Freddie Mac : Financial Results Supplement, 02/13/20

Fourth Quarter 2019 Financial Results Supplement

February 13, 2020

Financial Highlights

Comprehensive Income
$ Billions					▪ Comprehensive income increased
				$2.4	from the prior quarter driven primarily
				by higher amortization income, gains
		$1.8	$1.8
$1.5	$1.7		on debt extinguishment, and lower
				market-related losses.
4Q18	1Q19	2Q19	3Q19	4Q19

Adjusted Net Interest Income
and Adjusted Guarantee Fee Income			▪ Adjusted net interest income and
$ Billions
		$2.2	$2.4	$2.4	adjusted guarantee fee income were
$1.9	$1.9			substantially unchanged from the
$1.1	$1.0	$1.0			prior quarter.
$0.8	$0.7
4Q18	1Q19	2Q19	3Q19	4Q19
	Adjusted net interest income1	Adjusted guarantee fee income1

Note: Totals may not add due to rounding.

© Freddie Mac

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Total Portfolio Balances

Total guarantee portfolio2

Portfolio balance highlights

$ Billions				+6% YoY	▪	Total guarantee portfolio:
				increase
$2,133	$2,157	$2,184	$2,221	$2,265		• Single-Family - grew $98 billion, or 5% year-over-
$271		year.
$237	$243	$249	$260
		• Multifamily - grew $34 billion, or 14% year-over-
$1,896	$1,914	$1,935	$1,961	$1,994		year.
12/31/2018	3/31/2019	6/30/2019	9/30/2019	12/31/2019	▪	Total investments portfolio:
	• Mortgage-related investments portfolio - decreased
						$5 billion, or 2% year-over-year.

Single-Family credit guarantee portfolio

Multifamily guarantee portfolio3

Total investments portfolio	Total debt outstanding4,5	Purchase Agreement
$ Billions	$ Billions	2019 Debt Cap $300B

				+12% YoY	2.9	2.6	2.6	2.5	2.4
				increase	$256	$273	$280	$282	$283
		$302	$312	$316
$281	$296		10%	12%	10%	9%	9%
$63	$77	$83	$90	$103		37%	34%	32%	39%	36%
$218	$219	$219	$222	$213	FHFA	42%	37%	45%	37%	34%
2019 Limit	11%	17%	13%	15%	21%
					$225B*
12/31/2018	3/31/2019	6/30/2019	9/30/2019	12/31/2019		12/31/2018	3/31/2019	6/30/2019	9/30/2019	12/31/2019

					Discount notes		Callable debt
	Mortgage-related investments portfolio2,4
					Non-callable debt		Other
	Other investments portfolio
					Weighted average maturity in years

Note: Totals may not add due to rounding.

*In February 2019, FHFA directed the company to maintain the mortgage-related investments portfolio at or below $225 billion at all times.

© Freddie Mac

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Conservatorship Matters and Total Equity

Treasury draws and dividend payments	Total Equity / Net Worth
$ Billions	$ Billions

$112.4					$119.7
$71.3					6
				$71.6
	$0.3	$4.1	$0.0	$3.1
2008-2017	2018	2019	Cumulative
					Total

Draws from Treasury

Dividend payments to Treasury

$9.1

$4.5

-$0.3

2017

2018

2019

• Pursuant to the September 2019 Letter Agreement, the company will not have a dividend requirement on the senior preferred stock until its Net Worth Amount exceeds $20.0 billion.

Note: Totals may not add due to rounding.

© Freddie Mac

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Key Economic Indicators

National home prices increased by an average of 3.8%	Quarterly ending interest rates
over the past year

4.55%

2.72%

4.06%

2.41%

3.73% 3.64% 3.65%

1.96%1.89%

1.57%

12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019

			30-year mortgage rate, based on Primary Mortgage
			Market Survey (PMMS)
			10-year LIBOR
		Unemployment rate and job creation
		3.9%	3.8%	3.7%	3.5%	3.5%
National home prices have surpassed the 2006 peak	233,000		193,000	184,000
	174,000	152,000
	196
(2006 Peak)
168
		4Q18	1Q19	2Q19	3Q19	4Q19
	Freddie Mac House Price Index (December 2000 = 100)
2006 2007 2008 2009 2010	2011 2012 2013 2014 2015 2016 2017 2018 2019		Average monthly net new jobs (non-farm)
			National unemployment rate (as of the last month
	United States (Not Seasonally Adjusted)		in each quarter)

