Freddie Mac 2015 Annual Report Download

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
Commission File Number: 001-34139
Federal Home Loan Mortgage Corporation
(Exact name of registrant as specified in its charter)
Freddie Mac
Federally chartered 8200 Jones Branch Drive 52-0904874 (703) 903-2000
corporation McLean, Virginia 22102-3110 (I.R.S. Employer (Registrant’s telephone number,
(State or other jurisdiction of
incorporation or organization) (Address of principal executive offices,
including zip code) Identification No.) including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Voting Common Stock, no par value per share (OTCQB: FMCC)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCI)
5% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCKK)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCG)
5.1% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCH)
5.79% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCK)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCL)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCM)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCN)
5.81% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCO)
6% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCP)
Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCJ)
5.7% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCKP)
Variable Rate, Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCCS)
6.42% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCCT)
5.9% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKO)
5.57% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKM)
5.66% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKN)
6.02% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKL)
6.55% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKI)
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKJ)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ X ] Accelerated filer [ ]
Non-accelerated filer (Do not check if a smaller reporting company) [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the common equity was last
sold on June 30, 2015 (the last business day of the registrant’s most recently completed second fiscal quarter) was $1.4 billion.
As of February 4, 2016, there were 650,045,962 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None

Table of contents

  • Page 1
    ...Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 Commission File Number: 001-34139 Federal Home Loan Mortgage Corporation (Exact name of registrant as specified in its charter) Freddie...

  • Page 2
    ... SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS PRINCIPAL ACCOUNTING FEES AND SERVICES EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES GLOSSARY FORM 10-K INDEX EXHIBIT INDEX Freddie Mac 2015 Form...

  • Page 3
    ...use certain acronyms and terms that are defined in the "GLOSSARY." ABOUT FREDDIE MAC Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to provide liquidity, stability, and affordability to the U.S. housing market. We do this primarily by purchasing residential mortgage loans...

  • Page 4
    ...Total Senior Preferred Stock Outstanding Less: Initial Liquidation Preference Treasury Draws $ $ $ Total 72.3 1.0 71.3 Dividend Payments to Treasury (in billions) Dividend Payments as of 12/31/15 Q1 2016 Dividend Obligation Total Dividend Payments $ $ $ Total 96.5 1.7 98.2 Freddie Mac 2015 Form 10...

  • Page 5
    ... investments in non-agency mortgage-related securities. By comparison, we had a number of significant litigation settlements in 2014; We recorded fair value losses in 2015 on certain mortgage loans and mortgage-related securities that are measured at fair value due to spread widening, while in 2014...

  • Page 6
    ... business. This volatility and the declining capital reserve required under the terms of the Purchase Agreement (ultimately reaching zero in 2018) will increase the risk of our having a negative net worth and being required to draw from Treasury. We are exploring ways in which we can limit or manage...

  • Page 7
    ... Freddie Mac We are focused on operating as a very well-run large financial institution, by Being a very effective operating organization; Being a market leader through customer focus and innovation; and Managing risk and economic capital for quality risk-adjusted returns. A Better Housing Finance...

  • Page 8
    ... credit enhancement in excess of that already in place for any such loan, even when the LTV ratio of the new loan is above 80%. Our Charter does not permit us to originate loans or lend money directly to consumers in the primary mortgage market. Our Charter limits our purchase of single-family loans...

  • Page 9
    ...exempted from SEC registration requirements. As a result, we do not file registration statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements of Form 8-K relating to the incurrence of material financial Freddie Mac 2015 Form 10-K 7

  • Page 10
    ..., and Investments segments of our business, our efforts to assist the housing market, our liquidity and capital management, economic and market conditions and trends, our market share, the effect of legislative and regulatory developments and new accounting guidance, the credit quality of loans we...

  • Page 11
    ... About Freddie Mac | Forward-Looking Statements The success of our efforts to mitigate our losses on our Legacy single-family book and our investments in non-agency mortgage-related securities; The success of our strategy to transfer mortgage credit risk through STACR debt note, ACIS...

  • Page 12
    ...- 3,245 2015 2014 2013 2012 2011 Balance Sheets Data Loans held-for-investment, at amortized cost by consolidated trusts (net of allowances for loan losses) Total assets Debt securities of consolidated trusts held by third parties Other Debt All other liabilities Total stockholders' equity (deficit...

  • Page 13
    ... price index of single-family homes funded by loans owned or guaranteed by us or Fannie Mae. National home prices at the end of 2015 remained approximately 6% below their June 2006 peak levels, based on our index. We expect near-term home price growth rates to moderate gradually and return to growth...

  • Page 14
    ... in December 2015 to begin raising short-term interest rates but committed to a measured pace of monetary tightening. However, the magnitude and timing of the impact of the Federal Reserve's action on mortgage and other longer-term rates is uncertain. • • • Freddie Mac 2015 Form 10-K 12

  • Page 15
    ... • Monthly net new job growth decreased during 2015, but remained above 200,000 per month on average. The unemployment rate continued to decline from the peak of 10.0% reached in October 2009. We expect the unemployment rate to decline slightly throughout 2016 and 2017. Freddie Mac 2015 Form 10...

  • Page 16
    ...2014 compared to 2013, primarily due to a reduction in our mortgage-related investments portfolio and less amortization of upfront fees and basis adjustments as a result of lower prepayment rates. See "Net Interest Income" for more information. • Benefit (provision) for credit losses was a benefit...

  • Page 17
    ... decline in income from non-agency mortgage-related securities litigation settlements, as there was only one settlement in 2015; $2.0 billion increase in write-downs due to lower-of-cost-or-fair-value adjustments for mortgage loans transferred from held-for-investment to held-for-sale (see "Effect...

  • Page 18
    ... for mortgage loans transferred from held-for-investment to held-for-sale. • Administrative expense increased in 2015 and 2014 primarily because of costs associated with the FHFA-mandated termination of our pension plans. This increase was partially offset by lower professional services expense...

  • Page 19
    ...-of-cost-or-fair-value adjustment Other (expense) income - property taxes and insurance associated with these loans Effect on income before income tax (expense) benefit $ $ 2015 2,314 (2,193) (1,178) (1,057) $ $ 2014 147 (195) (62) (110) Interest-Rate Risk Management Activities We fund our business...

  • Page 20
    ... income was impacted by an estimated $(0.1) billion, $2.0 billion, and $2.5 billion (aftertax) for 2015, 2014, and 2013, respectively, due to the impact of credit spread tightening (widening) on certain mortgage loans and mortgage-related securities measured at fair value. Freddie Mac 2015 Form...

  • Page 21
    ... increase in management and guarantee fees that is remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011. Contractual net interest income is primarily driven by the volume of assets in the mortgage-related investments and guarantee portfolios and the interest rate...

  • Page 22
    ... Average Rate Average Balance 2013 Interest Income (Expense) Average Rate (dollars in millions) Interest-earning assets: Cash and cash equivalents Securities purchased under agreements to resell Mortgage-related securities: Mortgage-related securities Extinguishment of PCs held by Freddie Mac Total...

  • Page 23
    .... 2013 Variance Due to Total Rate Volume Change (in millions) Interest-earning assets: Cash and cash equivalents Securities purchased under agreements to resell Mortgage-related securities: Mortgage-related securities Extinguishment of PCs held by Freddie Mac Total mortgage-related securities, net...

  • Page 24
    ..., net amortization of loans and debt securities of consolidated trusts was lower in 2014 compared to 2013, due to slower prepayment rates on single-family loans and timing differences between the amortization of the loan and debt securities basis adjustments. • • Freddie Mac 2015 Form 10...

  • Page 25
    ... to refinance loans with an LTV ratio greater than 100% or obtain modifications; changes in property values; regional economic conditions, including unemployment rates; additional delays in the foreclosure process; and third-party mortgage insurance coverage and recoveries. Freddie Mac 2015 Form 10...

  • Page 26
    ... $0.3 billion and $1.7 billion, respectively, related to settlement agreements with certain sellers to release specified loans from certain repurchase obligations in exchange for one-time cash payments primarily associated with our Legacy single-family book. • • Freddie Mac 2015 Form 10-K 24

  • Page 27
    ...-rate risk management activities, we routinely enter into commitments to purchase and sell loans and mortgage-related securities. The majority of these commitments are accounted for as derivative instruments. Derivative gains (losses) consist of both fair value changes and accrual of periodic cash...

  • Page 28
    ... losses in 2014 primarily as a result of the impact of a flattening yield curve as shorter-term interest rates increased and longer-term interest rates declined during 2014. We recognized derivative gains in 2013 primarily as a result of an increase in longer-term interest rates. Freddie Mac 2015...

  • Page 29
    ...-for-sale mortgage-related securities in all periods presented. During 2015 and 2014, we reclassified net unrealized gains as a result of improved pricing due to declining longer-term interest rates and stabilized collateral performance. Conversely, during 2013, we reclassified net unrealized losses...

  • Page 30
    ...drivers of the increase in the combined balance are higher near-term cash needs for upcoming maturities and anticipated calls of other debt, and an increase in principal and interest payments received from servicers for unsecuritized mortgage loans owned by us. Investments in securities continued to...

  • Page 31
    Management's Discussion and Analysis Consolidated Balance Sheets Analysis • Debt, net increased as debt securities of consolidated trusts held by third parties rose as a result of the increase in the acquisition and securitization of mortgage loans in 2015 due to higher volumes of home sales ...

  • Page 32
    ... Tax Cut Continuation Act of 2011. As a result of this change, the expense related to the legislated 10 basis point increase is now netted within management and guarantee fee income. The purpose of this change is to better reflect how management evaluates the Single-family Freddie Mac 2015 Form...

  • Page 33
    ... and $533 million of Temporary Payroll Tax Cut Continuation Act of 2011 expense into management and guarantee fee income for 2014 and 2013, respectively. Segment Earnings differs significantly from, and should not be used as a substitute for, net income (loss) as determined in accordance with GAAP...

  • Page 34
    ... single-family loans originated by lenders and we manage our single-family mortgage credit risk. Our Single-family Guarantee segment supports our primary business strategies by creating: A Better Freddie Mac Providing market leadership by delivering quality offerings, programs, and services...

  • Page 35
    ... to buy up the management and guarantee fee rate are not considered compensation for the credit risk assumed for purposes of our financial statements. Consequently, these amounts are allocated to the Investments segment. We enter into loan purchase agreements with many of our single-family customers...

  • Page 36
    ...performing loans (which we sometimes refer to as a securitization pipeline) and securitize them for retention in our mortgagerelated investments portfolio or for sale to third parties, as shown in the diagram below. We also use this process to securitize reperforming loans. Freddie Mac 2015 Form 10...

  • Page 37
    Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee Resecuritization Products - our resecuritization products represent beneficial interests in pools of PCs and certain other types of mortgage assets. We create these securities primarily by using PCs or our ...

  • Page 38
    ...HFAs. See Note 2 for further information. • • • Long-term standby commitments - we provide a guarantee on mortgage assets held by third parties, in exchange for management and guarantee fees, without securitizing those assets. Long-term standby commitments obligate us to purchase seriously...

  • Page 39
    .... For loans that are covered by credit risk transfer transactions based on actual losses, we may write down STACR debt notes or receive reimbursement of losses once an actual loss event (e.g., third-party foreclosure sale, short sale or REO disposition) occurs. We issue STACR debt notes related to...

  • Page 40
    ...the risk positions that Freddie Mac retains). Under each insurance policy, we pay monthly premiums that are determined based on the outstanding balance of the STACR debt note reference pool. When specific credit events occur, we receive compensation from the insurance policy up to an aggregate limit...

  • Page 41
    ... Our customers in the Single-family Guarantee segment are predominantly lenders that originate loans for new or existing homeowners and sell them to us, and financial institutions that service these loans for us. These companies include mortgage banking companies, commercial banks, community banks...

  • Page 42
    ... Purchase Volume Percentage of Single-Family Servicing Volume For additional information about seller/servicer concentration risk and our relationships with our seller/ servicer customers, see "Risk Management - Credit Risk - Institutional Credit Risk - Sellers and Servicers." Freddie Mac 2015...

  • Page 43
    ...Fannie Mae, Ginnie Mae (with FHA/VA), and other financial institutions that retain or securitize loans, such as commercial and investment banks, dealers, and thrift institutions. We compete on the basis of price, products, securities structure, and service. Competition to acquire single-family loans...

  • Page 44
    ... Realtors news release dated January 22, 2016. Commentary • • There was a significant increase in single-family loan origination volumes in the U.S. in 2015, driven by an increase in refinancing activity as a result of lower average mortgage interest rates. We expect the volume of home sales in...

  • Page 45
    ... and Analysis Our Business Segments | Single-Family Guarantee Single-Family Mortgage Debt Outstanding as of December 31, Single-Family Serious Delinquency Rates as of December 31, Source: Federal Reserve Financial Accounts of the United States of America dated December 10, 2015. For 2015, the...

  • Page 46
    ...and home price appreciation. Our loan purchase activity declined in 2014 to its lowest level since 2000. The decrease in our loan purchase activity in 2014 compared to 2013 was due to decreased refinancing activity driven by higher average mortgage interest rates in 2014. • Freddie Mac 2015 Form...

  • Page 47
    ...and Analysis Our Business Segments | Single-Family Guarantee • • We continued working to improve access to affordable mortgage credit, including the introduction of a new loan initiative in March 2015 with a down payment option as low as three percent to help qualified borrowers with limited...

  • Page 48
    ... single-family credit guarantee portfolio at December 31, 2015. We exclude HARP and other relief refinance loans from the Core single-family book because such loans generally reflect credit risk attributes of the original loans (many of which were originated between 2005 and 2008). Freddie Mac 2015...

