddie Mac
$169.4
|
|
Reference Pool
(2)
$179.2
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
|
|
Freddie Mac
$0.4
|
|
ACIS
$1.7
|
|
STACR Debt Notes
$5.6
|
|
|||
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
First
Loss
|
|
Freddie Mac
$1.0
|
|
ACIS
$0.4
|
|
STACR Debt Notes
$0.7
|
|
(1)
|
The amounts represent the UPB upon issuance of STACR debt notes and execution of ACIS transactions.
|
|
|
(In billions)
|
|
|
||||||
Senior
|
|
Freddie Mac
$365.5
|
|
Reference Pool
$384.6
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
|
|
Freddie Mac
$0.9
|
|
ACIS
$3.2
|
|
STACR Debt Notes
$12.0
|
|
|||
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
First
Loss
|
|
Freddie Mac
$1.9
|
|
ACIS
$0.4
|
|
STACR
Debt Notes
$0.7
|
|
•
|
We continued to transfer a portion of credit losses to third-party investors, insurers, and selected sellers through credit risk transfer transactions. In 2015, we transferred a portion of the credit risk associated with $181.2 billion in UPB of loans in our Core single-family book using four types of credit risk transfer transactions. Significant developments in 2015 include completion of the following credit risk transfer transactions:
|
◦
|
STACR debt notes and ACIS transactions that transferred some of the credit risk related to the first loss positions. Prior to 2015, we retained all of the first loss positions of these transactions;
|
◦
|
STACR debt notes and ACIS transactions that allocated credit losses based on actual losses rather than calculated losses.
Five
of our
eight
STACR debt notes transactions completed in 2015 followed this new approach as did
seven
of our
ten
ACIS transactions;
|
Freddie Mac 2015 Form 10-K
|
|
49
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
◦
|
Two whole loan security transactions where we issued
$0.9 billion
in UPB of guaranteed securities and
$0.1 billion
in UPB of unguaranteed subordinated securities; and
|
◦
|
One seller indemnification agreement transaction.
|
•
|
Since 2013, we have completed
34
credit risk transfer transactions that, upon execution of the transaction, covered
$386.6 billion
in principal of loans in our Core single-family book.
|
•
|
The interest and premiums we pay on our issued STACR debt note and ACIS transactions to transfer credit risk effectively reduce the management and guarantee income we earn on the PCs within the respective pools. Our expected management and guarantee fee income on the PCs within the STACR and ACIS reference pools has been effectively reduced by approximately 30%, on average, for transactions executed as of December 31, 2015. The reduction to our overall management and guarantee income could change over time as we continue our credit risk transfer activities or if there are changes in the economic or regulatory environment that impact the cost of executing these transactions.
|
•
|
As of December 31, 2015 there has not been a significant number of loans in our STACR debt note reference pools that have experienced a credit event. As a result of the credit performance of these loans, we have only recognized small write-downs on our STACR debt notes and have begun to make claims for reimbursement of losses under our ACIS transactions.
|
•
|
The 2016 Conservatorship Scorecard sets a goal for us to complete credit risk transfer transactions on at least 90% of the UPB of certain categories of newly acquired single-family loans, such as non-HARP fixed-rate loans with terms greater than 20 years and LTV ratios above 60%.
|
Freddie Mac 2015 Form 10-K
|
|
50
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
We continue to help struggling families retain their homes or otherwise avoid foreclosure through loan workouts, helping approximately
1.2 million
borrowers since 2009. Our loan workout activity has declined over the last several years, along with a decline in the size of our seriously delinquent single-family loan portfolio. One of our loan workout programs, HAMP, terminates in December 2016.
|
•
|
When a home retention solution is not practicable, we require our servicers to pursue foreclosure alternatives, such as short sales, before initiating foreclosure. When foreclosure is unavoidable and we acquire the property as REO, we have helped to stabilize communities by focusing on REO sales to owner-occupants, who have made up
67%
of purchasers since the beginning of 2009.
|
•
|
As part of our strategy to mitigate losses and reduce our holdings of less liquid assets, we sold seriously delinquent loans totaling
$2.9 billion
in UPB during 2015. Of the $7.7 billion in UPB of single-family loans classified as held-for-sale at December 31, 2015,
$5.7 billion
related to loans that were seriously delinquent. We believe selling these loans provides better economic returns than continuing to hold them.
|
•
|
See “Risk Management” for additional information on our loan workout activities.
|
Freddie Mac 2015 Form 10-K
|
|
51
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net interest income (expense)
|
|
$
|
(111
|
)
|
|
$
|
(111
|
)
|
|
$
|
320
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
(431
|
)
|
|
(135
|
)%
|
Benefit (provision) for credit losses
|
|
2,030
|
|
|
(982
|
)
|
|
1,409
|
|
|
3,012
|
|
|
(307
|
)%
|
|
(2,391
|
)
|
|
(170
|
)%
|
|||||
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Management and guarantee fee income
|
|
5,406
|
|
|
4,397
|
|
|
4,397
|
|
|
1,009
|
|
|
23
|
%
|
|
—
|
|
|
—
|
%
|
|||||
Other non-interest income (loss)
|
|
(1,422
|
)
|
|
712
|
|
|
1,162
|
|
|
(2,134
|
)
|
|
(300
|
)%
|
|
(450
|
)
|
|
(39
|
)%
|
|||||
Total non-interest income
|
|
3,984
|
|
|
5,109
|
|
|
5,559
|
|
|
(1,125
|
)
|
|
(22
|
)%
|
|
(450
|
)
|
|
(8
|
)%
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Administrative expense
|
|
(1,285
|
)
|
|
(1,170
|
)
|
|
(1,025
|
)
|
|
(115
|
)
|
|
10
|
%
|
|
(145
|
)
|
|
14
|
%
|
|||||
REO operations (expense) income
|
|
(334
|
)
|
|
(205
|
)
|
|
124
|
|
|
(129
|
)
|
|
63
|
%
|
|
(329
|
)
|
|
(265
|
)%
|
|||||
Other non-interest expense
|
|
(1,445
|
)
|
|
(191
|
)
|
|
(179
|
)
|
|
(1,254
|
)
|
|
657
|
%
|
|
(12
|
)
|
|
7
|
%
|
|||||
Total non-interest expense
|
|
(3,064
|
)
|
|
(1,566
|
)
|
|
(1,080
|
)
|
|
(1,498
|
)
|
|
96
|
%
|
|
(486
|
)
|
|
45
|
%
|
|||||
Segment adjustments
|
|
(254
|
)
|
|
(303
|
)
|
|
(694
|
)
|
|
49
|
|
|
(16
|
)%
|
|
391
|
|
|
(56
|
)%
|
|||||
Segment Earnings before income tax (expense) benefit
|
|
2,585
|
|
|
2,147
|
|
|
5,514
|
|
|
438
|
|
|
20
|
%
|
|
(3,367
|
)
|
|
(61
|
)%
|
|||||
Income tax (expense) benefit
|
|
(807
|
)
|
|
(600
|
)
|
|
282
|
|
|
(207
|
)
|
|
35
|
%
|
|
(882
|
)
|
|
(313
|
)%
|
|||||
Segment Earnings, net of taxes
|
|
1,778
|
|
|
1,547
|
|
|
5,796
|
|
|
231
|
|
|
15
|
%
|
|
(4,249
|
)
|
|
(73
|
)%
|
|||||
Total other comprehensive income (loss), net of tax
|
|
12
|
|
|
(10
|
)
|
|
49
|
|
|
22
|
|
|
(220
|
)%
|
|
(59
|
)
|
|
(120
|
)%
|
|||||
Total comprehensive income
|
|
$
|
1,790
|
|
|
$
|
1,537
|
|
|
$
|
5,845
|
|
|
$
|
253
|
|
|
16
|
%
|
|
$
|
(4,308
|
)
|
|
(74
|
)%
|
•
|
The
benefit for credit losses
in 2015 was primarily due to a reduction of loan loss reserves associated with the reclassification of mortgage loans from held-for-investment to held-for-sale. Excluding the effect of loan reclassifications and other related subsequent activity in 2015 and settlement agreements in 2014, the provision for credit losses decreased compared to 2014 primarily due to decreases in newly impaired loans. The
(provision) for credit losses
in 2014 reflects decreases for both newly impaired loans and settlement agreements with certain sellers to release specified loans from certain repurchase obligations.
|
•
|
Management and guarantee fee income
increased in 2015 primarily due to higher amortization of upfront fees, driven by higher loan liquidations resulting from lower average mortgage interest rates, higher average management and guarantee fee income rates, and an increase in the single-family credit guarantee portfolio.
|
•
|
Other non-interest income
decreased in 2015 primarily due to increased lower-of-cost-or-fair value adjustments on loans that were reclassified from held-to-investment to held-for-sale, fair value losses on STACR debt notes carried at fair value due to an increase in market prices for these notes, as well as higher STACR transaction volumes, and losses on our investment in CSS.
Other non-interest income
decreased in 2014 primarily due to fair value losses on guarantee assets and lower-of-cost-or-fair-value adjustments on loans held-for-sale, compared to gains on guarantee assets in 2013 due to an increase in interest rates during that year.
|
Freddie Mac 2015 Form 10-K
|
|
52
|
Management's Discussion and Analysis
|
|
Our Business Segments | Single-Family Guarantee
|
•
|
Administrative expense
increases resulted, in part, from our investments in our technology to better support our lenders and Freddie Mac's products and programs, as well as the new common securitization platform and the single (common) security initiative.
|
•
|
REO operations expense
increased in 2015 and 2014 compared to the respective prior year. REO property expenses declined in 2015 and 2014, consistent with a decline in REO inventory in each year. However, the REO property expenses were offset to a lesser extent by gains on the disposition of REO properties and recoveries from mortgage insurance, compared to the respective prior year.
|
•
|
Other non-interest expense
increased in 2015 primarily due to property taxes and insurance expense associated with loans reclassified as held-for-sale and expenses related to the allocation of funds to certain housing funds pursuant to the GSE Act during 2015.
|
Freddie Mac 2015 Form 10-K
|
|
53
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Continuing to provide financing to the multifamily mortgage market and expanding our market presence for workforce housing in line with our mission;
|
•
|
Improving our risk-adjusted returns by leveraging private capital in our credit risk transfer transactions; and
|
•
|
Maintaining strong credit and capital management discipline.
|
•
|
Operating in a customer focused manner, in an effort to build value and support the creation of a strong, long-lasting rental housing system;
|
•
|
Identifying new opportunities beyond our existing K Certificate transactions to transfer credit risk to third parties and reduce taxpayer exposure; and
|
•
|
Fostering innovation of products that expand the availability of workforce housing in the marketplace.
|
Freddie Mac 2015 Form 10-K
|
|
54
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
K Certificates
- Our primary business model is to purchase multifamily loans for aggregation and securitization through the issuance of multifamily K Certificates, which allows us to transfer the vast majority of the expected credit losses of the loans to third-party investors. As shown in the diagram below, in a typical K Certificate transaction, we sell multifamily loans to a non-Freddie Mac securitization trust that issues senior and subordinated securities, and simultaneously purchase and place the senior securities into a Freddie Mac securitization trust that issues guaranteed K Certificates. In substantially all of these transactions, we guarantee only the senior securities issued by the Freddie Mac securitization trust and do not issue or guarantee the subordinated securities issued by the non-Freddie Mac securitization trust. As a result, the vast majority of the expected credit risk is sold to the third-party investors in the subordinated securities, thereby reducing our credit risk exposure. We receive a management and guarantee fee in exchange for guaranteeing the K Certificates. Profitability on our K Certificates is evaluated in terms of management and guarantee fee income and gains on the sales of loans. We attempt to maximize our returns by optimizing the combination of gains we earn when we sell the loans for securitization and the management and guarantee fees we will earn over time.
|
•
|
Other securitization products
- We purchase small balance multifamily loans and sell them to a third-party securitization trust in transactions that are similar to our K Certificate transactions and that transfer a portion of the credit risk of the loans to third-party investors. From time to time, we also issue other types of securitization products, including PCs backed by multifamily loans and pass
|
Freddie Mac 2015 Form 10-K
|
|
55
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Other mortgage-related guarantees
- We guarantee mortgage-related assets held by third parties in exchange for management and guarantee fee income without securitizing those assets. For example, we provide guarantees on certain tax-exempt multifamily housing revenue bonds secured by low- and moderate-income multifamily loans.
|
•
|
Mortgage loans -
Our primary business model is to acquire loans for aggregation and then to securitize the loans through the issuance of K Certificates. However, we continue to hold a portfolio of multifamily mortgage loans that we acquired under our prior buy-and-hold investment strategy. This portfolio is declining over time.
|
•
|
Agency mortgage-related securities
- We may purchase or retain a portion of the K Certificates and other types of multifamily securitization products we issue, depending on market conditions, and we may also buy or sell these securities in the secondary market.
|
•
|
Non-Agency mortgage-related securities
- We may purchase a portion of the unguaranteed subordinated securities related to our securitization transactions, depending on market conditions.
|
•
|
CMBS -
We are not currently an active purchaser of CMBS. However, we continue to hold a portfolio of CMBS and other multifamily investment securities that we acquired under our prior buy-and-hold investment strategy. This portfolio is declining over time.
|
Freddie Mac 2015 Form 10-K
|
|
56
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
Freddie Mac 2015 Form 10-K
|
|
57
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Effective rents (i.e., the average rent paid by the tenant over the term of the lease, adjusted for concessions by the landlord and costs borne by the tenant) remain strong, but the rate of increase is expected to moderate in the future, consistent with the rise in vacancy rates. Vacancy rates increased slightly since 2013 from what is likely the cyclical low.
|
•
|
Multifamily property prices have been especially strong, with 13% growth in 2015. Multifamily property price growth may slow from this level with the expected moderation in the rate of effective rent increase, the rising vacancy rate, as well as improving returns for other investment types.
|
Freddie Mac 2015 Form 10-K
|
|
58
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Apartment completions are an indication of the supply of rental housing. Net absorption, which is a measurement of the rate at which available apartments are occupied, is an indication of demand for rental housing.
|
•
|
While supply (indicated by completions) has been on the rise and has driven the increase in vacancies, demand (indicated by net absorption) has also been strong for rental housing in recent periods because of an improving job market and lower homeownership rates. However, in the longer term, the increasing supply may have unfavorable impacts on rental and vacancy rates.
|
•
|
The K Certificate benchmark spread represents the spread of a typical 10-year senior K Certificate over the U.S. swap curve. In 2015, the spread widened due to broad macroeconomic market volatility and uncertainty.
|
•
|
The profitability of our K Certificate transactions (as measured by gains and losses on sales of mortgage loans) is impacted by the change in the K Certificate benchmark spread during the period between loan purchase and execution of the K Certificate transaction. During 2015, spread widening had an adverse effect on K Certificate profitability.
|
Freddie Mac 2015 Form 10-K
|
|
59
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
There was significant growth in the multifamily market during 2015. As reported by the Federal Reserve, total multifamily mortgage debt outstanding was approximately
$1.1 trillion
at September 30, 2015 (the latest available information), representing an increase of
$95.0 billion
(or
10%
) since September 30, 2014, one of the largest annual increases ever reported by the Federal Reserve.
|
•
|
Our share of multifamily mortgage debt outstanding has remained relatively stable over the past several years in the 12-14% range.
|
•
|
Our multifamily delinquency rates during 2015 remained among the lowest in the industry, primarily due to our prior-approval underwriting approach discussed earlier.
|
•
|
We expect continued growth in the multifamily mortgage market due to increasing property prices and new completions, along with favorable investment opportunities. In addition, we expect to maintain our share of multifamily mortgage debt outstanding in 2016.
|
•
|
We expect the credit losses and delinquency rates for the multifamily mortgage portfolio to remain low in the near term.
|
Freddie Mac 2015 Form 10-K
|
|
60
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
We met the 2015 Conservatorship Scorecard goal of maintaining the dollar volume of multifamily new business activity at or below a production cap of $30.0 billion. For purposes of determining our performance under the goal, business activity associated with certain targeted loan types is excluded from this production cap.
|
Freddie Mac 2015 Form 10-K
|
|
61
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
In May 2015, FHFA expanded the affordable housing categories excluded from the production cap in our 2015 scorecard. These revisions enabled us to further support the needs of the workforce housing market across more communities. Based on this guidance, approximately
63%
of our multifamily new business activity during 2015 counted towards the 2015 scorecard production cap, and the remaining
37%
was uncapped.
|
•
|
Nearly 90% of the eligible units we financed during 2015 were affordable to families earning at or below the median income in their area (eligible units are multifamily units that qualify toward our affordable housing goal). We increased our support of workforce housing in the multifamily mortgage market during 2015 through new initiatives, including purchases of manufactured housing community loans and small balance loans.
|
•
|
We expect our overall new business volume to increase in 2016; however, we expect our volume in the capped categories to be at or below the 2016 Conservatorship Scorecard cap of $31.0 billion. We also expect to introduce new initiatives to support liquidity and workforce housing in the multifamily mortgage markets.
|
•
|
We expect the increased competition from other market participants, particularly banking institutions, to continue.
|
Freddie Mac 2015 Form 10-K
|
|
62
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Our Multifamily portfolio grew in 2015 due to an increase in the guarantee portfolio, which was primarily attributable to our securitization of loans in K Certificate transactions. This growth was consistent with the overall increase in multifamily mortgage debt outstanding in the U.S.
|
•
|
Our portfolio of interest-earning assets continued to decline in 2015 as a result of reductions in our unsecuritized loan and mortgage-related securities portfolios, consistent with our plans to reduce our holdings of less liquid assets. The interest earning assets that liquidated had lower net interest yields relative to the average portfolio, resulting in an increase in net interest yields in 2015.
|
•
|
We expect a continued increase in the size of our guarantee portfolio as a result of ongoing K Certificate transactions and a reduction in our unsecuritized loan and mortgage-related security portfolios due to ongoing principal repayments.
|
Freddie Mac 2015 Form 10-K
|
|
63
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
The guarantee portfolio increased in 2015 as a result of our ongoing issuance of K Certificates.
|
•
|
The average management and guarantee fee rate on both the overall guarantee portfolio and on newly issued K Certificates increased in 2015, primarily as a result of increased securitizations of products for which we charge higher fees. We expect the average management and guarantee fee rate charged for new K Certificate issuances in 2016 to be consistent with the rates in 2015.
|
Freddie Mac 2015 Form 10-K
|
|
64
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
The average management and guarantee fee rate charged on K Certificates is generally lower than the average management and guarantee fee rate charged on our other securitization products and other mortgage-related guarantees. The lower management and guarantee fee rate on K Certificates is driven by higher levels of subordination that absorb the vast majority of the expected credit losses.
|
Freddie Mac 2015 Form 10-K
|
|
65
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
In addition to the credit risk we transferred on the K Certificates issued in 2015, we also transferred credit risk associated with
$1.7 billion
of additional loans through other securitization products, such as small balance loan securitizations.
|
•
|
More than 90% of the loans we purchased in 2015 were designated for securitization.
|
•
|
We resecuritized
$3.4 billion
of less liquid non-agency mortgage-related securities, transferring a portion of the credit risk to private investors.
|
•
|
While we expect to use K Certificates as the primary method to transfer credit risk in 2016, we also expect to introduce new initiatives to transfer risk.
|
Freddie Mac 2015 Form 10-K
|
|
66
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
|
|
Year Ended December 31,
|
|
Change 2015 - 2014
|
|
Change 2014 - 2013
|
||||||||||||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net interest income
|
|
$
|
927
|
|
|
$
|
948
|
|
|
$
|
1,186
|
|
|
$
|
(21
|
)
|
|
(2
|
)%
|
|
$
|
(238
|
)
|
|
(20
|
)%
|
Benefit for credit losses
|
|
26
|
|
|
55
|
|
|
218
|
|
|
(29
|
)
|
|
(53
|
)%
|
|
(163
|
)
|
|
(75
|
)%
|
|||||
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Management and guarantee fee income
|
|
339
|
|
|
254
|
|
|
206
|
|
|
85
|
|
|
33
|
%
|
|
48
|
|
|
23
|
%
|
|||||
Gains (losses) on loans
|
|
(93
|
)
|
|
870
|
|
|
(336
|
)
|
|
(963
|
)
|
|
(111
|
)%
|
|
1,206
|
|
|
(359
|
)%
|
|||||
Derivative gains
|
|
372
|
|
|
335
|
|
|
1,281
|
|
|
37
|
|
|
11
|
%
|
|
(946
|
)
|
|
(74
|
)%
|
|||||
Other non-interest income
|
|
17
|
|
|
234
|
|
|
1,203
|
|
|
(217
|
)
|
|
(93
|
)%
|
|
(969
|
)
|
|
(81
|
)%
|
|||||
Total non-interest income
|
|
635
|
|
|
1,693
|
|
|
2,354
|
|
|
(1,058
|
)
|
|
(62
|
)%
|
|
(661
|
)
|
|
(28
|
)%
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Administrative expense
|
|
(325
|
)
|
|
(274
|
)
|
|
(257
|
)
|
|
(51
|
)
|
|
19
|
%
|
|
(17
|
)
|
|
7
|
%
|
|||||
REO operations (expense) income
|
|
(4
|
)
|
|
9
|
|
|
16
|
|
|
(13
|
)
|
|
(144
|
)%
|
|
(7
|
)
|
|
(44
|
)%
|
|||||
Other non-interest expense
|
|
(56
|
)
|
|
(23
|
)
|
|
(24
|
)
|
|
(33
|
)
|
|
143
|
%
|
|
1
|
|
|
(4
|
)%
|
|||||
Total non-interest expense
|
|
(385
|
)
|
|
(288
|
)
|
|
(265
|
)
|
|
(97
|
)
|
|
34
|
%
|
|
(23
|
)
|
|
9
|
%
|
|||||
Segment Earnings before income tax expense
|
|
1,203
|
|
|
2,408
|
|
|
3,493
|
|
|
(1,205
|
)
|
|
(50
|
)%
|
|
(1,085
|
)
|
|
(31
|
)%
|
|||||
Income tax expense
|
|
(376
|
)
|
|
(772
|
)
|
|
(443
|
)
|
|
396
|
|
|
(51
|
)%
|
|
(329
|
)
|
|
74
|
%
|
|||||
Segment Earnings, net of taxes
|
|
827
|
|
|
1,636
|
|
|
3,050
|
|
|
(809
|
)
|
|
(49
|
)%
|
|
(1,414
|
)
|
|
(46
|
)%
|
|||||
Total other comprehensive income (loss), net of tax
|
|
(261
|
)
|
|
(177
|
)
|
|
(1,595
|
)
|
|
(84
|
)
|
|
47
|
%
|
|
1,418
|
|
|
(89
|
)%
|
|||||
Total comprehensive income
|
|
$
|
566
|
|
|
$
|
1,459
|
|
|
$
|
1,455
|
|
|
$
|
(893
|
)
|
|
(61
|
)%
|
|
$
|
4
|
|
|
—
|
%
|
•
|
Net interest income
declined in 2015 compared to 2014 primarily due to a segment allocation in 2015 of debt extinguishment costs related to the transfer of $1.2 billion of seasoned mortgage loans to a consolidated K Certificate trust. This decline was partially offset by higher net interest income in 2015 due to changes in the composition of our multifamily portfolio, as lower yielding legacy loans and securities were replaced with purchases of higher-yielding loans to support future securitizations. The decline in 2014 compared to 2013 was primarily due to lower average multifamily portfolio balances of interest-earning assets.
|
•
|
Benefit for credit losses
declined each year. The credit performance of the multifamily mortgage portfolio remained strong each year and the number of loans subject to a loan loss reserve has declined over time. Loans purchased for securitization are recorded at fair value and are therefore not subject to a loan loss reserve.
|
•
|
Management and guarantee fee income
increased each year, primarily due to higher average multifamily guarantee portfolio balances as a result of ongoing issuances of K Certificates.
|
•
|
Gains (losses) on loans
was a loss in 2015 as loans are sensitive to changes in K Certificate benchmark spreads observed in the market as well as to interest rate-related fair value changes (for which resulting gains (losses) are offset in derivatives gains (losses)). The significant widening of K Certificate benchmark spreads coupled with higher loan purchase and securitization volume resulted in losses on loans in 2015, as compared to gains on loans recognized in 2014 when spreads tightened. The change from losses in 2013 to gains in 2014 was attributable to interest rate-related
|
Freddie Mac 2015 Form 10-K
|
|
67
|
Management's Discussion and Analysis
|
|
Our Business Segments | Multifamily
|
•
|
Derivative gains (losses)
for the Multifamily segment are offset by fair value changes of the loans and investment securities being hedged. As a result, there is no net impact on
total comprehensive income
for the Multifamily segment from fair value changes related to interest rate-related derivatives. The fair value changes of the hedged assets are included in
gains (losses) on loans
,
other non-interest income
and
total other comprehensive income
.
|
•
|
Other non-interest income
and
total other comprehensive loss
(excluding the interest rate-related fair value changes that are offset in derivative gains (losses)) declined each year, primarily due to declining sales of available-for-sale securities where gains had previously been recognized in AOCI. We sold
$1.0 billion
of investment securities in 2015, compared to $2.6 billion during 2014 and $13.6 billion in 2013.
|
Freddie Mac 2015 Form 10-K
|
|
68
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
Managing the company’s mortgage-related investments portfolio, excluding Multifamily segment investments and single-family seriously delinquent loans;
|
•
|
Managing the treasury function for the company, including funding and liquidity; and
|
•
|
Managing interest-rate risk for the company.
|
•
|
Engaging in economically sensible transactions to reduce our less liquid assets, including non-agency mortgage-related securities, and to reduce the balance of our reperforming loans and our performing modified loans;
|
•
|
Managing the mortgage-related investments portfolio’s risk-versus-return profile based on our internal economic capital framework;
|
•
|
Enhancing the liquidity of our issued securities in the secondary mortgage market to support our business needs;
|
•
|
Responding to market opportunities by efficiently funding the company's business activities; and
|
•
|
Managing the company's economic interest-rate risk through the use of derivatives and other debt.
|
•
|
Expanding and improving the delivery of mortgage capital markets services through our cash loan purchase program, in conjunction with the Single-family Guarantee segment.
|
•
|
Agency mortgage-related securities
- We primarily invest in Freddie Mac mortgage-related securities, but may also invest in Fannie Mae and Ginnie Mae mortgage-related securities from time to time. Our activities with respect to this product may include purchases and sales, dollar roll transactions, and structuring activities (e.g., resecuritizing existing agency securities into REMICs and selling some or all of the resulting REMIC tranches).
|
Freddie Mac 2015 Form 10-K
|
|
69
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
Non-agency mortgage-related securities
- We generally no longer purchase non-agency mortgage-related securities, but continue to have a large portfolio of non-agency mortgage-related securities that we acquired in prior years. We are working, in some cases in conjunction with other investors, to mitigate or recover losses we recognized in prior years. In recent years, we and FHFA reached settlements with a number of institutions. Lawsuits against other institutions are currently pending. Our activities with respect to this product are primarily sales but could include other disposition strategies in the future.
|
•
|
Single-family unsecuritized loans
- Single-family unsecuritized loans are classified into three categories:
|
◦
|
Loans acquired through our cash loan purchase program that are awaiting securitization;
|
◦
|
Reperforming loans and performing modified loans; and
|
◦
|
Seriously delinquent loans that we have removed from PC pools (this loan category is managed by both the Investments and Single-family Guarantee segments, but is included in the Single-family Guarantee segment's investment portfolio and financial results).
|
•
|
Non-mortgage-related assets
- We maintain a portfolio consisting primarily of cash, Treasury securities, and securities purchased under agreements to resell, principally for short-term liquidity management. This portfolio also includes cash invested on behalf of our consolidated trusts and cash pledged to us under various agreements.
|
•
|
Liquid
: single-class and multi-class agency securities, excluding certain structured agency securities collateralized by non-agency mortgage-related securities;
|
•
|
Securitization Pipeline
: performing single-family loans purchased for cash and primarily held for a short period until securitized, with the resulting Freddie Mac issued securities being sold or retained; and
|
•
|
Less Liquid:
assets that are less liquid than agency securities and loans in the securitization pipeline (e.g., reperforming loans and performing modified loans and non-agency mortgage-related securities).
|
Freddie Mac 2015 Form 10-K
|
|
70
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
Discount Notes and Reference Bills
- We issue short-term instruments with maturities of one year or less. These products are generally sold on a discounted basis, paying principal only at maturity. Reference Bills are auctioned to dealers on a regular schedule, while discount notes are issued in response to investor demand and our cash needs.
|
•
|
Medium-term Notes
-
We issue a variety of fixed-rate and variable-rate medium-term notes, including callable and non-callable fixed-rate securities, and zero-coupon securities, with various maturities.
|
•
|
Reference Notes Securities
-
Reference Notes securities are non-callable fixed-rate securities, which we currently issue with original maturities greater than two years.
|
Freddie Mac 2015 Form 10-K
|
|
71
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
Freddie Mac 2015 Form 10-K
|
|
72
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
We primarily use LIBOR-based derivatives and fixed-rate debt to hedge our interest rate risk. The mortgage-related investments portfolio's exposure to interest rate risk is calculated by our models that project loan and security cash flows over a variety of scenarios. For additional information on our exposure to interest rate risk, see "Risk Management - Interest-Rate Risk and Other Market Risks."
|
•
|
Changes in interest rates affect the fair value of our derivatives. Our primary derivative instruments are interest-rate swaps, including pay-fixed and receive-fixed interest-rate swaps. With a pay-fixed interest-rate swap, as interest rates decline, we recognize derivative losses. Conversely, as interest
|
Freddie Mac 2015 Form 10-K
|
|
73
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
As our derivative portfolio is referenced to different maturity terms along the yield curve, a change in the shape of the yield curve (flattening or steepening) will also affect the fair value of our derivatives.
|
•
|
The Federal Reserve decided in December 2015 to begin raising short-term interest rates but committed to a measured pace of monetary tightening. As a result, shorter-term interest rates, including the 3-month LIBOR rates, increased in December 2015. However, the magnitude and timing of the impact of the Federal Reserve’s action on mortgage and other longer-term rates is uncertain.
|
Freddie Mac 2015 Form 10-K
|
|
74
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
(in millions)
|
Liquid
|
|
Securiti-zation Pipeline
|
|
Less Liquid
|
|
Total
|
|
Liquid
|
|
Securiti-zation Pipeline
|
|
Less Liquid
|
|
Total
|
||||||||||||||||
Mortgage investments portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Single-family unsecuritized loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Performing loans
|
$
|
—
|
|
|
$
|
10,041
|
|
|
$
|
—
|
|
|
$
|
10,041
|
|
|
$
|
—
|
|
|
$
|
7,497
|
|
|
$
|
—
|
|
|
$
|
7,497
|
|
Reperforming loans and performing modified loans
|
—
|
|
|
—
|
|
|
67,036
|
|
|
67,036
|
|
|
—
|
|
|
—
|
|
|
75,281
|
|
|
75,281
|
|
||||||||
Total single-family unsecuritized loans
|
—
|
|
|
10,041
|
|
|
67,036
|
|
|
77,077
|
|
|
—
|
|
|
7,497
|
|
|
75,281
|
|
|
82,778
|
|
||||||||
Freddie Mac mortgage-related securities
|
135,869
|
|
|
—
|
|
|
6,076
|
|
|
141,945
|
|
|
150,852
|
|
|
—
|
|
|
7,363
|
|
|
158,215
|
|
||||||||
Non-agency mortgage-related securities
|
—
|
|
|
—
|
|
|
27,754
|
|
|
27,754
|
|
|
—
|
|
|
—
|
|
|
44,230
|
|
|
44,230
|
|
||||||||
Non-Freddie Mac agency mortgage-related securities
|
12,958
|
|
|
—
|
|
|
—
|
|
|
12,958
|
|
|
16,341
|
|
|
—
|
|
|
—
|
|
|
16,341
|
|
||||||||
Total - Mortgage investments portfolio
|
$
|
148,827
|
|
|
$
|
10,041
|
|
|
$
|
100,866
|
|
|
$
|
259,734
|
|
|
$
|
167,193
|
|
|
$
|
7,497
|
|
|
$
|
126,874
|
|
|
$
|
301,564
|
|
Non-mortgage-related assets portfolio
|
100,913
|
|
|
—
|
|
|
—
|
|
|
100,913
|
|
|
78,040
|
|
|
—
|
|
|
—
|
|
|
78,040
|
|
||||||||
Total Investments Portfolio
|
$
|
249,740
|
|
|
$
|
10,041
|
|
|
$
|
100,866
|
|
|
$
|
360,647
|
|
|
$
|
245,233
|
|
|
$
|
7,497
|
|
|
$
|
126,874
|
|
|
$
|
379,604
|
|
•
|
Consistent with our efforts to improve the overall liquidity of our mortgage investments portfolio, our new asset acquisitions have almost entirely consisted of purchases of agency mortgage-related securities and loans awaiting securitization into PCs. During 2015, the percentage of our less liquid assets relative to our total mortgage investments portfolio declined 3.3% to 38.8%.
|
•
|
We expect to reduce the balance of our less liquid assets through a combination of pay-downs, securitizations, and sales.
|
Freddie Mac 2015 Form 10-K
|
|
75
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
The average balance of the mortgage-related securities that we manage declined by 10.3% during 2015 compared to 2014, consistent with the company's efforts to comply with the mortgage-related investments portfolio limits. The decline in the balance of our mortgage-related securities was primarily due to pay-downs of certain agency mortgage-related securities and pay-downs and sales of certain non-agency mortgage-related securities.
|
•
|
The average balance of the single-family unsecuritized mortgage loans that we manage declined by 4.6% during 2015 compared to 2014, primarily due to the securitization of certain reperforming loans and performing modified loans.
|
•
|
The average balance of the non-mortgage-related assets that we manage will fluctuate period to period based on our liquidity needs, investment strategy, and investment returns. This portfolio reflects our investments for operating purposes as well as the restricted assets that we hold and invest on behalf of consolidated trusts and cash that has been pledged to us under various agreements.
|
•
|
Net interest yield declined 29 basis points during 2015, primarily due to a decline in the average yield earned from the mortgage-related assets that we manage. This decline was primarily driven by the pay-down of certain higher-yielding agency securities. Although we acquired additional agency
|
Freddie Mac 2015 Form 10-K
|
|
76
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
We expect our net interest yield and average investments portfolio balance to continue to decline in 2016 as we manage the size of our mortgage-related assets.
|
Freddie Mac 2015 Form 10-K
|
|
77
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
Since 2013, we have focused on reducing, in an economically sensible manner, our holdings of certain less liquid assets, including reperforming and performing modified single-family loans and non-agency mortgage-related securities. Our principal disposition strategies for our less liquid assets include securitizations and sales.
|
Freddie Mac 2015 Form 10-K
|
|
78
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Discount notes and Reference Bills:
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
$
|
134,670
|
|
|
$
|
137,767
|
|
|
$
|
117,930
|
|
Issuances
|
|
427,964
|
|
|
217,717
|
|
|
293,350
|
|
|||
Maturities
|
|
(458,546
|
)
|
|
(220,747
|
)
|
|
(273,513
|
)
|
|||
Other
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
|||
Ending balance
|
|
104,088
|
|
|
134,670
|
|
|
137,767
|
|
|||
|
|
|
|
|
|
|
||||||
Callable debt:
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
107,070
|
|
|
108,391
|
|
|
102,908
|
|
|||
Issuances
|
|
128,612
|
|
|
66,128
|
|
|
69,738
|
|
|||
Repurchases
|
|
—
|
|
|
(2,592
|
)
|
|
(1,879
|
)
|
|||
Calls
|
|
(124,435
|
)
|
|
(61,288
|
)
|
|
(59,557
|
)
|
|||
Maturities
|
|
(3,572
|
)
|
|
(3,563
|
)
|
|
(2,816
|
)
|
|||
Other
|
|
—
|
|
|
(6
|
)
|
|
(3
|
)
|
|||
Ending balance
|
|
107,675
|
|
|
107,070
|
|
|
108,391
|
|
|||
|
|
|
|
|
|
|
||||||
Non-callable debt:
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
206,393
|
|
|
264,080
|
|
|
331,634
|
|
|||
Issuances
|
|
42,520
|
|
|
21,595
|
|
|
45,353
|
|
|||
Repurchases
|
|
(397
|
)
|
|
(1,413
|
)
|
|
(197
|
)
|
|||
Maturities
|
|
(54,144
|
)
|
|
(77,869
|
)
|
|
(112,731
|
)
|
|||
Other
|
|
—
|
|
|
—
|
|
|
21
|
|
|||
Ending balance
|
|
194,372
|
|
|
206,393
|
|
|
264,080
|
|
|||
|
|
|
|
|
|
|
||||||
Total other debt
|
|
$
|
406,135
|
|
|
$
|
448,133
|
|
|
$
|
510,238
|
|
•
|
We fund our business activities primarily through the issuance of unsecured other short-term (e.g., discount notes and Reference Bills), medium-term and long-term debt. The outstanding balance of our other debt declined during 2015, as we required less debt to fund our business operations, as the balance of our mortgage-related investments portfolio continued to decline.
|
•
|
During 2015, we began to utilize overnight discount notes as a more cost effective tool to manage our intra-day liquidity needs. This resulted in an increase in both issuances and pay-offs of our short-term other debt.
|
•
|
Issuances and calls of our longer-term callable debt increased during 2015, as we refinanced more of our outstanding callable debt due to the low interest rate environment. See "Market Conditions" for additional discussion of interest rates.
|
Freddie Mac 2015 Form 10-K
|
|
79
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
As our long-term debt spreads remained high in 2015, we continued to rely on short-term and medium-term debt issuances to fund our business. Short-term debt as a percentage of total other debt has remained relatively flat at 41.3% in 2015, down 1.3% and 1.5% from 2014 and 2013, respectively.
|
•
|
Our short-term debt issuances provide us with overall lower funding costs relative to longer-term debt and greater flexibility as we reduce our mortgage-related investments portfolio. However, in recent years, we have witnessed a significant increase in FHLB short-term debt issuances and outstanding balances. Increased competition from the FHLBs with respect to short-term debt issuances may have caused our short-term debt spreads to increase during the last quarter of 2015.
|
•
|
During 2015, spreads on our callable debt were favorable relative to our non-callable medium-term and long-term debt. Furthermore, our callable debt provides us with flexibility in the event that our liquidity condition changes. As a result, we issued more callable debt during 2015 compared to 2014. As of December 31, 2015, $93 billion of the outstanding $108 billion of callable debt may be called in 2016.
|
Freddie Mac 2015 Form 10-K
|
|
80
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
|
Year Ended December 31,
|
Change 2015 - 2014
|
Change 2014 - 2013
|
||||||||||||||||
(dollars in millions)
|
2015
|
2014
|
2013
|
$
|
%
|
$
|
%
|
||||||||||||
Net interest income
|
$
|
1,734
|
|
$
|
2,966
|
|
$
|
3,525
|
|
$
|
(1,232
|
)
|
(42
|
)%
|
$
|
(559
|
)
|
(16
|
)%
|
Non-interest income:
|
|
|
|
|
|
|
|
||||||||||||
Net impairment of available-for-sale securities recognized in earnings
|
420
|
|
(140
|
)
|
(974
|
)
|
560
|
|
(400
|
)
|
834
|
|
(86
|
)
|
|||||
Derivative gains (losses)
|
(70
|
)
|
(5,158
|
)
|
5,543
|
|
5,088
|
|
(99
|
)
|
(10,701
|
)
|
(193
|
)
|
|||||
Gains (losses) on trading securities
|
(737
|
)
|
(276
|
)
|
(1,466
|
)
|
(461
|
)
|
167
|
|
1,190
|
|
(81
|
)
|
|||||
Non-agency mortgage-related securities settlements
|
65
|
|
6,084
|
|
5,501
|
|
(6,019
|
)
|
(99
|
)
|
583
|
|
|
||||||
Other non-interest income
|
3,614
|
|
2,797
|
|
3,401
|
|
817
|
|
29
|
|
(604
|
)
|
(18
|
)
|
|||||
Total non-interest income
|
3,292
|
|
3,307
|
|
12,005
|
|
(15
|
)
|
—
|
|
(8,698
|
)
|
(72
|
)
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
||||||||||||
Administrative expense
|
(317
|
)
|
(437
|
)
|
(523
|
)
|
120
|
|
(27
|
)
|
86
|
|
(16
|
)
|
|||||
Other non-interest (expense) income
|
(4
|
)
|
(6
|
)
|
349
|
|
2
|
|
(33
|
)
|
(355
|
)
|
(102
|
)
|
|||||
Total non-interest expense
|
(321
|
)
|
(443
|
)
|
(174
|
)
|
122
|
|
(28
|
)
|
(269
|
)
|
155
|
|
|||||
Segment adjustments
|
781
|
|
635
|
|
1,037
|
|
146
|
|
23
|
|
(402
|
)
|
(39
|
)
|
|||||
Segment Earnings before income tax expense
|
5,486
|
|
6,465
|
|
16,393
|
|
(979
|
)
|
(15
|
)
|
(9,928
|
)
|
(61
|
)
|
|||||
Income tax expense
|
(1,715
|
)
|
(1,945
|
)
|
(463
|
)
|
230
|
|
(12
|
)
|
(1,482
|
)
|
320
|
|
|||||
Segment Earnings, net of taxes
|
3,771
|
|
4,520
|
|
15,930
|
|
(749
|
)
|
(17
|
)
|
(11,410
|
)
|
(72
|
)
|
|||||
Total other comprehensive income (loss), net of tax
|
(356
|
)
|
1,951
|
|
4,357
|
|
(2,307
|
)
|
(118
|
)
|
(2,406
|
)
|
(55
|
)
|
|||||
Total comprehensive income
|
$
|
3,415
|
|
$
|
6,471
|
|
$
|
20,287
|
|
$
|
(3,056
|
)
|
(47
|
)%
|
$
|
(13,816
|
)
|
(68
|
)%
|
•
|
Net interest income
declined in 2015 and 2014, primarily due to the continued reduction in the balance of our mortgage-related assets. The decline in our mortgage-related assets balance during 2015 was due to pay-downs and sales and other active dispositions.
|
•
|
Net impairment of available-for-sale securities recognized in earnings
was in a net recovery position during 2015 compared to a net loss position in 2014, primarily due to the accretion of previously recognized other-than-temporary impairments exceeding new other-than-temporary impairments. Net impairment of available-for-sale securities recognized in earnings declined during 2014 compared to 2013, primarily due to a larger amount of accretion being recognized in 2014 and lower new other-than-temporary impairments.
|
•
|
Changes in
derivative gains (losses)
primarily resulted from changes in longer-term interest rates. Longer-term interest rates declined in both 2015 and 2014, while interest rates increased during
|
Freddie Mac 2015 Form 10-K
|
|
81
|
Management's Discussion and Analysis
|
|
Our Business Segments | Investments
|
•
|
The
losses on trading securities
during all periods were primarily due to the movement of securities in an unrealized gain position towards maturity. The losses on trading securities in 2015 were larger than 2014, as a result of agency spreads widening in 2015 compared to tightening in 2014. The losses on trading securities in 2013 were primarily driven by increases in longer-term interest rates.
|
•
|
Non-agency mortgage-related securities settlements
declined significantly during 2015 compared to 2014, as a majority of our non-agency mortgage-related securities litigation settled during 2014 and 2013. We continue to have ongoing litigation with respect to certain other non-agency mortgage-related securities. In 2015, we entered into one small settlement to resolve a claim with respect to certain non-agency mortgage-related securities that we hold, while we reached settlements with 10 institutions during 2014. Income from the settlement of non-agency mortgage-related securities litigation was significant during 2014, however it was relatively flat compared to 2013.
|
•
|
Other non-interest income
increased during 2015 compared to 2014, primarily due to an increase in the amortization of basis adjustments associated with debt securities of consolidated trusts. This increase was a result of higher prepayment rates during 2015 compared to 2014. Other non-interest income decreased during 2014 compared to 2013, primarily due to a decrease in the amortization of basis adjustments associated with debt securities of consolidated trusts, as a result of slower prepayment rates. See "Key Economic Indicators" for a discussion of mortgage interest rates, which are generally correlated to the amount of refinance activity.
|
•
|
Income tax expense
decreased during 2015 compared to 2014, as result of lower Segment Earnings and a relatively flat effective tax rate (see Note 11). Income tax expense increased during 2014 compared to 2013, as a result of a full year of income tax expense in 2014. In 2013, we released the valuation allowance against our net deferred tax assets, creating less income tax expense for the year.
|
•
|
Other comprehensive income
was a loss during 2015 compared to income during 2014, primarily due to less spread tightening for our non-agency mortgage-related securities and less impairment reclassifications from AOCI to earnings. The decrease in other comprehensive income during 2014 compared to 2013 was primarily due to less spread tightening for our non-agency mortgage-related securities, partially offset by a flattening of the yield curve during 2014. Other comprehensive income in all periods reflects the reversals of unrealized losses due to the accretion of other-than-temporary impairments in earnings and the reclassification of unrealized gains and losses related to available-for-sale securities that were sold during the respective periods.
|
Freddie Mac 2015 Form 10-K
|
|
82
|
Management's Discussion and Analysis
|
|
Our Business Segments | All Other
|
|
Year Ended December 31,
|
|
Change 2015-2014
|
|
Change 2014-2013
|
||||||||||||||||||||
(in millions)
|
2015
|
|
2014
|
|
2013
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Comprehensive income (loss) - All Other
|
$
|
28
|
|
|
$
|
(41
|
)
|
|
$
|
24,013
|
|
|
$
|
69
|
|
|
(168
|
)%
|
|
$
|
(24,054
|
)
|
|
(100
|
)%
|
Freddie Mac 2015 Form 10-K
|
|
83
|
Management's Discussion and Analysis
|
|
Risk Management | Overview
|
Freddie Mac 2015 Form 10-K
|
|
84
|
Management's Discussion and Analysis
|
|
Risk Management | Overview
|
|
Lines of Defense
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
First Line
Business Units
|
|
|
Second Line
ERM Division
Compliance Division
|
|
|
Third Line
Internal Audit Division
|
RISK
CATEGORY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
|
|
Identify, assess, measure and manage risk within established credit policy guidelines
Establish key risk indicators and various other metrics
|
|
|
Establish credit risk appetite, policy, limits, monitoring metrics and credit risk decision review process
|
|
|
Evaluates the design adequacy, operational effectiveness, and efficiency of governance, risk management, and control processes, including, but not limited to, the manner in which the first and second lines of defense achieve risk management and control objectives
|
|
|
|
|
|
|
|
|
|
Interest Rate and Other Market Risks
|
|
Identify, assess, measure and manage duration gap, PMVS, and other measures on a daily basis, including spread risk
Establish key risk indicators and various other metrics
|
|
|
Establish interest rate and other market risks appetite, policy, limits, monitoring metrics and assess measurement methodologies
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
Identify, assess, measure and manage cash balances and short-and long-term liquidity needs on a daily basis
Establish key risk indicators and various other metrics
|
|
|
Establish liquidity risk appetite, policy, limits, monitoring metrics and assess measurement methodologies
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational
|
|
Identify, assess, measure and manage risk, while establishing and implementing operational processes and controls
Establish key risk indicators and various other metrics
|
|
|
Establish operational risk appetite, policy, limits, monitoring metrics and evaluate loss event data and perform root cause analysis and testing
|
|
|
Freddie Mac 2015 Form 10-K
|
|
85
|
Management's Discussion and Analysis
|
|
Risk Management | Overview
|
•
|
Revising our integrated enterprise risk management framework to enable us to place more focus on high risk business processes and activities; and
|
•
|
Leveraging our enterprise risk management framework to begin implementation of a redesigned, enhanced, and still maturing three-lines-of-defense methodology.
|
Freddie Mac 2015 Form 10-K
|
|
86
|
Management's Discussion and Analysis
|
|
Risk Management | Overview
|
Freddie Mac 2015 Form 10-K
|
|
87
|
Management's Discussion and Analysis
|
|
Risk Management | Overview
|
Freddie Mac 2015 Form 10-K
|
|
88
|
Management's Discussion and Analysis
|
|
Risk Management | Credit Risk
|
•
|
Single-family mortgage (SF) credit risk
, through our ownership or guarantee of loans in the single-family credit guarantee portfolio;
|
•
|
Multifamily mortgage (MF) credit risk
, through our ownership or guarantee of loans in the multifamily mortgage portfolio; and
|
•
|
Mortgage-related securities (MRS) credit risk
, through our ownership of non-Freddie Mac mortgage-related securities in the mortgage-related investments portfolio.
|
Freddie Mac 2015 Form 10-K
|
|
89
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
•
|
Maintaining policies and procedures for new business activity, including prudent underwriting standards;
|
•
|
Offering private investors new and innovative ways to share in the credit risk of the Core single-family book;
|
•
|
Monitoring loan performance and characteristics for the single-family credit guarantee portfolio and individual sellers and servicers;
|
•
|
Engaging in loss mitigation activities; and
|
•
|
Managing foreclosure and REO activities.
|
Freddie Mac 2015 Form 10-K
|
|
90
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
•
|
Loans with 36 months (12 months for relief refinance loans) of consecutive, on-time payments after purchase, subject to certain exclusions;
|
•
|
Loans that have established an acceptable payment history; and
|
•
|
Loans that have satisfactorily completed a quality control review.
|
Freddie Mac 2015 Form 10-K
|
|
91
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
|||||||||||||||
(dollars in millions)
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|||||||||
30-year or more amortizing fixed-rate
|
|
$
|
262,209
|
|
|
75
|
%
|
|
$
|
192,458
|
|
|
75
|
%
|
|
$
|
287,773
|
|
|
68
|
%
|
20-year amortizing fixed-rate
|
|
16,470
|
|
|
5
|
|
|
8,677
|
|
|
4
|
|
|
21,658
|
|
|
5
|
|
|||
15-year amortizing fixed-rate
|
|
58,958
|
|
|
17
|
|
|
38,200
|
|
|
15
|
|
|
97,025
|
|
|
23
|
|
|||
Adjustable-rate
|
|
12,760
|
|
|
3
|
|
|
15,711
|
|
|
6
|
|
|
16,007
|
|
|
4
|
|
|||
FHA/VA and other governmental
|
|
163
|
|
|
—
|
|
|
207
|
|
|
—
|
|
|
279
|
|
|
—
|
|
|||
Total
|
|
$
|
350,560
|
|
|
100
|
%
|
|
$
|
255,253
|
|
|
100
|
%
|
|
$
|
422,742
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Percentage of purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
With credit enhancements
|
|
|
|
23
|
%
|
|
|
|
25
|
%
|
|
|
|
17
|
%
|
||||||
Detached/townhome property type
|
|
|
|
92
|
%
|
|
|
|
92
|
%
|
|
|
|
93
|
%
|
||||||
Primary residence
|
|
|
|
90
|
%
|
|
|
|
88
|
%
|
|
|
|
88
|
%
|
||||||
Loan purpose:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Purchase
|
|
|
|
44
|
%
|
|
|
|
52
|
%
|
|
|
|
27
|
%
|
||||||
Cash-out refinance
|
|
|
|
21
|
%
|
|
|
|
17
|
%
|
|
|
|
16
|
%
|
||||||
Other refinance
|
|
|
|
35
|
%
|
|
|
|
31
|
%
|
|
|
|
57
|
%
|
Freddie Mac 2015 Form 10-K
|
|
92
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
|
2015
|
|
2014
|
||||||||||||||||||
(UPB in millions)
|
|
UPB
|
|
Loan Count
|
|
Average
Loan Size
|
|
UPB
|
|
Loan Count
|
|
Average Loan Size
|
||||||||||
Above 125% Original LTV
|
|
$
|
569
|
|
|
3,766
|
|
|
$
|
151,000
|
|
|
$
|
1,439
|
|
|
8,794
|
|
|
$
|
164,000
|
|
Above 100% to 125% Original LTV
|
|
2,043
|
|
|
11,784
|
|
|
$
|
173,000
|
|
|
4,295
|
|
|
24,113
|
|
|
$
|
178,000
|
|
||
Above 80% to 100% Original LTV
|
|
4,938
|
|
|
28,999
|
|
|
$
|
170,000
|
|
|
8,356
|
|
|
49,340
|
|
|
$
|
169,000
|
|
||
80% and below Original LTV
|
|
11,980
|
|
|
85,677
|
|
|
$
|
140,000
|
|
|
13,204
|
|
|
96,409
|
|
|
$
|
137,000
|
|
||
Total
|
|
$
|
19,530
|
|
|
130,226
|
|
|
$
|
150,000
|
|
|
$
|
27,294
|
|
|
178,656
|
|
|
$
|
153,000
|
|
•
|
Primary mortgage insurance
- Most of our loans with LTV ratios above 80% are protected by primary mortgage insurance. Primary mortgage insurance provides loan-level protection against default up to a specified amount and is typically paid for by the borrower. Generally, an insured loan must be in default and the borrower’s interest in the underlying property must have been extinguished, such as through a short sale or foreclosure, before a claim can be filed under a primary mortgage insurance policy. The mortgage insurer has a prescribed period of time within which to process a claim and make a determination as to its validity and amount.
|
•
|
Seller indemnification agreement -
An agreement with a seller upon loan acquisition under which the seller will absorb a portion of the losses on the related single-family loans in exchange for a fee or a guarantee fee reduction. The indemnification amount may be fully or partially collateralized.
|
•
|
Lender recourse and indemnification agreements -
Require a lender to repurchase a loan upon default or to reimburse us for realized credit losses. Lender recourse and lender indemnification agreements are entered into as an alternative to requiring primary mortgage insurance or in exchange for a lower management and guarantee fee. We have not used lender recourse or lender indemnification agreements on a widespread basis in recent years.
|
•
|
Pool insurance -
Provides insurance on a group of loans up to a stated aggregate loss limit. We have not purchased pool insurance policies since 2008, and the majority of our pool insurance policies will expire in the next five years.
|
•
|
STACR debt notes -
Are unsecured debt obligations. We issue STACR debt notes related to certain notional credit risk positions to third-party investors. We make payments of principal and interest on the issued notes. The amount of principal that we are required to pay the STACR debt note investors is linked to the credit performance of certain loans (referred to as a reference pool) that we have
|
Freddie Mac 2015 Form 10-K
|
|
93
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
•
|
ACIS insurance policies -
Provide credit protection on a portion of the non-issued notional credit risk positions we retain in a STACR debt note transaction. We receive compensation from the insurance policy up to an aggregate limit when specified credit events occur.
|
•
|
Whole loan security -
We issue guaranteed senior securities and unguaranteed subordinated securities backed by certain single-family loans that we purchased previously. The unguaranteed subordinated securities will absorb first losses on the related loans. We retain a portion of the subordinated securities.
|
|
|
As of December 31,
|
|||||||||||||||
|
|
2015
|
|
2014
|
2013
|
||||||||||||
(Percentage of portfolio based on UPB)
|
|
% of Portfolio
|
|
Serious Delinquency Rate
|
|
% of Portfolio
|
|
Serious Delinquency Rate
|
% of Portfolio
|
|
Serious Delinquency Rate
|
||||||
Non-credit-enhanced
|
|
70
|
%
|
|
1.30
|
%
|
|
77
|
%
|
|
1.74
|
%
|
83
|
%
|
|
2.09
|
%
|
Credit-enhanced:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Primary mortgage insurance
|
|
15
|
%
|
|
2.06
|
%
|
|
14
|
%
|
|
3.10
|
%
|
12
|
%
|
|
4.40
|
%
|
Other
|
|
20
|
%
|
|
0.58
|
%
|
|
12
|
%
|
|
1.21
|
%
|
5
|
%
|
|
3.66
|
%
|
Total
|
|
N/A
|
|
|
1.32
|
%
|
|
N/A
|
|
|
1.88
|
%
|
N/A
|
|
|
2.39
|
%
|
Freddie Mac 2015 Form 10-K
|
|
94
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
As of December 31, 2015
|
|||||||||||||||||
(dollars in millions)
|
|
Total Current UPB
|
|
Total Protected UPB
|
|
Coverage Remaining
|
|
Collateralized Coverage Remaining
(1)
|
|
Percentage of Coverage Remaining Provided By Credit Risk Transfer Transactions
(2)
|
|||||||||
Core single-family book
|
|
$
|
1,128,732
|
|
|
$
|
441,426
|
|
|
$
|
69,217
|
|
|
$
|
13,015
|
|
|
23
|
%
|
HARP and other relief refinance book
|
|
302,564
|
|
|
33,900
|
|
|
9,272
|
|
|
—
|
|
|
—
|
%
|
||||
Legacy single-family book
|
|
270,591
|
|
|
36,867
|
|
|
11,281
|
|
|
—
|
|
|
—
|
%
|
||||
Total
|
|
$
|
1,701,887
|
|
|
$
|
512,193
|
|
|
$
|
89,770
|
|
|
$
|
13,015
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
As of December 31, 2014
|
|||||||||||||||||
(dollars in millions)
|
|
Total Current UPB
|
|
Total Protected UPB
|
|
Coverage Remaining
|
|
Collateralized Coverage Remaining
(1)
|
|
Percentage of Coverage Remaining Provided By Credit Risk Transfer Transactions
(2)
|
|||||||||
Core single-family book
|
|
$
|
994,454
|
|
|
$
|
300,379
|
|
|
$
|
50,350
|
|
|
$
|
6,011
|
|
|
13
|
%
|
HARP and other relief refinance book
|
|
331,059
|
|
|
37,804
|
|
|
10,339
|
|
|
—
|
|
|
—
|
%
|
||||
Legacy single-family book
|
|
339,609
|
|
|
48,149
|
|
|
14,626
|
|
|
—
|
|
|
—
|
%
|
||||
Total
|
|
$
|
1,665,122
|
|
|
$
|
386,332
|
|
|
$
|
75,315
|
|
|
$
|
6,011
|
|
|
8
|
%
|
(1)
|
Collateralized coverage includes cash received by Freddie Mac upon issuance of STACR debt notes and unguaranteed whole loan securities, as well as cash and securities pledged for our benefit. All collateralized coverage relates to credit risk transfer transactions in the Core single-family book.
|
(2)
|
Credit risk transfer transactions include STACR debt notes, ACIS insurance policies, seller indemnification agreements, and whole loan securities. The substantial majority of single-family loans covered by these transactions were acquired after 2012.
|
Freddie Mac 2015 Form 10-K
|
|
95
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
(dollars in millions)
|
|
As of December 31, 2015
|
|
|
|
|
|
|
|
|
|||||||||||
UPB of loans covered by STACR debt notes and ACIS insurance policies
|
|
$
|
328,872
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Performance Under Home Price Scenarios at December 31, 2015
|
|||||||||||||||||||
|
|
Above Average Home Price Appreciation
|
|
Moderate Home Price Appreciation
|
|
Severe Home Price Depreciation
|
|||||||||||||||
|
|
Amount
|
|
bps
|
|
Amount
|
|
bps
|
|
Amount
|
|
bps
|
|||||||||
Estimated credit losses
|
|
$
|
199
|
|
|
6
|
|
|
$
|
1,431
|
|
|
44
|
|
|
$
|
10,679
|
|
|
325
|
|
Estimated recoveries from STACR debt notes and ACIS insurance policies
|
|
$
|
66
|
|
|
2
|
|
|
$
|
507
|
|
|
15
|
|
|
$
|
7,993
|
|
|
243
|
|
Loss coverage ratio
|
|
33
|
%
|
|
N/A
|
|
|
35
|
%
|
|
N/A
|
|
|
75
|
%
|
|
N/A
|
|
•
|
Higher risk loan attributes and attribute combinations;
|
•
|
Higher risk loan product types; and
|
•
|
Geographic concentrations.
