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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, 2013
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. [ ]
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 28, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter) was $877.6 million.
As of February 14, 2014, there were 650,039,533 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
Table of Contents

Table of contents

  • Page 1
    ... 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, 2013 Commission File Number: 001-34139 Federal Home Loan Mortgage Corporation (Exact...

  • Page 2
    ... Principal Accounting Fees and Services 278 285 307 309 313 Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information...

  • Page 3
    ... of the Par Value and UPB to Total Debt, Net 32 Other Short-Term Debt 33 Freddie Mac Mortgage-Related Securities 34 Issuances and Extinguishments of Debt Securities of Consolidated Trusts 35 Changes in Total Equity (Deficit) 36 Single-Family Credit Guarantee Portfolio Data by Year of Origination 37...

  • Page 4
    ...63 Loans Released from Repurchase Obligations 64 Mortgage Insurance by Counterparty 65 Bond Insurance by Counterparty 66 Derivative Counterparty Credit Exposure 67 Activity in Other Debt 68 Freddie Mac Credit Ratings 69 Consolidated Fair Value Balance Sheets 70 Summary of Change in the Fair Value of...

  • Page 5
    ... Income Consolidated Balance Sheets Consolidated Statements of Equity (Deficit) Consolidated Statements of Cash Flows Note 1: Summary of Significant Accounting Policies Note 2: Conservatorship and Related Matters Note 3: Variable Interest Entities Note 4: Mortgage Loans and Loan Loss Reserves Note...

  • Page 6
    ... long-term interest rates; (c) benefits for credit losses resulting from declines in the volume of newly delinquent loans, lower estimates of incurred losses largely resulting from an increase in national home prices and representation and warranty settlements of pre-conservatorship loan origination...

  • Page 7
    ... of our single-family credit guarantee portfolio at December 31, 2013, but comprised 81% of our credit losses during 2013. Providing Homeowners with Alternatives that Allow Them to Stay in Their Homes We establish guidelines for our servicers to follow and provide them default management programs to...

  • Page 8
    ...Single-Family Mortgage Credit Risk" for more information about loss mitigation activities and our efforts to keep families in their homes, including through our loan modification initiatives and our relief refinance mortgage initiative. Maximizing the Proceeds from Short Sales and REO Sales In cases...

  • Page 9
    ... and one is rated BBB+, as of February 14, 2014. We consider the collectability of our claims against our mortgage insurers when determining the receivables and estimating our allowance for loan losses on our consolidated balance sheets. Our ability to manage our exposure to mortgage insurers may be...

  • Page 10
    ... managing our credit risk by setting our underwriting standards at a level commensurate with the long-term credit risk appetite of the company. We use a process of delegated underwriting for the single-family mortgages we purchase or securitize. In this process, our contracts with seller/servicers...

  • Page 11
    ... performing loans obtained through our cash purchase program. We purchase loans from lenders for cash and, in conjunction with the single-family business, securitize the majority of these loans into Freddie Mac agency securities that may be sold to dealers or investors, or retained in our mortgage...

  • Page 12
    ... to Freddie Mac and Fannie Mae. Under it, lenders are relieved of certain repurchase obligations for loans that meet specific payment requirements three years after purchase (and one year for HARP and other relief refinance mortgages). • Lender placed insurance standards: As part of the servicing...

  • Page 13
    ...of the related assets (we refer to these transactions as other guarantee commitments). Our charter limits our purchases of single-family loans to the conforming loan market. The conforming loan market is defined by loans originated with UPBs at or below limits determined annually based on changes in...

  • Page 14
    ...for single-family loans, the securitization and Freddie Mac guarantee process works as follows: (a) a lender originates a mortgage loan to a borrower purchasing a home or refinancing an existing mortgage loan; (b) we purchase the loan from the lender and place it with other mortgages into a security...

  • Page 15
    ...other fixed-income investors, including pension funds, insurance companies, securities dealers, money managers, REITs, and commercial banks, purchase our PCs. In recent years, the Federal Reserve has purchased significant amounts of mortgage-related securities issued by us, Fannie Mae and Ginnie Mae...

  • Page 16
    ... and relative price performance of our PCs. REMICs and Other Structured Securities Our REMICs and Other Structured Securities represent beneficial interests in pools of PCs and certain other types of mortgage-related assets. We create these securities (which can be single-class or multiclass...

  • Page 17
    ...Securities." For information about the relative performance of mortgages underlying these securities, see "MD&A - RISK MANAGEMENT - Credit Risk." Our Business Segments Our operations consist of three reportable segments, which are based on the type of business activities each performs: Single-family...

  • Page 18
    ...balance sheets as investments rather than securitize them with the GSEs. We compete on the basis of price, products, the structure of our securities, and service. Competition to acquire single-family mortgages can also be significantly affected by changes in our credit standards. The conservatorship...

  • Page 19
    ... fourth quarter of 2012, both we and Fannie Mae implemented, at FHFA's direction, a further increase in guarantee fees on single-family mortgages of an average of 10 basis points. In December 2013, FHFA announced a number of additional changes to our (and Fannie Mae's) guarantee fee rates that were...

  • Page 20
    ... fee, without our securitization of the related assets. For example, we provide long-term standby commitments to certain of our single-family customers, which obligate us to purchase seriously delinquent loans that are covered by those agreements. Underwriting Requirements and Quality Control...

  • Page 21
    ...realized credit losses in lieu of repurchase. For more information, see "MD&A - RISK MANAGEMENT - Credit Risk - Institutional Credit Risk - SingleFamily Mortgage Seller/Servicers." Credit Enhancements Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase...

  • Page 22
    ... single-family mortgage loans. We then create a hypothetical securitization structure with notional credit risk positions, or tranches (e.g., first loss, mezzanine, and senior). We issue STACR debt notes (which relate to the mezzanine loss position) to investors. We are obligated to make payments...

  • Page 23
    ...HAMP by mortgage holders other than Freddie Mac and Fannie Mae. Among other duties, as the program compliance agent, we conduct examinations and review servicer compliance with the published requirements for the program. Non-HAMP Modifications Similar to HAMP, our non-HAMP standard loan modification...

  • Page 24
    ...- Relief Refinance Mortgage Initiative and Home Affordable Refinance Program." Servicing Alignment Initiative Under the servicing alignment initiative, we made a number of changes to our single-family loan workout activities to align with Fannie Mae, including the non-HAMP standard loan modification...

  • Page 25
    .... With this model, we utilize securitization to substantially reduce our credit risk while providing liquidity to the multifamily market. Historically, we were primarily a buy and hold investor in multifamily mortgage assets (both loans held for investment and investment securities, primarily CMBS...

  • Page 26
    ...are Fannie Mae, FHA, commercial and investment banks, CMBS conduits, dealers, thrift institutions, and life insurance companies. Underwriting Requirements and Quality Control Standards Our process and standards for underwriting multifamily mortgages differ from those used for single-family mortgages...

  • Page 27
    .... In recent years, the Federal Reserve has purchased significant amounts of mortgage-related securities issued by us, Fannie Mae, and Ginnie Mae. The conservatorship, the Purchase Agreement and the senior preferred stock and warrant issued to Treasury have materially limited the rights of our common...

  • Page 28
    ...bonds, and single-family and multifamily unsecuritized mortgage loans. Our ability to acquire and sell mortgage assets is significantly constrained by limitations under the Purchase Agreement and those imposed by FHFA. Under the Purchase Agreement and FHFA regulation, the UPB of our mortgage-related...

  • Page 29
    ... (in millions) $ $ Based on UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled. Represents unsecuritized seriously delinquent single-family loans. The UPB of our mortgage-related investments portfolio at December 31, 2013 was $461.0 billion, a decline of...

  • Page 30
    ... to the market value of Treasury's funding commitment as then in effect. However, as long as the net worth sweep dividend provisions described below under "Senior Preferred Stock" remain in form and content substantially the same, no periodic commitment fee under the Purchase Agreement will be...

  • Page 31
    ..., the holders of these debt securities or Freddie Mac mortgage guarantee obligations may file a claim in the United States Court of Federal Claims for relief requiring Treasury to fund to us the lesser of: (a) the amount necessary to cure the payment defaults on our debt and Freddie Mac mortgage...

  • Page 32
    ... 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 Treasury...

  • Page 33
    ..." scenario. For additional information, see "MD&A - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources, the Purchase Agreement, and the Dividend Obligation on the Senior Preferred Stock" and "RISK FACTORS - Legal and Regulatory Risks." New Products The GSE Act requires the enterprises to obtain the...

  • Page 34
    ... data relating to our mortgage purchases, information or reports as required by law. See "RISK FACTORS - Legal and Regulatory Risks - We may make certain changes to our business in an attempt to meet our housing goals and subgoals." FHFA has established four goals and one subgoal for single-family...

  • Page 35
    ...For more information, see "LEGAL PROCEEDINGS." Prudential Management and Operations Standards FHFA has established prudential standards relating to the management and operations of Freddie Mac, Fannie Mae, and the FHLBs. The standards address a number of business, controls, and risk management areas...

  • Page 36
    ... developments are discussed below. In June 2013, the "Let the GSEs Pay Us Back Act of 2013" was introduced in the House of Representatives. The bill would amend Freddie Mac and Fannie Mae's Purchase Agreements with Treasury to: • terminate the dividends on the senior preferred stock; 31 Freddie...

  • Page 37
    ... conforming loan limits in high cost areas, gradually reducing the size of Freddie Mac's and Fannie Mae's retained mortgage portfolios to $250 billion each, and requiring the companies to enter into additional risk sharing transactions to cover at least 10% of their new single-family business each...

  • Page 38
    ... liability for originators making loans that satisfy the definition of a qualified mortgage. In May 2013, FHFA directed Freddie Mac and Fannie Mae to limit future single-family acquisitions to loans that are qualified mortgages under applicable CFPB regulations, including those mortgages meeting the...

  • Page 39
    ... Bulletin"), which is applicable to Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The Advisory Bulletin establishes guidelines for adverse classification and identification of specified single-family and multifamily assets and off-balance sheet credit exposures. The Advisory Bulletin...

  • Page 40
    ...off-balance sheet arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in connection with certain types of securities offerings, in prospectuses for that offering that are filed with the SEC. Freddie Mac's securities offerings are...

  • Page 41
    ..., internal control over financial reporting, and disclosure controls and procedures; • the failure of our customers, vendors, service providers, and counterparties to fulfill their obligations to us; • our ability to manage mortgage credit risks, including the effect of changes in underwriting...

  • Page 42
    ... mortgage-related investments portfolio or required sales of higher yielding assets, and other limitations on our investment activities that reduce our earnings capacity; • reductions in the maximum UPB of single-family loans we are permitted to purchase or other restrictions on our single-family...

  • Page 43
    ...on our business contained in the Purchase Agreement, and the senior status and net worth dividend provisions of the senior preferred stock issued to Treasury under the Purchase Agreement also could adversely affect our ability to attract new private sector capital in the future should the company be...

  • Page 44
    ... required to pay dividends to the extent that our Net Worth Amount exceeds a permitted Capital Reserve Amount that decreases over time. Accordingly, over the long-term, our future profits will effectively be distributed to Treasury. Therefore, the holders of our common stock and non-senior preferred...