© Freddie Mac

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Single-Family Guarantee

Financial Highlights and Key Metrics

Single-Family Guarantee Segment Earnings	New business activity
$ Millions	$ Billions

			$1,250	$1,420	Guarantee fees charged on new acquisitions (bps)7	48
				40	40	44	45
$1,024							$147
	$955						$134
	$740
						$102	$58	$84
					$77
					$70	$37
					$22	$24		$76
						$65	$63
					$55	$46
4Q18	1Q19	2Q19	3Q19	4Q19	4Q18	1Q19	2Q19	3Q19	4Q19

																							Home purchase UPB		Refinance UPB
Credit guarantee portfolio					+5% YoY	Serious delinquency rates
$ Billions
							increase	1.93%			1.91%	1.82%				1.84%
$1,896		$1,914		$1,935	$1,961		$1,994				1.77%
			$293
										$307
								$322
		$346			$335				0.69%			0.67%	0.63%	0.61%	0.63%
							$1,701
						$1,654
		$1,550			$1,579		$1,613
		(82%)			(83%)		(83%)		(84%)		(85%)		0.22%			0.22%	0.23%	0.24%	0.26%
		4Q18			1Q19		2Q19		3Q19		4Q19			4Q18		1Q19	2Q19	3Q19	4Q19
					Core single-family portfolio (loans originated post-2008)											Core single-family portfolio (loans originated post-2008)
					Legacy and relief refinance single-family portfolio													Legacy and relief refinance single-family portfolio
																								Total

Note: Totals may not add due to rounding.

© Freddie Mac

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Single-Family Guarantee

Loan Purchase Credit Characteristics

Weighted average original loan-to-value ratio (OLTV)

Weighted average credit score

77%	77%	77%	77%	75%	747	747	750	752	752
4Q18	1Q19	2Q19	3Q19	4Q19	4Q18	1Q19	2Q19	3Q19	4Q19

New business activity with debt-to-income ratio > 45%	Loan purpose and investment properties as a
	percentage of loan purchases

					6%	6%	5%	4%	4%
18%					11%	15%	18%	27%	37%
				18%	20%	18%
	16%							16%	20%
	14%	13%	13%	71%	65%	64%	57%
		43%
					4Q18	1Q19	2Q19	3Q19	4Q19
					Home purchase		Cash-out refinance
4Q18	1Q19	2Q19	3Q19	4Q19	Other refinance		Investment properties as a
			percentage of loan purchases

© Freddie Mac

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Single-Family Guarantee

Credit Risk Transfer - STACR / ACIS

Total single-family credit guarantee portfolio with transferred credit risk

$ Billions

Outstanding reference pool UPB as a
percentage of total single-family portfolio	44%	45%

		35%
19%	26%
			$1,144	$1,376
		$858	$906
		$838
$385 $329	$598 $457	$648
2015	2016	2017	2018	2019

Reference pool UPB at issuance

Reference pool UPB outstanding

Cumulative single-family transferred credit risk based on outstanding balance at period end

$ Billions

$26.4		$28.1		$28.1		$27.9		$26.9
	$1.6		$1.7		$1.3		$1.4	$8.0	$1.1
$5.3	$5.5	$6.1	$5.8	$6.7	$5.9	$7.3	$6.0	$5.9
12/31/2018	3/31/2019	6/30/2019	9/30/2019	12/31/2019

First loss positions: Retained by Freddie Mac

Mezzanine loss positions: Retained by Freddie Mac

First loss positions: Transferred to third parties

Mezzanine loss positions: Transferred to third parties

© Freddie Mac

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Multifamily

Financial Highlights and Key Metrics

Multifamily comprehensive income (loss)	Multifamily acquisitions of units by area median
$ Millions	income (AMI) (% of eligible units acquired)

			$591		6%	6%	9%	7%	6%
			$502
	$395	$440
					94%	94%	91%	93%	94%
$(199)
4Q18	1Q19	2Q19	3Q19	4Q19	2015	2016	2017	2018	2019

≤120% AMI

>120% AMI

Total portfolio	+45% increase	Multifamily market and Freddie Mac delinquency rates
$ Billions	since 2016

			$280		$309
	$249			$33
		$36
$213			$6
$39
	$7
$42
$7
$13	$203		$237		$271			0.91%
$158
					3Q19
(82%)	(64%)	(85%)	(74%)	(88%)	(82%)	0.12%
(74%)
	0.08%

12/31/2016	12/31/2017	12/31/2018	12/31/2019	4Q15	4Q16	4Q17	4Q18	4Q19
	Guarantee portfolio		Mortgage-related securities			Freddie Mac (60+ day)			FDIC insured institutions (90+ day)
	Unsecuritized loans and other						MF CMBS Market (60+ day)

Note: Totals may not add due to rounding.