|
Freddie Mac 2015 Form 10-K
|
|
96
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
Freddie Mac 2015 Form 10-K
|
|
97
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
||||||||||||||||||||
(dollars in billions)
|
|
UPB
|
|
Average
Credit
Score
|
|
Original
LTV Ratio
|
|
Current
LTV Ratio |
|
Current
LTV Ratio
>100%
|
|
Foreclosure
and Short Sale Rate (1) |
|
Alt-A %
|
||||||||
Core single-family book
|
|
$
|
1,129
|
|
|
754
|
|
|
72
|
%
|
|
61
|
%
|
|
—
|
%
|
|
0.15
|
%
|
|
—
|
%
|
HARP and other relief refinance book
|
|
303
|
|
|
731
|
|
|
89
|
%
|
|
70
|
%
|
|
10
|
%
|
|
0.95
|
%
|
|
—
|
%
|
|
Legacy single-family book
|
|
270
|
|
|
702
|
|
|
75
|
%
|
|
66
|
%
|
|
12
|
%
|
|
4.09
|
%
|
|
15
|
%
|
|
Total
|
|
$
|
1,702
|
|
|
741
|
|
|
75
|
%
|
|
63
|
%
|
|
4
|
%
|
|
N/A
|
|
|
2
|
%
|
(1)
|
The foreclosure and short sale rate presented for the Legacy single-family book represents the rate associated with loans originated in 2000 through 2008.
|
Freddie Mac 2015 Form 10-K
|
|
98
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
Characteristic
|
Description
|
|
Impact on Credit Quality
|
LTV Ratio
|
Ratio of the UPB of the loan to the value of the underlying property collateralizing the loan. Original LTV ratio is at loan origination, while current LTV ratio is based on the current UPB to the estimated current property value.
|
•
|
Measures ability of the underlying property to cover our exposure on the loans
|
•
|
Higher LTV ratios indicate higher risk, as proceeds from sale of the property may not cover our exposure on the loans
|
||
Credit Score
|
Statistically-derived number used by lenders to assess a borrower’s likelihood to repay debt. We primarily use FICO scores, which are currently the most commonly used credit scores.
|
•
|
Borrowers with higher credit scores are generally more likely to repay or have the ability to refinance than those with lower scores
|
•
|
Credit scores presented in this Form 10-K are at the time of origination and may not be indicative of the borrowers’ current creditworthiness
|
||
Loan Purpose
|
Indicates how the borrower intends to use the proceeds from a loan (i.e., purchase, cash-out refinance, or other refinance)
|
•
|
Cash-out refinancings generally have had a higher risk of default than loans originated in purchase or other refinance transactions
|
Property Type
|
Indicates whether the property is a detached single-family house, townhouse, condominium, or co-op
|
•
|
Detached single-family houses and townhouses are the predominant type of single-family property
|
•
|
Condominiums historically have experienced greater volatility in home prices than detached single-family houses, which may expose us to more risk
|
||
Occupancy Type
|
Indicates whether the borrower intends to use the property as a primary residence, second home, or investment property
|
•
|
Loans on primary residence properties tend to have lower credit risk than loans on second homes or investment properties
|
Product Type
|
Indicates the type of loan based on key loan terms, such as the contractual maturity, type of interest rate, and payment characteristics of the loan
|
•
|
Loan products that contain terms which result in scheduled changes in monthly payments may result in higher risk
|
•
|
Shorter loan terms result in faster repayment of principal and may indicate lower risk
|
||
Second Liens
|
Indicates whether the underlying property has more than one loan
|
•
|
Second liens can increase the risk of default
|
•
|
Borrowers are free to obtain second-lien financing after origination, and we are not entitled to receive notification when a borrower does so
|
Freddie Mac 2015 Form 10-K
|
|
99
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31,
|
|||||||
(percentage of portfolio based on UPB)
|
|
2015
|
|
2014
|
|
2013
|
|||
Original LTV Ratio Range
|
|
|
|
|
|
|
|||
60% and below
|
|
20
|
%
|
|
21
|
%
|
|
22
|
%
|
Above 60% to 80%
|
|
53
|
%
|
|
52
|
%
|
|
53
|
%
|
Above 80% to 100%
|
|
22
|
%
|
|
21
|
%
|
|
19
|
%
|
Above 100%
|
|
5
|
%
|
|
6
|
%
|
|
6
|
%
|
Portfolio weighted average original LTV ratio
|
|
75
|
%
|
|
75
|
%
|
|
75
|
%
|
Current LTV Ratio Range
|
|
|
|
|
|
|
|||
60% and below
|
|
43
|
%
|
|
39
|
%
|
|
33
|
%
|
Above 60% to 80%
|
|
37
|
%
|
|
37
|
%
|
|
38
|
%
|
Above 80% to 100%
|
|
16
|
%
|
|
18
|
%
|
|
19
|
%
|
Above 100%
|
|
4
|
%
|
|
6
|
%
|
|
10
|
%
|
Portfolio weighted average current LTV ratio
|
|
63
|
%
|
|
66
|
%
|
|
69
|
%
|
Credit Score
|
|
|
|
|
|
|
|||
740 and above
|
|
59
|
%
|
|
58
|
%
|
|
58
|
%
|
700 to 739
|
|
21
|
%
|
|
20
|
%
|
|
20
|
%
|
660 to 699
|
|
13
|
%
|
|
13
|
%
|
|
13
|
%
|
620 to 659
|
|
5
|
%
|
|
6
|
%
|
|
6
|
%
|
Less than 620
|
|
2
|
%
|
|
3
|
%
|
|
3
|
%
|
Portfolio weighted average credit score
|
|
741
|
|
|
740
|
|
|
739
|
|
Loan Purpose
|
|
|
|
|
|
|
|||
Purchase
|
|
32
|
%
|
|
30
|
%
|
|
26
|
%
|
Cash-out refinance
|
|
21
|
%
|
|
21
|
%
|
|
22
|
%
|
Other refinance
|
|
47
|
%
|
|
49
|
%
|
|
52
|
%
|
•
|
More than 90% of our loans were secured by detached homes or townhomes;
|
•
|
Approximately 90% of our loans were secured by properties used as the borrower’s primary residence; and
|
•
|
More than 90% of our loans were fixed-rate.
|
Freddie Mac 2015 Form 10-K
|
|
100
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Original LTV ratio greater than 90%, HARP loans
|
|
$
|
134.2
|
|
|
89
|
%
|
|
1.3
|
%
|
|
1.16
|
%
|
Original LTV ratio greater than 90%, all other loans
|
|
$
|
144.8
|
|
|
84
|
%
|
|
8.4
|
%
|
|
2.72
|
%
|
Loans with credit scores below 620 at origination
|
|
$
|
41.3
|
|
|
74
|
%
|
|
20.7
|
%
|
|
6.67
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, 2014
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Original LTV ratio greater than 90%, HARP loans
|
|
$
|
149.0
|
|
|
96
|
%
|
|
0.8
|
%
|
|
1.18
|
%
|
Original LTV ratio greater than 90%, all other loans
|
|
$
|
123.2
|
|
|
87
|
%
|
|
9.4
|
%
|
|
3.97
|
%
|
Loans with credit scores below 620 at origination
|
|
$
|
44.9
|
|
|
79
|
%
|
|
19.2
|
%
|
|
8.57
|
%
|
|
|
December 31, 2015
|
|||||||||||||||||||||||||
|
|
CLTV ≤ 80
|
|
CLTV > 80 to 100
|
|
CLTV > 100
|
|
All Loans
|
|||||||||||||||||||
(credit score)
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Modified
|
|||||||||
Core single-family book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.2
|
%
|
|
2.32
|
%
|
|
—
|
%
|
|
4.71
|
%
|
|
—
|
%
|
|
14.84
|
%
|
|
0.2
|
%
|
|
2.74
|
%
|
|
2.9
|
%
|
620 to 659
|
|
1.3
|
|
|
1.05
|
%
|
|
0.2
|
|
|
1.49
|
%
|
|
—
|
|
|
7.80
|
%
|
|
1.5
|
|
|
1.13
|
%
|
|
1.2
|
%
|
≥ 660
|
|
55.8
|
|
|
0.15
|
%
|
|
8.7
|
|
|
0.28
|
%
|
|
0.1
|
|
|
1.85
|
%
|
|
64.6
|
|
|
0.17
|
%
|
|
0.2
|
%
|
Not available
|
|
—
|
|
|
1.58
|
%
|
|
0.1
|
|
|
4.41
|
%
|
|
—
|
|
|
9.97
|
%
|
|
0.1
|
|
|
3.41
|
%
|
|
3.1
|
%
|
Total
|
|
57.3
|
%
|
|
0.18
|
%
|
|
9.0
|
%
|
|
0.34
|
%
|
|
0.1
|
%
|
|
3.49
|
%
|
|
66.4
|
%
|
|
0.21
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Relief refinance book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.6
|
%
|
|
1.65
|
%
|
|
0.2
|
%
|
|
3.06
|
%
|
|
0.1
|
%
|
|
4.65
|
%
|
|
0.9
|
%
|
|
2.38
|
%
|
|
3.4
|
%
|
620 to 659
|
|
0.7
|
|
|
1.03
|
%
|
|
0.4
|
|
|
2.12
|
%
|
|
0.2
|
|
|
3.31
|
%
|
|
1.3
|
|
|
1.60
|
%
|
|
2.0
|
%
|
≥ 660
|
|
10.7
|
|
|
0.29
|
%
|
|
3.4
|
|
|
1.02
|
%
|
|
1.5
|
|
|
1.85
|
%
|
|
15.6
|
|
|
0.56
|
%
|
|
0.6
|
%
|
Not available
|
|
—
|
|
|
1.37
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
5.08
|
%
|
|
—
|
|
|
1.47
|
%
|
|
0.6
|
%
|
Total
|
|
12.0
|
%
|
|
0.40
|
%
|
|
4.0
|
%
|
|
1.25
|
%
|
|
1.8
|
%
|
|
2.20
|
%
|
|
17.8
|
%
|
|
0.72
|
%
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Legacy single-family book
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.8
|
%
|
|
6.57
|
%
|
|
0.3
|
%
|
|
13.74
|
%
|
|
0.2
|
%
|
|
21.39
|
%
|
|
1.3
|
%
|
|
9.09
|
%
|
|
30.7
|
%
|
620 to 659
|
|
1.5
|
|
|
4.73
|
%
|
|
0.5
|
|
|
10.85
|
%
|
|
0.4
|
|
|
17.73
|
%
|
|
2.4
|
|
|
6.82
|
%
|
|
25.0
|
%
|
≥ 660
|
|
8.5
|
|
|
1.99
|
%
|
|
2.2
|
|
|
7.26
|
%
|
|
1.2
|
|
|
12.84
|
%
|
|
11.9
|
|
|
3.08
|
%
|
|
11.6
|
%
|
Not available
|
|
0.2
|
|
|
5.12
|
%
|
|
—
|
|
|
17.07
|
%
|
|
—
|
|
|
21.12
|
%
|
|
0.2
|
|
|
5.95
|
%
|
|
13.5
|
%
|
Total
|
|
11.0
|
%
|
|
2.74
|
%
|
|
3.0
|
%
|
|
8.66
|
%
|
|
1.8
|
%
|
|
15.03
|
%
|
|
15.8
|
%
|
|
4.12
|
%
|
|
14.9
|
%
|
Freddie Mac 2015 Form 10-K
|
|
101
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
As of December 31, 2014
|
|||||||||||||||||||||||||
|
|
CLTV ≤ 80
|
|
CLTV > 80 to 100
|
|
CLTV > 100
|
|
All Loans
|
|||||||||||||||||||
(credit score)
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Portfolio
|
|
SDQ Rate
|
|
% Modified
|
|||||||||
Core single-family book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.2
|
%
|
|
2.77
|
%
|
|
—
|
%
|
|
5.05
|
%
|
|
—
|
%
|
|
16.43
|
%
|
|
0.2
|
%
|
|
3.34
|
%
|
|
2.5
|
%
|
620 to 659
|
|
1.0
|
|
|
1.21
|
%
|
|
0.2
|
|
|
2.11
|
%
|
|
—
|
|
|
7.48
|
%
|
|
1.2
|
|
|
1.38
|
%
|
|
1.1
|
%
|
≥ 660
|
|
50.3
|
|
|
0.16
|
%
|
|
7.9
|
|
|
0.39
|
%
|
|
0.1
|
|
|
2.14
|
%
|
|
58.3
|
|
|
0.19
|
%
|
|
0.1
|
%
|
Not available
|
|
0.1
|
|
|
1.64
|
%
|
|
—
|
|
|
3.93
|
%
|
|
—
|
|
|
10.06
|
%
|
|
0.1
|
|
|
3.77
|
%
|
|
2.1
|
%
|
Total
|
|
51.6
|
%
|
|
0.19
|
%
|
|
8.1
|
%
|
|
0.47
|
%
|
|
0.1
|
%
|
|
3.75
|
%
|
|
59.8
|
%
|
|
0.24
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Relief refinance book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.4
|
%
|
|
1.85
|
%
|
|
0.3
|
%
|
|
3.10
|
%
|
|
0.2
|
%
|
|
4.15
|
%
|
|
0.9
|
%
|
|
2.63
|
%
|
|
2.3
|
%
|
620 to 659
|
|
0.7
|
|
|
1.12
|
%
|
|
0.4
|
|
|
2.02
|
%
|
|
0.3
|
|
|
2.86
|
%
|
|
1.4
|
|
|
1.71
|
%
|
|
1.3
|
%
|
≥ 660
|
|
10.5
|
|
|
0.28
|
%
|
|
4.5
|
|
|
0.90
|
%
|
|
2.6
|
|
|
1.53
|
%
|
|
17.6
|
|
|
0.58
|
%
|
|
0.4
|
%
|
Not available
|
|
—
|
|
|
1.79
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
1.04
|
%
|
|
—
|
|
|
1.25
|
%
|
|
0.4
|
%
|
Total
|
|
11.6
|
%
|
|
0.38
|
%
|
|
5.2
|
%
|
|
1.11
|
%
|
|
3.1
|
%
|
|
1.83
|
%
|
|
19.9
|
%
|
|
0.75
|
%
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Legacy single-family book
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.8
|
%
|
|
7.93
|
%
|
|
0.4
|
%
|
|
15.58
|
%
|
|
0.4
|
%
|
|
23.56
|
%
|
|
1.6
|
%
|
|
11.29
|
%
|
|
27.1
|
%
|
620 to 659
|
|
1.6
|
|
|
5.71
|
%
|
|
0.7
|
|
|
12.36
|
%
|
|
0.6
|
|
|
20.05
|
%
|
|
2.9
|
|
|
8.66
|
%
|
|
21.7
|
%
|
≥ 660
|
|
10.2
|
|
|
2.26
|
%
|
|
3.2
|
|
|
8.11
|
%
|
|
2.2
|
|
|
14.31
|
%
|
|
15.6
|
|
|
3.90
|
%
|
|
9.6
|
%
|
Not available
|
|
0.2
|
|
|
5.75
|
%
|
|
—
|
|
|
18.51
|
%
|
|
—
|
|
|
25.47
|
%
|
|
0.2
|
|
|
6.96
|
%
|
|
11.4
|
%
|
Total
|
|
12.8
|
%
|
|
3.13
|
%
|
|
4.3
|
%
|
|
9.62
|
%
|
|
3.2
|
%
|
|
16.56
|
%
|
|
20.3
|
%
|
|
5.13
|
%
|
|
12.5
|
%
|
Freddie Mac 2015 Form 10-K
|
|
102
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Amortizing ARM and option ARM
(1)
|
|
$
|
71.5
|
|
|
56
|
%
|
|
1.6
|
%
|
|
1.61
|
%
|
Interest-only
|
|
$
|
22.0
|
|
|
80
|
%
|
|
0.1
|
%
|
|
6.02
|
%
|
Step-rate modified
|
|
$
|
38.3
|
|
|
85
|
%
|
|
100
|
%
|
|
7.34
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, 2014
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Amortizing ARM and option ARM
(1)
|
|
$
|
75.3
|
|
|
60
|
%
|
|
1.5
|
%
|
|
2.28
|
%
|
Interest-only
|
|
$
|
27.8
|
|
|
87
|
%
|
|
0.2
|
%
|
|
9.36
|
%
|
Step-rate modified
|
|
$
|
42.3
|
|
|
93
|
%
|
|
100
|
%
|
|
9.20
|
%
|
(1)
|
Includes
$5.0 billion
and $5.7 billion in UPB of option ARM loans as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, the option ARM loans had: (a) current LTV ratios of
71%
and 79%, (b) loan modification percentages of
14.0%
and 12.5%; and (c) serious delinquency rates of
8.01%
and 9.87%, respectively.
|
|
December 31, 2015
|
||||||||||||||||||||||||||||||
(in millions)
|
2015 and Prior
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
|
Total
(1)
|
||||||||||||||||
ARM/amortizing
|
$
|
16,451
|
|
|
$
|
3,505
|
|
|
$
|
3,984
|
|
|
$
|
4,712
|
|
|
$
|
8,297
|
|
|
$
|
9,653
|
|
|
$
|
19,436
|
|
|
$
|
66,038
|
|
ARM/interest-only
|
9,291
|
|
|
2,938
|
|
|
4,697
|
|
|
1,916
|
|
|
110
|
|
|
254
|
|
|
—
|
|
|
19,206
|
|
||||||||
Fixed/interest-only
|
80
|
|
|
399
|
|
|
1,817
|
|
|
395
|
|
|
6
|
|
|
4
|
|
|
120
|
|
|
2,821
|
|
||||||||
Step-rate modified
|
16,926
|
|
|
24,318
|
|
|
25,895
|
|
|
17,184
|
|
|
6,151
|
|
|
4,431
|
|
|
2,616
|
|
|
38,343
|
|
||||||||
Total
|
$
|
42,748
|
|
|
$
|
31,160
|
|
|
$
|
36,393
|
|
|
$
|
24,207
|
|
|
$
|
14,564
|
|
|
$
|
14,342
|
|
|
$
|
22,172
|
|
|
$
|
126,408
|
|
(1)
|
Excludes mortgage loans underlying certain other securitization products, since the payment change information is not available to us for these loans.
|
Freddie Mac 2015 Form 10-K
|
|
103
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||
(dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
||||||||||
Alt-A
|
|
$
|
40.2
|
|
|
77
|
%
|
|
23.1
|
%
|
|
6.32
|
%
|
|
$
|
48.3
|
|
|
82
|
%
|
|
19.9
|
%
|
|
8.53
|
%
|
Freddie Mac 2015 Form 10-K
|
|
104
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
As of December 31, 2015
|
Full Year 2015 Credit Losses
|
|
As of December 31, 2014
|
Full Year 2014 Credit Losses
|
|
As of December 31, 2013
|
Full Year 2013 Credit Losses
|
||||||||||||||||||||||||||||||
(dollars in millions)
|
|
SDQ
Loan Count
|
|
% of SDQ
Loans
|
|
SDQ Rate
|
|
|
SDQ
Loan Count
|
|
% of SDQ
Loans
|
|
SDQ Rate
|
|
|
SDQ
Loan Count |
|
% of SDQ
Loans
|
|
SDQ Rate
|
|
||||||||||||||||||
Florida
|
|
14,070
|
|
|
10
|
%
|
|
2.16
|
%
|
|
$
|
867
|
|
|
25,656
|
|
|
13
|
%
|
|
3.92
|
%
|
|
$
|
1,079
|
|
|
42,948
|
|
|
17
|
%
|
|
6.44
|
%
|
|
$
|
1,374
|
|
New York
|
|
13,981
|
|
|
10
|
|
|
2.94
|
%
|
|
568
|
|
|
19,462
|
|
|
10
|
|
|
4.06
|
%
|
|
170
|
|
|
21,459
|
|
|
8
|
|
|
4.41
|
%
|
|
48
|
|
|||
New Jersey
|
|
11,978
|
|
|
9
|
|
|
3.90
|
%
|
|
702
|
|
|
16,960
|
|
|
8
|
|
|
5.49
|
%
|
|
244
|
|
|
19,306
|
|
|
8
|
|
|
6.20
|
%
|
|
115
|
|
|||
Illinois
|
|
8,841
|
|
|
6
|
|
|
1.62
|
%
|
|
388
|
|
|
11,902
|
|
|
6
|
|
|
2.17
|
%
|
|
403
|
|
|
15,521
|
|
|
6
|
|
|
2.79
|
%
|
|
625
|
|
|||
California
|
|
7,669
|
|
|
5
|
|
|
0.60
|
%
|
|
219
|
|
|
11,386
|
|
|
6
|
|
|
0.92
|
%
|
|
201
|
|
|
15,620
|
|
|
6
|
|
|
1.30
|
%
|
|
594
|
|
|||
All Others
|
|
83,182
|
|
|
60
|
|
|
1.12
|
%
|
|
2,036
|
|
|
112,700
|
|
|
57
|
|
|
1.52
|
%
|
|
1,822
|
|
|
137,907
|
|
|
55
|
|
|
1.85
|
%
|
|
2,032
|
|
|||
Total
|
|
139,721
|
|
|
100
|
%
|
|
1.32
|
%
|
|
$
|
4,780
|
|
|
198,066
|
|
|
100
|
%
|
|
1.88
|
%
|
|
$
|
3,919
|
|
|
252,761
|
|
|
100
|
%
|
|
2.39
|
%
|
|
$
|
4,788
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||||||||||||||||||||
(in millions)
|
|
Charge-offs,
gross
|
|
Recoveries
|
|
Charge-offs,
net
|
|
Charge-offs,
gross
|
|
Recoveries
|
|
Charge-offs,
net
|
|
Charge-offs,
gross
|
|
Recoveries
|
|
Charge-offs,
net
|
||||||||||||||||||
Northeast
|
|
$
|
2,093
|
|
|
$
|
(207
|
)
|
|
$
|
1,886
|
|
|
$
|
1,138
|
|
|
$
|
(238
|
)
|
|
$
|
900
|
|
|
$
|
1,357
|
|
|
$
|
(656
|
)
|
|
$
|
701
|
|
Southeast
|
|
1,294
|
|
|
(204
|
)
|
|
1,090
|
|
|
1,703
|
|
|
(393
|
)
|
|
1,310
|
|
|
3,015
|
|
|
(1,331
|
)
|
|
1,684
|
|
|||||||||
North Central
|
|
869
|
|
|
(149
|
)
|
|
720
|
|
|
1,018
|
|
|
(259
|
)
|
|
759
|
|
|
1,870
|
|
|
(810
|
)
|
|
1,060
|
|
|||||||||
West
|
|
701
|
|
|
(105
|
)
|
|
596
|
|
|
875
|
|
|
(283
|
)
|
|
592
|
|
|
2,589
|
|
|
(1,271
|
)
|
|
1,318
|
|
|||||||||
Southwest
|
|
206
|
|
|
(52
|
)
|
|
154
|
|
|
238
|
|
|
(85
|
)
|
|
153
|
|
|
394
|
|
|
(245
|
)
|
|
149
|
|
|||||||||
Total
|
|
$
|
5,163
|
|
|
$
|
(717
|
)
|
|
$
|
4,446
|
|
|
$
|
4,972
|
|
|
$
|
(1,258
|
)
|
|
$
|
3,714
|
|
|
$
|
9,225
|
|
|
$
|
(4,313
|
)
|
|
$
|
4,912
|
|
Freddie Mac 2015 Form 10-K
|
|
105
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
||||||||||||||||||||||
|
|
CLTV Ratio <= 80%
|
|
CLTV Ratio > 80% to 100%
|
|
CLTV Ratio > 100%
|
|
All Loans
|
||||||||||||||||
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
||||||||
North Central
|
|
13
|
%
|
|
0.73
|
%
|
|
3
|
%
|
|
1.91
|
%
|
|
1
|
%
|
|
6.23
|
%
|
|
17
|
%
|
|
1.13
|
%
|
Northeast
|
|
20
|
|
|
1.28
|
%
|
|
5
|
|
|
3.55
|
%
|
|
1
|
|
|
13.35
|
%
|
|
26
|
|
|
2.04
|
%
|
Southeast
|
|
12
|
|
|
1.08
|
%
|
|
3
|
|
|
2.54
|
%
|
|
1
|
|
|
7.15
|
%
|
|
16
|
|
|
1.57
|
%
|
Southwest
|
|
10
|
|
|
0.76
|
%
|
|
2
|
|
|
1.45
|
%
|
|
—
|
|
|
6.47
|
%
|
|
12
|
|
|
0.88
|
%
|
West
|
|
25
|
|
|
0.52
|
%
|
|
3
|
|
|
1.96
|
%
|
|
1
|
|
|
5.34
|
%
|
|
29
|
|
|
0.79
|
%
|
Total
|
|
80
|
%
|
|
0.87
|
%
|
|
16
|
%
|
|
2.41
|
%
|
|
4
|
%
|
|
8.08
|
%
|
|
100
|
%
|
|
1.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2014
|
||||||||||||||||||||||
|
|
CLTV Ratio <= 80%
|
|
CLTV Ratio > 80% to 100%
|
|
CLTV Ratio > 100%
|
|
All Loans
|
||||||||||||||||
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
||||||||
North Central
|
|
12
|
%
|
|
0.86
|
%
|
|
4
|
%
|
|
2.37
|
%
|
|
1
|
%
|
|
6.77
|
%
|
|
17
|
%
|
|
1.48
|
%
|
Northeast
|
|
20
|
|
|
1.67
|
%
|
|
5
|
|
|
4.98
|
%
|
|
1
|
|
|
15.21
|
%
|
|
26
|
|
|
2.81
|
%
|
Southeast
|
|
11
|
|
|
1.44
|
%
|
|
3
|
|
|
3.28
|
%
|
|
2
|
|
|
9.27
|
%
|
|
16
|
|
|
2.40
|
%
|
Southwest
|
|
10
|
|
|
0.96
|
%
|
|
2
|
|
|
2.06
|
%
|
|
—
|
|
|
6.98
|
%
|
|
12
|
|
|
1.16
|
%
|
West
|
|
23
|
|
|
0.67
|
%
|
|
4
|
|
|
2.70
|
%
|
|
2
|
|
|
6.23
|
%
|
|
29
|
|
|
1.23
|
%
|
Total
|
|
76
|
%
|
|
1.13
|
%
|
|
18
|
%
|
|
3.21
|
%
|
|
6
|
%
|
|
9.06
|
%
|
|
100
|
%
|
|
1.88
|
%
|
|
|
Year Ended December 31,
|
||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Charge-offs, gross
|
|
$
|
5,163
|
|
|
$
|
4,972
|
|
|
$
|
9,225
|
|
Recoveries
|
|
(717
|
)
|
|
(1,258
|
)
|
|
(4,313
|
)
|
|||
Charge-offs, net
|
|
4,446
|
|
|
3,714
|
|
|
4,912
|
|
|||
REO operations expense (income)
|
|
334
|
|
|
205
|
|
|
(124
|
)
|
|||
Total credit losses
|
|
$
|
4,780
|
|
|
$
|
3,919
|
|
|
$
|
4,788
|
|
|
|
|
|
|
|
|
||||||
Total credit losses (in bps)
|
|
28.1
|
|
|
23.4
|
|
|
28.8
|
|
|||
|
|
|
|
|
|
|
||||||
|
|
As of December 31,
|
||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||
Payment Status:
|
|
|
|
|
|
|
||||||
One month past due
|
|
1.37
|
%
|
|
1.52
|
%
|
|
1.73
|
%
|
|||
Two months past due
|
|
0.42
|
%
|
|
0.49
|
%
|
|
0.57
|
%
|
|||
Seriously delinquent
|
|
1.32
|
%
|
|
1.88
|
%
|
|
2.39
|
%
|
Freddie Mac 2015 Form 10-K
|
|
106
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
Year Ended December 31, 2015
|
|
December 31, 2014
|
Year Ended December 31, 2014
|
||||||||||||
|
|
% of Portfolio
|
|
Serious Delinquency Rate
|
|
% of Credit Losses
|
|
% of Portfolio
|
|
Serious Delinquency Rate
|
|
% of Credit Losses
|
||||||
CLTV > 100%
|
|
4
|
%
|
|
8.08
|
%
|
|
49
|
%
|
|
6
|
%
|
|
9.06
|
%
|
|
61
|
%
|
Alt-A loans
|
|
2
|
%
|
|
6.32
|
%
|
|
23
|
%
|
|
3
|
%
|
|
8.53
|
%
|
|
16
|
%
|
Judicial foreclosure states
|
|
39
|
%
|
|
1.84
|
%
|
|
70
|
%
|
|
40
|
%
|
|
2.61
|
%
|
|
68
|
%
|
|
|
Year Ended December 31,
|
||||||||||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
Beginning balance
|
|
$
|
21,793
|
|
|
$
|
24,578
|
|
|
$
|
30,508
|
|
|
$
|
38,916
|
|
|
$
|
39,098
|
|
Provision (benefit) for credit losses
|
|
(2,639
|
)
|
|
113
|
|
|
(2,247
|
)
|
|
2,013
|
|
|
10,898
|
|
|||||
Charge-offs, gross
|
|
(5,071
|
)
|
|
(4,892
|
)
|
|
(8,995
|
)
|
|
(13,520
|
)
|
|
(14,735
|
)
|
|||||
Recoveries
|
|
717
|
|
|
1,258
|
|
|
4,313
|
|
|
2,262
|
|
|
2,764
|
|
|||||
Transfers, net
|
|
548
|
|
|
736
|
|
|
999
|
|
|
837
|
|
|
891
|
|
|||||
Ending balance
|
|
$
|
15,348
|
|
|
$
|
21,793
|
|
|
$
|
24,578
|
|
|
$
|
30,508
|
|
|
$
|
38,916
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As a percentage of our single-family credit guarantee portfolio
|
|
0.90
|
%
|
|
1.31
|
%
|
|
1.49
|
%
|
|
1.86
|
%
|
|
2.23
|
%
|
Freddie Mac 2015 Form 10-K
|
|
107
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31,
|
||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
TDRs on accrual status
|
|
$
|
82,026
|
|
|
$
|
82,373
|
|
|
$
|
78,033
|
|
|
$
|
65,784
|
|
|
$
|
44,440
|
|
Non-accrual loans
|
|
22,460
|
|
|
32,745
|
|
|
42,829
|
|
|
61,517
|
|
|
74,686
|
|
|||||
Total TDRs and non-accrual loans
|
|
$
|
104,486
|
|
|
$
|
115,118
|
|
|
$
|
120,862
|
|
|
$
|
127,301
|
|
|
$
|
119,126
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan loss reserves associated with:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
TDRs on accrual status
|
|
$
|
12,105
|
|
|
$
|
13,728
|
|
|
$
|
14,239
|
|
|
$
|
12,430
|
|
|
$
|
11,595
|
|
Non-accrual loans
|
|
2,677
|
|
|
6,935
|
|
|
8,805
|
|
|
14,602
|
|
|
20,770
|
|
|||||
Total
|
|
$
|
14,782
|
|
|
$
|
20,663
|
|
|
$
|
23,044
|
|
|
$
|
27,032
|
|
|
$
|
32,365
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
Foregone interest income on TDRs and non-accrual loans
(1)
|
|
$
|
2,690
|
|
|
$
|
3,235
|
|
|
$
|
3,552
|
|
|
$
|
4,126
|
|
|
$
|
4,369
|
|
(1)
|
Represents the amount of interest income that we would have recognized for loans outstanding at the end of each period, had the loans performed according to their original contractual terms.
|
Freddie Mac 2015 Form 10-K
|
|
108
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2015
|
|
2014
|
||||||||||||||||
(dollars in millions)
|
|
UPB
|
|
Loan Count
|
|
SDQ Rate
|
|
UPB
|
|
Loan Count
|
|
SDQ Rate
|
||||||||
Above 125% Original LTV
|
|
$
|
28,241
|
|
|
157,035
|
|
|
1.38
|
%
|
|
$
|
30,233
|
|
|
162,299
|
|
|
1.36
|
%
|
Above 100% to 125% Original LTV
|
|
59,305
|
|
|
323,795
|
|
|
1.20
|
%
|
|
66,091
|
|
|
346,220
|
|
|
1.19
|
%
|
||
Above 80% to 100% Original LTV
|
|
97,375
|
|
|
567,201
|
|
|
0.86
|
%
|
|
109,618
|
|
|
609,239
|
|
|
0.93
|
%
|
||
80% and below Original LTV
|
|
117,677
|
|
|
942,183
|
|
|
0.36
|
%
|
|
125,158
|
|
|
957,435
|
|
|
0.36
|
%
|
||
Total
|
|
$
|
302,598
|
|
|
1,990,214
|
|
|
0.72
|
%
|
|
$
|
331,100
|
|
|
2,075,193
|
|
|
0.75
|
%
|
Freddie Mac 2015 Form 10-K
|
|
109
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
•
|
Forbearance agreements -
Arrangements that require reduced payments during a defined period, generally less than one year, to allow borrowers to return to compliance with the original mortgage terms or to implement another loan workout. For agreements completed in 2015, the average time period for reduced payments was between three and four months.
|
•
|
Repayment plans -
Contractual plans designed to repay past due amounts to allow borrowers to return to compliance with the original mortgage terms. For plans completed in 2015, the average time period to repay past due amounts was approximately four months.
|
•
|
Loan modifications
-
Contractual plans that may involve changing the terms of the loan, adding outstanding indebtedness, such as delinquent interest, to the UPB of the loan, or a combination of both, including principal forbearance, but not principal forgiveness. We offer two main types of loan modifications:
|
◦
|
HAMP loan modifications
-
The goal of a HAMP loan modification is to reduce the borrower’s monthly mortgage loan payment to 31% of gross monthly income. HAMP is available for loans originated on or before January 1, 2009. A borrower may receive only one HAMP modification. HAMP modifications contain the following features:
|
•
|
Trial period
-
HAMP requires completion of a trial period of at least three months, during which the borrower makes monthly payments based on the modified terms of the loan, prior to receiving the final modification. Borrowers who fail to complete the trial period are considered for our other workout activities.
|
•
|
Incentive payments -
Borrowers receive monthly incentive payments in the form of credits to reduce the principal balance of their loans by up to $1,000 per year, for five years, as long as they are making timely payments under the modified loan terms. Servicers are paid incentive fees for each completed HAMP modification. We bear the costs of these incentives and are not reimbursed by Treasury, except as discussed below.
|
•
|
Newly introduced incentive program -
In January 2015, at the instruction of FHFA, we implemented an additional $5,000 incentive program for eligible borrowers who remain in good standing through the sixth year of their HAMP loans. The incentive is applied toward reducing the borrowers' outstanding loan balance. Treasury will pay this incentive on the majority of our eligible HAMP modified loans. Incentive payments began in late 2015. Servicers are required to offer the borrowers who receive incentive payments an opportunity to modify their loan by reamortizing the UPB over the remaining term of the loan, which could lower the borrowers’ monthly principal and interest payments and further reduce the risk of borrower default.
|
◦
|
Non-HAMP loan modifications -
Primarily consist of our standard non-HAMP modification program and a streamlined modification initiative for certain eligible borrowers. Each of these programs requires completion of a trial period of at least three months prior to receiving the modification. If a borrower fails to complete the trial period, the loan is considered for our other workout activities. The streamlined modification offers eligible borrowers the same loan terms as the non-HAMP standard modification, including an extension of the loan’s term to 480 months and a fixed interest rate. Servicers are paid incentive fees for each completed non-HAMP modification,
|
Freddie Mac 2015 Form 10-K
|
|
110
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
•
|
Short sale -
The borrower sells the property for less than the total amount owed under the terms of the loan. A short sale is preferable to a borrower because we provide limited relief to the borrower from repaying the entire amount owed on the loan and, in some cases, we also provide cash relocation assistance, while allowing the borrower to exit the home in an orderly manner. A short sale allows Freddie Mac to avoid the costs we would otherwise incur to complete the foreclosure and subsequently sell the property.
|
•
|
Deed in lieu of foreclosure -
The borrower voluntarily agrees to transfer title of the property to us without going through formal foreclosure proceedings.
|
Freddie Mac 2015 Form 10-K
|
|
111
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
% of Portfolio
|
|
CLTV Ratio
|
|
SDQ Rate
|
|||||
HAMP
|
|
$
|
40.5
|
|
|
2
|
%
|
|
85
|
%
|
|
7.54
|
%
|
Non-HAMP
|
|
43.0
|
|
|
3
|
|
|
88
|
%
|
|
12.90
|
%
|
|
Total
|
|
$
|
83.5
|
|
|
5
|
%
|
|
86
|
%
|
|
10.54
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, 2014
|
|||||||||||
(dollars in billions)
|
|
UPB
|
|
% of Portfolio
|
|
CLTV Ratio
|
|
SDQ Rate
|
|||||
HAMP
|
|
$
|
44.9
|
|
|
3
|
%
|
|
93
|
%
|
|
9.61
|
%
|
Non-HAMP
|
|
40.2
|
|
|
2
|
|
|
94
|
%
|
|
14.77
|
%
|
|
Total
|
|
$
|
85.1
|
|
|
5
|
%
|
|
93
|
%
|
|
12.28
|
%
|
Freddie Mac 2015 Form 10-K
|
|
112
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
Quarter of Loan Modification Completion
|
||||||||||||||||||||||
|
|
4Q 2014
|
|
3Q 2014
|
|
2Q 2014
|
|
1Q 2014
|
|
4Q 2013
|
|
3Q 2013
|
|
2Q 2013
|
|
1Q 2013
|
||||||||
Current or paid off
one year after modification: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
HAMP
|
|
80
|
%
|
|
80
|
%
|
|
79
|
%
|
|
82
|
%
|
|
81
|
%
|
|
80
|
%
|
|
80
|
%
|
|
82
|
%
|
Non-HAMP
|
|
65
|
%
|
|
66
|
%
|
|
68
|
%
|
|
71
|
%
|
|
70
|
%
|
|
73
|
%
|
|
74
|
%
|
|
76
|
%
|
Total
|
|
67
|
%
|
|
69
|
%
|
|
70
|
%
|
|
74
|
%
|
|
72
|
%
|
|
75
|
%
|
|
76
|
%
|
|
78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current or paid off
two years after modification: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HAMP
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
79
|
%
|
|
78
|
%
|
|
78
|
%
|
|
79
|
%
|
Non-HAMP
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
68
|
%
|
|
71
|
%
|
|
71
|
%
|
|
72
|
%
|
Total
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
70
|
%
|
|
73
|
%
|
|
73
|
%
|
|
74
|
%
|
Freddie Mac 2015 Form 10-K
|
|
113
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
As of December 31,
|
||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||
|
|
Loan Count
|
|
Percent
|
|
Loan Count
|
|
Percent
|
|
Loan Count
|
|
Percent
|
||||||
Aging, by locality:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Judicial states:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
40,265
|
|
|
29
|
%
|
|
50,138
|
|
|
25
|
%
|
|
59,129
|
|
|
23
|
%
|
> 1 year and <= 2 years
|
|
16,199
|
|
|
12
|
|
|
21,919
|
|
|
11
|
|
|
30,604
|
|
|
12
|
|
> 2 years
|
|
28,265
|
|
|
20
|
|
|
48,984
|
|
|
25
|
|
|
65,154
|
|
|
26
|
|
Non-judicial states:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
38,010
|
|
|
27
|
|
|
49,657
|
|
|
25
|
|
|
60,175
|
|
|
24
|
|
> 1 year and <= 2 years
|
|
8,660
|
|
|
6
|
|
|
12,989
|
|
|
7
|
|
|
17,968
|
|
|
7
|
|
> 2 years
|
|
8,322
|
|
|
6
|
|
|
14,379
|
|
|
7
|
|
|
19,731
|
|
|
8
|
|
Combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
78,275
|
|
|
56
|
|
|
99,795
|
|
|
50
|
|
|
119,304
|
|
|
47
|
|
> 1 year and <= 2 years
|
|
24,859
|
|
|
18
|
|
|
34,908
|
|
|
18
|
|
|
48,572
|
|
|
19
|
|
> 2 years
|
|
36,587
|
|
|
26
|
|
|
63,363
|
|
|
32
|
|
|
84,885
|
|
|
34
|
|
Total
|
|
139,721
|
|
|
100
|
%
|
|
198,066
|
|
|
100
|
%
|
|
252,761
|
|
|
100
|
%
|
Freddie Mac 2015 Form 10-K
|
|
114
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||
(average days)
|
|
2015
|
|
2014
|
|
2013
|
|||
Judicial states:
|
|
|
|
|
|
|
|||
Florida
|
|
1,332
|
|
|
1,311
|
|
|
1,226
|
|
New Jersey
|
|
1,602
|
|
|
1,372
|
|
|
1,228
|
|
New York
|
|
1,553
|
|
|
1,325
|
|
|
1,120
|
|
All other judicial states
|
|
828
|
|
|
796
|
|
|
772
|
|
Judicial states, in aggregate
|
|
1,076
|
|
|
1,031
|
|
|
952
|
|
Non-judicial states, in aggregate
|
|
637
|
|
|
636
|
|
|
575
|
|
Total
|
|
892
|
|
|
867
|
|
|
774
|
|
|
|
Year Ended December 31,
|
|||||||
(number of properties)
|
|
2015
|
|
2014
|
|
2013
|
|||
Inventory, beginning of the period
|
|
25,768
|
|
|
47,307
|
|
|
49,071
|
|
Acquisitions
|
|
23,171
|
|
|
42,265
|
|
|
70,681
|
|
Dispositions
|
|
(31,935
|
)
|
|
(63,804
|
)
|
|
(72,445
|
)
|
Inventory, end of the period
|
|
17,004
|
|
|
25,768
|
|
|
47,307
|
|
Freddie Mac 2015 Form 10-K
|
|
115
|
Management's Discussion and Analysis
|
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||
|
|
2015
|
|
2014
|
|
2013
|
|||
REO dispositions and third-party foreclosure sales
|
|
34.3
|
%
|
|
34.2
|
%
|
|
36.1
|
%
|
Short sales
|
|
30.1
|
%
|
|
31.6
|
%
|
|
36.0
|
%
|
Freddie Mac 2015 Form 10-K
|
|
116
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
•
|
Maintaining policies and procedures for new business activity, including prudent underwriting standards;
|
•
|
Transferring the vast majority of expected credit losses to third parties through K Certificates and similar securitizations; and
|
•
|
Managing our portfolio, including loss mitigation activities.
|
|
|
December 31,
|
|||||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
|||||||||||||||
(dollars in millions)
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|||||||||
10-year loans, fixed or adjustable
|
|
$
|
20,603
|
|
|
43
|
%
|
|
$
|
11,069
|
|
|
39
|
%
|
|
$
|
14,977
|
|
|
58
|
%
|
7-year loans, fixed or adjustable
|
|
16,875
|
|
|
36
|
|
|
11,773
|
|
|
42
|
|
|
7,393
|
|
|
29
|
|
|||
Other
|
|
9,786
|
|
|
21
|
|
|
5,494
|
|
|
19
|
|
|
3,502
|
|
|
13
|
|
|||
Total
|
|
$
|
47,264
|
|
|
100
|
%
|
|
$
|
28,336
|
|
|
100
|
%
|
|
$
|
25,872
|
|
|
100
|
%
|
Freddie Mac 2015 Form 10-K
|
|
117
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||
|
|
% of Portfolio
|
|
Delinquency Rate
|
|
% of Portfolio
|
|
Delinquency Rate
|
|
% of Portfolio
|
|
Delinquency Rate
|
||||||
Non-credit-enhanced
|
|
32
|
%
|
|
0.03
|
%
|
|
40
|
%
|
|
0.02
|
%
|
|
47
|
%
|
|
0.07
|
%
|
Credit-enhanced:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
K Certificates
|
|
61
|
|
|
0.02
|
%
|
|
53
|
|
|
0.01
|
%
|
|
45
|
|
|
0.07
|
%
|
Other
|
|
7
|
|
|
—
|
%
|
|
7
|
|
|
0.35
|
%
|
|
8
|
|
|
0.29
|
%
|
Total
|
|
100
|
%
|
|
0.02
|
%
|
|
100
|
%
|
|
0.04
|
%
|
|
100
|
%
|
|
0.09
|
%
|
Freddie Mac 2015 Form 10-K
|
|
118
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
Freddie Mac 2015 Form 10-K
|
|
119
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||
|
|
2015
|
|
2014
|
||||||||||
(dollars in billions)
|
|
UPB
|
|
Delinquency Rate
|
|
UPB
|
|
Delinquency Rate
|
||||||
Unsecuritized loans
|
|
$
|
49.1
|
|
|
0.04
|
%
|
|
$
|
53.0
|
|
|
0.02
|
%
|
K Certificates
|
|
103.1
|
|
|
0.02
|
%
|
|
76.0
|
|
|
0.01
|
%
|
||
Other securitization products
|
|
6.7
|
|
|
—
|
%
|
|
5.0
|
|
|
0.64
|
%
|
||
Other mortgage-related guarantees
|
|
9.5
|
|
|
—
|
%
|
|
9.3
|
|
|
—
|
%
|
||
Total
|
|
$
|
168.4
|
|
|
0.02
|
%
|
|
$
|
143.3
|
|
|
0.04
|
%
|
Unsecuritized loans, excluding HFS loans:
|
|
|
|
|
|
|
|
|
||||||
Original LTV ratio:
|
|
|
|
|
|
|
|
|
||||||
Below 75%
|
|
$
|
21.2
|
|
|
—
|
%
|
|
$
|
30.4
|
|
|
0.04
|
%
|
75% to 80%
|
|
7.1
|
|
|
—
|
%
|
|
9.8
|
|
|
—
|
%
|
||
Above 80%
|
|
1.2
|
|
|
—
|
%
|
|
0.7
|
|
|
—
|
%
|
||
Total
|
|
$
|
29.5
|
|
|
—
|
%
|
|
$
|
40.9
|
|
|
0.03
|
%
|
Weighted average LTV ratio at origination
|
|
68
|
%
|
|
|
|
68
|
%
|
|
|
||||
Maturity dates:
|
|
|
|
|
|
|
|
|
||||||
2015
|
|
N/A
|
|
|
N/A
|
|
|
$
|
3.0
|
|
|
—
|
%
|
|
2016
|
|
$
|
1.9
|
|
|
—
|
%
|
|
5.8
|
|
|
—
|
%
|
|
2017
|
|
4.6
|
|
|
—
|
%
|
|
5.8
|
|
|
—
|
%
|
||
2018
|
|
7.8
|
|
|
—
|
%
|
|
8.4
|
|
|
—
|
%
|
||
2019
|
|
6.9
|
|
|
—
|
%
|
|
7.4
|
|
|
0.15
|
%
|
||
Thereafter
|
|
8.3
|
|
|
—
|
%
|
|
10.5
|
|
|
—
|
%
|
||
Total
|
|
$
|
29.5
|
|
|
—
|
%
|
|
$
|
40.9
|
|
|
0.03
|
%
|
Year of acquisition:
|
|
|
|
|
|
|
|
|
||||||
2010 and prior
|
|
$
|
23.1
|
|
|
—
|
%
|
|
$
|
35.5
|
|
|
0.03
|
%
|
2011 and after
|
|
6.4
|
|
|
—
|
%
|
|
5.4
|
|
|
—
|
%
|
||
Total
|
|
$
|
29.5
|
|
|
—
|
%
|
|
$
|
40.9
|
|
|
0.03
|
%
|
K Certificates and other securitization products:
|
|
|
|
|
|
|
|
|
||||||
Year of issuance:
|
|
|
|
|
|
|
|
|
||||||
2010 and prior
|
|
$
|
10.5
|
|
|
0.07
|
%
|
|
$
|
11.0
|
|
|
0.39
|
%
|
2011
|
|
10.7
|
|
|
0.12
|
%
|
|
11.2
|
|
|
—
|
%
|
||
2012
|
|
15.8
|
|
|
—
|
%
|
|
16.4
|
|
|
—
|
%
|
||
2013
|
|
22.9
|
|
|
—
|
%
|
|
23.9
|
|
|
—
|
%
|
||
2014
|
|
17.5
|
|
|
—
|
%
|
|
18.5
|
|
|
—
|
%
|
||
2015
|
|
32.4
|
|
|
—
|
%
|
|
N/A
|
|
|
N/A
|
|
||
Total
|
|
$
|
109.8
|
|
|
0.02
|
%
|
|
$
|
81.0
|
|
|
0.05
|
%
|
Subordination level at issuance:
|
|
|
|
|
|
|
|
|
||||||
No subordination
|
|
$
|
2.0
|
|
|
0.01
|
%
|
|
$
|
0.7
|
|
|
0.06
|
%
|
Less than 10%
|
|
5.1
|
|
|
—
|
%
|
|
4.4
|
|
|
—
|
%
|
||
10% to 15%
|
|
44.0
|
|
|
0.05
|
%
|
|
32.0
|
|
|
0.14
|
%
|
||
Greater than 15%
|
|
58.7
|
|
|
—
|
%
|
|
43.9
|
|
|
—
|
%
|
||
Total
|
|
$
|
109.8
|
|
|
0.02
|
%
|
|
$
|
81.0
|
|
|
0.05
|
%
|
Freddie Mac 2015 Form 10-K
|
|
120
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
|
|
Year Ended December 31,
|
||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Charge-offs, gross
(1)
|
|
$
|
9
|
|
|
$
|
3
|
|
|
$
|
29
|
|
Recoveries
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Charge-offs, net
|
|
9
|
|
|
2
|
|
|
28
|
|
|||
REO operations expense (income)
|
|
4
|
|
|
(9
|
)
|
|
(16
|
)
|
|||
Credit losses (gains)
|
|
$
|
13
|
|
|
$
|
(7
|
)
|
|
$
|
12
|
|
|
|
|
|
|
|
|
||||||
Credit losses (gains) (in bps)
|
|
0.8
|
|
|
(0.5
|
)
|
|
0.9
|
|
|||
Number of delinquent loans
|
|
4
|
|
|
8
|
|
|
16
|
|
(1)
|
Includes cumulative fair value losses recognized through the date of foreclosure for Multifamily loans we elected to carry at fair value at the time of our purchase.
|
|
|
Year Ended December 31,
|
||||||||||||||||||
(dollars in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
Beginning balance
|
|
$
|
94
|
|
|
$
|
151
|
|
|
$
|
382
|
|
|
$
|
545
|
|
|
$
|
828
|
|
Provision for credit losses
|
|
(26
|
)
|
|
(55
|
)
|
|
(218
|
)
|
|
(123
|
)
|
|
(196
|
)
|
|||||
Charge-offs, gross
|
|
(9
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|
(36
|
)
|
|
(75
|
)
|
|||||
Recoveries
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|||||
Transfers, net
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(6
|
)
|
|
(13
|
)
|
|||||
Ending balance
|
|
$
|
59
|
|
|
$
|
94
|
|
|
$
|
151
|
|
|
$
|
382
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As a percentage of total multifamily mortgage portfolio
|
|
0.04
|
%
|
|
0.07
|
%
|
|
0.11
|
%
|
|
0.30
|
%
|
|
0.47
|
%
|
Freddie Mac 2015 Form 10-K
|
|
121
|
Management's Discussion and Analysis
|
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
TDRs on accrual status
|
|
$
|
321
|
|
|
$
|
535
|
|
|
$
|
675
|
|
|
$
|
806
|
|
|
$
|
814
|
|
Non-accrual loans
|
|
189
|
|
|
385
|
|
|
628
|
|
|
1,488
|
|
|
1,889
|
|
|||||
Total TDRs and non-accrual loans
|
|
$
|
510
|
|
|
$
|
920
|
|
|
$
|
1,303
|
|
|
$
|
2,294
|
|
|
$
|
2,703
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan loss reserves associated with:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
TDRs on accrual status
|
|
$
|
9
|
|
|
$
|
21
|
|
|
$
|
15
|
|
|
$
|
48
|
|
|
$
|
45
|
|
Non-accrual loans
|
|
12
|
|
|
31
|
|
|
65
|
|
|
157
|
|
|
201
|
|
|||||
Total
|
|
$
|
21
|
|
|
$
|
52
|
|
|
$
|
80
|
|
|
$
|
205
|
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
Foregone interest income
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
11
|
|
|
$
|
15
|
|
Freddie Mac 2015 Form 10-K
|
|
122
|
Management's Discussion and Analysis
|
|
Risk Management | MRS Credit Risk
|
|
December 31,
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||||||||||||||
(in millions)
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||
Available-for-sale mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Freddie Mac
|
$
|
32,684
|
|
|
$
|
33,527
|
|
|
$
|
37,710
|
|
|
$
|
39,099
|
|
|
$
|
39,001
|
|
|
$
|
40,659
|
|
Fannie Mae
|
7,033
|
|
|
7,262
|
|
|
10,860
|
|
|
11,313
|
|
|
10,140
|
|
|
10,797
|
|
||||||
Ginnie Mae
|
150
|
|
|
162
|
|
|
183
|
|
|
199
|
|
|
149
|
|
|
167
|
|
||||||
CMBS
|
12,009
|
|
|
12,448
|
|
|
20,988
|
|
|
21,822
|
|
|
29,151
|
|
|
30,338
|
|
||||||
Subprime
|
12,499
|
|
|
12,802
|
|
|
20,210
|
|
|
20,589
|
|
|
29,897
|
|
|
27,499
|
|
||||||
Option ARM
|
3,423
|
|
|
3,678
|
|
|
5,460
|
|
|
5,649
|
|
|
6,617
|
|
|
6,574
|
|
||||||
Alt-A and other
|
2,788
|
|
|
3,278
|
|
|
4,500
|
|
|
5,043
|
|
|
8,322
|
|
|
8,706
|
|
||||||
Obligations of states and political subdivisions
|
1,187
|
|
|
1,205
|
|
|
2,166
|
|
|
2,198
|
|
|
3,533
|
|
|
3,495
|
|
||||||
Manufactured housing
|
488
|
|
|
575
|
|
|
556
|
|
|
638
|
|
|
629
|
|
|
684
|
|
||||||
Total investments in available-for-sale mortgage-related securities
|
$
|
72,261
|
|
|
$
|
74,937
|
|
|
$
|
102,633
|
|
|
$
|
106,550
|
|
|
$
|
127,439
|
|
|
$
|
128,919
|
|
Freddie Mac 2015 Form 10-K
|
|
123
|
Management's Discussion and Analysis
|
|
Risk Management | MRS Credit Risk
|
|
December 31,
|
||||||||||
(in millions)
|
2015
|
|
2014
|
|
2013
|
||||||
Trading mortgage-related securities:
|
|
|
|
|
|
||||||
Freddie Mac
|
$
|
15,513
|
|
|
$
|
17,469
|
|
|
$
|
9,349
|
|
Fannie Mae
|
6,438
|
|
|
6,099
|
|
|
7,180
|
|
|||
Ginnie Mae
|
30
|
|
|
16
|
|
|
98
|
|
|||
Other
|
146
|
|
|
171
|
|
|
141
|
|
|||
Total trading mortgage-related securities
|
$
|
22,127
|
|
|
$
|
23,755
|
|
|
$
|
16,768
|
|
•
|
Selling or securitizing certain assets; and
|
•
|
Pursuing litigation and other loss recovery efforts.
|
Freddie Mac 2015 Form 10-K
|
|
124
|
Management's Discussion and Analysis
|
|
Risk Management | MRS Credit Risk
|
|
As of
|
||||||||||||||||||
(in millions)
|
12/31/2015
|
|
9/30/2015
|
|
6/30/2015
|
|
3/31/2015
|
|
12/31/2014
|
||||||||||
UPB:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
$
|
17,295
|
|
|
$
|
18,539
|
|
|
$
|
20,987
|
|
|
$
|
23,790
|
|
|
$
|
27,682
|
|
Option ARM
|
5,309
|
|
|
5,604
|
|
|
6,938
|
|
|
7,704
|
|
|
8,287
|
|
|||||
Alt-A
|
2,696
|
|
|
3,066
|
|
|
3,622
|
|
|
4,318
|
|
|
4,549
|
|
|||||
Gross unrealized losses, pre-tax:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
$
|
350
|
|
|
$
|
394
|
|
|
$
|
388
|
|
|
$
|
497
|
|
|
$
|
610
|
|
Option ARM
|
62
|
|
|
74
|
|
|
85
|
|
|
164
|
|
|
183
|
|
|||||
Alt-A
|
13
|
|
|
22
|
|
|
22
|
|
|
30
|
|
|
32
|
|
|||||
Present value of expected future credit losses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
$
|
2,712
|
|
|
$
|
2,717
|
|
|
$
|
3,196
|
|
|
$
|
2,894
|
|
|
$
|
4,262
|
|
Option ARM
|
676
|
|
|
731
|
|
|
885
|
|
|
745
|
|
|
987
|
|
|||||
Alt-A
|
188
|
|
|
219
|
|
|
262
|
|
|
290
|
|
|
457
|
|
|||||
Principal repayments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
$
|
580
|
|
|
$
|
602
|
|
|
$
|
631
|
|
|
$
|
649
|
|
|
$
|
770
|
|
Option-ARM
|
153
|
|
|
191
|
|
|
156
|
|
|
149
|
|
|
154
|
|
|||||
Alt-A
|
187
|
|
|
232
|
|
|
213
|
|
|
198
|
|
|
199
|
|
|||||
Principal cash shortfalls:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
37
|
|
|
$
|
18
|
|
|
$
|
2
|
|
Option ARM
|
9
|
|
|
23
|
|
|
42
|
|
|
50
|
|
|
52
|
|
|||||
Alt-A
|
13
|
|
|
20
|
|
|
22
|
|
|
(1
|
)
|
|
21
|
|
|||||
Collateral delinquency rate:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
27
|
%
|
|
28
|
%
|
|
29
|
%
|
|
31
|
%
|
|
32
|
%
|
|||||
Option ARM
|
23
|
|
|
23
|
|
|
24
|
|
|
26
|
|
|
27
|
|
|||||
Alt-A
|
18
|
|
|
18
|
|
|
19
|
|
|
20
|
|
|
20
|
|
|||||
Average credit enhancement:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
6
|
%
|
|
7
|
%
|
|
8
|
%
|
|
9
|
%
|
|
9
|
%
|
|||||
Option ARM
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||||
Alt-A
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|||||
Cumulative collateral loss:
|
|
|
|
|
|
|
|
|
|
||||||||||
Subprime
|
34
|
%
|
|
33
|
%
|
|
33
|
%
|
|
33
|
%
|
|
32
|
%
|
|||||
Option ARM
|
26
|
|
|
26
|
|
|
25
|
|
|
25
|
|
|
25
|
|
|||||
Alt-A
|
16
|
|
|
15
|
|
|
16
|
|
|
15
|
|
|
15
|
|
Freddie Mac 2015 Form 10-K
|
|
125
|
Management's Discussion and Analysis
|
|
Risk Management | MRS Credit Risk
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net impairment of available-for-sale securities recognized in earnings:
|
|
|
|
|
|
|
||||||
Intent to sell
|
|
$
|
240
|
|
|
$
|
817
|
|
|
$
|
568
|
|
Other
|
|
52
|
|
|
121
|
|
|
942
|
|
|||
Total net impairment of available-for-sale securities recognized in earnings
|
|
$
|
292
|
|
|
$
|
938
|
|
|
$
|
1,510
|
|
Freddie Mac 2015 Form 10-K
|
|
126
|
Management's Discussion and Analysis
|
|
Risk Management | MRS Credit Risk
|
Freddie Mac 2015 Form 10-K
|
|
127
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
•
|
Maintaining eligibility standards;
|
•
|
Evaluating counterparty financial strength and performance and monitoring our exposure; and
|
•
|
Working with underperforming counterparties and limiting our losses from their nonperformance of obligations, when possible.
|
Freddie Mac 2015 Form 10-K
|
|
128
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
Freddie Mac 2015 Form 10-K
|
|
129
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
•
|
Repurchases and other remedies -
For certain violations of our single-family selling or servicing policies, we can require the counterparty to repurchase loans or provide alternative remedies, such as reimbursement of realized losses or indemnification. We typically first issue a notice of defect and allow a period of time to correct the problem prior to issuing a repurchase request.
|
•
|
Incentives and compensatory fees -
We pay various incentives to single-family servicers for completing workouts of problem loans. We also assess compensatory fees if single-family servicers do not achieve certain benchmarks with respect to servicing delinquent loans.
|
•
|
Servicing transfers -
From time to time, we facilitate the transfer of servicing for certain groups of single-family loans that are delinquent or are deemed at risk of default to servicers that we believe have the capabilities and resources necessary to improve the loss mitigation associated with the loans. Depending on our experience with the results of these transfers and specific servicer experience and capacity, we may permit additional transfers in the future, subject to FHFA approval in the case of larger transfers.
