UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934.

For the quarterly period ended March 31, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934.

For the transition period from to

Commission File Number: 001-34139

Federal Home Loan Mortgage Corporation

(Exact name of registrant as specified in its charter)

Federally chartered 52-0904874 8200 Jones Branch Drive 22102-3110 (703) 903-2000

corporation McLean, Virginia

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.) (Address of principal executive offices) (Zip Code) (Registrant’s telephone number,including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was 

required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 

every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this 

chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 

such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 

smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated 

filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer 

Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition 

period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the 

Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange 

Act). Yes No 

As of April 17, 2018, there were 650,058,775 shares of the registrant’s common stock outstanding.
Table of Contents

Freddie Mac Form 10-Q i

Table of Contents

Page

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Key Economic Indicators

Consolidated Results of Operations

Consolidated Balance Sheets Analysis

Our Business Segments

Risk Management

Liquidity and Capital Resources

Conservatorship and Related Matters

Regulation and Supervision

Off-Balance Sheet Arrangements

Forward-Looking Statements

FINANCIAL STATEMENTS

OTHER INFORMATION

CONTROLS AND PROCEDURES

EXHIBIT INDEX

SIGNATURES

FORM 10-Q INDEX

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Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 1

Management's Discussion and 

Analysis of Financial Condition and 

Results of Operations

This Quarterly Report on Form 10-Q includes forward-looking statements that are based on current 

expectations and are subject to significant risks and uncertainties. These forward-looking statements are 

made as of the date of this Form 10-Q. We undertake no obligation to update any forward-looking 

statement to reflect events or circumstances after the date of this Form 10-Q. Actual results might differ 

significantly from those described in or implied by such statements due to various factors and 

uncertainties, including those described in the Forward-Looking Statements sections of this Form 

10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017, or 2017 Annual 

Report, and the Business and Risk Factors sections of our 2017 Annual Report.

Throughout this Form 10-Q, we use certain acronyms and terms that are defined in the Glossary of our 

2017 Annual Report. 

You should read the following MD&A in conjunction with our 2017 Annual Report and our condensed 

consolidated financial statements and accompanying notes for the three months ended March 31, 2018 

included in Financial Statements. Throughout this Form 10-Q, we refer to the three months ended 

March 31, 2018, the three months ended December 31, 2017, the three months ended September 30, 

2017, the three months ended June 30, 2017 and the three months ended March 31, 2017 as "1Q 

2018," "4Q 2017," "3Q 2017," "2Q 2017" and "1Q 2017," respectively. 

INTRODUCTION

Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to provide liquidity, stability 

and affordability to the U.S. housing market. We do this primarily by purchasing residential mortgage 

loans originated by lenders. In most instances, we package these loans into mortgage-related securities, 

which are guaranteed by us and sold in the global capital markets. We also invest in mortgage loans and 

mortgage-related securities. We do not originate loans or lend money directly to mortgage borrowers.

We support the U.S. housing market and the overall economy by enabling America’s families to access 

mortgage loan funding with better terms and by providing consistent liquidity to the multifamily 

mortgage market. We have helped many distressed borrowers keep their homes or avoid foreclosure. 

We are working with FHFA, our customers and the industry to build a better housing finance system for 

the nation.
Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 2

Business Results

Portfolio Balances

Guarantee Portfolios Investments Portfolios 

Total Guarantee Portfolio

Our total guarantee portfolio grew $106 billion, or 5%, from March 31, 2017 to March 31, 2018, 

driven by a 3% increase in our single-family credit guarantee portfolio and a 30% increase in our 

multifamily guarantee portfolio. 

The growth in our single-family credit guarantee portfolio was driven in part by an increase in 

U.S. single-family mortgage debt outstanding as a result of continued home price appreciation. 

New business acquisitions had a higher average loan size compared to older vintages that 

continued to run off.

The growth in our multifamily guarantee portfolio was primarily driven by an increase in U.S. 

multifamily mortgage debt outstanding due to strong multifamily market fundamentals and low 

interest rates, coupled with the growth in our share of new business volume due to our strategic 

pricing efforts, expansion of our new product offerings and an increase in purchase activity 

associated with certain targeted loans in underserved markets.
Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 3

Total Investments Portfolio 

Our total investments portfolio declined $72 billion, or 19%, from March 31, 2017 to March 31, 2018, 

primarily due to repayments and the active disposition of less liquid assets. 

We continue to reduce the mortgage-related investments portfolio as required by the Purchase 

Agreement and FHFA.

Consolidated Financial Results

Comprehensive income (loss) was $2.2 billion in 1Q 2018, relatively unchanged from 1Q 2017. 

Key Drivers:

Continued growth in our single-family credit guarantee portfolio was more than offset by the 

continued reduction in the balance of our mortgage-related investments portfolio and lower 

amortization of debt securities of consolidated trusts due to lower prepayments driven by higher 

interest rates, which resulted in lower net interest income.

Benefit (provision) for credit losses was relatively unchanged.

Market-related items had minimal impact as interest rate-related fair value losses were partially offset 

by spread-related fair value gains.

Reduction in the statutory corporate income tax rate resulted in lower income tax expense.

Our total equity was $2.2 billion at March 31, 2018. Because our net worth was less than the $3.0 billion 

Capital Reserve Amount, we will not have a dividend obligation to Treasury in June 2018. Because our 

net worth was positive, we are not requesting a draw from Treasury under the Purchase Agreement for 

1Q 2018. Our cumulative senior preferred stock dividend payments totaled $112.4 billion as of March 

31, 2018.

At December 31, 2017, we had a net worth deficit of $312 million. As a result, FHFA, as Conservator, 

submitted a draw request, on our behalf, to Treasury. This draw request was funded in 1Q 2018, which 

increased the outstanding liquidation preference of the senior preferred stock at March 31, 2018 to 

$75.6 billion. In addition, the amount of available funding remaining under the Purchase Agreement was 

reduced to $140.2 billion and will be reduced by any future draws.

Conservatorship and Government Support for Our Business

Since September 2008, we have been operating in conservatorship, with FHFA as our Conservator. The 

conservatorship and related matters significantly affect our management, business activities, financial 

condition and results of operations. Our future is uncertain, and the conservatorship has no specified 

termination date. We do not know what changes may occur to our business model during or following 

conservatorship, including whether we will continue to exist.

Our Purchase Agreement with Treasury and the terms of the senior preferred stock we issued to 

Treasury also affect our business activities. Our ability to access funds from Treasury under the 

Purchase Agreement is critical to keeping us solvent and avoiding the appointment of a receiver by 

FHFA under statutory mandatory receivership provisions. We believe that the support provided by 

Treasury pursuant to the Purchase Agreement currently enables us to have adequate liquidity to conduct 

normal business activities. 
Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 4

Treasury, as the holder of the senior preferred stock, is entitled to receive cumulative quarterly cash 

dividends, when, as and if declared by the Conservator, acting as successor to the rights, titles, powers 

and privileges of our Board of Directors. The dividends we have paid to Treasury on the senior preferred 

stock have been declared by, and paid at the direction of, the Conservator. 

Under the August 2012 amendment to the Purchase Agreement, our dividend requirement each quarter 

is the amount, if any, by which our Net Worth Amount at the end of the immediately preceding fiscal 

quarter, less the applicable Capital Reserve Amount, exceeds zero. Pursuant to the December 2017 

Letter Agreement, the Capital Reserve Amount is $3.0 billion. If for any reason we were not to pay our 

dividend requirement on the senior preferred stock in full in any future period, the unpaid amount would 

be added to the liquidation preference and our applicable Capital Reserve Amount would thereafter be 

zero, but this would not affect our ability to draw funds from Treasury under the Purchase Agreement.
Management's Discussion and Analysis Key Economic Indicators | Single-Family Home Prices

Freddie Mac Form 10-Q 5

KEY ECONOMIC INDICATORS

The following graphs and related discussions present certain macroeconomic indicators that can 

significantly affect our business and financial results. 

Single-Family Home Prices

National Home Prices

Commentary 

Home prices continued to appreciate, increasing by 2.5% and 2.2% during 1Q 2018 and 1Q 2017, 

respectively, based on our own non-seasonally adjusted price index of single-family homes funded 

by loans owned or guaranteed by us or Fannie Mae. 

We expect the rate of home price growth in 2018 will moderate, driven by a gradual increase in 

housing supply and higher mortgage interest rates.

Increases in home prices typically result in lower delinquency rates and lower loss severity. Fewer 

loan delinquencies, loan workouts and foreclosure sales generally reduce estimated credit losses on 

our total mortgage portfolio. 

Higher single-family home prices may also contribute to an increase in potential multifamily renters.
Management's Discussion and Analysis Key Economic Indicators | Interest Rates

Freddie Mac Form 10-Q 6

Interest Rates 

Key Market Interest Rates 

 

 Commentary

The quarterly ending and quarterly average 30-year Primary Mortgage Market Survey ("PMMS") 

interest rates were higher at March 31, 2018 than March 31, 2017. Increases in the PMMS rate 

typically result in decreases in refinance activity and U.S. single-family loan originations.

The 10-year LIBOR and 2-year LIBOR quarterly ending interest rates increased more during 1Q 2018 

than during 1Q 2017. Changes in the 10-year and 2-year LIBOR interest rates affect the fair value of 

certain of our assets and liabilities, including derivatives, measured at fair value. A larger interest rate 

fluctuation from period to period generally results in larger fair value gains and losses, while a smaller 

fluctuation from period to period generally results in smaller fair value gains and losses. However, the 

majority of these fair value changes are offset by our hedge accounting programs.
Management's Discussion and Analysis Key Economic Indicators | Interest Rates

Freddie Mac Form 10-Q 7

The quarterly ending and quarterly average short-term interest rates, as indicated by the 3-month 

LIBOR rate, were higher at March 31, 2018 than March 31, 2017. An increase in short-term interest 

rates generally increases the interest earned on our short-term investments and interest expense on 

our short-term funding.

For additional information on the effect of LIBOR rates on our financial results, see Our Business 

Segments - Capital Markets - Market Conditions. 
Management's Discussion and Analysis Key Economic Indicators | Unemployment Rate

Freddie Mac Form 10-Q 8

Unemployment Rate

Unemployment Rate and Job Creation(1)

Source: U.S. Bureau of Labor Statistics

(1) Excludes Puerto Rico and the U.S. Virgin Islands.

Commentary

Average monthly net new jobs (non-farm) were higher in 1Q 2018 than 1Q 2017.

The national unemployment rate was lower in 1Q 2018 than 1Q 2017.

Changes in monthly net new jobs and the national unemployment rate can affect several market 

factors, including the demand for both single-family and multifamily housing and the level of loan 

delinquencies.

Decreases in the national unemployment rate typically result in lower levels of delinquencies, which 

generally result in a decrease in estimated credit losses on our total mortgage portfolio.
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 9

CONSOLIDATED RESULTS OF OPERATIONS

You should read this discussion of our consolidated results of operations in conjunction with our 

condensed consolidated financial statements and accompanying notes. 

The table below compares our summarized consolidated results of operations.

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Net interest income $3,018 $3,795 ($777) (20)%

Benefit (provision) for credit losses (63) 116 (179) (154)

Net interest income after benefit (provision) for credit losses 2,955 3,911 (956) (24)

Non-interest income (loss):

Gains (losses) on extinguishment of debt 110 218 (108) (50)

Derivative gains (losses) 1,830 (302) 2,132 706

Net impairment of available-for-sale securities recognized in earnings — (13) 13 100

Other gains (losses) on investment securities recognized in earnings (232) 56 (288) (514)

Other income (loss) 121 415 (294) (71)

Total non-interest income (loss) 1,829 374 1,455 389

Non-interest expense:

Administrative expense (520) (511) (9) (2)

REO operations expense (34) (56) 22 39

Temporary Payroll Tax Cut Continuation Act of 2011 expense (359) (321) (38) (12)

Other expense (197) (76) (121) (159)

Total non-interest expense (1,110) (964) (146) (15)

Income (loss) before income tax (expense) benefit 3,674 3,321 353 11

Income tax (expense) benefit (748) (1,110) 362 33

Net income (loss) 2,926 2,211 715 32

Total other comprehensive income (loss), net of taxes and reclassification

adjustments (776) 23 (799) (3,474)

Comprehensive income (loss) $2,150 $2,234 ($84) (4)%
Management's Discussion and Analysis Consolidated Results of Operations | Net Interest Income

Freddie Mac Form 10-Q 10

Net Interest Income

Net Interest Yield Analysis

The table below presents an analysis of interest-earning assets and interest-bearing liabilities. 

1Q 2018 1Q 2017

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $7,015 $11 0.60 % $12,053 $9 0.29 %

Securities purchased under agreements to resell 51,732 197 1.52 54,406 88 0.66

Advances to lenders and other secured lending 990 6 2.59 617 4 2.40

Mortgage-related securities:

Mortgage-related securities 150,267 1,580 4.21 175,955 1,663 3.78

Extinguishment of PCs held by Freddie Mac (90,814) (843) (3.71) (88,539) (820) (3.71)

Total mortgage-related securities, net 59,453 737 4.96 87,416 843 3.85

Non-mortgage-related securities 14,775 73 1.97 21,061 71 1.36

Loans held by consolidated trusts(1) 1,776,708 14,859 3.35 1,708,039 14,599 3.42

Loans held by Freddie Mac(1) 103,451 1,092 4.22 124,217 1,366 4.40

Total interest-earning assets 2,014,124 16,975 3.37 2,007,809 16,980 3.38

Interest-bearing liabilities:

Debt securities of consolidated trusts including PCs held by

Freddie Mac 1,803,122 (13,356) (2.96) 1,730,728 (12,541) (2.90)

Extinguishment of PCs held by Freddie Mac (90,814) 842 3.71 (88,539) 820 3.71

Total debt securities of consolidated trusts held by third

parties 1,712,308 (12,514) (2.92) 1,642,189 (11,721) (2.86)

Other debt:

Short-term debt 67,970 (229) (1.35) 73,467 (96) (0.52)

Long-term debt 228,981 (1,214) (2.12) 279,519 (1,368) (1.96)

Total other debt 296,951 (1,443) (1.94) 352,986 (1,464) (1.66)

Total interest-bearing liabilities 2,009,259 (13,957) (2.78) 1,995,175 (13,185) (2.64)

Impact of net non-interest-bearing funding 4,865 — 0.01 12,634 — 0.02

Total funding of interest-earning assets $2,014,124 ($13,957) (2.77)% $2,007,809 ($13,185) (2.62)%

Net interest income/yield $3,018 0.60 % $3,795 0.76 %

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $574 million and $506 million for loans held by 

consolidated trusts and $22 million and $62 million for loans held by Freddie Mac during 1Q 2018 and 1Q 2017, respectively.
Management's Discussion and Analysis Consolidated Results of Operations | Net Interest Income

Freddie Mac Form 10-Q 11

Components of Net Interest Income

The table below presents the components of net interest income.

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Contractual net interest income:

Guarantee fee income $834 $792 $42 5 %

Guarantee fee income related to the Temporary Payroll Tax Cut Continuation

Act of 2011 347 316 31 10

Other contractual net interest income 1,457 1,759 (302) (17)

Total contractual net interest income 2,638 2,867 (229) (8)

Net amortization - loans and debt securities of consolidated trusts 748 953 (205) (22)

Net amortization - other assets and debt 5 18 (13) (72)

Hedge accounting impact (373) (43) (330) (767)

Net interest income $3,018 $3,795 ($777) (20)%

Key Drivers:

Guarantee fee income

1Q 2018 vs. 1Q 2017 - increased during 1Q 2018 primarily due to higher average guarantee fee 

rates, as well as the continued growth in the size of the Core single-family loan portfolio. Average 

guarantee fee rates are generally higher on mortgage loans in our Core single-family loan 

portfolio compared to those in our Legacy and relief refinance single-family loan portfolio.

Other contractual net interest income 

1Q 2018 vs. 1Q 2017 - decreased during 1Q 2018 due to the continued reduction in the balance 

of our mortgage-related investments portfolio pursuant to the portfolio limits established by the 

Purchase Agreement and FHFA. See Conservatorship and Related Matters - Reducing 

Our Mortgage-Related Investments Portfolio Over Time for a discussion of the key 

drivers of the decline in our mortgage-related investments portfolio. 

Net amortization of loans and debt securities of consolidated trusts

1Q 2018 vs. 1Q 2017 - decreased during 1Q 2018 primarily due to a decrease in amortization of 

debt securities of consolidated trusts driven by a decrease in prepayments as a result of higher 

interest rates, partially offset by an increase in amortization from higher upfront fees on mortgage 

loans.

Hedge Accounting Impact

1Q 2018 vs. 1Q 2017 - losses increased primarily due to the inclusion of fair value hedge 

accounting results within net interest income in 1Q 2018 but not in 1Q 2017, due to our adoption 

of amended hedge accounting guidance in 4Q 2017. In 1Q 2017, this activity was included in 

other income and derivative gains (losses).
Management's Discussion and Analysis Consolidated Results of Operations | Benefit (Provision) for Credit Losses

Freddie Mac Form 10-Q 12

Benefit (Provision) for Credit Losses

Components of Benefit (Provision) for Credit Losses

The benefit (provision) for credit losses predominantly relates to single-family loans and includes 

components for both collectively and individually impaired loans. 

The table below presents the components of our benefit (provision) for credit losses.

Change

(Dollars in billions) 1Q 2018 1Q 2017 $ %

Benefit (provision) for newly impaired loans ($0.1) ($0.2) $0.1 50 %

Amortization of interest rate concessions 0.1 0.2 (0.1) (50)

Reclassifications between held-for-investment loans and held-for-sale loans (0.1) — (0.1) N/A

Other, including changes in estimated default probability and loss severity — 0.1 (0.1) (100)

Benefit (provision) for credit losses ($0.1) $0.1 ($0.2) (200)%

Key Drivers: 

1Q 2018 vs. 1Q 2017 - remained relatively unchanged.
Management's Discussion and Analysis Consolidated Results of Operations | Derivative Gains (Losses)

Freddie Mac Form 10-Q 13

Derivative Gains (Losses)

Components of Derivative Gains (Losses)

We continue to align our derivative portfolio with the changing duration of our assets and liabilities so as 

to economically hedge their interest-rate risk. We manage our exposure to interest-rate risk on an 

economic basis to a low level as measured by our models. We believe the impact of derivatives on our 

GAAP financial results should be considered in the context of our overall interest-rate risk profile, 

including our PMVS and duration gap results. For more information about our interest-rate risk 

management activities and the sensitivity of reported earnings to those activities, see Risk 

Management - Market Risk.

Derivative gains (losses) includes the fair value changes and the accrual of periodic cash settlements for 

derivatives while not designated in qualifying hedge relationships. In addition, prior to our adoption of 

amended hedge accounting guidance in 4Q 2017, we included the accrual of periodic cash settlements 

on derivatives in qualifying hedge relationships in derivatives gains (losses). 

The table below presents the components of derivative gains (losses).

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Fair value change in interest-rate swaps $1,514 $673 $841 125%

Fair value change in option-based derivatives (455) (430) (25) (6)

Fair value change in other derivatives 916 (78) 994 1,274

Accrual of periodic cash settlements (145) (467) 322 69

Derivative gains (losses) $1,830 ($302) $2,132 706%

Key Drivers: 

1Q 2018 vs. 1Q 2017 - Derivative fair value gains increased as long-term interest rates increased 

more during 1Q 2018. The 10-year par swap rate increased 39 basis points during 1Q 2018 and 7

basis points during 1Q 2017. The larger interest rate increase in 1Q 2018 resulted in larger fair value 

gains in our pay-fixed interest rate swaps, forward commitments to issue PCs, and futures, partially 

offset by larger fair value losses in our receive-fixed swaps. 
Management's Discussion and Analysis Consolidated Results of Operations | Other Income (Loss)

Freddie Mac Form 10-Q 14

Other Income (Loss)

Components of Other Income (Loss)

The table below presents the components of other income (loss).

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Other income (loss)

Gains (losses) on loans(1) ($320) $14 ($334) (2,386)%

Gains (losses) on held-for-sale loan purchase commitments(1) 105 224 (119) (53)

Gains (losses) on debt(1) 11 (89) 100 112

All other 325 227 98 43

 Fair value hedge accounting

Change in fair value of derivatives in qualifying hedge relationships N/A 65 (65) N/A

Change in fair value of hedged items in qualifying hedge relationships N/A (26) 26 N/A

Total other income (loss) $121 $415 ($294) (71)%

(1) Includes fair value gains (losses) on loans, held-for-sale loan purchase commitments and debt for which we have elected the fair value option.

Key Drivers:

1Q 2018 vs. 1Q 2017 - Other income (loss) declined in 1Q 2018 compared to 1Q 2017 primarily 

driven by:

Greater interest rate-related fair value losses on multifamily mortgage loans and commitments 

for which we have elected the fair value option due to a larger increase in long-term interest 

rates, coupled with spread widening on certain K Certificate products that are issued with less 

frequency.

An accounting policy change effective beginning in 4Q 2017 resulted in fair value changes for 

derivatives and hedged items in qualifying hedge relationships no longer being recognized in 

other income (loss). See Note 9 for more information.

This decrease was partially offset by:

Decreased fair value losses on STACR debt notes as market spreads between STACR yields and 

LIBOR remained relatively unchanged in 1Q 2018, while spreads tightened in 1Q 2017.
Management's Discussion and Analysis Consolidated Results of Operations | Other Comprehensive Income (Loss)

Freddie Mac Form 10-Q 15

Other Comprehensive Income (Loss)

Explanation of Key Drivers of Other Comprehensive Income (Loss)

The following table presents the attribution of total other comprehensive income (loss), net of taxes and 

reclassification adjustments reported in our condensed consolidated statements of comprehensive 

income.

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Other comprehensive income (loss), excluding certain items ($402) $163 ($565) (347)%

Excluded items:

Accretion due to significant increases in expected cash flows on previously

impaired available-for-sale securities (88) (54) (34) (63)

Realized (gains) losses reclassified from AOCI (286) (86) (200) (233)

Total excluded items (374) (140) (234) (167)

Total other comprehensive income (loss) ($776) $23 ($799) (3,474)%

Key Drivers: 

Other comprehensive income, excluding certain items

1Q 2018 vs. 1Q 2017 - decreased primarily due to higher fair value losses on agency and nonagency mortgage-related securities classified as available-for-sale as long-term interest rates 

increased more in 1Q 2018, coupled with smaller fair value gains from less market spread 

tightening on our agency mortgage-related securities. 

Excluded items:

Realized (gains) losses reclassified from AOCI 

1Q 2018 vs. 1Q 2017 - reflected larger amounts of reclassified gains during 1Q 2018 due to 

spread tightening on sales of non-agency mortgage-related securities classified as available-forsale.
Management's Discussion and Analysis Consolidated Results of Operations | Other Key Drivers

Freddie Mac Form 10-Q 16

Other Key Drivers 

Explanation of Other Key Drivers

Key Drivers: 

Gains (losses) on extinguishment of debt 

1Q 2018 vs. 1Q 2017 - declined primarily due to a decrease in the amount of debt securities of 

consolidated trusts (i.e., PCs) repurchased.

Other gains (losses) on investment securities recognized in earnings 

1Q 2018 vs. 1Q 2017 - decreased primarily driven by larger fair value losses on our mortgage 

and non-mortgage-related securities classified as trading as interest rates increased more during 

1Q 2018, partially offset by larger fair value gains driven by spread tightening on our sales of 

non-agency mortgage-related securities classified as available-for-sale.

Other expense

1Q 2018 vs. 1Q 2017 - increased primarily due to the recovery in 1Q 2017 of amounts previously 

recognized in other expense. This activity did not repeat in 1Q 2018. 

Income tax (expense) benefit

1Q 2018 vs. 1Q 2017 - decreased due to a reduction in the statutory corporate income tax rate.
Management's Discussion and Analysis Consolidated Balance Sheets Analysis

Freddie Mac Form 10-Q 17

CONSOLIDATED BALANCE SHEETS 

ANALYSIS

The table below compares our summarized consolidated balance sheets.

Change

(Dollars in millions) 3/31/2018 12/31/2017 $ %

Assets:

Cash and cash equivalents(1) $8,617 $9,811 ($1,194) (12)%

Securities purchased under agreements to resell 41,828 55,903 (14,075) (25)

Subtotal 50,445 65,714 (15,269) (23)

Investments in securities, at fair value 75,501 84,318 (8,817) (10)

Mortgage loans, net 1,868,351 1,871,217 (2,866) —

Accrued interest receivable 6,381 6,355 26 —

Derivative assets, net 454 375 79 21

Deferred tax assets, net 8,313 8,107 206 3

Other assets 13,038 13,690 (652) (5)

Total assets $2,022,483 $2,049,776 ($27,293) (1)%

Liabilities and Equity:

Liabilities:

Accrued interest payable $6,058 $6,221 ($163) (3)%

Debt, net 2,004,807 2,034,630 (29,823) (1)

Derivative liabilities, net 345 269 76 28

Other liabilities 9,123 8,968 155 2

Total liabilities 2,020,333 2,050,088 (29,755) (1)

Total equity 2,150 (312) 2,462 (789)

Total liabilities and equity $2,022,483 $2,049,776 ($27,293) (1)%

(1) The current and prior period presentation has been modified to include restricted cash and cash equivalents due to recently adopted accounting 

guidance. 

Key Drivers:

As of March 31, 2018 compared to December 31, 2017:

Cash and cash equivalents and securities purchased under agreements to resell affect one 

another and changes in the balances should be viewed together (e.g., cash and cash equivalents 

can be invested in securities purchased under agreements to resell or other investments). The 

decrease in the combined balance was primarily due to lower near term cash needs for fewer 

upcoming maturities and anticipated calls of other debt.

Investments in securities, at fair value decreased as we continued to reduce the mortgage-related 

investments portfolio during 2018 as required by the Purchase Agreement and FHFA.

Total equity increased primarily as a result of higher comprehensive income in 1Q 2018 compared 

to 4Q 2017, combined with our ability to retain equity as a result of an increase in the applicable 

Capital Reserve Amount, which is $3.0 billion as of January 1, 2018. 
Management's Discussion and Analysis Our Business Segments | Segment Earnings

Freddie Mac Form 10-Q 18

OUR BUSINESS SEGMENTS

We have three reportable segments, which are based on the way we manage our business. 

Single-family Guarantee - reflects results from our purchase, securitization and guarantee of singlefamily loans and the management of single-family mortgage credit risk.

Multifamily - reflects results from our purchase, sale, securitization and guarantee of multifamily 

loans and securities, our investments in those loans and securities and the management of 

multifamily mortgage credit risk and market spread risk.

Capital Markets - reflects results from managing our mortgage-related investments portfolio 

(excluding Multifamily segment investments, single-family seriously delinquent loans and the credit 

risk of single-family performing and reperforming loans), treasury function, single-family 

securitization activities and interest-rate risk.

Certain activities that are not part of a reportable segment, such as material corporate-level activities 

that are infrequent in nature and based on decisions outside the control of the management of our 

reportable segments, are included in the All Other category.

Segment Earnings

We present Segment Earnings by reclassifying certain credit guarantee-related activities and 

investment-related activities between various line items on our GAAP condensed consolidated 

statements of comprehensive income and allocating certain revenues and expenses to our three 

reportable segments. For more information on our segment reclassifications, see Note 13.

Segment Comprehensive Income

The graph below shows our comprehensive income by segment.

 
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 19

Single-Family Guarantee

Market Conditions

The graphs and related discussion below present certain market indicators that can significantly affect 

the business and financial results of our Single-family Guarantee segment. 

U.S. Single-Family Originations 

Source: Inside Mortgage Finance dated April 27, 2018 (latest available 

IMF purchase/refinance information).

Single-Family Serious Delinquency Rates

Source: National Delinquency Survey from the Mortgage Bankers 

Association. Data as of February 8, 2018 (latest available NDS 

information).

Commentary

U.S. single-family loan origination volumes decreased to $375 billion in 1Q 2018 from $385 billion in 

1Q 2017, driven by lower refinance volume as a result of higher mortgage interest rates in 1Q 2018. 

Mortgage origination data is from Inside Mortgage Finance as of April 27, 2018.

We expect continued growth in U.S. single-family home purchase volume due to a gradual increase 

in housing supply, while a moderate increase in mortgage interest rates is expected to result in a 

lower refinance volume. Freddie Mac's single-family loan purchase volumes typically follow a similar 

trend.

 The single-family serious delinquency rate in the U.S. increased during 4Q 2017 due to the impact of 

the hurricanes in 3Q 2017. Freddie Mac's serious delinquency rate followed a similar trend resulting 
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 20

in higher loan workout activities, which increased our expected credit losses on our total singlefamily credit guarantee portfolio. 
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 21

Business Results

The following tables, graphs and related discussion present the business results of our Single-family 

Guarantee segment.

New Business Activity

UPB of Single-Family Loan Purchases and Guarantees 

by Loan Purpose 

(In billions)

Percentage of Single-Family Loan Purchases and 

Guarantees by Loan Purpose 

Commentary 

Our loan purchase and guarantee activity decreased in 1Q 2018 compared to 1Q 2017 primarily due 

to lower refinance volume driven by higher average mortgage interest rates.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 22

Single-Family Credit Guarantee Portfolio

Single-Family Credit Guarantee Portfolio 

Commentary 

The single-family credit guarantee portfolio increased from December 31, 2017 to March 31, 2018, 

driven by an increase in U.S. single-family mortgage debt outstanding as a result of continued home 

price appreciation. New business acquisitions had a higher average loan size compared to older 

vintages that continued to run off. 

The Core single-family loan portfolio grew to 79% of the single-family credit guarantee portfolio at 

March 31, 2018, compared to 78% at December 31, 2017.

The Legacy and relief refinance single-family loan portfolio declined to 21% of the single-family 

credit guarantee portfolio at March 31, 2018, compared to 22% at December 31, 2017, driven 

primarily by liquidations.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 23

Guarantee Fees

We receive fees for guaranteeing the payment of principal and interest to investors in our mortgagerelated securities. These fees consist primarily of a combination of base contractual guarantee fees paid 

on a monthly basis and initial upfront payments. The average portfolio Segment Earnings guarantee fee 

rate recognizes upfront fee income over the contractual life of the related loans (usually 30 years). If the 

related loans prepay, the remaining upfront fee income is recognized immediately. In contrast, the 

average guarantee fee rate charged on new acquisitions recognizes upfront fee income over the 

estimated life of the related loans using our expectations of prepayments and other liquidations. See 

MD&A - Our Business Segments - Single-family Guarantee - Business Overview - 

Guarantee Fees in our 2017 Annual Report for more information on our guarantee fees.

Average Portfolio Segment Earnings Guarantee Fee 

Rate(1)(2) 

Average Guarantee Fee Rate(1) Charged on New 

Acquisitions 

(1) Excludes the legislated 10 basis point increase in guarantee fees.

(2) Reflects an average rate for our total single-family credit guarantee portfolio and is not limited to purchases in the applicable period.

Commentary

The average portfolio Segment Earnings guarantee fee rate increased slightly in 1Q 2018 compared 

to 1Q 2017 primarily due to older vintages being replaced by new loan acquisitions with higher 

guarantee fees.

The average guarantee fee rate charged on new acquisitions decreased in 1Q 2018 compared to 1Q 

2017 due to competitive pricing.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 24

Credit Risk Transfer (CRT) Activities

We transfer credit risk on a portion of our single-family credit guarantee portfolio to the private market, 

which reduces the risk of future losses to us and taxpayers when borrowers go into default. In our 

STACR debt note and ACIS transactions, we pay interest to investors or premiums to insurers in 

exchange for their taking on a portion of the credit risk on the mortgage loans in the related reference 

pool. These payments effectively reduce our guarantee fee income from the PCs backed by the 

mortgage loans in the related reference pools. See MD&A - Our Business Segments - SingleFamily Guarantee - Business Overview - Credit Risk Transfer Transactions in our 2017 

Annual Report for more information on our CRT transactions.

The following charts present the issuance amounts for the STACR debt note and ACIS transactions that 

occurred during 1Q 2018 and the cumulative issuance amounts for all STACR debt note, ACIS and Deep 

MI CRT transactions as of March 31, 2018 by loss position and the party holding each loss position.

New STACR Debt Note and ACIS Transactions during 

1Q 2018(1)

(In billions)

Senior

Freddie Mac

$73.3

Reference 

Pool(3)

$76.3

Mezzanine

Freddie 

Mac 

$0.2

ACIS(3)

$0.4

STACR Debt Notes

 

$1.6

First 

Loss

Freddie 

Mac

$0.4

ACIS(3)

$0.1

STACR 

Debt Notes

$0.3

Cumulative STACR Debt Note, ACIS and Deep MI CRT 

Transactions as of March 31, 2018(1)(2)  

(In billions)

Senior

Freddie Mac

$900.1

Reference 

Pool

$942.4

Mezzanine

Freddie 

Mac 

$2.3

ACIS

$7.9

STACR 

Debt 

Notes

$23.6

Deep 

MI CRT

$0.2

First

 Loss

Freddie 

Mac

$5.1

ACIS

$1.0

STACR 

Debt Notes

$2.2

(1) The amounts represent the UPB upon issuance of STACR debt notes and execution of ACIS and Deep MI CRT transactions. There were no Deep MI 

CRT transactions in 1Q 2018.

(2) For the current outstanding coverage provided by our STACR debt note and ACIS transactions, see Credit Enhancements.

(3) Excludes additional ACIS transactions of $1.0 billion related to reference pools in transactions executed in prior periods.

Commentary 

During 1Q 2018, we transferred a portion of credit risk associated with $81.6 billion in UPB of loans 

in our single-family credit guarantee portfolio through STACR debt note, ACIS and senior 

subordinate securitization structure transactions.

As of March 31, 2018, we had transferred a significant portion of credit risk on 39% of our singlefamily credit guarantee portfolio.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 25

Calculated as the current balance of single-family CRT reference pool UPB divided by the singlefamily credit guarantee portfolio UPB. 

We expect to reduce by approximately 60% the modeled capital required for credit risk on the 

quarter's $66 billion of new originations. 

Calculated as modeled credit capital expected to be released from the underlying single-family 

CRT reference pool divided by total modeled credit capital on quarterly new originations.

The modeled capital requirement is per FHFA's Conservatorship Capital Framework (CCF) and 

internal methods that use stress scenarios which are generally consistent with the 2017 DoddFrank Act Stress Test (DFAST) "severely adverse" scenario.

Our expected guarantee fee income on the PCs related to the STACR debt note and ACIS reference 

pools has been effectively reduced by approximately 29%, on average, for all transactions executed 

through March 31, 2018. 

As of March 31, 2018, we had experienced minimal write-downs on our STACR debt notes and have 

filed minimal claims for reimbursement of losses under our ACIS transactions. We expect losses may 

increase on loans in the reference pools in our existing CRT transactions as a result of the hurricanes 

in 3Q 2017.

We continue to evaluate our credit risk transfer strategy and to make changes depending on market 

conditions and our business strategy. The aggregate cost of our credit risk transfer activity will continue 

to increase as we continue to transfer risk on new originations.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 26

Credit Enhancements

The table below provides information on the total current and protected UPB and maximum coverage 

associated with credit enhanced loans in our single-family credit guarantee portfolio as of March 31, 

2018 and December 31, 2017, respectively. The table includes all types of single-family credit 

enhancements. See Note 6 for additional information about our single-family credit enhancements.

March 31, 2018 December 31, 2017

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Primary mortgage insurance $338,457 $86,622 $334,189 $85,429

STACR debt note(3) 661,399 19,183 604,356 17,788

ACIS transactions(4) 650,420 7,148 617,730 6,736

Senior subordinate securitization structures 16,986 2,211 12,283 1,913

Other(5) 15,641 6,362 15,975 6,479

Less: UPB with more than one type of credit enhancement (842,161) — (775,751) —

Single-family credit guarantee portfolio with credit enhancement 840,742 121,526 808,782 118,345

Single-family credit guarantee portfolio without credit enhancement 995,217 — 1,020,098 —

Total $1,835,959 $121,526 $1,828,880 $118,345

(1) Except for the majority of our STACR debt notes and ACIS transactions, our credit enhancements generally provide protection for the first, or initial, 

credit losses associated with the related loans. For subordination, total current and protected UPB represents the UPB of the guaranteed 

securities. For STACR debt notes and ACIS transactions, total current and protected UPB represents the UPB of the assets included in the 

reference pool. 

(2) Except for subordination, this represents the remaining amount of loss recovery that is available subject to the terms of counterparty agreements. 

For subordination, this represents the UPB of the securities that are subordinate to our guarantee and held by third parties, which could provide 

protection by absorbing first losses.

(3) Maximum coverage amounts represent the outstanding balance of STACR debt notes held by third parties. 

(4) Maximum coverage amounts represent the remaining aggregate limit of insurance purchased from third parties in ACIS transactions. 

(5) Includes seller indemnification, Deep MI CRT, lender recourse and indemnification agreements, pool insurance, HFA indemnification and other 

credit enhancements.

Commentary 

We had coverage remaining of $121.5 billion and $118.3 billion on our single-family credit guarantee 

portfolio as of March 31, 2018 and December 31, 2017, respectively. Credit risk transfer transactions 

provided 23.5% and 22.4% of the coverage remaining at those dates, respectively.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 27

Mortgage Loan Credit Risk

Certain combinations of loan attributes can indicate a higher degree of credit risk, such as loans with 

both higher LTV ratios and lower credit scores. The following table presents the combination of credit 

score and current LTV (CLTV) ratio attributes of loans in our single-family credit guarantee portfolio.

March 31, 2018

CLTV > 80 to 100 CLTV > 100 All Loans

(Credit score)

%

Portfolio

SDQ 

Rate(1)

%

Portfolio

SDQ 

Rate(1)

%

Portfolio

SDQ 

Rate(1)

%

Portfolio

SDQ 

Rate(1)

%

Modified

Core single-family loan portfolio:

< 620 0.2% 2.62% —% NM —% NM 0.2% 2.85% 3.3%

620 to 659 1.9 1.45 0.3 1.74% — NM 2.2 1.48 1.5

67.4 0.25 8.9 0.43 — NM 76.3 0.27 0.2

Not available 0.1 1.87 — NM — NM 0.1 3.49 3.6

Total 69.6% 0.29% 9.2% 0.50% —% NM 78.8% 0.32% 0.3%

Legacy and relief refinance single-family

loan portfolio:

< 620 1.2% 5.12% 0.3% 9.63% 0.1% 15.55% 1.6% 6.10% 23.5%

620 to 659 1.9 3.83 0.4 7.71 0.2 12.99 2.5 4.59 20.3

14.6 1.38 1.8 4.15 0.6 6.62 17.0 1.69 7.3

Not available 0.1 5.40 — NM — NM 0.1 5.80 18.2

Total 17.8% 1.97% 2.5% 5.34% 0.9% 8.95% 21.2% 2.41% 10.1%

(1) NM - Not meaningful due to the percentage of the portfolio rounding to zero.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 28

Alt-A and Subprime Loans

While we have referred to certain loans as subprime or Alt-A for purposes of the discussion below and 

elsewhere in this Form 10-Q, there is no universally accepted definition of subprime or Alt-A, and the 

classification of such loans may differ from company to company. We do not rely on these loan 

classifications to evaluate the credit risk exposure relating to such loans in our single-family credit 

guarantee portfolio. 

Participants in the mortgage market have characterized single-family loans based upon their overall 

credit quality at the time of origination, including as prime or subprime. While we have not historically 

characterized the loans in our single-family credit guarantee portfolio as either prime or subprime, we 

monitor the amount of loans we have guaranteed with characteristics that indicate a higher degree of 

credit risk. In addition, we estimate that approximately $1.0 billion and $1.1 billion of security collateral 

underlying our other securitization products at March 31, 2018 and December 31, 2017, respectively, 

were identified as subprime based on information provided to us when we entered into these 

transactions.

Mortgage market participants have classified single-family loans as Alt-A if these loans have credit 

characteristics that range between the prime and subprime categories, if they are underwritten with 

lower or alternative income or asset documentation requirements compared to a full documentation 

loan, or both. Although we have discontinued new purchases of loans with lower documentation 

standards, we continue to purchase certain amounts of such loans in cases where the loan was either 

purchased pursuant to a previously issued guarantee, as part of our relief refinance initiative, or as part 

of another refinance loan initiative and the pre-existing loan was originated under less than full 

documentation standards. In the event we purchase a refinance loan and the original loan had been 

previously identified as Alt-A, such refinance loan may no longer be categorized or reported as an Alt-A 

loan in this Form 10-Q and our other financial reports because the new refinance loan replacing the 

original loan would not be identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A 

balances may be lower than would otherwise be the case had such refinancing not occurred. From the 

time the relief refinance initiative began in 2009 to March 31, 2018, we have purchased approximately 

$36.1 billion of relief refinance loans that were previously categorized as Alt-A loans in our portfolio, 

including $0.2 billion in 1Q 2018. 

The table below contains information on Alt-A loans in our single-family credit guarantee portfolio. 

March 31, 2018 December 31, 2017

(Dollars in billions) UPB CLTV

%

Modified SDQ Rate UPB CLTV

%

Modified SDQ Rate

Alt-A $26.3 65% 24.2% 5.40% $27.1 67% 24.1% 5.62%

The UPB of Alt-A loans in our single-family credit guarantee portfolio declined during 1Q 2018 primarily 

due to borrowers refinancing into other mortgage products, foreclosure sales and other liquidation 

events. Significant portions of the Alt-A loans in our portfolio are concentrated in Arizona, California, 

Florida and Nevada.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 29

Single-Family Loan Performance

Serious Delinquency Rates Delinquency Rates for Loans One Month and Two 

Months Past Due

Commentary 

Serious delinquency rates on our single-family credit guarantee portfolio were higher as of March 31, 

2018 compared to March 31, 2017 due to the impact of the hurricanes in 3Q 2017. As a result, we 

expect an increase in our loan workout activities as well as our expected credit losses. Outside of 

the areas affected by the hurricanes, our single-family serious delinquency rates declined due to our 

continued loss mitigation efforts and sales of certain seriously delinquent loans, as well as home 

price appreciation and a low unemployment rate. This improvement was also driven by the 

continued shift in the single-family credit guarantee portfolio mix, as the Legacy and relief refinance 

loan portfolio runs off and we add high credit quality loans to our Core single-family loan portfolio.

Delinquency rates increased for both loans one month past due and loans two months past due as 

of March 31, 2018 compared to March 31, 2017. These increases were due to the impact of the 

hurricanes in 3Q 2017. 
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 30

Credit Performance

The table below contains certain credit performance metrics for our single-family credit guarantee 

portfolio. 

(Dollars in millions) 1Q 2018 1Q 2017

Charge-offs, gross $372 $740

Recoveries (96) (97)

Charge-offs, net 276 643

REO operations expense 34 56

Total credit losses $310 $699

Total credit losses (in bps) 6.7 15.6

The table below summarizes the carrying value for individually impaired single-family loans on our 

condensed consolidated balance sheets for which we have recorded an allowance determined on an 

individual basis.

March 31, 2018 March 31, 2017

(Dollars in millions) Loan Count Amount Loan Count Amount

TDRs, at January 1 364,704 $54,415 485,709 $78,869

New additions 23,699 3,800 10,838 1,486

Repayments and reclassifications to held-for-sale (8,908) (1,522) (15,881) (3,290)

Foreclosure sales and foreclosure alternatives (2,083) (282) (2,774) (373)

TDRs, at March 31 377,412 56,411 477,892 76,692

Loans impaired upon purchase 4,364 290 7,165 485

Total impaired loans with an allowance recorded 381,776 56,701 485,057 77,177

Allowance for loan losses (6,968) (11,268)

Net investment, at March 31 $49,733 $65,909

The tables below present information about the UPB of single-family TDRs and non-accrual loans on our 

condensed consolidated balance sheets. 

(In millions) March 31, 2018 December 31, 2017

TDRs on accrual status $53,271 $51,644

Non-accrual loans 15,962 17,748

Total TDRs and non-accrual loans $69,233 $69,392

Allowance for loan losses associated with:

 TDRs on accrual status $5,457 $5,257

 Non-accrual loans 1,933 1,883

Total $7,390 $7,140

(In millions) 1Q 2018 1Q 2017

Foregone interest income on TDRs and non-accrual loans(1) $446 $554

(1) Represents the amount of interest income that we would have recognized for loans outstanding at the end of each period had the loans 

performed according to their original contractual terms.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 31

Commentary 

As of March 31, 2018, 50% of the allowance for loan losses for single-family mortgage loans related 

to interest rate concessions provided to borrowers as part of loan modifications. 

Most of our modified single-family loans, including TDRs, were current and performing at March 31, 

2018.

