Company: FMCCN
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001026214-25-000040
Chunk: 133

Company: FEDERAL HOME LOAN MORTGAGE CORP
Filing Date: 2025-02-13
Form: 10-K
Item: Item 15
Chunk 133
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 for particular purposes. In 2008, FHFA suspended capital classification of us during conservatorship, in light of the Purchase Agreement. 

Originally published in December 2020, the ERCF rule was amended by FHFA three times in 2022 and once in 2023.

The ERCF establishes capital requirements for the Enterprises and includes requirements relating to the amount and form of the capital we hold, based largely on definitions of capital used in U.S. banking regulators' regulatory capital framework. The rule includes leverage-based and risk-based requirements, which together determine the requirements for each tier of capital. The rule also includes a requirement that we hold prescribed capital buffers that can be drawn down in periods of financial stress and then rebuilt over time as economic conditions improve. If we fall below the prescribed buffer amounts, we must restrict capital distributions such as stock repurchases and dividends, as well as discretionary bonus payments to executives, until the buffer amounts are restored. Pursuant to the rule, we publish quarterly capital reports on our public website. 

Our current capital levels are significantly below the levels that would be required under the ERCF. The ERCF has a transition period for compliance. In general, the compliance date for the regulatory capital requirements in the ERCF will be the later of the date of termination of our conservatorship and any compliance date provided in a consent order or other transition order. The compliance date for buffer requirements in the ERCF will be the date of termination of our conservatorship. With respect to the ERCF’s advanced approaches for measuring risk-weighted assets, the compliance date is January 1, 2028, or any later compliance date specified by FHFA. Further, prior to January 2, 2025, the Purchase Agreement included a covenant requiring us to comply with the ERCF as published in December 2020, disregarding any subsequent amendment or other modifications to the final rule. Consistent with FHFA instruction, we are reporting our regulatory capital requirements under the ERCF as subsequently amended by FHFA. Therefore, we were not in compliance with this Purchase Agreement covenant. FHFA has acknowledged this noncompliance. Effective January 2, 2025, the Purchase Agreement requires us to comply with the ERCF as amended from time to time.  

In 2023, FHFA amended the ERCF to modify certain provisions related to guarantees on commingled securities, multifamily mortgage exposures secured by properties with government subsidies, and derivatives and cleared transactions, among other modifications. The provisions related to derivatives