Freddie Mac : Third Quarter 10-Q, 10/29/20

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

• QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2020

or

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from

to

Commission File Number: 001-34139

Federal Home Loan Mortgage Corporation

Federally chartered

corporation

(State or other jurisdiction of incorporation or organization)

(Exact name of registrant as specified in its charter)
52-0904874	8200 Jones Branch Drive	22102-3110	[phone]
McLean,	Virginia
(I.R.S. Employer	(Address of principal executive offices)	(Zip Code)	(Registrant's telephone number,
Identification No.)		including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 13, 2020, there were 650,059,292 shares of the registrant's common stock outstanding.

Table of Contents

Table of Contents

			Page
MANAGEMENT'S DISCUSSION AND ANALYSIS OF	1
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
n	Introduction	1
n Market Conditions and Economic Indicators	8
n Consolidated Results of Operations	13
n Consolidated Balance Sheets Analysis	21
n	Our Business Segments	22
n	Risk Management	38
	•	Credit Risk	38
	•	Operational Risk	60
	•	Market Risk	61
n Liquidity and Capital Resources	64
n	Off-Balance Sheet Arrangements	71
n Critical Accounting Policies and Estimates	72
n Conservatorship and Related Matters	74
n	Regulation and Supervision	75
n	Forward-Looking Statements	78
FINANCIAL STATEMENTS	81
OTHER INFORMATION	156
CONTROLS AND PROCEDURES	158
EXHIBIT INDEX	159
SIGNATURES	160
FORM 10-Q INDEX	161

Freddie Mac 3Q 2020 Form 10-Q

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Table of Contents

MD&A TABLE INDEX

Table	Description	Page
1	Summary of Condensed Consolidated Statements of Comprehensive Income (Loss)	13
2	Components of Net Interest Income	14
3	Analysis of Net Interest Yield	15
4	Components of Guarantee Fee Income	16
5	Components of Investment Gains (Losses), Net	17
6	Components of Mortgage Loans Gains (Losses)	17
7	Components of Investment Securities Gains (Losses)	17
8	Components of Debt Gains (Losses)	18
9	Components of Derivative Gains (Losses)	18
10	Components of Benefit (Provision) for Credit Losses	19
11	Summarized Condensed Consolidated Balance Sheets	21
12	Single-Family Guarantee Segment Financial Results	27
13	Multifamily Portfolio and Market Support	30
14	Multifamily Segment Financial Results	34
15	Capital Markets Segment Financial Results	37
16	Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax	37
17	Single-Family New Business Activity	40
18	Single-Family Credit Guarantee Portfolio CRT Issuance	41
19	Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding	42
20	Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Credit Guarantee Portfolio	43
21	Credit Enhancement Coverage by Year of Origination	43
22	Details of Single-Family Credit Enhancement Expenses and Recoveries	43
23	Reduction in Conservatorship Credit Capital as a Result of Certain CRT Transactions	44
24	Single-Family Allowance for Credit Losses Activity	45
25	Single-Family Credit Guarantee Portfolio Credit Performance Metrics	46
26	Single-Family TDR and Non-Accrual Loans	47
27	Single-Family TDR Loan Activity	48
28	Single-Family Loans in Forbearance Plans by Payment Status	50
29	Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio	50
30	Credit Quality Characteristics of Our Single-Family Loans in Forbearance Plans	50
31	Single-Family Credit Guarantee Portfolio Attribute Combinations for Higher Risk Loans	51
32	Alt-A Loans in Our Single-Family Credit Guarantee Portfolio	52
33	Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio	52
34	Single-Family Loans in Forbearance Plans Activity	54
35	Single-Family REO Activity	54
36	Current Credit Quality of Multifamily Loans Under a Forbearance Program	56
37	Multifamily Allowance for Credit Losses Activity	57
38	Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio	57
39	Level of Subordination Outstanding	57
40	Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement	58
41	Single-Family Credit Guarantee Portfolio Non-Depository Servicers	59
42	Single-Family Mortgage Insurers	59
43	PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve	61
44	Duration Gap and PVS Results	62
45	PVS-L Results Before Derivatives and After Derivatives	62
46	Earnings Sensitivity to Changes in Interest Rates	63

Freddie Mac 3Q 2020 Form 10-Q

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Table of Contents

Table	Description	Page
47	Liquidity Sources	64
48	Other Investments Portfolio	65
49	Funding Sources	65
50	Other Debt Activity	66
51	Activity for Debt Securities of Consolidated Trusts Held by Third Parties	68
52	Net Worth Activity	69
53	Return on Conservatorship Capital	69
54	Forecasted House Price Growth Rates	72
55	Mortgage-Related Investments Portfolio Details	74
56	2019 Affordable Housing Goal Results	75

Freddie Mac 3Q 2020 Form 10-Q

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