We expect our allowance for loan losses associated with existing single-family TDRs to decline over 

time as we continue to sell reperforming loans. In addition, the allowance for loan losses will decline 

as borrowers continue to make monthly payments under the modified terms and interest rate 

concessions are amortized into earnings. 

See Note 4 for information on our single-family allowance for loan losses.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 32

Loss Mitigation Activities

Loan Workout Activity(1) 

(UPB in billions, number of loan workouts in thousands)

(1) Foreclosure alternatives consist of short sales and deeds in lieu of foreclosure. Home retention actions consist of forbearance agreements, 

repayment plans and loan modifications.

Commentary 

Our loan workout activity increased in 1Q 2018 compared to 1Q 2017, consistent with the increase 

in the number of delinquent loans in the single-family credit guarantee portfolio due to the impact of 

the hurricanes in 3Q 2017.

We continue our loss mitigation efforts through our relief refinance, modification and other initiatives.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 33

REO Activity

The table below presents a summary of our single-family REO activity.

1Q 2018 1Q 2017

(Dollars in millions)

Number of

Properties Amount

Number of

Properties Amount

Beginning balance — REO 8,299 $900 11,418 $1,215

Additions 2,620 246 3,545 346

Dispositions (3,201) (306) (4,025) (399)

Ending balance — REO 7,718 840 10,938 1,162

Beginning balance, valuation allowance (14) (17)

Change in valuation allowance 5 (2)

Ending balance, valuation allowance (9) (19)

Ending balance — REO, net $831 $1,143

Commentary 

Our REO ending inventory declined in 1Q 2018 primarily due to a decrease in REO acquisitions 

driven by fewer loans in foreclosure and a large proportion of property sales to third parties at 

foreclosure.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 34

Financial Results

The table below presents the components of Segment Earnings and comprehensive income for our 

Single-family Guarantee segment. 

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Guarantee fee income $1,513 $1,418 $95 7 %

Benefit (provision) for credit losses 28 39 (11) (28)

Other non-interest income (loss) 94 319 (225) (71)

Administrative expense (336) (333) (3) (1)

REO operations expense (39) (59) 20 34

Other non-interest expense (379) (318) (61) (19)

Segment Earnings before income tax expense 881 1,066 (185) (17)

Income tax expense (179) (356) 177 50

Segment Earnings, net of taxes 702 710 (8) (1)

Total other comprehensive income (loss), net of tax (4) (2) (2) (100)

Total comprehensive income $698 $708 ($10) (1)%

Key Business Drivers: 

1Q 2018 vs. 1Q 2017

Continued growth in our single-family credit guarantee portfolio and higher upfront fee 

amortization income resulted in increased guarantee fee income.

Benefit for credit losses remained relatively unchanged.

Decreased fair value losses on STACR debt notes as market spreads between STACR yields and 

LIBOR remained relatively unchanged in 1Q 2018, while spreads tightened in 1Q 2017.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 35

Multifamily 

Market Conditions

The graphs and related discussion below present certain multifamily market indicators that can 

significantly affect the business and financial results of our Multifamily segment. 

Change in Effective Rents 

Source: REIS, Inc.

Apartment Vacancy Rates

Source: REIS, Inc.

Commentary

Growth in effective rent (i.e., the average rent paid by the tenant over the term of the lease, adjusted 

for concessions by the landlord and costs borne by the tenant) for 1Q 2018 remained strong relative 

to the long-term average, primarily due to an increase in potential renters driven by healthy 

employment, higher single-family home prices and a growing demand for rental housing due to 

lifestyle changes and demographic trends.

While vacancy rates rose slightly during 1Q 2018 compared to 4Q 2017, these rates remain well 

below the long-term average. Net absorptions continued to lag new apartment completions in 1Q 

2018 partially due to seasonality impacts during the winter months. Although we expect continued 

strong demand, it may take longer to absorb new units compared to prior quarters.

Our financial results for 1Q 2018 were not significantly affected by these relatively stable market 

conditions.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 36

K Certificate Benchmark Spreads

Source: Independent dealers

Commentary

The valuation of our securitization pipeline and the profitability of our primary credit risk transfer 

securitization product, the K Certificate, are affected by changes in K Certificate benchmark spreads 

as well as deal-specific attributes, such as tranche size, risk distribution and collateral characteristics 

(loan term, coupon type, prepayment restrictions and underlying property type). These market 

spread movements and deal-specific attributes contribute to our earnings volatility, which we 

manage by controlling the size of our securitization pipeline and by entering into certain spreadrelated derivatives.

K Certificate benchmark spreads are market-quoted spreads over the U.S. swap curve. The 10-year 

fixed-rate spread represents the spread for the largest guaranteed class of a typical fixed-rate K 

Certificate, while the 7-year ARM spread represents the spread for the largest guaranteed class of a 

typical floating-rate K Certificate. 

K Certificate benchmark spreads generally tightened during 1Q 2018 and 1Q 2017. Overall, this 

tightening had a positive effect in 1Q 2018 and 1Q 2017 on the valuation of our securitization 

pipeline and K Certificate profitability. However, for certain of our K Certificate products that are 

issued with less frequency, spreads widened resulting in a negative effect on the valuation of loans 

designated as collateral for those products.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 37

Business Results

The graphs, tables and related discussion below present the business results of our Multifamily 

segment.

New Business Activity 

Multifamily New Business Activity

Commentary

The 2018 Conservatorship Scorecard production cap decreased to $35.0 billion from $36.5 billion in 

2017. The production cap is subject to reassessment throughout the year by FHFA to determine 

whether an increase in the cap is appropriate based on a stronger than expected overall market. 

Reclassifications between new business activity subject to the production cap and new business 

activity not subject to the production cap may occur during 2018.

Outstanding purchase commitments were $17.5 billion and $14.0 billion as of March 31, 2018 and 

March 31, 2017, respectively. Both periods include purchase commitments for which we have 

elected the fair value option.

Our new business activity and outstanding purchase commitments were higher during 1Q 2018 

compared to 1Q 2017 due to overall growth of the multifamily mortgage market resulting from 

continued strong demand for multifamily loan products and our strategic pricing efforts.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 38

Approximately 48% of our multifamily new business activity during 1Q 2018 counted towards the 

2018 Conservatorship Scorecard production cap, while the remaining 52% was considered 

uncapped.

Our uncapped new business volume increased slightly in 1Q 2018 compared to 1Q 2017 as we 

continued our efforts to support borrowers in certain property types and communities that meet the 

criteria for affordability and to support the overall growth of the multifamily market.

Approximately 90% and 88% of our 1Q 2018 and 1Q 2017 new business volume was intended for 

our securitization pipeline. Combined with market demand for our securities, our 1Q 2018 new 

business volume will be the primary driver of and collateral for credit risk transfer securitizations in 

2Q 2018 and 3Q 2018.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 39

Multifamily Portfolio and Market Support

Total Multifamily Portfolio Multifamily Mortgage Investments Portfolio

Multifamily Market Support

The following table summarizes our support of the multifamily market.

(UPB in millions) March 31, 2018 December 31, 2017

Unsecuritized mortgage loans held-for-sale $16,383 $20,537

Unsecuritized mortgage loans held-for-investment 16,213 17,702

Unsecuritized non-mortgage loans(1) 332 473

Mortgage-related securities(2) 7,449 7,451

Guarantee portfolio 213,141 203,074

Total multifamily portfolio 253,518 249,237

Add: Unguaranteed securities(3) 32,250 30,890

Less: Acquired mortgage-related securities(4) (7,141) (7,109)

Total multifamily market support $278,627 $273,018

(1) Reflects the UPB of financing provided to whole loan investment funds.

(2) Includes mortgage-related securities from our credit risk transfer transactions. We have not invested in unguaranteed securities that are in a first 

loss position.

(3) Reflects the UPB of unguaranteed securities issued as part of our securitization products and amounts related to whole loan investment funds not 

financed by Freddie Mac. 

(4) Reflects the UPB of mortgage-related securities that were both issued and acquired by us. This UPB must be removed to avoid double-counting 

the exposure, as it is already reflected within the guarantee portfolio and/or unguaranteed securities.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 40

Commentary

Our total multifamily portfolio increased in 1Q 2018 primarily due to new loan purchases. The vast 

majority of the growth in our guarantee portfolio was associated with ongoing credit risk transfer 

securitizations, primarily K Certificates and SB Certificates.

At March 31, 2018, the UPB of our unsecuritized held-for-sale loans and mortgage-related 

securities, which are measured at fair value or lower-of-cost-or-fair-value, decreased from December 

31, 2017. The decrease was primarily driven by ongoing credit risk transfer securitizations, partially 

offset by new held-for-sale loan purchases. 

At March 31, 2018, approximately 69% of our held-for-sale loans and held-for sale loan 

commitments were fixed-rate, while the remaining 31% were floating rate.

We expect our guarantee portfolio to continue to grow as a result of ongoing credit risk transfer 

securitizations, which we expect to be driven by continued strong new business volume. 
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 41

Net Interest Yield and Weighted Average Portfolio Balance

Net Interest Yield Earned

Commentary 

Net interest yield increased during 1Q 2018 compared to 1Q 2017 primarily due to higher 

prepayment income received from interest-only securities, coupled with an increase in our interestonly holdings which generally have higher yields relative to our non-interest-only securities.

The weighted average portfolio balance of interest-earning assets decreased due to the run-off of 

our legacy held-for-investment loans and non-agency CMBS.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 42

Credit Risk Transfer Activity

 Credit Risk Transfer Activity and New Business 

Activity

Credit Risk Transfer Activity(1)

(1) The amounts disclosed in the bar graph above represent the UPB of credit 

risk transferred to third parties. Commentary

The structures for credit risk transfer transactions, primarily the K Certificate and SB Certificate 

structures, vary by deal. Structural deal features such as term, type of underlying loan product, and 

subordination levels generally influence the deal's size and risk profile, which ultimately affect the 

guarantee fee rate set by Freddie Mac, as Guarantor, at the time of securitization. 

We executed $16 billion in UPB of credit risk transfer transactions during 1Q 2018 and $265 billion in 

UPB since 2009. Through these transactions, we transferred a large majority of the expected and 

stress credit losses of the underlying assets, primarily by issuing unguaranteed subordinated 
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 43

securities, as part of our K Certificate and SB Certificate transactions. Also, we began selling certain 

of our loans to investment funds in 3Q 2017, resulting in the transfer of the associated credit risk of 

those loans to third parties.

The UPB of our credit risk transfer transactions was higher during 1Q 2018 compared to 1Q 2017, 

primarily due to a larger average balance in our securitization pipeline, which was driven by strong 

new loan purchase volume during the latter part of 2017.

As of March 31, 2018, we had transferred a large majority of credit risk on 90% of the multifamily 

guarantee portfolio.

Calculated as the current balance of multifamily credit risk transfer transactions (primarily K 

Certificates and SB Certificates) divided by the multifamily guarantee portfolio UPB. 

We expect to reduce by approximately 90% the modeled capital required for credit risk on the 

quarter's $13 billion of new originations. 

Calculated as modeled credit capital expected to be released from credit risk transfer 

transactions (primarily through K Certificates and SB Certificates) divided by total modeled credit 

capital on quarterly new originations.

The modeled capital requirement is per FHFA's CCF and internal methods that use stress 

scenarios which are generally consistent with the 2017 DFAST "severely adverse" scenario.

In addition to transferring a large majority of expected and stress credit risk, nearly all of our credit 

risk transfer transactions also shifted non-credit risks associated with the underlying assets, such as 

interest-rate risk and liquidity risk, away from Freddie Mac to third-party investors. 

Based on the strength of our new business volume for 4Q 2017 and 1Q 2018, we expect our credit 

risk transfer activity for 2Q 2018 to exceed our 2Q 2017 activity.

While our K Certificate and SB Certificate issuances continue to be our primary mechanism to 

transfer multifamily mortgage credit and non-credit risk, we expect to continue to develop new credit 

risk transfer initiatives throughout 2018.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 44

Financial Guarantee Activity

Guarantee Assets Unearned Guarantee Fees

Commentary 

We generally recognize a guarantee asset on our balance sheets each time we enter into a financial 

guarantee contract. This asset represents the present value of guarantee fees we expect to receive in 

cash in the future from those guarantee transactions. We recognize these fees in segment earnings 

over the expected remaining guarantee term. While we expect to collect these future fees based on 

historical performance, the actual amount collected will depend on the performance of the 

underlying collateral subject to our financial guarantee.

New guarantee assets recognized in 1Q 2018 exceeded those recognized in 1Q 2017, primarily due 

to an increase in the UPB of our credit risk transfer securitizations, coupled with higher average 

guarantee fee rates due to underlying loan products that, by their nature and design, have more risk.

The balance of unearned guarantee fees remained relatively flat during 1Q 2018, as the increase 

attributable to the growth of our credit risk transfer securitization volume was mostly offset by the 

seasoning and run-off of prior credit risk transfer securitizations.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 45

Financial Results

The table below presents the components of Segment Earnings and comprehensive income for our 

Multifamily segment. 

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Net interest income $271 $271 $— — %

Guarantee fee income 195 151 44 29

Benefit (provision) for credit losses 16 6 10 167

Gains (losses) on loans and other non-interest income (430) 236 (666) (282)

Derivative gains (losses) 655 127 528 416

Administrative expense (100) (95) (5) (5)

Other non-interest expense (14) (21) 7 33

Segment Earnings before income tax expense 593 675 (82) (12)

Income tax expense (121) (226) 105 46

Segment Earnings, net of taxes 472 449 23 5

Total other comprehensive income (loss), net of tax (68) (4) (64) (1,600)

Total comprehensive income (loss) $404 $445 ($41) (9)%

Key Business Drivers:

1Q 2018 vs. 1Q 2017

Higher net interest yields, offset by a decline in our weighted average portfolio balance of 

interest-earning assets, resulted in net interest income being flat.

Continued growth in our multifamily guarantee portfolio and higher average guarantee fee rates 

on new guarantee business volume resulted in increased guarantee fee income.

Spread widening on certain of our K Certificate products that we issue with less frequency 

coupled with the effects of strategic pricing, partially offset by larger average balances of heldfor-sale commitments and securitization pipeline loans, resulted in lower spread-related fair value 

gains.

Derivative gains (losses) are largely offset by interest rate-related fair value changes on the loans 

and investment securities being economically hedged, resulting in interest rate changes having a 

minimal net impact on total comprehensive income.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 46

Capital Markets

Market Conditions

The following graphs and related discussion present the par swap rate curves as of the end of each 

comparative period. Changes in par swap rates can significantly affect the fair value of our debt, 

derivatives and mortgage and non-mortgage-related securities. However, the majority of these fair value 

changes are offset by our hedge accounting programs.

Par Swap Rate Curves

Source: BlackRock

Commentary

Long-term interest rates increased more during 1Q 2018 than 1Q 2017. In addition, during 1Q 2018, 

the 2-year interest rate increased more than the 10-year interest rate, resulting in the yield curve 

flattening. These yield curve changes resulted in larger fair value gains for our pay-fixed interest rate 

swaps, forward commitments to issue PCs, and futures, partially offset by larger fair value losses for 

our receive-fixed interest rate swaps and the vast majority of our investments in securities. The net 

amount of these changes in fair value was mostly offset by the change in fair value of the hedged 

items attributable to interest-rate risk in our hedge accounting programs.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 47

Business Results

The graphs and related discussion below present the business results of our Capital Markets segment.

Investing Activity

The following graphs present the Capital Markets segment's total investments portfolio and the 

composition of its mortgage investments portfolio by liquidity category.

Investments Portfolio Mortgage Investments Portfolio

Commentary

We continue to reduce the size of our mortgage investments portfolio in order to comply with the 

mortgage-related investments portfolio year-end limits. The balance of our mortgage investments 

portfolio declined 2.9% from December 31, 2017 to March 31, 2018.

The balance of our other investments and cash portfolio declined by 21.8%, primarily due to 

reduced near term cash needs as of March 31, 2018 compared to December 31, 2017.

The percentage of less liquid assets relative to our total mortgage investments portfolio declined 

from 28.4% at December 31, 2017 to 27.8% at March 31, 2018, primarily due to repayments, sales 

and securitizations of our less liquid assets. We continued to actively reduce the size of our less 

liquid assets during 1Q 2018 by selling $1.7 billion of non-agency mortgage-related securities and 

$1.8 billion of reperforming loans. Our sales of reperforming loans involved securitization of the loans 

using senior subordinate structures. 

The overall liquidity of our mortgage investments portfolio continued to improve as our less liquid 

assets decreased at a faster pace than the overall decline of our mortgage investments portfolio.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 48

Net Interest Yield and Average Balances

Net Interest Yield & Average Investments Portfolio Balances

(UPB in billions)

Commentary

Net Interest Yield

1Q 2018 vs. 1Q 2017 - Increased 8 basis points primarily due to changes in our investment and 

funding mix as we reduce our less liquid assets, coupled with an increase in the yield on our 

other investments and cash portfolio as short-term interest rates increased. These increased 

yields were partially offset by an increase in our funding costs.

Capital Markets segment net interest yield in the graph above is not impacted by our hedge 

accounting programs. See Note 13 in our 2017 Annual Report for more information.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 49

Financial Results

The table below presents the components of Segment Earnings and comprehensive income for our 

Capital Markets segment.

Change

(Dollars in millions) 1Q 2018 1Q 2017 $ %

Net interest income $817 $929 ($112) (12)

Net impairment of available-for-sale securities recognized in earnings 111 73 38 52

Derivative gains (losses) 1,302 52 1,250 2,404

Gains (losses) on trading securities (471) (135) (336) (249)

Other non-interest income 525 744 (219) (29)

Administrative expense (84) (83) (1) (1)

Segment Earnings before income tax expense 2,200 1,580 620 39

Income tax expense (448) (528) 80 15

Segment Earnings, net of taxes 1,752 1,052 700 67

Total other comprehensive income (loss), net of tax (704) 29 (733) (2,528)

Total comprehensive income (loss) $1,048 $1,081 ($33) (3)%

The portion of total comprehensive income (loss) driven by interest rate-related and market spreadrelated fair value changes, after-tax, is presented in the table below. These amounts affect various line 

items in the table above, including net interest income, derivative gains (losses), gains (losses) on trading 

securities, other non-interest income, income tax expense and total other comprehensive income (loss), 

net of tax.

Change

(Dollars in billions) 1Q 2018 1Q 2017 $ %

Interest rate-related ($0.1) $— ($0.1) N/A

Market spread-related 0.2 0.1 0.1 100%

Key Business Drivers: 

1Q 2018 vs. 1Q 2017 

The continued reduction in the balance of our mortgage-related investments portfolio resulted in 

a decrease in net interest income. 

Interest rate-related fair value changes resulted in a small net loss during 1Q 2018 as a result of 

our remaining post-hedge accounting interest rate-related exposure and the flattening of the 

yield curve. Long-term interest rates increased more during 1Q 2018 than 1Q 2017, resulting in 

higher fair value losses for the vast majority of our investments in securities (some of which are 

recorded in other comprehensive income) and our receive-fixed interest rate swaps, and higher 

fair value gains for our pay-fixed interest rate swaps, forward commitments to issue PCs, and 

futures. The net amount of these changes in fair value was mostly offset by the change in fair 

value of the hedged items attributable to interest-rate risk in our hedge accounting programs. 

Spread related fair value changes were relatively flat, with gains on our derivatives primarily on 

commitments to sell agency securities due to spread widening, partially offset by less spread 

tightening on our agency securities.

The lower volume of PCs repurchased in 1Q 2018 resulted in lower gains.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 50

Sales of single-family reperforming loans that were sold into senior subordinate securitization 

structures in 1Q 2018 resulted in gains. In 1Q 2017, we did not execute any similar structures.
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 51

RISK MANAGEMENT

Risk is an inherent part of our business activities. We are exposed to four major types of risk: credit risk, 

operational risk, market risk and liquidity risk.

For more discussion of these and other risks facing our business and our risk management framework, 

see MD&A - Risk Management and Risk Factors in our 2017 Annual Report and Liquidity and 

Capital Resources in this report and in our 2017 Annual Report. See below for updates since our 

2017 Annual Report.
Management's Discussion and Analysis Risk Management | Market Risk

Freddie Mac Form 10-Q 52

Market Risk

Our business segments have embedded exposure to market risk, including interest-rate and spread 

risks. Interest-rate risk is consolidated and primarily managed by the Capital Markets segment, while 

spread risk is owned and managed by each individual business segment. Market risk can adversely 

affect future cash flows, or economic value, as well as earnings and net worth. 

Economic Market Risk

The majority of our interest-rate risk comes from our investments in mortgage-related assets (securities 

and loans) and the debt we issue to fund them. Our primary goal in managing interest-rate risk is to 

reduce the amount of change in the value of our future cash flows due to future changes in interest 

rates. We use models to analyze possible future interest-rate scenarios, along with the cash flows of our 

assets and liabilities over those scenarios. 

Our primary interest-rate risk measures are duration gap and PMVS. Duration gap measures the 

difference in price sensitivity to interest rate changes between our financial assets and liabilities and is 

expressed in months relative to the market value of assets. PMVS is our estimate of the change in the 

market value of our financial assets and liabilities from an instantaneous shock to interest rates, 

assuming spreads are held constant and no rebalancing actions are undertaken. PMVS is measured in 

two ways, one measuring the estimated sensitivity of our portfolio market value to a 50 basis point 

parallel movement in interest rates (PMVS-L) and the other to a non-parallel movement resulting from a 

25 basis point change in slope of the LIBOR yield curve (PMVS-YC). While we believe that duration gap 

and PMVS are useful risk management tools, they should be understood as estimates rather than as 

precise measurements.

The following tables provide our duration gap, estimated point-in-time and minimum and maximum 

PMVS-L and PMVS-YC results, and an average of the daily values and standard deviation. The 

tables below also provide PMVS-L estimates assuming an immediate 100 basis point shift in the LIBOR 

yield curve. The interest-rate sensitivity of a mortgage portfolio varies across a wide range of interest 

rates.

March 31, 2018 December 31, 2017

PMVS-YC PMVS-L PMVS-YC PMVS-L

(In millions) 25 bps 50 bps 100 bps 25 bps 50 bps 100 bps

Assuming shifts of the LIBOR yield curve, 

(gains) losses on:(1)

Assets ($495) ($5,380) ($10,562) $463 $5,587 $11,446

Liabilities (164) 2,218 4,345 185 (2,377) (4,968)

Derivatives 673 3,177 6,254 (646) (3,200) (6,477)

Total $14 $15 $37 $2 $10 $1

PMVS $14 $15 $37 $2 $10 $1

(1) The categorization of the PMVS impact between assets, liabilities and derivatives on this table is based upon the economic characteristics of those 

assets and liabilities, not their accounting classification. For example, purchase and sale commitments of mortgage-related securities and debt 

securities of consolidated trusts held by the mortgage-related investments portfolio are both categorized as assets on this table.
Management's Discussion and Analysis Risk Management | Market Risk

Freddie Mac Form 10-Q 53

1Q 2018 1Q 2017

(Duration gap in months, dollars in millions)

Duration

Gap

PMVS-YC

25 bps

PMVS-L

50 bps

Duration

Gap

PMVS-YC

25 bps

PMVS-L

50 bps

Average — $9 $8 0.1 $7 $5

Minimum (0.3) — — (0.2) — —

Maximum 0.2 24 30 0.8 22 63

Standard deviation 0.1 5 8 0.2 5 15

Derivatives enable us to reduce our economic interest-rate risk exposure as we continue to align our 

derivative portfolio with the changing duration of our economically hedged assets and liabilities. The 

table below shows that the PMVS-L risk levels, assuming a 50 basis point shift in the LIBOR yield curve 

for the periods presented, would have been higher if we had not used derivatives. 

PMVS-L (50 bps)

(In millions)

Before

Derivatives

After

Derivatives

Effect of

Derivatives

March 31, 2018 $3,269 $15 ($3,254)

December 31, 2017 3,210 10 (3,200)

GAAP Earnings Variability

The GAAP accounting treatment for our financial assets and liabilities (i.e., some are measured at 

amortized cost, while others are measured at fair value) creates variability in our GAAP earnings when 

interest rates and spreads change. This variability of GAAP earnings, which may not reflect the 

economics of our business, increases the risk of our having a negative net worth and thus being 

required to draw from Treasury.

Interest-rate Volatility

While we manage our interest-rate risk exposure on an economic basis to a low level as measured by 

our models, our GAAP financial results are still subject to significant earnings variability from period to 

period. Based upon the composition of our financial assets and liabilities, including derivatives, at March 

31, 2018, we generally recognize fair value losses in GAAP earnings when interest rates decline.

In an effort to reduce our GAAP earnings variability and better align our GAAP results with the 

economics of our business, we elect hedge accounting for certain single-family mortgage loans and 

certain debt instruments. See Note 9 for additional information on hedge accounting.

The table below presents the effect of derivatives used in our interest-rate risk management activities on 

our comprehensive income (loss), net of tax, after considering any offsetting interest rate effects related 

to financial instruments measured at fair value and the effects of fair value hedge accounting.

(In billions) 1Q 2018 1Q 2017

Interest-rate effect on derivative fair values $3.1 $0.5

Estimate of offsetting interest-rate effect related to financial instruments measured at fair value(1) (1.9) (0.5)

Gains (losses) on mortgage loans and debt in fair value hedge relationships (1.4) —

Income tax (expense) benefit — —

Estimated net interest rate effect on comprehensive income (loss) ($0.2) $—

(1) Includes the interest-rate effect on our trading securities, available-for-sale securities, mortgage loans held-for-sale and other assets and debt for 

which we elected the fair value option, which is reflected in other non-interest income (loss) and total other comprehensive income (loss) on our 

condensed consolidated statements of comprehensive income.
Management's Discussion and Analysis Risk Management | Market Risk

Freddie Mac Form 10-Q 54

We evaluate the potential benefits of fair value hedge accounting by evaluating a range of interest rate 

scenarios and identifying which of those scenarios produces the most adverse GAAP earnings outcome. 

The interest rate scenarios evaluated include parallel shifts in the yield curve of plus and minus 100 

basis points, non-parallel yield curve shifts in which long-term interest rates increase or decrease by 100 

basis points and non-parallel yield curve shifts in which short-term and medium-term interest rates 

increase or decrease by 100 basis points.

At March 31, 2018, the GAAP adverse scenario before fair value hedge accounting was a nonparallel shift in which long-term rates decrease by 100 basis points, while the GAAP adverse 

scenario after fair value hedge accounting was a non-parallel shift in which short and medium-term 

rates increase by 100 basis points.

At March 31, 2017, the GAAP adverse scenario both before and after fair value hedge accounting 

was a non-parallel shift in which long-term rates decrease by 100 basis points.

The results of this evaluation are shown in the table below.

GAAP Adverse Scenario (Before-Tax)

(Dollars in billions)

Before Hedge

Accounting

After Hedge

Accounting % Change

March 31, 2018 ($3.3) ($0.6) 83%

March 31, 2017 (3.5) (1.8) 50

Spread Volatility

We have limited ability to manage our spread risk exposure and therefore the volatility of market spreads 

may contribute to significant GAAP earnings variability. For financial assets measured at fair value, we 

generally recognize fair value losses when market spreads widen. Conversely, for financial liabilities 

measured at fair value, we generally recognize fair value gains when market spreads widen.

The table below shows the estimated effect of spreads on our comprehensive income (loss), after tax, 

by segment.

(In billions) 1Q 2018 1Q 2017

Capital Markets $0.2 $0.1

Multifamily — 0.1

Single-family Guarantee(1) — (0.1)

Spread effect on comprehensive income (loss) $0.2 $0.1

(1) Represents spread exposure on certain STACR debt securities for which we have elected the fair value option.
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 55

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity and Capital

Our business activities require that we maintain adequate liquidity to fund our operations. We also must 

maintain adequate capital resources to avoid being placed into receivership by FHFA. For further 

discussion of our liquidity framework and profile, see MD&A - Liquidity and Capital Resources in 

our 2017 Annual Report.

Primary Sources of Liquidity, Funding and Capital

The following table lists the sources of our liquidity, funding and capital, the balances as of 1Q 2018, 

and a brief description of their importance to Freddie Mac. 

Source Balance(1)

 (In billions)

Description

Liquidity

• Other Investments and Cash

Portfolio - Liquidity and

Contingency Operating

Portfolio

$48.8 • The liquidity and contingency operating portfolio, included within our other

investments and cash portfolio, is primarily used for short-term liquidity

management.

• Liquid Portion of the

Mortgage-Related

Investments Portfolio

$132.1 • The liquid portion of our mortgage-related investments portfolio can be

pledged or sold for liquidity purposes. The amount of cash we may be

able to successfully raise may be substantially less than the balance.

Funding

• Other Debt $280.9 • Other debt is used to fund our other business activities.

• Debt Securities of

Consolidated Trusts

$1,727.0 • Debt securities of consolidated trusts is used primarily to fund our Singlefamily guarantee activities. This type of debt is principally repaid by the

cash flows of the associated mortgage loans. As a result, our repayment

obligation is limited to amounts paid pursuant to our guarantee of

principal and interest and to purchase modified or seriously delinquent

loans from the trusts.

Capital

• Net Worth $2.2 • GAAP net worth represents capital available before we need to draw from

Treasury on the available funding under the Purchase Agreement.

• Available Funding under

Purchase Agreement

$140.2 • FHFA may request that available funding under the Purchase Agreement

be drawn on our behalf from Treasury.

(1) Represents carrying value for the liquidity and contingency operating portfolio, included within our other investments and cash portfolio, and net 

worth. Represents UPB for the liquid portion of the mortgage-related investments portfolio and debt balances.
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 56

Other Investments and Cash Portfolio

The investments in our other investments and cash portfolio are important to our cash flow, collateral 

management, asset and liability management, and our ability to provide liquidity and stability to the 

mortgage market. The table below summarizes the balances in our other investments and cash 

portfolio, which includes the liquidity and contingency operating portfolio. 

March 31, 2018 December 31, 2017

(In billions)

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other(1)

Total Other

Investments

and Cash

Portfolio

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other(1)

Total Other

Investments

and Cash

Portfolio

Cash and cash equivalents(2) $5.2 $1.1 $2.3 $8.6 $6.8 $0.5 $2.5 $9.8

Securities purchased under agreements

to resell 27.0 14.3 0.5 41.8 38.9 16.8 0.2 55.9

Non-mortgage-related securities 16.6 — 2.0 18.6 22.2 — 0.6 22.8

Advances to lenders — — 0.9 0.9 — — 0.8 0.8

Total $48.8 $15.4 $5.7 $69.9 $67.9 $17.3 $4.1 $89.3

(1) Consists of amounts related to collateral held by us from derivative and other counterparties, securities used to pledge as collateral to our 

derivative counterparties, advances to lenders and other secured lending transactions.

(2) The current and prior period presentation has been modified to include restricted cash and cash equivalents due to recently adopted accounting 

guidance.

Our non-mortgage-related investments in the liquidity and contingency operating portfolio consist of 

U.S. Treasury securities and other investments that we could sell to provide us with an additional source 

of liquidity to fund our business operations. We also maintain non-interest-bearing deposits at the 

Federal Reserve Bank of New York.

Mortgage-Related Investments Portfolio 

We invest principally in mortgage loans and mortgage-related securities, certain categories of which are 

largely unencumbered and liquid. Our primary source of liquidity among these mortgage assets is our 

holdings of single-class and multiclass agency securities, excluding certain structured agency securities 

collateralized by non-agency mortgage-related securities. Our ability to pledge certain of these assets as 

collateral or sell them enhances our liquidity profile, although the amount of cash we may be able to 

successfully raise in the event of a liquidity crisis or significant market disruption may be substantially 

less than the amount of mortgage-related assets we hold. See Conservatorship and Related 

Matters for additional details on the liquidity of our mortgage-related investments portfolio.

Other Debt Activities

We issue other debt to fund our operations. Competition for funding can vary with economic, financial 

market and regulatory environments. We issue other debt based on a variety of factors including market 

conditions and our liquidity requirements. We currently favor a mix of derivatives and shorter- and 

medium-term debt to fund our business and manage interest-rate risk. This funding mix is a less 

expensive method than relying more extensively on long-term debt.

The tables below summarize the par value and the average rate of other debt securities we issued or 

paid off, including regularly scheduled principal payments, payments resulting from calls and payments 

for repurchases. We call, exchange or repurchase our outstanding debt securities from time to time for a 
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 57

variety of reasons, including managing our funding composition and supporting the liquidity of our debt 

securities.

1Q 2018

(Dollars in millions) Short-term Average Rate(1) Long-term Average Rate(1)

Discount notes and Reference Bills:

Beginning balance $45,717 1.19% $— —%

Issuances 74,116 1.29 — —

Repurchases — — — —

Maturities (92,875) 1.21 — —

Ending Balance 26,958 1.40 — —

Securities sold under agreements to repurchase:

Beginning balance 9,681 1.06 — —

Additions 41,794 1.32 — —

Repayments (41,730) 1.24 — —

Ending Balance 9,745 1.38 — —

Callable debt:

Beginning balance — — 113,822 1.58

Issuances — — 5,551 2.82

Repurchases — — (554) 2.13

Calls — — (892) 1.97

Maturities — — (4,375) 1.05

Ending Balance — — 113,552 1.66

Non-callable debt:(2)

Beginning balance 17,792 1.03 129,094 2.52

Issuances 1,825 1.44 8,375 2.25

Repurchases — — — —

Maturities (2,005) 0.77 (24,405) 0.83

Ending Balance 17,612 1.12 113,064 2.90

Total other debt $54,315 1.31% $226,616 2.28%
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 58

1Q 2017

(Dollars in millions) Short-term Average Rate(1) Long-term Average Rate(1)

Discount notes and Reference Bills:

Beginning balance $61,042 0.47% $— —%

Issuances 100,504 0.59 — —

Repurchases (57) 0.91 — —

Maturities (100,416) 0.47 — —

Ending Balance 61,073 0.66 — —

Securities sold under agreements to repurchase:

Beginning balance 3,040 0.42 — —

Additions 36,976 0.26 — —

Repayments (33,469) 0.23 — —

Ending Balance 6,547 0.41 — —

Callable debt:

Beginning balance — — 98,420 1.44

Issuances — — 18,008 1.91

Repurchases — — — —

Calls — — (1,460) 2.02

Maturities — — (2,178) 0.76

Ending Balance — — 112,790 1.52

Non-callable debt:(2)

Beginning balance 7,435 0.41 186,806 2.10

Issuances 4,572 0.69 5,134 2.23

Repurchases — — — —

Maturities — — (26,346) 1.30

Ending Balance 12,007 0.51 165,594 2.25

Total other debt $79,627 0.62% $278,384 1.95%

(1) Average rate is weighted based on par value.

(2) Includes STACR and SCR debt notes and certain multifamily other debt. STACR and SCR debt notes are subject to prepayment risk as their 

payments are based upon the performance of a reference pool of mortgage assets that may be prepaid by the related mortgage borrower at any 

time generally without penalty.

Our outstanding other debt balance continues to decline as we reduce our indebtedness along with the 

decline in our mortgage-related investments portfolio. As a result, our total issuances, excluding 

securities sold under agreements to repurchase, decreased in 1Q 2018. However, we increased our 

volume of securities sold under agreements to repurchase in 1Q 2018 as these borrowing transactions 

reduced the cost of our funding.
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 59

The following graphs present our other debt by contractual maturity date and earliest redemption date. 

The earliest redemption date refers to the earliest call date for callable debt and the contractual maturity 

date for all other debt.

Contractual Maturity Date as of March 31, 2018(1) Earliest Redemption Date as of March 31, 2018(1)

(1) STACR and SCR debt notes are subject to prepayment risk as their payments are based upon the performance of a reference pool of mortgage 

assets that may be prepaid by the related mortgage borrower at any time generally without penalty and are therefore included as a separate 

category in the graphs.
Management's Discussion and Analysis Liquidity and Capital Resources | Liquidity Profile

Freddie Mac Form 10-Q 60

Debt Securities of Consolidated Trusts

The largest component of debt on our condensed consolidated balance sheets is debt securities of 

consolidated trusts, which relates to securitization transactions that we consolidated for accounting 

purposes. We issue this type of debt by securitizing mortgage loans primarily to fund the majority of our 

single- family guarantee activities. When we consolidate securitization trusts, we recognize the following 

on our condensed consolidated balance sheets:

The assets held by the securitization trusts, the majority of which are mortgage loans. We 

recognized $1,778.0 billion and $1,774.3 billion of mortgage loans, which represented 87.9% and 

86.6% of our total assets, as of 1Q 2018 and 4Q 2017, respectively.

The debt securities issued by the securitization trusts, the majority of which are PCs. PCs are passthrough securities, where the cash flows of the mortgage loans held by the securitization trust are 

passed through to the holders of the PCs. We recognized $1,727.0 billion and $1,721.0 billion of 

debt securities of consolidated trusts, which represented 86.1% and 84.6% of our total debt, as of 

1Q 2018 and 4Q 2017, respectively.

Debt securities of consolidated trusts are principally repaid from the cash flows of the mortgage loans 

held by the securitization trusts that issued the debt securities. In circumstances when the cash flows of 

the mortgage loans are not sufficient to repay the debt, we make up the shortfall because we have 

guaranteed the payment of principal and interest on the debt. In certain circumstances, we have the 

right and/or obligation to purchase the loan from the trust prior to its contractual maturity.

The table below shows the issuance and extinguishment activity for the debt securities of our 

consolidated trusts.

(In millions) 1Q 2018 1Q 2017

Beginning balance $1,672,605 $1,602,162

Issuances:

New issuances to third parties 37,316 71,002

Additional issuances of securities 40,200 30,804

Total issuances 77,516 101,806

Extinguishments:

Purchases of debt securities from third parties (8,828) (12,515)

Debt securities received in settlement of advances to lenders (4,725) (8,231)

Repayments of debt securities (56,600) (65,061)

Total extinguishments (70,153) (85,807)

Ending balance 1,679,968 1,618,161

Unamortized premiums and discounts 47,001 45,650

Debt securities of consolidated trusts held by third parties $1,726,969 $1,663,811
Management's Discussion and Analysis Liquidity and Capital Resources | Capital

Freddie Mac Form 10-Q 61

Capital

Our entry into conservatorship resulted in significant changes to the assessment of our capital adequacy 

and our management of capital. Under the Purchase Agreement, Treasury made a commitment to 

provide us with equity funding, under certain conditions, to eliminate deficits in our net worth. As of 

March 31, 2018, our net worth was $2.2 billion and the amount of available funding remaining under the 

Purchase Agreement was $140.2 billion. See Note 2 for details of the support we receive from Treasury.

The table below presents activity related to our net worth during 1Q 2018 and 1Q 2017.

(In millions) 1Q 2018 1Q 2017

Beginning balance ($312) $5,075

Comprehensive income (loss) 2,150 2,234

Capital draw from Treasury 312 —

Senior preferred stock dividends declared — (4,475)

Total equity / net worth $2,150 $2,834

Aggregate draws under Purchase Agreement $71,648 $71,336

Aggregate cash dividends paid to Treasury 112,393 105,923
Management's Discussion and Analysis Liquidity and Capital Resources | Cash Flows

Freddie Mac Form 10-Q 62

Cash Flows

We evaluate our cash flow performance by comparing the net cash flows from operating and investing 

activities to the net cash flows required to finance those activities. The following graphs present the 

results of these activities for 1Q 2017 and 1Q 2018. 

 Operating Cash Flows Investing Cash Flows Financing Cash Flow

Commentary

Cash provided by operating activities increased $4.6 billion primarily due to:

An increase in net sales of held-for-sale loans, driven by an increase in the volume of our 

multifamily securitizations.

Cash provided by investing activities increased $24.3 billion primarily due to:

An increase in net proceeds received from sale of investment securities, driven by the continued 

reduction in the balance of our mortgage-related investments portfolio as required by the 

Purchase Agreement and FHFA; and

A decrease in securities purchased under agreements to resell due to lower near term cash 

needs for fewer upcoming maturities and anticipated calls of other debt.

This increase was partially offset by:

A decrease in net repayments of mortgage loans acquired as held-for-investment, driven by a 

decline in single-family loan liquidations.

Cash used in financing activities increased $20.5 billion primarily due to:

An increase in net repayments of other debt as debt maturities were not replaced with new 

issuances of debt due to lower near term cash needs.

This increase was partially offset by:

A decrease in net repayments and redemptions of debt securities of consolidated trusts held by 

third parties primarily due to lower prepayments driven by higher interest rates.
Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac Form 10-Q 63

CONSERVATORSHIP AND RELATED 

MATTERS

Reducing Our Mortgage-Related Investments Portfolio 

Over Time

The table below presents the UPB of our mortgage-related investments portfolio for purposes of the 

limit imposed by the Purchase Agreement and FHFA regulation. The cap for this portfolio will decrease 

to $250 billion at December 31, 2018.

March 31, 2018 December 31, 2017

(Dollars in millions) Liquid

Securitization

Pipeline Less Liquid Total Liquid

Securitization

Pipeline Less Liquid Total

Capital Markets segment -

Mortgage investments portfolio:

Single-family unsecuritized

loans

Performing loans $— $11,392 $— $11,392 $— $9,999 $— $9,999

Reperforming loans — — 45,832 45,832 — — 46,666 46,666

Total single-family

unsecuritized loans — 11,392 45,832 57,224 — 9,999 46,666 56,665

Freddie Mac mortgage-related

securities 120,092 — 3,639 123,731 123,905 — 3,817 127,722

Non-agency mortgage-related

securities 734 — 3,349 4,083 749 — 5,152 5,901

Other Non-Freddie Mac agency

mortgage-related securities 4,906 — — 4,906 5,211 — — 5,211

Total Capital Markets segment

- Mortgage investments

portfolio 125,732 11,392 52,820 189,944 129,865 9,999 55,635 195,499

Single-family Guarantee segment

- Single-family unsecuritized

seriously delinquent loans — — 10,993 10,993 — — 12,267 12,267

Multifamily segment:

Unsecuritized loans — 14,768 17,828 32,596 — 19,653 18,585 38,238

Mortgage-related securities 6,326 — 1,123 7,449 6,181 — 1,270 7,451

Total Multifamily segment 6,326 14,768 18,951 40,045 6,181 19,653 19,855 45,689

Total mortgage-related

investments portfolio $132,058 $26,160 $82,764 $240,982 $136,046 $29,652 $87,757 $253,455

Percentage of total mortgagerelated investments portfolio 55% 11% 34% 100% 54% 12% 34% 100%

Mortgage-related investments

portfolio cap at December 31,

2018 and December 31, 2017 $250,000 $288,408

90% of mortgage-related 

investments portfolio cap at 

December 31, 2018 and 

December 31, 2017(1) $225,000 $259,567

(1) Represents the amount to which we manage under our Retained Portfolio Plan, subject to certain exceptions.

The decline in our mortgage-related investments portfolio during 1Q 2018 was primarily due to 

repayments and the active disposition of less liquid assets.
Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac Form 10-Q 64

While we continued to purchase new single-family seriously delinquent loans and multifamily 

unsecuritized loans, which are classified as held-for-investment, our active disposition of less liquid 

assets included the following: 

Sales of $3.5 billion of less liquid assets, including $1.7 billion in UPB of non-agency mortgagerelated securities and $1.8 billion in UPB of single-family reperforming loans;

Securitizations of $0.2 billion in UPB of less liquid multifamily loans; and

Transfers of $0.3 billion in UPB of less liquid multifamily loans to the securitization pipeline.
Management's Discussion and Analysis Regulation and Supervision

Freddie Mac Form 10-Q 65

REGULATION AND SUPERVISION

In addition to our oversight by FHFA as our Conservator, we are subject to regulation and oversight by 

FHFA under our Charter and the GSE Act and to certain regulation by other government agencies. 

Furthermore, regulatory activities by other government agencies can affect us indirectly, even if we are 

not directly subject to such agencies’ regulation or oversight. For example, regulations that modify 

requirements applicable to the purchase or servicing of mortgages can affect us.

Affordable Housing Allocations

The GSE Act requires us to set aside in each fiscal year an amount equal to 4.2 basis points of each 

dollar of total new business purchases and pay this amount to certain housing funds. During 1Q 2018, 

we completed $79 billion of new business purchases subject to this requirement and accrued $33 

million of related expense. We expect to pay this amount (and any additional amounts accrued based on 

our new business purchases during the remainder of 2018) in February 2019. We are prohibited from 

passing through these costs to the originators of the loans that we purchase. 

