Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 83

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 83
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 We acquire a significant portion of our single-family loan purchase volume from several large lenders, and a large percentage of our loans are also serviced by several large servicers. If our sellers or servicers lack appropriate controls, experience a failure in their controls, or experience an operational disruption, including as a result of  cybersecurity incidents, legal or regulatory actions, or financial difficulties, we could experience a decline in mortgage servicing quality and/or be less likely to recover losses through lender repurchases, recourse agreements, or other credit enhancements, where applicable. We are also exposed to the settlement risk from the non-performance of single-family sellers as a result of our forward settlement loan purchase programs, as discussed in the Financial Intermediaries, Clearinghouses, and Other Counterparties - Forward Settlement Counterparties section below.

For our mortgage-related securities, we guarantee the payment of principal and interest, and when the underlying borrowers do not make their mortgage payments, our Guide generally requires Single-Family servicers to advance the missed mortgage interest payments for up to 120 days. After this time, Freddie Mac will make the missed mortgage principal and interest payments until the mortgages are no longer held by the securitization trust.  

In addition, when borrowers do not pay certain other expenses, such as property taxes and homeowner's insurance premiums, our Guide generally requires single-family servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties. These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the missed payments and incurred expenses will be collected from the borrowers. Should the borrower not reinstate the loan, we will reimburse the servicer for the advanced amounts at completion of foreclosure or loan workout activities.

Our eligibility standards for sellers and servicers require the following: a demonstrated operating history in residential mortgage origination and servicing, or an eligible agent acceptable to us; a quality control program that meets our standards; and sufficient net worth, capital, liquidity, and funding sources, as well as adequate insurance coverage. We perform ongoing monitoring and review of our exposure to individual sellers or servicers in accordance with our counterparty credit risk management practices, including requiring our counterparties to provide regular financial reporting to us. We also monitor and rate our sellers and servicers' compliance with our standards and periodically review their operational processes.

We actively manage the current quality of loan originations of our largest single-family sellers by performing loan quality control sampling reviews and communicating loan defect rates and the causes of those defects