|
Freddie Mac 2015 Form 10-K
|
|
130
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
•
|
In each ACIS transaction, we require the individual ACIS insurers and reinsurers to post collateral to cover portions of their exposure, which helps to promote certainty of coverage and timely claim payment; and
|
•
|
While private mortgage insurance companies are required to be monoline (i.e., to participate solely in the mortgage insurance business, although the holding company may be a diversified insurer), our ACIS insurers and reinsurers participate in multiple types of insurance businesses, which helps to diversify their risk exposure.
|
Freddie Mac 2015 Form 10-K
|
|
131
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
|
|
|
|
|
|
December 31, 2015
|
||||||||||||||
|
|
|
|
|
|
UPB
|
|
Coverage
|
||||||||||||
(in millions)
|
|
Credit
Rating (1) |
|
Credit
Rating Outlook (1) |
|
Primary
MI
|
|
Pool
Insurance
|
|
Primary
MI
|
|
Pool
Insurance
|
||||||||
United Guaranty Residential Insurance Company (United Guaranty)
|
|
BBB+
|
|
Watch Negative
|
|
$
|
56,931
|
|
|
$
|
19
|
|
|
$
|
14,675
|
|
|
$
|
12
|
|
Radian Guaranty Inc. (Radian)
|
|
BB+
|
|
Stable
|
|
55,170
|
|
|
1,905
|
|
|
14,125
|
|
|
623
|
|
||||
Mortgage Guaranty Insurance Corporation (MGIC)
|
|
BB+
|
|
Stable
|
|
54,505
|
|
|
148
|
|
|
14,034
|
|
|
2
|
|
||||
Genworth Mortgage Insurance Corporation
|
|
BB+
|
|
Stable
|
|
36,589
|
|
|
24
|
|
|
9,387
|
|
|
23
|
|
||||
Essent Guaranty, Inc.
|
|
BBB
|
|
Stable
|
|
22,696
|
|
|
—
|
|
|
5,824
|
|
|
—
|
|
||||
PMI Mortgage Insurance Co. (PMI)
|
|
Not Rated
|
|
N/A
|
|
9,489
|
|
|
91
|
|
|
2,360
|
|
|
62
|
|
||||
Republic Mortgage Insurance Company (RMIC)
|
|
Not Rated
|
|
N/A
|
|
7,335
|
|
|
55
|
|
|
1,831
|
|
|
26
|
|
||||
Arch Mortgage Insurance Company
|
|
BBB+
|
|
Stable
|
|
5,301
|
|
|
—
|
|
|
1,308
|
|
|
—
|
|
||||
Triad Guaranty Insurance Corporation (Triad)
|
|
Not Rated
|
|
N/A
|
|
3,564
|
|
|
20
|
|
|
896
|
|
|
5
|
|
||||
Others
|
|
N/A
|
|
N/A
|
|
5,483
|
|
|
—
|
|
|
1,320
|
|
|
—
|
|
||||
Total
|
|
|
|
|
|
$
|
257,063
|
|
|
$
|
2,262
|
|
|
$
|
65,760
|
|
|
$
|
753
|
|
(1)
|
Ratings and outlooks are for the corporate entity to which we have the greatest exposure. Coverage amounts may include coverage provided by consolidated affiliates and subsidiaries of the counterparty. Latest rating available as of February 4, 2016. Represents the lower of S&P and Moody’s credit ratings and outlooks stated in terms of the S&P equivalent.
|
Freddie Mac 2015 Form 10-K
|
|
132
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
|
|
|
|
|
|
December 31, 2015
|
|||||||||
|
|
|
|
|
|
UPB
|
|||||||||
(dollars in millions)
|
|
Credit
Rating (1) |
|
Credit
Rating Outlook (1) |
|
Gross Unrealized Losses
|
|
Coverage
Outstanding
|
|
% of Total
Coverage
Outstanding
|
|||||
Ambac Assurance Corporation (Ambac)
|
|
Not Rated
|
|
N/A
|
|
$
|
7
|
|
|
$
|
2,888
|
|
|
51
|
%
|
National Public Finance Guarantee Corp.
|
|
A-
|
|
Negative
|
|
3
|
|
|
1,046
|
|
|
18
|
%
|
||
Financial Guaranty Insurance Company (FGIC)
|
|
Not Rated
|
|
N/A
|
|
4
|
|
|
714
|
|
|
12
|
%
|
||
MBIA Insurance Corp.
|
|
B-
|
|
Stable
|
|
—
|
|
|
697
|
|
|
12
|
%
|
||
Assured Guaranty Municipal Corp.
|
|
A
|
|
Stable
|
|
—
|
|
|
303
|
|
|
5
|
%
|
||
Syncora Guarantee Inc.
|
|
Not Rated
|
|
N/A
|
|
—
|
|
|
30
|
|
|
1
|
%
|
||
CIFG Assurance North America, Inc.
|
|
Not Rated
|
|
N/A
|
|
—
|
|
|
30
|
|
|
1
|
%
|
||
Total
|
|
|
|
|
|
$
|
14
|
|
|
$
|
5,708
|
|
|
100
|
%
|
(1)
|
Ratings and outlooks are for the corporate entity to which we have the greatest exposure. Coverage amounts may include coverage provided by consolidated affiliates and subsidiaries of the counterparty. Latest rating available as of February 4, 2016. Represents the lower of S&P and Moody’s credit ratings and outlooks stated in terms of the S&P equivalent.
|
•
|
Cleared derivatives -
Beginning with contracts executed or modified on or after June 10, 2013, the types of interest-rate swaps that we use most frequently became subject to the central clearing requirement of the Dodd-Frank Act, which has resulted in additional costs. We are required to post initial and variation margin with our clearing members in connection with such transactions. Our exposure to the clearinghouses we use to clear such interest-rate derivatives, and to the clearing members that administer our transactions once accepted for clearing, has increased and may become more concentrated over time. This concentration exposes us to the risk of a failure of a clearinghouse. However, the use of cleared derivatives mitigates our institutional credit risk exposure to individual counterparties because a central counterparty is substituted for individual counterparties. The amount of initial margin we must post for cleared and exchange-traded derivatives may be based, in part, on S&P or Moody’s credit rating of our long-term senior unsecured debt securities. The lowering or withdrawal of our credit rating by S&P or Moody’s may increase our obligation to post margin, depending on the amount of the counterparty’s exposure to Freddie Mac with respect to the derivative transactions.
|
•
|
Exchange-traded derivatives -
We are required to post initial and variation margin with our clearing
|
Freddie Mac 2015 Form 10-K
|
|
133
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
•
|
OTC derivatives -
OTC derivatives expose us to institutional credit risk to individual counterparties, because these transactions are executed and settled directly between us and each counterparty, exposing us to potential losses if a counterparty fails to meet its contractual obligations. When a counterparty in OTC derivatives that is subject to a master netting agreement has a net obligation to us with a market value above an agreed upon threshold, the counterparty is obligated to deliver collateral in the form of cash, securities, or a combination of both to satisfy its obligation to us under the master netting agreement. Our OTC derivatives also require us to post collateral to counterparties in accordance with agreed upon thresholds when we are in a derivative liability position. The collateral posting thresholds we assign to our OTC counterparties, as well as the ones they assign to us, are generally based on S&P or Moody’s credit rating. The lowering or withdrawal of our credit rating by S&P or Moody’s may increase our obligation to post collateral, depending on the amount of the counterparty’s exposure to Freddie Mac with respect to the derivative transactions.
|
Freddie Mac 2015 Form 10-K
|
|
134
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
|
|
As of December 31, 2015
|
|||||||||
(dollars in millions)
|
|
Number of Counter-
parties
|
|
Fair Value -
Gain positions
|
|
Fair Value - Gain positions, net of collateral
|
|||||
OTC interest-rate swap and swaption counterparties (by rating):
|
|
|
|
|
|
|
|||||
AA- or above
|
|
5
|
|
|
$
|
270
|
|
|
$
|
2
|
|
A+, A, or A-
|
|
9
|
|
|
1,568
|
|
|
59
|
|
||
BBB+, BBB, or BBB-
|
|
3
|
|
|
—
|
|
|
—
|
|
||
Total OTC
|
|
17
|
|
|
1,838
|
|
|
61
|
|
||
Cleared and exchange-traded derivatives
|
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
17
|
|
|
$
|
1,838
|
|
|
$
|
61
|
|
•
|
Cash and other investments counterparties -
We are exposed to the non-performance of counterparties relating to cash and other investments (including non-mortgage-related investments and cash equivalent) transactions, including those entered into on behalf of our securitization trusts. Our policies require that the counterparty be evaluated using our internal counterparty rating model prior to our entering into such transactions. We monitor the financial strength of our counterparties to
|
Freddie Mac 2015 Form 10-K
|
|
135
|
Management's Discussion and Analysis
|
|
Risk Management | Institutional Credit Risk
|
•
|
Mortgage related-security issuers and servicers -
We are
exposed to the non-performance of servicers and issuers of our investments in non-Freddie Mac mortgage-related securities, which can result in credit losses, impairments and declines in the fair value of these securities. See the “Mortgage-Related Securities Credit Risk” section for more information on how we manage risk associated with non-agency mortgage-related securities. A significant portion of the single-family loans underlying our investments in non-agency mortgage-related securities is serviced by non-depository servicers. These servicers may not have the same financial strength, internal controls or operational capacity as depository servicers. As of
December 31, 2015
and 2014, approximately $
13.0 billion
and $17.9 billion, respectively, of our investments in single-family non-agency mortgage-related securities, based on UPB, were serviced by subsidiaries and/or affiliates of Ocwen.
|
•
|
Document custodians
- We use third-party document custodians to provide loan document certification and custody services for the loans that we purchase and securitize. In many cases, our seller/servicers or their affiliates also serve as document custodians for us. Our ownership rights to the loans that we own or that back our securitization products could be challenged if a seller/servicer intentionally or negligently pledges, sells, or fails to obtain a release of prior liens on the loans that we purchased, which could result in financial losses to us. When a seller/servicer or one of its affiliates acts as a document custodian for us, the risk that our ownership interest in the loans may be adversely affected is increased, particularly in the event the seller/servicer were to become insolvent. To manage these risks, we maintain legal and contractual arrangements that identify our ownership interest in the loans and establish qualifying standards for our document custodians. We also monitor the financial strength of our document custodians on an ongoing basis in accordance with our counterparty risk management framework, and we require transfer of documents to our possession or to a different third-party document custodian if we have concerns about the solvency or competency of the document custodian.
|
•
|
The MERS® System
- The MERS System is an electronic registry that is widely used by seller/servicers, Freddie Mac, and other participants in the mortgage industry to maintain records of beneficial ownership of loans. The MERS System is owned and operated by MERSCORP Holdings, Inc., a privately held company, the shareholders of which include a number of organizations in the mortgage industry (including Freddie Mac). A significant portion of the loans we own or guarantee are registered in the MERS System. Our business could be adversely affected if we were prevented from using the MERS System, or if our use of the MERS System adversely affects our ability to enforce our rights with respect to our loans registered in the MERS System.
|
Freddie Mac 2015 Form 10-K
|
|
136
|
Management's Discussion and Analysis
|
|
Risk Management | Operational Risk
|
Freddie Mac 2015 Form 10-K
|
|
137
|
Management's Discussion and Analysis
|
|
Risk Management | Operational Risk
|
Freddie Mac 2015 Form 10-K
|
|
138
|
Management's Discussion and Analysis
|
|
Risk Management | Operational Risk
|
•
|
Mortgage payments of principal and/or interest owed to investors;
|
•
|
Mortgage payments of principal and/or interest owed to the company;
|
•
|
Management and guarantee fees due to the company;
|
•
|
Excess payments as to which a refund or credit may be owed to a seller/servicer; and
|
•
|
Earnings owed to the company from the investment of the funds in the custodial account.
|
•
|
Has not kept detailed pool-by-pool records of funds in the custodial account, as required by the Master Trust Agreement; and
|
•
|
Has not been withdrawing from the custodial account all amounts due to the company, as required by the Master Trust Agreement, except for earnings from investment of funds.
|
Freddie Mac 2015 Form 10-K
|
|
139
|
Management's Discussion and Analysis
|
|
Risk Management | Operational Risk
|
Freddie Mac 2015 Form 10-K
|
|
140
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
•
|
Asset selection and structuring, such as acquiring or structuring mortgage-related securities with certain expected prepayment and other characteristics;
|
•
|
Issuance of both callable and non-callable unsecured debt; and
|
•
|
Use of interest rate derivatives, including swaptions and swaps.
|
Freddie Mac 2015 Form 10-K
|
|
141
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
Freddie Mac 2015 Form 10-K
|
|
142
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
Risk
|
Description
|
|
Risk Exposure
|
Yield Curve Risk
|
Yield curve risk is the risk that changes in the level and shape of the yield curve, such as a level change, or a flattening or steepening, will adversely affect our economic value. Our yield curve risk under a specified yield curve scenario is reflected in our PMVS-YC disclosure.
|
•
|
A change in the level of interest rates (represented by a parallel shift of the yield curve, all else constant) exposes our assets and liabilities to risk, potentially affecting future expected cash flows and their present values.
|
|
|
•
|
Similarly, changes in the shape or slope of the yield curve (often reflecting changes in the market’s expectation of future interest rates) exposes our assets and liabilities to risk, potentially affecting expected future cash flows and their present values.
|
Volatility Risk
|
Volatility risk is the risk that changes in the market’s expectation of the magnitude of future variations in interest rates will adversely affect our economic value.
|
•
|
We are exposed to volatility risk in both our mortgage-related assets and liabilities, especially in instruments with embedded options.
|
Spread Risk
|
Spread risk is the risk that yields in different asset classes may not move together and may adversely affect our economic value.
|
•
|
This risk arises principally because interest rates on our mortgage-related investments may not move in tandem with interest rates on our financial liabilities and derivatives, potentially affecting the effectiveness of our hedges.
|
•
|
We are continually exposed to significant spread risk, also referred to as mortgage-to-debt OAS risk, arising from funding mortgage-related investments with debt securities.
|
||
•
|
We also incur spread risk when we use LIBOR- or Treasury-based instruments in our risk management activities.
|
||
|
|
•
|
We are exposed to spread risk arising from the difference in time between when we commit to purchase a multifamily mortgage loan and when we securitize the loan. During this time, spreads can widen, causing losses due to changes in fair value. We also have spread risk on the K Certificates we hold in our mortgage-related investments portfolio.
|
•
|
Duration gap -
Measures the difference in price sensitivity to interest rate changes between our financial assets and liabilities, and is expressed in months relative to the market value of assets. For example, assets with a six month duration and liabilities with a five month duration would result in a positive duration gap of one month. A duration gap of zero implies that the duration of our assets equals the duration of our liabilities. As a result, the change in the value of assets from an instantaneous move in interest rates, either up or down, would be expected to be accompanied by an equal and offsetting change in the value of liabilities, thus leaving the economic value 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 economic value 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 economic value will increase in value when interest rates rise and decrease in value when interest rates fall.
|
Freddie Mac 2015 Form 10-K
|
|
143
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
•
|
PMVS -
An estimate of the change in the market value of our financial assets and liabilities with spreads held constant from an instantaneous shock to interest rates, assuming no rebalancing actions are undertaken and assuming the mortgage rate-to-LIBOR basis does not change. PMVS is measured in two ways, one measuring the estimated sensitivity of our portfolio market value to a 50 basis point parallel movement in interest rates (PMVS-Level or PMVS-L) and the other to a nonparallel movement (PMVS-Yield Curve or PMVS-YC), resulting from a 25 basis point change in slope of the LIBOR yield curve. The 50 basis point shift and 25 basis point change in slope of the LIBOR yield curve used for our PMVS measures reflect reasonably possible near-term changes that we believe provide a meaningful measure of our interest-rate risk sensitivity.
|
•
|
We calculate our exposure to changes in interest rates using effective duration and effective convexity based on our models. Effective duration measures the percentage change in the price of financial instruments from a 100 basis point change in interest rates. Financial instruments with positive duration increase in value as interest rates decline. Conversely, financial instruments with negative duration increase in value as interest rates rise. The net effective duration of our portfolio is expressed in months as our duration gap.
|
•
|
Effective convexity measures the change in effective duration for a 100 basis point change in interest rates. Effective duration is not constant over the entire yield curve and effective convexity measures how effective duration changes over large changes in interest rates.
|
•
|
Together, duration and convexity provide a measure of an instrument’s overall price sensitivity to changes in interest rates. We utilize the aggregate duration and convexity risk of all interest-rate sensitive instruments on a daily basis to estimate the two PMVS metrics. The duration and convexity measures are used to estimate PMVS using the following formula:
|
•
|
To estimate PMVS-L, an instantaneous parallel 50 basis point shock is applied to the yield curve, as represented by the swap curve, holding all spreads to the swap curve constant. This shock is applied to the duration and convexity of all interest-rate sensitive financial instruments. The resulting change in market value for the aggregate portfolio is computed for both the up rate and down rate shock and the change in market value in the more adverse scenario of the up and
|
Freddie Mac 2015 Form 10-K
|
|
144
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
•
|
To estimate sensitivity related to the shape of the yield curve, a yield curve steepening and flattening of 25 basis points is applied using the duration of all interest-rate sensitive instruments. The resulting change in market value for the aggregate portfolio is computed for both the steepening and flattening yield curve scenarios. The more adverse yield curve scenario is then used to determine the PMVS. Because this process uses a non-parallel shock to interest rates, we refer to this measure as PMVS-YC.
|
•
|
Credit guarantee activities
- We do not consider the sensitivity of the fair value of credit guarantee activities to changes in interest rates except for the guarantee-related items mentioned above because we do not actively manage the change in the fair value of our guarantee business that is attributable to changes in interest rates. We do not believe that periodic changes in fair value due to movements in interest rates are the best indication of the long-term value of our guarantee business because these changes do not take into account the potential for future guarantee business activity.
|
•
|
Other assets with minimal interest-rate sensitivity -
We do not include other assets, primarily non-financial instruments such as fixed assets and REO, because we estimate their impact on PMVS and duration gap to be minimal.
|
Freddie Mac 2015 Form 10-K
|
|
145
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
|
|
PMVS-YC
|
|
PMVS-L
|
||||||||
(in millions)
|
|
25 bps
|
|
50 bps
|
|
100 bps
|
||||||
Assuming shifts of the LIBOR yield curve:
|
|
|
|
|
|
|
||||||
December 31, 2015
|
|
$
|
12
|
|
|
$
|
50
|
|
|
$
|
186
|
|
December 31, 2014
|
|
$
|
—
|
|
|
$
|
102
|
|
|
$
|
396
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
|
2015
|
|
2014
|
||||||||||||||||||
(duration gap in months, dollars in millions)
|
|
Duration
Gap
|
|
PMVS-YC
25 bps
|
|
PMVS-L
50 bps
|
|
Duration
Gap
|
|
PMVS-YC
25 bps
|
|
PMVS-L
50 bps
|
||||||||||
Average
|
|
0.2
|
|
|
$
|
17
|
|
|
$
|
90
|
|
|
(0.1
|
)
|
|
$
|
14
|
|
|
$
|
69
|
|
Minimum
|
|
(0.4
|
)
|
|
$
|
—
|
|
|
$
|
23
|
|
|
(2.4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Maximum
|
|
1.0
|
|
|
$
|
47
|
|
|
$
|
249
|
|
|
0.7
|
|
|
$
|
65
|
|
|
$
|
509
|
|
Standard deviation
|
|
0.3
|
|
|
$
|
12
|
|
|
$
|
40
|
|
|
0.4
|
|
|
$
|
14
|
|
|
$
|
79
|
|
Freddie Mac 2015 Form 10-K
|
|
146
|
Management's Discussion and Analysis
|
|
Risk Management | Interest Rate Risk and Other Market Risks
|
|
GAAP FV-YC
|
|
GAAP FV-L
|
||||||||
(in millions)
|
25 bps
|
|
50 bps
|
|
100 bps
|
||||||
December 31, 2015
|
$
|
635
|
|
|
$
|
1,630
|
|
|
$
|
3,573
|
|
December 31, 2014
|
$
|
672
|
|
|
$
|
1,176
|
|
|
$
|
2,597
|
|
Freddie Mac 2015 Form 10-K
|
|
147
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Overview
|
•
|
Principal payments due to the maturity, redemption or repurchase of our short- and long-term debt;
|
•
|
Interest payments on our other debt securities;
|
•
|
Dividend obligations on our senior preferred stock;
|
•
|
Cash purchases of single-family and multifamily loans;
|
•
|
Purchases of mortgage-related securities and non-mortgage investments;
|
•
|
Removal of modified or seriously delinquent mortgage loans from PC trusts;
|
•
|
Any shortfall related to the payments of principal and interest on our debt securities issued by consolidated trusts and any other payments related to our guarantees of mortgage assets;
|
•
|
Any costs related to the disposition of our REO properties;
|
•
|
Payments related to derivative contracts;
|
•
|
Posting or pledging collateral to third parties in connection with secured financing and daily trade activities; and
|
•
|
Administrative expenses.
|
•
|
Interest and principal payments on and sales of securities or loans that we hold in our mortgage-related investments portfolio or our liquidity and contingency operating portfolio;
|
•
|
Repurchase transactions with counterparties;
|
•
|
Management and guarantee fees we receive in connection with our guarantee activities, excluding those fees associated with the legislated 10 basis point increase we remit to Treasury; and
|
•
|
Quarterly draws from Treasury under the Purchase Agreement, which are made if we have a quarterly deficit in our net worth.
|
Freddie Mac 2015 Form 10-K
|
|
148
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Management Framework
|
•
|
Manage intraday cash needs and provide for the contingency of an unexpected cash demand;
|
•
|
Maintain cash and non-mortgage investments to enable us to meet ongoing cash obligations for a limited period of time, assuming no access to unsecured debt markets;
|
•
|
Maintain unencumbered securities with a value greater than or equal to the largest projected daily cash shortfall for an extended period of time, assuming no access to unsecured debt markets; and
|
•
|
Manage the maturity of our unsecured debt based on our asset profile.
|
Freddie Mac 2015 Form 10-K
|
|
149
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
Freddie Mac 2015 Form 10-K
|
|
150
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Year Ended December 31,
|
||||||
(dollars in millions)
|
|
2015
|
|
2014
|
||||
Beginning balance
|
|
$
|
454,029
|
|
|
$
|
511,345
|
|
Issued during the period
|
|
|
|
|
||||
Short-term:
|
|
|
|
|
||||
Amount
|
|
$
|
437,509
|
|
|
$
|
217,716
|
|
Weighted-average effective interest rate
|
|
0.11
|
%
|
|
0.11
|
%
|
||
Long-term:
|
|
|
|
|
||||
Amount
|
|
$
|
168,581
|
|
|
$
|
92,641
|
|
Weighted-average effective interest rate
|
|
1.43
|
%
|
|
1.16
|
%
|
||
Total issued:
|
|
|
|
|
||||
Amount
|
|
$
|
606,090
|
|
|
$
|
310,357
|
|
Weighted-average effective interest rate
|
|
0.48
|
%
|
|
0.42
|
%
|
||
Paid off during the period:
|
|
|
|
|
||||
Short-term:
|
|
|
|
|
||||
Amount
|
|
$
|
(458,546
|
)
|
|
$
|
(224,814
|
)
|
Weighted-average effective interest rate
|
|
0.07
|
%
|
|
0.12
|
%
|
||
Long-term:
|
|
|
|
|
||||
Amount
|
|
$
|
(183,552
|
)
|
|
$
|
(142,859
|
)
|
Weighted-average effective interest rate
|
|
1.44
|
%
|
|
1.61
|
%
|
||
Total paid off:
|
|
|
|
|
||||
Amount
|
|
$
|
(642,098
|
)
|
|
$
|
(367,673
|
)
|
Weighted-average effective interest rate
|
|
0.47
|
%
|
|
0.70
|
%
|
||
Ending balance
|
|
$
|
418,021
|
|
|
$
|
454,029
|
|
Unamortized premiums and discounts
|
|
(3,684
|
)
|
|
(3,918
|
)
|
||
Hedging-related and other basis adjustments
|
|
17
|
|
|
(42
|
)
|
||
Other
|
|
(48
|
)
|
|
—
|
|
||
Total other debt
|
|
$
|
414,306
|
|
|
$
|
450,069
|
|
Freddie Mac 2015 Form 10-K
|
|
151
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
December 31, 2015
|
||||||||||||||||
|
|
Ending Balance
|
|
Yearly Average
|
|
Maximum Carrying Value Outstanding at Any Month End
|
||||||||||||
(dollars in millions)
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
|||||||||
Discount notes and Reference Bills
|
|
$
|
104,027
|
|
|
0.28
|
%
|
|
$
|
102,540
|
|
|
0.16
|
%
|
|
$
|
123,248
|
|
Medium-term notes
|
|
9,545
|
|
|
0.20
|
|
|
3,173
|
|
|
0.09
|
|
|
9,454
|
|
|||
Securities sold under agreements to repurchase
|
|
—
|
|
|
—
|
|
|
15
|
|
|
0.21
|
|
|
—
|
|
|||
Total
|
|
$
|
113,572
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2014
|
||||||||||||||||
|
|
Ending Balance
|
|
Yearly Average
|
|
Maximum Carrying Value Outstanding at Any Month End
|
||||||||||||
(dollars in millions)
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
|||||||||
Discount notes and Reference Bills
|
|
$
|
134,619
|
|
|
0.12
|
%
|
|
$
|
116,388
|
|
|
0.12
|
%
|
|
$
|
134,619
|
|
Medium-term notes
|
|
—
|
|
|
—
|
|
|
750
|
|
|
0.16
|
|
|
4,000
|
|
|||
Securities sold under agreements to repurchase
|
|
—
|
|
|
—
|
|
|
15
|
|
|
0.11
|
|
|
—
|
|
|||
Total
|
|
$
|
134,619
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2013
|
||||||||||||||||
|
|
Ending Balance
|
|
Yearly Average
|
|
Maximum Carrying Value Outstanding at Any Month End
|
||||||||||||
(dollars in millions)
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
Carrying Value
|
|
Weighted Average Effective Rate
|
|
|||||||||
Discount notes and Reference Bills
|
|
$
|
137,712
|
|
|
0.13
|
%
|
|
$
|
130,919
|
|
|
0.13
|
%
|
|
$
|
140,082
|
|
Medium-term notes
|
|
4,000
|
|
|
0.16
|
|
|
2,291
|
|
|
0.16
|
|
|
4,000
|
|
|||
Securities sold under agreements to repurchase
|
|
—
|
|
|
—
|
|
|
15
|
|
|
0.16
|
|
|
—
|
|
|||
Total
|
|
$
|
141,712
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
152
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Year Ended December 31,
|
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Beginning balance
|
|
$
|
1,440,325
|
|
|
$
|
1,399,456
|
|
New issuances
|
|
353,882
|
|
|
257,293
|
|
||
Newly-issued debt securities retained at issuance
|
|
(93,992
|
)
|
|
(47,792
|
)
|
||
Net new issuances to third parties
|
|
259,890
|
|
|
209,501
|
|
||
Additional issuances of securities
|
|
137,676
|
|
|
92,053
|
|
||
Total issuances
|
|
397,566
|
|
|
301,554
|
|
||
Extinguishments, net
|
|
(324,802
|
)
|
|
(260,685
|
)
|
||
Ending balance
|
|
1,513,089
|
|
|
1,440,325
|
|
||
Unamortized premiums and discounts
|
|
43,032
|
|
|
39,148
|
|
||
Debt securities of consolidated trusts held by third parties
|
|
$
|
1,556,121
|
|
|
$
|
1,479,473
|
|
|
|
December 31,
|
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Single-family
|
|
|
|
|
||||
PCs:
|
|
|
|
|
||||
30-year or more amortizing fixed-rate
|
|
$
|
1,156,220
|
|
|
$
|
1,088,340
|
|
20-year amortizing fixed-rate
|
|
81,255
|
|
|
78,603
|
|
||
15-year amortizing fixed-rate
|
|
281,165
|
|
|
278,282
|
|
||
Adjustable-rate
|
|
66,807
|
|
|
69,683
|
|
||
Interest-only
|
|
19,573
|
|
|
23,941
|
|
||
FHA/VA and other governmental
|
|
2,745
|
|
|
3,154
|
|
||
Total single-family PCs
|
|
1,607,765
|
|
|
1,542,003
|
|
||
Other single-family
|
|
5,824
|
|
|
7,030
|
|
||
Total single-family
|
|
1,613,589
|
|
|
1,549,033
|
|
||
Multifamily
|
|
|
|
|
||||
K Certificates
|
|
1,629
|
|
|
440
|
|
||
Other securitization products
|
|
82
|
|
|
84
|
|
||
Total multifamily
|
|
1,711
|
|
|
524
|
|
||
Total Freddie Mac mortgage-related securities
|
|
1,615,300
|
|
|
1,549,557
|
|
||
Repurchased or retained at issuance Freddie Mac mortgage-related securities
|
|
(102,211
|
)
|
|
(109,232
|
)
|
||
Debt securities of consolidated trusts held by third parties
|
|
$
|
1,513,089
|
|
|
$
|
1,440,325
|
|
Freddie Mac 2015 Form 10-K
|
|
153
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Nationally Recognized Statistical Rating
Organization
|
||||
|
|
S&P
|
|
Moody's
|
|
Fitch
|
Senior long-term debt
|
|
AA+
|
|
Aaa
|
|
AAA
|
Short-term debt
|
|
A-1+
|
|
P-1
|
|
F1+
|
Subordinated debt
|
|
AA-
|
|
Aa2
|
|
AA-
|
Preferred stock
(1)
|
|
D
|
|
Ca
|
|
C/RR6
|
Outlook
|
|
Stable
|
|
Stable
|
|
Stable
|
(1)
|
Does not include senior preferred stock issued to Treasury.
|
Freddie Mac 2015 Form 10-K
|
|
154
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
Freddie Mac 2015 Form 10-K
|
|
155
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Three Months Ended
|
|
Year
Ended
|
||||||||||||||||||||
(in millions)
|
|
12/31/2015
|
|
9/30/2015
|
|
6/30/2015
|
|
3/31/2015
|
|
12/31/2014
|
|
12/31/2015
|
||||||||||||
Beginning balance
|
|
$
|
1,299
|
|
|
$
|
5,713
|
|
|
$
|
2,546
|
|
|
$
|
2,651
|
|
|
$
|
5,186
|
|
|
$
|
2,651
|
|
Comprehensive income
|
|
1,641
|
|
|
(501
|
)
|
|
3,913
|
|
|
746
|
|
|
251
|
|
|
5,799
|
|
||||||
Capital draw from Treasury
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Senior preferred stock dividends declared
|
|
—
|
|
|
(3,913
|
)
|
|
(746
|
)
|
|
(851
|
)
|
|
(2,786
|
)
|
|
(5,510
|
)
|
||||||
Total equity / net worth
|
|
$
|
2,940
|
|
|
$
|
1,299
|
|
|
$
|
5,713
|
|
|
$
|
2,546
|
|
|
$
|
2,651
|
|
|
$
|
2,940
|
|
Aggregate draws under Purchase Agreement
|
|
$
|
71,336
|
|
|
$
|
71,336
|
|
|
$
|
71,336
|
|
|
$
|
71,336
|
|
|
$
|
71,336
|
|
|
$
|
71,336
|
|
Aggregate cash dividends paid to Treasury
|
|
$
|
96,465
|
|
|
$
|
96,465
|
|
|
$
|
92,552
|
|
|
$
|
91,806
|
|
|
$
|
90,955
|
|
|
$
|
96,465
|
|
Freddie Mac 2015 Form 10-K
|
|
156
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
Freddie Mac 2015 Form 10-K
|
|
157
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Pay dividends on our equity securities, other than the senior preferred stock or warrant, or repurchase our equity securities;
|
•
|
Issue any additional equity securities, except in limited instances;
|
•
|
Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value in the ordinary course of business, consistent with past practices, and in other limited circumstances; and
|
Freddie Mac 2015 Form 10-K
|
|
158
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Issue any subordinated debt.
|
•
|
Under the Purchase Agreement and FHFA regulation, the UPB of our mortgage-related investments portfolio is subject to a cap that decreases by 15% each year until the cap reaches $250 billion.
|
•
|
Under the Purchase Agreement, we also 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 permitted to own on December 31 of the immediately preceding calendar year.
|
•
|
Our Retained Portfolio Plan, which we adopted in 2014, provides for us to manage the mortgage-related investments portfolio so that it does not exceed 90% of the annual cap established by the Purchase Agreement, subject to certain exceptions. Under the plan, we may seek permission from FHFA to increase the plan's limit on the mortgage-related investments portfolio to 95% of the Purchase Agreement annual cap.
|
•
|
FHFA indicated that any portfolio sales should be commercially reasonable transactions that consider impacts to the market, borrowers and neighborhood stability.
|
Freddie Mac 2015 Form 10-K
|
|
159
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Agency securities, which include both single-family and multifamily Freddie Mac mortgage-related securities and non-Freddie Mac agency mortgage-related securities;
|
•
|
Non-agency mortgage-related securities, which include single-family non-agency mortgage-related securities, CMBS, housing revenue bonds, and other multifamily securities; and
|
•
|
Single-family and multifamily unsecuritized loans.
|
•
|
Liquid
: single-class and multi-class agency securities, excluding certain structured agency securities collateralized by non-agency mortgage-related securities;
|
•
|
Securitization Pipeline
: performing multifamily and single-family loans purchased for cash and primarily held for a short period until securitized, with the resulting Freddie Mac issued securities being sold or retained; and
|
Freddie Mac 2015 Form 10-K
|
|
160
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Less Liquid:
assets that are less liquid than agency securities and loans in the securitization pipeline (e.g., reperforming loans and performing modified loans and non-agency mortgage-related securities).
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
(dollars in millions)
|
Liquid
|
|
Securitiz-ation Pipeline
|
|
Less Liquid
|
|
Total
|
|
Liquid
|
|
Securitiz-ation Pipeline
|
|
Less Liquid
|
|
Total
|
||||||||||||||||
Investments segment - Mortgage investments portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Single-family unsecuritized loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Performing loans
|
$
|
—
|
|
|
$
|
10,041
|
|
|
$
|
—
|
|
|
$
|
10,041
|
|
|
$
|
—
|
|
|
$
|
7,497
|
|
|
$
|
—
|
|
|
$
|
7,497
|
|
Reperforming loans and performing modified loans
|
—
|
|
|
—
|
|
|
67,036
|
|
|
67,036
|
|
|
—
|
|
|
—
|
|
|
75,281
|
|
|
75,281
|
|
||||||||
Total single-family unsecuritized loans
|
—
|
|
|
10,041
|
|
|
67,036
|
|
|
77,077
|
|
|
—
|
|
|
7,497
|
|
|
75,281
|
|
|
82,778
|
|
||||||||
Freddie Mac mortgage-related securities
|
135,869
|
|
|
—
|
|
|
6,076
|
|
|
141,945
|
|
|
150,852
|
|
|
—
|
|
|
7,363
|
|
|
158,215
|
|
||||||||
Non-agency mortgage-related securities
|
—
|
|
|
—
|
|
|
27,754
|
|
|
27,754
|
|
|
—
|
|
|
—
|
|
|
44,230
|
|
|
44,230
|
|
||||||||
Non-Freddie Mac agency mortgage-related securities
|
12,958
|
|
|
—
|
|
|
—
|
|
|
12,958
|
|
|
16,341
|
|
|
—
|
|
|
—
|
|
|
16,341
|
|
||||||||
Total Investment segment - Mortgage investments portfolio
|
148,827
|
|
|
10,041
|
|
|
100,866
|
|
|
259,734
|
|
|
167,193
|
|
|
7,497
|
|
|
126,874
|
|
|
301,564
|
|
||||||||
Single-family Guarantee segment - Single-family unsecuritized seriously delinquent loans
|
—
|
|
|
—
|
|
|
19,501
|
|
|
19,501
|
|
|
—
|
|
|
—
|
|
|
28,738
|
|
|
28,738
|
|
||||||||
Multifamily segment - unsecuritized loans and mortgage-related securities
|
7,304
|
|
|
19,563
|
|
|
40,809
|
|
|
67,676
|
|
|
1,911
|
|
|
12,111
|
|
|
64,090
|
|
|
78,112
|
|
||||||||
Total mortgage-related investments portfolio
|
$
|
156,131
|
|
|
$
|
29,604
|
|
|
$
|
161,176
|
|
|
$
|
346,911
|
|
|
$
|
169,104
|
|
|
$
|
19,608
|
|
|
$
|
219,702
|
|
|
$
|
408,414
|
|
Percentage of total mortgage-related investments portfolio
|
45
|
%
|
|
9
|
%
|
|
46
|
%
|
|
100
|
%
|
|
41
|
%
|
|
5
|
%
|
|
54
|
%
|
|
100
|
%
|
||||||||
Mortgage-related investments portfolio cap at December 31, 2015 and 2014, respectively
|
|
|
|
|
|
|
$
|
399,181
|
|
|
|
|
|
|
|
|
$
|
469,625
|
|
||||||||||||
90% of mortgage-related investments portfolio cap at December 31, 2015
(1)
|
|
|
|
|
|
|
$
|
359,263
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the amount that we manage to under our Retained Portfolio Plan, subject to certain exceptions.
|
•
|
Sales of $14.7 billion of less liquid assets, including $11.4 billion in UPB of non-agency mortgage-related securities and $2.9 billion in UPB of seriously delinquent unsecuritized single-family loans;
|
•
|
Securitization of $8.2 billion of single-family reperforming loans and performing modified loans, which included HAMP loans; and
|
•
|
Enhanced the liquidity of $2.9 billion of multifamily non-agency mortgage-related securities through resecuritization. We retained these more liquid securities in our mortgage-related investments portfolio.
|
Freddie Mac 2015 Form 10-K
|
|
161
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Maintain
, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced loans to foster liquid, efficient, competitive, and resilient national housing finance markets.
|
•
|
Reduce
taxpayer risk through increasing the role of private capital in the mortgage market.
|
•
|
Build
a new single-family securitization infrastructure for use by Freddie Mac and Fannie Mae and adaptable for use by other participants in the secondary market in the future.
|
Freddie Mac 2015 Form 10-K
|
|
162
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2015 Form 10-K
|
|
163
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2015 Form 10-K
|
|
164
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
•
|
The benchmark levels for three of our single-family goals increased;
|
•
|
Both of our multifamily goals increased; and
|
•
|
FHFA established a new subgoal related to small (5- to 50-unit) multifamily properties affordable to low-income families.
|
|
|
2015
|
|
2016
|
|
2017
|
|||
Single-family purchase money goals (benchmark levels):
|
|
|
|
|
|
|
|||
Low-income
|
|
24
|
%
|
|
24
|
%
|
|
24
|
%
|
Very low-income
|
|
6
|
%
|
|
6
|
%
|
|
6
|
%
|
Low-income areas
|
|
19
|
%
|
|
TBD
|
|
|
TBD
|
|
Low-income areas subgoal
|
|
14
|
%
|
|
14
|
%
|
|
14
|
%
|
Single-family refinance low-income goal (benchmark level)
|
|
21
|
%
|
|
21
|
%
|
|
21
|
%
|
Multifamily low-income goal (in units)
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
Multifamily very low-income subgoal (in units)
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
Multifamily small property low-income subgoal (in units)
|
|
6,000
|
|
|
8,000
|
|
|
10,000
|
|
•
|
The amount we will set aside each fiscal year, commencing with fiscal year 2015, will be based on our total new business purchases during such fiscal year; and
|
•
|
Within 60 days after the end of each fiscal year commencing with fiscal year 2015, we will transfer the
|
Freddie Mac 2015 Form 10-K
|
|
165
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2015 Form 10-K
|
|
166
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
•
|
Securities we issue or guarantee are “exempted securities” and may be sold without registration under the Securities Act;
|
•
|
We are excluded from the definitions of “government securities broker” and “government securities dealer” under the Exchange Act;
|
•
|
The Trust Indenture Act of 1939 does not apply to securities issued by us; and
|
•
|
We are exempt from the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as we are an “agency, authority or instrumentality” of the U.S. for purposes of such Acts.
|
Freddie Mac 2015 Form 10-K
|
|
167
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
|
|
Goals for 2014
|
|
Market Level for 2014
|
|
Results for 2014
|
|
Goals for 2013
|
|
Market Level for 2013
|
|
Results for 2013
|
||||||
Single-family purchase money goals (benchmark levels):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Low-income
|
|
23
|
%
|
|
22.8
|
%
|
|
21.0
|
%
|
|
23
|
%
|
|
24.0
|
%
|
|
21.8
|
%
|
Very low-income
|
|
7
|
%
|
|
5.7
|
%
|
|
4.9
|
%
|
|
7
|
%
|
|
6.3
|
%
|
|
5.5
|
%
|
Low-income areas
|
|
18
|
%
|
|
22.1
|
%
|
|
20.1
|
%
|
|
21
|
%
|
|
22.1
|
%
|
|
20.0
|
%
|
Low-income areas subgoal
|
|
11
|
%
|
|
15.0
|
%
|
|
13.6
|
%
|
|
11
|
%
|
|
14.2
|
%
|
|
12.3
|
%
|
Single-family refinance low-income goal (benchmark level)
|
|
20
|
%
|
|
25.0
|
%
|
|
26.4
|
%
|
|
20
|
%
|
|
24.3
|
%
|
|
24.1
|
%
|
Multifamily low-income goal (in units)
|
|
200,000
|
|
|
N/A
|
|
|
273,434
|
|
|
215,000
|
|
|
N/A
|
|
|
254,628
|
|
Multifamily very low-income subgoal (in units)
|
|
40,000
|
|
|
N/A
|
|
|
48,689
|
|
|
50,000
|
|
|
N/A
|
|
|
56,752
|
|
Freddie Mac 2015 Form 10-K
|
|
168
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
•
|
We expect seller/servicers to make good faith efforts to comply with the TRID rule, and failure to use a TRID Rule-required form will be deemed a violation of the good faith efforts standard and will render the mortgage subject to all contractual remedies, including repurchase;
|
•
|
We will not conduct routine post-purchase loan file reviews for technical compliance with the TRID rule, until further notice; and
|
•
|
After a transitional period, we will consider whether to begin such reviews for technical compliance.
|
Freddie Mac 2015 Form 10-K
|
|
169
|
Management's Discussion and Analysis
|
|
Contractual Obligations
|
•
|
Future payments of principal and interest related to debt securities of consolidated trusts held by third parties because the amount and timing of such payments are generally contingent upon the occurrence of future events and are therefore uncertain. These payments generally include payments of principal and interest we make to the holders of our guaranteed mortgage-related securities in the event a loan underlying a security becomes delinquent. We remove loans from pools underlying our PCs in certain circumstances, including when loans are 120 days or more delinquent, and retire the associated PC debt;
|
•
|
Future cash payments associated with the liquidation preference of the senior preferred stock, the quarterly commitment fee (which has been suspended), and the dividends on the senior preferred stock;
|
•
|
Future cash settlements on derivative agreements not yet accrued, because the amount and timing of such payments are dependent upon items such as changes in interest rates;
|
•
|
Future dividends on outstanding preferred stock (other than the senior preferred stock), because dividends on these securities are non-cumulative and because we are currently prohibited from paying dividends on these securities;
|
•
|
Future cash payments related to the 4.2 basis points of each dollar of total new business purchases that we are required by the GSE Act to allocate or transfer to certain housing funds, because the amount and timing of such allocations or transfers is dependent on the volume of our new business purchases; and
|
Freddie Mac 2015 Form 10-K
|
|
170
|
Management's Discussion and Analysis
|
|
Contractual Obligations
|
•
|
The guarantee arrangements pertaining to multifamily housing revenue bonds, where we provided commitments to advance funds.
|
(in millions)
|
Total
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
||||||||||||||
Long-term debt
(1)
|
$
|
304,388
|
|
|
$
|
58,765
|
|
|
$
|
91,543
|
|
|
$
|
48,189
|
|
|
$
|
31,352
|
|
|
$
|
26,697
|
|
|
$
|
47,842
|
|
Short-term debt
(1)
|
113,633
|
|
|
113,633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Interest payable
(2)
|
32,646
|
|
|
11,042
|
|
|
4,271
|
|
|
3,024
|
|
|
2,404
|
|
|
2,019
|
|
|
9,886
|
|
|||||||
Other liabilities reflected on our consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Other contractual liabilities
(3)(4)
|
2,464
|
|
|
1,751
|
|
|
8
|
|
|
7
|
|
|
6
|
|
|
7
|
|
|
685
|
|
|||||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Purchase
commitments
(5)
|
25,692
|
|
|
25,692
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other purchase obligations
(6)
|
1,371
|
|
|
194
|
|
|
149
|
|
|
137
|
|
|
128
|
|
|
104
|
|
|
659
|
|
|||||||
Lease obligations
|
35
|
|
|
11
|
|
|
8
|
|
|
6
|
|
|
5
|
|
|
3
|
|
|
2
|
|
|||||||
Total specified contractual obligations
|
$
|
480,229
|
|
|
$
|
211,088
|
|
|
$
|
95,979
|
|
|
$
|
51,363
|
|
|
$
|
33,895
|
|
|
$
|
28,830
|
|
|
$
|
59,074
|
|
(1)
|
Represents par value. Callable debt is included in this table at its contractual maturity. For additional information about our debt, see Note 7.
|
(2)
|
Includes estimated future interest payments on our short-term and long-term debt securities as well as the accrual of periodic cash settlements of derivatives, netted by counterparty. Also includes accrued interest payable recorded on our consolidated balance sheet.
|
(3)
|
Includes obligations related to our qualified and non-qualified defined contribution plans, retiree medical plan, and other benefit plans.
|
(4)
|
Other contractual liabilities include future cash payments due under our contractual obligations to make delayed equity contributions to LIHTC partnerships and payables to the consolidated trusts established for the administration of cash remittances received related to the underlying assets of Freddie Mac mortgage-related securities.
|
(5)
|
Purchase commitments represent our obligations to purchase loans and mortgage-related securities from third parties, most of which are accounted for as derivatives in accordance with the accounting guidance for derivatives and hedging.
|
(6)
|
Primarily includes unconditional purchase obligations that are legally binding and that are subject to a cancellation penalty.
|
Freddie Mac 2015 Form 10-K
|
|
171
|
Management's Discussion and Analysis
|
|
Off-Balance Sheet Arrangements
|
Freddie Mac 2015 Form 10-K
|
|
172
|
Management's Discussion and Analysis
|
|
Off-Balance Sheet Arrangements
|
Freddie Mac 2015 Form 10-K
|
|
173
|
Management's Discussion and Analysis
|
|
Critical Accounting Policies and Estimates
|
Freddie Mac 2015 Form 10-K
|
|
174
|
Management's Discussion and Analysis
|
|
Critical Accounting Policies and Estimates
|
•
|
Future levels of loan modifications;
|
•
|
Future loan repurchases by seller/servicers;
|
•
|
The adequacy of third-party credit enhancements;
|
•
|
The effects of changes in government policies and programs;
|
•
|
The effects of macroeconomic variables such as rates of unemployment; and
|
•
|
The effects of home price changes on borrower behavior.
|
•
|
Mortgage-related and non-mortgage related securities;
|
•
|
Certain loans held-for-sale;
|
•
|
Derivative instruments;
|
•
|
Certain debt securities of consolidated trusts held by third parties and certain other debt; and
|
•
|
Certain REO assets.
|
Freddie Mac 2015 Form 10-K
|
|
175
|
Risk Factors
|
|
Conservatorship and Related Matters
|
Freddie Mac 2015 Form 10-K
|
|
176
|
Risk Factors
|
|
Conservatorship and Related Matters
|
•
|
Deterioration of economic conditions, including increased levels of unemployment and declines in home prices or family incomes;
|
•
|
Adverse changes in interest rates, yield curves, implied volatility or spreads, which could affect our financial assets and liabilities, including derivatives, and increase realized and unrealized losses recorded in earnings or AOCI;
|
•
|
The required reductions in the size of our mortgage-related investments portfolio, reductions of higher yielding assets, or other limitations on our investment activities that reduce our earnings capacity;
|
•
|
The success of any transactions or other steps we may take in an effort to mitigate the risk of needing additional draws from Treasury;
|
•
|
Restrictions on our single-family guarantee activities that could reduce our income from these activities;
|
•
|
Restrictions on the volume of multifamily business we may conduct or other limits on multifamily business activities that could reduce our income from these activities;
|
•
|
Adverse changes in our liquidity or funding costs, or limitations on our access to public debt markets;
|
•
|
A failure of one or more of our major counterparties to meet their obligations to us;
|
•
|
Changes in accounting policies, practices, or guidance;
|
•
|
The effects of our foreclosure prevention and loss mitigation efforts;
|
•
|
Changes in housing or economic conditions, legislation, including reductions in corporate tax rates, or other factors that affect our assessment of our ability to realize our net deferred tax asset, and cause us to establish a valuation allowance against our net deferred tax asset; or
|
•
|
Changes in business practices resulting from legislative and regulatory developments or direction from our Conservator.
|
•
|
Reduce our profitability;
|
•
|
Expose us to additional credit, market, funding, operational, and other risks; or
|
•
|
Provide additional support for the mortgage market to serve our public mission, but adversely affect our financial results.
|
Freddie Mac 2015 Form 10-K
|
|
177
|
Risk Factors
|
|
Conservatorship and Related Matters
|
•
|
The amount of indebtedness we may incur;
|
•
|
The size of our mortgage-related investments portfolio; and
|
•
|
Our ability to pay dividends, transfer certain assets, raise capital, and pay down the liquidation preference of the senior preferred stock.
|
Freddie Mac 2015 Form 10-K
|
|
178
|
Risk Factors
|
|
Credit Risks
|
Freddie Mac 2015 Form 10-K
|
|
179
|
Risk Factors
|
|
Credit Risks
|
•
|
Our limited ability to influence servicing performance, including the volume and type of loan modifications;
|
•
|
The lack of transparency in the market for the non-agency mortgage-related securities we hold. Information disclosed by the trustees of the trusts that issued the securities is often insufficient for us to adequately analyze the servicers’ decisions and how these decisions affect the cash flows on the securities;
|
•
|
Concentration of loan servicing among several non-depository financial institutions. These servicers may not have the same financial strength, or operational capacity, or be subject to the same level of regulatory oversight, as depository servicers; and
|
•
|
Inadequate protection from credit enhancements on these securities.
|
Freddie Mac 2015 Form 10-K
|
|
180
|
Risk Factors
|
|
Credit Risks
|
•
|
Increase our losses on dispositions of REO properties;
|
•
|
Cause us to incorrectly hedge prepayment risk;
|
•
|
Reduce our actual return on new single-family guarantee business, as actual default rates could be higher than we expected when we issued the guarantee;
|
•
|
Result in declines in net worth due to fair value declines on our investments in non-agency mortgage-related securities; or
|
•
|
Negatively affect loan pricing, which could cause us to change our disposition strategies for our single-family unsecuritized loans.
|
Freddie Mac 2015 Form 10-K
|
|
181
|
Risk Factors
|
|
Credit Risks
|
•
|
A decline in servicing performance - A decline in a servicer’s performance, such as delayed foreclosures or missed opportunities for loan modifications, could significantly affect our ability to mitigate credit losses and could affect the overall credit performance of our single-family credit guarantee portfolio. The large volume of seriously delinquent loans and the complexity of the servicing function are significant factors contributing to the risk of a decline in performance by servicers. We could be adversely affected if our servicers lack appropriate controls, experience a failure in their controls, or experience a disruption in their ability to service loans, including as a result of legal or regulatory actions or ratings downgrades. We are also exposed to fraud by third parties in the loan servicing function, particularly with respect to sales of REO properties, short sales, and other dispositions of non-performing assets.
|
•
|
A failure by seller/servicers to fulfill their obligations to repurchase loans or indemnify us as a result of breaches of representations and warranties - While we may have the contractual right to require a seller or servicer to repurchase loans from us, it may be difficult, expensive, and time-consuming to enforce such repurchase obligations. We could enter into settlements to resolve repurchase obligations; however, the amounts we receive under any such settlements may be less than the losses we ultimately incur on the underlying loans.
|
•
|
Increased exposure to non-depository and smaller financial institutions - Over the last several years, we have acquired a greater portion of our single-family business volume from non-depository and smaller financial institutions. In addition, a large and increasing volume of our single-family loans are
|
Freddie Mac 2015 Form 10-K
|
|
182
|
Risk Factors
|
|
Credit Risks
|
•
|
Manage interest rate and other risks related to our investments in mortgage-related assets;
|
•
|
Fund our business operations; and
|
•
|
Service our customers.
|
Freddie Mac 2015 Form 10-K
|
|
183
|
Risk Factors
|
|
Credit Risks
|
Freddie Mac 2015 Form 10-K
|
|
184
|
Risk Factors
|
|
Credit Risks
|
•
|
Cause our expenses to increase. For example, properties awaiting foreclosure could deteriorate until we acquire them, resulting in increased expenses to repair and maintain the properties;
|
•
|
Adversely affect the values of, and our losses on, the non-agency mortgage-related securities we hold; and
|
•
|
Adversely affect trends in home prices regionally or nationally, which could adversely affect our financial results.
|
Freddie Mac 2015 Form 10-K
|
|
185
|
Risk Factors
|
|
Interest Rate and Other Market Risks
|
•
|
Our credit losses from loans with adjustable payment terms may increase as borrower payments increase at their reset dates, which increases the borrower’s risk of default;
|
•
|
Borrowers with higher risk adjustable-rate loans may have fewer opportunities to refinance into fixed-rate loans;
|
•
|
A borrower's payment on additional debt obligations (such as home equity lines of credit and second liens) that have adjustable payment terms may increase, which in turn increases the risk that the borrower may default on a loan we own or guarantee; and
|
•
|
Other-than-temporary impairments on our investments in non-agency mortgage-related securities could increase due to a reduction in the benefit expected from structural credit enhancements on these securities.
|
Freddie Mac 2015 Form 10-K
|
|
186
|
Risk Factors
|
|
Interest Rate and Other Market Risks
|
Freddie Mac 2015 Form 10-K
|
|
187
|
Risk Factors
|
|
Operational Risks
|
Freddie Mac 2015 Form 10-K
|
|
188
|
Risk Factors
|
|
Operational Risks
|
Freddie Mac 2015 Form 10-K
|
|
189
|
Risk Factors
|
|
Operational Risks
|
Freddie Mac 2015 Form 10-K
|
|
190
|
Risk Factors
|
|
Liquidity Risks
|
•
|
Market and other factors;
|
•
|
Changes in U.S. government support for us;
|
•
|
Reduced demand for our debt securities; and
|
•
|
Competition for debt funding from other debt issuers
|
Freddie Mac 2015 Form 10-K
|
|
191
|
Risk Factors
|
|
Liquidity Risks
|
•
|
Uncertainty about the future of the GSEs;
|
•
|
If debt investors become concerned that the risk of us being placed in receivership is increasing; and
|
•
|
Future draws that significantly reduce the amount of available funding remaining under the Purchase Agreement.
|
Freddie Mac 2015 Form 10-K
|
|
192
|
Risk Factors
|
|
Liquidity Risks
|
Freddie Mac 2015 Form 10-K
|
|
193
|
Risk Factors
|
|
Legal and Regulatory Risks
|
•
|
Changes the foreclosure process of any individual state;
|
•
|
Limits or otherwise adversely affects the rights of a holder of a first lien on a mortgage (such as through granting priority rights in foreclosure proceedings for homeowner associations);
|
•
|
Expands the responsibilities of (and costs to) servicers for maintaining vacant properties prior to foreclosure;
|
•
|
Permits or requires principal reductions, such as allowing local governments to use eminent domain to seize mortgage loans and forgive principal on the loans; or
|
•
|
Prevents us from using the MERS System or disrupts foreclosures of loans registered in the MERS System.
|
Freddie Mac 2015 Form 10-K
|
|
194
|
Risk Factors
|
|
Legal and Regulatory Risks
|
Freddie Mac 2015 Form 10-K
|
|
195
|
Risk Factors
|
|
Legal and Regulatory Risks
|
Freddie Mac 2015 Form 10-K
|
|
196
|
Risk Factors
|
|
Other Risks
|
Freddie Mac 2015 Form 10-K
|
|
197
|
Risk Factors
|
|
Other Risks
|
Freddie Mac 2015 Form 10-K
|
|
198
|
Risk Factors
|
|
Other Risks
|
Freddie Mac 2015 Form 10-K
|
|
199
|
Legal Proceedings
|
|
|
Freddie Mac 2015 Form 10-K
|
|
200
|
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
|
|
|
High
|
|
Low
|
||||
2015 Quarter Ended
|
|
|
|
||||
December 31
|
$
|
2.67
|
|
|
$
|
1.57
|
|
September 30
|
2.61
|
|
|
1.90
|
|
||
June 30
|
2.84
|
|
|
2.18
|
|
||
March 31
|
3.32
|
|
|
2.04
|
|
||
2014 Quarter Ended
|
|
|
|
||||
December 31
|
$
|
2.50
|
|
|
$
|
1.44
|
|
September 30
|
4.58
|
|
|
2.56
|
|
||
June 30
|
4.78
|
|
|
3.63
|
|
||
March 31
|
6.00
|
|
|
2.63
|
|
•
|
Restrictions Relating to the Conservatorship -
The Conservator has prohibited us from paying any dividends on our common stock or on any series of our preferred stock (other than the senior preferred stock). FHFA has instructed our Board of Directors that it should consult with and obtain the approval of FHFA before taking actions involving dividends. In addition, FHFA has adopted a regulation prohibiting us from making capital distributions during conservatorship, except as authorized by the Director of FHFA.
|
•
|
Restrictions Under the Purchase Agreement -
The Purchase Agreement prohibits us and any of our subsidiaries from declaring or paying any dividends on Freddie Mac equity securities (other than
|
Freddie Mac 2015 Form 10-K
|
|
201
|
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
|
|
•
|
Restrictions Under the GSE Act -
Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if we fail to meet applicable capital requirements. However, our capital requirements have been suspended during conservatorship.
|
•
|
Restrictions Under our Charter -
Without regard to our capital classification, we must obtain prior written approval of FHFA to make any capital distribution that would decrease total capital to an amount less than the risk-based capital level or that would decrease core capital to an amount less than the minimum capital level. As noted above, our capital requirements have been suspended during conservatorship.
|
•
|
Restrictions Relating to Subordinated Debt -
During any period in which we defer payment of interest on qualifying subordinated debt, we may not declare or pay dividends on, or redeem, purchase or acquire, our common stock or preferred stock. Our qualifying subordinated debt provides for the deferral of the payment of interest for up to five years if either our core capital is below 125% of our critical capital requirement or our core capital is below our statutory minimum capital requirement, and the Secretary of the Treasury, acting on our request, exercises his or her discretionary authority pursuant to Section 306(c) of our Charter to purchase our debt obligations. FHFA has directed us to make interest and principal payments on our subordinated debt, even if we fail to maintain required capital levels. As a result, the terms of any of our subordinated debt that provide for us to defer payments of interest under certain circumstances, including our failure to maintain specified capital levels, are no longer applicable.
|
•
|
Restrictions Relating to Preferred Stock -
Payment of dividends on our common stock is also subject to the prior payment of dividends on our 24 series of preferred stock and one series of senior preferred stock, representing an aggregate of 464,170,000 shares and 1,000,000 shares, respectively, outstanding as of December 31, 2015. Payment of dividends on all outstanding preferred stock, other than the senior preferred stock, is subject to the prior payment of dividends on the senior preferred stock. We paid dividends on the senior preferred stock during 2015 at the direction of the Conservator, as discussed in “MD&A - LIQUIDITY AND CAPITAL RESOURCES” and Note 10. We did not declare or pay dividends on any other series of preferred stock outstanding in 2015.
