UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Ä QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended SeptemberÄ30, 2020

or

Å TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period fromÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ to

Commission File Number: 001-34139

Federal Home Loan Mortgage Corporation 

(Exact name of registrant as specified in its charter)

FederallyÄchartered 52-0904874 8200ÄJonesÄBranchÄDrive 22102-3110 (703) 903-2000

corporation McLean, Virginia

(StateÄorÄotherÄjurisdictionÄof

incorporationÄorÄorganization)

(I.R.S.ÄEmployer

IdentificationÄNo.) (Address of principal executive offices) (Zip Code) (RegistrantÅsÄtelephoneÄnumber,including area code)

Securities registered pursuant to SectionÄ12(b) of the Act:Ä

Title of each class Trading Symbol(s) Name of each exchange on which registered

None N/A N/A

Indicate by check mark whether the registrant:Ä(1)Ähas filed all reports required to be filed by SectionÄ13 or 15(d) of the

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

required to file such reports), and (2)Ähas been subject to such filing requirements for the past 90Ädays.ÄÄÄÄÄ YesÄÄÄÄÅ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be

submitted pursuant to RuleÄ405 of RegulationÄS-T (Å232.405 of this chapter) during the preceding 12Ämonths (or for such

shorter period that the registrant was required to submit such files).ÄÄÄÄÄ Yes ÄÄ Å 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 RuleÄ12b-2 of the Exchange Act.

Large accelerated filer Ä AcceleratedÄfiler Å

Non-acceleratedÄfiler Å SmallerÄreportingÄcompany Å

Emerging growth company Å

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. Å

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

Act).ÄÄÄ YesÄÄÅÄÄÄÄNoÄ Ä 

As of OctoberÄ13, 2020, there were 650,059,292 shares of the registrantÇs common stock outstanding.
Table of Contents

Page

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1

n Introduction 1

n Market Conditions and Economic Indicators 8

n Consolidated Results of Operations 13

n Consolidated Balance Sheets Analysis 21

n Our Business Segments 22

n Risk Management 38

l Credit Risk 38

l Operational Risk 60

l Market Risk 61

n Liquidity and Capital Resources 64

n Off-Balance Sheet Arrangements 71

n Critical Accounting Policies and Estimates 72

n Conservatorship and Related Matters 74

n Regulation and Supervision 75

n Forward-Looking Statements 78

FINANCIAL STATEMENTS 81

OTHER INFORMATION 156

CONTROLS AND PROCEDURES 158

EXHIBIT INDEX 159

SIGNATURES 160

FORM 10-Q INDEX 161

Table of Contents

Freddie Mac 3Q 2020 Form 10-Q i
MD&A TABLE INDEX

Table Description Page

1 Summary of Condensed Consolidated Statements of Comprehensive Income (Loss) 13

2 Components of Net Interest Income 14

3 Analysis of Net Interest Yield 15

4 Components of Guarantee Fee Income 16

5 Components of Investment Gains (Losses), Net 17

6 Components of Mortgage Loans Gains (Losses) 17

7 Components of Investment Securities Gains (Losses) 17

8 Components of Debt Gains (Losses) 18

9 Components of Derivative Gains (Losses) 18

10 Components of Benefit (Provision) for Credit Losses 19

11 Summarized Condensed Consolidated Balance Sheets 21

12 Single-Family Guarantee Segment Financial Results 27

13 Multifamily Portfolio and Market Support 30

14 Multifamily Segment Financial Results 34

15 Capital Markets Segment Financial Results 37

16 Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax 37

17 Single-Family New Business Activity 40

18 Single-Family Credit Guarantee Portfolio CRT Issuance 41

19 Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding 42

20 Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Credit Guarantee Portfolio 43

21 Credit Enhancement Coverage by Year of Origination 43

22 Details of Single-Family Credit Enhancement Expenses and Recoveries 43

23 Reduction in Conservatorship Credit Capital as a Result of Certain CRT Transactions 44

24 Single-Family Allowance for Credit Losses Activity 45

25 Single-Family Credit Guarantee Portfolio Credit Performance Metrics 46

26 Single-Family TDR and Non-Accrual Loans 47

27 Single-Family TDR Loan Activity 48

28 Single-Family Loans in Forbearance Plans by Payment Status 50

29 Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio 50

30 Credit Quality Characteristics of Our Single-Family Loans in Forbearance Plans 50

31 Single-Family Credit Guarantee Portfolio Attribute Combinations for Higher Risk Loans 51

32 Alt-A Loans in Our Single-Family Credit Guarantee Portfolio 52

33 Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio 52

34 Single-Family Loans in Forbearance Plans Activity 54

35 Single-Family REO Activity 54

36 Current Credit Quality of Multifamily Loans Under a Forbearance Program 56

37 Multifamily Allowance for Credit Losses Activity 57

38 Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio 57

39 Level of Subordination Outstanding 57

40 Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement 58

41 Single-Family Credit Guarantee Portfolio Non-Depository Servicers 59

42 Single-Family Mortgage Insurers 59

43 PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve 61

44 Duration Gap and PVS Results 62

45 PVS-L Results Before Derivatives and After Derivatives 62

46 Earnings Sensitivity to Changes in Interest Rates 63

Table of Contents

Freddie Mac 3Q 2020 Form 10-Q ii
Table Description Page

47 Liquidity Sources 64

48 Other Investments Portfolio 65

49 Funding Sources 65

50 Other Debt Activity 66

51 Activity for Debt Securities of Consolidated Trusts Held by Third Parties 68

52 Net Worth Activity 69

53 Return on Conservatorship Capital 69

54 Forecasted House Price Growth Rates 72

55 Mortgage-Related Investments Portfolio Details 74

56 2019 Affordable Housing Goal Results 75

Table of Contents

Freddie Mac 3Q 2020 Form 10-Q iii
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, including the

effects the COVID-19 pandemic and the actions taken in response may have on our liquidity, business activities, financial

condition, and results of operations, 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

section of this Form 10-Q, the Other Information - Risk Factors section of our Form 10-Q for the quarter ended March 31,

2020, and the Business, Forward-Looking Statements, and Risk Factors sections of our Annual Report on Form 10-K

for the year ended December 31, 2019, or 2019 Annual Report.

Throughout this Form 10-Q, we use certain acronyms and terms that are defined in the Glossary of our 2019 Annual Report. 

You should read the following MD&A in conjunction with our 2019 Annual Report and our condensed consolidated financial

statements and accompanying notes for the three and nine months ended September 30, 2020 included in Financial

Statements.

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 1

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 guaranteed mortgage-related securities, which are sold in the global capital markets and transfer

interest-rate and liquidity risks to third-party investors. In addition, we transfer mortgage credit risk exposure to third-party

investors through our credit risk transfer programs, which include securities- and insurance-based offerings. 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.

COVID-19 Pandemic Response Efforts

During 3Q 2020, the COVID-19 pandemic continued to evolve both globally and domestically with significant adverse effects on

populations and economies. We remain focused on serving our mission and the crucial role we play in the U.S. housing finance

system while supporting the health and safety of our communities, customers, and staff. We continue to actively monitor the

situation and make decisions based on guidance from national, state, and local governments and public health authorities,

including the U.S. Centers for Disease Control and Prevention (CDC). While more than 95% of our staff continued to work

remotely as of September 30, 2020, a small number of staff voluntarily returned to the office in 4Q 2020.

Providing Assistance to Homeowners and Supporting the Single-Family Mortgage Market

We remain focused on making sure homeowners with Freddie Mac-owned mortgages who are directly or indirectly affected by

the COVID-19 pandemic are able to stay in their homes during this challenging time. We have announced a number of

mortgage-relief options for borrowers affected by the COVID-19 pandemic, including providing up to 12 months of mortgage

forbearance during which a borrowerÇs payments are temporarily reduced or suspended. We have also established a

foreclosure and eviction moratorium for homeowners with Freddie Mac-owned single-family mortgages, which FHFA recently

instructed us to extend until at least December 31, 2020. In addition, we have introduced a number of temporary measures to

help provide sellers with the clarity and flexibility to continue to lend in a prudent and responsible manner and to expedite loan

closings and help keep homebuyers, sellers, and appraisers safe during the COVID-19 pandemic. For additional information on

these temporary measures, see MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk.

As of September 30, 2020, 2.95% of loans in our single-family credit guarantee portfolio, based on loan count, were both in

forbearance and delinquent. All information included in this Form 10-Q related to single-family loans in forbearance is based on

information reported to us by our servicers. For the purpose of reporting delinquency rates, we report single-family loans in

forbearance as delinquent during the forbearance period to the extent that payments are past due based on the loans' original

contractual terms, irrespective of the forbearance agreement. Single-family servicers have not been required to report

forbearance information to us if the borrower continues to make payments during the forbearance period and remains in current

status. As a result, our forbearance data is limited to loans in forbearance that are past due based on the loanÇs original
contractual terms and does not include loans that are in forbearance where borrowers have continued to make payments

during the forbearance period and remain in current status. For this reason, our reported forbearance rates may be lower than

single-family forbearance rates reported by other industry participants, which generally report forbearance rates that include all

loans in forbearance, including loans where the borrower has continued to make payments during the forbearance period and

remains in current status. Effective October 1, 2020, we are requiring servicers to report to us all alternatives to foreclosure,

which include forbearance plans on all mortgages, including those that are not delinquent. For additional information on our

support of the single-family mortgage market during the COVID-19 pandemic, see MD&A - Risk Management - Credit

Risk - Single-Family Mortgage Credit Risk. 

Providing Assistance to Renters and Multifamily Borrowers and Supporting the Multifamily Mortgage Market 

We have also provided support to the multifamily mortgage market, including by offering multifamily borrowers mortgage

forbearance with the condition that they suspend all evictions during the forbearance period for renters unable to pay rent.

Under our forbearance program, multifamily borrowers with a fully performing loan as of February 1, 2020 can defer their loan

payments for up to 90 days by showing hardship as a consequence of the COVID-19 pandemic and by gaining lender approval.

In June 2020, in coordination with FHFA, we announced several supplemental forbearance relief options to assist borrowers

who have a forbearance plan in place and continue to be materially affected by the COVID-19 pandemic. These supplemental

relief options extended most of the original tenant protections and provided increased flexibility to tenants, allowing the

repayment of past due rent over time and not in a lump sum. 

As of September 30, 2020, 2.21% of the loans in our multifamily mortgage portfolio, based on UPB, were enrolled in our

forbearance program, approximately 90% of which were in their repayment period. Our credit risk exposure related to loans in

forbearance is mitigated, as approximately 84% of the total loans in our forbearance program are included in securitizations

with credit enhancement provided by subordination. We report multifamily loans in forbearance as current as long as the

borrowers are in compliance with the forbearance agreement, including the agreed upon repayment plan. Loans in forbearance

are therefore not included in our multifamily delinquency rates if the borrowers are in compliance with their forbearance

agreement. For additional information on our support of the multifamily mortgage market during the COVID-19 pandemic, see

MD&A - Risk Management - Credit Risk - Multifamily Mortgage Credit Risk. 

Business Outlook

We expect the COVID-19 pandemic to have an adverse effect on our business for the remainder of 2020 and into 2021, and

perhaps beyond. The duration and continued severity of the COVID-19 pandemic will determine the extent of the effect on our

business. The impact the pandemic has had on the economy is unprecedented, and as a result, our economic and business

forecasts are more uncertain than usual, and there are significant downside risks.

The housing market, however, is one segment of the economy that has shown signs of strength, with mortgage refinance

originations increasing significantly during YTD 2020 as many homeowners took advantage of historically low mortgage interest

rates in 2Q 2020 and 3Q 2020. We expect the low mortgage rate environment to continue during the fourth quarter of 2020

through the end of 2021. In addition, we expect the recent surge in home sales will modestly increase total annual sales in

2020, before declining in 2021. We expect fewer new homes will be available for sale in 2021 due to the slowdown in

construction driven by the COVID-19 pandemic. As housing inventory declined in 3Q 2020, house prices increased. However,

we expect full-year house price growth to moderate in 2021. 

We also anticipate that supply and demand in the multifamily housing market will be affected over the next year or two due to

the COVID-19 pandemic, which will flow through to multifamily fundamentals. The economic uncertainty for renter households,

as well as the lack of ability to move and form new households, will make it difficult to fill vacancies. We expect new

completions to slow due to the COVID-19 pandemic, which should limit new supply. The multifamily sector entered the

COVID-19 pandemic on solid ground, with below historical average vacancy rates and above average rent growth. The higher

unemployment rate resulting from the COVID-19 pandemic will cause some renters to face financial hardships. Enhanced

federal unemployment benefits, which expired at the end of July 2020, helped lessen the impact on the multifamily sector.

Since the expiration of these benefits, there has been some additional but less robust support, and without a nationwide

legislative replacement, there could be a greater impact on the multifamily sector. Some multifamily indicators, such as rent

payment collections reported by the National Multifamily Housing Council, reflect lower payment rates starting in August 2020.

Furthermore, a CDC eviction moratorium through the end of the year will affect landlords' ability to evict tenants unable to pay,

which may impact the multifamily sector in future periods. Multifamily delinquency rates could continue to increase in the near

term due to the effects of the COVID-19 pandemic. However, we currently do not expect to experience significant credit losses

given our risk transfer business model. For additional information on market and macroeconomic indicators that can affect our

business and financial results, see MD&A - Market Conditions and Economic Indicators.

Our allowance for credit losses has increased significantly during YTD 2020, and we expect single-family serious delinquency

rates and the volume of loss mitigation activity to remain elevated as a result of the COVID-19 pandemic and the forbearance

programs and foreclosure sales and eviction moratoriums we have announced. While we expect that the actions we have taken

to support the mortgage markets as a result of the COVID-19 pandemic will improve borrower outcomes, these actions may not

be as successful as we hope. In addition, we expect these actions may continue to negatively affect our financial condition and

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 2
results of operations, perhaps significantly. The ultimate success of these programs will depend on the duration and severity of

the economic downturn. For additional information, see MD&A - Risk Management - Credit Risk.

After falling sharply in 2Q 2020 due to the effects of the COVID-19 pandemic, single-family CRT issuance resumed during 3Q

2020 with broad-based investor demand, favorable economics, and strong subscription levels. Single-family CRT remains a

critical component of our business strategy, and we intend to continue to pursue our existing CRT strategies under the current

capital framework. However, the COVID-19 pandemic continues to impose uncertainties and may continue to impact our

transactions going forward. 

Our debt funding needs and debt funding costs may increase as we expect to advance significant amounts to cover principal

and interest payments to security holders for loans in forbearance and to purchase delinquent loans from securities after

borrowers exit forbearance plans. Therefore, our less liquid assets in our mortgage-related investments portfolio are likely to

increase in future periods.

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 3

Business Results

Consolidated Financial Results

Net Revenues, Net Income, and Comprehensive Income 

Net Revenues Net Income Comprehensive Income

(In billions)

3Q19 4Q19 1Q20 2Q20 3Q20

$3.4

$4.6

$2.4

$4.1

$5.1

$1.7

$2.6

$0.2

$1.8

$2.5

$1.8

$2.4

$0.6

$1.9

$2.4

n Net income was $2.5 billion for 3Q 2020, an increase of $0.8 billion, or 44%, from 3Q 2019. Comprehensive income was

$2.4 billion for 3Q 2020, an increase of $0.6 billion, or 33%, from 3Q 2019. The increases in both net income and

comprehensive income were driven by higher net revenues, partially offset by higher expected credit losses due to the

COVID-19 pandemic.

n Net revenues increased $1.7 billion, or 50%, compared to 3Q 2019, primarily due to higher net interest income and higher

investment gains (losses), net. 
Total Equity

(In billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$6.7

$9.1 $9.5

$11.4

$13.9

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 4

n Total equity was $13.9 billion as of September 30, 2020, up from $9.1 billion as of December 31, 2019.

n Pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred stock increased from

$82.2 billion on June 30, 2020 to $84.1 billion on September 30, 2020 based on the $1.9 billion increase in our Net Worth

Amount during 2Q 2020, and will increase to $86.5 billion on December 31, 2020 based on the $2.4 billion increase in our

Net Worth Amount during 3Q 2020.

