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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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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CREDIT RISK
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OPERATIONAL RISK
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MARKET 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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2016 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
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Freddie Mac 2016 Form 10-K
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|
i
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Introduction
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About Freddie Mac
|
Freddie Mac 2016 Form 10-K
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1
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Introduction
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About Freddie Mac
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(In billions)
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Total
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Total Senior Preferred Stock Outstanding
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$72.3
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Less: Initial Liquidation Preference
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1.0
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Treasury Draws
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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 12/31/16
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$101.4
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Scheduled Q1 2017 Dividend Obligation
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4.5
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Total Dividend Payments
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$105.9
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Freddie Mac 2016 Form 10-K
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2
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Introduction
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About Freddie Mac
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•
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Lower derivative fair value losses due to an increase in longer-term interest rates during 2016 compared to 2015 when longer-term interest rates declined slightly;
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•
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Higher other income primarily as a result of improved pricing on K Certificates and SB Certificates, coupled with increased fair value gains on multifamily mortgage loans for which we have elected the fair value option and multifamily mortgage loan purchase commitments for which we newly elected the fair value option beginning in 2016, due to market spread tightening in 2016 compared to widening in 2015; partially offset by the following:
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•
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Lower net interest income due primarily to continued reduction in the balance of our mortgage-related investments portfolio; and
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•
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Increased losses on investment securities primarily as a result of an increase in interest rates during 2016 compared to 2015 when longer-term interest rates declined slightly, coupled with a decrease in realized gains in 2016 as we sold fewer non-agency securities in an unrealized gain position.
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Freddie Mac 2016 Form 10-K
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3
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Introduction
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About Freddie Mac
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•
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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 favorable 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 market spread widening, while in 2014 we recorded gains due to market 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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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 GAAP earnings when interest rates fluctuate. Based upon the composition of our financial assets and liabilities, including derivatives, at December 31, 2016, 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. For information about our interest-rate risk management activities and the sensitivity of our financial results to interest-rate volatility, see "MD&A - Consolidated Results of Operations - Derivative Gains (Losses) - Explanation of Key Drivers of Derivative Gains (Losses)", "MD&A - Consolidated Results of Operations - Other Key Drivers - Items Affecting Multiple Lines - Debt Funding Strategies and Interest-Rate Risk Management Activities," and "MD&A - Risk Management - Market Risk."
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•
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Spread Volatility
— The volatility of market spreads (i.e., credit spreads, liquidity spreads, risk premiums, etc.), or OAS, is the risk associated with changes in the excess of market interest rates over benchmark rates. We hold assets and liabilities that expose us to spread volatility, which may contribute to significant GAAP earnings volatility. For financial assets measured at fair value, we generally recognize fair value losses when market spreads widen. Conversely, for financial liabilities measured at fair value, we generally recognize fair value gains when market spreads widen.
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Freddie Mac 2016 Form 10-K
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4
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Introduction
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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 2016 Form 10-K
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5
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Introduction
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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 2016 Form 10-K
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6
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Introduction
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Our Business
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Freddie Mac 2016 Form 10-K
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7
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Introduction
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Our Business
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Freddie Mac 2016 Form 10-K
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8
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Introduction
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Forward-Looking Statements
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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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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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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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Changes in economic and market conditions, including changes in employment rates, interest rates, spreads, and home prices;
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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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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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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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Our ability to maintain adequate liquidity to fund our operations;
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Our ability to maintain the security of our operating systems and infrastructure (e.g., against cyberattacks);
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Our ability to effectively execute our business strategies, implement new initiatives, and improve efficiency;
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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 economic exposure and GAAP earnings exposure to interest-rate
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Freddie Mac 2016 Form 10-K
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9
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Introduction
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Forward-Looking Statements
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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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Other factors and assumptions described in this Form 10-K, including in the “MD&A” section.
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Freddie Mac 2016 Form 10-K
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10
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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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2016
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2015
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2014
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2013
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2012
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||||||||||
Statements of Comprehensive Income Data
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||||||||||
Net interest income
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$14,379
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$14,946
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$14,263
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$16,468
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$17,611
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Benefit (provision) for credit losses
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803
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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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|||||
Non-interest income (loss)
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500
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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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|||||
Non-interest expense
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(4,043
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)
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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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|||||
Income tax (expense) benefit
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(3,824
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)
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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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|||||
Net income
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7,815
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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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|||||
Comprehensive income
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7,118
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5,799
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9,426
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51,600
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16,039
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|||||
Net income (loss) attributable to common stockholders
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97
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(23
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)
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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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|||||
Net income (loss) per common share - basic and diluted
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0.03
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(0.01
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)
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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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)
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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)
|
3,234
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|
3,235
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3,236
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|
3,238
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|
3,240
|
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|||||
|
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|
||||||||||
Balance Sheets Data
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|
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|
||||||||||
Loans held-for-investment, at amortized cost by consolidated trusts (net of allowances for loan losses)
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|
$1,690,218
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$1,625,184
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|
$1,558,094
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|
$1,529,905
|
|
|
$1,495,932
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|
Real estate owned, net
|
1,198
|
|
1,725
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|
2,558
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|
4,551
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|
4,378
|
|
|||||
Total assets
|
2,023,376
|
|
1,985,892
|
|
1,945,360
|
|
1,965,831
|
|
1,989,557
|
|
|||||
Debt securities of consolidated trusts held by third parties
|
1,648,683
|
|
1,556,121
|
|
1,479,473
|
|
1,433,984
|
|
1,419,524
|
|
|||||
Other Debt
|
353,321
|
|
414,148
|
|
449,890
|
|
506,537
|
|
547,219
|
|
|||||
All other liabilities
|
16,297
|
|
12,683
|
|
13,346
|
|
12,475
|
|
13,987
|
|
|||||
Total stockholders' equity
|
5,075
|
|
2,940
|
|
2,651
|
|
12,835
|
|
8,827
|
|
|||||
|
|
|
|
|
|
||||||||||
Portfolio Balances - UPB
|
|
|
|
|
|
||||||||||
Mortgage-related investments portfolio
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|
$298,426
|
|
|
$346,911
|
|
|
$408,414
|
|
|
$461,024
|
|
|
$557,544
|
|
Total Freddie Mac mortgage-related securities
|
1,832,810
|
|
1,729,493
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|
1,637,086
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|
1,592,511
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|
1,562,040
|
|
|||||
Total mortgage portfolio
|
2,011,414
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|
1,941,587
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|
1,910,106
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|
1,914,661
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|
1,956,276
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|
|||||
TDRs on accrual status
|
77,399
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|
82,347
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|
82,908
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|
78,708
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|
66,590
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|
|||||
Non-accrual loans
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16,272
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|
22,649
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|
33,130
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|
43,457
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|
63,005
|
|
|||||
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||||||||||
Ratios
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|
||||||||||
Return on average assets
|
0.4
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%
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0.3
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%
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0.4
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%
|
2.5
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%
|
0.5
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%
|
|||||
Allowance for loan losses as percentage of loans, held-for-investment
|
0.7
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|
0.9
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|
1.3
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|
1.4
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|
1.8
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|
|||||
Equity to assets
|
0.2
|
|
0.1
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|
0.4
|
|
0.5
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|
0.2
|
|
Freddie Mac 2016 Form 10-K
|
|
11
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Management's Discussion and Analysis
|
Key Economic Indicators | Single-Family Home Prices
|
•
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Changes in home prices affect the amount of equity that borrowers have in their homes. Borrowers with less equity typically have higher delinquency rates.
|
•
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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. Increases in home prices lower the losses we incur on defaulted loans.
|
•
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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 2016, increasing
6.5%
, compared to an increase of 6.2% during 2015, based on our own non-seasonally adjusted price index of single-family homes funded by loans owned or guaranteed by us or Fannie Mae.
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•
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National home prices at the end of 2016 surpassed their pre-financial crisis peak reached in June 2006, based on our index.
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•
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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 2016 Form 10-K
|
|
12
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Management's Discussion and Analysis
|
Key Economic Indicators | Interest Rates
|
•
|
The 30-year Primary Mortgage Market Survey ("PMMS") interest rate is indicative of what a consumer could expect to be offered on a first-lien, prime, home purchase mortgage with an LTV of 80%. Increases in the PMMS rate typically result in decreases in refinance activity and originations. Decreases 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, measured at fair value on a recurring basis on our consolidated balance sheets.
|
•
|
For additional information on the effect of LIBOR swap rates on our financial results, see "Our Business Segments - Investments - Market Conditions."
|
Freddie Mac 2016 Form 10-K
|
|
13
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Management's Discussion and Analysis
|
Key Economic Indicators | Interest Rates
|
•
|
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 increase, mortgage interest rates for 30-year fixed-rate loans usually also increase. When these rates decline, mortgage interest rates for 30-year fixed-rate loans usually also decline.
|
•
|
Longer-term interest rates, as indicated by the 10-year LIBOR rate and the 10-year Treasury rate, and mortgage interest rates, as indicated by the 30-year PMMS rate, both increased significantly during the fourth quarter of 2016, which caused rates to be higher at the end of 2016 than the end of 2015. However, average interest rates were lower in 2016 compared to 2015 and lower in 2015 compared to 2014.
|
•
|
The Federal Reserve raised short-term interest rates in December 2015 and again in December 2016.
|
Freddie Mac 2016 Form 10-K
|
|
14
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
Monthly net new job growth decreased during 2016.
|
•
|
The unemployment rate declined slightly in 2016.
|
Freddie Mac 2016 Form 10-K
|
|
15
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
|
|
Year Ended December 31,
|
|
Change 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net interest income
|
|
|
$14,379
|
|
|
|
$14,946
|
|
|
|
$14,263
|
|
|
|
($567
|
)
|
|
(4
|
)%
|
|
|
$683
|
|
|
5
|
%
|
Benefit (provision) for credit losses
|
|
803
|
|
|
2,665
|
|
|
(58
|
)
|
|
(1,862
|
)
|
|
(70
|
)%
|
|
2,723
|
|
|
4,695
|
%
|
|||||
Net interest income after benefit (provision) for credit losses
|
|
15,182
|
|
|
17,611
|
|
|
14,205
|
|
|
(2,429
|
)
|
|
(14
|
)%
|
|
3,406
|
|
|
24
|
%
|
|||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gains (losses) on extinguishment of debt
|
|
(211
|
)
|
|
(240
|
)
|
|
(422
|
)
|
|
29
|
|
|
12
|
%
|
|
182
|
|
|
43
|
%
|
|||||
Derivative gains (losses)
|
|
(274
|
)
|
|
(2,696
|
)
|
|
(8,291
|
)
|
|
2,422
|
|
|
90
|
%
|
|
5,595
|
|
|
67
|
%
|
|||||
Net impairment of available-for-sale securities recognized in earnings
|
|
(191
|
)
|
|
(292
|
)
|
|
(938
|
)
|
|
101
|
|
|
35
|
%
|
|
646
|
|
|
69
|
%
|
|||||
Other gains (losses) on investment securities recognized in earnings
|
|
(78
|
)
|
|
508
|
|
|
1,494
|
|
|
(586
|
)
|
|
(115
|
)%
|
|
(986
|
)
|
|
(66
|
)%
|
|||||
Other income (loss)
|
|
1,254
|
|
|
(879
|
)
|
|
8,044
|
|
|
2,133
|
|
|
243
|
%
|
|
(8,923
|
)
|
|
(111
|
)%
|
|||||
Total non-interest income (loss)
|
|
500
|
|
|
(3,599
|
)
|
|
(113
|
)
|
|
4,099
|
|
|
114
|
%
|
|
(3,486
|
)
|
|
(3,085
|
)%
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Administrative expense
|
|
(2,005
|
)
|
|
(1,927
|
)
|
|
(1,881
|
)
|
|
(78
|
)
|
|
(4
|
)%
|
|
(46
|
)
|
|
(2
|
)%
|
|||||
REO operations expense
|
|
(287
|
)
|
|
(338
|
)
|
|
(196
|
)
|
|
51
|
|
|
15
|
%
|
|
(142
|
)
|
|
(72
|
)%
|
|||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
|
(1,152
|
)
|
|
(967
|
)
|
|
(775
|
)
|
|
(185
|
)
|
|
(19
|
)%
|
|
(192
|
)
|
|
(25
|
)%
|
|||||
Other expense
|
|
(599
|
)
|
|
(1,506
|
)
|
|
(238
|
)
|
|
907
|
|
|
60
|
%
|
|
(1,268
|
)
|
|
(533
|
)%
|
|||||
Total non-interest expense
|
|
(4,043
|
)
|
|
(4,738
|
)
|
|
(3,090
|
)
|
|
695
|
|
|
15
|
%
|
|
(1,648
|
)
|
|
(53
|
)%
|
|||||
Income before income tax expense
|
|
11,639
|
|
|
9,274
|
|
|
11,002
|
|
|
2,365
|
|
|
26
|
%
|
|
(1,728
|
)
|
|
(16
|
)%
|
|||||
Income tax expense
|
|
(3,824
|
)
|
|
(2,898
|
)
|
|
(3,312
|
)
|
|
(926
|
)
|
|
(32
|
)%
|
|
414
|
|
|
13
|
%
|
|||||
Net income
|
|
7,815
|
|
|
6,376
|
|
|
7,690
|
|
|
1,439
|
|
|
23
|
%
|
|
(1,314
|
)
|
|
(17
|
)%
|
|||||
Total other comprehensive income (loss), net of taxes and reclassification adjustments
|
|
(697
|
)
|
|
(577
|
)
|
|
1,736
|
|
|
(120
|
)
|
|
(21
|
)%
|
|
(2,313
|
)
|
|
(133
|
)%
|
|||||
Comprehensive income
|
|
|
$7,118
|
|
|
|
$5,799
|
|
|
|
$9,426
|
|
|
|
$1,319
|
|
|
23
|
%
|
|
|
($3,627
|
)
|
|
(38
|
)%
|
Freddie Mac 2016 Form 10-K
|
|
16
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Net Interest Income
|
•
|
Contractual net interest income
- consists of two primary components:
|
◦
|
Guarantee fees on debt securities issued 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 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 guarantee fees that is remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011; and
|
◦
|
The difference between the interest income earned on all other interest-earning assets, excluding loans held by consolidated trusts,
and the interest expense incurred on the liabilities used to fund those assets.
|
•
|
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 2016 Form 10-K
|
|
17
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Net Interest Income
|
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||||||||||||||
(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
|
|
$16,932
|
|
|
|
$42
|
|
|
0.25
|
%
|
|
|
$12,482
|
|
|
|
$8
|
|
|
0.06
|
%
|
|
|
$13,889
|
|
|
|
$4
|
|
|
0.03
|
%
|
Securities purchased under agreements to resell
|
59,639
|
|
|
217
|
|
|
0.36
|
|
|
51,219
|
|
|
58
|
|
|
0.11
|
|
|
42,905
|
|
|
28
|
|
|
0.06
|
|
||||||
Advances to lenders
|
484
|
|
|
11
|
|
|
2.28
|
|
|
161
|
|
|
4
|
|
|
2.48
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mortgage-related securities
|
189,982
|
|
|
7,262
|
|
|
3.82
|
|
|
226,162
|
|
|
8,706
|
|
|
3.85
|
|
|
256,548
|
|
|
10,027
|
|
|
3.91
|
|
||||||
Extinguishment of PCs held by Freddie Mac
|
(94,624
|
)
|
|
(3,509
|
)
|
|
(3.71
|
)
|
|
(107,986
|
)
|
|
(3,929
|
)
|
|
(3.64
|
)
|
|
(111,545
|
)
|
|
(4,190
|
)
|
|
(3.76
|
)
|
||||||
Total mortgage-related securities, net
|
95,358
|
|
|
3,753
|
|
|
3.94
|
|
|
118,176
|
|
|
4,777
|
|
|
4.04
|
|
|
145,003
|
|
|
5,837
|
|
|
4.03
|
|
||||||
Non-mortgage-related securities
|
15,734
|
|
|
102
|
|
|
0.65
|
|
|
10,699
|
|
|
17
|
|
|
0.16
|
|
|
9,983
|
|
|
6
|
|
|
0.06
|
|
||||||
Loans held by consolidated trusts
(1)
|
1,649,727
|
|
|
55,417
|
|
|
3.36
|
|
|
1,590,768
|
|
|
55,867
|
|
|
3.51
|
|
|
1,540,570
|
|
|
57,036
|
|
|
3.70
|
|
||||||
Loans held by Freddie Mac
(1)
|
135,882
|
|
|
5,623
|
|
|
4.14
|
|
|
157,261
|
|
|
6,359
|
|
|
4.04
|
|
|
170,017
|
|
|
6,569
|
|
|
3.86
|
|
||||||
Total interest-earning assets
|
|
$1,973,756
|
|
|
|
$65,165
|
|
|
3.30
|
|
|
|
$1,940,766
|
|
|
|
$67,090
|
|
|
3.46
|
|
|
|
$1,922,367
|
|
|
|
$69,480
|
|
|
3.61
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Debt securities of consolidated trusts including PCs held by Freddie Mac
|
|
$1,674,474
|
|
|
|
($48,108
|
)
|
|
(2.87
|
)
|
|
|
$1,611,388
|
|
|
|
($49,465
|
)
|
|
(3.07
|
)
|
|
|
$1,557,895
|
|
|
|
($52,193
|
)
|
|
(3.35
|
)
|
Extinguishment of PCs held by Freddie Mac
|
(94,624
|
)
|
|
3,509
|
|
|
3.71
|
|
|
(107,986
|
)
|
|
3,929
|
|
|
3.64
|
|
|
(111,545
|
)
|
|
4,190
|
|
|
3.76
|
|
||||||
Total debt securities of consolidated trusts held by third parties
|
1,579,850
|
|
|
(44,599
|
)
|
|
(2.82
|
)
|
|
1,503,402
|
|
|
(45,536
|
)
|
|
(3.03
|
)
|
|
1,446,350
|
|
|
(48,003
|
)
|
|
(3.32
|
)
|
||||||
Other debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Short-term debt
|
86,284
|
|
|
(350
|
)
|
|
(0.41
|
)
|
|
108,096
|
|
|
(173
|
)
|
|
(0.16
|
)
|
|
118,211
|
|
|
(145
|
)
|
|
(0.12
|
)
|
||||||
Long-term debt
|
298,040
|
|
|
(5,646
|
)
|
|
(1.89
|
)
|
|
313,502
|
|
|
(6,207
|
)
|
|
(1.98
|
)
|
|
331,887
|
|
|
(6,768
|
)
|
|
(2.04
|
)
|
||||||
Total other debt
|
384,324
|
|
|
(5,996
|
)
|
|
(1.56
|
)
|
|
421,598
|
|
|
(6,380
|
)
|
|
(1.51
|
)
|
|
450,098
|
|
|
(6,913
|
)
|
|
(1.54
|
)
|
||||||
Total interest-bearing liabilities
|
1,964,174
|
|
|
(50,595
|
)
|
|
(2.57
|
)
|
|
1,925,000
|
|
|
(51,916
|
)
|
|
(2.70
|
)
|
|
1,896,448
|
|
|
(54,916
|
)
|
|
(2.89
|
)
|
||||||
Expense related to derivatives
|
—
|
|
|
(191
|
)
|
|
(0.01
|
)
|
|
—
|
|
|
(228
|
)
|
|
(0.01
|
)
|
|
—
|
|
|
(301
|
)
|
|
(0.02
|
)
|
||||||
Impact of net non-interest-bearing funding
|
9,582
|
|
|
—
|
|
|
0.01
|
|
|
15,766
|
|
|
—
|
|
|
0.02
|
|
|
25,919
|
|
|
—
|
|
|
0.04
|
|
||||||
Total funding of interest-earning assets
|
|
$1,973,756
|
|
|
|
($50,786
|
)
|
|
(2.57
|
)
|
|
|
$1,940,766
|
|
|
|
($52,144
|
)
|
|
(2.69
|
)
|
|
|
$1,922,367
|
|
|
|
($55,217
|
)
|
|
(2.87
|
)
|
Net interest income/yield
|
|
|
|
$14,379
|
|
|
0.73
|
%
|
|
|
|
|
$14,946
|
|
|
0.77
|
%
|
|
|
|
|
$14,263
|
|
|
0.74
|
%
|
Freddie Mac 2016 Form 10-K
|
|
18
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Net Interest Income
|
(1)
|
Loan fees, primarily consisting of amortization of delivery fees, included in interest income were $2.6 billion, $2.0 billion, and $1.4 billion for loans held by consolidated trusts and $215 million, $383 million, and $373 million for loans held by Freddie Mac during 2016, 2015, and 2014, respectively.
|
|
|
2016 vs. 2015 Variance Due to
|
|
2015 vs. 2014 Variance Due to
|
||||||||||||||||||||
(Dollars in millions)
|
|
Rate
|
|
Volume
|
|
Total Change
|
|
Rate
|
|
Volume
|
|
Total Change
|
||||||||||||
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
|
|
$34
|
|
|
|
$—
|
|
|
|
$34
|
|
|
|
$6
|
|
|
|
($2
|
)
|
|
|
$4
|
|
Securities purchased under agreements to resell
|
|
147
|
|
|
12
|
|
|
159
|
|
|
24
|
|
|
6
|
|
|
30
|
|
||||||
Advances to lenders
|
|
—
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-related securities
|
|
(61
|
)
|
|
(1,383
|
)
|
|
(1,444
|
)
|
|
(149
|
)
|
|
(1,172
|
)
|
|
(1,321
|
)
|
||||||
Extinguishment of PCs held by Freddie Mac
|
|
(74
|
)
|
|
494
|
|
|
420
|
|
|
129
|
|
|
132
|
|
|
261
|
|
||||||
Total mortgage-related securities, net
|
|
(135
|
)
|
|
(889
|
)
|
|
(1,024
|
)
|
|
(20
|
)
|
|
(1,040
|
)
|
|
(1,060
|
)
|
||||||
Non-mortgage-related securities
|
|
74
|
|
|
11
|
|
|
85
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||||
Loans held by consolidated
trusts
|
|
(2,479
|
)
|
|
2,029
|
|
|
(450
|
)
|
|
(2,991
|
)
|
|
1,822
|
|
|
(1,169
|
)
|
||||||
Loans held by Freddie Mac
|
|
146
|
|
|
(882
|
)
|
|
(736
|
)
|
|
297
|
|
|
(507
|
)
|
|
(210
|
)
|
||||||
Total interest-earning assets
|
|
|
($2,213
|
)
|
|
|
$288
|
|
|
|
($1,925
|
)
|
|
|
($2,673
|
)
|
|
|
$283
|
|
|
|
($2,390
|
)
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt securities of consolidated trusts including PCs held by Freddie Mac
|
|
|
$3,246
|
|
|
|
($1,889
|
)
|
|
|
$1,357
|
|
|
|
$4,476
|
|
|
|
($1,748
|
)
|
|
|
$2,728
|
|
Extinguishment of PCs held by Freddie Mac
|
|
74
|
|
|
(494
|
)
|
|
|
($420
|
)
|
|
(129
|
)
|
|
(132
|
)
|
|
|
($261
|
)
|
||||
Total debt securities of consolidated trusts held by third parties
|
|
3,320
|
|
|
(2,383
|
)
|
|
|
$937
|
|
|
4,347
|
|
|
(1,880
|
)
|
|
2,467
|
|
|||||
Other debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Short-term debt
|
|
(218
|
)
|
|
41
|
|
|
(177
|
)
|
|
(41
|
)
|
|
13
|
|
|
(28
|
)
|
||||||
Long-term debt
|
|
262
|
|
|
299
|
|
|
561
|
|
|
193
|
|
|
368
|
|
|
561
|
|
||||||
Total other debt
|
|
44
|
|
|
340
|
|
|
384
|
|
|
152
|
|
|
381
|
|
|
533
|
|
||||||
Total interest-bearing liabilities
|
|
3,364
|
|
|
(2,043
|
)
|
|
1,321
|
|
|
4,499
|
|
|
(1,499
|
)
|
|
3,000
|
|
||||||
Expense related to derivatives
|
|
37
|
|
|
—
|
|
|
37
|
|
|
73
|
|
|
—
|
|
|
73
|
|
||||||
Total funding of interest-earning assets
|
|
|
$3,401
|
|
|
|
($2,043
|
)
|
|
|
$1,358
|
|
|
|
$4,572
|
|
|
|
($1,499
|
)
|
|
|
$3,073
|
|
Net interest income
|
|
|
$1,188
|
|
|
|
($1,755
|
)
|
|
|
($567
|
)
|
|
|
$1,899
|
|
|
|
($1,216
|
)
|
|
|
$683
|
|
Freddie Mac 2016 Form 10-K
|
|
19
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Net Interest Income
|
|
Year Ended December 31,
|
|
Change 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in millions)
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Contractual net interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Guarantee fee income
|
|
$2,997
|
|
|
|
$2,722
|
|
|
|
$2,399
|
|
|
|
$275
|
|
|
10
|
%
|
|
|
$323
|
|
|
13
|
%
|
Guarantee fee income related to the Temporary Payroll Tax Cut Continuation Act of 2011
|
1,142
|
|
|
957
|
|
|
759
|
|
|
185
|
|
|
19
|
%
|
|
198
|
|
|
26
|
%
|
|||||
Other contractual net interest income
|
6,896
|
|
|
8,106
|
|
|
9,070
|
|
|
(1,210
|
)
|
|
(15
|
)%
|
|
(964
|
)
|
|
(11
|
)%
|
|||||
Total contractual net interest income
|
11,035
|
|
|
11,785
|
|
|
12,228
|
|
|
(750
|
)
|
|
(6
|
)%
|
|
(443
|
)
|
|
(4
|
)%
|
|||||
Net amortization - loans and debt securities of consolidated trusts
|
3,333
|
|
|
2,883
|
|
|
1,913
|
|
|
450
|
|
|
16
|
%
|
|
970
|
|
|
51
|
%
|
|||||
Net amortization - other assets and debt
|
202
|
|
|
506
|
|
|
423
|
|
|
(304
|
)
|
|
(60
|
)%
|
|
83
|
|
|
20
|
%
|
|||||
Expense related to derivatives
|
(191
|
)
|
|
(228
|
)
|
|
(301
|
)
|
|
37
|
|
|
16
|
%
|
|
73
|
|
|
24
|
%
|
|||||
Net interest income
|
|
$14,379
|
|
|
|
$14,946
|
|
|
|
$14,263
|
|
|
|
($567
|
)
|
|
(4
|
)%
|
|
|
$683
|
|
|
5
|
%
|
•
|
Guarantee fee income (contractual)
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- increased during both comparative periods as a result of higher average contractual guarantee fee rates, reflecting continued growth in the size of the Core single-family book, and a larger overall single-family credit guarantee portfolio. Average contractual guarantee fees are generally higher on mortgage loans in our Core single-family book compared to those in our Legacy single-family guarantee book. See "Our Business Segments - Single-Family Guarantee" for additional discussion.
|
•
|
Other contractual net interest income
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- decreased during both comparative periods primarily due to the continued 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 FHFA. We expect this trend to continue in the 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
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- increased during both comparative periods primarily due to an increase in the amortization of upfront delivery fees and basis adjustments on debt securities of consolidated trusts. The increase in amortization was primarily driven by higher prepayment rates on single-family loans during 2016 compared to 2015 and 2015 compared to 2014.
|
•
|
Net amortization of other assets and debt
|
◦
|
2016 vs. 2015
- decreased primarily due to less accretion of previously recognized other-than-temporary impairments. The decrease in accretion is due to a decline in the population of impaired securities as a result of our active disposition of these securities and a decline in new other-than-temporary impairments recognized.
|
Freddie Mac 2016 Form 10-K
|
|
20
|
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 2016 Form 10-K
|
|
21
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Provision for Credit Losses
|
|
|
Year Ended December 31,
|
|
Change 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in billions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Provision for newly impaired loans
|
|
|
($0.8
|
)
|
|
|
($0.9
|
)
|
|
|
($1.7
|
)
|
|
|
$0.1
|
|
|
11
|
%
|
|
|
$0.8
|
|
|
47
|
%
|
Amortization of interest rate concessions
|
|
0.9
|
|
|
1.2
|
|
|
1.4
|
|
|
(0.3
|
)
|
|
(25
|
)%
|
|
(0.2
|
)
|
|
(14
|
)%
|
|||||
Reclassifications of held-for-investment loans to held-for-sale loans
|
|
0.8
|
|
|
2.3
|
|
|
0.1
|
|
|
(1.5
|
)
|
|
(65
|
)%
|
|
2.2
|
|
|
2,200
|
%
|
|||||
Other, including changes in estimated default probability and loss severity
|
|
(0.1
|
)
|
|
0.1
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
(200
|
)%
|
|
—
|
|
|
—
|
|
|||||
Benefit (provision) for credit losses
|
|
|
$0.8
|
|
|
|
$2.7
|
|
|
|
($0.1
|
)
|
|
|
($1.9
|
)
|
|
(70
|
)%
|
|
|
$2.8
|
|
|
2,800
|
%
|
•
|
2016 vs. 2015 -
benefit for credit losses declined in 2016 compared to 2015 primarily due to a decrease in the number of seasoned single-family loans reclassified from held-for-investment to held-for sale in 2016. During 2016, $4.7 billion in UPB of single-family loans was reclassified to held-for-sale, compared to $13.6 billion during 2015. See "Effect of Loan Reclassifications" for the effect of these loan reclassifications on pre-tax net income.
|
•
|
2015 vs. 2014 -
changed to a benefit in 2015 from a (provision) in 2014 primarily due to:
|
◦
|
An increase in the number of seasoned single-family loans reclassified from held-for-investment to held-for-sale in 2015. During 2014, $0.7 billion in UPB of seasoned single-family loans were reclassified to held-for-sale.
|
◦
|
A decrease in the provision for newly impaired loans in 2015 compared to 2014 due to a decline in the volume of newly delinquent single-family loans.
|
Freddie Mac 2016 Form 10-K
|
|
22
|
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). 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
|
Freddie Mac 2016 Form 10-K
|
|
23
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Derivative Gains (Losses)
|
•
|
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).
|
•
|
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 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Fair value change in interest-rate swaps
|
|
|
$178
|
|
|
|
($778
|
)
|
|
|
($7,294
|
)
|
|
|
$956
|
|
|
123
|
%
|
|
|
$6,516
|
|
|
89
|
%
|
Fair value change in option-based derivatives
|
|
421
|
|
|
258
|
|
|
1,437
|
|
|
163
|
|
|
63
|
%
|
|
(1,179
|
)
|
|
(82
|
)%
|
|||||
Fair value change in other derivatives
|
|
887
|
|
|
22
|
|
|
191
|
|
|
865
|
|
|
3,932
|
%
|
|
(169
|
)
|
|
(88
|
)%
|
|||||
Accrual of periodic cash settlements
|
|
(1,760
|
)
|
|
(2,198
|
)
|
|
(2,625
|
)
|
|
438
|
|
|
20
|
%
|
|
427
|
|
|
16
|
%
|
|||||
Derivative gains (losses)
|
|
|
($274
|
)
|
|
|
($2,696
|
)
|
|
|
($8,291
|
)
|
|
|
$2,422
|
|
|
90
|
%
|
|
|
$5,595
|
|
|
67
|
%
|
•
|
2016 vs. 2015
- derivative losses declined during 2016 primarily due to an increase in longer-term interest rates during the fourth quarter of 2016 resulting in an improvement in the fair value of our pay-fixed interest-rate swaps and forward commitments to issue PC debt. This improvement in fair value was partially offset by losses in our receive-fixed-interest-rate swaps. The 10-year par swap rate increased
13
basis points during 2016, while the 10-year par swap rate declined
10
basis points during 2015.
|
•
|
2015 vs. 2014
- derivative losses declined during 2015 primarily due to a smaller decline in interest rates in 2015 than in 2014. We recognized larger derivative losses during 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. The 10-year par swap rate declined
78
basis points during 2014.
|
•
|
See "Our Business Segments - Investments - Market Conditions" for more information about par swap rates.
|
Freddie Mac 2016 Form 10-K
|
|
24
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Other Comprehensive Income
|
|
|
Year Ended December 31,
|
|
Change 2016 - 2015
|
|
Change 2015 - 2014
|
||||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Other comprehensive income, excluding reclassifications
|
|
|
($29
|
)
|
|
|
$374
|
|
|
|
$2,563
|
|
|
|
($403
|
)
|
|
(108
|
)%
|
|
|
($2,189
|
)
|
|
(85
|
)%
|
Reclassifications from AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accretion due to significant increases in expected cash flows on previously-impaired available-for-sale securities
|
|
(299
|
)
|
|
(449
|
)
|
|
(519
|
)
|
|
150
|
|
|
33
|
%
|
|
70
|
|
|
13
|
%
|
|||||
Realized gains (losses) reclassified from AOCI
|
|
(369
|
)
|
|
(502
|
)
|
|
(308
|
)
|
|
133
|
|
|
26
|
%
|
|
(194
|
)
|
|
(63
|
)%
|
|||||
Total reclassifications from AOCI
|
|
(668
|
)
|
|
(951
|
)
|
|
(827
|
)
|
|
283
|
|
|
30
|
%
|
|
(124
|
)
|
|
(15
|
)%
|
|||||
Total other comprehensive income (loss)
|
|
|
($697
|
)
|
|
|
($577
|
)
|
|
|
$1,736
|
|
|
|
($120
|
)
|
|
(21
|
)%
|
|
|
($2,313
|
)
|
|
(133
|
)%
|
•
|
Other comprehensive income, excluding reclassifications
|
◦
|
2016 vs. 2015
- was a loss in 2016 compared to income in 2015, primarily due to unrealized losses resulting from an increase in longer-term interest rates, coupled with a decrease in unrealized gains as our non-agency securities portfolio continues to decline consistent with the reduction of our mortgage-related investments portfolio pursuant to the limits established by the Purchase Agreement and FHFA.
|
◦
|
2015 vs. 2014
- decreased primarily due to less market spread tightening for our non-agency securities.
|
•
|
Accretion due to significant increases in expected cash flows on previously impaired available-for-sale securities
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- decreased during both comparative periods primarily due to a decline in the population of impaired securities as a result of our active dispositions of these securities, coupled with a decline in new other-than-temporary impairments.
|
Freddie Mac 2016 Form 10-K
|
|
25
|
Management's Discussion and Analysis
|
Consolidated Results of Operations | Other Comprehensive Income
|
•
|
Realized gains (losses) reclassified from AOCI
|
◦
|
2016 vs. 2015
- decreased primarily due to a decline in sales of non-agency securities in an unrealized gain position. Our sales of non-agency securities will continue to vary as the portion of our portfolio that we are able to sell, based on a variety of criteria, has decreased.
|
◦
|
2015 vs. 2014
- increased primarily due to greater sales of agency and non-agency securities in an unrealized gain position. The increase in sales was a result of improved pricing due to declining longer-term interest rates and stabilized collateral performance.
|
Freddie Mac 2016 Form 10-K
|
|
26
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
•
|
Gains (losses) on extinguishment of debt
|
◦
|
2016 vs. 2015
- losses decreased primarily due to an increase in longer-term interest rates during the fourth quarter of 2016, coupled with a decline in our repurchase of single-family PCs. The increase in longer-term interest rates resulted in net extinguishment gains for PCs repurchased during the fourth quarter, which partially offset the net extinguishment losses recognized for PCs repurchased during the nine months ended September 30, 2016. The amount of extinguishment gains or losses may vary, as the type and amount of PCs selected for repurchase are based on our investment and funding strategies, including our efforts to support the liquidity and price performance of our PCs.
|
◦
|
2015 vs. 2014
- losses decreased primarily due to a significant decline in our repurchase of single-family PCs, coupled with a smaller decline in longer-term interest rates in 2015 compared to 2014.
|
•
|
Net impairments of available-for-sale securities recognized in earnings
|
◦
|
2016 vs. 2015
- decreased primarily due to a decline in the population of non-agency securities, including those non-agency securities that we intend to sell. Our intent to sell population declined, as the portion of our non-agency securities that we are able to sell, based on a variety of criteria, has decreased.
|
◦
|
2015 vs. 2014
- decreased as the unrealized losses associated with securities we intend to sell were lower due to improvements in forecasted home prices, a smaller decline in market interest rates in 2015 compared to 2014, and continued tightening of market spreads for our non-agency securities. Furthermore, the portion of the net impairment related to additional credit losses declined as a result of improved security pricing, stabilized collateral performance, and our efforts to sell certain of the previously impaired non-agency 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
|
◦
|
2016 vs. 2015
- decreased as we recognized net losses during 2016 compared to net gains during 2015, primarily due to losses on our mortgage-related and non-mortgage-related securities as a result of increasing longer-term interest rates, coupled with less realized gains from our available-for-sale securities, as we sold fewer non-agency securities in an unrealized gain position.
|
◦
|
2015 vs. 2014
- decreased primarily due to a decline in sales of our agency mortgage-related securities.
|
•
|
Other income (loss)
|
◦
|
2016 vs. 2015
- other income (loss) improved reflecting:
|
▪
|
Decreased lower-of-cost-or-fair-value adjustments as we reclassified fewer seasoned single-family loans from held-for-investment to held-for-sale during 2016; and
|
▪
|
Increased gains on multifamily mortgage loans and commitments for which we have elected the fair value option, due to increased market spread-related fair value gains. K Certificate benchmark spreads tightened during 2016 compared to these spreads widening during 2015.
|
Freddie Mac 2016 Form 10-K
|
|
27
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
◦
|
2015 vs. 2014
- other income (loss) declined reflecting:
|
▪
|
Decreased income from non-agency mortgage-related securities litigation settlements;
|
▪
|
Increased write-downs due to lower-of-cost-or-fair-value adjustments for seasoned single-family loans reclassified from held-for-investment to held-for-sale; and
|
▪
|
Decreased fair value of multifamily mortgage loans for which we have elected the fair value option, due to the widening of K Certificate benchmark spreads observed in the market.
|
•
|
REO operations expense
|
◦
|
2016 vs. 2015
- decreased resulting from a decline in REO inventory due to a decline in the number of seriously delinquent loans as the housing market and economy continued to improve.
|
◦
|
2015 vs. 2014
- increased due to a decrease in gains on the disposition of REO properties and recoveries from mortgage insurance.
|
•
|
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- continued to increase as a result of the increase in the population of loans subject to this expense. As of
December 31, 2016
and 2015, respectively,
$1.3 trillion
and $1.1 trillion of UPB of loans (or
72%
and 63% of the single-family credit guarantee portfolio) were subject to these fees. We expect the amount of these fees will continue to increase as we add new business and the population of loans subject to these fees increases.
|
•
|
Other expense
|
◦
|
2016 vs. 2015
-
decreased primarily driven by property taxes and insurance costs associated with seasoned single-family loans reclassified from held-for-investment to held-for-sale as we reclassified fewer loans in 2016 compared to 2015. These costs are considered part of the loan loss reserves while the loans are classified as held-for-investment. See "Single-Family Loan Reclassifications" for more information.
|
◦
|
2015 vs. 2014
- increased primarily driven by property taxes and insurance costs associated with seasoned single-family loans reclassified from held-for-investment to held-for-sale as we reclassified more loans in 2015 compared to 2014. These costs are considered part of the loan loss reserves while the loans are classified as held-for-investment. In addition, beginning January 1, 2015, FHFA directed us to set aside 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 requirement and accrued $165 million of related expense. See "MD&A - Regulation and Supervision - Affordable Housing Fund Allocations" for more information.
|
•
|
Income tax expense
|
◦
|
2016 vs. 2015
- increased in 2016 compared to 2015 primarily due to an increase in pre-tax income.
|
◦
|
2015 vs. 2014
- decreased in 2015 compared to 2014 primarily due to a decrease in pre-tax income.
|
Freddie Mac 2016 Form 10-K
|
|
28
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
|
|
Year Ended December 31,
|
||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Benefit for credit losses
|
|
|
$812
|
|
|
|
$2,314
|
|
|
|
$147
|
|
Other income (loss) - lower-of-cost-or-fair-value adjustment
|
|
(1,005
|
)
|
|
(2,193
|
)
|
|
(195
|
)
|
|||
Other (expense) - property taxes and insurance associated with these loans
|
|
(195
|
)
|
|
(1,178
|
)
|
|
(62
|
)
|
|||
Effect on income before income tax (expense) benefit
|
|
|
($388
|
)
|
|
|
($1,057
|
)
|
|
|
($110
|
)
|
Freddie Mac 2016 Form 10-K
|
|
29
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
|
Year Ended December 31,
|
||||||||||
(Dollars in billions)
|
2016
|
|
2015
|
|
2014
|
||||||
Derivative gains (losses)
|
|
($0.3
|
)
|
|
|
($2.7
|
)
|
|
|
($8.3
|
)
|
Less:
|
|
|
|
|
|
||||||
Accrual of periodic cash settlements
|
(1.8
|
)
|
|
(2.2
|
)
|
|
(2.6
|
)
|
|||
Non-interest rate effect on derivative fair values
|
(0.1
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||
Interest rate effect on derivative fair values
|
1.6
|
|
|
(0.5
|
)
|
|
(5.5
|
)
|
|||
Add:
|
|
|
|
|
|
||||||
Estimate of offsetting interest rate effect related to financial instruments measured at fair value
(1)
|
(1.2
|
)
|
|
0.2
|
|
|
2.0
|
|
|||
Income tax benefit (expense)
|
(0.1
|
)
|
|
0.1
|
|
|
1.2
|
|
|||
Estimated Net Interest Rate Effect on Comprehensive income
|
|
$0.3
|
|
|
|
($0.2
|
)
|
|
|
($2.3
|
)
|
(1)
|
Includes the interest-rate effect on our trading securities, available-for-sale securities, mortgage loans held-for-sale, and other assets and debt for which we elected the fair value option, which is reflected in other non-interest income (loss) and total other comprehensive income (loss) on our consolidated statements of comprehensive income.
|
Freddie Mac 2016 Form 10-K
|
|
30
|
Management's Discussion and Analysis
|
Consolidated Results of Operations
|
Freddie Mac 2016 Form 10-K
|
|
31
|
Management's Discussion and Analysis
|
Consolidated Balance Sheets Analysis
|
|
|
December 31,
|
|
|
|
|
|||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
|||||||
Cash and cash equivalents
|
|
|
$12,369
|
|
|
|
$5,595
|
|
|
|
$6,774
|
|
|
121
|
%
|
Restricted cash and cash equivalents
|
|
9,851
|
|
|
14,533
|
|
|
(4,682
|
)
|
|
(32
|
)%
|
|||
Securities purchased under agreements to resell
|
|
51,548
|
|
|
63,644
|
|
|
(12,096
|
)
|
|
(19
|
)%
|
|||
Subtotal
|
|
73,768
|
|
|
83,772
|
|
|
(10,004
|
)
|
|
(12
|
)%
|
|||
Investments in securities, at fair value
|
|
111,547
|
|
|
114,215
|
|
|
(2,668
|
)
|
|
(2
|
)%
|
|||
Mortgage loans, net
|
|
1,803,003
|
|
|
1,754,193
|
|
|
48,810
|
|
|
3
|
%
|
|||
Accrued interest receivable
|
|
6,135
|
|
|
6,074
|
|
|
61
|
|
|
1
|
%
|
|||
Derivative assets, net
|
|
747
|
|
|
395
|
|
|
352
|
|
|
89
|
%
|
|||
Deferred tax assets, net
|
|
15,818
|
|
|
18,205
|
|
|
(2,387
|
)
|
|
(13
|
)%
|
|||
Other assets
|
|
12,358
|
|
|
9,038
|
|
|
3,320
|
|
|
37
|
%
|
|||
Total assets
|
|
|
$2,023,376
|
|
|
|
$1,985,892
|
|
|
|
$37,484
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||
Accrued interest payable
|
|
|
$6,015
|
|
|
|
$6,183
|
|
|
|
($168
|
)
|
|
(3
|
)%
|
Debt, net
|
|
2,002,004
|
|
|
1,970,269
|
|
|
31,735
|
|
|
2
|
%
|
|||
Derivative liabilities, net
|
|
795
|
|
|
1,254
|
|
|
(459
|
)
|
|
(37
|
)%
|
|||
Other liabilities
|
|
9,487
|
|
|
5,246
|
|
|
4,241
|
|
|
81
|
%
|
|||
Total liabilities
|
|
2,018,301
|
|
|
1,982,952
|
|
|
35,349
|
|
|
2
|
%
|
|||
Total equity
|
|
5,075
|
|
|
2,940
|
|
|
2,135
|
|
|
73
|
%
|
|||
Total liabilities and equity
|
|
|
$2,023,376
|
|
|
|
$1,985,892
|
|
|
|
$37,484
|
|
|
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 decrease in the combined balance was due to lower near-term cash needs for upcoming maturities and anticipated calls of other debt at the end of 2016 compared to the end of 2015.
|
•
|
Deferred tax assets, net
decreased primarily due to an increase in longer-term interest rates during 2016, which caused the difference between the GAAP and tax basis of derivative instruments to decline.
|
•
|
Other assets
increased primarily because of higher receivables from servicers and an increase in current income tax receivable. Lower average mortgage interest rates during 2016 caused an increase in prepayments, and thus, an increase in receivables from servicers. The increase in the current income tax receivable is primarily due to an increase in estimated tax payments on account with the IRS.
|
Freddie Mac 2016 Form 10-K
|
|
32
|
Management's Discussion and Analysis
|
Consolidated Balance Sheets Analysis
|
•
|
Other liabilities
increased primarily due to purchases of non-mortgage-related securities that were traded prior to December 31, 2016 and recognized on the consolidated balance sheets, but settled after December 31, 2016.
|
•
|
Total equity
increased as a result of higher comprehensive income in the fourth quarter of 2016 compared to the fourth quarter of 2015 and was partially offset by dividends paid related to the $600 million decline in the Capital Reserve Amount in 2016.
|
Freddie Mac 2016 Form 10-K
|
|
33
|
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 credit risk
|
•
|
Guarantee fee income
|
•
|
Credit-related expenses
|
•
|
Administrative expenses
|
||||
•
|
Credit risk transfer expenses
|
||||
Multifamily
|
Reflects results from our purchase, securitization, and guarantee of multifamily loans and securities, our investments in those loans and securities, and the management of multifamily mortgage credit risk and mortgage market spread risk
|
•
|
Net interest income
|
•
|
Losses on loans
|
•
|
Guarantee fee income
|
•
|
Investment losses
|
||
•
|
Gains on loans
|
•
|
Derivative losses
|
||
•
|
Investment gains
|
•
|
Administrative expenses
|
||
|
•
|
Derivative gains
|
•
|
Credit-related expenses
|
|
|
|
|
|
|
|
Investments
|
Reflects results from managing the company’s mortgage-related investments portfolio (excluding Multifamily segment investments, single-family seriously delinquent loans, and the credit risk of single-family performing loans), treasury function, and interest-rate risk
|
•
|
Net interest income
|
•
|
Investment losses
|
•
|
Investment gains
|
•
|
Derivative losses
|
||
•
|
Derivative gains
|
•
|
Other-than-temporary impairments on non-agency mortgage-related securities
|
||
|
|
•
|
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 guarantee fee income on guarantees, net interest income on investments, and benefit (provision) for credit losses on loans 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 2016 Form 10-K
|
|
34
|
Management's Discussion and Analysis
|
Our Business Segments | Segment Earnings
|
Freddie Mac 2016 Form 10-K
|
|
35
|
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 effective 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 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 increase the liquidity of the TBA market and to reduce the disparities in trading value between our PCs and Fannie Mae's single-class mortgage-related securities.
|
Freddie Mac 2016 Form 10-K
|
|
36
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2016 Form 10-K
|
|
37
|
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) for cash 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. The purchase of loans and sale of PCs are managed by the Investments segment.
|
Freddie Mac 2016 Form 10-K
|
|
38
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2016 Form 10-K
|
|
39
|
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 may 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.
|
Freddie Mac 2016 Form 10-K
|
|
40
|
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). In certain of our STACR debt note transactions to date, we transferred risk in both first loss and mezzanine notional credit risk positions while in other transactions we only transferred risk in the mezzanine notional credit risk positions. The notional amounts of the credit risk positions are reduced when certain specified credit events occur on the loans in the reference pool. Generally, the notional amounts of the credit risk positions will be reduced based on scheduled and unscheduled principal payments that occur on the loans in the reference pool.
|
Freddie Mac 2016 Form 10-K
|
|
41
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
ACIS insurance policies
- In a typical ACIS transaction, we purchase insurance policies, generally 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 reference pool. We may also enter into ACIS transactions that provide credit protection for certain specified
|
Freddie Mac 2016 Form 10-K
|
|
42
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
Deep mortgage insurance credit risk transfer, or Deep MI -
In this transaction, we purchase a credit enhancement from affiliates of mortgage insurance companies that takes effect immediately upon the sale of the mortgage loan to Freddie Mac. Deep MI provides additional coverage beyond primary mortgage insurance. We require our counterparties to 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. In these transactions, the loans are serviced in accordance with our Guide and we control the servicing.
|
•
|
Senior subordinate securitization structures -
In this structure, we issue guaranteed senior securities and unguaranteed subordinated securities backed by single-family loans. The collateral for these structures consists of seasoned performing modified and reperforming loans. The unguaranteed subordinated securities will absorb first losses on the related loans. In these transactions, the loans are not serviced in accordance with our Guide and we do not control the servicing.
|
•
|
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 guarantee fee. The indemnification amount may be fully or partially collateralized.
|
Freddie Mac 2016 Form 10-K
|
|
43
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
Freddie Mac 2016 Form 10-K
|
|
44
|
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 2016 Form 10-K
|
|
45
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
Single-family loan origination volumes in the U.S. increased in 2016, driven by an increase in refinancing activity as a result of lower average mortgage interest rates.
|
•
|
If average mortgage interest rates continue to move higher in 2017, we would anticipate lower origination activity compared to 2016 as refinance activity and home sales would likely decline.
|
Freddie Mac 2016 Form 10-K
|
|
46
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
The U.S. single-family mortgage debt outstanding increased in 2016 compared to 2015, which resulted in an increase in the supply of loans available for us to purchase.
|
•
|
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.