© Freddie Mac

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Multifamily

Key Metrics, continued

New business activity

$ Billions

		$73.2	$78.0	$78.4
		$0.5	$0.5
	$56.8
$47.3
		$73.2	$77.5	$77.9
$47.3	$56.8
2015	2016	2017	2018	2019

New loan purchase activity

LIHTC new business activity

• During 4Q 2019, the total multifamily loan purchase activity was $17.5 billion. Approximately 36% of this purchase activity was mission-driven, affordable housing.

Multifamily securitization activity8,9

$ Billions

		$67.5	$72.8	$75.4
		$7.5
		$6.5
		$6.8
	$52.1
$41.2	$2.2
$5.1			$66.3	$67.9
	$49.9	$60.7
$36.1
2015	2016	2017	2018	2019

Primary securitization products

Other securitization products

Note: Totals may not add due to rounding.

© Freddie Mac 10

Capital Markets

Financial Highlights and Key Metrics

Capital Markets comprehensive income	Capital Markets investments portfolio
$ Millions	$ Billions

									+17% YoY
$648									increase
					$247	$254	$258	$269
	$534			$539	$229
	$433		$100
				$62	$76	$81	$87
					$167	$171	$173	$171	$168
			$10		4Q18	1Q19	2Q19	3Q19	4Q19
4Q18	1Q19	2Q19	3Q19	4Q19

Mortgage investments portfolio

			Other investments portfolio
Capital Markets cash window securitization	Capital Markets mortgage investments portfolio
$ Billions	$ Billions

								+1% YoY
				$73				increase
				$171	$173	$171	$168
			$59	$167
			$45	$42	$39	$34	$30
$38		$45		$9	$13	$16	$21	$19
$30			$114	$116	$118	$116	$119
			(68%)	(68%)	(68%)	(68%)	(66%)
				(71%)
				4Q18	1Q19	2Q19	3Q19	4Q19
4Q18	1Q19	2Q19	3Q19	4Q19	Liquid		Securitization pipeline
					Less liquid

Note: Totals may not add due to rounding.

© Freddie Mac 11

Interest-Rate Risk Measures

GAAP Adverse Scenario10(Before-Tax)

$ Billions

($0.2)	($0.2)	($0.1)	$(0.1)
		($0.8)
	($2.1)
($2.7)
		($3.5)
		($4.6)	$(4.3)
93%	89%	97%	98%
82%

12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019

Before hedge accounting

After hedge accounting

% Change

PVS-Level11 and Average Duration Gap12

		$275
$11	$15		$54	$35
4Q18	1Q19	2Q19	3Q19	4Q19

PVS-L (50 bps) ($ Millions)

0		0		2		0		0
4Q18	1Q19	2Q19	3Q19	4Q19

Average duration gap (Months)

In April 2019, the company updated its interest-rate risk measures to include upfront fees (including buy-downs) related to single-family credit guarantee activity as the company changed its strategy to incorporate upfront fees into its asset and liability interest-rate risk management strategy and definition. The company hedged the upfront fees interest-rate risk over several weeks resulting in temporarily higher than normal duration gap and PVS-L levels. These levels returned to historical averages by the end of 2Q19 as the company completed its hedging of upfront fees interest-rate risk. The inclusion of upfront fees increased the company's derivative volume resulting in a larger effect of derivatives on its PVS-L (50 bps).

© Freddie Mac 12

Housing Market Support

Number of families Freddie Mac helped to own or rent a home13

In Thousands

2,421			2,578
2,311
	2,192
		782
937	663	442
745	828	884	987
739	820	866	809
2016	2017	2018	2019

Multifamily rental units

Single-Family purchase borrowers

Single-Family refinance borrowers

Number of single-family loan workouts14

In Thousands

		90
		3
69	75	16
5	11
9	15
5
10		47
12
			2
			7
		60	9
	45
43		29
2016	2017	2018	2019

Loan modifications15

Home

Repayment plans15Retention

Actions

Forbearance agreements15

	Short sales and deed-in-lieu	Foreclosure
	of foreclosure transactions15	Alternatives

Note: Totals may not add due to rounding.

© Freddie Mac 13

Endnotes

• For additional information regarding Freddie Mac's non-GAAP financial measures and reconciliations to the comparable amounts under GAAP, see the company's Press Release for the quarter ended December 31, 2019.