Housing Market Support

Housing Market Support 

Single-family purchase borrowers Single-family refinance borrowers Multifamily rental units

(In thousands)

3Q19 4Q19 1Q20 2Q20 3Q20

299 243 217 218

340

215 310 309

609

813

296

810

171

724

111

637

201

1,028

185

1,338

We support the U.S. housing market by executing our Charter Mission to ensure credit availability for new and refinanced

single-family mortgages as well as for rental housing. We provided $361.9 billion in liquidity to the mortgage market in 3Q 2020,

which enabled the financing of 1.3 million home purchases, refinancings, or rental units. Single-family refinance activity

increased significantly compared to 3Q 2019, as borrowers took advantage of record low mortgage interest rates. 
Portfolio Balances

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 5

Guarantee Portfolio

Single-family credit guarantee portfolio - Core

(loans originated after 2008)

Single-family credit guarantee portfolio -

Legacy and relief refinance

Multifamily guarantee portfolio

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$1,654 $1,701 $1,739 $1,794

$1,928

$307

$293 $281

$267

$251

$260

$2,221

$271

$2,265

$275

$2,295

$281

$2,342

$297

$2,476

Investments Portfolio

Mortgage-related investments portfolio

Other investments portfolio

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$222 $213 $211 $194 $198

$90

$312

$103

$316

$123

$334

$155

$349

$147

$345

n Our total guarantee portfolio grew $255 billion, or 11%, from September 30, 2019 to September 30, 2020, driven by an

11% increase in our single-family credit guarantee portfolio and a 14% increase in our multifamily guarantee portfolio.

l The growth in our single-family credit guarantee portfolio continued in 3Q 2020 driven by an increase in U.S. singlefamily mortgage debt outstanding and strong business activity. Additionally, continued house price appreciation

contributed to new business acquisitions having a higher average loan size compared to older vintages that continued

to run off.

l The growth in our multifamily guarantee portfolio also continued in 3Q 2020, primarily driven by strong loan purchase

and securitization activity attributable to strong demand for multifamily loan products.

n Our total investments portfolio at September 30, 2020 increased compared to September 30, 2019, primarily due to an

increase in our other investments portfolio. 

l The increase in the other investments portfolio was driven by higher loan prepayments and higher near-term cash

needs for a higher expected single-family cash loan purchase forecast, as well as our transition to comply with

updated FHFA minimum liquidity requirements. For additional information on the updated FHFA minimum liquidity

requirements, see MD&A - Liquidity and Capital Resources. 

l In February 2019, FHFA instructed us to maintain the mortgage-related investments portfolio at or below $225 billion at

all times. In August 2020, FHFA instructed us to further limit the amount and type of assets we hold in our mortgagerelated investments portfolio. See MD&A - Conservatorship and Related Matters for additional information.
Credit Risk Transfer

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 6

Single-Family Credit Guarantee Portfolio with Credit Enhancement 

UPB Percentage

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$1,122 $1,121

$1,172

$1,103 $1,133

57% 56%

58%

54% 52%

Multifamily Mortgage Portfolio with Credit Enhancement

UPB Percentage

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$255

$267 $269 $273

$290

86% 89% 89% 87% 90%

In addition to transferring interest-rate and liquidity risk to third-party investors through our securitization activities, we have

developed innovative CRT programs that distribute mortgage credit risk to third-party investors and have transformed our

business model from one where we buy and hold credit risk to one where we buy and transfer a portion of such credit risk. Our

programmatic offerings regularly transfer a portion of the credit risk primarily on recently acquired loans, with the percentage of

our single-family credit guarantee portfolio and the percentage of our multifamily mortgage portfolio covered by credit

enhancements at 52% and 90%, respectively, as of September 30, 2020. For additional information, see MD&A -

Introduction - COVID-19 Pandemic Response Efforts - Business Outlook. See MD&A - Our Business Segments

- Single-Family Guarantee - Products and Activities and MD&A - Our Business Segments - Multifamily -

Products and Activities in our 2019 Annual Report for additional information on our credit enhancements.

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.

In connection with our entry into conservatorship, we entered into the Purchase Agreement with Treasury, under which we

issued Treasury both senior preferred stock and a warrant to purchase common stock. Our Purchase Agreement with Treasury

and the terms of the senior preferred stock affect our business activities and are 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. 

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 cash 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 September 2019 Letter Agreement, the Capital Reserve Amount is $20.0 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. This

would not affect our ability to draw funds from Treasury under the Purchase Agreement.

The September 2019 Letter Agreement also provides that the liquidation preference of the senior preferred stock will be

increased, at the end of each fiscal quarter, beginning on September 30, 2019, by an amount equal to the increase in the Net

Worth Amount, if any, during the immediately prior fiscal quarter, until the liquidation preference has increased by $17.0 billion.

See Note 2 for more information about our Purchase Agreement with Treasury.

Under the September 2019 Letter Agreement, Freddie Mac and Treasury agreed to negotiate and execute an amendment to the

Purchase Agreement that further enhances taxpayer protections by adopting covenants broadly consistent with

recommendations for administrative reform contained in Treasury's September 2019 Housing Reform Plan. For more

information regarding Treasury's Plan, see MD&A - Regulation and Supervision - Legislative and Regulatory

Developments - Treasury Housing Reform Plan in our 2019 Annual Report.

Management's Discussion and Analysis Introduction

Freddie Mac 3Q 2020 Form 10-Q 7

Draw Requests From and Dividend Payments to Treasury

At September 30, 2020, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury

under the Purchase Agreement. In addition, because our Net Worth Amount did not exceed the applicable Capital Reserve

Amount of $20.0 billion, we did not declare or pay a dividend to Treasury on the senior preferred stock during the three months

ended March 31, 2020, June 30, 2020, and September 30, 2020. The amount of available funding remaining under the

Purchase Agreement was $140.2 billion at September 30, 2020 and will be reduced by any future draws. 

The graph below shows our cumulative draw requests from Treasury and cumulative dividend payments to Treasury. The

Treasury draw request amounts reflect the total draws requested based on our quarterly net deficits for the periods presented.

Draw requests are funded in the quarter subsequent to any net deficit. The dividend payment amounts reflect the total dividend

payments made to Treasury as required by the Purchase Agreement for the periods presented. Dividend payments are currently

based on the prior quarter's Net Worth Amount. Under the Purchase Agreement, the payment of dividends does not reduce the

outstanding liquidation preference of the senior preferred stock. For more information on the conservatorship and government

support for our business, see MD&A - Conservatorship and Related Matters and Note 2 in our 2019 Annual Report.

Draw Requests From and Dividend Payments To Treasury 

Draw requests from Treasury Dividend payments to Treasury

(In billions)

2008 - 2015 2016 2017 2018 2019 YTD 3Q20 Cumulative Total

$71.3

$0.3

$71.6

$96.5

$5.0

$10.9 $4.1 $3.1

$119.7
MARKET CONDITIONS AND ECONOMIC INDICATORS

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

our business and financial results. 

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 3Q 2020 Form 10-Q 8

Interest Rates(1)

30-year PMMS SOFR

3-month LIBOR 10-year LIBOR

Quarterly Ending Rates

06/30/19 09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

3.73% 3.64% 3.74%

3.50%

3.13%

2.90%

2.40%

2.19%

1.55%

0.65%

0.08% 0.09%

2.30%

2.09%

1.91%

1.45%

0.30% 0.23%

1.96%

1.57%

1.89%

0.72% 0.64% 0.71%

(1) 30-year PMMS interest rates are as of the last week in each quarter. SOFR

interest rates are 30-day average rates. 

n The 30-year Primary Mortgage Market Survey (PMMS)

interest rate is indicative of what a consumer could

expect to be offered on a first-lien prime conventional

conforming home purchase mortgage with an LTV of

80%. Increases (decreases) in the PMMS rate typically

result in decreases (increases) in refinancing activity

and originations. 

n Changes in the 10-year LIBOR interest rate and other

benchmark rates can significantly affect the fair value

of our financial instruments. We have elected hedge

accounting for certain assets and liabilities in an effort

to reduce GAAP earnings variability attributable to

changes in benchmark interest rates.

n Changes in the 3-month LIBOR rate affect the interest

earned on our short-term investments and interest

expense on our short-term funding.

n SOFR is a benchmark rate for secured overnight dollar

denominated financing identified by certain banking

regulators and market participants as a potential

replacement for LIBOR.

n Interest rates remained at or near record lows during

3Q 2020.

Unemployment Rate and Monthly Net New Jobs

Average monthly net new jobs

(non-farm)

National unemployment rate

(as of the last month in each quarter)

3Q19 4Q19 1Q20 2Q20 3Q20

203,000 210,000

(303,000)

(4,427,000)

1,304,000

3.5% 3.5% 4.4%

11.1% 7.9%

Source: U.S. Bureau of Labor Statistics.

n Changes in 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.

n In response to the COVID-19 pandemic, many state

and local governments enacted measures designed to

curb the spread of COVID-19 that have severely

curtailed economic activity and significantly increased

unemployment levels, which may take an extended

period of time to recover.

n The unemployment rate declined to 7.9% during 3Q

2020, but total jobless claims remained elevated and a

shift from temporary to permanent unemployment and

a deterioration in the labor force participation rate

signaled underlying weakness in the labor market.
Single-Family Housing and Mortgage Market Conditions

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 3Q 2020 Form 10-Q 9

Sales of existing homes (units in thousands)

Sales of new homes (units in thousands)

Single-family house price growth rate

U.S. Single-Family Home Sales and House Prices

3Q19 4Q19 1Q20 2Q20 3Q20

5,410 5,420 5,483

4,313

6,127

698

6,108

711

6,131

701

6,184

703

5,016

973

7,100

0.3% Ä%

2.4% 2.2%

3.6%

Sources: National Association of Realtors, U.S. Census Bureau, and Freddie Mac

House Price Index.

U.S. Single-Family Mortgage Originations

(UPB in billions)

3Q19 4Q19 1Q20 2Q20 3Q20

$695

$725

$675

$975

$1,140

Source: Inside Mortgage Finance.

n Changes in house prices affect the amount of equity

that borrowers have in their homes. Borrowers with

less equity typically have higher delinquency rates. As

house prices decline, the severity of losses we incur

on defaulted loans that we hold or guarantee increases

because the amount we can recover from the property

securing the loan decreases. 

n Single-family house prices increased 3.6% during 3Q

2020, compared to an increase of 0.3% during 3Q

2019. We expect full-year 2020 house price growth to

exceed 2019 growth and moderate in 2021. The full

effect of the COVID-19 pandemic on house prices is

uncertain and dependent on the pandemic's economic

impact and the pace of economic recovery.

n For full-year 2020,we expect a modest increase in U.S.

single-family home purchase volume, while the low

mortgage interest rate environment has led to a

significant increase in refinance originations. Freddie

Mac's single-family loan purchase volumes generally

follow a similar trend.

n U.S. single-family mortgage origination volume

increased to $1.1 trillion in 3Q 2020 from $695 billion

in 3Q 2019, driven by higher refinance volume as a

result of lower average mortgage interest rates in

recent quarters.

n We expect the low mortgage rate environment to

continue and result in high levels of refinance activity

through the remainder of 2020, before declining in

2021.
Multifamily Housing and Mortgage Market Conditions

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 3Q 2020 Form 10-Q 10

Apartment vacancy rates

Change in effective rents

Apartment Vacancy Rates and Change in Effective Rents

3Q19 4Q19 1Q20 2Q20 3Q20

4.6% 4.7% 4.8% 4.9% 5.0%

1.1%

0.5% 0.5%

(0.4)%

(1.9)%

Source: Reis. 

Apartment Completions and Net Absorption

Completions Net absorption

(Units in thousands)

3Q19 4Q19 1Q20 2Q20 3Q20

58

52

42

38

33

55

36

31

15

Source: Reis. 3Q 2020 net absorption data is not yet available.

n Completions in 3Q 2020 totaled just under 33,000

units, the lowest level since 1Q 2014, due to the

COVID-19 pandemic slowing construction. The

vacancy rate increased slightly to 5.0% nationally. This

rate is below the long-term average vacancy rate of

5.4% dating back to 2000, but it is anticipated to rise

as COVID-19 relief programs and eviction moratoriums

expire.

n 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) decreased

by 1.9% in 3Q 2020. Annual rents decreased 1.3% as

a result of the weakening macroeconomy and labor

market due to the COVID-19 pandemic.

 

n Both supply and demand for rental housing will be

affected over the next year or two due to the

COVID-19 pandemic, which will flow through to

multifamily fundamentals. The economic uncertainty

for renter households, as well as the lack of ability to

move and form new households, will make it difficult

to fill vacancies. New completions are expected to

slow, which should limit new supply.

n The multifamily sector entered the COVID-19

pandemic on solid ground, with below historical

average vacancy rates and above average rent growth.

The higher unemployment rate resulting from the

COVID-19 pandemic will cause some renters to face

financial hardships. Enhanced federal unemployment

benefits, which expired at the end of July 2020, helped

lessen the impact on the multifamily sector. Since the

expiration of these benefits, there has been some

additional but less robust support, and without a

nationwide legislative replacement, there could be a

greater impact on the multifamily sector in future

periods.
Mortgage Debt Outstanding

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 3Q 2020 Form 10-Q 11

Single-Family Mortgage Debt Outstanding 

U.S. single-family mortgage debt outstanding

Freddie Mac share

(UPB in billions)

2Q19 3Q19 4Q19 1Q20 2Q20

$10,984 $11,086 $11,158 $11,219 $11,304

18% 18% 18% 18% 18%

Source: Federal Reserve Financial Accounts of the United States of America. 3Q

2020 U.S. single-family mortgage debt outstanding data is not yet available.

 Multifamily Mortgage Debt Outstanding

U.S. multifamily mortgage debt outstanding

Freddie Mac share

(UPB in billions)

2Q19 3Q19 4Q19 1Q20 2Q20

$1,530

$1,578

$1,618 $1,637 $1,672

18% 18% 18% 18% 18%

Source: Federal Reserve Financial Accounts of the United States of America. 3Q

2020 U.S. multifamily mortgage debt outstanding data is not yet available.

n During 3Q 2020, the single-family mortgage market

grew primarily driven by house price appreciation.

However, the length and severity of the economic

downturn caused by the COVID-19 pandemic, and its

impact on the housing market, is subject to significant

uncertainty.

n Prior to March 2020, multifamily market fundamentals

were driven by a healthy job market, population

growth, high propensity to rent among young adults,

and rising single-family house prices. Since then, the

effects of the COVID-19 pandemic have slowed the

economy significantly, which we believe could

negatively affect the multifamily mortgage market

during the remainder of 2020.
Delinquency Rates

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 3Q 2020 Form 10-Q 12

Total mortgage market

Freddie Mac

Single-Family Serious Delinquency Rates

3Q19 4Q19 1Q20 2Q20 3Q20

1.81% 1.76% 1.67%

4.26%

0.61% 0.63% 0.60%

2.48%

3.04%

Source: National Delinquency Survey from the Mortgage Bankers Association.

3Q 2020 total mortgage market rate is not yet available.

Freddie Mac

Multifamily CMBS market

FDIC insured institutions

ACLI investment bulletin

Multifamily Delinquency Rates

3Q19 4Q19 1Q20 2Q20 3Q20

0.04%

0.08% 0.08% 0.10%

0.13%

1.13%

0.91%

1.05%

1.56%

1.76%

0.12% 0.11% 0.12%

0.19%

0.09% 0.08% 0.08% 0.10%

Source: Freddie Mac, FDIC Quarterly Banking Profile, Intex Solutions, Inc., and

Wells Fargo Securities (Multifamily CMBS market, excluding REOs), American

Council of Life Insurers (ACLI). The 3Q 2020 delinquency rates for FDIC insured

institutions and ACLI investment bulletin are not yet available.

n Our single-family serious delinquency rate is based on

the number of loans in our single-family guarantee

portfolio that are three monthly payments or more past

due or in the process of foreclosure. We report singlefamily loans in forbearance as delinquent during the

forbearance period to the extent that payments are

past due based on the loans' original contractual

terms, irrespective of the forbearance agreement. 

n Our single-family serious delinquency rate was higher

as of September 30, 2020 compared to September 30,

2019, driven by loans in forbearance due to the

COVID-19 pandemic. However, 54% of the seriously

delinquent loans at September 30, 2020 were covered

by credit enhancements designed to reduce our credit

risk exposure.

n We expect our single-family serious delinquency rate

to remain elevated as a result of the COVID-19

pandemic and the forbearance programs we are

offering in response.

n Our multifamily delinquency rate is based on the UPB

of loans in our multifamily mortgage portfolio that are

two monthly payments or more past due or in the

process of foreclosure. We report multifamily loans in

forbearance as current as long as the borrowers are in

compliance with their forbearance agreement,

including the agreed upon repayment plan. Loans in

forbearance are therefore not included in our

multifamily delinquency rate if the borrowers are in

compliance with the forbearance agreement.

n Our multifamily delinquency rate was higher as of

September 30, 2020 compared to September 30,

2019, due to the effects of the COVID-19 pandemic,

but remains low compared to other market

participants, primarily due to our prior-approval

underwriting approach. See Risk Management -

Credit Risk - Multifamily Mortgage Credit Risk

for additional information on our delinquency and

forbearance rates.

n Multifamily delinquency rates could increase further in

the near term due to the continuing effects of the

COVID-19 pandemic. However, we currently do not

expect to experience significant credit losses given our

risk transfer business model.
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. 

On January 1, 2020, we adopted CECL, which changed our methodology for accounting for credit losses on financial assets

measured at amortized cost, off-balance sheet credit exposures, and investments in debt securities classified as available-forsale. See Note 1 for additional information on our adoption of CECL. See Note 4, Note 5, Note 6, and Note 7 for additional

information on the changes in our significant accounting policies as a result of our adoption of CECL.

The table below compares our summarized consolidated results of operations. Certain prior period amounts have been revised

to conform to the current period presentation. See Note 1 in our 2019 Annual Report for additional information.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 13

Table 1 - Summary of Condensed Consolidated Statements of Comprehensive Income (Loss)

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Net interest income $3,457 $2,410 $1,047 43% $9,118 $8,490 $628 7 %

Guarantee fee income 315 280 35 13 1,161 850 311 37

Investment gains (losses), net 1,122 568 554 98 957 (83) 1,040 1,253

Other income (loss) 172 121 51 42 401 247 154 62

Net revenues 5,066 3,379 1,687 50 11,637 9,504 2,133 22

Benefit (provision) for credit losses (327) 179 (506) (283) (2,265) 474 (2,739) (578)

Credit enhancement expense (267) (197) (70) (36) (731) (536) (195) (36)

Expected credit enhancement

recoveries 20 Ä 20 Ä 708 42 666 1,586

REO operations expense (40) (58) 18 31 (139) (172) 33 19

Credit-related expense (614) (76) (538) (708) (2,427) (192) (2,235) (1,164)

Administrative expense (641) (620) (21) (3) (1,829) (1,817) (12) (1)

Temporary Payroll Tax Cut Continuation

Act of 2011 expense (467) (408) (59) (14) (1,341) (1,197) (144) (12)

Other expense (237) (139) (98) (71) (480) (499) 19 4

Operating expense (1,345) (1,167) (178) (15) (3,650) (3,513) (137) (4)

Income (loss) before income tax

(expense) benefit 3,107 2,136 971 45 5,560 5,799 (239) (4)

Income tax (expense) benefit (644) (427) (217) (51) (1,147) (1,177) 30 3

Net income (loss) 2,463 1,709 754 44 4,413 4,622 (209) (5)

Total other comprehensive income (loss),

net of taxes and reclassification

adjustments

(14) 139 (153) (110) 596 717 (121) (17)

Comprehensive income (loss) $2,449 $1,848 $601 33% $5,009 $5,339 ($330) (6)%
Net Revenues

Net Interest Income

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 14

The table below presents the components of net interest income.

