Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 39

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 12
Chunk 39
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 enter into interest-rate risk management derivatives and forward sale contracts to manage our interest-rate exposures from multifamily commitments and loans prior to securitization, including index lock agreements. As a result of our interest-rate risk management activities, we have minimal exposure to earnings variability from changes in interest rates. However, index lock agreements for loans that we intend to sell create temporary interest-rate-related earnings variability as we economically hedge the interest-rate risk created by the index lock agreement prior to entering into an offsetting loan purchase commitment. This exposure is typically fully offset when we enter into the associated loan purchase commitment and elect to measure the commitment at fair value, as the fair value of the commitment reflects changes in the index rate that have occurred since we entered into the index lock agreement. As our ability to manage spread risk is more limited than our ability to manage interest rate risk, we have exposure to earnings variability due to changes in spreads. We enter into certain transactions to manage this exposure, including the following:

n    WI K-Deal Certificates - We forward sell a K Certificate to be issued in the future to WI K Certificate investors thereby reducing our exposure to future changes in interest rates and K Certificate spreads.

n    Spread-related derivatives - We purchase or enter into certain spread-related derivatives including the purchase of swaptions on credit indices providing some protection against significant adverse movements in spreads.  

Securitization Products

We securitize substantially all of the loans we purchase after a short holding period. Loans awaiting securitization are generally referred to as being in our securitization pipeline. We offer two main types of securitization products: K Certificates, which could either be fully guaranteed or senior subordinate securitizations, and Multifamily PCs, which are fully guaranteed securities where we retain the credit risk of the underlying mortgage loans. The securitization structure and product selected is generally designed to achieve an appropriate economic return, which may vary based on the characteristics of the underlying loans and the level of subordination, if any. We continue to issue securitization products focused on addressing affordable housing challenges and supporting broader environmental, social, and sustainability goals. We may accept lower economic returns for securitizations that further certain elements of our mission and/or support our affordable housing goals while operating in a safe and sound manner.

FREDDIE MAC  |  2024 Form 10-K39

Management's Discussion and AnalysisOur Business Segments | Multifamily

K Certificates 

In a senior subordinate