Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 166

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 166
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 transition could impact certain industries and regional economies, affecting property values and the ability of borrowers in those industries or regions to pay their mortgage loans. The impacts of climate transition risk may also expose us to reputational, compliance, and/or litigation risk due to increased legal and regulatory scrutiny or negative public sentiment. For additional information on our climate-related risks, see MD&A - Risk Management - Credit Risk - Natural Disaster and Climate-Related Risk Management.

New issuance market for our CRT transactions may not be available to us in adverse economic conditions. These transactions also increase our expenses.

Our ability to transfer credit risk (and the cost to us of doing so) could change rapidly depending on market conditions. Adverse market conditions may result in insufficient investor demand for CRT transactions at acceptable prices. For example, high interest rates, elevated inflation, and other market uncertainty could delay or otherwise impact our planned CRT transactions. It is possible that our CRT strategies and structuring decisions may not prevent us from incurring substantial losses. For instance, it takes time to transfer risk and we are exposed to credit losses during this pipeline period. Additionally, some of our CRT transactions have early termination clauses or maturity dates that are earlier than the maturities of the reference mortgage loans, and we may also seek to terminate certain CRT transactions by repurchasing the related securities. We will be exposed to increased credit risk on the reference mortgage loans after termination of such transactions. Additionally, we retain a portion of the risk of future losses on loans covered by CRT transactions, including all or a portion of the first loss risk in Single-Family STACR and ACIS transactions and Multifamily MCIP and MSCR transactions. The costs associated with CRT transactions are significant and may increase. For some CRT transactions, there may be a significant difference in time between when we recognize a credit loss in earnings and when we recognize the related recovery in earnings, and this lag could adversely affect our financial results in the earlier period. Changes in regulatory guidance, such as capital requirements under the ERCF, may cause us to modify our CRT activities.

Market Risks

Changes in interest rates could negatively affect the fair value of our financial assets and liabilities, results of operations, and net worth. 

Our financial results, including the amount of interest income we receive and interest expense we pay, can be significantly affected by changes in interest rates.

Interest rates can fluctuate for many reasons, including changes in the fiscal and monetary policies of the federal government and its agencies as well as geopolitical events or changes in general economic conditions, such