|
Freddie Mac 2015 Form 10-K
|
|
202
|
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
|
|
Freddie Mac 2015 Form 10-K
|
|
203
|
Financial Statements
|
|
Freddie Mac 2015 Form 10-K
|
|
204
|
Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
Freddie Mac 2015 Form 10-K
|
|
205
|
Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
Freddie Mac 2015 Form 10-K
|
|
206
|
Financial Statements
|
Consolidated Statements of Comprehensive Income
|
|
Year Ended December 31,
|
||||||||||
(in millions, except share-related amounts)
|
2015
|
|
2014
|
|
2013
|
||||||
Interest income
|
|
|
|
|
|
||||||
Mortgage loans
|
$
|
62,226
|
|
|
$
|
63,605
|
|
|
$
|
64,883
|
|
Investments in securities
|
4,794
|
|
|
5,843
|
|
|
7,768
|
|
|||
Other
|
70
|
|
|
32
|
|
|
51
|
|
|||
Total interest income
|
67,090
|
|
|
69,480
|
|
|
72,702
|
|
|||
Interest expense
|
(51,916
|
)
|
|
(54,916
|
)
|
|
(55,779
|
)
|
|||
Expense related to derivatives
|
(228
|
)
|
|
(301
|
)
|
|
(455
|
)
|
|||
Net interest income
|
14,946
|
|
|
14,263
|
|
|
16,468
|
|
|||
Benefit (provision) for credit losses
|
2,665
|
|
|
(58
|
)
|
|
2,465
|
|
|||
Net interest income after benefit (provision) for credit losses
|
17,611
|
|
|
14,205
|
|
|
18,933
|
|
|||
Non-interest income (loss)
|
|
|
|
|
|
||||||
Gains (losses) on extinguishment of debt
|
(240
|
)
|
|
(422
|
)
|
|
446
|
|
|||
Derivative gains (losses)
|
(2,696
|
)
|
|
(8,291
|
)
|
|
2,632
|
|
|||
Impairment of available-for-sale securities:
|
|
|
|
|
|
||||||
Total other-than-temporary impairment of available-for-sale securities
|
(241
|
)
|
|
(860
|
)
|
|
(763
|
)
|
|||
Portion of other-than-temporary impairment recognized in AOCI
|
(51
|
)
|
|
(78
|
)
|
|
(747
|
)
|
|||
Net impairment of available-for-sale securities recognized in earnings
|
(292
|
)
|
|
(938
|
)
|
|
(1,510
|
)
|
|||
Other gains (losses) on investment securities recognized in earnings
|
508
|
|
|
1,494
|
|
|
301
|
|
|||
Other income (loss)
|
(879
|
)
|
|
8,044
|
|
|
6,650
|
|
|||
Non-interest income (loss)
|
(3,599
|
)
|
|
(113
|
)
|
|
8,519
|
|
|||
Non-interest expense
|
|
|
|
|
|
||||||
Salaries and employee benefits
|
(975
|
)
|
|
(914
|
)
|
|
(833
|
)
|
|||
Professional services
|
(497
|
)
|
|
(527
|
)
|
|
(543
|
)
|
|||
Occupancy expense
|
(56
|
)
|
|
(58
|
)
|
|
(54
|
)
|
|||
Other administrative expense
|
(399
|
)
|
|
(382
|
)
|
|
(375
|
)
|
|||
Total administrative expense
|
(1,927
|
)
|
|
(1,881
|
)
|
|
(1,805
|
)
|
|||
Real estate owned operations (expense) income
|
(338
|
)
|
|
(196
|
)
|
|
140
|
|
|||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
(967
|
)
|
|
(775
|
)
|
|
(533
|
)
|
|||
Other (expense) income
|
(1,506
|
)
|
|
(238
|
)
|
|
109
|
|
|||
Non-interest expense
|
(4,738
|
)
|
|
(3,090
|
)
|
|
(2,089
|
)
|
|||
Income before income tax (expense) benefit
|
9,274
|
|
|
11,002
|
|
|
25,363
|
|
|||
Income tax (expense) benefit
|
(2,898
|
)
|
|
(3,312
|
)
|
|
23,305
|
|
|||
Net income
|
6,376
|
|
|
7,690
|
|
|
48,668
|
|
|||
Other comprehensive income (loss), net of taxes and reclassification adjustments:
|
|
|
|
|
|
||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
(806
|
)
|
|
1,584
|
|
|
2,406
|
|
|||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
182
|
|
|
197
|
|
|
316
|
|
|||
Changes in defined benefit plans
|
47
|
|
|
(45
|
)
|
|
210
|
|
|||
Total other comprehensive income (loss), net of taxes and reclassification adjustments
|
(577
|
)
|
|
1,736
|
|
|
2,932
|
|
|||
Comprehensive income
|
$
|
5,799
|
|
|
$
|
9,426
|
|
|
$
|
51,600
|
|
Net income
|
$
|
6,376
|
|
|
$
|
7,690
|
|
|
$
|
48,668
|
|
Undistributed net worth sweep and senior preferred stock dividends
|
(6,399
|
)
|
|
(10,026
|
)
|
|
(52,199
|
)
|
|||
Net income (loss) attributable to common stockholders
|
$
|
(23
|
)
|
|
$
|
(2,336
|
)
|
|
$
|
(3,531
|
)
|
Net income (loss) per common share — basic and diluted
|
$
|
(0.01
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(1.09
|
)
|
Weighted average common shares outstanding (in millions) — basic and diluted
|
3,235
|
|
|
3,236
|
|
|
3,238
|
|
Freddie Mac 2015 Form 10-K
|
|
207
|
Financial Statements
|
Consolidated Balance Sheets
|
|
|
At December 31,
|
||||||
(in millions, except share-related amounts)
|
|
2015
|
|
2014
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents (Notes 3, 13)
|
|
$
|
5,595
|
|
|
$
|
10,928
|
|
Restricted cash and cash equivalents (Notes 3, 13)
|
|
14,533
|
|
|
8,535
|
|
||
Securities purchased under agreements to resell (Notes 3, 9)
|
|
63,644
|
|
|
51,903
|
|
||
Investments in securities, at fair value (Note 6)
|
|
114,215
|
|
|
136,987
|
|
||
Mortgage loans held-for-sale (Notes 3, 4) (includes $17,660 and $12,130 at fair value)
|
|
24,992
|
|
|
12,368
|
|
||
Mortgage loans held-for-investment (Notes 3, 4) (net of allowance for loan losses of $15,331 and $21,761)
|
|
1,729,201
|
|
|
1,688,212
|
|
||
Accrued interest receivable (Note 3)
|
|
6,074
|
|
|
6,034
|
|
||
Derivative assets, net (Notes 8, 9)
|
|
395
|
|
|
822
|
|
||
Real estate owned, net (Notes 3, 5)
|
|
1,725
|
|
|
2,558
|
|
||
Deferred tax assets, net (Note 11)
|
|
18,205
|
|
|
19,498
|
|
||
Other assets (Notes 3, 17)
|
|
7,471
|
|
|
7,694
|
|
||
Total assets
|
|
$
|
1,986,050
|
|
|
$
|
1,945,539
|
|
Liabilities and equity
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Accrued interest payable (Note 3)
|
|
$
|
6,183
|
|
|
$
|
6,325
|
|
Debt, net (Notes 3, 7) (includes $7,184 and $5,862 at fair value)
|
|
1,970,427
|
|
|
1,929,542
|
|
||
Derivative liabilities, net (Notes 8, 9)
|
|
1,254
|
|
|
1,963
|
|
||
Other liabilities (Notes 3, 17)
|
|
5,246
|
|
|
5,058
|
|
||
Total liabilities
|
|
1,983,110
|
|
|
1,942,888
|
|
||
Commitments and contingencies (Notes 3, 8, and 15)
|
|
|
|
|
||||
Equity (Note 10)
|
|
|
|
|
||||
Senior preferred stock, at redemption value
|
|
72,336
|
|
|
72,336
|
|
||
Preferred stock, at redemption value
|
|
14,109
|
|
|
14,109
|
|
||
Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares issued and 650,045,962 shares and 650,043,899 shares outstanding
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
—
|
|
|
—
|
|
||
Retained earnings (accumulated deficit)
|
|
(80,773
|
)
|
|
(81,639
|
)
|
||
AOCI, net of taxes, related to:
|
|
|
|
|
||||
Available-for-sale securities (includes $778 and $839, related to net unrealized gains on securities for which other-than-temporary impairment has been recognized in earnings)
|
|
1,740
|
|
|
2,546
|
|
||
Cash flow hedge relationships
|
|
(621
|
)
|
|
(803
|
)
|
||
Defined benefit plans
|
|
34
|
|
|
(13
|
)
|
||
Total AOCI, net of taxes
|
|
1,153
|
|
|
1,730
|
|
||
Treasury stock, at cost, 75,817,924 shares and 75,819,987 shares
|
|
(3,885
|
)
|
|
(3,885
|
)
|
||
Total equity (See Note 10 for information on our dividend obligation to Treasury)
|
|
2,940
|
|
|
2,651
|
|
||
Total liabilities and equity
|
|
$
|
1,986,050
|
|
|
$
|
1,945,539
|
|
|
|
At December 31,
|
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Consolidated Balance Sheet Line Item
|
|
|
|
|
||||
Assets: (Note 3)
|
|
|
|
|
||||
Mortgage loans held-for-sale
|
|
$
|
1,403
|
|
|
$
|
—
|
|
Mortgage loans held-for-investment
|
|
1,625,184
|
|
|
1,558,094
|
|
||
All other assets
|
|
37,305
|
|
|
29,798
|
|
||
Total assets of consolidated VIEs
|
|
$
|
1,663,892
|
|
|
$
|
1,587,892
|
|
Liabilities: (Note 3)
|
|
|
|
|
||||
Debt, net
|
|
$
|
1,556,121
|
|
|
$
|
1,479,473
|
|
All other liabilities
|
|
4,769
|
|
|
4,703
|
|
||
Total liabilities of consolidated VIEs
|
|
$
|
1,560,890
|
|
|
$
|
1,484,176
|
|
Freddie Mac 2015 Form 10-K
|
|
208
|
Financial Statements
|
Consolidated Statements of Equity
|
|
Shares Outstanding
|
|
Senior
Preferred
Stock, at
Redemption
Value
|
|
Preferred
Stock, at
Redemption
Value
|
|
Common
Stock, at
Par Value
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
(Accumulated
Deficit)
|
|
AOCI,
Net of
Tax
|
|
Treasury
Stock, at
Cost
|
|
Total
Equity
|
|||||||||||||||||||||||
(in millions)
|
Senior
Preferred
Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
||||||||||||||||||||||||||||||||||
Balance at December 31, 2012
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(70,796
|
)
|
|
$
|
(2,938
|
)
|
|
$
|
(3,885
|
)
|
|
$
|
8,827
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,668
|
|
|
—
|
|
|
—
|
|
|
48,668
|
|
||||||||
Other comprehensive income, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,932
|
|
|
—
|
|
|
2,932
|
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,668
|
|
|
2,932
|
|
|
—
|
|
|
51,600
|
|
||||||||
Common stock issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||||
Senior preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47,591
|
)
|
|
—
|
|
|
—
|
|
|
(47,591
|
)
|
||||||||
Ending balance at December 31, 2013
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(69,719
|
)
|
|
$
|
(6
|
)
|
|
$
|
(3,885
|
)
|
|
$
|
12,835
|
|
Balance at December 31, 2013
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(69,719
|
)
|
|
$
|
(6
|
)
|
|
$
|
(3,885
|
)
|
|
$
|
12,835
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,690
|
|
|
—
|
|
|
—
|
|
|
7,690
|
|
||||||||
Other comprehensive income, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,736
|
|
|
—
|
|
|
1,736
|
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,690
|
|
|
1,736
|
|
|
—
|
|
|
9,426
|
|
||||||||
Senior preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,610
|
)
|
|
—
|
|
|
—
|
|
|
(19,610
|
)
|
||||||||
Ending balance at December 31, 2014
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(81,639
|
)
|
|
$
|
1,730
|
|
|
$
|
(3,885
|
)
|
|
$
|
2,651
|
|
Balance at December 31, 2014
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(81,639
|
)
|
|
$
|
1,730
|
|
|
$
|
(3,885
|
)
|
|
$
|
2,651
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,376
|
|
|
—
|
|
|
—
|
|
|
6,376
|
|
||||||||
Other comprehensive income, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(577
|
)
|
|
—
|
|
|
(577
|
)
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,376
|
|
|
(577
|
)
|
|
—
|
|
|
5,799
|
|
||||||||
Senior preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,510
|
)
|
|
—
|
|
|
—
|
|
|
(5,510
|
)
|
||||||||
Ending balance at December 31, 2015
|
1
|
|
|
464
|
|
|
650
|
|
|
$
|
72,336
|
|
|
$
|
14,109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(80,773
|
)
|
|
$
|
1,153
|
|
|
$
|
(3,885
|
)
|
|
$
|
2,940
|
|
Freddie Mac 2015 Form 10-K
|
|
209
|
Financial Statements
|
Consolidated Statements of Cash Flows
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2015
|
|
2014
|
|
2013
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
6,376
|
|
|
$
|
7,690
|
|
|
$
|
48,668
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Derivative losses (gains)
|
456
|
|
|
5,652
|
|
|
(6,097
|
)
|
|||
Asset related amortization — premiums, discounts, and basis adjustments
|
5,321
|
|
|
3,518
|
|
|
4,627
|
|
|||
Debt related amortization — premiums and discounts on certain debt securities and basis adjustments
|
(8,295
|
)
|
|
(5,368
|
)
|
|
(6,779
|
)
|
|||
Losses (gains) on extinguishment of debt
|
240
|
|
|
422
|
|
|
(446
|
)
|
|||
(Benefit) provision for credit losses
|
(2,665
|
)
|
|
58
|
|
|
(2,465
|
)
|
|||
Losses (gains) on investment activity
|
1,878
|
|
|
(1,287
|
)
|
|
1,545
|
|
|||
Deferred income tax expense (benefit)
|
1,655
|
|
|
2,284
|
|
|
(23,422
|
)
|
|||
Purchases of mortgage loans acquired as held-for-sale
|
(41,728
|
)
|
|
(24,593
|
)
|
|
(23,103
|
)
|
|||
Sales of mortgage loans acquired as held-for-sale
|
36,034
|
|
|
21,995
|
|
|
28,123
|
|
|||
Repayments of mortgage loans acquired as held-for-sale
|
150
|
|
|
67
|
|
|
167
|
|
|||
Payments to servicers for pre-foreclosure expense and servicer incentive fees
|
(867
|
)
|
|
(932
|
)
|
|
(1,302
|
)
|
|||
Change in:
|
|
|
|
|
|
||||||
Accrued interest receivable
|
(40
|
)
|
|
116
|
|
|
725
|
|
|||
Accrued interest payable
|
(43
|
)
|
|
(440
|
)
|
|
(849
|
)
|
|||
Income taxes receivable
|
1,022
|
|
|
268
|
|
|
117
|
|
|||
Other, net
|
(428
|
)
|
|
(565
|
)
|
|
(2,957
|
)
|
|||
Net cash (used in) provided by operating activities
|
(934
|
)
|
|
8,885
|
|
|
16,552
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Purchases of trading securities
|
(40,614
|
)
|
|
(42,477
|
)
|
|
(53,753
|
)
|
|||
Proceeds from sales of trading securities
|
14,847
|
|
|
18,513
|
|
|
57,380
|
|
|||
Proceeds from maturities of trading securities
|
16,377
|
|
|
17,118
|
|
|
12,542
|
|
|||
Purchases of available-for-sale securities
|
(6,818
|
)
|
|
(25,290
|
)
|
|
(9,681
|
)
|
|||
Proceeds from sales of available-for-sale securities
|
18,900
|
|
|
32,062
|
|
|
24,675
|
|
|||
Proceeds from maturities of available-for-sale securities
|
20,807
|
|
|
20,734
|
|
|
33,630
|
|
|||
Purchases of held-for-investment mortgage loans
|
(122,082
|
)
|
|
(75,298
|
)
|
|
(79,028
|
)
|
|||
Proceeds from sales of mortgage loans held-for-investment
|
2,727
|
|
|
454
|
|
|
196
|
|
|||
Repayments of mortgage loans held-for-investment
|
302,364
|
|
|
241,552
|
|
|
410,455
|
|
|||
(Increase) decrease in restricted cash
|
(5,998
|
)
|
|
3,730
|
|
|
2,327
|
|
|||
Net proceeds from dispositions of real estate owned and other recoveries
|
3,650
|
|
|
7,712
|
|
|
11,274
|
|
|||
Net (increase) decrease in securities purchased under agreements to resell
|
(11,741
|
)
|
|
10,480
|
|
|
(24,820
|
)
|
|||
Derivative premiums and terminations and swap collateral, net
|
(749
|
)
|
|
(3,888
|
)
|
|
6,062
|
|
|||
Changes in other assets
|
(12,724
|
)
|
|
(134
|
)
|
|
—
|
|
|||
Net cash provided by investing activities
|
178,946
|
|
|
205,268
|
|
|
391,259
|
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Proceeds from issuance of debt securities of consolidated trusts held by third parties
|
174,561
|
|
|
124,887
|
|
|
113,841
|
|
|||
Repayments and redemptions of debt securities of consolidated trusts held by third parties
|
(316,306
|
)
|
|
(262,920
|
)
|
|
(430,118
|
)
|
|||
Proceeds from issuance of other debt
|
610,091
|
|
|
451,854
|
|
|
701,342
|
|
|||
Repayments of other debt
|
(646,176
|
)
|
|
(508,710
|
)
|
|
(742,510
|
)
|
|||
Payment of cash dividends on senior preferred stock
|
(5,510
|
)
|
|
(19,610
|
)
|
|
(47,591
|
)
|
|||
Changes in other liabilities
|
(5
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|||
Net cash used in financing activities
|
(183,345
|
)
|
|
(214,506
|
)
|
|
(405,043
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(5,333
|
)
|
|
(353
|
)
|
|
2,768
|
|
|||
Cash and cash equivalents at beginning of year
|
10,928
|
|
|
11,281
|
|
|
8,513
|
|
|||
Cash and cash equivalents at end of year
|
$
|
5,595
|
|
|
$
|
10,928
|
|
|
$
|
11,281
|
|
|
|
|
|
|
|
||||||
Supplemental cash flow information
|
|
|
|
|
|
||||||
Cash paid for:
|
|
|
|
|
|
||||||
Debt interest
|
$
|
61,120
|
|
|
$
|
62,257
|
|
|
$
|
65,614
|
|
Income taxes
|
1,095
|
|
|
760
|
|
|
—
|
|
|||
Non-cash investing and financing activities (Notes 4, 5 and 6)
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
210
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 1
|
Freddie Mac 2015 Form 10-K
|
|
211
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 1
|
•
|
Servicing actions that indicate the potential for near-term loss mitigation, such as whether we have achieved quality borrower contact;
|
•
|
Credit risk factors, such as whether the loan is in a state with foreclosure practices that prevent timely resolution of delinquencies; and
|
•
|
Loan characteristics that indicate whether repayment is likely to occur, such as the borrower's payment history, loan status, and historical performance of loans with similar characteristics.
|
Freddie Mac 2015 Form 10-K
|
|
212
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 1
|
•
|
The unrealized gains and losses on available-for-sale securities;
|
•
|
The effective portion of derivatives accounted for as cash flow hedge relationships; and
|
•
|
Defined benefit plans.
|
Accounting Policy
|
Note
|
Variable Interest Entities
|
Note 3
|
Financial Guarantees
|
Note 3
|
Loans and Allowance for Loan Losses
|
Note 4
|
Real Estate Owned
|
Note 5
|
Investments in Securities
|
Note 6
|
Debt
|
Note 7
|
Derivatives
|
Note 8
|
Collateralized Agreements and Offsetting Arrangements
|
Note 9
|
Repurchase and Resale Agreements and Dollar Roll Transactions
|
Note 9
|
Earnings Per Share
|
Note 10
|
Stockholders’ Equity
|
Note 10
|
Income Taxes
|
Note 11
|
Segment Reporting
|
Note 12
|
Fair Value Measurements
|
Note 14
|
Freddie Mac 2015 Form 10-K
|
|
213
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 1
|
Standard
|
Description
|
Date of Adoption
|
Effect on Consolidated Financial Statements
|
ASU 2014-01,
Accounting for Investments in Qualified Affordable Housing Projects (Topic 323)
|
The amendment permits entities to elect to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.
|
January 1, 2014
|
The adoption of this amendment did not have a material effect on our consolidated financial statements.
|
ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Loans upon Foreclosure (Topic 310)
|
The amendment clarifies that a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.
|
January 1, 2015
|
The adoption of this amendment did not have a material effect on our consolidated financial statements.
|
ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (Topic 860)
|
The amendment requires repurchase-to-maturity transactions to be accounted for as secured borrowings and requires separate accounting for a transfer of a financial asset completed contemporaneously with a repurchase agreement with the same counterparty.
|
January 1, 2015
|
The adoption of this amendment did not have a material effect on our consolidated financial statements.
|
ASU 2014-14, Classification of Certain Government-Guaranteed Loans upon Foreclosure (Topic 310)
|
The amendment requires that a loan be de-recognized and a separate receivable be recognized upon foreclosure if certain conditions are met. If those conditions are met and such a receivable is recognized, the receivable should be measured based on the amount of principal and interest related to the loan expected to be recovered from the guarantor.
|
January 1, 2015
|
The adoption of this amendment did not have a material effect on our consolidated financial statements.
|
Freddie Mac 2015 Form 10-K
|
|
214
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 1
|
Standard
|
Description
|
Date of Adoption
|
Effect on Consolidated Financial Statements
|
ASU 2015-02, Amendments to the Consolidation Analysis (Topic 810)
|
The amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities.
|
January 1, 2016
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30)
|
The amendment requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.
|
January 1, 2016
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14
|
The amendment requires entities to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14 defers the effective date of ASU 2014-09 for all entities by one year.
|
January 1, 2018
|
We are evaluating the effect that the adoption of this amendment will have on our consolidated financial statements
|
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)
|
The amendment addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.
|
January 1, 2018
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
Freddie Mac 2015 Form 10-K
|
|
215
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
Maintain
, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced loans to foster liquid, efficient, competitive and resilient national housing finance markets.
|
•
|
Reduce
taxpayer risk through increasing the role of private capital in the mortgage market.
|
•
|
Build
a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future.
|
Freddie Mac 2015 Form 10-K
|
|
216
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
Freddie Mac 2015 Form 10-K
|
|
217
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
Freddie Mac 2015 Form 10-K
|
|
218
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
Declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to any Freddie Mac equity securities (other than with respect to the senior preferred stock or warrant);
|
•
|
Redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the senior preferred stock or warrant);
|
•
|
Sell or issue any Freddie Mac equity securities (other than the senior preferred stock, the warrant and the common stock issuable upon exercise of the warrant and other than as required by the terms of any binding agreement in effect on the date of the Purchase Agreement);
|
•
|
Terminate the conservatorship (other than in connection with a receivership);
|
•
|
Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value:
|
◦
|
To a limited life regulated entity (in the context of a receivership);
|
◦
|
Of assets and properties in the ordinary course of business, consistent with past practice;
|
◦
|
Of assets and properties having fair market value individually or in aggregate less than
$250 million
in one transaction or a series of related transactions;
|
◦
|
In connection with our liquidation by a receiver;
|
◦
|
Of cash or cash equivalents for cash or cash equivalents; or
|
◦
|
To the extent necessary to comply with the covenant described below relating to the reduction of our mortgage-related investments portfolio;
|
•
|
Issue any subordinated debt;
|
•
|
Enter into a corporate reorganization, recapitalization, merger, acquisition or similar event; or
|
•
|
Engage in transactions with affiliates unless the transaction is: (a) pursuant to the Purchase Agreement, the senior preferred stock or the warrant; (b) upon arm’s length terms; or (c) a transaction undertaken in the ordinary course or pursuant to a contractual obligation or customary employment arrangement in existence on the date of the Purchase Agreement.
|
Freddie Mac 2015 Form 10-K
|
|
219
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
Our SEC filings under the Exchange Act will comply in all material respects as to form with the Exchange Act and the rules and regulations thereunder;
|
•
|
Without the prior written consent of Treasury, we may not permit any of our significant subsidiaries to issue capital stock or equity securities, or securities convertible into or exchangeable for such securities, or any stock appreciation rights or other profit participation rights to any person other than Freddie Mac or its wholly-owned subsidiaries;
|
•
|
We may not take any action that will result in an increase in the par value of our common stock;
|
•
|
Unless waived or consented to in writing by Treasury, we may not take any action to avoid the observance or performance of the terms of the warrant and we must take all actions necessary or appropriate to protect Treasury’s rights against impairment or dilution; and
|
•
|
We must provide Treasury with prior notice of specified actions relating to our common stock, such as setting a record date for a dividend payment, granting subscription or purchase rights, authorizing a recapitalization, reclassification, merger or similar transaction, commencing a liquidation of the company or any other action that would trigger an adjustment in the exercise price or number or amount of shares subject to the warrant.
|
•
|
The completion of our liquidation and fulfillment of Treasury’s obligations under its funding commitment at that time;
|
•
|
The payment in full of, or reasonable provision for, all of our liabilities (whether or not contingent, including mortgage guarantee obligations); and
|
•
|
The funding by Treasury of the maximum amount of the commitment under the Purchase Agreement.
|
Freddie Mac 2015 Form 10-K
|
|
220
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
The amount necessary to cure the payment defaults on our debt and mortgage guarantee obligations; and
|
•
|
The lesser of:
|
◦
|
The deficiency amount; and
|
◦
|
The maximum amount of the commitment less the aggregate amount of funding previously provided under the commitment.
|
Freddie Mac 2015 Form 10-K
|
|
221
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
Keeping us solvent;
|
•
|
Allowing us to focus on our primary business objectives under conservatorship; and
|
•
|
Avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions.
|
•
|
TCLFP
- In December 2009, on a 50-50 pro rata basis, Freddie Mac and Fannie Mae agreed to provide
$8.2 billion
of credit and liquidity support, including outstanding interest at the date of the guarantee, for variable rate demand obligations, or VRDOs, previously issued by HFAs. This support was provided through the issuance of guarantees, which provide credit enhancement to the holders of such VRDOs and also create an obligation to provide funds to purchase any VRDOs that are put by their holders and are not remarketed. Treasury provided a credit and liquidity backstop on the TCLFP. These guarantees replaced existing liquidity facilities from other providers. The guarantees were scheduled to expire on December 31, 2012. However, Treasury gave TCLFP participants the option to extend their individual TCLFP facilities to December 31, 2015 and certain participants elected to do so.
No
outstanding guarantees existed as of December 31, 2015.
|
•
|
NIBP
- In December 2009, on a 50-50 pro rata basis, Freddie Mac and Fannie Mae agreed to issue in total
$15.3 billion
of partially guaranteed pass-through securities backed by new single-family and certain new multifamily housing bonds issued by HFAs. Treasury purchased all of the pass-through securities issued by Freddie Mac and Fannie Mae. This initiative provided financing for HFAs to issue new housing bonds.
|
Freddie Mac 2015 Form 10-K
|
|
222
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 2
|
•
|
The transactions discussed with Treasury above in “Purchase Agreement and Warrant,” “Government Support for our Business” and “Housing Finance Agency Initiative”;
|
•
|
The transactions discussed in Note 4, Note 7, and Note 10; and
|
•
|
The allocation or transfer of 4.2 basis points of each dollar of new business purchases to certain housing funds as required under the GSE Act.
|
Freddie Mac 2015 Form 10-K
|
|
223
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
•
|
The sum of the fair value of the consideration paid, the fair value of any noncontrolling interests, and the reported amount of any previously held interests; and
|
•
|
The net fair value of the assets and liabilities recognized. Guarantees to consolidated VIEs are eliminated in consolidation and are therefore not separately recognized on our consolidated balance sheets.
|
Freddie Mac 2015 Form 10-K
|
|
224
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
Consolidated Balance Sheet Line Item
|
|
|
|
|
||||
Assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
2
|
|
Restricted cash and cash equivalents
|
|
14,529
|
|
|
8,532
|
|
||
Securities purchased under agreements to resell
|
|
14,840
|
|
|
13,500
|
|
||
Mortgage loans held-for-sale
|
|
1,403
|
|
|
—
|
|
||
Mortgage loans held-for-investment
|
|
1,625,184
|
|
|
1,558,094
|
|
||
Accrued interest receivable
|
|
5,305
|
|
|
5,124
|
|
||
Real estate owned, net
|
|
40
|
|
|
44
|
|
||
Other assets
|
|
2,591
|
|
|
2,596
|
|
||
Total assets of consolidated VIEs
|
|
$
|
1,663,892
|
|
|
$
|
1,587,892
|
|
Liabilities:
|
|
|
|
|
||||
Accrued interest payable
|
|
$
|
4,763
|
|
|
$
|
4,702
|
|
Debt, net
|
|
1,556,121
|
|
|
1,479,473
|
|
||
Other liabilities
|
|
6
|
|
|
1
|
|
||
Total liabilities of consolidated VIEs
|
|
$
|
1,560,890
|
|
|
$
|
1,484,176
|
|
Freddie Mac 2015 Form 10-K
|
|
225
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
Freddie Mac 2015 Form 10-K
|
|
226
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
Freddie Mac 2015 Form 10-K
|
|
227
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
•
|
Long-term standby commitments of single-family loans which obligate us to purchase the covered loans when they become seriously delinquent. Periodically, certain of our customers seek to terminate long-term standby commitments and simultaneously enter into guarantor swap transactions to obtain our PCs backed by many of the same loans. During 2015 and 2014, we guaranteed
$4.0 billion
and
$2.6 billion
, respectively, of loans under long-term standby commitments;
|
•
|
Guarantees of multifamily housing revenue bonds that were issued by HFAs, including guarantees that require us to advance funds to enable others to repurchase any tendered tax-exempt and related taxable bonds that are unable to be marketed.
No
advances under these guarantees were outstanding at December 31, 2015 and 2014.
|
•
|
Guarantees under the TCLFP on securities backed by HFA bonds; however, we
no
longer had any of these issued guarantees outstanding at December 31, 2015.
|
Freddie Mac 2015 Form 10-K
|
|
228
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
(in millions)
|
|
Freddie Mac Securities
(1)
|
||||||
Assets and Liabilities Recorded on our Consolidated Balance Sheets
|
|
|
|
|
||||
Assets:
|
|
|
|
|
||||
Investments in securities
|
|
$
|
49,040
|
|
|
$
|
56,568
|
|
Accrued interest receivable
|
|
200
|
|
|
236
|
|
||
Other assets
|
|
1,232
|
|
|
914
|
|
||
Liabilities:
|
|
|
|
|
||||
Other liabilities
|
|
(1,230
|
)
|
|
(1,005
|
)
|
||
Maximum Exposure to Loss
|
|
$
|
114,193
|
|
|
$
|
87,529
|
|
Total Assets of Non-Consolidated VIEs
|
|
$
|
134,900
|
|
|
$
|
103,253
|
|
(1)
|
Freddie Mac securities include our variable interests in REMICs and Stripped Giant PCs, K Certificates, and other securitization products that we do not consolidate. Our maximum exposure to loss includes the guaranteed UPB of assets held by the non-consolidated VIEs related to K Certificates and other securitization products. Our maximum exposure to loss excludes investments in REMICs and Stripped Giant PCs, because we already consolidate the collateral of these trusts on our consolidated balance sheets.
|
Freddie Mac 2015 Form 10-K
|
|
229
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||
(dollars in millions, terms in years)
|
Maximum
Exposure
(1)
|
|
Recognized
Liability
(2)
|
|
Maximum
Remaining
Term
|
|
Maximum
Exposure
(1)
|
|
Recognized
Liability
(2)
|
|
Maximum
Remaining
Term
|
||||||||
K Certificates and other securitization products
|
$
|
114,193
|
|
|
$
|
1,136
|
|
|
40
|
|
$
|
87,529
|
|
|
$
|
861
|
|
|
39
|
Other mortgage-related guarantees
|
13,067
|
|
|
596
|
|
|
38
|
|
26,147
|
|
|
772
|
|
|
39
|
||||
Derivative instruments
|
17,894
|
|
|
151
|
|
|
30
|
|
21,336
|
|
|
154
|
|
|
31
|
(1)
|
The maximum exposure represents the contractual amounts that could be lost if counterparties or borrowers defaulted, without consideration of possible recoveries under credit enhancement arrangements, such as recourse provisions, third-party insurance contracts, or from collateral held or pledged.
|
(2)
|
For K Certificates, other securitization products, and other mortgage-related guarantees, this amount represents the guarantee obligation on our consolidated balance sheets. This amount excludes our reserve for guarantee losses, which totaled
$76 million
and
$126 million
as of
December 31, 2015
and
2014
, respectively, and is included within other liabilities on our consolidated balance sheets.
|
Freddie Mac 2015 Form 10-K
|
|
230
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 3
|
|
|
UPB at
|
|
Maximum Coverage
(1)
at
|
||||||||||||
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||
K Certificates
|
|
$
|
101,473
|
|
|
$
|
75,541
|
|
|
$
|
18,453
|
|
|
$
|
13,576
|
|
Other securitization products
|
|
7,026
|
|
|
5,496
|
|
|
1,477
|
|
|
1,495
|
|
||||
Total
|
|
$
|
108,499
|
|
|
$
|
81,037
|
|
|
$
|
19,930
|
|
|
$
|
15,071
|
|
(1)
|
For K Certificates, this represents the UPB of the securities that are subordinate to our guarantee. For other securitization products, this represents the remaining amount of loss recovery that is available subject to the terms of the counterparty agreement or the UPB of securities that are subordinate to our guarantee.
|
Freddie Mac 2015 Form 10-K
|
|
231
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
(in millions)
|
|
Held by Freddie Mac
|
|
Held by
consolidated trusts |
|
Total
|
|
Held by Freddie Mac
|
|
Held by
consolidated trusts |
|
Total
|
||||||||||||
Held-for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Single-family
|
|
$
|
6,045
|
|
|
$
|
1,702
|
|
|
$
|
7,747
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Multifamily
|
|
19,582
|
|
|
—
|
|
|
19,582
|
|
|
12,111
|
|
|
—
|
|
|
12,111
|
|
||||||
Total UPB
|
|
25,627
|
|
|
1,702
|
|
|
27,329
|
|
|
12,111
|
|
|
—
|
|
|
12,111
|
|
||||||
Cost basis and fair value adjustments, net
|
|
(2,038
|
)
|
|
(299
|
)
|
|
(2,337
|
)
|
|
257
|
|
|
—
|
|
|
257
|
|
||||||
Total held-for-sale loans
|
|
23,589
|
|
|
1,403
|
|
|
24,992
|
|
|
12,368
|
|
|
—
|
|
|
12,368
|
|
||||||
Held-for-investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Single-family
|
|
90,532
|
|
|
1,597,590
|
|
|
1,688,122
|
|
|
111,516
|
|
|
1,534,356
|
|
|
1,645,872
|
|
||||||
Multifamily
|
|
29,505
|
|
|
1,711
|
|
|
31,216
|
|
|
40,845
|
|
|
524
|
|
|
41,369
|
|
||||||
Total UPB
|
|
120,037
|
|
|
1,599,301
|
|
|
1,719,338
|
|
|
152,361
|
|
|
1,534,880
|
|
|
1,687,241
|
|
||||||
Cost basis adjustments
|
|
(3,465
|
)
|
|
28,659
|
|
|
25,194
|
|
|
(3,366
|
)
|
|
26,098
|
|
|
22,732
|
|
||||||
Allowance for loan losses
|
|
(12,555
|
)
|
|
(2,776
|
)
|
|
(15,331
|
)
|
|
(18,877
|
)
|
|
(2,884
|
)
|
|
(21,761
|
)
|
||||||
Total held-for-investment loans
|
|
104,017
|
|
|
1,625,184
|
|
|
1,729,201
|
|
|
130,118
|
|
|
1,558,094
|
|
|
1,688,212
|
|
||||||
Total loans, net
|
|
$
|
127,606
|
|
|
$
|
1,626,587
|
|
|
$
|
1,754,193
|
|
|
$
|
142,486
|
|
|
$
|
1,558,094
|
|
|
$
|
1,700,580
|
|
Freddie Mac 2015 Form 10-K
|
|
232
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2015 Form 10-K
|
|
233
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
•
|
Loans within the Alt-A category continue to be presented in that category following modification, even though the borrower may have provided full documentation of assets and income to complete the modification; and
|
•
|
Loans within the option ARM category continue to be presented in that category following modification, even though the modified loan no longer provides for optional payment provisions.
|
|
As of December 31, 2015
|
|
As of December 31, 2014
|
||||||||||||||||||||||||||||
|
Current LTV Ratio
|
|
|
|
Current LTV Ratio
|
|
|
||||||||||||||||||||||||
(in millions)
|
≤ 80
|
|
> 80 to 100
|
|
> 100
(1)
|
|
Total
|
|
≤ 80
|
|
> 80 to 100
|
|
> 100
(1)
|
|
Total
|
||||||||||||||||
20 and 30-year or more, amortizing fixed-rate
(2)
|
$
|
1,020,227
|
|
|
$
|
242,948
|
|
|
$
|
50,893
|
|
|
$
|
1,314,068
|
|
|
$
|
911,071
|
|
|
$
|
258,126
|
|
|
$
|
85,398
|
|
|
$
|
1,254,595
|
|
15-year amortizing fixed-rate
(2)
|
271,456
|
|
|
12,400
|
|
|
1,754
|
|
|
285,610
|
|
|
265,098
|
|
|
14,101
|
|
|
3,338
|
|
|
282,537
|
|
||||||||
Adjustable-rate
|
59,724
|
|
|
5,055
|
|
|
249
|
|
|
65,028
|
|
|
60,463
|
|
|
6,701
|
|
|
709
|
|
|
67,873
|
|
||||||||
Alt-A, interest-only, and option ARM
|
27,014
|
|
|
13,124
|
|
|
8,485
|
|
|
48,623
|
|
|
28,935
|
|
|
18,232
|
|
|
16,448
|
|
|
63,615
|
|
||||||||
Total single-family loans
|
$
|
1,378,421
|
|
|
$
|
273,527
|
|
|
$
|
61,381
|
|
|
$
|
1,713,329
|
|
|
$
|
1,265,567
|
|
|
$
|
297,160
|
|
|
$
|
105,893
|
|
|
$
|
1,668,620
|
|
(1)
|
The serious delinquency rate for the total of single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was
6.03%
and
9.01%
as of
December 31, 2015
and 2014, respectively.
|
(2)
|
The majority of our loan modifications result in new terms that include fixed interest rates after modification. As of
December 31, 2015
and 2014, we have categorized UPB of approximately
$38.3 billion
and
$42.3 billion
, respectively, of modified loans as fixed-rate loans (instead of as adjustable rate loans), even though the modified loans have rate adjustment provisions. In these cases, while the terms of the modified loans provide for the interest rate to adjust in the future, such future rates are determined at the time of modification rather than at a subsequent date.
|
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
Credit risk profile by internally assigned grade:
(1)
|
|
|
|
|
||||
Pass
|
|
$
|
29,660
|
|
|
$
|
38,518
|
|
Special mention
|
|
1,135
|
|
|
1,805
|
|
||
Substandard
|
|
408
|
|
|
1,030
|
|
||
Doubtful
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
31,203
|
|
|
$
|
41,353
|
|
(1)
|
A loan categorized as: "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower; "Special mention" has signs of potential financial weakness; "Substandard" has a well-defined weakness that jeopardizes the timely full repayment; and "Doubtful" has a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions.
|
Freddie Mac 2015 Form 10-K
|
|
234
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
December 31, 2015
|
||||||||||||||||||||||
(in millions)
|
Current
|
|
One
Month
Past Due
|
|
Two
Months
Past Due
|
|
Three
Months or
More Past Due,
or in
Foreclosure
(1)
|
|
Total
|
|
Non-accrual
|
||||||||||||
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
$
|
1,280,247
|
|
|
$
|
16,178
|
|
|
$
|
5,037
|
|
|
$
|
12,606
|
|
|
$
|
1,314,068
|
|
|
$
|
12,603
|
|
15-year amortizing fixed-rate
|
284,137
|
|
|
935
|
|
|
183
|
|
|
355
|
|
|
285,610
|
|
|
355
|
|
||||||
Adjustable-rate
|
64,326
|
|
|
359
|
|
|
88
|
|
|
255
|
|
|
65,028
|
|
|
255
|
|
||||||
Alt-A, interest-only, and option ARM
|
43,543
|
|
|
1,962
|
|
|
714
|
|
|
2,404
|
|
|
48,623
|
|
|
2,403
|
|
||||||
Total single-family
|
1,672,253
|
|
|
19,434
|
|
|
6,022
|
|
|
15,620
|
|
|
1,713,329
|
|
|
15,616
|
|
||||||
Total multifamily
|
31,203
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,203
|
|
|
170
|
|
||||||
Total single-family and multifamily
|
$
|
1,703,456
|
|
|
$
|
19,434
|
|
|
$
|
6,022
|
|
|
$
|
15,620
|
|
|
$
|
1,744,532
|
|
|
$
|
15,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
December 31, 2014
|
||||||||||||||||||||||
(in millions)
|
Current
|
|
One
Month
Past Due
|
|
Two
Months
Past Due
|
|
Three
Months or More Past Due, or in Foreclosure (1) |
|
Total
|
|
Non-accrual
|
||||||||||||
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
$
|
1,207,826
|
|
|
$
|
17,516
|
|
|
$
|
5,817
|
|
|
$
|
23,436
|
|
|
$
|
1,254,595
|
|
|
$
|
23,433
|
|
15-year amortizing fixed-rate
|
280,629
|
|
|
1,010
|
|
|
216
|
|
|
682
|
|
|
282,537
|
|
|
682
|
|
||||||
Adjustable-rate
|
66,737
|
|
|
406
|
|
|
118
|
|
|
612
|
|
|
67,873
|
|
|
612
|
|
||||||
Alt-A, interest-only, and option ARM
|
53,251
|
|
|
2,368
|
|
|
948
|
|
|
7,048
|
|
|
63,615
|
|
|
7,045
|
|
||||||
Total single-family
|
1,608,443
|
|
|
21,300
|
|
|
7,099
|
|
|
31,778
|
|
|
1,668,620
|
|
|
31,772
|
|
||||||
Total multifamily
|
41,335
|
|
|
7
|
|
|
11
|
|
|
—
|
|
|
41,353
|
|
|
385
|
|
||||||
Total single-family and multifamily
|
$
|
1,649,778
|
|
|
$
|
21,307
|
|
|
$
|
7,110
|
|
|
$
|
31,778
|
|
|
$
|
1,709,973
|
|
|
$
|
32,157
|
|
(1)
|
Includes
$7.0 billion
and
$17.9 billion
of loans that were in the process of foreclosure as of December 31, 2015 and 2014, respectively.
|
Freddie Mac 2015 Form 10-K
|
|
235
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
(dollars in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
Single-family:
(1)
|
|
|
|
|
||||
Non-credit-enhanced portfolio
|
|
|
|
|
||||
Serious delinquency rate
|
|
1.30
|
%
|
|
1.74
|
%
|
||
Total number of seriously delinquent loans
|
|
105,071
|
|
|
150,300
|
|
||
Credit-enhanced portfolio:
(2)
|
|
|
|
|
||||
Primary mortgage insurance:
|
|
|
|
|
||||
Serious delinquency rate
|
|
2.06
|
%
|
|
3.10
|
%
|
||
Total number of seriously delinquent loans
|
|
27,813
|
|
|
38,595
|
|
||
Other credit protection:
(3)
|
|
|
|
|
||||
Serious delinquency rate
|
|
0.58
|
%
|
|
1.21
|
%
|
||
Total number of seriously delinquent loans
|
|
9,422
|
|
|
12,175
|
|
||
Total single-family:
|
|
|
|
|
||||
Serious delinquency rate
|
|
1.32
|
%
|
|
1.88
|
%
|
||
Total number of seriously delinquent loans
|
|
141,255
|
|
|
200,069
|
|
||
Multifamily:
(4)
|
|
|
|
|
||||
Non-credit-enhanced portfolio:
|
|
|
|
|
||||
Delinquency rate
|
|
0.03
|
%
|
|
0.02
|
%
|
||
UPB of delinquent loans
|
|
$
|
19
|
|
|
$
|
11
|
|
Credit-enhanced portfolio:
|
|
|
|
|
||||
Delinquency rate
|
|
0.02
|
%
|
|
0.05
|
%
|
||
UPB of delinquent loans
|
|
$
|
20
|
|
|
$
|
44
|
|
Total Multifamily:
|
|
|
|
|
||||
Delinquency rate
|
|
0.02
|
%
|
|
0.04
|
%
|
||
UPB of delinquent loans
|
|
$
|
39
|
|
|
$
|
55
|
|
(1)
|
Serious delinquencies on single-family loans underlying certain REMICs, other securitization products, and other mortgage-related guarantees may be reported on a different schedule due to variances in industry practice.
|
(2)
|
The credit enhanced categories are not mutually exclusive as a single loan may be covered by both primary mortgage insurance and other credit protection.
|
(3)
|
Consists of single-family loans covered by financial arrangements (other than primary mortgage insurance) that are designed to reduce our credit risk exposure. See "Credit Protection and Other Forms of Credit Enhancement" for more information.
|
(4)
|
Multifamily delinquency performance is based on UPB of loans that are two monthly payments or more past due or those in the process of foreclosure.
|
Freddie Mac 2015 Form 10-K
|
|
236
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
•
|
Our allowance for loan losses, which pertains to all single-family and multifamily loans classified as held-for-investment on our consolidated balance sheets; and
|
•
|
Our reserve for guarantee losses, which pertains to single-family and multifamily loans underlying our K Certificates, other securitization products, and other mortgage-related guarantees.
|
Freddie Mac 2015 Form 10-K
|
|
237
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||
|
2015
|
|
2014
|
||||||||||||||||||||||||||||
|
Allowance for Loan Losses
|
|
Reserve for
Guarantee Losses |
|
|
|
Allowance for Loan Losses
|
|
Reserve for
Guarantee Losses |
|
|
||||||||||||||||||||
(in millions)
|
Held by Freddie Mac
|
|
Held By
Consolidated
Trusts
|
|
|
Total
|
|
Held by Freddie Mac
|
|
Held By
Consolidated
Trusts
|
|
|
Total
|
||||||||||||||||||
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance
|
$
|
18,800
|
|
|
$
|
2,884
|
|
|
$
|
109
|
|
|
$
|
21,793
|
|
|
$
|
21,487
|
|
|
$
|
3,006
|
|
|
$
|
85
|
|
|
$
|
24,578
|
|
Provision (benefit) for credit losses
|
(2,763
|
)
|
|
169
|
|
|
(45
|
)
|
|
(2,639
|
)
|
|
(864
|
)
|
|
947
|
|
|
30
|
|
|
113
|
|
||||||||
Charge-offs
|
(4,696
|
)
|
|
(367
|
)
|
|
(8
|
)
|
|
(5,071
|
)
|
|
(4,510
|
)
|
|
(376
|
)
|
|
(6
|
)
|
|
(4,892
|
)
|
||||||||
Recoveries
|
703
|
|
|
14
|
|
|
—
|
|
|
717
|
|
|
998
|
|
|
260
|
|
|
—
|
|
|
1,258
|
|
||||||||
Transfers, net
(1)
|
473
|
|
|
75
|
|
|
—
|
|
|
548
|
|
|
1,689
|
|
|
(953
|
)
|
|
—
|
|
|
736
|
|
||||||||
Ending balance
|
$
|
12,517
|
|
|
$
|
2,775
|
|
|
$
|
56
|
|
|
$
|
15,348
|
|
|
$
|
18,800
|
|
|
$
|
2,884
|
|
|
$
|
109
|
|
|
$
|
21,793
|
|
Multifamily:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
94
|
|
|
$
|
125
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
151
|
|
Provision (benefit) for credit losses
|
(29
|
)
|
|
—
|
|
|
3
|
|
|
(26
|
)
|
|
(46
|
)
|
|
—
|
|
|
(9
|
)
|
|
(55
|
)
|
||||||||
Charge-offs
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||||
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||
Transfers, net
(1)
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Ending balance
|
$
|
38
|
|
|
$
|
1
|
|
|
$
|
20
|
|
|
$
|
59
|
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
94
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance
|
$
|
18,877
|
|
|
$
|
2,884
|
|
|
$
|
126
|
|
|
$
|
21,887
|
|
|
$
|
21,612
|
|
|
$
|
3,006
|
|
|
$
|
111
|
|
|
$
|
24,729
|
|
Provision (benefit) for credit losses
|
(2,792
|
)
|
|
169
|
|
|
(42
|
)
|
|
(2,665
|
)
|
|
(910
|
)
|
|
947
|
|
|
21
|
|
|
58
|
|
||||||||
Charge-offs
|
(4,705
|
)
|
|
(367
|
)
|
|
(8
|
)
|
|
(5,080
|
)
|
|
(4,513
|
)
|
|
(376
|
)
|
|
(6
|
)
|
|
(4,895
|
)
|
||||||||
Recoveries
|
703
|
|
|
14
|
|
|
—
|
|
|
717
|
|
|
999
|
|
|
260
|
|
|
—
|
|
|
1,259
|
|
||||||||
Transfers, net
(1)
|
472
|
|
|
76
|
|
|
—
|
|
|
548
|
|
|
1,689
|
|
|
(953
|
)
|
|
—
|
|
|
736
|
|
||||||||
Ending balance
|
$
|
12,555
|
|
|
$
|
2,776
|
|
|
$
|
76
|
|
|
$
|
15,407
|
|
|
$
|
18,877
|
|
|
$
|
2,884
|
|
|
$
|
126
|
|
|
$
|
21,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Ratio of total loan loss reserves (excluding reserves for TDR concessions) to net charge-offs for single-family loans
|
|
3.0
|
|
|
|
|
|
|
|
|
2.5
|
|
|||||||||||||||||||
Ratio of total loan loss reserves to net charge-offs for single-family loans
|
|
9.2
|
|
|
|
|
|
|
|
|
5.2
|
|
(1)
|
For the years ended
December 31, 2015
and 2014, consists of approximately
$0.5 billion
and
$0.7 billion
, respectively, attributable to capitalization of past due interest on modified loans. Also includes amounts associated with reclassified single-family reserves related to our removal of loans previously held by consolidated trusts, net of reclassifications for single-family loans subsequently resecuritized after such removal.
|
Freddie Mac 2015 Form 10-K
|
|
238
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
•
|
Loss mitigation activities, including loan modifications for troubled borrowers and the incidence of redefault we have experienced on similar loans that have completed a loan modification;
|
•
|
Recoveries through repurchases by seller/servicers of defaulted loans due to failure to follow contractual underwriting requirements at the time of loan origination; and
|
•
|
Defaults we believe are likely to occur as a result of loss events that have occurred through the respective balance sheet date.
|
•
|
Six months of sales experience realized on our distressed property dispositions; and
|
•
|
Twelve months of pre-foreclosure expenses on our distressed properties, including REO, short sales, and third-party sales.
|
Freddie Mac 2015 Form 10-K
|
|
239
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
•
|
A trial period where the expected permanent modification will change our expectation of collecting all amounts due at the original contract rate;
|
•
|
A delay in payment that is more than insignificant;
|
•
|
A reduction in the contractual interest rate;
|
•
|
Interest forbearance for a period of time that is more than insignificant or forgiveness of accrued but uncollected interest amounts;
|
•
|
Principal forbearance that is more than insignificant; and
|
•
|
Discharge of the borrower’s obligation in Chapter 7 bankruptcy.
|
Freddie Mac 2015 Form 10-K
|
|
240
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
2015
|
|
2014
|
||||||||||
(dollars in millions)
|
|
Number of
Mortgage Loans
|
|
Post-TDR
Recorded
Investment
|
|
Number of
Mortgage Loans
|
|
Post-TDR
Recorded
Investment
|
||||||
Single-family:
(1)
|
|
|
|
|
|
|
|
|
||||||
20 and 30-year or more, amortizing fixed-rate
|
|
46,641
|
|
|
$
|
6,627
|
|
|
68,186
|
|
|
$
|
10,172
|
|
15-year amortizing fixed-rate
|
|
5,806
|
|
|
419
|
|
|
7,189
|
|
|
528
|
|
||
Adjustable-rate
|
|
1,335
|
|
|
195
|
|
|
1,849
|
|
|
285
|
|
||
Alt-A, interest-only, and option ARM
|
|
7,143
|
|
|
1,146
|
|
|
9,112
|
|
|
1,865
|
|
||
Total single-family
|
|
60,925
|
|
|
8,387
|
|
|
86,336
|
|
|
12,850
|
|
||
Multifamily
|
|
1
|
|
|
30
|
|
|
2
|
|
|
15
|
|
||
Total
|
|
60,926
|
|
|
$
|
8,417
|
|
|
86,338
|
|
|
$
|
12,865
|
|
(1)
|
The pre-TDR recorded investment for single-family loans initially classified as TDR during the years ended
December 31, 2015
and
2014
was
$8.4 billion
and
$12.8 billion
, respectively.
|
|
Year Ended December 31,
|
||||||||||||
|
2015
|
|
2014
|
||||||||||
(dollars in millions)
|
Number of
Mortgage Loans
|
|
Post-TDR
Recorded
Investment
(1)
|
|
Number of
Mortgage Loans
|
|
Post-TDR
Recorded
Investment
(1)
|
||||||
Single-family:
|
|
|
|
|
|
|
|
||||||
20 and 30-year or more, amortizing fixed-rate
|
18,478
|
|
|
$
|
3,036
|
|
|
19,101
|
|
|
$
|
3,384
|
|
15-year amortizing fixed-rate
|
900
|
|
|
72
|
|
|
645
|
|
|
62
|
|
||
Adjustable-rate
|
335
|
|
|
55
|
|
|
332
|
|
|
61
|
|
||
Alt-A, interest-only, and option ARM
|
1,955
|
|
|
435
|
|
|
2,357
|
|
|
564
|
|
||
Total single-family
|
21,668
|
|
|
$
|
3,598
|
|
|
22,435
|
|
|
$
|
4,071
|
|
Multifamily
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Freddie Mac 2015 Form 10-K
|
|
241
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2015 Form 10-K
|
|
242
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
Balance at December 31, 2015
|
|
For the Year Ended December 31, 2015
|
||||||||||||||||||||||||
(in millions)
|
|
UPB
|
|
Recorded
Investment
|
|
Associated
Allowance
|
|
Net
Investment
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Interest Income
Recognized
On Cash Basis
(1)
|
||||||||||||||
Single-family —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
With no specific allowance recorded:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
$
|
4,957
|
|
|
$
|
3,724
|
|
|
N/A
|
|
|
$
|
3,724
|
|
|
$
|
3,381
|
|
|
$
|
387
|
|
|
$
|
11
|
|
|
15-year amortizing fixed-rate
|
|
45
|
|
|
38
|
|
|
N/A
|
|
|
38
|
|
|
41
|
|
|
8
|
|
|
—
|
|
|||||||
Adjustable-rate
|
|
194
|
|
|
191
|
|
|
N/A
|
|
|
191
|
|
|
112
|
|
|
4
|
|
|
—
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
1,370
|
|
|
1,033
|
|
|
N/A
|
|
|
1,033
|
|
|
844
|
|
|
83
|
|
|
2
|
|
|||||||
Total with no specific allowance recorded
|
|
6,566
|
|
|
4,986
|
|
|
N/A
|
|
|
4,986
|
|
|
4,378
|
|
|
482
|
|
|
13
|
|
|||||||
With specific allowance recorded:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
72,886
|
|
|
71,215
|
|
|
$
|
(11,245
|
)
|
|
59,970
|
|
|
73,530
|
|
|
2,558
|
|
|
308
|
|
||||||
15-year amortizing fixed-rate
|
|
975
|
|
|
978
|
|
|
(21
|
)
|
|
957
|
|
|
1,033
|
|
|
47
|
|
|
11
|
|
|||||||
Adjustable-rate
|
|
518
|
|
|
510
|
|
|
(28
|
)
|
|
482
|
|
|
632
|
|
|
19
|
|
|
4
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
14,409
|
|
|
13,839
|
|
|
(2,725
|
)
|
|
11,114
|
|
|
14,958
|
|
|
422
|
|
|
55
|
|
|||||||
Total with specific allowance recorded
|
|
88,788
|
|
|
86,542
|
|
|
(14,019
|
)
|
|
72,523
|
|
|
90,153
|
|
|
3,046
|
|
|
378
|
|
|||||||
Combined single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
77,843
|
|
|
74,939
|
|
|
(11,245
|
)
|
|
63,694
|
|
|
76,911
|
|
|
2,945
|
|
|
319
|
|
|||||||
15-year amortizing fixed-rate
|
|
1,020
|
|
|
1,016
|
|
|
(21
|
)
|
|
995
|
|
|
1,074
|
|
|
55
|
|
|
11
|
|
|||||||
Adjustable-rate
|
|
712
|
|
|
701
|
|
|
(28
|
)
|
|
673
|
|
|
744
|
|
|
23
|
|
|
4
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
15,779
|
|
|
14,872
|
|
|
(2,725
|
)
|
|
12,147
|
|
|
15,802
|
|
|
505
|
|
|
57
|
|
|||||||
Total single-family
|
|
$
|
95,354
|
|
|
$
|
91,528
|
|
|
$
|
(14,019
|
)
|
|
$
|
77,509
|
|
|
$
|
94,531
|
|
|
$
|
3,528
|
|
|
$
|
391
|
|
Multifamily —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
With no specific allowance recorded
(2)
|
|
$
|
341
|
|
|
$
|
333
|
|
|
N/A
|
|
|
$
|
333
|
|
|
$
|
660
|
|
|
$
|
25
|
|
|
$
|
9
|
|
|
With specific allowance recorded
|
|
149
|
|
|
142
|
|
|
$
|
(21
|
)
|
|
121
|
|
|
235
|
|
|
8
|
|
|
5
|
|
||||||
Total multifamily
|
|
$
|
490
|
|
|
$
|
475
|
|
|
$
|
(21
|
)
|
|
$
|
454
|
|
|
$
|
895
|
|
|
$
|
33
|
|
|
$
|
14
|
|
Total single-family and multifamily
|
|
$
|
95,844
|
|
|
$
|
92,003
|
|
|
$
|
(14,040
|
)
|
|
$
|
77,963
|
|
|
$
|
95,426
|
|
|
$
|
3,561
|
|
|
$
|
405
|
|
Freddie Mac 2015 Form 10-K
|
|
243
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
Balance at December 31, 2014
|
|
For the Year Ended December 31, 2014
|
||||||||||||||||||||||||
(in millions)
|
|
UPB
|
|
Recorded Investment
|
|
Associated
Allowance
|
|
Net
Investment
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Interest Income
Recognized
On Cash Basis
(1)
|
||||||||||||||
Single-family —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
With no specific allowance recorded:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
$
|
6,041
|
|
|
$
|
4,007
|
|
|
N/A
|
|
|
$
|
4,007
|
|
|
$
|
3,727
|
|
|
$
|
376
|
|
|
$
|
33
|
|
|
15-year amortizing fixed-rate
|
|
63
|
|
|
44
|
|
|
N/A
|
|
|
44
|
|
|
39
|
|
|
10
|
|
|
1
|
|
|||||||
Adjustable rate
|
|
27
|
|
|
22
|
|
|
N/A
|
|
|
22
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
1,717
|
|
|
1,168
|
|
|
N/A
|
|
|
1,168
|
|
|
1,133
|
|
|
81
|
|
|
6
|
|
|||||||
Total with no specific allowance recorded
|
|
7,848
|
|
|
5,241
|
|
|
N/A
|
|
|
5,241
|
|
|
4,916
|
|
|
468
|
|
|
40
|
|
|||||||
With specific allowance recorded:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
77,798
|
|
|
76,708
|
|
|
$
|
(14,051
|
)
|
|
62,657
|
|
|
75,773
|
|
|
2,357
|
|
|
279
|
|
||||||
15-year amortizing fixed-rate
|
|
1,226
|
|
|
1,233
|
|
|
(40
|
)
|
|
1,193
|
|
|
1,242
|
|
|
54
|
|
|
10
|
|
|||||||
Adjustable rate
|
|
868
|
|
|
866
|
|
|
(65
|
)
|
|
801
|
|
|
881
|
|
|
23
|
|
|
6
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
16,734
|
|
|
16,335
|
|
|
(3,681
|
)
|
|
12,654
|
|
|
16,476
|
|
|
380
|
|
|
58
|
|
|||||||
Total with specific allowance recorded
|
|
96,626
|
|
|
95,142
|
|
|
(17,837
|
)
|
|
77,305
|
|
|
94,372
|
|
|
2,814
|
|
|
353
|
|
|||||||
Combined single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
83,839
|
|
|
80,715
|
|
|
(14,051
|
)
|
|
66,664
|
|
|
79,500
|
|
|
2,733
|
|
|
312
|
|
|||||||
15-year amortizing fixed-rate
|
|
1,289
|
|
|
1,277
|
|
|
(40
|
)
|
|
1,237
|
|
|
1,281
|
|
|
64
|
|
|
11
|
|
|||||||
Adjustable rate
|
|
895
|
|
|
888
|
|
|
(65
|
)
|
|
823
|
|
|
898
|
|
|
24
|
|
|
6
|
|
|||||||
Alt-A, interest-only, and option ARM
|
|
18,451
|
|
|
17,503
|
|
|
(3,681
|
)
|
|
13,822
|
|
|
17,609
|
|
|
461
|
|
|
64
|
|
|||||||
Total single-family
|
|
$
|
104,474
|
|
|
$
|
100,383
|
|
|
$
|
(17,837
|
)
|
|
$
|
82,546
|
|
|
$
|
99,288
|
|
|
$
|
3,282
|
|
|
$
|
393
|
|
Multifamily —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
With no specific allowance recorded
(2)
|
|
$
|
440
|
|
|
$
|
431
|
|
|
N/A
|
|
|
$
|
431
|
|
|
$
|
659
|
|
|
$
|
29
|
|
|
$
|
9
|
|
|
With specific allowance recorded
|
|
480
|
|
|
471
|
|
|
$
|
(52
|
)
|
|
419
|
|
|
535
|
|
|
26
|
|
|
16
|
|
||||||
Total multifamily
|
|
$
|
920
|
|
|
$
|
902
|
|
|
$
|
(52
|
)
|
|
$
|
850
|
|
|
$
|
1,194
|
|
|
$
|
55
|
|
|
$
|
25
|
|
Total single-family and multifamily
|
|
$
|
105,394
|
|
|
$
|
101,285
|
|
|
$
|
(17,889
|
)
|
|
$
|
83,396
|
|
|
$
|
100,482
|
|
|
$
|
3,337
|
|
|
$
|
418
|
|
(1)
|
Consists of income recognized during the period related to loans on non-accrual status.