We expect our single-family serious delinquency rate to decline below 1.00% in 2017.
|
•
|
As reported by the U.S. Census Bureau, the U.S. homeownership rate was 63.7% in the fourth quarter of 2016, compared to a high point of 69.2% in the fourth quarter of 2004, and the average of 66.2% since 1990.
|
Freddie Mac 2016 Form 10-K
|
|
47
|
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 have funded approximately
14.2 million
single-family homes since 2009 and purchased approximately
1.4 million
HARP loans since the initiative began in 2009, including over 25,000 during 2016.
|
•
|
Our overall loan purchase activity increased in 2016 compared to 2015, due to higher refinance loan purchase volume as average mortgage interest rates were lower in 2016 compared to 2015. Our overall loan purchase activity increased significantly in 2015 compared to 2014, due to higher volumes of home sales and home price appreciation.
|
•
|
We continued working to improve access to affordable mortgage credit, including through our Home Possible
®
loan initiatives. Our Home Possible
®
loan initiatives offer down payment options as low as
|
Freddie Mac 2016 Form 10-K
|
|
48
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
◦
|
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.
|
•
|
If average mortgage interest rates continue to move higher in 2017, we would anticipate lower purchase volume compared to 2016 as refinance activity and home sales would likely decline.
|
Freddie Mac 2016 Form 10-K
|
|
49
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
The single-family credit guarantee portfolio grew to $1,755 billion in 2016 from $1,702 billion in 2015, an increase of approximately 3%.
|
Freddie Mac 2016 Form 10-K
|
|
50
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
The Core single-family book grew to
73%
of the single-family credit guarantee portfolio at
December 31, 2016
. 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).
|
•
|
The HARP and other relief refinance book represented an additional
15%
of the single-family credit guarantee portfolio at
December 31, 2016
.
|
•
|
The Legacy single-family book declined to
12%
of the single-family credit guarantee portfolio at
December 31, 2016
.
|
Freddie Mac 2016 Form 10-K
|
|
51
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
Average portfolio Segment Earnings guarantee fees
|
◦
|
2016 vs. 2015 and 2015 vs. 2014 -
increased due to higher amortization of upfront delivery fees, driven by higher loan liquidations resulting from a lower average interest rate environment, as well as the acquisition of new loans with higher guarantee fee rates.
|
•
|
Guarantee fees charged on new acquisitions
|
◦
|
2016 vs. 2015 -
increased primarily due to changes in the product mix of our single-family new business purchases as new acquisitions have included a relatively higher proportion of 30-year fixed-rate mortgages, which generally have higher guarantee fee rates than most other mortgage
|
Freddie Mac 2016 Form 10-K
|
|
52
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
◦
|
2015 vs. 2014 -
decreased 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 2016 Form 10-K
|
|
53
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
|
|
(In billions)
|
|
|
||||||
Senior
|
|
Freddie Mac
$200.0
|
|
Reference Pool
$210.1
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
|
|
Freddie Mac
$0.4
|
|
ACIS
$2.4
|
|
STACR Debt Notes
$5.3
|
|
|||
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
First
Loss
|
|
Freddie Mac
$1.4
|
|
ACIS
$0.2
|
|
STACR Debt Notes
$0.2
|
|
|
|
(In billions)
|
|
|
||||||
Senior
|
|
Freddie Mac
$565.6
|
|
Reference Pool
$594.8
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
|
|
Freddie Mac
$1.4
|
|
ACIS
$5.6
|
|
STACR Debt Notes
$17.3
|
|
|||
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
First
Loss
|
|
Freddie Mac
$3.3
|
|
ACIS
$0.6
|
|
STACR
Debt Notes
$1.0
|
|
•
|
We continued to transfer a portion of the expected credit losses and a significant portion of credit losses in a stressed economic environment to third-party investors, insurers, and selected sellers through credit risk transfer transactions. In 2016, we transferred credit losses associated with $215.2 billion in UPB of loans in our Core single-family book through STACR debt note, ACIS, seller indemnification, whole loan security, senior subordinate securitization structures, and Deep MI transactions. Significant developments in 2016 include the following:
|
◦
|
We developed a new ACIS transaction using collateral other than 30-year fixed-rate mortgages. Also, unlike prior ACIS transactions, this transaction does not involve loans in a reference pool created for a STACR debt note transaction.
|
Freddie Mac 2016 Form 10-K
|
|
54
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
◦
|
We executed our first Deep MI transaction. The pilot transaction provided additional coverage beyond primary mortgage insurance on 30-year fixed-rate mortgages with LTV ratios between 80% and 95%.
|
•
|
Since 2013, we have completed
57
credit risk transfer transactions that, upon execution of the transaction, covered
$601.9 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 guarantee fee income we earn on the PCs within the respective pools. Our expected guarantee fee income on the loans within the STACR and ACIS reference pools has been effectively reduced by approximately
34%
, on average, for transactions executed as of December 31, 2016. The amount of effective reduction to our overall guarantee fee 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 affect the cost of executing these transactions. We expect that the aggregate cost of our credit risk transfer activity will continue to increase as we enter into additional transactions.
|
•
|
As of December 31, 2016 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 2017 Conservatorship Scorecard sets a goal for us to transfer a meaningful portion of credit risk on at least 90% of the UPB of certain categories of newly acquired single-family loans, such as non-HARP and non-high LTV refinance fixed-rate loans with terms greater than 20 years and LTV ratios above 60%.
|
Freddie Mac 2016 Form 10-K
|
|
55
|
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.
|
•
|
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
$3.1 billion
in UPB during 2016. Of the $2.1 billion in UPB of single-family loans classified as held-for-sale at December 31, 2016,
$1.6 billion
related to loans that were seriously delinquent. We believe selling these loans provides better economic returns than continuing to hold them.
|
Freddie Mac 2016 Form 10-K
|
|
56
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
HAMP ended in December 2016. The relief refinance program (including HARP) will end in September 2017 and is expected to be replaced by a new program. See “Risk Management” for additional information on our loan workout activities.
|
Freddie Mac 2016 Form 10-K
|
|
57
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
|
|
Year Ended December 31,
|
|
Change 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Guarantee fee income
|
|
|
$6,091
|
|
|
|
$5,152
|
|
|
|
$4,094
|
|
|
|
$939
|
|
|
18
|
%
|
|
|
$1,058
|
|
|
26
|
%
|
Provision for credit losses
|
|
(517
|
)
|
|
(283
|
)
|
|
(1,129
|
)
|
|
(234
|
)
|
|
(83
|
)%
|
|
846
|
|
|
75
|
%
|
|||||
Other non-interest income
|
|
447
|
|
|
136
|
|
|
952
|
|
|
311
|
|
|
229
|
%
|
|
(816
|
)
|
|
(86
|
)%
|
|||||
Administrative expense
|
|
(1,323
|
)
|
|
(1,285
|
)
|
|
(1,170
|
)
|
|
(38
|
)
|
|
(3
|
)%
|
|
(115
|
)
|
|
(10
|
)%
|
|||||
REO operations expense
|
|
(298
|
)
|
|
(341
|
)
|
|
(213
|
)
|
|
43
|
|
|
13
|
%
|
|
(128
|
)
|
|
(60
|
)%
|
|||||
Other non-interest expense
|
|
(1,169
|
)
|
|
(794
|
)
|
|
(387
|
)
|
|
(375
|
)
|
|
(47
|
)%
|
|
(407
|
)
|
|
(105
|
)%
|
|||||
Segment Earnings before income tax expense
|
|
3,231
|
|
|
2,585
|
|
|
2,147
|
|
|
646
|
|
|
25
|
%
|
|
438
|
|
|
20
|
%
|
|||||
Income tax expense
|
|
(1,061
|
)
|
|
(807
|
)
|
|
(600
|
)
|
|
(254
|
)
|
|
(31
|
)%
|
|
(207
|
)
|
|
(35
|
)%
|
|||||
Segment Earnings, net of taxes
|
|
2,170
|
|
|
1,778
|
|
|
1,547
|
|
|
392
|
|
|
22
|
%
|
|
231
|
|
|
15
|
%
|
|||||
Total other comprehensive income (loss), net of tax
|
|
(9
|
)
|
|
12
|
|
|
(10
|
)
|
|
(21
|
)
|
|
(175
|
)%
|
|
22
|
|
|
220
|
%
|
|||||
Total comprehensive income
|
|
|
$2,161
|
|
|
|
$1,790
|
|
|
|
$1,537
|
|
|
|
$371
|
|
|
21
|
%
|
|
|
$253
|
|
|
16
|
%
|
•
|
Guarantee fee income
|
◦
|
2016 vs. 2015 and 2015 vs. 2014 -
increased primarily due to higher amortization of upfront delivery fees resulting from increased loan liquidations. Higher average contractual guarantee fee rates, reflecting the growth in the Core single-family book, also contributed.
|
•
|
Provision for credit losses
|
◦
|
2016 vs. 2015 -
increased primarily due to higher total interest rate concessions resulting from the longer expected life of certain modified loans driven by rising mortgage interest rates in the fourth quarter of 2016.
|
◦
|
2015 vs. 2014 -
decreased primarily due to a lower volume of newly impaired loans as the housing market and economy continued to improve.
|
•
|
Other non-interest income
|
◦
|
2016 vs. 2015 -
increased due to fewer seasoned single-family loans reclassified from held-for-investment to held-for-sale in 2016 compared to 2015 due to a smaller inventory of certain seasoned single-family loans available for reclassification, partially offset by increased fair value losses on STACR debt notes, as market spreads between STACR yields and LIBOR tightened more in 2016 than in 2015.
|
◦
|
2015 vs. 2014 -
decreased primarily due to more seasoned single-family loans reclassified from held-for-investment to held-for-sale in 2015 compared to 2014; as we accelerated our program to sell certain seasoned single-family loans, fair value losses on STACR debt notes, as market spreads between STACR yields and LIBOR tightened in 2015, compared to fair value gains on STACR debt notes in 2014 when market spreads widened, and higher expenses related to CSS.
|
Freddie Mac 2016 Form 10-K
|
|
58
|
Management's Discussion and Analysis
|
Our Business Segments | Single-Family Guarantee
|
•
|
Other non-interest expense
|
◦
|
2016 vs. 2015 and 2015 vs. 2014 -
increased primarily due to higher credit risk transfer expense (interest expense on STACR debt notes and premiums paid to ACIS counterparties) reflecting higher outstanding cumulative volumes of credit risk transfer transactions in the respective comparable periods.
|
Freddie Mac 2016 Form 10-K
|
|
59
|
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 and SB 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 2016 Form 10-K
|
|
60
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
Primary Securitization and Credit Risk Transfer Products -
Our primary business model is to acquire loans for aggregation and then to securitize the loans through the issuance of K Certificates or SB Certificates, as discussed below.
|
◦
|
K Certificates
- We purchase multifamily loans for aggregation and securitization through the issuance of multifamily K Certificates, which allows us to transfer a large majority of expected and stress credit losses of the loans to third-party investors. As shown in the diagram below, in a 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 these transactions, we guarantee the senior securities and do not issue or guarantee the subordinated securities. As a result, a large majority of expected and stress credit risk is sold to the third-party investors in the subordinated securities, thereby reducing our credit risk exposure. We receive a guarantee fee in exchange for guaranteeing the K Certificates. Profitability on our K Certificates is evaluated in terms of 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 guarantee fees we will earn over time.
|
◦
|
SB Certificates
- We also purchase small balance multifamily loans for aggregation and securitization through the issuance of multifamily SB Certificates. Occasionally, we also issue SB Certificates backed by small balance multifamily loans which were underwritten by Freddie Mac after (rather than at) origination and were not purchased by Freddie Mac prior to securitization. Small balance loans typically are between $1.0 million and $6.0 million in size. SB Certificate transactions are structured in a manner generally similar to our K Certificate transactions, and this
|
Freddie Mac 2016 Form 10-K
|
|
61
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
Other securitization products
- We also issue other securitization products including:
|
◦
|
PCs
-
We securitize multifamily loans into fixed-rate pass-through securities that are similar in structure to our Single-family Guarantee segment fixed-rate PCs. We guarantee the timely payment of the principal and interest on our multifamily fixed-rate PCs.
|
◦
|
K Certificates without subordination
- We securitize multifamily loans and issue K Certificates without subordination using a transaction structure that is similar to our K Certificates. However, unlike K Certificates, K Certificates without subordination are fully guaranteed and no subordinate or mezzanine securities are issued.
|
◦
|
Q Certificates
- We securitize multifamily loans, excluding small balance multifamily loans, and issue Q Certificates using a transaction structure that is similar to our K Certificates. However, unlike K Certificates, the multifamily loans backing the Q Certificate trusts are underwritten by Freddie Mac after (rather than at) origination and are not purchased by Freddie Mac prior to securitization.
|
◦
|
M Certificates
- We securitize pools of tax-exempt or taxable multifamily housing revenue bonds and loans and issue both guaranteed senior M Certificates and unguaranteed subordinated M Certificates.
|
•
|
Other mortgage-related guarantees
- We guarantee mortgage-related assets held by third parties in exchange for 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.
|
•
|
Other credit risk transfer products (i.e., SCR debt notes)
- We began issuing our SCR debt notes in 2016 in order to transfer a portion of credit risk on the loans underlying certain of our other mortgage-related guarantees. The interest we pay on our SCR debt notes effectively reduces the guarantee fee income we would otherwise earn on the other mortgage-related guarantees. SCR debt notes are generally similar in structure to STACR debt notes.
|
•
|
Mortgage loans
-
Our primary business model is to acquire loans for aggregation and then to securitize the loans through the issuance of K Certificates or SB Certificates. However, we also hold a portfolio of multifamily mortgage loans as part of a buy-and-hold investment strategy. Although we continue to purchase small amounts of new multifamily mortgage loans for this portfolio, the size of the portfolio is declining over time.
|
•
|
Agency mortgage-related securities
- We may purchase or retain a portion of the K Certificates or SB 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. To
|
Freddie Mac 2016 Form 10-K
|
|
62
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
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 a prior buy-and-hold investment strategy. This portfolio is declining over time.
|
•
|
Swaptions on credit indices
- We purchase swaptions on credit indices in order to obtain protection against adverse movements in market spreads which may affect the profitability of our K Certificate or SB Certificate transactions.
|
Freddie Mac 2016 Form 10-K
|
|
63
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
Freddie Mac 2016 Form 10-K
|
|
64
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
The increase in 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) declined in 2016 but remains strong relative to long-term averages. In 2017, we expect the increase in effective rents to remain in line with the 2016 increase.
|
•
|
Vacancy rates decreased slightly in 2016, remaining well below long-term averages, but are expected to increase during 2017 at a moderate pace.
|
•
|
Multifamily property prices have been especially strong, with 12% annualized growth through November 2016. Multifamily property price growth may slow with the expected leveling-off in the rate of effective rent growth, an environment of increasing vacancy rates and interest rates, as well as improving returns for other investment types.
|
Freddie Mac 2016 Form 10-K
|
|
65
|
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.
|
•
|
Completions and net absorption were roughly equal during 2016. We expect them to remain in balance in 2017.
|
•
|
The K Certificate benchmark spread represents the market spread of a typical 10-year senior K Certificate over the U.S. swap curve.
|
•
|
The profitability of our K Certificate transactions (as measured by gains and losses on sales of mortgage loans) is affected by the change in the K Certificate benchmark spreads during the period between loan purchase and execution of the K Certificate transaction. These market spread impacts contribute to our earnings volatility, which we try to manage through the size of our securitization pipeline of held-for-sale mortgage loans and through our purchase of swaptions on credit indices.
|
•
|
During 2016, K Certificate benchmark spreads tightened due to a reduction in macroeconomic market volatility compared to 2015. This tightening had a positive effect on K Certificate profitability.
|
Freddie Mac 2016 Form 10-K
|
|
66
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
There was significant growth in the multifamily market during 2016, driven by increasing property prices, a continued elevated construction pipeline, and low interest rates. As reported by the Federal Reserve, total multifamily mortgage debt outstanding was approximately
$1.2 trillion
at September 30, 2016 (the latest available information), representing an increase of
$63.5 billion
(or
6%
) since December 31, 2015.
|
•
|
Our share of multifamily mortgage debt outstanding has remained relatively stable over the past several years in the 13-15% range.
|
•
|
Our multifamily delinquency rates during 2016 remained among the lowest in the industry, ending the year at 3 bps, 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. We also expect to maintain our share of multifamily mortgage debt outstanding in 2017.
|
•
|
We expect the credit losses and delinquency rates for the multifamily mortgage portfolio to remain low in the near term.
|
Freddie Mac 2016 Form 10-K
|
|
67
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
The dollar volume of capped multifamily new business activity transacted during 2016 was $36.5 billion. The 2016 scorecard production cap was increased to $36.5 billion by FHFA during 2016 from an original amount of $31 billion. Business activity associated with certain targeted loan types is excluded and is considered uncapped for purposes of determining the dollar volume of multifamily new business.
|
Freddie Mac 2016 Form 10-K
|
|
68
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
Approximately two-thirds
of our multifamily new business activity during 2016 counted towards the 2016 scorecard production cap, and the remaining one-third
was uncapped.
|
•
|
Nearly 90% of the eligible units we financed during 2016 were affordable to families earning at or below the median income in their area (eligible units are multifamily units that qualify towards our affordable housing goal). We continued our support of workforce housing in the multifamily mortgage market during 2016 through our purchases of manufactured housing community loans and small balance loans.
|
•
|
Our multifamily new business activity outstanding commitments were
$12.4 billion
and
$15.0 billion
, as of December 31, 2016 and December 31, 2015, respectively. The December 31, 2016 amount includes loan purchase commitments for which we have elected the fair value option.
|
•
|
The growth in our new business activity during 2016 was driven by the overall increase in multifamily mortgage debt outstanding.
|
•
|
We expect our overall new business volume to increase in 2017; however, we expect our volume in the capped categories to be at or below the 2017 Conservatorship Scorecard cap, which is currently set at $36.5 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 2016 Form 10-K
|
|
69
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
Our multifamily portfolio grew in 2016 due to an increase in the guarantee portfolio, which was primarily attributable to our securitization of loans in K Certificate and SB Certificate transactions. This growth was driven by the overall increase in multifamily new business activity in 2016.
|
•
|
The decline in less liquid assets in our multifamily investments portfolio during 2016 was primarily due to continued runoff of our held-for-investment mortgage loan and CMBS portfolios.
|
•
|
We expect a continued increase in the size of our guarantee portfolio as a result of ongoing K Certificate and SB Certificate transactions. We also expect a continued reduction in our held-for-investment mortgage loan and CMBS portfolios due to ongoing principal repayments and maturities, which will serve to reduce our less liquid assets.
|
Freddie Mac 2016 Form 10-K
|
|
70
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
Our portfolio of interest-earning assets continued to decline in 2016 primarily as a result of reductions in our held-for-investment loan and CMBS 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 2016.
|
Freddie Mac 2016 Form 10-K
|
|
71
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
Freddie Mac 2016 Form 10-K
|
|
72
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
The guarantee portfolio increased in 2016 primarily as a result of our ongoing issuance of K Certificates and SB Certificates.
|
•
|
The average guarantee fee rate on both the overall guarantee portfolio and on newly issued K Certificates, K Certificates without subordination, and SB Certificates increased in 2016, primarily as a result of increased securitizations of products for which we charge higher fees, such as those with lower subordination rates.
|
•
|
The average guarantee fee rate charged on K Certificates and SB Certificates is generally lower than the average guarantee fee rate charged on our other multifamily securitization products and other mortgage-related guarantees. The lower guarantee fee rate on K Certificates and SB Certificates is driven by higher levels of subordination that absorb the large majority of the expected and stress credit losses.
|
Freddie Mac 2016 Form 10-K
|
|
73
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
•
|
The number and dollar volume of our K Certificate and SB Certificate issuances increased during 2016 as a result of our strong new business volume during the year. We expect these issuances to continue at similar levels during 2017.
|
•
|
Nearly 90% of the loans we purchased in 2016 were designated for securitization.
|
•
|
While we expect to use K Certificates and SB Certificates as the primary methods to transfer multifamily credit risk in 2017, we also expect to introduce new initiatives to transfer credit risk.
|
Freddie Mac 2016 Form 10-K
|
|
74
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
|
|
Year Ended December 31,
|
|
Change 2016 - 2015
|
|
Change 2015 - 2014
|
||||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Net interest income
|
|
|
$1,022
|
|
|
|
$1,049
|
|
|
|
$948
|
|
|
|
($27
|
)
|
|
(3
|
)%
|
|
|
$101
|
|
|
11
|
%
|
Guarantee fee income
|
|
511
|
|
|
339
|
|
|
254
|
|
|
172
|
|
|
51
|
%
|
|
85
|
|
|
33
|
%
|
|||||
Benefit (provision) for credit losses
|
|
22
|
|
|
26
|
|
|
55
|
|
|
(4
|
)
|
|
(15
|
)%
|
|
(29
|
)
|
|
(53
|
)%
|
|||||
Gains (losses) on loans and other non-interest income
|
|
1,166
|
|
|
(198
|
)
|
|
1,104
|
|
|
1,364
|
|
|
689
|
%
|
|
(1,302
|
)
|
|
(118
|
)%
|
|||||
Derivative gains (losses)
|
|
407
|
|
|
372
|
|
|
335
|
|
|
35
|
|
|
9
|
%
|
|
37
|
|
|
11
|
%
|
|||||
Administrative expense
|
|
(362
|
)
|
|
(325
|
)
|
|
(274
|
)
|
|
(37
|
)
|
|
(11
|
)%
|
|
(51
|
)
|
|
(19
|
)%
|
|||||
Other non-interest expense
|
|
(58
|
)
|
|
(60
|
)
|
|
(14
|
)
|
|
2
|
|
|
3
|
%
|
|
(46
|
)
|
|
(329
|
)%
|
|||||
Segment Earnings before income tax expense
|
|
2,708
|
|
|
1,203
|
|
|
2,408
|
|
|
1,505
|
|
|
125
|
%
|
|
(1,205
|
)
|
|
(50
|
)%
|
|||||
Income tax expense
|
|
(890
|
)
|
|
(376
|
)
|
|
(772
|
)
|
|
(514
|
)
|
|
(137
|
)%
|
|
396
|
|
|
51
|
%
|
|||||
Segment Earnings, net of taxes
|
|
1,818
|
|
|
827
|
|
|
1,636
|
|
|
991
|
|
|
120
|
%
|
|
(809
|
)
|
|
(49
|
)%
|
|||||
Total other comprehensive income (loss), net of tax
|
|
(236
|
)
|
|
(261
|
)
|
|
(177
|
)
|
|
25
|
|
|
10
|
%
|
|
(84
|
)
|
|
(47
|
)%
|
|||||
Total comprehensive income (loss)
|
|
|
$1,582
|
|
|
|
$566
|
|
|
|
$1,459
|
|
|
|
$1,016
|
|
|
180
|
%
|
|
|
($893
|
)
|
|
(61
|
)%
|
•
|
Net interest income
|
◦
|
2016 vs. 2015 -
declined primarily due to lower balances of interest earning assets, as we reduce our less liquid assets, and lower net prepayment fee income in 2016.
|
◦
|
2015 vs. 2014 -
increased primarily due to changes in the composition of our multifamily portfolio, as lower yielding legacy loans and securities were replaced during 2015 with purchases of higher-yielding loans to support future securitizations.
|
•
|
Guarantee fee income
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- increased primarily due to higher average multifamily guarantee portfolio balances as a result of ongoing issuances of K Certificates and SB Certificates.
|
•
|
Gains (losses) on loans and other non-interest income, derivative gains (losses)
, and
total other comprehensive income (loss)
are evaluated together as they are collectively driven by a combination of market spread-related and interest rate-related fair value changes. We use derivatives in the Multifamily segment to economically offset interest rate-related fair value changes of certain assets. The fair value changes of these economically hedged assets are included in
gains (losses) on loans and other non-interest income
and
total other comprehensive income (loss)
. The interest rate-related portion of these changes and the interest rate-related derivative fair value changes that are included in
derivative gains (losses)
largely offset each other and, as a result, there is minimal net impact on total comprehensive income for the Multifamily segment from interest rate-related derivatives. We also recently began using derivatives in the Multifamily segment to economically offset a portion of the market spread-related fair value changes of certain assets.
|
◦
|
2016 vs. 2015 -
gains
in these items increased, in the aggregate, primarily due to improved pricing on K Certificates and SB Certificates, as well as improved market spread-related fair value
|
Freddie Mac 2016 Form 10-K
|
|
75
|
Management's Discussion and Analysis
|
Our Business Segments | Multifamily
|
◦
|
2015 vs. 2014 -
gains in these items decreased, in the aggregate, due to market spread-related fair value changes. The widening of K Certificate benchmark spreads during 2015 resulted in losses while the spread tightening during 2014 resulted in gains.
|
Freddie Mac 2016 Form 10-K
|
|
76
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
Managing the company’s mortgage-related investments portfolio, excluding Multifamily segment investments, single-family seriously delinquent loans, and the credit risk of single-family performing 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; and
|
•
|
Implementing the single (common) security initiative for Freddie Mac and Fannie Mae, which is intended to increase the liquidity of the TBA market and to reduce the disparities in trading value between our PCs and Fannie Mae's single-class mortgage-related securities.
|
Freddie Mac 2016 Form 10-K
|
|
77
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
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).
|
•
|
Non-agency mortgage-related securities
- We generally no longer purchase non-agency mortgage-related securities that have not been guaranteed by a GSE, 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).
|
◦
|
Securitization into Freddie Mac PCs, with all of the resulting mortgage-related securities initially being retained. We may resecuritize a portion of the retained mortgage-related securities, with some of the resulting interests being sold to third parties;
|
◦
|
Direct loan sales; and
|
◦
|
Sales and securitization using a senior subordinate securitization structure, in which we guarantee the resulting senior securities.
|
•
|
Other investments and cash portfolio
- This portfolio is principally used for short-term liquidity management and consists of: (i) the Liquidity and Contingency Operating Portfolio, (ii) cash and other investments held by consolidated trusts, (iii) collateral pledged by derivative and other counterparties; (iv) investments in unsecured agency debt, and (v) advances to lenders. In our advances to lenders program, we provide funds to lenders in exchange for Freddie Mac PCs that are created through the securitization of mortgage loans that have been pledged as collateral for the secured lending. In the future, we may execute certain secured financing transactions using various types of collateral.
|
Freddie Mac 2016 Form 10-K
|
|
78
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
Liquid:
single-class and multi-class agency securities, excluding certain structured agency securities collateralized by non-agency mortgage-related securities. Also includes certain non-agency mortgage-related securities guaranteed by a GSE;
|
•
|
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 both agency securities and loans in the securitization pipeline (e.g., reperforming loans, performing modified loans, and non-agency mortgage-related securities not guaranteed by a GSE).
|
•
|
Securities sold under agreements to repurchase
- Collateralized short-term borrowings where we sell securities to a counterparty with an agreement to repurchase those securities at a future date.
|
Freddie Mac 2016 Form 10-K
|
|
79
|
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 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 or equal to two years.
|
Freddie Mac 2016 Form 10-K
|
|
80
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
Freddie Mac 2016 Form 10-K
|
|
81
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
We primarily, but not exclusively, 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 - Market Risk."
|
Freddie Mac 2016 Form 10-K
|
|
82
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
2016 vs. 2015
|
◦
|
The 2-year and 10-year swap rates increased, resulting in gains for our pay-fixed interest rate swaps and losses for our receive-fixed interest rate swaps, certain of our option contracts, and the vast majority of our investments in securities.
|
◦
|
3-month LIBOR increased during the fourth quarter of 2016, resulting in higher yields for our short-term interest-earning assets, higher costs for our short-term interest-bearing liabilities, and interest-rate related losses for certain of our shorter duration trading securities.
|
•
|
2015 vs. 2014
|
◦
|
The 10-year and 30-year swap rates declined during both periods, resulting in losses for our pay-fixed interest rate swaps and gains for our receive-fixed interest rate swaps, certain of our option contracts, and the vast majority of our investments in securities.
|
◦
|
As the 10-year and 30-year swap rates declined less in 2015 than in 2014 and the yield curve did not flatten as much, the impact of interest rates on our financial instruments and financial results was less significant during 2015 as compared to 2014.
|
◦
|
In December 2015, the Federal Reserve raised short-term interest rates. As a result, shorter-term interest rates, including the 3-month LIBOR rate, increased in December 2015. The increase in 3-month LIBOR resulted in higher yields for our short-term interest-earning assets, higher costs for our short-term interest-bearing liabilities, and interest-rate related losses for certain of our shorter duration trading securities.
|
Freddie Mac 2016 Form 10-K
|
|
83
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
We continue to reduce the size of our mortgage investments portfolio in order to comply with the mortgage-related investments portfolio's year-end limits. The balance of our mortgage investments portfolio declined 11.5% between December 31, 2015 and December 31, 2016.
|
•
|
The balance of our other investments and cash portfolio decreased 5.4% primarily due to lower near-term cash needs for upcoming maturities and anticipated calls of other debt at the end of 2016 compared to the end of 2015.
|
•
|
The percentage of less liquid assets relative to our total mortgage investments portfolio declined to 34.4% at December 31, 2016 from 38.8% at December 31, 2015, primarily due to repayments, sales and securitizations of our less liquid assets.
|
•
|
The overall liquidity of our mortgage investments portfolio continued to improve as our less liquid assets decreased at a faster pace than the overall decline of our mortgage investments portfolio.
|
Freddie Mac 2016 Form 10-K
|
|
84
|
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 single-family reperforming loans and performing modified loans and non-agency mortgage-related securities. Our disposition strategies for our less liquid assets include securitizations and sales.
|
•
|
Our principal strategy related to the securitization of reperforming loans and performing modified loans is to create Freddie Mac PCs and initially retain all of the resulting mortgage-related securities. This strategy also includes the resecuritization of a portion of the retained mortgage-related securities, with some of the resulting interests being sold to third parties.
|
•
|
During 2016, our sales of less liquid assets included $8.1 billion in UPB of non-agency mortgage-related securities and $1.1 billion of reperforming loans and performing modified loans. Our sales of reperforming loans and performing modified loans involved securitization of the loans using a senior subordinate securitization structure, in which we guaranteed the resulting senior securities. As part of these transactions, we retained certain of the guaranteed senior securities for our mortgage-related investments portfolio.
|
Freddie Mac 2016 Form 10-K
|
|
85
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
Net Interest Yield
|
◦
|
2016 vs. 2015
- declined 37 basis points, primarily due to a reduction in the balance of our higher yielding mortgage-related assets due to repayments, coupled with higher hedging costs from an increase in amortization of upfront cash paid for swaptions. The upfront cash paid for swaptions is amortized on a straight-line basis and reclassified from
derivative gains (losses)
into
net interest income
for purposes of segment earnings. The increase in amortization is due to an increase in upfront cash paid for swaptions to hedge our increased exposure to mortgage prepayment risk due to the continued low interest rate environment in 2016.
|
◦
|
2015 vs. 2014
- declined 5 basis points, 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 repayment of certain higher-yielding agency securities. Although we acquired additional agency securities to replace certain of those securities that were repaid, the new securities had lower yields due to an overall lower interest rate environment.
|
•
|
Average Investments Portfolio Balance
|
◦
|
2016 vs. 2015 and 2015 vs. 2014
- declined in each period primarily due to the repayment and sale of non-agency mortgage-related securities and certain reperforming loans and performing
|
Freddie Mac 2016 Form 10-K
|
|
86
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
•
|
We expect our average investments portfolio balance to continue to decline in 2017 as we manage the size of our mortgage-related investments portfolio pursuant to the portfolio limit.
|
Freddie Mac 2016 Form 10-K
|
|
87
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
|
Year Ended December 31,
|
Change 2016 - 2015
|
Change 2015 - 2014
|
||||||||||||||||
(Dollars in millions)
|
2016
|
2015
|
2014
|
$
|
%
|
$
|
%
|
||||||||||||
Net interest income
|
|
$2,464
|
|
|
$3,902
|
|
|
$4,381
|
|
|
($1,438
|
)
|
(37
|
)%
|
|
($479
|
)
|
(11
|
)%
|
Net impairment of available-for-sale securities recognized in earnings
|
269
|
|
420
|
|
(140
|
)
|
(151
|
)
|
(36
|
)%
|
560
|
|
400
|
%
|
|||||
Derivative gains (losses)
|
2,499
|
|
(70
|
)
|
(5,158
|
)
|
2,569
|
|
3,670
|
%
|
5,088
|
|
99
|
%
|
|||||
Gains (losses) on trading securities
|
(1,077
|
)
|
(737
|
)
|
(276
|
)
|
(340
|
)
|
(46
|
)%
|
(461
|
)
|
(167
|
)%
|
|||||
Other non-interest income
|
1,865
|
|
2,288
|
|
8,095
|
|
(423
|
)
|
(18
|
)%
|
(5,807
|
)
|
(72
|
)%
|
|||||
Administrative expense
|
(320
|
)
|
(317
|
)
|
(437
|
)
|
(3
|
)
|
(1
|
)%
|
120
|
|
27
|
%
|
|||||
Segment Earnings before income tax (expense) benefit
|
5,700
|
|
5,486
|
|
6,465
|
|
214
|
|
4
|
%
|
(979
|
)
|
(15
|
)%
|
|||||
Income tax (expense) benefit
|
(1,873
|
)
|
(1,715
|
)
|
(1,945
|
)
|
(158
|
)
|
(9
|
)%
|
230
|
|
12
|
%
|
|||||
Segment Earnings, net of taxes
|
3,827
|
|
3,771
|
|
4,520
|
|
56
|
|
1
|
%
|
(749
|
)
|
(17
|
)%
|
|||||
Total other comprehensive income (loss), net of tax
|
(452
|
)
|
(356
|
)
|
1,951
|
|
(96
|
)
|
(27
|
)%
|
(2,307
|
)
|
(118
|
)%
|
|||||
Total comprehensive income (loss)
|
|
$3,375
|
|
|
$3,415
|
|
|
$6,471
|
|
|
($40
|
)
|
(1
|
)%
|
|
($3,056
|
)
|
(47
|
)%
|
•
|
Net interest income
|
◦
|
2016 vs. 2015
- decreased primarily due to a reduction in the balance of our higher yielding mortgage-related assets due to repayments, coupled with higher hedging costs from an increase in amortization of upfront cash paid for swaptions used to hedge our increased exposure to mortgage prepayment risk due to the continued low interest rate environment in 2016.
|
◦
|
2015 vs. 2014
- decreased 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 repayments, sales, and other active dispositions.
|
•
|
Net impairment of available-for-sale securities recognized in earnings
|
◦
|
2016 vs. 2015
- was in a net recovery position, as accretion of previously recognized other-than-temporary impairments exceeded new other-than-temporary impairments. The decrease in net recovery position was primarily due to less accretion of previously recognized other-than-temporary impairments, as the population of impaired securities continued to decline. The decrease in the population of impaired securities is due to our active disposition of these securities and a decrease in new other-than-temporary impairments due to improved security pricing and stabilized collateral performance.
|
Freddie Mac 2016 Form 10-K
|
|
88
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
◦
|
2015 vs. 2014
- was in a net recovery position during 2015 compared to a net impairment position in 2014, primarily due to the accretion of previously recognized other-than-temporary impairments exceeding new other-than-temporary impairments. New other-than-temporary impairments significantly declined during 2015 as a result of improved security pricing, stabilized collateral performance, and our efforts to sell certain of the previously impaired non-agency mortgage-related securities in prior periods.
|
•
|
Derivative gains (losses)
|
◦
|
2016 vs. 2015
- improved as we recognized derivative gains during 2016 due to an increase in long-term interest rates during the fourth quarter of 2016, compared to recognizing derivative losses during 2015 due to decreasing long-term interest rates. See "Consolidated Results of Operations - Derivative Gains (Losses)" for additional information.
|
◦
|
2015 vs. 2014
- improved as we recognized less derivative losses as a result of a smaller decline in longer-term interest rates during 2015 compared to 2014. See "Consolidated Results of Operations - Derivative Gains (Losses)" for additional information.
|
•
|
Gains (losses) on trading securities
|
◦
|
2016 vs. 2015
- losses increased primarily due to interest-rate related losses from an increase in longer-term interest rates in the fourth quarter of 2016.
|
◦
|
2015 vs. 2014
- losses increased primarily due to interest-rate related losses. While longer-term interest rates decreased, we recognized interest-rate losses due to our purchase of certain securities during the year when rates were lower than rates at December 31, 2015. In addition, we recognized losses due to an increase in short-term interest rates as our trading portfolio contained shorter duration investments, coupled with agency spread widening.
|
•
|
Other non-interest income
|
◦
|
2016 vs. 2015
- decreased primarily due to a decline in sales of available-for-sale agency and non-agency mortgage-related securities in an unrealized gain position.
|
◦
|
2015 vs. 2014
- decreased primarily due to a decline in proceeds received from the settlement of non-agency mortgage-related securities litigation, as most of this litigation settled during prior periods, including 2014. In 2015, we entered into one small settlement to resolve a claim with respect to certain non-agency mortgage-related securities that we held, while we reached settlements with 10 institutions during 2014. We continue to have ongoing litigation with respect to certain other non-agency mortgage-related securities.
|
•
|
Other comprehensive income
|
◦
|
2016 vs. 2015
- was a loss during both periods. The increase in the loss position was primarily due to unrealized losses on agency securities resulting from an increase in longer-term interest rates, coupled with a decrease in unrealized gains as our non-agency securities portfolio continued to decline consistent with the reduction of our mortgage-related investments portfolio. These changes were partially offset by larger unrealized gains due to greater market spread tightening for our agency securities and a decline in sales of available-for-sale non-agency mortgage-related securities in an unrealized gain position, which resulted in less unrealized gains being reclassified from AOCI to
other non-interest income
.
|
Freddie Mac 2016 Form 10-K
|
|
89
|
Management's Discussion and Analysis
|
Our Business Segments | Investments
|
◦
|
2015 vs. 2014
- was a loss during 2015 compared to income during 2014, primarily due to less market spread tightening for our non-agency mortgage-related securities and less impairment-related reclassifications from AOCI to earnings. Other comprehensive income in both 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 2016 Form 10-K
|
|
90
|
Management's Discussion and Analysis
|
Our Business Segments | All Other
|
|
Year Ended December 31,
|
|
Change 2016-2015
|
|
Change 2015-2014
|
||||||||||||||||||||
(Dollars in millions)
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
Comprehensive income (loss) - All Other
|
|
$—
|
|
|
|
$28
|
|
|
|
($41
|
)
|
|
|
($28
|
)
|
|
(100
|
)%
|
|
|
$69
|
|
|
168
|
%
|
Freddie Mac 2016 Form 10-K
|
|
91
|
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 implement a redesigned and enhanced three-lines-of-defense methodology.
|
Freddie Mac 2016 Form 10-K
|
|
92
|
Management's Discussion and Analysis
|
Risk Management | Overview
|
Freddie Mac 2016 Form 10-K
|
|
93
|
Management's Discussion and Analysis
|
Risk Management | Overview
|
Freddie Mac 2016 Form 10-K
|
|
94
|
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 2016 Form 10-K
|
|
95
|
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 of the single-family credit guarantee portfolio and individual sellers and servicers;
|
•
|
Engaging in loss mitigation activities; and
|
•
|
Managing foreclosure and REO activities.
|
Freddie Mac 2016 Form 10-K
|
|
96
|
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 2016 Form 10-K
|
|
97
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in millions)
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|||||||||
30-year or more amortizing fixed-rate
|
|
|
$307,572
|
|
|
78
|
%
|
|
|
$262,209
|
|
|
75
|
%
|
|
|
$192,458
|
|
|
75
|
%
|
20-year amortizing fixed-rate
|
|
17,011
|
|
|
4
|
|
|
16,470
|
|
|
5
|
|
|
8,677
|
|
|
4
|
|
|||
15-year amortizing fixed-rate
|
|
61,223
|
|
|
16
|
|
|
58,958
|
|
|
17
|
|
|
38,200
|
|
|
15
|
|
|||
Adjustable-rate
|
|
6,555
|
|
|
2
|
|
|
12,760
|
|
|
3
|
|
|
15,711
|
|
|
6
|
|
|||
FHA/VA and other governmental
|
|
146
|
|
|
—
|
|
|
163
|
|
|
—
|
|
|
207
|
|
|
—
|
|
|||
Total
|
|
|
$392,507
|
|
|
100
|
%
|
|
|
$350,560
|
|
|
100
|
%
|
|
|
$255,253
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Percentage of purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
With credit enhancements
|
|
|
|
26
|
%
|
|
|
|
23
|
%
|
|
|
|
25
|
%
|
||||||
Detached/townhome property type
|
|
|
|
92
|
%
|
|
|
|
92
|
%
|
|
|
|
92
|
%
|
||||||
Primary residence
|
|
|
|
90
|
%
|
|
|
|
90
|
%
|
|
|
|
88
|
%
|
||||||
Loan purpose:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Purchase
|
|
|
|
45
|
%
|
|
|
|
44
|
%
|
|
|
|
52
|
%
|
||||||
Cash-out refinance
|
|
|
|
22
|
%
|
|
|
|
21
|
%
|
|
|
|
17
|
%
|
||||||
Other refinance
|
|
|
|
33
|
%
|
|
|
|
35
|
%
|
|
|
|
31
|
%
|
Freddie Mac 2016 Form 10-K
|
|
98
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||
(UPB in millions)
|
|
UPB
|
|
Loan Count
|
|
Average
Loan Size
|
|
UPB
|
|
Loan Count
|
|
Average Loan Size
|
||||||||||
Above 125% Original LTV
|
|
|
$271
|
|
|
1,799
|
|
|
|
$151,000
|
|
|
|
$569
|
|
|
3,766
|
|
|
|
$151,000
|
|
Above 100% to 125% Original LTV
|
|
1,107
|
|
|
6,220
|
|
|
178,000
|
|
|
2,043
|
|
|
11,784
|
|
|
173,000
|
|
||||
Above 80% to 100% Original LTV
|
|
3,034
|
|
|
17,277
|
|
|
176,000
|
|
|
4,938
|
|
|
28,999
|
|
|
170,000
|
|
||||
80% and below Original LTV
|
|
8,562
|
|
|
60,353
|
|
|
142,000
|
|
|
11,980
|
|
|
85,677
|
|
|
140,000
|
|
||||
Total
|
|
|
$12,974
|
|
|
85,649
|
|
|
|
$151,000
|
|
|
|
$19,530
|
|
|
130,226
|
|
|
|
$150,000
|
|
•
|
Primary mortgage insurance
-
Primary mortgage insurance provides loan-level protection against loss up to a specified amount and the premium is typically paid 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 sale, 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. Most of our loans with LTV ratios above 80% are protected by primary mortgage insurance.
|
•
|
Seller indemnification agreement
-
Requires the seller to 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.
|
•
|
Deep MI
-
Provides additional coverage beyond primary mortgage insurance. Deep MI is a credit enhancement we purchase from affiliates of mortgage insurance companies. Deep MI covers a pool of loans and takes effect immediately upon sale of the mortgage loans to us over a pre-defined loan aggregation period. We require our counterparties to collateralize their exposure to reduce the risk that we will not be reimbursed for our claims under the policies.
|
•
|
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 guarantee fee. We have not used lender recourse or lender indemnification agreements on a broad 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 four years.
|
Freddie Mac 2016 Form 10-K
|
|
99
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
•
|
STACR debt notes
-
Unsecured debt obligations that we issue to third-party investors related to certain notional credit risk positions. 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 previously guaranteed. As a result, we are not required to repay principal to the extent that the notional credit risk position is reduced as a result of a specified credit event.
|
•
|
ACIS insurance policies
-
Policies that provide credit protection on a portion of the non-issued notional credit risk positions we retain in a STACR debt note transaction. We also enter into ACIS transactions that provide credit protection for certain specified credit events on loans not included in a reference pool created for a STACR debt note transaction. We receive compensation from the insurance policy up to an aggregate limit when specified credit events occur.
|
•
|
Whole loan securities
-
Guaranteed senior securities and unguaranteed subordinated securities that we issue which are 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. In these transactions, the loans are serviced in accordance with our servicing guide and we control the servicing.
|
•
|
Senior subordinate securitization structures -
Guaranteed senior securities and unguaranteed subordinated securities that we issue which are backed by seasoned performing modified and reperforming 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. In these transactions, the loans are not serviced in accordance with our servicing guide and we do not control the servicing.
