Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 157

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 157
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 of economic difficulty or higher unemployment may heighten our credit risk because borrowers may not make their required payments in a timely manner or not make payments at all. Additionally, in a high interest rate environment where there is higher than customary house price appreciation, we could be exposed to higher delinquencies, which could cause additional losses if the house price appreciation declines significantly.

We have loans in our Single-Family mortgage portfolio with certain characteristics that are typically associated with higher levels of credit risk. See MD&A - Risk Management - Single-Family Mortgage Credit Risk - Monitoring Loan Performance and Characteristics for additional information on the characteristics of the loans in our Single-Family mortgage portfolio. We may continue to acquire loans with higher LTV ratios, as well as loans with higher DTI ratios, generally up to 50%, which will increase our exposure to credit risk. Our current and/or future efforts to increase eligible borrowers' access to single-family mortgage credit, including our affordable housing program, changes in loan products, and our plan for fulfilling our duty to serve underserved markets and FHFA requirements and guidance related to equitable housing, may expose us to increased mortgage credit risk. At any time, the characteristics of the loans we acquire may change due to new or revised guidance from FHFA.

We face significant risks related to our delegated underwriting process for single-family loans, including risks related to sellers' origination operations, data accuracy, and mortgage fraud. Our delegated process relies on sellers' ability to originate and deliver loans that consistently meet our underwriting standards, and their failure to do so may impact the credit quality of the loans we purchase.

We delegate to our sellers the underwriting for the single-family loans we purchase or securitize. Our contracts with sellers describe mortgage eligibility and underwriting standards, and the sellers represent and warrant to us that the loans they deliver to us meet these standards. 

We rely on the strength of our sellers' origination processes and controls. We perform operational risk evaluations to test our counterparties' control environments. However, our review may not detect weak operations that could lead to errors in seller decisions concerning, for example, loan underwriting, correspondent approvals, property valuations, and insurance coverage.

We do not independently verify most of the information provided to us before we purchase or securitize a loan. This exposes us to the risk that one or more of the parties involved in a transaction (such as the borrower, property seller, broker, appraiser, title agent, loan officer, or lender) misrepresented facts about the borrower, property