Table 2 - Components of Net Interest Income

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Guarantee portfolio net interest income:

Contractual net interest income $1,290 $943 $347 37% $3,469 $2,751 $718 26%

Net interest income related to the Temporary

Payroll Tax Cut Continuation Act of 2011 480 405 75 19 1,363 1,172 191 16

Amortization 1,243 564 679 120 2,543 1,521 1,022 67

Total guarantee portfolio net interest income 3,013 1,912 1,101 58 7,375 5,444 1,931 35

Investments portfolio net interest income:

Contractual net interest income 1,498 1,439 59 4 4,391 4,578 (187) (4)

Amortization (191) (149) (42) (28) (533) (419) (114) (27)

Interest expense related to CRT debt (173) (275) 102 37 (600) (851) 251 29

Total investments portfolio net interest

income 1,134 1,015 119 12 3,258 3,308 (50) (2)

Income (expense) from hedge accounting (690) (517) (173) (33) (1,515) (262) (1,253) (478)

Net interest income $3,457 $2,410 $1,047 43% $9,118 $8,490 $628 7%

Key Drivers:

n Guarantee portfolio contractual net interest income 

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Increased primarily due to a higher contractual guarantee fee rate

coupled with the continued growth of the core single-family guarantee portfolio.

n Guarantee portfolio amortization

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Increased primarily due to higher upfront fee income recognition

as a result of the record low mortgage interest rate environment.

n Investments portfolio contractual net interest income 

l 3Q 2020 vs. 3Q 2019 - Increased primarily due to lower funding costs, partially offset by a change in our investment

mix as the other investments portfolio represented a larger percentage of our total investments portfolio.

l YTD 2020 vs. YTD 2019 - Decreased primarily due to a change in our investment mix as the other investments

portfolio represented a larger percentage of our total investments portfolio, partially offset by lower funding costs.

n Investments portfolio amortization

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Expense increased primarily due to the change in our investment

mix driven by our mortgage-related investments and other investments portfolios.

n Interest expense related to CRT debt

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Decreased primarily due to a decline in volume as we no longer

issue STACR debt notes on a regular basis.

n Income (expense) from hedge accounting

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs YTD 2019 - Expense increased primarily due to amortization of hedge

accounting-related basis adjustments, partially offset by a favorable earnings mismatch and higher income related to

accruals of periodic cash settlements on derivatives in hedging relationships.
Net Interest Yield Analysis

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 15

The tables below present an analysis of interest-earning assets and interest-bearing liabilities. 

Table 3 - Analysis of Net Interest Yield

3Q 2020 3Q 2019

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)

Average

Rate

Average

Balance

Interest

Income

(Expense)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $21,789 $3 0.04 % $10,313 $72 2.75 %

Securities purchased under agreements to resell 105,371 34 0.13 54,238 322 2.37

Secured lending 5,063 19 1.49 3,750 32 3.35

Mortgage-related securities:

Mortgage-related securities 101,312 1,060 4.18 133,278 1,435 4.31

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (57,681) (462) (3.20) (87,159) (883) (4.05)

Total mortgage-related securities, net 43,631 598 5.48 46,119 552 4.79

Non-mortgage-related securities 31,503 61 0.77 24,377 134 2.19

Loans held by consolidated trusts(1) 2,068,911 13,351 2.58 1,892,375 15,541 3.28

Loans held by Freddie Mac(1) 99,800 783 3.14 88,706 887 4.00

Total interest-earning assets 2,376,068 14,849 2.50 2,119,878 17,540 3.31

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

FreddieÅMac 2,103,546 (11,309) (2.15) 1,916,417 (14,207) (2.97)

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (57,681) 462 3.20 (87,159) 883 4.05

Total debt securities of consolidated trusts held by third

parties 2,045,865 (10,847) (2.12) 1,829,258 (13,324) (2.91)

Other debt:

Short-term debt 61,290 (38) (0.25) 85,980 (499) (2.28)

Long-term debt 232,682 (507) (0.87) 195,530 (1,307) (2.65)

Total other debt 293,972 (545) (0.74) 281,510 (1,806) (2.54)

Total interest-bearing liabilities 2,339,837 (11,392) (1.95) 2,110,768 (15,130) (2.86)

Impact of net non-interest-bearing funding 36,231 Ä 0.03 9,110 Ä 0.01

Total funding of interest-earning assets 2,376,068 (11,392) (1.92) 2,119,878 (15,130) (2.85)

Net interest income/yield $3,457 0.58 % $2,410 0.46 %

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $1.3 billion and $922 million for loans held by consolidated trusts

and $27 million and $49 million for loans held by Freddie Mac during 3Q 2020 and 3Q 2019, respectively.
YTD 2020 YTD 2019

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)

Average

Rate

Average

Balance

Interest

Income

(Expense)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $17,559 $27 0.20% $8,608 $156 2.40%

Securities purchased under agreements to resell 90,968 325 0.48 52,398 968 2.46

Secured lending 4,439 65 1.95 2,547 72 3.73

Mortgage-related securities:

Mortgage-related securities 115,979 3,643 4.19 133,585 4,369 4.36

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (72,079) (1,963) (3.63) (86,341) (2,687) (4.15)

Total mortgage-related securities, net 43,900 1,680 5.11 47,244 1,682 4.74

Non-mortgage-related securities 30,584 268 1.16 21,571 378 2.33

Loans held by consolidated trusts(1) 2,008,674 43,468 2.89 1,869,628 48,895 3.49

Loans held by Freddie Mac(1) 88,773 2,324 3.49 88,191 2,837 4.29

Total interest-earning assets 2,284,897 48,157 2.81 2,090,187 54,988 3.51

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

FreddieÅMac 2,038,407 (38,232) (2.50) 1,894,109 (43,688) (3.08)

Extinguishment of debt securities of consolidated trusts held

by Freddie Mac (72,079) 1,963 3.63 (86,341) 2,687 4.15

Total debt securities of consolidated trusts held by third

parties 1,966,328 (36,269) (2.46) 1,807,768 (41,001) (3.02)

Other debt:

Short-term debt 94,167 (598) (0.84) 78,076 (1,419) (2.40)

Long-term debt 199,575 (2,172) (1.45) 197,826 (4,078) (2.74)

Total other debt 293,742 (2,770) (1.25) 275,902 (5,497) (2.64)

Total interest-bearing liabilities 2,260,070 (39,039) (2.30) 2,083,670 (46,498) (2.97)

Impact of net non-interest-bearing funding 24,827 Ä 0.02 6,517 Ä 0.01

Total funding of interest-earning assets 2,284,897 (39,039) (2.28) 2,090,187 (46,498) (2.96)

Net interest income/yield $9,118 0.53% $8,490 0.55%

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $3.3 billion and $2.2 billion for loans held by consolidated trusts and

$68 million and $88 million for loans held by Freddie Mac during YTD 2020 and YTD 2019, respectively.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 16

Guarantee Fee Income

The table below presents the components of guarantee fee income. 

Table 4 - Components of Guarantee Fee Income

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Contractual guarantee fees $259 $231 $28 12% $744 $670 $74 11%

Guarantee obligation amortization 239 206 33 16 713 593 120 20

Guarantee asset fair value changes (183) (157) (26) (17) (296) (413) 117 28

Guarantee fee income $315 $280 $35 13% $1,161 $850 $311 37%

Key Drivers:

n 3Q 2020 vs. 3Q 2019 - Increased primarily driven by continued growth in our multifamily guarantee portfolio.

n YTD 2020 vs. YTD 2019 - Increased primarily driven by lower fair value losses on our multifamily guarantee asset coupled

with continued growth in our multifamily guarantee portfolio.
Investment Gains (Losses), Net

The table below presents the components of investment gains (losses), net.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 17

Table 5 - Components of Investment Gains (Losses), Net

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Mortgage loans gains (losses) $1,769 $1,705 $64 4% $3,987 $4,183 ($196) (5)%

Investment securities gains (losses) (285) 136 (421) (310) 835 638 197 31

Debt gains (losses) (25) (56) 31 55 735 8 727 9,088

Derivative gains (losses) (337) (1,217) 880 72 (4,600) (4,912) 312 6

Investment gains (losses), net $1,122 $568 $554 98% $957 ($83) $1,040 1,253 %

Mortgage Loans Gains (Losses)

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

Table 6 - Components of Mortgage Loans Gains (Losses)

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Gains (losses) on certain multifamily loan

purchase commitments $614 $641 ($27) (4)% $1,796 $1,644 $152 9 %

Gains (losses) on mortgage loans:

Single-family 777 617 160 26 858 1,273 (415) (33)

Multifamily 378 447 (69) (15) 1,333 1,266 67 5

Total 1,155 1,064 91 9 2,191 2,539 (348) (14)

Mortgage loans gains (losses) $1,769 $1,705 $64 4 % $3,987 $4,183 ($196) (5)%

Key Drivers:

n 3Q 2020 vs. 3Q 2019 - Single-family mortgage loans gains increased due to a higher volume of loan sales. For multifamily,

strong initial pricing margins on new loan commitments and fair value gains due to spread tightening were more than offset

by impacts from interest rate-related fair value changes, resulting in lower overall gains compared to 3Q 2019.

n YTD 2020 vs. YTD 2019 - Single-family mortgage loans gains decreased primarily due to a lower volume of loan sales and

higher losses from lower-of-cost-or-fair-value adjustments. For multifamily, strong initial pricing margins on new loan

commitments resulted in higher gains, partially offset by lower interest rate-related fair value gains.

Investment Securities Gains (Losses)

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

Table 7 - Components of Investment Securities Gains (Losses)

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Realized gains (losses) on sales of

available-for-sale securities $26 $62 ($36) (58)% $43 $129 ($86) (67)%

Realized and unrealized gains (losses) on

trading securities (285) 102 (387) (379) 868 599 269 45

Other (26) (28) 2 7 (76) (90) 14 16

Investment securities gains (losses) ($285) $136 ($421) (310)% $835 $638 $197 31 %
Key Drivers:

n 3Q 2020 vs. 3Q 2019 - Decreased primarily due to losses on trading securities as long-term interest rates increased in 3Q

2020 but declined in 3Q 2019.

n YTD 2020 vs. YTD 2019 - Increased primarily due to higher gains on trading securities from the decline in long-term

interest rates as a result of the significant market volatility caused by the COVID-19 pandemic.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 18

Debt Gains (Losses)

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

Table 8 - Components of Debt Gains (Losses)

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Fair value changes:

Debt securities of consolidated trusts $Ä ($1) $1 100% $3 ($5) $8 160%

Other debt (37) 50 (87) (174) 442 117 325 278

Total fair value changes (37) 49 (86) (176) 445 112 333 297

Gains (losses) on extinguishment of debt:

Debt securities of consolidated trusts 7 (206) 213 103 46 (255) 301 118

Other debt 5 101 (96) (95) 244 151 93 62

Total gains (losses) on extinguishment

of debt 12 (105) 117 111 290 (104) 394 379

Debt gains (losses) ($25) ($56) $31 55% $735 $8 $727 9,088%

Key Drivers: 

n 3Q 2020 vs. 3Q 2019 - Remained relatively flat as gains on extinguishments of debt were mostly offset by fair value losses

on STACR debt notes for which we elected the fair value option.

n YTD 2020 vs. YTD 2019 - Increased primarily due to fair value gains on STACR debt notes for which we elected the fair

value option as a result of spread widening caused by the significant market volatility related to the COVID-19 pandemic,

coupled with an increase in gains on extinguishments of debt due to an increase in the volume of debt repurchase activity.

Derivative Gains (Losses)

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

Table 9 - Components of Derivative Gains (Losses)

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Fair value changes:

Interest-rate swaps $1,048 ($1,809) $2,857 158% ($2,815) ($4,565) $1,750 38%

Option-based derivatives (543) 947 (1,490) (157) 2,974 1,408 1,566 111

Futures (33) (262) 229 87 (2,481) (1,283) (1,198) (93)

Commitments (335) (54) (281) (520) (1,457) (366) (1,091) (298)

CRT-related derivatives 48 Ä 48 Ä 169 1 168 16,800

Other 18 8 10 125 55 36 19 53

Total fair value changes 203 (1,170) 1,373 117 (3,555) (4,769) 1,214 25

Accrual of periodic cash settlements (540) (47) (493) (1,049) (1,045) (143) (902) (631)

Derivative gains (losses) ($337) ($1,217) $880 72% ($4,600) ($4,912) $312 6%

Key Drivers:

n 3Q 2020 vs. 3Q 2019 - Long-term interest rates increased in 3Q 2020 but declined in 3Q 2019, resulting in net fair value

gains in 3Q 2020 compared to net fair value losses in 3Q 2019. Expense related to accrual of periodic settlements

increased as a result of the overall decline in interest rates between 3Q 2019 and 3Q 2020.
n YTD 2020 vs. YTD 2019 - Long-term interest rates declined less during YTD 2020 than during YTD 2019, resulting in lower

fair value losses during YTD 2020 than YTD 2019. Expense related to accrual of periodic settlements increased as a result

of the overall decline in interest rates during YTD 2020.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 19

Credit-Related Expense

Benefit (Provision) for Credit Losses

Our provision for credit losses relates primarily to held-for-investment single-family loans and can vary substantially from period

to period based on a number of factors, such as changes in actual and forecasted house prices and interest rates, borrower

prepayments and delinquency rates, events such as natural disasters or pandemics, the type and volume of our loss mitigation

and foreclosure activity, government assistance provided to borrowers, and redesignation of loans between held-for-investment

and held-for-sale. Our estimate of expected credit losses is particularly sensitive to changes in forecasted house price growth

rates, which affect both the probability and severity of expected credit losses, and changes in forecasted interest rates, as lower

(higher) interest rates typically result in higher (lower) expected prepayments and a shorter (longer) estimated loan life, and

therefore lower (higher) expected credit losses. See Critical Accounting Policies and Estimates for additional

information.

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

Table 10 - Components of Benefit (Provision) for Credit Losses

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Benefit (provision) for credit losses:

 Single-family ($320) $180 ($500) (278)% ($2,110) $477 ($2,587) (542)%

 Multifamily (7) (1) (6) (600) (155) (3) (152) (5,067)

Benefit (provision) for credit losses ($327) $179 ($506) (283)% ($2,265) $474 ($2,739) (578)%

Key Drivers:

n Single-family

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Shifted to a provision primarily due to higher expected credit

losses as a result of the negative economic effects of the COVID-19 pandemic. The higher expected credit losses

during YTD 2020 were primarily driven by the following factors:

Å Expected credit losses related to COVID-19 relief programs - Our provision for credit losses in YTD 2020

required significant management judgment to estimate the impact of COVID-19-related forbearance and relief

programs on our expected credit losses. These judgments included estimates of the number of loans that will

receive forbearance, the likely exit paths for loans in forbearance, and the number of loans where forbearance will

be unsuccessful and the borrower will ultimately default. These factors resulted in a significant increase in our

provision for credit losses for YTD 2020, with the majority of the increase occurring in 1Q 2020. We recognized

additional provisions in 3Q 2020 for allowances for pre-foreclosure costs and accrued interest receivable related

to loans in forbearance due to the COVID-19 pandemic. In total, we have increased our allowance for credit losses

for held-for-investment single-family mortgage loans by $2.6 billion related to the COVID-19 pandemic.

É Changes in forecasted house price growth rates - The overall effect of forecasted house price changes on our

provision for credit losses for YTD 2020 was relatively minor, with an increase in provision in 1Q 2020 being largely

offset by the improvement in 2Q 2020 and 3Q 2020.

É Declines in forecasted interest rates - The effect of the significant declines in mortgage interest rates during

YTD 2020 partially offset the increase in the provision for credit losses as a result of the COVID-19 pandemic.

n Multifamily 

l 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Increase in provision due to higher expected credit losses as a

result of the negative economic effects of the COVID-19 pandemic. 

The decline in economic activity caused by the COVID-19 pandemic, and the corresponding government response, is

unprecedented, and as a result, our estimate of expected credit losses is subject to significant uncertainty. See MD&A - Risk

Management - Credit Risk for additional information.
Credit Enhancement Expense

Key Drivers:

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Increased primarily due to higher outstanding volumes of CRT

transactions.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 3Q 2020 Form 10-Q 20

Expected Credit Enhancement Recoveries

Key Drivers:

n YTD 2020 vs. YTD 2019 - Increase in expected recoveries from freestanding credit enhancements as a result of the

corresponding increase in expected credit losses due to the COVID-19 pandemic.

