Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 160

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 160
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ies are highly dependent on refinance loan volumes. A decrease in such volumes could adversely affect these counterparties, which could increase our exposure to counterparty credit risk.

Increases in interest rates may also reduce the ability of multifamily borrowers to refinance their loans, most of which have balloon balances at maturity. In addition, in a rising interest rate environment, multifamily borrowers with floating rate loans may have difficulty making higher monthly payments if cash flows generated by the properties are not increasing at a similar pace. While we generally require multifamily borrowers with floating rate loans to purchase an interest rate cap to protect against large movements in interest rates, purchasing or replacing a required interest rate cap, especially one with a longer term and/or lower strike rate, becomes more expensive in volatile and rising interest rate environments. Furthermore, when the cost of interest rate caps rises, there is no guarantee that the escrow established for the cost to purchase these caps will be sufficient. For additional information, see MD&A - Risk Management - Credit Risk - Multifamily Mortgage Credit Risk - Completing Our Own Underwriting, Credit, and Legal Review for New Business Activity.

We are exposed to counterparty credit risk with respect to our business counterparties. Our financial results may be adversely affected if one or more of our counterparties fail to meet their contractual obligations to us. 

We depend on our institutional counterparties to provide services that are critical to our business. We face the risk that one or more of our counterparties may fail to meet their contractual obligations to us. Our major counterparties include sellers, servicers, credit enhancement providers, custodial depository institutions, and counterparties to derivatives, short-term lending, and other funding transactions (e.g., cash and other investments transactions). For additional information, see MD&A - Risk Management - Counterparty Credit Risk.

Many of our major counterparties provide several types of services to us. The concentration of our exposure to our counterparties remains high. Efforts we take to reduce exposure to financially weak counterparties could increase the relative concentration of our exposure to other counterparties, increase our costs, and reduce our revenue. It is possible that our counterparties could experience challenging market conditions or other events that could adversely affect their liquidity and financial condition and cause some of them to become insolvent or otherwise fail to perform their obligations to us. Many of our counterparties are subject to increasingly complex regulatory requirements and oversight, which place additional stress on their resources and may affect their ability or willingness to do business with us.

Credit risk related to Single-Family