|
|
|
As of December 31,
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||
(Percentage of portfolio based on UPB)
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
||||||
Non-credit-enhanced
|
|
64
|
%
|
|
1.02
|
%
|
|
70
|
%
|
|
1.30
|
%
|
|
77
|
%
|
|
1.74
|
%
|
Credit-enhanced:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Primary mortgage insurance
|
|
17
|
%
|
|
1.46
|
%
|
|
15
|
%
|
|
2.06
|
%
|
|
14
|
%
|
|
3.10
|
%
|
Other
|
|
27
|
%
|
|
0.43
|
%
|
|
20
|
%
|
|
0.58
|
%
|
|
12
|
%
|
|
1.21
|
%
|
Total
|
|
N/A
|
|
|
1.00
|
%
|
|
N/A
|
|
|
1.32
|
%
|
|
N/A
|
|
|
1.88
|
%
|
Freddie Mac 2016 Form 10-K
|
|
100
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
As of December 31,
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||||
(Dollars in millions)
|
|
Total Current and Protected UPB
|
|
Coverage Remaining
|
|
Collateralized Coverage Remaining
(1)
|
|
Total Current and Protected UPB
|
|
Coverage Remaining
|
|
Collateralized Coverage Remaining
(1)
|
||||||||||||
Credit enhancements at the time we acquire the loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Primary mortgage insurance
|
|
|
$291,217
|
|
|
|
$74,345
|
|
|
|
$—
|
|
|
|
$257,063
|
|
|
|
$65,760
|
|
|
|
$—
|
|
Seller indemnification
(2)
|
|
1,030
|
|
|
10
|
|
|
10
|
|
|
1,095
|
|
|
11
|
|
|
7
|
|
||||||
Deep MI
(2)
|
|
3,067
|
|
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Lender recourse and indemnification agreements
|
|
5,247
|
|
|
4,911
|
|
|
—
|
|
|
5,902
|
|
|
5,385
|
|
|
—
|
|
||||||
Pool insurance
|
|
1,719
|
|
|
618
|
|
|
—
|
|
|
2,140
|
|
|
753
|
|
|
—
|
|
||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
HFA Indemnifications
|
|
1,747
|
|
|
1,747
|
|
|
—
|
|
|
2,599
|
|
|
2,599
|
|
|
—
|
|
||||||
Subordination
|
|
1,874
|
|
|
230
|
|
|
—
|
|
|
2,127
|
|
|
278
|
|
|
—
|
|
||||||
Other credit enhancements
|
|
17
|
|
|
6
|
|
|
—
|
|
|
23
|
|
|
10
|
|
|
—
|
|
||||||
Credit enhancements subsequent to our purchase or guarantee of the loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
STACR debt note
(2)
|
|
427,978
|
|
|
14,507
|
|
|
14,507
|
|
|
328,872
|
|
|
11,551
|
|
|
11,551
|
|
||||||
ACIS transactions
(2)
|
|
453,670
|
|
|
5,355
|
|
|
877
|
|
|
328,872
|
|
|
3,365
|
|
|
311
|
|
||||||
Whole loan security and senior subordinate securitization structures
(2)
|
|
2,494
|
|
|
375
|
|
|
375
|
|
|
893
|
|
|
58
|
|
|
58
|
|
||||||
Less: UPB with more than one type of credit enhancement
|
|
(559,400
|
)
|
|
—
|
|
|
—
|
|
|
(417,393
|
)
|
|
—
|
|
|
—
|
|
||||||
Single-family book with credit enhancement
|
|
630,660
|
|
|
102,185
|
|
|
15,769
|
|
|
512,193
|
|
|
89,770
|
|
|
11,927
|
|
||||||
Single-family book without credit enhancement
|
|
1,124,066
|
|
|
—
|
|
|
—
|
|
|
1,189,694
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
|
$1,754,726
|
|
|
|
$102,185
|
|
|
|
$15,769
|
|
|
|
$1,701,887
|
|
|
|
$89,770
|
|
|
|
$11,927
|
|
(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 primarily related to ACIS transactions.
|
(2)
|
Credit risk transfer transactions. The substantial majority of single-family loans covered by these transactions were acquired after 2012.
|
Freddie Mac 2016 Form 10-K
|
|
101
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
(Dollars in millions)
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|||||||||||
UPB of loans covered by STACR debt notes and ACIS insurance policies
|
|
$
|
427,978
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Performance Under Home Price Scenarios at December 31, 2016
|
|||||||||||||||||||
|
|
Above Average Home Price Appreciation (47%)
(1)
|
|
Moderate Home Price Appreciation (7%)
(1)
|
|
Severe Home Price Depreciation (-24%)
(1)
|
|||||||||||||||
|
|
Amount
|
|
bps
|
|
Amount
|
|
bps
|
|
Amount
|
|
bps
|
|||||||||
Estimated credit losses
|
|
|
$273
|
|
|
6
|
|
|
|
$1,845
|
|
|
43
|
|
|
|
$11,003
|
|
|
257
|
|
Estimated recoveries from STACR debt notes and ACIS insurance policies
|
|
|
$77
|
|
|
2
|
|
|
|
$609
|
|
|
14
|
|
|
|
$7,423
|
|
|
173
|
|
Loss coverage ratio
|
|
28
|
%
|
|
N/A
|
|
|
33
|
%
|
|
N/A
|
|
|
68
|
%
|
|
N/A
|
|
Freddie Mac 2016 Form 10-K
|
|
102
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
•
|
Higher risk loan attributes and attribute combinations;
|
•
|
Higher risk loan product types; and
|
•
|
Geographic concentrations.
|
Freddie Mac 2016 Form 10-K
|
|
103
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
104
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
||||||||||||||||||||
(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
|
|
|
$1,275
|
|
|
752
|
|
|
72
|
%
|
|
60
|
%
|
|
—
|
%
|
|
0.15
|
%
|
|
—
|
%
|
HARP and other relief refinance book
|
|
265
|
|
|
729
|
|
|
88
|
%
|
|
65
|
%
|
|
7
|
%
|
|
1.14
|
%
|
|
—
|
%
|
|
Legacy single-family book
|
|
215
|
|
|
700
|
|
|
75
|
%
|
|
62
|
%
|
|
8
|
%
|
|
4.26
|
%
|
|
15
|
%
|
|
Total
|
|
|
$1,755
|
|
|
743
|
|
|
75
|
%
|
|
61
|
%
|
|
2
|
%
|
|
N/A
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
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 2016 Form 10-K
|
|
105
|
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 measured at loan origination; while current LTV (CLTV) ratio is defined as the ratio of the current loan UPB to the estimated current property value.
|
•
|
Measures ability of the underlying property to cover our exposure on the loan
|
•
|
Higher LTV ratios indicate higher risk, as proceeds from sale of the property may not cover our exposure on the loan
|
||
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 their loans 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 is covered by 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 2016 Form 10-K
|
|
106
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31,
|
|||||||
(Percentage of portfolio based on UPB)
|
|
2016
|
|
2015
|
|
2014
|
|||
Original LTV Ratio Range
|
|
|
|
|
|
|
|||
60% and below
|
|
20
|
%
|
|
20
|
%
|
|
21
|
%
|
Above 60% to 80%
|
|
53
|
%
|
|
53
|
%
|
|
52
|
%
|
Above 80% to 100%
|
|
23
|
%
|
|
22
|
%
|
|
21
|
%
|
Above 100%
|
|
4
|
%
|
|
5
|
%
|
|
6
|
%
|
Portfolio weighted average original LTV ratio
|
|
75
|
%
|
|
75
|
%
|
|
75
|
%
|
Current LTV Ratio Range
|
|
|
|
|
|
|
|||
60% and below
|
|
45
|
%
|
|
43
|
%
|
|
39
|
%
|
Above 60% to 80%
|
|
38
|
%
|
|
37
|
%
|
|
37
|
%
|
Above 80% to 100%
|
|
15
|
%
|
|
16
|
%
|
|
18
|
%
|
Above 100%
|
|
2
|
%
|
|
4
|
%
|
|
6
|
%
|
Portfolio weighted average current LTV ratio
|
|
61
|
%
|
|
63
|
%
|
|
66
|
%
|
Credit Score
|
|
|
|
|
|
|
|||
740 and above
|
|
60
|
%
|
|
59
|
%
|
|
58
|
%
|
700 to 739
|
|
21
|
%
|
|
21
|
%
|
|
20
|
%
|
660 to 699
|
|
12
|
%
|
|
13
|
%
|
|
13
|
%
|
620 to 659
|
|
5
|
%
|
|
5
|
%
|
|
6
|
%
|
Less than 620
|
|
2
|
%
|
|
2
|
%
|
|
3
|
%
|
Portfolio weighted average credit score
|
|
743
|
|
|
741
|
|
|
740
|
|
Loan Purpose
|
|
|
|
|
|
|
|||
Purchase
|
|
35
|
%
|
|
32
|
%
|
|
30
|
%
|
Cash-out refinance
|
|
21
|
%
|
|
21
|
%
|
|
21
|
%
|
Other refinance
|
|
44
|
%
|
|
47
|
%
|
|
49
|
%
|
•
|
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 at origination; and
|
•
|
More than 90% of our loans were fixed-rate.
|
Freddie Mac 2016 Form 10-K
|
|
107
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
|||||||||||
(Dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Original LTV ratio greater than 90%, HARP loans
|
|
|
$115.1
|
|
|
83
|
%
|
|
1.8
|
%
|
|
1.07
|
%
|
Original LTV ratio greater than 90%, all other loans
|
|
|
$169.4
|
|
|
82
|
%
|
|
7.2
|
%
|
|
1.92
|
%
|
Loans with credit scores below 620 at origination
|
|
|
$37.5
|
|
|
69
|
%
|
|
21.7
|
%
|
|
5.73
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
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, 2016
|
|||||||||||||||||||||||||
|
|
CLTV ≤ 80
|
|
CLTV > 80 to 100
|
|
CLTV > 100
|
|
All Loans
|
|||||||||||||||||||
(Credit score)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Modified
(1)
|
|||||||||
Core single-family book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.2
|
%
|
|
2.18
|
%
|
|
—
|
%
|
|
NM
|
|
|
—
|
%
|
|
NM
|
|
|
0.2
|
%
|
|
2.45
|
%
|
|
3.0
|
%
|
620 to 659
|
|
1.6
|
|
|
1.02
|
%
|
|
0.3
|
|
|
1.30
|
%
|
|
—
|
|
|
NM
|
|
|
1.9
|
|
|
1.07
|
%
|
|
1.3
|
%
|
≥ 660
|
|
60.9
|
|
|
0.15
|
%
|
|
9.7
|
|
|
0.22
|
%
|
|
0.1
|
|
|
1.88
|
%
|
|
70.7
|
|
|
0.16
|
%
|
|
0.2
|
%
|
Not available
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
NM
|
|
Total
|
|
62.7
|
%
|
|
0.18
|
%
|
|
10.0
|
%
|
|
0.27
|
%
|
|
0.1
|
%
|
|
3.29
|
%
|
|
72.8
|
%
|
|
0.20
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Relief refinance book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.5
|
%
|
|
1.72
|
%
|
|
0.2
|
%
|
|
3.44
|
%
|
|
0.1
|
%
|
|
4.50
|
%
|
|
0.8
|
%
|
|
2.30
|
%
|
|
4.5
|
%
|
620 to 659
|
|
0.8
|
|
|
1.11
|
%
|
|
0.3
|
|
|
2.25
|
%
|
|
0.1
|
|
|
3.54
|
%
|
|
1.2
|
|
|
1.55
|
%
|
|
2.6
|
%
|
≥ 660
|
|
10.1
|
|
|
0.32
|
%
|
|
2.2
|
|
|
1.08
|
%
|
|
0.8
|
|
|
1.92
|
%
|
|
13.1
|
|
|
0.52
|
%
|
|
0.8
|
%
|
Not available
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
NM
|
|
Total
|
|
11.4
|
%
|
|
0.44
|
%
|
|
2.7
|
%
|
|
1.37
|
%
|
|
1.0
|
%
|
|
2.31
|
%
|
|
15.1
|
%
|
|
0.69
|
%
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Legacy single-family book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.8
|
%
|
|
6.23
|
%
|
|
0.2
|
%
|
|
12.70
|
%
|
|
0.1
|
%
|
|
20.28
|
%
|
|
1.1
|
%
|
|
8.05
|
%
|
|
33.7
|
%
|
620 to 659
|
|
1.3
|
|
|
4.41
|
%
|
|
0.3
|
|
|
9.75
|
%
|
|
0.3
|
|
|
16.40
|
%
|
|
1.9
|
|
|
5.83
|
%
|
|
27.8
|
%
|
≥ 660
|
|
7.0
|
|
|
1.92
|
%
|
|
1.4
|
|
|
6.65
|
%
|
|
0.6
|
|
|
11.79
|
%
|
|
9.0
|
|
|
2.63
|
%
|
|
13.3
|
%
|
Not available
|
|
0.1
|
|
|
4.90
|
%
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
0.1
|
|
|
5.58
|
%
|
|
15.8
|
%
|
Total
|
|
9.2
|
%
|
|
2.65
|
%
|
|
1.9
|
%
|
|
8.04
|
%
|
|
1.0
|
%
|
|
14.14
|
%
|
|
12.1
|
%
|
|
3.59
|
%
|
|
17.1
|
%
|
Freddie Mac 2016 Form 10-K
|
|
108
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2015
|
|||||||||||||||||||||||||
|
|
CLTV ≤ 80
|
|
CLTV > 80 to 100
|
|
CLTV > 100
|
|
All Loans
|
|||||||||||||||||||
(Credit score)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Portfolio
|
|
SDQ Rate
(1)
|
|
% Modified
(1)
|
|||||||||
Core single-family book:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
< 620
|
|
0.2
|
%
|
|
2.32
|
%
|
|
—
|
%
|
|
NM
|
|
|
—
|
%
|
|
NM
|
|
|
0.2
|
%
|
|
2.74
|
%
|
|
2.9
|
%
|
620 to 659
|
|
1.3
|
|
|
1.05
|
%
|
|
0.2
|
|
|
1.49
|
%
|
|
—
|
|
|
NM
|
|
|
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
|
|
—
|
|
|
NM
|
|
|
0.1
|
|
|
4.41
|
%
|
|
—
|
|
|
NM
|
|
|
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
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
NM
|
|
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
|
%
|
|
—
|
|
|
NM
|
|
|
—
|
|
|
NM
|
|
|
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
|
%
|
(1)
|
NM - not meaningful due to the percentage of the portfolio rounding to zero.
|
Freddie Mac 2016 Form 10-K
|
|
109
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
|||||||||||
(Dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|||||
Amortizing ARM and option ARM
(1)
|
|
|
$60.5
|
|
|
53
|
%
|
|
1.7
|
%
|
|
1.20
|
%
|
Interest-only
|
|
|
$16.6
|
|
|
73
|
%
|
|
0.1
|
%
|
|
4.34
|
%
|
Step-rate modified
|
|
|
$32.0
|
|
|
78
|
%
|
|
100
|
%
|
|
6.37
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
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
|
%
|
(1)
|
Includes
$4.1 billion
and $5.0 billion in UPB of option ARM loans as of
December 31, 2016
and 2015, respectively. As of
December 31, 2016
and 2015, the option ARM loans had: (a) current LTV ratios of
64%
and 71%, (b) loan modification percentages of
14.6%
and 14.0%; and (c) serious delinquency rates of
5.24%
and 8.01%, respectively.
|
|
December 31, 2016
|
||||||||||||||||||||||||||||||
(Dollars in millions)
|
2016 and Prior
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
(1)
|
||||||||||||||||
ARM/amortizing
|
|
$15,024
|
|
|
|
$2,652
|
|
|
|
$3,443
|
|
|
|
$6,282
|
|
|
|
$7,704
|
|
|
|
$7,122
|
|
|
|
$13,861
|
|
|
|
$56,088
|
|
ARM/interest-only
|
9,013
|
|
|
3,888
|
|
|
1,572
|
|
|
89
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
14,762
|
|
||||||||
Fixed/interest-only
|
270
|
|
|
1,201
|
|
|
269
|
|
|
4
|
|
|
2
|
|
|
17
|
|
|
72
|
|
|
1,835
|
|
||||||||
Step-rate modified
|
20,071
|
|
|
21,347
|
|
|
14,855
|
|
|
5,517
|
|
|
4,124
|
|
|
2,937
|
|
|
435
|
|
|
32,035
|
|
||||||||
Total
|
|
$44,378
|
|
|
|
$29,088
|
|
|
|
$20,139
|
|
|
|
$11,892
|
|
|
|
$12,030
|
|
|
|
$10,076
|
|
|
|
$14,368
|
|
|
|
$104,720
|
|
(1)
|
Excludes loans underlying certain other securitization products, since the payment change information is not available to us for these loans.
|
Freddie Mac 2016 Form 10-K
|
|
110
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||
(Dollars in billions)
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
|
UPB
|
|
CLTV
|
|
% Modified
|
|
SDQ Rate
|
||||||||||
Alt-A
|
|
|
$32.6
|
|
|
72
|
%
|
|
25.9
|
%
|
|
5.21
|
%
|
|
|
$40.2
|
|
|
77
|
%
|
|
23.1
|
%
|
|
6.32
|
%
|
Freddie Mac 2016 Form 10-K
|
|
111
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
As of December 31, 2016
|
Full Year 2016 Credit Losses
|
|
As of December 31, 2015
|
Full Year 2015 Credit Losses
|
|
As of December 31, 2014
|
Full Year 2014 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
|
|
||||||||||||||||||
New York
|
|
9,574
|
|
|
9
|
%
|
|
2.05
|
%
|
|
|
$163
|
|
|
13,981
|
|
|
10
|
%
|
|
2.94
|
%
|
|
|
$557
|
|
|
19,462
|
|
|
10
|
%
|
|
4.06
|
%
|
|
|
$167
|
|
Florida
|
|
9,355
|
|
|
9
|
|
|
1.42
|
%
|
|
157
|
|
|
14,070
|
|
|
10
|
|
|
2.16
|
%
|
|
850
|
|
|
25,656
|
|
|
13
|
|
|
3.92
|
%
|
|
1,057
|
|
|||
Illinois
|
|
7,291
|
|
|
7
|
|
|
1.34
|
%
|
|
170
|
|
|
8,841
|
|
|
6
|
|
|
1.62
|
%
|
|
381
|
|
|
11,902
|
|
|
6
|
|
|
2.17
|
%
|
|
395
|
|
|||
New Jersey
|
|
6,913
|
|
|
7
|
|
|
2.26
|
%
|
|
204
|
|
|
11,978
|
|
|
9
|
|
|
3.90
|
%
|
|
689
|
|
|
16,960
|
|
|
8
|
|
|
5.49
|
%
|
|
239
|
|
|||
California
|
|
5,992
|
|
|
6
|
|
|
0.46
|
%
|
|
83
|
|
|
7,669
|
|
|
5
|
|
|
0.60
|
%
|
|
215
|
|
|
11,386
|
|
|
6
|
|
|
0.92
|
%
|
|
197
|
|
|||
All Others
|
|
66,809
|
|
|
62
|
|
|
0.90
|
%
|
|
951
|
|
|
83,182
|
|
|
60
|
|
|
1.12
|
%
|
|
1,996
|
|
|
112,700
|
|
|
57
|
|
|
1.52
|
%
|
|
1,784
|
|
|||
Total
|
|
105,934
|
|
|
100
|
%
|
|
1.00
|
%
|
|
|
$1,728
|
|
|
139,721
|
|
|
100
|
%
|
|
1.32
|
%
|
|
|
$4,688
|
|
|
198,066
|
|
|
100
|
%
|
|
1.88
|
%
|
|
|
$3,839
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||||||||||||||||||||
(Dollars in millions)
|
|
Charge-offs,
gross (1) |
|
Recoveries
|
|
Charge-offs,
net
|
|
Charge-offs,
gross (1) |
|
Recoveries
|
|
Charge-offs,
net
|
|
Charge-offs,
gross (1) |
|
Recoveries
|
|
Charge-offs,
net
|
||||||||||||||||||
Northeast
|
|
|
$752
|
|
|
|
($188
|
)
|
|
|
$564
|
|
|
|
$2,056
|
|
|
|
($207
|
)
|
|
|
$1,849
|
|
|
|
$1,120
|
|
|
|
($238
|
)
|
|
|
$882
|
|
North Central
|
|
425
|
|
|
(94
|
)
|
|
331
|
|
|
854
|
|
|
(149
|
)
|
|
705
|
|
|
1,001
|
|
|
(259
|
)
|
|
742
|
|
|||||||||
Southeast
|
|
401
|
|
|
(121
|
)
|
|
280
|
|
|
1,270
|
|
|
(204
|
)
|
|
1,066
|
|
|
1,676
|
|
|
(393
|
)
|
|
1,283
|
|
|||||||||
West
|
|
247
|
|
|
(58
|
)
|
|
189
|
|
|
688
|
|
|
(105
|
)
|
|
583
|
|
|
861
|
|
|
(284
|
)
|
|
577
|
|
|||||||||
Southwest
|
|
113
|
|
|
(36
|
)
|
|
77
|
|
|
203
|
|
|
(52
|
)
|
|
151
|
|
|
234
|
|
|
(84
|
)
|
|
150
|
|
|||||||||
Total
|
|
|
$1,938
|
|
|
|
($497
|
)
|
|
|
$1,441
|
|
|
|
$5,071
|
|
|
|
($717
|
)
|
|
|
$4,354
|
|
|
|
$4,892
|
|
|
|
($1,258
|
)
|
|
|
$3,634
|
|
(1)
|
Does not include lower-of-cost-or-fair value adjustments and other expenses related to property taxes and insurance recognized when we transfer loans from held-for-investment to held-for-sale, which totaled
$1.2 billion
,
$3.4 billion
, and
$0.3 billion
during
2016
, 2015, and 2014, respectively.
|
Freddie Mac 2016 Form 10-K
|
|
112
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
||||||||||||||||||||||
|
|
CLTV <= 80%
|
|
CLTV > 80% to 100%
|
|
CLTV > 100%
|
|
All Loans
|
||||||||||||||||
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Portfolio
|
|
SDQ Rate
|
||||||||
North Central
|
|
13
|
%
|
|
0.67
|
%
|
|
3
|
%
|
|
1.53
|
%
|
|
—
|
%
|
|
6.36
|
%
|
|
16
|
%
|
|
0.93
|
%
|
Northeast
|
|
20
|
|
|
1.04
|
%
|
|
4
|
|
|
2.35
|
%
|
|
1
|
|
|
10.92
|
%
|
|
25
|
|
|
1.45
|
%
|
Southeast
|
|
12
|
|
|
0.92
|
%
|
|
3
|
|
|
1.95
|
%
|
|
1
|
|
|
6.35
|
%
|
|
16
|
|
|
1.19
|
%
|
Southwest
|
|
11
|
|
|
0.71
|
%
|
|
2
|
|
|
1.13
|
%
|
|
—
|
|
|
6.75
|
%
|
|
13
|
|
|
0.78
|
%
|
West
|
|
27
|
|
|
0.43
|
%
|
|
3
|
|
|
1.38
|
%
|
|
—
|
|
|
5.00
|
%
|
|
30
|
|
|
0.57
|
%
|
Total
|
|
83
|
%
|
|
0.74
|
%
|
|
15
|
%
|
|
1.75
|
%
|
|
2
|
%
|
|
7.43
|
%
|
|
100
|
%
|
|
1.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2015
|
||||||||||||||||||||||
|
|
CLTV <= 80%
|
|
CLTV > 80% to 100%
|
|
CLTV > 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
|
%
|
Freddie Mac 2016 Form 10-K
|
|
113
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
Year Ended December 31,
|
||||||||||
(Dollars in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Charge-offs, gross
(1)(2)
|
|
$1,938
|
|
|
|
$5,071
|
|
|
|
$4,892
|
|
Recoveries
|
(497
|
)
|
|
(717
|
)
|
|
(1,258
|
)
|
|||
Charge-offs, net
|
1,441
|
|
|
4,354
|
|
|
3,634
|
|
|||
REO operations expense
|
287
|
|
|
334
|
|
|
205
|
|
|||
Total credit losses
|
|
$1,728
|
|
|
|
$4,688
|
|
|
|
$3,839
|
|
|
|
|
|
|
|
||||||
Total credit losses (in bps)
|
9.9
|
|
|
27.6
|
|
|
22.9
|
|
|||
|
|
|
|
|
|
||||||
Ratio of total loan loss reserves (excluding reserves for TDR concessions) to net charge-offs for single-family loans
(3)
|
3.9
|
|
|
3.0
|
|
|
2.5
|
|
|||
|
|
|
|
|
|
||||||
Ratio of total loan loss reserves to net charge-offs for single-family loans
(3)
|
10.5
|
|
|
9.2
|
|
|
5.2
|
|
|||
|
|
|
|
|
|
||||||
|
As of December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Payment Status:
|
|
|
|
|
|
||||||
One month past due
|
1.37
|
%
|
|
1.37
|
%
|
|
1.52
|
%
|
|||
Two months past due
|
0.40
|
%
|
|
0.42
|
%
|
|
0.49
|
%
|
|||
Seriously delinquent
|
1.00
|
%
|
|
1.32
|
%
|
|
1.88
|
%
|
(1)
|
For 2015, includes $1.9 billion due to the adoption of Advisory Bulletin 2012-02 ("AB 2012-02")
Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention
.
|
(2)
|
Does not include lower-of-cost-or-fair value adjustments and other expenses related to property taxes and insurance recognized when we transfer loans from held-for-investment to held-for-sale, which totaled
$1.2 billion
,
$3.4 billion
, and
$0.3 billion
during
2016
, 2015, and 2014, respectively.
|
(3)
|
Calculated using annualized net charge-offs from the fourth quarter of each respective year.
|
Freddie Mac 2016 Form 10-K
|
|
114
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
|
Year Ended December 31, 2016
|
|
December 31, 2015
|
|
Year Ended December 31, 2015
|
||||||||||
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Credit Losses
|
|
% of Portfolio
|
|
SDQ Rate
|
|
% of Credit Losses
|
||||||
CLTV > 100%
|
|
2
|
%
|
|
7.43
|
%
|
|
34
|
%
|
|
4
|
%
|
|
8.08
|
%
|
|
49
|
%
|
Alt-A loans
|
|
2
|
%
|
|
5.21
|
%
|
|
15
|
%
|
|
2
|
%
|
|
6.32
|
%
|
|
23
|
%
|
Judicial foreclosure states
|
|
38
|
%
|
|
1.36
|
%
|
|
62
|
%
|
|
39
|
%
|
|
1.84
|
%
|
|
70
|
%
|
|
|
Year Ended December 31,
|
||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Beginning balance
|
|
|
$15,348
|
|
|
|
$21,793
|
|
|
|
$24,578
|
|
|
|
$30,508
|
|
|
|
$38,916
|
|
Provision (benefit) for credit losses
|
|
(781
|
)
|
|
(2,639
|
)
|
|
113
|
|
|
(2,247
|
)
|
|
2,013
|
|
|||||
Charge-offs, gross
(1)
|
|
(1,938
|
)
|
|
(5,071
|
)
|
|
(4,892
|
)
|
|
(8,995
|
)
|
|
(13,520
|
)
|
|||||
Recoveries
|
|
497
|
|
|
717
|
|
|
1,258
|
|
|
4,313
|
|
|
2,262
|
|
|||||
Transfers, net
|
|
337
|
|
|
548
|
|
|
736
|
|
|
999
|
|
|
837
|
|
|||||
Ending balance
|
|
|
$13,463
|
|
|
|
$15,348
|
|
|
|
$21,793
|
|
|
|
$24,578
|
|
|
|
$30,508
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As a percentage of our single-family credit guarantee portfolio
|
|
0.77
|
%
|
|
0.90
|
%
|
|
1.31
|
%
|
|
1.49
|
%
|
|
1.86
|
%
|
(1)
|
Does not include lower-of-cost-or-fair value adjustments and other expenses related to property taxes and insurance recognized when we transfer loans from held-for-investment to held-for-sale, which totaled
$1.2 billion
,
$3.4 billion
,
$0.3 billion
, $0 billion, and $0 billion during
2016
, 2015, 2014, 2013, and 2012, respectively.
|
Freddie Mac 2016 Form 10-K
|
|
115
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
2016
|
|
2015
|
||||||||||
(Dollars in millions)
|
|
Loan Count
|
|
Amount
|
|
Loan Count
|
|
Amount
|
||||||
TDRs, at January 1
|
|
512,253
|
|
|
|
$85,960
|
|
|
539,590
|
|
|
|
$94,401
|
|
New additions
|
|
43,153
|
|
|
5,956
|
|
|
59,887
|
|
|
8,227
|
|
||
Repayments and reclassifications to held-for-sale
|
|
(58,153
|
)
|
|
(11,405
|
)
|
|
(69,720
|
)
|
|
(13,975
|
)
|
||
Foreclosure transfers and foreclosure alternatives
|
|
(11,544
|
)
|
|
(1,642
|
)
|
|
(17,871
|
)
|
|
(2,789
|
)
|
||
TDRs, at December 31,
|
|
485,709
|
|
|
78,869
|
|
|
511,886
|
|
|
85,864
|
|
||
Loans impaired upon purchase
|
|
7,977
|
|
|
542
|
|
|
9,535
|
|
|
678
|
|
||
Total impaired loans with specific reserve
|
|
493,686
|
|
|
79,411
|
|
|
521,421
|
|
|
86,542
|
|
||
Allowance for loan losses
|
|
|
|
(11,980
|
)
|
|
|
|
(14,019
|
)
|
||||
Net investment, at December 31,
|
|
|
|
|
$67,431
|
|
|
|
|
|
$72,523
|
|
|
|
December 31,
|
||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
TDRs on accrual status
|
|
|
$77,122
|
|
|
|
$82,026
|
|
|
|
$82,373
|
|
|
|
$78,033
|
|
|
|
$65,784
|
|
Non-accrual loans
|
|
16,164
|
|
|
22,460
|
|
|
32,745
|
|
|
42,829
|
|
|
61,517
|
|
|||||
Total TDRs and non-accrual loans
|
|
|
$93,286
|
|
|
|
$104,486
|
|
|
|
$115,118
|
|
|
|
$120,862
|
|
|
|
$127,301
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan loss reserves associated with:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
TDRs on accrual status
|
|
|
$10,295
|
|
|
|
$12,105
|
|
|
|
$13,728
|
|
|
|
$14,239
|
|
|
|
$12,430
|
|
Non-accrual loans
|
|
2,290
|
|
|
2,677
|
|
|
6,935
|
|
|
8,805
|
|
|
14,602
|
|
|||||
Total
|
|
|
$12,585
|
|
|
|
$14,782
|
|
|
|
$20,663
|
|
|
|
$23,044
|
|
|
|
$27,032
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Foregone interest income on TDRs and non-accrual loans
(1)
|
|
|
$2,109
|
|
|
|
$2,690
|
|
|
|
$3,235
|
|
|
|
$3,552
|
|
|
|
$4,126
|
|
(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 2016 Form 10-K
|
|
116
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||
(Dollars in millions)
|
|
UPB
|
|
Loan Count
|
|
SDQ Rate
|
|
UPB
|
|
Loan Count
|
|
SDQ Rate
|
||||||||
Above 125% Original LTV
|
|
|
$25,027
|
|
|
144,719
|
|
|
1.24
|
%
|
|
|
$28,241
|
|
|
157,035
|
|
|
1.38
|
%
|
Above 100% to 125% Original LTV
|
|
50,618
|
|
|
288,697
|
|
|
1.10
|
%
|
|
59,305
|
|
|
323,795
|
|
|
1.20
|
%
|
||
Above 80% to 100% Original LTV
|
|
82,987
|
|
|
506,932
|
|
|
0.84
|
%
|
|
97,375
|
|
|
567,201
|
|
|
0.86
|
%
|
||
80% and below Original LTV
|
|
106,350
|
|
|
892,471
|
|
|
0.38
|
%
|
|
117,677
|
|
|
942,183
|
|
|
0.36
|
%
|
||
Total
|
|
|
$264,982
|
|
|
1,832,819
|
|
|
0.69
|
%
|
|
|
$302,598
|
|
|
1,990,214
|
|
|
0.72
|
%
|
•
|
Forbearance agreements -
Arrangements that require reduced or no payments during a defined period, generally less than one year, to allow borrowers to return to compliance with the original
|
Freddie Mac 2016 Form 10-K
|
|
117
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
•
|
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 2016, the average time period to repay past due amounts was approximately three 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. Our modification programs generally require 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. These modification programs offer eligible borrowers extension of the loan’s term up to 480 months and a fixed interest rate. Servicers are paid incentive fees for each completed modification, and there are limits on the number of times a loan may be modified.
|
•
|
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 2016 Form 10-K
|
|
118
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
December 31, 2016
|
|||||||||||
(Dollars in billions)
|
|
UPB
|
|
% of Portfolio
|
|
CLTV Ratio
|
|
SDQ Rate
|
|||||
HAMP
|
|
|
$33.8
|
|
|
2
|
%
|
|
78
|
%
|
|
6.49
|
%
|
Non-HAMP
|
|
43.1
|
|
|
2
|
|
|
82
|
%
|
|
11.76
|
%
|
|
Total
|
|
|
$76.9
|
|
|
4
|
%
|
|
80
|
%
|
|
9.64
|
%
|
|
|
|
|
|
|
|
|
|
|||||
|
|
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
|
%
|
|
|
Quarter of Loan Modification Completion
|
||||||||||||||||||||||
|
|
4Q 2015
|
|
3Q 2015
|
|
2Q 2015
|
|
1Q 2015
|
|
4Q 2014
|
|
3Q 2014
|
|
2Q 2014
|
|
1Q 2014
|
||||||||
Current or paid off
one year after modification: |
|
64
|
%
|
|
66
|
%
|
|
66
|
%
|
|
69
|
%
|
|
67
|
%
|
|
69
|
%
|
|
70
|
%
|
|
74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current or paid off
two years after modification: |
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
65
|
%
|
|
66
|
%
|
|
69
|
%
|
|
71
|
%
|
Freddie Mac 2016 Form 10-K
|
|
119
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
120
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
As of December 31,
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||
|
|
Loan Count
|
|
Percent
|
|
Loan Count
|
|
Percent
|
|
Loan Count
|
|
Percent
|
||||||
Aging, by locality:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Judicial states:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
35,599
|
|
|
34
|
%
|
|
40,265
|
|
|
29
|
%
|
|
50,138
|
|
|
25
|
%
|
> 1 year and <= 2 years
|
|
12,257
|
|
|
11
|
|
|
16,199
|
|
|
12
|
|
|
21,919
|
|
|
11
|
|
> 2 years
|
|
14,318
|
|
|
14
|
|
|
28,265
|
|
|
20
|
|
|
48,984
|
|
|
25
|
|
Non-judicial states:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
32,949
|
|
|
31
|
|
|
38,010
|
|
|
27
|
|
|
49,657
|
|
|
25
|
|
> 1 year and <= 2 years
|
|
6,075
|
|
|
6
|
|
|
8,660
|
|
|
6
|
|
|
12,989
|
|
|
7
|
|
> 2 years
|
|
4,736
|
|
|
4
|
|
|
8,322
|
|
|
6
|
|
|
14,379
|
|
|
7
|
|
Combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
<= 1 year
|
|
68,548
|
|
|
65
|
|
|
78,275
|
|
|
56
|
|
|
99,795
|
|
|
50
|
|
> 1 year and <= 2 years
|
|
18,332
|
|
|
17
|
|
|
24,859
|
|
|
18
|
|
|
34,908
|
|
|
18
|
|
> 2 years
|
|
19,054
|
|
|
18
|
|
|
36,587
|
|
|
26
|
|
|
63,363
|
|
|
32
|
|
Total
|
|
105,934
|
|
|
100
|
%
|
|
139,721
|
|
|
100
|
%
|
|
198,066
|
|
|
100
|
%
|
Freddie Mac 2016 Form 10-K
|
|
121
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||
(Average days)
|
|
2016
|
|
2015
|
|
2014
|
|||
Judicial states:
|
|
|
|
|
|
|
|||
Florida
|
|
1,205
|
|
|
1,332
|
|
|
1,311
|
|
New Jersey
|
|
1,767
|
|
|
1,602
|
|
|
1,372
|
|
New York
|
|
1,599
|
|
|
1,553
|
|
|
1,325
|
|
All other judicial states
|
|
742
|
|
|
828
|
|
|
796
|
|
Judicial states, in aggregate
|
|
1,030
|
|
|
1,076
|
|
|
1,031
|
|
Non-judicial states, in aggregate
|
|
562
|
|
|
637
|
|
|
636
|
|
Total
|
|
827
|
|
|
892
|
|
|
867
|
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in millions)
|
|
Number of Properties
|
|
Amount
|
|
Number of Properties
|
|
Amount
|
|
Number of Properties
|
|
Amount
|
|||||||||
Beginning balance - REO
|
|
17,004
|
|
|
|
$1,774
|
|
|
25,768
|
|
|
|
$2,684
|
|
|
47,307
|
|
|
|
$4,592
|
|
Acquisitions
|
|
16,161
|
|
|
1,562
|
|
|
23,171
|
|
|
2,235
|
|
|
42,265
|
|
|
4,094
|
|
|||
Dispositions
|
|
(21,747
|
)
|
|
(2,121
|
)
|
|
(31,935
|
)
|
|
(3,145
|
)
|
|
(63,804
|
)
|
|
(6,002
|
)
|
|||
Ending balance - REO
|
|
11,418
|
|
|
1,215
|
|
|
17,004
|
|
|
1,774
|
|
|
25,768
|
|
|
2,684
|
|
|||
Beginning balance, valuation allowance
|
|
|
|
(52
|
)
|
|
|
|
(126
|
)
|
|
|
|
(51
|
)
|
||||||
Change in valuation allowance
|
|
|
|
35
|
|
|
|
|
73
|
|
|
|
|
(75
|
)
|
||||||
Ending balance, valuation allowance
|
|
|
|
(17
|
)
|
|
|
|
(53
|
)
|
|
|
|
(126
|
)
|
||||||
Ending balance - REO
|
|
|
|
|
$1,198
|
|
|
|
|
|
$1,721
|
|
|
|
|
|
$2,558
|
|
Freddie Mac 2016 Form 10-K
|
|
122
|
Management's Discussion and Analysis
|
Risk Management | SF Credit Risk
|
|
|
Year Ended December 31,
|
|||||||
|
|
2016
|
|
2015
|
|
2014
|
|||
REO dispositions and third-party foreclosure sales
|
|
32.8
|
%
|
|
34.3
|
%
|
|
34.2
|
%
|
Short sales
|
|
29.0
|
%
|
|
30.1
|
%
|
|
31.6
|
%
|
Freddie Mac 2016 Form 10-K
|
|
123
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
•
|
Maintaining policies and procedures for new business activity, including prudent underwriting standards;
|
•
|
Transferring a large majority of expected and stress credit losses to third parties through K Certificates, SB Certificates, and other transactions; and
|
•
|
Managing our portfolio, including loss mitigation activities.
|
|
|
December 31,
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in millions)
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|
Amount
|
|
% of Total
|
|||||||||
10-year loans, fixed or adjustable
|
|
|
$24,378
|
|
|
43
|
%
|
|
|
$20,603
|
|
|
43
|
%
|
|
|
$11,069
|
|
|
39
|
%
|
7-year loans, fixed or adjustable
|
|
19,367
|
|
|
34
|
|
|
16,875
|
|
|
36
|
|
|
11,773
|
|
|
42
|
|
|||
Other
|
|
13,085
|
|
|
23
|
|
|
9,786
|
|
|
21
|
|
|
5,494
|
|
|
19
|
|
|||
Total
|
|
|
$56,830
|
|
|
100
|
%
|
|
|
$47,264
|
|
|
100
|
%
|
|
|
$28,336
|
|
|
100
|
%
|
Freddie Mac 2016 Form 10-K
|
|
124
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||
|
|
% of Portfolio
|
|
Delinquency Rate
|
|
% of Portfolio
|
|
Delinquency Rate
|
|
% of Portfolio
|
|
Delinquency Rate
|
||||||
Non-credit-enhanced
|
|
24
|
%
|
|
0.04
|
%
|
|
32
|
%
|
|
0.03
|
%
|
|
40
|
%
|
|
0.02
|
%
|
Credit-enhanced:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
K Certificates and SB Certificates
|
|
70
|
|
|
0.02
|
%
|
|
61
|
|
|
0.02
|
%
|
|
53
|
|
|
0.01
|
%
|
Other
|
|
6
|
|
|
0.02
|
%
|
|
7
|
|
|
—
|
%
|
|
7
|
|
|
0.35
|
%
|
Total
|
|
100
|
%
|
|
0.03
|
%
|
|
100
|
%
|
|
0.02
|
%
|
|
100
|
%
|
|
0.04
|
%
|
Freddie Mac 2016 Form 10-K
|
|
125
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
126
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
(Dollars in billions)
|
|
UPB
|
|
Delinquency Rate
|
|
UPB
|
|
Delinquency Rate
|
||||||
Unsecuritized loans
|
|
|
$42.4
|
|
|
0.04
|
%
|
|
|
$49.1
|
|
|
0.04
|
%
|
K Certificates and SB Certificates
|
|
139.4
|
|
|
0.02
|
%
|
|
103.1
|
|
|
0.02
|
%
|
||
Other securitization products
|
|
8.2
|
|
|
0.03
|
%
|
|
6.7
|
|
|
—
|
%
|
||
Other mortgage-related guarantees
|
|
9.7
|
|
|
—
|
%
|
|
9.5
|
|
|
—
|
%
|
||
Total
|
|
|
$199.7
|
|
|
0.03
|
%
|
|
|
$168.4
|
|
|
0.02
|
%
|
Unsecuritized loans, excluding HFS loans:
|
|
|
|
|
|
|
|
|
||||||
Original LTV ratio:
|
|
|
|
|
|
|
|
|
||||||
Below 75%
|
|
|
$16.8
|
|
|
—
|
%
|
|
|
$21.2
|
|
|
—
|
%
|
75% to 80%
|
|
7.0
|
|
|
—
|
%
|
|
7.1
|
|
|
—
|
%
|
||
Above 80%
|
|
2.1
|
|
|
—
|
%
|
|
1.2
|
|
|
—
|
%
|
||
Total
|
|
|
$25.9
|
|
|
—
|
%
|
|
|
$29.5
|
|
|
—
|
%
|
Weighted average LTV ratio at origination
|
|
68
|
%
|
|
|
|
68
|
%
|
|
|
||||
Maturity dates:
|
|
|
|
|
|
|
|
|
||||||
2016
|
|
N/A
|
|
|
N/A
|
|
|
|
$1.9
|
|
|
—
|
%
|
|
2017
|
|
|
$1.9
|
|
|
—
|
%
|
|
4.6
|
|
|
—
|
%
|
|
2018
|
|
6.7
|
|
|
—
|
%
|
|
7.8
|
|
|
—
|
%
|
||
2019
|
|
6.1
|
|
|
—
|
%
|
|
6.9
|
|
|
—
|
%
|
||
2020
|
|
2.2
|
|
|
—
|
%
|
|
1.9
|
|
|
—
|
%
|
||
Thereafter
|
|
9.0
|
|
|
—
|
%
|
|
6.4
|
|
|
—
|
%
|
||
Total
|
|
|
$25.9
|
|
|
—
|
%
|
|
|
$29.5
|
|
|
—
|
%
|
Year of acquisition:
|
|
|
|
|
|
|
|
|
||||||
2010 and prior
|
|
|
$14.5
|
|
|
—
|
%
|
|
|
$23.1
|
|
|
—
|
%
|
2011 and after
|
|
11.4
|
|
|
—
|
%
|
|
6.4
|
|
|
—
|
%
|
||
Total
|
|
|
$25.9
|
|
|
—
|
%
|
|
|
$29.5
|
|
|
—
|
%
|
K Certificates, SB Certificates and other securitization products:
|
|
|
|
|
|
|
|
|
||||||
Year of issuance:
|
|
|
|
|
|
|
|
|
||||||
2011 and prior
|
|
|
$20.9
|
|
|
0.16
|
%
|
|
|
$21.2
|
|
|
0.10
|
%
|
2012
|
|
14.6
|
|
|
—
|
%
|
|
15.8
|
|
|
—
|
%
|
||
2013
|
|
21.6
|
|
|
—
|
%
|
|
22.9
|
|
|
—
|
%
|
||
2014
|
|
15.4
|
|
|
—
|
%
|
|
17.5
|
|
|
—
|
%
|
||
2015
|
|
30.0
|
|
|
—
|
%
|
|
32.4
|
|
|
—
|
%
|
||
2016
|
|
45.1
|
|
|
0.01
|
%
|
|
N/A
|
|
|
N/A
|
|
||
Total
|
|
|
$147.6
|
|
|
0.03
|
%
|
|
|
$109.8
|
|
|
0.02
|
%
|
Subordination level at issuance:
|
|
|
|
|
|
|
|
|
||||||
No subordination
|
|
|
$3.3
|
|
|
—
|
%
|
|
|
$2.0
|
|
|
0.01
|
%
|
Less than 10%
|
|
4.5
|
|
|
0.71
|
%
|
|
5.1
|
|
|
—
|
%
|
||
10% to 15%
|
|
75.6
|
|
|
0.01
|
%
|
|
44.0
|
|
|
0.05
|
%
|
||
Greater than 15%
|
|
64.2
|
|
|
—
|
%
|
|
58.7
|
|
|
—
|
%
|
||
Total
|
|
|
$147.6
|
|
|
0.03
|
%
|
|
|
$109.8
|
|
|
0.02
|
%
|
Freddie Mac 2016 Form 10-K
|
|
127
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
|
|
Year Ended December 31,
|
||||||||||
(Dollars in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Charge-offs, gross
(1)
|
|
|
$2
|
|
|
|
$9
|
|
|
|
$3
|
|
Recoveries
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Charge-offs, net
|
|
2
|
|
|
9
|
|
|
2
|
|
|||
REO operations expense (income)
|
|
—
|
|
|
4
|
|
|
(9
|
)
|
|||
Credit losses (gains)
|
|
|
$2
|
|
|
|
$13
|
|
|
|
($7
|
)
|
|
|
|
|
|
|
|
||||||
Credit losses (gains) (in bps)
|
|
0.1
|
|
|
0.8
|
|
|
(0.5
|
)
|
|||
Number of delinquent loans
|
|
6
|
|
|
4
|
|
|
8
|
|
(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)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Beginning balance
|
|
|
$59
|
|
|
|
$94
|
|
|
|
$151
|
|
|
|
$382
|
|
|
|
$545
|
|
Provision (benefit) for credit losses
|
|
(22
|
)
|
|
(26
|
)
|
|
(55
|
)
|
|
(218
|
)
|
|
(123
|
)
|
|||||
Charge-offs, gross
|
|
(2
|
)
|
|
(9
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|
(36
|
)
|
|||||
Recoveries
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|||||
Transfers, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(6
|
)
|
|||||
Ending balance
|
|
|
$35
|
|
|
|
$59
|
|
|
|
$94
|
|
|
|
$151
|
|
|
|
$382
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As a percentage of non-credit-enhanced multifamily mortgage portfolio
|
|
0.07
|
%
|
|
0.11
|
%
|
|
0.16
|
%
|
|
0.24
|
%
|
|
0.48
|
%
|
Freddie Mac 2016 Form 10-K
|
|
128
|
Management's Discussion and Analysis
|
Risk Management | MF Credit Risk
|
|
|
December 31,
|
||||||||||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
TDRs on accrual status
|
|
|
$277
|
|
|
|
$321
|
|
|
|
$535
|
|
|
|
$675
|
|
|
|
$806
|
|
Non-accrual loans
|
|
108
|
|
|
189
|
|
|
385
|
|
|
628
|
|
|
1,488
|
|
|||||
Total TDRs and non-accrual loans
|
|
|
$385
|
|
|
|
$510
|
|
|
|
$920
|
|
|
|
$1,303
|
|
|
|
$2,294
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan loss reserves associated with:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
TDRs on accrual status
|
|
|
$3
|
|
|
|
$9
|
|
|
|
$21
|
|
|
|
$15
|
|
|
|
$48
|
|
Non-accrual loans
|
|
7
|
|
|
12
|
|
|
31
|
|
|
65
|
|
|
157
|
|
|||||
Total
|
|
|
$10
|
|
|
|
$21
|
|
|
|
$52
|
|
|
|
$80
|
|
|
|
$205
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Foregone interest income on TDRs and non-accrual loans
(1)
|
|
|
$3
|
|
|
|
$3
|
|
|
|
$4
|
|
|
|
$8
|
|
|
|
$11
|
|
(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 2016 Form 10-K
|
|
129
|
Management's Discussion and Analysis
|
Risk Management | MRS Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
130
|
Management's Discussion and Analysis
|
Risk Management | MRS Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
131
|
Management's Discussion and Analysis
|
Risk Management | MRS Credit Risk
|
|
As of
|
||||||||||||||||||
(Dollars in millions)
|
12/31/2016
|
|
9/30/2016
|
|
6/30/2016
|
|
3/31/2016
|
|
12/31/2015
|
||||||||||
UPB
|
|
$14,343
|
|
|
|
$15,330
|
|
|
|
$19,248
|
|
|
|
$23,760
|
|
|
|
$25,300
|
|
Gross unrealized losses, pre-tax
|
78
|
|
|
157
|
|
|
352
|
|
|
469
|
|
|
425
|
|
|||||
Present value of expected future credit losses
|
2,552
|
|
|
2,330
|
|
|
2,641
|
|
|
3,018
|
|
|
3,576
|
|
|||||
Principal repayments
|
595
|
|
|
658
|
|
|
1,005
|
|
|
731
|
|
|
920
|
|
|||||
Principal cash shortfalls
(1)
|
14
|
|
|
17
|
|
|
(82
|
)
|
|
20
|
|
|
26
|
|
|||||
Collateral delinquency rate
|
23
|
%
|
|
23
|
%
|
|
24
|
%
|
|
25
|
%
|
|
25
|
%
|
|||||
Average credit enhancements
(2)
|
(1
|
)%
|
|
1
|
%
|
|
4
|
%
|
|
3
|
%
|
|
4
|
%
|
|||||
Cumulative collateral loss
|
32
|
%
|
|
32
|
%
|
|
31
|
%
|
|
31
|
%
|
|
30
|
%
|
(1)
|
Negative value reflects the recovery of previous principal cash shortfalls through the settlement of non-agency RMBS representation and warranty claims. See Note 12 for more information concerning our litigation related to non-agency mortgage-related securities.