  • Page 49
    ... • • The HARP and other relief refinance book represented an additional 18% of the single-family credit guarantee portfolio at December 31, 2015. The Legacy single-family book declined to 16% of the single-family credit guarantee portfolio at December 31, 2015. Freddie Mac 2015 Form 10-K 47

  • Page 50
    ...that time. Management and guarantee fees charged on new acquisitions decreased during 2015, compared to 2014, due to a combination of competitive pricing and increased market-adjusted pricing costs based on the price performance of our PCs relative to Fannie Mae securities. Freddie Mac 2015 Form 10...

  • Page 51
    ... and Analysis Our Business Segments | Single-Family Guarantee Credit Risk Transfer Activity Since 2013, STACR debt note and ACIS transactions have been our principal method of transferring a portion of the mortgage credit risk subsequent to loan acquisition in our Core single-family book. The...

  • Page 52
    ... Scorecard sets a goal for us to complete credit risk transfer transactions on at least 90% of the UPB of certain categories of newly acquired single-family loans, such as nonHARP fixed-rate loans with terms greater than 20 years and LTV ratios above 60%. Freddie Mac 2015 Form 10-K 50

  • Page 53
    ... of our loan workout programs, HAMP, terminates in December 2016. When a home retention solution is not practicable, we require our servicers to pursue foreclosure alternatives, such as short sales, before initiating foreclosure. When foreclosure is unavoidable and we acquire the property as REO, we...

  • Page 54
    ... from lower average mortgage interest rates, higher average management and guarantee fee income rates, and an increase in the single-family credit guarantee portfolio. Other non-interest income decreased in 2015 primarily due to increased lower-of-cost-or-fair value adjustments on loans that were...

  • Page 55
    Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee • • • Administrative expense increases resulted, in part, from our investments in our technology to better support our lenders and Freddie Mac's products and programs, as well as the new common ...

  • Page 56
    ... loans and securities and the management of multifamily mortgage credit risk. The Multifamily segment supports our primary business strategies by creating: A Better Freddie Mac Continuing to provide financing to the multifamily mortgage market and expanding our market presence for workforce housing...

  • Page 57
    ... allows us to transfer the vast majority of the expected credit losses of the loans to third-party investors. As shown in the diagram below, in a typical K Certificate transaction, we sell multifamily loans to a non-Freddie Mac securitization trust that issues senior and subordinated securities, and...

  • Page 58
    ... records. The following graphs show the concentration of our 2015 multifamily new business volume by our largest sellers and loan servicing by our largest servicers as of December 31, 2015. Any seller or servicer with a 10% or greater share is listed separately. Freddie Mac 2015 Form 10-K 56

  • Page 59
    ... price, service, and products, including our use of certain securitization structures. Our principal competitors in the Multifamily segment are Fannie Mae, FHA, commercial and investment banks, CMBS conduits, dealers, thrift institutions, and life insurance companies. Freddie Mac 2015 Form 10-K 57

  • Page 60
    ...have been especially strong, with 13% growth in 2015. Multifamily property price growth may slow from this level with the expected moderation in the rate of effective rent increase, the rising vacancy rate, as well as improving returns for other investment types. • Freddie Mac 2015 Form 10-K 58

  • Page 61
    ...on sales of mortgage loans) is impacted by the change in the K Certificate benchmark spread during the period between loan purchase and execution of the K Certificate transaction. During 2015, spread widening had an adverse effect on K Certificate profitability. • • • Freddie Mac 2015 Form...

  • Page 62
    ... Mortgage Debt Outstanding as of December 31, Multifamily Delinquency Rates as of December 31, Source: Federal Reserve Financial Accounts of the United States of America dated December 10, 2015. For 2015, the amount is as of September 30, 2015 (latest available information). Source: Freddie Mac...

  • Page 63
    ... the dollar volume of multifamily new business activity at or below a production cap of $30.0 billion. For purposes of determining our performance under the goal, business activity associated with certain targeted loan types is excluded from this production cap. Freddie Mac 2015 Form 10-K 61

  • Page 64
    ...their area (eligible units are multifamily units that qualify toward our affordable housing goal). We increased our support of workforce housing in the multifamily mortgage market during 2015 through new initiatives, including purchases of manufactured housing community loans and small balance loans...

  • Page 65
    ... in net interest yields in 2015. We expect a continued increase in the size of our guarantee portfolio as a result of ongoing K Certificate transactions and a reduction in our unsecuritized loan and mortgage-related security portfolios due to ongoing principal repayments. Freddie Mac 2015 Form 10...

  • Page 66
    ... increased in 2015, primarily as a result of increased securitizations of products for which we charge higher fees. We expect the average management and guarantee fee rate charged for new K Certificate issuances in 2016 to be consistent with the rates in 2015. 64 Freddie Mac 2015 Form 10...

  • Page 67
    ... and guarantee fee rate charged on our other securitization products and other mortgage-related guarantees. The lower management and guarantee fee rate on K Certificates is driven by higher levels of subordination that absorb the vast majority of the expected credit losses. Freddie Mac 2015 Form 10...

  • Page 68
    ... liquid non-agency mortgage-related securities, transferring a portion of the credit risk to private investors. While we expect to use K Certificates as the primary method to transfer credit risk in 2016, we also expect to introduce new initiatives to transfer risk. Freddie Mac 2015 Form 10-K 66

  • Page 69
    ... with higher loan purchase and securitization volume resulted in losses on loans in 2015, as compared to gains on loans recognized in 2014 when spreads tightened. The change from losses in 2013 to gains in 2014 was attributable to interest rate-related 67 • • • Freddie Mac 2015 Form 10-K

  • Page 70
    ... in derivative gains (losses)), as rates increased in 2013 but decreased in 2014. Derivative gains (losses) for the Multifamily segment are offset by fair value changes of the loans and investment securities being hedged. As a result, there is no net impact on total comprehensive income for the...

  • Page 71
    ... funding the company's business activities; and Managing the company's economic interest-rate risk through the use of derivatives and other debt. A Better Housing Finance System: • Expanding and improving the delivery of mortgage capital markets services through our cash loan purchase program...

  • Page 72
    ... than single-class and multi-class agency securities. As part of our Retained Portfolio plan, we are focused on reducing the balance of less liquid assets that we hold in the mortgage-related investments portfolio through a combination of pay-downs, sales and securitizations. Freddie Mac 2015 Form...

  • Page 73
    ... cash on a short-term basis through transactions where we purchase securities under agreements to resell. This portfolio is designed to allow us to meet all of our obligations in the event that we lose access to the unsecured debt markets for a period of time. Interest-Rate and Other Risk Management...

  • Page 74
    ... these securities generally include state and local governments, insurance companies, money managers, central banks, depository institutions, and pension funds. Our customers under our loan cash purchase program are a variety of lenders, as discussed in "Single-Family Guarantee - Business Overview...

  • Page 75
    ... 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...

  • Page 76
    ... pace of monetary tightening. As a result, shorter-term interest rates, including the 3-month LIBOR rates, increased in December 2015. However, the magnitude and timing of the impact of the Federal Reserve's action on mortgage and other longer-term rates is uncertain. Freddie Mac 2015 Form 10-K 74

  • Page 77
    ...loans and performing modified loans Total single-family unsecuritized loans Freddie Mac mortgage-related securities Non-agency mortgage-related securities Non-Freddie Mac agency mortgage-related securities Total - Mortgage investments portfolio Non-mortgage-related assets portfolio Total Investments...

  • Page 78
    ... and Analysis Our Business Segments | Investments Net Interest Yield and Average Balances Net Interest Yield & Average Investments Portfolio Balance Commentary • The average balance of the mortgage-related securities that we manage declined by 10.3% during 2015 compared to 2014, consistent...

  • Page 79
    ... amortized into net interest income, the related debt premiums are amortized into other non-interest income. • We expect our net interest yield and average investments portfolio balance to continue to decline in 2016 as we manage the size of our mortgage-related assets. Freddie Mac 2015 Form 10...

  • Page 80
    ... manner, our holdings of certain less liquid assets, including reperforming and performing modified single-family loans and non-agency mortgage-related securities. Our principal disposition strategies for our less liquid assets include securitizations and sales. Freddie Mac 2015 Form 10-K 78

  • Page 81
    ... outstanding balance of our other debt declined during 2015, as we required less debt to fund our business operations, as the balance of our mortgage-related investments portfolio continued to decline. During 2015, we began to utilize overnight discount notes as a more cost effective tool to manage...

  • Page 82
    ...term debt spreads remained high in 2015, we continued to rely on short-term and medium-term debt issuances to fund our business. Short-term debt as a percentage of total other debt has remained relatively flat at 41.3% in 2015, down 1.3% and 1.5% from 2014 and 2013, respectively. Our short-term debt...

  • Page 83
    ... recognized in 2014 and lower new other-than-temporary impairments. Changes in derivative gains (losses) primarily resulted from changes in longer-term interest rates. Longer-term interest rates declined in both 2015 and 2014, while interest rates increased during • • Freddie Mac 2015 Form 10...

  • Page 84
    ...The losses on trading securities in 2015 were larger than 2014, as a result of agency spreads widening in 2015 compared to tightening in 2014. The losses on trading securities in 2013 were primarily driven by increases in longer-term interest rates. Non-agency mortgage-related securities settlements...

  • Page 85
    ... Change 2015-2014 $ 69 % (168)% $ Change 2014-2013 $ (24,054) % (100)% Comprehensive income (loss) for the All Other category for 2013 reflects a benefit for federal income taxes that resulted from the release of our valuation allowance against our net deferred tax assets. Freddie Mac 2015 Form 10...

  • Page 86
    ... MANAGEMENT FRAMEWORK We manage risk using a three-lines-of-defense risk management framework. The diagram below provides examples of how the three lines of defense complement each other under our risk management framework. These roles and responsibilities continue to evolve. Freddie Mac 2015 Form...

  • Page 87
    ... establishing and implementing operational processes and controls Establish key risk indicators and various other metrics Establish operational risk appetite, policy, limits, monitoring metrics and evaluate loss event data and perform root cause analysis and testing Freddie Mac 2015 Form 10-K 85

  • Page 88
    ... corporate oversight and independent assurance of the design and effectiveness of our risk management activities. For more information on the role of the Board and its committees, see "Directors, Corporate Governance, and Executive Officers - Board and Committee Information." Freddie Mac 2015 Form...

  • Page 89
    Management's Discussion and Analysis Risk Management | Overview Freddie Mac 2015 Form 10-K 87

  • Page 90
    ... asset classes based on their respective risks. Economic capital is a factor we consider when we make economic decisions, establish risk limits, and measure profitability. We are working with FHFA to develop an overall risk measurement framework for evaluating Freddie Mac's and Fannie Mae's business...

  • Page 91
    ...; and Mortgage-related securities (MRS) credit risk, through our ownership of non-Freddie Mac mortgage-related securities in the mortgage-related investments portfolio. We also hold investments in certain non-mortgage-related securities. As of December 31, 2015, 2014, and 2013, the fair value of...

  • Page 92
    ... share in the credit risk of the Core single-family book; Monitoring loan performance and characteristics for the single-family credit guarantee portfolio and individual sellers and servicers; Engaging in loss mitigation activities; and Managing foreclosure and REO activities. Maintaining Policies...

  • Page 93
    ... Analysis Risk Management | SF Credit Risk the loan. We also implemented new tools, such as our proprietary Quality Control Information Manager, to provide greater transparency into our customer quality control reviews. We also have a process of targeted quality control sampling reviews of loans...

  • Page 94
    ...'s Discussion and Analysis Risk Management | SF Credit Risk Weighted Average Original LTV Ratio Weighted Average Credit Score The table below contains additional information about the single-family loans we purchased or guaranteed in the last three years. Year Ended December 31, 2015 (dollars in...

  • Page 95
    ...to third-party investors. We make payments of principal and interest on the issued notes. The amount of principal that we are required to pay the STACR debt note investors is linked to the credit performance of certain loans (referred to as a reference pool) that we have 93 Freddie Mac 2015 Form 10...

  • Page 96
    ... a STACR debt note transaction. We receive compensation from the insurance policy up to an aggregate limit when specified credit events occur. Whole loan security - We issue guaranteed senior securities and unguaranteed subordinated securities backed by certain single-family loans that we purchased...

  • Page 97
    ... loan securities, as well as cash and securities pledged for our benefit. All collateralized coverage relates to credit risk transfer transactions in the Core single-family book. Credit risk transfer transactions include STACR debt notes, ACIS insurance policies, seller indemnification agreements...

  • Page 98
    ...-family book, continued loss mitigation and foreclosure activities for loans in the Legacy single-family book as well as sales of certain non-performing loans. The gradual reduction of our Legacy single-family book also contributed to the improvement in the serious delinquency Freddie Mac 2015 Form...

  • Page 99
    ... our credit losses, as shown below. Our Legacy single-family book continues to decline as a percentage of our overall portfolio, but continues to account for the majority of our credit losses. Portfolio Composition and Credit Losses Serious Delinquency Rates as of December 31, Freddie Mac 2015 Form...

  • Page 100
    ...Management | SF Credit Risk The table below provides credit quality information about our single-family books. December 31, 2015 Average Credit Score 754 731 702 741 Original LTV Ratio 72% 89% 75% 75% Current LTV Ratio 61% 70% 66% 63% Current LTV Ratio >100% -% 10% 12% 4% Foreclosure and Short Sale...

  • Page 101
    ... Analysis Risk Management | SF Credit Risk Characteristic LTV Ratio Description Impact on Credit Quality Ratio of the UPB of the loan to the • Measures ability of the underlying value of the underlying property property to cover our exposure on the collateralizing the loan. Original LTV loans...

  • Page 102
    ...'s Discussion and Analysis Risk Management | SF Credit Risk The table below contains details on characteristics of the loans in our single-family credit guarantee portfolio as of December 31, 2015, 2014, and 2013. December 31, (percentage of portfolio based on UPB) Original LTV Ratio Range 60...