Other Comprehensive Income (Loss)

Key Drivers:

n 3Q 2020 vs. 3Q 2019 - Decrease of $0.2 billion primarily driven by fair value losses on available-for-sale securities due to

an increase in long-term interest rates in 3Q 2020 compared to a decline in long-term interest rates in 3Q 2019.

n YTD 2020 vs. YTD 2019 - Decrease of $0.1 billion primarily driven by lower fair value gains on available-for-sale securities

due to a smaller decline in long-term interest rates in YTD 2020 compared to YTD 2019.
CONSOLIDATED BALANCE SHEETS ANALYSIS

The table below compares our summarized condensed consolidated balance sheets.

Beginning January 1, 2020, we elected to offset payables related to securities sold under agreements to repurchase against

receivables related to securities purchased under agreements to resell when such amounts meet the conditions for balance

sheet offsetting. Prior period amounts have been reclassified to conform to the current presentation. See Note 1 and Note 10

in this Form 10-Q for additional information.

Table 11 - Summarized Condensed Consolidated Balance Sheets

Change

(Dollars in millions) September 30, 2020 December 31, 2019 $ %

Assets:

Cash and cash equivalents $8,074 $5,189 $2,885 56 %

Securities purchased under agreements to resell 99,252 56,271 42,981 76

Subtotal 107,326 61,460 45,866 75

Investment securities, at fair value 71,702 75,711 (4,009) (5)

Mortgage loans, net 2,220,241 2,020,200 200,041 10

Accrued interest receivable, net 7,583 6,848 735 11

Derivative assets, net 1,282 844 438 52

Deferred tax assets, net 5,886 5,918 (32) (1)

Other assets 40,051 22,799 17,252 76

Total assets $2,454,071 $2,193,780 $260,291 12 %

Liabilities and Equity:

Liabilities:

Accrued interest payable $6,020 $6,559 ($539) (8)%

Debt 2,423,316 2,169,685 253,631 12

Derivative liabilities, net 613 372 241 65

Other liabilities 10,231 8,042 2,189 27

Total liabilities 2,440,180 2,184,658 255,522 12

Total equity 13,891 9,122 4,769 52

Total liabilities and equity $2,454,071 $2,193,780 $260,291 12 %

Key Drivers: 

As of SeptemberÄ30, 2020 compared to DecemberÄ31, 2019:

n Cash and cash equivalents and securities purchased under agreements to resell increased on a combined basis

primarily due to higher loan prepayments and a higher expected single-family cash loan purchase forecast. In addition, as

we transition to comply with FHFA's updated minimum liquidity requirements, our liquidity and contingency operating

portfolio has increased. For additional information on the updated FHFA guidance, see MD&A - Liquidity and Capital

Resources.

n Derivative assets, net and derivative liabilities, net increased primarily due to significant changes in the fair value of

forward commitments to purchase and sell mortgage loans and mortgage-related securities.

n Other assets increased primarily due to higher servicer receivables driven by an increase in mortgage loan payoffs

reported but not yet remitted at the end of 3Q 2020.

Management's Discussion and Analysis Consolidated Balance Sheets Analysis

Freddie Mac 3Q 2020 Form 10-Q 21
OUR BUSINESS SEGMENTS

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

n Single-Family Guarantee - Reflects results from our purchase, securitization, and guarantee of single-family loans and the

management of single-family mortgage credit risk.

n 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 risk.

n 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), single-family securitization activities, and treasury function, which includes interest-rate risk

management for the company.

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 (loss) and allocating

certain revenues and expenses to our three reportable segments. For more information on our segment reclassifications, see

Note 13.

Segment Comprehensive Income (Loss) 

The graph below shows our comprehensive income (loss) by segment.

 (In millions)

Management's Discussion and Analysis Our Business Segments | Segment Earnings

Freddie Mac 3Q 2020 Form 10-Q 22

Single-Family Guarantee Multifamily Capital Markets

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$1,247

$1,407

$586

$751

$1,308

$2,936

$2,645

$591

$502

($174)

$1,063

$1,177

$2,449

$1,426 $2,066

$10

$1,848

$539

$2,448

$210

$622

$124

$1,938

($36)

$977

$5,339

$298

$5,009

 
Single-Family Guarantee

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

Freddie Mac 3Q 2020 Form 10-Q 23

Business Results

The following 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 and Average Guarantee Fee Rate(1) Charged on New

Acquisitions 

(UPB in billions, guarantee fee in bps) 

Home purchase

Refinance

Average guarantee fee rate charged on new

acquisitions

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$76 $63 $55 $60

$101

$58 $84 $83 $187 $216

$172

$236

$119

$491

45

48 49 48

46

44

47

$134 $147 $138

$232

$337

$306

$707

(1) Guarantee fee excludes legislated 10 basis point increase.

Number of Families Helped to Own a Home 

(In thousands)

Home purchase borrowers

Refinance borrowers

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

299 243 217 218

340

215 744 775

514

310

553

309

526

609

827

813

1,153

472

1,216

1,731

2,506

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019

l Our loan purchase and guarantee activity increased, primarily due to higher refinance activity driven by the declining

average mortgage interest rates in recent quarters.

l The average guarantee fee rate charged on new acquisitions increased during YTD 2020, primarily due to an increase

in contractual guarantee fees and an enhancement in our estimation methodology related to recognition of buy-up fees

in 2Q 2019.

l Home sales increased in the 2020 periods driven by record low mortgage rates. The low mortgage rate environment,

which also led to a significant increase in mortgage refinance activity during YTD 2020, is expected to continue during

the fourth quarter of 2020 through the end of 2021. In addition, we expect the recent surge in home sales will modestly

increase total annual sales in 2020, before declining in 2021.
Single-Family Credit Guarantee Portfolio

 

 Single-Family Credit Guarantee Portfolio Single-Family Loans

 (UPB in billions) (Loan count in millions)

Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Average portfolio UPB during the quarter

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$1,654 $1,701 $1,739 $1,794

$1,928

$307

$1,961

$293

$1,994

$281

$2,020

$267

$2,061

$251

$2,179

$1,942 $1,971

$2,006

$2,038

$2,117

 

Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Average loan UPB

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

8.4 8.6 8.8 9.0 9.3

2.7 2.6 2.5 2.4

2.3

$176,000 $178,000 $179,000 $181,000

$187,000

11.1 11.2 11.3 11.4 11.6

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

Freddie Mac 3Q 2020 Form 10-Q 24

n The single-family credit guarantee portfolio increased at an annualized rate of approximately 12% between December 31,

2019 and SeptemberÄ30, 2020, driven by an increase in U.S. single-family mortgage debt outstanding and strong business

activity. Additionally, continued house price appreciation contributed to new business acquisitions having a higher average

loan size compared to older vintages that continued to run off.

n As we continued to purchase new loans, our core single-family loan portfolio grew to 89% of the single-family credit

guarantee portfolio at September 30, 2020, compared to 85% at December 31, 2019. Our legacy and relief refinance

single-family loan portfolio, which generally has a weaker credit profile, continued to run off, declining to 11% of the singlefamily credit guarantee portfolio at SeptemberÄ30, 2020, compared to 15% at December 31, 2019.

n The average portfolio Segment Earnings guarantee fee rate was 51 basis points, 43 basis points, 47 basis points, and 39

basis points during 3Q 2020, 3Q 2019, YTD 2020, and YTD 2019, respectively (all excluding the legislated 10 basis point

increase in guarantee fees). The rate increased in the 2020 periods due to an increase in the recognition of upfront fees,

partially offset by the amortization of hedge accounting related basis adjustments in segment earnings, driven by a higher

prepayment rate, coupled with an increase in contractual guarantee fees as older vintages were replaced by acquisitions of

new loans with higher contractual guarantee fees.
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. The graphs below show the issuance amounts associated

with CRT transactions for loans in our single-family credit guarantee portfolio. 

 CRT Issuance Protected UPB CRT Issuance Maximum Coverage 

 (In billions) (In billions)

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$72.1

$42.5

$140.7

$0.6

$167.3

$205.4

$308.6

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$3.2 $3.2

$5.1

$0.6

$6.4

$9.0

$12.1

n During 3Q 2020, 3Q 2019, YTD 2020, and YTD 2019, 61%, 72%, 63%, and 71% respectively, of our single-family

acquisitions were loans in the targeted population for our CRT transactions (primarily 30-year fixed rate loans with LTV

ratios between 60% and 97%).

n CRT issuance fell sharply in 2Q 2020 due to the effects of the COVID-19 pandemic but resumed during 3Q 2020 with

broad-based investor demand, favorable economics, and strong subscription levels. CRT remains a critical component of

our business strategy, and we intend to continue to pursue our existing CRT strategies under the current capital

framework. However, the COVID-19 pandemic continues to impose uncertainties and may continue to adversely impact

our transactions going forward.

n In May 2020, FHFA released its re-proposed Enterprise Capital Rule for comment. The re-proposed capital rule, if adopted,

would significantly change the impact of CRT transactions on our required capital by limiting the capital reduction resulting

from such transactions. For additional information, see MD&A - Introduction - COVID-19 Pandemic Response

Efforts.

n We are continually evaluating our CRT strategy, and we make changes depending on market conditions, including the

significant market volatility caused by the COVID-19 pandemic, and our business strategy. See Risk Management -

Single-Family Mortgage Credit Risk - Transferring Credit Risk to Third-Party Investors for additional

information on our CRT activities and other credit enhancements. 

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

Freddie Mac 3Q 2020 Form 10-Q 25
Loss Mitigation Activities

We require our servicers to first evaluate seriously delinquent loans for home retention options such as forbearance plans,

repayment plans, payment deferrals, and loan modifications. When a seriously delinquent single-family loan cannot be resolved

through an economically sensible home retention option, we typically seek to pursue a foreclosure alternative, such as a short

sale or a deed in lieu of foreclosure, or sale of the seriously delinquent loan.

The following graph provides details about our completed single-family loan workout activities. The forbearance data included

in the chart below is limited to loans in forbearance plans that are past due based on the loans' original contractual terms. 

Completed Loan Workout Activity(1)

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

Total single-family loan workouts

Number of loan workouts

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

10 11 11

89

193

36

293

$1.7 $1.7 $1.8

$18.4

$41.8

$6.2

$62.0

(1) 2Q20 results have been revised due to a methodology change related to the timing of recognition of completed loan workout activity.

n Completed loan workout activity includes payment deferrals, modifications, successfully completed forbearance plans,

successfully completed repayment agreements, short sales, and deeds in lieu of foreclosure. Completed loan workout

activity excludes active loss mitigation activity that has not been completed as of the end of the quarter, such as

forbearance plans that have been initiated but not completed and trial period modifications. There were approximately

342,000 forbearance plans and 18,000 loans in other active loss mitigation activity as of September 30, 2020.

n Pursuant to FHFA guidance and the CARES Act, we offer mortgage relief options for borrowers affected by the COVID-19

pandemic. Among other things, we are offering forbearance of up to 12 months to single-family borrowers

experiencing a financial hardship, either directly or indirectly, related to the COVID-19 pandemic. We expect the volume of

our loss mitigation activities related to the effects of the pandemic to remain elevated over the next several quarters as a

result of the actions we take to support the mortgage market. For additional information on our responses to the pandemic,

see MD&A - Introduction - COVID-19 Pandemic Response Efforts.

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 - Our loan workout activity increased significantly primarily driven by

the increase in completed forbearance plans and payment deferrals related to the COVID-19 pandemic.

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

Freddie Mac 3Q 2020 Form 10-Q 26
Financial Results

The table below presents the components of Segment Earnings and comprehensive income for our Single-family Guarantee

segment.

Table 12 - Single-Family Guarantee Segment Financial Results

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Guarantee fee income $2,683 $2,064 $619 30% $7,304 $5,574 $1,730 31 %

Investment gains (losses), net 409 377 32 8 867 639 228 36

Other income (loss) 124 55 69 125 56 225 (169) (75)

Net revenues 3,216 2,496 720 29 8,227 6,438 1,789 28

Benefit (provision) for credit losses (426) 81 (507) (626) (2,400) 240 (2,640) (1,100)

Credit enhancement expense (416) (373) (43) (12) (1,226) (1,042) (184) (18)

Expected credit enhancement recoveries 26 Ä 26 N/A 684 42 642 1,529

REO operations expense (41) (61) 20 33 (142) (185) 43 23

Credit-related expense (857) (353) (504) (143) (3,084) (945) (2,139) (226)

Administrative expense (409) (399) (10) (3) (1,160) (1,173) 13 1

Other expense (296) (180) (116) (64) (642) (625) (17) (3)

Operating expense (705) (579) (126) (22) (1,802) (1,798) (4) Ä

Segment Earnings (Losses) before income tax

(expense) benefit 1,654 1,564 90 6 3,341 3,695 (354) (10)

Income tax (expense) benefit (343) (314) (29) (9) (689) (750) 61 8

Segment Earnings (Losses), net of taxes 1,311 1,250 61 5 2,652 2,945 (293) (10)

Total other comprehensive income (loss), net of tax (3) (3) Ä Ä (7) (9) 2 22

Total comprehensive income (loss) $1,308 $1,247 $61 5% $2,645 $2,936 ($291) (10)%

Key Business Drivers: 

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019

l Higher guarantee fee income primarily due to higher upfront fee income recognition, partially offset by the amortization

of hedge accounting related basis adjustments, driven by faster prepayments, coupled with a higher contractual

guarantee fee rate.

l Higher investment gains during YTD 2020 primarily due to higher gains on STACR debt notes and ACIS transactions,

for which we have elected the fair value option, driven by significant widening of market spreads due to the COVID-19

pandemic, partially offset by an increase in lower-of-cost-or-fair-value losses related to held-for-sale loans.

l Benefit (provision) for credit losses shifted to a provision primarily due to higher expected credit losses as a result of

the COVID-19 pandemic.

l Higher credit enhancement expense primarily due to higher outstanding cumulative volumes of CRT transactions. 

l Higher expected credit enhancement recoveries during YTD 2020 primarily due to a corresponding increase in

expected credit losses as a result of the COVID-19 pandemic.

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

Freddie Mac 3Q 2020 Form 10-Q 27
Multifamily 

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 28

Business Results

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

New Business Activity

New Business Activity

(UPB in billions)

New loan purchase activity

LIHTC new business activity

Total number of units financed (in thousands)

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$29.4

$17.5

$9.9

$20.2 $17.9

$60.4

$48.0

$0.1

$0.2

$0.1

$0.2

$0.3

$0.3

295.6

171.0

111.2

201.0 185.2

638.0

497.4

$29.5

$17.7

$10.0

$20.2

$18.1

$60.7

$48.3

n In 3Q 2019, FHFA announced a revised loan purchase cap structure for the multifamily business. The loan purchase cap is

$100.0 billion for the five-quarter period from 4Q 2019 through 4Q 2020 and applies to all multifamily new loan purchase

activity, with no exclusions. To ensure a strong focus on affordable housing and traditionally underserved markets, at least

37.5% of the new multifamily business activity must be mission-driven, affordable housing over the same five-quarter

period.

l As of September 30, 2020, the total cumulative multifamily new loan purchase activity counting toward the cap was

$65.5 billion. Approximately 41% of this activity was mission-driven, affordable housing.

n Our new business activity decreased during 3Q 2020 and YTD 2020 compared to 3Q 2019 and YTD 2019. However, we

expect new business activity for full-year 2020 to be comparable to full-year 2019.

n Outstanding commitments, including index lock commitments and commitments to purchase or guarantee multifamily

assets, were $23.3 billion and $16.3 billion as of SeptemberÄ30, 2020 and SeptemberÄ30, 2019, respectively. 

n The portion of our new mortgage loan purchase activity that was classified as held-for-sale and intended for our

securitization pipeline increased to 91% in 3Q 2020 from 84% in 3Q 2019. The purchase activity in 3Q 2020, combined

with market demand for our securities, will be a driver for our primary securitizations during the fourth quarter of 2020 and

the first quarter of 2021.
Securitization, Guarantee, and Risk Transfer Activities

Securitization and Guarantee Activities

(UPB in billions)

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 29

Guaranteed securities issued by our securitizations

Unguaranteed subordinated securities issued by our securitizations

Other mortgage-related guarantees

Average guarantee fee rate (in bps)

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$19.5 $20.4

$10.9 $11.5

$20.6

$46.6

$43.0

$2.4

$2.6

$1.4 $0.9

$1.6

$5.8

$3.9

$0.1

$0.5 $0.4

$0.5

$0.9

$1.4

45

41

46

43

44

40

44

$22.0

$23.0

$12.8 $12.8

$22.7

$53.3

$48.3

n Total securitization UPB during 3Q 2020 was relatively consistent compared to 3Q 2019. Total securitization UPB

decreased during YTD 2020 compared to YTD 2019 primarily due to a lower held-for-sale loan portfolio available for

securitization during the year. However, we expect total securitization UPB for the full-year 2020 to be comparable to fullyear 2019.

n The average guarantee fee rate on new guarantees increased during YTD 2020 compared to YTD 2019, primarily driven by

a higher volume of fully guaranteed securitizations, which typically have higher guarantee fee rates than our primary

securitizations with subordination. Additionally, we increased the guarantee fee rate on certain K Certificate securitizations

in which we decreased the level of subordination. The lower subordination levels of these securitizations is still expected to

absorb the majority of expected and stress credit losses.

n In addition to the credit risk we transferred to third parties through our securitizations, we obtained credit protection of up

to $0.2 billion and $0.1 billion on $3.5 billion and $1.1 billion of UPB through our other CRT products and loss sharing

arrangements during YTD 2020 and YTD 2019, respectively.