|
(2)
|
Positive value reflects 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 value is 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 2016 Form 10-K
|
|
132
|
Management's Discussion and Analysis
|
Risk Management | Counterparty 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 2016 Form 10-K
|
|
133
|
Management's Discussion and Analysis
|
Risk Management | Counterparty Credit Risk
|
Freddie Mac 2016 Form 10-K
|
|
134
|
Management's Discussion and Analysis
|
Risk Management | Counterparty 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 may facilitate the transfer of servicing as a result of poor servicer performance, or 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. We may also facilitate the transfer of servicing on loans at the request of the servicer.
|
Freddie Mac 2016 Form 10-K
|
|
135
|
Management's Discussion and Analysis
|
Risk Management | Counterparty 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 generally participate in multiple types of insurance businesses, which helps to diversify their risk exposure.
|
Freddie Mac 2016 Form 10-K
|
|
136
|
Management's Discussion and Analysis
|
Risk Management | Counterparty Credit Risk
|
|
|
|
|
|
|
December 31, 2016
|
||||||||||||||
|
|
|
|
|
|
UPB
|
|
Coverage
|
||||||||||||
(In millions)
|
|
Credit
Rating (1) |
|
Credit
Rating Outlook (1) |
|
Primary
MI
|
|
Pool
Insurance
|
|
Primary
MI
|
|
Pool
Insurance
|
||||||||
Arch Mortgage Insurance Company
(2)
|
|
BBB+
|
|
Stable
|
|
|
$70,618
|
|
|
|
$14
|
|
|
|
$18,131
|
|
|
|
$9
|
|
Radian Guaranty Inc. (Radian)
|
|
BBB-
|
|
Stable
|
|
60,634
|
|
|
1,470
|
|
|
15,510
|
|
|
523
|
|
||||
Mortgage Guaranty Insurance Corporation (MGIC)
|
|
BBB-
|
|
Stable
|
|
59,339
|
|
|
113
|
|
|
15,227
|
|
|
1
|
|
||||
Genworth Mortgage Insurance Corporation
|
|
BB+
|
|
Watch Dev
|
|
43,323
|
|
|
15
|
|
|
11,106
|
|
|
17
|
|
||||
Essent Guaranty, Inc.
|
|
BBB
|
|
Stable
|
|
29,225
|
|
|
—
|
|
|
7,459
|
|
|
—
|
|
||||
PMI Mortgage Insurance Co. (PMI)
|
|
Not Rated
|
|
N/A
|
|
7,355
|
|
|
65
|
|
|
1,840
|
|
|
44
|
|
||||
Republic Mortgage Insurance Company (RMIC)
|
|
Not Rated
|
|
N/A
|
|
5,591
|
|
|
32
|
|
|
1,397
|
|
|
20
|
|
||||
Triad Guaranty Insurance Corporation (Triad)
|
|
Not Rated
|
|
N/A
|
|
2,871
|
|
|
10
|
|
|
723
|
|
|
4
|
|
||||
Others
|
|
N/A
|
|
N/A
|
|
12,261
|
|
|
—
|
|
|
2,952
|
|
|
—
|
|
||||
Total
|
|
|
|
|
|
|
$291,217
|
|
|
|
$1,719
|
|
|
|
$74,345
|
|
|
|
$618
|
|
(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 December 31, 2016. Represents the lower of S&P and Moody’s credit ratings and outlooks stated in terms of the S&P equivalent.
|
(2)
|
On January 3, 2017, Arch Capital Group Ltd. announced that it had completed its purchase of United Guaranty Corporation at the end of 2016. The table reflects this transaction.
|
Freddie Mac 2016 Form 10-K
|
|
137
|
Management's Discussion and Analysis
|
Risk Management | Counterparty Credit Risk
|
(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 December 31, 2016. Represents the lower of S&P and Moody’s credit ratings and outlooks stated in terms of the S&P equivalent.
|
•
|
Cleared derivatives -
We are required to post initial and variation margin with our clearing members in connection with interest-rate swaps that are subject to the central clearing requirement of the Dodd-Frank Act. 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 counterparty credit risk exposure to individual counterparties because a central counterparty is substituted for
|
Freddie Mac 2016 Form 10-K
|
|
138
|
Management's Discussion and Analysis
|
Risk Management | Counterparty Credit Risk
|
•
|
Exchange-traded derivatives -
We are required to post initial and variation margin with our clearing members in connection with exchange-traded derivatives. The posting of this margin exposes us to counterparty credit risk in the event that our clearing members or the exchanges' clearinghouses fail to meet their obligations. However, the use of exchange-traded derivatives mitigates our counterparty credit risk exposure to individual counterparties because a central counterparty is substituted for individual counterparties, and changes in the value of open exchange-traded contracts are settled daily via payments made through the financial clearinghouse established by each exchange.
|
•
|
OTC derivatives -
OTC derivatives expose us to counterparty 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. Regulations that take effect March 1, 2017 will require posting of variation margin without the application of any thresholds for OTC derivative transactions executed after that date. As a result, our and the counterparties' credit ratings will no longer be used in determining the amount of collateral to be posted in connection with these transactions.
|
Freddie Mac 2016 Form 10-K
|
|
139
|
Management's Discussion and Analysis
|
Risk Management | Counterparty Credit Risk
|
|
|
As of December 31, 2016
|
|||||||||
(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
|
|
|
|
$266
|
|
|
|
$14
|
|
A+, A, or A-
|
|
11
|
|
|
1,856
|
|
|
31
|
|
||
BBB+, BBB, or BBB-
|
|
3
|
|
|
42
|
|
|
6
|
|
||
Total OTC
|
|
19
|
|
|
2,164
|
|
|
51
|
|
||
Cleared and exchange-traded derivatives
|
|
2
|
|
|
215
|
|
|
21
|
|
||
Total
|
|
21
|
|
|
|
$2,379
|
|
|
|
$72
|
|
•
|
Cash and other investments counterparties -
We are exposed to the non-performance of counterparties relating to cash and other investments (including non-mortgage-related securities 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
|
Freddie Mac 2016 Form 10-K
|
|
140
|
Management's Discussion and Analysis
|
Risk Management | Counterparty 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, 2016 and 2015, approximately $8.4 billion and $13.0 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 Financial Corp.
|
•
|
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. In 2016, Intercontinental Exchange, Inc. acquired a majority equity position in MERSCORP Holdings, Inc. Freddie Mac and Fannie Mae also have equity positions in MERSCORP Holdings. 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 2016 Form 10-K
|
|
141
|
Management's Discussion and Analysis
|
Risk Management | Operational Risk
|
Freddie Mac 2016 Form 10-K
|
|
142
|
Management's Discussion and Analysis
|
Risk Management | Operational Risk
|
Freddie Mac 2016 Form 10-K
|
|
143
|
Management's Discussion and Analysis
|
Risk Management | Operational Risk
|
Freddie Mac 2016 Form 10-K
|
|
144
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
•
|
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 2016 Form 10-K
|
|
145
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
Freddie Mac 2016 Form 10-K
|
|
146
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
Risk
|
Description
|
|
Risk Exposure
|
Interest-rate Risk
|
Interest-rate 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.
|
•
|
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 expected future cash flows and their present values. This is reflected in our PMVS-L and Duration Gap disclosures.
|
|
•
|
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. This is reflected in our PMVS-YC disclosure.
|
|
|
|
•
|
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 market spread risk, also referred to as mortgage-to-debt OAS risk, arising from funding mortgage-related investments with debt securities.
|
||
•
|
We also incur market spread risk when we use LIBOR- or Treasury-based instruments in our risk management activities.
|
||
|
|
•
|
We are exposed to market 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, market spreads can widen, causing losses due to changes in fair value. We also have market spread risk on the K Certificates and SB 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
|
Freddie Mac 2016 Form 10-K
|
|
147
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
•
|
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:
|
Freddie Mac 2016 Form 10-K
|
|
148
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
•
|
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 down rate shocks is the PMVS. In cases where both the up rate and down rate shocks result in a positive effect, the PMVS is zero. Because this process uses a parallel, or level, shock to interest rates, we refer to this measure as PMVS-L.
|
•
|
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 2016 Form 10-K
|
|
149
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
|
|
PMVS-YC
|
|
PMVS-L
|
||||||||
(In millions)
|
|
25 bps
|
|
50 bps
|
|
100 bps
|
||||||
Assuming shifts of the LIBOR yield curve:
|
|
|
|
|
|
|
||||||
December 31, 2016
|
|
|
$7
|
|
|
|
$—
|
|
|
|
$—
|
|
December 31, 2015
|
|
|
$12
|
|
|
|
$50
|
|
|
|
$186
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||
(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
|
|
0.1
|
|
|
|
$6
|
|
|
|
$20
|
|
|
0.2
|
|
|
|
$17
|
|
|
|
$90
|
|
Minimum
|
|
(0.4
|
)
|
|
|
$—
|
|
|
|
$—
|
|
|
(0.4
|
)
|
|
|
$—
|
|
|
|
$23
|
|
Maximum
|
|
0.7
|
|
|
|
$31
|
|
|
|
$92
|
|
|
1.0
|
|
|
|
$47
|
|
|
|
$249
|
|
Standard deviation
|
|
0.2
|
|
|
|
$5
|
|
|
|
$21
|
|
|
0.3
|
|
|
|
$12
|
|
|
|
$40
|
|
Freddie Mac 2016 Form 10-K
|
|
150
|
Management's Discussion and Analysis
|
Risk Management | Market Risk
|
|
PMVS-L (50 bps)
|
|
|
||||||||
(In millions)
|
Before
Derivatives
|
|
After
Derivatives
|
|
Effect of
Derivatives
|
||||||
December 31, 2016
|
|
$3,651
|
|
|
|
$—
|
|
|
|
($3,651
|
)
|
December 31, 2015
|
|
$3,373
|
|
|
|
$50
|
|
|
|
($3,323
|
)
|
|
GAAP FV-YC
|
|
GAAP FV-L
|
||||||||
(In millions)
|
25 bps
|
|
50 bps
|
|
100 bps
|
||||||
December 31, 2016
|
|
$526
|
|
|
|
$1,328
|
|
|
|
$2,615
|
|
December 31, 2015
|
|
$635
|
|
|
|
$1,630
|
|
|
|
$3,573
|
|
Freddie Mac 2016 Form 10-K
|
|
151
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Overview
|
•
|
Principal payments due to the maturity, redemption or repurchase of our other debt;
|
•
|
Interest payments on our other debt;
|
•
|
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;
|
•
|
Payments to affordable housing funds under the GSE Act;
|
•
|
Payments to Treasury associated with the legislated 10 basis point increase under the Temporary Payroll Tax Cut Continuation Act;
|
•
|
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;
|
•
|
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 2016 Form 10-K
|
|
152
|
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 2016 Form 10-K
|
|
153
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
Freddie Mac 2016 Form 10-K
|
|
154
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Year Ended December 31, 2016
|
|||||||||||
(Dollars in millions)
|
|
Short-term
|
|
Average Rate
|
Long-term
|
|
Average Rate
|
||||||
Discount notes and Reference Bills:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
|
$104,088
|
|
|
0.28
|
%
|
|
$—
|
|
|
—
|
|
Issuances
|
|
424,256
|
|
|
0.30
|
%
|
—
|
|
|
—
|
|
||
Maturities
|
|
(467,302
|
)
|
|
0.27
|
%
|
—
|
|
|
—
|
|
||
Ending Balance
|
|
61,042
|
|
|
0.47
|
%
|
—
|
|
|
—
|
|
||
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
||
Issuances
|
|
61,284
|
|
|
0.07
|
%
|
—
|
|
|
—
|
|
||
Maturities
|
|
(58,244
|
)
|
|
0.05
|
%
|
—
|
|
|
—
|
|
||
Ending Balance
|
|
3,040
|
|
|
0.42
|
%
|
—
|
|
|
—
|
|
||
Callable debt:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
—
|
|
|
—
|
|
107,675
|
|
|
1.61
|
%
|
||
Issuances
|
|
—
|
|
|
—
|
|
115,930
|
|
|
1.47
|
%
|
||
Calls
|
|
—
|
|
|
—
|
|
(123,475
|
)
|
|
1.46
|
%
|
||
Maturities
|
|
—
|
|
|
—
|
|
(1,710
|
)
|
|
0.65
|
%
|
||
Ending Balance
|
|
—
|
|
|
—
|
|
98,420
|
|
|
1.44
|
%
|
||
Non-callable debt:
(1)
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
9,545
|
|
|
0.20
|
%
|
196,713
|
|
|
2.34
|
%
|
||
Issuances
|
|
7,435
|
|
|
0.41
|
%
|
49,383
|
|
|
1.17
|
%
|
||
Repurchases
|
|
—
|
|
|
—
|
|
(53
|
)
|
|
11.78
|
%
|
||
Maturities
|
|
(9,545
|
)
|
|
0.20
|
%
|
(59,237
|
)
|
|
2.26
|
%
|
||
Ending Balance
|
|
7,435
|
|
|
0.41
|
%
|
186,806
|
|
|
2.10
|
%
|
||
Total other debt
|
|
|
$71,517
|
|
|
0.47
|
%
|
|
$285,226
|
|
|
1.87
|
%
|
|
|
Year Ended December 31, 2015
|
|||||||||||
(Dollars in millions)
|
|
Short-term
|
|
Average Rate
|
Long-term
|
|
Average Rate
|
||||||
Discount notes and Reference Bills:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
|
$134,670
|
|
|
0.12
|
%
|
|
$—
|
|
|
—
|
|
Issuances
|
|
427,964
|
|
|
0.11
|
%
|
—
|
|
|
—
|
|
||
Maturities
|
|
(458,546
|
)
|
|
0.07
|
%
|
—
|
|
|
—
|
|
||
Ending Balance
|
|
104,088
|
|
|
0.28
|
%
|
—
|
|
|
—
|
|
||
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
||
Issuances
|
|
2,987
|
|
|
0.23
|
%
|
—
|
|
|
—
|
|
||
Maturities
|
|
(2,987
|
)
|
|
0.23
|
%
|
—
|
|
|
—
|
|
||
Ending Balance
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
||
Callable debt:
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
—
|
|
|
—
|
|
107,070
|
|
|
1.44
|
%
|
||
Issuances
|
|
—
|
|
|
—
|
|
128,612
|
|
|
1.53
|
%
|
||
Calls
|
|
—
|
|
|
—
|
|
(124,435
|
)
|
|
1.34
|
%
|
||
Maturities
|
|
—
|
|
|
—
|
|
(3,572
|
)
|
|
1.17
|
%
|
||
Ending Balance
|
|
—
|
|
|
—
|
|
107,675
|
|
|
1.61
|
%
|
||
Non-callable debt:
(1)
|
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
—
|
|
|
—
|
|
212,289
|
|
|
2.40
|
%
|
||
Issuances
|
|
9,545
|
|
|
0.20
|
%
|
39,969
|
|
|
1.10
|
%
|
||
Repurchases
|
|
—
|
|
|
—
|
|
(397
|
)
|
|
3.97
|
%
|
||
Maturities
|
|
—
|
|
|
—
|
|
(55,148
|
)
|
|
1.68
|
%
|
||
Ending Balance
|
|
9,545
|
|
|
0.20
|
%
|
196,713
|
|
|
2.34
|
%
|
||
Total other debt
|
|
|
$113,633
|
|
|
0.28
|
%
|
|
$304,388
|
|
|
2.08
|
%
|
(1)
|
Includes STACR debt notes and certain multifamily other debt.
|
Freddie Mac 2016 Form 10-K
|
|
155
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
Freddie Mac 2016 Form 10-K
|
|
156
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
Year Ended December 31,
|
||||||
(In millions)
|
|
2016
|
|
2015
|
||||
Beginning balance
|
|
|
$1,513,089
|
|
|
|
$1,440,325
|
|
Issuances:
|
|
|
|
|
||||
New issuances to third parties
|
|
309,021
|
|
|
259,890
|
|
||
Additional issuances of securities
|
|
162,386
|
|
|
137,676
|
|
||
Total issuances
|
|
471,407
|
|
|
397,566
|
|
||
Extinguishments:
|
|
|
|
|
||||
Purchases of debt securities from third parties
|
|
(42,716
|
)
|
|
(43,341
|
)
|
||
Debt securities received in settlement of advances to lenders
|
|
(29,292
|
)
|
|
(11,225
|
)
|
||
Repayments of debt securities
|
|
(310,326
|
)
|
|
(270,236
|
)
|
||
Total extinguishments
|
|
(382,334
|
)
|
|
(324,802
|
)
|
||
Ending balance
|
|
1,602,162
|
|
|
1,513,089
|
|
||
Unamortized premiums and discounts
|
|
46,521
|
|
|
43,032
|
|
||
Debt securities of consolidated trusts held by third parties
|
|
|
$1,648,683
|
|
|
|
$1,556,121
|
|
Freddie Mac 2016 Form 10-K
|
|
157
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
December 31,
|
||||||
(In millions)
|
|
2016
|
|
2015
|
||||
Single-family
|
|
|
|
|
||||
PCs:
|
|
|
|
|
||||
30-year or more amortizing fixed-rate
|
|
|
$1,235,862
|
|
|
|
$1,156,220
|
|
20-year amortizing fixed-rate
|
|
82,118
|
|
|
81,255
|
|
||
15-year amortizing fixed-rate
|
|
282,520
|
|
|
281,165
|
|
||
Adjustable-rate
|
|
57,038
|
|
|
66,807
|
|
||
Interest-only
|
|
15,043
|
|
|
19,573
|
|
||
FHA/VA and other governmental
|
|
2,421
|
|
|
2,745
|
|
||
Total single-family PCs
|
|
1,675,002
|
|
|
1,607,765
|
|
||
Other single-family
|
|
4,531
|
|
|
5,824
|
|
||
Total single-family
|
|
1,679,533
|
|
|
1,613,589
|
|
||
Multifamily
|
|
|
|
|
||||
Other securitization products
|
|
3,048
|
|
|
1,711
|
|
||
Total Freddie Mac mortgage-related securities
|
|
1,682,581
|
|
|
1,615,300
|
|
||
Repurchased or retained at issuance Freddie Mac mortgage-related securities
|
|
(80,419
|
)
|
|
(102,211
|
)
|
||
Debt securities of consolidated trusts held by third parties
|
|
|
$1,602,162
|
|
|
|
$1,513,089
|
|
|
|
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 2016 Form 10-K
|
|
158
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources | Liquidity Profile
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
(In billions)
|
|
Liquidity and Contingency Operating Portfolio
|
|
Custodial Account
|
|
Other
(1)
|
|
Total Other Investments and Cash Portfolio
|
|
Liquidity and Contingency Operating Portfolio
|
|
Custodial Account
|
|
Other
(1)
|
|
Total Other Investments and Cash Portfolio
|
||||||||||||||||
Cash and cash equivalents
|
|
|
$12.4
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$12.4
|
|
|
|
$5.4
|
|
|
|
$—
|
|
|
|
$0.2
|
|
|
|
$5.6
|
|
Restricted cash and cash equivalents
|
|
—
|
|
|
9.5
|
|
|
0.4
|
|
|
9.9
|
|
|
—
|
|
|
14.5
|
|
|
—
|
|
|
14.5
|
|
||||||||
Securities purchased under agreements to resell
|
|
37.5
|
|
|
13.6
|
|
|
0.4
|
|
|
51.5
|
|
|
48.4
|
|
|
14.8
|
|
|
0.4
|
|
|
63.6
|
|
||||||||
Non-mortgage related securities
|
|
19.6
|
|
|
—
|
|
|
1.5
|
|
|
21.1
|
|
|
16.2
|
|
|
—
|
|
|
1.0
|
|
|
17.2
|
|
||||||||
Other assets
(2)
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
0.9
|
|
||||||||
Total
|
|
|
$69.5
|
|
|
|
$23.1
|
|
|
|
$3.6
|
|
|
|
$96.2
|
|
|
|
$70.0
|
|
|
|
$29.3
|
|
|
|
$2.5
|
|
|
|
$101.8
|
|
(1)
|
Consists of amounts related to collateral held by us from OTC derivative counterparties, investments in unsecured agency debt that we may not otherwise invest in, other than to pledge as collateral to our counterparties when our derivatives are in a liability position, and advances to lenders.
|
(2)
|
Consists of advances to lenders.
|
Freddie Mac 2016 Form 10-K
|
|
159
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources I Cash Flows
|
•
|
Increase in net sales of mortgage loans acquired as held-for-sale, primarily due to an increase in the volume of our multifamily securitizations; partially offset by
|
•
|
Decrease in our net interest income.
|
•
|
Increase in advances to lenders;
|
•
|
Increase in net purchases of investment securities, primarily due to more investment securities being retained from our agency resecuritizations; partially offset by
|
•
|
Decrease in securities purchased under agreements to resell due to lower near-term cash needs for upcoming maturities and anticipated calls of other debt at the end of 2016 compared to the end of 2015; and
|
•
|
Decrease in restricted cash due to the withdrawal of company funds from the custodial account.
|
•
|
Decrease in net repayments and redemptions of debt securities of consolidated trusts held by third parties due to an increase in the volume of our single-family PC issuances for cash; partially offset by
|
•
|
Increase in net repayments of other debt, as we reduced our indebtedness along with the decline in our mortgage-related investments portfolio.
|
Freddie Mac 2016 Form 10-K
|
|
160
|
Management's Discussion and Analysis
|
|
Liquidity and Capital Resources I Cash Flows
|
•
|
Increase in net purchases of multifamily held-for-sale mortgage loans, as we increased our support of workforce housing in the multifamily mortgage market; and
|
•
|
Decrease in cash proceeds received from settlements of our non-agency mortgage-related securities litigation.
|
•
|
Increase in our securities purchased under agreements to resell as a result of higher near-term cash needs for upcoming maturities and anticipated calls of other debt; and
|
•
|
Increase in advances to lenders.
|
•
|
Decrease in net repayments of other debt, as we increased our use of medium-term other debt to fund our business operation; and
|
•
|
Decrease in cash dividend payments on the senior preferred stock, as a result of lower comprehensive income.
|
Freddie Mac 2016 Form 10-K
|
|
161
|
Management's Discussion and Analysis
|
Liquidity and Capital Resources I Capital Resources
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Beginning balance
|
|
|
$2,940
|
|
|
|
$2,651
|
|
|
|
$12,835
|
|
Comprehensive income
|
|
7,118
|
|
|
5,799
|
|
|
9,426
|
|
|||
Capital draw from Treasury
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Senior preferred stock dividends declared
|
|
(4,983
|
)
|
|
(5,510
|
)
|
|
(19,610
|
)
|
|||
Total equity / net worth
|
|
|
$5,075
|
|
|
|
$2,940
|
|
|
|
$2,651
|
|
Aggregate draws under Purchase Agreement
|
|
|
$71,336
|
|
|
|
$71,336
|
|
|
|
$71,336
|
|
Aggregate cash dividends paid to Treasury
|
|
|
$101,448
|
|
|
|
$96,465
|
|
|
|
$90,955
|
|
Freddie Mac 2016 Form 10-K
|
|
162
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
Freddie Mac 2016 Form 10-K
|
|
163
|
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
|
Freddie Mac 2016 Form 10-K
|
|
164
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
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
|
•
|
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 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 2016 Form 10-K
|
|
165
|
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. Also includes certain non-agency mortgage-related securities guaranteed by a GSE;
|
Freddie Mac 2016 Form 10-K
|
|
166
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
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
|
•
|
Less Liquid:
assets that are less liquid than both agency securities and loans in the securitization pipeline (e.g., reperforming loans and performing modified loans, single-family seriously delinquent loans, and non-agency mortgage-related securities not guaranteed by a GSE).
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
(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
|
|
$—
|
|
|
|
$13,113
|
|
|
|
$—
|
|
|
|
$13,113
|
|
|
|
$—
|
|
|
|
$10,041
|
|
|
|
$—
|
|
|
|
$10,041
|
|
Reperforming loans and performing modified loans
|
—
|
|
|
—
|
|
|
58,326
|
|
|
58,326
|
|
|
—
|
|
|
—
|
|
|
67,036
|
|
|
67,036
|
|
||||||||
Total single-family unsecuritized loans
|
—
|
|
|
13,113
|
|
|
58,326
|
|
|
71,439
|
|
|
—
|
|
|
10,041
|
|
|
67,036
|
|
|
77,077
|
|
||||||||
Freddie Mac mortgage-related securities
|
125,652
|
|
|
—
|
|
|
4,776
|
|
|
130,428
|
|
|
135,869
|
|
|
—
|
|
|
6,076
|
|
|
141,945
|
|
||||||||
Non-agency mortgage-related securities
|
113
|
|
|
—
|
|
|
16,059
|
|
|
16,172
|
|
|
—
|
|
|
—
|
|
|
27,754
|
|
|
27,754
|
|
||||||||
Non-Freddie Mac agency mortgage-related securities
|
11,759
|
|
|
—
|
|
|
—
|
|
|
11,759
|
|
|
12,958
|
|
|
—
|
|
|
—
|
|
|
12,958
|
|
||||||||
Total Investment segment - Mortgage investments portfolio
|
137,524
|
|
|
13,113
|
|
|
79,161
|
|
|
229,798
|
|
|
148,827
|
|
|
10,041
|
|
|
100,866
|
|
|
259,734
|
|
||||||||
Single-family Guarantee segment - Single-family unsecuritized seriously delinquent loans
|
—
|
|
|
—
|
|
|
13,692
|
|
|
13,692
|
|
|
—
|
|
|
—
|
|
|
19,501
|
|
|
19,501
|
|
||||||||
Multifamily segment - unsecuritized loans and mortgage-related securities
|
7,447
|
|
|
16,372
|
|
|
31,117
|
|
|
54,936
|
|
|
7,304
|
|
|
19,563
|
|
|
40,809
|
|
|
67,676
|
|
||||||||
Total mortgage-related investments portfolio
|
|
$144,971
|
|
|
|
$29,485
|
|
|
|
$123,970
|
|
|
|
$298,426
|
|
|
|
$156,131
|
|
|
|
$29,604
|
|
|
|
$161,176
|
|
|
|
$346,911
|
|
Percentage of total mortgage-related investments portfolio
|
49
|
%
|
|
10
|
%
|
|
41
|
%
|
|
100
|
%
|
|
45
|
%
|
|
9
|
%
|
|
46
|
%
|
|
100
|
%
|
||||||||
Mortgage-related investments portfolio cap at December 31, 2016 and 2015, respectively
|
|
|
|
|
|
|
|
$339,304
|
|
|
|
|
|
|
|
|
|
$399,181
|
|
||||||||||||
90% of mortgage-related investments portfolio cap at December 31, 2016 and 2015, respectively
(1)
|
|
|
|
|
|
|
|
$305,374
|
|
|
|
|
|
|
|
|
|
$359,263
|
|
(1)
|
Represents the amount that we manage to under our Retained Portfolio Plan, subject to certain exceptions.
|
Freddie Mac 2016 Form 10-K
|
|
167
|
Management's Discussion and Analysis
|
Conservatorship and Related Matters
|
•
|
Sales of $12.4 billion of less liquid assets, including $8.1 billion in UPB of non-agency mortgage-related securities, $3.1 billion in UPB of seriously delinquent unsecuritized single-family loans, and $1.1 billion in UPB of single-family reperforming loans and performing modified loans. Our sales of reperforming loans and performing modified loans involved securitization of the loans using a senior subordinate securitization structure, in which we guaranteed the resulting senior securities. As part of these transactions, we retained certain of the guaranteed senior securities for our mortgage-related investments portfolio;
|
•
|
Securitizations of $1.5 billion in UPB of less liquid multifamily loans; and
|
•
|
Securitizations of $5.7 billion in UPB of single-family reperforming loans and performing modified loans into Freddie Mac PCs, thereby enhancing their liquidity. Our strategy related to these securitizations is to initially retain all of the resulting mortgage-related securities and then resecuritize a portion of these securities with some of the resulting interests being sold to third parties.
|
•
|
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 2016 Form 10-K
|
|
168
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2016 Form 10-K
|
|
169
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2016 Form 10-K
|
|
170
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
|
|
2016
|
|
2017
|
||
Single-family purchase money goals (Benchmark levels):
|
|
|
|
|
||
Low-income
|
|
24
|
%
|
|
24
|
%
|
Very low-income
|
|
6
|
%
|
|
6
|
%
|
Low-income areas
|
|
17
|
%
|
|
TBD
|
|
Low-income areas subgoal
|
|
14
|
%
|
|
14
|
%
|
Single-family refinance low-income goal (Benchmark level)
|
|
21
|
%
|
|
21
|
%
|
Multifamily low-income goal (In units)
|
|
300,000
|
|
|
300,000
|
|
Multifamily very low-income subgoal (In units)
|
|
60,000
|
|
|
60,000
|
|
Multifamily small property low-income subgoal (In units)
|
|
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 amount set aside. However, if we have made a draw under the Purchase Agreement during that fiscal year or if such transfer will cause us to have to make a draw, then we will not make a transfer and the amount set aside for that fiscal year will be reversed.
|
Freddie Mac 2016 Form 10-K
|
|
171
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
Freddie Mac 2016 Form 10-K
|
|
172
|
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 of 1933;
|
•
|
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 2016 Form 10-K
|
|
173
|
Management's Discussion and Analysis
|
Regulation and Supervision
|
|
Goals for 2015
|
|
Market Level for 2015
|
|
Results for 2015
|
|
Goals for 2014
|
|
Market Level for 2014
|
|
Results for 2014
|
||||||
Single-family purchase money goals (Benchmark levels):
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Low-income
|
24
|
%
|
|
23.6
|
%
|
|
22.3
|
%
|
|
23
|
%
|
|
22.8
|
%
|
|
21.0
|
%
|
Very low-income
|
6
|
%
|
|
5.8
|
%
|
|
5.4
|
%
|
|
7
|
%
|
|
5.7
|
%
|
|
4.9
|
%
|
Low-income areas
|
19
|
%
|
|
19.8
|
%
|
|
19.0
|
%
|
|
18
|
%
|
|
22.1
|
%
|
|
20.1
|
%
|
Low-income areas subgoal
|
14
|
%
|
|
15.2
|
%
|
|
14.5
|
%
|
|
11
|
%
|
|
15.0
|
%
|
|
13.6
|
%
|
Single-family refinance low-income goal (Benchmark level)
|
21
|
%
|
|
22.5
|
%
|
|
22.8
|
%
|
|
20
|
%
|
|
25.0
|
%
|
|
26.4
|
%
|
Multifamily low-income goal (In units)
|
300,000
|
|
|
N/A
|
|
|
379,042
|
|
|
200,000
|
|
|
N/A
|
|
|
273,434
|
|
Multifamily very low-income subgoal (In units)
|
60,000
|
|
|
N/A
|
|
|
76,935
|
|
|
40,000
|
|
|
N/A
|
|
|
48,689
|
|
Multifamily small property low-income subgoal (In units)
|
6,000
|
|
|
N/A
|
|
|
12,801
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Freddie Mac 2016 Form 10-K
|
|
174
|
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 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 set aside and pay to certain housing funds, because the amount of such payments is dependent on the volume of our new business purchases and the timing of such payments is dependent, in part, on whether we have made, or could be required to make, a draw under the Purchase Agreement; and
|
Freddie Mac 2016 Form 10-K
|
|
175
|
Management's Discussion and Analysis
|
Contractual Obligations
|
•
|
The guarantee payments and commitments to advance funds pertaining to off-balance sheet arrangements.
|
(In millions)
|
Total
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||||
Other long-term debt
(1)
|
|
$285,226
|
|
|
|
$92,831
|
|
|
|
$71,392
|
|
|
|
$46,436
|
|
|
|
$13,274
|
|
|
|
$20,372
|
|
|
|
$40,921
|
|
Other short-term debt
(1)
|
71,517
|
|
|
71,517
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Interest payable
(2)
|
30,328
|
|
|
11,115
|
|
|
3,274
|
|
|
2,525
|
|
|
1,996
|
|
|
1,864
|
|
|
9,554
|
|
|||||||
Other contractual liabilities reflected on our consolidated balance sheets
(3)
|
6,747
|
|
|
5,961
|
|
|
7
|
|
|
6
|
|
|
8
|
|
|
7
|
|
|
758
|
|
|||||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Purchase
commitments
(4)
|
27,727
|
|
|
27,727
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other purchase obligations
(5)
|
2,624
|
|
|
299
|
|
|
217
|
|
|
216
|
|
|
209
|
|
|
207
|
|
|
1,476
|
|
|||||||
Lease obligations
|
39
|
|
|
11
|
|
|
9
|
|
|
9
|
|
|
6
|
|
|
3
|
|
|
1
|
|
|||||||
Total specified contractual obligations
|
|
$424,208
|
|
|
|
$209,461
|
|
|
|
$74,899
|
|
|
|
$49,192
|
|
|
|
$15,493
|
|
|
|
$22,453
|
|
|
|
$52,710
|
|
(1)
|
Represents par value. Callable debt is included in this table at its contractual maturity. For additional information about our debt, see Note 6.
|
(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 (i) obligations related to our qualified and non-qualified defined contribution plans, retiree medical plan and other benefit plans; (ii) future cash payments due under our contractual obligations to make delayed equity contributions to LIHTC partnerships; and (iii) payables to the consolidated trusts established for the administration of cash remittances received related to the underlying assets of Freddie Mac mortgage-related securities.
|
(4)
|
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.
|
(5)
|
Primarily includes unconditional purchase obligations that are legally binding and that are subject to a cancellation penalty.
|
Freddie Mac 2016 Form 10-K
|
|
176
|
Management's Discussion and Analysis
|
Off-Balance Sheet Arrangements
|
Freddie Mac 2016 Form 10-K
|
|
177
|
Management's Discussion and Analysis
|
Off-Balance Sheet Arrangements
|
Freddie Mac 2016 Form 10-K
|
|
178
|
Management's Discussion and Analysis
|
Critical Accounting Policies and Estimates
|
Freddie Mac 2016 Form 10-K
|
|
179
|
Management's Discussion and Analysis
|
Critical Accounting Policies and Estimates
|
•
|
Regional housing trends;
|
•
|
Applicable home price indices;
|
•
|
Unemployment and employment dislocation trends;
|
•
|
The effects of changes in government policies and programs;
|
•
|
Industry trends;
|
•
|
Consumer credit statistics; and
|
•
|
Third-party credit enhancements.
|
•
|
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 2016 Form 10-K
|
|
180
|
Risk Factors
|
Conservatorship and Related Matters
|
Freddie Mac 2016 Form 10-K
|
|
181
|
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 market 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 intended to help reduce earnings volatility and address some of the measurement differences between our GAAP financial results and the underlying economics of our business, including the adoption of hedge accounting;
|
•
|
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 (for example, FASB’s new accounting standards update related to the measurement of credit losses on financial instruments will increase (perhaps substantially) our provision for credit losses in the period of adoption);
|
•
|
The effects of our foreclosure prevention and loss mitigation efforts;
|
•
|
Changes in housing or economic conditions, legislation, or other factors that affect our assessment of our ability to realize our net deferred tax asset. If a valuation allowance on our net deferred tax asset were established, it could significantly increase our tax provision for that period;
|
•
|
A reduction in corporate tax rates would require us to measure our net deferred tax asset using the new rate in the period in which the rate change is enacted. This would result in a one-time charge through the tax provision; or
|
•
|
Changes in business practices resulting from legislative and regulatory developments or direction from our Conservator.
|
Freddie Mac 2016 Form 10-K
|
|
182
|
Risk Factors
|
Conservatorship and Related Matters
|
•
|
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.
|
•
|
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 2016 Form 10-K
|
|
183
|
Risk Factors
|
Conservatorship and Related Matters
|
Freddie Mac 2016 Form 10-K
|
|
184
|
Risk Factors
|
Credit Risks
|
Freddie Mac 2016 Form 10-K
|
|
185
|
Risk Factors
|
Credit Risks
|
Freddie Mac 2016 Form 10-K
|
|
186
|
Risk Factors
|
Credit Risks
|
•
|
Reduce our actual return or result in losses on new single-family guarantee business, as actual default rates could be higher than we expected when we issued the guarantee;
|
•
|
Cause us to hedge prepayment risk incorrectly;
|
•
|
Result in declines in net worth due to fair value declines on our investments in non-agency mortgage-related securities;
|
•
|
Negatively affect loan pricing, which could cause us to change our disposition strategies for our single-family unsecuritized loans; or
|
•
|
Increase our losses on dispositions of REO properties.
|
Freddie Mac 2016 Form 10-K
|
|
187
|
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. A 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 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 serviced by non-depository financial institutions. These non-depository and smaller financial institutions may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight, as our large single-family loan seller and servicer counterparties
|
Freddie Mac 2016 Form 10-K
|
|
188
|
Risk Factors
|
Credit Risks
|
•
|
Manage interest rate risk and other risks related to our investments in mortgage-related assets;
|
•
|
Fund our business operations; and
|
•
|
Service our customers.
|
Freddie Mac 2016 Form 10-K
|
|
189
|
Risk Factors
|
Credit Risks
|
Freddie Mac 2016 Form 10-K
|
|
190
|
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 2016 Form 10-K
|
|
191
|
Risk Factors
|
Market Risk
|
•
|
When interest rates decrease, borrowers are more likely to prepay their loans by refinancing them at a lower rate. An increased likelihood of prepayment on the loans underlying our mortgage-related securities may adversely affect the value of these securities.
|
•
|
When interest rates increase:
|
•
|
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;
|
•
|
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; 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 2016 Form 10-K
|
|
192
|
Risk Factors
|
Market Risk
|
Freddie Mac 2016 Form 10-K
|
|
193
|
Risk Factors
|
Operational Risks
|
Freddie Mac 2016 Form 10-K
|
|
194
|
Risk Factors
|
Operational Risks
|
Freddie Mac 2016 Form 10-K
|
|
195
|
Risk Factors
|
Operational Risks
|
•
|
We could fail to implement, operate, adjust, or use our models as intended. We may fail to code a model correctly, we could use incorrect or insufficient data inputs or fail to fully understand the data inputs, or model implementation software could malfunction. The complexity and interconnectivity of
|
Freddie Mac 2016 Form 10-K
|
|
196
|
Risk Factors
|
Operational Risks
|
•
|
The data we use as inputs into our models, much of which we receive from third-party data providers, may be inaccurate.
|
•
|
When market conditions change in unforeseen ways, our model projections may not accurately reflect these conditions or we may not fully understand the model outputs. For example, models may not fully reflect the effect of certain government policy changes or new industry trends. In such cases, it is often necessary to make assumptions and judgments to accommodate the effect of scenarios that are not sufficiently well represented in the historical data. While we may adjust our models in response to new events, considerable residual uncertainty remains.
|
•
|
We also use select third-party vendor models. While the use of such models may reduce our risk where no internal model is available, it exposes us to additional risk, as third parties typically do not provide us with proprietary information regarding their models. We have little control over the process by which vendor models are adjusted or changed. As a result, we may be unable to fully evaluate the risks associated with the use of such models.
|
Freddie Mac 2016 Form 10-K
|
|
197
|
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 2016 Form 10-K
|
|
198
|
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 2016 Form 10-K
|
|
199
|
Risk Factors
|
Liquidity Risks
|
Freddie Mac 2016 Form 10-K
|
|
200
|
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 or through initiatives that provide a lien priority in connection with loans to finance energy efficiency or similar improvements);
|
•
|
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 2016 Form 10-K
|
|
201
|
Risk Factors
|
Legal and Regulatory Risks
|
Freddie Mac 2016 Form 10-K
|
|
202
|
Risk Factors
|
Legal and Regulatory Risks
|
Freddie Mac 2016 Form 10-K
|
|
203
|
Risk Factors
|
Other Risks
|
Freddie Mac 2016 Form 10-K
|
|
204
|
Risk Factors
|
Other Risks
|
Freddie Mac 2016 Form 10-K
|
|
205
|
Risk Factors
|
Other Risks
|
Freddie Mac 2016 Form 10-K
|
|
206
|
Risk Factors
|
Other Risks
|
Freddie Mac 2016 Form 10-K
|
|
207
|
Legal Proceedings
|
Freddie Mac 2016 Form 10-K
|
|
208
|
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
|
High
|
|
Low
|
||||
2016 Quarter Ended
|
|
|
|
||||
December 31
|
|
$4.84
|
|
|
|
$1.52
|
|
September 30
|
1.90
|
|
|
1.46
|
|
||
June 30
|
2.20
|
|
|
1.21
|
|
||
March 31
|
1.75
|
|
|
0.97
|
|
||
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
|
|
•
|
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 with respect to the senior preferred stock or warrant) without the prior written consent of Treasury.
|
Freddie Mac 2016 Form 10-K
|
|
209
|
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, 2016. 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 2016 at the direction of the Conservator, as discussed in “MD&A - Liquidity and Capital Resources” and Note 9. We did not declare or pay dividends on any other series of preferred stock outstanding in 2016.