  • Page 103
    ...'s Discussion and Analysis Risk Management | SF Credit Risk December 31, 2015 (dollars in billions) Original LTV ratio greater than 90%, HARP loans Original LTV ratio greater than 90%, all other loans Loans with credit scores below 620 at origination $ $ $ UPB 134.2 144.8 41.3 CLTV 89% 84...

  • Page 104
    ... to collateral identified as subprime or Alt-A. For reporting purposes, loans within the option ARM category continue to be presented in that category following a modification of the loan, even though the modified loan no longer provides for optional payment provisions. Freddie Mac 2015 Form 10...

  • Page 105
    ...'s Discussion and Analysis Risk Management | SF Credit Risk The table below provides credit characteristic information on higher risk loan product types. December 31, 2015 (dollars in billions) Amortizing ARM and option ARM Interest-only Step-rate modified (1) UPB $ $ $ 71.5 22.0 38.3 CLTV...

  • Page 106
    ... may no longer be categorized or reported as an Alt-A loan in this Form 10-K and our other financial reports because the new refinance loan replacing the original loan would not be identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A balances may be lower than would...

  • Page 107
    ... had the largest number of seriously delinquent loans as of December 31, 2015. See Note 13 for additional information on the concentration of credit risk in our single-family credit guarantee portfolio. As of December 31, 2015 (dollars in millions) Florida New York New Jersey Illinois California...

  • Page 108
    ...37% 0.42% 1.32% 1.52% 0.49% 1.88% 1.73% 0.57% 2.39% 2014 2013 Credit loss recoveries during 2015, 2014, and 2013 included $0 billion, $0.3 billion, and $2.1 billion, respectively, related to settlement agreements with certain sellers that released specified loans from Freddie Mac 2015 Form 10-K 106

  • Page 109
    ...in millions) Beginning balance Provision (benefit) for credit losses Charge-offs, gross Recoveries Transfers, net Ending balance As a percentage of our single-family credit guarantee portfolio $ $ 2015 21,793 (2,639) (5,071) 717 548 15,348 $ $ 2014 24,578 113 (4,892) 1,258 736 21,793 $ $ 2013 30,508...

  • Page 110
    ...accrual loans(1) (1) $ 2015 2,690 $ 2014 3,235 $ 2013 3,552 $ 2012 4,126 $ 2011 4,369 Represents the amount of interest income that we would have recognized for loans outstanding at the end of each period, had the loans performed according to their original contractual terms. Freddie Mac 2015 Form...

  • Page 111
    ... in states that require a judicial foreclosure process. We offer a variety of borrower assistance programs, including refinance programs for certain eligible loans and loan workout activities for struggling borrowers. Our loan workouts include both home retention options and foreclosure alternatives...

  • Page 112
    ...We offer the following types of home retention options: • Forbearance agreements - Arrangements that require reduced payments during a defined period, generally less than one year, to allow borrowers to return to compliance with the original mortgage terms or to implement another loan workout. For...

  • Page 113
    ... the trend in recent periods. Similarly, the volume of short sales in the overall market also declined in recent periods as home prices have continued to increase. The following graphs provide detail about our single-family loan workout activities and foreclosures. Freddie Mac 2015 Form 10-K 111

  • Page 114
    ... Home Retention Actions Foreclosure Alternatives and Foreclosures The table below contains credit characteristic data on our single-family modified loans. December 31, 2015 % of Portfolio 40.5 43.0 $ 83.5 2% 3 5% (dollars in billions) HAMP Non-HAMP Total $ UPB CLTV Ratio 85% 88% 86% SDQ Rate...

  • Page 115
    ... at risk of default to servicers that we believe have capabilities and resources necessary to improve the loss mitigation associated with the loans. See "Sellers and Servicers" in Institutional Credit Risk below for additional information on these activities. During 2015 and 2014, we completed sales...

  • Page 116
    ... foreclosure processes will remain high in the near term as the substantial backlog of loans awaiting court proceedings in those states transitions to REO or other loss events. The number of our single-family loans delinquent for more than one year declined 37% during 2015. Our servicing guidelines...

  • Page 117
    ... Analysis Risk Management | SF Credit Risk the timeliness of foreclosure completion by our servicers based on the state where the property is located. In September 2015, we announced an extension of foreclosure timelines in our guidelines for 34 states or other jurisdictions. Our servicing guide...

  • Page 118
    ... from disposition of the properties, net of capitalized repair and selling expenses, if applicable. The table below presents single-family severity ratios. Year Ended December 31, 2015 REO dispositions and third-party foreclosure sales Short sales 34.3% 30.1% 2014 34.2% 31.6% 2013 36.1% 36.0% Our...

  • Page 119
    ... repay using the secured property's cash flow, after expenses. A higher DSCR indicates lower credit risk. Our standards require maximum LTV ratios and minimum DSCRs that vary based on the characteristics and features of the loan. Loans are generally underwritten with a maximum original LTV ratio of...

  • Page 120
    ... use credit enhancements, such as the subordination provided by K Certificates, to mitigate our credit losses. For unsecuritized loans, we may offer a workout option to give the borrower an opportunity to bring the loan current and retain ownership of the property, such as providing a short-term...

  • Page 121
    ... that are two monthly payments or more past due or in the process of foreclosure, as reported by our servicers. Loans that have been modified are not counted as delinquent as long as the borrower is less than two monthly payments past due under the modified terms. Freddie Mac 2015 Form 10-K 119

  • Page 122
    ...53.0 76.0 5.0 9.3 143.3 2014 Delinquency Rate 0.02% 0.01% 0.64% -% 0.04% Our REO activity has remained low in the past several years as a result of the strong property performance of our multifamily mortgage portfolio. As of December 31, 2015, we had one REO property. Freddie Mac 2015 Form 10-K 120

  • Page 123
    ..., net REO operations expense (income) Credit losses (gains) $ $ 2015 9 - 9 4 13 $ $ 2014 3 (1) 2 (9) (7) $ $ 2013 29 (1) 28 (16) 12 Credit losses (gains) (in bps) Number of delinquent loans (1) 0.8 4 (0.5) 8 0.9 16 Includes cumulative fair value losses recognized through the date of foreclosure...

  • Page 124
    Management's Discussion and Analysis Risk Management | MF Credit Risk December 31, (in millions) TDRs on accrual status Non-accrual loans Total TDRs and non-accrual loans $ $ 2015 321 189 510 $ $ 2014 535 385 920 $ $ 2013 675 628 1,303 $ $ 2012 806 1,488 2,294 $ $ 2011 814 1,889 2,703 Loan loss ...

  • Page 125
    ...-For-Sale Securities December 31, 2015 (in millions) Available-for-sale mortgage-related securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states and political subdivisions Manufactured housing Total investments in available-for-sale mortgage...

  • Page 126
    ... Freddie Mac Fannie Mae Ginnie Mae Other Total trading mortgage-related securities $ $ 15,513 6,438 30 146 22,127 $ $ 17,469 6,099 16 171 23,755 $ $ 9,349 7,180 98 141 16,768 2015 2014 2013 Risk Management Activities - Non-Agency Mortgage-Related Securities We manage our exposure to the credit risk...

  • Page 127
    ... settlements. Since the beginning of 2007, we experienced actual principal cash shortfalls of $4.4 billion on impaired available-for-sale non-agency mortgage-related securities. Most of these shortfalls occurred on securities backed by subprime, option ARM, and Alt-A loans. Freddie Mac 2015 Form...

  • Page 128
    ... and Analysis Risk Management | MRS Credit Risk Other-Than-Temporary Impairment of Available-For-Sale Mortgage-Related Securities We evaluate our available-for-sale securities, including non-agency mortgage-related securities, in an unrealized loss position, as of each balance sheet date, to...

  • Page 129
    ... and Indebtedness" for additional information on the limits on our mortgage-related investments portfolio. The "other" impairment amount relates to increases in our estimate of the present value of expected future credit losses on certain individual available-for-sale securities. The portion of the...

  • Page 130
    ... to us; adequate insurance coverage; a quality control program that meets our standards; and sufficient net worth, liquidity, and funding sources. In 2015, at the direction of FHFA, we and Fannie Mae announced changes to our single-family seller and servicer eligibility requirements. These changes...

  • Page 131
    ... non-compliance. In addition, we actively manage the current quality of loan originations of our largest single-family sellers by performing loan quality control sampling reviews and communicating loan defect rates and the causes of those defects to such sellers on a Freddie Mac 2015 Form 10-K 129

  • Page 132
    ... and Analysis Risk Management | Institutional Credit Risk monthly basis. If necessary, we work with these sellers to develop an appropriate plan of corrective action. We use a variety of tools and techniques to engage our single-family sellers and servicers and limit our losses, including...

  • Page 133
    ... published revised eligibility requirements for mortgage insurers, in conjunction with Fannie Mae, which became effective for all Freddie Mac-approved mortgage insurers on December 31, 2015. These revised eligibility requirements include financial requirements determined using a risk-based framework...

  • Page 134
    ... credit ratings below investment grade. The table below summarizes our exposure to bond insurers as of December 31, 2015. In the event a bond insurer fails to perform, the coverage outstanding represents our maximum principal exposure to credit losses related to such a failure. Freddie Mac 2015 Form...

  • Page 135
    ... The Investments segment manages this risk for the company. Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We maintain internal standards for approving new derivative counterparties, clearinghouses, and clearing members. • Cleared derivatives...

  • Page 136
    ... is typically transferred within one business day based on the values of the related derivatives. We regularly review the market values of the securities pledged to us as non-cash collateral to manage our exposure to loss. We conduct additional reviews of our exposure when market conditions dictate...

  • Page 137
    ... those entered into on behalf of our securitization trusts. Our policies require that the counterparty be evaluated using our internal counterparty rating model prior to our entering into such transactions. We monitor the financial strength of our counterparties to 135 Freddie Mac 2015 Form 10-K

  • Page 138
    ... of the single-family loans underlying our investments in non-agency mortgage-related securities is serviced by nondepository servicers. These servicers may not have the same financial strength, internal controls or operational capacity as depository servicers. As of December 31, 2015 and 2014...

  • Page 139
    ... action is required to manage the risk to an acceptable level. In addition to the RCSA process, we employ several tools to identify and measure operational risks, including loss event data, key risk indicators, root cause analysis, and testing. While our operational risk framework includes tools...

  • Page 140
    ...significant risks associated with our use of models, as discussed in "Risk Factors - Operational Risks - We face risks and uncertainties associated with the models that we use to inform business and risk management decisions and for financial accounting and reporting purposes." Freddie Mac 2015 Form...

  • Page 141
    ...'s Discussion and Analysis Risk Management | Operational Risk Operational Risk Issue Relating to Master Trust Agreement Loan payments remitted to the company from seller/servicers are deposited into a custodial account that contains both property of the company and property of the company...

  • Page 142
    ... and Analysis Risk Management | Operational Risk Effectiveness of Our Disclosure Controls and Procedures Management, including the company's CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2015. As of December 31, 2015, we...

  • Page 143
    ... and managed by each individual business segment. Interest-rate risk and other market risks can adversely affect future cash flows, or economic value, as well as earnings and net worth. The majority of our interest-rate risk comes from our mortgage-related assets (securities and loans) and the debt...

  • Page 144
    ... Board and management limits. We generally do not hedge changes in fair value of our credit guarantees except for interest-rate exposure related to buy-ups and float. Float, which arises from timing differences between the borrower's principal payments on the loan and the reduction of the PC balance...

  • Page 145
    ... mortgage-related investments with debt securities. • We also incur spread risk when we use LIBORor Treasury-based instruments in our risk management activities. • We are exposed to spread risk arising from the difference in time between when we commit to purchase a multifamily mortgage loan...

  • Page 146
    ... are generally not measured at fair value. • 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...

  • Page 147
    ... in recent years to measure and manage the interest-rate risk related to mortgage assets as risk for prepayment model error remains high due to the low interest rate environment and uncertainty regarding default rates, unemployment, government policy changes and Freddie Mac 2015 Form 10-K 145

  • Page 148
    ... rates. These estimates are essentially the derivative gains (losses) attributable to financial instruments that are not measured at fair value, as discussed in "Consolidated Results of Operations - Interest-Rate Risk Management Activities." The methodology used to calculate Freddie Mac 2015 Form...

  • Page 149
    ...'s Discussion and Analysis Risk Management | Interest Rate Risk and Other Market Risks these figures is consistent with the methodology used to calculate our PMVS-YC and PMVS-L metrics above. GAAP FV-YC (in millions) December 31, 2015 December 31, 2014 $ $ 25 bps 635 672 $ $ 50 bps 1,630 1,176...

  • Page 150
    ... Principal payments due to the maturity, redemption or repurchase of our short- and long-term debt; Interest payments on our other debt securities; Dividend obligations on our senior preferred stock; Cash purchases of single-family and multifamily loans; Purchases of mortgage-related securities...

  • Page 151
    ... ratings of the U.S. government. We make extensive use of the Federal Reserve's payment system in our business activities. The Federal Reserve requires that we fully fund our accounts at the Federal Reserve Bank of New York to the extent necessary to cover cash payments on our debt and mortgage...

  • Page 152
    ... payments, payments resulting from calls, and payments for repurchases. We repurchase, call, or exchange our outstanding debt securities from time to time for a variety of reasons, including managing our funding composition and supporting the liquidity of our debt securities. Freddie Mac 2015 Form...

  • Page 153
    ... discount notes as a more cost efficient tool to manage our intra-day liquidity needs. In addition, issuances and pay-offs of long-term debt increased during 2015 compared to 2014 as we issued more long-term callable debt to replace debt that was called for economic reasons. Freddie Mac 2015 Form...