  • Page 45
    ... credit risk with respect to securities and guarantee arrangements that are not reflected as assets on our consolidated balance sheets. These relate primarily to: (a) Freddie Mac mortgage-related securities backed by multifamily loans (e.g., K Certificates we guarantee); (b) certain single-family...

  • Page 46
    ...losses on the related loans. For more information, see "NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES - Credit Protection and Other Forms of Credit Enhancement." For more information on our mortgage credit risk with respect to single-family and multifamily loans, see "MD&A - RISK MANAGEMENT - Credit...

  • Page 47
    ... that has entered into a business contract or arrangement with us may fail to meet its obligations to us. Our important institutional counterparties include seller/servicers, mortgage insurers, and bond insurers, and counterparties to derivatives and short-term lending and other funding transactions...

  • Page 48
    ...Singlefamily Mortgage Seller/Servicers" and "- Multifamily Mortgage Seller/Servicers." Our losses could increase if more of our mortgage or bond insurers become insolvent or fail to perform their obligations to us. A number of our mortgage insurers (that insure single-family mortgages we purchase or...

  • Page 49
    ... loss of some or all of our business with the customer. Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase be covered by mortgage insurance or other credit enhancements. Our purchases of mortgages with LTV ratios above 80% (other than relief refinance...

  • Page 50
    ...limited. We pay cash dividends (known as the net worth sweep dividend) to Treasury on the senior preferred stock on a quarterly basis. The amount of the net worth sweep dividend could vary substantially from quarter to quarter for a number of reasons, including as a result of non-cash changes in net...

  • Page 51
    ... of our mortgage purchase program. Our competitiveness in purchasing singlefamily mortgages from our seller/servicers, and thus the volume and/or profitability of our new single-family guarantee business, can be directly affected by the price performance of our PCs relative to comparable Fannie Mae...

  • Page 52
    ...Business Segments - Single-Family Guarantee Segment - Securitization Activities" and "- Investments Segment - Market Presence and PC Support Activities." The current Multifamily segment business model is highly dependent on the ability of Freddie Mac to finance purchased loans through securitization...

  • Page 53
    ...business structure during or following conservatorship, including whether we will continue to exist. Our efforts to reduce foreclosures, modify loan terms and refinance mortgages may adversely affect our financial results. The servicing alignment initiative, MHA Program (which includes HAMP and HARP...

  • Page 54
    ... RISK MANAGEMENT - Credit Risk - Mortgage Credit Risk - Single-Family Mortgage Credit Risk - Single-Family Loan Workouts and the MHA Program." We may experience further write-downs and losses relating to our assets that could materially adversely affect our financial results, liquidity and net worth...

  • Page 55
    ... if servicers do not complete foreclosures within required timelines. Delays in the foreclosure process could create fluctuations in our single-family credit statistics. For example, our realization of credit losses, which consists of REO operations income (expense) plus charge-offs, net, could...

  • Page 56
    ... loan purchases, securitizations and sales of loans, purchases and sales of securities, funding strategy, management and guarantee fee pricing, interest-rate risk management, market risk management, credit risk management, quality-control sampling strategies for loans in our single-family credit...

  • Page 57
    ... regulatory standards. The types of transactions we process and the standards relating to those transactions can change rapidly in response to external events, such as the implementation of government-mandated programs and changes in market conditions. Our financial, accounting, data processing, or...

  • Page 58
    ... to asset-backed securities, including requiring securitizers and potentially originators to retain a portion of the underlying loans' credit risk. Any such new standards and requirements could modify or remove incentives for financial institutions to sell mortgage loans to us. For more information...

  • Page 59
    ... time in the ordinary course of business. See "NOTE 17: LEGAL CONTINGENCIES" for more information regarding our involvement as a party to various legal proceedings. Litigation Against the U.S. Government Concerning Conservatorship and the Purchase Agreement Between June and September 2013, a number...

  • Page 60
    ... payment of dividends is subject to the following restrictions: Restrictions Relating to the Conservatorship As Conservator, FHFA announced on September 7, 2008 that we would not pay any dividends on Freddie Mac's common stock or on any series of Freddie Mac's preferred stock (other than the senior...

  • Page 61
    ...pay dividends on any other series of preferred stock outstanding in 2013. Recent Sales of Unregistered Securities The securities we issue are "exempted securities" under the Securities Act of 1933, as amended. As a result, we do not file registration statements with the SEC with respect to offerings...

  • Page 62
    ...share - basic and diluted Cash dividends per common share Weighted average common shares outstanding (in thousands) - basic and diluted(3) Balance Sheets Data Mortgage loans held-for-investment, at amortized cost by consolidated trusts (net of allowances for loan losses) Total assets Debt securities...

  • Page 63
    ...Mortgage Market Indicators Year Ended December 31, 2013 Home sale units (in thousands)(1) National home price change(2) Single-family originations (in billions)(3) ARM share(4) Refinance share(5) U.S. single-family mortgage debt outstanding (in billions)(6) U.S. multifamily mortgage debt outstanding...

  • Page 64
    ...national or international economic conditions and changes in the federal government's fiscal or monetary policies. See "FORWARD-LOOKING STATEMENTS" for additional information. Although national home prices have increased for the last two years, home prices at December 31, 2013 remained significantly...

  • Page 65
    ... strong portfolio performance, we expect our credit losses and delinquency rates to remain low in 2014. We believe the long-term outlook for the national multifamily market continues to be favorable as strong demand will support healthy cash flows and stable property values. • 60 Freddie Mac

  • Page 66
    ... (loss), net of taxes and reclassification adjustments: Changes in unrealized gains (losses) related to available-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...

  • Page 67
    ... Income Balance(1)(2) (Expense)(1) Rate (dollars in millions) Interest-earning assets: Cash and cash equivalents Federal funds sold and securities purchased under agreements to resell Mortgage-related securities: Mortgage-related securities(3) Extinguishment of PCs held by Freddie Mac Total mortgage...

  • Page 68
    ... flow hedge relationships related to individual debt issuances and mortgage purchase transactions. The portion of the impairment charges recognized in earnings where we expect significant increases in cash flows is recognized as net interest income. Represents changes in fair value of derivatives in...

  • Page 69
    ...rates, charge-offs, our loan loss reserves balance, and our non-performing assets. We recognized a benefit for credit losses associated with our multifamily mortgage portfolio of $218 million, $123 million and $196 million for 2013, 2012, and 2011, respectively. The benefit for credit losses in 2013...

  • Page 70
    ... information regarding purchases of mortgage-related securities, including those issued by consolidated PC trusts. Gains (Losses) on Retirement of Other Debt We repurchase or call our outstanding other debt securities from time to time when we believe it is economically beneficial and to manage...

  • Page 71
    ... home prices were offset primarily by the impact of two changes: (a) the incorporation in the fourth quarter of 2013 of new information, which enhanced the assumptions used to estimate the contractual loan terms for certain modified loans collateralizing non-agency mortgage-related securities...

  • Page 72
    ... counterparties in 2013, while we had no such settlements in 2012 or 2011. For information on these settlements, see "NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS - Non-Agency Mortgage-Related Security Issuers." Gains (Losses) on Mortgage Loans We recognized gains (losses) on mortgage loans of...

  • Page 73
    ...the date of the foreclosure transfer. Represents the (increase) decrease in the estimated fair value of properties that were in inventory during the period. Includes recoveries from primary mortgage insurance, pool insurance and seller/servicer repurchases. REO operations (income) expense was $(140...

  • Page 74
    ... value gains on our single-family non-agency mortgage-related available-for-sale securities. See "CONSOLIDATED BALANCE SHEETS ANALYSIS - Total Equity (Deficit)" for additional information regarding total other comprehensive income. Segment Earnings Our operations consist of three reportable segments...

  • Page 75
    ... deferred tax asset valuation allowance associated with previously recognized income tax credits carried forward, the release of our valuation allowance against our net deferred tax assets, amounts related to the termination of our pension plan, and tax settlements, as applicable. Segment Earnings...

  • Page 76
    ... securitization of the related assets. Excludes unsecuritized seriously delinquent single-family loans. The Single-family Guarantee segment earns management and guarantee fees associated with unsecuritized single-family loans in the Investments segment's mortgage investments portfolio. Freddie Mac...

  • Page 77
    ...Earnings management and guarantee income(7) Guarantee fee charged on new acquisitions(8) Credit: Serious delinquency rate, at end of period REO inventory, at end of period (number of properties) Single-family credit losses, in bps(9) Market: Single-family mortgage debt outstanding (total U.S. market...

  • Page 78
    ... HFA initiative-related guarantees. (10) Source: Federal Reserve Financial Accounts of the United States of America dated December 9, 2013. The outstanding amount for December 31, 2013 reflects the balance as of September 30, 2013. (11) Based on Freddie Mac's Primary Mortgage Market Survey rate for...

  • Page 79
    ... 31, 2013 Segment Earnings Management and Guarantee Income(1) Amount Year of origination:(5) 2013 2012 2011 2010 2009 Subtotal - New single-family book HARP and other relief refinance loans(6) 2005-2008 Legacy single-family book Pre-2005 Legacy single-family book Total Administrative expenses Net...

  • Page 80
    ... credit-related and administrative expenses associated with such loans, primarily due to the high rate of defaults on the loans originated in those years. HARP and other relief refinance loans represent a significant portion of our single-family credit guarantee portfolio. Relief refinance mortgages...

  • Page 81
    ...default. Our benefit (provision) for credit losses in 2013 also reflects $1.7 billion of benefit related to settlement agreements with certain sellers for the release of repurchase obligations in exchange for one-time cash payments, primarily associated with our Legacy single-family books. See "NOTE...

  • Page 82
    ... to reduced recoveries from mortgage insurers and a decline in reimbursements of losses from seller/servicers associated with repurchase requests. Our REO inventory (measured in number of properties) declined 4% and 19% in 2013 and 2012, respectively, primarily due to lower foreclosure activity as...

  • Page 83
    ... consolidated balance sheets. Includes the average balances of interest-earning cash and cash equivalents, non-mortgage-related securities, and federal funds sold and securities purchased under agreements to resell. Excludes unsecuritized seriously delinquent single-family mortgage loans. 2013 vs...

  • Page 84
    ... in 2013. The gains on sales of available-for-sale securities includes the estimated amount of gains on sales of Multifamily segment CMBS attributed to changes in interest rates. For information on the settlement agreements, see "NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS - Non-Agency Mortgage...

  • Page 85
    ... the UPB of single-family unsecuritized mortgage loans is primarily related to our securitization of mortgage loans that we had purchased for cash. See "CONSOLIDATED BALANCE SHEETS ANALYSIS - Investments in Securities" and "- Mortgage Loans" for additional information regarding our mortgage-related...

  • Page 86
    ... - Multifamily(1) Year Ended December 31, 2013 Segment Earnings: Net interest income Benefit for credit losses Non-interest income: Management and guarantee income Net impairment of available-for-sale securities recognized in earnings Gains on mortgage loans Other non-interest income Total non...

