Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 193

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 193
---
 below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses for Single-Family Mortgage Loans Held-for-Investment

As described in Note 6 to the consolidated financial statements, the Company's allowance for credit losses for single-family mortgage loans held-for-investment was $6.4 billion as of December 31, 2024. As disclosed by management, determining the appropriateness of the allowance for credit losses for single-family mortgage loans held-for-investment is a complex process that is subject to numerous estimates and assumptions requiring significant management judgment about matters that involve a high degree of subjectivity. This process involves the use of models that require management to make judgments about matters that are difficult to predict. Management estimates the allowance for credit losses for single-family mortgage loans held-for-investment on a pooled basis using a discounted cash flow model that evaluates a variety of factors to estimate the cash flows the Company expects to collect. Management projects cash flows the Company expects to collect using historical experience, such as historical default rates and severity of loss based on loan characteristics. These cash flow estimates incorporate probability of default and severity of losses and are adjusted for current and forecasted economic conditions. 

The principal considerations for our determination that performing procedures relating to the allowance for credit losses for single-family mortgage loans held-for-investment is a critical audit matter are (i) the significant judgment by management when developing the allowance for credit losses for single-family mortgage loans held-for-investment; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to the probability of default; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the development of the allowance for credit losses for single-family mortgage loans held-for-investment, including controls over the probability of default assumption. These procedures also included, among others (i) testing management’s process for developing the allowance for credit losses for single-family mortgage loans held-for-investment, (ii) testing the completeness and accuracy of certain data used in the models, and (iii) the involvement of professionals with specialized skill and knowledge to assist in evaluating (a) the appropriateness of management’s methodology and models, and (b) the reasonableness of the probability of default assumption.

/s/