  • Page 154
    ... millions) Discount notes and Reference Bills Medium-term notes Securities sold under agreements to repurchase Total $ $ Carrying Value 137,712 4,000 - 141,712 Carrying Value 130,919 2,291 15 0.13% $ 0.16 0.16 For information about our other long-term debt, see Note 7. Freddie Mac 2015 Form 10...

  • Page 155
    ... provides information on the debt securities issued by our consolidated trusts as of the dates set forth below. December 31, (in millions) Single-family PCs: 30-year or more amortizing fixed-rate 20-year amortizing fixed-rate 15-year amortizing fixed-rate Adjustable-rate Interest-only FHA/VA and...

  • Page 156
    ... we could sell to provide us with an additional source of liquidity to fund our business operations. We also maintained non-interest-bearing deposits at the Federal Reserve Bank of New York, which are included in cash and cash equivalents on our consolidated balance sheets. Freddie Mac 2015 Form 10...

  • Page 157
    ... of repayments of single-family held-for-investment mortgage loans. Cash flows used for financing activities during 2015, 2014, and 2013 were $183.3 billion, $214.5 billion, and $405.0 billion, respectively, primarily driven by net funds used to repay or redeem debt securities of consolidated trusts...

  • Page 158
    ... last five quarters. Three Months Ended (in millions) Beginning balance Comprehensive income Capital draw from Treasury Senior preferred stock dividends declared Total equity / net worth Aggregate draws under Purchase Agreement Aggregate cash dividends paid to Treasury $ $ $ $ 12/31/2015 1,299 1,641...

  • Page 159
    ... on Freddie Mac in addressing housing and mortgage market conditions, we sometimes take actions that could have a negative impact on our business, operating results or financial condition, and thus contribute to a need for additional draws under the Purchase Agreement. Certain of these actions are...

  • Page 160
    ...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 158 Freddie Mac 2015 Form 10...

  • Page 161
    Management's Discussion and Analysis Conservatorship and Related Matters • Issue any subordinated debt. LIMITS ON OUR MORTGAGE-RELATED INVESTMENTS PORTFOLIO AND INDEBTEDNESS Our ability to acquire and sell mortgage assets is significantly constrained by limitations under the Purchase Agreement...

  • Page 162
    ... by non-agency mortgage-related securities; Securitization Pipeline: performing multifamily and single-family loans purchased for cash and primarily held for a short period until securitized, with the resulting Freddie Mac issued securities being sold or retained; and 160 Freddie Mac 2015 Form 10-K

  • Page 163
    ...and performing modified loans, which included HAMP loans; and Enhanced the liquidity of $2.9 billion of multifamily non-agency mortgage-related securities through resecuritization. We retained these more liquid securities in our mortgage-related investments portfolio. 161 Freddie Mac 2015 Form 10-K

  • Page 164
    ... 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...

  • Page 165
    .... For example, regulations that modify requirements applicable to the purchase or servicing of mortgages can affect us. FEDERAL HOUSING FINANCE AGENCY FHFA is an independent agency of the federal government responsible for oversight of the operations of Freddie Mac, Fannie Mae, and the FHLBs. Under...

  • Page 166
    Management's Discussion and Analysis Regulation and Supervision economic conditions. Under the rule, Freddie Mac is required to conduct annual stress tests using scenarios specified by FHFA that reflect a minimum of three sets of economic and financial conditions and publicly disclose the results ...

  • Page 167
    ... year. In August 2015, FHFA issued the final rule establishing affordable housing goals for Freddie Mac and Fannie Mae for 2015 through 2017. The rule applies retroactively to the beginning of 2015. Under FHFA's final rule The benchmark levels for three of our single-family goals increased; Both of...

  • Page 168
    ..., Recovery and Enforcement Act of 1989. The Secretary of the Treasury has performed this debt securities approval function by coordinating GSE debt offerings with Treasury funding activities. In addition, our Charter authorizes Treasury to purchase Freddie Mac debt Freddie Mac 2015 Form 10-K 166

  • Page 169
    ... near-term. Congress held hearings and considered legislation on the future state of Freddie Mac, Fannie Mae, and the housing finance system during 2015. A number of bills were introduced in Congress in 2015 relating to the future status of Freddie Mac, Fannie Mae, and the secondary mortgage market...

  • Page 170
    ...the sale, transfer, liquidation, relinquishment, or divestiture by Treasury of the government's stake in Freddie Mac and Fannie Mae until 2018 without future legislation. The Act also terminates the MHA Program as of December 31, 2016. 2014 Affordable Housing Goals and Housing Plan In December 2015...

  • Page 171
    ... requirements. While an increasing number of our interest rate swap transactions are cleared, we continue to execute uncleared swap transactions, which will be affected by these rules. Final Rule on Risk Retention In October 2014, six agencies, including FHFA, issued a rule that generally requires...

  • Page 172
    ...dollar of total new business purchases that we are required by the GSE Act to allocate or transfer to certain housing funds, because the amount and timing of such allocations or transfers is dependent on the volume of our new business purchases; and 170 • • • • Freddie Mac 2015 Form 10-K

  • Page 173
    ... for the administration of cash remittances received related to the underlying assets of Freddie Mac mortgage-related securities. Purchase commitments represent our obligations to purchase loans and mortgage-related securities from third parties, most of which are accounted for as derivatives in...

  • Page 174
    ... in mortgage-related assets. Our consolidated balance sheets reflect only our investment in the VIEs, rather than the full amount of the VIEs' assets and liabilities. As part of our credit guarantee business, we routinely enter into forward purchase and sale commitments Freddie Mac 2015 Form 10...

  • Page 175
    ... for loans and mortgage-related securities. Some of these commitments are accounted for as derivatives. Their fair values are reported as either derivative assets, net or derivative liabilities, net on our consolidated balance sheets. For more information, see "Risk Management - Credit Risk...

  • Page 176
    ... that we use to inform business and risk management decisions and for financial accounting and reporting purposes." We believe the level of our single-family allowance for loan losses is appropriate based on internal reviews of the factors and methodologies used. No single statistic or measurement...

  • Page 177
    ... model together with other information such as our expectations with respect to the following Future levels of loan modifications; Future loan repurchases by seller/servicers; The adequacy of third-party credit enhancements; The effects of changes in government policies and programs; The effects of...

  • Page 178
    ... loss in value. Several bills were introduced in Congress in 2014 and 2015 concerning the future status of Freddie Mac, Fannie Mae, and the mortgage finance system, including bills which provided for the wind down of Freddie Mac and Fannie Mae or modification of the terms of the Purchase Agreement...

  • Page 179
    ... may require us to undertake activities that Reduce our profitability; Expose us to additional credit, market, funding, operational, and other risks; or Provide additional support for the mortgage market to serve our public mission, but adversely affect our financial results. Freddie Mac 2015 Form...

  • Page 180
    ... in the future. For example, FHFA could limit the amount of securities we could sell or further limit the size of our mortgage-related investments portfolio. The Purchase Agreement and the terms of the senior preferred stock also place significant restrictions on our ability to manage our business...

  • Page 181
    ...our delegated underwriting process for single-family loans, including risks related to data accuracy and mortgage fraud. Recent changes to the process could increase our risks. We delegate underwriting for the single-family loans we purchase or securitize to our sellers. Our Freddie Mac 2015 Form 10...

  • Page 182
    ..., there is a risk that the enhanced tools and processes will not enable us to identify all breaches in a timely manner. For more information, see "MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk - Maintaining policies and procedures for new business activity, including...

  • Page 183
    ... our actual return on new single-family guarantee business, as actual default rates could be higher than we expected when we issued the guarantee; Result in declines in net worth due to fair value declines on our investments in non-agency mortgagerelated securities; or Negatively affect loan pricing...

  • Page 184
    ...in their controls, or experience a disruption in their ability to service loans, including as a result of legal or regulatory actions or ratings downgrades. We are also exposed to fraud by third parties in the loan servicing function, particularly with respect to sales of REO properties, short sales...

  • Page 185
    ... risks related to our investments in mortgage-related assets; Fund our business operations; and Service our customers. We face the risk of operational failure of the clearing members, exchanges, clearinghouses, or other financial intermediaries we use to facilitate derivatives, short-term lending...

  • Page 186
    ... of those securities. For more information, see "MD&A - Risk Management - Credit Risk - Institutional Credit Risk - Mortgage and Bond Insurers." Our loss mitigation activities may be costly and may adversely affect our financial results. Our loss mitigation strategies (including HAMP and HARP...

  • Page 187
    ... in the immediate recognition of losses, such as paying a premium to repurchase debt, increasing the amount of non-agency mortgage-related securities we intend to sell, or engaging in certain asset structuring activities that result in the write-off of premiums. Freddie Mac 2015 Form 10-K 185

  • Page 188
    ...such as home equity lines of credit and second liens) that have adjustable payment terms may increase, which in turn increases the risk that the borrower may default on a loan we own or guarantee; and Other-than-temporary impairments on our investments in non-agency mortgage-related securities could...

  • Page 189
    ... in loans and mortgage-related securities, and could increase the cost of our activities to support the liquidity and price performance of our PCs. Consequently, a tightening of the spreads on our assets may adversely affect our future financial results and net worth. Freddie Mac 2015 Form 10...

  • Page 190
    ... Our business is highly dependent on our ability to process a large number of transactions on a daily basis and manage and analyze significant amounts of information, much of which is provided by third parties. The transactions we process are complex and are subject to various legal, accounting, and...

  • Page 191
    ... and service providers could disrupt our business operations or expose us to loss of confidential information or intellectual property. At times, we outsource certain key functions to external parties, including some that are critical to financial reporting, our mortgage-related investment activity...

  • Page 192
    ... of loans, the purchase and sale of securities, funding, the setting of management and guarantee fee prices, and the management of interest-rate, market, or credit risk. Our use of models also affects our quality-control sampling strategies for loans in our single-family credit guarantee...

  • Page 193
    .... We make extensive use of the Federal Reserve's payment system in our business activities. The Federal Reserve requires that we fully fund accounts at the Federal Reserve Bank of New York to the extent necessary to cover cash payments on our debt and mortgage-related securities each day, before...

  • Page 194
    ... affect our financial results. See "MD&A - Our Business Segments - Investments" for a description of our debt issuance programs. Our funding costs and liquidity contingency plans may also be affected by changes in the amount of, and demand for, debt issued by Treasury. Freddie Mac 2015 Form 10...

  • Page 195
    ... to major disruptions in the mortgage and financial markets and to our business due to lower liquidity, higher borrowing costs, lower asset values, and higher credit losses, and could cause us to experience net losses and net worth deficits. A downgrade in our credit ratings could require us to post...

  • Page 196
    ... rights in foreclosure proceedings for homeowner associations); Expands the responsibilities of (and costs to) servicers for maintaining vacant properties prior to foreclosure; Permits or requires principal reductions, such as allowing local governments to use eminent domain to seize mortgage loans...

  • Page 197
    ...new requirements by banking organizations may affect us. For example, the emerging regulatory framework could decrease demand for our debt and mortgage-related securities and/ or affect competition in the market for loan originations and servicing, with possible adverse consequences for our business...

  • Page 198
    ...the business. In addition, a number of lawsuits have been filed against the U.S. government relating to conservatorship and the Purchase Agreement that could adversely affect us. See "Legal Proceedings" and Note 15 for information about these various pending legal proceedings. Freddie Mac 2015 Form...

  • Page 199
    ... with their commitments. The loss of business from any of our major lenders could adversely affect our market share and our revenues. Our charter requires that single-family loans with LTV ratios above 80% at the time of purchase be covered by mortgage insurance or other credit enhancements. If the...

  • Page 200
    ... in purchasing single-family loans from our sellers and the volume and/or profitability of our new single-family guarantee business is directly affected by the price performance of our PCs relative to comparable Fannie Mae securities. Freddie Mac fixed-rate PCs provide for faster scheduled monthly...

  • Page 201
    ... between the mortgage-related securities of Freddie Mac and Fannie Mae. This initiative is complex and costly, and may require us to align our business processes more closely with those of Fannie Mae. There can be no assurance that a single (common) security will reduce the trading value disparities...

  • Page 202
    .... Freddie Mac is not a party to any of these lawsuits. However, a number of other lawsuits have been filed against Freddie Mac concerning the August 2012 amendment to the Purchase Agreement. See Note 15 for information on the lawsuits filed against Freddie Mac. Pershing Square Capital Management...

  • Page 203
    ... 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 201 • Freddie Mac 2015 Form 10-K

  • Page 204
    ...31, 2015. See Note 10 for more information. ISSUER PURCHASES OF EQUITY SECURITIES We did not repurchase any of our common or preferred stock during 2015. Additionally, we do not currently have any outstanding authorizations to repurchase common or preferred stock. Under the Freddie Mac 2015 Form 10...

  • Page 205
    ... certain limited circumstances set forth in the certificate of designation of the senior preferred stock. TRANSFER AGENT AND REGISTRAR Computershare Trust Company, N.A. P.O. Box 30170 College Station, TX 77842 Telephone: 877-373-6374 https://www-us.computershare.com/investor Freddie Mac 2015 Form...

  • Page 206
    Financial Statements FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Freddie Mac 2015 Form 10-K 204

  • Page 207
    ...to the Federal Housing Finance Agency ("FHFA") that may have financial statement disclosure ramifications to be communicated to management of Freddie Mac existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such...

  • Page 208
    ... to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP McLean, Virginia February 18, 2016 Freddie Mac 2015 Form 10...

  • Page 209
    ... Income FREDDIE MAC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, (in millions, except share-related amounts) Interest income Mortgage loans Investments in securities Other Total interest income Interest expense Expense related to derivatives Net interest income Benefit...

  • Page 210
    ...millions, except share-related amounts) Assets Cash and cash equivalents (Notes 3, 13) Restricted cash and cash equivalents (Notes 3, 13) Securities purchased under agreements to resell (Notes 3, 9) Investments in securities, at fair value (Note 6) Mortgage loans held-for-sale (Notes 3, 4) (includes...