We continually evaluate our risk transfer strategy and make changes depending on market conditions and our business

strategy. See MD&A - Risk Management - Multifamily Mortgage Credit Risk - Transferring Credit Risk to ThirdParty Investors for more information on risk transfer transactions and credit enhancements on our multifamily mortgage

portfolio.
Multifamily Portfolio and Market Support

The following table summarizes our multifamily portfolio and our support of the multifamily market by UPB.

Table 13 - Multifamily Portfolio and Market Support

(Dollars in millions) September 30, 2020 December 31, 2019

Guarantee portfolio:

Primary securitizations $260,542 $240,134

Other securitizations 24,501 20,205

Other mortgage-related guarantees 11,478 10,514

Total guarantee portfolio 296,521 270,853

Mortgage-related investments portfolio:

Unsecuritized mortgage loans held-for-sale 18,509 18,954

Unsecuritized mortgage loans held-for-investment 9,035 10,831

Mortgage-related securities(1) 4,418 5,889

Total mortgage-related investments portfolio 31,962 35,674

Other investments(2) 2,690 2,945

Total multifamily portfolio 331,173 309,472

Add: Unguaranteed securities(3) 42,287 40,666

Less: Acquired mortgage-related securities(4) (4,283) (5,709)

Total multifamily market support $369,177 $344,429

Total units financed 4,449,721 4,305,480

(1) Includes mortgage-related securities acquired by us from our securitizations.

(2) Includes the carrying value of LIHTC investments and the UPB of non-mortgage loans, including financing provided to whole loan funds.

(3) Reflects the UPB of unguaranteed securities issued as part of our securitizations and amounts related to loans sold to whole loan funds that were not financed by

Freddie Mac. 

(4) Reflects the UPB of mortgage-related securities that were both issued as part of our securitizations and acquired by us. This UPB must be removed from the

mortgage-related securities balance to avoid double-counting the exposure, as it is already reflected within the guarantee portfolio or unguaranteed securities.

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 30

n Our total multifamily portfolio increased during 3Q 2020 primarily due to our strong loan purchase and securitization

activity. Despite the impact of the COVID-19 pandemic, we expect continued growth in our total portfolio as purchase and

securitization activities should outpace run off.

n At SeptemberÄ30, 2020, approximately 64% of our held-for-sale loans were fixed-rate, while the remaining 36% were

floating-rate.

n As of September 30, 2020, we had cumulatively transferred the large majority of expected and stress credit risk on the

multifamily guarantee portfolio primarily through subordination in our securitizations. In addition, nearly all of our

securitization activities shifted substantially all of the interest-rate and liquidity risk associated with the underlying collateral

away from Freddie Mac to third-party investors.

n We earn guarantee fees in exchange for providing our guarantee of some or all of the securities we issue as part of our

securitizations. The average guarantee fee rate that we earn on our guarantee portfolio was 37 basis points, and the

average remaining guarantee term was eight years, as of both September 30, 2020 and December 31, 2019. While we

expect to earn future guarantee fees at the average guarantee fee rate over the average remaining guarantee term, the

actual amount earned will depend on the performance of the underlying collateral subject to our financial guarantee.
 Net Interest Yield

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 31

Net Interest Yield & Average Investment Portfolio Balance

(Weighted average balance in billions)

Unsecuritized mortgage loans

Mortgage-related securities

Other investments portfolio (excludes LIHTC)

Net interest yield

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$32.4

$29.3 $29.0 $28.9 $30.5

$33.0

$29.4

$7.5

$6.9 $6.8 $6.7

$6.1

$8.6

$6.6

$1.9

$1.9 $1.7 $1.7

$1.7

$1.0

$1.7

2.80% 2.77% 2.87%

2.45%

2.19%

2.52% 2.50%

$41.8

$38.1 $37.5 $37.3

$38.3

$42.6

$37.7

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019

l Net interest yield decreased during 3Q 2020 compared to 3Q 2019 primarily due to lower prepayment income. Net

interest yield was relatively flat during YTD 2020 compared to YTD 2019.

l The weighted average investment portfolio balance of interest-earning assets was lower during the 2020 periods

compared to the 2019 periods due to a decrease in held-for-sale loans and mortgage-related securities.
Mortgage Loans Gains (Losses), Net and Initial Pricing Margin on Commitments

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 32

 Multifamily Segment Mortgage Loans Gains (Losses), Net

 (In millions)

Initial pricing margin on commitments

Spread-related fair value changes

Other

10-year fixed-rate spread (in bps)

7-year ARM spread (in bps)

3Q19 4Q19 1Q20 2Q20 3Q20

$377 $412

$198

$430

$631

$50

$414

$34

$359

($528)

$220

$220

($13)

($87)

($305)

-$635

$181

$831

$225

60

55

75

45

39

53 56

70

45 29

$1,076

 Initial Pricing Margin on Commitments 

 (In millions)

Initial pricing margin on commitments

Initial pricing margin on commitments (in %)

3Q19 4Q19 1Q20 2Q20 3Q20

$377

$412

$198

$430

$631

2.87%

4.47%

2.65%

3.97%

5.84%

 

(In millions) 3Q19 4Q19 1Q20 2Q20 3Q20

New loan commitments $13,145 $9,215 $7,475 $10,821 $10,804

measured at fair value

n We primarily recognize revenue from our securitization activities related to mortgage loans as mortgage loans gains

(losses), net, which is a component of investment gains (losses), net. The amount of mortgage loans gains (losses), net,

shown above is net of gains and losses on derivative instruments we use to economically hedge the interest-rate risk of the

loan commitments and mortgage loans.

n Mortgage loans gains (losses), net, consists of three components: (1) the initial pricing margin on new loan commitments,

which we recognize at the commitment date for commitments we measure at fair value, (2) spread-related fair value

changes during the commitment and loan holding periods for loan commitments and mortgage loans we measure at fair

value, which are primarily driven by changes in benchmark spreads after the commitment date, and (3) other items,

including realized gains on sales of mortgage loans we do not elect to measure at fair value.

n The largest component of mortgage loans gains (losses), net, is generally the initial pricing margin on new loan

commitments measured at fair value, which is based on the price we would receive to sell the mortgage loans in a typical

securitization transaction at the commitment date. When pricing new loan commitments, we consider a number of factors,

including current securitization spreads, loan characteristics, the amount available under the loan purchase cap, our

current business strategies, and changing competitive market conditions. 

n Another driver of mortgage loans gains (losses), net, is changes in K Certificate benchmark spreads during the

commitment and mortgage loan holding periods. K Certificate benchmark spreads are market-quoted spreads over the
swap rate. 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. We generally recognize spread-related fair value gains (losses) for our held-for-sale mortgage loans and loan

commitments measured at fair value when market spreads tighten (widen). We manage our exposure to these spreadrelated fair value changes by controlling the size of our securitization pipeline and by entering into certain spread-related

derivatives that provide for protection against significant adverse movements in market spreads.

n We recognized higher gains on mortgage loans gains (losses), net, during 3Q 2020 compared to 3Q 2019 primarily due to

loan pricing decisions resulting in higher initial pricing margins on new loan commitments, spread-related fair value gains

due to spread tightening, and realized gains from sales of mortgage loans not measured at fair value.

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 33
Financial Results

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

Table 14 - Multifamily Segment Financial Results

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Net interest income $210 $292 ($82) (28)% $707 $805 ($98) (12)%

Guarantee fee income 303 294 9 3 1,158 874 284 32

Mortgage loans gains (losses), net 1,076 414 662 160 1,272 843 429 51

Other investment gains (losses), net 15 (156) 171 110 (271) (584) 313 54

Investment gains (losses), net 1,091 258 833 323 1,001 259 742 286

Other income (loss) 43 27 16 59 131 84 47 56

Net revenues 1,647 871 776 89 2,997 2,022 975 48

Credit-related expense (20) (5) (15) (300) (147) (14) (133) (950)

Administrative expense (128) (125) (3) (2) (372) (357) (15) (4)

Other expense (9) (14) 5 36 (23) (27) 4 15

Operating expense (137) (139) 2 1 (395) (384) (11) (3)

Segment Earnings (Losses) before

income tax (expense) benefit 1,490 727 763 105 2,455 1,624 831 51

Income tax (expense) benefit (309) (146) (163) (112) (507) (330) (177) (54)

Segment Earnings (Losses), net of

taxes 1,181 581 600 103 1,948 1,294 654 51

Total other comprehensive income

(loss), net of tax (4) 10 (14) (140) 118 132 (14) (11)

Total comprehensive income (loss) $1,177 $591 $586 99 % $2,066 $1,426 $640 45 %

Key Business Drivers:

n 3Q 2020 vs. 3Q 2019 

l Decrease in net interest income due to a decline in our weighted average portfolio balance of interest-earning assets

and a decline in prepayment income.

l Increase in guarantee fee income driven by continued growth in our multifamily guarantee portfolio.

l Increase in investment gains (net of other comprehensive income) primarily due to strong initial pricing margins on new

loan commitments and fair value gains due to spread tightening.

n YTD 2020 vs. YTD 2019

l Decrease in net interest income due to a decline in our weighted average portfolio balance of interest-earning assets.

l Increase in guarantee fee income due to continued growth in our multifamily guarantee portfolio coupled with lower fair

value losses on our guarantee asset.

l Increase in investment gains (net of other comprehensive income) primarily driven by strong initial pricing margins on

new loan commitments, coupled with fair value gains from our spread-related derivatives primarily recognized during

1Q 2020 due to significant spread widening.

l Increase in credit-related expense due to higher expected credit losses as a result of the negative economic effects of

the COVID-19 pandemic. 

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 3Q 2020 Form 10-Q 34
Capital Markets

Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac 3Q 2020 Form 10-Q 35

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

Other investments portfolio

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$170.9 $168.4 $171.0

$146.8 $156.1

$86.9

$257.8

$100.3

$268.7

$119.7

$290.7

$152.4

$299.2

$143.9

$300.0

 

Mortgage Investments Portfolio

Liquid

Securitization pipeline

Less liquid

(UPB in billions)

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

$115.9 $119.2 $116.3

$84.1 $84.8

$20.8 $19.1 $26.3

$35.5

$48.8

$34.2

$170.9

$30.1

$168.4

$28.4

$171.0

$27.2

$146.8

$22.5

$156.1

n The balance of our mortgage investments portfolio decreased by $12.3 billion from December 31, 2019 to SeptemberÄ30,

2020 primarily due to sales of agency securities to support our significantly higher single-family loan purchase volume. See

MD&A - Conservatorship and Related Matters - Managing Our Mortgage-Related Investments Portfolio for

additional details.

n The balance of our other investments portfolio increased by 43.5% as of SeptemberÄ30, 2020 compared to December 31,

2019 primarily due to higher near-term cash needs driven by a higher expected single-family cash loan purchase forecast,

coupled with a larger liquidity and contingency operating portfolio as we transition to comply with the updated FHFA

minimum liquidity requirements. In addition, our custodial trust account balance increased due to higher loan prepayments.

n Our less liquid assets decreased and the percentage of less liquid assets relative to our total mortgage investments

portfolio declined from 17.9% at December 31, 2019 to 14.4% at September 30, 2020 primarily due to repayments, sales,

and securitizations. We actively reduced our holdings of less liquid assets during 3Q 2020 by selling $4.0 billion of

reperforming loans using senior subordinate securitization structures. However, our less liquid assets are likely to increase

in future periods as we will likely purchase a higher amount of delinquent and modified loans from securities after

borrowers exit forbearance plans.

n We continue to participate in transactions that support the development of SOFR as an alternative rate to LIBOR. These

transactions may include investment in and issuance of SOFR indexed floating-rate debt securities and securitizations and

execution of SOFR indexed derivatives.
Net Interest Yield and Average Balances

Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac 3Q 2020 Form 10-Q 36

Net Interest Yield & Average Investments Portfolio Balances 

(Weighted average balance in billions) 

 

Mortgage-related securities

Other investments

Single-family unsecuritized loans

Net interest yield

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

$126.0 $123.7 $124.7

$110.1

$95.9

$125.5

$110.2

$90.8

$107.1

$115.1 $148.4

$162.0

$84.1

$141.8

$52.2

$50.3

$46.7

$56.5

$67.4

$50.2

$56.9

0.74% 0.69% 0.71%

0.19% 0.02%

1.03%

0.31%

$269.0

$281.1

$286.5

$315.0

$325.3

$259.8

$308.9

 

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019 

l Net interest yield decreased during the 2020 periods primarily due to higher liquidation rates resulting in an increase in

amortization expense and additional expense due to payments to security holders of the full monthly coupon rate

when loans pay off mid-month. In addition, our custodial trust account balance increased due to higher prepayments

and earned a minimal yield due to historically low interest rates.

l Net interest yield for the Capital Markets segment is not affected by our hedge accounting programs due to

reclassifications made for Segment Earnings. See Note 13 in our 2019 Annual Report for more information.
Financial Results

The table below presents the components of Segment Earnings (Losses) and comprehensive income (loss) for our Capital

Markets segment.

Table 15 - Capital Markets Segment Financial Results

Change Change

(Dollars in millions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

 Net interest income $20 $497 ($477) (96)% $681 $2,002 ($1,321) (66)%

 Investment gains (losses), net 15 (292) 307 105 (206) (587) 381 65

 Other income (loss) 37 (261) 298 114 (398) (639) 241 38

Net revenues 72 (56) 128 229 77 776 (699) (90)

 Administrative expense (104) (96) (8) (8) (297) (287) (10) (3)

 Other expense (5) (3) (2) (67) (16) (9) (7) (78)

Operating expense (109) (99) (10) (10) (313) (296) (17) (6)

Segment Earnings (Losses) before

income tax (expense) benefit (37) (155) 118 76 (236) 480 (716) (149)

Income tax (expense) benefit 8 33 (25) (76) 49 (97) 146 151

Segment Earnings (Losses), net of

taxes (29) (122) 93 76 (187) 383 (570) (149)

Total other comprehensive income

(loss), net of tax (7) 132 (139) (105) 485 594 (109) (18)

Total comprehensive income (loss) ($36) $10 ($46) (460)% $298 $977 ($679) (69)%

The portion of total comprehensive income (loss) driven by interest rate-related and market spread-related fair value changes,

after-tax, is presented in the table below. These amounts affect various line items in the table above, including investment gains

(losses), net, income tax expense, and total other comprehensive income (loss), net of tax.

Table 16 - Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax

Change Change

(Dollars in billions) 3Q 2020 3Q 2019 $ % YTD 2020 YTD 2019 $ %

Interest rate-related $Ä ($0.4) $0.4 100% $0.5 ($0.4) $0.9 225%

Market spread-related (0.1) 0.2 (0.3) (150) (0.2) 0.3 (0.5) (167)

Key Drivers:

n 3Q 2020 vs. 3Q 2019 and YTD 2020 vs. YTD 2019

l Net interest income decreased primarily due to higher liquidation rates resulting in an increase in amortization expense

and additional expense due to payments to security holders of the full monthly coupon rate when loans pay off midmonth. In addition, our custodial trust account balance increased due to higher prepayments and earned a minimal

yield due to historically low interest rates.

l Investments gains (losses), net, increased in 3Q 2020 primarily due to interest-rate related fair value gains as long-term

interest rates increased compared to a decrease in 3Q 2019. The increase in long-term interest rates resulted in net fair

value gains on our derivatives, partially offset by fair value losses on many of our investments in securities (some of

which are recorded in other comprehensive income) and amortization expense from previously deferred fair value

hedge accounting basis adjustments related to hedging company-wide interest-rate risk.

Investments gains (losses), net, increased in YTD 2020 as long-term interest rates further declined, resulting in higher

fair value gains on many of our investments in securities coupled with lower fair value losses on our derivatives,

partially offset by amortization expense from previously deferred fair value hedge accounting basis adjustments

related to hedging company-wide interest-rate risk. In addition, we recognized higher gains on repurchase of debt

securities of consolidated trusts as investments in our mortgage-related investments portfolio. See Risk

Management - Market Risk for additional information on the effect of market-related items on our comprehensive

income.

l Increase in other income primarily due to higher amortization of certain basis adjustments on loans and debt securities

of consolidated trusts.

Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac 3Q 2020 Form 10-Q 37
RISK MANAGEMENT

Risk is an inherent part of our business activities. We are exposed to the following key types of risk: credit risk, operational risk,

market risk, liquidity risk, strategic risk, and reputation risk.

For more discussion of these and other risks facing our business and our enterprise risk framework, see MD&A - Liquidity

and Capital Resources in this Form 10-Q, Other Information - Risk Factors in our Form 10-Q for the quarter ended

March 31, 2020, and Risk Factors, MD&A - Risk Management, and MD&A - Liquidity and Capital Resources in our

2019 Annual Report. See below for updates since our 2019 Annual Report.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 38

Credit Risk

Overview

Credit risk is the risk associated with the inability or failure of a borrower, issuer, or counterparty to meet its financial and/or

contractual obligations. We are exposed to both mortgage credit risk and counterparty credit risk. 

Mortgage credit risk is the risk associated with the inability or failure of a borrower to meet its financial and/or contractual

obligations. We are exposed to two types of mortgage credit risk:

n Single-family mortgage credit risk, through our ownership or guarantee of loans in the single-family credit guarantee

portfolio and

n Multifamily mortgage credit risk, through our ownership or guarantee of loans in the multifamily mortgage portfolio.