Legislative and Regulatory Developments

Affordable Housing Goals 

On February 6, 2018, FHFA published a final rule that establishes new annual single-family and 

multifamily housing goals for Freddie Mac and Fannie Mae for 2018 through 2020. The new goals set 

forth below replace the previous goals, which were in effect through 2017:

2018 - 2020

Single-family purchase money goals (Benchmark levels):

Low-income 24%

Very low-income 6%

Low-income areas TBD

Low-income areas subgoal 14%

Single-family refinance low-income goal (Benchmark level) 21%

Multifamily low-income goal (In units) 315,000

Multifamily very low-income subgoal (In units) 60,000

Multifamily small property low-income subgoal (In units) 10,000

In March 2018, we filed our Annual Housing Activities Report with FHFA. For 2017, we have determined 

that we achieved all three multifamily affordable housing goal benchmarks, as well as the single-family 

low-income areas purchase goal, low-income areas subgoal and low-income refinance goal 

benchmarks. We believe that we will also meet the single-family low-income and very low-income 

purchase goals based on meeting or exceeding the actual share of the market that meets the criteria for 

those goals once such market information is published in late 2018.

FHFA will ultimately make the determination as to whether we achieved compliance with the housing 

goals for 2017.
Management's Discussion and Analysis Regulation and Supervision

Freddie Mac Form 10-Q 66

Single (Common) Security Update 

In March 2018, FHFA announced that on June 3, 2019, Freddie Mac and Fannie Mae will start issuing a 

new, common security, the Uniform Mortgage-Backed Security (UMBS), using the Common 

Securitization Platform created by their joint venture, CSS.
Management's Discussion and Analysis Off-Balance Sheet Arrangements

Freddie Mac Form 10-Q 67

OFF-BALANCE SHEET ARRANGEMENTS

We enter into certain off-balance sheet arrangements related to our securitization activities involving 

guaranteed loans and mortgage-related securities, though most of our securitization activities are onbalance sheet. For a description of our off-balance sheet arrangements, see MD&A - Off-Balance 

Sheet Arrangements in our 2017 Annual Report. See Note 3 and Note 5 for more information on 

our off-balance sheet securitization and guarantee activities.

Our maximum potential off-balance sheet exposure to credit losses relating to these securitization 

activities and guarantees is primarily represented by the UPB of the underlying loans and securities, 

which was $225.8 billion and $215.7 billion at March 31, 2018 and December 31, 2017, respectively.
Management's Discussion and Analysis Forward-Looking Statements

Freddie Mac Form 10-Q 68

FORWARD-LOOKING STATEMENTS

We regularly communicate information concerning our business activities to investors, the news media, 

securities analysts and others as part of our normal operations. Some of these communications, 

including this Form 10-Q, contain "forward-looking statements." Examples of forward-looking 

statements include, but are not limited to, statements pertaining to the conservatorship, our current 

expectations and objectives for the Single-family Guarantee, Multifamily and Capital Markets segments 

of our business, our efforts to assist the housing market, our liquidity and capital management, 

economic and market conditions and trends, our market share, the effect of legislative and regulatory 

developments and new accounting guidance, the credit quality of loans we own or guarantee, the costs 

and benefits of our credit risk transfer transactions and our results of operations and financial condition 

on a GAAP, Segment Earnings and fair value basis. Forward-looking statements involve known and 

unknown risks and uncertainties, some of which are beyond our control. Forward-looking statements 

are often accompanied by, and identified with, terms such as "could," "may," "will," "believe," "expect," 

"anticipate," "forecast" and similar phrases. These statements are not historical facts, but rather 

represent our expectations based on current information, plans, judgments, assumptions, estimates and 

projections. Actual results may differ significantly from those described in or implied by such forwardlooking statements due to various factors and uncertainties, including those described in the Risk 

Factors section of our 2017 Annual Report, and:

The actions the U.S. government (including FHFA, Treasury and Congress) may take, or require us to 

take, including to support the housing markets or to implement FHFA’s Conservatorship Scorecards 

and other objectives for us;

The effect of the restrictions on our business due to the conservatorship and the Purchase 

Agreement, including our dividend requirement on the senior preferred stock;

Changes in our Charter or in applicable legislative or regulatory requirements (including any 

legislation affecting the future status of our company);

Changes in the fiscal and monetary policies of the Federal Reserve, including the balance sheet 

normalization program announced in October 2017 to reduce the Federal Reserve's holdings of 

mortgage-related securities;

Changes in tax laws, including those made by the Tax Cuts and Jobs Act enacted in December 

2017;

Changes in accounting policies, practices or guidance (e.g., FASB's accounting standards update 

related to the measurement of credit losses of financial instruments);

Changes in economic and market conditions, including changes in employment rates, interest rates, 

spreads and home prices;

Changes in the U.S. residential mortgage market, including changes in the supply and type of loan 

products (e.g., refinance vs. purchase and fixed-rate vs. ARM);

The success of our efforts to mitigate our losses on our Legacy and relief refinance single-family loan 

portfolio;

The success of our strategy to transfer mortgage credit risk through STACR debt note, ACIS, K 

Certificate, SB Certificate and other credit risk transfer transactions;

Our ability to maintain adequate liquidity to fund our operations;

Our ability to maintain the security and resiliency of our operational systems and infrastructure (e.g., 
Management's Discussion and Analysis Forward-Looking Statements

Freddie Mac Form 10-Q 69

against cyberattacks);

Our ability to effectively execute our business strategies, implement new initiatives and improve 

efficiency;

The adequacy of our risk management framework;

Our ability to manage mortgage credit risk, including the effect of changes in underwriting and 

servicing practices;

Our ability to limit or manage our economic exposure and GAAP earnings exposure to interest-rate 

volatility and spread volatility, including the availability of derivative financial instruments needed for 

interest-rate risk management purposes;

Our operational ability to issue new securities, make timely and correct payments on securities and 

provide initial and ongoing disclosures;

Changes or errors in the methodologies, models, assumptions and estimates we use to prepare our 

financial statements, make business decisions and manage risks;

Changes in investor demand for our debt or mortgage-related securities; 

Changes in the practices of loan originators, servicers, investors and other participants in the 

secondary mortgage market; 

The occurrence of a major natural or other disaster in areas in which our offices or significant 

portions of our total mortgage portfolio are located; and 

Other factors and assumptions described in this Form 10-Q and our 2017 Annual Report, including 

in the MD&A section.

Forward-looking statements are made only as of the date of this Form 10-Q, and we undertake no 

obligation to update any forward-looking statements we make to reflect events or circumstances 

occurring after the date of this Form 10-Q.
Financial Statements

Freddie Mac Form 10-Q 70

Financial Statements
Financial Statements Condensed Consolidated Statements of Comprehensive Income

Freddie Mac Form 10-Q 71

FREDDIE MAC 

Condensed Consolidated Statements of 

Comprehensive Income (Loss) (Unaudited) 

(In millions, except share-related amounts) 1Q 2018 1Q 2017

Interest income

Mortgage loans $15,951 $15,965

Investments in securities 810 914

Other 214 101

Total interest income 16,975 16,980

Interest expense (13,957) (13,185)

Net interest income 3,018 3,795

Benefit (provision) for credit losses (63) 116

Net interest income after benefit (provision) for credit losses 2,955 3,911

Non-interest income (loss)

Gains (losses) on extinguishment of debt 110 218

Derivative gains (losses) 1,830 (302)

Net impairment of available-for-sale securities recognized in earnings — (13)

Other gains (losses) on investment securities recognized in earnings (232) 56

Other income (loss) 121 415

Non-interest income (loss) 1,829 374

Non-interest expense

Salaries and employee benefits (286) (275)

Professional services (102) (112)

Other administrative expense (132) (124)

Total administrative expense (520) (511)

Real estate owned operations expense (34) (56)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (359) (321)

Other expense (197) (76)

Non-interest expense (1,110) (964)

Income (loss) before income tax (expense) benefit 3,674 3,321

Income tax (expense) benefit (748) (1,110)

Net income (loss) 2,926 2,211

Other comprehensive income (loss), net of taxes and reclassification adjustments:

Changes in unrealized gains (losses) related to available-for-sale securities (800) (2)

Changes in unrealized gains (losses) related to cash flow hedge relationships 30 28

Changes in defined benefit plans (6) (3)

Total other comprehensive income (loss), net of taxes and reclassification adjustments (776) 23

Comprehensive income (loss) $2,150 $2,234

Net income (loss) $2,926 $2,211

Undistributed net worth sweep and senior preferred stock dividends — (2,234)

Net income (loss) attributable to common stockholders $2,926 ($23)

Net income (loss) per common share — basic and diluted $0.90 ($0.01)

Weighted average common shares outstanding (in millions) — basic and diluted 3,234 3,234

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Condensed Consolidated Balance Sheets

Freddie Mac Form 10-Q 72

FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited)

March 31, December 31,

(In millions, except share-related amounts) 2018 2017

Assets

Cash and cash equivalents (Notes 1, 3 and 14) (includes $3,398 and $2,963 of restricted cash and cash

equivalents) $8,617 $9,811

Securities purchased under agreements to resell (Notes 3, 10) 41,828 55,903

Investments in securities, at fair value (Note 7) 75,501 84,318

Mortgage loans held-for-sale (Notes 3, 4) (includes $15,832 and $20,054 at fair value) 27,615 34,763

Mortgage loans held-for-investment (Notes 3, 4) (net of allowance for loan losses of $8,848 and $8,966) 1,840,736 1,836,454

Accrued interest receivable (Note 3) 6,381 6,355

Derivative assets, net (Notes 9, 10) 454 375

Deferred tax assets, net (Note 12) 8,313 8,107

Other assets (Notes 3, 18) (includes $3,502 and $3,353 at fair value) 13,038 13,690

Total assets $2,022,483 $2,049,776

Liabilities and equity

Liabilities

Accrued interest payable (Note 3) $6,058 $6,221

Debt, net (Notes 3, 8) (includes $5,617 and $5,799 at fair value) 2,004,807 2,034,630

Derivative liabilities, net (Notes 9, 10) 345 269

Other liabilities (Notes 3, 18) 9,123 8,968

Total liabilities 2,020,333 2,050,088

Commitments and contingencies (Notes 5, 9 and 16)

Equity (Note 11)

Senior preferred stock (redemption value of $75,648 and $75,336) 72,648 72,336

Preferred stock, at redemption value 14,109 14,109

Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares issued and

650,054,986 shares and 650,054,731 shares outstanding — —

Additional paid-in capital — —

Retained earnings (accumulated deficit) (80,424) (83,261)

AOCI, net of taxes, related to:

Available-for-sale securities (includes $363 and $593, related to net unrealized gains on securities for

which other-than-temporary impairment has been recognized in earnings) 5 662

Cash flow hedge relationships (399) (356)

Defined benefit plans 96 83

Total AOCI, net of taxes (298) 389

Treasury stock, at cost, 75,808,900 shares and 75,809,155 shares (3,885) (3,885)

Total equity (See Note 11 for information on our dividend requirement to Treasury) 2,150 (312)

Total liabilities and equity $2,022,483 $2,049,776

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our condensed 

consolidated balance sheets.

March 31, December 31,

(In millions) 2018 2017

Consolidated Balance Sheet Line Item

Assets: (Note 3)

Mortgage loans held-for-sale $— $—

Mortgage loans held-for-investment 1,778,010 1,774,286

All other assets 23,488 25,753

Total assets of consolidated VIEs $1,801,498 $1,800,039

Liabilities: (Note 3)

Debt, net $1,726,969 $1,720,996

All other liabilities 5,045 5,030

Total liabilities of consolidated VIEs $1,732,014 $1,726,026

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Condensed Consolidated Statements of Cash Flows

Freddie Mac Form 10-Q 73

FREDDIE MAC

Condensed Consolidated Statements of Cash Flows 

(Unaudited)

(In millions) 1Q 2018 1Q 2017

Net cash provided by (used in) operating activities $4,643 ($17)

Cash flows from investing activities

Purchases of trading securities (29,949) (55,647)

Proceeds from sales of trading securities 32,487 44,936

Proceeds from maturities and repayments of trading securities 1,471 2,383

Purchases of available-for-sale securities (4,266) (2,610)

Proceeds from sales of available-for-sale securities 6,351 5,327

Proceeds from maturities and repayments of available-for-sale securities 1,541 3,796

Purchases of held-for-investment mortgage loans (30,737) (26,993)

Proceeds from sales of mortgage loans held-for-investment 2,282 96

Repayments of mortgage loans held-for-investment 60,542 64,253

Advances to lenders (4,944) (8,251)

Net proceeds from dispositions of real estate owned and other recoveries 352 473

Net (increase) decrease in securities purchased under agreements to resell 14,075 291

Derivative premiums and terminations, swap collateral, and exchange settlement payments, net 2,958 (240)

Changes in other assets (143) (77)

Net cash provided by investing activities 52,020 27,737

Cash flows from financing activities

Proceeds from issuance of debt securities of consolidated trusts held by third parties 42,558 43,036

Repayments and redemptions of debt securities of consolidated trusts held by third parties (65,614) (77,193)

Proceeds from issuance of other debt 131,574 165,060

Repayments of other debt (166,686) (163,852)

Increase in liquidation preference of senior preferred stock 312 —

Payment of cash dividends on senior preferred stock — (4,475)

Changes in other liabilities (1) —

Net cash used in financing activities (57,857) (37,424)

Net (decrease) increase in cash and cash equivalents (includes restricted cash and cash equivalents) (1,194) (9,704)

Cash and cash equivalents (includes restricted cash and cash equivalents) at beginning of year 9,811 22,220

Cash and cash equivalents (includes restricted cash and cash equivalents) at end of period $8,617 $12,516

Supplemental cash flow information

Cash paid for:

Debt interest $16,306 $15,647

Income taxes — —

Non-cash investing and financing activities (Note 4 and 7)

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 74

Notes to Condensed Consolidated 

Financial Statements

NOTE 1

Summary of Significant Accounting Policies

Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to provide liquidity, stability 

and affordability to the U.S. housing market. We are regulated by FHFA, the SEC, HUD and Treasury, 

and are currently operating under the conservatorship of FHFA. For more information on the roles of 

FHFA and Treasury, see Note 2 in this Form 10-Q and in our Annual Report on Form 10-K for the year 

ended December 31, 2017, or 2017 Annual Report. Throughout our unaudited condensed consolidated 

financial statements and related notes, we use certain acronyms and terms which are defined in the 

"Glossary" of our 2017 Annual Report. Throughout this Form 10-Q, we refer to the three months ended 

March 31, 2018, the three months ended December 31, 2017, the three months ended September 30, 

2017, the three months ended June 30, 2017 and the three months ended March 31, 2017 as "1Q 

2018," "4Q 2017," "3Q 2017," "2Q 2017" and "1Q 2017," respectively.

The accompanying unaudited condensed consolidated financial statements should be read in 

conjunction with the audited consolidated financial statements and related notes in our 2017 Annual 

Report.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in 

accordance with GAAP and include our accounts as well as the accounts of other entities in which we 

have a controlling financial interest. All intercompany balances and transactions have been eliminated.

We are operating under the basis that we will realize assets and satisfy liabilities in the normal course of 

business as a going concern and as authorized by FHFA through our Board of Directors and 

management. Certain amounts in prior periods’ condensed consolidated financial statements have been 

reclassified to conform to the current presentation. In the opinion of management, our unaudited 

condensed consolidated financial statements contain all adjustments, which include only normal 

recurring adjustments, necessary for a fair statement of our results.

We evaluate the materiality of identified errors in the financial statements using both an income 

statement, or "rollover," and a balance sheet, or "iron curtain," approach, based on relevant quantitative

and qualitative factors. Net income includes certain adjustments to correct immaterial errors related to 

previously reported periods.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 75

Use of Estimates

The preparation of financial statements requires us to make estimates and assumptions that affect the 

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date 

of the financial statements and the reported amounts of revenues, expenses, gains and losses during 

the reporting period. Management has made significant estimates in preparing the financial statements 

for establishing the allowance for credit losses, valuing financial instruments and other assets and 

liabilities and assessing impairments on investments. Actual results could be different from these 

estimates.

Recently Issued Accounting Guidance

Recently Adopted Accounting Guidance

Standard Description Date of

Adoption

Effect on Condensed Consolidated

Financial Statements

ASU 2014-09, Revenue 

from Contracts with 

Customers (Topic 606) and 

ASU 2015-14, Topic 606: 

Deferral of the Effective 

Date

The amendment requires entities to recognize

revenue to depict the transfer of promised goods

or services to customers in amounts that reflect

the consideration to which the entity expects to be

entitled in exchange for those goods or services.

ASU 2015-14 defers the effective date of ASU

2014-09 for all entities by one year.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 

ASU 2016-01, Recognition 

and Measurement of 

Financial Assets and 

Financial Liabilities 

(Subtopic 825-10)

The amendment addresses certain aspects of

recognition, measurement, presentation and

disclosure of financial instruments.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 

ASU 2016-08, Topic 606: 

Principal versus Agent 

Considerations (Reporting 

Revenue Gross versus Net)

The amendments in this Update do not change the

core principle of the guidance in Topic 606. The

amendments clarify the implementation guidance

on principal versus agent considerations.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 

ASU 2016-10, Topic 606: 

Identifying Performance 

Obligations and Licensing

The amendments in this Update do not change the

core principle of the guidance in Topic 606, but

they clarify two issues: i) identifying performance

obligations; and ii) licensing. These clarifications

are intended to reduce diversity in practice and to

reduce the cost and complexity of Topic 606 at

transition and on an ongoing basis.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 

ASU 2016-12, Topic 606: 

Narrow-Scope 

Improvements and 

Practical Expedients

The amendments in this Update do not change the

core principle of the guidance in Topic 606, but

affect aspects of the guidance and technical

corrections.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 76

Recently Adopted Accounting Guidance

Standard Description Date of

Adoption

Effect on Condensed Consolidated

Financial Statements

ASU 2016-15, Statement of 

Cash Flows (Topic 230): 

Classification of Certain 

Cash Receipts and Cash 

Payments (a consensus of 

the Emerging Issues Task 

Force)

The main objective of this Update is to address the

diversity in practice that currently exists in regards

to how certain cash receipts and cash payments

are presented and classified in the statement of

cash flows under Topic 230, Statement of Cash

Flows, and other Topics. This Update addresses

eight specific cash flow issues with the objective

of reducing the existing diversity in practice.

January 1,

2018

Upon adoption, the portion of the cash

payment attributable to the accreted

interest related to zero-coupon debt is

presented in the operating activities

section, a classification change from

the financing activities section where

this item was previously presented. As

a result, we reclassified approximately

$71 million of cash payments from

financing activities to operating

activities on our condensed

consolidated statements of cash flows

for 1Q 2017 upon adoption.

ASU 2016-18, Statement of 

Cash Flows (Topic 230): 

Restricted Cash (a 

consensus of the FASB 

Emerging Issues Task 

Force)

The amendments in this Update address the

diversity in the classification and presentation of

changes in restricted cash on the statement of

cash flows under Topic 230, Statement of Cash

Flows. Specifically, this amendment dictates that

the statement of cash flows should explain the

change in the period of the total of cash, cash

equivalents and restricted cash balances.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements; however, we modified the 

presentation of restricted cash and 

cash equivalent balances on our 

condensed consolidated balance 

sheets. The presentation of our 

condensed consolidated statements of 

cash flows has also been revised to 

reflect the change of total cash and 

cash equivalents and restricted cash 

and cash equivalents balances.

ASU 2016-20, Technical 

Corrections and 

Improvements to Topic 606

The amendments in this Update are of a similar

nature to the items typically addressed in the

Technical Corrections and Improvements project.

However, the Board decided to issue a separate

Update for technical corrections and

improvements to Topic 606 and other Topics

amended by Update 2014-09 to increase

stakeholders’ awareness of the proposals and to

expedite improvements to Update 2014-09.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 

ASU 2018-02, Income 

Statement—Reporting 

Comprehensive Income 

(Topic 220): 

Reclassification of Certain 

Tax Effects from 

Accumulated Other 

Comprehensive Income

The amendments in this Update allow a

reclassification from accumulated other

comprehensive income to retained earnings for

stranded tax effects resulting from the Tax Cuts

and Jobs Act.

January 1,

2018

Upon adoption, we reclassified 

approximately $89 million from 

accumulated other comprehensive 

income to retained earnings on our 

condensed consolidated financial 

statements. 

ASU 2018-03, Technical 

Corrections and 

Improvements to Financial 

Instruments—Overall 

(Subtopic 825-10) 

Recognition and 

Measurement of Financial 

Assets and Financial 

Liabilities 

The amendments clarify certain aspects of the

guidance issued in Update 2016-01 and address

six specific issues.

January 1,

2018

The adoption of the amendments did 

not have a material effect on our 

condensed consolidated financial 

statements or on our disclosures. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 77

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Condensed Consolidated Financial Statements

Standard Description Date of Planned

Adoption

Effect on Consolidated

Financial Statements

ASU 2016-02, Leases (Topic 

842)

The amendment addresses the accounting for

lease arrangements.

January 1, 2019 We do not expect that the

adoption of this amendment

will have a material effect on

our consolidated financial

statements.

ASU 2016-13, Financial 

Instruments—Credit Losses 

(Topic 326): Measurement of 

Credit Losses on Financial 

Instruments

The amendments in this Update replace the

incurred loss impairment methodology in current

GAAP with a methodology that reflects lifetime

expected credit losses and requires consideration

of a broader range of reasonable and supportable

information to inform credit loss estimates.

January 1, 2020 While we are evaluating the

effect that the adoption of this

amendment will have on our

consolidated financial

statements, it will increase

(perhaps substantially) our

provision for credit losses in

the period of adoption.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac Form 10-Q 78

NOTE 2

Conservatorship and Related Matters

Business Objectives

We operate under the conservatorship that commenced on September 6, 2008, conducting our 

business under the direction of FHFA, as our Conservator. The conservatorship and related matters 

significantly affect our management, business activities, financial condition and results of operations. 

Upon its appointment, FHFA, as Conservator, immediately succeeded to all rights, titles, powers and 

privileges of Freddie Mac, and of any stockholder, officer or director thereof, with respect to the 

company and its assets. The Conservator also succeeded to the title to all books, records and assets of 

Freddie Mac held by any other legal custodian or third party. The Conservator provided for the Board of 

Directors to perform certain functions and to oversee management, and the board delegated to 

management authority to conduct business operations so that the company can continue to operate in 

the ordinary course. The directors serve on behalf of, and perform such functions as provided by, the 

Conservator.

We are also subject to certain constraints on our business activities under the Purchase Agreement. 

However, the support provided by Treasury pursuant to the Purchase Agreement currently enables us to 

maintain our access to the debt markets and to have adequate liquidity to conduct our normal business 

activities, although the costs of our debt funding could vary. Our ability to access funds from Treasury 

under the Purchase Agreement is critical to keeping us solvent. 

Impact of Conservatorship and Related Developments on the 

Mortgage-Related Investments Portfolio

For purposes of the limit imposed by the Purchase Agreement and FHFA regulation, the UPB of our 

mortgage-related investments portfolio cannot exceed $250 billion at December 31, 2018 and was 

$241.0 billion at March 31, 2018. Our Retained Portfolio Plan provides for us to manage the UPB of the 

mortgage-related investments portfolio so that it does not exceed 90% of the cap established by the 

Purchase Agreement (subject to certain exceptions). Our ability to acquire and sell mortgage assets is 

significantly constrained by limitations of the Purchase Agreement and those imposed by FHFA. 

Government Support for Our Business

We receive substantial support from Treasury and are dependent upon its continued support in order to 

continue operating our business. Our ability to access funds from Treasury under the Purchase 

Agreement is critical to: 

Keeping us solvent;

Allowing us to focus on our primary business objectives under conservatorship; and

Avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions. 

At December 31, 2017, our liabilities exceeded our assets under GAAP; therefore, FHFA, as 

Conservator, submitted a draw request, on our behalf, to Treasury under the Purchase Agreement to 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac Form 10-Q 79

eliminate our net worth deficit. As a result, we received $312 million from Treasury under the Purchase 

Agreement during 1Q 2018. The amount of available funding remaining under the Purchase Agreement 

was reduced to $140.2 billion and will be reduced by any future draws. 

See Note 8 and Note 11 for more information on the conservatorship and the Purchase Agreement.

Related Parties as a Result of Conservatorship

We are deemed related parties with Fannie Mae as both we and Fannie Mae have the same relationships 

with FHFA and Treasury. CSS was formed in 2013 as a limited liability company equally-owned by 

Freddie Mac and Fannie Mae. Therefore, CSS is also deemed a related party. During 1Q 2018, we 

contributed $41 million of capital to CSS, and we have contributed $370 million since the fourth quarter 

of 2014. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 3

Freddie Mac Form 10-Q 80

NOTE 3

Securitization Activities and Consolidation

Our primary business activities in our Single-family Guarantee and Multifamily segments involve the 

securitization of loans or other mortgage-related assets using trusts that are VIEs. These trusts issue 

beneficial interests in the loans or other mortgage-related assets that they own. We guarantee the 

principal and interest payments on some or all of the issued beneficial interests in substantially all of our 

securitization transactions. We consolidate VIEs when we have a controlling financial interest in the VIE 

and are therefore considered the primary beneficiary of the VIE. See Note 5 for additional information 

on our guarantee activities.

Consolidated VIEs 

The table below presents the carrying value and classification of the assets and liabilities of 

consolidated VIEs on our condensed consolidated balance sheets.

(In millions) March 31, 2018 December 31, 2017

Consolidated Balance Sheet Line Item

Assets:

Restricted cash and cash equivalents $1,165 $518

Securities purchased under agreements to resell 14,275 16,750

Mortgage loans held-for-investment 1,778,010 1,774,286

Accrued interest receivable 5,775 5,747

Other assets 2,273 2,738

Total assets of consolidated VIEs $1,801,498 $1,800,039

Liabilities:

Accrued interest payable $5,045 $5,028

Debt, net 1,726,969 1,720,996

Other liabilities — 2

Total liabilities of consolidated VIEs $1,732,014 $1,726,026
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 3

Freddie Mac Form 10-Q 81

Non-Consolidated VIEs

Our involvement with VIEs for which we are not the primary beneficiary takes one or both of two forms - 

purchasing an investment in these entities or providing a guarantee to these entities. The following table 

presents the carrying amounts and classification of the assets and liabilities recorded on our condensed 

consolidated balance sheets related to our variable interests in non-consolidated VIEs with which we 

were involved in the design and creation and have a significant continuing involvement, as well as our 

maximum exposure to loss. We do not believe the maximum exposure to loss disclosed in the table 

below is representative of the actual loss we are likely to incur, based on our historical loss experience 

and after consideration of proceeds from related collateral liquidation, including possible recoveries 

under credit enhancement arrangements. See Note 6 for additional information on credit enhancement 

arrangements.

(In millions) March 31, 2018 December 31, 2017

Assets and Liabilities Recorded on our Condensed Consolidated Balance 

Sheets(1)

Assets:

Investments in securities $48,925 $51,494

Accrued interest receivable 235 233

Derivative assets, net 26 7

Other assets 2,706 2,591

 Liabilities:

Derivative liabilities, net 29 —

Other liabilities 2,581 2,489

Maximum Exposure to Loss(2)(3) 211,465 200,196

Total Assets of Non-Consolidated VIEs(3) 245,591 232,762

(1) Includes our variable interests in REMICs and Stripped Giant PCs, K Certificates, SB Certificates, senior subordinate securitization structures and 

other securitization products that we do not consolidate. 

(2) Our maximum exposure to loss includes the guaranteed UPB of assets held by the non-consolidated VIEs, the UPB of unguaranteed securities that 

we acquired from these securitization transactions and the UPB of guarantor advances made to the holders of the guaranteed securities. 

(3) Our maximum exposure to loss and total assets of non-consolidated VIEs exclude our investments in and obligations to REMICs and Stripped Giant 

PCs, because we already consolidate the underlying collateral of these trusts on our condensed consolidated balance sheets. In addition, our 

maximum exposure to loss excludes other guarantees measured at fair value related to certain of our REMICs where our exposure may be 

unlimited. We generally reduce our exposure to these guarantees with unlimited exposure through separate contracts with third parties.

We also obtain interests in various other VIEs created by third parties through the normal course of 

business. To the extent that we were not involved in the design and creation of these VIEs, they are 

excluded from the table above. Our interests in these VIEs are generally passive in nature and are not 

expected to result in us obtaining a controlling financial interest in these VIEs in the future.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 82

NOTE 4

Mortgage Loans and Allowance for Credit Losses

The table below provides details of the loans on our condensed consolidated balance sheets.

March 31, 2018 December 31, 2017

(In millions)

Held by

Freddie Mac

Held by

Consolidated

Trusts Total

Held by

Freddie Mac

Held by

Consolidated

Trusts Total

Held-for-sale:

Single-family $13,756 $— $13,756 $17,039 $— $17,039

Multifamily 16,383 — 16,383 20,537 — 20,537

Total UPB 30,139 — 30,139 37,576 — 37,576

Cost basis and fair value adjustments, net (2,524) — (2,524) (2,813) — (2,813)

Total held-for-sale loans, net 27,615 — 27,615 34,763 — 34,763

Held-for-investment:

Single-family 54,460 1,749,047 1,803,507 51,893 1,742,736 1,794,629

Multifamily 16,213 3,874 20,087 17,702 3,747 21,449

Total UPB 70,673 1,752,921 1,823,594 69,595 1,746,483 1,816,078

Cost basis adjustments (2,625) 28,615 25,990 (2,148) 31,490 29,342

Allowance for loan losses (5,322) (3,526) (8,848) (5,279) (3,687) (8,966)

Total held-for-investment loans, net 62,726 1,778,010 1,840,736 62,168 1,774,286 1,836,454

Total loans, net $90,341 $1,778,010 $1,868,351 $96,931 $1,774,286 $1,871,217

During 1Q 2018 and 1Q 2017, we purchased $65.5 billion and $85.6 billion, respectively, in UPB of 

single-family loans and $1.0 billion and $1.3 billion, respectively, in UPB of multifamily loans that were 

classified as held-for-investment. During 1Q 2018 and 1Q 2017, we purchased $11.8 billion and $11.2 

billion, respectively, in UPB of multifamily loans that were initially classified as held-for-sale. 

Our sales of multifamily loans occur primarily through the issuance of multifamily K Certificates and SB 

Certificates. During 1Q 2018 and 1Q 2017, we sold $16.2 billion and $9.9 billion, respectively, in UPB of 

held-for-sale multifamily loans. See Note 3 for more information on our K Certificates and SB 

Certificates.

As part of our strategy to mitigate losses and reduce our holdings of less liquid assets, we completed 

sales of $1.8 billion in UPB of seasoned single-family loans during 1Q 2018. We did not have sales of 

seasoned single-family loans in 1Q 2017. Seasoned single-family mortgage loans include seriously 

delinquent and reperforming loans.

We reclassified $1.7 billion in UPB of seasoned single-family loans from held-for-investment to held-forsale during both 1Q 2018 and 1Q 2017. In addition, we reclassified $0.3 billion in UPB of multifamily 

mortgage loans from held-for-investment to held-for-sale during 1Q 2018. We did not reclassify any 

multifamily mortgage loans in 1Q 2017. For additional information regarding the fair value of our loans 

classified as held-for-sale, see Note 15.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 83

Credit Quality

Single-Family

The current LTV ratio is one key factor we consider when estimating our allowance for credit losses for 

single-family loans. As current LTV ratios increase, the borrower’s equity in the home decreases, which 

may negatively affect the borrower’s ability to refinance or to sell the property for an amount at or above 

the balance of the outstanding loan. 

A second-lien loan also reduces the borrower’s equity in the home and has a similar negative effect on 

the borrower’s ability to refinance or sell the property for an amount at or above the combined balances 

of the first and second loans. As of both March 31, 2018 and December 31, 2017, based on data 

collected by us at loan delivery, approximately 9% of loans in our single-family credit guarantee portfolio 

had second-lien financing by third parties at origination of the first loan. However, borrowers are free to 

obtain second-lien financing after origination, and we are not entitled to receive notification when a 

borrower does so. For further information about concentrations of risk associated with our single-family 

and multifamily loans, see Note 14.

The table below presents the recorded investment of single-family held-for-investment loans by current 

LTV ratios. Our current LTV ratios are estimates based on available data through the end of each 

respective period presented. 

March 31, 2018 December 31, 2017

Current LTV Ratio Total Current LTV Ratio Total

(In millions) > 80 to 100 > 100(1) > 80 to 100 > 100(1)

20 and 30-year or more, amortizing 

fixed-rate(2) $1,270,145 $199,335 $11,097 $1,480,577 $1,240,224 $214,177 $13,303 $1,467,704

15-year amortizing fixed-rate(2) 267,453 6,105 296 273,854 270,266 7,351 381 277,998

Adjustable-rate 47,364 2,474 19 49,857 48,596 2,963 28 51,587

Alt-A, interest-only, and option ARM 20,489 3,576 1,162 25,227 21,013 4,256 1,429 26,698

Total single-family loans $1,605,451 $211,490 $12,574 $1,829,515 $1,580,099 $228,747 $15,141 $1,823,987

(1) The serious delinquency rate for the total of single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 

8.50% and 8.43% as of March 31, 2018 and December 31, 2017, respectively.

(2) As of March 31, 2018 and December 31, 2017, $20.5 billion and $22.2 billion, respectively, in UPB of modified loans were categorized as fixedrate loans (instead of as adjustable rate loans), even though the modified loans have rate adjustment provisions. In these cases, while the terms of 

the modified loans provide for the interest rate to adjust, such rates and the timing of the adjustment are determined at the time of modification 

rather than at a subsequent date.

For reporting purposes:

Loans within the Alt-A category continue to be presented in that category following modification, 

even though the borrower may have provided full documentation of assets and income to complete 

the modification; and

Loans within the option ARM category continue to be presented in that category following 

modification, even though the modified loan no longer provides for optional payment or adjustable 

interest-rate provisions.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 84

Multifamily

The table below presents the recorded investment in our multifamily held-for-investment loans, by credit 

quality indicator based on available data through the end of each period presented. These indicators 

involve significant management judgment. 

(In millions) March 31, 2018 December 31, 2017

Credit risk profile by internally assigned grade:(1)

Pass $19,503 $20,963

Special mention 330 301

Substandard 234 169

Doubtful 2 —

Total $20,069 $21,433

(1) A loan categorized as: "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower; 

"Special mention" has administrative issues that may affect future repayment prospects but does not have current credit weaknesses; 

"Substandard" has a weakness that jeopardizes the timely full repayment; and "Doubtful" has a weakness that makes collection or liquidation in 

full highly questionable and improbable based on existing conditions.

Mortgage Loan Performance

The tables below present the recorded investment of our single-family and multifamily loans, held-forinvestment, by payment status.

March 31, 2018

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in Foreclosure(1) Total Non-accrual

Single-family:

20 and 30-year or more, amortizing fixed-rate $1,451,682 $13,478 $4,075 $11,342 $1,480,577 $11,337

15-year amortizing fixed-rate 272,305 855 187 507 273,854 507

Adjustable-rate 49,347 262 65 183 49,857 183

Alt-A, interest-only, and option ARM 22,224 1,046 436 1,521 25,227 1,520

Total single-family 1,795,558 15,641 4,763 13,553 1,829,515 13,547

Total multifamily 20,033 18 — 18 20,069 65

Total single-family and multifamily $1,815,591 $15,659 $4,763 $13,571 $1,849,584 $13,612

December 31, 2017

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in Foreclosure(1) Total Non-accrual

Single-family:

20 and 30-year or more, amortizing fixed-rate $1,431,342 $18,297 $5,660 $12,405 $1,467,704 $12,401

15-year amortizing fixed-rate 275,864 1,288 290 556 277,998 556

Adjustable-rate 50,915 383 84 205 51,587 205

Alt-A, interest-only, and option ARM 23,235 1,297 509 1,657 26,698 1,656

Total single-family 1,781,356 21,265 6,543 14,823 1,823,987 14,818

Total multifamily 21,414 — — 19 21,433 64

Total single-family and multifamily $1,802,770 $21,265 $6,543 $14,842 $1,845,420 $14,882

(1) Includes $4.2 billion and $4.1 billion of loans that were in the process of foreclosure as of March 31, 2018 and December 31, 2017, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 85

The table below summarizes the delinquency rates of loans within our single-family credit guarantee and 

multifamily mortgage portfolios.

(Dollars in millions) March 31, 2018 December 31, 2017

Single-family:(1)

Non-credit-enhanced portfolio

Serious delinquency rate 1.07% 1.16%

Total number of seriously delinquent loans 73,914 81,668

Credit-enhanced portfolio:(2)

Primary mortgage insurance:

 Serious delinquency rate 1.28% 1.43%

 Total number of seriously delinquent loans 20,939 23,275

Other credit protection:(3)

 Serious delinquency rate 0.44% 0.53%

 Total number of seriously delinquent loans 14,834 16,259

Total single-family:

Serious delinquency rate 0.97% 1.08%

Total number of seriously delinquent loans 105,211 116,662

Multifamily:(4)

Non-credit-enhanced portfolio:

Delinquency rate 0.05% 0.06%

UPB of delinquent loans $19 $24

Credit-enhanced portfolio:

Delinquency rate 0.01% 0.01%

UPB of delinquent loans $26 $16

Total multifamily:

Delinquency rate 0.02% 0.02%

UPB of delinquent loans $45 $40

(1) Serious delinquencies on single-family loans underlying certain REMICs, other securitization products and other mortgage-related guarantees may 

be reported on a different schedule due to variances in industry practice.

(2) The credit-enhanced categories are not mutually exclusive, as a single loan may be covered by both primary mortgage insurance and other credit 

protection.

(3) Consists of single-family loans covered by financial arrangements (other than primary mortgage insurance) that are designed to reduce our credit 

risk exposure. See Note 6 for additional information on our credit enhancements.

(4) Multifamily delinquency performance is based on UPB of loans that are two monthly payments or more past due or those in the process of 

foreclosure. 

Allowance for Credit Losses

The allowance for credit losses represents estimates of probable incurred credit losses which we 

recognize by recording a charge to the provision for credit losses in our condensed consolidated 

statements of comprehensive income. The allowance for credit losses includes:

Our allowance for loan losses, which pertains to all single-family and multifamily loans classified as 

held-for-investment on our condensed consolidated balance sheets; and

Our reserve for guarantee losses, which pertains to single-family and multifamily loans underlying 

our K Certificates, SB Certificates, senior subordinate securitization structures, other securitization 

products and other mortgage-related guarantees.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 86

The table below summarizes changes in our allowance for credit losses.

1Q 2018 1Q 2017

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

 (In millions)

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Single-family:

Beginning balance $5,251 $3,680 $48 $8,979 $10,442 $2,969 $54 $13,465

Provision (benefit) for credit losses 98 (21) 2 79 (216) 106 — (110)

Charge-offs (355) (15) (2) (372) (697) (43) — (740)

Recoveries 95 1 — 96 95 2 — 97

Transfers, net(1) 126 (126) — — 181 (181) — —

Other(2) 90 5 — 95 61 1 — 62

Single-family ending balance 5,305 3,524 48 8,877 9,866 2,854 54 12,774

Multifamily ending balance 17 2 7 26 18 1 10 29

Total ending balance $5,322 $3,526 $55 $8,903 $9,884 $2,855 $64 $12,803

(1) Relates to removal of delinquent single-family loans from consolidated trusts and resecuritization after such removal. 

(2) Primarily includes capitalization of past due interest on modified loans.

A significant number of unsecuritized single-family loans on our condensed consolidated balance sheets 

are individually evaluated for impairment while substantially all single-family loans held by our 

consolidated trusts are collectively evaluated for impairment. The allowance for loan losses associated 

with our held-for-investment unsecuritized loans represented approximately 7.8% of the recorded 

investment in such loans at both March 31, 2018 and December 31, 2017, and a substantial portion of 

the allowance associated with these loans represented interest rate concessions provided to borrowers 

as part of loan modifications. The allowance for loan losses associated with loans held by our 

consolidated trusts represented approximately 0.2% of the recorded investment in such loans as of both 

March 31, 2018 and December 31, 2017.

The table below presents our allowance for loan losses and our recorded investment in loans, held-forinvestment, by impairment evaluation methodology.

March 31, 2018 December 31, 2017

(In millions) Single-family Multifamily Total Single-family Multifamily Total

Recorded investment:

Collectively evaluated $1,767,827 $19,948 $1,787,775 $1,764,750 $21,301 $1,786,051

Individually evaluated 61,688 121 61,809 59,237 132 59,369

Total recorded investment 1,829,515 20,069 1,849,584 1,823,987 21,433 1,845,420

Ending balance of the allowance for loan losses:

Collectively evaluated (1,861) (11) (1,872) (2,301) (28) (2,329)

Individually evaluated (6,968) (8) (6,976) (6,630) (7) (6,637)

Total ending balance of the allowance (8,829) (19) (8,848) (8,931) (35) (8,966)

Net investment in loans $1,820,686 $20,050 $1,840,736 $1,815,056 $21,398 $1,836,454
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 87

Allowance for Loan Losses Determined on an Individual Basis

Impaired Loans

The tables below present the UPB, recorded investment, related allowance for loan losses, average 

recorded investment and interest income recognized for individually impaired loans.

March 31, 2018 December 31, 2017

(In millions) UPB

Recorded

Investment

Associated

Allowance UPB

Recorded

Investment

Associated

Allowance

Single-family:

With no allowance recorded:(1)

20 and 30-year or more, amortizing fixedrate $4,324 $3,354 N/A $3,768 $2,908 N/A

15-year amortizing fixed-rate 24 20 N/A 24 21 N/A

Adjustable-rate 261 259 N/A 259 256 N/A

Alt-A, interest-only, and option ARM 1,636 1,354 N/A 1,558 1,297 N/A

Total with no allowance recorded 6,245 4,987 N/A 5,609 4,482 N/A

With an allowance recorded:(2)

20 and 30-year or more, amortizing fixedrate 49,940 48,721 ($5,832) 47,897 46,783 ($5,505)

15-year amortizing fixed-rate 944 955 (45) 752 757 (24)

Adjustable-rate 245 241 (14) 232 228 (14)

Alt-A, interest-only, and option ARM 7,255 6,784 (1,077) 7,407 6,987 (1,087)

Total with an allowance recorded 58,384 56,701 (6,968) 56,288 54,755 (6,630)

Combined single-family:

20 and 30-year or more, amortizing fixedrate 54,264 52,075 (5,832) 51,665 49,691 (5,505)

15-year amortizing fixed-rate 968 975 (45) 776 778 (24)

Adjustable-rate 506 500 (14) 491 484 (14)

Alt-A, interest-only, and option ARM 8,891 8,138 (1,077) 8,965 8,284 (1,087)

Total single-family 64,629 61,688 (6,968) 61,897 59,237 (6,630)

Multifamily:

With no allowance recorded(1) 92 85 N/A 106 97 N/A

With an allowance recorded 36 36 (8) 35 35 (7)

Total multifamily 128 121 (8) 141 132 (7)

Total single-family and multifamily $64,757 $61,809 ($6,976) $62,038 $59,369 ($6,637)

Referenced footnotes are included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 88

1Q 2018 1Q 2017

(In millions)

Average

Recorded

Investment

Interest

Income

Recognized

Interest Income

Recognized On

Cash Basis(3)

Average

Recorded

Investment

Interest

Income

Recognized

Interest Income

Recognized On

Cash Basis(3)

Single-family:

With no allowance recorded:(1)

20 and 30-year or more, amortizing

fixed-rate $3,311 $94 $7 $4,031 $109 $4

15-year amortizing fixed-rate 20 1 — 26 1 —

Adjustable rate 263 3 — 311 3 —

Alt-A, interest-only, and option ARM 1,356 23 1 1,655 29 1

Total with no allowance recorded 4,950 121 8 6,023 142 5

With an allowance recorded:(2)

20 and 30-year or more, amortizing

fixed-rate 47,868 592 83 65,091 670 70

15-year amortizing fixed-rate 869 8 3 825 12 2

Adjustable rate 226 2 1 274 3 1

Alt-A, interest-only, and option ARM 6,834 80 9 11,416 107 11

Total with an allowance recorded 55,797 682 96 77,606 792 84

Combined single-family:

20 and 30-year or more, amortizing

fixed-rate 51,179 686 90 69,122 779 74

15-year amortizing fixed-rate 889 9 3 851 13 2

Adjustable rate 489 5 1 585 6 1

Alt-A, interest-only, and option ARM 8,190 103 10 13,071 136 12

Total single-family 60,747 803 104 83,629 934 89

Multifamily:

With no allowance recorded(1) 84 2 1 271 3 1

With an allowance recorded 36 — — 41 1 —

Total multifamily 120 2 1 312 4 1

Total single-family and multifamily $60,867 $805 $105 $83,941 $938 $90

(1) Individually impaired loans with no allowance primarily represent those loans for which the collateral value is sufficiently in excess of the loan 

balance to result in recovery of the entire recorded investment if the property were foreclosed upon or otherwise subject to disposition.

