Freddie Mac 2015 Annual Report Download - page 293

Financial Statements Notes to the Consolidated Financial Statements | Note 13
Freddie Mac 2015 Form 10-K 291
NOTE 13: CONCENTRATION OF CREDIT AND OTHER RISKS
Concentrations of credit risk may arise when we do business with a number of customers or
counterparties that engage in similar activities or have similar economic characteristics that make them
vulnerable in similar ways to changes in industry conditions, which could affect their ability to meet their
contractual obligations. Concentrations of credit risk may also arise when there are a limited number of
counterparties in a certain industry. Based on our assessment of business conditions that could impact
our financial results, we have determined that concentrations of credit risk exist among certain borrowers
(including geographic concentrations and loans with certain higher risk characteristics), loan sellers and
servicers, mortgage insurers, bond insurers, cash, derivative and other investment counterparties, and
non-agency mortgage-related security issuers. In the sections below, we discuss our concentration of
credit risk for each of the groups to which we are exposed. For a discussion of our derivative
counterparties as well as related master netting and collateral agreements, see Note 9.
SINGLE-FAMILY CREDIT GUARANTEE PORTFOLIO
Regional economic conditions may affect a borrower’s ability to repay his or her loan and the property
value underlying the loan. Geographic concentrations increase the exposure of our portfolio to changes in
credit risk. Single-family borrowers are primarily affected by home prices, unemployment rates and
interest rates.