  • Page 87
    ... MANAGEMENT - Credit Risk - Mortgage Credit Risk - Multifamily Mortgage Credit Risk" for information on our reported multifamily delinquency rate. Calculated as the amount of multifamily credit losses (gains) divided by the sum of the average carrying value of our multifamily loans (on-balance sheet...

  • Page 88
    ... fourth quarter of 2013 of federal funds sold and securities purchased under agreements to resell was primarily due to our obligation to pay to Treasury the significant senior preferred stock dividend at the end of 2013. For information regarding our liquidity management practices and policies, see...

  • Page 89
    ... Gains Gross Unrealized Losses Amortized Cost December 31, 2013 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...

  • Page 90
    ...: Freddie Mac Fannie Mae Ginnie Mae Other Total trading mortgage-related securities Trading non-mortgage-related securities: Asset-backed securities Treasury bills Treasury notes FDIC-guaranteed corporate medium-term notes Total trading non-mortgage-related securities Total fair value of investments...

  • Page 91
    ... Balance Sheets December 31, 2013 Fixed Rate Freddie Mac mortgage-related securities:(2) Single-family Multifamily Total Freddie Mac mortgage-related securities Non-Freddie Mac mortgage-related securities: Agency securities:(3) Fannie Mae: Single-family Multifamily Ginnie Mae: Single-family...

  • Page 92
    ... Balance Sheets December 31, 2013 UPB Agency pass-through securities(1) Other agency securities: Interest-only securities(2) Principal-only securities(3) Inverse floating-rate securities(4) Other Structured Securities(5) Total agency securities Non-agency securities(6) Total mortgage-related...

  • Page 93
    .... Excludes tax-exempt multifamily housing revenue bonds for securitization in guarantee swap transactions. Consists of our purchases of subordinated tranches issued in K Certificate transactions. Primarily consists of purchases of mortgage-related securities backed by Freddie Mac underwritten loans...

  • Page 94
    ... Related Credit Statistics(1) As of 12/31/2013 UPB: Subprime first lien(2) Option ARM Alt-A(3) Gross unrealized losses, pre-tax:(4) Subprime first lien(2) Option ARM Alt-A(3) Present value of expected future credit losses:(5) Subprime first lien (2) Option ARM Alt-A (3) Collateral delinquency rate...

  • Page 95
    ... to pay our future claims on expected credit losses related to our non-agency mortgage-related security investments. For more information, see "Table 7.3 - Significant Modeled Attributes for Certain Available-For-Sale Non-Agency Mortgage-Related Securities." For more information on bond insurance...

  • Page 96
    ... on earnings. For more information, including information regarding model changes or enhancements related to impairments implemented in the fourth quarters of 2013 and 2012, see "CONSOLIDATED RESULTS OF OPERATIONS - Non-Interest Income (Loss) - Investment Securities-Related Activities" and "NOTE...

  • Page 97
    ... changes in interest rates may also affect our losses due to the structural credit enhancements on our investments in non-agency mortgage-related securities. The lengthening of the foreclosure timelines that has occurred in recent years can also affect our losses. For example, while defaulted loans...

  • Page 98
    ... Alt-A and other loans, and CMBS: AAA-rated Other investment grade Below investment grade(2) Total Total investments in mortgage-related securities Percentage of subprime, option ARM, Alt-A and other loans, and CMBS of total investments in mortgage-related securities Credit Ratings as of December 31...

  • Page 99
    ..., respectively, related to single-family loans. At December 31, 2013 and 2012, our loan loss reserves, as a percentage of our total mortgage portfolio, excluding non-Freddie Mac securities, were 1.4% and 1.7%, respectively, and as a percentage of the UPB associated with our non-performing loans were...

  • Page 100
    ... STACR debt notes or other risk transfer transactions. See "NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES - Credit Protection and Other Forms of Credit Enhancement" for further details on credit enhancement of mortgage loans in our multifamily mortgage and single-family credit guarantee portfolios...

  • Page 101
    ... 2013, we changed the mix and balance of products in our derivative portfolio in response to an increase in longer-term interest rates. See "NOTE 9: DERIVATIVES" for the notional or contractual amounts and related fair values of our total derivative portfolio by product type at December 31, 2013...

  • Page 102
    ... income reported in our 2012 federal tax return; (d) our tax net operating loss and tax credit carryforwards and the length of carryforward periods available to utilize these assets under current tax law; and (e) our access to capital under the agreements associated with conservatorship. Furthermore...

  • Page 103
    ... that were in hedge accounting relationships, and changes in the fair value attributable to instrument-specific interest-rate and credit risk related to STACR debt notes (beginning in 2013) and foreign-currency denominated debt. The table below summarizes our other short-term debt. 98 Freddie Mac

  • Page 104
    ... Table 32 - Other Short-Term Debt 2013 December 31, Balance, Net(1) Reference Bills securities and discount notes Medium-term notes Federal funds purchased and securities sold under agreements to repurchase Other short-term debt ® Average Outstanding During the Year Balance, Net(3) (dollars in...

  • Page 105
    ... Single-family Multifamily Total HFA Initiative Bonds Total Other Guarantee Transactions REMICs and Other Structured Securities backed by Ginnie Mae certificates(6) Total Freddie Mac Mortgage-Related Securities Less: Repurchased Freddie Mac Mortgage-Related Securities(7) Total UPB of debt securities...

  • Page 106
    ... a result of a decrease in the population of seriously delinquent loans. See "NOTE 19: SELECTED FINANCIAL STATEMENT LINE ITEMS" for additional information. Total Equity (Deficit) The table below presents the changes in total equity (deficit) and certain capital-related disclosures. 101 Freddie Mac

  • Page 107
    ... changes in business processes and activities. For information about our Board's role in oversight of risk management, see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE - Board Leadership Structure and Role in Risk Oversight." We utilize an internal economic capital...

  • Page 108
    ...occupancy type, property type and value, the LTV ratio, and local and regional economic conditions, including home prices and unemployment rates. We use a process of delegated underwriting for the single-family mortgages we purchase or securitize. In this process, our contracts with seller/servicers...

  • Page 109
    ... on changes in the market value of homes in the same geographical area since origination. Calculated as a percentage of the aggregate UPB of loans with LTV ratios greater than 100% in relation to the total UPB of loans in the category. See "Credit Performance - Delinquencies" for further information...

  • Page 110
    ..., of single-family loans that were refinance mortgages, totaling $308.7 billion and $351.1 billion in UPB, respectively. Our purchases of refinance mortgages declined for the three most recent quarters, which we believe was a result of rising mortgage interest rates. As of December 31, 2013 and 2012...

  • Page 111
    ... us to determine whether the mortgage was a cash-out or a no cash-out refinance transaction. Includes manufactured housing and homes within planned unit development communities. The UPB of manufactured housing mortgage loans purchased during the years ended December 31, 2013, 2012, and 2011 was $776...

  • Page 112
    ...of the property at origination based on changes in the market value of homes in the same geographical area since that time. Relief refinance mortgages of all LTV ratios comprised approximately 21%, 18%, and 11% of our single-family credit guarantee portfolio by UPB as of December 31, 2013, 2012, and...

  • Page 113
    ...cash-out" or "rate and term" refinances. The percentage of home purchase loans in our loan acquisition volume remained at a low level during 2013, as low interest rates contributed to high refinance activity. Cash-out refinancings generally have had a higher risk of default than mortgages originated...

  • Page 114
    ... risk. For example, single-family mortgages with both high LTV ratios and borrowers who have lower credit scores typically experience higher rates of serious delinquency and default. We estimate that there were $12.8 billion and $12.0 billion at December 31, 2013 and 2012, respectively, of loans...

  • Page 115
    ... since 2006, than by the increase in the borrower's monthly payment. In addition, a number of these loans were categorized as Alt-A, due to reduced documentation standards at the time of loan origination. The overall serious delinquency rate for all interest-only loans in our single-family credit...

  • Page 116
    ...include amortization of principal as of December 31, 2013. Effective January 1, 2013, we no longer purchase balloon/reset mortgages. The table below presents serious delinquency information for adjustable-rate mortgage loans in our single-family credit guarantee portfolio, excluding Other Guarantee...

  • Page 117
    ... single-family credit guarantee portfolio as of December 31, 2013 and 2012, respectively, these loans represented approximately 26% and 23% of our credit losses during 2013 and 2012, respectively. Although we discontinued new purchases of mortgage loans with lower documentation standards for assets...

  • Page 118
    ... below 620 in limited amounts if they meet our underwriting standards. Credit Enhancements The use of credit enhancements is intended to mitigate some of our potential credit losses. Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase be covered by...

  • Page 119
    ... (c) loan modifications; and (d) foreclosure alternatives (i.e., short sales or deed in lieu of foreclosure transactions). Our single-family loss mitigation strategy emphasizes early intervention by servicers in delinquent mortgages and provides alternatives to foreclosure. Our seller/servicers have...

  • Page 120
    ... incentive fees as well as the cost of any monthly payment reductions. Home Affordable Modification Program and Non-HAMP Modifications Our primary loan modification initiatives are HAMP and our non-HAMP standard loan modification initiatives. HAMP commits U.S. government, Freddie Mac and Fannie Mae...

  • Page 121
    ... change in interest rate, term extension and principal forbearance Total loan modifications(3) Repayment plans(4) Forbearance agreements(5) Total home retention actions Foreclosure alternatives: Short sale Deed in lieu of foreclosure transactions Total foreclosure alternatives Total single-family...

  • Page 122
    ...-family loans that completed foreclosure transfers, including third-party sales at foreclosure auction in which ownership of the property is transferred directly to a third party rather than to us. (5) (6) The number of seriously delinquent loans declined during 2013, and our loan modification...

  • Page 123
    ... LTV ratios above 125%. In addition, in April 2013, we extended HARP by two years to December 31, 2015, at the direction of FHFA. Relief refinance mortgages (including HARP loans) generally present higher risk to us than other refinance loans we have purchased since 2009 because: 118 Freddie Mac

  • Page 124
    ... delinquency rates of these loans. Table 47 - Single-Family Relief Refinance Loans(1) Year Ended December 31, 2013 Number of Loans Average Loan Balance(2) Year Ended December 31, 2012 Number of Loans Average loan Balance(2) • UPB Purchases of relief refinance mortgages: HARP: Above 125% LTV...

  • Page 125
    Table of Contents Credit Performance Delinquencies We report single-family serious delinquency rate information based on the number of loans that are three monthly payments or more past due or in the process of foreclosure, as reported by our servicers. Mortgage loans that have been modified are ...

  • Page 126
    ... single-family loans reported as seriously delinquent were in the process of foreclosure. Represent the states with the highest number of seriously delinquent loans as of December 31, 2013. Excludes loans underlying certain single-family Other Guarantee Transactions since the geographic information...

  • Page 127
    ... weak economic conditions during the housing crisis that began in 2006. We purchased significant amounts of loans originated in 2005 through 2008 with higher-risk characteristics and, as of December 31, 2013, we continued to experience high serious delinquency rates on those loans. 122 Freddie Mac

  • Page 128
    ... Year of origination(6): 2013 2012 2011 2010 2009 Subtotal - New single-family book HARP and other relief refinance loans(6) 2005-2008 Legacy single-family book Pre-2005 Legacy single-family book (1) (2) (4) Total UPB Estimated Current LTV Ratio(1) Percentage Modified(2) Serious Delinquency Rate...