|
Freddie Mac 2016 Form 10-K
|
|
210
|
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
Freddie Mac 2016 Form 10-K
|
|
211
|
Financial Statements
|
|
Freddie Mac 2016 Form 10-K
|
|
212
|
Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
Freddie Mac 2016 Form 10-K
|
|
213
|
Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
Freddie Mac 2016 Form 10-K
|
|
214
|
Financial Statements
|
Consolidated Statements of Comprehensive Income
|
|
|
Year Ended December 31,
|
||||||||||
(In millions, except share-related amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Interest income
|
|
|
|
|
|
|
||||||
Mortgage loans
|
|
|
$61,040
|
|
|
|
$62,226
|
|
|
|
$63,605
|
|
Investments in securities
|
|
3,855
|
|
|
4,794
|
|
|
5,843
|
|
|||
Other
|
|
270
|
|
|
70
|
|
|
32
|
|
|||
Total interest income
|
|
65,165
|
|
|
67,090
|
|
|
69,480
|
|
|||
Interest expense
|
|
(50,595
|
)
|
|
(51,916
|
)
|
|
(54,916
|
)
|
|||
Expense related to derivatives
|
|
(191
|
)
|
|
(228
|
)
|
|
(301
|
)
|
|||
Net interest income
|
|
14,379
|
|
|
14,946
|
|
|
14,263
|
|
|||
Benefit (provision) for credit losses
|
|
803
|
|
|
2,665
|
|
|
(58
|
)
|
|||
Net interest income after benefit (provision) for credit losses
|
|
15,182
|
|
|
17,611
|
|
|
14,205
|
|
|||
Non-interest income (loss)
|
|
|
|
|
|
|
||||||
Gains (losses) on extinguishment of debt
|
|
(211
|
)
|
|
(240
|
)
|
|
(422
|
)
|
|||
Derivative gains (losses)
|
|
(274
|
)
|
|
(2,696
|
)
|
|
(8,291
|
)
|
|||
Net impairment of available-for-sale securities recognized in earnings
|
|
(191
|
)
|
|
(292
|
)
|
|
(938
|
)
|
|||
Other gains (losses) on investment securities recognized in earnings
|
|
(78
|
)
|
|
508
|
|
|
1,494
|
|
|||
Other income (loss)
|
|
1,254
|
|
|
(879
|
)
|
|
8,044
|
|
|||
Non-interest income (loss)
|
|
500
|
|
|
(3,599
|
)
|
|
(113
|
)
|
|||
Non-interest expense
|
|
|
|
|
|
|
||||||
Salaries and employee benefits
|
|
(989
|
)
|
|
(975
|
)
|
|
(914
|
)
|
|||
Professional services
|
|
(489
|
)
|
|
(497
|
)
|
|
(527
|
)
|
|||
Occupancy expense
|
|
(66
|
)
|
|
(56
|
)
|
|
(58
|
)
|
|||
Other administrative expense
|
|
(461
|
)
|
|
(399
|
)
|
|
(382
|
)
|
|||
Total administrative expense
|
|
(2,005
|
)
|
|
(1,927
|
)
|
|
(1,881
|
)
|
|||
Real estate owned operations expense
|
|
(287
|
)
|
|
(338
|
)
|
|
(196
|
)
|
|||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
|
(1,152
|
)
|
|
(967
|
)
|
|
(775
|
)
|
|||
Other expense
|
|
(599
|
)
|
|
(1,506
|
)
|
|
(238
|
)
|
|||
Non-interest expense
|
|
(4,043
|
)
|
|
(4,738
|
)
|
|
(3,090
|
)
|
|||
Income before income tax expense
|
|
11,639
|
|
|
9,274
|
|
|
11,002
|
|
|||
Income tax expense
|
|
(3,824
|
)
|
|
(2,898
|
)
|
|
(3,312
|
)
|
|||
Net income
|
|
7,815
|
|
|
6,376
|
|
|
7,690
|
|
|||
Other comprehensive income (loss), net of taxes and reclassification adjustments:
|
|
|
|
|
|
|
||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
|
(825
|
)
|
|
(806
|
)
|
|
1,584
|
|
|||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
|
141
|
|
|
182
|
|
|
197
|
|
|||
Changes in defined benefit plans
|
|
(13
|
)
|
|
47
|
|
|
(45
|
)
|
|||
Total other comprehensive income (loss), net of taxes and reclassification adjustments
|
|
(697
|
)
|
|
(577
|
)
|
|
1,736
|
|
|||
Comprehensive income
|
|
|
$7,118
|
|
|
|
$5,799
|
|
|
|
$9,426
|
|
Net income
|
|
|
$7,815
|
|
|
|
$6,376
|
|
|
|
$7,690
|
|
Undistributed net worth sweep and senior preferred stock dividends
|
|
(7,718
|
)
|
|
(6,399
|
)
|
|
(10,026
|
)
|
|||
Net income (loss) attributable to common stockholders
|
|
|
$97
|
|
|
|
($23
|
)
|
|
|
($2,336
|
)
|
Net income (loss) per common share — basic and diluted
|
|
|
$0.03
|
|
|
|
($0.01
|
)
|
|
|
($0.72
|
)
|
Weighted average common shares outstanding (in millions) — basic and diluted
|
|
3,234
|
|
|
3,235
|
|
|
3,236
|
|
Freddie Mac 2016 Form 10-K
|
|
215
|
Financial Statements
|
Consolidated Balance Sheets
|
|
|
At December 31,
|
||||||
(In millions, except share-related amounts)
|
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents (Notes 3, 12)
|
|
|
$12,369
|
|
|
|
$5,595
|
|
Restricted cash and cash equivalents (Notes 3, 12)
|
|
9,851
|
|
|
14,533
|
|
||
Securities purchased under agreements to resell (Notes 3, 8)
|
|
51,548
|
|
|
63,644
|
|
||
Investments in securities, at fair value (Note 5)
|
|
111,547
|
|
|
114,215
|
|
||
Mortgage loans held-for-sale (Notes 3, 4) (includes $16,255 and $17,660 at fair value)
|
|
18,088
|
|
|
24,992
|
|
||
Mortgage loans held-for-investment (Notes 3, 4) (net of allowance for loan losses of $13,431 and $15,331)
|
|
1,784,915
|
|
|
1,729,201
|
|
||
Accrued interest receivable (Note 3)
|
|
6,135
|
|
|
6,074
|
|
||
Derivative assets, net (Notes 7, 8)
|
|
747
|
|
|
395
|
|
||
Deferred tax assets, net (Note 10)
|
|
15,818
|
|
|
18,205
|
|
||
Other assets (Notes 3, 16) (includes $2,408 and $1,753 at fair value)
|
|
12,358
|
|
|
9,038
|
|
||
Total assets
|
|
|
$2,023,376
|
|
|
|
$1,985,892
|
|
Liabilities and equity
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Accrued interest payable (Note 3)
|
|
|
$6,015
|
|
|
|
$6,183
|
|
Debt, net (Notes 3, 6) (includes $6,010 and $7,184 at fair value)
|
|
2,002,004
|
|
|
1,970,269
|
|
||
Derivative liabilities, net (Notes 7, 8)
|
|
795
|
|
|
1,254
|
|
||
Other liabilities (Notes 3, 16)
|
|
9,487
|
|
|
5,246
|
|
||
Total liabilities
|
|
2,018,301
|
|
|
1,982,952
|
|
||
Commitments and contingencies (Notes 3, 7, and 14)
|
|
|
|
|
||||
Equity (Note 9)
|
|
|
|
|
||||
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 650,046,828 shares and 650,045,962 shares outstanding
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
—
|
|
|
—
|
|
||
Retained earnings (accumulated deficit)
|
|
(77,941
|
)
|
|
(80,773
|
)
|
||
AOCI, net of taxes, related to:
|
|
|
|
|
||||
Available-for-sale securities (includes $782 and $778, related to net unrealized gains on securities for which other-than-temporary impairment has been recognized in earnings)
|
|
915
|
|
|
1,740
|
|
||
Cash flow hedge relationships
|
|
(480
|
)
|
|
(621
|
)
|
||
Defined benefit plans
|
|
21
|
|
|
34
|
|
||
Total AOCI, net of taxes
|
|
456
|
|
|
1,153
|
|
||
Treasury stock, at cost, 75,817,058 shares and 75,817,924 shares
|
|
(3,885
|
)
|
|
(3,885
|
)
|
||
Total equity (See Note 9 for information on our dividend obligation to Treasury)
|
|
5,075
|
|
|
2,940
|
|
||
Total liabilities and equity
|
|
|
$2,023,376
|
|
|
|
$1,985,892
|
|
|
|
At December 31,
|
||||||
(in millions)
|
|
2016
|
|
2015
|
||||
Consolidated Balance Sheet Line Item
|
|
|
|
|
||||
Assets: (Note 3)
|
|
|
|
|
||||
Mortgage loans held-for-sale
|
|
|
$—
|
|
|
|
$1,403
|
|
Mortgage loans held-for-investment
|
|
1,690,218
|
|
|
1,625,184
|
|
||
All other assets
|
|
32,262
|
|
|
37,305
|
|
||
Total assets of consolidated VIEs
|
|
|
$1,722,480
|
|
|
|
$1,663,892
|
|
Liabilities: (Note 3)
|
|
|
|
|
||||
Debt, net
|
|
|
$1,648,683
|
|
|
|
$1,556,121
|
|
All other liabilities
|
|
4,846
|
|
|
4,769
|
|
||
Total liabilities of consolidated VIEs
|
|
|
$1,653,529
|
|
|
|
$1,560,890
|
|
Freddie Mac 2016 Form 10-K
|
|
216
|
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, 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
|
|
Balance at December 31, 2015
|
1
|
|
|
464
|
|
|
650
|
|
|
|
$72,336
|
|
|
|
$14,109
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
($80,773
|
)
|
|
|
$1,153
|
|
|
|
($3,885
|
)
|
|
|
$2,940
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,815
|
|
|
—
|
|
|
—
|
|
|
7,815
|
|
||||||||
Other comprehensive income, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(697
|
)
|
|
—
|
|
|
(697
|
)
|
||||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,815
|
|
|
(697
|
)
|
|
—
|
|
|
7,118
|
|
||||||||
Senior preferred stock dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,983
|
)
|
|
—
|
|
|
—
|
|
|
(4,983
|
)
|
||||||||
Ending balance at December 31, 2016
|
1
|
|
|
464
|
|
|
650
|
|
|
|
$72,336
|
|
|
|
$14,109
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
($77,941
|
)
|
|
|
$456
|
|
|
|
($3,885
|
)
|
|
|
$5,075
|
|
Freddie Mac 2016 Form 10-K
|
|
217
|
Financial Statements
|
Consolidated Statements of Cash Flows
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
|
$7,815
|
|
|
|
$6,376
|
|
|
|
$7,690
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||||||
Derivative (gains) losses
|
(1,516
|
)
|
|
456
|
|
|
5,652
|
|
|||
Asset related amortization — premiums, discounts, and basis adjustments
|
7,089
|
|
|
5,321
|
|
|
3,518
|
|
|||
Debt related amortization — premiums and discounts on certain debt securities and basis adjustments
|
(10,151
|
)
|
|
(8,295
|
)
|
|
(5,368
|
)
|
|||
Losses on extinguishment of debt
|
211
|
|
|
240
|
|
|
422
|
|
|||
(Benefit) provision for credit losses
|
(803
|
)
|
|
(2,665
|
)
|
|
58
|
|
|||
Losses (gains) on investment activity
|
69
|
|
|
1,878
|
|
|
(1,287
|
)
|
|||
Deferred income tax expense
|
2,787
|
|
|
1,655
|
|
|
2,284
|
|
|||
Purchases of mortgage loans acquired as held-for-sale
|
(48,379
|
)
|
|
(41,728
|
)
|
|
(24,593
|
)
|
|||
Sales of mortgage loans acquired as held-for-sale
|
49,350
|
|
|
36,034
|
|
|
21,995
|
|
|||
Repayments of mortgage loans acquired as held-for-sale
|
1,259
|
|
|
150
|
|
|
67
|
|
|||
Payments to servicers for pre-foreclosure expense and servicer incentive fees
|
(585
|
)
|
|
(867
|
)
|
|
(932
|
)
|
|||
Change in:
|
|
|
|
|
|
||||||
Accrued interest receivable
|
(61
|
)
|
|
(40
|
)
|
|
116
|
|
|||
Accrued interest payable
|
(52
|
)
|
|
(43
|
)
|
|
(440
|
)
|
|||
Income taxes receivable
|
(1,230
|
)
|
|
1,022
|
|
|
268
|
|
|||
Other, net
|
(944
|
)
|
|
(428
|
)
|
|
(565
|
)
|
|||
Net cash provided by (used in) operating activities
|
4,859
|
|
|
(934
|
)
|
|
8,885
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Purchases of trading securities
|
(104,045
|
)
|
|
(40,614
|
)
|
|
(42,477
|
)
|
|||
Proceeds from sales of trading securities
|
79,095
|
|
|
14,847
|
|
|
18,513
|
|
|||
Proceeds from maturities of trading securities
|
22,244
|
|
|
16,377
|
|
|
17,118
|
|
|||
Purchases of available-for-sale securities
|
(28,306
|
)
|
|
(6,818
|
)
|
|
(25,290
|
)
|
|||
Proceeds from sales of available-for-sale securities
|
20,699
|
|
|
18,900
|
|
|
32,062
|
|
|||
Proceeds from maturities of available-for-sale securities
|
15,869
|
|
|
20,807
|
|
|
20,734
|
|
|||
Purchases of held-for-investment mortgage loans
|
(169,948
|
)
|
|
(122,082
|
)
|
|
(75,298
|
)
|
|||
Proceeds from sales of mortgage loans held-for-investment
|
4,507
|
|
|
2,727
|
|
|
454
|
|
|||
Repayments of mortgage loans held-for-investment
|
340,348
|
|
|
302,364
|
|
|
241,552
|
|
|||
(Increase) decrease in restricted cash
|
4,682
|
|
|
(5,998
|
)
|
|
3,730
|
|
|||
Advances to lenders
|
(30,730
|
)
|
|
(12,527
|
)
|
|
(90
|
)
|
|||
Net proceeds from dispositions of real estate owned and other recoveries
|
2,519
|
|
|
3,650
|
|
|
7,712
|
|
|||
Net (increase) decrease in securities purchased under agreements to resell
|
12,096
|
|
|
(11,741
|
)
|
|
10,480
|
|
|||
Derivative premiums and terminations and swap collateral, net
|
555
|
|
|
(749
|
)
|
|
(3,888
|
)
|
|||
Changes in other assets
|
(357
|
)
|
|
(197
|
)
|
|
(44
|
)
|
|||
Net cash provided by investing activities
|
169,228
|
|
|
178,946
|
|
|
205,268
|
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Proceeds from issuance of debt securities of consolidated trusts held by third parties
|
254,236
|
|
|
174,561
|
|
|
124,887
|
|
|||
Repayments and redemptions of debt securities of consolidated trusts held by third parties
|
(355,020
|
)
|
|
(316,306
|
)
|
|
(262,920
|
)
|
|||
Proceeds from issuance of other debt
|
659,108
|
|
|
610,091
|
|
|
451,854
|
|
|||
Repayments of other debt
|
(720,648
|
)
|
|
(646,176
|
)
|
|
(508,710
|
)
|
|||
Payment of cash dividends on senior preferred stock
|
(4,983
|
)
|
|
(5,510
|
)
|
|
(19,610
|
)
|
|||
Changes in other liabilities
|
(6
|
)
|
|
(5
|
)
|
|
(7
|
)
|
|||
Net cash used in financing activities
|
(167,313
|
)
|
|
(183,345
|
)
|
|
(214,506
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
6,774
|
|
|
(5,333
|
)
|
|
(353
|
)
|
|||
Cash and cash equivalents at beginning of year
|
5,595
|
|
|
10,928
|
|
|
11,281
|
|
|||
Cash and cash equivalents at end of year
|
|
$12,369
|
|
|
|
$5,595
|
|
|
|
$10,928
|
|
|
|
|
|
|
|
||||||
Supplemental cash flow information
|
|
|
|
|
|
||||||
Cash paid for:
|
|
|
|
|
|
||||||
Debt interest
|
|
$60,862
|
|
|
|
$61,120
|
|
|
|
$62,257
|
|
Income taxes
|
2,324
|
|
|
1,095
|
|
|
760
|
|
|||
Non-cash investing and financing activities (Notes 4 and 5)
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
218
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 1
|
Freddie Mac 2016 Form 10-K
|
|
219
|
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 2016 Form 10-K
|
|
220
|
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
|
Investments in Securities
|
Note 5
|
Debt
|
Note 6
|
Derivatives
|
Note 7
|
Collateralized Agreements and Offsetting Arrangements
|
Note 8
|
Repurchase and Resale Agreements and Dollar Roll Transactions
|
Note 8
|
Earnings Per Share
|
Note 9
|
Stockholders’ Equity
|
Note 9
|
Income Taxes
|
Note 10
|
Segment Reporting
|
Note 11
|
Fair Value Measurements
|
Note 13
|
Freddie Mac 2016 Form 10-K
|
|
221
|
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
|
The adoption of this amendment did not 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
|
Previously reported amounts have been conformed to the current presentation (see Notes 6 and 16). The effect of adoption as of January 1, 2016 was a reduction to Other Assets and Debt, net of $158 million. There were no effects on earnings resulting from this change.
|
Freddie Mac 2016 Form 10-K
|
|
222
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 1
|
Standard
|
Description
|
Date of Adoption
|
Effect on Consolidated Financial Statements
|
ASU 2016-06, Derivatives and Hedging (Topic 815)
|
The amendment clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendment is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.
|
January 1, 2017
|
The adoption of this amendment will not have a material effect on our consolidated financial statements.
|
ASU 2016-17 - Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control
|
The Board is issuing this Update to amend the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE.
|
January 1, 2017
|
The adoption of this amendment will not 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 do not expect that the adoption of this amendment will have a material effect 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.
|
ASU 2016-08 - Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
|
The amendments in this Update do not change the core principle of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations.
|
January 1, 2018
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2016-10, Revenue from Contracts with Customers (Topic 606)
|
The amendments in this Update do not change the core principle of the guidance in Topic 606, but clarify two issues: i) identifying performance obligations; and ii) licensing. These clarifications are intended to reduce diversity in practice and to reduce the cost and complexity of Topic 606 at transition and on an ongoing basis.
|
January 1, 2018
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2016-12, Revenue from Contracts with Customers (Topic 606)
|
The amendments in this Update do not change the core principle of the guidance in Topic 606, but affect aspects of the guidance and technical corrections.
|
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 2016 Form 10-K
|
|
223
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 1
|
Standard
|
Description
|
Date of Adoption
|
Effect on Consolidated Financial Statements
|
ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
|
The main objective of this Update is to address the diversity in practice that currently exists in regards to how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.
|
January 1, 2018
|
We are evaluating the effect that the adoption of this amendment will have on our consolidated financial statements.
|
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)
|
The amendments in this Update address the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. Specifically, this amendment dictates that the statement of cash flows should explain the change in the period of the total of cash, cash equivalents, and restricted cash balances.
|
January 1, 2018
|
We are evaluating the effect that the adoption of this amendment will have on our consolidated financial statements.
|
ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
|
The amendments in this Update are of a similar nature to the items typically addressed in the Technical Corrections and Improvements project. However, the Board decided to issue a separate Update for technical corrections and improvements to Topic 606 and other Topics amended by Update 2014-09 to increase stakeholders’ awareness of the proposals and to expedite improvements to Update 2014-09.
|
January 1, 2018
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2016-02, Leases (Topic 842)
|
The amendment addresses the accounting for lease arrangements.
|
January 1, 2019
|
We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements.
|
ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
|
The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
|
January 1, 2020
|
While we are evaluating the effect that the adoption of this amendment will have on our consolidated financial statements, it will increase (perhaps substantially) our provision for credit losses in the period of adoption.
|
Freddie Mac 2016 Form 10-K
|
|
224
|
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 2016 Form 10-K
|
|
225
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 2
|
Freddie Mac 2016 Form 10-K
|
|
226
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 2
|
Freddie Mac 2016 Form 10-K
|
|
227
|
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 2016 Form 10-K
|
|
228
|
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 2016 Form 10-K
|
|
229
|
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 2016 Form 10-K
|
|
230
|
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.
|
•
|
The transactions with Treasury discussed above in “Purchase Agreement and Warrant” and “Government Support for our Business;”
|
•
|
The transactions entered into whereby we and Fannie Mae, in conjunction with Treasury, provided assistance to state and local HFAs. Treasury will reimburse Freddie Mac for initial guarantee losses on these transactions;
|
•
|
The transactions discussed in Note 4, Note 6, and Note 9; 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 2016 Form 10-K
|
|
231
|
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 2016 Form 10-K
|
|
232
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Consolidated Balance Sheet Line Item
|
|
|
|
|
||||
Assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
|
$—
|
|
|
|
$—
|
|
Restricted cash and cash equivalents
|
|
9,431
|
|
|
14,529
|
|
||
Securities purchased under agreements to resell
|
|
13,550
|
|
|
14,840
|
|
||
Mortgage loans held-for-sale
|
|
—
|
|
|
1,403
|
|
||
Mortgage loans held-for-investment
|
|
1,690,218
|
|
|
1,625,184
|
|
||
Accrued interest receivable
|
|
5,454
|
|
|
5,305
|
|
||
Other assets
|
|
3,827
|
|
|
2,631
|
|
||
Total assets of consolidated VIEs
|
|
|
$1,722,480
|
|
|
|
$1,663,892
|
|
Liabilities:
|
|
|
|
|
||||
Accrued interest payable
|
|
|
$4,846
|
|
|
|
$4,763
|
|
Debt, net
|
|
1,648,683
|
|
|
1,556,121
|
|
||
Other liabilities
|
|
—
|
|
|
6
|
|
||
Total liabilities of consolidated VIEs
|
|
|
$1,653,529
|
|
|
|
$1,560,890
|
|
Freddie Mac 2016 Form 10-K
|
|
233
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
Freddie Mac 2016 Form 10-K
|
|
234
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
Freddie Mac 2016 Form 10-K
|
|
235
|
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
2016
and
2015
, we guaranteed
$3.6 billion
and
$4.0 billion
, respectively, of loans under new long-term standby commitments; and
|
•
|
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
|
Freddie Mac 2016 Form 10-K
|
|
236
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
Freddie Mac 2016 Form 10-K
|
|
237
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Assets and Liabilities Recorded on our Consolidated Balance Sheets
(1)
|
|
|
|
|
||||
Assets:
|
|
|
|
|
||||
Investments in securities
|
|
|
$58,995
|
|
|
|
$49,040
|
|
Accrued interest receivable
|
|
254
|
|
|
200
|
|
||
Other assets
|
|
1,708
|
|
|
1,232
|
|
||
Liabilities:
|
|
|
|
|
||||
Other liabilities
|
|
(1,604
|
)
|
|
(1,230
|
)
|
||
Maximum Exposure to Loss
|
|
|
$150,227
|
|
|
|
$114,193
|
|
Total Assets of Non-Consolidated VIEs
|
|
|
$175,713
|
|
|
|
$134,900
|
|
(1)
|
Includes our variable interests in REMICs and Stripped Giant PCs, K Certificates, SB Certificates, senior subordinate securitization structures, 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, SB Certificates, senior subordinate securitization structures, 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.
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||
(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, SB Certificates, senior subordinate securitization structures, and other securitization products
|
|
$150,227
|
|
|
|
$1,532
|
|
|
40
|
|
|
$114,193
|
|
|
|
$1,136
|
|
|
40
|
Other mortgage-related guarantees
|
16,445
|
|
|
679
|
|
|
34
|
|
13,067
|
|
|
596
|
|
|
38
|
||||
Derivative instruments
|
6,396
|
|
|
127
|
|
|
29
|
|
17,894
|
|
|
151
|
|
|
30
|
(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. For derivative instruments, this amount represents the notional value.
|
Freddie Mac 2016 Form 10-K
|
|
238
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 3
|
(2)
|
For K Certificates, SB Certificates, senior subordinate securitization structures, 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
$67 million
and
$76 million
as of
December 31, 2016
and
2015
, respectively, and is included within other liabilities on our consolidated balance sheets.
|
|
|
UPB at
|
|
Maximum Coverage
(1)
at
|
||||||||||||
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||
K Certificates and SB Certificates
|
|
|
$139,416
|
|
|
|
$103,061
|
|
|
|
$23,864
|
|
|
|
$18,571
|
|
Other securitization products
|
|
5,545
|
|
|
5,438
|
|
|
1,359
|
|
|
1,359
|
|
||||
Total
|
|
|
$144,961
|
|
|
|
$108,499
|
|
|
|
$25,223
|
|
|
|
$19,930
|
|
(1)
|
For K Certificates and SB 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 the securities that are subordinate to our guarantee.
|
Freddie Mac 2016 Form 10-K
|
|
239
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
(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
|
|
|
$2,092
|
|
|
|
$—
|
|
|
|
$2,092
|
|
|
|
$6,045
|
|
|
|
$1,702
|
|
|
|
$7,747
|
|
Multifamily
|
|
16,544
|
|
|
—
|
|
|
16,544
|
|
|
19,582
|
|
|
—
|
|
|
19,582
|
|
||||||
Total UPB
|
|
18,636
|
|
|
—
|
|
|
18,636
|
|
|
25,627
|
|
|
1,702
|
|
|
27,329
|
|
||||||
Cost basis and fair value adjustments, net
|
|
(548
|
)
|
|
—
|
|
|
(548
|
)
|
|
(2,038
|
)
|
|
(299
|
)
|
|
(2,337
|
)
|
||||||
Total held-for-sale loans
|
|
18,088
|
|
|
—
|
|
|
18,088
|
|
|
23,589
|
|
|
1,403
|
|
|
24,992
|
|
||||||
Held-for-investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Single-family
|
|
83,040
|
|
|
1,659,591
|
|
|
1,742,631
|
|
|
90,532
|
|
|
1,597,590
|
|
|
1,688,122
|
|
||||||
Multifamily
|
|
25,873
|
|
|
3,048
|
|
|
28,921
|
|
|
29,505
|
|
|
1,711
|
|
|
31,216
|
|
||||||
Total UPB
|
|
108,913
|
|
|
1,662,639
|
|
|
1,771,552
|
|
|
120,037
|
|
|
1,599,301
|
|
|
1,719,338
|
|
||||||
Cost basis adjustments
|
|
(3,755
|
)
|
|
30,549
|
|
|
26,794
|
|
|
(3,465
|
)
|
|
28,659
|
|
|
25,194
|
|
||||||
Allowance for loan losses
|
|
(10,461
|
)
|
|
(2,970
|
)
|
|
(13,431
|
)
|
|
(12,555
|
)
|
|
(2,776
|
)
|
|
(15,331
|
)
|
||||||
Total held-for-investment loans
|
|
94,697
|
|
|
1,690,218
|
|
|
1,784,915
|
|
|
104,017
|
|
|
1,625,184
|
|
|
1,729,201
|
|
||||||
Total loans, net
|
|
|
$112,785
|
|
|
|
$1,690,218
|
|
|
|
$1,803,003
|
|
|
|
$127,606
|
|
|
|
$1,626,587
|
|
|
|
$1,754,193
|
|
Freddie Mac 2016 Form 10-K
|
|
240
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2016 Form 10-K
|
|
241
|
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, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||||||||||
|
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)
|
|
$1,120,722
|
|
|
|
$236,111
|
|
|
|
$30,063
|
|
|
|
$1,386,896
|
|
|
|
$1,020,227
|
|
|
|
$242,948
|
|
|
|
$50,893
|
|
|
|
$1,314,068
|
|
15-year amortizing fixed-rate
(2)
|
274,967
|
|
|
11,016
|
|
|
887
|
|
|
286,870
|
|
|
271,456
|
|
|
12,400
|
|
|
1,754
|
|
|
285,610
|
|
||||||||
Adjustable-rate
|
52,319
|
|
|
2,955
|
|
|
85
|
|
|
55,359
|
|
|
59,724
|
|
|
5,055
|
|
|
249
|
|
|
65,028
|
|
||||||||
Alt-A, interest-only, and option ARM
|
26,293
|
|
|
9,392
|
|
|
4,634
|
|
|
40,319
|
|
|
27,014
|
|
|
13,124
|
|
|
8,485
|
|
|
48,623
|
|
||||||||
Total single-family loans
|
|
$1,474,301
|
|
|
|
$259,474
|
|
|
|
$35,669
|
|
|
|
$1,769,444
|
|
|
|
$1,378,421
|
|
|
|
$273,527
|
|
|
|
$61,381
|
|
|
|
$1,713,329
|
|
(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
6.80%
and
6.03%
as of
December 31, 2016
and
2015
, respectively.
|
(2)
|
The majority of our loan modifications result in new terms that include fixed interest rates after modification. As of
December 31, 2016
and
2015
, we have categorized UPB of approximately
$32.0 billion
and
$38.3 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.
|
Freddie Mac 2016 Form 10-K
|
|
242
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Credit risk profile by internally assigned grade:
(1)
|
|
|
|
|
||||
Pass
|
|
|
$27,830
|
|
|
|
$29,660
|
|
Special mention
|
|
502
|
|
|
1,135
|
|
||
Substandard
|
|
570
|
|
|
408
|
|
||
Doubtful
|
|
—
|
|
|
—
|
|
||
Total
|
|
|
$28,902
|
|
|
|
$31,203
|
|
(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 2016 Form 10-K
|
|
243
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
December 31, 2016
|
||||||||||||||||||||||
(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
|
|
$1,354,511
|
|
|
|
$16,645
|
|
|
|
$4,865
|
|
|
|
$10,875
|
|
|
|
$1,386,896
|
|
|
|
$10,868
|
|
15-year amortizing fixed-rate
|
285,373
|
|
|
1,010
|
|
|
178
|
|
|
309
|
|
|
286,870
|
|
|
309
|
|
||||||
Adjustable-rate
|
54,738
|
|
|
354
|
|
|
77
|
|
|
190
|
|
|
55,359
|
|
|
190
|
|
||||||
Alt-A, interest-only, and option ARM
|
35,994
|
|
|
1,748
|
|
|
650
|
|
|
1,927
|
|
|
40,319
|
|
|
1,927
|
|
||||||
Total single-family
|
1,730,616
|
|
|
19,757
|
|
|
5,770
|
|
|
13,301
|
|
|
1,769,444
|
|
|
13,294
|
|
||||||
Total multifamily
|
28,902
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,902
|
|
|
89
|
|
||||||
Total single-family and multifamily
|
|
$1,759,518
|
|
|
|
$19,757
|
|
|
|
$5,770
|
|
|
|
$13,301
|
|
|
|
$1,798,346
|
|
|
|
$13,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
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
|
|
(1)
|
Includes
$5.3 billion
and
$7.0 billion
of loans that were in the process of foreclosure as of
December 31, 2016
and
2015
, respectively.
|
Freddie Mac 2016 Form 10-K
|
|
244
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
(Dollars in millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Single-family:
(1)
|
|
|
|
|
||||
Non-credit-enhanced portfolio
|
|
|
|
|
||||
Serious delinquency rate
|
|
1.02
|
%
|
|
1.30
|
%
|
||
Total number of seriously delinquent loans
|
|
77,662
|
|
|
105,071
|
|
||
Credit-enhanced portfolio:
(2)
|
|
|
|
|
||||
Primary mortgage insurance:
|
|
|
|
|
||||
Serious delinquency rate
|
|
1.46
|
%
|
|
2.06
|
%
|
||
Total number of seriously delinquent loans
|
|
21,460
|
|
|
27,813
|
|
||
Other credit protection:
(3)
|
|
|
|
|
||||
Serious delinquency rate
|
|
0.43
|
%
|
|
0.58
|
%
|
||
Total number of seriously delinquent loans
|
|
9,455
|
|
|
9,422
|
|
||
Total single-family:
|
|
|
|
|
||||
Serious delinquency rate
|
|
1.00
|
%
|
|
1.32
|
%
|
||
Total number of seriously delinquent loans
|
|
107,170
|
|
|
141,255
|
|
||
Multifamily:
(4)
|
|
|
|
|
||||
Non-credit-enhanced portfolio:
|
|
|
|
|
||||
Delinquency rate
|
|
0.04
|
%
|
|
0.03
|
%
|
||
UPB of delinquent loans
|
|
|
$19
|
|
|
|
$19
|
|
Credit-enhanced portfolio:
|
|
|
|
|
||||
Delinquency rate
|
|
0.02
|
%
|
|
0.02
|
%
|
||
UPB of delinquent loans
|
|
|
$37
|
|
|
|
$20
|
|
Total Multifamily:
|
|
|
|
|
||||
Delinquency rate
|
|
0.03
|
%
|
|
0.02
|
%
|
||
UPB of delinquent loans
|
|
|
$56
|
|
|
|
$39
|
|
(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 2016 Form 10-K
|
|
245
|
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 and SB Certificates, other securitization products, and other mortgage-related guarantees.
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||
|
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
|
|
$12,517
|
|
|
|
$2,775
|
|
|
|
$56
|
|
|
|
$15,348
|
|
|
|
$18,800
|
|
|
|
$2,884
|
|
|
|
$109
|
|
|
|
$21,793
|
|
Provision (benefit) for credit losses
|
(1,384
|
)
|
|
599
|
|
|
4
|
|
|
(781
|
)
|
|
(2,763
|
)
|
|
169
|
|
|
(45
|
)
|
|
(2,639
|
)
|
||||||||
Charge-offs
(1)(2)
|
(1,757
|
)
|
|
(173
|
)
|
|
(8
|
)
|
|
(1,938
|
)
|
|
(4,696
|
)
|
|
(367
|
)
|
|
(8
|
)
|
|
(5,071
|
)
|
||||||||
Recoveries
|
487
|
|
|
10
|
|
|
—
|
|
|
497
|
|
|
703
|
|
|
14
|
|
|
—
|
|
|
717
|
|
||||||||
Transfers, net
(3)
|
580
|
|
|
(243
|
)
|
|
—
|
|
|
337
|
|
|
473
|
|
|
75
|
|
|
—
|
|
|
548
|
|
||||||||
Ending balance
|
|
$10,443
|
|
|
|
$2,968
|
|
|
|
$52
|
|
|
|
$13,463
|
|
|
|
$12,517
|
|
|
|
$2,775
|
|
|
|
$56
|
|
|
|
$15,348
|
|
Multifamily:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance
|
|
$38
|
|
|
|
$1
|
|
|
|
$20
|
|
|
|
$59
|
|
|
|
$77
|
|
|
|
$—
|
|
|
|
$17
|
|
|
|
$94
|
|
Provision (benefit) for credit losses
|
(17
|
)
|
|
—
|
|
|
(5
|
)
|
|
(22
|
)
|
|
(29
|
)
|
|
—
|
|
|
3
|
|
|
(26
|
)
|
||||||||
Charge-offs
(2)
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||||
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Transfers, net
(3)
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||||
Ending balance
|
|
$18
|
|
|
|
$2
|
|
|
|
$15
|
|
|
|
$35
|
|
|
|
$38
|
|
|
|
$1
|
|
|
|
$20
|
|
|
|
$59
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance
|
|
$12,555
|
|
|
|
$2,776
|
|
|
|
$76
|
|
|
|
$15,407
|
|
|
|
$18,877
|
|
|
|
$2,884
|
|
|
|
$126
|
|
|
|
$21,887
|
|
Provision (benefit) for credit losses
|
(1,401
|
)
|
|
599
|
|
|
(1
|
)
|
|
(803
|
)
|
|
(2,792
|
)
|
|
169
|
|
|
(42
|
)
|
|
(2,665
|
)
|
||||||||
Charge-offs
(2)
|
(1,759
|
)
|
|
(173
|
)
|
|
(8
|
)
|
|
(1,940
|
)
|
|
(4,705
|
)
|
|
(367
|
)
|
|
(8
|
)
|
|
(5,080
|
)
|
||||||||
Recoveries
|
487
|
|
|
10
|
|
|
—
|
|
|
497
|
|
|
703
|
|
|
14
|
|
|
—
|
|
|
717
|
|
||||||||
Transfers, net
(3)
|
579
|
|
|
(242
|
)
|
|
—
|
|
|
337
|
|
|
472
|
|
|
76
|
|
|
—
|
|
|
548
|
|
||||||||
Ending balance
|
|
$10,461
|
|
|
|
$2,970
|
|
|
|
$67
|
|
|
|
$13,498
|
|
|
|
$12,555
|
|
|
|
$2,776
|
|
|
|
$76
|
|
|
|
$15,407
|
|
(1)
|
Includes charge-offs of
$1.9 billion
associated with our initial adoption of FHFA Advisory Bulletin 2012-02 on January 1, 2015.
|
(2)
|
Total charge-offs do not include lower-of-cost-or-fair-value adjustments and other expenses related to property taxes and insurance recognized when we transfer loans from held-for-investment to held-for-sale, which totaled
$1.2 billion
and
$3.4 billion
during 2016 and 2015 respectively.
|
Freddie Mac 2016 Form 10-K
|
|
246
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
(3)
|
For the years ended
December 31, 2016
and
2015
, consists of approximately
$0.3 billion
and
$0.5 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.
|
•
|
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; 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 2016 Form 10-K
|
|
247
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2016 Form 10-K
|
|
248
|
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.
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
(Dollars in millions)
|
|
Number of Loans
|
|
Post-TDR
Recorded
Investment
|
|
Number of Loans
|
|
Post-TDR
Recorded
Investment
|
||||||
Single-family:
(1)
|
|
|
|
|
|
|
|
|
||||||
20 and 30-year or more, amortizing fixed-rate
|
|
35,503
|
|
|
|
$5,092
|
|
|
46,641
|
|
|
|
$6,627
|
|
15-year amortizing fixed-rate
|
|
4,623
|
|
|
338
|
|
|
5,806
|
|
|
419
|
|
||
Adjustable-rate
|
|
969
|
|
|
140
|
|
|
1,335
|
|
|
195
|
|
||
Alt-A, interest-only, and option ARM
|
|
3,115
|
|
|
548
|
|
|
7,143
|
|
|
1,146
|
|
||
Total single-family
|
|
44,210
|
|
|
6,118
|
|
|
60,925
|
|
|
8,387
|
|
||
Multifamily
|
|
2
|
|
|
8
|
|
|
1
|
|
|
30
|
|
||
Total
|
|
44,212
|
|
|
|
$6,126
|
|
|
60,926
|
|
|
|
$8,417
|
|
(1)
|
The pre-TDR recorded investment for single-family loans initially classified as TDR during the years ended
December 31, 2016
and
2015
was
$6.2 billion
and
$8.4 billion
, respectively.
|
Freddie Mac 2016 Form 10-K
|
|
249
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
Year Ended December 31,
|
||||||||||||
|
2016
|
|
2015
|
||||||||||
(Dollars in millions)
|
Number of Loans
|
|
Post-TDR
Recorded
Investment
(1)
|
|
Number of Loans
|
|
Post-TDR
Recorded
Investment
(1)
|
||||||
Single-family:
|
|
|
|
|
|
|
|
||||||
20 and 30-year or more, amortizing fixed-rate
|
16,139
|
|
|
|
$2,520
|
|
|
18,478
|
|
|
|
$3,036
|
|
15-year amortizing fixed-rate
|
813
|
|
|
66
|
|
|
900
|
|
|
72
|
|
||
Adjustable-rate
|
277
|
|
|
41
|
|
|
335
|
|
|
55
|
|
||
Alt-A, interest-only, and option ARM
|
1,535
|
|
|
305
|
|
|
1,955
|
|
|
435
|
|
||
Total single-family
|
18,764
|
|
|
|
$2,932
|
|
|
21,668
|
|
|
|
$3,598
|
|
Multifamily
|
—
|
|
|
|
$—
|
|
|
—
|
|
|
|
$—
|
|
(1)
|
Represents the recorded investment at the end of the period in which the loan was modified and does not represent the recorded investment as of December 31.
|
Freddie Mac 2016 Form 10-K
|
|
250
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2016 Form 10-K
|
|
251
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
Balance at December 31, 2016
|
For the Year Ended December 31, 2016
|
|||||||||||||||||||||
(In millions)
|
|
UPB
|
|
Recorded
Investment
|
|
Associated
Allowance
|
|
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
|
|
|
$4,963
|
|
|
|
$3,746
|
|
|
N/A
|
|
|
|
$4,033
|
|
|
|
$447
|
|
|
|
$14
|
|
|
15-year amortizing fixed-rate
|
|
31
|
|
|
26
|
|
|
N/A
|
|
|
33
|
|
|
5
|
|
|
—
|
|
||||||
Adjustable-rate
|
|
292
|
|
|
289
|
|
|
N/A
|
|
|
259
|
|
|
9
|
|
|
—
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
1,935
|
|
|
1,561
|
|
|
N/A
|
|
|
1,417
|
|
|
117
|
|
|
3
|
|
||||||
Total with no specific allowance recorded
|
|
7,221
|
|
|
5,622
|
|
|
N/A
|
|
|
5,742
|
|
|
578
|
|
|
17
|
|
||||||
With specific allowance recorded:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
67,853
|
|
|
66,143
|
|
|
|
($9,678
|
)
|
|
68,402
|
|
|
2,668
|
|
|
251
|
|
|||||
15-year amortizing fixed-rate
|
|
847
|
|
|
851
|
|
|
(25
|
)
|
|
884
|
|
|
39
|
|
|
7
|
|
||||||
Adjustable-rate
|
|
319
|
|
|
312
|
|
|
(19
|
)
|
|
384
|
|
|
14
|
|
|
3
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
12,699
|
|
|
12,105
|
|
|
(2,258
|
)
|
|
12,916
|
|
|
437
|
|
|
34
|
|
||||||
Total with specific allowance recorded
|
|
81,718
|
|
|
79,411
|
|
|
(11,980
|
)
|
|
82,586
|
|
|
3,158
|
|
|
295
|
|
||||||
Combined single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
72,816
|
|
|
69,889
|
|
|
(9,678
|
)
|
|
72,435
|
|
|
3,115
|
|
|
265
|
|
||||||
15-year amortizing fixed-rate
|
|
878
|
|
|
877
|
|
|
(25
|
)
|
|
917
|
|
|
44
|
|
|
7
|
|
||||||
Adjustable-rate
|
|
611
|
|
|
601
|
|
|
(19
|
)
|
|
643
|
|
|
23
|
|
|
3
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
14,634
|
|
|
13,666
|
|
|
(2,258
|
)
|
|
14,333
|
|
|
554
|
|
|
37
|
|
||||||
Total single-family
|
|
|
$88,939
|
|
|
|
$85,033
|
|
|
|
($11,980
|
)
|
|
|
$88,328
|
|
|
|
$3,736
|
|
|
|
$312
|
|
Multifamily —
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
With no specific allowance recorded
(2)
|
|
|
$321
|
|
|
|
$308
|
|
|
N/A
|
|
|
|
$356
|
|
|
|
$15
|
|
|
|
$4
|
|
|
With specific allowance recorded
|
|
44
|
|
|
42
|
|
|
(9
|
)
|
|
63
|
|
|
3
|
|
|
2
|
|
||||||
Total multifamily
|
|
|
$365
|
|
|
|
$350
|
|
|
|
($9
|
)
|
|
|
$419
|
|
|
|
$18
|
|
|
|
$6
|
|
Total single-family and multifamily
|
|
|
$89,304
|
|
|
|
$85,383
|
|
|
|
($11,989
|
)
|
|
|
$88,747
|
|
|
|
$3,754
|
|
|
|
$318
|
|
Freddie Mac 2016 Form 10-K
|
|
252
|
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
|
|
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
|
|
|
|
$3,381
|
|
|
|
$387
|
|
|
|
$11
|
|
|
15-year amortizing fixed-rate
|
|
45
|
|
|
38
|
|
|
N/A
|
|
|
41
|
|
|
8
|
|
|
—
|
|
||||||
Adjustable rate
|
|
194
|
|
|
191
|
|
|
N/A
|
|
|
112
|
|
|
4
|
|
|
—
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
1,370
|
|
|
1,033
|
|
|
N/A
|
|
|
844
|
|
|
83
|
|
|
2
|
|
||||||
Total with no specific allowance recorded
|
|
6,566
|
|
|
4,986
|
|
|
N/A
|
|
|
4,378
|
|
|
482
|
|
|
13
|
|
||||||
With specific allowance recorded:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
72,886
|
|
|
71,215
|
|
|
|
($11,245
|
)
|
|
73,530
|
|
|
2,558
|
|
|
308
|
|
|||||
15-year amortizing fixed-rate
|
|
975
|
|
|
978
|
|
|
(21
|
)
|
|
1,033
|
|
|
47
|
|
|
11
|
|
||||||
Adjustable rate
|
|
518
|
|
|
510
|
|
|
(28
|
)
|
|
632
|
|
|
19
|
|
|
4
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
14,409
|
|
|
13,839
|
|
|
(2,725
|
)
|
|
14,958
|
|
|
422
|
|
|
55
|
|
||||||
Total with specific allowance recorded
|
|
88,788
|
|
|
86,542
|
|
|
(14,019
|
)
|
|
90,153
|
|
|
3,046
|
|
|
378
|
|
||||||
Combined single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
20 and 30-year or more, amortizing fixed-rate
|
|
77,843
|
|
|
74,939
|
|
|
(11,245
|
)
|
|
76,911
|
|
|
2,945
|
|
|
319
|
|
||||||
15-year amortizing fixed-rate
|
|
1,020
|
|
|
1,016
|
|
|
(21
|
)
|
|
1,074
|
|
|
55
|
|
|
11
|
|
||||||
Adjustable rate
|
|
712
|
|
|
701
|
|
|
(28
|
)
|
|
744
|
|
|
23
|
|
|
4
|
|
||||||
Alt-A, interest-only, and option ARM
|
|
15,779
|
|
|
14,872
|
|
|
(2,725
|
)
|
|
15,802
|
|
|
505
|
|
|
57
|
|
||||||
Total single-family
|
|
|
$95,354
|
|
|
|
$91,528
|
|
|
|
($14,019
|
)
|
|
|
$94,531
|
|
|
|
$3,528
|
|
|
|
$391
|
|
Multifamily —
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
With no specific allowance recorded
(2)
|
|
|
$341
|
|
|
|
$333
|
|
|
N/A
|
|
|
|
$660
|
|
|
|
$25
|
|
|
|
$9
|
|
|
With specific allowance recorded
|
|
149
|
|
|
142
|
|
|
|
($21
|
)
|
|
235
|
|
|
8
|
|
|
5
|
|
|||||
Total multifamily
|
|
|
$490
|
|
|
|
$475
|
|
|
|
($21
|
)
|
|
|
$895
|
|
|
|
$33
|
|
|
|
$14
|
|
Total single-family and multifamily
|
|
|
$95,844
|
|
|
|
$92,003
|
|
|
|
($14,040
|
)
|
|
|
$95,426
|
|
|
|
$3,561
|
|
|
|
$405
|
|
(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 2016 Form 10-K
|
|
253
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
(In millions)
|
|
Single-family
|
|
Multifamily
|
|
Total
|
|
Single-family
|
|
Multifamily
|
|
Total
|
||||||||||||
Recorded investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collectively evaluated
|
|
|
$1,684,411
|
|
|
|
$28,552
|
|
|
|
$1,712,963
|
|
|
|
$1,621,801
|
|
|
|
$30,728
|
|
|
|
$1,652,529
|
|
Individually evaluated
|
|
85,033
|
|
|
350
|
|
|
85,383
|
|
|
91,528
|
|
|
475
|
|
|
92,003
|
|
||||||
Total recorded investment
|
|
1,769,444
|
|
|
28,902
|
|
|
1,798,346
|
|
|
1,713,329
|
|
|
31,203
|
|
|
1,744,532
|
|
||||||
Ending balance of the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collectively evaluated
|
|
(1,431
|
)
|
|
(11
|
)
|
|
(1,442
|
)
|
|
(1,273
|
)
|
|
(18
|
)
|
|
(1,291
|
)
|
||||||
Individually evaluated
|
|
(11,980
|
)
|
|
(9
|
)
|
|
(11,989
|
)
|
|
(14,019
|
)
|
|
(21
|
)
|
|
(14,040
|
)
|
||||||
Total ending balance of the allowance
|
|
(13,411
|
)
|
|
(20
|
)
|
|
(13,431
|
)
|
|
(15,292
|
)
|
|
(39
|
)
|
|
(15,331
|
)
|
||||||
Net investment in loans
|
|
|
$1,756,033
|
|
|
|
$28,882
|
|
|
|
$1,784,915
|
|
|
|
$1,698,037
|
|
|
|
$31,164
|
|
|
|
$1,729,201
|
|
Freddie Mac 2016 Form 10-K
|
|
254
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
|
|
UPB
(1)
at
|
|
Maximum Coverage
(1)(2)
at
|
||||||||||||
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||
Credit enhancements at the time we acquire the loan:
|
|
|
|
|
|
|
|
|
||||||||
Primary mortgage insurance
|
|
|
$291,217
|
|
|
|
$257,063
|
|
|
|
$74,345
|
|
|
|
$65,760
|
|
Seller indemnification
|
|
1,030
|
|
|
1,095
|
|
|
10
|
|
|
11
|
|
||||
Deep MI
(3)
|
|
3,067
|
|
|
—
|
|
|
81
|
|
|
—
|
|
||||
Lender recourse and indemnification agreements
(4)
|
|
5,247
|
|
|
5,902
|
|
|
4,911
|
|
|
5,385
|
|
||||
Pool insurance
(4)
|
|
1,719
|
|
|
2,140
|
|
|
618
|
|
|
753
|
|
||||
Other:
|
|
|
|
|
|
|
|
|
||||||||
HFA indemnification
|
|
1,747
|
|
|
2,599
|
|
|
1,747
|
|
|
2,599
|
|
||||
Subordination
|
|
1,874
|
|
|
2,127
|
|
|
230
|
|
|
278
|
|
||||
Other credit enhancements
(4)
|
|
17
|
|
|
22
|
|
|
6
|
|
|
10
|
|
||||
Credit enhancements subsequent to our purchase or guarantee of the loan:
|
|
|
|
|
|
|
|
|
||||||||
STACR debt note
(5)
|
|
427,978
|
|
|
328,872
|
|
|
14,507
|
|
|
11,551
|
|
||||
ACIS transactions
(6)
|
|
453,670
|
|
|
328,872
|
|
|
5,355
|
|
|
3,365
|
|
||||
Whole loan securities and senior subordinate securitization structures
|
|
2,494
|
|
|
894
|
|
|
375
|
|
|
58
|
|
||||
Less: UPB with more than one type of credit enhancement
|
|
(559,400
|
)
|
|
(417,393
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
|
|
$630,660
|
|
|
|
$512,193
|
|
|
|
$102,185
|
|
|
|
$89,770
|
|
(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) credit protection associated with
$6.7 billion
and
$8.3 billion
in UPB of single-family loans underlying other structured transactions where data was not available as of
December 31, 2016
and 2015, 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
$2.8 billion
and
$3.2 billion
as of
December 31, 2016
, and
2015
, respectively.
|
(2)
|
Except for subordination and whole loan security, this represents the remaining amount of loss recovery that is available subject to terms of counterparty agreements. For subordination and whole loan security, this represents the UPB of the securities that are subordinate to our guarantee, which could provide protection by absorbing first losses.
|
(3)
|
Includes approximately
$3.1 billion
in UPB at
December 31, 2016
, where the related loans are also covered by primary mortgage insurance. Deep MI credit risk transfer, or Deep MI, began in the third quarter of 2016.
|
(4)
|
In aggregate, includes approximately
$1.0 billion
and
$1.1 billion
in UPB at
December 31, 2016
and
2015
, respectively, where the related loans are also covered by primary mortgage insurance.
|
(5)
|
Includes approximately
$123.5 billion
and
$87.4 billion
in UPB at
December 31, 2016
and
2015
, 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.
|
(6)
|
Includes
$127.4 billion
and
$87.4 billion
in UPB at
December 31, 2016
and
2015
, respectively, where the related loans are also covered by primary mortgage insurance. Maximum coverage amounts presented represent the remaining aggregate limit of insurance purchased from third parties in ACIS transactions.