  • Page 211
    ... MAC CONSOLIDATED STATEMENTS OF EQUITY Shares Outstanding Senior Preferred Stock 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...

  • Page 212
    ... redemptions of debt securities of consolidated trusts held by third parties Proceeds from issuance of other debt Repayments of other debt Payment of cash dividends on senior preferred stock Changes in other liabilities Net cash used in financing activities 2015 $ Year Ended December 31, 2014 2013...

  • Page 213
    ... | Note 1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to provide liquidity, stability, and affordability to the U.S. housing market. We are regulated by FHFA, the SEC, HUD...

  • Page 214
    ... factors, including, but not limited to 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...

  • Page 215
    ... Repurchase and Resale Agreements and Dollar Roll Transactions Earnings Per Share Stockholders' Equity Income Taxes Segment Reporting Fair Value Measurements Note Note 3 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Note 9 Note 10 Note 10 Note 11 Note 12 Note 14 Freddie Mac 2015 Form 10-K 213

  • Page 216
    ... in lieu of foreclosure or through a similar legal agreement. The amendment requires repurchase-tomaturity transactions to be accounted for as secured borrowings and requires separate accounting for a transfer of a financial asset completed contemporaneously with a repurchase agreement with the same...

  • Page 217
    ...Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements Standard ASU 2015-02, Amendments to the Consolidation Analysis (Topic 810) Description The amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Date...

  • Page 218
    ... housing and mortgage market conditions, we may be required to take actions that could have a negative impact on our business, operating results or financial condition, and thus contribute to a need for additional draws under the Purchase Agreement. In May 2014, FHFA issued its 2014 Strategic Plan...

  • Page 219
    ... the new shared system operational for Freddie Mac's and Fannie Mae's existing single-family securitization activities. The third goal also provides for the Enterprises to work towards the development of a single (common) security. We continue to align our resources and internal business plans to...

  • Page 220
    ... preferred stock and warrant, we are required under the Purchase Agreement to pay a quarterly commitment fee to Treasury. Under the Purchase Agreement, the fee is to be determined in an amount mutually agreed to by us and Treasury with reference to the market value of Treasury's funding commitment...

  • Page 221
    ... Financial Statements | Note 2 The Purchase Agreement includes significant restrictions on our ability to manage our business, including limiting the amount of indebtedness we can incur and capping the size of our mortgage-related investments portfolio. The Purchase Agreement has an indefinite term...

  • Page 222
    ... executive officer or other executive officer (as such terms are defined by SEC rules) without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. The Purchase Agreement also provides that, on an annual basis, we are required to deliver a risk management plan to...

  • Page 223
    ... at December 31, 2015 and was $346.9 billion at that date. Our Retained Portfolio Plan, which we adopted in 2014, provides for us to manage the UPB of the mortgage-related investments portfolio so that it does not exceed 90% of the annual cap established by the Purchase Agreement (subject to certain...

  • Page 224
    ..., in recent years, the Federal Reserve purchased significant amounts of mortgage-related securities issued by us, Fannie Mae, and Ginnie Mae. See Note 7 and Note 10 for more information on the conservatorship and the Purchase Agreement. HOUSING FINANCE AGENCY INITIATIVE In 2009, we entered...

  • Page 225
    ... Finance Agency Initiative"; The transactions discussed in Note 4, Note 7, and Note 10; and The allocation or transfer of 4.2 basis points of each dollar of new business purchases to certain housing funds as required under the GSE Act. In addition, we are deemed related parties with Fannie Mae...

  • Page 226
    Financial Statements Notes to the Consolidated Financial Statements | Note 3 NOTE 3: SECURITIZATION AND GUARANTEE ACTIVITIES Our primary business activities in our Single-family Guarantee and Multifamily segments involve the securitization of loans or other mortgage-related assets using trusts ...

  • Page 227
    ... and the debt carrying value when we purchase single-family PCs as investments in our mortgage-related investments portfolio. Sales of single-family PCs previously held as investments in our mortgage-related investments portfolio are accounted for as debt issuances. Freddie Mac 2015 Form 10-K 225

  • Page 228
    ... rights to receive benefits or obligations to absorb losses that could be significant to the resecuritization trust. Purchases of Giant PCs as investments in our mortgage-related investments portfolio are accounted for as debt extinguishments of a pro-rata portion of the underlying single-family...

  • Page 229
    ... in our mortgage-related investments portfolio are accounted for as sales of investments in debt securities. See Note 7 for additional information on accounting for investments in debt securities. K Certificates In a typical K Certificate transaction, we sell multifamily loans to a non-Freddie Mac...

  • Page 230
    ...guarantee of mortgage-related assets held by third parties, in exchange for a management and guarantee fee, without securitizing those assets. These guarantees consist of the following: • Long-term standby commitments of single-family loans which obligate us to purchase the covered loans when they...

  • Page 231
    ... other VIEs created by third parties through the normal course of business, such as through our investments in non-Freddie Mac mortgage-related securities, purchases of multifamily loans, guarantees of multifamily housing revenue bonds, as a derivative counterparty, or Freddie Mac 2015 Form 10-K 229

  • Page 232
    ... same manner that we account for our interests in other third-party transactions. See Note 6 for additional information regarding our investments in non-Freddie Mac mortgage-related securities. See Note 4 for more information regarding multifamily loans. FINANCIAL GUARANTEES The table below shows...

  • Page 233
    ... the securities that are subordinate to our guarantee. For other securitization products, this represents the remaining amount of loss recovery that is available subject to the terms of the counterparty agreement or the UPB of securities that are subordinate to our guarantee. Freddie Mac 2015 Form...

  • Page 234
    ... as either investing activities (e.g., principal repayments) or operating activities (e.g., interest payments received from borrowers included within net income (loss)). Cash flows related to loans originally classified as held-forsale are classified as operating activities. Freddie Mac 2015 Form 10...

  • Page 235
    ... interest income is resumed. CREDIT QUALITY The current LTV ratio is one key factor we consider when estimating our loan loss reserves for singlefamily loans. As current LTV ratios increase, the borrower's equity in the home decreases, which negatively affects the borrower's ability to refinance...

  • Page 236
    ... the total of single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 6.03% and 9.01% as of December 31, 2015 and 2014, respectively. The majority of our loan modifications result in new terms that include fixed interest rates after modification. As of December...

  • Page 237
    ... Statements Notes to the Consolidated Financial Statements | Note 4 MORTGAGE LOAN PERFORMANCE The following table presents the recorded investment of our single-family and multifamily loans, held-forinvestment, by payment status. December 31, 2015 Three Months or More Past Due, or in Foreclosure...

  • Page 238
    ... Other Forms of Credit Enhancement" for more information. 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. We continue to implement a number of initiatives to refinance and modify single-family loans...

  • Page 239
    ... to the provision for credit losses in our consolidated statements of comprehensive income. The loan loss reserves include: • • 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...

  • Page 240
    ... and underwriting information. Each subsequent month, the servicers provide us with monthly loan level servicing data, including delinquency and loss information. Our single-family loan loss reserve default models produce estimates based on 12 months of loan level Freddie Mac 2015 Form 10-K 238

  • Page 241
    ... properties, including REO, short sales, and third-party sales. Our single-family loan loss severity estimate also captures expectations about recoveries from primary mortgage insurance or from seller/servicers due to repurchases. We use historical trends in home prices in our single-family loan...

  • Page 242
    ...original loan agreement. Single-family loans individually evaluated for impairment include TDRs, as well as loans acquired under our financial guarantees with deteriorated credit quality prior to 2010. Multifamily loans individually evaluated for impairment include TDRs, loans three monthly payments...

  • Page 243
    ...preceding the payment default. The table presents loans based on their original product category before modification. Year Ended December 31, 2015 Number of Mortgage Loans 18,478 900 335 1,955 21,668 - $ $ $ Post-TDR Recorded Investment(1) 3,036 72 55 435 3,598 - 2014 Number of Mortgage Loans 19,101...

  • Page 244
    ...-Family Loans Impairment of a single-family loan having undergone a TDR is generally measured as the excess of our recorded investment in the loan over the present value of the expected future cash flows, discounted at the loan's original effective interest rate for fixed-rate loans, or at the loan...

  • Page 245
    ... loans and the related allowance for loan losses. Balance at December 31, 2015 Recorded Investment Associated Allowance Net Investment For the Year Ended December 31, 2015 Average Recorded Investment Interest Income Recognized Interest Income Recognized On Cash Basis(1) (in millions) Single-family...

  • Page 246
    ...Notes to the Consolidated Financial Statements | Note 4 Balance at December 31, 2014 Recorded Investment Associated Allowance Net Investment For the Year Ended December 31, 2014 Average Recorded Investment Interest Income Recognized Interest Income Recognized On Cash Basis(1) (in millions) Single...

  • Page 247
    ... mortgage-related guarantees, we have various forms of credit protection. The table below presents the UPB of single-family loans on our consolidated balance sheets or underlying certain of our financial guarantees with credit protection and the maximum amounts of potential loss recovery by type...

  • Page 248
    ... contracts provide insurance on a group of mortgage loans up to a stated aggregate loss limit. We have not purchased pool insurance on single-family mortgage loans since March 2008. For information about counterparty risk associated with mortgage insurers, see Note 13. Our credit risk transfer...

  • Page 249
    ... (126) 2,558 $ 2013 4,407 6,498 (6,303) 4,602 (29) (22) (51) 4,551 $ We obtain REO properties when we are the highest bidder at foreclosure sales of properties that secure single-family and multifamily loans owned by us or when a delinquent borrower chooses to transfer the mortgaged property to us...

  • Page 250
    ...during 2015, 2014, and 2013, respectively. NON-CASH INVESTING AND FINANCING ACTIVITIES REO property acquisitions as a result of the derecognition of loans held on our consolidated balance sheets upon foreclosure of the underlying collateral or deed in lieu of foreclosure represent non-cash transfers...

  • Page 251
    ... do so in the future. Securities classified as available-for-sale and trading are reported at fair value with changes in fair value included in AOCI, net of income taxes and other gains (losses) on investment securities recognized in earnings, respectively. See Note 14 for more information on how we...

  • Page 252
    ... Statements | Note 6 TRADING SECURITIES The following table presents the estimated fair values of our trading securities by major security type. Our non-mortgage-related securities consisted solely of Treasury securities. (in millions) Mortgage-related securities: Freddie Mac Fannie Mae Ginnie Mae...

  • Page 253
    ... Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states and political subdivisions Manufactured housing Total available-for-sale securities (1) (2) $ Amortized Cost 37,710 10,860 183 20,988 20,210 5,460 4,500 2,166 $ 556 102,633 $ $ December 31, 2014 Gross...

  • Page 254
    ...-for-sale securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states and political subdivisions Manufactured housing Total available-for-sale securities in a gross unrealized loss position $ December 31, 2014 Less than 12 Months 12 Months or...

  • Page 255
    ...-sale securities in an unrealized loss position at December 31, 2015, we have asserted that we have no intent to sell and that we believe it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis. Freddie Mac and Fannie Mae Securities...

  • Page 256
    ..., and risk premiums. In evaluating securities for impairment, we use an external model that considers the credit performance of the underlying collateral, including current LTV ratio, delinquency status, servicer performance, loan modification terms and status, borrower credit information, and...

  • Page 257
    ... Financial Statements | Note 6 Obligations of States and Political Subdivisions These investments consist of housing revenue bonds. We believe the unrealized losses on obligations of states and political subdivisions are primarily a result of movements in interest rates and liquidity and risk...

  • Page 258
    ...Ten Years Amortized Cost Fair Value After Ten Years Amortized Cost Fair Value (dollars in millions) Available-for-sale securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states and political subdivisions Manufactured housing Total available-forsale...

  • Page 259
    ...extinguishment of debt securities of consolidated trusts. During 2015 and 2014, we extinguished debt securities of consolidated trusts as consideration for the transfer of investment securities of $0.5 billion and $0 billion, respectively, as a result of these transactions. Freddie Mac 2015 Form 10...

  • Page 260
    ... is accounted for as a modification of the existing debt. Fees paid to the creditor are deferred and amortized into interest expense over the life of the modified debt security using the effective interest method and fees paid to third parties are expensed as incurred. Freddie Mac 2015 Form 10...

  • Page 261
    ...liability to third parties that hold beneficial interests in our consolidated securitization trusts. Debt securities of consolidated trusts held by third parties are generally prepayable as the loans that collateralize the debt may prepay without penalty at any time. Freddie Mac 2015 Form 10-K 259

  • Page 262
    ... of other short-term debt consisted of discount notes and Reference Bills® securities, paying only principal at maturity. Discount notes, Reference Bills® securities, and medium-term notes are unsecured general corporate obligations. Certain medium-term notes that have original maturities of...

  • Page 263
    ... maturities of debt securities of consolidated trusts held by third parties are not presented because they are prepayable at any time without penalty. Other basis adjustments primarily represent changes in fair value attributable to instrument-specific credit risk. Freddie Mac 2015 Form 10-K 261

  • Page 264
    ... specified capital levels. However, in a September 23, 2008 statement concerning the conservatorship, the Director of FHFA stated that we would continue to make interest and principal payments on our subordinated debt, even if we fail to maintain required capital levels. Freddie Mac 2015 Form 10...

  • Page 265
    ... to mitigate our exposures, we consider a number of factors, including cost, exposure to counterparty risk, and our overall risk management strategy. We classify derivatives into three categories Exchange-traded derivatives; Cleared derivatives; and OTC derivatives. 263 Freddie Mac 2015 Form 10-K

  • Page 266
    ... for mortgage debt or payment cancellation for borrowers who experience unanticipated losses of income dependent on a covered event. The rights and obligations under these agreements have been assigned to the servicers. However, in the event the servicer does not perform as required by contract we...