  • Page 129
    ...Mac's home price index. Represents selected states in the North Central region that have experienced adverse economic conditions since 2006. Represents two states with a judicial foreclosure process in which there are a significant number of seriously delinquent loans within our single-family credit...

  • Page 130
    ... Table 50 - Single-Family Credit Guarantee Portfolio by Attribute Combinations As of December 31, 2013 Current LTV Ratio Percentage of Portfolio(2) By Product Type FICO scores < 620: 20 and 30- year or more amortizing fixed-rate 15- year amortizing fixed-rate ARMs/adjustable rate(4) Interest-only...

  • Page 131
    ... Southeast Southwest West Total single-family credit guarantee portfolio(7) (8) 80 (1) Current LTV Ratio of > 80 to 100(1) Percentage of Portfolio(2) Serious Delinquency Rate Current LTV > 100(1) Percentage of Portfolio(2) Serious Delinquency Rate Current LTV Ratio All Loans(1) Percentage of...

  • Page 132
    ... Year of Origination(2): 2013 2012 2011 2010 2009 Subtotal - New single-family book HARP and other relief refinance loans(2) 2005-2008 Legacy single-family book Pre-2005 Legacy single-family book(3) Total (1) 16% 16 8 7 7 54 21 16 9 100% 2011 Foreclosure and Short Sale Rate(1) N/A N/A -% 0.01 0.11...

  • Page 133
    ...(2) 2006 and prior 2007 2008 2009 2010 2011 2012 2013 Total Current Loan Size Above $25 million Above $5 million to $25 million $5 million and below Total Legal Structure Unsecuritized loans K Certificates Other Freddie Mac mortgage-related securities Other guarantee commitments Total Credit...

  • Page 134
    ... securities was 18% and 17%, respectively. See "NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES" for additional information about credit protections and other forms of credit enhancements covering loans in our multifamily mortgage portfolio. Multifamily Delinquencies We report multifamily delinquency...

  • Page 135
    ... loans Total non-performing mortgage loans - off-balance sheet Real estate owned, net Total non-performing assets Loan loss reserves as a percentage of our non-performing mortgage loans Total non-performing assets as a percentage of the total mortgage portfolio, excluding non-Freddie Mac securities...

  • Page 136
    ... includes a number of states with longer foreclosure timelines due to the local laws and foreclosure process, and has housing markets with generally lower demand and lower home values than in other regions. See "NOTE 6: REAL ESTATE OWNED" for more information on our REO properties. 131 Freddie Mac

  • Page 137
    ... delinquent, or in foreclosure, result in credit losses. The table below provides detail on our credit loss performance associated with mortgage loans and REO assets on our consolidated balance sheets and underlying our non-consolidated mortgage-related financial guarantees. 132 Freddie Mac

  • Page 138
    ... foreclosure and short sale activity. The decline in single-family charge-offs, net, in 2013 also includes recoveries of: (a) $2.1 billion related to settlement agreements with certain sellers to release specified loans from certain repurchase obligations in exchange for one-time cash payments...

  • Page 139
    ... single-family credit guarantee portfolio, based on UPB, while loans in these states contributed to approximately 61% of our credit losses recognized in 2013. We expect the portion of our credit losses related to loans in states with judicial foreclosure processes will remain high in the near term...

  • Page 140
    ... beginning balance(2) Provision (benefit) for credit losses Charge-offs, gross(3) Recoveries(4) Transfers, net(5) Ending balance Components of loan loss reserves: Single-family Multifamily Total loan loss reserve, as a percentage of the total mortgage portfolio, excluding non-Freddie Mac securities...

  • Page 141
    ... a deed in lieu of foreclosure or short sale transaction. Loans impaired upon purchase as of December 31. Credit Risk Sensitivity Under a 2005 agreement with FHFA, then OFHEO, we are required to disclose the estimated increase in the NPV of future expected credit losses for our single-family credit...

  • Page 142
    ... our credit losses. Assumes we collect amounts due from credit enhancement providers after giving effect to certain assumptions about counterparty default rates. Based on the single-family credit guarantee portfolio, excluding REMICs and Other Structured Securities backed by Ginnie Mae Certificates...

  • Page 143
    ... losses for requests associated with foreclosed mortgage loans, negotiated agreements, and other alternative remedies. Includes $2.1 billion during 2013 related to settlement agreements with certain sellers to release specified loans from certain repurchase obligations in exchange for one-time cash...

  • Page 144
    ...released repurchase obligations with 70 other seller/ servicers as of December 31, 2013. Table 63 - Loans Released from Repurchase Obligations(1) As of December 31, 2013 Percentage of Single-family Credit Guarantee UPB Portfolio (in billions) Negotiated agreements: 2009 and thereafter 2008 2007 2006...

  • Page 145
    ... (d) standards for enhanced information sharing between insurers, servicers and Freddie Mac. These changes help address the significant problems we faced in recent years in resolving repurchase requests related to mortgage insurance rescission. As part of the estimate of our loan loss reserves, we...

  • Page 146
    ... coverage periods that range from 10 to 12 years. In many cases, we entered into these agreements to cover higher-risk mortgage product types delivered to us through loan purchase transactions for cash rather than guarantor swaps. As of December 31, 2013, pool insurance policies 141 Freddie Mac

  • Page 147
    ... the non-agency mortgage-related securities we hold. 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. Table 65 - Bond Insurance by Counterparty(1) As of December 31, 2013 Credit Rating Outlook...

  • Page 148
    ... OF CREDIT AND OTHER RISKS - Non-Agency Mortgage-Related Security Issuers." Document Custodians We use third-party document custodians to provide loan document certification and custody services for the loans that we purchase and securitize. In many cases, our seller/servicer customers or...

  • Page 149
    ... be an asset reported as derivative assets, net on our consolidated balance sheets), the counterparty is obligated to deliver collateral in the form of cash, securities, or a combination of both, in an amount equal to that market value (less a small unsecured "threshold" amount in most cases) as...

  • Page 150
    ...term senior unsecured debt securities. The lowering or withdrawal of our credit rating by S&P or Moody's may increase our obligation to post collateral, depending on the amount of the counterparty's exposure to Freddie Mac with respect to the derivative transactions. See "CONSOLIDATED BALANCE SHEETS...

  • Page 151
    ... are shown netted at the counterparty or clearing member level, as applicable, including accrued interest receivable/payable and trade/settle fees. Calculated as Total Exposure at Fair Value less both cash and non-cash collateral held as determined at the counterparty level. At December 31, 2013 and...

  • Page 152
    ... maximum loss for accounting purposes and concentrations of counterparty risk related to derivative counterparties. Approximately 94% of our counterparty credit exposure for OTC interest-rate swap, option-based, and foreign-currency swap derivatives was collateralized at December 31, 2013 (excluding...

  • Page 153
    ... single-family mortgage servicing and foreclosure practices. As a result, we may be required to make additional significant changes to our practices, which could further increase our operational risk. Our business decision-making, risk management, and financial reporting are highly dependent...

  • Page 154
    ...• interest payments on our other debt securities; • dividend obligations on our senior preferred stock; • cash purchases of single-family and multifamily loans; • purchases of mortgage-related securities and non-mortgage investments; • removal of modified or seriously delinquent loans from...

  • Page 155
    ... overnight and term repurchase agreements, unsecured Federal Funds, and bank certificates of deposit. During 2013, the majority of the funds used to cover our short-term cash liquidity needs was deposited with the Federal Reserve Bank of New York, invested in short-term assets with a rating of...

  • Page 156
    ... from one day to one year in response to investor demand and our cash needs. For purposes of presentation in this report, short-term debt also includes certain medium-term notes that have original maturities of one year or less. See "CONSOLIDATED BALANCE SHEETS ANALYSIS - Total Debt, Net" for more...

  • Page 157
    ...first two STACR debt note transactions. For more information, see "RISK MANAGEMENT - Credit Risk - Mortgage Credit Risk - Single-Family Mortgage Credit Risk - Credit Enhancements" and "NOTE 8: DEBT AND SUBORDINATED BORROWNGS - Table 8.2 - Other Long-Term Debt." Subordinated Debt During 2013 and 2012...

  • Page 158
    ...the Federal Reserve Bank of New York, which are included in cash and cash equivalents on our consolidated balance sheets. For additional information on these assets, see "CONSOLIDATED BALANCE SHEETS ANALYSIS - Cash and Cash Equivalents, Federal Funds Sold and Securities Purchased Under Agreements to...

  • Page 159
    ... paid aggregate cash dividends to Treasury of $71.3 billion, the liquidation preference on the senior preferred stock remains $72.3 billion. For more information on these matters, see "BUSINESS - Conservatorship and Related Matters" and "- Regulation and Supervision." FAIR VALUE BALANCE SHEETS AND...

  • Page 160
    ... to market data. For a discussion of types and characteristics of mortgage loans underlying our mortgage-related securities, see "Table 22 - Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets" and "RISK MANAGEMENT - Credit Risk - Mortgage Credit Risk - Single-Family...

  • Page 161
    ... fees. Cash receipts and payments related to these items are generally recognized in the fair value of net assets when received or paid, with no basis reflected on our consolidated fair value balance sheets. Our senior preferred stock held by Treasury in connection with the Purchase Agreement...

  • Page 162
    ...Beginning balance Changes in fair value of net assets, before capital transactions Subtotal - balance before 2013 capital transactions Capital transactions: Dividends and share issuances, net(1) Ending balance (1) We did not receive funds from Treasury during 2013 under the Purchase Agreement. $ (58...

  • Page 163
    ...: (a) the release of our valuation allowance against our net deferred tax assets; (b) an increase in the fair value of our single-family mortgage loans as the result of continued improvement in the credit environment and home prices, partially offset by the effect of a change in estimate related to...

  • Page 164
    ... when loans are 120 days or more delinquent, and retire the associated PC debt; • any future cash payments associated with the liquidation preference of the senior preferred stock, as well as the quarterly commitment fee (which has been suspended) and the dividends on the senior preferred stock...

  • Page 165
    ... financial statements. Our critical accounting policies and estimates relate to: (a) the allowance for loan losses and the reserve for guarantee losses; (b) fair value measurements; (c) impairment recognition on investments in securities; and (d) our ability to realize net deferred tax assets. For...

  • Page 166
    ...of loan modifications; (b) future repurchases by seller/servicers of loans; (c) the adequacy of third-party credit enhancements; (d) the effects of changes in government policies and programs; (e) the effects of macroeconomic variables such as rates of unemployment; and (f) the effects of home price...

  • Page 167
    ... of taxable income reported in our federal income tax return; (d) our tax net operating loss and tax credit carryforwards and the length of carryforward periods available to utilize these assets under current tax law; and (e) our access to capital under the agreements associated with conservatorship...

  • Page 168
    ...-party prices, or observable market-based inputs. For more information, see "NOTE 16: FAIR VALUE DISCLOSURES - Valuation Processes and Controls over Fair Value Measurement." Annually, the Business and Risk Committee of our Board of Directors establishes certain Board limits for interest-rate risk...