(2) Consists primarily of loans classified as TDRs.

(3) Consists of income recognized during the period related to loans on non-accrual status.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 89

Troubled Debt Restructurings

The table below presents the volume of single-family and multifamily loans that were newly classified as 

TDRs, based on the original product category of the loan before the loan was classified as a TDR. Loans 

classified as a TDR in one period may be subject to further action (such as a modification or 

remodification) in a subsequent period. In such cases, the subsequent action would not be reflected in 

the table below since the loan would already have been classified as a TDR.

1Q 2018 1Q 2017

(Dollars in millions)

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Single-family:(1)

20 and 30-year or more, amortizing fixed-rate 19,699 $3,305 8,964 $1,283

15-year amortizing fixed-rate 2,816 292 1,192 88

Adjustable-rate 319 57 250 35

Alt-A, interest-only, and option ARM 1,239 203 680 114

Total single-family 24,073 3,857 11,086 1,520

Multifamily(2) — $— — $—

(1) The pre-TDR recorded investment for single-family loans initially classified as TDR during 1Q 2018 and 1Q 2017 was $3.9 billion and $1.5 billion, 

respectively.

(2) The post-TDR recorded investment is not meaningful.

Of the single-family loans that were newly classified as TDRs during 1Q 2018 and 1Q 2017, respectively:

19% and 43% involved interest rate reductions and, in certain cases, term extensions; 

29% and 14% involved principal forbearance in addition to interest rate reductions and, in certain 

cases, term extensions; 

The average term extension was 166 months and 172 months; and

The average interest rate reduction was 0.4% and 0.9%. 

The table below presents the volume of our TDR modifications that experienced payment defaults (i.e., 

loans that became two months delinquent or completed a loss event) during the applicable periods and 

had completed a modification during the year preceding the payment default. The table presents loans 

based on their original product category before modification.

1Q 2018 1Q 2017

(Dollars in millions)

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Single-family:

20 and 30-year or more, amortizing fixed-rate 2,956 $443 3,356 $553

15-year amortizing fixed-rate 170 15 168 13

Adjustable-rate 44 7 56 8

Alt-A, interest-only, and option ARM 275 54 305 64

Total single-family 3,445 519 3,885 638

Multifamily — $— — $—
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 90

In addition, loans may be initially classified as TDRs as a result of other loss mitigation activities (i.e., 

repayment plans, forbearance agreements, or loans in modification trial periods). During 1Q 2018 and 

1Q 2017, 1,710 and 1,590, respectively, of such loans (with a post-TDR recorded investment of $0.2 

billion for both periods) experienced a payment default within a year after the loss mitigation activity 

occurred.

Loans may also be initially classified as TDRs because the borrowers’ debts were discharged in Chapter 

7 bankruptcy (and the loan was not already classified as a TDR for other reasons). During 1Q 2018 and 

1Q 2017, 159 and 258, respectively, of such loans (with a post-TDR recorded investment of $18 million

and $30 million, respectively) experienced a payment default within a year after the borrowers' Chapter 7 

bankruptcy.

Non-Cash Investing and Financing Activities

During 1Q 2018 and 1Q 2017, we acquired $36.1 billion and $60.6 billion, respectively, of loans held-forinvestment in exchange for the issuance of debt securities of consolidated trusts in guarantor swap 

transactions. We received approximately $4.8 billion and $8.4 billion of loans from sellers during 1Q 

2018 and 1Q 2017, respectively, to satisfy advances to lenders that were recorded in other assets on 

our condensed consolidated balance sheets. These loans were primarily included in the guarantor swap 

transactions.

In addition, we acquire REO properties through foreclosure sales or by deed in lieu of foreclosure. These 

acquisitions represent non-cash transfers. During 1Q 2018 and 1Q 2017, we had transfers of $0.2 billion

and $0.3 billion, respectively, from loans to REO.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 5

Freddie Mac Form 10-Q 91

NOTE 5 

Guarantee Activities

We generate revenue through our guarantee activities by agreeing to absorb the credit risk associated 

with certain financial instruments that are owned or held by third parties. In exchange for providing this 

guarantee, we receive an ongoing guarantee fee that is commensurate with the risks assumed and that 

will, over the long-term, provide us with cash flows that are expected to exceed the credit-related and 

administrative expenses of the underlying financial instruments. The profitability of our guarantee 

activities may vary and will be dependent on our guarantee fee and the actual credit performance of the 

underlying financial instruments that we have guaranteed.

The table below shows our maximum exposure, recognized liability and maximum remaining term of our 

recognized guarantees to non-consolidated VIEs and other third parties. This table does not include our 

unrecognized guarantees, such as guarantees to consolidated VIEs or to resecuritization trusts that do 

not expose us to incremental credit risk. The maximum exposure disclosed in the table is not 

representative of the actual loss we are likely to incur, based on our historical loss experience and after 

consideration of proceeds from related collateral liquidation, including possible recoveries under credit 

enhancement arrangements. See Note 6 for additional information on our credit enhancement 

arrangements.

March 31, 2018 December 31, 2017

(Dollars in millions, terms in years)

Maximum

Exposure(1)

Recognized

Liability(2)

Maximum

Remaining

Term

Maximum

Exposure(1)

Recognized

Liability(2)

Maximum

Remaining

Term

Single-family:

Securitization activity guarantees $12,208 $139 40 $10,817 $120 40

Other mortgage-related guarantees 6,125 180 30 6,264 190 31

Total single-family $18,333 $319 $17,081 $310

Multifamily:

Securitization activity guarantees $197,404 $2,375 40 $188,768 $2,305 40

Other mortgage-related guarantees 10,018 463 36 9,888 466 36

Total multifamily $207,422 $2,838 $198,656 $2,771

Other guarantees measured at fair value $12,837 $150 30 $9,661 $141 28

(1) The maximum exposure represents the contractual amounts that could be lost if counterparties or borrowers defaulted, without consideration of 

possible recoveries under credit enhancement arrangements, such as recourse provisions, third-party insurance contracts, or from collateral held 

or pledged. For other guarantees measured at fair value, this amount represents the notional value if it relates to our market value guarantees or 

guarantees of third party derivative instruments; or the UPB if it relates to a guarantee of a mortgage-related asset. For certain of our other 

guarantees measured at fair value, our exposure may be unlimited. We generally reduce our exposure to these guarantees with unlimited exposure 

through separate contracts with third parties.

(2) For securitization activity guarantees and other mortgage-related guarantees, this amount represents the guarantee obligation on our condensed 

consolidated balance sheets. This amount excludes our reserve for guarantee losses, which totaled $55 million and $57 million as of March 31, 

2018 and December 31, 2017, respectively, and is included within other liabilities on our condensed consolidated balance sheets. For other 

guarantees measured at fair value, this amount represents the fair value of the contract.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac Form 10-Q 92

NOTE 6

Credit Enhancements

In connection with many of our mortgage loans, securitization activity guarantees, other mortgagerelated guarantees and other credit risk transfer transactions, we obtain various forms of credit 

enhancements that reduce our exposure to credit losses. These credit enhancements may be attached 

to the underlying mortgage loans, freestanding or embedded in debt instruments. 

Attached Credit Enhancements 

The table below presents the total current and protected UPB and maximum coverage provided by our 

attached credit enhancements. For information about counterparty credit risk associated with mortgage 

insurers, see Note 14.

March 31, 2018 December 31, 2017

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Single-family:

Primary mortgage insurance $338,457 $86,622 $334,189 $85,429

(1) Underlying loans may be covered by more than one form of credit enhancement, including freestanding credit enhancements and debt with 

embedded credit enhancements.

(2) Represents the remaining amount of loss recovery that is available subject to the terms of counterparty agreements.

Freestanding Credit Enhancements 

The table below presents the total current and protected UPB and maximum amounts of potential loss 

recovery related to our single-family and multifamily freestanding credit enhancements. 

March 31, 2018 December 31, 2017

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Single-family:

Subordination (non-consolidated VIEs) $10,404 $1,904 $8,953 $1,734

ACIS(3) 650,420 7,148 617,730 6,736

Other(4) 15,641 6,362 15,975 6,479

Total single-family 15,414 14,949

Multifamily:

Subordination (non-consolidated VIEs) 197,268 32,039 187,299 30,689

Other(5) 1,756 724 1,833 726

Total multifamily 32,763 31,415

Total single-family and multifamily freestanding credit enhancements $48,177 $46,364

(1) Underlying loans may be covered by more than one form of credit enhancement, including attached credit enhancements and debt with embedded 

credit enhancements. For subordination, total current and protected UPB includes the UPB of the guaranteed securities and the UPB of guarantor 

advances made to the holders of the guaranteed securities.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac Form 10-Q 93

(2) For subordination, maximum coverage represents the UPB of the securities that are subordinate to our guarantee and held by third parties. For all 

other freestanding credit enhancements, maximum coverage represents the remaining amount of loss recovery that is available subject to the 

terms of counterparty agreements.

(3) As of March 31, 2018 and December 31, 2017, our counterparties posted collateral on our ACIS transactions of $1.2 billion and $1.1 billion, 

respectively.

(4) Includes seller indemnification, Deep MI CRT, lender recourse and indemnification agreements, pool insurance, HFA indemnification and other 

credit enhancements. 

(5) Consists of multifamily HFA indemnification and loss reimbursement agreements with third parties obtained in certain of our Q Certificate 

transactions. 

In addition to the credit enhancements disclosed above, the Multifamily segment has other credit 

enhancements. Recoveries from these other credit enhancements have been minimal as the historical 

losses on our mortgage loans and amounts paid under our guarantee contracts have not been 

significant. Therefore, these other credit enhancements have been excluded from the table. 

Debt with Embedded Credit Enhancements 

The table below presents the total current and protected UPB and maximum amounts of potential loss 

recovery related to debt with embedded credit enhancements.

March 31, 2018 December 31, 2017

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Single-family:

STACR debt notes $661,399 $19,183 $604,356 $17,788

Subordination (consolidated VIEs) 6,582 307 3,330 179

Total single-family 19,490 17,967

Multifamily:

SCR debt notes 2,704 135 2,732 137

Subordination (consolidated VIEs) 1,800 180 1,800 180

Total multifamily 315 317

Total single-family and multifamily debt with embedded credit

enhancements $19,805 $18,284

(1) Underlying loans may be covered by more than one form of credit enhancement, including attached credit enhancements and freestanding credit 

enhancements. For STACR debt notes and SCR debt notes, total current and protected UPB represents the UPB of the assets included in the 

reference pool. For subordination, total current and protected UPB represents the UPB of the guaranteed securities.

(2) For STACR debt notes and SCR debt notes, maximum coverage amount represents the outstanding balance of the STACR debt notes and SCR debt 

notes held by third parties. For subordination, maximum coverage amount represents the UPB of the securities that are subordinate to our 

guarantee and held by third parties. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 94

NOTE 7

Investments in Securities

The table below summarizes the fair values of our investments in debt securities by classification. 

(In millions) March 31, 2018 December 31, 2017

Trading securities $36,206 $40,721

Available-for-sale securities 39,295 43,597

Total $75,501 $84,318

As of March 31, 2018 and December 31, 2017, we did not classify any securities as held-to-maturity, 

although we may elect to do so in the future. 

Trading Securities 

The table below presents the estimated fair values of our trading securities by major security type. Our 

non-mortgage-related securities primarily consist of investments in U.S. Treasury securities.

(In millions) March 31, 2018 December 31, 2017

Mortgage-related securities:

Freddie Mac $12,617 $12,235

Other agency 3,425 3,574

Non-agency RMBS 732 750

Non-agency CMBS 870 1,343

Total mortgage-related securities 17,644 17,902

Non-mortgage-related securities 18,562 22,819

Total fair value of trading securities $36,206 $40,721

For trading securities held at March 31, 2018 and 2017, we recorded net unrealized gains (losses) of 

($212) million and $43 million during 1Q 2018 and 1Q 2017, respectively. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 95

Available-for-Sale Securities 

At March 31, 2018 and December 31, 2017, all available-for-sale securities were mortgage-related 

securities. 

The tables below present the amortized cost, gross unrealized gains and losses and fair value by major 

security type for our securities classified as available-for-sale.

March 31, 2018

Amortized

Cost

Gross

Unrealized

Gains

Gross Unrealized Losses

Fair

(In millions) Value

Other-ThanTemporary 

Impairment(1)

Temporary 

Impairment(2)

Available-for-sale securities:

Freddie Mac $33,532 $288 $— ($757) $33,063

Other agency 1,790 46 — (6) 1,830

Non-agency RMBS 1,894 472 (2) (1) 2,363

Non-agency CMBS 1,749 — (10) (27) 1,712

Obligations of states and political subdivisions 324 3 — — 327

Total available-for-sale securities $39,289 $809 ($12) ($791) $39,295

December 31, 2017

Amortized

Cost

Gross

Unrealized

Gains

Gross Unrealized Losses

Fair

(In millions) Value

Other-ThanTemporary 

Impairment(1)

Temporary 

Impairment(2)

Available-for-sale securities:

Freddie Mac $35,433 $499 $— ($462) $35,470

Other agency 2,008 56 — (11) 2,053

Non-agency RMBS 3,012 927 (5) (1) 3,933

Non-agency CMBS 1,773 22 (9) (2) 1,784

Obligations of states and political subdivisions 352 5 — — 357

Total available-for-sale securities $42,578 $1,509 ($14) ($476) $43,597

(1) Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairment in earnings.

(2) Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairment in earnings.

The fair value of our available-for-sale securities held at March 31, 2018 scheduled to contractually 

mature after ten years was $36.2 billion, with an additional $2.5 billion scheduled to contractually mature 

after five years through ten years.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 96

Available-For-Sale Securities in a Gross Unrealized Loss Position

The tables below present available-for-sale securities in a gross unrealized loss position and whether 

such securities have been in an unrealized loss position for less than 12 months, or 12 months or 

greater.

March 31, 2018

Less than 12 Months 12 Months or Greater

(In millions)

Fair

Value

Gross Unrealized

Losses

Fair

Value

Gross Unrealized

Losses

Available-for-sale securities:

Freddie Mac $11,877 ($219) $9,455 ($538)

Other agency 35 — 943 (6)

Non-agency RMBS 4 — 104 (3)

Non-agency CMBS 1,671 (27) 39 (10)

Obligations of states and political subdivisions 28 — 21 —

Total available-for-sale securities in a gross unrealized loss

position $13,615 ($246) $10,562 ($557)

December 31, 2017

Less than 12 Months 12 Months or Greater

(In millions)

Fair

Value

Gross Unrealized

Losses

Fair

Value

Gross Unrealized

Losses

Available-for-sale securities:

Freddie Mac $10,337 ($107) $9,251 ($355)

Other agency 40 — 1,079 (11)

Non-agency RMBS 5 — 105 (6)

Non-agency CMBS 1,026 (2) 52 (9)

Obligations of states and political subdivisions 12 — 21 —

Total available-for-sale securities in a gross unrealized loss

position $11,420 ($109) $10,508 ($381)

At March 31, 2018, the gross unrealized losses relate to 354 separate securities. 

Impairment Recognition on Investments in Securities

We recognized $0 million and $13 million in net impairment of available-for-sale securities in earnings 

during 1Q 2018 and 1Q 2017, respectively. For our available-for-sale securities in an unrealized loss 

position at March 31, 2018, we have asserted that we have no intent to sell and believe it is not more 

likely than not that we will be required to sell the security before recovery of its amortized cost basis.

The ending balance of remaining credit losses on available-for-sale securities where a portion of otherthan-temporary impairment was recognized in other comprehensive income was $1.0 billion and $1.1 

billion as of March 31, 2018 and December 31, 2017, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 97

Realized Gains and Losses on Sales of Available-For-Sale Securities

The table below summarizes the gross realized gains and gross realized losses from the sale of 

available-for-sale securities.

(In millions) 1Q 2018 1Q 2017

Gross realized gains $446 $218

Gross realized losses (51) (28)

Net realized gains (losses) $395 $190

Non-Cash Investing and Financing Activities

During 1Q 2018, we purchased $2.5 billion and sold $2.6 billion of non-mortgage-related securities that 

were traded, but not settled. We settled our purchase and sale obligations during 2Q 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac Form 10-Q 98

NOTE 8 

Debt Securities and Subordinated Borrowings

The table below summarizes the interest expense per our condensed consolidated statements of 

comprehensive income and the balances of total debt, net per our condensed consolidated balance 

sheets.

Balance, Net Interest Expense

(In millions) March 31, 2018 December 31, 2017 1Q 2018 1Q 2017

Debt securities of consolidated trusts held by third parties $1,726,969 $1,720,996 $12,514 $11,721

Other debt:

Short-term debt 54,255 73,069 229 96

Long-term debt 223,583 240,565 1,214 1,368

Total other debt 277,838 313,634 1,443 1,464

Total debt, net $2,004,807 $2,034,630 $13,957 $13,185

Our debt cap under the Purchase Agreement is $346.1 billion in 2018 and will decline to $300 billion on 

January 1, 2019. As of March 31, 2018, our aggregate indebtedness for purposes of the debt cap was 

$281.6 billion. Our aggregate indebtedness calculation primarily includes the par value of other shortand long-term debt.

Debt Securities of Consolidated Trusts Held by Third Parties

The table below summarizes the debt securities of consolidated trusts held by third parties based on 

underlying loan product type.

March 31, 2018 December 31, 2017

(Dollars in millions)

Contractual

Maturity UPB

Carrying 

Amount(1)

Weighted

Average

Coupon(2)

Contractual

Maturity UPB

Carrying 

Amount(1)

Weighted

Average

Coupon(2)

Single-family:

30-year or more, fixed-rate 2018 - 2055 $1,294,881 $1,333,449 3.68% 2018 - 2055 $1,278,911 $1,318,350 3.68%

20-year fixed-rate 2018 - 2038 72,248 74,308 3.42 2018 - 2038 73,866 76,022 3.43

15-year fixed-rate 2018 - 2033 255,968 261,219 2.86 2018 - 2033 260,633 266,241 2.86

Adjustable-rate 2018 - 2048 45,337 46,313 2.88 2018 - 2048 47,169 48,220 2.85

Interest-only 2026 - 2041 6,711 6,780 3.79 2026 - 2041 7,303 7,379 3.74

FHA/VA 2018 - 2046 815 834 4.83 2018 - 2046 847 866 4.85

Total single-family 1,675,960 1,722,903 1,668,729 1,717,078

Multifamily 2019-2047 4,008 4,066 3.80 2019-2047 3,876 3,918 3.99

Total debt securities of

consolidated trusts held by third

parties $1,679,968 $1,726,969 $1,672,605 $1,720,996

(1) Includes $638 million and $639 million at March 31, 2018 and December 31, 2017, respectively, of debt of consolidated trusts that represents the 

fair value of debt securities with the fair value option elected.

(2) The effective interest rate for debt securities of consolidated trusts held by third parties was 2.94% and 2.84% as of March 31, 2018 and 

December 31, 2017, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac Form 10-Q 99

Other Debt

The table below summarizes the balances and effective interest rates for other debt.

March 31, 2018 December 31, 2017

(Dollars in millions) Par Value

Carrying 

Amount(1)

Weighted

Average

Effective Rate(2) Par Value

Carrying 

Amount(1)

Weighted

Average

Effective Rate(2)

Other short-term debt:

Discount notes and Reference Bills® $26,958 $26,898 1.40% $45,717 $45,596 1.19%

Medium-term notes 17,612 17,612 1.12 17,792 17,792 1.03

Securities sold under agreements to

repurchase 9,745 9,745 1.38 9,681 9,681 1.06

Total other short-term debt 54,315 54,255 1.31 73,190 73,069 1.14

Other long-term debt:

Original maturities on or before December 31,

2018 42,157 42,172 1.38 70,557 70,587 1.16

2019 61,168 61,120 1.54 57,689 57,637 1.54

2020 38,232 38,205 1.68 38,117 38,087 1.68

2021 26,040 26,050 1.89 22,809 22,829 1.80

2022 18,715 18,684 2.38 18,538 18,506 2.38

Thereafter 20,986 18,394 4.81 17,281 14,660 5.29

STACR and SCR debt(3) 19,318 19,714 5.24 17,925 18,338 5.06

Hedging-related basis adjustments N/A (756) N/A (79)

Total other long-term debt(4) 226,616 223,583 2.24 242,916 240,565 2.04

Total other debt $280,931 $277,838 $316,106 $313,634

(1) Represents par value, net of associated discounts or premiums and issuance cost. Includes $5.0 billion and $5.2 billion at March 31, 2018 and 

December 31, 2017, respectively, of other long-term debt that represents the fair value of debt securities with the fair value option elected.

(2) Based on carrying amount.

(3) Contractual maturities of these debt securities are not presented because they are subject to prepayment risk, as their payments are based upon 

the performance of a pool of mortgage assets that may be prepaid by the related mortgage borrower at any time generally without penalty. 

(4) Carrying amount for other long-term debt includes callable debt of $113.5 billion and $113.8 billion at March 31, 2018 and December 31, 2017, 

respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 100

NOTE 9

Derivatives

Use of Derivatives

We use derivatives primarily to hedge interest-rate sensitivity mismatches between our financial assets 

and liabilities. We analyze the interest-rate sensitivity of financial assets and liabilities on a daily basis 

across a variety of interest-rate scenarios based on market prices, models and economics. When we 

use derivatives to mitigate our exposures, we consider a number of factors, including cost, exposure to 

counterparty risk and our overall risk management strategy.

We classify derivatives into three categories: 

Exchange-traded derivatives; 

Cleared derivatives; and 

OTC derivatives.

Exchange-traded derivatives include standardized interest-rate futures contracts and options on futures 

contracts. Cleared derivatives refer to those interest-rate swaps that the U.S. Commodity Futures 

Trading Commission has determined are subject to the central clearing requirement of the Dodd-Frank 

Act. OTC derivatives refer to those derivatives that are neither exchange-traded derivatives nor cleared 

derivatives.

Types of Derivatives

We principally use the following types of derivatives:

LIBOR-based interest-rate swaps;

LIBOR- and Treasury-based purchased options (including swaptions); and

LIBOR- and Treasury-based exchange-traded futures.

We also purchase swaptions on credit indices in order to obtain protection against adverse movements 

in multifamily spreads which may affect the profitability of our K Certificate or SB Certificate 

transactions.

In addition to swaps, futures and purchased options, our derivative positions include written options and 

swaptions, commitments and credit derivatives.

Hedge Accounting

Fair Value Hedges

We apply fair value hedge accounting to certain single-family mortgage loans and certain issuances of 

debt where we hedge the changes in fair value of these items attributable to the designated benchmark 

interest rate (i.e., LIBOR), using LIBOR-based interest-rate swaps. 

Beginning on October 1, 2017, due to the adoption of amended hedge accounting guidance, if a hedge 

relationship qualifies for fair value hedge accounting, all changes in fair value of the derivative hedging 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 101

instrument, including interest accruals, are recognized in the same condensed consolidated statements 

of comprehensive income line item used to present the earnings effect of the hedged item. Therefore, 

changes in the fair value of the hedged item, mortgage loans and debt, attributable to the risk being 

hedged are recognized in interest income - mortgage loans and interest expense, respectively, along 

with the changes in the fair value of the respective derivative hedging instruments. Prior to October 1, 

2017, if the hedge relationship qualified for hedge accounting, changes in fair value of the derivative 

hedging instrument and changes in the fair value of the hedged item attributable to the risk being 

hedged were recognized in other income (loss) and interest accruals on the derivative hedging 

instrument were included in derivative gains (losses). 

Cash Flow Hedges

There are amounts recorded in AOCI related to discontinued cash flow hedges which are recognized in 

earnings when the originally forecasted transactions affect earnings. Amounts reclassified from AOCI are 

recorded in interest expense. During 1Q 2018 and 1Q 2017, we reclassified from AOCI into earnings, 

pre-tax losses of $38 million and $43 million, respectively, related to closed cash flow hedges. See Note 

11 for information about future reclassifications of deferred net losses related to closed cash flow 

hedges to net income.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 102

Derivative Assets and Liabilities at Fair Value

The table below presents the notional value and fair value of derivatives reported on our condensed 

consolidated balance sheets.

March 31, 2018 December 31, 2017

Notional or

Contractual

Amount

Derivatives at Fair Value Notional or

Contractual

Amount

Derivatives at Fair Value

(In millions) Assets Liabilities Assets Liabilities

Not designated as hedges

Interest-rate swaps:

Receive-fixed $186,581 $1,517 ($361) $213,717 $2,121 ($1,224)

Pay-fixed 195,839 690 (496) 185,400 751 (5,008)

Basis (floating to floating) 5,763 — — 5,244 — (2)

Total interest-rate swaps 388,183 2,207 (857) 404,361 2,872 (6,234)

Option-based:

Call swaptions

Purchased 55,425 2,066 — 58,975 2,709 —

Written 4,400 — (86) 4,650 — (101)

Put swaptions

Purchased(1) 40,080 1,446 — 47,810 1,058 —

Written 3,750 — (14) 3,000 — (20)

Other option-based derivatives(2) 10,625 669 — 10,683 757 —

Total option-based 114,280 4,181 (100) 125,118 4,524 (121)

Futures 250,445 — — 267,385 — —

Commitments 77,875 105 (183) 54,207 44 (64)

Credit derivatives 4,651 26 (48) 3,569 7 (46)

Other 4,569 1 (48) 2,906 1 (19)

Total derivatives not designated as hedges 840,003 6,520 (1,236) 857,546 7,448 (6,484)

Designated as fair value hedges

Interest-rate swaps:

Receive-fixed 87,398 — (1,318) 83,352 2 (714)

Pay-fixed 75,441 277 (2,588) 69,402 1,388 (291)

Total derivatives designated as fair value hedges 162,839 277 (3,906) 152,754 1,390 (1,005)

Derivative interest receivable (payable) 836 (941) 1,407 (1,596)

Netting adjustments(3) (7,179) 5,738 (9,870) 8,816

Total derivative portfolio, net $1,002,842 $454 ($345) $1,010,300 $375 ($269)

(1) Includes swaptions on credit indices with a notional or contractual amount of $4.4 billion and $13.4 billion at March 31, 2018 and December 31, 

2017, respectively, and a fair value of $3.5 million and $5.0 million at March 31, 2018 and December 31, 2017, respectively. 

(2) Primarily consists of purchased interest-rate caps and floors and options on Treasury futures.

(3) Represents counterparty netting and cash collateral netting.

See Note 10 for information related to our derivative counterparties and collateral held and posted.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 103

Gains and Losses on Derivatives

The table below presents the gains and losses on derivatives, including the accrual of periodic cash 

settlements, while not designated in qualifying hedge relationships and reported on our condensed 

consolidated statements of comprehensive income as derivative gains (losses). In addition, for 1Q 2017, 

the table includes the accrual of periodic cash settlements on derivatives in qualifying hedge 

relationships.

(In millions) 1Q 2018 1Q 2017

Not designated as hedges

Interest-rate swaps:

Receive-fixed ($3,097) ($569)

Pay-fixed 4,641 1,242

Basis (floating to floating) (30) —

Total interest-rate swaps 1,514 673

Option based:

Call swaptions

Purchased (694) (331)

Written 27 3

Put swaptions

Purchased 327 (97)

Written (27) 18

Other option-based derivatives(1) (88) (23)

Total option-based (455) (430)

Other:

Futures 387 (115)

Commitments 518 54

Credit derivatives 14 (16)

Other (3) (1)

Total other 916 (78)

Accrual of periodic cash settlements:

Receive-fixed interest-rate swaps 222 445

Pay-fixed interest-rate swaps (368) (912)

Other 1 —

Total accrual of periodic cash settlements (145) (467)

Total $1,830 ($302)

(1) Primarily consists of purchased interest-rate caps and floors and options on Treasury futures.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 104

Fair Value Hedges 

The table below presents the effects of fair value hedge accounting by condensed consolidated 

statements of comprehensive income line, including the gains and losses on derivatives and hedged 

items designated in qualifying hedge relationships and other components due to the application of 

hedge accounting. 

1Q 2018

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Other Income

(Loss)

Total amounts of income and expense line items presented in our condensed

consolidated statements of comprehensive income in which the effects of fair value

hedges are recorded: $15,951 ($13,957) $121

Interest contracts on mortgage loans held-for-investment:

Gain or (loss) on fair value hedging relationships:(1)

Hedged items (1,973) — —

Derivatives designated as hedging instruments 1,687 — —

Interest accruals on hedging instruments (167) — —

Discontinued hedge related basis adjustment amortization 16 — —

Interest contracts on debt:

Gain or (loss) on fair value hedging relationships:

Hedged items — 678 —

Derivatives designated as hedging instruments — (591) —

Interest accruals on hedging instruments — (14) —

Discontinued hedge related basis adjustment amortization — — —

1Q 2017

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Other Income

(Loss)

Total amounts of income and expense line items presented in our condensed

consolidated statements of comprehensive income in which the effects of fair value

hedges are recorded: $15,965 ($13,185) $415

Interest contracts on mortgage loans held-for-investment:

Gain or (loss) on fair value hedging relationships:(1)

Hedged items — — (26)

Derivatives designated as hedging instruments(2) — — 65

Discontinued hedge related basis adjustment amortization — — —

(1) In 1Q 2017, gains or losses on derivatives and hedged items were recorded in other income (loss). Beginning in 4Q 2017, gains and losses and 

interest accruals are recorded in interest income - mortgage loans in our condensed consolidated statements of comprehensive income due to 

adoption of amended hedge accounting guidance.

(2) The gain or (loss) on fair value hedging relationships excludes ($83) million of interest accruals which were recorded in derivatives gains (losses) 

in our condensed consolidated statements of comprehensive income.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 105

Cumulative Basis Adjustments Due to Fair Value Hedging

The table below presents the hedged item cumulative basis adjustments due to qualifying fair value 

hedging and the related hedged item carrying amounts by their respective balance sheet line item.

March 31, 2018

Carrying Amount

Assets / (Liabilities)

Cumulative Amount of Fair Value Hedging Basis

Adjustment Included in the Carrying Amount

(In millions) Total

Discontinued - Hedge

Related

Mortgage loans held-for-investment $130,875 ($1,731) ($1,731)

Debt (95,975) 756 (14)

December 31, 2017

Carrying Amount

Assets / (Liabilities)

Cumulative Amount of Fair Value Hedging Basis

Adjustment Included in the Carrying Amount

(In millions) Total

Discontinued - Hedge

Related

Mortgage loans held-for-investment $128,140 $198 $198

Debt (92,277) 79 (14)
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 106

NOTE 10

Collateralized Agreements and Offsetting 

Arrangements

Derivative Portfolio

Derivative Counterparties

Our use of cleared derivatives, exchange-traded derivatives and OTC derivatives exposes us to 

counterparty credit risk. 

Our use of interest-rate swaps and option-based derivatives is subject to internal credit and legal 

reviews. On an ongoing basis, we review the credit fundamentals of all of our derivative counterparties, 

clearinghouses and clearing members to confirm that they continue to meet our internal risk 

management standards.

Over-the-Counter Derivatives

We use master netting and collateral agreements to reduce our credit risk exposure to our OTC 

derivative counterparties. 

In the event that all of our counterparties for OTC derivatives were to have defaulted simultaneously on 

March 31, 2018, our maximum loss for accounting purposes after applying netting agreements and 

collateral on an individual counterparty basis would have been approximately $33 million.

Regulations adopted by certain financial institution regulators (including FHFA) that became effective 

March 1, 2017 require posting of variation margin without the application of any thresholds for OTC 

derivative transactions executed after that date. As a result, our and the counterparties' credit ratings are 

no longer used in determining the amount of collateral to be posted in connection with these 

transactions. 

Cleared and Exchange-Traded Derivatives

The majority of our interest-rate swaps are subject to the central clearing requirement of the Dodd-Frank 

Act. A reduction in our credit ratings could cause the clearinghouses or clearing members we use for our 

cleared and exchange-traded derivatives to demand additional collateral. 

Other Derivatives

We also execute forward purchase and sale commitments of loans and mortgage-related securities, 

including dollar roll transactions, that are treated as derivatives for accounting purposes. The total net 

exposure on our forward purchase and sale commitments, which are treated as derivatives, was $105 

million and $44 million at March 31, 2018 and December 31, 2017, respectively. 

Many of our transactions involving forward purchase and sale commitments of mortgage-related 

securities utilize the Mortgage Backed Securities Division of the Fixed Income Clearing Corporation 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 107

("MBSD/FICC") as a clearinghouse. As a clearing member of the clearinghouse, we post margin to the 

MBSD/FICC and are exposed to the counterparty credit risk of the organization (including its clearing 

members). 

Securities Purchased Under Agreements to Resell

As an investor, we enter into arrangements to purchase securities under agreements to subsequently 

resell the identical or substantially the same securities to our counterparty. Our counterparties to these 

transactions are required to pledge the purchased securities as collateral for their obligation to 

repurchase those securities at a later date. While such transactions involve the legal transfer of 

securities, they are accounted for as secured financings because the transferor does not relinquish 

effective control over the securities transferred. Although it is not our practice to repledge collateral that 

has been pledged to us, these agreements may allow us to repledge all or a portion of the collateral.

We consider the types of securities being pledged to us as collateral when determining how much we 

lend in transactions involving securities purchased under agreements to resell. Additionally, we regularly 

review the market values of these securities compared to amounts loaned in an effort to manage our 

exposure to losses. 

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are effectively collateralized borrowings where we sell 

securities with an agreement to repurchase such securities at a future date. We are required to pledge 

the sold securities to the counterparties to these transactions as collateral for our obligation to 

repurchase these securities at a later date. Similar to the securities purchased under agreements to 

resell transactions, these transactions involve the legal transfer of securities. However, they are 

accounted for as secured financings because they require the identical or substantially the same 

securities to be subsequently repurchased. These agreements may allow our counterparties to repledge 

all or a portion of the collateral.

Offsetting of Financial Asset and Liabilities

At March 31, 2018 and December 31, 2017, all amounts of cash collateral related to derivatives with 

master netting and collateral agreements were offset against derivative assets, net or derivative 

liabilities, net, as applicable.

The table below displays offsetting and collateral information related to derivatives, securities purchased 

under agreements to resell and securities sold under agreements to repurchase which are subject to 

enforceable master netting agreements or similar arrangements. Securities sold under agreements to 

repurchase are included in debt, net on our condensed consolidated balance sheets. During 1Q 2018, 

certain rule amendments made by the LCH Group became effective. As a result, the legal 

characterization of variation margin payments for certain of our cleared swaps changed from posting of 

margin collateral to settlements. The table below reflects this change as of March 31, 2018. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 108

March 31, 2018

Gross

Amount

Recognized

Amount 

Offset in the

Consolidated

Balance Sheets Net Amount

Presented in the 

Consolidated

Balance Sheets

Gross Amount

Not Offset in the 

Consolidated

Balance 

Sheets(2)

Net

(In millions) Amount

Counterparty

Netting

Cash 

Collateral 

Netting(1)

Assets:

Derivatives:

OTC derivatives $7,490 ($5,366) ($1,975) $149 ($116) $33

Cleared and exchange-traded derivatives 11 — 162 173 — 173

Other 132 — — 132 — 132

Total derivatives 7,633 (5,366) (1,813) 454 (116) 338

Securities purchased under agreements to resell(3)(4) 41,828 — — 41,828 (41,828) —

Total $49,461 ($5,366) ($1,813) $42,282 ($41,944) $338

Liabilities:

Derivatives:

OTC derivatives ($5,797) $5,366 $365 ($66) $— ($66)

Cleared and exchange-traded derivatives (7) — 7 — — —

Other (279) — — (279) — (279)

Total derivatives (6,083) 5,366 372 (345) — (345)

Securities sold under agreements to repurchase(4) (9,745) — — (9,745) 9,745 —

Total ($15,828) $5,366 $372 ($10,090) $9,745 ($345)

December 31, 2017

Gross

Amount

Recognized

Amount 

Offset in the

Consolidated

Balance Sheets Net Amount

Presented in the 

Consolidated

Balance Sheets

Gross Amount

Not Offset in the 

Consolidated

Balance 

Sheets(2)

Net

(In millions) Amount

Counterparty

Netting

Cash 

Collateral 

Netting(1)

Assets:

Derivatives:

OTC derivatives $7,648 ($5,499) ($1,903) $246 ($205) $41

Cleared and exchange-traded derivatives 2,545 (2,266) (202) 77 — 77

Other 52 — — 52 — 52

Total derivatives 10,245 (7,765) (2,105) 375 (205) 170

Securities purchased under agreements to resell(3)(4) 55,903 — — 55,903 (55,903) —

Total $66,148 ($7,765) ($2,105) $56,278 ($56,108) $170

Liabilities:

Derivatives:

OTC derivatives ($6,285) $5,499 $688 ($98) $— ($98)

Cleared and exchange-traded derivatives (2,671) 2,266 363 (42) — (42)

Other (129) — — (129) — (129)

Total derivatives (9,085) 7,765 1,051 (269) — (269)

Securities sold under agreements to repurchase(4) (9,681) — — (9,681) 9,681 —

Total ($18,766) $7,765 $1,051 ($9,950) $9,681 ($269)
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 109

(1) Excess cash collateral held is presented as a derivative liability, while excess cash collateral posted is presented as a derivative asset.

(2) Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability, netted by 

counterparty, presented on the condensed consolidated balance sheets. For cleared and exchange-traded derivatives, does not include non-cash 

collateral posted by us as initial margin with an aggregate fair value of $3.1 billion as of both March 31, 2018 and December 31, 2017.

(3) We primarily execute securities purchased under agreements to resell transactions with central clearing organizations where we have the right to 

repledge the collateral that has been pledged to us, either with the central clearing organization or with other counterparties. At March 31, 2018, 

and December 31, 2017, we had $27.0 billion and $34.8 billion, respectively, of securities pledged to us in these transactions. In addition, at 

March 31, 2018 and December 31, 2017, we had $0.5 billion and $3.4 billion, respectively, of securities pledged to us for transactions involving 

securities purchased under agreements to resell not executed with central clearing organizations that we had the right to repledge. 

(4) Does not include the impacts of netting by central clearing organizations.

Collateral Pledged

Collateral Pledged to Freddie Mac

We have cash pledged to us as collateral primarily related to OTC derivative transactions. At March 31, 

2018, we had $2.2 billion pledged to us as collateral that was classified as restricted cash included in 

cash and cash equivalents on our condensed consolidated balance sheets.

Collateral Pledged by Freddie Mac

The tables below summarize the fair value of the securities pledged as collateral by us for derivatives 

and collateralized borrowing transactions, including securities that the secured party may repledge.

March 31, 2018

(In millions) Derivatives

Securities sold

under

agreements to

repurchase Other(2) Total

Debt securities of consolidated trusts(1) $395 $— $42 $437

Trading securities 2,766 8,954 165 11,885

Total securities pledged $3,161 $8,954 $207 $12,322

December 31, 2017

(In millions) Derivatives

Securities sold

under

agreements to

repurchase Other(2) Total

Debt securities of consolidated trusts(1) $375 $— $111 $486

Trading securities 2,766 9,705 362 12,833

Total securities pledged $3,141 $9,705 $473 $13,319

(1) Represents PCs held by us in our Capital Markets segment mortgage investments portfolio which are recorded as a reduction to debt securities of 

consolidated trusts held by third parties on our condensed consolidated balance sheets.

(2) Includes other collateralized borrowings and collateral related to transactions with certain clearinghouses.

The table below summarizes the underlying collateral pledged and the remaining contractual maturity of 

our gross obligations under securities sold under agreements to repurchase.

March 31, 2018

(In millions)

Overnight and

continuous 30 days or less

After 30 days

through 90 days

Greater than 90

days Total

U.S. Treasury securities $— $8,954 $— $— $8,954
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 110

NOTE 11

Stockholders’ Equity and Earnings Per Share

Accumulated Other Comprehensive Income

The tables below present changes in AOCI after the effects of our federal statutory tax rates of 21% and 

35% for 1Q 2018 and 1Q 2017, respectively, related to available-for-sale securities, closed cash flow 

hedges and our defined benefit plans.

1Q 2018

(In millions)

AOCI Related

to AvailableFor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $662 ($356) $83 $389

Other comprehensive income before 

reclassifications(1) (488) — (2) (490)

Amounts reclassified from accumulated other

comprehensive income (312) 30 (4) (286)

Changes in AOCI by component (800) 30 (6) (776)

Cumulative effect of change in accounting 

principle(2) 143 (73) 19 89

Ending balance $5 ($399) $96 ($298)

1Q 2017

(In millions)

AOCI Related

to AvailableFor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $915 ($480) $21 $456

Other comprehensive income before 

reclassifications(1) 112 — (3) 109

Amounts reclassified from accumulated other

comprehensive income (114) 28 — (86)

Changes in AOCI by component (2) 28 (3) 23

Ending balance $913 ($452) $18 $479

(1) For 1Q 2018 and 1Q 2017, net of tax expense (benefit) of ($0.1) billion and $0.1 billion, respectively, for AOCI related to available-for-sale 

securities.

(2) Includes the effect of adopting the accounting guidance on reclassification of stranded tax effects of the Tax Cuts and Jobs Act.

In 1Q 2018, we adopted the accounting guidance related to the reclassification of stranded tax effects 

resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained 

earnings. The reclassification includes stranded tax effects related to unrealized gains and losses on 

available-for-sale securities, deferred net losses on closed cash flow hedges and our defined benefit 

plans.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 111

Reclassifications from AOCI to Net Income

The table below presents reclassifications from AOCI to net income, including the affected line item in 

our condensed consolidated statements of comprehensive income.

(In millions) 1Q 2018 1Q 2017

AOCI related to available-for-sale securities

Affected line items in the consolidated statements of comprehensive income:

Other gains (losses) on investment securities recognized in earnings $395 $190

Net impairment of available-for-sale securities recognized in earnings — (13)

Total before tax 395 177

Income tax (expense) or benefit (83) (63)

Net of tax 312 114

AOCI related to cash flow hedge relationships

Affected line items in the consolidated statements of comprehensive income:

Interest expense (38) (43)

Income tax (expense) or benefit 8 15

Net of tax (30) (28)

AOCI related to defined benefit plans

Affected line items in the consolidated statements of comprehensive income:

Salaries and employee benefits 5 —

Income tax (expense) or benefit (1) —

Net of tax 4 —

Total reclassifications in the period $286 $86

Future Reclassifications from AOCI to Net Income Related to 

Closed Cash Flow Hedges

The total AOCI related to derivatives designated as cash flow hedges was a loss of $0.4 billion and $0.5 

billion at March 31, 2018 and March 31, 2017, respectively, composed of deferred net losses on closed 

cash flow hedges. Closed cash flow hedges involve derivatives that have been terminated or are no 

longer designated as cash flow hedges. Fluctuations in prevailing market interest rates have no effect on 

the deferred portion of AOCI relating to losses on closed cash flow hedges.

The previously deferred amount related to closed cash flow hedges remains in our AOCI balance and 

will be recognized into earnings over the expected time period for which the forecasted transactions 

affect earnings, unless it is deemed probable that the forecasted transactions will not occur. Over the 

next 12 months, we estimate that approximately $97 million, net of taxes, of the $0.4 billion of cash flow 

hedge losses in AOCI at March 31, 2018 will be reclassified into earnings. The maximum remaining 

length of time over which we have hedged the exposure related to the variability in future cash flows on 

forecasted transactions, primarily forecasted debt issuances, is 16 years.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 112

Senior Preferred Stock

As of March 31, 2018, our Net Worth Amount was $2.2 billion, less than the $3.0 billion Capital Reserve 

Amount; therefore, we will not have a dividend obligation to Treasury in June 2018. In addition, because 

our net worth was positive at March 31, 2018, no draw is being requested from Treasury under the 

Purchase Agreement. See Note 2 for additional information. 

Because we had a net worth deficit at December 31, 2017, FHFA, as Conservator, submitted a draw 

request, on our behalf, to Treasury under the Purchase Agreement. We received this funding request 

during 1Q 2018. The aggregate liquidation preference of the senior preferred stock owned by Treasury 

was $75.6 billion and $75.3 billion as of March 31, 2018 and December 31, 2017, respectively. 

Stock Issuances and Repurchases

We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 1Q 

2018, except for issuances of treasury stock relating to stock-based compensation granted prior to 

conservatorship.

Earnings Per Share

We have participating securities related to options and restricted stock units with dividend equivalent 

rights that receive dividends as declared on an equal basis with common shares but are not obligated to 

participate in undistributed net losses. These participating securities consist of: 

 Vested options to purchase common stock; and 

 Vested restricted stock units that earn dividend equivalents at the same rate when and as declared 

on common stock. 

