Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 261

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 261
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 Statements                              Notes to Consolidated Financial Statements | Note 9

NOTE 9 

Derivatives

We analyze the interest-rate sensitivity of financial assets and liabilities across a variety of interest-rate scenarios based on market prices, models, and economics. We use derivatives primarily to hedge interest-rate sensitivity mismatches between our financial assets and liabilities. We principally use interest-rate swaps, purchased or written options (including swaptions), and exchange-traded futures in our interest-rate risk management activities. We designate certain derivatives as hedging instruments in qualifying hedge accounting relationships. Interest-rate risk management derivatives that are not designated in qualifying hedge accounting relationships are economic hedges of financial instruments measured at fair value on a recurring basis or of other transactions or instruments that expose us to interest-rate risk. When we use derivatives to mitigate our exposures, we consider a number of factors, including cost, exposure to counterparty credit risk, and our overall risk management strategy.We routinely enter into commitments to purchase and sell investments in mortgage-related securities, purchase and sell mortgage loans, and purchase and extinguish or issue debt of our consolidated trusts. Most of these commitments meet the definition of a derivative and, therefore, are subject to the accounting guidance for derivatives and hedging. We also enter into certain types of guarantees that are accounted for as derivatives. These guarantees primarily include our obligation to support payment of the interest due on the notes issued by VIEs used in certain CRT transactions.We evaluate whether financial instruments that we purchase or issue contain embedded derivatives. We generally elect to measure newly acquired or issued financial instruments that contain embedded derivatives at fair value, with changes in fair value recorded in earnings.On our consolidated statements of cash flows, cash flows related to derivatives are classified as either operating activities (such as periodic settlements of interest payments) or investing activities (such as variation margin payments and cash flows related to the acquisition and termination of derivatives) depending on the nature of the activity. Cash flows related to physical settlement of forward commitments accounted for as derivative instruments are classified as operating, investing, or financing activities depending on the financial instruments to which they relate.

Derivative Assets and Liabilities at Fair ValueDerivatives are reported at their fair value on our consolidated balance sheets. Derivatives in a net asset position, including net derivative interest receivable or payable, are reported as derivative assets, net, which is included in other assets on our consolidated balance sheets. Similarly, derivatives in a net liability position, including net derivative interest receivable or payable, are reported as derivative liabilities, net,