Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 51

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 13
Chunk 51
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 guarantee of loans in our Single-Family mortgage portfolio and

n    Multifamily mortgage credit risk, through our ownership or guarantee of loans in our Multifamily mortgage portfolio.

Counterparty credit risk is the risk associated with the inability or failure of a counterparty to meet its contractual obligations. 

In the sections below, we provide a general discussion of our enterprise Risk Framework and current risk environment for mortgage credit risk, including natural disaster and climate-related risk, and for counterparty credit risk.

Allowance for Credit Losses

For financial assets measured at amortized cost, we recognize an allowance for credit losses that is deducted from or added to the amortized cost basis of the financial asset to present the net amount expected to be collected on the financial asset on the balance sheet.

For Single-Family credit exposures, we estimate the allowance for credit losses for loans on a pooled basis using a discounted cash flow model that evaluates a variety of factors to estimate the cash flows we expect to collect. The discounted cash flow model forecasts cash flows over the loan’s remaining contractual life, adjusted for expectations of prepayments, and using our historical experience (which includes the effects of natural disasters), adjusted for current and forecasted economic conditions. These projections require significant management judgment, and we face uncertainties and risks related to the models we use for financial accounting and reporting purposes. For further information on our accounting policies and methods for estimating our allowance for credit losses and related management judgments, see MD&A - Critical Accounting Estimates. 

For Multifamily credit exposures, we estimate the allowance for credit losses using a loss-rate method to estimate the net amount of cash flows we expect to collect. The loss rate method is based on a probability of default and loss given default framework that estimates credit losses by considering a loan’s underlying characteristics, our historical experience (which includes the effects of natural disasters), and current and forecasted economic conditions. Loan characteristics considered by our model include vintage, loan term, current DSCR, current NOI, current LTV ratio, interest rate type, underlying property type, and property location. We simulate multiple forecast paths of economic variables, property values, and NOI over the loan's remaining contractual life. We also consider as model inputs expected prepayments and expected recoveries from credit enhancements that are not freestanding contracts. Management adjustments to our model output may be necessary to take into consideration current economic events and other factors not considered within the model.

FREDDIE MAC  |  2024 Form 10-K49