Consequently, in accordance with accounting guidance, we use the "two-class" method of computing 

earnings per common share. The "two-class" method is an earnings allocation formula that determines 

earnings per share for common stock and participating securities based on dividends declared and 

participation rights in undistributed earnings.

Basic earnings per common share is computed as net income attributable to common stockholders 

divided by the weighted average common shares outstanding for the period. The weighted average 

common shares outstanding for the period includes the weighted average number of shares that are 

associated with the warrant for our common stock issued to Treasury pursuant to the Purchase 

Agreement. These shares are included since the warrant is unconditionally exercisable by the holder at a 

minimal cost. 

Diluted earnings per common share is computed as net income attributable to common stockholders 

divided by the weighted average common shares outstanding during the period adjusted for the dilutive

effect of common equivalent shares outstanding. For periods with net income attributable to common 

stockholders, the calculation includes the effect of the following common stock equivalent shares 

outstanding: 

 Weighted average shares related to stock options if the average market price during the period 

exceeds the exercise price; and
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 113

 The weighted-average of restricted stock units. 

During periods in which a net loss attributable to common stockholders has been incurred, potential 

common equivalent shares outstanding are not included in the calculation because it would have an 

antidilutive effect. 

For purposes of the earnings-per-share calculation, all stock options outstanding at March 31, 2018 and 

March 31, 2017 were out of the money and excluded from the computation of dilutive potential common 

shares during both 1Q 2018 and 1Q 2017. 

Dividends Declared

No common dividends were declared during 1Q 2018. During 1Q 2018, we also did not pay dividends 

on the senior preferred stock. In addition, we did not declare or pay dividends on any other series of 

Freddie Mac preferred stock outstanding during 1Q 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 12

Freddie Mac Form 10-Q 114

NOTE 12

Income Taxes

Income Tax Expense

For 1Q 2018 and 1Q 2017, we reported income tax expense of $0.7 billion and $1.1 billion, respectively, 

resulting in effective tax rates of 20.4% and 33.4%, respectively. Our effective tax rates differed from the 

statutory tax rates of 21% and 35% in these periods primarily due to our recognition of low income 

housing tax credits.

Deferred Tax Assets, Net

We had net deferred tax assets of $8.3 billion and $8.1 billion as of March 31, 2018 and December 31, 

2017, respectively. At March 31, 2018, our net deferred tax assets consisted primarily of basis 

differences related to derivative instruments and deferred fees.

Based on all positive and negative evidence available at March 31, 2018, we determined that it is more 

likely than not that our net deferred tax assets, except for a portion of the deferred tax asset related to 

our capital loss carryforward, will be realized. As of March 31, 2018, we have a $33 million valuation 

allowance recorded against our capital loss carryforward deferred tax asset.

Unrecognized Tax Benefits and IRS Examinations

We evaluated all income tax positions and determined that there were no uncertain tax positions that 

required reserves as of March 31, 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 115

NOTE 13

Segment Reporting

We have three reportable segments, which are based on the type of business activities each performs - 

Single-family Guarantee, Multifamily and Capital Markets. The chart below provides a summary of our 

three reportable segments and the All Other category. For more information, see our 2017 Annual 

Report.

Segment/

Category Description Activities/Items

Financial

Performance

Measurement

Basis

Singlefamily

Guarantee

The Single-family Guarantee segment reflects 

results from our purchase, securitization and 

guarantee of single-family loans and the 

management of single-family mortgage credit 

risk. In most instances, we securitize the loans 

and guarantee the payment of principal and 

interest on the mortgage-related securities in 

exchange for guarantee fees. 

Segment Earnings for this segment consist 

primarily of guarantee fee income, less creditrelated expenses, credit risk transfer expenses, 

administrative expenses, allocated funding 

costs and amounts related to net float income 

or expenses.

• Purchase and guarantee of single-family

mortgage loans

• Contribution to

GAAP net

• Credit risk transfer transactions income (loss)

• Loss mitigation activities

• Managing foreclosure and REO activities

• Tax expense/benefit

• Allocated debt costs and administrative expenses
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 116

Segment/

Category Description Activities/Items

Financial

Performance

Measurement

Basis

Multifamily

The Multifamily segment reflects results from 

our purchase, sale, securitization and guarantee 

of multifamily loans and securities, our 

investments in those loans and securities and 

the management of multifamily mortgage credit 

risk and market spread risk. Our primary 

business model is to purchase multifamily loans 

for aggregation and then securitization through 

issuance of multifamily K Certificates and SB 

Certificates. We also issue and guarantee other 

securitization products, issue other credit risk 

transfer products and provide other mortgagerelated guarantees.

Segment Earnings for this segment consist 

primarily of returns on assets related to 

multifamily investment activities and guarantee 

fee income, less credit-related expenses, 

administrative expenses and allocated funding 

costs.

• Multifamily loans held-for-sale and associated

securitization activities (i.e., K Certificates and SB

Certificates)

• Contribution to

GAAP

comprehensive

income (loss) • Investments in CMBS and multifamily loans heldfor-investment

• Other mortgage-related guarantees

• Other securitization products

• Other credit risk transfer products

• Tax expense/benefit

• Allocated debt costs and administrative expenses

Capital

Markets

The Capital Markets segment reflects results 

from managing the company’s mortgagerelated investments portfolio (excluding 

Multifamily segment investments, single-family 

seriously delinquent loans and the credit risk of 

single-family performing and reperforming 

loans), treasury function, single-family 

securitization activities and interest-rate risk.

Segment Earnings for this segment consist 

primarily of the returns on these investments, 

less the related funding, hedging and 

administrative expenses.

• Investments in single-family mortgage-related

securities and single-family performing loans and

reperforming loans

• Contribution to

GAAP

comprehensive

income (loss) • All other traded non-mortgage related

instruments and securities

• Debt issuances

• Interest-rate risk management

• Guarantee buy-ups, net of execution gains/losses

• Cash and liquidity management

• Settlements, including legal settlements, relating

to non-agency mortgage-related securities

• Tax expense/benefit

• Allocated administrative expenses

All Other

The All Other category consists of material

corporate-level activities that are infrequent in

nature and based on decisions outside the

control of the management of our reportable

segments.

• Tax settlements, as applicable

N/A

• Legal settlements, as applicable

• Tax expense/benefit associated with changes in

the deferred tax asset valuation allowance or

revaluation associated with a statutory tax rate

change

• FHFA-mandated termination of our pension plan
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 117

Segment Earnings

We present Segment Earnings by reclassifying certain credit guarantee-related activities and 

investment-related activities between various line items on our GAAP condensed consolidated 

statements of comprehensive income and allocating certain revenues and expenses, including funding 

costs and administrative expenses, to our three reportable segments. 

We do not consider our assets by segment when evaluating segment performance or allocating 

resources. We operate our business in the United States and its territories, and accordingly, we generate 

no revenue from and have no long-lived assets, other than financial instruments, in geographic locations 

other than the United States and its territories.

We evaluate segment performance and allocate resources based on a Segment Earnings approach, 

subject to the conduct of our business under the direction of the Conservator. See Note 2 for 

information about the conservatorship. 

The table below presents Segment Earnings by segment.

(In millions) 1Q 2018 1Q 2017

Segment Earnings (loss), net of taxes:

Single-family Guarantee $702 $710

Multifamily 472 449

Capital Markets 1,752 1,052

All Other — —

Total Segment Earnings, net of taxes 2,926 2,211

Net income $2,926 $2,211

Comprehensive income (loss) of segments:

Single-family Guarantee $698 $708

Multifamily 404 445

Capital Markets 1,048 1,081

All Other — —

Comprehensive income of segments 2,150 2,234

Comprehensive income $2,150 $2,234
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 118

The tables below present detailed reconciliations between our GAAP financial statements and Segment 

Earnings for our reportable segments and All Other.

1Q 2018

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $271 $817 $— $1,088 $1,930 $3,018

Guarantee fee income(1) 1,513 195 — — 1,708 (1,514) 194

Benefit (provision) for credit losses 28 16 — — 44 (107) (63)

Net impairment of available-for-sale

securities recognized in earnings — — 111 — 111 (111) —

Derivative gains (losses) (6) 655 1,302 — 1,951 (121) 1,830

Gains (losses) on trading securities — (156) (471) — (627) — (627)

Gains (losses) on loans — (451) — — (451) 131 (320)

Other non-interest income (loss) 100 177 530 — 807 (55) 752

Administrative expenses (336) (100) (84) — (520) — (520)

REO operations expense (39) — 1 — (38) 4 (34)

Other non-interest expense (379) (14) (6) — (399) (157) (556)

Income tax expense (179) (121) (448) — (748) — (748)

Net income 702 472 1,752 — 2,926 — 2,926

Changes in unrealized gains (losses)

related to available-for-sale securities — (67) (733) — (800) — (800)

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 30 — 30 — 30

Changes in defined benefit plans (4) (1) (1) — (6) — (6)

Total other comprehensive income

(loss), net of taxes (4) (68) (704) — (776) — (776)

Comprehensive income $698 $404 $1,048 $— $2,150 $— $2,150

Referenced footnote is included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 119

1Q 2017

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $271 $929 $— $1,200 $2,595 $3,795

Guarantee fee income(1) 1,418 151 — — 1,569 (1,420) 149

Benefit (provision) for credit losses 39 6 — — 45 71 116

Net impairment of available-for-sale

securities recognized in earnings — (4) 73 — 69 (82) (13)

Derivative gains (losses) (15) 127 52 — 164 (466) (302)

Gains (losses) on trading securities — 1 (135) — (134) — (134)

Gains (losses) on loans — (33) — — (33) 47 14

Other non-interest income (loss) 334 272 748 — 1,354 (694) 660

Administrative expenses (333) (95) (83) — (511) — (511)

REO operations expense (59) — — — (59) 3 (56)

Other non-interest expense (318) (21) (4) — (343) (54) (397)

Income tax expense (356) (226) (528) — (1,110) — (1,110)

Net income 710 449 1,052 — 2,211 — 2,211

Changes in unrealized gains (losses)

related to available-for-sale securities — (4) 2 — (2) — (2)

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 28 — 28 — 28

Changes in defined benefit plans (2) — (1) — (3) — (3)

Total other comprehensive income

(loss), net of taxes (2) (4) 29 — 23 — 23

Comprehensive income $708 $445 $1,081 $— $2,234 $— $2,234

(1) Guarantee fee income is included in other income (loss) on our GAAP condensed consolidated statements of comprehensive income.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 120

NOTE 14

Concentration of Credit and Other Risks

Single-Family Credit Guarantee Portfolio

The table below summarizes the concentration by loan portfolio and geographic area of the 

approximately $1.8 trillion UPB of our single-family credit guarantee portfolio at both March 31, 2018

and December 31, 2017. See Note 4 and Note 7 for more information about credit risk associated with 

loans and mortgage-related securities that we hold or guarantee.

March 31, 2018 December 31, 2017 Percent of Credit Losses

Percentage 

of

Portfolio

Serious

Delinquency

Rate

Percentage 

of

Portfolio

Serious

Delinquency

Rate 1Q 2018 1Q 2017

Core single-family loan portfolio 79% 0.32% 78% 0.35% 6% 3%

Legacy and relief refinance single-family loan portfolio 21 2.41 22 2.59 94 97

Total 100% 0.97 100% 1.08 100% 100%

Region(1)

West 31% 0.43 30% 0.47 17% 31%

Northeast 24 1.13 25 1.24 41 32

North Central 16 0.73 16 0.81 19 17

Southeast 16 1.79 16 1.95 18 17

Southwest 13 0.83 13 0.98 5 3

Total 100% 0.97 100% 1.08 100% 100%

State(2)

New Jersey 3% 1.56 3% 1.78 13% 10%

California 18 0.38 18 0.41 13 23

Florida 6 3.02 6 3.33 10 11

New York 5 1.62 5 1.74 9 6

Illinois 5 1.03 5 1.13 9 9

All other 63 0.81 63 0.91 46 41

Total 100% 0.97% 100% 1.08% 100% 100%

(1) Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North 

Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).

(2) States presented based on those with the highest percentage of credit losses during 1Q 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 121

Credit Performance of Certain Higher Risk Single-Family Loan 

Categories

Participants in the mortgage market have characterized single-family loans based upon their overall 

credit quality at the time of origination, including as prime or subprime. Mortgage market participants 

have classified single-family loans as Alt-A if these loans have credit characteristics that range between 

their prime and subprime categories, if they are underwritten with lower or alternative income or asset 

documentation requirements compared to a full documentation loan, or both. Although we discontinued 

new purchases of loans with lower documentation standards beginning March 1, 2009, we continued to 

purchase certain amounts of these loans in cases where the loan was either: 

Purchased pursuant to a previously issued other mortgage-related guarantee;

Part of our relief refinance initiative; or 

In another refinance loan initiative and the pre-existing loan (including Alt-A loans) was originated 

under less than full documentation standards. 

In the event we purchase a refinance loan and the original loan had been previously identified as Alt-A, 

such refinance loan may no longer be categorized or reported as Alt-A in the table below because the 

new refinance loan replacing the original loan would not be identified by the seller/servicer as an Alt-A 

loan. As a result, our reported Alt-A balances may be lower than would otherwise be the case had such 

refinancing not occurred.

Although we do not categorize single-family loans we purchase or guarantee as prime or subprime, we 

recognize that there are a number of loan types with certain characteristics that indicate a higher degree 

of credit risk.

For example, a borrower’s credit score is a useful measure for assessing the credit quality of the 

borrower. Statistically, borrowers with higher credit scores are more likely to repay or have the ability to 

refinance than those with lower scores.

Presented below is a summary of the serious delinquency rates of certain higher-risk categories (based 

on characteristics of the loan at origination) of loans in our single-family credit guarantee portfolio. The 

table includes a presentation of each higher-risk category in isolation. A single loan may fall within more 

than one category (for example, an interest-only loan may also have an original LTV ratio greater than 

90%). Loans with a combination of these attributes will have an even higher risk of delinquency than 

those with an individual attribute.

Percentage of Portfolio(1) Serious Delinquency Rate(1)

(Percentage of portfolio based on UPB) March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017

Interest-only 1% 1% 4.61% 4.97%

Alt-A 1 1 5.40 5.62

Original LTV ratio greater than 90%(2) 17 17 1.51 1.70

Lower credit scores at origination (less than 620) 2 2 5.74 6.34

(1) Excludes loans underlying certain other securitization products for which data was not available. 

(2) Includes HARP loans, which we purchase as part of our participation in the MHA Program.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 122

Sellers and Servicers

Sellers

We acquire a significant portion of our single-family and multifamily loan purchase volume from several 

large sellers. The table below summarizes the concentration of single-family and multifamily sellers who 

provided 10% or more of our purchase volume.

Single-family Sellers 1Q 2018 1Q 2017

Wells Fargo Bank, N.A. 15% 18%

Other top 10 sellers 36 38

Top 10 single-family sellers 51% 56%

Multifamily Sellers 1Q 2018 1Q 2017

CBRE Capital Markets, Inc. 14% 15%

Walker & Dunlop, LLC 12 8

Berkadia Commercial Mortgage LLC 11 15

Holliday Fenoglio Fowler, L.P. 10 12

Other top 10 sellers 32 32

Top 10 multifamily sellers 79% 82%

In recent years, there has been a shift in our single-family purchase volume from depository institutions 

to non-depository and smaller depository financial institutions. Some of these non-depository sellers 

have grown rapidly in recent years, and we purchase a significant share of our loans from them. Our top 

five non-depository sellers provided approximately 22% and 18% of our single-family purchase volume 

during 1Q 2018 and 1Q 2017, respectively.

Servicers

Significant portions of our single-family and multifamily loans are serviced by several large servicers. The 

table below summarizes the concentration of single-family and multifamily servicers who serviced 10% 

or more of our single-family credit guarantee portfolio and our multifamily mortgage portfolio, excluding 

loans underlying multifamily securitizations where we are not in first loss position, primarily K Certificates 

and SB Certificates.

Single-family Servicers March 31, 2018(1) December 31, 2017(1)

Wells Fargo Bank, N.A. 18% 18%

Other top 10 servicers 40 40

Top 10 single-family servicers 58% 58%

(1) Percentage of servicing volume is based on the total single-family credit guarantee portfolio, excluding loans where we do not exercise control 

over the associated servicing.

Multifamily Servicers March 31, 2018 December 31, 2017

Wells Fargo Bank, N.A. 18% 16%

Berkadia Commercial Mortgage LLC 10 11

CBRE Capital Markets, Inc. 9 12

Other top 10 servicers 37 36

Top 10 multifamily servicers 74% 75%
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 123

In recent years, there has been a shift in our single-family servicing from depository institutions to nondepository servicers. Some of these non-depository servicers have grown rapidly in recent years and 

now service a large share of our loans. As of March 31, 2018 and December 31, 2017, approximately 

16% and 15%, respectively, of our single-family credit guarantee portfolio, excluding loans where we do 

not exercise control over the associated servicing, was serviced by our top five non-depository 

servicers. We routinely monitor the performance of our largest non-depository servicers.

Mortgage Insurers

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, 

mortgage insurers that insure single-family loans we purchase or guarantee. We evaluate the recovery 

and collectability from mortgage insurers as part of the estimate of our allowance for credit losses. See 

Note 4 for additional information. As of March 31, 2018, mortgage insurers provided coverage with 

maximum loss limits of $86.7 billion, for $338.5 billion of UPB, in connection with our single-family credit 

guarantee portfolio. These amounts are based on gross coverage without regard to netting of coverage 

that may exist to the extent an affected loan is covered under both primary and pool insurance.

The table below summarizes the concentration of mortgage insurer counterparties who provided 10% or 

more of our overall mortgage insurance coverage. On October 23, 2016, Genworth Financial, Inc. 

announced that it had entered into an agreement to be acquired by China Oceanwide Holdings Group 

Co., Ltd. Regulatory approvals of the acquisition are still pending. Genworth Mortgage Insurance 

Corporation is a subsidiary of Genworth Financial, Inc.

Mortgage Insurance Coverage(2)

Mortgage Insurer Credit Rating(1) March 31, 2018 December 31, 2017

Arch Mortgage Insurance Company A- 24% 24%

Radian Guaranty Inc. BBB- 21 21

Mortgage Guaranty Insurance Corporation BBB 19 19

Genworth Mortgage Insurance Corporation BB+ 15 15

Essent Guaranty, Inc. BBB+ 12 12

Total 91% 91%

(1) Ratings are for the corporate entity to which we have the greatest exposure. Latest rating available as of March 31, 2018. Represents the lower of 

S&P and Moody’s credit ratings stated in terms of the S&P equivalent.

(2) Coverage amounts may include coverage provided by affiliates and subsidiaries of the counterparty. 

We received proceeds of $0.1 billion during both 1Q 2018 and 1Q 2017 from our primary and pool 

mortgage insurance policies for recovery of losses on our single-family loans. We had outstanding 

receivables from mortgage insurers of $0.1 billion (excluding deferred payment obligations associated 

with unpaid claim amounts) as of both March 31, 2018 and December 31, 2017. The balance of these 

receivables, net of an associated allowance for credit losses, was approximately $0.1 billion at both 

March 31, 2018 and December 31, 2017.

PMI Mortgage Insurance Co. and Triad Guaranty Insurance Corp. are both under the control of their 

state regulators and are in run-off. A substantial portion of their claims is recorded by us as deferred 

payment obligations. As of both March 31, 2018 and December 31, 2017, we had cumulative unpaid 

deferred payment obligations of $0.5 billion from these insurers. We recognized an allowance for credit 

losses for all of these unpaid amounts as collectability is uncertain. It is not clear how the regulators of 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 124

these companies will administer their respective deferred payment plans in the future, nor when or if 

those obligations will be paid.

Cash and Other Investments Counterparties

We are exposed to the non-performance of counterparties relating to cash and other investments 

(including non-mortgage-related securities and cash equivalents) transactions, including those entered 

into on behalf of our securitization trusts. Our policies require that the counterparty be evaluated using 

our internal counterparty rating model prior to our entering into such transactions. We monitor the 

financial strength of our counterparties to these transactions and may use collateral maintenance 

requirements to manage our exposure to individual counterparties. The permitted term and dollar limits 

for each of these transactions are also based on the counterparty's financial strength.

Our cash and other investments (including non-mortgage-related securities and cash equivalents) 

counterparties are primarily major financial institutions, including other GSEs, Treasury, the Federal 

Reserve Bank of New York, the Government Securities Division of Fixed Income Clearing Corporation 

(GSD/FICC), highly-rated supranational institutions and government money market funds. As of March 

31, 2018 and December 31, 2017, $561 million and $239 million of our securities purchased under 

agreements to resell were used to provide financing to investors in Freddie Mac securities to increase 

liquidity and expand the investor base for those securities. These transactions differ from the securities 

purchased under agreements to resell that we use for liquidity purposes as the counterparties we face 

may not be major financial institutions and we are exposed to the counterparty risk of these institutions. 

As of March 31, 2018 and December 31, 2017, including amounts related to our consolidated VIEs, the 

balance in our other investments and cash portfolio was $69.9 billion and $89.3 billion, respectively. The 

balances consist primarily of cash and securities purchased under agreements to resell invested with 

counterparties, U.S. Treasury securities, cash deposited with the Federal Reserve Bank of New York and 

cash advanced to lenders. As of March 31, 2018, all of our securities purchased under agreements to 

resell were fully collateralized. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 125

NOTE 15

Fair Value Disclosures

The accounting guidance for fair value measurements and disclosures defines fair value, establishes a 

framework for measuring fair value, and sets forth disclosure requirements regarding fair value 

measurements. This guidance applies whenever other accounting guidance requires or permits assets 

or liabilities to be measured at fair value. Fair value represents the price that would be received to sell an 

asset or paid to transfer a liability in an orderly transaction between market participants at the 

measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the 

liability takes place either in the principal market for the asset or liability, or, in the absence of a principal 

market, in the most advantageous market for the asset or liability.

We use fair value measurements for the initial recording of certain assets and liabilities and periodic 

remeasurement of certain assets and liabilities on a recurring or non-recurring basis.

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures establishes a three-level fair value 

hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The levels 

of the fair value hierarchy are defined as follows in priority order:

 Level 1 - inputs to the valuation techniques are based on quoted prices in active markets for identical 

assets or liabilities.

 Level 2 - inputs to the valuation techniques are based on observable inputs other than quoted prices 

in active markets for identical assets or liabilities.

Level 3 - one or more inputs to the valuation technique are unobservable and significant to the fair value 

measurement.

We use quoted market prices and valuation techniques that seek to maximize the use of observable 

inputs, where available, and minimize the use of unobservable inputs. Our inputs are based on the 

assumptions a market participant would use in valuing the asset or liability. Assets and liabilities are 

classified in their entirety within the fair value hierarchy based on the lowest level input that is significant 

to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present our assets and liabilities measured on our condensed consolidated balance 

sheets at fair value on a recurring basis subsequent to initial recognition, including instruments where 

we have elected the fair value option.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 126

March 31, 2018

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustment(1) Total

Assets:

Investments in securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Freddie Mac $— $27,936 $5,127 $— $33,063

Other agency — 1,786 44 — 1,830

Non-agency RMBS — — 2,363 — 2,363

Non-agency CMBS — 69 1,643 — 1,712

Obligations of states and political subdivisions — — 327 — 327

Total available-for-sale securities, at fair value — 29,791 9,504 — 39,295

Trading, at fair value:

Mortgage-related securities:

Freddie Mac — 11,161 1,456 — 12,617

Other agency — 3,416 9 — 3,425

All other — 19 1,583 — 1,602

Total mortgage-related securities — 14,596 3,048 — 17,644

Non-mortgage-related securities 15,713 2,849 — — 18,562

Total trading securities, at fair value 15,713 17,445 3,048 — 36,206

Total investments in securities 15,713 47,236 12,552 — 75,501

Mortgage loans:

Held-for-sale, at fair value — 15,832 — — 15,832

Derivative assets, net:

Interest-rate swaps — 2,484 — — 2,484

Option-based derivatives — 4,181 — — 4,181

Other — 105 27 — 132

Subtotal, before netting adjustments — 6,770 27 — 6,797

Netting adjustments(1) — — — (6,343) (6,343)

Total derivative assets, net — 6,770 27 (6,343) 454

Other assets:

Guarantee asset, at fair value — — 3,285 — 3,285

Non-derivative held-for-sale purchase commitments, at fair value — 129 — — 129

All other, at fair value — — 88 — 88

Total other assets — 129 3,373 — 3,502

Total assets carried at fair value on a recurring basis $15,713 $69,967 $15,952 ($6,343) $95,289

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $— $9 $629 $— $638

Other debt, at fair value — 4,844 135 — 4,979

Derivative liabilities, net:

Interest-rate swaps — 4,763 — — 4,763

Option-based derivatives — 100 — — 100

Other 212 67 — 279

Subtotal, before netting adjustments — 5,075 67 — 5,142

Netting adjustments(1) — — — (4,797) (4,797)

Total derivative liabilities, net — 5,075 67 (4,797) 345

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 19 — — 19

Total liabilities carried at fair value on a recurring basis $— $9,947 $831 ($4,797) $5,981

Referenced footnote is included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 127

December 31, 2017

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustment(1) Total

Assets:

Investments in securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Freddie Mac $— $30,415 $5,055 $— $35,470

Other agency — 2,007 46 — 2,053

Non-agency RMBS — — 3,933 — 3,933

Non-agency CMBS — 87 1,697 — 1,784

Obligations of states and political subdivisions — — 357 — 357

Total available-for-sale securities, at fair value — 32,509 11,088 — 43,597

Trading, at fair value:

Mortgage-related securities:

Freddie Mac — 11,393 842 — 12,235

Other agency — 3,565 9 — 3,574

All other — 27 2,066 — 2,093

Total mortgage-related securities — 14,985 2,917 — 17,902

Non-mortgage-related securities 20,159 2,660 — — 22,819

Total trading securities, at fair value 20,159 17,645 2,917 — 40,721

Total investments in securities 20,159 50,154 14,005 — 84,318

Mortgage loans:

Held-for-sale, at fair value — 20,054 — — 20,054

Derivative assets, net:

Interest-rate swaps — 4,262 — — 4,262

Option-based derivatives — 4,524 — — 4,524

Other — 44 8 — 52

Subtotal, before netting adjustments — 8,830 8 — 8,838

Netting adjustments(1) — — — (8,463) (8,463)

Total derivative assets, net — 8,830 8 (8,463) 375

Other assets:

Guarantee asset, at fair value — — 3,171 — 3,171

Non-derivative held-for-sale purchase commitments, at fair value — 137 — — 137

All other, at fair value — — 45 — 45

Total other assets — 137 3,216 — 3,353

Total assets carried at fair value on a recurring basis $20,159 $79,175 $17,229 ($8,463) $108,100

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $— $9 $630 $— $639

Other debt, at fair value — 5,023 137 — 5,160

Derivative liabilities, net:

Interest-rate swaps — 7,239 — — 7,239

Option-based derivatives — 121 — — 121

Other — 64 65 — 129

Subtotal, before netting adjustments — 7,424 65 — 7,489

Netting adjustments(1) — — — (7,220) (7,220)

Total derivative liabilities, net — 7,424 65 (7,220) 269

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 4 — — 4

Total liabilities carried at fair value on a recurring basis $— $12,460 $832 ($7,220) $6,072

(1) Represents counterparty netting, cash collateral netting and net derivative interest receivable or payable.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 128

Level 3 Fair Value Measurements

The tables below present a reconciliation of all assets and liabilities measured on our condensed 

consolidated balance sheets at fair value on a recurring basis using significant unobservable inputs 

(Level 3), including transfers into and out of Level 3. The tables also present gains and losses due to 

changes in fair value, including both realized and unrealized gains and losses, recognized in our 

condensed consolidated statements of comprehensive income for Level 3 assets and liabilities. When 

assets and liabilities are transferred between levels, we recognize the transfer as of the beginning of the 

period.

1Q 2018

Balance,

January 1,

2018

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

March 31,

2018

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $5,055 ($3) ($105) ($108) $433 $— $— ($253) $— $— $5,127 ($3)

Other agency 46 — — — — — — (2) — — 44 —

Non-agency RMBS 3,933 448 (451) (3) — — (1,467) (100) — — 2,363 16

Non-agency CMBS 1,697 (2) (47) (49) — — — (5) — — 1,643 (2)

Obligations of states

and political

subdivisions 357 — (2) (2) — — — (28) — — 327 —

Total available-for-sale

mortgage-related securities 11,088 443 (605) (162) 433 — (1,467) (388) — — 9,504 11

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 842 (77) — (77) 817 — (35) (5) — (86) 1,456 (73)

Other agency 9 — — — — — — — — — 9 —

All other 2,066 (47) — (47) — — (420) (16) — — 1,583 (38)

Total trading mortgagerelated securities 2,917 (124) — (124) 817 — (455) (21) — (86) 3,048 (111)

Other assets:

Guarantee asset 3,171 16 — 16 — 235 — (137) — — 3,285 16

All other, at fair value 45 6 — 6 43 9 (15) — — — 88 3

Total other assets $3,216 $22 $— $22 $43 $244 ($15) ($137) $— $— $3,373 $19

Balance,

January 1,

2018

Realized and unrealized (gains) losses

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

March 31,

2018

Unrealized

(gains) 

losses

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of

consolidated trusts held by

third parties, at fair value $630 ($1) $— ($1) $— $— $— $— $— $— $629 ($1)

Other debt, at fair value 137 — — — — — — (2) — — 135 —

Net derivatives(2) $57 $9 $— $9 $— ($22) $— ($4) $— $— $40 $6

Referenced footnotes are included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 129

1Q 2017

Balance,

January 1,

2017

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

March 31,

2017

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $9,847 ($2) $21 $19 $647 $— ($699) ($316) $17 ($3,096) $6,419 ($6)

Other agency 66 — — — — — — (4) — — 62 —

Non-agency RMBS 11,797 277 (98) 179 — — (2,217) (489) — — 9,270 69

Non-agency CMBS 3,366 1 2 3 — — — (9) — — 3,360 1

Obligations of states

and political

subdivisions 665 — — — — — — (105) — — 560 —

Total available-for-sale

mortgage-related securities 25,741 276 (75) 201 647 — (2,916) (923) 17 (3,096) 19,671 64

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 1,095 (47) — (47) 103 — (592) (9) 154 (152) 552 (41)

Other agency 12 (1) — (1) — — — — — — 11 (1)

All other 113 — — — — — — (4) — — 109 —

Total trading mortgagerelated securities 1,220 (48) — (48) 103 — (592) (13) 154 (152) 672 (42)

Other assets:

Guarantee asset 2,299 (7) — (7) — 164 — (116) — — 2,340 (7)

All other, at fair value — — — — — — — — — — — —

Total other assets $2,299 ($7) $— ($7) $— $164 $— ($116) $— $— $2,340 ($7)

Balance,

January 1,

2017

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

March 31,

2017

Unrealized

gains 

(losses)

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of consolidated

trusts held by third parties, at

fair value $— $— $— $— $— $530 $— $— $— $— $530 $—

Other debt, at fair value 95 — — — — — — (1) — — 94 —

Net derivatives(2) 50 21 — 21 — 1 — (11) — — 61 13

Other Liabilities:

All other, at fair value ($2) $2 $— $2 $10 $— $— $— $— $— $10 $2

(1) Transfers out of Level 3 during 1Q 2018 and 1Q 2017 consisted primarily of certain mortgage-related securities due to an increased volume and level of activity in 

the market and availability of price quotes from dealers and third-party pricing services. Certain Freddie Mac securities are classified as Level 3 at issuance and 

generally are classified as Level 2 when they begin trading. Transfers into Level 3 during 1Q 2018 and 1Q 2017 consisted primarily of certain mortgage-related 

securities due to a lack of market activity and relevant price quotes from dealers and third-party pricing services.

(2) Amounts are the net of derivative assets and liabilities prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable and net derivative 

interest receivable or payable.

(3) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains and losses related to assets and 

liabilities classified as Level 3 that were still held at March 31, 2018 and March 31, 2017, respectively. Included in these amounts are other-than temporary 

impairments recorded on available-for-sale securities.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 130

The tables below provide valuation techniques, the range and the weighted average of significant 

unobservable inputs for Level 3 assets and liabilities measured on our condensed consolidated balance 

sheets at fair value on a recurring basis.

March 31, 2018

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(In millions, except for certain unobservable inputs as 

shown) Type Range

Weighted

Average

Recurring fair value measurements

Assets

Investments in securities

Available-for-sale, at fair value

Mortgage-related securities

Freddie Mac $4,950 Discounted cash flows OAS 21 - 325 bps 72 bps

177 Other

Total Freddie Mac 5,127

Other agency 44 Other

Non-agency RMBS 2,148

Median of external

sources

External pricing

sources $71.2 - $77.6 $73.8

215 Other

Total non-agency RMBS 2,363

Non-agency CMBS 1,643 Single external source

External pricing

sources $105.0 - $106.0 $105.6

Obligations of states and political subdivisions 306

Median of external

sources

External pricing

sources $100.6 - $101.2 $100.9

21 Other

Total obligations of states and political

subdivisions 327

Total available-for-sale mortgage-related

securities 9,504

Trading, at fair value

Mortgage-related securities

Freddie Mac 1,168 Risk metrics Effective duration (12.82) - 65.95 years 6.70 years

288 Other

Total Freddie Mac 1,456

Other agency 9 Other

All other 1,582 Single external source

External pricing

sources $6.3 - $110.0 $96.1

1 Other

Total all other 1,583

Total trading mortgage-related securities 3,048

Total investments in securities $12,552

Other assets:

Guarantee asset, at fair value $3,285 Discounted cash flows OAS 17 - 198 bps 45 bps

All other at fair value 88 Other

Total other assets 3,373

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value 629 Single external source

 External Pricing

Sources $97.8 - $100.5 $100.0

Other debt, at fair value 135 Other

Net derivatives 40 Other
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 131

December 31, 2017

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(In millions, except for certain unobservable inputs as 

shown) Type Range

Weighted

Average

Recurring fair value measurements

Assets

Investments in securities:

Available-for-sale, at fair value

Mortgage-related securities

Freddie Mac $4,873 Discounted cash flows OAS 27 - 501 bps 68 bps

182 Other

Total Freddie Mac 5,055

Other agency 46 Other

Non-agency RMBS 3,665

Median of external

sources

External pricing

sources $75.6 - $80.8 $77.7

268 Other

Total non-agency RMBS 3,933

Non-agency CMBS 1,696 Single external source

External pricing

sources $108.4 - $108.9 $108.7

1 Other

Total non-agency CMBS 1,697

Obligations of states and political subdivisions 334

Median of external

sources

External pricing

sources $101.2 - $101.6 $101.4

23 Other

Total obligations of states and political

subdivisions 357

Total available-for-sale mortgage-related

securities 11,088

Trading, at fair value

Mortgage-related securities

Freddie Mac 582 Discounted cash flows OAS (8,905) - 27,202 bps (88) bps

243 Risk metrics Effective duration 0.00 - 55.93 years 11.76 years

17 Other

Total Freddie Mac 842

Other agency 9 Other

All other 2,065 Single external source

External pricing

sources $6.4 - $113.2 $98.0

1 Other

Total all other 2,066

Total trading mortgage-related securities 2,917

Total investments in securities $14,005

Other assets:

Guarantee asset, at fair value $3,171 Discounted cash flows OAS 17 - 198 bps 45 bps

All other at fair value 45 Other

Total other assets 3,216

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value 630 Single external source

External Pricing

Sources $99.2 - $100.2 $100.1

Other debt, at fair value 137 Other

Net derivatives 57 Other
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 132

Assets Measured at Fair Value on a Non-recurring Basis

We may be required, from time to time, to measure certain assets at fair value on a non-recurring basis 

after our initial recognition. These adjustments usually result from the application of lower-of-cost-orfair-value accounting or measurement of impairment based on the fair value of the underlying collateral.

The table below presents assets measured on our condensed consolidated balance sheets at fair value 

on a non-recurring basis. 

March 31, 2018 December 31, 2017

(In millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Assets measured at fair value on a

non-recurring basis:

Mortgage loans(1) $— $61 $5,716 $5,777 $— $494 $6,199 $6,693

(1) Includes loans that are classified as held-for-investment and have been measured for impairment based on the fair value of the underlying 

collateral and held-for-sale loans where the fair value is below cost.

The tables below provide valuation techniques, the range and the weighted average of significant 

unobservable inputs for Level 3 assets and liabilities measured on our condensed consolidated balance 

sheets at fair value on a non-recurring basis. Certain of the fair values in the tables below were not 

obtained as of the period end, but were obtained during the period.

March 31, 2018

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(In millions, except for certain 

unobservable inputs as shown) Type Range

Weighted

Average

Non-recurring fair value

measurements

Mortgage loans $5,716

Internal model Historical sales proceeds $3,000 - $947,675 $176,122

Internal model Housing sales index 43 - 455 bps 102 bps

Median of external sources External pricing sources $36.1 - $94.8 $81.5

December 31, 2017

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(In millions, except for certain 

unobservable inputs as shown) Type Range

Weighted

Average

Non-recurring fair value

measurements

Mortgage loans $6,199

Internal model Historical sales proceeds $3,000 - $899,000 $176,558

Internal model Housing sales index 43 - 394 bps 102 bps

Median of external sources External pricing sources $36.5 - $94.9 $80.9
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 133

Fair Value of Financial Instruments

The tables below present the carrying value and estimated fair value of our financial instruments. For 

certain types of financial instruments, such as cash and cash equivalents, securities purchased under 

agreements to resell, advances to lenders and other secured lending and certain debt, the carrying value 

on our GAAP balance sheets approximates fair value, as these assets and liabilities are short-term in 

nature and have limited market value volatility. 

March 31, 2018

GAAP 

Measurement 

Category(1)

GAAP

Carrying 

Amount

Fair Value

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustments(2) Total

Financial Assets

Cash and cash equivalents(3) Amortized

cost $8,617 $8,617 $— $— $— $8,617

Securities purchased under agreements

to resell

Amortized

cost 41,828 — 41,828 — — 41,828

Investments in securities:

Available-for-sale, at fair value FV - OCI 39,295 — 29,791 9,504 — 39,295

Trading, at fair value FV - NI 36,206 15,713 17,445 3,048 — 36,206

Total investments in securities 75,501 15,713 47,236 12,552 — 75,501

Mortgage loans:

Loans held by consolidated trusts 1,778,010 — 1,614,741 137,928 — 1,752,669

Loans held by Freddie Mac 90,341 — 29,045 64,246 — 93,291

Total mortgage loans Various(4) 1,868,351 — 1,643,786 202,174 — 1,845,960

Derivative assets, net FV - NI 454 — 6,770 27 (6,343) 454

Guarantee asset FV - NI 3,285 — — 3,304 — 3,304

Non-derivative purchase commitments,

at fair value FV - NI 129 — 129 48 — 177

Advances to lenders and other secured

lending

Amortized

cost 1,233 — 332 636 — 968

Total financial assets $1,999,398 $24,330 $1,740,081 $218,741 ($6,343) $1,976,809

Financial Liabilities

Debt, net:

Debt securities of consolidated trusts

held by third parties $1,726,969 $— $1,695,195 $2,668 $— $1,697,863

Other debt 277,838 — 277,455 3,759 — 281,214

Total debt, net Various(5) 2,004,807 — 1,972,650 6,427 — 1,979,077

Derivative liabilities, net FV - NI 345 — 5,075 67 (4,797) 345

Guarantee obligation Amortized

cost 3,157 — — 3,435 — 3,435

Non-derivative purchase commitments,

at fair value FV - NI 19 — 19 15 — 34

Total financial liabilities $2,008,328 $— $1,977,744 $9,944 ($4,797) $1,982,891

(1) FV - NI denotes fair value through net income. FV - OCI denotes fair value through other comprehensive income.

(2) Represents counterparty netting, cash collateral netting and net derivative interest receivable or payable.

(3) The current and prior period presentation has been modified to include restricted cash and cash equivalents due to recently adopted accounting 

guidance. 

(4) As of March 31, 2018, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value and FV - NII were $1.8 trillion, 

$11.8 billion and $15.8 billion, respectively. 

(5) As of March 31, 2018, the GAAP carrying amounts measured at amortized cost and FV - NII were $2.0 trillion and $5.6 billion, respectively. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 134

December 31, 2017

GAAP 

Measurement 

Category(1)

GAAP

Carrying 

Amount

Fair Value

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustments(2) Total

Financial Assets

Cash and cash equivalents(3) Amortized

cost $9,811 $9,811 $— $— $— $9,811

Securities purchased under agreements

to resell

Amortized

cost 55,903 — 55,903 — — 55,903

Investments in securities:

Available-for-sale, at fair value FV - OCI 43,597 — 32,509 11,088 — 43,597

Trading, at fair value FV - NI 40,721 20,159 17,645 2,917 — 40,721

Total investments in securities 84,318 20,159 50,154 14,005 — 84,318

Mortgage loans:

Loans held by consolidated trusts 1,774,286 — 1,635,137 145,911 — 1,781,048

Loans held by Freddie Mac 96,931 — 32,169 67,932 — 100,101

Total mortgage loans Various(4) 1,871,217 — 1,667,306 213,843 — 1,881,149

Derivative assets, net FV - NI 375 — 8,830 8 (8,463) 375

Guarantee asset FV - NI 3,171 — — 3,359 — 3,359

Non-derivative purchase commitments,

at fair value FV - NI 137 — 137 55 — 192

Advances to lenders and other secured

lending

Amortized

cost 1,269 — 473 796 — 1,269

Total financial assets $2,026,201 $29,970 $1,782,803 $232,066 ($8,463) $2,036,376

Financial Liabilities

Debt, net:

Debt securities of consolidated trusts

held by third parties $1,720,996 $— $1,721,091 $2,679 $— $1,723,770

Other debt 313,634 — 313,688 3,892 — 317,580

Total debt, net Various(5) 2,034,630 — 2,034,779 6,571 — 2,041,350

Derivative liabilities, net FV - NI 269 — 7,424 65 (7,220) 269

Guarantee obligation Amortized

cost 3,081 — — 3,742 — 3,742

Non-derivative purchase commitments,

at fair value FV - NI 4 — 4 15 — 19

Total financial liabilities $2,037,984 $— $2,042,207 $10,393 ($7,220) $2,045,380

(1) FV - NI denotes fair value through net income. FV - OCI denotes fair value through other comprehensive income.

(2) Represents counterparty netting, cash collateral netting and net derivative interest receivable or payable.

(3) The current and prior period presentation has been modified to include restricted cash and cash equivalents due to recently adopted accounting 

guidance. 

(4) As of December 31, 2017, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value and FV - NII were $1.8 trillion, 

$14.7 billion and $20.1 billion, respectively. 

(5) As of December 31, 2017, the GAAP carrying amounts measured at amortized cost and FV - NII were $2.0 trillion and $5.8 billion, respectively. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 135

HARP Loans

The fair value of mortgage loans includes loans refinanced under HARP of $24.8 billion and $30.2 billion

as of March 31, 2018 and December 31, 2017, respectively. The fair value of HARP loans reflects the 

total compensation that we receive for the delivery of a HARP loan, based on the pricing that we are 

willing to offer because HARP is a part of a broader government program intended to provide assistance 

to homeowners and prevent foreclosures. When HARP ends on December 31, 2018, the beneficial 

pricing afforded to HARP loans may no longer be reflected in the pricing structure of our guarantee fees. 

If these benefits were not reflected in the pricing for these loans, the fair value of our loans would have 

decreased by $1.8 billion and $2.1 billion as of March 31, 2018 and December 31, 2017, respectively. 

Fair Value Option

We elected the fair value option for certain multifamily held-for-sale loans, multifamily held-for-sale loan 

purchase commitments and certain long-term debt. 

The table below presents the fair value and UPB related to certain loans and long-term debt for which 

we have elected the fair value option.

March 31, 2018 December 31, 2017

(In millions)

Multifamily

Held-For-Sale

 Loans

Other Debt -

Long Term

Debt Securities Of 

Consolidated 

Trusts Held By 

Third Parties(1)

Multifamily

Held-For-Sale

 Loans

Other Debt -

Long Term

Debt Securities Of 

Consolidated 

Trusts Held By 

Third Parties(1)

Fair value $15,832 $4,979 $629 $20,054 $5,160 $630

Unpaid principal

balance 15,880 4,494 630 19,762 4,666 630

Difference ($48) $485 ($1) $292 $494 $—

(1) Does not include interest-only securities with fair value of $9 million for both March 31, 2018 and December 31, 2017.