On January 1, 2020, we adopted CECL, which changed our methodology for accounting for credit losses on financial assets

measured at amortized cost and off-balance sheet credit exposures. See Note 1 for additional information on our adoption of

CECL. See Note 4 and Note 5 for additional information on the changes in our significant accounting policies that affect the

accounting for credit losses on our single-family and multifamily credit risk exposures as a result of our adoption of CECL.

In the section below, we provide a discussion of the current risk environment for our mortgage credit risk.

Single-Family Mortgage Credit Risk

Maintaining Prudent Underwriting Standards and Quality Control Practices and

Managing Seller/Servicer Performance

Loan Purchase Credit Characteristics

We continually monitor and evaluate market conditions that could affect the credit quality of our single-family loan purchases. 

In March and May 2020, we introduced a number of temporary measures to help provide sellers with the clarity and flexibility to

continue to lend in a prudent and responsible manner during the COVID-19 pandemic. The application date windows for these

measures have been extended as outlined below. These temporary measures include:

n Allowing flexibility in demonstrating a borrower's current employment status for applications received through November

30, 2020.

The following temporary measures are in effect until further notice:

n Requiring income and asset documentation, including that associated with self-employed borrowers, to be dated closer to

the loan closing date in order to ensure the most up-to-date information is being used to support the borrower's ability to

repay;

n Providing additional document requirements and guidance for borrowers whose income is derived from self-employment; 

n Requiring mortgages to be sold to Freddie Mac within six months of the note date;

n Establishing underwriting restrictions applicable to a borrower's accounts containing stocks, stock options, and mutual

funds due to current market volatility; and

n Verifying that any mortgage that a borrower has is current or is brought current via reinstatement or by making at least

three consecutive timely payments under a loss mitigation program.

In March and April 2020, we announced loan processing flexibilities to expedite loan closings and help keep homebuyers,

sellers, and appraisers safe during the COVID-19 pandemic. These flexibilities have also been extended to include loans with

applications dated on or before November 30, 2020. They include:
n Allowing desktop appraisals or exterior-only inspection appraisals for certain purchase transactions; 

n Allowing exterior-only appraisals for certain no cash-out refinances;

n Allowing desktop appraisals on new construction properties (purchase transactions);

n Allowing flexibility on demonstrating that construction has been completed;

n Allowing flexibility for borrowers to provide documentation (rather than requiring an inspection) to allow renovation

disbursements (draws);

n Offering flexibility in condominium project reviews; and

n Expanding the use of powers of attorney and remote online notarizations.

These temporary changes in our underwriting standards due to the COVID-19 pandemic may negatively affect the expected

performance of loans purchased while these changes are in effect. The pandemic may also strain sellers' ability to increase

their operational capacity to handle the historically high volume of refinance mortgages while maintaining proper quality control,

which may further impact the credit quality of the loans we purchase during the affected periods. In addition, the CARES Act

requires creditors to report to credit bureaus that loans in relief programs, such as forbearance plans, repayment plans, and

loan modification programs, are current as long as the loans were current prior to entering into the relief programs and the

borrowers remain in compliance with the programs. This credit reporting requirement applies to all mortgage relief programs

entered into between January 31, 2020 and the date that is 120 days after the declaration of the national emergency related to

the COVID-19 pandemic ends. As a result, our ability to evaluate purchases of new loans may be adversely affected as credit

scores may not reflect the impact of relief programs, offered by us or other creditors, into which borrowers may have entered.

We announced in April 2020 that we would temporarily purchase certain single-family mortgage loans that have entered into

forbearance plans as a result of borrower hardship caused by the COVID-19 pandemic to help provide liquidity to the mortgage

market and allow originators to keep lending. The purchases of such loans have been insignificant. For additional information

on our response to the pandemic, see MD&A - Introduction - COVID-19 Pandemic Response Efforts. 

We have also announced that, at the instruction of FHFA and in alignment with Fannie Mae, a new 50 basis point adverse

market refinance fee will be implemented for refinance mortgages, excluding those with low balances and certain product

types, with settlement dates on or after December 1, 2020 in response to projected credit losses related to the COVID-19

pandemic.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 39

The credit quality of our single-family loan purchases remained strong during the 2020 periods by historical standards. The

graphs below show the credit profile of the single-family loans we purchased or guaranteed. 

Weighted Average Original LTV Ratio

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

77% 75% 74% 72% 71%77% 72%

 Weighted Average Original Credit Score (1)

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

752 752 752 758 761 750 758

(1) Original credit score is based on three credit bureaus (Equifax, Experian, and

xxxTransUnion). 
The table below contains additional information about the single-family loans we purchased or guaranteed.

Table 17 - Single-Family New Business Activity

3Q 2020 3Q 2019 YTD 2020 YTD 2019

(Dollars in billions) Amount % of Total Amount % of Total Amount % of Total Amount % of Total

30-year or more amortizing fixed-rate $264 79% $116 86% $560 79% $268 88%

20-year amortizing fixed-rate 18 5 5 4 35 5 9 3

15-year amortizing fixed-rate 54 16 12 9 109 15 25 8

Adjustable-rate 1 Ä 1 1 3 1 4 1

FHA/VA and other governmental Ä Ä Ä Ä Ä Ä Ä Ä

Total $337 100% $134 100% $707 100% $306 100%

Percentage of purchases

DTI ratio > 45% 10% 13% 11% 14%

Property type:

Detached single-family houses 62 61 62 60

Townhouse 31 31 31 31

Condominium or co-op 7 8 7 9

Occupancy type:

Primary residence 94 92 94 91

Second home 3 4 3 4

Investment property 3 4 3 5

Loan purpose:

Purchase 30 57 30 61

Cash-out refinance 16 16 18 18

Other refinance 54 27 52 21

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 40
Transferring Credit Risk to Third-Party Investors

To reduce our credit risk exposure, we engage in various credit enhancement arrangements, which include CRT transactions

and other credit enhancements.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 41

Single-Family Credit Guarantee Portfolio CRT Issuance

The tables below provide the issuance amounts during the applicable periods, including the protected UPB and maximum

coverage by loss position, associated with CRT transactions for loans in our single-family credit guarantee portfolio. We have

enhanced our methodology to identify UPB with more than one type of CRT activity and, as a result, certain prior period

amounts have been revised to conform to the current period presentation. Although the COVID-19 pandemic has caused

significant volatility in the single-family CRT markets, CRT issuance resumed during 3Q 2020 with broad-based investor

demand, favorable economics, and strong subscription levels. As a result, our CRT issuance amounts increased during the

2020 periods. See MD&A - Introduction - COVID-19 Pandemic Response Efforts - Business Outlook for additional

information.

Table 18 - Single-Family Credit Guarantee Portfolio CRT Issuance

Issuance 3Q 2020 Issuance 3Q 2019

Protected

UPB(1) Maximum Coverage(2) ProtectedUPB(1) Maximum Coverage(2)

(In millions) Total First Loss(3) Mezzanine Total Total First Loss(3) Mezzanine Total

STACR $152,423 $1,423 $2,477 $3,900 $56,654 $480 $1,186 $1,666

Insurance/reinsurance 138,633 544 1,022 1,566 46,198 174 404 578

Subordination 3,260 262 508 770 3,002 195 269 464

Lender risk-sharing 377 340 Ä 340 9,025 177 279 456

Less: UPB with more than

one type of CRT activity (127,414) (40) (151) (191) (42,826) Ä Ä Ä

Total CRT Activities $167,279 $2,529 $3,856 $6,385 $72,053 $1,026 $2,138 $3,164

Issuance YTD 2020 Issuance YTD 2019

Protected

UPB(1) Maximum Coverage(2)

Protected

UPB(1) Maximum Coverage(2)

(In millions) Total First Loss(3) Mezzanine Total Total First Loss(3) Mezzanine Total

STACR $302,676 $2,637 $5,548 $8,185 $156,789 $1,481 $3,463 $4,944

Insurance/reinsurance 271,830 905 1,891 2,796 156,841 694 1,442 2,136

Subordination 4,948 380 567 947 8,010 529 652 1,181

Lender risk-sharing 6,830 730 189 919 20,943 388 647 1,035

Less: UPB with more than

one type of CRT activity (277,667) (214) (555) (769) (137,179) (60) (220) (280)

Total CRT Activities $308,617 $4,438 $7,640 $12,078 $205,404 $3,032 $5,984 $9,016

(1) For STACR and certain insurance/reinsurance transactions (e.g., ACIS), represents the UPB of the assets included in the reference pool of the transactions. For other

insurance/reinsurance transactions, represents the UPB of the assets covered by the insurance policy. For subordination, represents the UPB of the guaranteed

securities, which represents the UPB of the assets included in the trust net of the protection provided by the subordinated securities.

(2) For STACR transactions, represents the balance held by third parties at issuance. For insurance/reinsurance transactions, represents the aggregate limit of

insurance purchased from third parties at issuance. For subordination, represents the UPB of the securities that are subordinate to Freddie Mac guaranteed

securities and held by third parties.

(3) First loss includes the most subordinate securities (i.e., B tranches) in our STACR Trust notes and their equivalent in ACIS and other CRT transactions. 
Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding

The tables below provide information on the total protected UPB and maximum coverage associated with credit enhanced

loans in our single-family credit guarantee portfolio as of SeptemberÄ30, 2020 and December 31, 2019. 

Table 19 - Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding

Outstanding as of September 30, 2020

Protected

UPB(1)

% of Single-Family

Credit Guarantee

Portfolio Maximum Coverage(2)

(Dollars in millions) Total Total First Loss(3) Mezzanine Total

Primary mortgage insurance $449,731 21% $112,577 $Ä $112,577

STACR 860,692 40 8,504 18,973 27,477

Insurance/reinsurance 862,054 40 3,309 7,282 10,591

Subordination 39,727 2 2,952 3,040 5,992

Lender risk-sharing 5,917 Ä 5,158 Ä 5,158

Other 585 Ä 580 Ä 580

Less: UPB with multiple CRT and/or other credit

enhancements (1,085,433) (51) Ä Ä Ä

Single-family credit guarantee portfolio with

credit enhancement 1,133,273 52 133,080 29,295 162,375

Single-family credit guarantee portfolio without

credit enhancement 1,045,588 48 Ä Ä Ä

Total $2,178,861 100% $133,080 $29,295 $162,375

Outstanding as of December 31, 2019

Protected

UPB(1)

% of Single-Family

Credit Guarantee

Portfolio Maximum Coverage(2)

(Dollars in millions) Total Total First Loss(3) Mezzanine Total

Primary mortgage insurance $421,870 21% $107,690 $Ä $107,690

STACR 824,359 41 5,874 19,238 25,112

Insurance/reinsurance 863,149 43 2,483 7,674 10,157

Subordination 44,941 2 2,608 2,791 5,399

Lender risk-sharing 24,078 1 5,077 580 5,657

Other 1,056 Ä 1,051 Ä 1,051

Less: UPB with multiple CRT and/or other credit

enhancements (1,058,402) (52) Ä Ä Ä

Single-family credit guarantee portfolio with

credit enhancement 1,121,051 56 124,783 30,283 155,066

Single-family credit guarantee portfolio without

credit enhancement 873,398 44 Ä Ä Ä

Total $1,994,449 100% $124,783 $30,283 $155,066

(1) For STACR and certain insurance/reinsurance transactions (e.g., ACIS), represents the UPB of the assets included in the reference pool. For other insurance/

reinsurance transactions, represents the UPB of the assets covered by the insurance policy. For subordination, represents the UPB of the guaranteed securities,

which represents the UPB of the assets included in the trust net of the protection provided by the subordinated securities. For certain transactions, protected UPB

may be different from the UPB of the underlying loans due to timing differences in reporting cycles between the transactions and the loans.Å

(2) For STACR transactions, represents the outstanding balance held by third parties. For insurance/reinsurance transactions, represents the remaining aggregate limit

of insurance purchased from third parties. For subordination, represents the outstanding UPB of the securities that are subordinate to Freddie Mac guaranteed

securities and held by third parties.

(3) First loss includes the most subordinate securities (i.e., B tranches) in our STACR transactions and their equivalent in ACIS and other CRT transactions.

We had outstanding maximum coverage of $162.4 billion and $155.1 billion on our single-family credit guarantee portfolio as of

September 30, 2020 and December 31, 2019, respectively. CRT transactions provided 30.3% and 29.8% of the outstanding

maximum coverage on those dates. 

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 42
Credit Enhancement Coverage Characteristics

The table below provides information on the credit-enhanced and non-credit-enhanced loans in our single-family credit

guarantee portfolio. The credit-enhanced categories are not mutually exclusive as a single loan may be covered by both primary

mortgage insurance and other credit protection.

Table 20 - Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Credit Guarantee Portfolio

September 30, 2020 December 31, 2019

(Percentage of portfolio based on loan UPB)(1)(2) % of Portfolio SDQ Rate % of Portfolio SDQ Rate

Credit-enhanced

 Primary mortgage insurance 21% 4.18% 21% 0.79%

 CRT and other 43 3.60 55 0.40

Non-credit-enhanced 49 2.51 45 0.70

Total N/A 3.04 N/A 0.63

(1) Excludes loans underlying certain securitization products for which loan-level data is not available.

(2) Based on loan UPB, which may be different from the protected UPB of the associated credit enhancement transaction due to timing differences in reporting cycles

between the transactions and the loans.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 43

The table below provides information on the amount of credit enhancement coverage by year of origination associated with

loans in our single-family credit guarantee portfolio.

Table 21 - Credit Enhancement Coverage by Year of Origination

September 30, 2020 December 31, 2019

(Dollars in millions) UPB(1)(2)

% of UPB with

Credit

Enhancement UPB(1)(2)

% of UPB with

Credit

Enhancement

Year of Loan Origination

 2020 $626,391 28% N/A N/A

 2019 326,481 72 $383,003 40%

 2018 141,752 80 221,712 81

 2017 173,068 76 242,605 77

 2016 214,703 70 277,762 71

 2015 and prior 696,053 43 869,043 44

Total $2,178,448 51 $1,994,125 55

(1) Excludes loans underlying certain securitization products for which loan-level data is not available.

(2) Based on loan UPB, which may be different from the protected UPB of the associated credit enhancement transaction due to timing differences in reporting cycles

between the transactions and the loans.

Credit Enhancement Expenses and Recoveries

The recognition of expenses and expected recoveries associated with credit enhancements in our condensed consolidated

financial statements depends on the type of credit enhancement. See our 2019 Annual Report for more information. See Note

6 for additional information on our credit enhancements. The table below contains details on the expenses and recoveries

associated with our single-family credit enhancements.

Table 22 - Details of Single-Family Credit Enhancement Expenses and Recoveries

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Credit enhancement expenses:(1) 

Credit enhancement expense ($260) ($193) ($715) ($525)

Interest expense related to CRT debt (165) (263) (579) (815)

 Estimated reinvestment income from proceeds of CRT debt issuance 9 83 68 298

Single-family credit enhancement expenses ($416) ($373) ($1,226) ($1,042)

Single-family expected credit enhancement recoveries $26 $Ä $684 $42

(1) Excludes fair value gains and losses on CRT derivatives and CRT debt recorded at fair value. See MD&A - Consolidated Results of Operations for additional

information on these items. 
Our single-family freestanding credit enhancement expected recovery receivable was $1.0 billion and $0.1 billion as of

September 30, 2020 and December 31, 2019, respectively.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 44

Impact of CRT Transactions on Conservatorship Capital 

We use FHFA's risk-based CCF guidelines to determine the amount of total conservatorship capital needed for our singlefamily credit guarantee portfolio. We reduce the amount of conservatorship capital needed for credit risk by shifting the risk of

credit losses from Freddie Mac to third-party investors through our CRT transactions, primarily our STACR and ACIS

transactions. In May 2020, FHFA released its re-proposed Enterprise Capital Rule for comment. The re-proposed capital rule, if

adopted, would significantly change the impact of CRT transactions on our required capital by limiting the capital reduction

resulting from such transactions and would materially increase the amount of capital required for loans covered by CRT

transactions. The table below presents information on the impact of certain CRT transactions on the amount of capital needed

for credit risk (conservatorship credit capital) pursuant to the existing CCF in effect during the period presented. For more

information on the CCF, see MD&A - Liquidity and Capital Resources - Capital Resources - Conservatorship

Capital Framework.

Table 23 - Reduction in Conservatorship Credit Capital(1) as a Result of Certain CRT Transactions

September 30, 2020 December 31, 2019

(Dollars in billions)

SingleFamily

Credit

Guarantee

Portfolio

Single-Family

Credit

Guarantee

Portfolio -

Covered by

Certain CRT

Transactions

SingleFamily Credit

Guarantee

Portfolio -

Other

SingleFamily

Credit

Guarantee

Portfolio

Single-Family

Credit

Guarantee

Portfolio -

Covered by

Certain CRT

Transactions

Single-Family

Credit

Guarantee

Portfolio -

Other

Conservatorship credit capital prior to CRT(2) $36.2 $18.9 $17.3 $32.0 $16.1 $15.9

Conservatorship credit capital reduced by CRT(3) (14.4) (14.4) Ä (11.8) (11.8) Ä

Conservatorship credit capital needed after CRT $21.8 $4.5 $17.3 $20.2 $4.3 $15.9

Reduction in conservatorship credit capital (%)(4) 39.8% 76.2% Ä% 36.9% 73.3% Ä%

UPB $2,179 $950 $1,229 $1,994 $945 $1,049

Percentage of portfolio 100% 44% 56% 100% 47% 53%

(1) Conservatorship credit capital figures for each period are based on the CCF in effect during the period. The CCF in effect as of September 30, 2020 was largely

unchanged from the CCF as of December 31, 2019. The conservatorship credit capital figures as of September 30, 2020 are preliminary and subject to change until

official submission to FHFA. The conservatorship credit capital figures as of December 31, 2019 have been revised to conform to the official submission to FHFA.