  • Page 169
    ...Fair Value Balance Sheets Analysis - Key Components of Changes in Fair Value of Net Assets - Changes in Mortgage-To-Debt OAS" for additional information. We also incur basis risk when we use LIBOR- or Treasury-based instruments in our risk management activities. Model Risk Models, including mortgage...

  • Page 170
    ... rates fall. We estimate the sensitivity to changes in interest rates of the fair value of all financial assets, liabilities, and derivatives on a pre-tax basis. We also take into account the cash flows related to certain credit guarantee-related items, including buy-ups and expected gains or losses...

  • Page 171
    ...-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 programs, loan modifications, and the volatility and impact of home price movements...

  • Page 172
    ... management, we also measure and manage the price sensitivity of our portfolio to a number of different specific interest rate changes along the yield curve. The price sensitivity of an instrument to specific changes in interest rates is known as the instrument's key rate duration risk. By managing...

  • Page 173
    Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 168 Freddie Mac

  • Page 174
    ... financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits...

  • Page 175
    ... gains (losses) related to cash flow hedge relationships Changes in defined benefit plans Total other comprehensive income (loss), net of taxes and reclassification adjustments Comprehensive income (loss) Net income (loss) Undistributed net worth sweep and senior preferred stock dividends Loss...

  • Page 176
    ... in earnings) Cash flow hedge relationships Defined benefit plans Total AOCI, net of taxes Treasury stock, at cost, 75,824,353 shares and 75,830,263 shares, respectively Total equity (deficit) (See NOTE 11: STOCKHOLDERS' EQUITY (DEFICIT) for information on our dividend obligation to Treasury) Total...

  • Page 177
    ... income, net of taxes Comprehensive income (loss) Increase in liquidation preference Stock-based compensation Income tax benefit from stock-based compensation Common stock issuances Transfer from retained earnings (accumulated deficit) to additional paidin capital Senior preferred stock dividends...

  • Page 178
    ... of senior preferred stock Payment of cash dividends on senior preferred stock Excess tax benefits associated with stock-based awards Payments of low-income housing tax credit partnerships notes payable Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash...

  • Page 179
    ...originated by mortgage lenders in the primary mortgage market and investing in mortgage loans and mortgage-related securities. Our operations consist of three reportable segments, which are based on the type of business activities each performs - Single-family Guarantee, Investments, and Multifamily...

  • Page 180
    ... net present value of projected cash flows on our non-agency mortgage-related securities and increased our net other-than-temporary impairments recognized in earnings by $0.7 billion. Single-Family Loan Loss Reserve Severity During the second quarter of 2013, we updated our method of estimating loss...

  • Page 181
    ..., paying agent services, tax reporting, and other required services. We estimate the value of these future responsibilities based on quotes from third-party vendors who perform each type of service and, where quotes are not available, based on our estimates of what those vendors would charge. The...

  • Page 182
    ...exchange for non-Freddie Mac mortgage-related securities. Other Guarantee Transactions typically involve us purchasing either the senior tranches from a non-Freddie Mac senior-subordinated securitization or single-class pass-through securities, placing the acquired assets into a securitization trust...

  • Page 183
    ... fee, without our securitization of the related assets. For example, we provide long-term standby commitments to certain of our single-family customers, which obligate us to purchase seriously delinquent loans that are covered by those agreements. We also provide guarantee commitments on multifamily...

  • Page 184
    ...balance sheets whereas the reserve for guarantee losses relates to single-family and multifamily loans underlying our non-consolidated Freddie Mac mortgage-related securities and other guarantee commitments. Total held-for-investment mortgage loans, net are shown net of the allowance for loan losses...

  • Page 185
    ... the timing of foreclosures. For additional information on estimated current LTV ratios and single-family loan loss reserves, see "NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES - Credit Quality of Mortgage Loans." Freddie Mac relies upon third-parties to provide primary servicing for the performing...

  • Page 186
    ...Debt Restructurings" section of this note that follows. All other single-family loans are aggregated and measured collectively for impairment based on similar risk characteristics. Collective impairment is measured as described above in the "Allowance for Loan Losses and Reserve for Guarantee Losses...

  • Page 187
    ... rate, subject to our non-accrual policy as discussed in "Mortgage Loans - Non-Performing Loans" above, with all other changes in the present value of expected future cash flows being recognized as a component of the provision for credit losses in our consolidated statements of comprehensive income...

  • Page 188
    ..., upfront costs and fees are recognized in earnings as incurred and not deferred. For additional information on our election of the fair value option, see "NOTE 16: FAIR VALUE DISCLOSURES." When we repurchase or call outstanding debt securities, we recognize a gain or loss related to the difference...

  • Page 189
    ... claim is filed and is reported as a component of other assets on our consolidated balance sheets. We do not record receivables for repurchase recoveries. We record these on a cash basis due to uncertainty of the timing and amount of collections. Material development and improvement costs relating...

  • Page 190
    ... upon ultimate settlement. See "NOTE 12: INCOME TAXES" for additional information. Earnings Per Common Share The August 2012 amendment to the Purchase Agreement changed the manner in which the dividend on the senior preferred stock is determined. For each quarter from January 1, 2013 through and...

  • Page 191
    ... 2008, the Director of FHFA placed us into conservatorship. On September 7, 2008, Treasury and FHFA announced several actions regarding Freddie Mac and Fannie Mae. These actions included the execution of the Purchase Agreement, pursuant to which we issued to Treasury both senior preferred stock and...

  • Page 192
    ... is requiring us to contract our presence in the mortgage market and simplify our operations. The Conservator also stated that it is focusing on retaining value in the business operations of Freddie Mac and Fannie Mae, overseeing remediation of identified weaknesses in corporate operations and risk...

  • Page 193
    ... fees, phasing in a 10% down payment requirement, reducing conforming loan limits, and winding down Freddie Mac and Fannie Mae's investment portfolios, consistent with the senior preferred stock purchase agreements. These recommendations, if implemented, would have a material impact on our business...

  • Page 194
    ...capital from the earnings generated by our business operations, or return capital to stockholders other than Treasury. In addition to the issuance of the senior preferred stock and warrant, we are required under the Purchase Agreement to pay a quarterly commitment fee to Treasury. Under the Purchase...

  • Page 195
    ..., the holders of these debt securities or Freddie Mac mortgage guarantee obligations may file a claim in the United States Court of Federal Claims for relief requiring Treasury to fund to us the lesser of: (a) the amount necessary to cure the payment defaults on our debt and Freddie Mac mortgage...

  • Page 196
    ...portfolio balance (exclusive of agency securities, multifamily held-for-sale loans, and single-family loans purchased for cash) by selling 5% of less liquid mortgage-related assets. In November 2013, FHFA announced that we had achieved this scorecard objective. Government Support for our Business We...

  • Page 197
    ...single-family PC trusts with assets totaling $1.5 trillion, as measured using the UPB of issued PCs. The assets of each PC trust can be used only to settle obligations of that trust. In connection with our PC trusts, we have credit protection in the form of primary mortgage insurance, pool insurance...

  • Page 198
    ... balance sheets related to our variable interests in non-consolidated VIEs, as well as our maximum exposure to loss as a result of our involvement with these VIEs. Our involvement with VIEs for which we are not the primary beneficiary generally takes one of two forms: (a) purchasing an investment...

  • Page 199
    ...in securities: Available-for-sale, at fair value Trading, at fair value Mortgage loans: Held-for-investment, unsecuritized Held-for-sale Accrued interest receivable Derivative assets, net Other assets Liabilities: Derivative liabilities, net Other liabilities Maximum Exposure to Loss Total Assets of...

  • Page 200
    ...-for-sale securities or trading securities on our consolidated balance sheets. See "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Securitization Activities through Issuances of Freddie Mac Mortgage-Related Securities" for additional information on accounting for purchases of securities issued...

  • Page 201
    ...Total single-family Multifamily:(1) Fixed-rate Adjustable-rate Other governmental Total multifamily Total UPB of mortgage loans Deferred fees, unamortized premiums, discounts and other cost basis adjustments Fair value adjustments on loans held-for sale(2) Allowance for loan losses on mortgage loans...

  • Page 202
    ... the risk of default. The serious delinquency rate for the total of single-family held-for-investment mortgage loans with estimated current LTV ratios in excess of 100% was 9.9% and 12.7% as of December 31, 2013 and 2012, respectively. The majority of our loan modifications result in new terms that...

  • Page 203
    ...loan loss reserves consist of our: (a) allowance for loan losses on mortgage loans that we classify as held-forinvestment on our consolidated balance sheets; and (b) reserve for guarantee losses associated with Freddie Mac mortgagerelated securities backed by multifamily loans, certain single-family...

  • Page 204
    ... $ Total: Beginning balance $ 25,788 $ Provision (benefit) for credit (4,203) losses (2) Charge-offs (8,188) Recoveries(3) 3,811 Transfers, net(4) 4,404 Ending balance $ 21,612 $ Total loan loss reserve as a percentage of the total mortgage portfolio, excluding non-Freddie Mac securities (1) $ 30...

  • Page 205
    ... mortgage insurance, pool insurance, recourse to lenders, and other forms of credit enhancements. The table below presents the UPB of loans on our consolidated balance sheets or underlying our financial guarantees with credit protection and the maximum amounts of potential loss recovery by type...

  • Page 206
    ... and sell debt securities, the principal balance of which is subject to the credit and prepayment risk of a reference pool of single-family mortgage loans owned or guaranteed by Freddie Mac; and (b) a transaction in which we purchased an insurance policy on a portion of the mezzanine loss position...

  • Page 207
    ...-performing loans, which are applied consistently for multifamily loans and single-family loan classes, see "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES." Total loan loss reserves consist of a specific valuation allowance related to individually impaired mortgage loans, and a general reserve...

  • Page 208
    ... December 31, 2013, 2012 and 2011 respectively. Mortgage Loan Performance We do not accrue interest on loans three months or more past due. The table below presents the recorded investment of our single-family and multifamily mortgage loans, held-forinvestment, by payment status. 203 Freddie Mac

  • Page 209
    ...PC trusts (or purchased delinquent loans associated with other guarantee commitments) during the years ended December 31, 2013 and 2012. The table below summarizes the delinquency rates of mortgage loans within our single-family credit guarantee and multifamily mortgage portfolios. 204 Freddie Mac

  • Page 210
    ... them default management programs designed to help them manage non-performing loans more effectively and to assist borrowers in maintaining home ownership where possible, or facilitate foreclosure alternatives when continued homeownership is not an option. We require our single-family servicers to...

  • Page 211
    ... no payments are required during a defined period. These agreements are considered TDRs if they result in a delay in payment that is considered to be more than insignificant. For HAMP loan modifications, our servicers typically obtain information on income, assets, and other borrower obligations to...

  • Page 212
    ... cash flows. For multifamily loans, we use an estimate of the fair value of the loan's collateral rather than the present value of expected future cash flows to determine the amount of impairment. Generally, restructurings of single-family loans that are TDRs have a higher allowance for loan losses...