|
(2)
|
Individually impaired loans with no specific related valuation allowance primarily represent those loans for which the collateral value is sufficiently in excess of the loan balance to result in recovery of the entire recorded investment if the property were foreclosed upon or otherwise subject to disposition.
|
(3)
|
Consists primarily of loans classified as TDRs.
|
Freddie Mac 2015 Form 10-K
|
|
244
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
(in millions)
|
|
Single-family
|
|
Multifamily
|
|
Total
|
|
Single-family
|
|
Multifamily
|
|
Total
|
||||||||||||
Recorded investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collectively evaluated
|
|
$
|
1,621,801
|
|
|
$
|
30,728
|
|
|
$
|
1,652,529
|
|
|
$
|
1,568,237
|
|
|
$
|
40,451
|
|
|
$
|
1,608,688
|
|
Individually evaluated
|
|
91,528
|
|
|
475
|
|
|
92,003
|
|
|
100,383
|
|
|
902
|
|
|
101,285
|
|
||||||
Total recorded investment
|
|
1,713,329
|
|
|
31,203
|
|
|
1,744,532
|
|
|
1,668,620
|
|
|
41,353
|
|
|
1,709,973
|
|
||||||
Ending balance of the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collectively evaluated
|
|
(1,273
|
)
|
|
(18
|
)
|
|
(1,291
|
)
|
|
(3,847
|
)
|
|
(25
|
)
|
|
(3,872
|
)
|
||||||
Individually evaluated
|
|
(14,019
|
)
|
|
(21
|
)
|
|
(14,040
|
)
|
|
(17,837
|
)
|
|
(52
|
)
|
|
(17,889
|
)
|
||||||
Total ending balance of the allowance
|
|
(15,292
|
)
|
|
(39
|
)
|
|
(15,331
|
)
|
|
(21,684
|
)
|
|
(77
|
)
|
|
(21,761
|
)
|
||||||
Net investment in loans
|
|
$
|
1,698,037
|
|
|
$
|
31,164
|
|
|
$
|
1,729,201
|
|
|
$
|
1,646,936
|
|
|
$
|
41,276
|
|
|
$
|
1,688,212
|
|
|
|
UPB
(1)
at
|
|
Maximum Coverage
(1)(2)
at
|
||||||||||||
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||
Primary mortgage insurance
|
|
$
|
257,063
|
|
|
$
|
227,495
|
|
|
$
|
65,760
|
|
|
$
|
57,938
|
|
Other credit protection:
|
|
|
|
|
|
|
|
|
||||||||
STACR debt note and ACIS transactions
(3)
|
|
241,450
|
|
|
144,272
|
|
|
14,916
|
|
|
6,657
|
|
||||
Lender recourse and indemnifications
|
|
6,339
|
|
|
6,527
|
|
|
5,396
|
|
|
6,092
|
|
||||
Pool insurance
(4)
|
|
1,706
|
|
|
2,284
|
|
|
753
|
|
|
947
|
|
||||
HFA indemnification
|
|
2,599
|
|
|
3,357
|
|
|
2,599
|
|
|
3,324
|
|
||||
Subordination
|
|
3,021
|
|
|
2,377
|
|
|
336
|
|
|
339
|
|
||||
Other credit enhancements
|
|
15
|
|
|
20
|
|
|
10
|
|
|
18
|
|
||||
Total
|
|
$
|
512,193
|
|
|
$
|
386,332
|
|
|
$
|
89,770
|
|
|
$
|
75,315
|
|
Freddie Mac 2015 Form 10-K
|
|
245
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 4
|
(1)
|
Except for the majority of our single-family credit risk transfer transactions, our credit enhancements generally provide protection for the first, or initial, credit losses associated with the related loans. Excludes: (a) FHA/VA and other governmental loans; (b) purchased credit protection associated with
$8.3 billion
and
$9.8 billion
in UPB of single-family loans underlying other securitization products as of
December 31, 2015
and 2014, respectively; and (c) repurchase rights (subject to certain conditions and limitations) we have under representations and warranties provided by our agreements with seller/servicers to underwrite loans and service them in accordance with our standards. The UPB of single-family loans covered by insurance or partial guarantees issued by federal agencies (such as FHA, VA and USDA) was
$3.2 billion
and
$3.6 billion
as of December 31, 2015, and December 31, 2014, respectively.
|
(2)
|
Except for subordination, this represents the remaining amount of loss recovery that is available subject to terms of counterparty agreements. For subordination, this represents the UPB of the securities that are subordinate to our guarantee, which could provide protection by absorbing first losses.
|
(3)
|
Excludes
$87.4 billion
and
$48.3 billion
in UPB at
December 31, 2015
and 2014, respectively, where the related loans are also covered by primary mortgage insurance. Maximum coverage amounts presented represent the outstanding balance of STACR debt notes held by third parties as well as the remaining aggregate limit of insurance purchased from third parties in ACIS transactions.
|
(4)
|
Excludes approximately
$0.6 billion
and
$0.9 billion
in UPB at
December 31, 2015
and 2014, respectively, where the related loans are also covered by primary mortgage insurance.
|
Freddie Mac 2015 Form 10-K
|
|
246
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 5
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Beginning balance — REO
|
|
$
|
2,684
|
|
|
$
|
4,602
|
|
|
$
|
4,407
|
|
Additions
|
|
2,243
|
|
|
4,110
|
|
|
6,498
|
|
|||
Dispositions
|
|
(3,145
|
)
|
|
(6,028
|
)
|
|
(6,303
|
)
|
|||
Ending balance — REO
|
|
1,782
|
|
|
2,684
|
|
|
4,602
|
|
|||
Beginning balance, valuation allowance
|
|
(126
|
)
|
|
(51
|
)
|
|
(29
|
)
|
|||
Change in valuation allowance
|
|
69
|
|
|
(75
|
)
|
|
(22
|
)
|
|||
Ending balance, valuation allowance
|
|
(57
|
)
|
|
(126
|
)
|
|
(51
|
)
|
|||
Ending balance — REO, net
|
|
$
|
1,725
|
|
|
$
|
2,558
|
|
|
$
|
4,551
|
|
Freddie Mac 2015 Form 10-K
|
|
247
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 5
|
•
|
REO property expenses;
|
•
|
Net gains or losses incurred on disposition of REO properties;
|
•
|
Adjustments to the holding period allowance associated with REO properties to record them at the lower of their carrying amount or fair value less the estimated costs to sell; and
|
•
|
Recoveries from insurance and other credit enhancements.
|
Freddie Mac 2015 Form 10-K
|
|
248
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
(in millions)
|
December 31, 2015
|
|
December 31, 2014
|
||||
Trading securities
|
$
|
39,278
|
|
|
$
|
30,437
|
|
Available-for-sale securities
|
74,937
|
|
|
106,550
|
|
||
Total
|
$
|
114,215
|
|
|
$
|
136,987
|
|
•
|
Can contractually be prepaid or otherwise settled in such a way that we may not recover substantially all of our recorded investment;
|
•
|
Are not of high credit quality at acquisition; or
|
•
|
Have been determined to be other-than-temporarily impaired.
|
Freddie Mac 2015 Form 10-K
|
|
249
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
Mortgage-related securities:
|
|
|
|
|
||||
Freddie Mac
|
|
$
|
15,513
|
|
|
$
|
17,469
|
|
Fannie Mae
|
|
6,438
|
|
|
6,099
|
|
||
Ginnie Mae
|
|
30
|
|
|
16
|
|
||
Other
|
|
146
|
|
|
171
|
|
||
Total mortgage-related securities
|
|
22,127
|
|
|
23,755
|
|
||
Non-mortgage-related securities
|
|
17,151
|
|
|
6,682
|
|
||
Total fair value of trading securities
|
|
$
|
39,278
|
|
|
$
|
30,437
|
|
Freddie Mac 2015 Form 10-K
|
|
250
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
|
|
December 31, 2015
|
||||||||||||||||||
|
|
|
|
|
|
Gross Unrealized Losses
|
|
|
||||||||||||
(in millions)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Other-Than-Temporary Impairment
(1)
|
|
Temporary Impairment
(2)
|
|
Fair
Value
|
||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
|
$
|
32,684
|
|
|
$
|
942
|
|
|
$
|
—
|
|
|
$
|
(99
|
)
|
|
$
|
33,527
|
|
Fannie Mae
|
|
7,033
|
|
|
265
|
|
|
—
|
|
|
(36
|
)
|
|
7,262
|
|
|||||
Ginnie Mae
|
|
150
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|||||
CMBS
|
|
12,009
|
|
|
450
|
|
|
(2
|
)
|
|
(9
|
)
|
|
12,448
|
|
|||||
Subprime
|
|
12,499
|
|
|
653
|
|
|
(295
|
)
|
|
(55
|
)
|
|
12,802
|
|
|||||
Option ARM
|
|
3,423
|
|
|
317
|
|
|
(56
|
)
|
|
(6
|
)
|
|
3,678
|
|
|||||
Alt-A and other
|
|
2,788
|
|
|
506
|
|
|
(11
|
)
|
|
(5
|
)
|
|
3,278
|
|
|||||
Obligations of states and political subdivisions
|
|
1,187
|
|
|
19
|
|
|
—
|
|
|
(1
|
)
|
|
1,205
|
|
|||||
Manufactured housing
|
|
488
|
|
|
87
|
|
|
—
|
|
|
—
|
|
|
575
|
|
|||||
Total available-for-sale securities
|
|
$
|
72,261
|
|
|
$
|
3,251
|
|
|
$
|
(364
|
)
|
|
$
|
(211
|
)
|
|
$
|
74,937
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
December 31, 2014
|
||||||||||||||||||
|
|
|
|
|
|
Gross Unrealized Losses
|
|
|
||||||||||||
(in millions)
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Other-Than-Temporary Impairment
(1)
|
|
Temporary Impairment
(2)
|
|
Fair
Value |
||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
|
$
|
37,710
|
|
|
$
|
1,435
|
|
|
$
|
—
|
|
|
$
|
(46
|
)
|
|
$
|
39,099
|
|
Fannie Mae
|
|
10,860
|
|
|
463
|
|
|
—
|
|
|
(10
|
)
|
|
11,313
|
|
|||||
Ginnie Mae
|
|
183
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
199
|
|
|||||
CMBS
|
|
20,988
|
|
|
890
|
|
|
(2
|
)
|
|
(54
|
)
|
|
21,822
|
|
|||||
Subprime
|
|
20,210
|
|
|
989
|
|
|
(518
|
)
|
|
(92
|
)
|
|
20,589
|
|
|||||
Option ARM
|
|
5,460
|
|
|
372
|
|
|
(179
|
)
|
|
(4
|
)
|
|
5,649
|
|
|||||
Alt-A and other
|
|
4,500
|
|
|
578
|
|
|
(29
|
)
|
|
(6
|
)
|
|
5,043
|
|
|||||
Obligations of states and political subdivisions
|
|
2,166
|
|
|
34
|
|
|
—
|
|
|
(2
|
)
|
|
2,198
|
|
|||||
Manufactured housing
|
|
556
|
|
|
84
|
|
|
(2
|
)
|
|
—
|
|
|
638
|
|
|||||
Total available-for-sale securities
|
|
$
|
102,633
|
|
|
$
|
4,861
|
|
|
$
|
(730
|
)
|
|
$
|
(214
|
)
|
|
$
|
106,550
|
|
(1)
|
Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairments in earnings.
|
(2)
|
Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairments in earnings.
|
Freddie Mac 2015 Form 10-K
|
|
251
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
|
|
December 31, 2015
|
||||||||||||||
|
|
Less than 12 Months
|
|
12 Months or Greater
|
||||||||||||
(in millions)
|
|
Fair
Value
|
|
Gross Unrealized Losses
|
|
Fair
Value
|
|
Gross Unrealized Losses
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
Freddie Mac
|
|
$
|
8,171
|
|
|
$
|
(64
|
)
|
|
$
|
1,224
|
|
|
$
|
(35
|
)
|
Fannie Mae
|
|
2,402
|
|
|
(24
|
)
|
|
1,337
|
|
|
(12
|
)
|
||||
Ginnie Mae
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
||||
CMBS
|
|
396
|
|
|
(9
|
)
|
|
160
|
|
|
(2
|
)
|
||||
Subprime
|
|
719
|
|
|
(21
|
)
|
|
3,923
|
|
|
(329
|
)
|
||||
Option ARM
|
|
349
|
|
|
(8
|
)
|
|
579
|
|
|
(54
|
)
|
||||
Alt-A and other
|
|
108
|
|
|
(1
|
)
|
|
265
|
|
|
(15
|
)
|
||||
Obligations of states and political subdivisions
|
|
18
|
|
|
—
|
|
|
8
|
|
|
(1
|
)
|
||||
Manufactured housing
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
||||
Total available-for-sale securities in a gross unrealized loss position
|
|
$
|
12,163
|
|
|
$
|
(127
|
)
|
|
$
|
7,565
|
|
|
$
|
(448
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2014
|
||||||||||||||
|
|
Less than 12 Months
|
|
12 Months or Greater
|
||||||||||||
(in millions)
|
|
Fair
Value |
|
Gross Unrealized Losses
|
|
Fair
Value |
|
Gross Unrealized Losses
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
Freddie Mac
|
|
$
|
2,531
|
|
|
$
|
(14
|
)
|
|
$
|
936
|
|
|
$
|
(32
|
)
|
Fannie Mae
|
|
2,693
|
|
|
(9
|
)
|
|
5
|
|
|
(1
|
)
|
||||
Ginnie Mae
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
CMBS
|
|
184
|
|
|
(5
|
)
|
|
1,149
|
|
|
(51
|
)
|
||||
Subprime
|
|
286
|
|
|
(3
|
)
|
|
6,533
|
|
|
(607
|
)
|
||||
Option ARM
|
|
77
|
|
|
—
|
|
|
1,490
|
|
|
(183
|
)
|
||||
Alt-A and other
|
|
185
|
|
|
(5
|
)
|
|
499
|
|
|
(30
|
)
|
||||
Obligations of states and political subdivisions
|
|
48
|
|
|
—
|
|
|
28
|
|
|
(2
|
)
|
||||
Manufactured housing
|
|
42
|
|
|
—
|
|
|
15
|
|
|
(2
|
)
|
||||
Total available-for-sale securities in a gross unrealized loss position
|
|
$
|
6,112
|
|
|
$
|
(36
|
)
|
|
$
|
10,655
|
|
|
$
|
(908
|
)
|
Freddie Mac 2015 Form 10-K
|
|
252
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
Freddie Mac 2015 Form 10-K
|
|
253
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
|
December 31, 2015
|
||||||||||
(dollars in millions)
|
Subprime
|
|
Option ARM
|
|
Alt-A
|
||||||
UPB
|
$
|
17,295
|
|
|
$
|
5,309
|
|
|
$
|
2,696
|
|
Weighted average collateral defaults
(1)
|
43
|
%
|
|
27
|
%
|
|
23
|
%
|
|||
Weighted average collateral severities
(2)
|
65
|
%
|
|
63
|
%
|
|
48
|
%
|
|||
Weighted average voluntary prepayment rates
(3)
|
3
|
%
|
|
10
|
%
|
|
11
|
%
|
|||
Average credit enhancements
(4)
|
6
|
%
|
|
(1
|
)%
|
|
1
|
%
|
(1)
|
The expected cumulative default rate is expressed as a percentage of the current collateral UPB.
|
(2)
|
The expected average loss given default is calculated as the ratio of cumulative loss over cumulative default for each security.
|
(3)
|
The security’s voluntary prepayment rate represents the average of the monthly voluntary prepayment rate weighted by the security’s outstanding UPB.
|
(4)
|
Positive values reflect the amount of subordination and other financial support (excluding credit enhancement provided by bond insurance) that will incur losses in the securitization structure before any losses are allocated to securities that we own. Percentage generally calculated based on the total UPB of securities subordinate to the securities we own, divided by the total UPB of all of the securities issued by the trust (excluding notional balances). Negative values are shown when unallocated collateral losses will be allocated to the securities that we own in excess of current remaining credit enhancement, if any. The unallocated collateral losses have been considered in our assessment of other-than-temporary impairment.
|
Freddie Mac 2015 Form 10-K
|
|
254
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
|
|
Net Impairment of Available-For-Sale Securities Recognized in Earnings For the Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Available-for-sale securities:
(1)
|
|
|
|
|
|
|
||||||
CMBS
|
|
$
|
(29
|
)
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
Subprime
|
|
(146
|
)
|
|
(794
|
)
|
|
(1,258
|
)
|
|||
Option ARM
|
|
(101
|
)
|
|
(101
|
)
|
|
(58
|
)
|
|||
Alt-A and other
|
|
(16
|
)
|
|
(42
|
)
|
|
(179
|
)
|
|||
Manufactured housing
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Total net impairment of available-for-sale securities recognized in earnings
|
|
$
|
(292
|
)
|
|
$
|
(938
|
)
|
|
$
|
(1,510
|
)
|
(1)
|
Includes
$240 million
,
$817 million
, and
$568 million
of other-than-temporary impairments recognized in earnings for the years ended
December 31, 2015
, 2014, and 2013, respectively, as we had the intent to sell the related securities before recovery of their amortized cost basis.
|
|
|
Year Ended December 31,
|
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Credit-related other-than-temporary impairments on available-for-sale securities recognized in earnings:
|
|
|
|
|
||||
Beginning balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings
|
|
$
|
6,798
|
|
|
$
|
14,463
|
|
Additions:
|
|
|
|
|
||||
Amounts related to credit losses on securities for which an other-than-temporary impairment was not previously recognized
|
|
—
|
|
|
—
|
|
||
Amounts related to credit losses on securities for which an other-than-temporary impairment was previously recognized
|
|
52
|
|
|
121
|
|
||
Reductions:
|
|
|
|
|
||||
Amounts related to securities which were sold, written off, or matured
|
|
(107
|
)
|
|
(1,188
|
)
|
||
Amounts related to securities which we intend to sell or it is more likely than not that we will be required to sell before recovery of amortized cost basis
|
|
(1,116
|
)
|
|
(6,113
|
)
|
||
Amounts related to amortization resulting from significant increases in cash flows expected to be collected and/or due to the passage of time that are recognized over the remaining life of the security
|
|
(321
|
)
|
|
(485
|
)
|
||
Ending balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings
(1)
|
|
$
|
5,306
|
|
|
$
|
6,798
|
|
(1)
|
Excludes other-than-temporary impairments on securities that we intend to sell or it is more likely than not that we will be required to sell before recovery of the amortized cost basis.
|
Freddie Mac 2015 Form 10-K
|
|
255
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Gross realized gains
|
|
$
|
1,371
|
|
|
$
|
1,897
|
|
|
$
|
1,950
|
|
Gross realized losses
|
|
(33
|
)
|
|
(185
|
)
|
|
(51
|
)
|
|||
Net realized gains (losses)
|
|
$
|
1,338
|
|
|
$
|
1,712
|
|
|
$
|
1,899
|
|
|
|
As of December 31, 2015
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
After One Year Through Five Years
|
|
After Five Years Through Ten Years
|
|
|
|
|
||||||||||||||||||||||||
|
|
Total Amortized Cost
|
|
Total Fair Value
|
|
One Year or Less
|
|
|
|
After Ten Years
|
||||||||||||||||||||||||||||||
|
|
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||||||||||||
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Freddie Mac
|
|
$
|
32,684
|
|
|
$
|
33,527
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1,757
|
|
|
$
|
1,756
|
|
|
$
|
30,897
|
|
|
$
|
31,741
|
|
Fannie Mae
|
|
7,033
|
|
|
7,262
|
|
|
3
|
|
|
3
|
|
|
15
|
|
|
16
|
|
|
76
|
|
|
85
|
|
|
6,939
|
|
|
7,158
|
|
||||||||||
Ginnie Mae
|
|
150
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
22
|
|
|
25
|
|
|
126
|
|
|
135
|
|
||||||||||
CMBS
|
|
12,009
|
|
|
12,448
|
|
|
—
|
|
|
—
|
|
|
315
|
|
|
320
|
|
|
—
|
|
|
—
|
|
|
11,694
|
|
|
12,128
|
|
||||||||||
Subprime
|
|
12,499
|
|
|
12,802
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,499
|
|
|
12,802
|
|
||||||||||
Option ARM
|
|
3,423
|
|
|
3,678
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,423
|
|
|
3,678
|
|
||||||||||
Alt-A and other
|
|
2,788
|
|
|
3,278
|
|
|
1
|
|
|
1
|
|
|
14
|
|
|
14
|
|
|
8
|
|
|
9
|
|
|
2,765
|
|
|
3,254
|
|
||||||||||
Obligations of states and political subdivisions
|
|
1,187
|
|
|
1,205
|
|
|
10
|
|
|
10
|
|
|
25
|
|
|
26
|
|
|
87
|
|
|
91
|
|
|
1,065
|
|
|
1,078
|
|
||||||||||
Manufactured housing
|
|
488
|
|
|
575
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
9
|
|
|
481
|
|
|
566
|
|
||||||||||
Total available-for-sale securities
|
|
$
|
72,261
|
|
|
$
|
74,937
|
|
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
372
|
|
|
$
|
379
|
|
|
$
|
1,957
|
|
|
$
|
1,975
|
|
|
$
|
69,889
|
|
|
$
|
72,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Weighted Average Yield
(1)
|
|
2.74
|
%
|
|
|
|
2.74
|
%
|
|
|
|
5.58
|
%
|
|
|
|
1.33
|
%
|
|
|
|
2.76
|
%
|
|
|
(1)
|
The weighted average yield is calculated based on a yield for each individual lot held at
December 31, 2015
excluding any fully taxable-equivalent adjustments related to tax exempt sources of interest income. The numerator for the individual lot yield consists of the sum of: (a) the year-end interest rate multiplied by the year-end UPB; and (b) the amortization income or expense calculated for December 2015 (excluding the accretion of non-credit-related other-than-temporary impairments and any adjustments recorded for changes in the effective rate). The denominator for the individual lot yield consists of the year-end amortized cost of the lot excluding effects of other-than-temporary impairments on the UPB of impaired lots.
|
Freddie Mac 2015 Form 10-K
|
|
256
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 6
|
Freddie Mac 2015 Form 10-K
|
|
257
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 7
|
|
|
|
|
|
Interest Expense for the
|
||||||||||||||
|
Balance, Net
|
|
Year Ended December 31,
|
||||||||||||||||
(in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Debt securities of consolidated trusts held by third parties
|
$
|
1,556,121
|
|
|
$
|
1,479,473
|
|
|
$
|
45,536
|
|
|
$
|
48,003
|
|
|
$
|
47,350
|
|
Other debt:
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term debt
|
113,572
|
|
|
134,619
|
|
|
173
|
|
|
145
|
|
|
178
|
|
|||||
Long-term debt
|
300,734
|
|
|
315,450
|
|
|
6,207
|
|
|
6,768
|
|
|
8,251
|
|
|||||
Total other debt
|
414,306
|
|
|
450,069
|
|
|
6,380
|
|
|
6,913
|
|
|
8,429
|
|
|||||
Total debt, net
|
$
|
1,970,427
|
|
|
$
|
1,929,542
|
|
|
$
|
51,916
|
|
|
$
|
54,916
|
|
|
$
|
55,779
|
|
Freddie Mac 2015 Form 10-K
|
|
258
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 7
|
Freddie Mac 2015 Form 10-K
|
|
259
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 7
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||
(dollars in million)
|
Contractual
Maturity
|
|
UPB
|
|
Carrying Amount
|
|
Weighted
Average
Coupon
(1)
|
|
Contractual
Maturity
|
|
UPB
|
|
Carrying Amount
|
|
Weighted
Average
Coupon
(1)
|
||||||||||
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
30-year or more, fixed-rate
(2)
|
2016 - 2053
|
|
$
|
1,090,584
|
|
|
$
|
1,123,290
|
|
|
3.88
|
%
|
|
2015 - 2053
|
|
$
|
1,018,357
|
|
|
$
|
1,047,302
|
|
|
4.04
|
%
|
20-year fixed-rate
|
2016 - 2036
|
|
73,018
|
|
|
75,221
|
|
|
3.61
|
|
|
2015 - 2035
|
|
71,545
|
|
|
73,764
|
|
|
3.74
|
|
||||
15-year fixed-rate
|
2016 - 2031
|
|
270,036
|
|
|
276,531
|
|
|
3.01
|
|
|
2015 - 2030
|
|
266,117
|
|
|
272,538
|
|
|
3.13
|
|
||||
Adjustable-rate
|
2016 - 2047
|
|
62,496
|
|
|
63,899
|
|
|
2.61
|
|
|
2015 - 2047
|
|
65,082
|
|
|
66,518
|
|
|
2.62
|
|
||||
Interest-only
|
2026 - 2041
|
|
14,252
|
|
|
14,317
|
|
|
3.16
|
|
|
2026 - 2041
|
|
17,474
|
|
|
17,524
|
|
|
3.29
|
|
||||
FHA/VA
|
2016 - 2044
|
|
986
|
|
|
1,005
|
|
|
5.37
|
|
|
2015 - 2044
|
|
1,226
|
|
|
1,250
|
|
|
5.42
|
|
||||
Total single-family
|
|
|
1,511,372
|
|
|
1,554,263
|
|
|
|
|
|
|
1,439,801
|
|
|
1,478,896
|
|
|
|
||||||
Multifamily
(2)
|
2017 - 2028
|
|
1,717
|
|
|
1,858
|
|
|
4.90
|
|
|
2017 - 2019
|
|
524
|
|
|
577
|
|
|
4.93
|
|
||||
Total debt securities of consolidated trusts held by third parties
|
|
|
$
|
1,513,089
|
|
|
$
|
1,556,121
|
|
|
|
|
|
|
$
|
1,440,325
|
|
|
$
|
1,479,473
|
|
|
|
(1)
|
The effective rate for debt securities of consolidated trusts held by third parties was
3.06%
and
3.19%
as of
December 31, 2015
and 2014, respectively.
|
(2)
|
Carrying amount includes securities recorded at fair value.
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||
(dollars in millions)
|
|
Par Value
|
|
Carrying Amount
|
|
Weighted
Average
Effective Rate
|
|
Par Value
|
|
Carrying Amount
|
|
Weighted
Average
Effective Rate
|
||||||||||
Other short-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Discount notes and Reference Bills
®
|
|
$
|
104,088
|
|
|
$
|
104,027
|
|
|
0.28
|
%
|
|
$
|
134,670
|
|
|
$
|
134,619
|
|
|
0.12
|
%
|
Medium-term notes
|
|
9,545
|
|
|
9,545
|
|
|
0.20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other short-term debt
|
|
$
|
113,633
|
|
|
$
|
113,572
|
|
|
0.27
|
|
|
$
|
134,670
|
|
|
$
|
134,619
|
|
|
0.12
|
|
Freddie Mac 2015 Form 10-K
|
|
260
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 7
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
(dollars in millions)
|
Contractual Maturity
|
|
Par Value
|
|
Carrying Amount
|
|
Weighted
Average
Effective Rate
|
|
Par Value
|
|
Carrying Amount
|
|
Weighted
Average
Effective Rate
|
||||||||||
Other long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other senior debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Medium-term notes — callable
|
2016 - 2037
|
|
$
|
90,744
|
|
|
$
|
90,754
|
|
|
1.47
|
%
|
|
$
|
98,860
|
|
|
$
|
98,856
|
|
|
1.35
|
%
|
Medium-term notes — non-callable
|
2016 - 2028
|
|
16,033
|
|
|
16,351
|
|
|
0.92
|
|
|
20,059
|
|
|
20,383
|
|
|
0.86
|
|
||||
Reference Notes securities — non-callable
|
2016 - 2032
|
|
137,201
|
|
|
137,267
|
|
|
2.60
|
|
|
151,701
|
|
|
151,751
|
|
|
2.80
|
|
||||
Variable-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Medium-term notes — callable
|
2017 - 2030
|
|
15,931
|
|
|
15,931
|
|
|
2.11
|
|
|
7,210
|
|
|
7,210
|
|
|
2.00
|
|
||||
Medium-term notes — non-callable
|
2016 - 2026
|
|
23,697
|
|
|
23,697
|
|
|
0.21
|
|
|
23,971
|
|
|
23,971
|
|
|
0.19
|
|
||||
STACR
|
2023 - 2028
|
|
11,551
|
|
|
11,503
|
|
|
3.60
|
|
|
5,896
|
|
|
5,820
|
|
|
3.16
|
|
||||
Zero-coupon:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Medium-term notes — callable
|
2037
|
|
1,000
|
|
|
280
|
|
|
6.17
|
|
|
1,000
|
|
|
264
|
|
|
6.17
|
|
||||
Medium-term notes — non-callable
|
2016 - 2039
|
|
7,343
|
|
|
4,293
|
|
|
3.58
|
|
|
10,109
|
|
|
6,739
|
|
|
2.53
|
|
||||
Other
|
2052 - 2055
|
|
335
|
|
|
198
|
|
|
5.93
|
|
|
—
|
|
|
—
|
|
|
|
|
||||
Hedging-related basis adjustments
|
|
|
N/A
|
|
|
17
|
|
|
|
|
|
N/A
|
|
|
34
|
|
|
|
|
||||
Total other senior debt
|
|
|
303,835
|
|
|
300,291
|
|
|
|
|
318,806
|
|
|
315,028
|
|
|
|
||||||
Other subordinated debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed-rate
|
2016 - 2018
|
|
221
|
|
|
219
|
|
|
6.61
|
|
|
221
|
|
|
219
|
|
|
6.60
|
|
||||
Zero-coupon
|
2019
|
|
332
|
|
|
224
|
|
|
10.51
|
|
|
332
|
|
|
203
|
|
|
10.51
|
|
||||
Total other subordinated debt
|
|
|
553
|
|
|
443
|
|
|
|
|
553
|
|
|
422
|
|
|
|
||||||
Total other long-term debt
|
|
|
$
|
304,388
|
|
|
$
|
300,734
|
|
|
2.02
|
%
|
|
$
|
319,359
|
|
|
$
|
315,450
|
|
|
2.02
|
%
|
(in millions)
|
|
Par Value
|
||
Annual Maturities
|
|
|
||
Other long-term debt:
|
|
|
||
2016
|
|
$
|
58,765
|
|
2017
|
|
91,543
|
|
|
2018
|
|
48,189
|
|
|
2019
|
|
31,352
|
|
|
2020
|
|
26,697
|
|
|
Thereafter
|
|
47,842
|
|
|
Debt securities of consolidated trusts held by third parties
(1)
|
|
1,513,089
|
|
|
Total
|
|
1,817,477
|
|
|
Net discounts, premiums, hedge-related and other basis adjustments
(2)
|
|
39,378
|
|
|
Total debt securities of consolidated trusts held by third parties and other long-term debt
|
|
$
|
1,856,855
|
|
(1)
|
Contractual maturities of debt securities of consolidated trusts held by third parties are not presented because they are prepayable at any time without penalty.
|
(2)
|
Other basis adjustments primarily represent changes in fair value attributable to instrument-specific credit risk.
|
Freddie Mac 2015 Form 10-K
|
|
261
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 7
|
Freddie Mac 2015 Form 10-K
|
|
262
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 8
|
•
|
Exchange-traded derivatives;
|
•
|
Cleared derivatives; and
|
•
|
OTC derivatives.
|
Freddie Mac 2015 Form 10-K
|
|
263
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 8
|
•
|
LIBOR-based interest-rate swaps;
|
•
|
LIBOR- and Treasury-based options (including swaptions); and
|
•
|
LIBOR- and Treasury-based exchange-traded futures.
|
•
|
Purchase and sell investments in securities;
|
•
|
Purchase loans; and
|
•
|
Purchase and extinguish or issue debt securities of our consolidated trusts.
|
Freddie Mac 2015 Form 10-K
|
|
264
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 8
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Notional or
Contractual
Amount
|
|
Derivatives at Fair Value
|
|
Notional or
Contractual
Amount
|
|
Derivatives at Fair Value
|
||||||||||||||||
(in millions)
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||||||||||
Total derivative portfolio
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest-rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Receive-fixed
|
$
|
209,988
|
|
|
$
|
4,591
|
|
|
$
|
(486
|
)
|
|
$
|
205,219
|
|
|
$
|
5,243
|
|
|
$
|
(487
|
)
|
Pay-fixed
|
218,599
|
|
|
319
|
|
|
(11,736
|
)
|
|
213,325
|
|
|
408
|
|
|
(12,829
|
)
|
||||||
Basis (floating to floating)
|
1,125
|
|
|
1
|
|
|
—
|
|
|
300
|
|
|
2
|
|
|
—
|
|
||||||
Total interest-rate swaps
|
429,712
|
|
|
4,911
|
|
|
(12,222
|
)
|
|
418,844
|
|
|
5,653
|
|
|
(13,316
|
)
|
||||||
Option-based:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Call swaptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchased
|
57,925
|
|
|
3,450
|
|
|
—
|
|
|
56,390
|
|
|
3,315
|
|
|
—
|
|
||||||
Written
|
4,375
|
|
|
—
|
|
|
(100
|
)
|
|
10,660
|
|
|
—
|
|
|
(90
|
)
|
||||||
Put Swaptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchased
|
24,050
|
|
|
580
|
|
|
—
|
|
|
22,125
|
|
|
179
|
|
|
—
|
|
||||||
Written
|
11,025
|
|
|
—
|
|
|
(28
|
)
|
|
3,560
|
|
|
—
|
|
|
(9
|
)
|
||||||
Other option-based derivatives
(1)
|
12,088
|
|
|
791
|
|
|
—
|
|
|
19,733
|
|
|
730
|
|
|
(28
|
)
|
||||||
Total option-based
|
109,463
|
|
|
4,821
|
|
|
(128
|
)
|
|
112,468
|
|
|
4,224
|
|
|
(127
|
)
|
||||||
Futures
|
56,332
|
|
|
—
|
|
|
—
|
|
|
40,263
|
|
|
—
|
|
|
—
|
|
||||||
Commitments
|
29,114
|
|
|
34
|
|
|
(28
|
)
|
|
27,054
|
|
|
40
|
|
|
(79
|
)
|
||||||
Credit derivatives
|
3,899
|
|
|
25
|
|
|
(10
|
)
|
|
5,207
|
|
|
27
|
|
|
(11
|
)
|
||||||
Other
|
3,033
|
|
|
—
|
|
|
(23
|
)
|
|
3,204
|
|
|
—
|
|
|
(27
|
)
|
||||||
Total derivatives not designated as hedging instruments
|
631,553
|
|
|
9,791
|
|
|
(12,411
|
)
|
|
607,040
|
|
|
9,944
|
|
|
(13,560
|
)
|
||||||
Derivative interest receivable (payable)
|
|
|
814
|
|
|
(1,393
|
)
|
|
|
|
817
|
|
|
(1,500
|
)
|
||||||||
Netting adjustments
(2)
|
|
|
(10,210
|
)
|
|
12,550
|
|
|
|
|
(9,939
|
)
|
|
13,097
|
|
||||||||
Total derivative portfolio, net
|
$
|
631,553
|
|
|
$
|
395
|
|
|
$
|
(1,254
|
)
|
|
$
|
607,040
|
|
|
$
|
822
|
|
|
$
|
(1,963
|
)
|
(1)
|
Primarily includes purchased interest-rate caps and floors and options on Treasury futures.
|
(2)
|
Represents counterparty netting and cash collateral netting. Cash collateral amounts were a net was
$2.3 billion
and
$3.2 billion
at
December 31, 2015
and 2014, respectively.
|
Freddie Mac 2015 Form 10-K
|
|
265
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 8
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Interest-rate swaps:
|
|
|
|
|
|
|
||||||
Receive-fixed
|
|
|
|
|
|
|
||||||
Foreign-currency denominated
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(21
|
)
|
U.S. dollar denominated
|
|
35
|
|
|
4,074
|
|
|
(10,400
|
)
|
|||
Total receive-fixed swaps
|
|
35
|
|
|
4,073
|
|
|
(10,421
|
)
|
|||
Pay-fixed
|
|
(811
|
)
|
|
(11,366
|
)
|
|
19,021
|
|
|||
Basis (floating to floating)
|
|
(2
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|||
Total interest-rate swaps
|
|
(778
|
)
|
|
(7,294
|
)
|
|
8,598
|
|
|||
Option based:
|
|
|
|
|
|
|
||||||
Call swaptions
|
|
|
|
|
|
|
||||||
Purchased
|
|
371
|
|
|
2,355
|
|
|
(2,547
|
)
|
|||
Written
|
|
(9
|
)
|
|
(168
|
)
|
|
546
|
|
|||
Put swaptions
|
|
|
|
|
|
|
||||||
Purchased
|
|
(249
|
)
|
|
(1,006
|
)
|
|
(8
|
)
|
|||
Written
|
|
77
|
|
|
8
|
|
|
—
|
|
|||
Other option-based derivatives
(1)
|
|
68
|
|
|
248
|
|
|
(413
|
)
|
|||
Total option-based
|
|
258
|
|
|
1,437
|
|
|
(2,422
|
)
|
|||
Other:
|
|
|
|
|
|
|
||||||
Futures
|
|
(5
|
)
|
|
(54
|
)
|
|
21
|
|
|||
Foreign-currency swaps
|
|
—
|
|
|
(7
|
)
|
|
30
|
|
|||
Commitments
|
|
63
|
|
|
239
|
|
|
(131
|
)
|
|||
Credit derivatives
|
|
(37
|
)
|
|
8
|
|
|
(3
|
)
|
|||
Other
|
|
1
|
|
|
5
|
|
|
6
|
|
|||
Total other
|
|
22
|
|
|
191
|
|
|
(77
|
)
|
|||
Accrual of periodic cash settlements:
|
|
|
|
|
|
|
||||||
Receive-fixed interest-rate swaps
|
|
2,568
|
|
|
3,033
|
|
|
3,764
|
|
|||
Pay-fixed interest-rate swaps
|
|
(4,768
|
)
|
|
(5,660
|
)
|
|
(7,233
|
)
|
|||
Other
|
|
2
|
|
|
2
|
|
|
2
|
|
|||
Total accrual of periodic cash settlements
|
|
(2,198
|
)
|
|
(2,625
|
)
|
|
(3,467
|
)
|
|||
Total
|
|
$
|
(2,696
|
)
|
|
$
|
(8,291
|
)
|
|
$
|
2,632
|
|
(1)
|
Primarily includes purchased interest-rate caps and floors and options on Treasury futures.
|
Freddie Mac 2015 Form 10-K
|
|
266
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 9
|
Freddie Mac 2015 Form 10-K
|
|
267
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 9
|
Freddie Mac 2015 Form 10-K
|
|
268
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 9
|
|
December 31, 2015
|
||||||||||||||||||
(in millions)
|
Gross
Amount
Recognized
|
|
Amount
Offset in the
Consolidated
Balance Sheets
|
|
Net Amount
Presented in
the
Consolidated
Balance Sheets
(1)
|
|
Gross Amount
Not Offset in
the
Consolidated
Balance
Sheets
(2)
|
|
Net
Amount
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
OTC interest-rate swaps and option-based derivatives
|
$
|
8,763
|
|
|
$
|
(8,433
|
)
|
|
$
|
330
|
|
|
$
|
(269
|
)
|
|
$
|
61
|
|
Cleared and exchange-traded derivatives
|
1,783
|
|
|
(1,777
|
)
|
|
6
|
|
|
—
|
|
|
6
|
|
|||||
Other
|
59
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|||||
Total derivatives
|
10,605
|
|
|
(10,210
|
)
|
|
395
|
|
|
(269
|
)
|
|
126
|
|
|||||
Securities purchased under agreements to resell
|
63,644
|
|
|
—
|
|
|
63,644
|
|
|
(63,644
|
)
|
|
—
|
|
|||||
Total
|
$
|
74,249
|
|
|
$
|
(10,210
|
)
|
|
$
|
64,039
|
|
|
$
|
(63,913
|
)
|
|
$
|
126
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
OTC interest-rate swaps and option-based derivatives
|
$
|
(8,886
|
)
|
|
$
|
7,801
|
|
|
$
|
(1,085
|
)
|
|
$
|
948
|
|
|
$
|
(137
|
)
|
Cleared and exchange-traded derivatives
|
(4,857
|
)
|
|
4,749
|
|
|
(108
|
)
|
|
—
|
|
|
(108
|
)
|
|||||
Other
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|||||
Total
|
$
|
(13,804
|
)
|
|
$
|
12,550
|
|
|
$
|
(1,254
|
)
|
|
$
|
948
|
|
|
$
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
December 31, 2014
|
||||||||||||||||||
(in millions)
|
Gross
Amount
Recognized
|
|
Amount Offset in the Consolidated
Balance Sheets
|
|
Net Amount
Presented in the
Consolidated
Balance Sheets
(1)
|
|
Gross Amount
Not Offset in the
Consolidated
Balance Sheets
(2)
|
|
Net
Amount
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
OTC interest-rate swaps and option-based derivatives
|
$
|
10,315
|
|
|
$
|
(9,688
|
)
|
|
$
|
627
|
|
|
$
|
(453
|
)
|
|
$
|
174
|
|
Cleared and exchange-traded derivatives
|
379
|
|
|
(251
|
)
|
|
128
|
|
|
—
|
|
|
128
|
|
|||||
Other
|
67
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
67
|
|
|||||
Total derivatives
|
10,761
|
|
|
(9,939
|
)
|
|
822
|
|
|
(453
|
)
|
|
369
|
|
|||||
Securities purchased under agreements to resell
|
51,903
|
|
|
—
|
|
|
51,903
|
|
|
(51,903
|
)
|
|
—
|
|
|||||
Total
|
$
|
62,664
|
|
|
$
|
(9,939
|
)
|
|
$
|
52,725
|
|
|
$
|
(52,356
|
)
|
|
$
|
369
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
||||||||||
OTC interest-rate swaps and option-based derivatives
|
$
|
(10,666
|
)
|
|
$
|
8,845
|
|
|
$
|
(1,821
|
)
|
|
$
|
1,743
|
|
|
$
|
(78
|
)
|
Cleared and exchange-traded derivatives
|
(4,277
|
)
|
|
4,252
|
|
|
(25
|
)
|
|
—
|
|
|
(25
|
)
|
|||||
Other
|
(117
|
)
|
|
—
|
|
|
(117
|
)
|
|
—
|
|
|
(117
|
)
|
|||||
Total
|
$
|
(15,060
|
)
|
|
$
|
13,097
|
|
|
$
|
(1,963
|
)
|
|
$
|
1,743
|
|
|
$
|
(220
|
)
|
Freddie Mac 2015 Form 10-K
|
|
269
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 9
|
(1)
|
For derivatives, includes cash collateral posted or held in excess of exposure.
|
(2)
|
Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability presented on the consolidated balance sheets. For cleared and exchange-traded derivatives, does not include non-cash collateral posted by us with an aggregate fair value of
$2.8 billion
and
$2.3 billion
as of
December 31, 2015
and 2014, respectively.
|
Freddie Mac 2015 Form 10-K
|
|
270
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 9
|
(1)
|
Represents PCs held by us in our Investments segment mortgage investments portfolio and pledged as collateral which are recorded as a reduction to debt securities of consolidated trusts held by third parties on our consolidated balance sheets.
|
Freddie Mac 2015 Form 10-K
|
|
271
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
|
|
Year Ended December 31, 2015
|
||||||||||||||
(in millions)
|
|
AOCI Related
to Available-
For-Sale
Securities
|
|
AOCI Related
to Cash Flow
Hedge
Relationships
|
|
AOCI Related
to Defined
Benefit Plans
|
|
Total
|
||||||||
Beginning balance
|
|
$
|
2,546
|
|
|
$
|
(803
|
)
|
|
$
|
(13
|
)
|
|
$
|
1,730
|
|
Other comprehensive income before reclassifications
(1)
|
|
(123
|
)
|
|
—
|
|
|
48
|
|
|
(75
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
(683
|
)
|
|
182
|
|
|
(1
|
)
|
|
(502
|
)
|
||||
Changes in AOCI by component
|
|
(806
|
)
|
|
182
|
|
|
47
|
|
|
(577
|
)
|
||||
Ending balance
|
|
$
|
1,740
|
|
|
$
|
(621
|
)
|
|
$
|
34
|
|
|
$
|
1,153
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Year Ended December 31, 2014
|
||||||||||||||
(in millions)
|
|
AOCI Related
to Available-
For-Sale
Securities
|
|
AOCI Related
to Cash Flow
Hedge
Relationships
|
|
AOCI Related
to Defined
Benefit Plans
|
|
Total
|
||||||||
Beginning balance
|
|
$
|
962
|
|
|
$
|
(1,000
|
)
|
|
$
|
32
|
|
|
$
|
(6
|
)
|
Other comprehensive income before reclassifications
(1)
|
|
2,087
|
|
|
—
|
|
|
(43
|
)
|
|
2,044
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
(503
|
)
|
|
197
|
|
|
(2
|
)
|
|
(308
|
)
|
||||
Changes in AOCI by component
|
|
1,584
|
|
|
197
|
|
|
(45
|
)
|
|
1,736
|
|
||||
Ending balance
|
|
$
|
2,546
|
|
|
$
|
(803
|
)
|
|
$
|
(13
|
)
|
|
$
|
1,730
|
|
(1)
|
For the years ended
December 31, 2015
and 2014, net of tax expense of
$0.1 billion
and
$1.1 billion
, respectively, for AOCI related to available-for-sale securities.
|
Freddie Mac 2015 Form 10-K
|
|
272
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
Details about Accumulated Other
Comprehensive Income Components
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
Affected Line Item in the
Consolidated
Statements of Comprehensive Income
|
||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
||||||||
AOCI related to
available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$
|
188
|
|
|
$
|
500
|
|
|
$
|
1,343
|
|
|
$
|
1,712
|
|
|
Other gains (losses) on investment securities recognized in earnings
|
|
|
(48
|
)
|
|
(251
|
)
|
|
(292
|
)
|
|
(938
|
)
|
|
Net impairment of available-for-sale securities recognized in earnings
|
||||
|
|
140
|
|
|
249
|
|
|
1,051
|
|
|
774
|
|
|
Total before tax
|
||||
|
|
(49
|
)
|
|
(87
|
)
|
|
(368
|
)
|
|
(271
|
)
|
|
Tax (expense) or benefit
|
||||
|
|
91
|
|
|
162
|
|
|
683
|
|
|
503
|
|
|
Net of tax
|
||||
AOCI related to cash flow hedge relationships
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
Interest expense — Other debt
|
||||
|
|
(52
|
)
|
|
(71
|
)
|
|
(228
|
)
|
|
(301
|
)
|
|
Expense related to derivatives
|
||||
|
|
(52
|
)
|
|
(71
|
)
|
|
(230
|
)
|
|
(303
|
)
|
|
Total before tax
|
||||
|
|
1
|
|
|
25
|
|
|
48
|
|
|
106
|
|
|
Tax (expense) or benefit
|
||||
|
|
(51
|
)
|
|
(46
|
)
|
|
(182
|
)
|
|
(197
|
)
|
|
Net of tax
|
||||
AOCI related to defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
—
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
Salaries and employee benefits
|
||||
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
Tax (expense) or benefit
|
||||
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
Net of tax
|
||||
Total reclassifications in the period
|
|
$
|
40
|
|
|
$
|
116
|
|
|
$
|
502
|
|
|
$
|
308
|
|
|
Net of tax
|
Freddie Mac 2015 Form 10-K
|
|
273
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
•
|
Full cumulative dividends on the outstanding senior preferred stock (including any unpaid dividends added to the liquidation preference) have been declared and paid in cash; and
|
•
|
All amounts required to be paid with the net proceeds of any issuance of capital stock for cash (as described in the following paragraph) have been paid in cash.
|
Freddie Mac 2015 Form 10-K
|
|
274
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
(in millions, except initial liquidation preference price per share)
|
|
Shares
Authorized
|
|
Shares
Outstanding
|
|
Total
Par Value
|
|
Initial
Liquidation
Preference
Price per Share
|
|
Total
Liquidation
Preference
|
||||||||
Draw Date:
|
|
|
||||||||||||||||
September 8, 2008
|
|
1.00
|
|
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
November 24, 2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
13,800
|
|
|||
March 31, 2009
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
30,800
|
|
|||
June 30, 2009
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
6,100
|
|
|||
June 30, 2010
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
10,600
|
|
|||
September 30, 2010
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
1,800
|
|
|||
December 30, 2010
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
100
|
|
|||
March 31, 2011
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
500
|
|
|||
September 30, 2011
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
1,479
|
|
|||
December 30, 2011
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
5,992
|
|
|||
March 30, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
146
|
|
|||
June 29, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|
19
|
|
|||
Total, senior preferred stock
|
|
1.00
|
|
|
1.00
|
|
|
$
|
1.00
|
|
|
|
|
$
|
72,336
|
|
Freddie Mac 2015 Form 10-K
|
|
275
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
Freddie Mac 2015 Form 10-K
|
|
276
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
(in millions, except redemption price per share)
|
Issue Date
|
Shares
Authorized
|
Shares
Outstanding
|
Total
Par Value
|
Redemption
Price per
Share
|
Total
Outstanding
Balance
|
Redeemable
On or After
|
OTCQB
Symbol
|
||||||||
Preferred stock:
|
|
|
|
|
|
|
|
|
||||||||
1996 Variable-rate
(1)
|
April 26, 1996
|
5.00
|
|
5.00
|
|
$
|
5.00
|
|
$
|
50.00
|
|
$
|
250
|
|
June 30, 2001
|
FMCCI
|
5.81%
|
October 27, 1997
|
3.00
|
|
3.00
|
|
3.00
|
|
50.00
|
|
150
|
|
October 27, 1998
|
(2)
|
|||
5%
|
March 23, 1998
|
8.00
|
|
8.00
|
|
8.00
|
|
50.00
|
|
400
|
|
March 31, 2003
|
FMCKK
|
|||
1998 Variable-rate
(3)
|
September 23
and 29, 1998
|
4.40
|
|
4.40
|
|
4.40
|
|
50.00
|
|
220
|
|
September 30, 2003
|
FMCCG
|
|||
5.10%
|
September 23, 1998
|
8.00
|
|
8.00
|
|
8.00
|
|
50.00
|
|
400
|
|
September 30, 2003
|
FMCCH
|
|||
5.30%
|
October 28, 1998
|
4.00
|
|
4.00
|
|
4.00
|
|
50.00
|
|
200
|
|
October 30, 2000
|
(2)
|
|||
5.10%
|
March 19, 1999
|
3.00
|
|
3.00
|
|
3.00
|
|
50.00
|
|
150
|
|
March 31, 2004
|
(2)
|
|||
5.79%
|
July 21, 1999
|
5.00
|
|
5.00
|
|
5.00
|
|
50.00
|
|
250
|
|
June 30, 2009
|
FMCCK
|
|||
1999 Variable-rate
(4)
|
November 5, 1999
|
5.75
|
|
5.75
|
|
5.75
|
|
50.00
|
|
287
|
|
December 31, 2004
|
FMCCL
|
|||
2001 Variable-rate
(5)
|
January 26, 2001
|
6.50
|
|
6.50
|
|
6.50
|
|
50.00
|
|
325
|
|
March 31, 2003
|
FMCCM
|
|||
2001 Variable-rate
(6)
|
March 23, 2001
|
4.60
|
|
4.60
|
|
4.60
|
|
50.00
|
|
230
|
|
March 31, 2003
|
FMCCN
|
|||
5.81%
|
March 23, 2001
|
3.45
|
|
3.45
|
|
3.45
|
|
50.00
|
|
173
|
|
March 31, 2011
|
FMCCO
|
|||
6%
|
May 30, 2001
|
3.45
|
|
3.45
|
|
3.45
|
|
50.00
|
|
173
|
|
June 30, 2006
|
FMCCP
|
|||
2001 Variable-rate
(7)
|
May 30, 2001
|
4.02
|
|
4.02
|
|
4.02
|
|
50.00
|
|
201
|
|
June 30, 2003
|
FMCCJ
|
|||
5.70%
|
October 30, 2001
|
6.00
|
|
6.00
|
|
6.00
|
|
50.00
|
|
300
|
|
December 31, 2006
|
FMCKP
|
|||
5.81%
|
January 29, 2002
|
6.00
|
|
6.00
|
|
6.00
|
|
50.00
|
|
300
|
|
March 31, 2007
|
(2)
|
|||
2006 Variable-rate
(8)
|
July 17, 2006
|
15.00
|
|
15.00
|
|
15.00
|
|
50.00
|
|
750
|
|
June 30, 2011
|
FMCCS
|
|||
6.42%
|
July 17, 2006
|
5.00
|
|
5.00
|
|
5.00
|
|
50.00
|
|
250
|
|
June 30, 2011
|
FMCCT
|
|||
5.90%
|
October 16, 2006
|
20.00
|
|
20.00
|
|
20.00
|
|
25.00
|
|
500
|
|
September 30, 2011
|
FMCKO
|
|||
5.57%
|
January 16, 2007
|
44.00
|
|
44.00
|
|
44.00
|
|
25.00
|
|
1,100
|
|
December 31, 2011
|
FMCKM
|
|||
5.66%
|
April 16, 2007
|
20.00
|
|
20.00
|
|
20.00
|
|
25.00
|
|
500
|
|
March 31, 2012
|
FMCKN
|
|||
6.02%
|
July 24, 2007
|
20.00
|
|
20.00
|
|
20.00
|
|
25.00
|
|
500
|
|
June 30, 2012
|
FMCKL
|
|||
6.55%
|
September 28, 2007
|
20.00
|
|
20.00
|
|
20.00
|
|
25.00
|
|
500
|
|
September 30, 2017
|
FMCKI
|
|||
2007 Fixed-to-floating rate
(9)
|
December 4, 2007
|
240.00
|
|
240.00
|
|
240.00
|
|
25.00
|
|
6,000
|
|
December 31, 2012
|
FMCKJ
|
|||
Total, preferred stock
|
|
464.17
|
|
464.17
|
|
$
|
464.17
|
|
|
$
|
14,109
|
|
|
|
(1)
|
Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377, and is capped at 9.00%.
|
(2)
|
Issued through private placement.
|
(3)
|
Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377, and is capped at 7.50%.
|
(4)
|
Dividend rate resets on January 1 every five years after January 1, 2005 based on a five-year Constant Maturity Treasury rate, and is capped at 11.00%.
Optional redemption on December 31, 2004 and on December 31 every five years thereafter.
|
(5)
|
Dividend rate resets on April 1 every two years after April 1, 2003 based on the two-year Constant Maturity Treasury rate plus 0.10%, and is capped at 11.00%.
Optional redemption on March 31, 2003 and on March 31 every two years thereafter.
|
(6)
|
Dividend rate resets on April 1 every year based on 12-month LIBOR minus 0.20%, and is capped at 11.00%.
Optional redemption on March 31, 2003 and on March 31 every year thereafter.
|
(7)
|
Dividend rate resets on July 1 every two years after July 1, 2003 based on the two-year Constant Maturity Treasury rate plus 0.20%, and is capped at 11.00%.
Optional redemption on June 30, 2003 and on June 30 every two years thereafter.
|
(8)
|
Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 0.50% but not less than 4.00%.
|
(9)
|
Dividend rate is set at an annual fixed rate of 8.375% from December 4, 2007 through December 31, 2012. For the period beginning on or after January 1, 2013, dividend rate resets quarterly and is equal to the higher of: (a) the sum of three-month LIBOR plus 4.16% per annum; or (b) 7.875% per annum. Optional redemption on December 31, 2012, and on December 31 every five years thereafter.
|
Freddie Mac 2015 Form 10-K
|
|
277
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
•
|
Vested options to purchase common stock; and
|
•
|
Vested and unvested restricted stock units that earn dividend equivalents at the same rate when and as declared on common stock.
|
•
|
Weighted average shares related to stock options if the average market price during the period
|
Freddie Mac 2015 Form 10-K
|
|
278
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 10
|
•
|
The weighted-average of unvested restricted stock units.
|
Freddie Mac 2015 Form 10-K
|
|
279
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 11
|
•
|
Deferred tax (expense) benefit, which represents the net change in the deferred tax asset or liability balance during the year and any change in the valuation allowance, if any; and
|
•
|
Current tax (expense) benefit, which represents the amount of tax currently payable to or receivable from a tax authority, including related interest and penalties, and amounts accrued for unrecognized tax benefits, if any.