  • Page 267
    ... counterparty netting and cash collateral netting. Cash collateral amounts were a net was $2.3 billion and $3.2 billion at December 31, 2015 and 2014, respectively. See Note 9 for information related to our derivative counterparties and collateral held and posted. Freddie Mac 2015 Form 10...

  • Page 268
    ... (168) (1,006) 8 248 1,437 (54) (7) 239 8 5 191 3,033 (5,660) 2 (2,625) (8,291) $ (2,547) 546 (8) - (413) (2,422) 21 30 (131) (3) 6 (77) 3,764 (7,233) 2 (3,467) 2,632 $ Primarily includes purchased interest-rate caps and floors and options on Treasury futures. Freddie Mac 2015 Form 10-K 266

  • Page 269
    ... and we require counterparties to deliver collateral in the form of cash, securities, or a combination of both when their net obligation to us is above an agreed upon threshold. Our use of interest rate swaps and option-based derivatives is subject to internal credit and legal reviews. On an...

  • Page 270
    ... at December 31, 2015 and 2014, respectively. Many of our transactions involving forward purchase and sale commitments of mortgage-related securities, including our dollar roll transactions, utilize the Mortgage Backed Securities Division of the Fixed Income Clearing Corporation ("MBSD/FICC") as...

  • Page 271
    ... Statements | Note 9 OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES The table below displays information related to derivatives and securities purchased under agreements to resell on our consolidated balance sheets. December 31, 2015 Net Amount Presented in the Consolidated Balance Sheets(1) Gross...

  • Page 272
    ..., Freddie Mac mortgage-related securities, and cash may be pledged. We consider the types of securities being pledged to us as collateral when determining how much we lend in transactions involving securities purchased under agreements to resell. Additionally, we regularly review the market values...

  • Page 273
    ... 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. Cash Pledged At December 31, 2015, we pledged $4.0 billion of collateral in the form of cash and cash...

  • Page 274
    ...Notes to the Consolidated Financial Statements | Note 10 NOTE 10: STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE ACCUMULATED OTHER COMPREHENSIVE INCOME The table below presents changes in AOCI after the effects of our 35% federal statutory tax rate related to available-for-sale securities, closed cash...

  • Page 275
    ...-for-sale (938) securities recognized in earnings 774 Total before tax (271) Tax (expense) or benefit 503 Net of tax Affected Line Item in the Consolidated Statements of Comprehensive Income Three Months Ended December 31, 2015 2014 Year Ended December 31, 2015 2014 Future Reclassifications...

  • Page 276
    ... senior preferred stock, as a reduction to net income (loss) available to common stockholders and net income (loss) per common share. The dividend is declared and paid in the following period and recorded as a reduction to equity in the period declared. Total dividends paid in cash during 2015, 2014...

  • Page 277
    Financial Statements Notes to the Consolidated Financial Statements | Note 10 commitment fees previously added to the liquidation preference and not previously paid down. In addition, if we issue any shares of capital stock for cash while the senior preferred stock is outstanding, the net proceeds...

  • Page 278
    ...24 classes of preferred stock are perpetual and non-cumulative, and carry no significant voting rights or rights to purchase additional Freddie Mac stock or securities. Costs incurred in connection with the issuance of preferred stock are charged to additional paid-in capital. Freddie Mac 2015 Form...

  • Page 279
    Financial Statements Notes to the Consolidated Financial Statements | Note 10 The table below provides a summary of our preferred stock outstanding at their redemption values at December 31, 2015. (in millions, except redemption price per share) Preferred stock: 1996 Variable-rate(1) 5.81% 5% 1998...

  • Page 280
    ...outstanding. For periods with net income attributable to common stockholders, the calculation includes the effect of the following common stock equivalent shares outstanding: • Weighted average shares related to stock options if the average market price during the period 278 Freddie Mac 2015 Form...

  • Page 281
    ...common stock now trade under the ticker symbol FMCC. We expect that our common stock and the previously listed classes of preferred stock will continue to trade in the OTCQB Marketplace so long as market makers demonstrate an interest in trading the common and preferred stock. Freddie Mac 2015 Form...

  • Page 282
    ....0) - (0.5) (124.8) 0.3 (91.9)% $ DEFERRED TAX ASSETS, NET We use the asset and liability method of accounting for income taxes for financial reporting purposes. Under this method, deferred tax assets and liabilities are recognized based upon the expected future tax Freddie Mac 2015 Form 10-K 280

  • Page 283
    ... and the length of the carryforward period available to utilize our tax credit carryforward under current tax law; Our access to capital under the agreements associated with conservatorship; and Our expected 2015 taxable income and forecasts of future book income. 281 Freddie Mac 2015 Form 10-K

  • Page 284
    ... for certain hedging transactions. A final decision was entered in U.S. Tax Court in June 2015. We have accrued gross interest receivable of $65 million and $535 million as of December 31, 2015 and 2014, respectively, related to payments on account with the IRS. Freddie Mac 2015 Form 10-K 282

  • Page 285
    ... delivery and buy-down fees Adjustments to management and guarantee fees for the price performance of our PCs relative to comparable Fannie Mae securities Costs and recoveries of risk transfer transactions Credit losses on all single-family assets Net float income or expense on the single-family...

  • Page 286
    ... housing revenue bonds Debt issuances Interest rate risk management Guarantee buy-ups, net of execution gains / losses Cash and liquidity management Settlements, including legal settlements, relating to non-agency mortgage-related securities Tax expense/benefit and changes in the deferred tax asset...

  • Page 287
    ... 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. 285 • Freddie Mac 2015 Form 10-K

  • Page 288
    ... the life of the underlying loans. Adjustments to net interest income for the Investments segment to include the amortization of cash premiums and discounts, as well as buy-up fees, on the consolidated Freddie Mac mortgage-related securities we purchase as investments. As of December 31, 2015, the...

  • Page 289
    ... taxes Net income Comprehensive income (loss) of segments: Single-family Guarantee Multifamily Investments All Other Comprehensive income of segments Comprehensive income 2015 $ 1,778 827 3,771 - 6,376 6,376 1,790 566 3,415 28 5,799 5,799 $ $ $ $ $ $ (41) 9,426 9,426 $ Freddie Mac 2015 Form...

  • Page 290
    ...-for-sale securities Changes in unrealized gains (losses) related to cash flow hedge relationships Changes in defined benefit plans Total other comprehensive income (loss), net of taxes Comprehensive income (loss) Singlefamily Guarantee $ (111) 2,030 Multifamily $ 927 26 Investments $ 1,734...

  • Page 291
    ...-for-sale securities Changes in unrealized gains (losses) related to cash flow hedge relationships Changes in defined benefit plans Total other comprehensive income (loss), net of taxes Comprehensive income (loss) Singlefamily Guarantee $ (111) (982) Multifamily $ 948 55 Investments $ 2,966...

  • Page 292
    ... - - - - - 316 210 49 $ 5,845 $ (1,595) 1,455 $ 4,357 20,287 121 $ 24,013 $ 2,932 51,600 $ - - $ - - $ - - $ 2,932 51,600 (1) Management and guarantee income is included in other income (loss) on our GAAP consolidated statements of comprehensive income. Freddie Mac 2015 Form 10-K 290

  • Page 293
    ... to repay his or her loan and the property value underlying the loan. Geographic concentrations increase the exposure of our portfolio to changes in credit risk. Single-family borrowers are primarily affected by home prices, unemployment rates and interest rates. Freddie Mac 2015 Form 10-K 291

  • Page 294
    ...Note 4 and Note 6 for more information about credit risk associated with loans and mortgage-related securities that we hold or guarantee. December 31, 2015 Percentage of Portfolio Year of Origination 2015 2014 2013 2012 2011 2010 2009 Subtotal - Core singlefamily book HARP and other relief refinance...

  • Page 295
    ... within the option ARM category continue to be reported in that category following modification, even though the modified loan no longer provides for optional payment provisions. Includes HARP loans, which we purchase as part of our participation in the MHA Program. Freddie Mac 2015 Form 10-K 293

  • Page 296
    ... single-family credit guarantee portfolio, based on UPB at December 31, 2015, and these loans accounted for approximately 89% of our credit losses during 2015. We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or Alt-A if the securities were identified...

  • Page 297
    ... loans purchased by the GSEs on or after January 1, 2013. The objective of the revised framework is to clarify lenders' repurchase exposures and liability on future sales of loans to Freddie Mac and Fannie Mae. This framework does not affect seller/servicers' obligations under their contracts...

  • Page 298
    ... primarily relates to multifamily loans that we hold on our consolidated balance sheets where we retain all of the related credit risk. We monitor the status of all our multifamily seller/servicers in accordance with our counterparty credit risk management framework. Freddie Mac 2015 Form 10-K 296

  • Page 299
    ... Note 4 for additional information. As of December 31, 2015, mortgage insurers provided coverage with maximum loss limits of $66.5 billion, for $259.3 billion of UPB, in connection with our single-family credit guarantee portfolio. These amounts are based on gross coverage without regard to netting...

  • Page 300
    ... of Financial Services of the State of New York the authority to take possession and/or control of FGIC's property and assets and to conduct FGIC's business. In 2013, FGIC's plan of rehabilitation was approved, under which permitted claims are paid 17% in cash and the remainder in deferred payment...

  • Page 301
    ... NON-AGENCY MORTGAGE-RELATED SECURITY ISSUERS We are engaged in various loss mitigation efforts concerning certain investments in non-agency mortgage-related securities. In 2011, FHFA, as Conservator for Freddie Mac and Fannie Mae, filed lawsuits against a number of corporate families of financial...

  • Page 302
    ...-depository servicers. As of December 31, 2015 and 2014, approximately $13.0 billion and $17.9 billion, respectively, in UPB of loans underlying our investments in single-family non-agency mortgage-related securities were serviced by subsidiaries and/or affiliates of Ocwen. Freddie Mac 2015 Form 10...

  • Page 303
    ... within our Finance division, independent of our business functions, execute and validate the valuation processes and are responsible for determining the fair values of the majority of our financial assets and liabilities. In determining fair value, we consider the credit risk of our counterparties...

  • Page 304
    ... corporate model change governance process, with all material changes reviewed at the Valuation Committee. Inputs used by models are regularly updated for changes in the underlying data, assumptions, valuation inputs, and market conditions, and are subject to the valuation controls noted above. Use...

  • Page 305
    ... Securities Agency mortgagerelated securities Valuation Technique Valuations are based on quoted prices in active markets. Valuations are based on: Fixed-rate single-class: Observable prices for similar TBA securities adjusted for specific collateral characteristics Level 2 Freddie Mac 2015 Form...

  • Page 306
    ... non-agency mortgage-related securities Mortgage Loans Single-family loans Valuations are based on: GSE Securitization Market: Benchmark security pricing for actively traded mortgage-related securities with similar characteristics, adjusting for the value of our management and guarantee fee and...

  • Page 307
    ...) fair value measurement Mortgage servicing rights Valuations are based on market prices from third party using discounted cash flows. Significant inputs include: Estimated prepayment rates, Estimated costs to service both performing and non-accrual loans, and Estimated servicing income per loan...

  • Page 308
    ...are based on: Single-family The delivery and management and guarantee fees that we charge Level 2 under our current market pricing Internal credit models. Significant inputs include loan characteristics, loan performance, and status information. Multifamily: Discounted cash flows. Significant inputs...

  • Page 309
    ...the Consolidated Financial Statements | Note 14 The total compensation that we receive for the delivery of a HARP loan reflects the pricing that we are willing to offer because HARP is a part of a broader government program intended to provide assistance to homeowners and prevent foreclosures. When...

  • Page 310
    ... Statements Notes to the Consolidated Financial Statements | Note 14 December 31, 2015 (in millions) Assets: Investments in securities: Available-for-sale, at fair value: Mortgage-related securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states...

  • Page 311
    ... Statements Notes to the Consolidated Financial Statements | Note 14 December 31, 2014 (in millions) Assets: Investments in securities: Available-for-sale, at fair value: Mortgage-related securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states...

  • Page 312
    ...losses, recognized in our consolidated statements of comprehensive income for Level 3 assets and liabilities for the years ended December 31, 2015 and 2014. When assets and liabilities are transferred between levels, we recognize the transfer as of the beginning of the period. Freddie Mac 2015 Form...

  • Page 313
    ..., 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: Mortgagerelated securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt...

  • Page 314
    ... Total Purchases Issues Sales Settlements, net Transfers into Level 3 Transfers out of Level 3 Balance, December 31, 2014 (in millions) Assets Investments in securities: Available-for-sale, at fair value: Mortgagerelated securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM...

  • Page 315
    ... techniques, the range, and the weighted average of significant unobservable inputs for assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis using unobservable inputs (Level 3) as of December 31, 2015 and 2014. Freddie Mac 2015 Form 10-K 313

  • Page 316
    ... Assets Investments in securities Available-for-sale, at fair value Mortgage-related securities Freddie Mac Total Freddie Mac Fannie Mae $ $ 33,527 Total Fannie Mae Ginnie Mae Total Ginnie Mae CMBS Total CMBS Subprime, option ARM, and Alt-A: Subprime Total subprime Option ARM Total option ARM...

  • Page 317
    ... Assets Investments in securities Available-for-sale, at fair value Mortgage-related securities Freddie Mac $ Total Freddie Mac Fannie Mae $ 39,099 Total Fannie Mae Ginnie Mae Total Ginnie Mae CMBS Total CMBS Subprime, option ARM, and Alt-A: Subprime Total subprime Option ARM Total option ARM...

  • Page 318
    ... Mortgage loans $ 8,962 $ 8,962 Internal model Internal model Third-party appraisal Income capitalization (1) Historical sales proceeds Housing sales index Property value Capitalization rates $3,000 $896,519 38 - 294 bps $11 million $44 million 6%- 9% $162,556 82 bps $31 million 7% REO, net...