  • Page 213
    ... a payment default. NOTE 6: REAL ESTATE OWNED We obtain REO properties: (a) when we are the highest bidder at foreclosure sales of properties that collateralize nonperforming single-family and multifamily mortgage loans owned by us; or (b) when a delinquent borrower chooses to transfer the mortgaged...

  • Page 214
    ... Gains Losses (in millions) $ 1,847 660 18 1,524 382 338 526 23 61 5,379 $ (189) $ (3) - (337) (2,780) (381) (142) (61) (6) (3,899) $ Fair Value December 31, 2013 Available-for-sale securities: Freddie Mac Fannie Mae Ginnie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states...

  • Page 215
    ... 12 Months Gross Unrealized Losses December 31, 2013 Available-forsale securities: Freddie Mac Fannie Mae CMBS Subprime Option ARM Alt-A and other Obligations of states and political subdivisions Manufactured housing Total availablefor-sale securities in a gross unrealized loss position $ 7,957 248...

  • Page 216
    ... a third-party model for single-family non-agency mortgage-related securities that considers the credit performance of the underlying collateral, including current LTV ratio, delinquency status, servicer performance, loan modification terms and status, and borrower credit information. The model also...

  • Page 217
    ... voluntary prepayment rate weighted by the security's outstanding UPB. Positive values reflect the amount of subordination and other financial support (excluding credit enhancement provided by bond insurance) that will incur losses in the securitization structure before any losses are allocated...

  • Page 218
    ...bond insurer's ability to pay all future claims can give rise to recognition of other-than-temporary impairment recognized in earnings. See "NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS - Bond Insurers" for additional information. Other-Than-Temporary Impairments on Available-for-Sale Securities...

  • Page 219
    ... 31, 2013 Gross realized gains Mortgage-related securities: Freddie Mac Fannie Mae CMBS Option ARM Alt-A and other Obligations of states and political subdivisions Subprime Total mortgage-related securities gross realized gains Gross realized gains Gross realized losses Mortgage related securities...

  • Page 220
    ... rate, interest-only and principal-only securities. Table 7.8 - Trading Securities December 31, 2013 Mortgage-related securities: Freddie Mac Fannie Mae Ginnie Mae Other Total mortgage-related securities Non-mortgage-related securities: Asset-backed securities Treasury bills Treasury notes Total...

  • Page 221
    ... from commercial banks that are members of the Federal Reserve System. We had no balances in federal funds purchased and securities sold under agreements to repurchase at either December 31, 2013 or 2012. Other Long-Term Debt The table below summarizes our other long-term debt. 216 Freddie Mac

  • Page 222
    ... in our consolidated securitization trusts (i.e., single-family PC trusts and certain single-family and multifamily Other Guarantee Transactions). The table below summarizes the debt securities of consolidated trusts held by third parties based on underlying mortgage product type. 217 Freddie Mac

  • Page 223
    ... secured, uncommitted intraday line of credit with a third party totaling $10 billion. We use this line of credit regularly to provide us with additional liquidity to fund our intraday payment activities through the Fedwire system in connection with the Federal Reserve's payments system risk policy...

  • Page 224
    ... and principal payments on our subordinated debt, even if we fail to maintain required capital levels. NOTE 9: DERIVATIVES Use of Derivatives We use derivatives primarily to manage the interest rate and prepayment risk associated with our investments in mortgage-related assets, net of related...

  • Page 225
    ... balance sheets is equal to their fair value, including net derivative interest receivable or payable and net trade/settle receivable or payable, and is net of cash collateral held or posted, where allowable. Derivatives in a net asset position are reported as derivative assets, net. Similarly...

  • Page 226
    ...$ Gains (losses) are reported as derivative gains (losses) on our consolidated statements of comprehensive income. Primarily includes purchased interest-rate caps and floors. Includes fees and commissions paid on cleared and exchange-traded derivatives and, in 2011, a $3 million benefit related to...

  • Page 227
    ...derivative counterparty is typically in the form of cash, although U.S. Treasury securities and Freddie Mac mortgage-related securities may also be posted. In the event a counterparty defaults on its obligations under the derivatives agreement and the default is not remedied in the manner prescribed...

  • Page 228
    ... credit risk of the organization. The table below displays information related to derivatives and securities purchased under agreements to resell on our consolidated balance sheets. Table 10.1 - Offsetting of Financial Assets and Liabilities December 31, 2013 Gross Amount Recognized(1) Assets...

  • Page 229
    ... instruments is determined after giving consideration to our credit rating. As of December 31, 2013, we had one secured, uncommitted intraday line of credit with a third party in connection with the Federal Reserve's payments system risk policy, which restricts or eliminates daylight overdrafts by...

  • Page 230
    ... federal statutory tax rate related to available-forsale securities, closed cash flow hedges, and our defined benefit plans. Table 11.1 - Changes in AOCI by Component, Net of Tax Year Ended December 31, 2013 AOCI Related to AvailableFor-Sale Securities(1) Beginning balance Other comprehensive income...

  • Page 231
    ...in limited circumstances. As discussed in "NOTE 2: CONSERVATORSHIP AND RELATED MATTERS - Purchase Agreement," the quarterly commitment fee has been suspended. Treasury, as the holder of the senior preferred stock, is entitled to receive quarterly cash dividends, when, as and if declared by our Board...

  • Page 232
    ...December 31, 2013, our dividend obligation to Treasury in March 2014 will be $10.4 billion. See "NOTE 2: CONSERVATORSHIP AND RELATED MATTERS - Government Support for our Business" for additional information. The aggregate liquidation preference on the senior preferred stock owned by Treasury was $72...

  • Page 233
    ... price plus dividends accrued through the redemption date. However, without the consent of Treasury, we are restricted from making payments to purchase or redeem preferred stock as well as paying any preferred dividends, other than dividends on the senior preferred stock. In addition, all 24 classes...

  • Page 234
    ... written consent of Treasury, redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the senior preferred stock or warrant). (3) Preferred stock trades exclusively through the OTCQB Marketplace unless otherwise noted. (4) Dividend rate resets quarterly and is...

  • Page 235
    ...senior preferred stock at the direction of our Conservator. We did not declare or pay dividends on any other series of Freddie Mac preferred stock outstanding during 2013. Delisting of Common Stock and Preferred Stock from NYSE On July 8, 2010, we delisted our common and 20 previously listed classes...

  • Page 236
    ... income reported in our 2012 federal income tax return; (d) our tax net operating loss and tax credit carryforwards and the length of carryforward periods available to utilize these assets under current tax law; and (e) our access to capital under the agreements associated with conservatorship...

  • Page 237
    ... - Income Taxes." NOTE 13: SEGMENT REPORTING We evaluate segment performance and allocate resources based on a Segment Earnings approach, subject to the conduct of our business under the direction of the Conservator. See "NOTE 2: CONSERVATORSHIP AND RELATED MATTERS" for additional information about...

  • Page 238
    ... buy-ups, net of execution gains / losses addition, the Investments segment reflects changes in the fair • Cash and liquidity management value of the Multifamily segment securities, primarily CMBS, and • Deferred tax asset valuation allowance held-for-sale loans that are associated with changes...

  • Page 239
    ... segment equals GAAP net income (loss) for each segment. Segment adjustments consist of the following: • We adjust our Segment Earnings management and guarantee income for the Single-family Guarantee segment to include the amortization of buy-down fees and credit delivery fees recorded in periods...

  • Page 240
    ... our Segment Earnings 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, 2013, the unamortized balance of such...

  • Page 241
    ...income Benefit (provision) for credit losses Non-interest income (loss): Management and guarantee income(3) Net impairment of available-for-sale securities recognized in earnings Derivative gains (losses) Gains (losses) on trading securities Gains (losses) on mortgage loans Other non-interest income...

  • Page 242
    ...income Benefit (provision) for credit losses Non-interest income (loss): Management and guarantee income(3) Net impairment of available-for-sale securities recognized in earnings Derivative gains (losses) Gains (losses) on trading securities Gains (losses) on mortgage loans Other non-interest income...

  • Page 243
    ..., in UPB of Freddie Mac mortgage-related securities backed by single-family mortgage loans (excluding those backed by HFA bonds). For guarantees to consolidated securitization trusts, our exposure to these guarantees is generally the UPB of the loans recorded on our consolidated balance sheets. We...

  • Page 244
    ...in connection with our issuance of certain REMICs and Other Structured Securities, which are backed by tax-exempt bonds, we guarantee that the sponsor of the transaction will perform under the interest-rate swap contract linked to the senior variable-rate certificates that we issued. 239 Freddie Mac

  • Page 245
    ... UPB of our single-family credit guarantee portfolio at December 31, 2013 and 2012, respectively. See "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES", "NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES", and "NOTE 7: INVESTMENTS IN SECURITIES" for more information about credit risk associated...

  • Page 246
    ... 2006. Represents two states with a judicial foreclosure process in which there are a significant number of seriously delinquent loans within our single-family credit guarantee portfolio. Credit Performance of Certain Higher Risk Single-Family Loan Categories Participants in the mortgage market...

  • Page 247
    ... in the home has declined, and can negatively affect the borrower's ability to refinance (outside of HARP) or to sell the property for an amount at or above the balance of the outstanding mortgage loan. The serious delinquency rate for single-family loans with estimated current LTV ratios greater...

  • Page 248
    ... ability to refinance or sell a property for an amount at or above the balance of the outstanding mortgage. The DSCR is another indicator of future credit performance. The DSCR estimates a multifamily borrower's ability to service its mortgage obligation using the secured property's cash flow, after...

  • Page 249
    ...loans that meet specific payment requirements. This includes, subject to certain exclusions, loans with 36 months (12 months for relief refinance mortgages) of consecutive, on-time payments after we purchase them. As of December 31, 2013, approximately 24% in UPB of loans in our single-family credit...

  • Page 250
    ... ACCOUNTING POLICIES - Allowance for Loan Losses and Reserve for Guarantee Losses" for additional information. As of December 31, 2013, mortgage insurers provided coverage with maximum loss limits of $52.0 billion, for $209.9 billion of UPB, in connection with our single-family credit guarantee...

  • Page 251
    ...; (b) Treasury securities classified as cash equivalents; or (c) cash deposited with the Federal Reserve Bank of New York. As of December 31, 2013 these included: • $50.3 billion of securities purchased under agreements to resell with 11 counterparties that had short-term S&P ratings of...

  • Page 252
    ... Corporation and Countrywide Home Loans, Inc. entered into a settlement agreement with The Bank of New York Mellon, as trustee, to resolve certain claims with respect to a number of Countrywide first-lien and second-lien residential mortgage-related securitization trusts. We have investments...

  • Page 253
    ...our consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments where we have elected the fair value option, as of December 31, 2013 and 2012. Table 16.1 - Assets and Liabilities Measured at Fair Value on a Recurring Basis 248 Freddie Mac

  • Page 254
    ... Fair Value at December 31, 2013 Quoted Prices in Active Markets for Identical Assets (Level 1) 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 and...