(2) Represents the total conservatorship credit capital prior to CRT on the outstanding balance of our single-family credit guarantee portfolio as of September 30, 2020

and December 31, 2019 based on prescribed CCF guidelines. 

(3) Represents the amount of conservatorship credit capital released from certain CRT transactions, including STACR, ACIS/AFRM, certain senior subordination

securitization structures, and certain lender risk-sharing transactions, based on prescribed CCF guidelines. 

(4) Calculated as conservatorship credit capital reduced by CRT divided by conservatorship credit capital prior to CRT.

Monitoring Loan Performance and Characteristics

We review loan performance, including monitoring credit quality characteristics in conjunction with housing market and

economic conditions, to assess credit risk when estimating our allowance for credit losses.

Loans in COVID-19 Related Forbearance Plans 

Pursuant to FHFA guidance and the CARES Act, we offer mortgage relief options for borrowers affected by the

COVID-19 pandemic. Among other things, we are offering forbearance of up to 12 months to single-family borrowers

experiencing a financial hardship, either directly or indirectly, related to the COVID-19 pandemic. The CARES Act requires

creditors to report to credit bureaus that loans in relief programs, such as forbearance plans, repayment plans, and loan

modification programs, are current as long as the loans were current prior to entering into the relief programs and the borrowers

remain in compliance with the programs. This credit reporting requirement applies to all mortgage relief programs entered into

between January 31, 2020 and the date that is 120 days after the declaration of the national emergency related to the

COVID-19 pandemic ends. Our ability to monitor the credit quality of loans in our single-family credit guarantee portfolio may be

adversely affected as credit scores may not reflect the impact of relief programs, offered by us or other creditors, into which

borrowers may have entered. 

For the purpose of reporting delinquency rates, we report single-family loans in forbearance plans as delinquent during the

forbearance period to the extent that payments are past due based on the loans' original contractual terms, irrespective of the

forbearance plan. Single-family servicers have not been required to report forbearance information to us if the borrower

continues to make payments during the forbearance period and remains in current status. As a result, our forbearance data is

limited to loans in forbearance plans that are past due based on the loanÇs original contractual terms and does not include loans
that are in forbearance plans where borrowers have continued to make payments during the forbearance period and remain in

current status. For this reason, our reported forbearance rates may be lower than single-family forbearance rates reported by

other industry participants, which generally report forbearance rates that include all loans in forbearance plans, including loans

where the borrower has continued to make payments during the forbearance period and remains in current status. Effective

October 1, 2020, we are requiring servicers to report to us all alternatives to foreclosure, which include forbearance plans on all

mortgages, including those that are not delinquent.

Allowance for Credit Losses

Upon the adoption of CECL on January 1, 2020, we recognized an increase to the opening balance of the allowance for credit

losses on single-family loans classified as held-for-investment. Under CECL, we recognize an allowance for credit losses before

a loss event has been incurred, which results in earlier recognition of credit losses compared to the previous incurred loss

impairment methodology. Under CECL, we estimate the allowance for credit losses for loans on a pooled basis using a

discounted cash flow model that evaluates a variety of factors to estimate the cash flows we expect to collect. The discounted

cash flow model forecasts cash flows over the loanÇs remaining contractual life, adjusted for expectations of prepayments and

TDRs we reasonably expect will occur, and using our historical experience, adjusted for current and future economic forecasts.

These projections require significant management judgment and we face uncertainties and risks related to the models we use

for financial accounting and reporting purposes. In particular, the length and severity of the economic downturn caused by the

COVID-19 pandemic and its impact on house prices and the housing market, the number of borrowers that require assistance

under the COVID-19 forbearance programs we are offering, and the ultimate success of those programs in resolving borrower

hardships are all subject to significant uncertainty and may have a material effect on our allowance for credit losses in future

periods. 

For further information on our accounting policies and methods for estimating our allowance for credit losses and related

management judgments, see MD&A - Critical Accounting Policies and Estimates. 

The table below summarizes our single-family allowance for credit losses activity. 

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 45

Table 24 - Single-Family Allowance for Credit Losses Activity

Å(Dollar in millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Beginning balance(1) $6,916 $5,326 $5,233 $6,176

(Benefit) provision for credit losses 320 (180) 2,110 (477)

Charge-offs (122) (407) (407) (1,256)

Recoveries collected 41 107 165 341

Other 39 41 93 103

Ending balance $7,194 $4,887 $7,194 $4,887

Components of ending balance of allowance for credit losses:

Mortgage loans held-for-investment $6,647 $4,841

Advances of pre-foreclosure costs 383 N/A

Accrued interest receivable 107 N/A

Off-balance-sheet credit exposures 57 46

 Total $7,194 $4,887

As a percentage of our single-family credit guarantee portfolio 0.33% 0.25%

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.
Credit Losses and Recoveries

The table below contains certain credit performance metrics for our single-family credit guarantee portfolio. Credit losses

declined during the 2020 periods as charge-offs related to reclassification of single-family loans from held-for-investment to

held-for-sale decreased driven by lower volume. Other credit losses also declined as a result of the foreclosure moratorium that

will remain in effect until at least December 31, 2020. It is likely that we will incur additional costs in future periods, such as

higher property preservation and maintenance expenses, due to the foreclosure moratorium as the borrowers may remain

delinquent for an extended period of time.

Table 25 - Single-Family Credit Guarantee Portfolio Credit Performance Metrics

(Dollars in millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Charge-offs $122 $407 $407 $1,256

Recoveries collected (41) (107) (165) (341)

Charge-offs, net 81 300 242 915

REO operations expense 40 58 139 172

Total credit losses $121 $358 $381 $1,087

Total credit losses (in bps) 2.3 7.3 2.9 7.4

Recoveries from (gains) losses on sales of seriously delinquent loans(1) $Ä $Ä ($27) $Ä

Recoveries collected under freestanding credit enhancements and write-offs of CRT debt (5) (3) (13) (10)

(1) Excludes (gains) losses on securitizations of reperforming loans.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 46

TDRs and Non-Accrual Loan Activity

Single-family loans that have been modified or placed on non-accrual status generally have a higher associated allowance for

credit losses. Due to the large number of loan modifications completed in past years, a significant portion of our allowance for

credit losses is attributable to TDR loans: 

n As of September 30, 2020, 21% of the allowance for credit losses associated with single-family loans related to interestrate concessions provided to borrowers as part of loan modifications. 

n Most of our modified single-family loans, including TDRs, were current and performing at September 30, 2020.

n In general, we expect our allowance for credit losses associated with existing single-family TDRs to decline over time as

borrowers continue to make monthly payments under the modified terms and interest-rate concessions are amortized into

earnings. However, the COVID-19 pandemic is likely to cause some borrowers to have difficulty making their monthly

payments under the modified terms. In addition, our sales of reperforming loans will decrease these allowances for credit

losses. However, our ability to sell reperforming loans was affected in 2Q 2020 and may again be negatively affected by the

pandemic.

The CARES Act provides temporary relief from the accounting requirements for TDRs for certain loan modifications that are the

result of a hardship that is related, either directly or indirectly, to the COVID-19 pandemic. We have elected to apply this

temporary relief and therefore will not account for qualifying loan modifications as TDRs. In addition, interpretive guidance

issued by federal banking regulators and endorsed by the FASB staff has indicated that government-mandated modification or

deferral programs related to the COVID-19 pandemic are not TDRs as the lender did not choose to grant a concession to the

borrower. As a result, we expect that substantially all of the forbearance and other relief programs we are offering as a result of

the COVID-19 pandemic will not be accounted for as TDRs. 

We generally place single-family loans on non-accrual status when the loan becomes three monthly payments past due, but we

make an exception to our standard non-accrual policy for loans in forbearance plans that were current prior to receiving

forbearance and do not place such loans on non-accrual status based solely on delinquency status. For these loans, we

consider additional factors, such as current LTV ratio, and continue to accrue interest while the loan is in forbearance and is

three or more monthly payments past due when we believe the available evidence indicates that collectability of principal and

interest is reasonably assured. When we accrue interest on loans that are three or more monthly payments past due, we

measure an allowance for expected credit losses on unpaid accrued interest receivable balances such that the balance sheet

reflects the net amount of interest we expect to collect. The UPB and related accrued interest receivable, net of the allowance

for credit losses, for our single-family loans in forbearance plans related to the COVID-19 pandemic that were three months or

more past due and continuing to accrue interest was $53.1 billion and $1.0 billion, respectively, as of September 30, 2020. See

Note 4 for additional information on our accounting policies for forbearance programs related to the COVID-19 pandemic. 
The tables below present information about the UPB and interest income of single-family TDR loans and non-accrual loans on

our condensed consolidated balance sheets. 

Table 26 - Single-Family TDR and Non-Accrual Loans

September 30, 2020 December 31, 2019

(Dollars in millions)

Mortgage Loans

Held-forInvestment

Mortgage

Loans Heldfor-Sale Total

Mortgage Loans

Held-forinvestment

Mortgage

Loans Heldfor-Sale Total

UPB:

 TDRs on accrual status(1) $29,643 $6,096 $35,739 $32,188 $11,576 $43,764

 Non-accrual loans 14,104 5,403 19,507 6,529 4,654 11,183

Total TDRs and non-accrual loans $43,747 $11,499 $55,246 $38,717 $16,230 $54,947

Allowance for credit losses associated with:

 TDRs on accrual status $1,341 $2 $1,343 $2,452 $Ä $2,452

 Non-accrual loans 678 145 823 597 Ä 597

Total $2,019 $147 $2,166 $3,049 $Ä $3,049

Allowance as a percentage of UPB:

 TDRs on accrual status 5% Ä% 4% 8% Ä% 6%

 Non-accrual loans 5 3 4 9 Ä 5

Total 5 1 4 8 Ä 6

3Q 2020 3Q 2019

(In millions)

Mortgage Loans

Held-forInvestment

Mortgage

Loans Heldfor-Sale Total

Mortgage Loans

Held-forInvestment

Mortgage

Loans Heldfor-Sale Total

Interest on TDRs and non-accrual loans:

 At original contractual rates $549 $157 $706 $543 $229 $772

 Recognized (343) (68) (411) (378) (137) (515)

Foregone interest income on TDRs and

non-accrual loans(2) $206 $89 $295 $165 $92 $257

YTD 2020(3) YTD 2019(3)

(In millions)

Mortgage Loans

Held-forInvestment

Mortgage

Loans Heldfor-Sale Total

Mortgage Loans

Held-forInvestment

Mortgage

Loans Heldfor-Sale Total

Interest on TDRs and non-accrual loans:

 At original contractual rates $1,471 $471 $1,942 $1,620 $636 $2,256

 Recognized (1,001) (236) (1,237) (1,193) (383) (1,576)

Foregone interest income on TDRs and

non-accrual loans(2) $470 $235 $705 $427 $253 $680

(1) In prior periods, UPB amounts included only loans classified as held-for-investment.

(2) Represents the amount of interest income that we did not recognize but would have recognized during the period for loans outstanding at the end of each period,

had the loans performed according to their original contractual terms.

(3) Represents the interest income at original contractual rates, interest income recognized, and foregone interest income based on TDRs and non-accrual loans at the

end of each period.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 47
The table below summarizes the UPB of single-family held-for-investment TDR loan activity.

Table 27 - Single-Family TDR Loan Activity

September 30, 2020 September 30, 2019(1)

(Dollars in millions) Loan Count Amount Loan Count Amount

Beginning balance, as of January 1 249,182 $35,623 290,255 $42,254

New additions 21,176 3,654 23,420 3,696

Repayments and reclassifications to held-for-sale (32,480) (5,172) (52,970) (8,897)

Foreclosure sales and foreclosure alternatives (1,446) (226) (3,673) (496)

Ending balance, as of September 30 236,432 33,879 257,032 36,557

Loans impaired upon purchase Ä Ä 1,909 122

Total impaired loans with an allowance recorded Ä Ä 258,941 36,679

Allowance for credit losses (1,704) (3,326)

Net investment, as of September 30 $32,175 $33,353

(1) Excludes held-for-investment TDRs with no allowance for credit losses based on the individual impairment assessment according to the previous incurred loss

impairment methodology.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 48

Delinquency Rates 

We report single-family delinquency rates based on the number of loans in our single-family guarantee portfolio that are past

due as reported to us by our servicers as a percentage of the total number of loans in our single-family guarantee portfolio. The

charts below show the credit losses and serious delinquency rates for each of our single-family loan portfolios.

The total serious delinquency rate on our single-family credit guarantee portfolio increased to 3.04% as of September 30, 2020,

compared to 0.61% as of September 30, 2019, driven by an increase in the number of loans in forbearance plans related to the

COVID-19 pandemic. However, 54% of the seriously delinquent loans at September 30, 2020 were covered by credit

enhancements designed to reduce our credit risk exposure. Despite the increase in the serious delinquency rate, our core

single-family loan portfolio continued to perform well through September 30, 2020, and accounted for a small percentage of our

credit losses. Our legacy and relief refinance single-family loan portfolio continued to decline but also continued to account for

the majority of our credit losses. See Note 4 for additional information on the payment status of our single-family mortgage

loans.

The ongoing COVID-19 pandemic has caused an unprecedented disruption in the mortgage market. While we expect the

actions we take to support the mortgage market to improve borrower outcomes, these actions may not be as successful as we

hope, and we expect the serious delinquency rates for our single-family loan portfolio to remain elevated as a result of the

pandemic and the forbearance programs we are offering in response.
Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Portfolio Composition and Credit Losses

% of Portfolio % of Credit Losses

As of 09/30/2020 Nine Months Ended 9/30/2020

89%

33%

11%

67%

 

 Serious Delinquency Rates

Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Total

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

0.24% 0.26% 0.26%

1.95%

2.44%

1.77% 1.84% 1.79%

4.44%

5.47%

0.61% 0.63% 0.60%

2.48%

3.04%

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 49

The chart below shows the percentage of mortgage loans in our single-family credit guarantee portfolio that are one month and

two months past due. Both of these percentages decreased compared to June 30, 2020, and have trended back toward prepandemic levels as the impact of the pandemic on early-stage delinquencies has started to stabilize.

Percentage of Single-Family Loans One Month and Two Months Past Due 

One month past due Two months past due

09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

1.18%

1.26% 1.26%

1.47%

1.08%

0.32% 0.33% 0.30%

1.66%

0.50%
The table below presents payment status information of our single-family loans in forbearance plans that are past due based on

the loans' original contractual terms. 

Table 28 - Single-Family Loans in Forbearance Plans by Payment Status

September 30, 2020 December 31, 2019

(Dollars in millions)

One Month

Past Due

Two

Months

Past Due

ThreeÅ

MonthsÅor

More Past

Due Total

One Month

Past Due

Two

Months

Past Due

ThreeÅ

MonthsÅor

More Past

Due Total

UPB $7,328 $6,890 $59,960 $74,178 $131 $85 $362 $578

Number of loans (in thousands) 37 34 271 342 1 Ä 2 3

As a percentage of our singlefamily credit guarantee portfolio

(1) 0.32% 0.29% 2.34% 2.95% 0.01% Ä% 0.02% 0.03%

(1) Based on loan count.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 50

Loan Characteristics 

The tables below contain details on characteristics of the loans in our single-family credit guarantee portfolio.

Table 29 - Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio

September 30, 2020

(Dollars in billions) UPB

Original

Credit

Score (1)

Current

Credit

Score (1)

Original

LTVÅRatio

Current

LTV

Ratio

Current

LTVÅRatio

>100% Alt-A %

Core single-family loan portfolio $1,928 752 756 74% 60% Ä% Ä%

Legacy and relief refinance single-family loan portfolio 251 709 697 82 48 2 8

Total $2,179 747 753 75 59 Ä 1

 Referenced footnote is included after the next table.

December 31, 2019

(Dollars in billions) UPB

Original

Credit

Score (1)

Current

Credit

Score (1)

Original

LTVÅRatio

Current

LTV

Ratio

Current

LTVÅRatio

>100% Alt-A %

Core single-family loan portfolio $1,701 750 752 75% 60% Ä% Ä%

Legacy and relief refinance single-family loan portfolio 293 712 692 83 52 2 7

Total $1,994 745 749 76 59 Ä 1

(1) Original credit score is based on three credit bureaus (Equifax, Experian, and TransUnion). Current credit score is based on Experian only.

The tables below contain details on the characteristics of our single-family loans in forbearance plans that are past due based

on the loans' original contractual terms. 

Table 30 - Credit Quality Characteristics of Our Single-Family Loans in Forbearance Plans

 September 30, 2020 December 31, 2019

(Dollars in billions) UPB

Original

Credit

Score (1)

Current

Credit

Score (1)

Original

LTV

Ratio

Current

LTV

Ratio UPB

Original

Credit

Score (1)

Current

Credit

Score (1)

Original

LTV

Ratio

Current

LTV

Ratio

Single-family loans in forbearance

plans (2) $74.2 717 690 79% 62% $0.6 691 588 82% 65%

September 30, 2020 December 31, 2019

(Dollars in billions) UPB As a % of Total UPB As a % of Total

Current LTV ratio:

 Ç 60 $32.9 44% $0.2 33%

 > 60 to 80 29.1 39 0.3 50

 > 80 to 100 11.8 16 0.1 17

 > 100 0.4 1 Ä NM

Total $74.2 100% $0.6 100%

(1) Original credit score is based on three credit bureaus (Equifax, Experian, and TransUnion). Current credit score is based on Experian only.