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Current income tax (expense) benefit
|
|
$
|
(1,243
|
)
|
|
$
|
(1,028
|
)
|
|
$
|
(117
|
)
|
Deferred income tax (expense) benefit
|
|
(1,655
|
)
|
|
(2,284
|
)
|
|
23,422
|
|
|||
Total income tax (expense) benefit
|
|
$
|
(2,898
|
)
|
|
$
|
(3,312
|
)
|
|
$
|
23,305
|
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2015
|
|
2014
|
|
2013
|
|||||||||||||||
(dollars in millions)
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
Statutory corporate tax rate
|
|
$
|
(3,246
|
)
|
|
35.0
|
%
|
|
$
|
(3,851
|
)
|
|
35.0
|
%
|
|
$
|
(8,877
|
)
|
|
35.0
|
%
|
Tax-exempt interest
|
|
52
|
|
|
(0.6
|
)
|
|
73
|
|
|
(0.7
|
)
|
|
101
|
|
|
(0.4
|
)
|
|||
Tax credits
|
|
346
|
|
|
(3.7
|
)
|
|
438
|
|
|
(4.0
|
)
|
|
495
|
|
|
(2.0
|
)
|
|||
Valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Current year activity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,156
|
|
|
(20.3
|
)
|
|||
Release of valuation allowance
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,369
|
|
|
(104.0
|
)
|
|||
Unrecognized tax benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
138
|
|
|
(0.5
|
)
|
|||
Total valuation allowance
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,663
|
|
|
(124.8
|
)
|
|||
Other
|
|
(50
|
)
|
|
0.5
|
|
|
28
|
|
|
(0.2
|
)
|
|
(77
|
)
|
|
0.3
|
|
|||
Effective tax rate
|
|
$
|
(2,898
|
)
|
|
31.2
|
%
|
|
$
|
(3,312
|
)
|
|
30.1
|
%
|
|
$
|
23,305
|
|
|
(91.9
|
)%
|
Freddie Mac 2015 Form 10-K
|
|
280
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 11
|
(in millions)
|
|
2015
|
|
2014
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Deferred fees
|
|
$
|
7,008
|
|
|
$
|
6,245
|
|
Basis differences related to derivative instruments
|
|
5,912
|
|
|
7,059
|
|
||
Credit related items and allowance for loan losses
|
|
170
|
|
|
2,311
|
|
||
Basis differences related to assets held for investment
|
|
3,303
|
|
|
1,902
|
|
||
LIHTC and AMT credit carryforward
|
|
2,764
|
|
|
3,465
|
|
||
Other items, net
|
|
81
|
|
|
10
|
|
||
Total deferred tax assets
|
|
19,238
|
|
|
20,992
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Unrealized gains related to available-for-sale securities
|
|
(937
|
)
|
|
(1,371
|
)
|
||
Basis differences related to debt
|
|
(96
|
)
|
|
(123
|
)
|
||
Total deferred tax liabilities
|
|
(1,033
|
)
|
|
(1,494
|
)
|
||
Deferred tax assets, net
|
|
$
|
18,205
|
|
|
$
|
19,498
|
|
•
|
Our three-year cumulative income position and taxable income for the past three years;
|
•
|
Our current loss carryback capacity and the length of the carryforward period available to utilize our tax credit carryforward under current tax law;
|
•
|
Our access to capital under the agreements associated with conservatorship; and
|
•
|
Our expected 2015 taxable income and forecasts of future book income.
|
Freddie Mac 2015 Form 10-K
|
|
281
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 11
|
Freddie Mac 2015 Form 10-K
|
|
282
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2015 Form 10-K
|
|
283
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2015 Form 10-K
|
|
284
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
•
|
Net guarantee fees are reclassified in Segment Earnings from net interest income to management and guarantee fee income.
|
•
|
Implied management and guarantee fee income related to unsecuritized loans held in the mortgage investments portfolio is reclassified in Segment Earnings from net interest income to management and guarantee fee income.
|
•
|
The portion of the amount reversed for accrued but uncollected interest upon placing loans on a non-accrual status that relates to management and guarantee fees is reclassified in Segment Earnings from net interest income to management and guarantee fee income. The remaining portion of the allowance for lost interest is reclassified in Segment Earnings from net interest income to provision for credit losses.
|
•
|
The accrual of periodic cash settlements of all derivatives is reclassified in Segment Earnings from derivative gains (losses) into net interest income to fully reflect the periodic cost associated with the protection provided by these contracts.
|
•
|
Up-front cash paid or received upon the purchase or writing of swaptions and other option contracts is reclassified in Segment Earnings prospectively on a straight-line basis from derivative gains (losses) into net interest income over the contractual life of the instrument to fully reflect the periodic cost associated with the protection provided by these contracts.
|
Freddie Mac 2015 Form 10-K
|
|
285
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
•
|
Amortization related to derivative commitment basis adjustments associated with mortgage-related and non-mortgage-related securities.
|
•
|
Amortization related to accretion of other-than-temporary impairments on available-for-sale securities.
|
•
|
Amortization related to premiums and discounts associated with PCs issued by our consolidated trusts that we previously held and subsequently transferred to third parties. The amortization is related to deferred gains (losses) on transfers of these securities.
|
•
|
Adjustments to management and guarantee fee income for the Single-family Guarantee segment to include the amortization of buy-down fees and credit delivery fees recorded in periods prior to the January 1, 2010 adoption of accounting guidance for transfers of financial assets and the consolidation of VIEs. As of
December 31, 2015
, the unamortized balance of buy-down fees was
$0.2 billion
and the unamortized balance of credit delivery fees was
$0.5 billion
. We consider such fees to be part of the effective rate of the management and guarantee fee income on guaranteed loans. These adjustments are necessary to better reflect the realization of revenue associated with guarantee contracts over the life of the underlying loans.
|
•
|
Adjustments to net interest income for the Investments segment to include the amortization of cash premiums and discounts, as well as buy-up fees, on the consolidated Freddie Mac mortgage-related securities we purchase as investments. As of
December 31, 2015
, the unamortized balance of such premiums and discounts, net was
$3.9 billion
and the unamortized balance of buy-up fees was
$0.3 billion
.
|
Freddie Mac 2015 Form 10-K
|
|
286
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2013
|
||||||
Segment Earnings (loss), net of taxes:
|
|
|
|
|
|
|
||||||
Single-family Guarantee
|
|
$
|
1,778
|
|
|
$
|
1,547
|
|
|
$
|
5,796
|
|
Multifamily
|
|
827
|
|
|
1,636
|
|
|
3,050
|
|
|||
Investments
|
|
3,771
|
|
|
4,520
|
|
|
15,930
|
|
|||
All Other
|
|
—
|
|
|
(13
|
)
|
|
23,892
|
|
|||
Total Segment Earnings, net of taxes
|
|
6,376
|
|
|
7,690
|
|
|
48,668
|
|
|||
Net income
|
|
$
|
6,376
|
|
|
$
|
7,690
|
|
|
$
|
48,668
|
|
Comprehensive income (loss) of segments:
|
|
|
|
|
|
|
||||||
Single-family Guarantee
|
|
$
|
1,790
|
|
|
$
|
1,537
|
|
|
$
|
5,845
|
|
Multifamily
|
|
566
|
|
|
1,459
|
|
|
1,455
|
|
|||
Investments
|
|
3,415
|
|
|
6,471
|
|
|
20,287
|
|
|||
All Other
|
|
28
|
|
|
(41
|
)
|
|
24,013
|
|
|||
Comprehensive income of segments
|
|
5,799
|
|
|
9,426
|
|
|
51,600
|
|
|||
Comprehensive income
|
|
$
|
5,799
|
|
|
$
|
9,426
|
|
|
$
|
51,600
|
|
Freddie Mac 2015 Form 10-K
|
|
287
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
|
Year Ended December 31, 2015
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss),
Net of Tax
|
|
Reconciliation to Consolidated Statements of
Comprehensive Income
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||||||||||
(in millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
Segment
Adjustments
|
|
Total
Reconciling
Items
|
|
||||||||||||||||||||
Net interest income (expense)
|
$
|
(111
|
)
|
|
$
|
927
|
|
|
$
|
1,734
|
|
|
$
|
—
|
|
|
$
|
2,550
|
|
|
$
|
11,615
|
|
|
$
|
781
|
|
|
$
|
12,396
|
|
|
$
|
14,946
|
|
Benefit (Provision) for credit losses
|
2,030
|
|
|
26
|
|
|
—
|
|
|
—
|
|
|
2,056
|
|
|
609
|
|
|
—
|
|
|
609
|
|
|
2,665
|
|
|||||||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Management and guarantee income
(1)
|
5,406
|
|
|
339
|
|
|
—
|
|
|
—
|
|
|
5,745
|
|
|
(5,122
|
)
|
|
(254
|
)
|
|
(5,376
|
)
|
|
369
|
|
|||||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
(22
|
)
|
|
420
|
|
|
—
|
|
|
398
|
|
|
(690
|
)
|
|
—
|
|
|
(690
|
)
|
|
(292
|
)
|
|||||||||
Derivative gains (losses)
|
(37
|
)
|
|
372
|
|
|
(70
|
)
|
|
—
|
|
|
265
|
|
|
(2,961
|
)
|
|
—
|
|
|
(2,961
|
)
|
|
(2,696
|
)
|
|||||||||
Gains (losses) on trading securities
|
—
|
|
|
(98
|
)
|
|
(737
|
)
|
|
—
|
|
|
(835
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(835
|
)
|
|||||||||
Gains (losses) on loans
|
(2,001
|
)
|
|
(93
|
)
|
|
—
|
|
|
—
|
|
|
(2,094
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,094
|
)
|
|||||||||
Other non-interest income
|
616
|
|
|
137
|
|
|
3,679
|
|
|
—
|
|
|
4,432
|
|
|
(2,483
|
)
|
|
—
|
|
|
(2,483
|
)
|
|
1,949
|
|
|||||||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Administrative expense
|
(1,285
|
)
|
|
(325
|
)
|
|
(317
|
)
|
|
—
|
|
|
(1,927
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,927
|
)
|
|||||||||
REO operations (expense) income
|
(334
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(338
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(338
|
)
|
|||||||||
Other non-interest (expense) income
|
(1,445
|
)
|
|
(56
|
)
|
|
(4
|
)
|
|
—
|
|
|
(1,505
|
)
|
|
(968
|
)
|
|
—
|
|
|
(968
|
)
|
|
(2,473
|
)
|
|||||||||
Segment adjustments
|
(254
|
)
|
|
—
|
|
|
781
|
|
|
—
|
|
|
527
|
|
|
—
|
|
|
(527
|
)
|
|
(527
|
)
|
|
—
|
|
|||||||||
Income tax (expense) benefit
|
(807
|
)
|
|
(376
|
)
|
|
(1,715
|
)
|
|
—
|
|
|
(2,898
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,898
|
)
|
|||||||||
Net income (loss)
|
1,778
|
|
|
827
|
|
|
3,771
|
|
|
—
|
|
|
6,376
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,376
|
|
|||||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
—
|
|
|
(264
|
)
|
|
(542
|
)
|
|
—
|
|
|
(806
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(806
|
)
|
|||||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
—
|
|
|
—
|
|
|
182
|
|
|
—
|
|
|
182
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
182
|
|
|||||||||
Changes in defined benefit plans
|
12
|
|
|
3
|
|
|
4
|
|
|
28
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|||||||||
Total other comprehensive income (loss), net of taxes
|
12
|
|
|
(261
|
)
|
|
(356
|
)
|
|
28
|
|
|
(577
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(577
|
)
|
|||||||||
Comprehensive income (loss)
|
$
|
1,790
|
|
|
$
|
566
|
|
|
$
|
3,415
|
|
|
$
|
28
|
|
|
$
|
5,799
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,799
|
|
Freddie Mac 2015 Form 10-K
|
|
288
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
|
Year Ended December 31, 2014
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss),
Net of Tax
|
|
Reconciliation to Consolidated Statements of
Comprehensive Income
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||||||||||
(in millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
Segment
Adjustments
|
|
Total
Reconciling
Items
|
|
||||||||||||||||||||
Net interest income (expense)
|
$
|
(111
|
)
|
|
$
|
948
|
|
|
$
|
2,966
|
|
|
$
|
—
|
|
|
$
|
3,803
|
|
|
$
|
9,825
|
|
|
$
|
635
|
|
|
$
|
10,460
|
|
|
$
|
14,263
|
|
Benefit (Provision) for credit losses
|
(982
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
(927
|
)
|
|
869
|
|
|
—
|
|
|
869
|
|
|
(58
|
)
|
|||||||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Management and guarantee income
(1)
|
4,397
|
|
|
254
|
|
|
—
|
|
|
—
|
|
|
4,651
|
|
|
(4,019
|
)
|
|
(303
|
)
|
|
(4,322
|
)
|
|
329
|
|
|||||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
(140
|
)
|
|
(798
|
)
|
|
—
|
|
|
(798
|
)
|
|
(938
|
)
|
|||||||||
Derivative gains (losses)
|
7
|
|
|
335
|
|
|
(5,158
|
)
|
|
—
|
|
|
(4,816
|
)
|
|
(3,475
|
)
|
|
—
|
|
|
(3,475
|
)
|
|
(8,291
|
)
|
|||||||||
Gains (losses) on trading securities
|
—
|
|
|
58
|
|
|
(276
|
)
|
|
—
|
|
|
(218
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(218
|
)
|
|||||||||
Gains (losses) on loans
|
(139
|
)
|
|
870
|
|
|
—
|
|
|
—
|
|
|
731
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
731
|
|
|||||||||
Other non-interest income
|
844
|
|
|
176
|
|
|
8,881
|
|
|
—
|
|
|
9,901
|
|
|
(1,627
|
)
|
|
—
|
|
|
(1,627
|
)
|
|
8,274
|
|
|||||||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Administrative expense
|
(1,170
|
)
|
|
(274
|
)
|
|
(437
|
)
|
|
—
|
|
|
(1,881
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,881
|
)
|
|||||||||
REO operations (expense) income
|
(205
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(196
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(196
|
)
|
|||||||||
Other non-interest (expense) income
|
(191
|
)
|
|
(23
|
)
|
|
(6
|
)
|
|
(18
|
)
|
|
(238
|
)
|
|
(775
|
)
|
|
—
|
|
|
(775
|
)
|
|
(1,013
|
)
|
|||||||||
Segment adjustments
|
(303
|
)
|
|
—
|
|
|
635
|
|
|
—
|
|
|
332
|
|
|
—
|
|
|
(332
|
)
|
|
(332
|
)
|
|
—
|
|
|||||||||
Income tax (expense) benefit
|
(600
|
)
|
|
(772
|
)
|
|
(1,945
|
)
|
|
5
|
|
|
(3,312
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,312
|
)
|
|||||||||
Net income (loss)
|
1,547
|
|
|
1,636
|
|
|
4,520
|
|
|
(13
|
)
|
|
7,690
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,690
|
|
|||||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
—
|
|
|
(175
|
)
|
|
1,759
|
|
|
—
|
|
|
1,584
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,584
|
|
|||||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
—
|
|
|
—
|
|
|
197
|
|
|
—
|
|
|
197
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197
|
|
|||||||||
Changes in defined benefit plans
|
(10
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
(28
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|||||||||
Total other comprehensive income (loss), net of taxes
|
(10
|
)
|
|
(177
|
)
|
|
1,951
|
|
|
(28
|
)
|
|
1,736
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,736
|
|
|||||||||
Comprehensive income (loss)
|
$
|
1,537
|
|
|
$
|
1,459
|
|
|
$
|
6,471
|
|
|
$
|
(41
|
)
|
|
$
|
9,426
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
289
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 12
|
|
Year Ended December 31, 2013
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss),
Net of Tax
|
|
Reconciliation to Consolidated Statements of
Comprehensive Income
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||||||||||
(in millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
Segment
Adjustments
|
|
Total
Reconciling
Items
|
|
||||||||||||||||||||
Net interest income (expense)
|
$
|
320
|
|
|
$
|
1,186
|
|
|
$
|
3,525
|
|
|
$
|
—
|
|
|
$
|
5,031
|
|
|
$
|
10,400
|
|
|
$
|
1,037
|
|
|
$
|
11,437
|
|
|
$
|
16,468
|
|
Benefit (Provision) for credit losses
|
1,409
|
|
|
218
|
|
|
—
|
|
|
—
|
|
|
1,627
|
|
|
838
|
|
|
—
|
|
|
838
|
|
|
2,465
|
|
|||||||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Management and guarantee income
(1)
|
4,397
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
4,603
|
|
|
(3,638
|
)
|
|
(694
|
)
|
|
(4,332
|
)
|
|
271
|
|
|||||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
(15
|
)
|
|
(974
|
)
|
|
—
|
|
|
(989
|
)
|
|
(521
|
)
|
|
—
|
|
|
(521
|
)
|
|
(1,510
|
)
|
|||||||||
Derivative gains (losses)
|
(3
|
)
|
|
1,281
|
|
|
5,543
|
|
|
—
|
|
|
6,821
|
|
|
(4,189
|
)
|
|
—
|
|
|
(4,189
|
)
|
|
2,632
|
|
|||||||||
Gains (losses) on trading securities
|
—
|
|
|
(132
|
)
|
|
(1,466
|
)
|
|
—
|
|
|
(1,598
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,598
|
)
|
|||||||||
Gains (losses) on loans
|
—
|
|
|
(336
|
)
|
|
—
|
|
|
—
|
|
|
(336
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(336
|
)
|
|||||||||
Other non-interest income
|
1,165
|
|
|
1,350
|
|
|
8,902
|
|
|
—
|
|
|
11,417
|
|
|
(2,357
|
)
|
|
—
|
|
|
(2,357
|
)
|
|
9,060
|
|
|||||||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Administrative expense
|
(1,025
|
)
|
|
(257
|
)
|
|
(523
|
)
|
|
—
|
|
|
(1,805
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,805
|
)
|
|||||||||
REO operations (expense) income
|
124
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|||||||||
Other non-interest (expense) income
|
(179
|
)
|
|
(24
|
)
|
|
349
|
|
|
(37
|
)
|
|
109
|
|
|
(533
|
)
|
|
—
|
|
|
(533
|
)
|
|
(424
|
)
|
|||||||||
Segment adjustments
|
(694
|
)
|
|
—
|
|
|
1,037
|
|
|
—
|
|
|
343
|
|
|
—
|
|
|
(343
|
)
|
|
(343
|
)
|
|
—
|
|
|||||||||
Income tax (expense) benefit
|
282
|
|
|
(443
|
)
|
|
(463
|
)
|
|
23,929
|
|
|
23,305
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,305
|
|
|||||||||
Net income (loss)
|
5,796
|
|
|
3,050
|
|
|
15,930
|
|
|
23,892
|
|
|
48,668
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,668
|
|
|||||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
—
|
|
|
(1,604
|
)
|
|
4,010
|
|
|
—
|
|
|
2,406
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,406
|
|
|||||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
—
|
|
|
—
|
|
|
316
|
|
|
—
|
|
|
316
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
316
|
|
|||||||||
Changes in defined benefit plans
|
49
|
|
|
9
|
|
|
31
|
|
|
121
|
|
|
210
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
210
|
|
|||||||||
Total other comprehensive income (loss), net of taxes
|
49
|
|
|
(1,595
|
)
|
|
4,357
|
|
|
121
|
|
|
2,932
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,932
|
|
|||||||||
Comprehensive income (loss)
|
$
|
5,845
|
|
|
$
|
1,455
|
|
|
$
|
20,287
|
|
|
$
|
24,013
|
|
|
$
|
51,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
51,600
|
|
(1)
|
Management and guarantee income is included in other income (loss) on our GAAP consolidated statements of comprehensive income.
|
Freddie Mac 2015 Form 10-K
|
|
290
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
291
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2015
|
|
December 31, 2014
|
|
Percent of Credit Losses Year Ended
|
||||||||||||
|
Percentage of
Portfolio
|
|
Serious
Delinquency
Rate
|
|
Percentage of
Portfolio
|
|
Serious
Delinquency
Rate
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||
Year of Origination
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2015
|
17
|
%
|
|
0.01
|
%
|
|
N/A
|
|
|
N/A
|
|
|
—
|
%
|
|
N/A
|
|
2014
|
11
|
|
|
0.11
|
%
|
|
12
|
%
|
|
0.02
|
%
|
|
—
|
|
|
—
|
%
|
2013
|
13
|
|
|
0.12
|
%
|
|
16
|
|
|
0.06
|
%
|
|
—
|
|
|
—
|
|
2012
|
12
|
|
|
0.11
|
%
|
|
14
|
|
|
0.09
|
%
|
|
—
|
|
|
—
|
|
2011
|
5
|
|
|
0.28
|
%
|
|
6
|
|
|
0.26
|
%
|
|
—
|
|
|
—
|
|
2010
|
4
|
|
|
0.47
|
%
|
|
6
|
|
|
0.46
|
%
|
|
1
|
|
|
1
|
|
2009
|
4
|
|
|
0.88
|
%
|
|
6
|
|
|
0.92
|
%
|
|
2
|
|
|
2
|
|
Subtotal - Core single-family book
|
66
|
|
|
0.21
|
%
|
|
60
|
|
|
0.24
|
%
|
|
3
|
|
|
3
|
|
HARP and other relief refinance book
(1)
|
18
|
|
|
0.72
|
%
|
|
20
|
|
|
0.75
|
%
|
|
8
|
|
|
8
|
|
Legacy single-family book
|
16
|
|
|
4.12
|
%
|
|
20
|
|
|
5.13
|
%
|
|
89
|
|
|
89
|
|
Total
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
1.88
|
%
|
|
100
|
%
|
|
100
|
%
|
Region
(2)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
West
|
29
|
%
|
|
0.79
|
%
|
|
29
|
%
|
|
1.23
|
%
|
|
13
|
%
|
|
13
|
%
|
Northeast
|
26
|
|
|
2.04
|
%
|
|
26
|
|
|
2.81
|
%
|
|
41
|
|
|
26
|
|
North Central
|
17
|
|
|
1.13
|
%
|
|
17
|
|
|
1.48
|
%
|
|
17
|
|
|
22
|
|
Southeast
|
16
|
|
|
1.57
|
%
|
|
16
|
|
|
2.40
|
%
|
|
25
|
|
|
35
|
|
Southwest
|
12
|
|
|
0.88
|
%
|
|
12
|
|
|
1.16
|
%
|
|
4
|
|
|
4
|
|
Total
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
1.88
|
%
|
|
100
|
%
|
|
100
|
%
|
State
(3)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Florida
|
5
|
%
|
|
2.16
|
%
|
|
6
|
%
|
|
3.92
|
%
|
|
18
|
%
|
|
28
|
%
|
New Jersey
|
4
|
|
|
3.90
|
%
|
|
4
|
|
|
5.49
|
%
|
|
15
|
|
|
6
|
|
New York
|
5
|
|
|
2.94
|
%
|
|
5
|
|
|
4.06
|
%
|
|
12
|
|
|
4
|
|
Illinois
|
5
|
|
|
1.62
|
%
|
|
5
|
|
|
2.17
|
%
|
|
8
|
|
|
10
|
|
California
|
18
|
|
|
0.60
|
%
|
|
17
|
|
|
0.92
|
%
|
|
5
|
|
|
5
|
|
All other
|
63
|
|
|
1.12
|
%
|
|
63
|
|
|
1.52
|
%
|
|
42
|
|
|
47
|
|
Total
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
1.88
|
%
|
|
100
|
%
|
|
100
|
%
|
(1)
|
HARP and other relief refinance loans are presented separately rather than in the year that the refinancing occurred (from 2009 to 2015). All other refinance loans are presented in the year that the refinancing occurred.
|
(2)
|
Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).
|
(3)
|
States presented based on those with the highest percentage of credit losses during the year ended
December 31, 2015
.
|
Freddie Mac 2015 Form 10-K
|
|
292
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
•
|
Purchased pursuant to a previously issued other mortgage-related guarantee;
|
•
|
Part of our relief refinance initiative; or
|
•
|
In another refinance loan initiative and the pre-existing loan (including Alt-A loans) was originated under less than full documentation standards.
|
|
|
Percentage of Portfolio
(1)
|
|
Serious Delinquency Rate
(1)
|
||||||||
|
|
December 31, 2015
|
|
December 31, 2014
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
Interest-only
|
|
1
|
%
|
|
2
|
%
|
|
6.02
|
%
|
|
9.36
|
%
|
Option ARM
(2)
|
|
—
|
%
|
|
—
|
%
|
|
8.01
|
%
|
|
9.87
|
%
|
Alt-A
|
|
2
|
%
|
|
3
|
%
|
|
6.32
|
%
|
|
8.53
|
%
|
Original LTV ratio greater than 90%
(3)
|
|
16
|
%
|
|
16
|
%
|
|
2.01
|
%
|
|
2.58
|
%
|
Lower credit scores at origination (less than 620)
|
|
2
|
%
|
|
3
|
%
|
|
6.67
|
%
|
|
8.57
|
%
|
(1)
|
Excludes loans underlying certain other securitization products for which data was not available.
|
(2)
|
For reporting purposes, loans within the option ARM category continue to be reported in that category following modification, even though the modified loan no longer provides for optional payment provisions.
|
(3)
|
Includes HARP loans, which we purchase as part of our participation in the MHA Program.
|
Freddie Mac 2015 Form 10-K
|
|
293
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||||||||
(dollars in billions)
|
|
UPB
|
|
Delinquency
Rate
(1)
|
|
UPB
|
|
Delinquency
Rate
(1)
|
||||||
Unsecuritized loans
|
|
$
|
49.1
|
|
|
0.04
|
%
|
|
$
|
53.0
|
|
|
0.02
|
%
|
K Certificates
|
|
103.1
|
|
|
0.02
|
%
|
|
76.0
|
|
|
0.01
|
%
|
||
Other securitization products
|
|
6.7
|
|
|
—
|
%
|
|
5.0
|
|
|
0.64
|
%
|
||
Other mortgage-related guarantees
|
|
9.5
|
|
|
—
|
%
|
|
9.3
|
|
|
—
|
%
|
||
Total
|
|
$
|
168.4
|
|
|
0.02
|
%
|
|
$
|
143.3
|
|
|
0.04
|
%
|
(1)
|
Based on loans two monthly payments or more delinquent or in foreclosure.
|
Freddie Mac 2015 Form 10-K
|
|
294
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
295
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
296
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
297
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
298
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
•
|
$42.7 billion
of securities purchased under agreements to resell with
13
counterparties that had short-term S&P ratings of A-1 or above;
|
•
|
$9.7 billion
of securities purchased under agreements to resell with
four
counterparties that had short-term S&P ratings of A-2;
|
•
|
$11.1 billion
of securities purchased under agreements to resell with
three
counterparties that do not have short-term S&P or other third-party credit ratings, but were evaluated under the company's counterparty credit risk system and were determined to be eligible for these transactions (by providing more than 100% in approved collateral);
|
•
|
$0.4 billion
of cash equivalents invested in Treasury securities; and
|
•
|
$19.7 billion
of cash deposited with the Federal Reserve Bank of New York (as a non-interest bearing deposit).
|
Freddie Mac 2015 Form 10-K
|
|
299
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2015 Form 10-K
|
|
300
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
•
|
Level 1 - inputs to the valuation techniques are based on quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 - inputs to the valuation techniques are based on observable inputs other than quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 3 - one or more inputs to the valuation technique are unobservable and significant to the fair value measurement
|
Freddie Mac 2015 Form 10-K
|
|
301
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
•
|
A comparison to transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; or
|
•
|
Industry-standard modeling, such as a discounted cash flow model.
|
Freddie Mac 2015 Form 10-K
|
|
302
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
Securities
|
|
|
|
U.S. Treasury Securities
|
Valuations are based on quoted prices in active markets.
|
Level 1
|
|
Agency mortgage-related securities
|
Valuations are based on:
|
|
|
|
|
Fixed-rate single-class: Observable prices for similar TBA securities adjusted for specific collateral characteristics
|
Level 2
|
Freddie Mac 2015 Form 10-K
|
|
303
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
|
|
Adjustable-rate single-class and majority of multi-class securities: Median of external sources
|
Predominantly Level 2
|
|
|
Certain multi-class securities: Single external source
|
Levels 2 and 3
|
Agency mortgage-related securities (continued)
|
|
Certain multi-class securities with limited market activity: Discounted cash flows or risk metric pricing. Under risk metric pricing, securities are valued by starting with a prior period price and adjusting that price for market changes in certain key risk metrics such as key rate durations. Significant inputs used in the discounted cash flow technique include OAS. Significant inputs used in the risk metric pricing technique include key risk metrics, such as key rate durations. Significant increases (decreases) in the OAS in isolation would result in a significantly lower (higher) fair value. Significant increases (decreases) in key rate durations in isolation would result in a significant increase (decrease) in the magnitude of change of fair value measurement in response to key rate movements
|
Level 3
|
|
|
|
|
Commercial mortgage-related securities
|
Valuations are based on the median of external sources or, in limited circumstances, a single external source
|
Predominantly Level 2
|
|
Other non-agency mortgage-related securities
|
Valuations are based on the median of external sources
|
Level 3
|
|
Mortgage Loans
|
|
|
|
Single-family loans
|
Valuations are based on:
|
|
|
|
|
GSE Securitization Market: Benchmark security pricing for actively traded mortgage-related securities with similar characteristics, adjusting for the value of our management and guarantee fee and our credit obligation related to performing our guarantee (see Guarantee Obligation). The credit obligation is based on: delivery and guarantee fees we charge under current market pricing for loans that qualify under our current underwriting standards (Level 2) and internal credit models for loans that do not qualify under our current underwriting standards (Level 3)
|
Level 2 or 3
|
|
|
Whole Loan Market: Median of external sources, referencing market activity for deeply delinquent and modified loans, where available
|
Level 3
|
|
|
Impaired held-for-investment: Internal models that estimate the fair value of the underlying collateral for impaired loans. Significant inputs used by our internal models include REO disposition, short sale and third-party sale values, combined with mortgage loan level characteristics using the repeat housing sales index to estimate the current fair value of the mortgage loan. Significant increases (decreases) in the historical average sales proceeds per mortgage loan in isolation would result in significantly higher (lower) fair value measurements
|
Level 3
|
|
|
|
|
Multifamily loans
|
Valuations are based on:
|
|
Freddie Mac 2015 Form 10-K
|
|
304
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
|
|
Held-for-sale: Market prices from a third-party pricing service, using discounted cash flows based on K Certificate market spreads
|
Level 2
|
|
|
Held-for-investment: Market prices from a third-party pricing service using discounted cash flows incorporating credit spreads for similar loans based on the loan's LTV and DSCR
|
Level 3
|
|
|
Impaired held-for-investment: Income capitalization or third-party appraisals. Significant inputs in the income capitalization technique include capitalization rates. Significant increases (decreases) in the capitalization rate in isolation would result in a significantly lower (higher) fair value measurement
|
Level 3
|
|
|
|
|
Derivative Assets, Net and Derivative Liabilities, Net
|
|||
Derivatives
|
Valuations are based on:
|
|
|
|
|
Exchange-traded futures: Quoted prices in active markets
|
Level 1
|
|
|
Interest-rate swaps: Discounted cash flows. Significant inputs include market-based interest rates
|
Level 2
|
|
|
Option-based derivatives: Option-pricing models. Significant inputs include Interest-rate volatility matrices
|
Level 2
|
|
|
Purchase and Sale Commitments: see Agency Mortgage-Related Securities
|
Level 2
|
Other Assets and Other Liabilities
|
|||
Guarantee asset
|
Valuations are based on:
|
|
|
|
|
Single-family: Median of external sources with adjustments for specific loan characteristics
|
Level 3
|
|
|
Multifamily: Discounted cash flows. Significant inputs include current OAS-to-benchmark interest rates for new guarantees. Significant increases (decreases) in the OAS in isolation would result in a significantly lower (higher) fair value measurement
|
Level 3
|
|
|
|
|
Mortgage servicing rights
|
Valuations are based on market prices from third party using discounted cash flows. Significant inputs include:
|
Level 3
|
|
|
|
Estimated prepayment rates,
|
|
|
|
Estimated costs to service both performing and non-accrual loans, and
|
|
|
|
Estimated servicing income per loan (including ancillary income).
|
|
|
|
|
|
|
|
Significant increases (decreases) in cost to service per loan and prepayment rate in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in servicing income per loan in isolation would result in a significantly higher (lower) fair value measurement.
|
|
Freddie Mac 2015 Form 10-K
|
|
305
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
Single-family REO
|
|
Valuations are based on an internal model, which uses REO disposition prices combined with loan level characteristics, using the repeat housing sales index. Significant inputs include the historical sales proceeds per property and the repeat housing sales index. Significant increases (decreases) in the historical sales proceeds per property in isolation would result in significantly higher (lower) fair value measurement.
|
Level 3
|
Guarantee obligation
|
Valuations are based on:
|
|
|
|
|
Single-family
|
|
|
|
The delivery and management and guarantee fees that we charge under our current market pricing
|
Level 2
|
|
|
Internal credit models. Significant inputs include loan characteristics, loan performance, and status information.
|
Level 3
|
|
|
Multifamily: Discounted cash flows. Significant inputs are similar to those used in the valuation technique for the Multifamily Guarantee Asset.
|
Level 3
|
Debt
|
|
|
|
Debt securities of consolidated trusts held by third parties
|
Valuations are based on the valuation techniques we use to value our investments in agency securities.
|
Level 2 or 3
|
|
Other debt
|
Valuations are based on:
|
Predominantly Level 2
|
|
|
|
Median of external sources
|
|
|
|
Single external source
|
|
|
|
Published yield matrices
|
|
Freddie Mac 2015 Form 10-K
|
|
306
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2015 Form 10-K
|
|
307
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2015
|
||||||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
Adjustment
(1)
|
|
Total
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
$
|
—
|
|
|
$
|
30,919
|
|
|
$
|
2,608
|
|
|
$
|
—
|
|
|
$
|
33,527
|
|
Fannie Mae
|
—
|
|
|
7,172
|
|
|
90
|
|
|
—
|
|
|
7,262
|
|
|||||
Ginnie Mae
|
—
|
|
|
161
|
|
|
1
|
|
|
—
|
|
|
162
|
|
|||||
CMBS
|
—
|
|
|
8,918
|
|
|
3,530
|
|
|
—
|
|
|
12,448
|
|
|||||
Subprime
|
—
|
|
|
—
|
|
|
12,802
|
|
|
—
|
|
|
12,802
|
|
|||||
Option ARM
|
—
|
|
|
—
|
|
|
3,678
|
|
|
—
|
|
|
3,678
|
|
|||||
Alt-A and other
|
—
|
|
|
—
|
|
|
3,278
|
|
|
—
|
|
|
3,278
|
|
|||||
Obligations of states and political subdivisions
|
—
|
|
|
—
|
|
|
1,205
|
|
|
—
|
|
|
1,205
|
|
|||||
Manufactured housing
|
—
|
|
|
—
|
|
|
575
|
|
|
—
|
|
|
575
|
|
|||||
Total available-for-sale securities, at fair value
|
—
|
|
|
47,170
|
|
|
27,767
|
|
|
—
|
|
|
74,937
|
|
|||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
—
|
|
|
15,182
|
|
|
331
|
|
|
—
|
|
|
15,513
|
|
|||||
Fannie Mae
|
—
|
|
|
6,397
|
|
|
41
|
|
|
—
|
|
|
6,438
|
|
|||||
Ginnie Mae
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|||||
Other
|
—
|
|
|
144
|
|
|
2
|
|
|
—
|
|
|
146
|
|
|||||
Total mortgage-related securities
|
—
|
|
|
21,753
|
|
|
374
|
|
|
—
|
|
|
22,127
|
|
|||||
Non-mortgage-related securities
|
17,151
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,151
|
|
|||||
Total trading securities, at fair value
|
17,151
|
|
|
21,753
|
|
|
374
|
|
|
—
|
|
|
39,278
|
|
|||||
Total investments in securities
|
17,151
|
|
|
68,923
|
|
|
28,141
|
|
|
—
|
|
|
114,215
|
|
|||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
||||||||||
Held-for-sale, at fair value
|
—
|
|
|
17,660
|
|
|
—
|
|
|
—
|
|
|
17,660
|
|
|||||
Derivative assets, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
4,911
|
|
|
—
|
|
|
—
|
|
|
4,911
|
|
|||||
Option-based derivatives
|
—
|
|
|
4,821
|
|
|
—
|
|
|
—
|
|
|
4,821
|
|
|||||
Other
|
—
|
|
|
34
|
|
|
25
|
|
|
—
|
|
|
59
|
|
|||||
Subtotal, before netting adjustments
|
—
|
|
|
9,766
|
|
|
25
|
|
|
—
|
|
|
9,791
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,396
|
)
|
|
(9,396
|
)
|
|||||
Total derivative assets, net
|
—
|
|
|
9,766
|
|
|
25
|
|
|
(9,396
|
)
|
|
395
|
|
|||||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Guarantee asset, at fair value
|
—
|
|
|
—
|
|
|
1,753
|
|
|
—
|
|
|
1,753
|
|
|||||
Total assets carried at fair value on a recurring basis
|
$
|
17,151
|
|
|
$
|
96,349
|
|
|
$
|
29,919
|
|
|
$
|
(9,396
|
)
|
|
$
|
134,023
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt securities of consolidated trusts held by third parties, at fair value
|
$
|
—
|
|
|
$
|
139
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
139
|
|
Other debt, at fair value
|
—
|
|
|
7,045
|
|
|
—
|
|
|
—
|
|
|
7,045
|
|
|||||
Derivative liabilities, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
12,222
|
|
|
—
|
|
|
—
|
|
|
12,222
|
|
|||||
Option-based derivatives
|
—
|
|
|
128
|
|
|
—
|
|
|
—
|
|
|
128
|
|
|||||
Other
|
—
|
|
|
28
|
|
|
33
|
|
|
—
|
|
|
61
|
|
|||||
Subtotal, before netting adjustments
|
—
|
|
|
12,378
|
|
|
33
|
|
|
—
|
|
|
12,411
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,157
|
)
|
|
(11,157
|
)
|
|||||
Total derivative liabilities, net
|
—
|
|
|
12,378
|
|
|
33
|
|
|
(11,157
|
)
|
|
1,254
|
|
|||||
Other liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
All other, at fair value
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|||||
Total liabilities carried at fair value on a recurring basis
|
$
|
—
|
|
|
$
|
19,562
|
|
|
$
|
43
|
|
|
$
|
(11,157
|
)
|
|
$
|
8,448
|
|
Freddie Mac 2015 Form 10-K
|
|
308
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2014
|
||||||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
Adjustment
(1)
|
|
Total
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
$
|
—
|
|
|
$
|
34,868
|
|
|
$
|
4,231
|
|
|
$
|
—
|
|
|
$
|
39,099
|
|
Fannie Mae
|
—
|
|
|
11,228
|
|
|
85
|
|
|
—
|
|
|
11,313
|
|
|||||
Ginnie Mae
|
—
|
|
|
195
|
|
|
4
|
|
|
—
|
|
|
199
|
|
|||||
CMBS
|
—
|
|
|
18,348
|
|
|
3,474
|
|
|
—
|
|
|
21,822
|
|
|||||
Subprime
|
—
|
|
|
—
|
|
|
20,589
|
|
|
—
|
|
|
20,589
|
|
|||||
Option ARM
|
—
|
|
|
—
|
|
|
5,649
|
|
|
—
|
|
|
5,649
|
|
|||||
Alt-A and other
|
—
|
|
|
16
|
|
|
5,027
|
|
|
—
|
|
|
5,043
|
|
|||||
Obligations of states and political subdivisions
|
—
|
|
|
—
|
|
|
2,198
|
|
|
—
|
|
|
2,198
|
|
|||||
Manufactured housing
|
—
|
|
|
—
|
|
|
638
|
|
|
—
|
|
|
638
|
|
|||||
Total available-for-sale securities, at fair value
|
—
|
|
|
64,655
|
|
|
41,895
|
|
|
—
|
|
|
106,550
|
|
|||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
—
|
|
|
16,542
|
|
|
927
|
|
|
—
|
|
|
17,469
|
|
|||||
Fannie Mae
|
—
|
|
|
5,867
|
|
|
232
|
|
|
—
|
|
|
6,099
|
|
|||||
Ginnie Mae
|
—
|
|
|
15
|
|
|
1
|
|
|
—
|
|
|
16
|
|
|||||
Other
|
—
|
|
|
167
|
|
|
4
|
|
|
—
|
|
|
171
|
|
|||||
Total mortgage-related securities
|
—
|
|
|
22,591
|
|
|
1,164
|
|
|
—
|
|
|
23,755
|
|
|||||
Non-mortgage-related securities
|
6,682
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,682
|
|
|||||
Total trading securities, at fair value
|
6,682
|
|
|
22,591
|
|
|
1,164
|
|
|
—
|
|
|
30,437
|
|
|||||
Total investments in securities
|
6,682
|
|
|
87,246
|
|
|
43,059
|
|
|
—
|
|
|
136,987
|
|
|||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
||||||||||
Held-for-sale, at fair value
|
—
|
|
|
12,130
|
|
|
—
|
|
|
—
|
|
|
12,130
|
|
|||||
Derivative assets, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
5,653
|
|
|
—
|
|
|
—
|
|
|
5,653
|
|
|||||
Option-based derivatives
|
5
|
|
|
4,219
|
|
|
—
|
|
|
—
|
|
|
4,224
|
|
|||||
Other
|
—
|
|
|
40
|
|
|
27
|
|
|
—
|
|
|
67
|
|
|||||
Subtotal, before netting adjustments
|
5
|
|
|
9,912
|
|
|
27
|
|
|
—
|
|
|
9,944
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,122
|
)
|
|
(9,122
|
)
|
|||||
Total derivative assets, net
|
5
|
|
|
9,912
|
|
|
27
|
|
|
(9,122
|
)
|
|
822
|
|
|||||
Other assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Guarantee asset, at fair value
|
—
|
|
|
—
|
|
|
1,626
|
|
|
—
|
|
|
1,626
|
|
|||||
All other, at fair value
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||
Total other assets
|
—
|
|
|
—
|
|
|
1,631
|
|
|
—
|
|
|
1,631
|
|
|||||
Total assets carried at fair value on a recurring basis
|
$
|
6,687
|
|
|
$
|
109,288
|
|
|
$
|
44,717
|
|
|
$
|
(9,122
|
)
|
|
$
|
151,570
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt securities of consolidated trusts held by third parties, at fair value
|
$
|
—
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42
|
|
Other debt, at fair value
|
—
|
|
|
5,820
|
|
|
—
|
|
|
—
|
|
|
5,820
|
|
|||||
Derivative liabilities, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
13,316
|
|
|
—
|
|
|
—
|
|
|
13,316
|
|
|||||
Option-based derivatives
|
28
|
|
|
99
|
|
|
—
|
|
|
—
|
|
|
127
|
|
|||||
Other
|
—
|
|
|
80
|
|
|
37
|
|
|
—
|
|
|
117
|
|
|||||
Subtotal, before netting adjustments
|
28
|
|
|
13,495
|
|
|
37
|
|
|
—
|
|
|
13,560
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,597
|
)
|
|
(11,597
|
)
|
|||||
Total derivative liabilities, net
|
28
|
|
|
13,495
|
|
|
37
|
|
|
(11,597
|
)
|
|
1,963
|
|
|||||
Total liabilities carried at fair value on a recurring basis
|
$
|
28
|
|
|
$
|
19,357
|
|
|
$
|
37
|
|
|
$
|
(11,597
|
)
|
|
$
|
7,825
|
|
(1)
|
Represents counterparty netting, cash collateral netting and net derivative interest receivable or payable. The net cash collateral posted was
$2.3 billion
and
$3.2 billion
, respectively, at
December 31, 2015
and 2014. The net interest receivable (payable) of derivative assets and derivative liabilities was
$(0.6) billion
and
$(0.7) billion
at
December 31, 2015
and 2014, respectively, which was mainly related to interest rate swaps.
|
Freddie Mac 2015 Form 10-K
|
|
309
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31,
|
||||||||||||||||||||||||||||||
|
2015
|
|
2014
|
||||||||||||||||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Assets measured at fair value on a non-recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Mortgage loans
(1)
|
$
|
—
|
|
|
$
|
9,314
|
|
|
$
|
5,851
|
|
|
$
|
15,165
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
8,962
|
|
|
$
|
9,042
|
|
REO, net
(2)
|
—
|
|
|
—
|
|
|
1,046
|
|
|
1,046
|
|
|
—
|
|
|
—
|
|
|
1,665
|
|
|
1,665
|
|
||||||||
Total assets measured at fair value on a non-recurring basis
|
$
|
—
|
|
|
$
|
9,314
|
|
|
$
|
6,897
|
|
|
$
|
16,211
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
10,627
|
|
|
$
|
10,707
|
|
(1)
|
Includes loans that are classified as held-for-investment and have been measured for impairment based on the fair value of the underlying collateral and held-for-sale loans where the fair value is below cost.
|
(2)
|
Represents the fair value of foreclosed properties that were measured at fair value subsequent to their initial classification as REO, net. The carrying amount of REO, net was adjusted to fair value of
$1.0 billion
, less estimated costs to sell of
$68 million
(or approximately
$0.9 billion
) at
December 31, 2015
. The carrying amount of REO, net was adjusted to fair value of
$1.7 billion
, less estimated costs to sell of
$109 million
(or approximately
$1.6 billion
) at
December 31, 2014
.
|
Freddie Mac 2015 Form 10-K
|
|
310
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
Year Ended December 31, 2015
|
||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
Realized and unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1,
2015
|
|
Included in
earnings
(1)
|
|
Included in
other
comprehensive
income
(1)
|
|
Total
|
|
Purchases
|
|
Issues
|
|
Sales
|
|
Settlements,
net
|
|
Transfers
into
Level 3
(2)
|
|
Transfers
out of
Level 3
(2)
|
|
Balance,
December 31,
2015
|
|
Unrealized
gains (losses)
still held
|
||||||||||||||||||||||||
|
in millions
|
||||||||||||||||||||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Freddie Mac
|
$
|
4,231
|
|
|
$
|
28
|
|
|
$
|
3
|
|
|
$
|
31
|
|
|
$
|
671
|
|
|
$
|
—
|
|
|
$
|
(665
|
)
|
|
$
|
93
|
|
|
$
|
—
|
|
|
$
|
(1,753
|
)
|
|
$
|
2,608
|
|
|
$
|
(3
|
)
|
Fannie Mae
|
85
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
37
|
|
|
(9
|
)
|
|
90
|
|
|
—
|
|
||||||||||||
Ginnie Mae
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||||||||
CMBS
|
3,474
|
|
|
(20
|
)
|
|
109
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
3,530
|
|
|
(20
|
)
|
||||||||||||
Subprime
|
20,589
|
|
|
817
|
|
|
(76
|
)
|
|
741
|
|
|
—
|
|
|
—
|
|
|
(6,067
|
)
|
|
(2,461
|
)
|
|
—
|
|
|
—
|
|
|
12,802
|
|
|
168
|
|
||||||||||||
Option ARM
|
5,649
|
|
|
233
|
|
|
67
|
|
|
300
|
|
|
—
|
|
|
—
|
|
|
(1,627
|
)
|
|
(646
|
)
|
|
2
|
|
|
—
|
|
|
3,678
|
|
|
137
|
|
||||||||||||
Alt-A and other
|
5,027
|
|
|
263
|
|
|
(50
|
)
|
|
213
|
|
|
—
|
|
|
—
|
|
|
(1,145
|
)
|
|
(823
|
)
|
|
6
|
|
|
—
|
|
|
3,278
|
|
|
—
|
|
||||||||||||
Obligations of states and political subdivisions
|
2,198
|
|
|
2
|
|
|
(15
|
)
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(981
|
)
|
|
1
|
|
|
—
|
|
|
1,205
|
|
|
—
|
|
||||||||||||
Manufactured housing
|
638
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(73
|
)
|
|
6
|
|
|
—
|
|
|
575
|
|
|
112
|
|
||||||||||||
Total available-for-sale mortgage-related securities
|
41,895
|
|
|
1,323
|
|
|
46
|
|
|
1,369
|
|
|
671
|
|
|
—
|
|
|
(9,505
|
)
|
|
(4,953
|
)
|
|
52
|
|
|
(1,762
|
)
|
|
27,767
|
|
|
394
|
|
||||||||||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Freddie Mac
|
927
|
|
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
|
36
|
|
|
—
|
|
|
(10
|
)
|
|
(11
|
)
|
|
91
|
|
|
(660
|
)
|
|
331
|
|
|
(41
|
)
|
||||||||||||
Fannie Mae
|
232
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(94
|
)
|
|
(2
|
)
|
|
—
|
|
|
(98
|
)
|
|
41
|
|
|
(12
|
)
|
||||||||||||
Ginnie Mae
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||||
Other
|
4
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||||||||||
Total trading mortgage-related securities
|
1,164
|
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|
36
|
|
|
—
|
|
|
(109
|
)
|
|
(14
|
)
|
|
91
|
|
|
(758
|
)
|
|
374
|
|
|
(53
|
)
|
||||||||||||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Guarantee asset
(3)
|
1,626
|
|
|
(47
|
)
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|
688
|
|
|
—
|
|
|
(514
|
)
|
|
—
|
|
|
—
|
|
|
1,753
|
|
|
(33
|
)
|
||||||||||||
All other, at fair value
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||||
Total other assets
|
1,631
|
|
|
(52
|
)
|
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
688
|
|
|
—
|
|
|
(514
|
)
|
|
—
|
|
|
—
|
|
|
1,753
|
|
|
(33
|
)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Realized and unrealized (gains) losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1, 2015 |
|
Included in
earnings
(1)
|
|
Included in
other
comprehensive
income
(1)
|
|
Total
|
|
Purchases
|
|
Issues
|
|
Sales
|
|
Settlements,
net
|
|
Transfers
into
Level 3
(2)
|
|
Transfers
out of
Level 3
(2)
|
|
Balance,
December 31, 2015 |
|
Unrealized
(gains)
losses
still held
|
||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net derivatives
(4)
|
$
|
10
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
2
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
All other, at fair value
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
15
|
|
Freddie Mac 2015 Form 10-K
|
|
311
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
Year Ended December 31, 2014
|
||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
Realized and unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1,
2014
|
|
Included in
earnings
(1)
|
|
Included in
other
comprehensive
income
(1)
|
|
Total
|
|
Purchases
|
|
Issues
|
|
Sales
|
|
Settlements,
net
|
|
Transfers
into
Level 3
|
|
Transfers
out of
Level 3
|
|
Balance,
December 31,
2014
|
|
Unrealized
gains (losses)
still held
|
||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Freddie Mac
|
$
|
1,939
|
|
|
$
|
2
|
|
|
$
|
71
|
|
|
$
|
73
|
|
|
$
|
5,742
|
|
|
$
|
—
|
|
|
$
|
(3,346
|
)
|
|
$
|
(138
|
)
|
|
$
|
3
|
|
|
$
|
(42
|
)
|
|
$
|
4,231
|
|
|
$
|
—
|
|
Fannie Mae
|
131
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
48
|
|
|
—
|
|
|
(59
|
)
|
|
(29
|
)
|
|
45
|
|
|
(49
|
)
|
|
85
|
|
|
—
|
|
||||||||||||
Ginnie Mae
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(3
|
)
|
|
1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||||||||
CMBS
|
3,109
|
|
|
—
|
|
|
397
|
|
|
397
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
|
3,474
|
|
|
—
|
|
||||||||||||
Subprime
|
27,499
|
|
|
(524
|
)
|
|
2,778
|
|
|
2,254
|
|
|
—
|
|
|
—
|
|
|
(7,469
|
)
|
|
(1,695
|
)
|
|
—
|
|
|
—
|
|
|
20,589
|
|
|
(794
|
)
|
||||||||||||
Option ARM
|
6,574
|
|
|
(71
|
)
|
|
232
|
|
|
161
|
|
|
—
|
|
|
—
|
|
|
(791
|
)
|
|
(295
|
)
|
|
—
|
|
|
—
|
|
|
5,649
|
|
|
(102
|
)
|
||||||||||||
Alt-A and other
|
8,706
|
|
|
111
|
|
|
158
|
|
|
269
|
|
|
—
|
|
|
—
|
|
|
(3,659
|
)
|
|
(272
|
)
|
|
—
|
|
|
(17
|
)
|
|
5,027
|
|
|
(42
|
)
|
||||||||||||
Obligations of states and political subdivisions
|
3,495
|
|
|
1
|
|
|
71
|
|
|
72
|
|
|
1
|
|
|
—
|
|
|
(13
|
)
|
|
(1,357
|
)
|
|
—
|
|
|
—
|
|
|
2,198
|
|
|
—
|
|
||||||||||||
Manufactured housing
|
684
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
638
|
|
|
—
|
|
||||||||||||
Total available-for-sale mortgage-related securities
|
52,149
|
|
|
(481
|
)
|
|
3,733
|
|
|
3,252
|
|
|
5,791
|
|
|
—
|
|
|
(15,344
|
)
|
|
(3,894
|
)
|
|
49
|
|
|
(108
|
)
|
|
41,895
|
|
|
(938
|
)
|
||||||||||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Freddie Mac
|
343
|
|
|
8
|
|
|
—
|
|
|
8
|
|
|
2,282
|
|
|
95
|
|
|
(1,690
|
)
|
|
(43
|
)
|
|
—
|
|
|
(68
|
)
|
|
927
|
|
|
11
|
|
||||||||||||
Fannie Mae
|
221
|
|
|
(45
|
)
|
|
—
|
|
|
(45
|
)
|
|
79
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
21
|
|
|
(30
|
)
|
|
232
|
|
|
(45
|
)
|
||||||||||||
Ginnie Mae
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(70
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(2
|
)
|
||||||||||||
Other
|
8
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
(1
|
)
|
||||||||||||
Total trading mortgage-related securities
|
646
|
|
|
(38
|
)
|
|
—
|
|
|
(38
|
)
|
|
2,362
|
|
|
95
|
|
|
(1,760
|
)
|
|
(64
|
)
|
|
21
|
|
|
(98
|
)
|
|
1,164
|
|
|
(37
|
)
|
||||||||||||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Guarantee asset
(3)
|
1,611
|
|
|
(184
|
)
|
|
—
|
|
|
(184
|
)
|
|
—
|
|
|
427
|
|
|
—
|
|
|
(228
|
)
|
|
—
|
|
|
—
|
|
|
1,626
|
|
|
(263
|
)
|
||||||||||||
All other, at fair value
|
9
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(4
|
)
|
||||||||||||
Total other assets
|
1,620
|
|
|
(188
|
)
|
|
—
|
|
|
(188
|
)
|
|
—
|
|
|
427
|
|
|
—
|
|
|
(228
|
)
|
|
—
|
|
|
—
|
|
|
1,631
|
|
|
(267
|
)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Realized and unrealized (gains) losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1,
2014
|
|
Included in
earnings
(1)
|
|
Included in
other
comprehensive
income
(1)
|
|
Total
|
|
Purchases
|
|
Issues
|
|
Sales
|
|
Settlements,
net
|
|
Transfers
into
Level 3
|
|
Transfers
out of
Level 3
|
|
Balance,
December 31, 2014 |
|
Unrealized
(gains)
losses
still held
|
||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Other debt, at fair value
|
$
|
1,528
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,521
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net derivatives
(4)
|
325
|
|
|
(94
|
)
|
|
—
|
|
|
(94
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
(281
|
)
|
|
$
|
10
|
|
|
(30
|
)
|
|
|
|
|
(1)
|
Changes in fair value for available-for-sale securities are recorded in AOCI, while gains and losses from sales are recorded in other gains (losses) on investment securities recognized in earnings on our consolidated statements of comprehensive income. For mortgage-related securities classified as trading, the realized and unrealized gains (losses) are recorded in other gains (losses) on investment securities recognized in earnings on our consolidated statements of comprehensive income.
|
(2)
|
Transfers out of Level 3 during the year ended
December 31, 2015
consisted primarily of certain mortgage-related securities and certain derivatives due to an increased volume and level of activity in the market and availability of price quotes from dealers and third-party pricing services. Freddie Mac securities are generally classified as Level 3 at issuance and generally are classified as Level 2 when they begin trading. Transfers into Level 3 during the year ended
December 31, 2015
consisted primarily of certain mortgage-related securities due to a lack of market activity and relevant price quotes from dealers and third-party pricing services.
|
(3)
|
Changes in fair value of the guarantee asset are recorded in other income on our consolidated statements of comprehensive income.
|
(4)
|
Amounts are prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable and net derivative interest receivable or payable.