  • Page 319
    ...cash equivalents Securities purchased under agreements to resell Investments in securities: Available-for-sale, at fair value Trading, at fair value Total investments in securities Mortgage loans: Loans held by consolidated trusts Loans held by Freddie Mac Total mortgage loans Derivative assets, net...

  • Page 320
    ...cash equivalents Securities purchased under agreements to resell Investments in securities: Available-for-sale, at fair value Trading, at fair value Total investments in securities Mortgage loans: Loans held by consolidated trusts Loans held by Freddie Mac Total mortgage loans Derivative assets, net...

  • Page 321
    ..., Multifamily Held-For-Sale Loans 17,660 $ 17,673 $ 2014 Multifamily Other Debt Other Debt Held-For-Sale Long Term Long Term Loans 7,045 $ 12,130 $ 5,820 $ 7,093 11,872 5,896 (48) $ 258 $ (76) (13) $ 2015 (in millions) Fair value Unpaid principal balance Difference Freddie Mac 2015 Form 10-K 319

  • Page 322
    ...our consolidated statements of comprehensive income. Changes in fair value attributable to instrument-specific credit risk were not material for the years ended December 31, 2015, 2014, or 2013 for any assets or liabilities for which we elected the fair value option. Freddie Mac 2015 Form 10-K 320

  • Page 323
    ... incidental to our business. We are frequently involved, directly or indirectly, in litigation involving mortgage foreclosures. From time to time, we are also involved in proceedings arising from our termination of a seller/servicer's eligibility to sell loans to, and/or service loans for, us. In...

  • Page 324
    ... the settlement to have a material effect on our financial results for 2016. LIBOR LAWSUIT On March 14, 2013, Freddie Mac filed a lawsuit in the U.S. District Court for the Eastern District of Virginia against the British Bankers Association and the 16 U.S. Dollar LIBOR panel banks and a number of...

  • Page 325
    ... In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations. This case is the result of the consolidation of three putative class action lawsuits: Cacciapelle and Bareiss vs. Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and FHFA...

  • Page 326
    ... America and Federal Home Loan Mortgage Corporation. This case was filed as a derivative lawsuit, purportedly on behalf of Freddie Mac as a "nominal" defendant, on February 26, 2014. The complaint alleges, among other items, that the net worth sweep dividend provisions of the senior preferred stock...

  • Page 327
    ...Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations case, the plaintiffs have not demanded a stated amount of damages they believe are due, and the Court has not certified a class. Stockholder Letters We have received two letters dated January 19, 2016 addressed...

  • Page 328
    ... requirement was not affected by adoption of amendments to the accounting guidance for transfers of financial assets and consolidation of VIEs effective January 1, 2010. Specifically, upon adoption of these amendments, FHFA directed us, for purposes of minimum capital, to continue reporting single...

  • Page 329
    ... Notes to the Consolidated Financial Statements | Note 16 (2) Core capital excludes certain components of GAAP total equity (i.e., AOCI and the liquidation preference of the senior preferred stock) as these items do not meet the statutory definition of core capital. The Purchase Agreement...

  • Page 330
    ... $ - 109 109 Settlement agreements primarily related to lawsuits regarding our investments in certain non-agency mortgage-related securities and were a significant component of other income in 2014 and 2013. The table below presents the significant components of other assets and other liabilities...

  • Page 331
    Quarterly Selected Financial Data QUARTERLY SELECTED FINANCIAL DATA (UNAUDITED) 2015 (in millions, except share-related amounts) Net interest income Benefit (provision) for credit losses Non-interest income (loss): Derivative gains (losses) Net impairments of available-for-sale securities ...

  • Page 332
    ...Financial Data 2014 (in millions, except share-related amounts) Net interest income Benefit (provision) for credit losses Non-interest income (loss): Derivative gains (losses) Net impairments of available-for-sale securities recognized in earnings Other non-interest income Non-interest income (loss...

  • Page 333
    ... control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by the Board of Directors, management...

  • Page 334
    ...the SEC's rules and forms and that such information is accumulated and communicated to management of the company, including the company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing our disclosure controls...

  • Page 335
    ... 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. • • • • In view of our mitigating actions...

  • Page 336
    ... reasonably likely to materially affect, our internal control over financial reporting. We continue to make considerable enhancements to our risk management framework. During 2015, we continued to enhance and refine our three-lines-of-defense risk management framework. As part of this effort, during...

  • Page 337
    ...Director Biographical Information" for information about each of our re-elected directors. The terms of those directors will end on the date of the next annual meeting of our stockholders or when the Conservator next elects directors by written consent, whichever occurs first. Freddie Mac 2015 Form...

  • Page 338
    ... 2015 (the "Corporate Governance Rule"), the factors considered include the knowledge directors would have, as a group, in the areas of business, finance, accounting, risk management, public policy, mortgage lending, real estate, low-income housing, homebuilding, regulation of financial institutions...

  • Page 339
    ... and Risk Committee and Chair of the Audit Committee of Regions Financial Corporation (2010-present) Member of the Board and Audit Committee of Circuit City Stores, Inc. (2000-2009) Member of the Board and Audit Committee of RARE Hospitality International, Inc. (2000-2007) Freddie Mac 2015 Form 10...

  • Page 340
    ... financial services, insurance, mortgage banking, and risk management experience. Experience and Qualifications 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...

  • Page 341
    ... Bank and Wells Fargo), last serving as Managing Director of the Fixed Income Division (1992-2003) Various positions with AIG Financial Products (1990-1992); Stamford Capital Group (1987-1990); Bankers Trust Corporation (1985-1987); and Lehman Brothers, Inc. (1983-1985) Freddie Mac 2015 Form...

  • Page 342
    ...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...

  • Page 343
    ... of Corporate Directors (2014-present) Freddie Mac Committees: Audit Nominating & Governance Public Directorships: Avon Products, Inc. Campbell Soup Company Shire plc • Sara Mathew Age: 60 Director Since: December 2013 Ms. Mathew is an executive with global financial and general management...

  • Page 344
    ... 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) Freddie Mac Committees: Audit Compensation, Chair...

  • Page 345
    ...Rhode Island Housing and Mortgage Finance Corporation (2015-present) Freddie Mac Committees: Audit Compensation Public Directorships: ACE Limited Eugene B. Shanks, Jr. Age: 68 Director Since: December 2008 Mr. Shanks is an experienced finance executive with leadership and risk management expertise...

  • Page 346
    ... the Bank of Georgetown (2012-present) Member of the Board and Audit Committee of Calvert Sage Fund (2010-present) Member of the Board and Audit Committee of Weston Solutions (2008-2015) Member of the Board and Audit Committee of Meruelo Maddox Properties, Inc. (2007-2009) Freddie Mac 2015 Form 10...

  • Page 347
    ...June 2015. These Guidelines establish corporate governance practices, and include: qualifications for directors, a limitation on the number of boards on which a director may serve, term limits, director orientation and continuing education, and a requirement that the Board and each of its committees...

  • Page 348
    ...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...

  • Page 349
    ...his independence as a Freddie Mac director. Mr. Naqvi owns stock of PNC Financial Services Group, Inc. ("PNC"). In the aggregate, this stock represents a material portion of his net worth. PNC conducts significant business with Freddie Mac, including as a single-family seller/servicer and as trustee...

  • Page 350
    ... 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...

  • Page 351
    ..."Principal Accounting Fees and Services - Approval of Independent Auditor Services and Fees." The Audit Committee also periodically reviews the company's guidelines and policies governing the processes for assessing and managing the company's risks and generally reviews the company's major financial...

  • Page 352
    ... Compensation - CD&A - Compensation Committee Report." The Compensation Committee consists entirely of independent directors. None of the members of the Compensation Committee during fiscal year 2015 were officers or employees of Freddie Mac or had any relationship with us that would be required...

  • Page 353
    ... Governance, and Executive Officers Corporate Governance The Risk Committee, which consists entirely of independent directors, oversees the company's risk management framework, including credit risk, market risk, and operational risk. The Committee reviews and approves the company's ERM policy...

  • Page 354
    ... July 2015. The amount of Mr. Drummond's compensation includes partial annual compensation for the period he served on the Audit Committee during 2015. 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...

  • Page 355
    ... 2010. Mr. Mackey joined Ally Financial in March 2009 as Group Vice President and Senior Finance Executive. Previously, he served as Chief Financial Officer for the Corporate Investments, Corporate Treasury, and Private Equity divisions at Bank of America Corporation, a financial services firm, from...

  • Page 356
    ...Citigroup in diverse roles with increasing responsibility across finance, operations, sales and distribution, business, and risk management in global consumer businesses. In risk, he was Director for Global Consumer Credit Risk and then Chief Risk Officer for the Consumer Lending Group, where he was...

  • Page 357
    ... our EVP - Chief Administrative Officer since August 2010. In this role, he manages the services and operations of Freddie Mac's External Relations, including Government and Industry Relations; Public Relations and Corporate Marketing; Internal Communications; Conservatorship and Corporate Strategic...

  • Page 358
    ... Officers Chief Executive Officer Executive Vice President - Chief Financial Officer Executive Vice President - Investments and Capital Markets Executive Vice President - Single-Family Business Executive Vice President - General Counsel & Corporate Secretary Donald H. Layton James G. Mackey...

  • Page 359
    ... measures What We Don't Do No tax "gross-ups" No agreements that guarantee a specific amount of compensation for a specified term of employment No golden parachute payments or other similar change in control provisions No hedging or pledging of company securities Freddie Mac 2015 Form 10-K 357

  • Page 360
    ... in all employee benefit plans offered to Freddie Mac's other senior executives pursuant to the terms of those plans. DETERMINATION OF 2015 TARGET TDC FOR NEOs ROLE OF COMPENSATION CONSULTANT As part of the annual process to determine the Target TDC for each of the NEOs, the Compensation Committee...

  • Page 361
    ... Bank of America* Bank of New York Mellon BB&T Capital One * Citigroup* Fannie Mae Fifth Third Bancorp The Hartford JPMorgan Chase* MetLife Northern Trust PNC Prudential Regions Financial State Street SunTrust U.S. Bancorp Wells Fargo* Only mortgage or real estate division-level compensation data...

  • Page 362
    ... to reduce taxpayer risk through credit risk transfers of more than $196 billion in unpaid principal balance and by reducing the retained portfolio through sales of less liquid assets; The execution of four different types of single-family credit risk transfer transactions and the implementation...

  • Page 363
    ... volume of new multifamily business at $30 billion or below, excluding: • Affordable housing loans, loans to small multifamily properties and loans to manufactured housing rental communities. Single-Family • Transact credit risk transfers on reference pools of single-family mortgages with a UPB...

  • Page 364
    ... Purchase Agreement requirements. The goal was achieved 3 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 (30%) Continue working with FHFA, Fannie Mae and CSS to build and test...

  • Page 365
    ...single-family business, we increased our share of the GSE market, with a large share of new business being provided by a more diversified customer base. In our multifamily business, we exceeded the targeted increase in the number of small balance loan sellers. In addition, the quality of our service...

  • Page 366
    ...of private-label securities, as well as the securitization of $8.2 billion of reperforming loans. Partnered with the Single-Family Business to improve the market penetration of cash purchases of single-family mortgages, which accounted for 35% of single-family volume in 2015, an increase from 29% in...

  • Page 367
    ... and Analysis David B. Lowman Performance Highlights: Executive Vice President Single-Family Business Further improved customer service and engagement levels in 2015, with a 15% increase in the company's internal measurement of "relationship health." Achieved higher market share in 2015 as...

  • Page 368
    ... in connection with his employment as our CEO. The terms of Mr. Layton's letter agreement provide him with an annual Base Salary of $600,000 and the opportunity to participate in all employee benefit plans offered to Freddie Mac's executive officers pursuant to the terms of these plans. Copies of Mr...

  • Page 369
    ... EVP - Single-Family Business. The terms of Mr. Lowman's letter agreement provide him with an annual Target TDC opportunity of $3,000,000, consisting of Base Salary of $500,000 and Deferred Salary of $2,500,000; and the opportunity to participate in all employee benefit plans offered to Freddie Mac...

  • Page 370
    ... was materially harmful to Freddie Mac. Compensation Subject to Recapture and/or Forfeiture: Any Deferred Salary earned during the two years prior to the date that the NEO is terminated, any Deferred Salary scheduled to be paid within two years after termination, and any cash payment made or to be...

  • Page 371
    ... exceed $25,000 without FHFA approval, and we do not provide a gross-up to cover any taxes due on the perquisite itself. The only perquisite provided to our NEOs during 2015 was reimbursement for assistance with personal financial planning, tax planning, and/or estate Freddie Mac 2015 Form 10-K 369

  • Page 372
    ... 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 370 • • Freddie Mac 2015 Form...

  • Page 373
    ... Sara Mathew Saiyid T. Naqvi Nicolas P. Retsinas (1) Reflects Compensation Committee membership as of the time that the Compensation Disclosure and Analysis was reviewed and discussed with management and recommended to the Board for inclusion in this Form 10-K. Freddie Mac 2015 Form 10-K 371

  • Page 374
    ... Committee concurred, is that Freddie Mac has taken appropriate and reasonable efforts to help ensure that our compensation policies and practices do not encourage employees to take unnecessary and excessive risks to meet our corporate objectives, and our current compensation policies and practices...

  • Page 375
    ...56,958 $ 2,008,937 EVP - Chief Financial 2014 Officer 2013 Michael T. Hutchins(6) EVP - Investments & Capital Markets David B. Lowman EVP - Single-Family Business William H. McDavid EVP - General Counsel and Corporate Secretary (1) (2) 2015 2014 2013 2015 2014 2013 2015 500,000 500,000 329,502 500...