Changes in Fair Value Under the Fair Value Option Election

The table below presents the changes in fair value included in other income (loss) in our condensed 

consolidated statements of comprehensive income, related to items for which we have elected the fair 

value option. 

1Q 2018 1Q 2017

(In millions) Gains (Losses)

Multifamily held-for-sale loans ($458) ($35)

Multifamily held-for-sale loan purchase commitments 105 224

Other debt - long term 9 (99)

Debt securities of consolidated trusts held by third parties 2 10

Changes in fair value attributable to instrument-specific credit risk were not material for 1Q 2018 and 1Q 

2017 for any assets or liabilities for which we elected the fair value option.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 136

NOTE 16

Legal Contingencies

We are involved as a party in a variety of legal and regulatory proceedings arising from time to time in 

the ordinary course of business including, among other things, contractual disputes, personal injury 

claims, employment-related litigation and other legal proceedings incidental to our business. We are 

frequently involved, directly or indirectly, in litigation involving mortgage foreclosures. From time to time, 

we are also involved in proceedings arising from our termination of a seller's or servicer’s eligibility to sell 

loans to, and/or service loans for, us. In these cases, the former seller or servicer sometimes seeks 

damages against us for wrongful termination under a variety of legal theories. In addition, we are 

sometimes sued in connection with the origination or servicing of loans. These suits typically involve 

claims alleging wrongful actions of sellers and servicers. Our contracts with our sellers and servicers 

generally provide for indemnification of Freddie Mac against liability arising from sellers' and servicers' 

wrongful actions with respect to loans sold to or serviced for Freddie Mac.

Litigation and claims resolution are subject to many uncertainties and are not susceptible to accurate 

prediction. In accordance with the accounting guidance for contingencies, we reserve for litigation 

claims and assessments asserted or threatened against us when a loss is probable (as defined in such 

guidance) and the amount of the loss can be reasonably estimated.

Putative Securities Class Action Lawsuit: Ohio Public Employees 

Retirement System vs. Freddie Mac, Syron, Et Al.

This putative securities class action lawsuit was filed against Freddie Mac and certain former officers on 

January 18, 2008 in the U.S. District Court for the Northern District of Ohio purportedly on behalf of a 

class of purchasers of Freddie Mac stock from August 1, 2006 through November 20, 2007. FHFA later 

intervened as Conservator, and the plaintiff amended its complaint on several occasions. The plaintiff 

alleged, among other things, that the defendants violated federal securities laws by making false and 

misleading statements concerning our business, risk management, and the procedures we put into 

place to protect the company from problems in the mortgage industry. The plaintiff seeks unspecified 

damages and interest, and reasonable costs and expenses, including attorney and expert fees.

In October 2013, defendants filed motions to dismiss the complaint. In October 2014, the District Court 

granted defendants’ motions and dismissed the case in its entirety against all defendants, with 

prejudice. In November 2014, plaintiff filed a notice of appeal in the U.S. Court of Appeals for the Sixth 

Circuit. On July 20, 2016, the Court of Appeals reversed the District Court's dismissal and remanded the 

case to the District Court for further proceedings.

At present, it is not possible for us to predict the probable outcome of this lawsuit or any potential effect 

on our business, financial condition, liquidity, or results of operations. In addition, we are unable to 

reasonably estimate the possible loss or range of possible loss in the event of an adverse judgment in 

the foregoing matter due to the following factors, among others: the inherent uncertainty of pre-trial 

litigation and the fact that the District Court has not yet ruled upon motions for class certification or 

summary judgment. In particular, absent the certification of a class, the identification of a class period, 

and the identification of the alleged statement or statements that survive dispositive motions, we cannot 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 137

reasonably estimate any possible loss or range of possible loss.

LIBOR Lawsuit

On March 14, 2013, Freddie Mac filed a lawsuit in the U.S. District Court for the Eastern District of 

Virginia against the British Bankers Association and the 16 U.S. Dollar LIBOR panel banks and a number 

of their affiliates. The case was subsequently transferred to the U.S. District Court for the Southern 

District of New York. The complaint alleges, among other things, that the defendants fraudulently and 

collusively depressed LIBOR, a benchmark interest rate indexed to trillions of dollars of financial 

products, and asserts claims for antitrust violations, breach of contract, tortious interference with 

contract and fraud. Freddie Mac filed an amended complaint in July 2013, and a second amended 

complaint in October 2014. In August 2015, the District Court dismissed the portion of our claim related 

to antitrust violations and fraud and we filed a motion for reconsideration. On March 31, 2016, the 

District Court granted a portion of our motion, finding personal jurisdiction over certain defendants, and 

denied the portion of our motion with respect to statutes of limitation for our fraud claims. Subsequently, 

in a related case, the U.S. Court of Appeals for the Second Circuit reversed the District Court’s dismissal 

of certain plaintiffs’ antitrust claims and remanded the case to the District Court for consideration of 

whether, among other things, the plaintiffs are "efficient enforcers" of the antitrust laws. 

On December 20, 2016, after briefing and argument on the defendants' renewed motions to dismiss on 

personal jurisdiction and efficient enforcer grounds, the District Court denied defendants' motions in 

part and granted them in part. The District Court held that Freddie Mac is an efficient enforcer of the 

antitrust laws, but dismissed on personal jurisdiction grounds Freddie Mac's antitrust claims against all 

defendants except HSBC USA, N.A. Then, in an order issued February 2, 2017, the District Court 

effectively dismissed Freddie Mac's remaining antitrust claim against HSBC USA, N.A. At present, 

Freddie Mac's breach of contract actions against Bank of America, N.A., Barclays Bank, Citibank, N.A., 

Credit Suisse, Deutsche Bank, Royal Bank of Scotland and UBS AG are its only claims remaining in the 

District Court.

On February 23, 2018, the Second Circuit reversed the District Court’s dismissal of certain plaintiffs’ 

state law fraud and unjust enrichment claims on statutes of limitations grounds. While Freddie Mac was 

not a party to the appeal, this decision could have the effect of reinstating Freddie Mac’s fraud claims 

against the above-named defendants. The Second Circuit also reversed certain aspects of the District 

Court’s personal jurisdiction rulings and remanded with instructions to allow the named appellant to 

amend its complaint. In response to a request from Freddie Mac, on April 11, 2018, the District Court 

issued an order requiring Freddie Mac to submit a formal motion for leave to amend the complaint, 

along with its proposed amended complaint, by May 15, 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 138

Litigation Concerning the Purchase Agreement

Since July 2013, a number of lawsuits have been filed against us concerning the August 2012 

amendment to the Purchase Agreement, which created the net worth sweep dividend provisions of the 

senior preferred stock. The plaintiffs in the lawsuits allege that they are holders of common stock and/or 

junior preferred stock issued by Freddie Mac and Fannie Mae. (For purposes of this discussion, junior 

preferred stock refers to the various series of preferred stock of Freddie Mac and Fannie Mae other than 

the senior preferred stock issued to Treasury.) It is possible that similar lawsuits will be filed in the future. 

The lawsuits against us are described below.

Litigation in the U.S. District Court for the District of Columbia

In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations. This case is the result of the consolidation of three putative class action lawsuits: 

Cacciapelle and Bareiss vs. Federal National Mortgage Association, Federal Home Loan Mortgage 

Corporation and FHFA, filed on July 29, 2013; American European Insurance Company vs. Federal 

National Mortgage Association, Federal Home Loan Mortgage Corporation and FHFA, filed on July 30, 

2013; and Marneu Holdings, Co. vs. FHFA, Treasury, Federal National Mortgage Association and Federal 

Home Loan Mortgage Corporation, filed on September 18, 2013. (The Marneu case was also filed as a 

shareholder derivative lawsuit.) A consolidated amended complaint was filed in December 2013. In the 

consolidated amended complaint, plaintiffs allege, among other items, that the August 2012 amendment 

to the Purchase Agreement breached Freddie Mac's and Fannie Mae's respective contracts with the 

holders of junior preferred stock and common stock and the covenant of good faith and fair dealing 

inherent in such contracts. Plaintiffs sought unspecified damages, equitable and injunctive relief, and 

costs and expenses, including attorney and expert fees. 

The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf 

of a class of purchasers of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock 

prior to, and as of, August 17, 2012. The Marneu lawsuit was filed purportedly on behalf of a class of 

purchasers of junior preferred stock and purchasers of common stock issued by Freddie Mac or Fannie 

Mae over a not-yet-defined period of time. 

Arrowood Indemnity Company vs. Federal National Mortgage Association, Federal Home 

Loan Mortgage Corporation, FHFA and Treasury.This case was filed on September 20, 2013. The 

allegations and demands made by plaintiffs in this case were generally similar to those made by the 

plaintiffs in the In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations case described above. Plaintiffs in the Arrowood lawsuit also requested that, if injunctive 

relief were not granted, the Arrowood plaintiffs be awarded damages against the defendants in an 

amount to be determined including, but not limited to, the aggregate par value of their junior preferred 

stock, the total of which they stated to be approximately $42 million. 

American European Insurance Company, Cacciapelle and Miller vs. Treasury and FHFA. This 

case was filed as a shareholder derivative lawsuit, purportedly on behalf of Freddie Mac as a "nominal" 

defendant, on July 30, 2014. The complaint alleged that, through the August 2012 amendment to the 

Purchase Agreement, Treasury and FHFA breached their respective fiduciary duties to Freddie Mac, 

causing Freddie Mac to suffer damages. The plaintiffs asked that Freddie Mac be awarded 

compensatory damages and disgorgement, as well as attorneys’ fees, costs and other expenses. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 139

FHFA, joined by Freddie Mac and Fannie Mae, moved to dismiss the In re Fannie Mae/Freddie Mac 

Senior Preferred Stock Purchase Agreement Class Action Litigations case and the other related cases in 

January 2014. Treasury filed a motion to dismiss the same day. In September 2014, the District Court 

granted the motions and dismissed the plaintiffs’ claims. All plaintiffs appealed that decision, and on 

February 21, 2017, the U.S. Court of Appeals for the District of Columbia Circuit affirmed in part and 

remanded in part the decision granting the motions to dismiss. The Court of Appeals affirmed dismissal 

of all claims except certain claims seeking monetary damages for breach of contract and breach of 

implied duty of good faith and fair dealing. In March 2017, certain institutional and class plaintiffs filed 

petitions for panel rehearing with respect to certain claims. On July 17, 2017, the Court of Appeals 

granted the petitions for rehearing and issued a modified decision, which permitted the institutional 

plaintiffs to pursue the breach of contract and breach of implied duty of good faith and fair dealing 

claims that had been remanded. The Court of Appeals also removed language related to the standard to 

be applied to the implied duty claims, leaving that issue for the District Court to determine on remand. 

On October 16, 2017, certain institutional and class plaintiffs filed petitions for a writ of certiorari in the 

U.S. Supreme Court challenging whether HERA's prohibition on injunctive relief against FHFA bars 

judicial review of the net worth sweep dividend provisions of the August 2012 amendment to the 

Purchase Agreement, as well as whether HERA bars shareholders from pursuing derivative litigation 

where they allege the conservator faces a conflict of interest. The Supreme Court denied the petitions 

on February 20, 2018. On November 1, 2017, certain institutional and class plaintiffs and plaintiffs in 

another case in which Freddie Mac was not originally a defendant, Fairholme Funds, Inc. v. FHFA, 

Treasury, and Federal National Mortgage Association, filed proposed amended complaints in the District 

Court. Each of the proposed amended complaints names Freddie Mac as a defendant for breach of 

contract and breach of the covenant of good faith and fair dealing claims as well as for new claims 

alleging breach of fiduciary duty and breach of Virginia corporate law. On January 10, 2018, FHFA, 

Freddie Mac, and Fannie Mae moved to dismiss the amended complaints.

Litigation in the U.S. Court of Federal Claims

Reid and Fisher vs. the United States of America and Federal Home Loan Mortgage 

Corporation. This case was filed as a derivative lawsuit, purportedly on behalf of Freddie Mac as a 

"nominal" defendant, on February 26, 2014. The complaint alleges, among other items, that the net 

worth sweep dividend provisions of the senior preferred stock constitute an unlawful taking of private 

property for public use without just compensation. The plaintiffs ask that Freddie Mac be awarded just 

compensation for the U.S. government’s alleged taking of its property, attorneys’ fees, costs and other 

expenses. On March 8, 2018, the plaintiffs filed an amended complaint under seal.

Rafter, Rattien and Pershing Square Capital Management vs. the United States of America et 

al. This case was filed as a shareholder derivative lawsuit, purportedly on behalf of Freddie Mac as a 

"nominal" defendant, on August 14, 2014. The complaint alleges that the net worth sweep dividend 

provisions of the senior preferred stock constitute an unlawful taking of private property for public use 

without just compensation, and the U.S. government breached an implied-in-fact contract with Freddie 

Mac. In September 2015, plaintiffs filed an amended complaint, which contains one claim involving 

Freddie Mac. The amended complaint alleges that Freddie Mac’s charter is a contract with its common 

stockholders, and that, through the August 2012 amendment to the Purchase Agreement, the U.S. 

government breached the implied covenant of good faith and fair dealing inherent in such contract. 

Plaintiffs ask that they be awarded damages or other appropriate relief for the alleged breach of contract 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 140

as well as attorneys’ fees, costs and expenses. Plaintiffs filed a further amended complaint under seal 

on March 8, 2018.

Litigation in the U.S. District Court for the District of Delaware

Jacobs and Hindes vs. FHFA and Treasury. This case was filed on August 17, 2015 as a putative 

class action lawsuit purportedly on behalf of a class of holders of preferred stock or common stock 

issued by Freddie Mac or Fannie Mae. The case was also filed as a shareholder derivative lawsuit, 

purportedly on behalf of Freddie Mac and Fannie Mae as "nominal" defendants. The complaint alleges, 

among other items, that the August 2012 amendment to the Purchase Agreement violated applicable 

state law and constituted a breach of contract, as well as a breach of covenants of good faith and fair 

dealing. Plaintiffs seek equitable and injunctive relief (including restitution of the monies paid by Freddie 

Mac and Fannie Mae to Treasury under the net worth sweep dividend), compensatory damages, 

attorneys’ fees, costs and expenses. On November 27, 2017, the Court dismissed the case with 

prejudice after defendants filed a motion to dismiss. On December 21, 2017, plaintiffs filed a notice of 

appeal to the U.S. Court of Appeals for the Third Circuit.

At present, it is not possible for us to predict the probable outcome of the lawsuits discussed above in 

the U.S. District Courts and the U.S. Court of Federal Claims (including the outcome of any appeal) or 

any potential effect on our business, financial condition, liquidity, or results of operations. In addition, we 

are unable to reasonably estimate the possible loss or range of possible loss in the event of an adverse 

judgment in the foregoing matters due to a number of factors, including the inherent uncertainty of pretrial litigation. In addition, with respect to the In re Fannie Mae/Freddie Mac Senior Preferred Stock 

Purchase Agreement Class Action Litigations case, the plaintiffs have not demanded a stated amount of 

damages they believe are due, and the Court has not certified a class.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 17

Freddie Mac Form 10-Q 141

NOTE 17

Regulatory Capital

In October 2008, FHFA announced that it was suspending capital classification of us during 

conservatorship in light of the Purchase Agreement. FHFA continues to monitor our capital levels, but 

the existing statutory and FHFA regulatory capital requirements are not binding during conservatorship.

We continue to provide quarterly submissions to FHFA on minimum capital. The table below summarizes 

our minimum capital requirements and deficits and net worth. 

(In millions) March 31, 2018 December 31, 2017

GAAP net worth (deficit) $2,150 ($312)

Core capital (deficit)(1)(2) (70,200) (73,037)

Less: Minimum capital requirement(1) 17,661 18,431

Minimum capital surplus (deficit)(1) ($87,861) ($91,468)

(1) Core capital and minimum capital figures are estimates and represent amounts submitted to FHFA. FHFA is the authoritative source for our 

regulatory capital.

(2) Core capital excludes certain components of GAAP total equity (i.e., AOCI and the liquidation preference of the senior preferred stock) as these 

items do not meet the statutory definition of core capital.

During 2017, we and Fannie Mae worked with FHFA to develop an overall risk measurement framework 

for evaluating our risk management and business decisions during conservatorship, known as CCF. We 

use both CCF and our internal capital methodologies, which are aligned, to measure risk for making 

economically effective decisions. We are required to submit quarterly reports to FHFA related to CCF 

requirements. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 18

Freddie Mac Form 10-Q 142

NOTE 18

Selected Financial Statement Line Items

The table below presents the significant components of other income (loss) on our condensed 

consolidated statements of comprehensive income. 

(In millions) 1Q 2018 1Q 2017

Other income (loss):

Gains (losses) on loans ($320) $14

Income on guarantee obligation 171 146

Guarantee fee income 194 149

Gains (losses) on held-for-sale loan purchase commitments 105 224

All other (29) (118)

Total other income (loss) $121 $415

The table below presents the significant components of other assets and other liabilities on our 

condensed consolidated balance sheets. 

(In millions) March 31, 2018 December 31, 2017

Other assets:

Real estate owned, net $837 $892

Accounts and other receivables(1) 6,565 7,397

Guarantee asset 3,285 3,171

Fixed assets 837 798

Advances to lenders 901 796

All other 613 636

Total other assets $13,038 $13,690

Other liabilities:

Servicer liabilities $587 $628

Guarantee obligation 3,157 3,081

Accounts payable and accrued expenses 715 754

Payables related to securities 2,503 2,813

Income taxes payable 1,415 656

All other 746 1,036

Total other liabilities $9,123 $8,968

(1) Primarily consists of servicer receivables and other non-interest receivables.

END OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
Other Information

Freddie Mac Form 10-Q 143

Other Information

LEGAL PROCEEDINGS

We are involved as a party to a variety of legal proceedings. For more information, see Note 16 in this 

report and in our 2017 Annual Report.

In addition, a number of lawsuits have been filed against the U.S. government related to the 

conservatorship and the Purchase Agreement. For information on these lawsuits, see the Legal 

Proceedings section in our 2017 Annual Report. On March 8, 2018, seven amended complaints were 

filed in the U.S. Court of Federal Claims, including five under seal. Freddie Mac was previously named as 

a nominal defendant in two of the actions for which an amended complaint was filed under seal. In 

addition, five new lawsuits were filed in the U.S. Court of Federal Claims against the United States, one 

on February 23, 2018, three on March 8, 2018, and one on April 11, 2018. These new lawsuits seek to 

invalidate the net worth sweep provisions of the senior preferred stock. Freddie Mac is not a party to any 

of these lawsuits.

RISK FACTORS

This Form 10-Q should be read together with the Risk Factors section in our 2017 Annual Report, 

which describes various risks and uncertainties to which we are or may become subject. These risks 

and uncertainties could, directly or indirectly, adversely affect our business, financial condition, results 

of operations, cash flows, strategies and/or prospects.

UNREGISTERED SALES OF EQUITY 

SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

The securities we issue are "exempted securities" under the Securities Act of 1933, as amended. As a 

result, we do not file registration statements with the SEC with respect to offerings of our securities.

Following our entry into conservatorship, we suspended the operation of, and ceased making grants 

under, equity compensation plans. Previously, we had provided equity compensation under those plans 

to employees and members of the Board of Directors. Under the Purchase Agreement, we cannot issue 

any new options, rights to purchase, participations, or other equity interests without Treasury’s prior

approval. However, grants outstanding as of the date of the Purchase Agreement remain in effect in 

accordance with their terms.

No stock options were exercised during 1Q 2018. See Note 11 in our 2017 Annual Report for more 

information.
Other Information

Freddie Mac Form 10-Q 144

Dividend Restrictions

Our payment of dividends on Freddie Mac common stock or any series of Freddie Mac preferred stock 

(other than senior preferred stock) is subject to certain restrictions as described in Market for 

Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of 

Equity Securities - Dividends and Dividend Restrictions in our 2017 Annual Report.

Information About Certain Securities Issuances by 

Freddie Mac

Pursuant to SEC regulations, public companies are required to disclose certain information when they 

incur a material direct financial obligation or become directly or contingently liable for a material 

obligation under an off-balance sheet arrangement. The disclosure must be made in a current report on 

Form 8-K under Item 2.03 or, if the obligation is incurred in connection with certain types of securities 

offerings, in prospectuses for those offerings that are filed with the SEC.

Freddie Mac’s securities offerings are exempted from SEC registration requirements. As a result, we do 

not file registration statements or prospectuses with the SEC with respect to our securities offerings. To 

comply with the disclosure requirements of Form 8-K relating to the incurrence of material financial 

obligations, we report these types of obligations either in offering circulars or offering circular 

supplements that we post on our web site or in a current report on Form 8-K, in accordance with a "noaction" letter we received from the SEC staff. In cases where the information is disclosed in an offering 

circular or offering circular supplement, the document will be posted on our web site within the same 

time period that a prospectus for a non-exempt securities offering would be required to be filed with the 

SEC.

The web site address for disclosure about our debt securities is www.freddiemac.com/debt. From this 

address, investors can access the offering circular and related supplements for debt securities offerings 

under Freddie Mac’s global debt facility, including pricing supplements for individual issuances of debt 

securities. Similar information about our STACR debt notes and SCR debt notes is available at 

www.freddiemac.com/creditriskofferings and mf.freddiemac.com/investors/, respectively.

Disclosure about the mortgage-related securities we issue, some of which are off-balance sheet 

obligations (e.g., K Certificates and SB Certificates), can be found at www.freddiemac.com/mbs. From 

this address, investors can access information and documents about our mortgage-related securities, 

including offering circulars and offering circular supplements.

We provide additional information, including product descriptions, investor presentations, securities 

issuance calendars, transactions volumes and details, redemption notices and Freddie Mac research, in 

each case as applicable, on the websites for our business segments, which can be found at 

www.freddiemac.com/singlefamily, mf.freddiemac.com and www.freddiemac.com/capitalmarkets.

EXHIBITS

The exhibits are listed in the Exhibit Index of this Form 10-Q.
Controls and Procedures

Freddie Mac Form 10-Q 145

Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS 

AND PROCEDURES

Disclosure controls and procedures include, without limitation, controls and procedures designed to 

ensure that the information we are required to disclose in reports that we file or submit under the 

Exchange Act is recorded, processed, summarized and reported within the time periods specified by the 

SEC’s rules and forms and that such information is accumulated and communicated to management of 

the company, including the company’s Chief Executive Officer and Chief Financial Officer, as 

appropriate, to allow timely decisions regarding required disclosure. In designing our disclosure controls 

and procedures, we recognize that any controls and procedures, no matter how well designed and 

operated, can provide only reasonable assurance of achieving the desired control objectives, and we 

must apply judgment in implementing possible controls and procedures.

Management, including the company’s Chief Executive Officer and Chief Financial Officer, conducted an 

evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2018. As a 

result of management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded 

that our disclosure controls and procedures were not effective as of March 31, 2018, at a reasonable 

level of assurance, because we have not been able to update our disclosure controls and procedures to 

provide reasonable assurance that information known by FHFA on an ongoing basis is communicated 

from FHFA to Freddie Mac’s management in a manner that allows for timely decisions regarding our 

required disclosure under the federal securities laws. We consider this situation to be a material 

weakness in our internal control over financial reporting. 

CHANGES IN INTERNAL CONTROL OVER 

FINANCIAL REPORTING DURING 1Q 2018

We evaluated the changes in our internal control over financial reporting that occurred during 1Q 2018 

and concluded that there were no changes that materially affected, or are reasonably likely to materially 

affect, our internal control over financial reporting.
Controls and Procedures

Freddie Mac Form 10-Q 146

MITIGATING ACTIONS RELATED TO THE 

MATERIAL WEAKNESS IN INTERNAL 

CONTROL OVER FINANCIAL REPORTING

As described above under Evaluation of Disclosure Controls and Procedures, we have one 

material weakness in internal control over financial reporting as of March 31, 2018 that we have not 

remediated.

Based on discussions with FHFA and given the structural nature of this material weakness, we believe it 

is likely that we will not remediate it while we are under conservatorship. However, both we and FHFA 

have continued to engage in activities and employ procedures and practices intended to permit 

accumulation and communication to management of information needed to meet our disclosure 

obligations under the federal securities laws. These include the following:

FHFA has established the Division of Conservatorship, which is intended to facilitate operation of the 

company with the oversight of the Conservator.

We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. 

We also provide drafts of external press releases, statements and certain speeches to FHFA 

personnel for their review and comment prior to release.

FHFA personnel, including senior officials, review our SEC filings prior to filing, including this 

Form 10-Q, and engage in discussions with us regarding issues associated with the information 

contained in those filings. Prior to filing this Form 10-Q, FHFA provided us with a written 

acknowledgment that it had reviewed the Form 10-Q, was not aware of any material misstatements 

or omissions in the Form 10-Q, and had no objection to our filing the Form 10-Q.

The Director of FHFA is in frequent communication with our Chief Executive Officer, typically meeting 

(in person or by phone) on at least a bi-weekly basis.

FHFA representatives attend meetings frequently with various groups within the company to 

enhance the flow of information and to provide oversight on a variety of matters, including 

accounting, credit and capital markets management, external communications and legal matters.

Senior officials within FHFA’s accounting group meet frequently with our senior financial executives 

regarding our accounting policies, practices and procedures.

In view of our mitigating actions related to this material weakness, we believe that our condensed 

consolidated financial statements for 1Q 2018 have been prepared in conformity with GAAP.
Exhibit Index

Freddie Mac Form 10-Q 147

Exhibit Index

Exhibit Description*

4.1 Federal Home Loan Mortgage Corporation Global Debt Facility Agreement, dated February 15, 2018

12.1 Statement re: computation of ratio of earnings to fixed charges and computation of ratio of earnings to combined fixed 

charges and preferred stock dividends

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

31.2 Certification of Executive Vice President —Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2 Certification of Executive Vice President —Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation

101.LAB XBRL Taxonomy Extension Labels

101.PRE XBRL Taxonomy Extension Presentation

101.DEF XBRL Taxonomy Extension Definition

* The SEC file numbers for the Registrant’s Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and

Current Reports on Form 8-K are 000-53330 and 001-34139.
Signatures

Freddie Mac Form 10-Q 148

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this 

report to be signed on its behalf by the undersigned thereunto duly authorized.

Federal Home Loan Mortgage Corporation

By: /s/ Donald H. Layton

Donald H. Layton

Chief Executive Officer

Date: May 1, 2018

By: /s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial

Officer

(Principal Financial Officer)

Date: May 1, 2018
Index

Freddie Mac Form 10-Q 149

Form 10-Q Index

Item Number Page(s)

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of

Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 6. Exhibits

Exhibit Index

Signatures

70 - 142

1 - 69

52 - 55

145 - 146

143

143

143 - 144

144

147

148
1

Exhibit 4.1

FEDERAL HOME LOAN MORTGAGE CORPORATION 

GLOBAL DEBT FACILITY AGREEMENT 

AGREEMENT, dated as of February 15, 2018, among the Federal Home Loan Mortgage 

Corporation (“Freddie Mac”) and Holders of Debt Securities (each as hereinafter defined). 

Whereas: 

(a) Freddie Mac is a corporation duly organized and existing under and by virtue of the laws of the 

United States (Title III of the Emergency Home Finance Act of 1970, as amended (the “Freddie Mac 

Act”)) and has full corporate power and authority to enter into this Agreement and to undertake the 

obligations undertaken by it herein; 

(b) Pursuant to Section 306(a) of the Freddie Mac Act, Freddie Mac is authorized, upon such terms 

and conditions as it may prescribe, to borrow, to pay interest or other return, and to issue notes, bonds 

or other obligations or securities; and 

(c) To provide funds to permit Freddie Mac to engage in activities consistent with its statutory 

purposes, Freddie Mac has established a Global Debt Facility (the “Facility”) and authorized the 

issuance, from time to time, pursuant to this Agreement, of unsecured general obligations of Freddie 

Mac or, if so provided in the applicable Supplemental Agreement (as hereinafter defined), secured 

obligations of Freddie Mac (“Debt Securities”). 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is 

hereby agreed that the following terms and conditions of this Agreement (including, as to each issue of 

the Debt Securities, the applicable Supplemental Agreement) shall govern the Debt Securities and the 

rights and obligations of Freddie Mac and Holders with respect to the Debt Securities. 

ARTICLE I 

Definitions 

Whenever used in this Agreement, the following words and phrases shall have the following 

meanings, unless the context otherwise requires. 

Additional Debt Securities: Debt Securities issued by Freddie Mac with the same terms (other 

than Issue Date, interest commencement date and issue price) and conditions as Debt Securities for 

which settlement has previously occurred so as to form a single series of Debt Securities as specified in 

the applicable Supplemental Agreement. 

Agreement: This Global Debt Facility Agreement dated as of February 15, 2018, as it may be 

amended or supplemented from time to time, and successors thereto pursuant to which Freddie Mac 

issues the Debt Securities. 

Amortizing Debt Securities: Debt Securities on which Freddie Mac makes periodic payments of 

principal during the terms of such Debt Securities as described in the related Supplemental Agreement. 

Beneficial Owner: The entity or individual that beneficially owns a Debt Security. 

Bonds: Callable or non-callable, puttable or non-puttable Debt Securities with maturities of more 

than ten years. 
2

Book-Entry Rules: FHFA regulations, 12 C.F.R. Part 1249, applicable to the Fed Book-Entry Debt 

Securities, and such procedures as to which Freddie Mac and the FRBNY may agree. 

Business Day: (i) With respect to Fed Book-Entry Debt Securities, any day other than (a) a 

Saturday, (b) a Sunday, (c) a day on which the FRBNY is closed, (d) as to any Holder of a Fed BookEntry Debt Security, a day on which the Federal Reserve Bank that maintains the Holder’s account is 

closed, or (e) a day on which Freddie Mac’s offices are closed; and (ii) with respect to Registered Debt 

Securities, any day other than (a) a Saturday, (b) a Sunday, (c) a day on which banking institutions are 

closed in (i) the City of New York, if the Specified Payment Currency is U.S. dollars or (2) the Principal 

Financial Center of the country of such Specified Payment Currency, if the Specified Payment Currency 

is other than U.S. dollars or euro, (d) if the Specified Payment Currency is euro, a day on which the 

TARGET2 system is not open for settlements, or a day on which payments in euro cannot be settled in 

the international interbank market as determined by the Global Agent, (e) for any required payment, a 

day on which banking institutions are closed in the place of payment, or (f) a day on which Freddie 

Mac’s offices are closed. 

Calculation Agent: Freddie Mac or a bank or broker-dealer designated by Freddie Mac in the 

applicable Supplemental Agreement as the entity responsible for determining the interest rate on a 

Variable Rate Debt Security. 

Calculation Date: In each year, each of those days in the calendar year that are specified in the 

applicable Supplemental Agreement as being the scheduled Interest Payment Dates regardless, for this 

purpose, of whether any such date is in fact an Interest Payment Date and, for the avoidance of doubt, a 

“Calculation Date” may occur prior to the Issue Date or after the last Principal Payment Date. 

Cap: A maximum interest rate at which interest may accrue on a Variable Rate Debt Security 

during any Interest Reset Period. 

Citibank - London: Citibank, N.A., London office, the Global Agent for Registered Debt Securities. 

Citigroup - Frankfurt: Citigroup Global Markets Deutschland AG, the Registrar for Registered Debt 

Securities. 

Clearstream, Luxembourg: Clearstream Banking, société anonyme, which holds securities for its 

participants and facilitates the clearance and settlement of securities transactions between its 

participants through electronic book-entry changes in accounts of its participants. 

CMS Determination Date: The second New York Banking Day preceding the applicable Reset 

Date. 

CMS Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(M). 

CMT Determination Date: The second New York Banking Day preceding the applicable Reset 

Date. 

CMT Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(L). 

Code: The Internal Revenue Code of 1986, as amended. 

Common Depositary: The common depositary for Euroclear, Clearstream, Luxembourg and/or 

any other applicable clearing system, which will hold Other Registered Debt Securities on behalf of 

Euroclear, Clearstream, Luxembourg and/or any such other applicable clearing system. 
3

CUSIP Number: A unique nine-character designation assigned to each Debt Security by the 

CUSIP Service Bureau and used to identify each issuance of Debt Securities on the records of the 

Federal Reserve Banks or DTC, as applicable. 

Dealers: Firms that engage in the business of dealing or trading in debt securities as agents, 

brokers or principals. 

Debt Securities: Unsecured subordinated or unsubordinated notes, bonds and other debt 

securities issued from time to time by Freddie Mac under the Facility, or if so provided in the applicable 

Supplemental Agreement, secured obligation issued from time to time by Freddie Mac under the Facility. 

Deleverage Factor: A Multiplier of less than one by which an applicable Index is multiplied. 

Depository: DTC or any successor. 

Deposits: Deposits commencing on the applicable Reset Date. 

Designated EURIBOR Reuters Page: The display on Reuters Page EURIBOR01, or any successor 

page or such other page (or any successor page) on that service or any successor service specified in 

the applicable Supplemental Agreement for the purpose of displaying rates for Deposits in euro. 

Designated EUR-LIBOR Reuters Page: The display on Reuters Page LIBOR01 or any successor 

page or such other page (or any successor page) on that service or any successor service specified in 

the applicable Supplemental Agreement for the purpose of displaying rates for Deposits in euro. 

Designated Reuters Page: The display on Reuters Page LIBOR01 (or where the Index Currency is 

Australian dollars, Swiss francs or Yen, Page LIBOR02) or any successor page or such other page (or 

any successor page) on that service or any successor service specified in the applicable Supplemental 

Agreement for the purpose of displaying British Bankers’ Association interest settlement rates for 

Deposits in the Index Currency. 

Determination Date: The date as of which the rate of interest applicable to an Interest Reset 

Period is determined. 

Determination Period: The period from, and including, one Calculation Date to, but excluding, the 

next Calculation Date. 

DTC: The Depository Trust Company, a limited-purpose trust company, which holds securities 

for DTC participants and facilitates the clearance and settlement of transactions between DTC 

participants through electronic book-entry changes in accounts of DTC participants. 

DTC Registered Debt Securities: Registered Debt Securities registered in the name of a nominee 

of DTC, which will clear and settle through the system operated by DTC. 

EURIBOR: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(I). 

EURIBOR Determination Date: The second TARGET2 Business Day preceding the applicable 

Reset Date, unless EURIBOR is determined in accordance with Section 2.07(i)(I)(3), in which case it 

means the applicable Reset Date. 

EUR-LIBOR: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(H). 

EUR-LIBOR Determination Date: The second TARGET2 Business Day preceding the applicable 

Reset Date. 

Euroclear: Euroclear System, a depositary that holds securities for its participants and clears and 

settles transactions between its participants through simultaneous electronic book-entry delivery 

against payment. 
4

Euro Representative Amount: A principal amount of not less than the equivalent of 

U.S. $1,000,000 in euro that, in the Calculation Agent’s sole judgment, is representative for a single 

transaction in the relevant market at the relevant time. 

Euro-Zone: The region consisting of member states of the European Union that adopt the single 

currency in accordance with the Treaty. 

Event of Default: As defined in Section 7.01(a). 

Extendible Variable Rate Securities: Variable Rate Debt Securities, the maturity of which may be 

extended at a Benefical Owner’s option effective as of certain specified dates, subject to a final maturity 

date, and that bear interest at variable rates subject to different Spreads for different specified periods. 

Facility: The Global Debt Facility described in the Offering Circular dated February 15, 2018 under 

which Freddie Mac issues the Debt Securities. 

Fed Book-Entry Debt Securities: U.S. dollar denominated Debt Securities issued and maintained 

in book-entry form on the Fed Book-Entry System. 

Fed Book-Entry System: The book-entry system of the Federal Reserve Banks which provides 

book-entry holding and settlement for U.S. dollar denominated securities issued by the 

U.S. Government, certain of its agencies, instrumentalities, government-sponsored enterprises and 

international organizations of which the United States is a member. 

Federal Funds Rate (Daily): The rate determined by the Calculation Agent in accordance with 

Section 2.07(i)(N). 

Federal Funds Rate (Daily) Determination Date: The applicable Reset Date; provided, however, 

that if the Reset Date is not a Business Day, then the Federal Funds Rate (Daily) Determination Date 

means the Business Day immediately following the applicable Reset Date. 

Federal Reserve: The Board of Governors of the Federal Reserve System. 

Federal Reserve Bank: Each U.S. Federal Reserve Bank that maintains Debt Securities in bookentry form. 

Federal Reserve Banks: Collectively, the Federal Reserve Banks. 

Fiscal Agency Agreement: The Uniform Fiscal Agency Agreement between Freddie Mac and the 

FRBNY. 

Fiscal Agent: The FRBNY is fiscal agent for Fed Book-Entry Debt Securities. 

Fixed Principal Repayment Amount: An amount equal to 100% of the principal amount of a Debt 

Security, payable on the applicable Maturity Date or earlier date of redemption or repayment or a 

specified amount above or below such principal amount, as provided in the applicable Supplemental 

Agreement. 

Fixed Rate Debt Securities: Debt Securities that bear interest at a single fixed rate. 

Fixed/Variable Rate Debt Securities: Debt Securities that bear interest at a single fixed rate during 

one or more specified periods and at a variable rate determined by reference to one or more Indices, or 

otherwise, during one or more other periods. As to any such fixed rate period, the provisions of this 

Agreement relating to Fixed Rate Debt Securities shall apply, and, as to any such variable rate period, 

the provisions of this Agreement relating to Variable Rate Debt Securities shall apply. 

Floor: A minimum interest rate at which interest may accrue on a Debt Security during any 

Interest Reset Period. 
5

Freddie Mac: Federal Home Loan Mortgage Corporation, a government-sponsored enterprise 

chartered by Congress pursuant to the Freddie Mac Act. 

Freddie Mac Act: Title III of the Emergency Home Finance Act of 1970, as amended, 12 U.S.C. 

§ 1451-1459. 

FRBNY: The Federal Reserve Bank of New York. 

Global Agency Agreement: The agreement between Freddie Mac, the Global Agent and the 

Registrar. 

Global Agent: The entity selected by Freddie Mac to act as its fiscal, transfer and paying agent for 

Registered Debt Securities. 

H.15: The statistical release entitled “Statistical Release H.15, Selected Interest Rates” as 

published by the Federal Reserve, or any successor publication of the Federal Reserve available on its 

website at http://www.federalreserve.gov/releases/h15/or any successor site. 

Holder: In the case of Fed Book-Entry Debt Securities, the entity whose name appears on the 

book-entry records of a Federal Reserve Bank as Holder; in the case of Registered Debt Securities in 

global registered form, the depository, or its nominee, in whose name the Registered Debt Securities are 

registered on behalf of a related clearing system; and, in the case of Registered Debt Securities in 

definitive registered form, the person or entity in whose name such Debt Securities are registered in the 

Register. 

Holding Institutions: Entities eligible to maintain book-entry accounts with a Federal Reserve 

Bank. 

Index: LIBOR, EUR-LIBOR, EURIBOR, Prime Rate, Treasury Rate, CMT Rate, CMS Rate, or 

Federal Funds Rate (Daily) or other specified interest rate, exchange rate or other index, as the case may 

be. 

Index Currency: The currency or currency unit specified in the applicable Supplemental 

Agreement with respect to which an Index will be calculated for a Variable Rate Debt Security; provided, 

however, that if euro are substituted for such currency or currency unit, the Index Currency will be euro 

and, with respect to LIBOR, the determination provisions for EUR-LIBOR will apply to such Debt 

Securities upon such substitution. If no such currency or currency unit is specified in the applicable 

Supplemental Agreement, the Index Currency will be U.S. dollars. 

Index Maturity: The period with respect to which an Index will be calculated for a Variable Rate 

Debt Security that is specified in the applicable Supplemental Agreement. 

Interest Component: Each future interest payment, or portion thereof, due on or prior to the 

Maturity Date, or if the Debt Security is subject to redemption or repayment prior to the Maturity Date, 

the first date on which such Debt Security is subject to redemption or repayment. 

Interest Payment Date: The date or dates on which interest on Debt Securities will be payable in 

arrears. 

Interest Payment Period: Unless otherwise provided in the applicable Supplemental Agreement, 

the period beginning on (and including) the Issue Date or the most recent Interest Payment Date, as the 

case may be, and ending on (but excluding) the earlier of the next Interest Payment Date or the Principal 

Payment Date. 

Interest Reset Period: The period beginning on the applicable Reset Date and ending on the 

calendar day preceding the next Reset Date. 
6

Issue Date: The date on which Freddie Mac wires an issue of Debt Securities to Holders or other 

date specified in the applicable Supplemental Agreement. 

Leverage Factor: A Multiplier of greater than one by which an applicable Index is multiplied. 

LIBOR: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(G). 

LIBOR Determination Date: The second London Banking Day preceding the applicable Reset 

Date unless the Index Currency is Sterling, in which case it means the applicable Reset Date. 

London Banking Day: Any day on which commercial banks are open for business (including 

dealings in foreign exchange and deposits in the Index Currency) in London. 

Maturity Date: The date, one day or longer from the Issue Date, on which a Debt Security will 

mature unless extended, redeemed or repaid prior thereto. 

Mortgage Linked Amortizing Debt Securities: Amortizing Debt Securities on which Freddie Mac 

makes periodic payments of principal based on the rate of payments on referenced mortgage or 

mortgage-related assets, as described in the related Supplemental Agreement. 

Multiplier: A constant or variable number (which may be greater than or less than one) to be 

multiplied by the relevant Index for a Variable Rate Debt Security. 

Notes: Callable or non-callable, puttable or non-puttable Debt Securities with maturities of more 

than one day. 

New York Banking Day: Any day other than (a) a Saturday, (b) a Sunday, (c) a day on which 

banking institutions in the City of New York are required or permitted by law or executive order to close, 

or (d) a day on which the FRBNY is closed. 

Offering Circular: The Freddie Mac Global Debt Facility Offering Circular dated February 15, 2018 

(including any related Offering Circular Supplement) and successors thereto. 

OID Determination Date: The last day of the last accrual period ending prior to the date of the 

meeting of Holders (or, for consents not at a meeting, prior to a date established by Freddie Mac). The 

accrual period will be the same as the accrual period used by Freddie Mac to determine its deduction 

for accrued original issue discount under section 163 (e) of the Code. 

Other Registered Debt Securities: Registered Debt Securities that are not DTC Registered Debt 

Securities, that are deposited with a Common Depositary and that will clear and settle through the 

systems operated by Euroclear, Clearstream, Luxembourg and/or any such other applicable clearing 

system other than DTC. 

Pricing Supplement: A supplement to the Offering Circular that describes the specific terms of, 

and provides pricing information and other information for, an issue of Debt Securities or which 

otherwise amends, modifies or supplements the terms of the Offering Circular. 

Prime Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)(J). 

Prime Rate Determination Date: The New York Banking Day preceding the applicable Reset Date. 

Principal Component: The principal payment plus any interest payments that are either due after 

the date specified in, or are specified as ineligible for stripping in, the applicable Supplemental 

Agreement. 

Principal Financial Center: (1) with respect to U.S. dollars, Sterling, Yen and Swiss francs, the City 

of New York, London, Tokyo and Zurich, respectively; or (2) with respect to any other Index Currency, 

the city specified in the related Pricing Supplement. 
7

Principal Payment Date: The Maturity Date, or the earlier date of redemption or repayment, if any 

(whether such redemption or repayment is in whole or in part). 

Range Accrual Debt Securities: Variable Rate Debt Securities on which no interest may accrue 

during periods when the applicable Index is outside a specified range as described in the related 

Supplemental Agreement. 

Record Date: As to Registered Debt Securities issued in global form, the close of business on the 

Business Day immediately preceding such Interest Payment Date. As to Registered Debt Securities 

issued in definitive form, the fifteenth calendar day preceding an Interest Payment Date. Interest on a 

Registered Debt Security will be paid to the Holder of such Registered Debt Security as of the close of 

business on the Record Date. 

Reference Bonds: U.S. dollar denominated non-callable and non-puttable Reference Securities 

with maturities of more than ten years. 

Reference Notes: U.S. dollar denominated non-callable and non-puttable Reference Securities 

with maturities of more than one year. 

Reference Securities: Scheduled U.S. dollar denominated issues of Debt Securities in large 

principal amounts, which may be either Reference Bonds or Reference Notes. 

Register: A register of the Holders of Registered Debt Securities maintained by the Registrar. 

Registered Debt Securities: Debt Securities issued and maintained in global registered or 

definitive registered form on the books and records of the Registrar. 

Registrar: The entity selected by Freddie Mac to maintain the Register. 

Representative Amount: A principal amount of not less than U.S. $1,000,000 (or, if the Index 

Currency is other than U.S. dollars, a principal amount not less than the equivalent in the Index 

Currency) that, in the Calculation Agent’s sole judgment, is representative for a single transaction in the 

relevant market at the relevant time. 