|
Freddie Mac 2015 Form 10-K
|
|
312
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2015 Form 10-K
|
|
313
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2015
|
||||||||||||||||
|
Total
Fair
Value
|
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||||||
(dollars in millions)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||||||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investments in securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Available-for-sale, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Freddie Mac
|
|
|
$
|
2,145
|
|
|
Discounted cash flows
|
|
OAS
|
|
(46) - 503 bps
|
|
86 bps
|
|
|||
|
|
|
463
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Freddie Mac
|
$
|
33,527
|
|
|
2,608
|
|
|
|
|
|
|
|
|
|
|
||
Fannie Mae
|
|
|
37
|
|
|
Median of external sources
|
|
|
|
|
|
|
|
||||
|
|
|
36
|
|
|
Single external source
|
|
|
|
|
|
|
|||||
|
|
|
17
|
|
|
Other
|
|
|
|
|
|
|
|
||||
Total Fannie Mae
|
7,262
|
|
|
90
|
|
|
|
|
|
|
|
|
|
||||
Ginnie Mae
|
|
|
1
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||||
Total Ginnie Mae
|
162
|
|
|
1
|
|
|
|
|
|
|
|
|
|
||||
CMBS
|
|
|
3,530
|
|
|
Risk Metrics
|
|
Effective duration
|
|
3.15 - 11.02 years
|
|
9.57 years
|
|
||||
Total CMBS
|
12,448
|
|
|
3,530
|
|
|
|
|
|
|
|
|
|
||||
Subprime, option ARM, and Alt-A:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subprime
|
|
|
11,652
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$73.2 - $77.3
|
|
$
|
75.0
|
|
|||
|
|
|
1,150
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total subprime
|
12,802
|
|
|
12,802
|
|
|
|
|
|
|
|
|
|
||||
Option ARM
|
|
|
3,190
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$67.8 - $72.4
|
|
$
|
69.9
|
|
|||
|
|
|
488
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total option ARM
|
3,678
|
|
|
3,678
|
|
|
|
|
|
|
|
|
|
||||
Alt-A and other
|
|
|
2,601
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$85.8 - $89.3
|
|
$
|
87.6
|
|
|||
|
|
|
506
|
|
|
Single external source
|
|
External pricing source
|
|
$84.7 - $84.7
|
|
$
|
84.7
|
|
|||
|
|
|
171
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Alt-A and other
|
3,278
|
|
|
3,278
|
|
|
|
|
|
|
|
|
|
||||
Obligations of states and political subdivisions
|
|
|
1,099
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$101.4 - $101.8
|
|
$
|
101.6
|
|
|||
|
|
|
106
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total obligations of states and political subdivisions
|
1,205
|
|
|
1,205
|
|
|
|
|
|
|
|
|
|
||||
Manufactured housing
|
|
|
505
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$90.4 - $93.7
|
|
$
|
92.1
|
|
|||
|
|
|
70
|
|
|
Other
|
|
|
|
|
|
|
|
||||
Total manufactured housing
|
575
|
|
|
575
|
|
|
|
|
|
|
|
|
|
||||
Total available-for-sale mortgage-related securities
|
74,937
|
|
|
27,767
|
|
|
|
|
|
|
|
|
|
||||
Trading, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Freddie Mac
|
|
|
249
|
|
|
Discounted cash flows
|
|
OAS
|
|
(1,315) - 1,959 bps
|
|
129 bps
|
|
||||
|
|
|
19
|
|
|
Risk Metrics
|
|
|
|
|
|
|
|
||||
|
|
|
63
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Freddie Mac
|
15,513
|
|
|
331
|
|
|
|
|
|
|
|
|
|
||||
Fannie Mae
|
|
|
41
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|
||||
Total Fannie Mae
|
6,438
|
|
|
41
|
|
|
|
|
|
|
|
|
|
||||
Ginnie Mae
|
30
|
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Other
|
|
|
1
|
|
|
Median of external sources
|
|
|
|
|
|
|
|||||
|
|
|
|
1
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
||||
Total other
|
146
|
|
|
2
|
|
|
|
|
|
|
|
|
|
||||
Total trading mortgage-related securities
|
22,127
|
|
|
374
|
|
|
|
|
|
|
|
|
|
||||
Total investments in securities
|
$
|
97,064
|
|
|
$
|
28,141
|
|
|
|
|
|
|
|
|
|
||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Guarantee asset, at fair value
|
|
|
$
|
1,623
|
|
|
Discounted cash flows
|
|
OAS
|
|
17 - 198 bps
|
|
57 bps
|
|
|||
|
|
|
130
|
|
|
Other
|
|
|
|
|
|
|
|
||||
Total guarantee asset, at fair value
|
$
|
1,753
|
|
|
1,753
|
|
|
|
|
|
|
|
|
|
|||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net derivatives
|
|
|
8
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total net derivatives
|
859
|
|
|
8
|
|
|
|
|
|
|
|
|
|
||||
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
All other, at fair value
|
|
|
10
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total all other, at fair value
|
10
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
314
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2014
|
||||||||||||||||
|
Total
Fair
Value
|
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||||||
(dollars in millions)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||||||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investments in securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Available-for-sale, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Freddie Mac
|
|
|
$
|
2,980
|
|
|
Discounted cash flows
|
|
OAS
|
|
(146) - 144 bps
|
|
83 bps
|
|
|||
|
|
|
375
|
|
|
Risk metric
|
|
Effective duration
|
|
0.18 - 7.54 years
|
|
3.82 years
|
|
||||
|
|
|
143
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$103.2 - $104.4
|
|
$
|
103.8
|
|
|||
|
|
|
733
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Freddie Mac
|
$
|
39,099
|
|
|
4,231
|
|
|
|
|
|
|
|
|
|
|||
Fannie Mae
|
|
|
47
|
|
|
Median of external sources
|
|
|
|
|
|
|
|||||
|
|
|
29
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||||
|
|
|
9
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Fannie Mae
|
11,313
|
|
|
85
|
|
|
|
|
|
|
|
|
|
||||
Ginnie Mae
|
|
|
4
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||||
Total Ginnie Mae
|
199
|
|
|
4
|
|
|
|
|
|
|
|
|
|
||||
CMBS
|
|
|
2,726
|
|
|
Risk Metrics
|
|
Effective duration
|
|
5.84 - 10.65 years
|
|
9.59 years
|
|
||||
|
|
|
748
|
|
|
Discounted cash flows
|
|
OAS
|
|
181 -766 bps
|
|
421 bps
|
|
||||
Total CMBS
|
21,822
|
|
|
3,474
|
|
|
|
|
|
|
|
|
|
||||
Subprime, option ARM, and Alt-A:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subprime
|
|
|
18,789
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$71.0 - $76.1
|
|
$
|
73.5
|
|
|||
|
|
|
1,800
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total subprime
|
20,589
|
|
|
20,589
|
|
|
|
|
|
|
|
|
|
||||
Option ARM
|
|
|
5,205
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$65.3 - $70.9
|
|
$
|
67.9
|
|
|||
|
|
|
444
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total option ARM
|
5,649
|
|
|
5,649
|
|
|
|
|
|
|
|
|
|
||||
Alt-A and other
|
|
|
4,116
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$83.0 - $86.2
|
|
$
|
84.5
|
|
|||
|
|
|
911
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Alt-A and other
|
5,043
|
|
|
5,027
|
|
|
|
|
|
|
|
|
|
||||
Obligations of states and political subdivisions
|
|
|
1,992
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$101.3 - $101.9
|
|
$
|
101.6
|
|
|||
|
|
|
206
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total obligations of states and political subdivisions
|
2,198
|
|
|
2,198
|
|
|
|
|
|
|
|
|
|
||||
Manufactured housing
|
|
|
515
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$89.3 - $92.4
|
|
$
|
91.0
|
|
|||
|
|
|
123
|
|
|
Single external source
|
|
External pricing source
|
|
$89.8 - $89.8
|
|
$
|
89.8
|
|
|||
Total manufactured housing
|
638
|
|
|
638
|
|
|
|
|
|
|
|
|
|
||||
Total available-for-sale mortgage-related securities
|
106,550
|
|
|
41,895
|
|
|
|
|
|
|
|
|
|
||||
Trading, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Freddie Mac
|
|
|
478
|
|
|
Discounted cash flows
|
|
OAS
|
|
(219) - 9,748 bps
|
|
169 bps
|
|
||||
|
|
|
320
|
|
|
Risk Metrics
|
|
Effective duration
|
|
1.78 - 2.30 years
|
|
2.27 years
|
|
||||
|
|
|
129
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Freddie Mac
|
17,469
|
|
|
927
|
|
|
|
|
|
|
|
|
|
||||
Fannie Mae
|
|
|
207
|
|
|
Discounted cash flows
|
|
OAS
|
|
(173) - 2,027 bps
|
|
204 bps
|
|
||||
|
|
|
25
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total Fannie Mae
|
6,099
|
|
|
232
|
|
|
|
|
|
|
|
|
|
||||
Ginnie Mae
|
16
|
|
|
1
|
|
|
|
|
|
|
|
|
|
||||
Other
|
|
|
3
|
|
|
Median of external sources
|
|
|
|
|
|
|
|||||
|
|
|
1
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||||
Total other
|
171
|
|
|
4
|
|
|
|
|
|
|
|
|
|
||||
Total trading mortgage-related securities
|
23,755
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
||||
Total investments in securities
|
$
|
130,305
|
|
|
$
|
43,059
|
|
|
|
|
|
|
|
|
|
||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Guarantee asset, at fair value
|
|
|
$
|
1,285
|
|
|
Discounted cash flows
|
|
OAS
|
|
17 - 202 bps
|
|
53 bps
|
|
|||
|
|
|
341
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$10.0 - $21.2
|
|
$
|
16.6
|
|
|||
Total guarantee asset, at fair value
|
$
|
1,626
|
|
|
1,626
|
|
|
|
|
|
|
|
|
|
|||
All other, at fair value
|
|
|
5
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total all other, at fair value
|
5
|
|
|
5
|
|
|
|
|
|
|
|
|
|
||||
Total other assets
|
1,631
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net derivatives
|
|
|
10
|
|
|
Other
|
|
|
|
|
|
|
|||||
Total net derivatives
|
1,141
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
315
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2015
|
||||||||||||||
|
Total
Fair
Value
|
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||||
(dollars in millions)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||||||
Non-recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage loans
|
$
|
15,165
|
|
|
$
|
5,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal model
|
|
Historical sales
proceeds |
|
$3,000 - $788,699
|
|
$191,957
|
||||
|
|
|
|
|
Internal model
|
|
Housing sales index
|
|
44 - 428 bps
|
|
90 bps
|
||||
|
|
|
|
|
|
Third-party appraisal
|
|
Property value
|
|
$1 million - $30 million
|
|
$28 million
|
|||
|
|
|
|
|
Income capitalization
(1)
|
|
Capitalization rates
|
|
6% - 9%
|
|
7%
|
||||
|
|
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$39.0 - $94.6
|
|
$70.0
|
||||
REO, net
|
$
|
1,046
|
|
|
$
|
1,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal model
|
|
Historical sales
proceeds
|
|
$3,000 - $581,751
|
|
$155,885
|
||||
|
|
|
|
|
Internal model
|
|
Housing sales index
|
|
44 - 428 bps
|
|
87 bps
|
||||
|
|
|
|
|
Other
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2014
|
||||||||||||||
|
Total
Fair
Value
|
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||||
(dollars in millions)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||||||
Non-recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage loans
|
$
|
8,962
|
|
|
$
|
8,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal model
|
|
Historical sales
proceeds |
|
$3,000 - $896,519
|
|
$162,556
|
||||
|
|
|
|
|
Internal model
|
|
Housing sales index
|
|
38 - 294 bps
|
|
82 bps
|
||||
|
|
|
|
|
Third-party appraisal
|
|
Property value
|
|
$11 million - $44 million
|
|
$31 million
|
||||
|
|
|
|
|
Income capitalization
(1)
|
|
Capitalization rates
|
|
6%- 9%
|
|
7%
|
||||
REO, net
|
$
|
1,665
|
|
|
$
|
1,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal model
|
|
Historical sales
proceeds
|
|
$3,008 - $896,519
|
|
$154,165
|
||||
|
|
|
|
|
Internal model
|
|
Housing sales index
|
|
38 - 294 bps
|
|
82 bps
|
(1)
|
The predominant valuation technique used for multifamily loans. Certain loans in this population are valued using other techniques, and the capitalization rate for those is not represented in the “Range” or “Weighted Average” above.
|
Freddie Mac 2015 Form 10-K
|
|
316
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2015
|
||||||||||||||||||||||
|
|
|
Fair Value
|
||||||||||||||||||||
(in millions)
|
GAAP Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
Adjustments
|
|
Total
|
||||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash
equivalents
|
$
|
5,595
|
|
|
$
|
5,595
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,595
|
|
Restricted cash and cash equivalents
|
14,533
|
|
|
14,533
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,533
|
|
||||||
Securities purchased under agreements to resell
|
63,644
|
|
|
—
|
|
|
63,644
|
|
|
—
|
|
|
—
|
|
|
63,644
|
|
||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Available-for-sale, at fair value
|
74,937
|
|
|
—
|
|
|
47,170
|
|
|
27,767
|
|
|
—
|
|
|
74,937
|
|
||||||
Trading, at fair value
|
39,278
|
|
|
17,151
|
|
|
21,753
|
|
|
374
|
|
|
—
|
|
|
39,278
|
|
||||||
Total investments in securities
|
114,215
|
|
|
17,151
|
|
|
68,923
|
|
|
28,141
|
|
|
—
|
|
|
114,215
|
|
||||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans held by consolidated trusts
|
1,625,184
|
|
|
—
|
|
|
1,477,251
|
|
|
162,947
|
|
|
—
|
|
|
1,640,198
|
|
||||||
Loans held by Freddie Mac
|
129,009
|
|
|
—
|
|
|
31,831
|
|
|
97,133
|
|
|
—
|
|
|
128,964
|
|
||||||
Total mortgage loans
|
1,754,193
|
|
|
—
|
|
|
1,509,082
|
|
|
260,080
|
|
|
—
|
|
|
1,769,162
|
|
||||||
Derivative assets, net
|
395
|
|
|
—
|
|
|
9,766
|
|
|
25
|
|
|
(9,396
|
)
|
|
395
|
|
||||||
Guarantee asset
|
1,753
|
|
|
—
|
|
|
—
|
|
|
1,958
|
|
|
—
|
|
|
1,958
|
|
||||||
Advances to lenders
|
910
|
|
|
—
|
|
|
910
|
|
|
—
|
|
|
—
|
|
|
910
|
|
||||||
Total financial assets
|
$
|
1,955,238
|
|
|
$
|
37,279
|
|
|
$
|
1,652,325
|
|
|
$
|
290,204
|
|
|
$
|
(9,396
|
)
|
|
$
|
1,970,412
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt, net:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt securities of consolidated trusts held by third parties
|
$
|
1,556,121
|
|
|
$
|
—
|
|
|
$
|
1,624,019
|
|
|
$
|
805
|
|
|
$
|
—
|
|
|
$
|
1,624,824
|
|
Other debt
|
414,306
|
|
|
—
|
|
|
412,752
|
|
|
6,586
|
|
|
—
|
|
|
419,338
|
|
||||||
Total debt, net
|
1,970,427
|
|
|
—
|
|
|
2,036,771
|
|
|
7,391
|
|
|
—
|
|
|
2,044,162
|
|
||||||
Derivative liabilities, net
|
1,254
|
|
|
—
|
|
|
12,378
|
|
|
33
|
|
|
(11,157
|
)
|
|
1,254
|
|
||||||
Guarantee obligation
|
1,729
|
|
|
—
|
|
|
—
|
|
|
3,129
|
|
|
—
|
|
|
3,129
|
|
||||||
Total financial liabilities
|
$
|
1,973,410
|
|
|
$
|
—
|
|
|
$
|
2,049,149
|
|
|
$
|
10,553
|
|
|
$
|
(11,157
|
)
|
|
$
|
2,048,545
|
|
Freddie Mac 2015 Form 10-K
|
|
317
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
December 31, 2014
|
||||||||||||||||||||||
|
|
|
Fair Value
|
||||||||||||||||||||
(in millions)
|
GAAP Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting Adjustments
|
|
Total
|
||||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash
equivalents
|
$
|
10,928
|
|
|
$
|
10,928
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,928
|
|
Restricted cash and cash equivalents
|
8,535
|
|
|
8,535
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,535
|
|
||||||
Securities purchased under agreements to resell
|
51,903
|
|
|
—
|
|
|
51,903
|
|
|
—
|
|
|
—
|
|
|
51,903
|
|
||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Available-for-sale, at fair value
|
106,550
|
|
|
—
|
|
|
64,655
|
|
|
41,895
|
|
|
—
|
|
|
106,550
|
|
||||||
Trading, at fair value
|
30,437
|
|
|
6,682
|
|
|
22,591
|
|
|
1,164
|
|
|
—
|
|
|
30,437
|
|
||||||
Total investments in securities
|
136,987
|
|
|
6,682
|
|
|
87,246
|
|
|
43,059
|
|
|
—
|
|
|
136,987
|
|
||||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans held by consolidated trusts
|
1,558,094
|
|
|
—
|
|
|
1,387,412
|
|
|
197,896
|
|
|
—
|
|
|
1,585,308
|
|
||||||
Loans held by Freddie Mac
|
142,486
|
|
|
—
|
|
|
22,305
|
|
|
119,157
|
|
|
—
|
|
|
141,462
|
|
||||||
Total mortgage loans
|
1,700,580
|
|
|
—
|
|
|
1,409,717
|
|
|
317,053
|
|
|
—
|
|
|
1,726,770
|
|
||||||
Derivative assets, net
|
822
|
|
|
5
|
|
|
9,912
|
|
|
27
|
|
|
(9,122
|
)
|
|
822
|
|
||||||
Guarantee asset
|
1,626
|
|
|
—
|
|
|
—
|
|
|
1,837
|
|
|
—
|
|
|
1,837
|
|
||||||
Total financial assets
|
$
|
1,911,381
|
|
|
$
|
26,150
|
|
|
$
|
1,558,778
|
|
|
$
|
361,976
|
|
|
$
|
(9,122
|
)
|
|
$
|
1,937,782
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Debt, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Debt securities of consolidated trusts held by third parties
|
$
|
1,479,473
|
|
|
$
|
—
|
|
|
$
|
1,521,508
|
|
|
$
|
1,364
|
|
|
$
|
—
|
|
|
$
|
1,522,872
|
|
Other debt
|
450,069
|
|
|
—
|
|
|
444,748
|
|
|
13,371
|
|
|
—
|
|
|
458,119
|
|
||||||
Total debt, net
|
1,929,542
|
|
|
—
|
|
|
1,966,256
|
|
|
14,735
|
|
|
—
|
|
|
1,980,991
|
|
||||||
Derivative liabilities, net
|
1,963
|
|
|
28
|
|
|
13,495
|
|
|
37
|
|
|
(11,597
|
)
|
|
1,963
|
|
||||||
Guarantee obligation
|
1,623
|
|
|
—
|
|
|
—
|
|
|
3,127
|
|
|
—
|
|
|
3,127
|
|
||||||
Total financial liabilities
|
$
|
1,933,128
|
|
|
$
|
28
|
|
|
$
|
1,979,751
|
|
|
$
|
17,899
|
|
|
$
|
(11,597
|
)
|
|
$
|
1,986,081
|
|
Freddie Mac 2015 Form 10-K
|
|
318
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
|
|
December 31,
|
||||||||||||||
|
|
2015
|
|
2014
|
||||||||||||
(in millions)
|
|
Multifamily
Held-For-Sale
Loans
|
|
Other Debt -
Long Term
|
|
Multifamily
Held-For-Sale
Loans
|
|
Other Debt -
Long Term
|
||||||||
Fair value
|
|
$
|
17,660
|
|
|
$
|
7,045
|
|
|
$
|
12,130
|
|
|
$
|
5,820
|
|
Unpaid principal balance
|
|
17,673
|
|
|
7,093
|
|
|
11,872
|
|
|
5,896
|
|
||||
Difference
|
|
$
|
(13
|
)
|
|
$
|
(48
|
)
|
|
$
|
258
|
|
|
$
|
(76
|
)
|
Freddie Mac 2015 Form 10-K
|
|
319
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2015 Form 10-K
|
|
320
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 15
|
Freddie Mac 2015 Form 10-K
|
|
321
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 15
|
Freddie Mac 2015 Form 10-K
|
|
322
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 15
|
Freddie Mac 2015 Form 10-K
|
|
323
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 15
|
Freddie Mac 2015 Form 10-K
|
|
324
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 15
|
Freddie Mac 2015 Form 10-K
|
|
325
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 16
|
(in millions)
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
GAAP net worth
|
|
$
|
2,940
|
|
|
$
|
2,651
|
|
Core capital (deficit)
(1)(2)
|
|
$
|
(70,549
|
)
|
|
$
|
(71,415
|
)
|
Less: Minimum capital requirement
(1)
|
|
19,687
|
|
|
20,090
|
|
||
Minimum capital surplus (deficit)
(1)
|
|
$
|
(90,236
|
)
|
|
$
|
(91,505
|
)
|
(1)
|
Core capital and minimum capital figures for
December 31, 2015
are estimates. FHFA is the authoritative source for our regulatory capital.
|
Freddie Mac 2015 Form 10-K
|
|
326
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 16
|
(2)
|
Core capital excludes certain components of GAAP total equity (i.e., AOCI and the liquidation preference of the senior preferred stock) as these items do not meet the statutory definition of core capital.
|
Freddie Mac 2015 Form 10-K
|
|
327
|
Financial Statements
|
|
Notes to the Consolidated Financial Statements | Note 17
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2015
|
|
2014
|
|
2013
|
||||||
Other income (loss):
|
|
|
|
|
|
||||||
Non-agency mortgage-related securities settlements
(1)
|
$
|
65
|
|
|
$
|
6,084
|
|
|
$
|
5,501
|
|
Gains (losses) on loans
|
(2,094
|
)
|
|
731
|
|
|
(336
|
)
|
|||
Other
|
1,150
|
|
|
1,229
|
|
|
1,485
|
|
|||
Total other income (loss)
|
$
|
(879
|
)
|
|
$
|
8,044
|
|
|
$
|
6,650
|
|
|
|
|
|
|
|
||||||
Other (expense) income:
|
|
|
|
|
|
||||||
Property tax and insurance expense on held-for-sale loans
|
$
|
(1,094
|
)
|
|
$
|
(62
|
)
|
|
$
|
—
|
|
Other (expense) income
|
(412
|
)
|
|
(176
|
)
|
|
109
|
|
|||
Total other (expense) income
|
$
|
(1,506
|
)
|
|
$
|
(238
|
)
|
|
$
|
109
|
|
(1)
|
Settlement agreements primarily related to lawsuits regarding our investments in certain non-agency mortgage-related securities and were a significant component of other income in 2014 and 2013.
|
(in millions)
|
December 31, 2015
|
|
December 31, 2014
|
||||
Other assets:
|
|
|
|
||||
Accounts and other receivables
(1)
|
$
|
3,625
|
|
|
$
|
3,899
|
|
Current income tax receivable
|
26
|
|
|
1,048
|
|
||
Guarantee asset
|
1,753
|
|
|
1,626
|
|
||
Advances to lenders
|
910
|
|
|
—
|
|
||
All other
|
1,157
|
|
|
1,121
|
|
||
Total other assets
|
$
|
7,471
|
|
|
$
|
7,694
|
|
Other liabilities:
|
|
|
|
||||
Servicer liabilities
|
$
|
1,191
|
|
|
$
|
1,847
|
|
Guarantee obligation
|
1,729
|
|
|
1,623
|
|
||
Accounts payable and accrued expenses
|
1,286
|
|
|
803
|
|
||
All other
|
1,040
|
|
|
785
|
|
||
Total other liabilities
|
$
|
5,246
|
|
|
$
|
5,058
|
|
(1)
|
Primarily consists of servicer receivables and other non-interest receivables.
|
Freddie Mac 2015 Form 10-K
|
|
328
|
Quarterly Selected Financial Data
|
|
2015
|
||||||||||||||||||
(in millions, except share-related amounts)
|
1Q
|
|
2Q
|
|
3Q
|
|
4Q
|
|
Full-Year
|
||||||||||
Net interest income
|
$
|
3,647
|
|
|
$
|
3,969
|
|
|
$
|
3,743
|
|
|
$
|
3,587
|
|
|
$
|
14,946
|
|
Benefit (provision) for credit losses
|
499
|
|
|
857
|
|
|
528
|
|
|
781
|
|
|
2,665
|
|
|||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative gains (losses)
|
(2,403
|
)
|
|
3,135
|
|
|
(4,172
|
)
|
|
744
|
|
|
(2,696
|
)
|
|||||
Net impairments of available-for-sale securities recognized in earnings
|
(93
|
)
|
|
(98
|
)
|
|
(54
|
)
|
|
(47
|
)
|
|
(292
|
)
|
|||||
Other non-interest income (loss)
|
349
|
|
|
(496
|
)
|
|
385
|
|
|
(849
|
)
|
|
(611
|
)
|
|||||
Non-interest income (loss)
|
(2,147
|
)
|
|
2,541
|
|
|
(3,841
|
)
|
|
(152
|
)
|
|
(3,599
|
)
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
||||||||||
Administrative expense
|
(451
|
)
|
|
(501
|
)
|
|
(465
|
)
|
|
(510
|
)
|
|
(1,927
|
)
|
|||||
REO operations income (expense)
|
(75
|
)
|
|
(52
|
)
|
|
(116
|
)
|
|
(95
|
)
|
|
(338
|
)
|
|||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
(222
|
)
|
|
(235
|
)
|
|
(248
|
)
|
|
(262
|
)
|
|
(967
|
)
|
|||||
Other non-interest expense
|
(463
|
)
|
|
(501
|
)
|
|
(270
|
)
|
|
(272
|
)
|
|
(1,506
|
)
|
|||||
Non-interest expense
|
(1,211
|
)
|
|
(1,289
|
)
|
|
(1,099
|
)
|
|
(1,139
|
)
|
|
(4,738
|
)
|
|||||
Income tax (expense) benefit
|
(264
|
)
|
|
(1,909
|
)
|
|
194
|
|
|
(919
|
)
|
|
(2,898
|
)
|
|||||
Net income (loss)
|
$
|
524
|
|
|
$
|
4,169
|
|
|
$
|
(475
|
)
|
|
$
|
2,158
|
|
|
$
|
6,376
|
|
Total other comprehensive income (loss), net of taxes
|
$
|
222
|
|
|
$
|
(256
|
)
|
|
$
|
(26
|
)
|
|
$
|
(517
|
)
|
|
$
|
(577
|
)
|
Comprehensive income (loss)
|
$
|
746
|
|
|
$
|
3,913
|
|
|
$
|
(501
|
)
|
|
$
|
1,641
|
|
|
$
|
5,799
|
|
Income (loss) attributable to common stockholders
|
$
|
(222
|
)
|
|
$
|
256
|
|
|
$
|
(475
|
)
|
|
$
|
418
|
|
|
$
|
(23
|
)
|
Income (loss) per common share – basic and diluted
(1)
|
$
|
(0.07
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.15
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
Freddie Mac 2015 Form 10-K
|
|
329
|
Quarterly Selected Financial Data
|
|
2014
|
||||||||||||||||||
(in millions, except share-related amounts)
|
1Q
|
|
2Q
|
|
3Q
|
|
4Q
|
|
Full-Year
|
||||||||||
|
|
||||||||||||||||||
Net interest income
|
$
|
3,510
|
|
|
$
|
3,503
|
|
|
$
|
3,663
|
|
|
$
|
3,587
|
|
|
$
|
14,263
|
|
Benefit (provision) for credit losses
|
(85
|
)
|
|
618
|
|
|
(574
|
)
|
|
(17
|
)
|
|
(58
|
)
|
|||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Derivative gains (losses)
|
(2,351
|
)
|
|
(1,926
|
)
|
|
(617
|
)
|
|
(3,397
|
)
|
|
(8,291
|
)
|
|||||
Net impairments of available-for-sale securities recognized in earnings
|
(364
|
)
|
|
(157
|
)
|
|
(166
|
)
|
|
(251
|
)
|
|
(938
|
)
|
|||||
Other non-interest income
|
5,826
|
|
|
677
|
|
|
1,547
|
|
|
1,066
|
|
|
9,116
|
|
|||||
Non-interest income (loss)
|
3,111
|
|
|
(1,406
|
)
|
|
764
|
|
|
(2,582
|
)
|
|
(113
|
)
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
||||||||||
Administrative expenses
|
(468
|
)
|
|
(453
|
)
|
|
(472
|
)
|
|
(488
|
)
|
|
(1,881
|
)
|
|||||
REO operations income (expense)
|
(59
|
)
|
|
50
|
|
|
(103
|
)
|
|
(84
|
)
|
|
(196
|
)
|
|||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
(178
|
)
|
|
(187
|
)
|
|
(198
|
)
|
|
(212
|
)
|
|
(775
|
)
|
|||||
Other non-interest expense
|
(66
|
)
|
|
(90
|
)
|
|
(43
|
)
|
|
(39
|
)
|
|
(238
|
)
|
|||||
Non-interest expense
|
(771
|
)
|
|
(680
|
)
|
|
(816
|
)
|
|
(823
|
)
|
|
(3,090
|
)
|
|||||
Income tax (expense) benefit
|
(1,745
|
)
|
|
(673
|
)
|
|
(956
|
)
|
|
62
|
|
|
(3,312
|
)
|
|||||
Net income
|
$
|
4,020
|
|
|
$
|
1,362
|
|
|
$
|
2,081
|
|
|
$
|
227
|
|
|
$
|
7,690
|
|
Total other comprehensive income, net of taxes
|
$
|
479
|
|
|
$
|
528
|
|
|
$
|
705
|
|
|
$
|
24
|
|
|
$
|
1,736
|
|
Comprehensive income
|
$
|
4,499
|
|
|
$
|
1,890
|
|
|
$
|
2,786
|
|
|
$
|
251
|
|
|
$
|
9,426
|
|
Income (loss) attributable to common stockholders
|
$
|
(479
|
)
|
|
$
|
(528
|
)
|
|
$
|
(705
|
)
|
|
$
|
(624
|
)
|
|
$
|
(2,336
|
)
|
Income (loss) per common share – basic and diluted
(1)
|
$
|
(0.15
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.72
|
)
|
(1)
|
Earnings (loss) per common share is computed independently for each of the quarters presented. Due to the use of weighted average common shares outstanding when calculating earnings (loss) per share, the sum of the four quarters may not equal the full-year amount. Earnings (loss) per common share amounts may not recalculate using the amounts shown in this table due to rounding.
|
Freddie Mac 2015 Form 10-K
|
|
330
|
Controls and Procedures
|
|
|
Freddie Mac 2015 Form 10-K
|
|
331
|
Controls and Procedures
|
|
|
Freddie Mac 2015 Form 10-K
|
|
332
|
Controls and Procedures
|
|
|
•
|
FHFA has established the Division of Conservatorship, which is intended to facilitate operation of the company with the oversight of the Conservator.
|
•
|
We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also provide drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release.
|
•
|
FHFA personnel, including senior officials, review our SEC filings prior to filing, including this Form 10-K, and engage in discussions with us regarding issues associated with the information contained in those filings. Prior to filing this Form 10-K, FHFA provided us with a written acknowledgment that it had reviewed the Form 10-K, was not aware of any material misstatements or omissions in the Form 10-K, and had no objection to our filing the Form 10-K.
|
•
|
The Director of FHFA is in frequent communication with our Chief Executive Officer, typically meeting (in person or by phone) on at least a bi-weekly basis.
|
•
|
FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and capital markets management, external communications, and legal matters.
|
•
|
Senior officials within FHFA’s accounting group meet frequently with our senior financial executives regarding our accounting policies, practices, and procedures.
|
Freddie Mac 2015 Form 10-K
|
|
333
|
Controls and Procedures
|
|
|
Freddie Mac 2015 Form 10-K
|
|
334
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Freddie Mac 2015 Form 10-K
|
|
335
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Freddie Mac 2015 Form 10-K
|
|
336
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Raphael W. Bostic
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
49
|
Compensation
|
None
|
Director Since:
January 2015
|
Risk
|
|
|
|
|
•
|
Chair, Department on Governance, Management, and the Policy Process at the Sol Price School of Public Policy at the University of Southern California (2015-present); Bedrosian Chair in Governance and Public Enterprise at the Sol Price School of Public Policy at the University of Southern California (2012-2015)
|
•
|
Assistant Secretary for Policy Development and Research at HUD (2009-2012)
|
•
|
Various positions at the University of Southern California, including Professor at the School of Policy, Planning and Development (2001-2009)
|
•
|
Trustee of Enterprise Community Partners (2012-present)
|
•
|
Member of the Board of the Lincoln Institute of Land Policy (2013-present)
|
•
|
Advisory Board member of the National Community Stabilization Trust (2012-2015)
|
Carolyn H. Byrd
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
67
|
Audit, Chair
|
Popeyes Louisiana
|
Director Since:
December 2008
|
Compensation
|
Kitchen, Inc.
|
|
Executive
|
Regions Financial
|
|
|
Corporation
|
•
|
Founder, Chairman, and Chief Executive Officer of GlobalTech Financial, LLC (2000-present)
|
•
|
President of Coca-Cola Financial Corporation (1997-2000)
|
•
|
Various domestic and international positions with The Coca-Cola Company, including Chief of Internal Audits and Director of the Corporate Auditing Department (1977-1997)
|
•
|
Member of the Board, Audit Committee and Executive Committee and Chair of the Corporate Governance and Nominating Committee of Popeyes Louisiana Kitchen, Inc. (2001-present)
|
•
|
Member of the Board and Risk Committee and Chair of the Audit Committee of Regions Financial Corporation (2010-present)
|
•
|
Member of the Board and Audit Committee of Circuit City Stores, Inc. (2000-2009)
|
•
|
Member of the Board and Audit Committee of RARE Hospitality International, Inc. (2000-2007)
|
Freddie Mac 2015 Form 10-K
|
|
337
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Lance F. Drummond
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
61
|
Audit
|
None
|
Director Since:
July 2015
|
Nominating & Governance
|
|
|
|
|
•
|
Executive Vice President of Operations and Technology of TD Canada Trust (2011-2014)
|
•
|
Executive Vice President of Human Resources and Shared Services of Fiserv Inc. (2009-2011)
|
•
|
Senior Vice President and Supply Chain Executive, Service and Fulfillment Executive for Global Technology and Operations, and eCommerce and ATM Executive of Bank of America (2002-2008)
|
•
|
Various positions with Eastman Kodak Company, including Chief Operating Officer and Corporate Vice President of Kodak Professional Division (1976-2002)
|
Thomas M. Goldstein
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
56
|
Audit
|
None
|
Director Since:
October 2014
|
Nominating & Governance
|
|
|
|
|
•
|
Senior Vice President and Chief Financial Officer of the Protection Division of Allstate Insurance Company (2011-2014)
|
•
|
Consultant to the financial services industry, pursuing community bank acquisitions with The GRG Group LLC (2009-2011)
|
•
|
Managing Director and Chief Financial Officer of Madison Dearborn Partners (2007-2009)
|
•
|
Various executive and finance positions for LaSalle Bank Corporation, including Chairman, Chief Executive Officer, and President of ABN AMRO Mortgage Group and Chief Financial Officer of LaSalle Bank Corporation (1998-2007)
|
•
|
Various positions with Morgan Stanley Dean Witter, including Senior Vice President and Head of Risk Management and Financial Planning and Analysis of Novus Financial as well as Vice President and Head of Finance, Risk Management, Model Development, and Investor Relations of SPS Transaction Services (1988-1998)
|
•
|
Member of the Board of the FHLB of Chicago (2009-2014)
|
•
|
Member of the Board of various Allstate subsidiaries (2011-2014)
|
Freddie Mac 2015 Form 10-K
|
|
338
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Richard C. Hartnack
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
70
|
Executive
|
Synchrony Financial
|
Director Since:
May 2013
|
Nominating & Governance,
|
|
|
Chair
|
|
|
Risk
|
|
•
|
Vice Chairman and Head of Consumer and Small Business Banking of U.S. Bancorp (2005-2013)
|
•
|
Vice Chairman, Director, and Head of the Community Banking Group of Union Bank of California (1991-2005)
|
•
|
Various positions with First Chicago Corporation, including Executive Vice President and Head of Community Banking (1982-1991)
|
•
|
Various positions with First Interstate Bank of Oregon, including Head of Corporate Banking (1971-1982)
|
•
|
Non-Executive Chairman of the Board, Chair of Management Development and Compensation Committee, and Former Chair of Audit Committee of Synchrony Financial (2014-present)
|
•
|
Non-Executive Chairman of the Board of Synchrony Bank, a wholly owned subsidiary of Synchrony Financial (2014-present)
|
•
|
Member of the Board of U.S. Bank, a wholly owned subsidiary of U.S. Bancorp (2005-2013)
|
•
|
Member of the Board of the Federal Reserve Bank of San Francisco (2001-2005)
|
•
|
Member of the Board of MasterCard International (U.S. Region) (1994-2005)
|
•
|
Member of the Board of UnionBanCal Corporation (1991-2005)
|
•
|
Chairman of the California Bankers Association (2002-2003)
|
•
|
Chairman of the Bank Administration Institute (1998-1999)
|
Steven W. Kohlhagen
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
68
|
Compensation
|
AMETEK, Inc.
|
Director Since:
February 2013
|
Executive
|
GulfMark Offshore, Inc.
|
|
Risk, Chair
|
|
•
|
Various positions with First Union National Bank (predecessor to Wachovia National Bank and Wells Fargo), last serving as Managing Director of the Fixed Income Division (1992-2003)
|
•
|
Various positions with AIG Financial Products (1990-1992); Stamford Capital Group (1987-1990); Bankers Trust Corporation (1985-1987); and Lehman Brothers, Inc. (1983-1985)
|
Freddie Mac 2015 Form 10-K
|
|
339
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
•
|
Consulting work for the Organization for Economic Cooperation and Development (1980-1981), Treasury (1976-1977), and the Federal Reserve Board (1976)
|
•
|
Senior Staff Economist for the Council of Economic Advisors, White House Staff (1978-1979)
|
•
|
Professor of International Economics and Finance at the University of California, Berkeley (1973-1983)
|
•
|
Member of the Board and Audit Committee of AMETEK, Inc. (2006-present)
|
•
|
Member of the Board, Audit Committee, and Compensation Committee of GulfMark Offshore, Inc. (2013-present)
|
•
|
Member of the Board and Compensation Committee and Chair of the Governance and Nominating Committee of Reval, Inc. (2007-present)
|
•
|
Member of the Board and Audit Committee of Abtech Holdings, Inc. (2013-2014)
|
•
|
Advisory Board member of the Stanford Institute for Economic Policy Research (2001-present)
|
•
|
Advisory Board member of the Roper St. Francis Cancer Center (2011-present)
|
•
|
Member of the Board of IQ Mutual Funds, a family of Merrill Lynch registered, closed end investment companies (2005-2010)
|
Donald H. Layton
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
65
|
Executive
|
None
|
Director Since:
May 2012
|
|
|
|
|
|
•
|
Chief Executive Officer of Freddie Mac (2012-present)
|
•
|
Chairman of E*TRADE Financial (2007-2009); Chief Executive Officer (2008-2009)
|
•
|
Senior Advisor to the Securities Industry and Financial Markets Association (2006-2008)
|
•
|
Various positions with JP Morgan Chase and its predecessors, beginning as a trainee and rising to Vice Chairman and a member of the company’s three-person Office of the Chairman (1975-2004); positions included Head of Chase Financial Services (2002-2004); Co-Chief Executive Officer of J.P. Morgan, the investment bank of the company (2000-2002); Head of Treasury and Securities Services (1999-2004); and Head of Chase Manhattan’s worldwide capital markets and trading activities, including foreign exchange, risk management products, emerging markets, fixed income, and the bank’s investment portfolio and funding department (1996 to 2000; prior to Chase’s merger with J.P. Morgan)
|
•
|
Chairman Emeritus of the Partnership for the Homeless (2015-present); Chairman of the Board (2005-2015)
|
•
|
Member of the Board of Assured Guaranty Ltd. (2006-2012)
|
•
|
Member of the Board of American International Group (2010-2012)
|
Freddie Mac 2015 Form 10-K
|
|
340
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
Christopher S. Lynch
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
58
|
Executive, Chair
|
American International
|
Director Since:
December 2008
|
|
Group Inc.
|
|
|
|
•
|
Independent consultant providing a variety of services to financial intermediaries, including corporate restructuring, risk management, strategy, governance, financial and regulatory reporting, and troubled-asset management (2007-present)
|
•
|
Various positions with KPMG LLP, including National Partner in Charge - Financial Services, the U.S. firm’s largest industry division; Chairman of KPMG’s Americas Financial Services Leadership team; Member of the Global Financial Services Leadership and the U.S. Industries Leadership teams; Head of the Banking & Finance practice; and Department of Professional Practice partner (1979-2007)
|
•
|
Practice Fellow at the FASB (1987-1989)
|
•
|
Non-Executive Chairman of the Board of Freddie Mac (2011-present)
|
•
|
Member of the Board and Risk and Capital Committee and current member and former Chair of the Audit Committee of American International Group (2009-present)
|
•
|
Advisory Board member of the Stanford Institute for Economic Policy Research (2014-present)
|
•
|
Member of the National Audit Committee Chair Advisory Council of the National Association of Corporate Directors (2014-present)
|
Sara Mathew
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
60
|
Audit
|
Avon Products, Inc.
|
Director Since:
December 2013
|
Nominating & Governance
|
Campbell Soup Company
|
|
|
Shire plc
|
•
|
Various positions with Dun & Bradstreet Corporation (2001-2013), including Chairman, President, and Chief Executive Officer (2010-2013) and President and Chief Operating Officer (2007-2010)
|
•
|
Various finance and management positions with The Procter & Gamble Company, including Vice President of Finance for Australia, Asia, and India (1983-2001)
|
Freddie Mac 2015 Form 10-K
|
|
341
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
•
|
Member of the Board, Finance Committee, and Nominating and Corporate Governance Committee of Avon Products, Inc. (2014-present)
|
•
|
Member of the Board and Governance Committee and Chair of the Audit Committee of Campbell Soup Company (2005-present)
|
•
|
Member of the Board, Audit Committee and Remuneration Committee of Shire plc (2015-present)
|
•
|
Member of the Board and Audit Committee of Dun & Bradstreet Corporation (2008-2013)
|
•
|
Member of the International Advisory Council of Zurich Financial Services Group (2012-present)
|
Saiyid T. Naqvi
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
66
|
Compensation
|
None
|
Director Since:
August 2013
|
Risk
|
|
|
|
|
•
|
President and Chief Executive Officer of PNC Mortgage, a division of PNC Bank, National Association, which is a subsidiary of PNC Financial Services Group (2009-2013)
|
•
|
President of Harley-Davidson Financial Services, Inc. (2007-2009)
|
•
|
Chief Executive Officer of DeepGreen Financial, Inc. (2005-2006)
|
•
|
President and Chief Financial Officer of Setara Corporation (2002-2005)
|
•
|
President and Chief Executive Officer of PNC Mortgage Corporation of America (1995-2001)
|
•
|
Member of the Board of Genworth Financial (2005-2009)
|
•
|
Member of the Board of Hanover Mortgage Capital Holdings, Inc. (1998-2006)
|
Nicolas P. Retsinas
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
69
|
Audit
|
None
|
Director Since:
June 2007
|
Compensation, Chair
|
|
|
Executive
|
|
•
|
Senior Lecturer in Real Estate at the Harvard Business School (2006-2015)
|
•
|
Lecturer in Housing Studies at the Harvard Graduate School of Design (1998-2015)
|
•
|
Assistant Secretary for Housing - Federal Housing Commissioner at HUD (1993-1998)
|
•
|
Director of the Office of Thrift Supervision (1996-1997)
|
•
|
Member of the Board of the Center for Responsible Lending (2006-present)
|
Freddie Mac 2015 Form 10-K
|
|
342
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
•
|
Chair of Community Development Trust (2014-present); Member of the Board (1999-present)
|
•
|
Director Emeritus of Harvard University’s Joint Center for Housing Studies (2010-present); Director (1998-2010)
|
•
|
Chair of Providence Housing Authority (2013-present)
|
•
|
Trustee of Enterprise Community Partners (1999-2013)
|
•
|
Member of the Board of the Federal Deposit Insurance Corporation (1996-1997)
|
•
|
Member of the Board of the Federal Housing Finance Board (1993-1998)
|
•
|
Trustee of the National Housing Endowment (1998-2012)
|
•
|
Member of the Board of the Neighborhood Reinvestment Corporation (1993-1998)
|
•
|
Chair of Rhode Island Housing and Mortgage Finance Corporation (2015-present)
|
Eugene B. Shanks, Jr.
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
68
|
Audit
|
ACE Limited
|
Director Since:
December 2008
|
Compensation
|
|
|
|
|
•
|
Senior consultant to Trinsum Group, Incorporated (2007-2008)
|
•
|
Founder, President, and Chief Executive Officer of NetRisk, Inc. (1997-2002)
|
•
|
Various positions with Bankers Trust New York Corporation, including Head of Global Markets and President and Director (1973-1978 and 1980-1995)
|
•
|
Treasurer of Commerce Union Bank in Nashville, Tennessee (1978-1980)
|
•
|
Member of the Board and Risk and Finance Committee of ACE Limited (2011-present)
|
•
|
Advisory Board member of the Stanford Institute for Economic Policy Research (2010-present)
|
•
|
Senior Advisor of Bain and Company (2008-2011)
|
•
|
Founding Director of The Posse Foundation (1992-present)
|
•
|
Trustee Emeritus of Vanderbilt University (2015-present), Trustee (1992-2015)
|
Anthony A. Williams
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
64
|
Nominating & Governance
|
None
|
Director Since:
December 2008
|
Risk
|
|
|
|
|
•
|
Chief Executive Officer and Executive Director of Federal City Council (2012-present)
|
Freddie Mac 2015 Form 10-K
|
|
343
|
Directors, Corporate Governance, and Executive Officers
|
|
Directors
|
•
|
Senior Advisor at Dentons (2015-present)
|
•
|
Senior Advisor at McKenna, Long & Aldridge, LLP (2013-2015)
|
•
|
Senior Fellow (2012) and Executive Director of Global Government Practice (2010-2012) of the Corporate Executive Board Company
|
•
|
Bloomberg Lecturer in Public Management at Harvard’s Kennedy School of Government (2009-2012)
|
•
|
Senior Advisor, Intergovernmental Practice at Arent Fox LLP (2009-2010)
|
•
|
CEO of Primum Public Realty Trust (2007-2008)
|
•
|
Mayor of Washington, DC (1999-2007)
|
•
|
Chief Financial Officer of Washington, DC (1995-1998)
|
•
|
President of the National League of Cities (2005)
|
•
|
Vice-Chair of the Metropolitan Washington Council of Governments (2005-2006)
|
•
|
Chief Financial Officer for the U.S. Department of Agriculture (1993-1995)
|
•
|
Deputy State Comptroller of Connecticut (1991-1993)
|
•
|
Executive Director of the Community Development Agency of St. Louis, Missouri (1989-1991)
|
•
|
Assistant Director of the Boston Redevelopment Agency and Head of the Department of Neighborhood Housing and Development (1988-1989)
|
•
|
Member of the Board of the Bank of Georgetown (2012-present)
|
•
|
Member of the Board and Audit Committee of Calvert Sage Fund (2010-present)
|
•
|
Member of the Board and Audit Committee of Weston Solutions (2008-2015)
|
•
|
Member of the Board and Audit Committee of Meruelo Maddox Properties, Inc. (2007-2009)
|
Freddie Mac 2015 Form 10-K
|
|
344
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
|
Our Board has an independent Non-Executive Chairman, whose responsibilities include presiding over meetings of the Board and executive sessions of the non-employee or independent directors. Mr. Lynch has served as Non-Executive Chairman since December 2011.
|
|
Of the Board’s 13 directors, 12 are independent, including the Non-Executive Chairman.
|
|
Our directors are re-elected annually by FHFA.
|
|
Each of the Audit, Compensation, Nominating and Governance, and Risk Committees consists entirely of independent directors.
|
|
Each of the committees operates pursuant to a written charter that has been approved by the Board (these charters are available at www.freddiemac.com/governance/bd_committees.html).
|
|
Independent directors meet regularly without management.
|
|
The Board and each committee conduct an annual self-evaluation.
|
|
New directors receive a full orientation regarding the company and issues specific to the committees to which they have been appointed.
|
|
All directors are provided with access to, and are encouraged to utilize, third party continuing education.
|
|
Management provides the Board and committees with in-depth technical briefings on substantive issues affecting the company.
|
|
The Board reviews management talent and succession at least annually.
|
Freddie Mac 2015 Form 10-K
|
|
345
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
Board Memberships With Business Partners.
During 2015 and currently, Ms. Byrd and Messrs. Bostic, Lynch, Retsinas, Shanks, and Williams have served as directors of other companies that engage or have engaged in business with us resulting in payments between us and such companies during the past three fiscal years. After considering the nature and extent of the specific relationship between each of those companies and us, and the fact that these Board members are directors of these other companies rather than employees, our non-employee Board members concluded that those business relationships do not constitute material relationships between any of the directors and us that would impair their independence as our directors.
|
•
|
Board Memberships With Charitable Organizations To Which We Have Made Payments.
During 2015 and currently, Mr. Bostic has served as a board member of two charitable organizations that received payments from us. Under the Guidelines, no specific independence determination is required with respect to these payments because they do not exceed the greater of $1 million or 2% of the organization’s consolidated gross revenues for each of the last three fiscal years. During 2015 and currently, Mr. Retsinas has served as Director Emeritus of a charitable organization that received payments from us. Because the total annual amount paid to the charitable organization did not exceed the greater of $1 million or 2% of the organization’s consolidated gross revenues for each of the last three fiscal years, no specific independence determination with respect to these payments is required under our Guidelines; moreover, since Mr. Retsinas is neither a board member nor a trustee of the charitable organization, the payments would not require an independence determination in any event. The non-employee members of the Board considered the payments and the nature of the organizations and concluded that the relationships with the charitable organizations do not constitute a material relationship between Mr. Bostic or Mr. Retsinas and us that would impair their independence as our directors.
|
•
|
Financial Relationships with For-Profit Business Partners.
Mr. Hartnack owns stock of US Bancorp. In the aggregate, this stock represents a material portion of his net worth. US Bancorp conducts significant business with Freddie Mac, including as a single-family seller/servicer and as trustee of some of Freddie Mac’s securitization transactions. In order to eliminate any potential conflict of interest that might arise as a result of this stock ownership, Mr. Hartnack has agreed to recuse himself from discussing and acting upon any matters that are to be considered by the full Board or any of the committees of which he is a member, and that relate directly to US Bancorp. The Audit
|
Freddie Mac 2015 Form 10-K
|
|
346
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
Matters requiring the approval of or consultation with Treasury under the covenants of the Purchase Agreement (see “MD&A — Conservatorship and Related Matters — Treasury Agreements and Senior Preferred Stock” and Note 2);
|
Freddie Mac 2015 Form 10-K
|
|
347
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
Redemptions or repurchases of subordinated debt, except as necessary to comply with the debt limit in the Purchase Agreement;
|
•
|
Increases in Board risk limits, material changes in accounting policy, and reasonably foreseeable material increases in operational risk;
|
•
|
Matters that relate to the Conservator’s powers, the status of Freddie Mac in conservatorship, or the legal effect of the conservatorship on contracts, such as, but not limited to, the initiation of material actions in connection with litigation addressing the actions or authority of the Conservator, repudiation of contracts, qualified financial contracts in dispute due to conservatorship status, and counterparties attempting to nullify or amend contracts due to conservatorship status;
|
•
|
Retention and termination of external auditors and law firms serving as consultants to the Board;
|
•
|
Agreements relating to litigation, claims, regulatory proceedings, or tax-related matters where the value of the claim is in excess of $50 million, including related matters that aggregate to more than $50 million (but excluding loan workouts);
|
•
|
Alterations or changes to the terms of any master agreement between us and any of our top five single-family sellers or servicers that are not otherwise mandated by FHFA and that will alter, in a material way, the business relationship between the parties;
|
•
|
Termination of a contract (other than by expiration pursuant to its terms) between us and any of our top five single-family sellers or servicers;
|
•
|
Actions that, in the reasonable business judgment of management at the time that the action is to be taken, are likely to cause significant reputational risk to us or result in substantial negative publicity;
|
•
|
Creation of any subsidiary or affiliate, or entering into a substantial transaction with a subsidiary or affiliate, except for the creation of, or a transaction with, a subsidiary or affiliate undertaken in the ordinary course of business (e.g., creation of a securitization trust or REMIC);
|
•
|
Servicing transfers of 25,000 loans or more;
|
•
|
Setting or increasing the compensation or benefits payable to directors;
|
•
|
Entering into new compensation arrangements or increasing amounts or benefits payable under existing compensation arrangements for senior vice presidents and above and other officers as FHFA may deem necessary to successfully execute its role as Conservator;
|
•
|
Any establishment or modification by us of performance management processes for such officers, including the establishment or modification of a Conservator scorecard; and
|
•
|
Establishing the annual operating budget.
|
Freddie Mac 2015 Form 10-K
|
|
348
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Audit Committee
|
Chair:
|
Members:
|
|
Carolyn H. Byrd
|
Lance F. Drummond
|
|
|
Thomas M. Goldstein
|
|
|
Sara Mathew
|
|
|
Nicolas P. Retsinas
|
|
|
Eugene B. Shanks, Jr.
|
Executive Committee
|
Chair:
|
Members:
|
|
Christopher S. Lynch
|
Carolyn H. Byrd
|
|
|
Richard C. Hartnack
|
|
|
Steven W. Kohlhagen
|
|
|
Donald H. Layton
|
|
|
Nicolas P. Retsinas
|
Freddie Mac 2015 Form 10-K
|
|
349
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Compensation Committee
|
Chair:
|
Members:
|
Nicolas P. Retsinas
|
Raphael W. Bostic
|
|
|
|
Carolyn H. Byrd
|
|
|
Steven W. Kohlhagen
|
|
|
Saiyid T. Naqvi
|
|
|
Eugene B. Shanks, Jr.
|
Nominating and Governance Committee
|
Chair:
|
Members:
|
Richard C. Hartnack
|
Lance F. Drummond
|
|
|
|
Thomas M. Goldstein
|
|
|
Sara Mathew
|
|
|
Anthony A. Williams
|
Risk Committee
|
Chair:
|
Members:
|
|
Steven W. Kohlhagen
|
Raphael W. Bostic
|
|
|
Richard C. Hartnack
|
|
|
Saiyid T. Naqvi
|
|
|
Anthony A. Williams
|
Freddie Mac 2015 Form 10-K
|
|
350
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Freddie Mac 2015 Form 10-K
|
|
351
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Board Service
(Cash)
|
|
||
Annual Retainer for Non-Executive Chairman
|
$
|
290,000
|
|
Annual Retainer for Directors (other than the Non-Executive Chairman)
|
160,000
|
|
|
Committee Service
(Cash)
|
|
||
Annual Retainer for Audit Committee Chair
|
$
|
25,000
|
|
Annual Retainer for Risk Committee Chair
|
15,000
|
|
|
Annual Retainer for Committee Chairs (other than Audit or Risk)
|
10,000
|
|
|
Annual Retainer for Audit Committee Members
|
10,000
|
|
Name
|
Fees Earned or
Paid in Cash
(3)
|
|
|
|
Total
|
||||
C. Lynch
(1)
|
$
|
292,167
|
|
|
|
|
$
|
292,167
|
|
R. Bostic
(2)
|
157,778
|
|
|
|
|
157,778
|
|
||
C. Byrd
|
185,000
|
|
|
|
|
185,000
|
|
||
L. Drummond
(2)
|
79,375
|
|
|
|
|
79,375
|
|
||
T. Goldstein
|
170,000
|
|
|
|
|
170,000
|
|
||
R. Hartnack
|
170,000
|
|
|
|
|
170,000
|
|
||
S. Kohlhagen
|
175,000
|
|
|
|
|
175,000
|
|
||
S. Mathew
|
170,000
|
|
|
|
|
170,000
|
|
||
S. Naqvi
|
160,000
|
|
|
|
|
160,000
|
|
||
N. Retsinas
|
160,000
|
|
|
|
|
160,000
|
|
||
E. Shanks, Jr.
(1)
|
177,833
|
|
|
|
|
177,833
|
|
||
A. Williams
(1)
|
172,167
|
|
|
|
|
172,167
|
|
(1)
|
In addition to the annual Board service and appropriate Committee Chair retainers, the amount represents partial annual compensation for the period served on the Audit Committee during 2015. In March 2015, Mr. Lynch and Mr. Williams left, and Mr. Shanks joined, the Audit Committee.
|
(2)
|
The amount represents partial annual compensation for the period served during 2015. Mr. Bostic joined the Board in January 2015. Mr. Drummond joined the Board in July 2015. The amount of Mr. Drummond's compensation includes partial annual compensation for the period he served on the Audit Committee during 2015.
|
(3)
|
Because we do not have pension or retirement plans for our non-employee directors and all compensation is paid in cash, “Change in Pension Value and Non-qualified Deferred Compensation Earnings” and “All Other Compensation” columns have been omitted.
|
Freddie Mac 2015 Form 10-K
|
|
352
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
Donald H. Layton
|
Position:
|
Age:
65
|
Chief Executive Officer
|
Year of Affiliation:
2012
|
|
James G. Mackey
|
Position:
|
Age:
48
|
Executive Vice President - Chief Financial Officer
|
Year of Affiliation:
2013
|
|
David M. Brickman
|
Position:
|
Age:
50
|
Executive Vice President - Multifamily
|
Year of Affiliation:
1999
|
|
Anil D. Hinduja
|
Position:
|
Age:
52
|
Executive Vice President - Chief Enterprise Risk
|
Year of Affiliation:
2015
|
Officer
|
Freddie Mac 2015 Form 10-K
|
|
353
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
Michael T. Hutchins
|
Position:
|
Age:
60
|
Executive Vice President - Investments and
|
Year of Affiliation:
2013
|
Capital Markets
|
David B. Lowman
|
Position:
|
Age:
58
|
Executive Vice President - Single-Family Business
|
Year of Affiliation:
2013
|
|
Robert Lux
|
Position:
|
Age:
52
|
Executive Vice President - Chief Information Officer
|
Year of Affiliation:
2010
|
|
Freddie Mac 2015 Form 10-K
|
|
354
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
William H. McDavid
|
Position:
|
Age:
69
|
Executive Vice President - General Counsel &
|
Year of Affiliation:
2012
|
Corporate Secretary
|
Jerry Weiss
|
Position:
|
Age:
57
|
Executive Vice President - Chief Administrative
|
Year of Affiliation:
2003
|
Officer
|
Freddie Mac 2015 Form 10-K
|
|
355
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Named Executive Officers
|
||||
Donald H. Layton
|
Chief Executive Officer
|
|||
James G. Mackey
|
Executive Vice President - Chief Financial Officer
|
|||
Michael T. Hutchins
|
Executive Vice President - Investments and Capital Markets
|
|||
David B. Lowman
|
Executive Vice President - Single-Family Business
|
|||
William H. McDavid
|
Executive Vice President - General Counsel & Corporate Secretary
|
Freddie Mac 2015 Form 10-K
|
|
356
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
|
Base Salary
|
|
Deferred Salary
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
Fixed Deferred Salary
|
|
At-Risk Deferred Salary
|
|
|||||||
|
|
|
|
|
|
|
|
|||||
|
|
Conservatorship Scorecard
|
|
Corporate Scorecard/ Individual
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
●
|
Cannot exceed $500,000 without FHFA approval
|
|
●
|
To encourage executive retention
|
|
●
|
To encourage achievement of conservatorship, corporate, and individual performance goals
|
|
|||
|
●
|
Earned and paid bi-weekly
|
|
●
|
Equal to total Deferred Salary less the At-Risk portion
|
|
●
|
Subject to reduction based on Conservatorship Scorecard performance
|
|
●
|
Subject to reduction based on performance against both the Corporate Scorecard and individual objectives
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
●
|
The amount earned in each quarter is paid on the last pay date of the corresponding quarter in the following year, referred to as the Approved Payment Schedule
|
|
||||||
|
|
|
|
●
|
Interest accrues on Deferred Salary at one-half of the one-year Treasury Bill rate in effect on the last business day immediately preceding the year in which the Deferred Salary is earned and is paid at the same time as the Deferred Salary to which it relates.
|
|
What We Do
|
|
What We Don't Do
|
||||
ü
|
Clawback provisions with a significant portion of compensation subject to recapture and/or forfeiture
|
|
ý
|
No tax “gross-ups”
|
||
|
|
ý
|
No agreements that guarantee a specific amount of compensation for a specified term of employment
|
|||
ü
|
Use of an independent compensation consultant by the Board’s Compensation Committee
|
|
|
|||
|
|
ý
|
No golden parachute payments or other similar change in control provisions
|
|||
ü
|
Annual compensation risk review
|
|
|
|||
ü
|
Provide a single executive perquisite, reimbursement of tax, estate, and/or personal financial planning expenses (up to $4,500 annually, with an additional $2,500 in the first year of use)
|
|
ý
|
No hedging or pledging of company securities
|
||
|
|
|
|
|
||
ü
|
Evaluation of company performance against multiple measures, including non-financial measures
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
357
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Freddie Mac 2015 Form 10-K
|
|
358
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Allstate
|
|
Citigroup*
|
|
PNC
|
Ally Financial
|
|
Fannie Mae
|
|
Prudential
|
AIG
|
|
Fifth Third Bancorp
|
|
Regions Financial
|
Bank of America*
|
|
The Hartford
|
|
State Street
|
Bank of New York Mellon
|
|
JPMorgan Chase*
|
|
SunTrust
|
BB&T
|
|
MetLife
|
|
U.S. Bancorp
|
Capital One
|
|
Northern Trust
|
|
Wells Fargo*
|
*
|
Only mortgage or real estate division-level compensation data from these diversified banking firms may be utilized where available and appropriate for the position being benchmarked.
|
|
|
2015 Target TDC
|
||||||||||||||
Named Executive Officer
|
|
Base
Salary
|
|
Fixed
Deferred
Salary
|
|
At-Risk
Deferred
Salary
|
|
Target TDC
|
||||||||
Donald H. Layton
|
|
|
|
|
|
|
|
|
||||||||
From January 1 to June 30, 2015
|
|
$
|
600,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
600,000
|
|
From July 1 to November 24, 2015
|
|
750,000
|
|
|
2,050,000
|
|
|
1,200,000
|
|
|
4,000,000
|
|
||||
From November 25, 2015
|
|
600,000
|
|
|
—
|
|
|
—
|
|
|
600,000
|
|
||||
James G. Mackey
|
|
500,000
|
|
|
1,600,000
|
|
|
900,000
|
|
|
3,000,000
|
|
||||
Michael T. Hutchins
|
|
500,000
|
|
|
1,250,000
|
|
|
750,000
|
|
|
2,500,000
|
|
||||
David B. Lowman
|
|
500,000
|
|
|
1,600,000
|
|
|
900,000
|
|
|
3,000,000
|
|
||||
William H. McDavid
|
|
500,000
|
|
|
1,320,000
|
|
|
780,000
|
|
|
2,600,000
|
|
Freddie Mac 2015 Form 10-K
|
|
359
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
•
|
Our thought leadership in the areas of non-performing loan sales, multifamily risk transfers and the Common Securitization Platform (CSP);
|
•
|
Our continuing efforts to reduce taxpayer risk through credit risk transfers of more than $196 billion in unpaid principal balance and by reducing the retained portfolio through sales of less liquid assets;
|
•
|
The execution of four different types of single-family credit risk transfer transactions and the implementation of two pilot multifamily risk transfer structures, including $3.4 billion of multifamily military housing bonds; and
|
•
|
Our support of the development and testing of the CSP, our support of certain corporate functions related to Common Securitization Solutions (CSS) and our active and engaged role on the CSS Board of Managers.
|
•
|
The extent to which the initiatives were undertaken in a safe and sound manner;
|
•
|
The extent to which the outcomes of our activities supported a competitive and resilient secondary mortgage market to the benefit of homeowners and renters;
|
•
|
The extent to which initiatives were conducted with appropriate consideration for diversity and inclusion;
|
•
|
Cooperation and collaboration with FHFA, Fannie Mae, CSS, and the industry; and
|
•
|
The quality, thoroughness, creativity, effectiveness, and timeliness of our work products.