|
Freddie Mac 2016 Form 10-K
|
|
255
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 4
|
Freddie Mac 2016 Form 10-K
|
|
256
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
(In millions)
|
December 31, 2016
|
|
December 31, 2015
|
||||
Trading securities
|
|
$44,790
|
|
|
|
$39,278
|
|
Available-for-sale securities
|
66,757
|
|
|
74,937
|
|
||
Total
|
|
$111,547
|
|
|
|
$114,215
|
|
•
|
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 2016 Form 10-K
|
|
257
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Mortgage-related securities:
|
|
|
|
|
||||
Freddie Mac
|
|
|
$15,343
|
|
|
|
$15,513
|
|
Other agency
|
|
8,161
|
|
|
6,468
|
|
||
All other
|
|
149
|
|
|
146
|
|
||
Total mortgage-related securities
|
|
23,653
|
|
|
22,127
|
|
||
Non-mortgage-related securities
|
|
21,137
|
|
|
17,151
|
|
||
Total fair value of trading securities
|
|
|
$44,790
|
|
|
|
$39,278
|
|
Freddie Mac 2016 Form 10-K
|
|
258
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
|
|
December 31, 2016
|
||||||||||||||||||
|
|
|
|
|
|
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
|
|
|
$43,671
|
|
|
|
$563
|
|
|
|
$—
|
|
|
|
($582
|
)
|
|
|
$43,652
|
|
Other agency
|
|
4,127
|
|
|
119
|
|
|
—
|
|
|
(25
|
)
|
|
4,221
|
|
|||||
Non-agency RMBS
|
|
10,606
|
|
|
1,271
|
|
|
(62
|
)
|
|
(18
|
)
|
|
11,797
|
|
|||||
Non-agency CMBS
|
|
6,288
|
|
|
160
|
|
|
(3
|
)
|
|
(23
|
)
|
|
6,422
|
|
|||||
Obligations of states and political subdivisions
|
|
657
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
665
|
|
|||||
Total available-for-sale securities
|
|
|
$65,349
|
|
|
|
$2,121
|
|
|
|
($65
|
)
|
|
|
($648
|
)
|
|
|
$66,757
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
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
|
|
Other agency
|
|
7,183
|
|
|
277
|
|
|
—
|
|
|
(36
|
)
|
|
7,424
|
|
|||||
Non-agency RMBS
|
|
19,198
|
|
|
1,563
|
|
|
(362
|
)
|
|
(66
|
)
|
|
20,333
|
|
|||||
Non-agency CMBS
|
|
12,009
|
|
|
450
|
|
|
(2
|
)
|
|
(9
|
)
|
|
12,448
|
|
|||||
Obligations of states and political subdivisions
|
|
1,187
|
|
|
19
|
|
|
—
|
|
|
(1
|
)
|
|
1,205
|
|
|||||
Total available-for-sale securities
|
|
|
$72,261
|
|
|
|
$3,251
|
|
|
|
($364
|
)
|
|
|
($211
|
)
|
|
|
$74,937
|
|
(1)
|
Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairment in earnings.
|
(2)
|
Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairment in earnings.
|
Freddie Mac 2016 Form 10-K
|
|
259
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
|
|
December 31, 2016
|
||||||||||||||
|
|
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
|
|
|
$19,786
|
|
|
|
($559
|
)
|
|
|
$1,732
|
|
|
|
($23
|
)
|
Other agency
|
|
542
|
|
|
(6
|
)
|
|
2,040
|
|
|
(19
|
)
|
||||
Non-agency RMBS
|
|
309
|
|
|
(1
|
)
|
|
2,188
|
|
|
(79
|
)
|
||||
Non-agency CMBS
|
|
383
|
|
|
(2
|
)
|
|
204
|
|
|
(24
|
)
|
||||
Obligations of states and political subdivisions
|
|
83
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total available-for-sale securities in a gross unrealized loss position
|
|
|
$21,103
|
|
|
|
($568
|
)
|
|
|
$6,164
|
|
|
|
($145
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
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
|
)
|
Other agency
|
|
2,402
|
|
|
(24
|
)
|
|
1,392
|
|
|
(12
|
)
|
||||
Non-agency RMBS
|
|
1,176
|
|
|
(30
|
)
|
|
4,781
|
|
|
(398
|
)
|
||||
Non-agency CMBS
|
|
396
|
|
|
(9
|
)
|
|
160
|
|
|
(2
|
)
|
||||
Obligations of states and political subdivisions
|
|
18
|
|
|
—
|
|
|
8
|
|
|
(1
|
)
|
||||
Total available-for-sale securities in a gross unrealized loss position
|
|
|
$12,163
|
|
|
|
($127
|
)
|
|
|
$7,565
|
|
|
|
($448
|
)
|
Freddie Mac 2016 Form 10-K
|
|
260
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
Freddie Mac 2016 Form 10-K
|
|
261
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
(Dollars in millions)
|
December 31, 2016
|
||
UPB
|
|
$14,343
|
|
Weighted average collateral cumulative loss
|
23
|
%
|
|
Weighted average voluntary prepayment rates
|
6
|
%
|
|
Average security credit enhancements
(1)
|
(1
|
)%
|
(1)
|
Positive value reflects 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 value is 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 2016 Form 10-K
|
|
262
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Impairment of available-for-sale securities:
|
|
|
|
|
|
|
||||||
Total other-than-temporary impairment of available-for-sale securities
|
|
|
$72
|
|
|
|
$241
|
|
|
|
$860
|
|
Portion of other-than-temporary impairment recognized in AOCI
|
|
119
|
|
|
51
|
|
|
78
|
|
|||
Net impairment of available-for-sale securities recognized in earnings
(1)
|
|
|
$191
|
|
|
|
$292
|
|
|
|
$938
|
|
(1)
|
Includes
$70 million
,
$240 million
, and
$817 million
during 2016, 2015, and 2014, respectively, of impairment recognized in earnings due to change in status from intent to hold to intent to sell.
|
|
|
Year Ended December 31,
|
||||||
(In millions)
|
|
2016
|
|
2015
|
||||
Credit-related other-than-temporary impairment on available-for-sale securities recognized in earnings:
|
|
|
|
|
||||
Beginning balance — remaining credit losses on available-for-sale securities where other-than-temporary impairment was recognized in earnings
|
|
|
$5,306
|
|
|
|
$6,798
|
|
Additions:
|
|
|
|
|
||||
Amounts related to credit losses on securities for which an other-than-temporary impairment was previously recognized
|
|
121
|
|
|
52
|
|
||
Reductions:
|
|
|
|
|
||||
Amounts related to securities which were sold, written off, or matured
|
|
(167
|
)
|
|
(107
|
)
|
||
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
|
|
(856
|
)
|
|
(1,116
|
)
|
||
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
|
|
(268
|
)
|
|
(321
|
)
|
||
Ending balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings
|
|
|
$4,136
|
|
|
|
$5,306
|
|
Freddie Mac 2016 Form 10-K
|
|
263
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Gross realized gains
|
|
|
$1,062
|
|
|
|
$1,371
|
|
|
|
$1,897
|
|
Gross realized losses
|
|
(91
|
)
|
|
(33
|
)
|
|
(185
|
)
|
|||
Net realized gains (losses)
|
|
|
$971
|
|
|
|
$1,338
|
|
|
|
$1,712
|
|
|
|
As of December 31, 2016
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$43,671
|
|
|
|
$43,652
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$68
|
|
|
|
$67
|
|
|
|
$3,079
|
|
|
|
$3,069
|
|
|
|
$40,524
|
|
|
|
$40,516
|
|
Other agency
|
|
4,127
|
|
|
4,221
|
|
|
1
|
|
|
1
|
|
|
5
|
|
|
7
|
|
|
76
|
|
|
85
|
|
|
4,045
|
|
|
4,128
|
|
||||||||||
Non-agency RMBS
|
|
10,606
|
|
|
11,797
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
23
|
|
|
29
|
|
|
10,576
|
|
|
11,761
|
|
||||||||||
Non-agency CMBS
|
|
6,288
|
|
|
6,422
|
|
|
98
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,190
|
|
|
6,324
|
|
||||||||||
Obligations of states and political subdivisions
|
|
657
|
|
|
665
|
|
|
6
|
|
|
6
|
|
|
13
|
|
|
13
|
|
|
63
|
|
|
65
|
|
|
575
|
|
|
581
|
|
||||||||||
Total available-for-sale securities
|
|
|
$65,349
|
|
|
|
$66,757
|
|
|
|
$105
|
|
|
|
$105
|
|
|
|
$93
|
|
|
|
$94
|
|
|
|
$3,241
|
|
|
|
$3,248
|
|
|
|
$61,910
|
|
|
|
$63,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Weighted Average Yield
(1)
|
|
2.70
|
%
|
|
|
|
5.61
|
%
|
|
|
|
2.67
|
%
|
|
|
|
1.80
|
%
|
|
|
|
2.71
|
%
|
|
|
(1)
|
The weighted average yield is calculated based on a yield for each individual lot held at
December 31, 2016
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 annualized amortization income or expense calculated for December 2016 (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 2016 Form 10-K
|
|
264
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 5
|
Freddie Mac 2016 Form 10-K
|
|
265
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 6
|
|
|
|
|
|
Interest Expense for the
|
||||||||||||||
|
Balance, Net
|
|
Year Ended December 31,
|
||||||||||||||||
(In millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Debt securities of consolidated trusts held by third parties
|
|
$1,648,683
|
|
|
|
$1,556,121
|
|
|
|
$44,599
|
|
|
|
$45,536
|
|
|
|
$48,003
|
|
Other debt:
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term debt
|
71,451
|
|
|
113,569
|
|
|
350
|
|
|
173
|
|
|
145
|
|
|||||
Long-term debt
|
281,870
|
|
|
300,579
|
|
|
5,646
|
|
|
6,207
|
|
|
6,768
|
|
|||||
Total other debt
|
353,321
|
|
|
414,148
|
|
|
5,996
|
|
|
6,380
|
|
|
6,913
|
|
|||||
Total debt, net
|
|
$2,002,004
|
|
|
|
$1,970,269
|
|
|
|
$50,595
|
|
|
|
$51,916
|
|
|
|
$54,916
|
|
Freddie Mac 2016 Form 10-K
|
|
266
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 6
|
Freddie Mac 2016 Form 10-K
|
|
267
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 6
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||
(Dollars in millions)
|
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)
|
2017 - 2055
|
|
|
$1,193,329
|
|
|
|
$1,229,849
|
|
|
3.71
|
%
|
|
2016 - 2053
|
|
|
$1,090,584
|
|
|
|
$1,123,290
|
|
|
3.88
|
%
|
20-year fixed-rate
|
2017 - 2037
|
|
74,033
|
|
|
76,331
|
|
|
3.49
|
%
|
|
2016 - 2036
|
|
73,018
|
|
|
75,221
|
|
|
3.61
|
%
|
||||
15-year fixed-rate
|
2017 - 2032
|
|
267,739
|
|
|
273,978
|
|
|
2.90
|
%
|
|
2016 - 2031
|
|
270,036
|
|
|
276,531
|
|
|
3.01
|
%
|
||||
Adjustable-rate
|
2017 - 2047
|
|
52,991
|
|
|
54,205
|
|
|
2.69
|
%
|
|
2016 - 2047
|
|
62,496
|
|
|
63,899
|
|
|
2.61
|
%
|
||||
Interest-only
|
2026 - 2041
|
|
10,007
|
|
|
10,057
|
|
|
3.47
|
%
|
|
2026 - 2041
|
|
14,252
|
|
|
14,317
|
|
|
3.16
|
%
|
||||
FHA/VA
|
2017 - 2046
|
|
1,015
|
|
|
1,038
|
|
|
4.92
|
%
|
|
2016 - 2044
|
|
986
|
|
|
1,005
|
|
|
5.37
|
%
|
||||
Total single-family
|
|
|
1,599,114
|
|
|
1,645,458
|
|
|
|
|
|
|
1,511,372
|
|
|
1,554,263
|
|
|
|
||||||
Multifamily
(2)
|
2019 - 2033
|
|
3,048
|
|
|
3,225
|
|
|
4.63
|
%
|
|
2017 - 2028
|
|
1,717
|
|
|
1,858
|
|
|
4.90
|
%
|
||||
Total debt securities of consolidated trusts held by third parties
|
|
|
|
$1,602,162
|
|
|
|
$1,648,683
|
|
|
|
|
|
|
|
$1,513,089
|
|
|
|
$1,556,121
|
|
|
|
(1)
|
The effective rate for debt securities of consolidated trusts held by third parties was
2.63%
and
3.06%
as of
December 31, 2016
and 2015, respectively.
|
(2)
|
Carrying amount includes securities recorded at fair value.
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||
(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
®
|
|
|
$61,042
|
|
|
|
$60,976
|
|
|
0.47
|
%
|
|
|
$104,088
|
|
|
|
$104,024
|
|
|
0.28
|
%
|
Medium-term notes
|
|
7,435
|
|
|
7,435
|
|
|
0.41
|
%
|
|
9,545
|
|
|
9,545
|
|
|
0.20
|
%
|
||||
Securities sold under agreements to repurchase
|
|
3,040
|
|
|
3,040
|
|
|
0.42
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other short-term debt
|
|
|
$71,517
|
|
|
|
$71,451
|
|
|
0.47
|
%
|
|
|
$113,633
|
|
|
|
$113,569
|
|
|
0.28
|
%
|
Freddie Mac 2016 Form 10-K
|
|
268
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 6
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
(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
|
2017 - 2037
|
|
|
$76,412
|
|
|
|
$76,383
|
|
|
1.24
|
%
|
|
|
$90,744
|
|
|
|
$90,690
|
|
|
1.47
|
%
|
Medium-term notes — non-callable
|
2017 - 2028
|
|
13,742
|
|
|
13,987
|
|
|
1.08
|
%
|
|
16,033
|
|
|
16,348
|
|
|
0.92
|
%
|
||||
Reference Notes securities — non-callable
|
2017 - 2032
|
|
118,702
|
|
|
118,727
|
|
|
2.17
|
%
|
|
137,201
|
|
|
137,215
|
|
|
2.60
|
%
|
||||
Variable-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Medium-term notes — callable
|
2017 - 2031
|
|
21,008
|
|
|
20,972
|
|
|
1.94
|
%
|
|
15,931
|
|
|
15,904
|
|
|
2.11
|
%
|
||||
Medium-term notes — non-callable
|
2017 - 2026
|
|
33,077
|
|
|
33,076
|
|
|
0.48
|
%
|
|
23,697
|
|
|
23,694
|
|
|
0.21
|
%
|
||||
STACR
|
2023 - 2029
|
|
14,507
|
|
|
14,745
|
|
|
4.34
|
%
|
|
11,551
|
|
|
11,503
|
|
|
3.60
|
%
|
||||
Zero-coupon:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Medium-term notes — callable
|
2037
|
|
1,000
|
|
|
296
|
|
|
6.17
|
%
|
|
1,000
|
|
|
279
|
|
|
6.17
|
%
|
||||
Medium-term notes — non-callable
|
2017 - 2039
|
|
5,792
|
|
|
2,925
|
|
|
5.01
|
%
|
|
7,343
|
|
|
4,288
|
|
|
3.57
|
%
|
||||
Other
|
2031 - 2055
|
|
533
|
|
|
376
|
|
|
7.72
|
%
|
|
335
|
|
|
198
|
|
|
5.93
|
%
|
||||
Hedging-related basis adjustments
|
|
|
N/A
|
|
|
15
|
|
|
|
|
N/A
|
|
|
17
|
|
|
|
||||||
Total other senior debt
|
|
|
284,773
|
|
|
281,502
|
|
|
|
|
303,835
|
|
|
300,136
|
|
|
|
||||||
Other subordinated debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed-rate
|
2018
|
|
121
|
|
|
120
|
|
|
7.84
|
%
|
|
221
|
|
|
219
|
|
|
6.61
|
%
|
||||
Zero-coupon
|
2019
|
|
332
|
|
|
248
|
|
|
10.51
|
%
|
|
332
|
|
|
224
|
|
|
10.51
|
%
|
||||
Total other subordinated debt
|
|
|
453
|
|
|
368
|
|
|
|
|
553
|
|
|
443
|
|
|
|
||||||
Total other long-term debt
|
|
|
|
$285,226
|
|
|
|
$281,870
|
|
|
1.81
|
%
|
|
|
$304,388
|
|
|
|
$300,579
|
|
|
2.02
|
%
|
(In millions)
|
|
Par Value
|
||
Annual Maturities
|
|
|
||
Other long-term debt:
|
|
|
||
2017
|
|
|
$92,831
|
|
2018
|
|
71,392
|
|
|
2019
|
|
46,436
|
|
|
2020
|
|
13,274
|
|
|
2021
|
|
20,372
|
|
|
Thereafter
|
|
40,921
|
|
|
Debt securities of consolidated trusts held by third parties
(1)
|
|
1,602,162
|
|
|
Total
|
|
1,887,388
|
|
|
Net discounts, premiums, debt issuance costs, hedge-related and other basis adjustments
(2)
|
|
43,165
|
|
|
Total debt securities of consolidated trusts held by third parties and other long-term debt
|
|
|
$1,930,553
|
|
(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 2016 Form 10-K
|
|
269
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 6
|
Freddie Mac 2016 Form 10-K
|
|
270
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 7
|
Freddie Mac 2016 Form 10-K
|
|
271
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 7
|
•
|
Exchange-traded derivatives;
|
•
|
Cleared derivatives; and
|
•
|
OTC derivatives.
|
•
|
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 and sell loans; and
|
•
|
Purchase and extinguish or issue debt securities of our consolidated trusts.
|
Freddie Mac 2016 Form 10-K
|
|
272
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 7
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
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
|
|
$313,106
|
|
|
|
$4,337
|
|
|
|
($2,703
|
)
|
|
|
$209,988
|
|
|
|
$4,591
|
|
|
|
($486
|
)
|
Pay-fixed
|
271,477
|
|
|
2,586
|
|
|
(9,684
|
)
|
|
218,599
|
|
|
319
|
|
|
(11,736
|
)
|
||||||
Basis (floating to floating)
|
1,450
|
|
|
1
|
|
|
—
|
|
|
1,125
|
|
|
1
|
|
|
—
|
|
||||||
Total interest-rate swaps
|
586,033
|
|
|
6,924
|
|
|
(12,387
|
)
|
|
429,712
|
|
|
4,911
|
|
|
(12,222
|
)
|
||||||
Option-based:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Call swaptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchased
|
60,730
|
|
|
2,817
|
|
|
—
|
|
|
57,925
|
|
|
3,450
|
|
|
—
|
|
||||||
Written
|
1,350
|
|
|
—
|
|
|
(78
|
)
|
|
4,375
|
|
|
—
|
|
|
(100
|
)
|
||||||
Put swaptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchased
(1)
|
48,080
|
|
|
1,442
|
|
|
—
|
|
|
24,050
|
|
|
580
|
|
|
—
|
|
||||||
Written
|
3,200
|
|
|
—
|
|
|
(28
|
)
|
|
11,025
|
|
|
—
|
|
|
(28
|
)
|
||||||
Other option-based derivatives
(2)
|
11,032
|
|
|
795
|
|
|
—
|
|
|
12,088
|
|
|
791
|
|
|
—
|
|
||||||
Total option-based
|
124,392
|
|
|
5,054
|
|
|
(106
|
)
|
|
109,463
|
|
|
4,821
|
|
|
(128
|
)
|
||||||
Futures
|
138,294
|
|
|
—
|
|
|
—
|
|
|
56,332
|
|
|
—
|
|
|
—
|
|
||||||
Commitments
|
45,353
|
|
|
289
|
|
|
(151
|
)
|
|
29,114
|
|
|
34
|
|
|
(28
|
)
|
||||||
Credit derivatives
|
2,951
|
|
|
1
|
|
|
(27
|
)
|
|
3,899
|
|
|
25
|
|
|
(10
|
)
|
||||||
Other
|
2,879
|
|
|
—
|
|
|
(21
|
)
|
|
3,033
|
|
|
—
|
|
|
(23
|
)
|
||||||
Total derivatives not designated as hedging instruments
|
899,902
|
|
|
12,268
|
|
|
(12,692
|
)
|
|
631,553
|
|
|
9,791
|
|
|
(12,411
|
)
|
||||||
Derivative interest receivable (payable)
|
|
|
1,442
|
|
|
(1,770
|
)
|
|
|
|
814
|
|
|
(1,393
|
)
|
||||||||
Netting adjustments
(3)
|
|
|
(12,963
|
)
|
|
13,667
|
|
|
|
|
(10,210
|
)
|
|
12,550
|
|
||||||||
Total derivative portfolio, net
|
|
$899,902
|
|
|
|
$747
|
|
|
|
($795
|
)
|
|
|
$631,553
|
|
|
|
$395
|
|
|
|
($1,254
|
)
|
(1)
|
Includes multifamily swaptions on credit indices with a notional or contractual amount of
$10.9 billion
and a fair value of
$5 million
at
December 31, 2016
.
|
(2)
|
Primarily consists of purchased interest-rate caps and floors and options on Treasury futures.
|
(3)
|
Represents counterparty netting and cash collateral netting.
|
Freddie Mac 2016 Form 10-K
|
|
273
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 7
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Interest-rate swaps:
|
|
|
|
|
|
|
||||||
Receive-fixed
|
|
|
($3,539
|
)
|
|
|
$35
|
|
|
|
$4,073
|
|
Pay-fixed
|
|
3,717
|
|
|
(811
|
)
|
|
(11,366
|
)
|
|||
Basis (floating to floating)
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Total interest-rate swaps
|
|
178
|
|
|
(778
|
)
|
|
(7,294
|
)
|
|||
Option based:
|
|
|
|
|
|
|
||||||
Call swaptions
|
|
|
|
|
|
|
||||||
Purchased
|
|
234
|
|
|
371
|
|
|
2,355
|
|
|||
Written
|
|
(45
|
)
|
|
(9
|
)
|
|
(168
|
)
|
|||
Put swaptions
|
|
|
|
|
|
|
||||||
Purchased
|
|
210
|
|
|
(249
|
)
|
|
(1,006
|
)
|
|||
Written
|
|
35
|
|
|
77
|
|
|
8
|
|
|||
Other option-based derivatives
(1)
|
|
(13
|
)
|
|
68
|
|
|
248
|
|
|||
Total option-based
|
|
421
|
|
|
258
|
|
|
1,437
|
|
|||
Other:
|
|
|
|
|
|
|
||||||
Futures
|
|
334
|
|
|
(5
|
)
|
|
(54
|
)
|
|||
Commitments
|
|
631
|
|
|
63
|
|
|
239
|
|
|||
Credit derivatives
|
|
(75
|
)
|
|
(37
|
)
|
|
8
|
|
|||
Other
|
|
(3
|
)
|
|
1
|
|
|
(2
|
)
|
|||
Total other
|
|
887
|
|
|
22
|
|
|
191
|
|
|||
Accrual of periodic cash settlements:
|
|
|
|
|
|
|
||||||
Receive-fixed interest-rate swaps
|
|
2,316
|
|
|
2,568
|
|
|
3,033
|
|
|||
Pay-fixed interest-rate swaps
|
|
(4,077
|
)
|
|
(4,768
|
)
|
|
(5,660
|
)
|
|||
Other
|
|
1
|
|
|
2
|
|
|
2
|
|
|||
Total accrual of periodic cash settlements
|
|
(1,760
|
)
|
|
(2,198
|
)
|
|
(2,625
|
)
|
|||
Total
|
|
|
($274
|
)
|
|
|
($2,696
|
)
|
|
|
($8,291
|
)
|
(1)
|
Primarily consists of purchased interest-rate caps and floors and options on Treasury futures.
|
Freddie Mac 2016 Form 10-K
|
|
274
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
Freddie Mac 2016 Form 10-K
|
|
275
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
Freddie Mac 2016 Form 10-K
|
|
276
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
Freddie Mac 2016 Form 10-K
|
|
277
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
Freddie Mac 2016 Form 10-K
|
|
278
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
|
December 31, 2016
|
|||||||||||||||||||||
|
Gross
Amount
Recognized
|
|
Amount
Offset in the
Consolidated
Balance Sheets
|
|
Net Amount
Presented in
the
Consolidated
Balance Sheets
|
|
Gross Amount
Not Offset in
the
Consolidated
Balance
Sheets
(2)
|
|
Net
Amount
|
|||||||||||||
(In millions)
|
|
Counterparty Netting
|
Cash Collateral Netting
(1)
|
|
|
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
OTC interest-rate swaps and option-based derivatives
|
|
$8,531
|
|
|
|
($6,367
|
)
|
|
($1,760
|
)
|
|
|
$404
|
|
|
|
($353
|
)
|
|
|
$51
|
|
Cleared and exchange-traded derivatives
|
4,889
|
|
|
(4,674
|
)
|
(162
|
)
|
|
53
|
|
|
—
|
|
|
53
|
|
||||||
Other
|
290
|
|
|
—
|
|
—
|
|
|
290
|
|
|
—
|
|
|
290
|
|
||||||
Total derivatives
|
13,710
|
|
|
(11,041
|
)
|
(1,922
|
)
|
|
747
|
|
|
(353
|
)
|
|
394
|
|
||||||
Securities purchased under agreements to resell
(3)
|
51,548
|
|
|
—
|
|
—
|
|
|
51,548
|
|
|
(51,548
|
)
|
|
—
|
|
||||||
Total
|
|
$65,258
|
|
|
|
($11,041
|
)
|
|
($1,922
|
)
|
|
|
$52,295
|
|
|
|
($51,901
|
)
|
|
|
$394
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
OTC interest-rate swaps and option-based derivatives
|
|
($7,298
|
)
|
|
|
$6,367
|
|
|
$469
|
|
|
|
($462
|
)
|
|
|
$274
|
|
|
|
($188
|
)
|
Cleared and exchange-traded derivatives
|
(6,965
|
)
|
|
4,705
|
|
2,126
|
|
|
(134
|
)
|
|
—
|
|
|
(134
|
)
|
||||||
Other
|
(199
|
)
|
|
—
|
|
—
|
|
|
(199
|
)
|
|
—
|
|
|
(199
|
)
|
||||||
Total derivatives
|
(14,462
|
)
|
|
11,072
|
|
2,595
|
|
|
(795
|
)
|
|
274
|
|
|
(521
|
)
|
||||||
Securities sold under agreements to repurchase
|
(3,040
|
)
|
|
—
|
|
—
|
|
|
(3,040
|
)
|
|
3,040
|
|
|
—
|
|
||||||
Total
|
|
($17,502
|
)
|
|
|
$11,072
|
|
|
$2,595
|
|
|
|
($3,835
|
)
|
|
|
$3,314
|
|
|
|
($521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
December 31, 2015
|
|||||||||||||||||||||
|
Gross
Amount
Recognized
|
|
Amount
Offset in the
Consolidated
Balance Sheets
|
|
Net Amount
Presented in
the
Consolidated
Balance Sheets
|
|
Gross Amount
Not Offset in
the
Consolidated
Balance
Sheets
(2)
|
|
Net
Amount
|
|||||||||||||
(In millions)
|
|
Counterparty Netting
|
Cash Collateral Netting
(1)
|
|
|
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
OTC interest-rate swaps and option-based derivatives
|
|
$8,763
|
|
|
|
($6,924
|
)
|
|
($1,509
|
)
|
|
|
$330
|
|
|
|
($269
|
)
|
|
|
$61
|
|
Cleared and exchange-traded derivatives
|
1,783
|
|
|
(1,776
|
)
|
(1
|
)
|
|
6
|
|
|
—
|
|
|
6
|
|
||||||
Other
|
59
|
|
|
—
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
||||||
Total derivatives
|
10,605
|
|
|
(8,700
|
)
|
(1,510
|
)
|
|
395
|
|
|
(269
|
)
|
|
126
|
|
||||||
Securities purchased under agreements to resell
(3)
|
63,644
|
|
|
—
|
|
—
|
|
|
63,644
|
|
|
(63,644
|
)
|
|
—
|
|
||||||
Total
|
|
$74,249
|
|
|
|
($8,700
|
)
|
|
($1,510
|
)
|
|
|
$64,039
|
|
|
|
($63,913
|
)
|
|
|
$126
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
OTC interest-rate swaps and option-based derivatives
|
|
($8,886
|
)
|
|
|
$6,925
|
|
|
$876
|
|
|
|
($1,085
|
)
|
|
|
$948
|
|
|
|
($137
|
)
|
Cleared and exchange-traded derivatives
|
(4,857
|
)
|
|
1,776
|
|
2,973
|
|
|
(108
|
)
|
|
—
|
|
|
(108
|
)
|
||||||
Other
|
(61
|
)
|
|
—
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
||||||
Total
|
|
($13,804
|
)
|
|
|
$8,701
|
|
|
$3,849
|
|
|
|
($1,254
|
)
|
|
|
$948
|
|
|
|
($306
|
)
|
(1)
|
Excess cash collateral held is presented as a derivative liability, while excess cash collateral posted is presented as a derivative asset.
|
Freddie Mac 2016 Form 10-K
|
|
279
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 8
|
(2)
|
Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability, netted by counterparty, presented on the consolidated balance sheets. For cleared and exchange-traded derivatives, does not include non-cash collateral posted by us as initial margin with an aggregate fair value of
$3.4 billion
and
$2.8 billion
as of
December 31, 2016
and 2015, respectively.
|
(3)
|
At
December 31, 2016
and 2015, we had
$4.0 billion
and
$0.7 billion
, respectively, of securities pledged to us for transactions involving securities purchased under agreements to resell that we had the right to repledge.
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Restricted cash and cash equivalents
|
|
|
$399
|
|
|
|
$175
|
|
Securities purchased under agreements to resell
|
|
426
|
|
|
905
|
|
||
Investments in securities - Trading securities
|
|
1,000
|
|
|
447
|
|
||
Total
(1)
|
|
|
$1,825
|
|
|
|
$1,527
|
|
(1)
|
Includes cash collateral held in excess of exposure.
|
|
|
December 31, 2016
|
||||||||||||||
(In millions)
|
|
Derivatives
|
|
Securities sold under agreements to repurchase
|
|
Other collateralized borrowing
|
|
Total
|
||||||||
Debt securities of consolidated trusts held by third parties
(1)
|
|
|
$686
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$686
|
|
Available-for-sale securities
|
|
—
|
|
|
—
|
|
|
260
|
|
|
260
|
|
||||
Trading securities
|
|
3,014
|
|
|
3,070
|
|
|
—
|
|
|
6,084
|
|
||||
Total securities pledged that may be repledged by the secured party
|
|
|
$3,700
|
|
|
|
$3,070
|
|
|
|
$260
|
|
|
|
$7,030
|
|
(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.
|
|
|
December 31, 2016
|
||||||||||||||||||
(In millions)
|
|
Overnight and continuous
|
|
30 days or less
|
|
After 30 days through 90 days
|
|
Greater than 90 days
|
|
Total
|
||||||||||
U.S. Treasury securities
|
|
|
$—
|
|
|
|
$2,072
|
|
|
|
$998
|
|
|
|
$—
|
|
|
|
$3,070
|
|
Freddie Mac 2016 Form 10-K
|
|
280
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
|
|
Year Ended December 31, 2016
|
||||||||||||||
(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
|
|
|
$1,740
|
|
|
|
($621
|
)
|
|
|
$34
|
|
|
|
$1,153
|
|
Other comprehensive income before reclassifications
(1)
|
|
(318
|
)
|
|
—
|
|
|
(10
|
)
|
|
(328
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
(507
|
)
|
|
141
|
|
|
(3
|
)
|
|
(369
|
)
|
||||
Changes in AOCI by component
|
|
(825
|
)
|
|
141
|
|
|
(13
|
)
|
|
(697
|
)
|
||||
Ending balance
|
|
|
$915
|
|
|
|
($480
|
)
|
|
|
$21
|
|
|
|
$456
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
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, 2016
, 2015, and 2014, net of tax expense of
($0.2) billion
,
$0.1 billion
, and
$1.1 billion
, respectively, for AOCI related to available-for-sale securities.
|
Freddie Mac 2016 Form 10-K
|
|
281
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
Details about Accumulated Other
Comprehensive Income Components
|
|
Year Ended December 31,
|
|
Affected Line Item in the
Consolidated
Statements of Comprehensive Income
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
|
|
||||||
AOCI related to
available-for-sale securities
|
|
|
|
|
|
|
|
|
||||||
|
|
|
$971
|
|
|
|
$1,343
|
|
|
|
$1,712
|
|
|
Other gains (losses) on investment securities recognized in earnings
|
|
|
(191
|
)
|
|
(292
|
)
|
|
(938
|
)
|
|
Net impairment of available-for-sale securities recognized in earnings
|
|||
|
|
780
|
|
|
1,051
|
|
|
774
|
|
|
Total before tax
|
|||
|
|
(273
|
)
|
|
(368
|
)
|
|
(271
|
)
|
|
Income tax (expense) or benefit
|
|||
|
|
507
|
|
|
683
|
|
|
503
|
|
|
Net of tax
|
|||
AOCI related to cash flow hedge relationships
|
|
|
|
|
|
|
|
|
||||||
|
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
Interest expense
|
|||
|
|
(191
|
)
|
|
(228
|
)
|
|
(301
|
)
|
|
Expense related to derivatives
|
|||
|
|
(192
|
)
|
|
(230
|
)
|
|
(303
|
)
|
|
Total before tax
|
|||
|
|
51
|
|
|
48
|
|
|
106
|
|
|
Income tax (expense) or benefit
|
|||
|
|
(141
|
)
|
|
(182
|
)
|
|
(197
|
)
|
|
Net of tax
|
|||
AOCI related to defined benefit plans
|
|
|
|
|
|
|
|
|
||||||
|
|
4
|
|
|
1
|
|
|
4
|
|
|
Salaries and employee benefits
|
|||
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
Income tax (expense) or benefit
|
|||
|
|
3
|
|
|
1
|
|
|
2
|
|
|
Net of tax
|
|||
Total reclassifications in the period
|
|
|
$369
|
|
|
|
$502
|
|
|
|
$308
|
|
|
Net of tax
|
Freddie Mac 2016 Form 10-K
|
|
282
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
•
|
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 below) have been paid in cash.
|
Freddie Mac 2016 Form 10-K
|
|
283
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
(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 2016 Form 10-K
|
|
284
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
Freddie Mac 2016 Form 10-K
|
|
285
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
(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 2016 Form 10-K
|
|
286
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
•
|
Vested options to purchase common stock; and
|
•
|
Vested RSUs 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 2016 Form 10-K
|
|
287
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 9
|
•
|
The weighted-average of RSUs.
|
Freddie Mac 2016 Form 10-K
|
|
288
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 10
|
•
|
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)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Current income tax expense
|
|
|
($1,037
|
)
|
|
|
($1,243
|
)
|
|
|
($1,028
|
)
|
Deferred income tax expense
|
|
(2,787
|
)
|
|
(1,655
|
)
|
|
(2,284
|
)
|
|||
Total income tax expense
|
|
|
($3,824
|
)
|
|
|
($2,898
|
)
|
|
|
($3,312
|
)
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in millions)
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
Statutory corporate tax rate
|
|
|
($4,074
|
)
|
|
35.0
|
%
|
|
|
($3,246
|
)
|
|
35.0
|
%
|
|
|
($3,851
|
)
|
|
35.0
|
%
|
Tax-exempt interest
|
|
36
|
|
|
(0.3
|
)
|
|
52
|
|
|
(0.6
|
)
|
|
73
|
|
|
(0.7
|
)
|
|||
Tax credits
|
|
243
|
|
|
(2.1
|
)
|
|
346
|
|
|
(3.7
|
)
|
|
438
|
|
|
(4.0
|
)
|
|||
Other
|
|
(29
|
)
|
|
0.3
|
|
|
(50
|
)
|
|
0.5
|
|
|
28
|
|
|
(0.2
|
)
|
|||
Effective tax rate
|
|
|
($3,824
|
)
|
|
32.9
|
%
|
|
|
($2,898
|
)
|
|
31.2
|
%
|
|
|
($3,312
|
)
|
|
30.1
|
%
|
Freddie Mac 2016 Form 10-K
|
|
289
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 10
|
(In millions)
|
|
2016
|
|
2015
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Deferred fees
|
|
|
$6,662
|
|
|
|
$7,008
|
|
Basis differences related to derivative instruments
|
|
4,006
|
|
|
5,912
|
|
||
Credit related items and allowance for loan losses
|
|
1,045
|
|
|
170
|
|
||
Basis differences related to assets held for investment
|
|
2,310
|
|
|
3,303
|
|
||
LIHTC partnerships and AMT credit carryforward
|
|
2,156
|
|
|
2,764
|
|
||
Basis differences related to debt
|
|
48
|
|
|
—
|
|
||
Other items, net
|
|
83
|
|
|
81
|
|
||
Total deferred tax assets
|
|
16,310
|
|
|
19,238
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Unrealized gains related to available-for-sale securities
|
|
(492
|
)
|
|
(937
|
)
|
||
Basis differences related to debt
|
|
—
|
|
|
(96
|
)
|
||
Total deferred tax liabilities
|
|
(492
|
)
|
|
(1,033
|
)
|
||
Deferred tax assets, net
|
|
|
$15,818
|
|
|
|
$18,205
|
|
•
|
Our three-year cumulative income position and taxable income for the past four 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 2016 taxable income and forecasts of future book income.
|
Freddie Mac 2016 Form 10-K
|
|
290
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 10
|
Freddie Mac 2016 Form 10-K
|
|
291
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
Freddie Mac 2016 Form 10-K
|
|
292
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
•
|
The discontinuation of adjustments to net interest income and guarantee fee income which reflected the amortization of cash premiums and discounts on the consolidated Freddie Mac mortgage-related securities we purchased as investments, as well as the amortization of certain guarantee buy-up and buy-down fees and credit delivery fees on mortgage loans we purchased. The discontinuation of the adjustments resulted in an increase to net interest income for the Investments segment of
$781 million
and
$635 million
and a decrease to guarantee fee income for the Single-family Guarantee
|
Freddie Mac 2016 Form 10-K
|
|
293
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
•
|
Adjustments to record amortization of premiums and discounts on loans that were securitized in other non-interest income. Previously when we securitized loans into PCs, the premiums and discounts on the loans were amortized in net interest income. We reclassified
$1.4 billion
and
$780 million
of expense from net interest income into other non-interest income (loss) for the Investments segment for the years ended December 31, 2015 and 2014, respectively, to align with the current presentation.
|
•
|
Adjustments to reflect the impacts from the reclassification of mortgage loans from held-for-investment to held-for-sale as other non-interest income. We reclassified
$2.3 billion
and
$147 million
of benefit from (provision) benefit for credit losses and
$1.1 billion
and
$62 million
of expense from other non-interest expense into other non-interest income (loss) for the Single-family Guarantee segment for the years ended December 31, 2015 and 2014, respectively, to align with the current presentation.
|
•
|
Adjustments to record amortization of non-cash premiums and discounts on single-family loans in trusts and on the associated consolidated PCs and amortization of discounts on loans purchased with deteriorated credit quality that are on accrual status into other non-interest income (loss). Previously this activity was included in net interest income. We reclassified
$338 million
and
$156 million
of income from net interest income into other non-interest income (loss) for the Single-family Guarantee segment for the years ended December 31, 2015 and 2014, respectively, to align with the current presentation.
|
•
|
Adjustments to record STACR debt note expense and net float income or expense into other non-interest expense. Previously this activity was included in net interest income. We reclassified $
443 million
and
$258 million
of expense from net interest income into other non-interest expense for the Single-family Guarantee segment for the years ended December 31, 2015 and 2014, respectively, to align with the current presentation.
|
•
|
Multifamily segment net interest income previously reflected the internally allocated costs associated with the refinancing of debt related to held-for-investment loans which we securitized. These costs are now reflected in other non-interest income (loss). We reclassified
$122 million
and
$0 million
of expense from net interest income into other non-interest income (loss) for the Multifamily segment for the years ended December 31, 2015 and 2014, respectively, to align with the current presentation.
|
Freddie Mac 2016 Form 10-K
|
|
294
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
•
|
Net guarantee fees are reclassified in Segment Earnings from net interest income to guarantee fee income.
|
•
|
Implied guarantee fee income related to unsecuritized loans held in the mortgage investments portfolio is reclassified in Segment Earnings from net interest income to guarantee fee income.
|
•
|
A portion of the amount reversed for accrued but uncollected interest upon placing loans on a non-accrual status is reclassified in Segment Earnings from net interest income to provision for credit losses.
|
•
|
The revenue and expense related to the 10 basis point increase which was legislated in the Temporary Payroll Tax Cut Continuation Act of 2011 are netted within guarantee fee income.
|
•
|
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.
|
•
|
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, including non-cash premiums and discounts, on single-family loans in trusts and on the associated consolidated PCs.
|
Freddie Mac 2016 Form 10-K
|
|
295
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
•
|
Amortization of discounts on loans purchased with deteriorated credit quality that are on accrual status.
|
•
|
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.
|
•
|
Costs associated with STACR debt note expense.
|
•
|
Internally allocated costs associated with the refinancing of debt related to Multifamily segment held-for-investment loans which we securitized.
|
Freddie Mac 2016 Form 10-K
|
|
296
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Segment Earnings (loss), net of taxes:
|
|
|
|
|
|
|
||||||
Single-family Guarantee
|
|
|
$2,170
|
|
|
|
$1,778
|
|
|
|
$1,547
|
|
Multifamily
|
|
1,818
|
|
|
827
|
|
|
1,636
|
|
|||
Investments
|
|
3,827
|
|
|
3,771
|
|
|
4,520
|
|
|||
All Other
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||
Total Segment Earnings, net of taxes
|
|
7,815
|
|
|
6,376
|
|
|
7,690
|
|
|||
Net income
|
|
|
$7,815
|
|
|
|
$6,376
|
|
|
|
$7,690
|
|
Comprehensive income (loss) of segments:
|
|
|
|
|
|
|
||||||
Single-family Guarantee
|
|
|
$2,161
|
|
|
|
$1,790
|
|
|
|
$1,537
|
|
Multifamily
|
|
1,582
|
|
|
566
|
|
|
1,459
|
|
|||
Investments
|
|
3,375
|
|
|
3,415
|
|
|
6,471
|
|
|||
All Other
|
|
—
|
|
|
28
|
|
|
(41
|
)
|
|||
Comprehensive income of segments
|
|
7,118
|
|
|
5,799
|
|
|
9,426
|
|
|||
Comprehensive income
|
|
|
$7,118
|
|
|
|
$5,799
|
|
|
|
$9,426
|
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss)
|
|
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||
(In millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
||||||||||||||||
Net interest income
|
|
$—
|
|
|
|
$1,022
|
|
|
|
$2,464
|
|
|
|
$—
|
|
|
|
$3,486
|
|
|
|
$10,893
|
|
|
|
$14,379
|
|
Guarantee fee income
(1)
|
6,091
|
|
|
511
|
|
|
—
|
|
|
—
|
|
|
6,602
|
|
|
(6,089
|
)
|
|
513
|
|
|||||||
Benefit (Provision) for credit losses
|
(517
|
)
|
|
22
|
|
|
—
|
|
|
—
|
|
|
(495
|
)
|
|
1,298
|
|
|
803
|
|
|||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
—
|
|
|
269
|
|
|
—
|
|
|
269
|
|
|
(460
|
)
|
|
(191
|
)
|
|||||||
Derivative gains (losses)
|
(69
|
)
|
|
407
|
|
|
2,499
|
|
|
—
|
|
|
2,837
|
|
|
(3,111
|
)
|
|
(274
|
)
|
|||||||
Gains (losses) on trading securities
|
—
|
|
|
28
|
|
|
(1,077
|
)
|
|
—
|
|
|
(1,049
|
)
|
|
—
|
|
|
(1,049
|
)
|
|||||||
Gains (losses) on loans
|
—
|
|
|
309
|
|
|
—
|
|
|
—
|
|
|
309
|
|
|
(772
|
)
|
|
(463
|
)
|
|||||||
Other non-interest income
|
516
|
|
|
829
|
|
|
1,846
|
|
|
—
|
|
|
3,191
|
|
|
(1,227
|
)
|
|
1,964
|
|
|||||||
Administrative expense
|
(1,323
|
)
|
|
(362
|
)
|
|
(320
|
)
|
|
—
|
|
|
(2,005
|
)
|
|
—
|
|
|
(2,005
|
)
|
|||||||
REO operations (expense) income
|
(298
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(298
|
)
|
|
11
|
|
|
(287
|
)
|
|||||||
Other non-interest (expense) income
|
(1,169
|
)
|
|
(58
|
)
|
|
19
|
|
|
—
|
|
|
(1,208
|
)
|
|
(543
|
)
|
|
(1,751
|
)
|
|||||||
Income tax expense
|
(1,061
|
)
|
|
(890
|
)
|
|
(1,873
|
)
|
|
—
|
|
|
(3,824
|
)
|
|
—
|
|
|
(3,824
|
)
|
|||||||
Net income (loss)
|
2,170
|
|
|
1,818
|
|
|
3,827
|
|
|
—
|
|
|
7,815
|
|
|
—
|
|
|
7,815
|
|
|||||||
Changes in unrealized gains (losses) related to available-for-sale securities
|
—
|
|
|
(234
|
)
|
|
(591
|
)
|
|
—
|
|
|
(825
|
)
|
|
—
|
|
|
(825
|
)
|
|||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships
|
—
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
141
|
|
|||||||
Changes in defined benefit plans
|
(9
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|||||||
Total other comprehensive income (loss), net of taxes
|
(9
|
)
|
|
(236
|
)
|
|
(452
|
)
|
|
—
|
|
|
(697
|
)
|
|
—
|
|
|
(697
|
)
|
|||||||
Comprehensive income (loss)
|
|
$2,161
|
|
|
|
$1,582
|
|
|
|
$3,375
|
|
|
|
$—
|
|
|
|
$7,118
|
|
|
|
$—
|
|
|
|
$7,118
|
|
Freddie Mac 2016 Form 10-K
|
|
297
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 11
|
|
Year Ended December 31, 2015
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss)
|
|
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||
(In millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
||||||||||||||||
Net interest income
|
|
$—
|
|
|
|
$1,049
|
|
|
|
$3,902
|
|
|
|
$—
|
|
|
|
$4,951
|
|
|
|
$9,995
|
|
|
|
$14,946
|
|
Guarantee fee income
(1)
|
5,152
|
|
|
339
|
|
|
—
|
|
|
—
|
|
|
5,491
|
|
|
(5,122
|
)
|
|
369
|
|
|||||||
Benefit (Provision) for credit losses
|
(283
|
)
|
|
26
|
|
|
—
|
|
|
—
|
|
|
(257
|
)
|
|
2,922
|
|
|
2,665
|
|
|||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
(22
|
)
|
|
420
|
|
|
—
|
|
|
398
|
|
|
(690
|
)
|
|
(292
|
)
|
|||||||
Derivative gains (losses)
|
(37
|
)
|
|
372
|
|
|
(70
|
)
|
|
—
|
|
|
265
|
|
|
(2,961
|
)
|
|
(2,696
|
)
|
|||||||
Gains (losses) on trading securities
|
—
|
|
|
(98
|
)
|
|
(737
|
)
|
|
—
|
|
|
(835
|
)
|
|
—
|
|
|
(835
|
)
|
|||||||
Gains (losses) on loans
|
—
|
|
|
(93
|
)
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|
(2,001
|
)
|
|
(2,094
|
)
|
|||||||
Other non-interest income
|
173
|
|
|
15
|
|
|
2,292
|
|
|
—
|
|
|
2,480
|
|
|
(531
|
)
|
|
1,949
|
|
|||||||
Administrative expense
|
(1,285
|
)
|
|
(325
|
)
|
|
(317
|
)
|
|
—
|
|
|
(1,927
|
)
|
|
—
|
|
|
(1,927
|
)
|
|||||||
REO operations (expense) income
|
(341
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(345
|
)
|
|
7
|
|
|
(338
|
)
|
|||||||
Other non-interest (expense) income
|
(794
|
)
|
|
(56
|
)
|
|
(4
|
)
|
|
—
|
|
|
(854
|
)
|
|
(1,619
|
)
|
|
(2,473
|
)
|
|||||||
Income tax expense
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Year Ended December 31, 2014
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total Segment
Earnings (Loss)
|
|
|
|
Total per
Consolidated
Statements of
Comprehensive
Income
|
||||||||||||||
(In millions)
|
Single-family
Guarantee
|
|
Multifamily
|
|
Investments
|
|
All
Other
|
|
|
Reclassifications
|
|
||||||||||||||||
Net interest income
|
|
$—
|
|
|
|
$948
|
|
|
|
$4,381
|
|
|
|
$—
|
|
|
|
$5,329
|
|
|
|
$8,934
|
|
|
|
$14,263
|
|
Guarantee fee income
(1)
|
4,094
|
|
|
254
|
|
|
—
|
|
|
—
|
|
|
4,348
|
|
|
(4,019
|
)
|
|
329
|
|
|||||||
Benefit (Provision) for credit losses
|
(1,129
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
(1,074
|
)
|
|
1,016
|
|
|
(58
|
)
|
|||||||
Net impairment of available-for-sale securities recognized in earnings
|
—
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
(140
|
)
|
|
(798
|
)
|
|
(938
|
)
|
|||||||
Derivative gains (losses)
|
7
|
|
|
335
|
|
|
(5,158
|
)
|
|
—
|
|
|
(4,816
|
)
|
|
(3,475
|
)
|
|
(8,291
|
)
|
|||||||
Gains (losses) on trading securities
|
—
|
|
|
58
|
|
|
(276
|
)
|
|
—
|
|
|
(218
|
)
|
|
—
|
|
|
(218
|
)
|
|||||||
Gains (losses) on loans
|
—
|
|
|
870
|
|
|
—
|
|
|
—
|
|
|
870
|
|
|
(139
|
)
|
|
731
|
|
|||||||
Other non-interest income
|
945
|
|
|
176
|
|
|
8,101
|
|
|
—
|
|
|
9,222
|
|
|
(948
|
)
|
|
8,274
|
|
|||||||
Administrative expense
|
(1,170
|
)
|
|
(274
|
)
|
|
(437
|
)
|
|
—
|
|
|
(1,881
|
)
|
|
—
|
|
|
(1,881
|
)
|
|||||||
REO operations (expense) income
|
(213
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|
8
|
|
|
(196
|
)
|
|||||||
Other non-interest (expense) income
|
(387
|
)
|
|
(23
|
)
|
|
(6
|
)
|
|
(18
|
)
|
|
(434
|
)
|
|
(579
|
)
|
|
(1,013
|
)
|
|||||||
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
|
|
(1)
|
Guarantee fee income is included in other income (loss) on our GAAP consolidated statements of comprehensive income.