Reset Date: The date on which a new rate of interest on a Debt Security becomes effective. 

Reuters: Reuters Group PLC or any successor service. 

Reuters USAUCTION10 Page: The display designated as “USAUCTION10” (or any successor 

page) provided by Reuters. 

Reuters USAUCTION11 Page: The display designated as “USAUCTION11” (or any successor 

page) provided by Reuters. 

Reuters US PRIME1 Page: The display designated as page “USPRIME1”’ (or any successor 

page) provided by Reuters 

Specified Currency: The currency or currency unit in which a Debt Security may be denominated 

and in which payments of principal of and interest on a Debt Security may be made. 

Specified Interest Currency: The Specified Currency provided for the payment of interest on Debt 

Securities. 

Specified Payment Currency: The term to which the Specified Interest Currency and Specified 

Principal Currency are referred collectively. 

Specified Principal Currency: The Specified Currency provided for the payment of principal on 

Debt Securities. 
8

Spread: A constant or variable percentage or number to be added to or subtracted from the 

relevant Index for a Variable Rate Debt Security. 

Step Debt Securities: Debt Securities that bear interest at different fixed rates during different 

specified periods. 

Sterling: British pounds sterling. 

Supplemental Agreement: An agreement which, as to the related issuance of Debt Securities, 

supplements the other provisions of this Agreement and identifies and establishes the particular offering 

of Debt Securities issued in respect thereof. A Supplemental Agreement may be documented by a 

supplement to this Agreement, a Pricing Supplement, a confirmation or a terms sheet. A Supplemental 

Agreement may, as to any particular issuance of Debt Securities, modify, amend or supplement the 

provisions of this Agreement in any respect whatsoever. A Supplemental Agreement shall be effective 

and binding as of its publication, whether or not executed by Freddie Mac. 

TARGET2: The Trans-European Automated Real-Time Gross Settlement Express Transfer 

payment system which utilizes a single shared platform and which was launched on November 19, 

2007. 

TARGET2 Business Day: A day on which the TARGET2 system or its successor is operating. 

Treasury Auction: The most recent auction of Treasury Bills prior to a given Reset Date. 

Treasury Bills: Direct obligations of the United States. 

Treasury Department: United States Department of the Treasury. 

Treasury Rate: The rate determined by the Calculation Agent in accordance with Section 2.07(i)

(K). 

Treasury Rate Determination Date: The day of the week in which the Reset Date falls on which 

Treasury Bills would normally be auctioned or, if no auction is held for a particular week, the first 

Business Day of that week. Treasury Bills are normally sold at auction on Monday of each week, unless 

that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except 

that the auction may be held on the preceding Friday; provided, however, that if an auction is held on 

the Friday of the week preceding the Reset Date, the Treasury Rate Determination Date will be that 

preceding Friday; and provided, further, that if the Treasury Rate Determination Date would otherwise fall 

on the Reset Date, that Reset Date will be postponed to the next succeeding Business Day. 

Variable Principal Repayment Amount: The principal amount determined by reference to one or 

more Indices or otherwise, payable on the applicable Maturity Date or date of redemption or repayment 

of a Debt Security, as specified in the applicable Supplemental Agreement. 

Variable Rate Debt Securities: Debt Securities that bear interest at a variable rate, and reset 

periodically, determined by reference to one or more Indices or otherwise. The formula for a variable rate 

may include a Spread. 

Yen: Japanese yen. 

Zero Coupon Debt Securities: Debt Securities that do not bear interest and are issued at a 

discount to their principal amount. 
9

ARTICLE II 

Authorization; Certain Terms 

Section 2.01. Authorization. 

Debt Securities shall be issued by Freddie Mac in accordance with the authority vested in Freddie 

Mac by Section 306(a) of the Freddie Mac Act. The indebtedness represented by the Debt Securities 

shall be unsecured general obligations of Freddie Mac, or, if so provided in the applicable Supplemental 

Agreement, secured obligations of Freddie Mac. Debt Securities shall be offered from time to time by 

Freddie Mac in an unlimited amount and shall be known by the designation given them, and have the 

Maturity Dates stated, in the applicable Supplemental Agreement. Freddie Mac, in its discretion and at 

any time, may offer Additional Debt Securities having the same terms and conditions as Debt Securities 

previously offered. The Debt Securities may be issued as Reference Securities, which includes 

Reference Notes and Reference Bonds, or may be issued as any other Debt Securities denominated in 

U.S. dollars or other currencies, with maturities of one day or longer and may be in the form of Notes or 

Bonds or otherwise. Issuances may consist of new issues of Debt Securities or reopenings of an 

existing issue of Debt Securities. 

Section 2.02. Other Debt Securities Issued Hereunder. 

Freddie Mac may from time to time create and issue Debt Securities hereunder which contain 

terms and conditions not specified in this Agreement. Such Debt Securities shall be governed by the 

applicable Supplemental Agreement and, to the extent that the terms of this Agreement are not 

inconsistent with Freddie Mac’s intent in creating and issuing such Debt Securities, by the terms of this 

Agreement. Such Debt Securities shall be secured or unsecured obligations of Freddie Mac. If the Debt 

Securities are secured obligations of Freddie Mac, the provisions of Article V hereof shall apply to such 

Debt Securities. 

Section 2.03. Specified Currencies and Specified Payment Currencies. 

(a) Each Debt Security shall be denominated and payable in such Specified Currency as 

determined by Freddie Mac. Fed Book-Entry Debt Securities will be denominated and payable in U.S. 

dollars only. 

(b) Except under the circumstances provided in Article VI hereof, Freddie Mac shall make payments 

of any interest on Debt Securities in the Specified Interest Currency and shall make payments of the 

principal of Debt Securities in the Specified Principal Currency. The Specified Currency for the payment 

of interest and principal with respect to any Debt Security shall be set forth in the applicable 

Supplemental Agreement. 

Section 2.04. Minimum Denominations. 

The Debt Securities shall be issued and maintained in the minimum denominations of U.S. $1,000 

and additional increments of U.S. $1,000 for U.S. dollar denominated Debt Securities, unless otherwise 

provided in the applicable Supplemental Agreement and as may be allowed or required from time to 

time by the relevant regulatory authority or any laws or regulations applicable to the relevant Specified 

Currency. In the case of Zero Coupon Debt Securities, denominations will be expressed in terms of the 

principal amount payable on the Maturity Date. 
10

Section 2.05. Maturity. 

(a) Each Debt Security shall mature on its Maturity Date, as provided in the applicable 

Supplemental Agreement, unless redeemed at the option of Freddie Mac or repaid at the option of the 

Holder prior thereto in accordance with the provisions described under Section 2.06. Debt Securities 

may be issued with minimum or maximum maturities or variable maturities allowed or required from time 

to time by the relevant regulatory or stock exchange authority or clearing systems or any laws or 

regulations applicable to the Specified Currency. 

(b) If so provided in the applicable Supplemental Agreement, certain Debt Securities may have 

provision permitting their Beneficial Owner to elect to extend the initial Maturity Date specified in such 

Supplemental Agreement, or any later date to which the maturity of such Debt Securities has been 

extended, on specified dates. However, the maturity of such Debt Securities may not be extended 

beyond the final Maturity Date specified in the Supplemental Agreement. 

(c) The principal amount payable on the Maturity Date of a Debt Security shall be a Fixed Principal 

Repayment Amount or a Variable Principal Repayment Amount, in each case as provided in the 

applicable Supplemental Agreement. 

Section 2.06. Optional Redemption and Optional Repayment. 

(a) The Supplemental Agreement for any particular issue of Debt Securities shall provide whether 

such Debt Securities may be redeemed at Freddie Mac’s option or repayable at the Holder’s option, in 

whole or in part, prior to their Maturity Date. If so provided in the applicable Supplemental Agreement, 

an issue of Debt Securities shall be subject to redemption at the option of Freddie Mac, or repayable at 

the option of the Holders, in whole or in part, on one or more specified dates, at any time on or after a 

specified date, or during one or more specified periods of time. The redemption or repayment price for 

such Debt Securities (or such part of such Debt Securities as is redeemed or repaid) shall be an amount 

provided in, or determined in a manner provided in, the applicable Supplemental Agreement, together 

with accrued and unpaid interest to the date fixed for redemption or repayment. 

(b) Unless otherwise provided in the applicable Supplemental Agreement, notice of optional 

redemption shall be given to Holders of the related Debt Securities not less than 5 Business Days prior 

to the date of redemption in the manner provided in Section 8.07. The date that we provide such notice 

constitutes the first Business Day for purposes of this minimum notice period. Freddie Mac also 

announces its intent to redeem certain Debt Securities on the Freddie Mac website at http://

www.freddiemac.com/debt/html/redemption_release.html. 

(c) In the case of a partial redemption of an issue of Fed Book-Entry Debt Securities by Freddie 

Mac, such Fed Book-Entry Debt Securities shall be redeemed pro rata. In the case of a partial 

redemption of an issue of Registered Debt Securities by Freddie Mac, one or more of such Registered 

Debt Securities shall be reduced by the Global Agent in the amount of such redemption, subject to the 

principal amount of such Registered Debt Securities after redemption remaining in an authorized 

denomination. The effect of any partial redemption of an issue of Registered Debt Securities on the 

Beneficial Owners of such Registered Debt Securities will depend on the procedures of the applicable 

clearing system and, if such Beneficial Owner is not a participant therein, on the procedures of the 

participant through which such Beneficial Owner owns its interest. 

(d) If so provided in the applicable Supplemental Agreement, certain Debt Securities shall be 

repayable, in whole or in part, by Freddie Mac at the option of the relevant Holders thereof or otherwise, 

on one or more specified dates, at any time on or after a specified date, or during one or more specified 
11

periods of time, upon terms and procedures provided in the applicable Supplemental Agreement. 

Unless otherwise provided in the applicable Supplemental Agreement, in the case of a Registered Debt 

Security, to exercise such option, the Holder shall deposit with the Global Agent (i) such Registered 

Debt Security; and (ii) a duly completed notice of optional repayment in the form obtainable from the 

Global Agent, in each case not more than the number of days nor less than the number of days 

specified in the applicable Supplemental Agreement prior to the date fixed for repayment. Unless 

otherwise specified in the applicable Supplemental Agreement, no such Registered Debt Security (or 

notice of repayment) so deposited may be withdrawn without the prior consent of Freddie Mac or the 

Global Agent. Unless otherwise provided in the applicable Supplemental Agreement, in the case of a 

Fed Book-Entry Debt Security, if the Beneficial Owner wishes to exercise such option, then the 

Beneficial Owner shall give notice thereof to Freddie Mac through the relevant Holding Institution as 

provided in the applicable Supplemental Agreement. 

(e) The principal amount payable upon redemption or repayment of a Debt Security shall be a 

Fixed Principal Repayment Amount or a Variable Principal Repayment Amount, in each case as provided 

in the applicable Supplemental Agreement. 

Section 2.07. Payment Terms of the Debt Securities. 

(a) Debt Securities shall bear interest at one or more fixed rates or variable rates or may not bear 

interest. If so provided in the applicable Supplemental Agreement, Debt Securities may be separated by 

a Holder into one or more Interest Components and Principal Components. The Offering Circular or the 

applicable Supplemental Agreement for such Debt Securities shall specify the procedure for stripping 

such Debt Securities into such Interest and Principal Components. 

(b) The applicable Supplemental Agreement shall specify the frequency with which interest, if any, 

is payable on the related Debt Securities. Interest on Debt Securities shall be payable in arrears on the 

Interest Payment Dates specified in the applicable Supplemental Agreement and on each Principal 

Payment Date. 

(c) Each issue of interest-bearing Debt Securities shall bear interest during each Interest Payment 

Period. No interest on the principal of any Debt Security will accrue on or after the Principal Payment 

Date on which such principal is repaid. 

(d) The determination by the Calculation Agent of the interest rate on, or any Index in relation to, a 

Variable Rate Debt Security and the determination of any payment on any Debt Security (or any interim 

calculation in the determination of any such interest rate, index or payment) shall, absent manifest error, 

be final and binding on all parties. If a principal or interest payment error occurs, Freddie Mac may 

correct it by adjusting payments to be made on later Interest Payment Dates or Principal Payment Dates 

(as appropriate) or in any other manner Freddie Mac considers appropriate. If the source of an Index 

changes in format, but the Calculation Agent determines that the Index source continues to disclose the 

information necessary to determine the related interest rate substantially as required, the Calculation 

Agent will amend the procedure for obtaining information from that source to reflect the changed 

format. All Index values used to determine principal or interest payments are subject to correction within 

30 days from the applicable payment. The source of a corrected value must be the same source from 

which the original value was obtained. A correction might result in an adjustment on a later date to the 

amount paid to the Holder. 
12

(e) Payments on Debt Securities shall be rounded, in the case of U.S. dollars, to the nearest cent 

or, in the case of a Specified Payment Currency other than U.S. dollars, to the nearest smallest 

transferable unit (with one-half cent or unit being rounded upwards). 

(f) In the event that any jurisdiction imposes any withholding or other tax on any payment made by 

Freddie Mac (or our agent or any other person potentially required to withhold) with respect to a Debt 

Security, Freddie Mac (or our agent or such other person) will deduct the amount required to be 

withheld from such payment, and Freddie Mac (or our agent or such other person) will not be required to 

pay additional interest or other amounts, or redeem or repay the Debt Securities prior to the applicable 

Maturity Date, as a result. 

(g) Fixed Rate Debt Securities 

Fixed Rate Debt Securities shall bear interest at a single fixed interest rate. The applicable 

Supplemental Agreement shall specify the fixed interest rate per annum on a Fixed Rate Debt Security. 

Unless otherwise specified in the applicable Supplemental Agreement, interest on a Fixed Rate Debt 

Security shall be computed on the basis of a 360-day year consisting of twelve 30-day months. 

(h) Step Debt Securities 

Step Debt Securities shall bear interest from their Issue Date to a specified date at their initial fixed 

interest rate and from that date to their Maturity Date at one or more different fixed interest rates that 

shall be prescribed as of the Issue Date. A Step Debt Security will have one or more step periods. The 

applicable Supplemental Agreement shall specify the fixed interest rate per annum payable on Step 

Debt Securities for each related period from issuance to maturity. Unless otherwise specified in the 

applicable Supplemental Agreement, interest on a Step Debt Security shall be computed on the basis of 

a 360-day year consisting of twelve 30-day months. 

(i) Variable Rate Debt Securities 

(A) Variable Rate Debt Securities shall bear interest at a variable rate determined on the basis of a 

direct or an inverse relationship to one or more specified Indices or otherwise, (x) plus or minus a 

Spread, if any, or (y) multiplied by one or more Leverage or Deleverage Factors, if any, as specified 

in the applicable Supplemental Agreement. Variable Rate Debt Securities also may bear interest in 

any other manner described in the applicable Supplemental Agreement. 

(B) Variable Rate Debt Securities may have a Cap and/or a Floor. 

(C) The applicable Supplemental Agreement shall specify the accrual method (i.e., the day count 

convention) for calculating interest or any relevant accrual factor on the related Variable Rate Debt 

Securities. The accrual method may incorporate one or more of the following defined terms: 

“Actual/360” shall mean that interest or any other relevant accrual factor shall be calculated 

on the basis of the actual number of days elapsed in a year of 360 days. 

“Actual/365 (fixed)” shall mean that interest or any other relevant accrual factor shall be 

calculated on the basis of the actual number of days elapsed in a year of 365 days, regardless of 

whether accrual or payment occurs during a calendar leap year. 

“Actual/Actual” shall mean, unless otherwise indicated in the applicable Supplemental 

Agreement, that interest or any other relevant accrual factor shall be calculated on the basis of 

(x) the actual number of days elapsed in the Interest Payment Period divided by 365, or (y) if any 

portion of the Interest Payment Period falls in a calendar leap year, (A) the actual number of days in 

that portion divided by 366 plus (B) the actual number of days in the remaining portion divided by 
13

365. If so indicated in the applicable Supplemental Agreement, “Actual/Actual” shall mean interest 

or any other relevant accrual factor shall be calculated in accordance with the definition of “Actual/

Actual” adopted by the International Securities Market Association (“Actual/Actual (ISMA)”), which 

means a calculation on the basis of the following: 

(1) where the number of days in the relevant Interest Payment Period is equal to or shorter 

than the Determination Period during which such Interest Payment Period ends, the number 

of days in such Interest Payment Period divided by the product of (A) the number of days in 

such Determination Period and (B) the number of Interest Payment Dates that would occur in 

one calendar year; or 

(2) where the Interest Payment Period is longer than the Determination Period during which 

the Interest Payment Period ends, the sum of (A) the number of days in such Interest 

Payment Period falling in the Determination Period in which the Interest Payment Period 

begins divided by the product of (X) the number of days in such Determination Period and 

(Y) the number of Interest Payment Dates that would occur in one calendar year; and (B) the 

number of days in such Interest Payment Period falling in the next Determination Period 

divided by the product of (X) the number of days in such Determination Period and (Y) the 

number of Interest Payment Dates that would occur in one calendar year. 

(D) The applicable Supplemental Agreement shall specify the frequency with which the rate of 

interest on the related Variable Rate Debt Securities shall reset. The applicable Supplemental 

Agreement also shall specify the Reset Date. If the interest rate will reset within an Interest Payment 

Period, then the interest rate in effect on the sixth Business Day preceding an Interest Payment 

Date will be the interest rate for the remainder of that Interest Payment Period and the first day of 

each Interest Payment Period also will be a Reset Date. Variable Rate Debt Securities may bear 

interest prior to the initial Reset Date at an initial interest rate, if any, specified in the applicable 

Supplemental Agreement. If so, then the first day of the first Interest Payment Period will not be a 

Reset Date. The rate of interest applicable to each Interest Reset Period shall be determined as 

provided below or in the applicable Supplemental Agreement. 

Except for a Variable Rate Debt Security as to which the rate of interest thereon is determined by 

reference to LIBOR, EUR-LIBOR, EURIBOR, Prime Rate, Treasury Rate, CMT Rate, CMS Rate, or 

Federal Funds Rate (Daily) or as otherwise set forth in the applicable Supplemental Agreement, the 

Determination Date for a Variable Rate Debt Security means the second Business Day preceding 

the Reset Date applicable to an Interest Reset Period. 

(E) If the rate of interest on a Variable Rate Debt Security is subject to adjustment within an Interest 

Payment Period, accrued interest shall be calculated by multiplying the principal amount of such 

Variable Rate Debt Security by an accrued interest factor. Unless otherwise specified in the 

applicable Supplemental Agreement, this accrued interest factor shall be computed by adding the 

interest factor calculated for each Interest Reset Period in such Interest Payment Period and 

rounding the sum to nine decimal places. The interest factor for each such Interest Reset Period 

shall be computed by (1) multiplying the number of days in the Interest Reset Period by the interest 

rate (expressed as a decimal) applicable to such Interest Reset Period; and (2) dividing the product 

by the number of days in the year referred to in the accrual method specified in the applicable 

Supplemental Agreement. 

(F) For each issue of Variable Rate Debt Securities, the Calculation Agent shall also cause the 

interest rate for the applicable Interest Reset Period and the amount of interest accrued on the 
14

minimum denomination specified for such issue to be made available to Holders as soon as 

practicable after its determination but in no event later than two Business Days thereafter. Such 

interest amounts so made available may subsequently be amended (or appropriate alternative 

arrangements made by way of adjustment) without notice in the event of an extension or 

shortening of the Interest Reset Period. 

(G) If the applicable Supplemental Agreement specifies LIBOR as the applicable Index for 

determining the rate of interest for the related Variable Rate Debt Security, the following provisions 

shall apply (unless otherwise specified in the applicable Supplemental Agreement): 

“LIBOR” shall mean, with respect to any Reset Date (in the following order of priority): 

(1) the rate (expressed as a percentage per annum) for Deposits in the Index Currency 

having the Index Maturity that appears on the Designated Reuters Page at 11:00 a.m. 

(London time) on such LIBOR Determination Date; 

(2) if such rate does not so appear pursuant to clause (1) above, the Calculation Agent shall 

request the principal London offices of four leading banks in the London interbank market 

selected by the Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not 

then acting as Calculation Agent) to provide such banks’ offered quotations (expressed as a 

percentage per annum) to prime banks in the London interbank market for Deposits in the 

Index Currency having the Index Maturity at 11:00 a.m. (London time) on such LIBOR 

Determination Date and in a Representative Amount. If at least two quotations are provided, 

LIBOR shall be the arithmetic mean (if necessary rounded upwards) of such quotations; 

(3) if fewer than two such quotations are provided as requested in clause (2) above, the 

Calculation Agent shall request four major banks in the applicable Principal Financial Center 

selected by the Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not 

then acting as Calculation Agent) to provide such banks’ offered quotations (expressed as a 

percentage per annum) to leading European banks for a loan in the Index Currency for a 

period of time corresponding to the Index Maturity, commencing on such Reset Date, at 

approximately 11:00 a.m. in the Principal Financial Center on such LIBOR Determination 

Date and in a Representative Amount. If at least two such quotations are provided, LIBOR 

shall be the arithmetic mean (if necessary rounded upwards) of such quotations; 

(4) if fewer than two such quotations are provided as requested in clause (3) above, LIBOR 

shall be LIBOR determined with respect to the Reset Date immediately preceding such Reset 

Date or, in the case of the first Reset Date, shall be the rate for Deposits in the Index 

Currency having the Index Maturity at 11:00 a.m. (London time) on the most recent London 

Banking Day preceding the related LIBOR Determination Date for which such rate shall have 

been displayed on the Designated Reuters Page with respect to Deposits commencing on 

the second London Banking Day following such date (or, if the Index Currency is Sterling, 

commencing on such date); and 

(5) if LIBOR in its present form ceases to exist and the provisions described in this 

Agreement for determining a fallback rate are found to be unreliable or result in a fallback 

rate that is not comparable to LIBOR, Freddie Mac, as the Calculation Agent, is authorized to 

designate an alternative determination method or index to LIBOR. If, prior to the time LIBOR 

may cease to exist, a new industry standard index is adopted, the Calculation Agent may 

elect, in its sole discretion, to use such standard index in lieu of LIBOR. If the Calculation 

Agent has designated an alternative determination method or index to LIBOR in accordance 
15

with the foregoing, the Calculation Agent in its sole discretion may determine the business 

day convention, the definition of business day and the interest determination date to be used 

and any other relevant methodology, including any adjustment factor needed to make such 

alternative determination method or index comparable to the LIBOR base rate, in a manner 

that is consistent with industry-accepted practices. The Calculation Agent’s designation of 

an alternative determination method or index as described herein will be final and binding on 

all parties. 

(H) If the applicable Supplemental Agreement specifies EUR-LIBOR as the applicable Index for 

determining the rate of interest for the related Variable Rate Debt Security, the following provisions 

shall apply (unless otherwise specified in the applicable Supplemental Agreement): 

“EUR-LIBOR” shall mean, with respect to any Reset Date (in the following order of priority): 

(1) the rate (expressed as a percentage per annum) for Deposits in euro having the Index 

Maturity that appears on the Designated EUR-LIBOR Reuters Page at 11:00 a.m. (London 

time) on the related EUR-LIBOR Determination Date; 

(2) if such rate does not so appear pursuant to clause (1) above, the Calculation Agent shall 

request the principal London offices of four leading banks in the London interbank market 

selected by the Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not 

then acting as Calculation Agent) to provide such banks’ offered quotations (expressed as a 

percentage per annum) to prime banks in the London interbank market for Deposits in euro 

having the Index Maturity at 11:00 a.m. (London time) on such EUR-LIBOR Determination 

Date and in a Euro Representative Amount. If at least two quotations are provided, EURLIBOR shall be the arithmetic mean (if necessary rounded upwards) of such quotations; 

(3) if fewer than two such quotations are provided as requested in clause (2) above, the 

Calculation Agent shall request four major banks in London selected by the Calculation 

Agent (after consultation with Freddie Mac, if Freddie Mac is not then acting as Calculation 

Agent) to provide such banks’ offered quotations (expressed as a percentage per annum) to 

leading European banks for a loan in euro for a period of time corresponding to the Index 

Maturity, commencing on such Reset Date, at approximately 11:00 a.m. (London time) on 

such EUR-LIBOR Determination Date and in a Euro Representative Amount. If at least two 

such quotations are provided, EUR-LIBOR shall be the arithmetic mean (if necessary 

rounded upwards) of such quotations; 

(4) if fewer than two such quotations are provided as requested in clause (3) above, EURLIBOR shall be EUR-LIBOR determined with respect to the Reset Date immediately 

preceding such Reset Date or, in the case of the first Reset Date, will be the rate for Deposits 

in euro having the Index Maturity at 11:00 a.m. (London time) on the most recent TARGET 

Business Day preceding the EUR-LIBOR Determination Date for which such rate was 

displayed on the Designated EUR-LIBOR Reuters Page for deposits starting on the second 

TARGET Business Day following such date; and 

(5) if EUR-LIBOR in its present form ceases to exist and the provisions described in this 

Agreement for determining a fallback rate are found to be unreliable or result in a fallback 

rate that is not comparable to EUR-LIBOR, Freddie Mac, as the Calculation Agent, is 

authorized to designate an alternative determination method or index to EU-LIBOR. If, prior 

to the time EU-LIBOR may cease to exist, a new industry standard index is adopted, the 

Calculation Agent may elect, in its sole discretion, to use such standard index in lieu of EU-
16

LIBOR. If the Calculation Agent has designated an alternative determination method or index 

to EU-LIBOR in accordance with the foregoing, the Calculation Agent in its sole discretion 

may determine the business day convention, the definition of business day and the interest 

determination date to be used and any other relevant methodology, including any adjustment 

factor needed to make such alternative determination method or index comparable to the 

EU-LIBOR base rate, in a manner that is consistent with industry-accepted practices. The 

Calculation Agent’s designation of an alternative determination method or index as described 

herein will be final and binding on all parties. 

(I) If the applicable Supplemental Agreement specifies EURIBOR as the applicable Index for 

determining the rate of interest for the related Variable Rate Debt Security, the following provisions 

shall apply (unless otherwise specified in the applicable Supplemental Statement): 

“EURIBOR” shall mean, with respect to a Reset Date (in the following order of priority): 

(1) the rate (expressed as a percentage per annum) for Deposits in euro having the Index 

Maturity that appears on the Designated EURIBOR Reuters Page at 11:00 a.m., Brussels 

time, on the relevant EURIBOR Determination Date; 

(2) if such rate does not so appear pursuant to clause (1) above, then the Calculation Agent 

will request the principal offices of four major banks in the Euro-Zone selected by the 

Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not then acting as 

Calculation Agent) to provide such banks’ offered quotations (expressed as a percentage per 

annum) to prime banks in the Euro-Zone interbank market for Deposits in euro having the 

Index Maturity at 11:00 a.m. Brussels time on such EURIBOR Determination Date and in a 

Euro Representative Amount. If at least two quotations are provided, EURIBOR for that date 

will be the arithmetic mean (if necessary, rounded upwards) of the quotations; 

(3) if fewer than two such quotations are provided as requested in clause (2) above, 

EURIBOR for that date will be the arithmetic mean (if necessary, rounded upwards) of the 

rates quoted by major banks in the Euro-Zone, selected by the Calculation Agent (after 

consultation with Freddie Mac, if Freddie Mac is not then acting as Calculation Agent), at 

approximately 11:00 a.m., Brussels time, on the EURIBOR Determination Date for loans in 

euro to leading European banks for a period of time corresponding to the Index Maturity and 

in a Euro Representative Amount. If at least two quotations are provided, EURIBOR for that 

date will be the arithmetic mean (if necessary, rounded upwards) of the quotations; 

(4) if fewer than two quotations are provided as requested in clause (3) above, EURIBOR will 

be EURIBOR as determined for the immediately preceding Reset Date or, in the case of the 

first Reset Date, the interest rate payable for the new Interest Reset Period will be the initial 

interest rate; and 

(5) if EURIBOR in its present form ceases to exist and the provisions described in this 

Agreement for determining a fallback rate are found to be unreliable or result in a fallback 

rate that is not comparable to EURIBOR, Freddie Mac, as the Calculation Agent, is 

authorized to designate an alternative determination method or index to EURIBOR. If, prior to 

the time EURIBOR may cease to exist, a new industry standard index is adopted, the 

Calculation Agent may elect, in its sole discretion, to use such standard index in lieu of 

EURIBOR. If the Calculation Agent has designated an alternative determination method or 

index to EURIBOR in accordance with the foregoing, the Calculation Agent in its sole 

discretion may determine the business day convention, the definition of business day and 
17

the interest determination date to be used and any other relevant methodology, including any 

adjustment factor needed to make such alternative determination method or index 

comparable to the EURIBOR base rate, in a manner that is consistent with industry-accepted 

practices. The Calculation Agent’s designation of an alternative determination method or 

index as described herein will be final and binding on all parties. 

(J) If the applicable Supplemental Agreement specifies the Prime Rate as the applicable Index for 

determining the rate of interest for the related Variable Rate Debt Securities, the following 

provisions shall apply: 

The “Prime Rate” means, with respect to any Reset Date (in the following order of priority): 

(1) the rate for the Prime Rate Determination Date, as published in H.15 or other recognized 

electronic source used for the purpose of displaying that rate opposite the caption “Bank 

prime loan”; 

(2) if the rate is not published in H.15 by 5:00 p.m., New York City time, on the Reset Date, 

then the Prime Rate will be the arithmetic mean, determined by the Calculation Agent, of the 

rates (after eliminating certain rates, as described below in this clause (2)) that appear, at 

11:00 a.m., New York City time, on the Prime Rate Determination Date, on Reuters 

USPRIME1 Page as the U.S. dollar prime rate or base lending rate of each bank appearing 

on that page; provided, that at least three rates appear. In determining the arithmetic mean: 

(i) if 20 or more rates appear, the highest five rates (or in the event of equality, five of 

the highest) and the lowest five rates (or in the event of equality, five of the lowest) will 

be eliminated, 

(ii) if fewer than 20 but 10 or more rates appear, the highest two rates (or in the event 

of equality, two of the highest) and the lowest two rates (or in the event of equality, two 

of the lowest) will be eliminated, or 

(iii) if fewer than 10 but five or more rates appear, the highest rate (or in the event of 

equality, one of the highest) and the lowest rate (or in the event of equality, one of the 

lowest) will be eliminated; 

(3) if fewer than three rates so appear on Reuters USPRIME1 Page pursuant to 

clause (2) above, then the Calculation Agent will request five major banks in the City of New 

York selected by the Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is 

not then acting as Calculation Agent) to provide a quotation of such banks’ U.S. dollar prime 

rates or base lending rates on the basis of the actual number of days in the year divided by 

360 as of the close of business on the Prime Rate Determination Date. If at least three 

quotations are provided, then the Prime Rate will be the arithmetic mean determined by the 

Calculation Agent of the quotations obtained (and, if five quotations are provided, eliminating 

the highest quotation (or in the event of equality, one of the highest) and the lowest quotation 

(or in the event of equality, one of the lowest)); 

(4) if fewer than three quotations are so provided pursuant to clause (3) above, the 

Calculation Agent will request five banks or trust companies organized and doing business 

under the laws of the United States or any state, each having total equity capital of at least 

U.S. $500,000,000 and being subject to supervision or examination by federal or state 

authority, selected by the Calculation Agent (after consultation with Freddie Mac, if Freddie 

Mac is not then acting as Calculation Agent), to provide a quotation of such banks’ or trust 
18

companies’ U.S. dollar prime rates or base lending rates on the basis of the actual number of 

days in the year divided by 360 as of the close of business on the Prime Rate Determination 

Date. In making such selection of five banks or trust companies, the Calculation Agent will 

include each bank, if any, that provided a quotation as requested in clause (3) above and 

exclude each bank that failed to provide a quotation as requested in clause (3). If at least 

three quotations are provided, then the Prime Rate will be the arithmetic mean determined by 

the Calculation Agent of the quotations obtained; and 

(5) if fewer than three quotations are so provided pursuant to clause (4) above, then the 

Prime Rate will be the Prime Rate determined for the immediately preceding Reset Date. If 

the applicable Reset Date is the first Reset Date, then the Prime Rate will be the rate 

calculated pursuant to clause (1) for the most recent New York Banking Day preceding the 

Reset Date for which such rate was published in H.15. 

(K) If the applicable Supplemental Agreement specifies the Treasury Rate as the applicable Index 

for determining the rate of interest for the related Variable Rate, the following provisions shall apply: 

The “Treasury Rate” means, with respect to any Reset Date (in the following order of priority): 

(1) the rate for the Treasury Rate Determination Date of Treasury Bills having the Index 

Maturity, as published in H.15, or other recognized electronic source used for the purpose of 

displaying that rate under the caption “U.S. government securities/Treasury bills (secondary 

market)”; 

(2) if the rate described in clause (1) above is not so published by 3.00 p.m., New York City 

time, on the Reset Date, then the rate from Treasury Auction of Treasury Bills having the 

Index Maturity, as that rate appears under the caption “INVEST RATE” on the display on 

Reuters USAUCTION10 Page or Reuters USAUCTION11 Page; 

(3) if the rate described in clause (2) above is not published by 5:00 p.m., New York City 

time, on the Reset Date, then the auction average rate for Treasury Bills having the Index 

Maturity obtained from the applicable Treasury Auction as announced by the Treasury 

Department in the form of a press release under the heading “Investment Rate” by 5:00 p.m. 

on such Reset Date; 

(4) if the rate describe in clause (3) above is not so announced by the Treasury Department 

by 5:00 p.m., New York City time, on the Reset Date, then auction average rate obtained 

from the Treasury Auction of the applicable Treasury Bills, as otherwise announced by the 

Treasury Department by 5:00 p.m., New York City time, on the Reset Date as determined by 

the Calculation Agent; 

(5) if such rate described in clause (4) is not so announced by the Treasury Department by 

5:00 p.m., New York City time, on the Reset Date, the Calculation Agent will request five 

leading primary United States government securities dealers in the City of New York selected 

by the Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not then 

acting as Calculation Agent) to provide a quotation of such dealers’ secondary market bid 

yields, as of 3:00 p.m. on the Reset Date, for Treasury Bills with a remaining maturity closest 

to the Index Maturity (or, in the event that the remaining maturities are equally close, the 

longer remaining maturity). If at least three quotations are provided, then the Treasury Rate 

will be the arithmetic mean determined by the Calculation Agent of the quotations 

obtained; and 
19

(6) if fewer than three quotations are so provided pursuant to clause (5) above, then the 

Treasury Rate for the immediately preceding Reset Date. If the applicable Reset Date is the 

first Reset Date, then the auction average rate for Treasury Bills having the Index Maturity 

from the most recent auction of Treasury Bills prior to the Reset Date for which such rate was 

announced by the Treasury Department in the form of a press release under the heading 

“Investment Rate.” 

The rate (including the auction average rate) for Treasury Bills and the secondary market bid yield 

for Treasury Bills will be obtained and expressed as a bond equivalent on the basis of a year of 365 or 

366 days, as applicable (or, if not so expressed, will be converted by the Calculation Agent to such a 

bond equivalent yield). 

(L) If the applicable Supplemental Agreement specifies the CMT Rate as the applicable Index for 

determining the rate of interest for the related Variable Rate, the following provisions shall apply: 

The “CMT Rate” means, with respect to any Reset Date (in the following order of priority): 

(1) for any CMT Determination Date, the daily rate for the Index Maturity that appears on 

page “FRBCMT” on Reuters (or any other page that replaces the FRBCMT page on that 

service or any successor service) under the heading “...Treasury Constant Maturities. Federal 

Reserve Board Release H.15...Mondays Approximately 3:45 p.m.”; 

(2) if the applicable rate described in clause (1) is not displayed on Reuters page FRBCMT at 

3:45 p.m., New York City time, on the CMT Determination Date, then the CMT Rate will be 

the Treasury constant maturity rate for the Index Maturity applicable for the CMT 

Determination Date as published in H.15; 

(3) if the CMT Rate is not determined pursuant to clause (1) and the applicable rate 

described in clause (2) does not appear in H.15 at 3:45 p.m., New York City time, on the 

CMT Determination Date, then the CMT Rate will be the Treasury constant maturity rate, or 

other U.S. Treasury rate, applicable to an Index Maturity with reference to the CMT 

Determination Date, that: 

 (i) is published by the Federal Reserve or the Treasury Department; and 

(ii) Freddie Mac has determined to be comparable to the applicable rate formerly 

displayed on Reuters page 7051 and published in H.15; 

(4) if the CMT Rate is not determined pursuant to clause (1) or (2) and the rate described in 

clause (3) above does not appear at 3:45 p.m., New York City time, on the CMT 

Determination Date, then the CMT Rate will be the yield to maturity of the arithmetic mean of 

the secondary market offered rates for U.S. Treasury securities with an original maturity of 

approximately the Index Maturity and a remaining term to maturity of no more than one year 

shorter than the Index Maturity, and in a Representative Amount, as of approximately 

3:45 p.m., New York City time, on the CMT Determination Date, as quoted by three primary 

U.S. government securities dealers in New York City that Freddie Mac selects. In selecting 

these offered rates, Freddie Mac will request quotations from five primary dealers and will 

disregard the highest quotation or, if there is equality, one of the highest and the lowest 

quotation or, if there is equality, one of the lowest. If two U.S. Treasury securities with an 

original maturity longer than the Index Maturity have remaining terms to maturity that are 

equally close to the Index Maturity, Freddie Mac will obtain quotations for the U.S. Treasury 

security with the shorter remaining term to maturity; 
20

(5) if the CMT Rate is not determined pursuant to clause (1), (2) or (3) and fewer than five but 

more than two primary dealers are quoting offered rates as described in clause (4), then the 

CMT Rate for the CMT Determination Date will be based on the arithmetic mean of the 

offered rates so obtained, and neither the highest nor the lowest of those quotations will be 

disregarded; 

(6) if the CMT Rate is not determined pursuant to clause (1), (2), (3) or (4) and two or fewer 

primary dealers are quoting offered rates as described in clause (5), then the CMT Rate will 

be the yield to maturity of the arithmetic mean of the secondary market offered rates for 

U.S. Treasury securities having an original maturity longer than the Index Maturity and a 

remaining term to maturity closest to the Index Maturity, and in a Representative Amount, as 

of approximately 3:45 p.m., New York City time, on the CMT Determination Date, as quoted 

by three primary U.S. government securities dealers in New York City that Freddie Mac 

selects. In selecting these offered rates, Freddie Mac will request quotations from five 

primary dealers and will disregard the highest quotation, or, if there is equality, one of the 

highest and the lowest quotation or, if there is equality, one of the lowest; 

(7) if the CMT Rate is not determined pursuant to clauses (1) through (6) above and fewer 

than five but more than two primary dealers are quoting offered rates as described in 

clause (6), then the CMT Rate for the CMT Determination date will be based on the 

arithmetic mean of the offered rates so obtained, and neither the highest nor the lowest of 

those quotations will be disregarded; 

(8) if the Calculation Agent obtains fewer than three quotations of the kind described in 

clause (6), the CMT Rate in effect for the new Interest Reset Period will be the CMT Rate in 

effect for the prior Interest Rate Period, or if the applicable Reset Date is the first Reset Date, 

the rate of interest payable for the new Interest Reset Period will be the initial interest rate; 

and 

(9) if the CMT Rate in its present form ceases to exist and the provisions described in this 

Agreement for determining a fallback rate are found to be unreliable or result in a fallback 

rate that is not comparable to the CMT Rate, Freddie Mac, as the Calculation Agent, is 

authorized to designate an alternative determination method or index to the CMT Rate. If, 

prior to the time the CMT Rate may cease to exist, a new industry standard index is adopted, 

the Calculation Agent may elect, in its sole discretion, to use such standard index in lieu of 

the CMT Rate. If the Calculation Agent has designated an alternative determination method 

or index to the CMT Rate in accordance with the foregoing, the Calculation Agent in its sole 

discretion may determine the business day convention, the definition of business day and 

the interest determination date to be used and any other relevant methodology, including any 

adjustment factor needed to make such alternative determination method or index 

comparable to the CMT Rate base rate, in a manner that is consistent with industryaccepted practices. The Calculation Agent’s designation of an alternative determination 

method or index as described herein will be final and binding on all parties. 

(M) If the applicable Supplemental Agreement specifies the CMS Rate as the applicable Index for 

determining the rate of interest for the related Variable Rate, the following provisions shall apply: 

The “CMS Rate” means, with respect to any Reset Date: 

(1) the most recent rate for U.S. dollar swap transactions for the applicable Index Currency 

and applicable Index Maturity, as specified in the applicable Supplemental Agreement for the 
21

Debt Securities, expressed as a percentage, which appears on the Reuters page 

“ISDAFIX1” (or such other page that may replace that page on that service or a successor 

service) at 11:00 a.m., New York City time, on the applicable CMS Determination Date; 

(2) if the most recent CMS Rate as described in clause (1) above was first available prior to 

ten calendar days before the applicable CMS Determination Date, then the CMS Rate will be 

determined by the Calculation Agent on the basis of the mid-market semi-annual swap rate 

quotations provided by the five leading swaps dealers in the New York City interbank market 

(which may include Dealers and their affiliates), and for this purpose, “mid-market semiannual swap rate” means the arithmetic mean of the bid and offered rate quotations for the 

semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating United 

States dollars denominated interest rate swap transaction with the applicable Index Currency 

and Index Maturity, as specified in the applicable Supplemental Agreement for the Debt 

Securities, commencing on the Reset Date for the relevant Interest Period, and for a relevant 

representative amount in the relevant market at the relevant time, with an acknowledged 

dealer of good credit in the swap market, where the floating leg, calculated on an Actual/

360 day count basis, is equivalent to USD-LIBOR-BBA (as defined in the 2006 ISDA 

Definitions published by the International Swaps and Derivatives Association, Inc.) with a 

designated maturity of three months. The Calculation Agent will request the principal New 

York City office of each of the five leading swaps dealers selected by the Calculation Agent 

to provide a quotation of its rate. If at least five quotations are provided, the rate for that CMS 

Determination Date will be the arithmetic mean of the quotations, eliminating the highest 

quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the 

event of equality, one of the lowest); 

(3) if two, three or four (and not five) of such swaps dealers are quoting as described in 

clause (2) above, then the CMS Rate will be based on the arithmetic mean of the bid prices 

obtained and neither the highest nor lowest of such quotations will be eliminated; 

(4) if fewer than two rate quotations are provided, then the CMS Rate for the Reset Date will 

be the CMS Rate in effect on the preceding Reset Date, or if the applicable Reset Date is the 

first Reset Date, the rate of interest payable for the new Interest Reset Period will be the 

initial interest rate; and 

(5) if the CMS Rate in its present form ceases to exist and the provisions described in this 

Agreement for determining a fallback rate are found to be unreliable or result in a fallback 

rate that is not comparable to the CMS Rate, Freddie Mac, as the Calculation Agent, is 

authorized to designate an alternative determination method or index to the CMS Rate. If, 

prior to the time the CMS Rate may cease to exist, a new industry standard index is adopted, 

the Calculation Agent may elect, in its sole discretion, to use such standard index in lieu of 

the CMS Rate. If the Calculation Agent has designated an alternative determination method 

or index to the CMS Rate in accordance with the foregoing, the Calculation Agent in its sole 

discretion may determine the business day convention, the definition of business day and 

the interest determination date to be used and any other relevant methodology, including any 

adjustment factor needed to make such alternative determination method or index 

comparable to the CMS Rate base rate, in a manner that is consistent with industryaccepted practices. The Calculation Agent’s designation of an alternative determination 

method or index as described herein will be final and binding on all parties. 
22

(N) If the applicable Supplemental Agreement specifies the Federal Funds Rate (Daily) as the 

applicable Index for determining the rate of interest for the related Variable Rate, the following provisions 

shall apply: 

The “Federal Funds Rate (Daily)” means, with respect to any Reset Date:

(1) the rate for the Business Day preceding the Federal Funds Rate (Daily) Determination 

Date for U.S. dollar federal funds, as published in the latest H.15 or other recognized 

electronic source used for the purpose of displaying that rate opposite the caption “Federal 

funds (effective)”; 

(2) if the rate specified in clause (1) is not published by 5:00 p.m., New York City time, on the 

Federal Funds Rate Determination Date, then the Calculation Agent will request five leading 

brokers (which may include the related Dealers or their affiliates) of federal funds transactions 

in the City of New York selected by the Calculation Agent (after consultation with Freddie 

Mac, if Freddie Mac is not then acting as Calculation Agent) each to provide a quotation of 

the broker’s effective rate for transactions in overnight federal funds arranged by the broker 

settling on the Business Day preceding the Federal Funds Rate (Daily) Determination Date. If 

at least two quotations are provided, then the Federal Funds Rate (Daily) will be the 

arithmetic mean determined by the Calculation Agent of the quotations obtained (and, if five 

quotations are provided, eliminating the highest quotation (or, in the event of equality, one of 

the highest) and the lowest quotation (or, in the event of equality, one of the lowest)); 

(3) if fewer than two quotations are so provided pursuant to clause (2) above, then the 

Calculation Agent will request five leading brokers (which may include the related Dealers or 

their affiliates) of federal funds transactions in the City of New York selected by the 

Calculation Agent (after consultation with Freddie Mac, if Freddie Mac is not then acting as 

Calculation Agent) each to provide a quotation of the broker’s rates for the last transaction in 

overnight federal funds arranged by the broker as of 11:00 a.m., New York City time, on the 

Business Day preceding the Federal Funds Rate (Daily) Determination Date. If at least two 

quotations are provided, then the Federal Funds Rate (Daily) will be the arithmetic mean 

determined by the Calculation Agent of the quotations obtained (and, if five quotations are 

provided, eliminating the highest quotation (or, in the event of equality, one of the highest) 

and the lowest quotation (or, in the event of equality, one of the lowest)); and 

(4) if fewer than two quotations are so provided pursuant to clause (3) above, then the 

Federal Funds Rate (Daily) as of such Federal Funds Rate (Daily) Determination Date will be 

the Federal Funds Rate (Daily) determined for the immediately preceding Reset Date. If the 

applicable Reset Date is the first Reset Date, then the rate of interest payable for the new 

Interest Rate Period will be the initial interest rate. 