|
Freddie Mac 2015 Form 10-K
|
|
360
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Performance Goals
|
FHFA's Summary of Performance
|
||||||
1
|
Maintain in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets (40%)
|
||||||
|
Work to increase access to mortgage credit for creditworthy borrowers, consistent with the full extent of applicable credit requirements and risk management practices:
|
All goals were achieved except for a year-end deliverable for a portion of the sub-goal related to improvements to the Representations and Warranties Framework for originations.
|
|||||
|
•
|
Finalize improvements to the Representations and Warranties Framework for originations;
|
|||||
|
•
|
Continue to provide clarity regarding expectations for servicer performance and remedies, where appropriate;
|
|
||||
|
•
|
Enhance servicer eligibility standards for our counterparties;
|
|
||||
|
•
|
Continue to encourage greater participation by small lenders, rural lenders, and state and local Housing Finance Agencies;
|
|
||||
|
•
|
Continue to assess impediments to access to credit. Explore the feasibility of:
|
|
||||
|
|
•
|
Greater purchases of loans on manufactured housing secured by real estate;
|
|
|||
|
|
•
|
Improving the effectiveness of pre-purchase and early delinquency counseling through existing or new partnerships with housing counseling networks.
|
|
|||
|
•
|
Assess the feasibility of alternate credit score models and credit history in loan-decision models, including the operational and system implications;
|
|
||||
|
•
|
Prepare to implement Duty to Serve requirements upon publication of a final rule.
|
|
||||
|
Effectively implement key loss mitigation activities, which include enabling borrowers to stay in their homes and avoid foreclosure where possible:
|
All goals were achieved, except for a year-end deliverable for a portion of the sub-goal related to the pursuit of opportunities to encourage HARP-eligible borrowers to take advantage of beneficial refinance opportunities.
|
|||||
|
•
|
Pursue opportunities to encourage current HARP-eligible borrowers to take advantage of beneficial refinance opportunities;
|
|||||
|
•
|
Develop and execute additional strategies to reduce the number of severely aged delinquent loans held, considering tools such as loan modifications, short sales, deeds in lieu of foreclosure, and non-performing loan sales. These strategies should be informed by the Neighborhood Stabilization Initiative and have an emphasis on improving outcomes in hardest hit markets.
|
|||||
|
•
|
Develop and execute additional strategies to reduce the number of vacant real estate owned (REO) properties, considering tools such as sales to non-profit organizations, repairs to REO properties before third-party sale, and demolition or possible donation of uninhabitable properties. These strategies should be informed by the Neighborhood Stabilization Initiative and have an emphasis on improving outcomes in hardest hit markets.
|
|
||||
|
•
|
Propose and implement solutions for HAMP borrowers facing rate resets.
|
|
||||
|
•
|
Continue to engage in efforts to reduce costs for Lender Force Placed Insurance.
|
|
||||
|
Maintain the dollar volume of new multifamily business at $30 billion or below, excluding:
|
While the goal was achieved, adjustments to the loan caps during the year could have been avoided by employing a different approach.
|
|||||
|
•
|
Affordable housing loans, loans to small multifamily properties and loans to manufactured housing rental communities.
|
|||||
2
|
Reduce taxpayer risk through increasing the role of private capital in the mortgage market (30%)
|
||||||
|
Single-Family
|
All goals were achieved
|
|||||
|
•
|
Transact credit risk transfers on reference pools of single-family mortgages with a UPB of at least $120 billion;
|
|||||
|
•
|
In meeting the above target, utilize at least two types of risk transfer structures;
|
Freddie Mac 2015 Form 10-K
|
|
361
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Freddie Mac 2015 Form 10-K
|
|
362
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Corporate Scorecard Goal
|
Assessment of Performance
|
||||
People
|
All elements of this goal were achieved or exceeded. We continued to build our desired culture, as indicated by employee survey results. We exceeded the target for retention of high-performing employees and continued to take steps to improve leadership diversity.
|
||||
|
Maximize the contributions of our people
|
||||
|
|
|
|||
Our Customers
|
All elements of this goal were achieved or exceeded. In our single-family business, we increased our share of the GSE market, with a large share of new business being provided by a more diversified customer base. In our multifamily business, we exceeded the targeted increase in the number of small balance loan sellers. In addition, the quality of our service has improved, as indicated by both our single-family and multifamily customer satisfaction scores.
|
||||
|
Strive to achieve industry-leading customer experience levels
|
||||
|
|
||||
Mission
|
At this time, based on preliminary information, we believe we met three of our single-family goals and our three multifamily goals for 2015, but believe we failed to meet the FHFA benchmark level for the other single-family goals. We also achieved or exceeded the elements of this goal that included establishing a new function focused on single-family affordable housing and access to credit, developing one or more new offerings to better serve the multifamily renovation, rehabilitation and repositioning markets, and achieving a measure of the efficiency of our single-family loan modifications and repayment plans.
|
||||
|
Help people own, rent and stay in their homes
|
||||
|
|
|
|||
Financial Performance
|
We exceeded the objectives for the elements of this goal related to single-family new book earnings, single-family credit risk transfer, developing additional types of multifamily risk transfer transactions, and actively managing the assets in the retained portfolio. However, for two elements of this goal - multifamily operating earnings and core operating expenses - we fell short of our objectives. Widening K-Deal spreads caused multifamily operating earnings to be less than planned and increased investments in business technology caused operating expenses to be higher than anticipated.
|
||||
|
Improve our capital and expense efficiency as well as our core financial performance
|
||||
|
|
|
|||
Risk Management
|
We achieved or exceeded the elements of this goal related to establishing and reinforcing ownership for various risks, making informed risk-reward decisions and reducing exposure to legacy assets. With respect to the element related to maintaining an effective control environment, we achieved one of the two goals, but did not achieve the desired increase in internal audit findings identified by management.
|
||||
|
Risk management will be at best-practice levels
|
||||
|
|
|
|||
Technology & Infrastructure
|
We achieved or exceeded all elements of this goal by:
|
||||
|
Utilize technology and infrastructure to prepare for a future competitive market
|
|
Delivering most key technology initiatives on or ahead of schedule and on or below budget and realizing the intended quantitative benefits from most discretionary projects;
|
||
|
|
|
|
Continuing to improve our information security as measured by an industry rating standard and by completing the encryption, retirement, or removal of protected personal information in 23 legacy systems; and
|
|
|
|
|
|
Ensuring the availability of key applications.
|
|
Execution
|
While we exceeded the desired improvement in managerial spans of control and stakeholder feedback on the company’s level of innovation, we fell short of achieving two elements of this goal; one related to reducing the number of senior staff without managerial responsibilities and another on employee survey feedback on the company’s efforts to be more efficient.
|
||||
|
Do everything better, faster, and more efficiently
|
||||
|
Freddie Mac 2015 Form 10-K
|
|
363
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Donald H. Layton
|
Chief Executive Officer
|
|
Performance Highlights:
|
||
●
|
Continued increasing the strength and capability of the management team through internal promotions and external hires, resulting in a total of 17 new officers in 2015, including his personal recruitment of a new Chief Enterprise Risk Officer.
|
|
●
|
Continued leadership by the company in credit risk transfer through increased volumes and new transaction structures is transforming how a significant portion of U.S. mortgages are funded. This reduces taxpayer exposure to mortgage risk in both the single-family and multifamily businesses.
|
|
●
|
Supervised the continuing, rapid and efficient reduction in the risk of legacy assets. Most noteworthy in 2015 was the 30% decline in the single-family seriously delinquent rate to 1.32% from 1.88%, plus $2.9 billion of non-performing loan sales.
|
|
●
|
Guided the company to strengthened competitiveness, which is reflected in increased market share in both the single-family and multifamily businesses. Multifamily, in particular, had a record volume year.
|
|
●
|
The company exceeded or achieved the vast majority of the objectives in the Corporate Scorecard.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. Layton should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company’s performance against the Corporate Scorecard and his individual performance.
|
James G. Mackey
|
Executive Vice President and Chief Financial Officer
|
|
Performance Highlights:
|
||
●
|
Substantial modifications to the internal financial management information systems resulting in improved internal management reporting and analysis to support better decision-making.
|
|
●
|
Engineered significant process simplification programs in the Finance Division throughout the year, including a full three lines of defense risk management assessment and implementation.
|
|
●
|
Updated external reporting, including a redesigned earnings release and a simpler 10-K, which has been condensed by over 20%, providing improved investor usability.
|
|
●
|
Major reorganization of the Finance Division to reduce expenses and improve communication timeliness and efficiency, with a reduction in organizational layers by 25% and an increased span of control by 38%.
|
|
●
|
Strong leadership in the development of management talent in the Finance Division, including the implementation of a job rotation program for key personnel.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. Mackey should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company’s performance against the Corporate Scorecard and his individual performance.
|
Michael T. Hutchins
|
Executive Vice President Investments and Capital Markets
|
|
Performance Highlights:
|
||
●
|
Strong leadership of the Investments and Capital Markets Division led to the achievement of several critical milestones, including the reduction of legacy assets in value-accretive transactions, including sales of $2.9 billion of non-performing loans and $11.4 billion of private-label securities, as well as the securitization of $8.2 billion of reperforming loans.
|
|
●
|
Partnered with the Single-Family Business to improve the market penetration of cash purchases of single-family mortgages, which accounted for 35% of single-family volume in 2015, an increase from 29% in 2014.
|
|
●
|
Continued to enhance the liquidity of the company’s Agency residential mortgage-related securities in the secondary market.
|
|
●
|
Continued to focus on risk management, maintaining economic interest-rate risk at modeled low levels, efficiently managing the company’s liquidity and funding needs as well as strengthening capital markets operational processes.
|
|
●
|
Exceeded the 2015 reduction targets specified in the Purchase Agreement and the FHFA-approved Retained Portfolio Plan for decreasing the size of the retained portfolio.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. Hutchins should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company’s performance against the Corporate Scorecard and his individual performance.
|
Freddie Mac 2015 Form 10-K
|
|
364
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
David B. Lowman
|
Executive Vice President Single-Family Business
|
|
Performance Highlights:
|
||
●
|
Further improved customer service and engagement levels in 2015, with a 15% increase in the company’s internal measurement of “relationship health.”
|
|
●
|
Achieved higher market share in 2015 as compared to the prior two years.
|
|
●
|
Successfully executed substantial systems development projects designed to provide Seller/Servicers with greater purchase certainty
that the loans they sell us meet our requirements
.
|
|
●
|
Continued personal industry leadership to improve standards related to foreclosure alternatives, representation and warranty terms and loan manufacturing quality.
|
|
●
|
Established an integrated “first line of defense” risk management organization within the Single-Family Business.
|
|
●
|
Strong leadership led to improvement in all employee engagement and operating culture categories in the annual employee survey.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. Lowman should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company’s performance against the Corporate Scorecard and his individual performance.
|
William H. McDavid
|
Executive Vice President General Counsel and Corporate Secretary
|
|
Performance Highlights:
|
||
●
|
Supervised the successful resolution of a variety of lawsuits, which included substantial negotiated settlements.
|
|
●
|
Continued the ongoing improvement in the productivity of the Legal Division, resulting in a significant increase in transaction volumes and only a minimal increase in expenses.
|
|
●
|
Provided sound legal advice to the Board and senior management on a wide variety of significant issues.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. McDavid should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company’s performance against the Corporate Scorecard and his individual performance.
|
|
2015 Actual Deferred Salary
|
|
||||||||||||||||||||
|
|
|
At-Risk
|
|
Total Actual Deferred
Salary
|
|
% of Target
|
|
||||||||||||||
Named Executive Officer
|
Fixed
|
|
Conservatorship Scorecard
|
|
% of Target
|
|
Corporate Scorecard/ Individual
|
|
% of Target
|
|
|
|||||||||||
Mr. Layton
|
$
|
818,886
|
|
|
$
|
232,484
|
|
|
97%
|
|
$
|
239,674
|
|
|
100%
|
|
$
|
1,291,044
|
|
|
99%
|
|
Mr. Mackey
|
1,600,000
|
|
|
436,500
|
|
|
97%
|
|
450,000
|
|
|
100%
|
|
2,486,500
|
|
|
99%
|
|
||||
Mr. Hutchins
(1)
|
1,181,728
|
|
|
343,883
|
|
|
97%
|
|
354,518
|
|
|
100%
|
|
1,880,129
|
|
|
99%
|
|
||||
Mr. Lowman
|
1,600,000
|
|
|
436,500
|
|
|
97%
|
|
450,000
|
|
|
100%
|
|
2,486,500
|
|
|
99%
|
|
||||
Mr. McDavid
|
1,320,000
|
|
|
378,300
|
|
|
97%
|
|
390,000
|
|
|
100%
|
|
2,088,300
|
|
|
99%
|
|
(1)
|
Amounts reported for Mr. Hutchins are less than the corresponding target amounts because he took additional vacation as leave without pay during 2015. The percentages reported are based on adjusted target amounts that reflect the impact of the leave without pay.
|
Freddie Mac 2015 Form 10-K
|
|
365
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Freddie Mac 2015 Form 10-K
|
|
366
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
Freddie Mac 2015 Form 10-K
|
|
367
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
•
|
Materially Inaccurate Information
|
◦
|
Forfeiture Event
: The NEO has earned or obtained the legally binding right to a payment of Deferred Salary based on materially inaccurate financial statements or any other materially inaccurate performance measure.
|
◦
|
Compensation Subject to Recapture and/or Forfeiture
: Any Deferred Salary in excess of the amount that the Board determines would likely have been otherwise earned using accurate measures during the two years prior to the Forfeiture Event.
|
•
|
Termination for Felony Conviction or Willful Misconduct
|
◦
|
Forfeiture Event
: The NEO’s employment is terminated in any of the following circumstances:
|
▪
|
Termination of employment because the NEO is convicted of, or pleads guilty or nolo contendere to, a felony;
|
▪
|
Subsequent to termination of employment, the NEO is convicted of, or pleads guilty or nolo contendere to, a felony, based on conduct occurring prior to termination, and within one year of such conviction or plea, the Board determines that such conduct is materially harmful to Freddie Mac.
|
▪
|
Termination of employment because, or within two years of termination, the Board determines that, the NEO engaged in willful misconduct in the performance of his or her duties that was materially harmful to Freddie Mac.
|
◦
|
Compensation Subject to Recapture and/or Forfeiture
: Any Deferred Salary earned during the two years prior to the date that the NEO is terminated, any Deferred Salary scheduled to be paid within two years after termination, and any cash payment made or to be made as consideration for any release of claims agreement.
|
•
|
Gross Neglect or Gross Misconduct
|
◦
|
Forfeiture Event
: The NEO’s employment is terminated because, in carrying out his or her duties, the NEO engages in conduct that constitutes gross neglect or gross misconduct that is materially harmful to Freddie Mac, or within two years after the NEO’s termination of employment, the Board determines that the NEO, prior to his or her termination, engaged in such conduct.
|
◦
|
Compensation Subject to Recapture and/or Forfeiture
: Any Deferred Salary paid at the time of termination or subsequent to the date of termination, including any cash payment made as consideration for any release of claims agreement.
|
•
|
Violation of a Post-Termination Non-Competition Covenant
|
◦
|
Forfeiture Event
: The NEO violates a post-termination non-competition covenant set forth in the restrictive covenant and confidentiality agreement in effect when a payment of Deferred Salary is scheduled to be made.
|
◦
|
Compensation Subject to Recapture and/or Forfeiture
: 50% of the Deferred Salary paid during the twelve months immediately preceding the violation and 100% of any unpaid Deferred Salary.
|
Freddie Mac 2015 Form 10-K
|
|
368
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
•
|
Accounting Restatement Resulting from Misconduct
- If, as a result of misconduct, we are required to prepare an accounting restatement due to material non-compliance with financial reporting requirements, the CEO and CFO are required to reimburse us for amounts determined in accordance with Section 304.
|
Freddie Mac 2015 Form 10-K
|
|
369
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
•
|
Engaging in all transactions (including purchasing and selling equity and non-equity securities) involving our securities (except selling company securities owned prior to the implementation of the policy and then only with pre-clearance);
|
•
|
Purchasing or selling derivative securities related to our equity securities or dealing in any derivative securities related to our equity securities;
|
•
|
Transacting in options (other than options granted by us, and then only with pre-clearance) or other hedging instruments related to our securities; and
|
•
|
Holding our securities in a margin account or pledging our securities as collateral for a loan.
|
•
|
The powers of FHFA as our Conservator include the authority to set executive compensation. Under the terms of the Purchase Agreement, FHFA is required to consult with Treasury on any increases in compensation or new compensation arrangements for our executive officers.
|
•
|
Our directors serve on behalf of FHFA and exercise their authority as directed by FHFA. More information about the role of our directors is provided above in “Directors, Corporate Governance, and Executive Officers — Board and Committee Information — Authority of the Board and Board Committees.”
|
•
|
FHFA has directed us to obtain its approval before we: (i) enter into new compensation arrangements or increase amounts or benefits payable under existing compensation arrangements for officers at the
|
Freddie Mac 2015 Form 10-K
|
|
370
|
Executive Compensation
|
|
Compensation Discussion and Analysis
|
•
|
FHFA retains the authority not only to approve both the terms and amount of any compensation prior to payment to any of our executive officers, but also to modify any existing compensation arrangements.
|
Anthony A. Williams, Chair
|
Raphael W. Bostic
|
Steven W. Kohlhagen
|
Sara Mathew
|
Saiyid T. Naqvi
|
Nicolas P. Retsinas
|
(1)
|
Reflects Compensation Committee membership as of the time that the Compensation Disclosure and Analysis was reviewed and discussed with management and recommended to the Board for inclusion in this Form 10-K.
|
Freddie Mac 2015 Form 10-K
|
|
371
|
Executive Compensation
|
|
Compensation and Risk
|
•
|
The types of compensation offered (including fixed, variable, and deferred);
|
•
|
Eligibility for participation in compensation programs;
|
•
|
Minimum and maximum payout levels;
|
•
|
Corporate performance objectives;
|
•
|
The process for establishing corporate performance objectives and for evaluating performance against those objectives; and
|
•
|
Processes and program approvals for our compensation programs.
|
Freddie Mac 2015 Form 10-K
|
|
372
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
|
|
Salary
|
|
Non-Equity Incentive Plan Compensation
(4)
|
All Other Compensation
(5)
|
|
|||||||||||||
|
Year
|
Earned During Year
(1)
|
Deferred
(2)
|
Bonus
(3)
|
Total
|
||||||||||||||
Donald H. Layton
|
2015
|
$
|
660,345
|
|
$
|
818,886
|
|
$
|
—
|
|
$
|
472,748
|
|
$
|
56,958
|
|
$
|
2,008,937
|
|
Chief Executive Officer
|
2014
|
600,000
|
|
—
|
|
—
|
|
|
|
60,586
|
|
660,586
|
|
||||||
2013
|
600,000
|
|
—
|
|
—
|
|
|
|
23,827
|
|
623,827
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
James G. Mackey
|
2015
|
500,000
|
|
1,600,000
|
|
—
|
|
887,608
|
|
86,674
|
|
3,074,282
|
|
||||||
EVP — Chief Financial Officer
|
2014
|
500,000
|
|
1,600,000
|
|
450,000
|
|
900,585
|
|
21,099
|
|
3,471,684
|
|
||||||
2013
|
70,881
|
|
230,303
|
|
510,000
|
|
127,602
|
|
—
|
|
938,786
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
Michael T. Hutchins
(6)
|
2015
|
461,810
|
|
1,181,728
|
|
—
|
|
699,274
|
|
79,659
|
|
2,422,471
|
|
||||||
EVP — Investments & Capital Markets
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
David B. Lowman
|
2015
|
500,000
|
|
1,600,000
|
|
—
|
|
887,608
|
|
86,674
|
|
3,074,282
|
|
||||||
EVP — Single-Family Business
|
2014
|
500,000
|
|
1,600,000
|
|
—
|
|
900,585
|
|
65,045
|
|
3,065,630
|
|
||||||
2013
|
329,502
|
|
1,048,485
|
|
150,000
|
|
580,926
|
|
—
|
|
2,108,913
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
William H. McDavid
|
2015
|
500,000
|
|
1,320,000
|
|
—
|
|
769,260
|
|
86,324
|
|
2,675,584
|
|
||||||
EVP — General Counsel and Corporate Secretary
|
2014
|
500,000
|
|
1,320,000
|
|
—
|
|
780,507
|
|
110,168
|
|
2,710,675
|
|
||||||
2013
|
500,000
|
|
1,320,000
|
|
—
|
|
768,300
|
|
29,713
|
|
2,618,013
|
|
(1)
|
Amounts shown reflect Base Salary earned during the year.
|
(2)
|
Amounts shown reflect Fixed Deferred Salary earned during the year. Fixed Deferred Salary earned during each quarter is paid in cash on the last pay date of the corresponding quarter in the following year. The remaining portion of Deferred Salary is reported in “Non-Equity Incentive Plan Compensation” and is referred to as “At-Risk” because it is subject to reduction based on corporate and individual performance. Interest on Fixed Deferred Salary earned during 2015 and 2014 is included in All Other Compensation.
|
(3)
|
Amounts shown reflect cash sign-on payments made to Messrs. Mackey and Lowman in connection with their hiring in 2013. See “— Written Agreements Relating to NEO Employment” for additional information.
|
(4)
|
Amounts shown reflect At-Risk Deferred Salary earned during each year and, for 2015 and 2014, interest on that At-Risk Deferred Salary. No interest accrued on Deferred Salary earned during 2013 under the terms of the executive compensation program in effect for that year. The interest rate for At-Risk Deferred Salary earned during 2015 and 2014 was 0.125% and 0.065%, respectively, which is equal to 50% of the one-year Treasury Bill rate as of December 31 of the applicable prior year. At-Risk Deferred Salary earned during each quarter is paid on the last pay date of the corresponding quarter in the following year. See “— Determination of 2015 At-Risk Deferred Salary.”
|
(5)
|
Amounts for 2015 reflect (i) contributions earned under our tax-qualified Thrift/401(k) Plan for the year; (ii) accruals earned pursuant to the SERP Benefit for the year; (iii) interest on Fixed Deferred Salary earned during the year; and (vi) perquisites. These amounts for 2015 are as follows:
|
Freddie Mac 2015 Form 10-K
|
|
373
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
|
Thrift/401(k)
Plan
Contributions
|
|
SERP Benefit
Accruals
|
|
Interest on Fixed Deferred Salary
|
|
Perquisites
|
||||||||
Mr. Layton
|
$
|
22,525
|
|
|
$
|
33,409
|
|
|
$
|
1,024
|
|
|
$
|
—
|
|
Mr. Mackey
|
22,525
|
|
|
62,149
|
|
|
2,000
|
|
|
—
|
|
||||
Mr. Hutchins
|
22,525
|
|
|
55,657
|
|
|
1,477
|
|
|
—
|
|
||||
Mr. Lowman
|
22,525
|
|
|
62,149
|
|
|
2,000
|
|
|
—
|
|
||||
Mr. McDavid
|
22,525
|
|
|
62,149
|
|
|
1,650
|
|
|
—
|
|
(6)
|
Amounts reported for Mr. Hutchins in the Salary-Earned During Year, Salary-Deferred and Non-Equity Incentive Plan Compensation columns are less than the corresponding annual target amounts because he took additional vacation as leave without pay during 2015.
|
Freddie Mac 2015 Form 10-K
|
|
374
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(1)
|
|||||
Name
|
|
At-Risk Deferred Salary Award
|
|
Threshold
|
|
Target/Maximum
|
|||
Mr. Layton
(2)
|
|
Conservatorship Scorecard
|
|
$ —
|
|
|
$
|
239,674
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
239,674
|
|
|
|
|
Total
|
|
—
|
|
|
479,348
|
|
|
Mr. Mackey
|
|
Conservatorship Scorecard
|
|
—
|
|
|
450,000
|
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
450,000
|
|
|
|
|
Total
|
|
—
|
|
|
900,000
|
|
|
Mr. Hutchins
|
|
Conservatorship Scorecard
|
|
—
|
|
|
375,000
|
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
375,000
|
|
|
|
|
Total
|
|
—
|
|
|
750,000
|
|
|
Mr. Lowman
|
|
Conservatorship Scorecard
|
|
—
|
|
|
450,000
|
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
450,000
|
|
|
|
|
Total
|
|
—
|
|
|
900,000
|
|
|
Mr. McDavid
|
|
Conservatorship Scorecard
|
|
—
|
|
|
390,000
|
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
390,000
|
|
|
|
|
Total
|
|
—
|
|
|
780,000
|
|
(1)
|
The amounts reported reflect At-Risk Deferred Salary granted in 2015 which is subject to reduction based on (i) corporate performance against the Conservatorship Scorecard; and (ii) an officer's individual performance and the company’s performance against the Corporate Scorecard goals. The amount of At-Risk Deferred Salary actually earned can range from 0% of target (reported in the Threshold column) to a maximum of 100% of target (reported in the Target/Maximum column). Actual At-Risk Deferred Salary amounts earned during 2015 are reported in the “Non-Equity Incentive Plan Compensation” column of “Summary Compensation Table.”
|
(2)
|
Mr. Layton was only eligible to receive Deferred Salary between July 1, 2015 and November 24, 2015.
|
Freddie Mac 2015 Form 10-K
|
|
375
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
Name
|
Executive
Contribution in
Last FY ($)
(1)
|
|
Freddie Mac
Accruals in
Last FY ($)
(2)
|
|
Aggregate
Earnings in
Last FY ($)
(3)
|
|
Aggregate
Withdrawals/
Distrib. ($)
|
|
Aggregate
Balance at
Last FYE ($)
(4)
|
||||||||||
Mr. Layton
|
|
|
|
|
|
|
|
|
|
||||||||||
SERP Benefit
|
$
|
—
|
|
|
$
|
33,409
|
|
|
$
|
855
|
|
|
$
|
—
|
|
|
$
|
90,601
|
|
Mr. Mackey
|
|
|
|
|
|
|
|
|
|
||||||||||
SERP Benefit
|
—
|
|
|
62,149
|
|
|
53
|
|
|
—
|
|
|
75,761
|
|
|||||
Mr. Hutchins
|
|
|
|
|
|
|
|
|
|
||||||||||
SERP Benefit
|
—
|
|
|
55,657
|
|
|
79
|
|
|
—
|
|
|
100,889
|
|
|||||
Mr. Lowman
|
|
|
|
|
|
|
|
|
|
||||||||||
SERP Benefit
|
—
|
|
|
62,149
|
|
|
(2,276
|
)
|
|
—
|
|
|
104,138
|
|
|||||
Mr. McDavid
|
|
|
|
|
|
|
|
|
|
||||||||||
SERP Benefit
|
—
|
|
|
62,149
|
|
|
154
|
|
|
—
|
|
|
172,595
|
|
(1)
|
The SERP does not allow for employee contributions.
|
(2)
|
Amounts reported reflect accruals under the SERP Benefit during 2015, including accruals for the plan year 2015 2.5% contribution which will be allocated to NEO accounts in 2016. These amounts are also reported in the “All Other Compensation” column in the Summary Compensation Table.
|
(3)
|
Amounts reported represent the total interest and other earnings credited to each NEO under the SERP Benefit.
|
(4)
|
Amounts reported reflect the accumulated balances under the SERP Benefit for each NEO and include the plan year 2015 2.5% contribution which will be allocated to NEO accounts in 2016. All NEOs are fully vested in their SERP Benefit account balances.
|
Freddie Mac 2015 Form 10-K
|
|
376
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
•
|
Forfeiture Event — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is subject to forfeiture upon the occurrence of a Forfeiture Event, as described above under “— Written Agreements Relating to NEO Employment — Recapture and Forfeiture Agreement.”
|
•
|
Death — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is paid in full as soon as administratively possible, but not later than 90 calendar days after the date of death. Any earned but unpaid At-Risk Deferred Salary is not subject to reduction based on corporate and individual performance if the reduction has not been determined as of the date of death.
|
•
|
Long-Term Disability — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is paid in full in accordance with the Approved Payment Schedule. Any earned but unpaid At-Risk Deferred Salary is not subject to reduction based on corporate and individual performance if the reduction has not been determined as of the termination date.
|
•
|
Any Other Reason (including, but not limited to, voluntary termination, retirement, and involuntary termination for any reason other than a Forfeiture Event) — All earned but unpaid Deferred Salary (including related interest) is paid in accordance with the Approved Payment Schedule, and earned but unpaid At-Risk Deferred Salary remains subject to the performance assessment and reduction process. Except in the case of retirement, the amount of earned but unpaid Fixed Deferred Salary will be reduced by 2% for each full or partial month by which the NEO’s termination precedes January 31 of the second calendar year following the calendar year in which the Fixed Deferred Salary is earned. No such reduction is applicable if an NEO retires, which is deemed to have occurred upon a voluntary termination of employment after attaining or exceeding 62 years of age, without regard to length of service, or attaining or exceeding 55 years of age with 10 or more years of service.
|
Freddie Mac 2015 Form 10-K
|
|
377
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
|
Death
|
|
Disability
|
|
Retirement
(1)
|
|
All Other Not
For Cause
Terminations
(2)
|
||||||||
Donald H. Layton
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
$
|
818,886
|
|
|
$
|
818,886
|
|
|
$
|
818,886
|
|
|
$
|
—
|
|
At Risk-Conservatorship Scorecard
(3)
|
239,674
|
|
|
239,674
|
|
|
232,484
|
|
|
—
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
239,674
|
|
|
239,674
|
|
|
239,674
|
|
|
—
|
|
||||
Interest on Deferred Salary
(5)
|
654
|
|
|
1,623
|
|
|
1,614
|
|
|
—
|
|
||||
Total
|
$
|
1,298,888
|
|
|
$
|
1,299,857
|
|
|
$
|
1,292,658
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
James G. Mackey
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
$
|
1,600,000
|
|
|
$
|
1,600,000
|
|
|
$
|
—
|
|
|
$
|
1,184,000
|
|
At Risk-Conservatorship Scorecard
(3)
|
450,000
|
|
|
450,000
|
|
|
—
|
|
|
436,500
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
450,000
|
|
|
450,000
|
|
|
—
|
|
|
450,000
|
|
||||
Interest on Deferred Salary
(5)
|
1,945
|
|
|
3,125
|
|
|
—
|
|
|
2,588
|
|
||||
Total
|
$
|
2,501,945
|
|
|
$
|
2,503,125
|
|
|
$
|
—
|
|
|
$
|
2,073,088
|
|
|
|
|
|
|
|
|
|
||||||||
Michael T. Hutchins
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
$
|
1,181,728
|
|
|
$
|
1,181,728
|
|
|
$
|
—
|
|
|
$
|
874,479
|
|
At Risk-Conservatorship Scorecard
(3)
|
354,518
|
|
|
354,518
|
|
|
—
|
|
|
343,883
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
354,518
|
|
|
354,518
|
|
|
—
|
|
|
354,518
|
|
||||
Interest on Deferred Salary
(5)
|
1,471
|
|
|
2,363
|
|
|
—
|
|
|
1,966
|
|
||||
Total
|
$
|
1,892,235
|
|
|
$
|
1,893,127
|
|
|
$
|
—
|
|
|
$
|
1,574,846
|
|
|
|
|
|
|
|
|
|
||||||||
David B. Lowman
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
$
|
1,600,000
|
|
|
$
|
1,600,000
|
|
|
$
|
—
|
|
|
$
|
1,184,000
|
|
At Risk-Conservatorship Scorecard
(3)
|
450,000
|
|
|
450,000
|
|
|
—
|
|
|
436,500
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
450,000
|
|
|
450,000
|
|
|
—
|
|
|
450,000
|
|
||||
Interest on Deferred Salary
(5)
|
1,945
|
|
|
3,125
|
|
|
—
|
|
|
2,588
|
|
||||
Total
|
$
|
2,501,945
|
|
|
$
|
2,503,125
|
|
|
$
|
—
|
|
|
$
|
2,073,088
|
|
|
|
|
|
|
|
|
|
||||||||
William H. McDavid
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
$
|
1,320,000
|
|
|
$
|
1,320,000
|
|
|
$
|
1,320,000
|
|
|
$
|
—
|
|
At Risk-Conservatorship Scorecard
(3)
|
390,000
|
|
|
390,000
|
|
|
378,300
|
|
|
—
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
390,000
|
|
|
390,000
|
|
|
390,000
|
|
|
—
|
|
||||
Interest on Deferred Salary
(5)
|
1,633
|
|
|
2,625
|
|
|
2,610
|
|
|
—
|
|
||||
Total
|
$
|
2,101,633
|
|
|
$
|
2,102,625
|
|
|
$
|
2,090,910
|
|
|
$
|
—
|
|
(1)
|
Messrs. Layton and McDavid are the only retirement-eligible NEOs under the 2015 EMCP.
|
Freddie Mac 2015 Form 10-K
|
|
378
|
Executive Compensation
|
|
2015 Compensation Information for NEOs
|
(2)
|
All Other Not For Cause Terminations refer to voluntary terminations other than for retirement and involuntary terminations other than for cause. No amounts are displayed for Messrs. Layton and McDavid because they are retirement eligible. In accordance with early termination provisions in the 2015 EMCP, the amounts disclosed for Deferred Salary: Fixed for all other NEOs have been reduced by 26% to reflect a December 31, 2015 termination scenario.
|
(3)
|
The amounts reported for Deferred Salary: At Risk-Conservatorship Scorecard in the Retirement and All Other Not For Cause Terminations columns reflect the funding level determined by FHFA with respect to performance against the 2015 Conservatorship Scorecard. In cases of death or disability, the process for determining the funding level is waived if the funding level has not been determined at the date of termination. The funding level had not been determined as of December 31
st
and, as a result, no reduction has been applied to these amounts.
|
(4)
|
The amounts reported for Deferred Salary: At Risk-Corporate Scorecard/Individual in the Retirement and All Other Not For Cause Terminations columns reflect the assessment of 2015 performance approved by the Compensation Committee and FHFA. For death or disability, the provisions are the same as for the amounts reported for Deferred Salary: At Risk-Conservatorship Scorecard.
|
(5)
|
Interest on Deferred Salary is accrued and paid in accordance with the terms of the 2015 EMCP. The amount of interest in the Death column assumes that payment occurs on the 90th day following the date of death, which is assumed to be December 31, 2015.
|
Freddie Mac 2015 Form 10-K
|
|
379
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
|
(1)
|
Includes shares of stock beneficially owned as of February 16, 2016.
|
(2)
|
Includes distribution of 6,866 shares and 169 dividend equivalents on RSUs previously deferred and which have no remaining restrictions.
|
Freddie Mac 2015 Form 10-K
|
|
380
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
|
|
|
|
5% Holder
(1)
|
Common Stock Beneficially Owned
|
Percent of Class
|
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
|
Variable
(2)
|
79.9%
|
(1)
|
Pershing Square Capital Management, L.P., PS Management GP, LLC, and William A. Ackerman (“Pershing”) have filed certain reports on Schedule 13D, the latest of which was filed on March 31, 2014. In that report, Pershing reported a beneficial ownership percentage calculation of 9.78%, based solely on the 650,039,533 shares of our common stock outstanding as reported in our Form 10-K for the fiscal year ended December 31, 2013, and excluding the shares issuable to Treasury pursuant to the warrant. The Schedule 13D indicated that Pershing also had additional economic exposure to approximately 8,434,958 notional shares of common stock, bringing the total aggregate economic exposure on the date of that filing to 72,010,523 shares of common stock (approximately 11.08% of the outstanding common stock). In that filing, Pershing indicated that because it believes our common stock is not a voting security, it had determined not to file future reports on Schedule 13D. We do not know Pershing’s current beneficial ownership of our common stock.
|
(2)
|
In September 2008, we issued to Treasury a warrant to purchase, for one one-thousandth of a cent ($0.00001) per share, shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is exercised. The warrant may be exercised in whole or in part at any time until September 7, 2028. As of the date of this filing, Treasury has not exercised the warrant. The information above assumes Treasury beneficially owns no other shares of our common stock.
|
Freddie Mac 2015 Form 10-K
|
|
381
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
|
|
Weighted average exercise price of outstanding options,
warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
Equity compensation plans approved by stockholders
|
98,326
(1)
|
|
$28.68
(2)
|
|
35,824,214
(3)
|
Equity compensation plans not approved by stockholders
|
None
|
|
N/A
|
|
None
|
(1)
|
Includes 51,190 RSUs and shares of restricted stock issued under the Directors’ Plan and the Employee Plans.
|
(2)
|
For the purpose of calculating this amount, the RSUs and shares of restricted stock are assigned a value of zero.
|
(3)
|
Includes 28,310,784 shares, 5,845,739 shares, and 1,667,691 shares available for issuance under the 2004 Stock Compensation Plan, the Employee Stock Purchase Plan, and the Directors’ Plan, respectively. No shares are available for issuance under the 1995 Stock Compensation Plan.
|
Freddie Mac 2015 Form 10-K
|
|
382
|
Certain Relationships and Related Transactions
|
|
|
•
|
The aggregate amount involved exceeded or is expected to exceed $120,000;
|
•
|
We were or are expected to be a participant; and
|
•
|
Any related person had or will have a direct or indirect material interest.
|
•
|
The nature of the related person’s interest in the transaction;
|
•
|
The approximate total dollar value of, and extent of the related person’s interest in, the transaction;
|
•
|
Whether the transaction was or would be undertaken in the ordinary course of our business;
|
Freddie Mac 2015 Form 10-K
|
|
383
|
Certain Relationships and Related Transactions
|
|
|
•
|
Whether the transaction is proposed to be, or was, entered into on terms no less favorable to us than terms that could have been reached with an unrelated third party; and
|
•
|
The purpose, and potential benefits to us, of the transaction.
|
Freddie Mac 2015 Form 10-K
|
|
384
|
Certain Relationships and Related Transactions
|
|
|
Freddie Mac 2015 Form 10-K
|
|
385
|
Principal Accounting Fees and Services
|
|
|
|
2015
|
|
2014
|
||||
|
(in thousands)
|
||||||
Audit Fees
(2)
|
$
|
23,321
|
|
|
$
|
27,997
|
|
Audit-Related Fees
(3)
|
3,888
|
|
|
2,461
|
|
||
Tax Fees
(4)
|
64
|
|
|
27
|
|
||
All Other Fees
(5)
|
264
|
|
|
357
|
|
||
Total
|
$
|
27,537
|
|
|
$
|
30,842
|
|
(1)
|
These fees represent amounts billed within the designated year and include reimbursable expenses for 2015 and 2014.
|
(2)
|
Audit fees include fees in connection with quarterly reviews of our interim financial information and the audit of our annual consolidated financial statements.
|
(3)
|
The 2015 and 2014 audit-related fees include: (i) fees for the performance of certain agreed-upon procedures regarding aspects of compliance with the Purchase Agreement covenants; (ii) compliance evaluation of the minimum servicing standards as set forth in the Uniform Single Attestation Program for Mortgage Bankers; and (iii) transaction validation and attestation related to certain of Freddie Mac’s risk transfer and structured transactions.
|
(4)
|
The tax fees billed in 2015 and 2014 related to non-audit tax consulting services to provide advice and recommendations related to tax planning or reporting matters, as well as non-audit tax services to provide assistance with the IRS tax audit matters and ongoing examinations, including information requests and associated responses.
|
(5)
|
All other fees for 2015 and 2014 include: (i) our subscription to a web-based suite of human resources benchmark data; (ii) advice and recommendations related to retention strategies; (iii) our subscription to accounting research software; and (iv) non-audit services in connection with certain of our project deployments as part of implementing regulatory initiatives.
|
•
|
Appointing our independent public accounting firm (subject to FHFA approval as required);
|
•
|
Approving all audit and non-audit services permitted under applicable law to be performed by the independent public accounting firm (subject to FHFA approval as required); and
|
•
|
Approving the scope of the annual audit.
|
Freddie Mac 2015 Form 10-K
|
|
386
|
Principal Accounting Fees and Services
|
|
|
•
|
The firm’s status as a registered public accounting firm with the Public Company Accounting Oversight Board (United States) (“PCAOB”) as required by the Sarbanes-Oxley Act of 2002 and the Rules of the PCAOB;
|
•
|
Its independence and processes for maintaining its independence;
|
•
|
Its approach to resolving significant accounting and auditing matters;
|
•
|
Its capability and expertise in handling the complexity of the company’s business, including the expertise and capability of the lead audit partner and of the key members of the engagement team;
|
•
|
Historical and recent performance, including the extent and quality of the independent public accounting firm’s communications with the Audit Committee, and the results of a management survey of the independent public accounting firm’s overall performance;
|
•
|
Data related to audit quality and performance, including recent PCAOB inspection reports on the firm; and
|
•
|
The appropriateness of its fees, both on an absolute basis and as compared with peers.
|
Freddie Mac 2015 Form 10-K
|
|
387
|
Exhibits and Financial Statement Schedules
|
|
|
Freddie Mac 2015 Form 10-K
|
|
388
|
Signatures
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
|
By:
|
/s/ Donald H. Layton
|
|
Donald H. Layton
|
|
Chief Executive Officer
|
Date: February 18, 2016
|
Freddie Mac 2015 Form 10-K
|
|
389
|
Signatures
|
|
|
Signature
|
|
Capacity
|
|
Date
|
||
|
|
|
|
|
|
|
/s/ Christopher S. Lynch*
|
|
Non-Executive Chairman of the Board
|
|
February 18, 2016
|
||
Christopher S. Lynch
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Donald H. Layton
|
|
Chief Executive Officer and Director
|
|
February 18, 2016
|
||
Donald H. Layton
|
|
(Principal Executive Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ James G. Mackey
|
|
Executive Vice President — Chief Financial Officer
|
|
February 18, 2016
|
||
James G. Mackey
|
|
(Principal Financial Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ Robert D. Mailloux
|
|
Senior Vice President — Corporate Controller and
|
|
February 18, 2016
|
||
Robert D. Mailloux
|
|
Principal Accounting Officer (Principal Accounting Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ Raphael W. Bostic*
|
|
Director
|
|
February 18, 2016
|
||
Raphael W. Bostic
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Carolyn H. Byrd*
|
|
Director
|
|
February 18, 2016
|
||
Carolyn H. Byrd
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Lance F. Drummond*
|
|
Director
|
|
February 18, 2016
|
||
Lance F. Drummond
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Thomas M. Goldstein*
|
|
Director
|
|
February 18, 2016
|
||
Thomas M. Goldstein
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Richard C. Hartnack*
|
|
Director
|
|
February 18, 2016
|
||
Richard C. Hartnack
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Steven W. Kohlhagen*
|
|
Director
|
|
February 18, 2016
|
||
Steven W. Kohlhagen
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Sara Mathew*
|
|
Director
|
|
February 18, 2016
|
||
Sara Mathew
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Saiyid T. Naqvi*
|
|
Director
|
|
February 18, 2016
|
||
Saiyid T. Naqvi
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Nicolas P. Retsinas*
|
|
Director
|
|
February 18, 2016
|
||
Nicolas P. Retsinas
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Eugene B. Shanks, Jr.*
|
|
Director
|
|
February 18, 2016
|
||
Eugene B. Shanks, Jr.
|
|
|
|
|
||
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
390
|
Signatures
|
|
|
/s/ Anthony A. Williams*
|
|
Director
|
|
February 18, 2016
|
||
Anthony A. Williams
|
|
|
|
|
||
|
|
|
|
|
|
|
*By:
|
|
/s/ Alicia S. Myara
|
|
|
||
|
|
Alicia S. Myara
|
|
|
|
|
|
|
Attorney-in-Fact
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
391
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
392
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
393
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
394
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
395
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
396
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
397
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
398
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
399
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
400
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
401
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
402
|
Glossary
|
|
|
Freddie Mac 2015 Form 10-K
|
|
403
|
Index
|
|
|
Freddie Mac 2015 Form 10-K
|
|
404
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
3.1
|
|
Federal Home Loan Mortgage Corporation Act (12 U.S.C. §1451 et seq.), as amended through July 21, 2010 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, as filed on August 9, 2010)
|
|
|
|
3.2
|
|
Bylaws of the Federal Home Loan Mortgage Corporation, as amended and restated July 13, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K as filed on July 15, 2015)
|
|
|
|
4.1
|
|
Eighth Amended and Restated Certificate of Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Voting Common Stock (no par value per share) dated September 10, 2008 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K as filed on September 11, 2008)
|
|
|
|
4.2
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated April 23, 1996 (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.3
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 27, 1997 (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.4
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 1998 (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.5
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.1% Non-Cumulative Preferred Stock (par value $1.00 per share), dated September 23, 1998 (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.6
|
|
Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated September 29, 1998 (incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.7
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.3% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 28, 1998 (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.8
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.1% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 19, 1999 (incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.9
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.79% Non-Cumulative Preferred Stock (par value $1.00 per share), dated July 21, 1999 (incorporated by reference to Exhibit 4.9 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
E-1
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
4.10
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated November 5, 1999 (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.11
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated January 26, 2001 (incorporated by reference to Exhibit 4.11 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.12
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 2001 (incorporated by reference to Exhibit 4.12 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.13
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 2001 (incorporated by reference to Exhibit 4.13 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.14
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated May 30, 2001 (incorporated by reference to Exhibit 4.14 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.15
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 6% Non-Cumulative Preferred Stock (par value $1.00 per share), dated May 30, 2001 (incorporated by reference to Exhibit 4.15 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.16
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.7% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 30, 2001 (incorporated by reference to Exhibit 4.16 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.17
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated January 29, 2002 (incorporated by reference to Exhibit 4.17 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.18
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 17, 2006 (incorporated by reference to Exhibit 4.18 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.19
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 6.42% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 17, 2006 (incorporated by reference to Exhibit 4.19 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.20
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.9% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated October 16, 2006 (incorporated by reference to Exhibit 4.20 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
E-2
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
4.21
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.57% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated January 16, 2007 (incorporated by reference to Exhibit 4.21 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.22
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 5.66% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated April 16, 2007 (incorporated by reference to Exhibit 4.22 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.23
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 6.02% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 24, 2007 (incorporated by reference to Exhibit 4.23 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.24
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of 6.55% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated September 28, 2007 (incorporated by reference to Exhibit 4.24 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.25
|
|
Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated December 4, 2007 (incorporated by reference to Exhibit 4.25 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)
|
|
|
|
4.26
|
|
Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (par value $1.00 per share), dated September 27, 2012 (incorporated by reference to Exhibit 4.26 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed on February 28, 2013)
|
|
|
|
4.27
|
|
Federal Home Loan Mortgage Corporation Global Debt Facility Agreement, dated February 19, 2015 (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, as filed on May 5, 2015)
|
|
|
|
10.1
|
|
Federal Home Loan Mortgage Corporation 2004 Stock Compensation Plan (as amended and restated as of June 6, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.2
|
|
First Amendment to the Federal Home Loan Mortgage Corporation 2004 Stock Compensation Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.3
|
|
Second Amendment to the Federal Home Loan Mortgage Corporation 2004 Stock Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, as filed on August 7, 2009)†
|
|
|
|
10.4
|
|
Form of Nonqualified Stock Option Agreement for executive officers under the Federal Home Loan Mortgage Corporation 2004 Stock Compensation Plan for awards on and after January 1, 2006 (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.5
|
|
Federal Home Loan Mortgage Corporation 1995 Directors’ Stock Compensation Plan (as amended and restated June 8, 2007) (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.6
|
|
Federal Home Loan Mortgage Corporation Directors’ Deferred Compensation Plan (as amended and restated April 3, 1998) (incorporated by reference to Exhibit 10.25 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
Freddie Mac 2015 Form 10-K
|
|
E-3
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
10.7
|
|
First Amendment to the Federal Home Loan Mortgage Corporation Directors’ Deferred Compensation Plan (as amended and restated April 3, 1998) (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed on March 11, 2009)†
|
|
|
|
10.8
|
|
Federal Home Loan Mortgage Corporation Executive Deferred Compensation Plan (as amended and restated effective January 1, 2008) (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.9
|
|
First Amendment to the Federal Home Loan Mortgage Corporation Executive Deferred Compensation Plan (as amended and restated effective January 1, 2008) (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008, as filed on November 14, 2008)†
|
|
|
|
10.10
|
|
Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2008) (incorporated by reference to Exhibit 10.33 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.11
|
|
First Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (As Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, as filed on February 24, 2010)†
|
|
|
|
10.12
|
|
Second Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed on June 28, 2011)†
|
|
|
|
10.13
|
|
Third Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, as filed on November 6, 2012)†
|
|
|
|
10.14
|
|
Fourth Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (As Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, as filed on August 7, 2013)†
|
|
|
|
10.15
|
|
Fifth Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on October 25, 2013) †
|
|
|
|
10.16
|
|
Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan II (effective January 1, 2014)(incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed on February 19, 2015) †
|
|
|
|
10.17
|
|
First Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan II (effective January 1, 2014) (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, as filed on August 4, 2015) †
|
|
|
|
10.18
|
|
Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.19
|
|
First Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.35 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.20
|
|
Second Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.36 to the Registrant’s Registration Statement on Form 10 as filed on July 18, 2008)†
|
|
|
|
10.21
|
|
Third Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan†
|
Freddie Mac 2015 Form 10-K
|
|
E-4
|
Exhibit Index
|
|
|
|
|
|
Exhibit No.
|
|
Description*
|
10.22
|
|
2013 Executive Management Compensation Program Recapture and Forfeiture Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K as filed on June 12, 2013) †
|
|
|
|
10.23
|
|
2015 Executive Management Compensation Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, as filed on August 4, 2015) †
|
|
|
|
10.24
|
|
Memorandum Agreement, dated May 7, 2012, between Freddie Mac and Donald H. Layton (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed on May 10, 2012)†
|
|
|
|
10.25
|
|
Restrictive Covenant and Confidentiality Agreement, dated May 7, 2012, between Freddie Mac and Donald H. Layton (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed on May 10, 2012)†
|
|
|
|
10.26
|
|
Memorandum Agreement, dated September 24, 2013, between Freddie Mac and James Mackey (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on September 30, 2013) †
|
|
|
|
10.27
|
|
Restrictive Covenant and Confidentiality Agreement, dated September 25, 2013, between Freddie Mac and James Mackey (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed on September 30, 2013) †
|
|
|
|
10.28
|
|
Memorandum Agreement, dated July 3, 2012, between Freddie Mac and William H. McDavid (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on July 9, 2012)†
|
|
|
|
10.29
|
|
Restrictive Covenant and Confidentiality Agreement, dated July 6, 2012, between Freddie Mac and William H. McDavid (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed on July 9, 2012)†
|
|
|
|
10.30
|
|
Memorandum Agreement, dated April 7, 2013, between Freddie Mac and David B. Lowman (incorporated by reference to Exhibit 10.48 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013, as filed on February 27, 2014)†
|
|
|
|
10.31
|
|
Restrictive Covenant and Confidentiality Agreement, dated April 9, 2013, between Freddie Mac and David B. Lowman (incorporated by reference to Exhibit 10.49 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013, as filed on February 27, 2014)†
|
|
|
|
10.32
|
|
Memorandum Agreement, dated June 24, 2013, between Freddie Mac and Michael Hutchins †
|
|
|
|
10.33
|
|
Restrictive Covenant and Confidentiality Agreement, dated June 25, 2013, between Freddie Mac and Michael Hutchins †
|
|
|
|
10.34
|
|
Description of non-employee director compensation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed on December 23, 2008)†
|
|
|
|
10.35
|
|
PC Master Trust Agreement dated April 23, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, as filed on May 5, 2015)
|
|
|
|
10.36
|
|
Form of Indemnification Agreement between the Federal Home Loan Mortgage Corporation and executive officers (for agreements with officers entered into prior to August 2011) and outside Directors (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed on December 23, 2008)†
|
|
|
|
|
|
|
Freddie Mac 2015 Form 10-K
|
|
E-5
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
10.37
|
|
Form of Indemnification Agreement between the Federal Home Loan Mortgage Corporation and executive officers (for agreements with officers entered into beginning in August 2011) (incorporated by reference to Exhibit 10.54 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed on March 9, 2012)†
|
|
|
|
10.38
|
|
Amended and Restated Senior Preferred Stock Purchase Agreement dated as of September 26, 2008, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008, as filed on November 14, 2008)
|
|
|
|
10.39
|
|
Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, as filed on May 12, 2009)
|
|
|
|
10.40
|
|
Second Amendment dated as of December 24, 2009, to the Amended and Restated Senior Preferred Stock Purchase Agreement dated as of September 26, 2008, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on December 29, 2009)
|
|
|
|
10.41
|
|
Third Amendment dated as of August 17, 2012, to the Amended and Restated Senior Preferred Stock Purchase Agreement dated as of September 26, 2008, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on August 17, 2012)
|
|
|
|
10.42
|
|
Warrant to Purchase Common Stock, dated September 7, 2008 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K as filed on September 11, 2008)
|
|
|
|
10.43
|
|
Memorandum of Understanding Among the Department of Treasury, the Federal Housing Finance Agency, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation, dated October 19, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on October 23, 2009)
|
|
|
|
10.44
|
|
Omnibus Consent to HFA Initiative Program Modifications, dated November 23, 2011, among the U.S. Department of the Treasury, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal Housing Finance Agency (incorporated by reference to Exhibit 10.62 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed on March 9, 2012)
|
|
|
|
12.1
|
|
Statement re: computation of ratio of earnings to fixed charges and computation of ratio of earnings to combined fixed charges and preferred stock dividends
|
|
|
|
24.1
|
|
Powers of Attorney
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)
|
|
|
|
31.2
|
|
Certification of Executive Vice President —Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
32.2
|
|
Certification of Executive Vice President —Chief Financial Officer pursuant to 18 U.S.C. Section 1350
|
Freddie Mac 2015 Form 10-K
|
|
E-6
|
Exhibit Index
|
|
|
Exhibit No.
|
|
Description*
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition
|
*
|
The SEC file numbers for the Registrant’s Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K are 000-53330 and 001-34139.
|
|
|
†
|
This exhibit is a management contract or compensatory plan or arrangement.
|
Freddie Mac 2015 Form 10-K
|
|
E-7
|
1.
|
Section 1.1 (
Purpose
) is amended to replace the second sentence thereof with the following:
|
2.3.
|
Eligibility and Benefits
.
The employees or classes of employees eligible for coverage under the Plan, the effective dates upon which they become eligible, the conditions which they must satisfy to become eligible to receive disability benefits, the benefits payable, and other provisions affecting the Plan are those set forth in the Policy. The term “employee” as used in the Plan shall mean a
|
2.6.
|
Employer
.
For purposes of this Plan, an Employer is:
|
(a)
|
the Corporation;
|
(b)
|
a wholly-owned subsidiary of the Corporation that adopts the Plan with the approval of the Corporation, subject to such terms and conditions as
|
(c)
|
any successor entity which assumes the obligations of this Plan.
|
Date
|
To
|
June 24, 2013
|
Michael Hutchins
|
|
|
From
|
|
Donald H. Layton
|
|
|
|
Subject
|
|
Your Compensation as Senior Vice President-Investments and Capital Markets
|
•
|
At-Risk Deferred Salary - This portion of your Deferred Salary is equal to thirty percent (30%) of your Target TDC, or $600,000, up to half of which may be reduced based on the company’s performance against objectives established by FHFA and up to half of which may be reduced based on performance against objectives established by Freddie Mac and your individual performance.
|
•
|
Fixed Deferred Salary - This portion of your Deferred Salary is equal to your Target TDC less your Base Salary and At-Risk Deferred Salary, and is equal to $900,000.
|
•
|
Healthcare Coverage - We offer a competitive healthcare program that provides medical, dental and vision coverage for you and your eligible dependents with several options to choose from.
|
•
|
Income Protection - We provide short- and long-term disability income protection, life insurance, accidental death and personal loss insurance, and business travel accident insurance.
|
•
|
Vacation - As an officer, you will accrue 20 days of vacation annually. This equates to 6.46 hours each semi-monthly pay period. You begin accruing vacation starting with your first full pay period. Beginning in your second calendar year of employment you have the option to purchase up to five (5) additional days of vacation.
|
•
|
Thrift/401(k) Savings Plan - You will be able to contribute to our Thrift/401(k) Savings Plan on a pre-tax and/or after-tax basis. Freddie Mac will begin matching a portion of your contributions after one year of service at up to six percent of pay. This plan also includes an annual company discretionary contribution that is based on company performance.
|
•
|
Supplemental Executive Retirement Plan (SERP) - The SERP is an unfunded nonqualified plan for officers intended to make up for employer-provided contributions under the Thrift/401(k) Savings Plan that are capped due to Internal Revenue Code limitations.
|
/s/ Donald H. Layton_____________
|
|
June 25, 2013
|
Donald H. Layton
|
|
Date
|
Chief Executive Officer
|
|
|
|
|
|
I agree to the terms of this Agreement.
|
|
|
|
|
|
/s/ Michael Hutchins_____________
|
|
June 25, 2013
|
Michael Hutchins
|
|
Date
|
By:
|
/s/ Michael Hutchins
|
Date:
June 25, 2013
|
|
Michael Hutchins
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
|
(dollars in millions)
|
||||||||||||||||||
Net income (loss) before income tax (expense) benefit and cumulative effect of changes in accounting principles
|
$
|
9,274
|
|
|
$
|
11,002
|
|
|
$
|
25,363
|
|
|
$
|
9,445
|
|
|
$
|
(5,666
|
)
|
Add:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total interest expense
|
51,916
|
|
|
54,916
|
|
|
55,779
|
|
|
66,502
|
|
|
79,988
|
|
|||||
Interest factor in rental expenses
|
2
|
|
|
5
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|||||
Earnings (loss), as adjusted
|
$
|
61,192
|
|
|
$
|
65,923
|
|
|
$
|
81,146
|
|
|
$
|
75,951
|
|
|
$
|
74,326
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total interest expense
|
$
|
51,916
|
|
|
$
|
54,916
|
|
|
$
|
55,779
|
|
|
$
|
66,502
|
|
|
$
|
79,988
|
|
Interest factor in rental expenses
|
2
|
|
|
5
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|||||
Total fixed charges
|
$
|
51,918
|
|
|
$
|
54,921
|
|
|
$
|
55,783
|
|
|
$
|
66,506
|
|
|
$
|
79,992
|
|
Senior preferred stock and preferred stock dividends
(1)
|
5,510
|
|
|
19,610
|
|
|
47,591
|
|
|
7,229
|
|
|
6,498
|
|
|||||
Total fixed charges including preferred stock dividends
|
$
|
57,428
|
|
|
$
|
74,531
|
|
|
$
|
103,374
|
|
|
$
|
73,735
|
|
|
$
|
86,490
|
|
Ratio of earnings to fixed charges
(2)
|
1.18
|
|
|
1.20
|
|
|
1.45
|
|
|
1.14
|
|
|
—
|
|
|||||
Ratio of earnings to combined fixed charges and preferred stock dividends
(3)
|
1.07
|
|
|
—
|
|
|
—
|
|
|
1.03
|
|
|
—
|
|
(1)
|
Senior preferred stock and preferred stock dividends represent pre-tax earnings required to cover any senior preferred stock and preferred stock dividend requirements computed using our effective tax rate, whenever there is an income tax provision, for the relevant periods.
|
(2)
|
Ratio of earnings to fixed charges is computed by dividing earnings (loss), as adjusted by total fixed charges. For the ratio to equal 1.00, earnings (loss), as adjusted must increase by $5.7 billion for the year ended December 31, 2011, respectively.
|
(3)
|
Ratio of earnings to combined fixed charges and preferred stock dividends is computed by dividing earnings (loss), as adjusted by total fixed charges including preferred stock dividends. For the ratio to equal 1.00, earnings (loss), as adjusted must increase by $8.6 billion, $22.2 billion, and $12.2 billion for the years ended December 31, 2014, 2013, and 2011, respectively.
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
/s/ Donald H. Layton
|
|
|
Donald H. Layton
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
/s/ James G. Mackey
|
|
|
James G. Mackey
|
|
|
Executive Vice President — Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
/s/ Donald H. Layton
|
|
|
Donald H. Layton
|
|
|
Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
/s/ James G. Mackey
|
|
|
James G. Mackey
|
|
|
Executive Vice President — Chief Financial Officer
|