|
Freddie Mac 2016 Form 10-K
|
|
298
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2016 Form 10-K
|
|
299
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Percent of Credit Losses
|
||||||||||||
|
Percentage of
Portfolio
|
|
Serious
Delinquency
Rate
|
|
Percentage of
Portfolio
|
|
Serious
Delinquency
Rate
|
|
YTD 2016
|
|
YTD 2015
|
||||||
Core single-family book
|
73
|
%
|
|
0.20
|
%
|
|
66
|
%
|
|
0.21
|
%
|
|
6
|
%
|
|
3
|
%
|
HARP and other relief refinance book
|
15
|
|
|
0.69
|
%
|
|
18
|
|
|
0.72
|
%
|
|
16
|
|
|
8
|
|
Legacy single-family book
|
12
|
|
|
3.59
|
%
|
|
16
|
|
|
4.12
|
%
|
|
78
|
|
|
89
|
|
Total
|
100
|
%
|
|
1.00
|
%
|
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
100
|
%
|
Region
(1)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
West
|
30
|
%
|
|
0.57
|
%
|
|
29
|
%
|
|
0.79
|
%
|
|
11
|
%
|
|
13
|
%
|
Northeast
|
25
|
|
|
1.45
|
%
|
|
26
|
|
|
2.04
|
%
|
|
41
|
|
|
41
|
|
North Central
|
16
|
|
|
0.93
|
%
|
|
17
|
|
|
1.13
|
%
|
|
24
|
|
|
17
|
|
Southeast
|
16
|
|
|
1.19
|
%
|
|
16
|
|
|
1.57
|
%
|
|
19
|
|
|
25
|
|
Southwest
|
13
|
|
|
0.78
|
%
|
|
12
|
|
|
0.88
|
%
|
|
5
|
|
|
4
|
|
Total
|
100
|
%
|
|
1.00
|
%
|
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
100
|
%
|
State
(2)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New Jersey
|
3
|
%
|
|
2.26
|
%
|
|
4
|
%
|
|
3.90
|
%
|
|
12
|
%
|
|
15
|
%
|
Illinois
|
5
|
|
|
1.34
|
%
|
|
5
|
|
|
1.62
|
%
|
|
10
|
|
|
8
|
|
New York
|
5
|
|
|
2.05
|
%
|
|
5
|
|
|
2.94
|
%
|
|
9
|
|
|
12
|
|
Florida
|
6
|
|
|
1.42
|
%
|
|
5
|
|
|
2.16
|
%
|
|
9
|
|
|
18
|
|
Maryland
|
3
|
|
|
1.29
|
%
|
|
3
|
|
|
1.64
|
%
|
|
6
|
|
|
4
|
|
All other
|
78
|
|
|
0.82
|
%
|
|
78
|
|
|
1.03
|
%
|
|
54
|
|
|
43
|
|
Total
|
100
|
%
|
|
1.00
|
%
|
|
100
|
%
|
|
1.32
|
%
|
|
100
|
%
|
|
100
|
%
|
(1)
|
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).
|
(2)
|
States presented based on those with the highest percentage of credit losses during the year ended
December 31, 2016
.
|
Freddie Mac 2016 Form 10-K
|
|
300
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
•
|
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, 2016
|
|
December 31, 2015
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Interest-only
|
|
1
|
%
|
|
1
|
%
|
|
4.34
|
%
|
|
6.02
|
%
|
Alt-A
|
|
2
|
%
|
|
2
|
%
|
|
5.21
|
%
|
|
6.32
|
%
|
Original LTV ratio greater than 90%
(2)
|
|
16
|
%
|
|
16
|
%
|
|
1.58
|
%
|
|
2.01
|
%
|
Lower credit scores at origination (less than 620)
|
|
2
|
%
|
|
2
|
%
|
|
5.73
|
%
|
|
6.67
|
%
|
(1)
|
Excludes loans underlying certain other securitization products for which data was not available.
|
(2)
|
Includes HARP loans, which we purchase as part of our participation in the MHA Program.
|
Freddie Mac 2016 Form 10-K
|
|
301
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||
(Dollars in billions)
|
UPB
|
|
Delinquency
Rate
(1)
|
|
UPB
|
|
Delinquency
Rate
(1)
|
||||||
Unsecuritized loans
|
|
$42.4
|
|
|
0.04
|
%
|
|
|
$49.1
|
|
|
0.04
|
%
|
K Certificates and SB Certificates
|
139.4
|
|
|
0.02
|
%
|
|
103.1
|
|
|
0.02
|
%
|
||
Other securitization products
|
8.2
|
|
|
0.03
|
%
|
|
6.7
|
|
|
—
|
%
|
||
Other mortgage-related guarantees
|
9.7
|
|
|
—
|
%
|
|
9.5
|
|
|
—
|
%
|
||
Total
|
|
$199.7
|
|
|
0.03
|
%
|
|
|
$168.4
|
|
|
0.02
|
%
|
(1)
|
Based on loans two monthly payments or more delinquent or in foreclosure.
|
Freddie Mac 2016 Form 10-K
|
|
302
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
|
|
2016
|
|
2015
|
||
Single-family Sellers
|
|
|
|
|
||
Wells Fargo Bank, N.A.
|
|
15
|
%
|
|
12
|
%
|
Bank of America, N.A.
|
|
4
|
|
|
11
|
|
Other top 10 sellers
|
|
30
|
|
|
27
|
|
Top 10 single-family sellers
|
|
49
|
%
|
|
50
|
%
|
Multifamily Sellers
|
|
|
|
|
||
CBRE Capital Markets, Inc.
|
|
19
|
%
|
|
15
|
%
|
Berkadia Commercial Mortgage LLC
|
|
17
|
|
|
13
|
|
Walker & Dunlop, LLC
|
|
10
|
|
|
11
|
|
Holliday Fenoglio Fowler, L.P.
|
|
8
|
|
|
11
|
|
Other top 10 sellers
|
|
25
|
|
|
28
|
|
Top 10 multifamily sellers
|
|
79
|
%
|
|
78
|
%
|
Freddie Mac 2016 Form 10-K
|
|
303
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||
Single-family Servicers
|
|
|
|
|
||
Wells Fargo Bank, N.A.
|
|
19
|
%
|
|
20
|
%
|
JPMorgan Chase Bank, N.A.
|
|
9
|
|
|
10
|
|
Other top 10 sellers
|
|
32
|
|
|
35
|
|
Top 10 single-family servicers
|
|
60
|
%
|
|
65
|
%
|
Multifamily Servicers
|
|
|
|
|
||
Wells Fargo Bank, N.A.
|
|
15
|
%
|
|
16
|
%
|
CBRE Capital Markets, Inc.
|
|
14
|
|
|
13
|
|
Berkadia Commercial Mortgage LLC
|
|
11
|
|
|
15
|
|
Other top 10 servicers
|
|
39
|
|
|
35
|
|
Top 10 multifamily servicers
|
|
79
|
%
|
|
79
|
%
|
Freddie Mac 2016 Form 10-K
|
|
304
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
|
|
|
|
Mortgage Insurance Coverage
|
||||
|
|
Credit Rating
(1)
|
|
December 31, 2016
|
|
December 31, 2015
|
||
Arch Mortgage Insurance Company
|
|
BBB+
|
|
25
|
%
|
|
23
|
%
|
Radian Guaranty Inc.
|
|
BBB-
|
|
21
|
|
|
22
|
|
Mortgage Guaranty Insurance Corporation
|
|
BBB-
|
|
20
|
|
|
21
|
|
Genworth Mortgage Insurance Corporation
|
|
BB+
|
|
15
|
|
|
14
|
|
Essent Guaranty, Inc.
|
|
BBB
|
|
10
|
|
|
9
|
|
Total
|
|
|
|
91
|
%
|
|
89
|
%
|
(1)
|
Ratings are for the corporate entity to which we have the greatest exposure. Coverage amounts may include coverage provided by affiliates and subsidiaries of the counterparty. Latest rating available as of December 31, 2016. Represents the lower of S&P and Moody’s credit ratings stated in terms of the S&P equivalent.
|
Freddie Mac 2016 Form 10-K
|
|
305
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2016 Form 10-K
|
|
306
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2016 Form 10-K
|
|
307
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 12
|
Freddie Mac 2016 Form 10-K
|
|
308
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
•
|
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 2016 Form 10-K
|
|
309
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
•
|
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 2016 Form 10-K
|
|
310
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
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
|
Freddie Mac 2016 Form 10-K
|
|
311
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
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
|
|
|
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
|
|
|
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 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
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
312
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
Multifamily loans
|
Valuations are based on:
|
|
|
|
|
Held-for-sale: Market prices from a third-party pricing service, using discounted cash flows based on K Certificate and SB Certificates 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
|
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 a 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.
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
313
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
Instrument
|
|
Valuation Technique
|
Classification in the Fair Value Hierarchy
|
Guarantee obligation
|
Valuations are based on:
|
|
|
|
|
Single-family
|
|
|
|
The delivery 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 2016 Form 10-K
|
|
314
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2016
|
||||||||||||||||||
(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
|
|
$—
|
|
|
|
$33,805
|
|
|
|
$9,847
|
|
|
|
$—
|
|
|
|
$43,652
|
|
Other agency
|
—
|
|
|
4,155
|
|
|
66
|
|
|
—
|
|
|
4,221
|
|
|||||
Non-agency RMBS
|
—
|
|
|
—
|
|
|
11,797
|
|
|
—
|
|
|
11,797
|
|
|||||
Non-agency CMBS
|
—
|
|
|
3,056
|
|
|
3,366
|
|
|
—
|
|
|
6,422
|
|
|||||
Obligations of states and political subdivisions
|
—
|
|
|
—
|
|
|
665
|
|
|
—
|
|
|
665
|
|
|||||
Total available-for-sale securities, at fair value
|
—
|
|
|
41,016
|
|
|
25,741
|
|
|
—
|
|
|
66,757
|
|
|||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Freddie Mac
|
—
|
|
|
14,248
|
|
|
1,095
|
|
|
—
|
|
|
15,343
|
|
|||||
Other agency
|
—
|
|
|
8,149
|
|
|
12
|
|
|
—
|
|
|
8,161
|
|
|||||
All other
|
—
|
|
|
36
|
|
|
113
|
|
|
—
|
|
|
149
|
|
|||||
Total mortgage-related securities
|
—
|
|
|
22,433
|
|
|
1,220
|
|
|
—
|
|
|
23,653
|
|
|||||
Non-mortgage-related securities
|
19,402
|
|
|
1,735
|
|
|
—
|
|
|
—
|
|
|
21,137
|
|
|||||
Total trading securities, at fair value
|
19,402
|
|
|
24,168
|
|
|
1,220
|
|
|
—
|
|
|
44,790
|
|
|||||
Total investments in securities
|
19,402
|
|
|
65,184
|
|
|
26,961
|
|
|
—
|
|
|
111,547
|
|
|||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
||||||||||
Held-for-sale, at fair value
|
—
|
|
|
16,255
|
|
|
—
|
|
|
—
|
|
|
16,255
|
|
|||||
Derivative assets, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
6,924
|
|
|
—
|
|
|
—
|
|
|
6,924
|
|
|||||
Option-based derivatives
|
—
|
|
|
5,054
|
|
|
—
|
|
|
—
|
|
|
5,054
|
|
|||||
Other
|
—
|
|
|
287
|
|
|
3
|
|
|
—
|
|
|
290
|
|
|||||
Subtotal, before netting adjustments
|
—
|
|
|
12,265
|
|
|
3
|
|
|
—
|
|
|
12,268
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,521
|
)
|
|
(11,521
|
)
|
|||||
Total derivative assets, net
|
—
|
|
|
12,265
|
|
|
3
|
|
|
(11,521
|
)
|
|
747
|
|
|||||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Guarantee asset, at fair value
|
—
|
|
|
—
|
|
|
2,298
|
|
|
—
|
|
|
2,298
|
|
|||||
Non-derivative held-for-sale purchase commitments, at fair value
|
—
|
|
|
108
|
|
|
—
|
|
|
—
|
|
|
108
|
|
|||||
All other, at fair value
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||
Total other assets
|
—
|
|
|
108
|
|
|
2,300
|
|
|
—
|
|
|
2,408
|
|
|||||
Total assets carried at fair value on a recurring basis
|
|
$19,402
|
|
|
|
$93,812
|
|
|
|
$29,264
|
|
|
|
($11,521
|
)
|
|
|
$130,957
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt securities of consolidated trusts held by third parties, at fair value
|
|
$—
|
|
|
|
$144
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$144
|
|
Other debt, at fair value
|
—
|
|
|
5,771
|
|
|
95
|
|
|
—
|
|
|
5,866
|
|
|||||
Derivative liabilities, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest-rate swaps
|
—
|
|
|
12,387
|
|
|
—
|
|
|
—
|
|
|
12,387
|
|
|||||
Option-based derivatives
|
—
|
|
|
106
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|||||
Other
|
—
|
|
|
147
|
|
|
52
|
|
|
—
|
|
|
199
|
|
|||||
Subtotal, before netting adjustments
|
—
|
|
|
12,640
|
|
|
52
|
|
|
—
|
|
|
12,692
|
|
|||||
Netting adjustments
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,897
|
)
|
|
(11,897
|
)
|
|||||
Total derivative liabilities, net
|
—
|
|
|
12,640
|
|
|
52
|
|
|
(11,897
|
)
|
|
795
|
|
|||||
Other liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-derivative held-for-sale purchase commitments, at fair value
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|||||
Total liabilities carried at fair value on a recurring basis
|
|
$—
|
|
|
|
$18,592
|
|
|
|
$147
|
|
|
|
($11,897
|
)
|
|
|
$6,842
|
|
Freddie Mac 2016 Form 10-K
|
|
315
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
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
|
|
Other agency
|
—
|
|
|
7,333
|
|
|
91
|
|
|
—
|
|
|
7,424
|
|
|||||
Non-agency RMBS
|
—
|
|
|
—
|
|
|
20,333
|
|
|
—
|
|
|
20,333
|
|
|||||
Non-agency CMBS
|
—
|
|
|
8,918
|
|
|
3,530
|
|
|
—
|
|
|
12,448
|
|
|||||
Obligations of states and political subdivisions
|
—
|
|
|
—
|
|
|
1,205
|
|
|
—
|
|
|
1,205
|
|
|||||
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
|
|
|||||
Other agency
|
—
|
|
|
6,427
|
|
|
41
|
|
|
—
|
|
|
6,468
|
|
|||||
All 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
|
|
(1)
|
Represents counterparty netting, cash collateral netting, and net derivative interest receivable or payable.
|
Freddie Mac 2016 Form 10-K
|
|
316
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31,
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||
(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)
|
|
$—
|
|
|
|
$199
|
|
|
|
$2,483
|
|
|
|
$2,682
|
|
|
|
$—
|
|
|
|
$1,130
|
|
|
|
$5,851
|
|
|
|
$6,981
|
|
(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.
|
Freddie Mac 2016 Form 10-K
|
|
317
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
Realized and unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1, 2016 |
|
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, 2016 |
|
Unrealized
gains (losses)
still held
|
||||||||||||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Freddie Mac
|
|
$2,608
|
|
|
|
$10
|
|
|
|
($71
|
)
|
|
|
($61
|
)
|
|
|
$8,894
|
|
|
|
$—
|
|
|
|
($605
|
)
|
|
|
($703
|
)
|
|
|
$29
|
|
|
|
($315
|
)
|
|
|
$9,847
|
|
|
|
($9
|
)
|
Other agency
|
91
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(6
|
)
|
|
66
|
|
|
—
|
|
||||||||||||
Non-agency RMBS
|
20,333
|
|
|
877
|
|
|
55
|
|
|
932
|
|
|
—
|
|
|
—
|
|
|
(6,286
|
)
|
|
(3,182
|
)
|
|
—
|
|
|
—
|
|
|
11,797
|
|
|
236
|
|
||||||||||||
Non-agency CMBS
|
3,530
|
|
|
2
|
|
|
(132
|
)
|
|
(130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
3,366
|
|
|
2
|
|
||||||||||||
Obligations of states and political subdivisions
|
1,205
|
|
|
1
|
|
|
(10
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(531
|
)
|
|
—
|
|
|
—
|
|
|
665
|
|
|
—
|
|
||||||||||||
Total available-for-sale mortgage-related securities
|
27,767
|
|
|
890
|
|
|
(160
|
)
|
|
730
|
|
|
8,894
|
|
|
—
|
|
|
(6,891
|
)
|
|
(4,467
|
)
|
|
29
|
|
|
(321
|
)
|
|
25,741
|
|
|
229
|
|
||||||||||||
Trading, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Freddie Mac
|
331
|
|
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
|
869
|
|
|
—
|
|
|
(142
|
)
|
|
(3
|
)
|
|
190
|
|
|
(129
|
)
|
|
1,095
|
|
|
(20
|
)
|
||||||||||||
Other agency
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
(1
|
)
|
||||||||||||
All other
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
114
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
113
|
|
|
—
|
|
||||||||||||
Total trading mortgage-related securities
|
374
|
|
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
|
983
|
|
|
—
|
|
|
(164
|
)
|
|
(13
|
)
|
|
190
|
|
|
(129
|
)
|
|
1,220
|
|
|
(21
|
)
|
||||||||||||
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Guarantee asset
(3)
|
1,753
|
|
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
850
|
|
|
—
|
|
|
(358
|
)
|
|
—
|
|
|
—
|
|
|
2,298
|
|
|
54
|
|
||||||||||||
All other, at fair value
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
2
|
|
|
(2
|
)
|
||||||||||||
Total other assets
|
1,753
|
|
|
51
|
|
|
—
|
|
|
51
|
|
|
14
|
|
|
850
|
|
|
—
|
|
|
(358
|
)
|
|
(10
|
)
|
|
—
|
|
|
2,300
|
|
|
52
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Realized and unrealized (gains) losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Balance,
January 1, 2016 |
|
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, 2016 |
|
Unrealized
(gains) losses still held |
||||||||||||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Other debt, at fair value
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$95
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$95
|
|
|
|
$—
|
|
Net derivatives
(4)
|
8
|
|
|
68
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
—
|
|
|
52
|
|
|
40
|
|
||||||||||||
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
All other, at fair value
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
Freddie Mac 2016 Form 10-K
|
|
318
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
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
|
)
|
Other agency
|
89
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
37
|
|
|
(9
|
)
|
|
91
|
|
|
—
|
|
||||||||||||
Non-agency RMBS
|
31,903
|
|
|
1,313
|
|
|
(54
|
)
|
|
1,259
|
|
|
—
|
|
|
—
|
|
|
(8,840
|
)
|
|
(4,003
|
)
|
|
14
|
|
|
—
|
|
|
20,333
|
|
|
417
|
|
||||||||||||
Non-agency CMBS
|
3,474
|
|
|
(20
|
)
|
|
109
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
3,530
|
|
|
(20
|
)
|
||||||||||||
Obligations of states and political subdivisions
|
2,198
|
|
|
2
|
|
|
(15
|
)
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(981
|
)
|
|
1
|
|
|
—
|
|
|
1,205
|
|
|
—
|
|
||||||||||||
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
|
)
|
||||||||||||
Other agency
|
233
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
(2
|
)
|
|
—
|
|
|
(98
|
)
|
|
41
|
|
|
(12
|
)
|
||||||||||||
All 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
|
|
|
|
|
|
(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, 2016
consisted primarily of certain mortgage-related securities due to an increased volume and level of activity in the market and availability of price quotes from dealers and third-party pricing services. Certain Freddie Mac securities are 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, 2016
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 2016 Form 10-K
|
|
319
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2016
|
||||||||||
|
Level 3
Fair Value |
|
Predominant
Valuation Technique(s) |
|
Unobservable Inputs
|
||||||
(Dollars in millions, except for certain unobservable inputs as shown)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
||
Assets
|
|
|
|
|
|
|
|
|
|
||
Investments in securities
|
|
|
|
|
|
|
|
|
|
||
Available-for-sale, at fair value
|
|
|
|
|
|
|
|
|
|
||
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
||
Freddie Mac
|
$7,619
|
|
Discounted cash flows
|
|
OAS
|
|
(146) - 500 bps
|
|
91 bps
|
|
|
|
129
|
|
Median of external sources
|
|
External pricing sources
|
|
$100.8 - $103.3
|
|
|
$101.8
|
|
|
66
|
|
Single external source
|
|
|
|
|
|
|
||
|
60
|
|
Risk Metrics
|
|
|
|
|
|
|
||
|
1,973
|
|
Other
|
|
|
|
|
|
|
|
|
Total Freddie Mac
|
9,847
|
|
|
|
|
|
|
|
|
|
|
Other agency
|
32
|
|
Median of external sources
|
|
|
|
|
|
|
|
|
|
23
|
|
Single external source
|
|
|
|
|
|
|
||
|
11
|
|
Other
|
|
|
|
|
|
|
|
|
Total other agency
|
66
|
|
|
|
|
|
|
|
|
|
|
Non-agency RMBS
|
9,974
|
|
Median of external sources
|
|
External pricing sources
|
|
$74.0 - $78.8
|
|
|
$76.0
|
|
|
1,823
|
|
Other
|
|
|
|
|
|
|
|
|
Total non-agency RMBS
|
11,797
|
|
|
|
|
|
|
|
|
|
|
Non-agency CMBS
|
3,365
|
|
Risk Metrics
|
|
Effective duration
|
|
2.15 - 10.02 years
|
|
8.57 years
|
|
|
|
1
|
|
Other
|
|
|
|
|
|
|
||
Total non-agency CMBS
|
3,366
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
619
|
|
Median of external sources
|
|
External pricing sources
|
|
$100.9 - $101.5
|
|
|
$101.2
|
|
|
46
|
|
Other
|
|
|
|
|
|
|
|
|
Total obligations of states and political subdivisions
|
665
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale mortgage-related securities
|
25,741
|
|
|
|
|
|
|
|
|
|
|
Trading, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac
|
452
|
|
Risk metrics
|
|
Effective duration
|
|
(5.07) - 46.37 years
|
|
6.94 years
|
|
|
|
311
|
|
Discounted cash flows
|
|
OAS
|
|
(3,346) - 2,460 bps
|
|
(224) bps
|
|
|
|
5
|
|
Single external source
|
|
|
|
|
|
|
||
|
4
|
|
Median of external sources
|
|
|
|
|
|
|
|
|
|
323
|
|
Other
|
|
|
|
|
|
|
|
|
Total Freddie Mac
|
1,095
|
|
|
|
|
|
|
|
|
|
|
Other agency
|
12
|
|
Discounted cash flows
|
|
|
|
|
|
|
|
|
All other
|
113
|
|
Risk metrics
|
|
Effective duration
|
|
0.14 - 4.08 years
|
|
2.52 years
|
|
|
Total trading mortgage-related securities
|
1,220
|
|
|
|
|
|
|
|
|
|
|
Total investments in securities
|
$26,961
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee asset, at fair value
|
$2,091
|
|
Discounted cash flows
|
|
OAS
|
|
17 - 198 bps
|
|
50 bps
|
|
|
|
207
|
|
Other
|
|
|
|
|
|
|
||
Total guarantee asset, at fair value
|
2,298
|
|
|
|
|
|
|
|
|
||
All other at fair value
|
2
|
|
Other
|
|
|
|
|
|
|
||
Total other assets
|
2,300
|
|
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Other debt, at fair value
|
95
|
|
Other
|
|
|
|
|
|
|
||
Net derivatives
|
49
|
|
Other
|
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
320
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2015
|
||||||||||||
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||||
(Dollars in millions, except for certain unobservable inputs as shown)
|
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
|
2,608
|
|
|
|
|
|
|
|
|
|
|||
Other agency
|
37
|
|
|
Median of external sources
|
|
|
|
|
|
|
|||
|
36
|
|
|
Single external source
|
|
|
|
|
|
|
|||
|
18
|
|
|
Other
|
|
|
|
|
|
|
|||
Total other agency
|
91
|
|
|
|
|
|
|
|
|
|
|||
Non-agency RMBS
|
17,948
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$74.1 - $78.3
|
|
|
$76.0
|
|
|
|
2,385
|
|
|
Other
|
|
|
|
|
|
|
|||
Total non-agency RMBS
|
20,333
|
|
|
|
|
|
|
|
|
|
|||
Non-agency CMBS
|
3,530
|
|
|
Risk Metrics
|
|
Effective duration
|
|
3.15 - 11.02 years
|
|
9.57 years
|
|
||
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
|
|
|
|
|
|
|
|
|
|
|||
Total available-for-sale mortgage-related securities
|
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
|
331
|
|
|
|
|
|
|
|
|
|
|||
Other agency
|
41
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||
All other
|
1
|
|
|
Discounted cash flows
|
|
|
|
|
|
|
|||
|
1
|
|
|
Median of external sources
|
|
|
|
|
|
|
|||
Total all other
|
2
|
|
|
|
|
|
|
|
|
|
|||
Total trading mortgage-related securities
|
374
|
|
|
|
|
|
|
|
|
|
|||
Total investments in securities
|
|
$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
|
|
|
|
|
|
|
|
|
|
|||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||
Net derivatives
|
8
|
|
|
Other
|
|
|
|
|
|
|
|||
Other liabilities:
|
|
|
|
|
|
|
|
|
|
||||
All other, at fair value
|
10
|
|
|
Other
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
321
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2016
|
||||||||||
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||
(Dollars in millions, except for certain unobservable inputs as shown)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||
Non-recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
||
Mortgage loans
|
|
$2,483
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal model
|
|
Historical sales proceeds
|
|
$3,000 - $770,000
|
|
$167,137
|
||
|
|
|
Internal model
|
|
Housing sales index
|
|
42 - 374 bps
|
|
96 bps
|
||
|
|
|
|
Income capitalization
(1)
|
|
Capitalization rates
|
|
7% - 10%
|
|
7%
|
|
|
|
|
Median of external sources
|
|
External pricing sources
|
|
$37.0 - $94.3
|
|
$75.0
|
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||
|
December 31, 2015
|
||||||||||
|
Level 3
Fair
Value
|
|
Predominant
Valuation
Technique(s)
|
|
Unobservable Inputs
|
||||||
(Dollars in millions, except for certain unobservable inputs as shown)
|
Type
|
|
Range
|
|
Weighted
Average
|
||||||
Non-recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
||
Mortgage loans
|
|
$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
|
(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 2016 Form 10-K
|
|
322
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2016
|
||||||||||||||||||||||
|
|
|
Fair Value
|
||||||||||||||||||||
(In millions)
|
GAAP Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting
Adjustments
(1)
|
|
Total
|
||||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash
equivalents
|
|
$12,369
|
|
|
|
$12,369
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$12,369
|
|
Restricted cash and cash equivalents
|
9,851
|
|
|
9,851
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,851
|
|
||||||
Securities purchased under agreements to resell
|
51,548
|
|
|
—
|
|
|
51,548
|
|
|
—
|
|
|
—
|
|
|
51,548
|
|
||||||
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Available-for-sale, at fair value
|
66,757
|
|
|
—
|
|
|
41,016
|
|
|
25,741
|
|
|
—
|
|
|
66,757
|
|
||||||
Trading, at fair value
|
44,790
|
|
|
19,402
|
|
|
24,168
|
|
|
1,220
|
|
|
—
|
|
|
44,790
|
|
||||||
Total investments in securities
|
111,547
|
|
|
19,402
|
|
|
65,184
|
|
|
26,961
|
|
|
—
|
|
|
111,547
|
|
||||||
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans held by consolidated trusts
|
1,690,218
|
|
|
—
|
|
|
1,554,143
|
|
|
142,121
|
|
|
—
|
|
|
1,696,264
|
|
||||||
Loans held by Freddie Mac
|
112,785
|
|
|
—
|
|
|
31,004
|
|
|
84,227
|
|
|
—
|
|
|
115,231
|
|
||||||
Total mortgage loans
|
1,803,003
|
|
|
—
|
|
|
1,585,147
|
|
|
226,348
|
|
|
—
|
|
|
1,811,495
|
|
||||||
Derivative assets, net
|
747
|
|
|
—
|
|
|
12,265
|
|
|
3
|
|
|
(11,521
|
)
|
|
747
|
|
||||||
Guarantee asset
|
2,298
|
|
|
—
|
|
|
—
|
|
|
2,490
|
|
|
—
|
|
|
2,490
|
|
||||||
Non-derivative purchase commitments, at fair value
|
108
|
|
|
—
|
|
|
108
|
|
|
18
|
|
|
—
|
|
|
126
|
|
||||||
Advances to lenders
|
1,278
|
|
|
—
|
|
|
—
|
|
|
1,278
|
|
|
—
|
|
|
1,278
|
|
||||||
Total financial assets
|
|
$1,992,749
|
|
|
|
$41,622
|
|
|
|
$1,714,252
|
|
|
|
$257,098
|
|
|
|
($11,521
|
)
|
|
|
$2,001,451
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt, net:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Debt securities of consolidated trusts held by third parties
|
|
$1,648,683
|
|
|
|
$—
|
|
|
|
$1,651,313
|
|
|
|
$605
|
|
|
|
$—
|
|
|
|
$1,651,918
|
|
Other debt
|
353,321
|
|
|
—
|
|
|
352,837
|
|
|
4,809
|
|
|
—
|
|
|
357,646
|
|
||||||
Total debt, net
|
2,002,004
|
|
|
—
|
|
|
2,004,150
|
|
|
5,414
|
|
|
—
|
|
|
2,009,564
|
|
||||||
Derivative liabilities, net
|
795
|
|
|
—
|
|
|
12,640
|
|
|
52
|
|
|
(11,897
|
)
|
|
795
|
|
||||||
Guarantee obligation
|
2,208
|
|
|
—
|
|
|
—
|
|
|
3,399
|
|
|
—
|
|
|
3,399
|
|
||||||
Non-derivative purchase commitments, at fair value
|
37
|
|
|
—
|
|
|
37
|
|
|
45
|
|
|
—
|
|
|
82
|
|
||||||
Total financial liabilities
|
|
$2,005,044
|
|
|
|
$—
|
|
|
|
$2,016,827
|
|
|
|
$8,910
|
|
|
|
($11,897
|
)
|
|
|
$2,013,840
|
|
Freddie Mac 2016 Form 10-K
|
|
323
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
December 31, 2015
|
||||||||||||||||||||||
|
|
|
Fair Value
|
||||||||||||||||||||
(In millions)
|
GAAP Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting Adjustments
(1)
|
|
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
|
|
(1)
|
Represents counterparty netting, cash collateral netting, and net derivative interest receivable or payable.
|
Freddie Mac 2016 Form 10-K
|
|
324
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
|
|
December 31,
|
||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||
(In millions)
|
|
Multifamily
Held-For-Sale
Loans
|
|
Other Debt -
Long Term
|
|
Multifamily
Held-For-Sale
Loans
|
|
Other Debt -
Long Term
|
||||||||
Fair value
|
|
|
$16,255
|
|
|
|
$5,866
|
|
|
|
$17,660
|
|
|
|
$7,045
|
|
Unpaid principal balance
|
|
16,231
|
|
|
5,584
|
|
|
17,673
|
|
|
7,093
|
|
||||
Difference
|
|
|
$24
|
|
|
|
$282
|
|
|
|
($13
|
)
|
|
|
($48
|
)
|
Freddie Mac 2016 Form 10-K
|
|
325
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 13
|
Freddie Mac 2016 Form 10-K
|
|
326
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2016 Form 10-K
|
|
327
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2016 Form 10-K
|
|
328
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2016 Form 10-K
|
|
329
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2016 Form 10-K
|
|
330
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 14
|
Freddie Mac 2016 Form 10-K
|
|
331
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 15
|
(In millions)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
GAAP net worth
|
|
|
$5,075
|
|
|
|
$2,940
|
|
Core capital (deficit)
(1)(2)
|
|
|
($67,717
|
)
|
|
|
($70,549
|
)
|
Less: Minimum capital requirement
(1)
|
|
18,933
|
|
|
19,687
|
|
||
Minimum capital surplus (deficit)
(1)
|
|
|
($86,650
|
)
|
|
|
($90,236
|
)
|
(1)
|
Core capital and minimum capital figures are estimates and represent amounts submitted to FHFA. FHFA is the authoritative source for our regulatory capital.
|
Freddie Mac 2016 Form 10-K
|
|
332
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 15
|
(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 2016 Form 10-K
|
|
333
|
Financial Statements
|
Notes to the Consolidated Financial Statements | Note 16
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Other income (loss):
|
|
|
|
|
|
||||||
Non-agency mortgage-related securities settlements
(1)
|
|
$—
|
|
|
|
$65
|
|
|
|
$6,084
|
|
Gains (losses) on loans
|
(463
|
)
|
|
(2,094
|
)
|
|
731
|
|
|||
All other
|
1,717
|
|
|
1,150
|
|
|
1,229
|
|
|||
Total other income (loss)
|
|
$1,254
|
|
|
|
($879
|
)
|
|
|
$8,044
|
|
|
|
|
|
|
|
||||||
Other expense:
|
|
|
|
|
|
||||||
Property tax and insurance expense on held-for-sale loans
|
|
($90
|
)
|
|
|
($1,094
|
)
|
|
|
($62
|
)
|
All other
|
(509
|
)
|
|
(412
|
)
|
|
(176
|
)
|
|||
Total other expense
|
|
($599
|
)
|
|
|
($1,506
|
)
|
|
|
($238
|
)
|
(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.
|
(In millions)
|
December 31, 2016
|
|
December 31, 2015
|
||||
Other assets:
|
|
|
|
||||
Real estate owned, net
|
|
$1,198
|
|
|
|
$1,725
|
|
Accounts and other receivables
(1)
|
5,083
|
|
|
3,625
|
|
||
Guarantee asset
|
2,298
|
|
|
1,753
|
|
||
Advances to lenders
|
1,278
|
|
|
910
|
|
||
All other
|
2,501
|
|
|
1,025
|
|
||
Total other assets
|
|
$12,358
|
|
|
|
$9,038
|
|
Other liabilities:
|
|
|
|
||||
Servicer liabilities
|
|
$730
|
|
|
|
$1,191
|
|
Guarantee obligation
|
2,208
|
|
|
1,729
|
|
||
Accounts payable and accrued expenses
|
957
|
|
|
1,286
|
|
||
Payables related to securities
|
4,510
|
|
|
72
|
|
||
All other
|
1,082
|
|
|
968
|
|
||
Total other liabilities
|
|
$9,487
|
|
|
|
$5,246
|
|
(1)
|
Primarily consists of servicer receivables and other non-interest receivables.
|
Freddie Mac 2016 Form 10-K
|
|
334
|
Quarterly Selected Financial Data
|
|
2016
|
||||||||||||||||||
(In millions, except share-related amounts)
|
1Q
|
|
2Q
|
|
3Q
|
|
4Q
|
|
Full-Year
|
||||||||||
Net interest income
|
|
$3,405
|
|
|
|
$3,443
|
|
|
|
$3,646
|
|
|
|
$3,885
|
|
|
|
$14,379
|
|
Benefit (provision) for credit losses
|
467
|
|
|
775
|
|
|
(113
|
)
|
|
(326
|
)
|
|
803
|
|
|||||
Non-interest income (loss):
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative gains (losses)
|
(4,561
|
)
|
|
(2,058
|
)
|
|
(36
|
)
|
|
6,381
|
|
|
(274
|
)
|
|||||
Net impairments of available-for-sale securities recognized in earnings
|
(57
|
)
|
|
(72
|
)
|
|
(9
|
)
|
|
(53
|
)
|
|
(191
|
)
|
|||||
Other non-interest income (loss)
|
1,195
|
|
|
306
|
|
|
822
|
|
|
(1,358
|
)
|
|
965
|
|
|||||
Non-interest income (loss)
|
(3,423
|
)
|
|
(1,824
|
)
|
|
777
|
|
|
4,970
|
|
|
500
|
|
|||||
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
||||||||||
Administrative expense
|
(448
|
)
|
|
(475
|
)
|
|
(498
|
)
|
|
(584
|
)
|
|
(2,005
|
)
|
|||||
REO operations income (expense)
|
(84
|
)
|
|
(29
|
)
|
|
(56
|
)
|
|
(118
|
)
|
|
(287
|
)
|
|||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense
|
(272
|
)
|
|
(280
|
)
|
|
(293
|
)
|
|
(307
|
)
|
|
(1,152
|
)
|
|||||
Other non-interest expense
|
(153
|
)
|
|
(151
|
)
|
|
(138
|
)
|
|
(157
|
)
|
|
(599
|
)
|
|||||
Non-interest expense
|
(957
|
)
|
|
(935
|
)
|
|
(985
|
)
|
|
(1,166
|
)
|
|
(4,043
|
)
|
|||||
Income tax (expense) benefit
|
154
|
|
|
(466
|
)
|
|
(996
|
)
|
|
(2,516
|
)
|
|
(3,824
|
)
|
|||||
Net income (loss)
|
|
($354
|
)
|
|
|
$993
|
|
|
|
$2,329
|
|
|
|
$4,847
|
|
|
|
$7,815
|
|
Total other comprehensive income (loss), net of taxes
|
|
$154
|
|
|
|
$140
|
|
|
|
($19
|
)
|
|
|
($972
|
)
|
|
|
($697
|
)
|
Comprehensive income (loss)
|
|
($200
|
)
|
|
|
$1,133
|
|
|
|
$2,310
|
|
|
|
$3,875
|
|
|
|
$7,118
|
|
Income (loss) attributable to common stockholders
|
|
($354
|
)
|
|
|
$60
|
|
|
|
$19
|
|
|
|
$372
|
|
|
|
$97
|
|
Income (loss) per common share – basic and diluted
(1)
|
|
($0.11
|
)
|
|
|
$0.02
|
|
|
|
$0.01
|
|
|
|
$0.11
|
|
|
|
$0.03
|
|
Freddie Mac 2016 Form 10-K
|
|
335
|
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 expenses
|
(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
|
)
|
(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 2016 Form 10-K
|
|
336
|
Controls and Procedures
|
|
Freddie Mac 2016 Form 10-K
|
|
337
|
Controls and Procedures
|
|
Freddie Mac 2016 Form 10-K
|
|
338
|
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 2016 Form 10-K
|
|
339
|
Controls and Procedures
|
|
Freddie Mac 2016 Form 10-K
|
|
340
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Freddie Mac 2016 Form 10-K
|
|
341
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Freddie Mac 2016 Form 10-K
|
|
342
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Raphael W. Bostic
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
50
|
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:
68
|
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 Chair of the Audit Committee and former member of the Risk 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 2016 Form 10-K
|
|
343
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Lance F. Drummond
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
62
|
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:
57
|
Audit
|
Kemper Corporation
|
Director Since:
October 2014
|
Nominating & Governance
|
|
|
|
|
•
|
Founder of Jamlerpartners LLC (2014-present)
|
•
|
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, Audit, Compensation and Investment Committees of Kemper Corporation (2016-present)
|
•
|
Member of the Board of Trustees, Chair of the Audit Committee, and member of the Performance and Compliance Committees of Columbia Acorn Trust and Wanger Advisors Trust (2014-present)
|
•
|
Member of the Board of the FHLB of Chicago (2009-2014)
|
•
|
Member of the Board of various Allstate subsidiaries (2011-2014)
|
Freddie Mac 2016 Form 10-K
|
|
344
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Richard C. Hartnack
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
71
|
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 the Management Development and Compensation Committee, and Former Chair of the 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:
69
|
Compensation
|
AMETEK, Inc.
|
Director Since:
February 2013
|
Risk
|
GulfMark Offshore, Inc.
|
|
|
|
•
|
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 2016 Form 10-K
|
|
345
|
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. (2007-2016)
|
•
|
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:
66
|
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 JPMorgan 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 2016 Form 10-K
|
|
346
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Christopher S. Lynch
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
59
|
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, Nominating and Corporate Governance, and Technology Committees 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:
61
|
Audit
|
Campbell Soup Company
|
Director Since:
December 2013
|
Nominating & Governance
|
Shire plc
|
|
|
|
•
|
Various positions with Dun & Bradstreet Corporation (2001-2013), including Chairman and Chief Executive Officer (2010-2013); President and Chief Operating Officer (2007-2010); and Senior Vice President and CFO (2002-2006)
|
•
|
Various finance and management positions with The Procter & Gamble Company, including Vice President of Finance for Australia, Asia, and India (1983-2001)
|
Freddie Mac 2016 Form 10-K
|
|
347
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
•
|
Member of the Board and Finance and Corporate Development Committee and Chair of the Audit Committee of Campbell Soup Company (2005-present)
|
•
|
Member of the Board and Audit, Compliance and Risk, and Remuneration Committees of Shire plc (2015-present)
|
•
|
Member of the Board and Finance and Nominating and Corporate Governance Committees of Avon Products, Inc. (2014-2016)
|
•
|
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:
67
|
Compensation
|
None
|
Director Since:
August 2013
|
Executive
|
|
|
Risk, Chair
|
|
•
|
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:
70
|
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)
|
Freddie Mac 2016 Form 10-K
|
|
348
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
•
|
Member of the Board of the Center for Responsible Lending (2006-present)
|
•
|
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:
69
|
Audit
|
Chubb (formerly ACE
|
Director Since:
December 2008
|
Compensation
|
Limited)
|
|
|
|
•
|
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 Chubb (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)
|
Freddie Mac 2016 Form 10-K
|
|
349
|
Directors, Corporate Governance, and Executive Officers
|
Directors
|
Anthony A. Williams
|
Freddie Mac Committees:
|
Public Directorships:
|
Age:
65
|
Nominating & Governance
|
None
|
Director Since:
December 2008
|
Risk
|
|
|
|
|
•
|
Chief Executive Officer and Executive Director of Federal City Council (2012-present)
|
•
|
Senior Advisor at King & Spalding (2016-present)
|
•
|
Senior Advisor at Dentons (2015-2016)
|
•
|
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 2016 Form 10-K
|
|
350
|
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 elected annually.
|
|
Each of the Audit, Compensation, Nominating and Governance, and Risk Committees consists entirely of independent directors.
|
|
Each committee 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 of the Audit, Compensation, Nominating and Governance, and Risk Committees 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 planning at least annually.
|
Freddie Mac 2016 Form 10-K
|
|
351
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
Employment Affiliations with Business Partners -
During 2016 and currently, Mr. Williams has served as an employee of a firm that engages or has engaged in business with us resulting in payments between us and the firm. 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 firm’s consolidated gross revenues for each of the last three fiscal years. After considering the nature and extent of the specific relationship between the firm and us, our non-employee Board members concluded that the business relationship does not constitute a material relationship between Mr. Williams and us that would impair his independence as our director.
|
•
|
Board Memberships with Business Partners
-
During 2016 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 2016 and currently, Mr. Bostic has served as a board member of a charitable organization 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 2016 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 the 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
|
Freddie Mac 2016 Form 10-K
|
|
352
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
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 Committee Chair, in consultation with the Non-Executive Chairman, will address any questions that may arise regarding whether recusal from a particular discussion or action is appropriate.
|
Freddie Mac 2016 Form 10-K
|
|
353
|
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 — Purchase Agreement, Warrant and Senior Preferred Stock” and Note 2);
|
•
|
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 involving:
|
◦
|
100,000 or more loans to a non-bank transferee; or
|
◦
|
25,000 or more loans to any transferee if the transfer would increase the number of the transferee's Freddie Mac- and Fannie Mae-owned seriously delinquent loans by at least 25 percent and the servicing transfer has a minimum of 500 seriously delinquent loans;
|
•
|
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;
|
Freddie Mac 2016 Form 10-K
|
|
354
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
•
|
Any establishment or modification by us of performance management processes for such officers, including the establishment or modification of a Conservatorship Scorecard; and
|
•
|
Establishing the annual operating budget.
|
Audit Committee
|
Chair:
|
Members:
|
|
Carolyn H. Byrd
|
Lance F. Drummond
|
|
|
Thomas M. Goldstein
|
|
|
Sara Mathew
|
|
|
Nicolas P. Retsinas
|
|
|
Eugene B. Shanks, Jr.
|
Freddie Mac 2016 Form 10-K
|
|
355
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Executive Committee
|
Chair:
|
Members:
|
|
Christopher S. Lynch
|
Carolyn H. Byrd
|
|
|
Richard C. Hartnack
|
|
|
Donald H. Layton
|
|
|
Saiyid T. Naqvi
|
|
|
Nicolas P. Retsinas
|
Compensation Committee
|
Chair:
|
Members:
|
Nicolas P. Retsinas
|
Raphael W. Bostic
|
|
|
|
Carolyn H. Byrd
|
|
|
Steven W. Kohlhagen
|
|
|
Saiyid T. Naqvi
|
|
|
Eugene B. Shanks, Jr.
