Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 182

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 182
---
 the third party, which may make it difficult for us to assess and manage the risks associated with these relationships.

We face risks and uncertainties associated with the models that we use to inform business and risk management decisions and for financial accounting and reporting purposes.

We use models in our businesses under a variety of scenarios. Certain models make projections over long periods of time. Models are inherently imperfect predictors of actual results. There is inherent uncertainty associated with model projections of economic variables and the downstream projections dependent on these variables. 

Uncertainty and risks related to models may arise from a number of sources, including the following:

n    We could fail to design, implement, operate, adjust, or use our models as intended. We may fail to code a model correctly, we could use incorrect or insufficient data inputs or fail to fully understand the data inputs, or model implementation software could malfunction. We may not have performed user acceptance testing appropriately or correctly, including allowing sufficient testing time and resources and using the right subject matter experts before deploying the model. The complexity and interconnectivity of our models create additional risk regarding the accuracy of model output. We may not be able to deploy or update models in a timely manner.

n    When market conditions change in unforeseen ways, our model projections may not accurately reflect these conditions, or we may not fully understand the model outputs. For example, models may not fully reflect the effect of certain government policy changes or new industry trends. In such cases, it is often necessary to make assumptions and judgments to accommodate the effect of scenarios that are not sufficiently well represented in the historical data. While we may adjust our models in response to new events, considerable residual uncertainty remains. Our models face challenges in forecasting key inputs into our financial projections due to volatility in economic conditions. These can include, but are not limited to, projections of mortgage and other interest rates, house prices, credit defaults, yields, and prepayments. In addition, in periods of low transaction volume for certain types of assets, the limited data available may reduce the reliability of model outputs.

n    We also use selected third-party models. While the use of such models may reduce our risk where no internal model is available, it exposes us to additional risk, as third parties typically do not provide us with proprietary information regarding their models. We have little control over the processes by which these models are adjusted or changed. As a result, we may be unable to fully evaluate the risks associated with the use of such models.

Our use of models could affect decisions concerning the purchase