(j) Fixed/Variable Rate Debt Securities 

Fixed/Variable Rate Debt Securities shall bear interest at a single fixed rate for one or more 

specified periods and at a rate determined by reference to one or more Indices, or otherwise, for one or 

more other specified periods. Fixed/Variable Rate Debt Securities also may bear interest at a rate that 

Freddie Mac may elect to convert from a fixed rate to a variable rate or from a variable rate to a fixed 

rate, if so provided in the applicable Supplemental Agreement. 
23

If Freddie Mac may convert the interest rate on a Fixed/Variable Rate Debt Security from a fixed 

rate to a variable rate, or from a variable rate to a fixed rate, accrued interest for each Interest Payment 

Period may be calculated using an accrued interest factor in the manner described in Section 2.07(i)(E). 

(k) Zero Coupon Debt Securities 

Zero Coupon Debt Securities shall not bear interest. 

(l) Amortizing Debt Securities 

Amortizing Debt Securities are those on which Freddie Mac makes periodic payments of principal 

during the terms of such Debt Securities as described in the related Supplemental Agreement. 

Amortizing Debt Securities may bear interest at fixed or variable rates. 

(m) Debt Securities with Variable Principal Repayment Amounts 

Variable Principal Repayment Amount Debt Securities are those on which the amount of principal 

payable is determined with reference to an Index specified in the related Supplemental Agreement. 

(n) Mortgage Linked Amortizing Debt Securities 

Mortgage Linked Amortizing Debt Securities are Amortizing Debt Securities on which Freddie Mac 

makes periodic payments of principal based on the rate of payments on referenced mortgage or 

mortgage-related assets, as described in the related Supplemental Agreement. Mortgage Linked 

Amortizing Debt Securities may bear interest at fixed or variable rates. 

(o) Range Accrual Debt Securities 

Range Accrual Debt Securities are Variable Rate Debt Securities on which no interest may accrue 

during periods when the applicable Index is outside a specified range as described in the related 

Supplemental Agreement. 

(p) Extendible Variable Rate Debt Securities 

Extendible Variable Rate Debt Securities’ are Variable Rate Debt Securities, the maturity of which 

may be extended at a Beneficial Owner’s option effective as of specified dates, subject to a final 

maturity date, and that bear interest at variable rates subject to different Spreads for different specified 

periods, as described in the related Supplemental Agreement. 

Section 2.08. Business Day Convention. 

Unless otherwise specified in the applicable Supplemental Agreement, in any case in which an 

Interest Payment Date or Principal Payment Date is not a Business Day, payment of any interest on or 

the principal of the Debt Securities shall not be made on such date but shall be made on the next 

Business Day with the same force and effect as if made on such Interest Payment Date or Principal 

Payment Date, as the case may be. Unless otherwise provided in the applicable Supplemental 

Agreement, no interest on such payment shall accrue for the period from and after such Interest 

Payment Date or Principal Payment Date, as the case may be, to the actual date of such payment. 

Section 2.09. Reopened Issues and Repurchases. 

Freddie Mac reserves the right, in its discretion and at any time, to offer additional Debt Securities 

which have the same terms (other than Issue Date, interest commencement date and issue price) and 

conditions as Debt Securities for which settlement has previously occurred or been scheduled so as to 

form a single series of Debt Securities as specified in the applicable Supplemental Agreement. 
24

Freddie Mac reserves the right, in its discretion and at any time, to purchase Debt Securities or 

otherwise acquire (either for cash or in exchange for securities) some or all of an issue of Debt Securities 

at any price or prices in the open market or otherwise. Such Debt Securities may be held, resold or 

canceled by Freddie Mac. 

ARTICLE III 

Form; Clearance and Settlement Procedures 

Section 3.01. Form of Fed Book-Entry Debt Securities. 

(a) General 

Fed Book-Entry Debt Securities shall be issued and maintained only on the Fed Book-Entry 

System. Fed Book-Entry Debt Securities shall not be exchangeable for definitive Debt Securities. The 

Book-Entry Rules are applicable to Fed Book-Entry Debt Securities. 

(b) Title 

Fed Book-Entry Debt Securities shall be held of record only by Holding Institutions. Such entities 

whose names appear on the book-entry records of a Federal Reserve Bank as the entities to whose 

accounts Fed Book-Entry Debt Securities have been deposited shall be the Holders of such Fed BookEntry Debt Securities. The rights of the Beneficial Owner of a Fed Book-Entry Debt Security with respect 

to Freddie Mac and the Federal Reserve Banks may be exercised only through the Holder of the Fed 

Book-Entry Debt Security. Freddie Mac and the Federal Reserve Banks shall have no direct obligation to 

a Beneficial Owner of a Fed Book-Entry Debt Security that is not also the Holder of the Fed Book-Entry 

Debt Security. The Federal Reserve Banks shall act only upon the instructions of the Holder in recording 

transfers of a Debt Security maintained on the Fed Book-Entry System. Freddie Mac and the Federal 

Reserve Banks may treat the Holders as the absolute owners of Fed Book-Entry Debt Securities for the 

purpose of making payments in respect thereof and for all other purposes, whether or not such Fed 

Book-Entry Debt Securities shall be overdue and notwithstanding any notice to the contrary. 

The Holders and each other financial intermediary holding such Fed Book-Entry Debt Securities 

directly or indirectly on behalf of the Beneficial Owners shall have the responsibility of remitting 

payments for the accounts of their customers. All payments on Fed Book-Entry Debt Securities shall be 

subject to any applicable law or regulation. 

(c) Fiscal Agent 

The FRBNY shall be the Fiscal Agent for Fed Book-Entry Debt Securities. 

In acting under the Fiscal Agency Agreement, the FRBNY shall act solely as Fiscal Agent of Freddie 

Mac and does not assume any obligation or relationship of agency or trust for or with any Holder of a 

Fed Book-Entry Debt Security. 

Section 3.02. Form of Registered Debt Securities. 

(a) General 

As specified in the applicable Supplemental Agreement, Registered Debt Securities shall be 

deposited with (i) a custodian for, and registered in the name of a nominee of, DTC, or (ii) a Common 

Depositary, and registered in the name of such Common Depositary or a nominee of such Common 

Depositary. 
25

(b) Title 

The person in whose name a Registered Debt Security is registered in the Register shall be the 

Holder of such Registered Debt Security. Beneficial interests in a Registered Debt Security shall be 

represented, and transfers thereof shall be effected, only through book-entry accounts of financial 

institutions acting on behalf of the Beneficial Owners of such Registered Debt Security, as a direct or 

indirect participant in the applicable clearing system for such Registered Debt Security. 

Freddie Mac, the Global Agent and the Registrar may treat the Holders as the absolute owners of 

Registered Debt Securities for the purpose of making payments and for all other purposes, whether or 

not such Registered Debt Securities shall be overdue and notwithstanding any notice to the contrary. 

Owners of beneficial interests in a Registered Debt Security shall not be considered by Freddie Mac, the 

Global Agent or the Registrar as the owner or Holder of such Registered Debt Security and, except as 

provided in Section 4.02(a), shall not be entitled to have Debt Securities registered in their names and 

shall not receive or be entitled to receive definitive Debt Securities. Any Beneficial Owner shall rely on 

the procedures of the applicable clearing system and, if such Beneficial Owner is not a participant 

therein, on the procedures of the participant through which such Beneficial Owner holds its interest, to 

exercise any rights of a Holder of such Registered Debt Securities. 

Payments by DTC participants to Beneficial Owners of DTC Registered Debt Securities held 

through DTC participants shall be the responsibility of such participants. Payments with respect to Other 

Registered Debt Securities held through Euroclear, Clearstream, Luxembourg or any other applicable 

clearing system shall be credited to Euroclear participants, Clearstream, Luxembourg participants or 

participants of any other applicable clearing system in accordance with the relevant system’s rules and 

procedures. 

(c) Global Agent 

In acting under the Global Agency Agreement, the Global Agent acts solely as a fiscal agent of 

Freddie Mac and does not assume any obligation or relationship of agency or trust for or with any 

Holder of a Registered Debt Security, except that any moneys held by the Global Agent for payment on 

a Registered Debt Security shall be held in trust for the Holder as provided in the Global Agency 

Agreement. 

(d) Registrar 

In acting under the Global Agency Agreement, the Registrar does not assume any obligation or 

relationship of agency or trust for, or with, any Holder of a Registered Debt Security. 

Section 3.03. Clearance and Settlement Procedures. 

(a) General 

Unless otherwise provided in the applicable Supplemental Agreement: 

(i) Most Debt Securities denominated and payable in U.S. dollars and distributed within the United 

States shall clear and settle through the Fed Book-Entry System. 

(ii) Most Debt Securities denominated and payable in U.S. dollars and distributed simultaneously 

within and outside of the United States, including all Reference Securities, shall clear and settle, 

within the United States, through the Fed Book-Entry System and, outside of the United States, 

through the systems operated by Euroclear, Clearstream, Luxembourg and/or any other designated 

clearing system. 
26

(iii) Debt Securities denominated or payable in a Specified Currency other than U.S. dollars (and 

Debt Securities denominated and payable in U.S. dollars that are not cleared and settled in 

accordance with clause (i) and (ii) above and distributed solely within the United States will clear 

and settle through the system operated by DTC. 

(iv) Debt Securities denominated or payable in a Specified Currency other than U.S. dollars (and 

Debt Securities denominated and payable in U.S. dollars that are not cleared and settled in 

accordance with clauses (i) and (ii) above) and distributed simultaneously within and outside of the 

United States shall clear and settle through the systems operated by DTC, Euroclear, Clearstream, 

Luxembourg and/or any other designated clearing system. 

(v) Debt Securities, irrespective of the Specified Currency in which such Debt Securities are 

denominated or payable, distributed solely outside of the United States shall clear and settle 

through the systems operated by Euroclear, Clearstream, Luxembourg and/or any other designated 

clearing system or, in certain cases, DTC. 

(b) Primary Distribution 

(i) General. On initial issue, Debt Securities shall be credited through one or more of the systems 

specified below or any other system specified in the applicable Supplemental Agreement. 

(ii) Federal Reserve Banks. Fed Book-Entry Debt Securities shall be issued and settled through 

the Fed-Book-Entry System in same-day funds and shall be held by designated Holding 

Institutions. After initial issue, all Fed Book-Entry Debt Securities shall continue to be held by such 

Holding Institutions in the Fed Book-Entry System unless arrangements are made for the transfer 

thereof to another Holding Institution. Fed Book-Entry Debt Securities shall not be exchangeable 

for definitive Debt Securities. 

(iii) DTC. DTC participants acting on behalf of investors holding DTC Registered Debt Securities 

through DTC shall follow the delivery practices applicable to securities eligible for DTC’s Same-Day 

Funds Settlement System. DTC Registered Debt Securities shall be credited to DTC participants’ 

securities accounts following confirmation of receipt of payment to Freddie Mac on the relevant 

Issue Date. 

(iv) Euroclear and Clearstream, Luxembourg. Investors holding Other Registered Debt Securities 

through Euroclear, Clearstream, Luxembourg or such other clearing system shall follow the 

settlement procedures applicable to conventional Eurobonds in registered form. Such Other 

Registered Debt Securities shall be credited to Euroclear, Clearstream, Luxembourg or such other 

clearing system participants’ securities accounts either on the relevant Issue Date or on the 

settlement day following the relevant Issue Date against payment in same-day funds (for value on 

the relevant Issue Date). 

(c) Secondary Market Transfers 

(i) Fed Book-Entry Debt Securities. Transfers of Fed Book-Entry Debt Securities shall take place 

only in book-entry form on the Fed Book-Entry System. Such transfers shall occur between 

Holding Institutions in accordance with the rules of the Fed Book-Entry System. 

(ii) Registered Debt Securities. Transfers of beneficial interests in Registered Debt Securities 

within the various systems that may be clearing and settling interests therein shall be made in 

accordance with the usual rules and operating procedures of the relevant system applicable to the 

Registered Debt Securities and the nature of the transfer. 
27

(iii) Freddie Mac shall not bear responsibility for the performance by any system or the 

performance of the system’s respective direct or indirect participants or accountholders of the 

respective obligations of such participants or account holders under the rules and procedures 

governing such system’s operations. 

ARTICLE IV 

Payments, Exchange for Definitive Debt Securities 

Section 4.01. Payments. 

(a) Payments on Fed Book-Entry Debt Securities 

Payments of principal of and any interest on Fed Book-Entry Debt Securities shall be made in 

U.S. dollars (except as otherwise provided in the applicable Supplemental Agreement) on the applicable 

payment dates to Holders thereof as of the end of the Business Day preceding each such payment 

date. Payments on Fed Book-Entry Debt Securities shall be made by credit of the payment amount to 

the Holders’ accounts at the relevant Federal Reserve Bank. All payments to or upon the order of a 

Holder shall be valid and effective to discharge the liability of Freddie Mac and the Fiscal Agent in 

respect of the related Fed Book-Entry Debt Securities. 

(b) Payments on Registered Debt Securities 

(i) Payments in respect of Registered Debt Securities shall be made in immediately available funds 

to DTC, Euroclear, Clearstream, Luxembourg or any other applicable clearing system, or their 

respective nominees, as the case may be, as the Holders thereof. Except as provided in Article VII 

hereof, such payments shall be made in the Specified Payment Currency. All payments to or upon 

the order of the Holder of a Registered Debt Security shall be valid and effective to discharge the 

liability of Freddie Mac in respect of such Registered Debt Security. Ownership positions within 

each system shall be determined in accordance with the normal conventions observed by such 

system. Freddie Mac, the Global Agent and the Registrar shall not have any responsibility or liability 

for any aspect of the records relating to or payments made on account of beneficial ownership 

interests in a Registered Debt Security or for maintaining, supervising or reviewing any records 

relating to such beneficial ownership interests. 

(ii) Interest on a Registered Debt Security shall be paid on the applicable Interest Payment Date. 

Such interest payment shall be made to the Holder of such Registered Debt Security as of the 

close of business on the related Record Date. The first payment of interest on any Registered Debt 

Security originally issued between a Record Date and the related Interest Payment Date shall be 

made on the Interest Payment Date following the next Record Date to the Holder on such next 

Record Date. The principal of each Registered Debt Security, together with accrued and unpaid 

interest thereon, shall be paid to the Holder thereof against presentation and surrender of such 

Registered Debt Security. 

(iii) All payments on Registered Debt Securities are subject to any applicable law or regulation. If a 

payment outside the United States is illegal or effectively precluded by exchange controls or other 

similar restrictions, payments in respect of the related Registered Debt Securities shall be made at 

the office of any paying agent in the United States. 
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Section 4.02. Exchange for Definitive Debt Securities. 

In the event that Freddie Mac issues definitive Debt Securities in exchange for Registered Debt 

Securities issued in global form, such definitive Debt Securities shall have terms identical to the 

Registered Debt Securities for which they were exchanged except as described below. 

(a) Issuance of Definitive Debt Securities 

Unless otherwise provided in the applicable Supplemental Agreement, beneficial interests in 

Registered Debt Securities issued in global form shall be subject to exchange for definitive Debt 

Securities only if such exchange is permitted by applicable law and (i) in the case of a DTC Registered 

Debt Security, DTC notifies Freddie Mac that it is no longer willing or able to discharge properly its 

responsibilities as depositary with respect to such DTC Registered Debt Security, or ceases to be a 

“clearing agency” registered under the Securities Exchange Act of 1934 (if so required), or is at any time 

no longer eligible to act as such, and in each case Freddie Mac is unable to locate a successor within 90 

calendar days of receiving notice of such ineligibility on the part of DTC; (ii) in the case of any Other 

Registered Debt Security, if all of the systems through which it is cleared or settled are closed for 

business for a continuous period of 14 calendar days (other than by reason of holidays, statutory or 

otherwise) or are permanently closed for business or have announced an intention permanently to cease 

business and in any such situations Freddie Mac is unable to locate a single successor within 90 

calendar days of such closure; or (iii) an Event of Default has occurred and continues unremedied. In 

such circumstances, Freddie Mac shall cause sufficient definitive Debt Securities to be executed and 

delivered as soon as practicable (and in any event within 45 calendar days of Freddie Mac’s receiving 

notice of the occurrence of such circumstances) to the Global Agent or its agent for completion, 

authentication and delivery to the relevant registered holders of such definitive Debt Securities. A person 

having an interest in a DTC Registered Debt Security or Other Registered Debt Security issued in global 

form shall provide Freddie Mac or the Global Agent with a written order containing instructions and such 

other information as Freddie Mac or the Global Agent may require to complete, execute and deliver such 

definitive Debt Securities in authorized denominations. 

(b) Title 

The person in whose name a definitive Debt Security is registered in the Register shall be the 

“Holder” of such definitive Debt Security. Freddie Mac, the Global Agent and the Registrar may treat the 

Holders as the absolute owners of definitive Debt Securities for the purpose of making payments and 

for all other purposes, whether or not such definitive Debt Securities shall be overdue and 

notwithstanding any notice to the contrary. 

(c) Payments 

Interest on a definitive Debt Security shall be paid on the applicable Interest Payment Date. Such 

interest payments shall be made by check mailed to the Holder thereof at the close of business on the 

Record Date preceding such Interest Payment Date at such Holder’s address appearing in the Register. 

The principal of each definitive Debt Security, together with accrued and unpaid interest thereon, shall 

be due on the Principal Payment Date (subject to the right of the Holder thereof on the related Record 

Date to receive interest due on an Interest Payment Date that is on or prior to such Principal Payment 

Date) and shall be paid against presentation and surrender of such definitive Debt Security at the offices 

of the Global Agent or other paying agent. Payments on the Principal Payment Date shall be made by 

check provided at the appropriate office of the Global Agent or other paying agent or mailed by the 

Global Agent to the Holder of such definitive Debt Security. U.S. dollar checks shall be drawn on a bank 
29

in the United States. Checks in a Specified Payment Currency other than U.S. dollars shall be drawn on 

a bank office located outside the United States. 

Notwithstanding the provisions described in the preceding paragraph relating to payments by 

check, the Holder of an aggregate principal amount of at least $10,000,000 of an issue of Debt 

Securities of which definitive Debt Securities form a part (or, in the case of a definitive Debt Security 

denominated in a Specified Currency other than U.S. dollars, the Specified Currency equivalent of at 

least $10,000,000) may elect to receive payments thereon by wire transfer of immediately available 

funds in the Specified Payment Currency to an account in such Specified Payment Currency with a 

bank designated by such Holder that is acceptable to Freddie Mac; provided, that such bank has 

appropriate facilities therefor and accepts such transfer and such transfer is permitted by any applicable 

law or regulation and will not subject Freddie Mac to any liability, requirement or unacceptable charge. 

In order for such Holder to receive such payments, the relevant paying agent (including the Global 

Agent) must receive at its office from such Holder (i) in the case of payments on an Interest Payment 

Date, a written request therefor not later than the close of business (a) on the related Record Date in the 

case of a definitive Debt Security or (b) 15 days prior to such Interest Payment Date in the case of a 

Registered Debt Security issued in the global form; or (ii) in the case of payments on the Principal 

Payment Date, a written request therefor not later than the close of business on the date 15 days prior 

to such Principal Payment Date and the related definitive Debt Security not later than two Business Days 

prior to such Principal Payment Date. Such written request must be delivered to the relevant paying 

agent (including the Global Agent) by mail, by hand delivery or by tested or authenticated telex. Any 

such request shall remain in effect until the relevant paying agent receives written notice to the contrary. 

All payments on definitive Debt Securities shall be subject to any applicable law or regulation. If a 

payment outside the United States is illegal or effectively precluded by exchange controls or similar 

restrictions, payments in respect of the related definitive Debt Securities may be made at the office of 

any paying agent in the United States. 

(d) Partial Redemption 

Definitive Debt Securities subject to redemption in part by Freddie Mac shall be selected by the 

Global Agent by lot or in such other manner as the Global Agent deems fair and appropriate, subject to 

the requirement that the principal amount of each outstanding definitive Debt Security after such 

redemption is in an authorized denomination. 

(e) Transfer and Exchange 

Definitive Debt Securities shall be presented for registration of transfer or exchange (with the form 

of transfer included thereon properly endorsed, or accompanied by a written instrument of transfer, with 

such evidence of due authorization and guaranty of signature as may be required by the Registrar, duly 

executed) at the office of the Registrar or any other transfer agent upon payment of any taxes and other 

governmental charges and other amounts, but without payment of any service charge to the Registrar or 

such transfer agent for such transfer or exchange. A transfer or exchange shall not be effective unless, 

and until, recorded in the Register. 

A transfer or exchange of a definitive Debt Security shall be effected upon satisfying the Registrar 

with regard to the documents and identity of the person making the request and subject to such 

reasonable regulations as Freddie Mac may from time to time agree with the Registrar. Such documents 

may include forms prescribed by U.S. tax authorities to establish the applicability of, or the exemption 

from, withholding or other taxes regarding the transferee Holder. Definitive Debt Securities may be 

transferred or exchanged in whole or in part only in the authorized denominations of the DTC Registered 
30

Debt Securities or Other Registered Debt Securities issued in global form for which they were 

exchanged. In the case of a transfer of a definitive Debt Security in part, a new definitive Debt Security 

in respect of the balance not transferred shall be issued to the transferor. In addition, replacement of 

mutilated, destroyed, stolen or lost definitive Debt Securities also is subject to the conditions discussed 

above with respect to transfers and exchanges generally. Each new definitive Debt Security to be issued 

upon transfer of such a definitive Debt Security, as well as the definitive Debt Security issued in respect 

of the balance not transferred, shall be mailed to such address as may be specified in the form or 

instrument of transfer at the risk of the Holder entitled thereto in accordance with the customary 

procedures of the Registrar. 

ARTICLE V 

Secured Debt Securities 

If so provided in the applicable Supplemental Agreement, the indebtedness represented by certain 

Debt Securities shall be secured obligations of Freddie Mac. In such event, the description of the 

security interest and the terms of the grant of the security interest shall be set forth in the applicable 

Supplemental Agreement. 

ARTICLE VI 

Currency Conversions 

Section 6.01. Currency Conversions for DTC Registered Debt Securities. 

(a) In the case of DTC Registered Debt Securities whose Specified Payment Currency is other than 

U.S. dollars, the Currency Exchange Bank specified in the applicable Supplemental Agreement, for 

Holders of such DTC Registered Debt Securities, shall convert any amounts paid by Freddie Mac in 

such Specified Payment Currency into U.S. dollars, unless such Holders elect to receive payments in 

such Specified Payment Currency as hereinafter described. Freddie Mac shall have no responsibility for 

the conversion of the Specified Payment Currency for such DTC Registered Debt Securities into U.S. 

dollars. 

(b) The U.S. dollar amount to be received by a Holder of a DTC Registered Debt Security in respect 

of which payments are to be converted from the Specified Payment Currency into U.S. dollars shall be 

determined by the Currency Exchange Bank in the morning of the day that would be considered the 

date for “spot” settlement of the Specified Payment Currency on the applicable payment date in 

accordance with market convention (generally two New York business days prior to such payment date) 

at the market rate determined by the Currency Exchange Bank to accomplish the conversion on such 

payment date of the aggregate amount of the Specified Payment Currency payable in respect of DTC 

Registered Debt Securities scheduled to receive payments converted into U.S. dollars. All currency 

exchange costs shall be borne by the Holders of such DTC Registered Debt Securities (and, 

accordingly, by the related Beneficial Owners) by deductions from such payments. In the event all or 

any portion of a Specified Payment Currency is not convertible into U.S. dollars, Holders of such DTC 

Registered Debt Securities shall receive payment in the Specified Payment Currency. 

(c) A Holder of a DTC Registered Debt Security to be paid in a Specified Payment Currency other 

than U.S. dollars shall have the option to receive payments of the principal of and any interest on such 

DTC Registered Debt Security in the Specified Payment Currency by notifying DTC no later than the 

date 12 days prior to such Principal Payment Date or Interest Payment date, as applicable. 
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ARTICLE VII 

Events of Default and Remedies 

Section 7.01. Events of Default. 

(a) An “Event of Default” with respect to a specific issue of Debt Securities shall consist of (i) any 

failure by Freddie Mac to pay to Holders of such Debt Securities any required payment that continues 

unremedied for 30 days; (ii) any failure by Freddie Mac to perform in any material respect any other 

covenant or agreement in this Agreement, which failure continues unremedied for 60 days after the 

giving of notice of such failure to Freddie Mac by the Holders of not less than 25% of the outstanding 

principal amount (or notional principal amount) of such Debt Securities; (iii) a court having jurisdiction in 

the premises shall enter a decree or order for relief in respect of Freddie Mac in an involuntary case 

under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a 

receiver, liquidator, assignee, custodian, or sequestrator (or other similar official) of Freddie Mac or for all 

or substantially all of its property, or order the winding up or liquidation of its affairs, and such decree or 

order shall remain unstayed and in effect for a period of 60 consecutive days; or (iv) Freddie Mac shall 

commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or 

hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any 

such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, 

trustee, custodian, or sequestrator (or other similar official) of Freddie Mac or any substantial part of its 

property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay 

its debts as they become due. 

The appointment of a conservator (or other similar official) by a regulator having jurisdiction over 

Freddie Mac, whether or not Freddie Mac consents to such appointment, will not constitute an Event of 

Default. 

Section 7.02. Rights Upon Event of Default. 

(a) As long as an Event of Default under this Agreement remains unremedied, Holders of not less 

than 50% of the outstanding principal amount (or notional principal amount) of an issue of Debt 

Securities to which such Event of Default relates may, by written notice to Freddie Mac, declare such 

Debt Securities due and payable and accelerate the maturity of such Debt Securities. Upon such 

acceleration, the principal amount of such Debt Securities and the interest accrued thereon shall be due 

and payable. 

(b) No Holder has any right under this Agreement to institute any action or proceeding at law or in 

equity or in bankruptcy or otherwise, or for the appointment of a receiver or trustee, or for any other 

remedy, unless (i) such Holder previously has given to Freddie Mac written notice of an Event of Default 

and of the continuance thereof; (ii) the Holders of not less than 50% of the outstanding principal amount 

(or notional principal amount) of an issue of Debt Securities to which such Event of Default relates have 

given written notice to Freddie Mac of such Event of Default; and (iii) such Event of Default continues 

uncured for a period of 60 days following such notice. No Holder of an issue of Debt Securities has any 

right in any manner whatsoever by virtue of or by availing itself of any provision of this Agreement to 

affect, disturb or prejudice the rights of any other such Holder, or to obtain or seek to obtain preference 

or priority over any other such Holder or to enforce any right under this Agreement, except in the 

manner provided in this Agreement and for the ratable and common benefit of all such Holders. 

(c) Prior to or after the institution of any action or proceeding relating to an issue of Debt 

Securities, the Holders of not less than 50% of the outstanding principal amount (or notional principal 
32

amount) of such Debt Securities may waive an Event of Default, whether or not it has resulted in a 

declaration of an acceleration of the maturity of such Debt Securities, and may rescind and annul any 

previously declared acceleration. 

(d) Whenever in this Agreement it is provided that the Holders of a specified percentage in 

outstanding principal amount (or notional principal amount) of an issue of Debt Securities may take any 

action (including the making of any demand or request, or the giving of any authorization, notice, 

consent or waiver), the fact that at the time of taking any such action the Holders of such specified 

percentage have joined therein may be evidenced by a writing, or any number of writings of similar 

tenor, executed by Holders in person, or by an agent or proxy appointed in writing. 

ARTICLE VIII 

Miscellaneous Provisions 

Section 8.01. Limitations on Liability of Freddie Mac and Others. 

Neither Freddie Mac nor any of its directors, officers, employees or agents shall be under any 

liability to the Holders or Beneficial Owners for any action taken, or not taken, by them in good faith 

under this Agreement or for errors in judgment. This provision will not protect Freddie Mac or any other 

related person against any liability which would otherwise be imposed by reason of willful misfeasance, 

bad faith or gross negligence or by reason of reckless disregard of obligations and duties under this 

Agreement. Freddie Mac and such related persons shall have no liability of whatever nature for special, 

indirect or consequential damages, lost profits or business, or any other liability or claim (other than for 

direct damages), even if reasonably foreseeable or Freddie Mac has been advised of the possibility of 

such loss, damage, liability or claim. 

In performing its responsibilities under this Agreement, Freddie Mac may employ agents or 

independent contractors. Except upon an Event of Default (as defined herein), Freddie Mac shall not be 

subject to the control of Holders in any manner in the discharge of its responsibilities pursuant to this 

Agreement. 

Freddie Mac shall not be under any obligation to appear in, prosecute or defend any legal action 

that is not incidental to its responsibilities under this Agreement and which in its opinion may involve it in 

any expense or liability. However, Freddie Mac may in its discretion undertake any such legal action 

which it may deem necessary or desirable in the interests of the Holders. In such event, the legal 

expenses and costs of such action shall be expenses and costs of Freddie Mac. 

Section 8.02. Binding Effect of this Agreement. 

(a) By receiving and accepting a Debt Security, each Holder, financial intermediary and Beneficial 

Owner of such Debt Security unconditionally agrees, without any signature or further manifestation of 

assent, to be bound by the terms and conditions of this Agreement, as supplemented, modified or 

amended pursuant to its terms. 

(b) This Agreement shall be binding upon and inure to the benefit of any successor to Freddie Mac. 

Section 8.03. Replacement. 

Any Registered Debt Security in definitive form that becomes mutilated, destroyed, stolen or lost 

shall be replaced by Freddie Mac at the expense of the Holder upon delivery to the Global Agent of 

evidence of the destruction, theft or loss thereof, and an indemnity satisfactory to Freddie Mac and the 

Global Agent. Upon the issuance of any substituted Registered Debt Security, Freddie Mac or the 
33

Global Agent may require the payment by the Holder of a sum sufficient to cover any taxes and 

expenses connected therewith. 

Section 8.04. Conditions to Payment, Transfer or Exchange. 

Freddie Mac, its agent or any other person potentially required to withhold with respect to 

payments on a Debt Security shall have the right to require a Holder of a Debt Security, as a condition to 

payment of principal of or interest on such Debt Security, or as a condition to transfer or exchange of 

such Debt Security, to present at such place as Freddie Mac, its agent or such other person shall 

designate a certificate in such form as Freddie Mac, its agent or such other person may from time to 

time prescribe, to enable Freddie Mac, its agent or such other person to determine its duties and 

liabilities with respect to (i) any taxes, assessments or governmental charges which Freddie Mac, any 

Federal Reserve Bank, the Global Agent or such other person, as the case may be, may be required to 

deduct or withhold from payments in respect of such Debt Security under any present or future law of 

the United States or jurisdiction therein or any regulation or interpretation of any taxing authority thereof; 

and (ii) any reporting or other requirements under such laws, regulations or interpretations. Freddie Mac, 

its agent or such other person shall be entitled to determine its duties and liabilities with respect to such 

deduction, withholding, reporting or other requirements on the basis of information contained in such 

certificate or, if no certificate shall be presented, on the basis of any presumption created by any such 

law, regulation or interpretation, and shall be entitled to act in accordance with such determination. 

Section 8.05. Amendment. 

(a) Freddie Mac may modify, amend or supplement this Agreement and the terms of an issue of 

Debt Securities, without the consent of the Holders or Beneficial Owners, (i) to cure any ambiguity, or to 

correct or supplement any defective provision or to make any other provision with respect to matters or 

questions arising under this Agreement or the terms of any Debt Security that are not inconsistent with 

any other provision of this Agreement or the Debt Security; (ii) to add to the covenants of Freddie Mac 

for the benefit of the Holders or surrender any right or power conferred upon Freddie Mac; (iii) to 

evidence the succession of another entity to Freddie Mac and its assumption of the covenants of 

Freddie Mac; (iv) to conform the terms of an issue of Debt Securities or cure any ambiguity or 

discrepancy resulting from any changes in the Book-Entry Rules or any regulation or document that are 

applicable to book-entry securities of Freddie Mac; (v) to increase the amount of an issue of Debt 

Securities as contemplated under Section 2.09; or (vi) in any other manner that Freddie Mac may 

determine and that will not adversely affect in any material respect the interests of Holders or Beneficial 

Owners at the time of such modification, amendment or supplement. 

(b) In addition, either (i) with the written consent of the Holders of at least 50% of the aggregate 

then outstanding principal amount or notional principal amount of an issue of Debt Securities affected 

thereby, excluding any such Debt Securities owned by Freddie Mac; or (ii) by the adoption of a 

resolution at a meeting of Holders at which a quorum is present, by the Holders of at least 50% of the 

aggregate then outstanding principal amount or notional principal amount of an issue of Debt Securities 

represented at such meeting, excluding any such Debt Securities owned by Freddie Mac, Freddie Mac 

may from time to time and at any time modify, amend or supplement the terms of an issue of Debt 

Securities for the purpose of adding any provisions to or changing in any manner or eliminating any 

provisions of such Debt Securities or modifying in any manner the rights of the Holders; provided, 

however, that no such modification, amendment or supplement may, without the written consent or 

affirmative vote of each Holder of a Debt Security; (A) change the Maturity Date or any Interest Payment 

Date of such Debt Security; (B) materially modify the redemption or repayment provisions, if any, relating 
34

to the redemption or repayment price of, or any redemption or repayment date or period for, such Debt 

Security; (C) reduce the principal amount of, delay the principal payment of, or materially modify the rate 

of interest or the calculation of the rate of interest on, such Debt Security; (D) in the case of Registered 

Debt Securities only, change the Specified Payment Currency of such Registered Debt Security; or 

(E) reduce the percentage of Holders whose consent or affirmative vote is necessary to modify, amend 

or supplement the terms of the relevant issue of Debt Securities. A quorum at any meeting of Holders 

called to adopt a resolution shall be Holders entitled to vote a majority of the then aggregate 

outstanding principal amount or notional principal amount of an issue of such Debt Securities called to 

such meeting and, at any reconvened meeting adjourned for lack of a quorum, 25% of the then 

aggregate outstanding principal amount or notional principal amount of such issue of Debt Securities, in 

both cases excluding any such Debt Securities owned by Freddie Mac. It shall not be necessary for the 

Holders to approve the particular form of any proposed amendment, but it shall be sufficient if such 

consent or resolution approves the substance of such change. If any modification, amendment or 

supplement of the terms of an issue of Debt Securities that have been separated into Interest and 

Principal Components requires the consent of Holders, only the Holders of the Principal Components 

will be entitled to give or withhold that consent. Holders of Interest Components will have no right to 

give or withhold such consent. 

(c) The “principal amount,” for purposes of the preceding paragraph, for a Debt Security that is a 

Zero Coupon Debt Security or for a Debt Security issued at an “issue price” of 80% or less of its 

principal amount will be equal to (i) the issue price of such Debt Security; plus (ii) the original issue 

discount that has accrued from the Issue Date of such Debt Security to the OID Determination Date; 

minus (iii) any amount considered as part of the “stated redemption price at maturity” of such Debt 

Security that has been paid from the Issue Date of such Debt Security to the OID Determination Date. 

The “principal amount,” for purposes of the second preceding paragraph, of a Debt Security whose 

Specified Principal Currency is other than U.S. dollars will be the U.S. dollar equivalent, determined on 

the Issue Date, of the principal amount (or, in the case of the Debt Securities referred to in the preceding 

paragraph, the amount determined in accordance with the provisions described in such preceding 

paragraph) of such Debt Security. The “principal amount” of a Debt Security with principal determined 

by reference to an Index will be described in the applicable Supplemental Agreement. The “principal 

amount” of a Debt Security with principal determined by reference to an Index will be described in the 

applicable Supplemental Agreement. 

(d) Freddie Mac may establish a record date for the determination of Holders entitled to vote at any 

meeting of Holders of Debt Securities, to grant any consent in respect of Debt Securities and to notice 

with respect to any such meeting or consent. 

(e) Any instrument given by or on behalf of any Holder of a Debt Security in connection with any 

consent to any such modification, amendment or supplement shall be irrevocable once given and shall 

be conclusive and binding on all subsequent Holders of such Debt Security or any Debt Security issued, 

directly or indirectly, in exchange or substitution therefor, irrespective of whether or not notation in 

regard thereto is made thereon. Any modification, amendment or supplement of this Agreement or of 

the terms of Debt Securities shall be conclusive and binding on all Holders of Debt Securities affected 

thereby, whether or not they have given such consent or were present at any meeting (unless by the 

terms of this Agreement a written consent or an affirmative vote of such Holders is required), and 

whether or not notation of such modification, amendment or supplement is made upon the Debt 

Securities. 
35

Section 8.06. Securities Acquired by Freddie Mac. 

Freddie Mac may, from time to time, repurchase or otherwise acquire (either for cash or in 

exchange for newly-issued Debt Securities) all or a portion of any issue of Debt Securities. Any Debt 

Securities owned by Freddie Mac shall have an equal and proportionate benefit under the provisions of 

this Agreement, without preference, priority or distinction as among such Debt Securities, except that in 

determining whether the Holders of the required percentage of the outstanding principal amount (or 

notional principal amount) of an issue of Debt Securities have given any required demand, authorization, 

notice, consent or waiver under this Agreement, any Debt Securities owned by Freddie Mac or any 

person directly or indirectly controlling or controlled by or under direct or indirect common control with 

Freddie Mac shall be disregarded and deemed not to be outstanding for the purpose of such 

determination. 

Section 8.07. Notice. 

(a) Any notice, demand or other communication which by any provision of this Agreement is 

required or permitted to be given to or served upon any Holder may be given or served in writing by 

deposit thereof, postage prepaid, in the mail, addressed to such Holder as such Holder’s name and 

address may appear in the records of Freddie Mac, a Federal Reserve Bank or the Registrar, as the case 

may be, or, in the case of a Holder of a Fed Book-Entry Debt Security by transmission to such Holder 

through the communication system linking the Federal Reserve Banks, or, in the case of a Holder of a 

Debt Security maintained on DTC, by transmission to such Holder through the DTC communication 

system. In the event that the Federal Reserve Banks’ communication system and/or the DTC 

communication system is unavailable, Freddie Mac may give notice to a Holder by making use of an 

alternate comparable communication system, platform or service. Such notice, demand or other 

communication to or upon any Holder shall be deemed to have been sufficiently given or made, for all 

purposes, upon mailing or transmission. 

(b) Any notice, demand or other communication which by any provision of this Agreement is 

required or permitted to be given to or served upon Freddie Mac shall be given in writing addressed 

(until another address is published by Freddie Mac) as follows: Federal Home Loan Mortgage 

Corporation, 8200 Jones Branch Drive, McLean, Virginia 22102 Attention: General Counsel and 

Secretary. Such notice, demand or other communication to or upon Freddie Mac shall be deemed to 

have been sufficiently given or made only upon actual receipt of the writing by Freddie Mac. 

Section 8.08. Governing Law. 

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE HOLDERS AND FREDDIE MAC 

WITH RESPECT TO THE DEBT SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND 

GOVERNED BY THE LAWS OF THE UNITED STATES. INSOFAR AS THERE MAY BE NO APPLICABLE 

PRECEDENT, AND INSOFAR AS TO DO SO WOULD NOT FRUSTRATE THE PURPOSES OF THE 

FREDDIE MAC ACT OR ANY PROVISION OF THIS AGREEMENT OR THE TRANSACTIONS GOVERNED 

THEREBY, THE LAWS OF THE STATE OF NEW YORK SHALL BE DEEMED REFLECTIVE OF THE LAWS 

OF THE UNITED STATES. 

Section 8.09. Headings. 

The Article, Section and Subsection headings are for convenience only and shall not affect the 

construction of this Agreement. 

FEDERAL HOME LOAN MORTGAGE CORPORATION 
Exhibit 12.1

RATIO OF EARNINGS TO FIXED CHARGES AND

RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

Year Ended December 31,

(Dollars in millions) 1Q 2018 1Q 2017 2017 2016 2015 2014 2013

Net income before income tax (expense) benefit and

cumulative effect of changes in accounting principles

$ 3,674 $ 3,321 $ 16,834 $ 11,639 $ 9,274 $ 11,002 $ 25,363

Add:

Total interest expense(1) 13,957 13,185 53,643 50,786 52,144 55,217 56,234

Interest factor in rental expenses 1 1 3 3 2 5 4

Earnings, as adjusted $ 17,632 $ 16,507 $ 70,480 $ 62,428 $ 61,420 $ 66,224 $ 81,601

Fixed charges:

Total interest expense(1) $ 13,957 13,185 $ 53,643 50,786 52,144 55,217 56,234

Interest factor in rental expenses 1 1 3 3 2 5 4

Total fixed charges $ 13,958 $ 13,186 $ 53,646 $ 50,789 $ 52,146 $ 55,222 $ 56,238

Senior preferred stock and preferred stock 

dividends(2) — 6,679 33,167 7,437 5,510 19,610 47,591

Total fixed charges including preferred stock

dividends $ 13,958 $ 19,865 $ 86,813 $ 58,226 $ 57,656 $ 74,832 $ 103,829

Ratio of earnings to fixed charges(3) 1.26 1.25 1.31 1.23 1.18 1.20 1.45

Ratio of earnings to combined fixed charges and 

preferred stock dividends(4) 1.26 — — 1.07 1.07 — —

(1) 1Q 2017 data have been revised to conform to the current presentation.

(2) Senior preferred stock and preferred stock dividends represent pre-tax earnings required to cover any senior preferred stock and preferred stock dividend 

requirements computed using our effective tax rate.

(3) Ratio of earnings to fixed charges is computed by dividing earnings, as adjusted by total fixed charges. 

(4) Ratio of earnings to combined fixed charges and preferred stock dividends is computed by dividing earnings, as adjusted by total fixed charges including preferred 

stock dividends. For the ratio to equal 1.00, earnings, as adjusted must increase by $3.4 billion, $16.3 billion, $8.6 billion and $22.2 billion for 1Q 2017 and for the 

years ended December 31, 2017, 2014, and 2013, respectively.
Exhibit 31.1

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Donald H. Layton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of the Federal Home Loan Mortgage

Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading

with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented

in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures

(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange

Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under

our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made

known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed

under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions

about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on

such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the

registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially

affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial

reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the

equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting

which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial

information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

Date: May 1, 2018

/s/ Donald H. Layton

Donald H. Layton

Chief Executive Officer
Exhibit 31.2

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, James G. Mackey, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of the Federal Home Loan Mortgage

Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading

with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all

material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented

in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures

(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange

Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under

our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made

known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed

under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions

about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on

such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the

registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially

affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial

reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the

equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting

which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial

information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

Date: May 1, 2018

/s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial Officer
Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of the 

Federal Home Loan Mortgage Corporation (the “Company”), as filed with the Securities and Exchange 

Commission on the date hereof (the “Report”), I, Donald H. Layton, Chief Executive Officer of the 

Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the 

Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company.

Date: May 1, 2018

/s/ Donald H. Layton

Donald H. Layton

Chief Executive Officer
Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of the 

Federal Home Loan Mortgage Corporation (the “Company”), as filed with the Securities and Exchange 

Commission on the date hereof (the “Report”), I, James G. Mackey, Executive Vice President – Chief 

Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 

Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company.

Date: May 1, 2018

/s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial Officer