|
Freddie Mac 2016 Form 10-K
|
|
356
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Nominating and Governance Committee
|
Chair:
|
Members:
|
Richard C. Hartnack
|
Lance F. Drummond
|
|
|
|
Thomas M. Goldstein
|
|
|
Sara Mathew
|
|
|
Anthony A. Williams
|
Risk Committee
|
Chair:
|
Members:
|
|
Saiyid T. Naqvi
|
Raphael W. Bostic
|
|
|
Richard C. Hartnack
|
|
|
Steven W. Kohlhagen
|
|
|
Anthony A. Williams
|
Freddie Mac 2016 Form 10-K
|
|
357
|
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
|
|
Freddie Mac 2016 Form 10-K
|
|
358
|
Directors, Corporate Governance, and Executive Officers
|
|
Corporate Governance
|
Name
|
Fees Earned or
Paid in Cash
(1)
|
|
|
|
Total
|
||||
C. Lynch
|
|
$290,000
|
|
|
|
|
|
$290,000
|
|
R. Bostic
|
160,000
|
|
|
|
|
160,000
|
|
||
C. Byrd
|
185,000
|
|
|
|
|
185,000
|
|
||
L. Drummond
|
170,000
|
|
|
|
|
170,000
|
|
||
T. Goldstein
|
170,000
|
|
|
|
|
170,000
|
|
||
R. Hartnack
(2)
|
170,000
|
|
|
|
|
170,000
|
|
||
S. Kohlhagen
(2)
|
166,593
|
|
|
|
|
166,593
|
|
||
S. Mathew
|
170,000
|
|
|
|
|
170,000
|
|
||
S. Naqvi
(2)
|
168,407
|
|
|
|
|
168,407
|
|
||
N. Retsinas
(2)
|
177,418
|
|
|
|
|
177,418
|
|
||
E. Shanks, Jr.
(2)
|
171,291
|
|
|
|
|
171,291
|
|
||
A. Williams
(2)
|
161,291
|
|
|
|
|
161,291
|
|
(1)
|
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.
|
(2)
|
In addition to the annual Board service and appropriate Committee Chair retainers, the amount represents partial annual compensation for service as a member of the Audit Committee or as a Committee Chair during 2016. In February 2016, Mr. Hartnack left, and Mr. Retsinas joined, the Audit Committee, the Chair of the Nominating and Governance Committee transitioned from Mr. Shanks to Mr. Hartnack, and the Chair of the Compensation Committee transitioned from Mr. Williams to Mr. Retsinas. In June 2016, the Chair of the Risk Committee transitioned from Mr. Kohlhagen to Mr. Naqvi.
|
Freddie Mac 2016 Form 10-K
|
|
359
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
Donald H. Layton
|
Position:
|
Age:
66
|
Chief Executive Officer
|
Year of Affiliation:
2012
|
|
James G. Mackey
|
Position:
|
Age:
49
|
Executive Vice President - Chief Financial Officer
|
Year of Affiliation:
2013
|
|
David M. Brickman
|
Position:
|
Age
: 51
|
Executive Vice President - Multifamily
|
Year of Affiliation:
1999
|
|
Anil D. Hinduja
|
Position:
|
Age
: 53
|
Executive Vice President - Chief Enterprise Risk
|
Year of Affiliation:
2015
|
Officer
|
Freddie Mac 2016 Form 10-K
|
|
360
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
Michael T. Hutchins
|
Position:
|
Age:
61
|
Executive Vice President - Investments and
|
Year of Affiliation:
2013
|
Capital Markets
|
David B. Lowman
|
Position:
|
Age:
59
|
Executive Vice President - Single-Family Business
|
Year of Affiliation:
2013
|
|
Robert Lux
|
Position:
|
Age:
53
|
Executive Vice President - Chief Information Officer
|
Year of Affiliation:
2010
|
|
Freddie Mac 2016 Form 10-K
|
|
361
|
Directors, Corporate Governance, and Executive Officers
|
|
Executive Officers
|
William H. McDavid
|
Position:
|
Age:
70
|
Executive Vice President - General Counsel &
|
Year of Affiliation:
2012
|
Corporate Secretary
|
Jerry Weiss
|
Position:
|
Age:
58
|
Executive Vice President - Chief Administrative
|
Year of Affiliation:
2003
|
Officer
|
Freddie Mac 2016 Form 10-K
|
|
362
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Named Executive Officers
|
||||
Donald H. Layton
|
Chief Executive Officer
|
|||
James G. Mackey
|
Executive Vice President - Chief Financial Officer
|
|||
Anil D. Hinduja
|
Executive Vice President - Chief Enterprise Risk Officer
|
|||
David B. Lowman
|
Executive Vice President - Single-Family Business
|
|||
William H. McDavid
|
Executive Vice President - General Counsel & Corporate Secretary
|
Freddie Mac 2016 Form 10-K
|
|
363
|
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 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
|
|
ý
|
No tax “gross-ups”
|
||
ü
|
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 eligibility)
|
|
ý
|
No hedging or pledging of company securities permitted
|
||
|
|
|
|
|||
ü
|
Evaluation of company performance against multiple measures, including non-financial measures
|
|
|
|
||
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
364
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Freddie Mac 2016 Form 10-K
|
|
365
|
Executive Compensation
|
Compensation Discussion and Analysis
|
|
|
2016 Target TDC
|
||||||||||
Named Executive Officer
(1)
|
|
Base
Salary
|
|
Fixed
Deferred
Salary
|
|
At-Risk
Deferred
Salary
|
|
Target TDC
|
||||
James G. Mackey
|
|
500,000
|
|
|
1,600,000
|
|
|
900,000
|
|
|
3,000,000
|
|
Anil D. Hinduja
|
|
500,000
|
|
|
1,075,000
|
|
|
675,000
|
|
|
2,250,000
|
|
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
|
|
(1)
|
Mr. Layton did not participate in the EMCP in 2016 and therefore is not included in this table. For a discussion of Mr. Layton’s compensation, see “CEO Compensation” above.
|
|
|
2017 Target TDC
|
||||||||||
Named Executive Officer
(1)
|
|
Base
Salary
|
|
Fixed
Deferred
Salary
|
|
At-Risk
Deferred
Salary
|
|
Target TDC
|
||||
James G. Mackey
|
|
500,000
|
|
|
1,775,000
|
|
|
975,000
|
|
|
3,250,000
|
|
Anil D. Hinduja
|
|
500,000
|
|
|
1,180,000
|
|
|
720,000
|
|
|
2,400,000
|
|
David B. Lowman
|
|
500,000
|
|
|
1,775,000
|
|
|
975,000
|
|
|
3,250,000
|
|
William H. McDavid
|
|
500,000
|
|
|
1,460,000
|
|
|
840,000
|
|
|
2,800,000
|
|
(1)
|
Mr. Layton will not participate in the EMCP in 2017 and therefore is not included in this table. For a discussion of Mr. Layton’s compensation, see “CEO Compensation” above.
|
Freddie Mac 2016 Form 10-K
|
|
366
|
Executive Compensation
|
Compensation Discussion and Analysis
|
•
|
Our contribution to maintaining the national housing finance markets through rolling out a program which provides lenders an alternative for resolving loan-level disputes on repurchase demands for selling and servicing breaches as well as our diligence and collaboration on the Neighborhood Stabilization Initiative;
|
•
|
Our continuing efforts to reduce taxpayer risk by pursuing new and innovative approaches to single-family and multifamily risk transfer transactions and advancing the Risk Management framework; and
|
•
|
Our collaboration with CSS to complete Release 1 of the common securitization platform.
|
•
|
The extent to which the company conducts initiatives in a safe and sound manner consistent with FHFA’s expectations for all activities;
|
•
|
The extent to which the outcomes of the company’s activities support a competitive and resilient secondary mortgage market to support homeowners and renters;
|
•
|
The extent to which the company conducts initiatives with the consideration for diversity and inclusion consistent with FHFA’s expectations for all activities;
|
•
|
Cooperation and collaboration with FHFA, Fannie Mae, CSS, the industry, and other stakeholders; and
|
•
|
The quality, thoroughness, creativity, effectiveness, and timeliness of the company’s work products.
|
Freddie Mac 2016 Form 10-K
|
|
367
|
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 single-family mortgage credit for creditworthy borrowers, consistent with the full extent of applicable credit requirements and risk management practices:
|
All goals were achieved with important progress made with the rollout of the Independent Resolution program which provides lenders an alternative for resolving loan-level disputes on repurchase demands for selling and servicing breaches. Significant progress has also been made with updating the mortgage insurer master policy rescission relief principles which is expected to be completed in 2017.
|
|||||
|
•
|
Continue to assess impediments to credit access and develop recommendations to address barriers, including work to:
|
|||||
|
|
•
|
Continue to evaluate practices, including underwriting criteria, to improve access to single-family credit in a manner consistent with safety and soundness and implement improvements as appropriate.
|
||||
|
|
•
|
Consider options to use automated underwriting systems for loans that are currently manually underwritten.
|
|
|||
|
|
•
|
Evaluate options that would enable greater liquidity for Freddie Mac financing of energy or water efficiency investments in single-family and multifamily properties.
|
|
|||
|
•
|
Complete work to enhance the Representation and Warranty Framework and continue work on related efforts to:
|
|
||||
|
|
•
|
Complete the independent dispute resolution process in support of the Representation and Warranty Framework.
|
|
|||
|
|
•
|
Work with lenders to improve the quality and efficiency of the loan origination process, including providing lenders with feedback soon after delivery.
|
|
|||
|
|
•
|
Continue to assess policies and tools to review collateral valuations in the Representation and Warranty Framework context.
|
|
|||
|
•
|
Update mortgage insurer master policy rescission relief principles to address early rescission relief offerings.
|
|
||||
|
•
|
Assess improvements identified in 2015 to increase the effectiveness of pre-purchase and early delinquency counseling as well as homeownership education and begin implementation of initiatives as appropriate.
|
|
||||
|
•
|
Informed by the analysis conducted in 2015, conclude assessment of leveraging alternate or updated credit scores for underwriting, pricing, and investor disclosures and, as appropriate, plan for implementation.
|
|
||||
|
Develop Post-Crisis Loss Mitigation Activities and Prepare for the Expiration of HAMP and HARP:
|
All goals were achieved.
|
|||||
|
•
|
Complete assessment and, as appropriate, begin development of a high loan-to-value ratio refinance program to ensure a January 2017 implementation.
|
|||||
|
•
|
Develop and implement final strategy to promote HARP prior to expiration.
|
|||||
|
•
|
Finalize post-crisis loss mitigation options for borrowers, including loan modifications, and develop an implementation plan and timeline.
|
|
||||
|
•
|
Enhance the Uniform Borrower Assistance Form.
|
|
||||
|
•
|
Update and enhance Freddie Mac’s servicer scorecard methodology.
|
|
||||
|
Continue to Responsibly Reduce the Number of Severely-Aged Delinquent Loans and Real Estate Owned Properties:
|
All goals were achieved with the company demonstrating diligence and collaboration in the Neighborhood Stabilization initiative program resulting in responsible disposition of Real Estate Owned properties in hardest-hit communities.
|
|||||
|
•
|
Provide a plan for continuing non-performing loan (NPL) sales to FHFA for approval. The plan should address: 1) Freddie Mac’s broad NPL sales strategy; 2) potential expansion to multi-servicer pools; 3) efforts to continue offering small pools and strengthening nonprofit access and purchase opportunities; 4) consideration for improving borrower outcomes and, where appropriate, impacts on neighborhood stabilization; and 5) public reporting of loan performance post sale.
|
|||||
|
•
|
Continue to responsibly reduce the number of severely-aged delinquent loans held by Freddie Mac at the national and local level.
|
|||||
|
•
|
Continue to responsibly reduce the number of real estate owned properties held by Freddie Mac, including through the Neighborhood Stabilization Initiative.
|
Freddie Mac 2016 Form 10-K
|
|
368
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Freddie Mac 2016 Form 10-K
|
|
369
|
Executive Compensation
|
Compensation Discussion and Analysis
|
|
Common Securitization Platform and Single Security
|
All goals were achieved, except for the publication of timeline for the Single Security implementation. Although the publication of the timeline was not met, significant work was done and many objectives were achieved.
|
|||||
|
The Common Securitization Platform (CSP) and Single Security are significant, multiyear initiatives, and FHFA expects these inter-related projects to remain ongoing conservatorship priorities. FHFA expects the Enterprises and Common Securitization Solutions, LLC (CSS) to implement these initiatives on the following timeline:
i. Release 1: In 2016, implement the CSP for Freddie Mac’s existing single-class securities; and
ii. Release 2: In 2018, implement the Single Security on the CSP for both Fannie Mae and Freddie Mac.
|
||||||
|
•
|
Continue working with FHFA, Fannie Mae, and CSS to meet the Release 1 and Release 2 timelines, which includes work to: 1) build and test the CSP; 2) implement the changes necessary to integrate the Enterprises’ related systems and operations with the CSP; and 3) implement the Single Security on the CSP for both Enterprises.
|
|||||
|
•
|
Incorporate the following design principles in developing the CSP:
|
|||||
|
|
•
|
Focus on the functions necessary for current Enterprise single-family securitization activities.
|
||||
|
|
•
|
Include the development of operational and system capabilities necessary for CSP to facilitate the issuance and administration of a Single Security for the Enterprises.
|
||||
|
|
•
|
Allow for the integration of additional market participants in the future.
|
||||
|
•
|
In 2016, publish an aligned timeline for implementing the Single Security on the CSP for both Enterprises in 2018. The timeline must provide stakeholders with at least 12 months notice prior to implementing the Single Security.
|
|||||
|
•
|
Work with FHFA to develop and implement a process at each Enterprise to:
|
|||||
|
|
•
|
Assess new or revised Enterprise programs, policies, and practices for their effects on the cash flows of TBA mortgage-backed securities (e.g., prepayments and loan buy-outs).
|
||||
|
|
•
|
Provide on-going monitoring of purchases, security issuances, and prepayments.
|
||||
|
|
•
|
Provide all relevant information on a timely basis to support FHFA’s review process.
|
||||
|
•
|
Continue to work with CSS to obtain and utilize input from the Single Security/CSP Industry Advisory Group.
|
|||||
|
Provide active support for mortgage data standardization initiatives.
|
All goals were achieved.
|
|||||
|
•
|
Continue the development and implementation of the Uniform Closing Disclosure Dataset.
|
|
||||
|
•
|
Continue the development and implementation of the Uniform Loan Application Dataset.
|
|||||
|
•
|
Assess and, as appropriate, implement strategies to improve the lending industry’s ability to originate and deliver e-mortgages to the Enterprises.
|
Freddie Mac 2016 Form 10-K
|
|
370
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Corporate Scorecard Goal
|
Assessment of Performance
|
||||
Our Customers
|
The company achieved or exceeded almost all elements of this goal. Significant improvements were made in the quality of customer service with a strong increase in customer satisfaction survey scores for the multifamily business. In addition, the single-family customer satisfaction survey results remained in line with top performing financial institutions.
|
||||
|
Compete for business by being a customer-centric organization
|
||||
|
|
|
|||
People and Culture
|
Most elements of this goal were achieved or exceeded. Focused efforts to build the company's desired culture have yielded positive results, including improved scores on the company's People Survey. The company also increased the retention of high-performing employees and continued to improve leadership diversity. Although the company improved its practice of filling management roles with internal candidates, it did not do so to the full extent desired.
|
||||
|
Hire and retain talented people in a winning culture
|
||||
|
|
||||
Operating Performance
|
All elements of this goal were achieved or exceeded. Single-family core new book earnings and multifamily comprehensive income were above plan, and the company had lower core G&A expenses. Multifamily new business volume was also above plan, and the company achieved its single-family GSE market share target.
|
||||
|
Operate as well as the best-run financial institutions
|
||||
|
|
|
|||
Risk and Capital Management
|
All elements of this goal were achieved or exceeded. The company continued to mitigate the its risk through the transfer of credit risk on single-family new business, developed additional types of multifamily risk transfer transactions, and pro-actively and efficiently reduced legacy assets.
|
||||
|
Manage risk and capital as well as the largest financial institutions
|
||||
|
|
|
|||
Community Mission
|
Based on preliminary information, the company believes it met three of the single-family affordable housing goals, but believes that it fell short of meeting the FHFA benchmark level for the other two single-family goals. The company believes it achieved all three multifamily affordable housing goals and exceeded the target for new multifamily affordable lending. The company continued to close the gap on its single-family affordable housing goals, which were missed by the smallest margin in the past three years. The single-family business continued to broaden access to credit with outreach and training and with the Home Possible Advantage and Housing Finance Agency Advantage mortgage products. The multifamily business continued its focus on workforce and affordable housing by rolling out the company's Green Advantage suite of offerings and investing in the Targeted Affordable business and the moderate rehabilitation lending program.
|
||||
|
Responsibly increase access to housing finance
|
||||
|
Freddie Mac 2016 Form 10-K
|
|
371
|
Executive Compensation
|
Compensation Discussion and Analysis
|
James G. Mackey
|
Executive Vice President
—
Chief Financial Officer
|
|
Performance Highlights:
|
||
●
|
Near-complete development and implementation of hedge accounting with full safety and soundness.
|
|
●
|
Improved budgeting process, with more timely budget development, greater transparency, and improved internal cost allocation capabilities.
|
|
●
|
Further financial planning and analysis improvement, including training, tools, and productivity metrics.
|
|
●
|
Continued operation efficiency improvements, which included streamlining records management, SEC reporting and disclosures, redefined segment earnings and press release design, and Dodd-Frank Stress Testing (“DFAST”) process submissions.
|
|
●
|
Continued strengthening of legacy controls, including the successful remediation of the Master Trust Agreement cash process.
|
|
●
|
Strong leadership in the development of management in the Finance Division, including ongoing job rotation programs 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.
|
Anil D. Hinduja
|
Executive Vice President
—
Chief Enterprise Risk Officer
|
|
Performance Highlights:
|
||
●
|
Significantly upgraded the company’s Enterprise Risk Framework, Policies, and Standards, addressing accountabilities, risk types, and governance.
|
|
●
|
Successfully aided development of the FHFA Conservator Capital Framework and prepared for 2017 implementation.
|
|
●
|
Defined the strategy and roadmap for a major strengthening of operational risk management in the company, including personal leadership across the entire enterprise.
|
|
●
|
Developed risk appetite methodology for Credit, Market and Liquidity Risks.
|
|
●
|
Increased the capabilities of the Enterprise Risk Management Division by hiring experienced officers in several key areas.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. Hinduja 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.
|
David B. Lowman
|
Executive Vice President
—
Single-Family Business
|
|
Performance Highlights:
|
||
●
|
Achieved higher Single-Family earnings (excluding the legacy portfolio) in 2016 over the prior year.
|
|
●
|
Led the successful launch of the Loan Advisor Suite.
|
|
●
|
Expanded credit risk transfer offerings, including STACR Collateral, ACIS Stand Alone and Deep MI.
|
|
●
|
Improved the performance of meeting all of the company’s single-family affordable housing goals.
|
|
●
|
Continued ongoing improvement in customer service; 2016 results were consistent with customer satisfaction at the best financial institutions.
|
|
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 & Corporate Secretary
|
|
Performance Highlights:
|
||
●
|
Supervised the successful resolution of a variety of lawsuits resulting in favorable settlements and helped effectively navigate a number of new regulatory initiatives.
|
|
●
|
Provided sound legal advice to the Board and senior management on a wide variety of significant issues.
|
|
●
|
Successfully supported the increased volume and complexity of Single-Family transactions and securitizations.
|
|
●
|
Successfully supported the substantially increased volume of Multifamily transactions.
|
|
●
|
Continued to maintain a high level of internal client satisfaction.
|
|
At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision:
|
||
The Compensation Committee determined that Mr. McDavid should receive 95% 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 2016 Form 10-K
|
|
372
|
Executive Compensation
|
Compensation Discussion and Analysis
|
|
2016 Actual Deferred Salary
|
|
||||||||||||||||
|
|
|
At-Risk
|
|
Total Actual Deferred
Salary
|
|
% of Target
|
|
||||||||||
Named Executive Officer
(1)
|
Fixed
|
|
Conservatorship Scorecard
|
|
% of Target
|
|
Corporate Scorecard/ Individual
|
|
% of Target
|
|
|
|||||||
Mr. Mackey
|
1,600,000
|
|
|
441,000
|
|
|
98%
|
|
450,000
|
|
|
100%
|
|
2,491,000
|
|
|
99.6%
|
|
Mr. Hinduja
|
1,075,000
|
|
|
330,750
|
|
|
98%
|
|
337,500
|
|
|
100%
|
|
1,743,250
|
|
|
99.6%
|
|
Mr. Lowman
|
1,600,000
|
|
|
441,000
|
|
|
98%
|
|
450,000
|
|
|
100%
|
|
2,491,000
|
|
|
99.6%
|
|
Mr. McDavid
|
1,320,000
|
|
|
382,200
|
|
|
98%
|
|
370,500
|
|
|
95%
|
|
2,072,700
|
|
|
98.7%
|
|
(1)
|
Mr. Layton was not eligible for deferred salary in 2016 and therefore is not included in this table.
|
Freddie Mac 2016 Form 10-K
|
|
373
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Freddie Mac 2016 Form 10-K
|
|
374
|
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.
|
Freddie Mac 2016 Form 10-K
|
|
375
|
Executive Compensation
|
Compensation Discussion and Analysis
|
◦
|
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.
|
•
|
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 2016 Form 10-K
|
|
376
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Freddie Mac 2016 Form 10-K
|
|
377
|
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 SVP level and above and for other officers as FHFA may deem necessary to successfully carry out its role as Conservator; or (ii) establish or modify performance management processes for such officers.
|
•
|
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.
|
Freddie Mac 2016 Form 10-K
|
|
378
|
Executive Compensation
|
Compensation Discussion and Analysis
|
Nicolas P. Retsinas, Chair
|
Raphael W. Bostic
|
Carolyn H. Byrd
|
Steven W. Kohlhagen
|
Saiyid T. Naqvi
|
Eugene B. Shanks, Jr.
|
Freddie Mac 2016 Form 10-K
|
|
379
|
Executive Compensation
|
|
Compensation and Risk
|
•
|
The types of compensation offered (including fixed, variable, and deferred);
|
•
|
Eligibility for participation in compensation programs;
|
•
|
Compensation program design and governance;
|
•
|
The process for establishing performance objectives; and
|
•
|
Processes and program approvals for our compensation programs.
|
Freddie Mac 2016 Form 10-K
|
|
380
|
Executive Compensation
|
|
2016 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
|
2016
|
|
$600,000
|
|
|
$—
|
|
|
$—
|
|
|
$—
|
|
|
$101,609
|
|
|
$701,609
|
|
Chief Executive Officer
|
2015
(6)
|
660,345
|
|
818,886
|
|
—
|
|
472,748
|
|
56,958
|
|
2,008,937
|
|
||||||
2014
|
600,000
|
|
—
|
|
—
|
|
|
|
60,586
|
|
660,586
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
James G. Mackey
|
2016
|
500,000
|
|
1,600,000
|
|
—
|
|
893,896
|
|
89,874
|
|
3,083,770
|
|
||||||
EVP — Chief Financial Officer
|
2015
|
500,000
|
|
1,600,000
|
|
—
|
|
887,608
|
|
86,674
|
|
3,074,282
|
|
||||||
2014
|
500,000
|
|
1,600,000
|
|
450,000
|
|
900,585
|
|
21,099
|
|
3,471,684
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
Anil D. Hinduja
|
2016
|
500,000
|
|
1,075,000
|
|
662,500
|
|
670,422
|
|
39,318
|
|
2,947,240
|
|
||||||
EVP — Chief Enterprise Risk Officer
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
David B. Lowman
|
2016
|
500,000
|
|
1,600,000
|
|
—
|
|
893,896
|
|
89,874
|
|
3,083,770
|
|
||||||
EVP — Single-Family Business
|
2015
|
500,000
|
|
1,600,000
|
|
—
|
|
887,608
|
|
86,674
|
|
3,074,282
|
|
||||||
2014
|
500,000
|
|
1,600,000
|
|
—
|
|
900,585
|
|
65,045
|
|
3,065,630
|
|
|||||||
|
|
|
|
|
|
|
|
||||||||||||
William H. McDavid
|
2016
|
500,000
|
|
1,320,000
|
|
—
|
|
755,146
|
|
88,964
|
|
2,664,110
|
|
||||||
EVP — General Counsel & Corporate Secretary
|
2015
|
500,000
|
|
1,320,000
|
|
—
|
|
769,260
|
|
86,324
|
|
2,675,584
|
|
||||||
2014
|
500,000
|
|
1,320,000
|
|
—
|
|
780,507
|
|
110,168
|
|
2,710,675
|
|
(1)
|
Amounts shown reflect Base Salary earned during the year.
|
(2)
|
Amounts shown reflect Fixed Deferred Salary earned during the year. The interest rate for Fixed Deferred Salary earned during 2016, 2015, and 2014 was 0.325%, 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. Fixed Deferred Salary earned during each quarter is paid in cash on the last pay date of the corresponding quarter in the following year, along with accrued interest. 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 2016, 2015, and 2014 is included in All Other Compensation.
|
(3)
|
Amounts shown reflect cash sign-on payments made to Messrs. Mackey and Hinduja in connection with their hiring. See “Written Agreements Relating to NEO Employment” for additional information.
|
(4)
|
Amounts shown reflect At-Risk Deferred Salary earned during each year as well as interest on that At-Risk Deferred Salary. The interest rate for At-Risk Deferred Salary earned during 2016, 2015, and 2014 was 0.325%, 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 in cash on the last pay date of the corresponding quarter in the following year. See “Determination of 2016 At-Risk Deferred Salary.”
|
(5)
|
Amounts for 2016 reflect (i) employer 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 (as described in footnote 2) on Fixed Deferred Salary earned during the year; and (vi) perquisites. These amounts for 2016 are as follows:
|
Freddie Mac 2016 Form 10-K
|
|
381
|
Executive Compensation
|
|
2016 Compensation Information for NEOs
|
|
Thrift/401(k)
Plan
Contributions
|
|
SERP Benefit
Accruals
|
|
Interest on Fixed Deferred Salary
|
|
Perquisites
|
||||||||
Mr. Layton
|
|
$22,525
|
|
|
|
$79,084
|
|
|
|
$—
|
|
|
|
$—
|
|
Mr. Mackey
|
22,525
|
|
|
62,149
|
|
|
5,200
|
|
|
—
|
|
||||
Mr. Hinduja
|
6,625
|
|
|
29,199
|
|
|
3,494
|
|
|
—
|
|
||||
Mr. Lowman
|
22,525
|
|
|
62,149
|
|
|
5,200
|
|
|
—
|
|
||||
Mr. McDavid
|
22,525
|
|
|
62,149
|
|
|
4,290
|
|
|
—
|
|
(6)
|
On June 29, 2015, FHFA approved Mr. Layton’s participation in the EMCP, effective July 1, 2015. On December 1, 2015, FHFA subsequently directed Freddie Mac to suspend, pursuant to the Equity in Government Compensation Act of 2015, his participation as of November 24, 2015. The components of Mr. Layton’s Target TDC under the EMCP are described in the company’s Annual Report on Form 10-K for the year ended December 31, 2015 in “Executive Compensation — Compensation Discussion and Analysis — Determination of 2015 Target TDC for NEOs — 2015 Target TDC.”
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(2)
|
||||
Name
(1)
|
|
At-Risk Deferred Salary Award
|
|
Threshold
|
|
Target/Maximum
|
||
Mr. Mackey
|
|
Conservatorship Scorecard
|
|
—
|
|
|
450,000
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
450,000
|
|
|
|
Total
|
|
—
|
|
|
900,000
|
|
Mr. Hinduja
|
|
Conservatorship Scorecard
|
|
—
|
|
|
337,500
|
|
|
|
Corporate Scorecard/Individual
|
|
—
|
|
|
337,500
|
|
|
|
Total
|
|
—
|
|
|
675,000
|
|
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)
|
Mr. Layton was not eligible to receive Deferred Salary in 2016 and therefore is not included in this table.
|
Freddie Mac 2016 Form 10-K
|
|
382
|
Executive Compensation
|
|
2016 Compensation Information for NEOs
|
(2)
|
The amounts reported reflect At-Risk Deferred Salary granted in 2016 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 2016 are reported in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”
|
Freddie Mac 2016 Form 10-K
|
|
383
|
Executive Compensation
|
|
2016 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. ($)
|
|
Balance at
Last FYE ($)
(4)
|
||||||||||
Mr. Layton
|
|
$—
|
|
|
|
$79,084
|
|
|
|
$13,178
|
|
|
|
$—
|
|
|
|
$182,863
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mr. Mackey
|
—
|
|
|
62,149
|
|
|
579
|
|
|
—
|
|
|
138,489
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Mr. Hinduja
|
—
|
|
|
29,199
|
|
|
960
|
|
|
—
|
|
|
30,159
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Mr. Lowman
|
—
|
|
|
62,149
|
|
|
6,979
|
|
|
—
|
|
|
173,266
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Mr. McDavid
|
—
|
|
|
62,149
|
|
|
1,102
|
|
|
—
|
|
|
235,846
|
|
|||||
|
|
|
|
|
|
|
|
|
|
(1)
|
The SERP does not allow for employee contributions.
|
(2)
|
Amounts reported reflect accruals under the SERP Benefit during 2016, including accruals for the plan year 2016 2.5% contribution which will be allocated to NEO accounts in 2017. 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 2016 2.5% contribution which will be allocated to NEO accounts in 2017. All NEOs are fully vested in their SERP Benefit account balances.
|
Freddie Mac 2016 Form 10-K
|
|
384
|
Executive Compensation
|
|
2016 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 2016 Form 10-K
|
|
385
|
Executive Compensation
|
|
2016 Compensation Information for NEOs
|
|
Death
|
|
Disability
|
|
Retirement
(1)
|
|
All Other Not
For Cause
Terminations
(2)
|
||||||||
James G. Mackey
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
|
$1,600,000
|
|
|
|
$1,600,000
|
|
|
$
|
|
|
|
$1,184,000
|
|
|
At Risk-Conservatorship Scorecard
(3)
|
450,000
|
|
|
450,000
|
|
|
-
|
|
|
441,000
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
450,000
|
|
|
450,000
|
|
|
-
|
|
|
450,000
|
|
||||
Interest on Deferred Salary
(5)
|
5,070
|
|
|
8,125
|
|
|
-
|
|
|
6,744
|
|
||||
Total
|
|
$2,505,070
|
|
|
|
$2,508,125
|
|
|
|
$—
|
|
|
|
$2,081,744
|
|
|
|
|
|
|
|
|
|
||||||||
Anil D. Hinduja
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
|
$1,075,000
|
|
|
|
$1,075,000
|
|
|
|
$—
|
|
|
|
$795,500
|
|
At Risk-Conservatorship Scorecard
(3)
|
337,500
|
|
|
337,500
|
|
|
—
|
|
|
330,750
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
337,500
|
|
|
337,500
|
|
|
—
|
|
|
337,500
|
|
||||
Interest on Deferred Salary
(5)
|
3,549
|
|
|
5,688
|
|
|
—
|
|
|
4,757
|
|
||||
Total
|
|
$1,753,549
|
|
|
|
$1,755,688
|
|
|
|
$—
|
|
|
|
$1,468,507
|
|
|
|
|
|
|
|
|
|
||||||||
David B. Lowman
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
|
$1,600,000
|
|
|
|
$1,600,000
|
|
|
$
|
|
|
|
$1,184,000
|
|
|
At Risk-Conservatorship Scorecard
(3)
|
450,000
|
|
|
450,000
|
|
|
-
|
|
|
441,000
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
450,000
|
|
|
450,000
|
|
|
-
|
|
|
450,000
|
|
||||
Interest on Deferred Salary
(5)
|
5,070
|
|
|
8,125
|
|
|
-
|
|
|
6,744
|
|
||||
Total
|
|
$2,505,070
|
|
|
|
$2,508,125
|
|
|
|
$—
|
|
|
|
$2,081,744
|
|
|
|
|
|
|
|
|
|
||||||||
William H. McDavid
|
|
|
|
|
|
|
|
||||||||
Deferred Salary:
|
|
|
|
|
|
|
|
||||||||
Fixed
|
|
$1,320,000
|
|
|
|
$1,320,000
|
|
|
|
$1,320,000
|
|
|
|
$—
|
|
At Risk-Conservatorship Scorecard
(3)
|
390,000
|
|
|
390,000
|
|
|
382,200
|
|
|
—
|
|
||||
At Risk-Corporate Scorecard/Individual
(4)
|
390,000
|
|
|
390,000
|
|
|
370,500
|
|
|
—
|
|
||||
Interest on Deferred Salary
(5)
|
4,259
|
|
|
6,825
|
|
|
6,736
|
|
|
—
|
|
||||
Total
|
|
$2,104,259
|
|
|
|
$2,106,825
|
|
|
|
$2,079,436
|
|
|
|
$—
|
|
(1)
|
Mr. McDavid is the only retirement-eligible NEO under the EMCP.
|
(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 shown for Mr. McDavid because he is retirement eligible. In accordance with early termination provisions in the EMCP, the amounts disclosed for Deferred Salary: Fixed for all other NEOs have been reduced by 26% to reflect a December 31, 2016 termination event.
|
(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 2016 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, 2016 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 2016 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 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, 2016.
|
Freddie Mac 2016 Form 10-K
|
|
386
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
(1)
|
Includes shares of stock beneficially owned as of February 14, 2017.
|
Freddie Mac 2016 Form 10-K
|
|
387
|
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 2016 Form 10-K
|
|
388
|
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
|
50,670
|
|
N/A
|
|
35,871,004
(1)
|
Equity compensation plans not approved by stockholders
|
None
|
|
N/A
|
|
None
|
(1)
|
Includes 28,352,108 shares, 5,845,739 shares, and 1,673,157 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 2016 Form 10-K
|
|
389
|
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 2016 Form 10-K
|
|
390
|
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 2016 Form 10-K
|
|
391
|
Certain Relationships and Related Transactions
|
|
Freddie Mac 2016 Form 10-K
|
|
392
|
Principal Accounting Fees and Services
|
|
|
2016
|
|
2015
|
||||
|
(In thousands)
|
||||||
Audit Fees
(2)
|
|
$23,175
|
|
|
|
$23,321
|
|
Audit-Related Fees
(3)
|
5,122
|
|
|
3,888
|
|
||
Tax Fees
(4)
|
55
|
|
|
64
|
|
||
All Other Fees
(5)
|
218
|
|
|
264
|
|
||
Total
|
|
$28,570
|
|
|
|
$27,537
|
|
(1)
|
These fees represent amounts billed (including reimbursable expenses within the designated year).
|
(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)
|
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; (iii) transaction validation and attestation related to certain of Freddie Mac’s risk transfer and structured transactions; (iv) fees for pre-implementation assistance for hedge accounting; and (v) fees related to accounting policy consultations.
|
(4)
|
The tax fees billed relate 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 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 advice and recommendations related to technology implementation in the governance process.
|
•
|
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 2016 Form 10-K
|
|
393
|
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 2016 Form 10-K
|
|
394
|
Exhibits and Financial Statement Schedules
|
|
Freddie Mac 2016 Form 10-K
|
|
395
|
Signatures
|
|
Federal Home Loan Mortgage Corporation
|
|
|
|
By:
|
/s/ Donald H. Layton
|
|
Donald H. Layton
|
|
Chief Executive Officer
|
Date: February 16, 2017
|
Freddie Mac 2016 Form 10-K
|
|
396
|
Signatures
|
|
Signature
|
|
Capacity
|
|
Date
|
||
|
|
|
|
|
|
|
/s/ Christopher S. Lynch*
|
|
Non-Executive Chairman of the Board
|
|
February 16, 2017
|
||
Christopher S. Lynch
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Donald H. Layton
|
|
Chief Executive Officer and Director
|
|
February 16, 2017
|
||
Donald H. Layton
|
|
(Principal Executive Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ James G. Mackey
|
|
Executive Vice President — Chief Financial Officer
|
|
February 16, 2017
|
||
James G. Mackey
|
|
(Principal Financial Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ Robert D. Mailloux
|
|
Senior Vice President — Corporate Controller and
|
|
February 16, 2017
|
||
Robert D. Mailloux
|
|
Principal Accounting Officer (Principal Accounting Officer)
|
|
|
||
|
|
|
|
|
|
|
/s/ Raphael W. Bostic*
|
|
Director
|
|
February 16, 2017
|
||
Raphael W. Bostic
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Carolyn H. Byrd*
|
|
Director
|
|
February 16, 2017
|
||
Carolyn H. Byrd
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Lance F. Drummond*
|
|
Director
|
|
February 16, 2017
|
||
Lance F. Drummond
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Thomas M. Goldstein*
|
|
Director
|
|
February 16, 2017
|
||
Thomas M. Goldstein
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Richard C. Hartnack*
|
|
Director
|
|
February 16, 2017
|
||
Richard C. Hartnack
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Steven W. Kohlhagen*
|
|
Director
|
|
February 16, 2017
|
||
Steven W. Kohlhagen
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Sara Mathew*
|
|
Director
|
|
February 16, 2017
|
||
Sara Mathew
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Saiyid T. Naqvi*
|
|
Director
|
|
February 16, 2017
|
||
Saiyid T. Naqvi
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Nicolas P. Retsinas*
|
|
Director
|
|
February 16, 2017
|
||
Nicolas P. Retsinas
|
|
|
|
|
||
|
|
|
|
|
|
|
/s/ Eugene B. Shanks, Jr.*
|
|
Director
|
|
February 16, 2017
|
||
Eugene B. Shanks, Jr.
|
|
|
|
|
||
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
397
|
Signatures
|
|
/s/ Anthony A. Williams*
|
|
Director
|
|
February 16, 2017
|
||
Anthony A. Williams
|
|
|
|
|
||
|
|
|
|
|
|
|
*By:
|
|
/s/ Alicia S. Myara
|
|
|
||
|
|
Alicia S. Myara
|
|
|
|
|
|
|
Attorney-in-Fact
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
398
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
399
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
400
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
401
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
402
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
403
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
404
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
405
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
406
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
407
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
408
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
409
|
Glossary
|
|
Freddie Mac 2016 Form 10-K
|
|
410
|
Index
|
|
Freddie Mac 2016 Form 10-K
|
|
411
|
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 7, 2016 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K as filed on July 8, 2016)
|
|
|
|
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 2016 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 2016 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 18, 2016 (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, as filed on May 3, 2016)
|
|
|
|
10.1
|
|
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)†
|
|
|
|
10.2
|
|
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)†
|
|
|
|
10.3
|
|
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)†
|
|
|
|
10.4
|
|
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)†
|
|
|
|
10.5
|
|
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)†
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
E-3
|
Exhibit Index
|
|
Exhibit No.
|
|
Description*
|
10.6
|
|
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)†
|
|
|
|
10.7
|
|
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)†
|
|
|
|
10.8
|
|
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)†
|
|
|
|
10.9
|
|
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)†
|
|
|
|
10.10
|
|
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) †
|
|
|
|
10.11
|
|
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) †
|
|
|
|
10.12
|
|
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) †
|
|
|
|
10.13
|
|
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)†
|
|
|
|
10.14
|
|
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)†
|
|
|
|
10.15
|
|
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)†
|
|
|
|
10.16
|
|
Third Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015, as filed on February 18, 2016)†
|
|
|
|
10.17
|
|
Fourth Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan†
|
|
|
|
10.18
|
|
Executive Management Compensation Program Recapture and Forfeiture Agreement †
|
|
|
|
10.19
|
|
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)†
|
|
|
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
E-4
|
Exhibit Index
|
|
Exhibit No.
|
|
Description*
|
10.20
|
|
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)†
|
|
|
|
10.21
|
|
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)†
|
|
|
|
10.22
|
|
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)†
|
|
|
|
10.23
|
|
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)†
|
|
|
|
10.24
|
|
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)†
|
|
|
|
10.25
|
|
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)†
|
|
|
|
10.26
|
|
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)†
|
|
|
|
10.27
|
|
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)†
|
|
|
|
10.28
|
|
Memorandum Agreement, dated April 6, 2015, between Freddie Mac and Anil Hinduja†
|
|
|
|
10.29
|
|
Restrictive Covenant and Confidentiality Agreement, dated April 7, 2015, between Freddie Mac and Anil Hinduja†
|
|
|
|
10.30
|
|
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)†
|
|
|
|
10.31
|
|
PC Master Trust Agreement dated February 2, 2017
|
|
|
|
10.32
|
|
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)†
|
|
|
|
10.33
|
|
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)†
|
|
|
|
10.34
|
|
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)
|
|
|
|
Freddie Mac 2016 Form 10-K
|
|
E-5
|
Exhibit Index
|
|
Exhibit No.
|
|
Description*
|
10.35
|
|
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)
|
|
|
|
10.36
|
|
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)
|
|
|
|
10.37
|
|
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)
|
|
|
|
10.38
|
|
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)
|
|
|
|
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
|
|
|
|
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 2016 Form 10-K
|
|
E-6
|
3.1.
|
Nonassignability
.
The right of any Participant or Beneficiary to any benefit or to any payment hereunder, to the fullest extent permitted by law, shall not be subject to alienation, anticipation, assignment, garnishment, attachment, execution or levy of any kind. Any such attempted assignment or transfer shall be disregarded, and shall not operate in any way to assign or confer upon any third party any rights under the Plan or
Employee Retirement Income Security Act of 1974, as amended.
|
Notice
Requirements
|
A determination as to the occurrence of a Forfeiture Event and the dollar amount of compensation, if any, to be recaptured and/or forfeited pursuant to this Agreement shall be made only after first providing to the Covered Officer:
(i) reasonable advance notice setting forth Freddie Mac’s intention to make such a determination;
(ii) where remedial action is appropriate and feasible, a reasonable opportunity for the Covered Officer to take such action;
(iii) an opportunity for the Covered Officer, together with his or her counsel, to be heard before the Board; and
(iv) a copy of a resolution duly adopted by a majority of the entire Board at a meeting of the Board called and held for such purpose, making the requisite determination.
|
Reservation of
Rights
|
Nothing in this Recapture Agreement is intended or shall be construed to abrogate the “at will” employment relationship between the Covered Officer and Freddie Mac, and both the Covered Officer and Freddie Mac retain the right to terminate the employment relationship at any time for any lawful reason with or without notice.
Any dispute between the Covered Officer and Freddie Mac concerning the occurrence of a Forfeiture Event or the dollar amount of compensation subject to recapture and/or forfeiture shall be determined exclusively in accordance with the substantive law of the state in which the Covered Officer’s primary place of employment with Freddie Mac is located, excluding the provisions of the laws of such state concerning choice
-
of
-
law that would result in the application of the laws of any state other than such state being applied. The Covered Officer agrees that the federal courts with jurisdiction for the state in which his or her primary place of employment is located shall be the venue for and have exclusive jurisdiction over any such dispute
.
The terms and conditions of this Recapture Agreement and any successors thereto are not intended to negate and do not supersede the provisions of any applicable law
,
regulation or regulatory guidance, including the authority of the Federal Housing Finance Agency (or any federal agency acting as Freddie Mac’s regulator or Conservator), pertaining to the payment or non-payment of any form of compensation paid or to be paid to the Covered Officer. The Federal Housing Finance Agency retains its authority to modify or terminate any of Freddie Mac’s compensation plans or programs (including the EMCP and any successors thereto), and with respect to any compensation paid or to be paid to you during or after your employment pursuant to the EMCP and any successors thereto, to withhold
,
escrow or prohibit such compensation, without giving rise to liability on the part of Freddie Mac.
|
Your Review of
This Agreement
|
During your review of and prior to your agreement to this Recapture Agreement, Freddie Mac expects that you have had the opportunity to consult and receive assistance from appropriate advisors, including legal, tax, and financial
advisors.
|
Date
|
To
|
April 6, 2015
|
Anil Hinduja
|
|
|
From
|
|
Donald H. Layton
|
|
|
|
Subject
|
|
Your Compensation as Executive Vice President and Chief Enterprise Risk Officer
|
I.
|
Compensation
|
•
|
At-Risk Deferred Salary - This portion of your Deferred Salary is equal to thirty percent (30%) of your Target TDC, or $675,000, 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 $1,075,000.
|
•
|
First Installment:
$350,000 on the same date on which you receive your first
|
•
|
Second Installment:
$400,000 in the first pay period of March 2016
|
•
|
Third Installment:
$300,000 in the first pay period of March 2017
|
•
|
Fourth Installment:
$150,000 in the first pay period of March 2018
|
•
|
90 Days of Garden Leave: $150,000
|
•
|
120 Days of Garden Leave: $262,500
|
•
|
150 Days of Garden Leave: $375,000
|
•
|
180 Days of Garden Leave: $450,000
|
•
|
You voluntarily resign employment; or,
|
•
|
We terminate your employment due to the occurrence of any of the Forfeiture Events described in the Recapture and Forfeiture Agreement.
|
II.
|
Benefits
|
•
|
Healthcare Coverage - We offer a competitive healthcare program that provides medical, dental and vision coverage for you and your eligible dependents with several options from which to choose.
|
•
|
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. 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 contribution. This contribution is in addition to the matching contribution.
|
•
|
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.
|
III.
|
Restrictive Covenant and Confidentiality Agreement
|
IV.
|
FHFA’s Review and Approval Authority
|
V.
|
Reservations of Rights:
|
VI.
|
Return of Signed Documents:
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(Dollars in millions)
|
||||||||||||||||||
Net income before income tax expense and cumulative effect of changes in accounting principles
|
$
|
11,639
|
|
|
$
|
9,274
|
|
|
$
|
11,002
|
|
|
$
|
25,363
|
|
|
$
|
9,445
|
|
Add:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total interest expense
|
50,595
|
|
|
51,916
|
|
|
54,916
|
|
|
55,779
|
|
|
66,502
|
|
|||||
Interest factor in rental expenses
|
3
|
|
|
2
|
|
|
5
|
|
|
4
|
|
|
4
|
|
|||||
Earnings, as adjusted
|
$
|
62,237
|
|
|
$
|
61,192
|
|
|
$
|
65,923
|
|
|
$
|
81,146
|
|
|
$
|
75,951
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total interest expense
|
$
|
50,595
|
|
|
$
|
51,916
|
|
|
$
|
54,916
|
|
|
$
|
55,779
|
|
|
$
|
66,502
|
|
Interest factor in rental expenses
|
3
|
|
|
2
|
|
|
5
|
|
|
4
|
|
|
4
|
|
|||||
Total fixed charges
|
$
|
50,598
|
|
|
$
|
51,918
|
|
|
$
|
54,921
|
|
|
$
|
55,783
|
|
|
$
|
66,506
|
|
Senior preferred stock and preferred stock dividends
(1)
|
7,437
|
|
|
5,510
|
|
|
19,610
|
|
|
47,591
|
|
|
7,229
|
|
|||||
Total fixed charges including preferred stock dividends
|
$
|
58,035
|
|
|
$
|
57,428
|
|
|
$
|
74,531
|
|
|
$
|
103,374
|
|
|
$
|
73,735
|
|
Ratio of earnings to fixed charges
(2)
|
1.23
|
|
|
1.18
|
|
|
1.20
|
|
|
1.45
|
|
|
1.14
|
|
|||||
Ratio of earnings to combined fixed charges and preferred stock dividends
(3)
|
1.07
|
|
|
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.
|
(2)
|
Ratio of earnings to fixed charges is computed by dividing earnings, as adjusted by total fixed charges.
|
(3)
|
Ratio of earnings to combined fixed charges and preferred stock dividends is computed by dividing earnings, as adjusted by total fixed charges including preferred stock dividends. For the ratio to equal 1.00, earnings, as adjusted must increase by $8.6 billion, $22.2 billion for the years ended December 31, 2014, and 2013, respectively.
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2016 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, 2016 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
|