  • Page 255
    ...Freddie Mac Fannie Mae Ginnie Mae Other Total mortgage-related securities Non-mortgage-related securities: Asset-backed securities Treasury bills Treasury notes Total non-mortgage-related securities Total trading securities, at fair value Total investments in securities Mortgage loans: Held-for-sale...

  • Page 256
    ... value hierarchy; and (b) transfer assets and liabilities between Level 1, Level 2, and Level 3 accordingly. Observable market data includes, but is not limited to, quoted prices and market transactions. Changes in economic conditions or the volume and level of activity in a market generally will...

  • Page 257
    ... Purchases Issues Sales Settlements, net Transfers into Level 3(5) Transfers out of Level 3(5) Balance, December 31, 2013 (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 258
    ... Total Purchases Issues Sales Settlements, net Transfers into Level 3 Transfers out of Level 3 Balance, December 31, 2012 (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 259
    ..., gains (losses) on fair value changes and from sales of mortgage loans are recorded in other income on our consolidated statements of comprehensive income. Transfers out of Level 3 during the year ended December 31, 2013 are due to: (a) our enhancement to our pricing methodology for multifamily...

  • Page 260
    ...to the 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...

  • Page 261
    ... of mortgage-related securities issued and guaranteed by Freddie Mac, Fannie Mae, and Ginnie Mae. The valuation techniques for agency securities vary depending on the type of security. Fixed-rate single-class securities are valued using observable prices for similar securities in the TBA market. The...

  • Page 262
    ... as Level 2. Treasury Bills and Treasury Notes Treasury bills and Treasury notes are valued using quoted prices in active markets for identical assets and are classified as Level 1. Mortgage Loans, Held-for-Sale Mortgage loans, held-for-sale consist of multifamily mortgage loans with the fair...

  • Page 263
    ... present value of future cash flows related to our management and guarantee fee is discounted based on the current OAS-to-benchmark interest rates for new guarantees, which are driven by changes in our estimates of credit risk and changes in the credit profile of the multifamily guarantee portfolio...

  • Page 264
    ...of activity in the market for these types of debt instruments. See "Fair Value Option - Other Debt" for additional information. Quantitative Information about Level 3 Fair Value Measurements for Assets and Liabilities Measured in Our Consolidated Balance Sheets at Fair Value The table below provides...

  • Page 265
    ...-for-sale mortgage-related securities Trading, at fair value Mortgage-related securities Agency securities: Freddie Mac Total Freddie Mac Fannie Mae Total Fannie Mae Ginnie Mae Total Ginnie Mae Other Total other Total trading mortgage-related securities Total investments in securities Other assets...

  • Page 266
    ... value Mortgage-related securities Agency securities: Freddie Mac Total Freddie Mac Fannie Mae Total Fannie Mae Ginnie Mae Total Ginnie Mae Other Total other Total trading mortgage-related securities Total investments in securities Mortgage loans: Held-for-sale, at fair value Other assets: Guarantee...

  • Page 267
    ...7% $27 million Total held-for-investment REO, net $ 515 Internal model(3) Historical average sales proceeds per property by state(4) 105,508 Total REO, net 1,837 1,837 December 31, 2012 Total Fair Value Non-recurring fair value measurements Mortgage loans Held-for-investment Level 3 Fair...

  • Page 268
    ... the amount reported on our GAAP consolidated balance sheets. The fair value of single-family mortgage loans as of December 31, 2013 includes the effect of a change in estimate related to enhancements implemented to align our economic capital methodology with external capital benchmarks. Valuation...

  • Page 269
    ... internal models and their judgment to determine default rates, severity rates, home prices, and risk premiums. Single-family mortgage loans valued using this technique are classified as Level 3 due to the low volume and level of activity in this market. GSE Securitization Market as Principal Market...

  • Page 270
    ... a market observation. For loans that do not qualify for purchase based on current underwriting standards, we use our internal credit models, which incorporate factors such as loan characteristics, loan performance status information, expected losses, and risk premiums. Single-family mortgage loans...

  • Page 271
    ...fair value option for multifamily mortgage loans that were purchased for securitization. These multifamily mortgage loans are classified as held-for-sale mortgage loans in our consolidated balance sheets to reflect our intent to sell in the future. Related interest income continues to be reported as...

  • Page 272
    ... of a class of purchasers of Freddie Mac stock from August 1, 2006 through November 20, 2007. FHFA later intervened as Conservator. The plaintiff alleges that the defendants violated federal securities laws by making false and misleading statements concerning our business, risk management, and the...

  • Page 273
    ... Syron and former Executive Vice President and Chief Financial Officer Anthony S. Piszel), certain underwriters and Freddie Mac's auditor violated federal securities laws by making material false and misleading statements in connection with the company's November 2007 public offering. The complaint...

  • Page 274
    ... unsecured claim relating to Lehman's repurchase obligations for breaches of representations and warranties on single-family loans sold to us. The Liquidation Plan addressed these claims as follows: • Short-term lending claim: The Liquidation Plan treated this claim as a senior unsecured claim...

  • Page 275
    .... Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, FHFA and Treasury. The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf of a class of purchasers of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock...

  • Page 276
    ...Court has not certified a class. We received a letter dated October 16, 2013 addressed to the Chief Executive Officer, the Board of Directors and the then Acting Director of FHFA, purportedly on behalf of holders of common stock and junior preferred stock of Freddie Mac. We received a similar letter...

  • Page 277
    ... of other income during 2013. For more information, see "NOTE 15: CONCENTRATION OF CREDIT AND OTHER RISKS - Non-Agency Mortgage-Related Security Issuers." The table below presents the significant components of other assets and other liabilities on our consolidated balance sheets. 272 Freddie Mac

  • Page 278
    ... Components of Other Assets and Other Liabilities on Our Consolidated Balance Sheets December 31, 2013 Other assets: Accounts and other receivables(1) Guarantee asset All other Total other assets Other liabilities: Servicer liabilities Guarantee obligation Accounts payable and accrued expenses...

  • Page 279
    ... of how the change in the manner in which the senior preferred stock dividend is determined affects net income (loss) attributable to common stockholders beginning in the fourth quarter of 2012, see "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Common Share." Earnings (loss) per...

  • Page 280
    ...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 281
    ... likely to materially affect, our internal control over financial reporting: • On November 11, 2013, James G. Mackey, Executive Vice President - Chief Financial Officer, joined Freddie Mac, replacing Ross J. Kari. ITEM 9B. OTHER INFORMATION Election of Directors Upon the appointment of FHFA as...

  • Page 282
    ... purchases with rents less than or equal to small area fair market rents; and increase loan modifications and repayment plans efficiency ratio. • Financial Performance: Improve single-family profitability; maintain profitable multifamily business; actively manage retained portfolio assets...

  • Page 283
    ...'s internal audit and public company audit committee experience enables her to support the Board's oversight of our internal control over financial reporting and compliance matters. Ms. Byrd has served as Chairman and Chief Executive Officer of GlobalTech Financial, LLC, a financial services company...

  • Page 284
    ...joined E*TRADE Financial Corporation as chairman in November 2007 and became chief executive officer in March 2008, retiring in December 2009. Mr. Layton also served as a senior advisor to the Securities Industry and Financial Markets Association from 2006 to 2008 and is chairman of the board of the...

  • Page 285
    ...constituted PNC Mortgage as president and chief executive officer. PNC Mortgage operates as a division of PNC Bank, National Association, which is a subsidiary of PNC Financial Services Group. Until his retirement in April 2013, Mr. Naqvi was responsible for management of PNC Mortgage's $121 billion...

  • Page 286
    ... to comply with the limit in the Purchase Agreement; • increases in Board risk limits, material changes in accounting policy, and reasonably foreseeable material increases in operational risk; • matters that relate to the Conservator's powers, the status of Freddie Mac in conservatorship, or the...

  • Page 287
    ... matters are submitted to FHFA. In addition, FHFA requires us to provide timely notice to it of any planned changes in business processes or operations, including changes to single-family or multifamily credit policies and loss mitigation strategies that management has determined in its reasonable...

  • Page 288
    ...Executive Vice President - Chief Enterprise Risk Officer Senior Vice President - Investments and Capital Markets Senior Vice President - General Auditor Senior Vice President - Chief Information Officer Senior Vice President - Corporate Controller & Principal Accounting Officer Senior Vice President...

  • Page 289
    ... Relations and Corporate Marketing; Internal Communications; Models, Mission and Research; Conservatorship and Corporate Initiatives; Enterprise Project Management; and Making Home Affordable - Compliance organizations. For a period subsequent to his appointment as Executive Vice President - Chief...

  • Page 290
    ...she manages Freddie Mac's compliance with legal and regulatory requirements and related controls that govern the company's business activities. Prior to this, Ms. Wambeke served as Vice President of Compliance & Regulatory Affairs from June 2008 until June 2011. In this role, she was responsible for...

  • Page 291
    ... titles, powers, and privileges of the company and its stockholders, directors and management, including the authority to set executive compensation. Under the terms of the Purchase Agreement, FHFA is required to consult with Treasury on any increases in compensation or new compensation arrangements...

  • Page 292
    ... Agreement." Mr. Layton is, however, eligible to participate in all other employee benefit plans offered to Freddie Mac's other senior executives pursuant to the terms of those plans. Elements of Target Total Direct Compensation (Target TDC) Compensation under the Executive Compensation Program...

  • Page 293
    ... of competitive market compensation levels, the Compensation Committee may use alternative survey sources. Prior to the Compensation Committee's review to determine the Comparator Group companies to be used to establish 2013 Target TDC, FHFA recommended that Freddie Mac and Fannie Mae align their...

  • Page 294
    ... develop the initial business operational process model. FHFA's Summary of Performance All goals were achieved with the following exceptions, which will be carried over to the 2014 Scorecard: • Completion of functional requirements • Development of a servicer integration plan 289 Freddie Mac

  • Page 295
    ... the Mortgage Industry Standards Maintenance Organization process. Establish timeline to implement data collection and use of UMSD data in enhanced disclosures and risk management strategy, • Develop plan to standardize origination data (e.g., HUD-1 and Uniform Residential Loan Application...

  • Page 296
    ... manage and improve the commercial aspects of our business and are intended to complement the FHFA Strategic Plan and Conservatorship Scorecard. Certain of the individual performance objectives for the NEOs were either Conservatorship Scorecard objectives or Complementary Corporate Goals or directly...

  • Page 297
    ... actions were borne out by increased customer satisfaction index scores among both single-family and multifamily customers. All elements of this goal were either met or exceeded, including those related to HARP purchases, loan modifications, short sales, REO dispositions in repaired condition and...

  • Page 298
    ..., and improving processes for remediating control issues. David B. Lowman, Executive Vice President - Single-Family Business. The Compensation Committee determined that the payment to Mr. Lowman for the portion of his At-Risk Deferred Salary that was subject to reduction based on Complementary...

  • Page 299
    ...in connection with his employment as our Chief Executive Officer. 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 senior executive officers pursuant to the terms of...

  • Page 300
    .... Lowman in connection with his employment as our Executive Vice President - Single-Family Business. The terms of Mr. Lowman's letter agreement provide him with the following during his employment with Freddie Mac, subject to the terms of the Executive Compensation Program: an annual Base Salary of...