• Based on unpaid principal balances (UPB) of loans and securities. Excludes mortgage-related securities traded, but not yet settled.
  3 Primarily Freddie Mac's K Certificate and SB (Small Balance) Certificate transactions.

• The company's Purchase Agreement with Treasury limits the amount of mortgage assets the company can own and indebtedness it can incur. See the company's Annual Report on Form 10-K for the year ended December 31, 2019 for more information.

• Represents the company's aggregate indebtedness for purposes of the Purchase Agreement debt cap and primarily includes the par value of other short-term and long-term debt used to fund its business activities.

• Excludes the initial $1 billion liquidation preference of senior preferred stock issued to Treasury in September 2008 as consideration for Treasury's funding commitment, the $3.0 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 2017 Letter Agreement, and the $1.8 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the September 2019 Letter Agreement. The company received no cash proceeds in connection with the initial $1 billion liquidation preference of senior preferred stock or the $3.0 billion, $1.8 billion, and $1.8 billion increases on December 31, 2017, September 30, 2019, and December 31, 2019, respectively.

• Represents the estimated average rate of guarantee fees for new acquisitions during the period assuming amortization of upfront fees using the estimated life of the related loans rather than the original contractual maturity date of the related loans. Includes the effect of fee adjustments that are based on the price performance of Freddie Mac's PCs relative to comparable Fannie Mae securities. Net of legislated 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011.

• Multifamily's primary securitization products are K Certificates and SB Certificates. In these transactions, the company guarantees the senior securities, but does not issue or guarantee the mezzanine or subordinated securities. The interest-rate risk and a large majority of expected and stress credit risk is sold to third-party investors through the mezzanine and subordinated securities, thereby reducing the company's risk exposure.

• Excludes re-securitization UPB of primary and other securitization products.

1. The company evaluates the potential benefits of fair value hedge accounting by evaluating a range of interest rate scenarios and identifying which of those scenarios produces the most adverse GAAP earnings outcome. At December 31, 2019, the GAAP adverse scenario (for both before and after fair value hedge accounting) was a parallel shift in which rates decrease by 100 basis points.
2. Portfolio Value Sensitivity (PVS) is the company's estimate of the change in the value of its financial assets and liabilities from an instantaneous shock to interest rates, assuming spreads are held constant and no rebalancing actions are undertaken. PVS-L measures the estimated sensitivity of the portfolio value to a 50 basis point parallel movement in interest rates.
3. Duration gap measures the difference in price sensitivity to interest rate changes between the company's financial assets and liabilities and is expressed in months relative to the value of assets.
4. Based on the company's purchases of loans and issuances of mortgage-related securities. For the periods presented, a borrower may be counted more than once if the company purchased more than one loan (purchase or refinance mortgage) relating to the same borrower.
5. Consists of both home retention actions and foreclosure alternatives.
6. Categories are not mutually exclusive, and a borrower in one category may also be included in another category in the same or another period. For example, a borrower helped through a home retention action in one period may subsequently lose his or her home through a foreclosure alternative in a later period.

© Freddie Mac 14

Safe Harbor Statements

Freddie Mac obligations

Freddie Mac's securities are obligations of Freddie Mac only. The securities, including any interest or return of discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac.

No offer or solicitation of securities

This presentation includes information related to, or referenced in the offering documentation for, certain Freddie Mac securities, including offering circulars and related supplements and agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions or to certain persons. This information is provided for your general information only, is current only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information does not constitute a sufficient basis for making a decision with respect to the purchase or sale of any security. All information regarding or relating to Freddie Mac securities is qualified in its entirety by the relevant offering circular and any related supplements. Investors should review the relevant offering circular and any related supplements before making a decision with respect to the purchase or sale of any security. In addition, before purchasing any security, please consult your legal and financial advisors for information about and analysis of the security, its risks and its suitability as an investment in your particular circumstances.

Forward-looking statements

Freddie Mac's presentations may contain forward-looking statements, which may include statements pertaining to the conservatorship, the company's current expectations and objectives for its Single-family Guarantee, Multifamily and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends, market share, the effect of legislative and regulatory developments and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of the company's credit risk transfer transactions, and results of operations and financial condition on a GAAP, Segment Earnings, non-GAAP and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company's control. Management's expectations for the company's future necessarily involve a number of assumptions, judgments and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation or regulations and new or amended accounting guidance, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2019, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company's website at www.freddiemac.com/ investors and the SEC's website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this presentation.

© Freddie Mac 15