  • Page 376
    ... the Thrift/401(k) Plan are generally available on the same terms to all of our employees. After the first year of employment, we match up to 6% of eligible compensation at 100% of the employee's contributions. Employee contributions and our matching contributions are invested in accordance with the...

  • Page 377
    ... options or had RSUs vest during 2015. PENSION BENEFITS Freddie Mac previously offered a Pension Plan, which was a tax-qualified, defined benefit pension plan, covering substantially all employees hired before 2012 who had attained age 21 and completed one year of service with us. In October, 2013...

  • Page 378
    ... or losses in their SERP Benefit accounts based upon each participant's individual direction of the investment of such notional amounts among the virtual investment funds available under the SERP, which are the same as the investment options available under the Thrift/401(k) Plan. To be eligible for...

  • Page 379
    ... for us to pay compensation to our NEOs in the event of a termination of employment. The actual payment of any level of termination benefits is subject to FHFA review and approval. For more information, see "- Written Agreements Relating to NEO Employment." In addition, the 2015 EMCP addresses the...

  • Page 380
    ...were no outstanding stock options or RSUs held by NEOs as of December 31, 2015. All Other Not For Cause Terminations(2) Death Donald H. Layton Deferred Salary: Fixed At Risk-Conservatorship Scorecard Interest on Deferred Salary(5) Total James G. Mackey Deferred Salary: Fixed At Risk-Conservatorship...

  • Page 381
    ... been applied to these amounts. The amounts reported for Deferred Salary: At Risk-Corporate Scorecard/Individual in the Retirement and All Other Not For Cause Terminations columns reflect the assessment of 2015 performance approved by the Compensation Committee and FHFA. For death or disability, the...

  • Page 382
    ...G. Mackey EVP - Chief Financial Officer Michael T. Hutchins EVP - Invest. & Cap. Markets David B. Lowman EVP - Single-Family Business EVP - General Counsel & Corp. Sec. William H. McDavid All directors and executive officers as a group (22 persons) (1) (2) 10,824 44,272 Includes shares of stock...

  • Page 383
    ... in ownership with the SEC. Based solely on a review of such reports, we believe that during 2015 all of our directors and executive officers complied with such reporting obligations. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table provides information about...

  • Page 384
    ...310,784 shares, 5,845,739 shares, and 1,667,691 shares available for issuance under the 2004 Stock Compensation Plan, the Employee Stock Purchase Plan, and the Directors' Plan, respectively. No shares are available for issuance under the 1995 Stock Compensation Plan. Freddie Mac 2015 Form 10-K 382

  • Page 385
    ... Transactions Policy. If so, the transaction is reviewed by the appropriate Authorized Approver. In consultation with the Chair of the Nominating and Governance Committee, the General Counsel may refer any proposed transaction to the Nominating and Governance Committee for review and approval. If...

  • Page 386
    ... $11.2 billion in single-family loans to Freddie Mac in 2015. JPMorgan Chase also is a significant capital markets, derivatives, and multifamily counterparty and is an underwriter of our debt and mortgage securities. As of January 31, 2016, JPMorgan Chase and its Freddie Mac 2015 Form 10-K 384

  • Page 387
    ... form of "private equity balance," which is expected to be paid in full in 2016. Mr. Layton's deferred compensation balance is less than 10% of his total net worth on an after-tax basis. Mr. Layton also has brokerage and deposit accounts with JPMorgan Chase. The amounts of Mr. Layton's pension and...

  • Page 388
    ...related to certain of Freddie Mac's risk transfer and structured transactions. The tax fees billed in 2015 and 2014 related to non-audit tax consulting services to provide advice and recommendations related to tax planning or reporting matters, as well as non-audit tax services to provide assistance...

  • Page 389
    ... by our senior financial management, which reports throughout the year to the Audit Committee. The Audit Committee pre-approved all audit, audit-related, tax, and other services performed in 2015 and 2014. The Audit Committee appoints the independent public accounting firm on an annual basis. In...

  • Page 390
    ... required to be filed in this Form 10-K are included in "Financial Statements and Supplementary Data." (2) Financial Statement Schedules None. (3) Exhibits An Exhibit Index has been filed as part of this Form 10-K beginning on page E-1 and is incorporated herein by reference. Freddie Mac 2015 Form...

  • Page 391
    ...Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Federal Home Loan Mortgage Corporation By: /s/ Donald H. Layton Donald H. Layton Chief Executive Officer Date: February 18, 2016 Freddie Mac 2015 Form...

  • Page 392
    ... and Director (Principal Executive Officer) Executive Vice President - Chief Financial Officer (Principal Financial Officer) Senior Vice President - Corporate Controller and Principal Accounting Officer (Principal Accounting Officer) Director February 18, 2016 /s/ James G. Mackey James G. Mackey...

  • Page 393
    Signatures /s/ Anthony A. Williams* Anthony A. Williams *By: /s/ Alicia S. Myara Alicia S. Myara Attorney-in-Fact Director February 18, 2016 Freddie Mac 2015 Form 10-K 391

  • Page 394
    ...of debt instruments or movements in interest rates. Cash and other investments portfolio - Consists of the liquidity and contingency operating portfolio and restricted cash. CCO - Chief Compliance Officer CD&A - Compensation Discussion and Analysis CEO - Chief Executive Officer Freddie Mac 2015 Form...

  • Page 395
    ...result from foreclosure transfers and short sales and are generally calculated as the recorded investment of a loan at the date it is discharged less the estimated value in final disposition or actual net proceeds received in a short sale. Charter - The Federal Home Loan Mortgage Corporation Act, as...

  • Page 396
    .... Changes in market value are derived from our internal index, which measures price changes for repeat sales and refinancing activity on the same properties using Freddie Mac and Fannie Mae single-family loan acquisitions, including foreclosure sales. Estimates of the current LTV ratio exclude any...

  • Page 397
    ...Board of Governors of the Federal Reserve System FHA - Federal Housing Administration FHFA - Federal Housing Finance Agency - An independent agency of the U.S. government with responsibility for regulating Freddie Mac, Fannie Mae, and the FHLBs. FHLB - Federal Home Loan Bank Fixed-rate loan - Refers...

  • Page 398
    ... - Corporate Governance Guidelines, as revised HAMP - Home Affordable Modification Program - Refers to the effort under the MHA Program whereby the U.S. government, Freddie Mac and Fannie Mae commit funds to help eligible homeowners avoid foreclosure and keep their homes through loan modifications...

  • Page 399
    ... liquidity and housing affordability, expand foreclosure prevention efforts, and set market standards. The MHA Program includes HARP and HAMP. Mortgage assets - Refers to both loans and the mortgage-related securities we hold in our mortgagerelated investments portfolio. Freddie Mac 2015 Form 10...

  • Page 400
    ... of mortgage-related securities and unsecuritized single-family and multifamily loans. The size of our mortgage-related investments portfolio under the Purchase Agreement is determined without giving effect to the January 1, 2010 change in accounting guidance related to transfers of financial assets...

  • Page 401
    ... are generally transferred to the seller of the loans in consideration of the loans or are sold to third-party investors or retained by us if we purchased the loans for cash. Pension plan - Employees' Pension Plan Performing loan - A loan where the borrower is less than three monthly payments past...

  • Page 402
    ... Preferred Stock issued to Treasury under the Purchase Agreement. Seriously delinquent or SDQ - Single-family loans that are three monthly payments or more past due or in the process of foreclosure as reported to us by our servicers. SERP - Supplemental Executive Retirement Plan Freddie Mac 2015...

  • Page 403
    ...as LIBOR. STACR debt note - Structured Agency Credit Risk debt note - A debt security where the principal balance is subject to the performance of a reference pool of loans owned or guaranteed by Freddie Mac. Step-rate modified loan - A term that we generally use to refer to our HAMP loans that have...

  • Page 404
    ...Home Loan Mortgage Corporation Thrift/401(k) Savings Plan Total other comprehensive income (loss) (or other comprehensive income (loss)) - Consists of the after-tax changes in the unrealized gains and losses on available-for-sale securities, the effective portion of derivatives accounted for as cash...

  • Page 405
    ... income households. Workout, or loan workout - A workout is either a home retention action, which is either a loan modification, repayment plan, or forbearance agreement, or a foreclosure alternative, which is either a short sale or a deed in lieu of foreclosure. XBRL - eXtensible Business Reporting...

  • Page 406
    ... Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules Freddie Mac...

  • Page 407
    ... of the Federal Home Loan Mortgage Corporation, as amended and restated July 13, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K as filed on July 15, 2015) 3.2 4.1 Eighth Amended and Restated Certificate of Designation, Powers, Preferences, Rights...

  • Page 408
    ...-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) 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 Freddie Mac 2015 Form 10...

  • Page 409
    ... 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) Federal Home Loan Mortgage Corporation Global Debt Facility Agreement...

  • Page 410
    ...October 25, 2013) †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) †First...

  • Page 411
    ...May 5, 2015) 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...

  • Page 412
    ... 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...

  • Page 413
    ... The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K are 000-53330 and 001-34139. This exhibit is a management contract or compensatory plan or arrangement. Freddie Mac 2015 Form 10...

  • Page 414
    ... the Federal Home Loan Mortgage Corporation and participating Employers (as defined in Section 2.6) on an insured basis. 2. Section 2.3 (Eligibility and Benefits) is amended to read as follows: 2.3. Eligibility and Benefits. The employees or classes of employees eligible for coverage under the Plan...

  • Page 415
    ... Policy"), who is regularly scheduled to work at least 20 hours per week, is on the payroll of an Employer and not paid by accounts payable, whose wages from the Employer are subject to withholding for purposes of Federal income taxes and the Federal Insurance Contributions Act. The term "employee...

  • Page 416
    ...THE FEDERAL HOME LOAN MORTGAGE CORPORATION LONG TERM DISABILITY PLAN to be executed by its duly authorized officer, this 22nd day of December, 2015. FEDERAL HOME LOAN MORTGAGE CORPORATION Signature: /s/ Daniel E. Scheinkman_____ Daniel E. Scheinkman Vice President - Compensation and Benefits Attest...

  • Page 417
    Federal Home Loan Mortgage Long Term Disability Plan APPENDIX 1 - WHOLLY OWNED SUBSIDIARIES DESIGNATED BY FREDDIE MAC AS 'EMPLOYERS' UNDER THE PLAN None.

  • Page 418
    ..., consistent with Freddie Mac's Personal Securities Investment policy. I. Compensation Your compensation is governed by the 2013 Executive Management Compensation Program ("2013 EMCP"). To participate in the 2013 EMCP, you must agree to the terms of the 2013 EMCP Program Document and a Recapture...

  • Page 419
    ... At-Risk Deferred Salary, and is equal to $900,000. • II. Benefits You will be eligible to participate in all employee benefit plans offered to Freddie Mac's senior executive officers (as may be modified or terminated from time to time by Freddie Mac in its sole discretion) pursuant to the terms...

  • Page 420
    ... of our employee benefit plans. As a new employee, you may select the benefit plans that best meet your needs by logging on to Fidelity's NetBenefits website at http://netbenefits.fidelity.com. Shortly after your start date, you will receive an email from the Freddie Mac Benefits Center instructing...

  • Page 421
    ... Virginia being applied. VI. Return of Signed Documents Please confirm that the terms and conditions in this letter conform to your understanding by returning to Scott Coolidge, Freddie Mac's Senior Vice President - Human Resources, a signed copy of this letter as well as signed copies of the 2013...

  • Page 422
    ... and tax or financial planning; (v) confidential information about Freddie Mac's customers, borrowers, employees, or others; (vi) pricing and quoting information, policies, procedures, and practices; (vii) confidential customer lists; (viii) proprietary algorithms; (ix) confidential contract terms...

  • Page 423
    ... employment with Freddie Mac for any reason whatsoever, Executive will deliver to Executive's immediate supervisor all tangible materials embodying Confidential Information, including, but not limited to, any documentation, records, listings, notes, files, data, sketches, memoranda, models, accounts...

  • Page 424
    ... anything in this Agreement limit in any way Freddie Mac's right to terminate Executive's employment at any time for any reason. VII. Compliance with the Code of Conduct and Corporate Policies & Procedures, Including Personal Securities Investments Policy As a Freddie Mac employee, Executive will be...

  • Page 425
    ... not subject to any employment, confidentiality or stock grant agreements, or any other restrictions or limitations imposed by a prior employer, which would affect Executive's ability to perform the duties and responsibilities for Freddie Mac in the job position offered, and further represents that...

  • Page 426
    ...Executive. Neither Freddie Mac nor its agents, representatives, directors, officers or employees have made any representations to Executive concerning the terms or effects of this Agreement, other than those contained in this Agreement. By: /s/ Michael Hutchins Michael Hutchins Date: June 25, 2013

  • Page 427
    ...represent pre-tax earnings required to cover any senior preferred stock and preferred stock dividend requirements computed using our effective tax rate, whenever there is an income tax provision, for the relevant periods. Ratio of earnings to fixed charges is computed by dividing earnings (loss), as...

  • Page 428
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 429
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 430
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 431
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 432
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 433
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 434
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 435
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 436
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 437
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 438
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 439
    ...of Attorney Annual Report on Form 10-K Freddie Mac KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Donald H. Layton, James G. Mackey...

  • Page 440
    ... PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a) I, Donald H. Layton, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation; Based on my knowledge, this report does not contain any untrue statement of...

  • Page 441
    ... PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a) I, James G. Mackey, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation; Based on my knowledge, this report does not contain any untrue statement of...

  • Page 442
    ... In connection with the Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation (the "Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald H. Layton, Chief Executive Officer of the Company...

  • Page 443
    ... with the Annual Report on Form 10-K for the year ended December 31, 2015 of the Federal Home Loan Mortgage Corporation (the "Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James G. Mackey, Executive Vice President - Chief Financial Officer of...