  • Page 301
    ... to FHFA's final rule on Golden Parachute Payments, published in the Federal Register on January 28, 2014, FHFA indicated that a final rule on indemnification payment provisions remains under review. Other Executive Compensation Considerations Effect of Termination of Employment 296 Freddie Mac

  • Page 302
    ...Trading Policy. In addition, all directors and employees (including our NEOs) are prohibited from holding our securities in a margin account or pledging our securities as collateral for a loan. Section 162(m) Limits on the Tax Deductibility of Our Compensation Expenses Section 162(m) of the Internal...

  • Page 303
    ... with the Compensation Committee in December 2013. Management's conclusion, with which the Compensation Committee concurred, is that our compensation policies and practices in place during 2013 do not create risks that are reasonably likely to have a material adverse effect on us. 298 Freddie Mac

  • Page 304
    ...in 2013. See "Compensation Discussion and Analysis - Written Agreements Relating to Our NEOs' Employment" for additional information. The 2013 amounts reflect At-Risk Deferred Salary earned during 2013. At-Risk Deferred Salary earned during each calendar quarter will be paid on the last business day...

  • Page 305
    ... under the terms of the Purchase Agreement. Accordingly, no stock awards were granted during 2013. For a description of the performance and other measures used to determine payouts, see "Compensation Discussion & Analysis - Executive Management Compensation Program - Elements of Target Total Direct...

  • Page 306
    ... and the Pension SERP Benefit (the component of the SERP that relates to the Pension Plan), computed as of December 31, 2013. A summary of the material terms of each plan follows the table, including information on early retirement. On October 24, 2013, the Company received a directive from FHFA to...

  • Page 307
    ... pay structure for vice presidents and below, as well as overtime pay, shift differentials, non-deferred bonuses paid under a corporate-wide annual bonus program (if any) or pursuant to a functional incentive plan (excluding the value of any stock options or cash equivalents), commissions and salary...

  • Page 308
    ... the Pension Plan. Non-qualified Deferred Compensation Executive Deferred Compensation Plan The EDCP is a non-qualified plan and is unfunded (benefits are paid from our general assets). The EDCP has, in the past, allowed the NEOs to defer receipt of a portion of their annual base pay and cash bonus...

  • Page 309
    ... review and approval. For more information, see "Employment and Separation Agreements" below. The table below does not address changes in control, as we are not obligated to provide any additional compensation to our NEOs in connection with a change in control, nor does it address potential payments...

  • Page 310
    ... price of our common stock on December 31, 2013. Potential Payments Under the Executive Compensation Program The Executive Compensation Program addresses the treatment of Base Salary and Deferred Salary upon various termination events. Base Salary ceases upon an NEO's termination of employment...

  • Page 311
    ... - Written Agreements Relating to Our NEOs' Employment." Director Compensation After we entered conservatorship, FHFA approved compensation for Board members in the form of cash retainers only, paid on a quarterly basis. Under the terms of the Purchase Agreement, without Treasury's consent, we...

  • Page 312
    ... - Board Compensation - 2013 Non-Employee Director Compensation Levels Board Service Cash Compensation Annual Retainer Annual Retainer for Non-Executive Chairman Committee Service (Cash) Annual Retainer for Audit Committee Chair Annual Retainer for Business and Risk Committee Chair Annual Retainer...

  • Page 313
    ... stock outstanding as reported in our Form 10-Q for the Quarter ended September 30, 2013, and excludes the shares issuable to Treasury pursuant to the warrant. According to the Schedule 13D, Pershing Square Capital Management, L.P., as investment adviser for a number of funds for which it purchased...

  • Page 314
    ...(2) N/A Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 35,051,033(3) None Includes 61,501 restricted stock units and shares of restricted stock issued under the Directors' Plan and the Employee Plans. For...

  • Page 315
    ... of his net worth. PNC conducts significant business with Freddie Mac, including as a single-family seller/ servicer and as trustee of some of Freddie Mac's securitization transactions. In order to eliminate any potential conflict of interest that might arise as a result of this stock ownership, Mr...

  • Page 316
    ... a material portion of her net worth. JPMorgan Chase conducts significant business with Freddie Mac, including, among other things, as a single-family and multifamily seller/servicer, as an underwriter of our debt and mortgage securities and as a capital markets counterparty. In order to eliminate...

  • Page 317
    ... Risk, Single Family Risk, Multifamily Risk, I&CM Risk, Economic Capital Working Group and Loan Loss Reserves and Loss Forecast. Information flows from the subcommittees to the ERMC as appropriate, and information and reports to be provided to the Board's Business and Risk Committee, the Board...

  • Page 318
    ... Transactions Policy. Conservatorship Agreements Treasury, FHFA, and the Federal Reserve have taken a number of actions to support us during conservatorship, including entering into the Purchase Agreement, described in this Form 10-K. See "BUSINESS - Conservatorship and Related Matters" and "NOTE...

  • Page 319
    ...'s next scheduled meeting. The pre-approval procedure is administered 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 2013 and 2012. 314 Freddie Mac

  • Page 320
    ... consolidated financial statements required to be filed in this Form 10-K are included in Part II, Item 8. (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. 315 Freddie Mac

  • Page 321
    ... Attorney-in-Fact Non-Executive Chairman of the Board February 27, 2014 Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President - Chief Financial Officer (Principal Financial Officer) Senior Vice President - Corporate Controller and Principal Accounting Officer...

  • Page 322
    ... sold and securities purchased under agreements to resell, and investments in non-mortgage-related securities. CD&A - Compensation Discussion and Analysis CEB - The Corporate Executive Board Company CEO - Chief Executive Officer CFO - Chief Financial Officer Charter - The Federal Home Loan Mortgage...

  • Page 323
    ... timely payments of principal or interest on a mortgage loan. For single-family mortgage loans, we generally report delinquency rate information based on the number of loans that are seriously delinquent. For multifamily loans, we report delinquency rate information based on the UPB of loans that...

  • Page 324
    ... Executive Compensation Program - Executive Management Compensation Program, as amended and restated Fannie Mae - Federal National Mortgage Association FASB - Financial Accounting Standards Board FDIC - Federal Deposit Insurance Corporation Federal Reserve - Board of Governors of the Federal Reserve...

  • Page 325
    ... Agreement. In addition, dividends and periodic commitment fees not paid in cash are added to the liquidation preference of the senior preferred stock. We may make payments to reduce the liquidation preference of the senior preferred stock only in limited circumstances. LTV ratio - Loan-to-value...

  • Page 326
    ... loans that have undergone a TDR, single-family seriously delinquent loans, multifamily loans that are three or more payments past due or in the process of foreclosure, and multifamily loans that are deemed impaired based on management judgment. NPV - Net present value NYSE - New York Stock...

  • Page 327
    ... estimates of the amount of average potential pre-tax loss in the market value of our net assets due to parallel (PMVS-L) and non-parallel (PMVS-YC) changes in LIBOR. Pre-2005 Legacy single-family book - Consists of mortgage loans in our single-family credit guarantee portfolio that were originated...

  • Page 328
    ... Senior Preferred Stock issued to Treasury under the Purchase Agreement. Seriously delinquent - Single-family mortgage 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 Short sale...

  • Page 329
    ... loan workout - A workout is either: (a) a home retention action, which is either a loan modification, repayment plan, or forbearance agreement; or (b) a foreclosure alternative, which is either a short sale or a deed in lieu of foreclosure. XBRL - eXtensible Business Reporting Language Yield curve...

  • Page 330
    ...Registrant's Registration Statement on Form 10 as filed on July 18, 2008) Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated...

  • Page 331
    ... Preference Senior Preferred Stock (par value $1.00 per share), dated September 27, 2012 (incorporated by reference to Exhibit 4.26 to the Registrant's Annual Report on Form 10-K as filed on February 28, 2013) Federal Home Loan Mortgage Corporation Global Debt Facility Agreement, dated March 1, 2013...

  • Page 332
    ...for executive officers under the Federal Home Loan Mortgage Corporation 1995 Stock Compensation Plan (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form 10 as filed on July 18, 2008)†Federal Home Loan Mortgage Corporation Employee Stock Purchase Plan (as...

  • Page 333
    ...to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as Amended and Restated January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, as filed on October 25, 2013) †Federal Home Loan Mortgage Corporation Long-Term...

  • Page 334
    ... Report on Form 10-Q for the quarterly period ended September 30, 2008, as filed on November 14, 2008) Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation...

  • Page 335
    ...Annual Report on Form 10-K for the year ended December 31, 2011, as filed on March 9, 2012) Statement re: computation of ratio of earnings to fixed charges and computation of ratio of earnings to combined fixed charges and preferred stock dividends Powers of Attorney Certification of Chief Executive...

  • Page 336
    ...EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Year Ended December 31, 2013 Net income (loss) before income tax benefit (expense) and cumulative effect of changes in accounting principles $ Add: Low-income housing tax credit partnerships Total...

  • Page 337
    Exhibit 24.1 Power 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. ...

  • Page 338
    Power 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. ...

  • Page 339
    Power 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. ...

  • Page 340
    Power 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. ...

  • Page 341
    Power 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. ...

  • Page 342
    Power 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. ...

  • Page 343
    Power 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. ...

  • Page 344
    Power 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. ...

  • Page 345
    Power 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. ...

  • Page 346
    ... 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, 2013 of the Federal Home Loan Mortgage Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 347
    ... 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, 2013 of the Federal Home Loan Mortgage Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 348
    ... OF 2002 In connection with the Annual Report on Form 10-K for the year ended December 31, 2013 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...

  • Page 349
    ...Annual Report on Form 10-K for the year ended December 31, 2013 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 the Company...

  • Page 350
    ... Compensation as Executive Vice President - Single-Family Business On behalf of the Compensation Committee (the "Committee") of Freddie Mac's Board of Directors (the "Board"), this memorandum sets forth Freddie Mac's agreement to employ you as its Executive Vice President - Single-Family Business...

  • Page 351
    ... 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 and Forfeiture Agreement, both of which will be provided for your review...

  • Page 352
    ... 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 set forth in the applicable plan. In summary, our current benefit plans consist of the following...

  • Page 353
    ... 30 days following your hire date. During orientation, our benefit plans and information about enrollment will be explained in greater detail. Please visit our new employee website, http://www.freddiemac.com/careers/newemployee/, for information about working at Freddie Mac. III. Personal Securities...

  • Page 354
    ... of the Commonwealth of Virginia, excluding provisions of Virginia law concerning choice-of-law that would result in the law of any state other than Virginia being applied. /s/ Donald H. Layton_____ Donald H. Layton Chief Executive Officer I agree to the terms of this Agreement. 4/10/13_____ Date...

  • Page 355
    ...plans, or strategies concerning shareholders, investors, pricing, investment, marketing, sales, trading, funding, hedging, modeling, sales and risk management; (iv) financial or tax information and analyses, including but not limited to, information concerning Freddie Mac's capital structure and tax...

  • Page 356
    ... 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 357
    ...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 358
    ... Freddie Mac. Executive also represents that Executive is 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...

  • Page 359
    ..., and which Executive further acknowledges Freddie Mac is not otherwise obligated to provide to 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...