(2) Includes only loans in forbearance plans that are past due based on the loans' original contractual terms.

(3) NM - not meaningful due to the UPB rounding to zero.
Higher Risk Loan Attributes and Attribute Combinations

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 tables present the combination of credit score and CLTV ratio attributes of loans in our singlefamily credit guarantee portfolio.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 51

Table 31 - Single-Family Credit Guarantee Portfolio Attribute Combinations for Higher Risk Loans

September 30, 2020

CLTV ÇÅ80 CLTVÅ>Å80 to 100 CLTVÅ>Å100 All Loans

(Original credit score)

% of

Portfolio

SDQ

Rate

% of

Portfolio

SDQ

Rate(1)

% of

Portfolio

SDQ

Rate(1)

% of

Portfolio

SDQ

Rate

%

Modified

Core single-family loan portfolio:

<Å620 0.3% 10.54% Ä% NM Ä% NM 0.3% 11.11% 4.9%

620 to 659 2.1 6.87 0.3 8.30 Ä NM 2.4 7.01 3.6

ÉÅ660 72.4 2.18 13.5 2.71 Ä NM 85.9 2.24 1.0

Not available Ä NM Ä NM Ä NM Ä NM NM

Total 74.8% 2.37 13.8% 2.91 Ä% NM 88.6% 2.44 1.1

Legacy and relief refinance single-family

loan portfolio:

<Å620 1.0% 10.11 0.1% 19.72 Ä% NM 1.1% 10.93 15.7

620 to 659 1.2 8.17 0.1 17.76 Ä NM 1.3 8.80 15.4

ÉÅ660 8.4 4.00 0.4 11.86 0.1 15.62 8.9 4.29 6.2

Not available 0.1 8.44 Ä NM Ä NM 0.1 8.76 20.9

Total 10.7% 5.06 0.6% 14.18 0.1% 19.19 11.4% 5.47 8.4

 Referenced footnote is included after the next table.

December 31, 2019

CLTV ÇÅ80 CLTVÅ>Å80 to 100 CLTVÅ>Å100 All Loans

(Original credit score)

% of

Portfolio

SDQ

Rate

% of

Portfolio

SDQ

Rate(1)

% of

Portfolio

SDQ

Rate(1)

% of

Portfolio

SDQ

Rate

%

Modified

Core single-family loan portfolio:

<Å620 0.3% 2.68% Ä% NM Ä% NM 0.3% 2.87% 3.5%

620 to 659 2.1 1.26 0.4 1.59% Ä NM 2.5 1.30 1.9

ÉÅ660 69.8 0.20 12.6 0.26 Ä NM 82.4 0.20 0.3

Not available 0.1 1.23 Ä NM Ä NM 0.1 1.96 3.6

Total 72.3% 0.24 13.0% 0.33 Ä% NM 85.3% 0.26 0.4

Legacy and relief refinance single-family

loan portfolio:

<Å620 1.1% 4.16 0.2% 9.33 0.1% 15.03% 1.4% 4.83 17.7

620 to 659 1.5 3.01 0.2 7.91 0.1 12.84 1.8 3.52 16.3

ÉÅ660 10.5 1.06 0.7 3.91 0.2 6.32 11.4 1.23 5.9

Not available 0.1 4.39 Ä NM Ä NM 0.1 4.68 19.6

Total 13.2% 1.58 1.1% 5.39 0.4% 8.96 14.7% 1.84 8.3

(1) NM - not meaningful due to the percentage of the portfolio rounding to zero.

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 $0.7 billion and $0.8 billion of security

collateral underlying our other securitization products at September 30, 2020 and December 31, 2019, 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 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 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,Äpart of our relief refinance initiative or 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 or 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 SeptemberÄ30, 2020, we have purchased approximately $36.4 billion of relief refinance loans that were previously

categorized as Alt-A loans in our portfolio.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 52

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

Table 32 - Alt-A Loans in Our Single-Family Credit Guarantee Portfolio

September 30, 2020 December 31, 2019

(Dollars in billions) UPB CLTV

%

Modified SDQ Rate UPB CLTV

%

Modified SDQ Rate

Alt-A $19.3 58% 17.0% 11.05% $21.1 61% 18.4% 3.75%

The UPB of Alt-A loans in our single-family credit guarantee portfolio is continuing to decline due to borrowers refinancing into

other mortgage products, foreclosure sales, and other liquidation events.

Geographic Concentrations

The table below summarizes the concentration by geographic area of our single-family credit guarantee portfolio as of

SeptemberÄ30, 2020 and December 31, 2019, respectively. While our portfolio is well-diversified geographically, the economic

effects of the COVID-19 pandemic may be disproportionately concentrated in certain geographic regions or areas. See Risk

Management - Single-Family Mortgage Credit Risk in our 2019 Annual Report for additional information on geographic

concentrations. See NoteÄ14 for more information about credit risk associated with loans that we hold or guarantee. 

Table 33 - Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio

September 30, 2020 December 31, 2019 Percent of Credit Losses(1)

%Å of

Portfolio

Serious

Delinquency

Rate

%Å of

Portfolio

Serious

Delinquency

Rate YTD 2020 YTD 2019

Region:(2)

West 30% 2.84% 30% 0.36% 5% 12%

Northeast 24 3.70 24 0.87 40 40

North Central 16 2.31 16 0.61 27 19

Southeast 16 3.42 16 0.73 18 22

Southwest 14 2.89 14 0.54 10 7

Total 100% 3.04 100% 0.63 100% 100%

State:(3)

Illinois 4% 3.36 4% 0.85 14% 10%

New York 5 5.26 5 1.21 12 12

Florida 6 4.39 6 0.77 10 14

New Jersey 3 5.09 3 1.08 9 10

Pennsylvania 3 3.01 3 0.89 5 4

All other 79 2.71 79 0.53 50 50

Total 100% 3.04 100% 0.63 100% 100%

(1) Excludes credit losses related to charge-offs of accrued interest receivables.

(2) 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).

(3) States presented based on those with the highest percentage of credit losses during YTD 2020.
Engaging in Loss Mitigation Activities

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 53

Loan Workout Activities

Servicers perform loss mitigation activities as well as foreclosures on loans that they service for us. Our loss mitigation strategy

emphasizes early intervention by servicers in delinquent loans and offers alternatives to foreclosure by providing servicers with

default management programs designed to manage non-performing loans more effectively and to assist borrowers in

maintaining home ownership or to facilitate foreclosure alternatives.

We offer a variety of borrower assistance programs for struggling borrowers. Pursuant to FHFA guidance and the CARES Act,

we offer mortgage relief options for borrowers affected by the COVID-19 pandemic. Among other things, we are offering

forbearance of up to 12 months to single-family borrowers experiencing a financial hardship, either directly or indirectly, related

to the COVID-19 pandemic. On July 1, 2020, we began providing servicers a payment deferral option to offer to eligible

homeowners. This solution, a broad offering that, at the direction of FHFA, is aligned with Fannie Mae's approach, is available

to homeowners who have endured a short-term hardship and subsequently resolved it (including but not limited to hardships

related to the COVID-19 pandemic) and provides them with a means to make up for missed payments. The payment deferral

provides relief to eligible borrowers who have the financial capacity to resume making their monthly payments, but who are

unable to afford the additional monthly contributions required by a repayment plan. We expect these programs to result in

elevated levels of loss mitigation activity.

Prior to expiration of a borrower's forbearance plan, servicers are required to contact the borrower to determine how the

payments missed during the forbearance period will be repaid. Freddie Mac requires servicers to follow a defined loss

mitigation hierarchy to determine which options to offer to borrowers. If the borrower is not eligible for any of the homeretention options below, we may seek to pursue a foreclosure alternative or foreclosure. Borrowers are not required to repay all

past due amounts in a single lump sum. We offer the following options to borrowers upon expiration of the forbearance plan:

n Reinstatement - A relief option that allows borrowers to repay all delinquent amounts to return to current status; 

n Repayment plan - A relief option that allows borrowers a specified period of time to return to current status by paying the

normal monthly payment plus additional agreed upon delinquent amounts. Repayment plans must have a term greater than

one month and less than or equal to 12 months and the monthly repayment plan payment amount must not exceed 150%

of the contractual mortgage payment;

n Payment deferral - A relief option that allows borrowers to return to current status by deferring delinquent principal and

interest into a non-interest-bearing principal balance that is due at the earlier of the payoff date, maturity date, or sale of

the property. The remaining mortgage term, interest rate, payment schedule, and maturity date remain unchanged and no

trial period plan is required; and

n Modification - A modification program that targets a 20% payment reduction through interest rate reduction, term

extension, and principal forbearance. Borrowers must complete a 90-day trial period plan prior to permanent modification.

For additional information on actions we have taken in response to the COVID-19 pandemic, see MD&A - Introduction -

COVID-19 Pandemic Response Efforts.
The table below presents a summary of our forbearance activity for single-family loans in forbearance plans that are past due

based on the loans' original contractual terms.

Table 34 - Single-Family Loans in Forbearance Plans Activity

(Loan count in thousands) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

 Beginning balance(1) 449 4 3 5

New plans 98 3 639 11

 Exits (205) (4) (300) (13)

Ending balance 342 3 342 3

Forbearance plan exit path: (in percentage based on loan count during 3Q 2020)

 Reinstatement(2) 44%

 Payment deferral 45

 Other(3) 11

Total 100%

Ending UPB (in millions) $74,178

(1) The beginning balance for 3Q 2020 has been revised due to a methodology change related to the timing of recognition of completed forbearance plans.

(2) Includes forbearance plans where the borrower cured the delinquency through payment of the mortgage in full.

(3) Primarily includes forbearance plans where the borrowers remained delinquent and the exit paths were not determined at the end of the forbearance periods. Also

includes other exit paths such as repayment plans, modifications, and foreclosure alternatives.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 54

Sales and Securitization of Certain Seasoned Loans

We pursue sales of certain seriously delinquent loans when we believe the sale of these loans provides better economic returns

than continuing to hold them. We also sell certain reperforming loans, which typically involves securitization of the loans using

our senior subordinate securitization structures. In certain cases, operational constraints may preclude us from selling loans. Of

the $13.2 billion in UPB of single-family loans classified as held-for-sale at September 30, 2020, $5.2 billion related to loans that

were seriously delinquent. 

While our ability to sell these seasoned loans was negatively affected by the COVID-19 pandemic, the market for certain loans

improved during 3Q 2020. As a result, we sold $4.0 billion in UPB of reperforming loans during 3Q 2020, compared to $3.5

billion during 3Q 2019. We completed no sales of seriously delinquent loans during 3Q 2020, compared to sales of $0.2 billion

in UPB of such loans during 3Q 2019.

Managing Foreclosure and REO Activities

Pursuant to FHFA guidance and the CARES Act, we are required to suspend foreclosures and evictions due to the COVID-19

pandemic until December 31, 2020, and this suspension period may be extended by FHFA, if necessary. As a result, our REO

ending inventory declined as of September 30, 2020. 

Table 35 - Single-Family REO Activity 

3Q 2020 3Q 2019 YTD 2020 YTD 2019

(Dollars in millions)

Number of

Properties Amount Number ofProperties Amount Number ofProperties Amount Number ofProperties Amount

Beginning balance Ä REO 2,812 $330 5,869 $666 4,989 $565 7,100 $780

Additions 356 27 2,004 203 1,987 178 6,143 605

Dispositions (1,126) (121) (2,470) (254) (4,934) (507) (7,840) (770)

Ending balance Ä REO 2,042 236 5,403 615 2,042 236 5,403 615

Beginning balance, valuation allowance (8) (6) (10) (11)

Change in valuation allowance 6 (2) 8 3

Ending balance, valuation allowance (2) (8) (2) (8)

Ending balance Ä REO, net $234 $607 $234 $607
Multifamily Mortgage Credit Risk

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 55

Maintaining Prudent Underwriting Standards

We use a prior approval underwriting approach for multifamily loans in which we maintain credit discipline by completing our

own underwriting and credit review for each new loan prior to purchase. Our underwriting standards focus on the LTV ratio and

DSCR, which estimates a borrower's ability to repay the loan using the secured property's cash flows, after expenses. Our

standards require maximum LTV ratios and minimum DSCRs that vary based on the characteristics and features of the loan.

Changes in market conditions can affect the credit quality of our multifamily loan purchases and/or guarantees.

Notwithstanding the effects of the COVID-19 pandemic on the multifamily market and broader economic environment, the

credit quality of our multifamily loan purchases and guarantees has remained strong during 2020.

The graphs below show the credit profile of the multifamily loans we purchased or guaranteed. 

Weighted Average Original LTV Ratio

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

69% 69% 69% 69% 66% 68% 68%

 Weighted Average Original Debt Service Coverage Ratio

3Q19 4Q19 1Q20 2Q20 3Q20 YTD19 YTD20

1.34 1.32

1.42

1.36

1.42

1.33

1.40

Managing Our Portfolio, Including Loss Mitigation Activities

Loans in COVID-19 Related Forbearance Plans

Pursuant to FHFA guidance and the CARES Act, we offer multifamily borrowers mortgage forbearance with the condition that

they suspend all evictions during the forbearance period for renters unable to pay rent. Under our forbearance program,

multifamily borrowers with a fully performing loan as of February 1, 2020 can defer their loan payments for up to 90 days by

showing hardship as a consequence of the COVID-19 pandemic and by gaining lender approval. After the forbearance period,

the borrower is required to repay the forborne loan amounts in no more than 12 equal monthly installments.

In June 2020, in coordination with FHFA, we announced three supplemental forbearance relief options to assist borrowers with

a forbearance plan who continue to be affected by the COVID-19 pandemic. These supplemental relief options extend most of

the original tenant protections and provide increased flexibility to tenants, allowing the repayment of past due rent over time

and not in a lump sum. The three supplemental relief options include: (i) the option to delay the start of the repayment period

following the forbearance period, (ii) an extension of the repayment period, and (iii) an extension of the forbearance period with

an optional extended repayment period. Borrower requests for supplemental forbearance relief will be reviewed by the

applicable servicer to confirm that the COVID-19 pandemic continues to be the underlying cause of the impairment of the

property's performance. If so, the servicer will determine whether any of the three supplemental relief options can reasonably

be expected to return the property's performance to its pre-pandemic levels. If none of the options seem appropriate, the loan

will be transferred to the appropriate asset resolution group. The selection of the appropriate supplemental relief option is at the

discretion of the servicer and will not be an election of the borrower. For additional information on our responses to the

COVID-19 pandemic, see MD&A - Introduction - COVID-19 Pandemic Response Efforts. 

We report multifamily delinquency rates based on the UPB of loans in our multifamily mortgage portfolio that are two monthly

payments or more past due based on the loan's current contractual terms, or in the process of foreclosure, as reported by our

servicers. Loans in forbearance are not considered delinquent as long as the borrower is in compliance with the forbearance

agreement, including the agreed upon repayment plan.
Prior to the COVID-19 pandemic, the multifamily market was on solid ground and the credit quality of the loans for which

forbearance was requested was generally strong. The following table summarizes the current credit quality of loans under a

forbearance program, which includes both the forbearance period and the repayment period.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 56

Table 36 - Current Credit Quality of Multifamily Loans Under a Forbearance Program

September 30, 2020

(Dollars in millions) UPB LTV > 80%(1) DSCR < 1.25(1)

Forbearance period $548 $81 $381

Repayment period 6,730 427 3,386

Credit-enhanced(2) 7,278 508 3,767

Forbearance period 269 52 61

Repayment period 494 130 136

Non-credit-enhanced 763 182 197

Total $8,041 $690 $3,964

Weighted average LTV(1) 64%

Weighted average DSCR(1) 1.40

(1) Based on the most recent borrower financial information submissions received from the servicers.

(2) Represents the loan UPB underlying our multifamily mortgage portfolio.

Approximately 84.0% of the loans in forbearance by UPB are in securitizations with subordination. The weighted average

subordination level of securitizations with subordination that have loans in forbearance was 14.4% as of September 30, 2020.

18.5% of loans in forbearance are scheduled to mature prior to 2024. In addition, as of September 30, 2020, we have approved

supplemental forbearance requests totaling $1.1 billion in UPB. 

Given the credit quality of the loans and subordination levels, we currently do not expect to experience significant credit losses

related to the COVID-19 pandemic and the related forbearance program. We will continue to assess the financial condition of

our borrowers as they exit forbearance and evaluate their needs for supplemental relief. 

Allowance for Credit Losses

Upon the adoption of CECL on January 1, 2020, we recognized an increase to the opening balance of the allowance for credit

losses on multifamily loans classified as held for investment and other off-balance sheet credit exposures. Under CECL, we

recognize an allowance for credit losses before a loss event has been incurred, which results in earlier recognition of credit

losses compared to the previous incurred loss impairment methodology. 

We estimate the allowance for credit losses using a loss-rate method to estimate the net amount of cash flows we expect to

collect. The loss rate method is based on a probability of default and loss given default framework that estimates credit losses

by considering a loanÇs underlying characteristics and current and forecasted economic conditions. Loan characteristics

considered by our model include vintage, loan term, current DSCR, current LTV ratio, occupancy rate, and interest rate hedges.

We forecast economic conditions over a reasonable and supportable two-year period prior to reverting to historical averages at

the model input level over a five-year period, using a linear reversion method. We also consider as model inputs expected

prepayments, contractually specified extensions, modifications we reasonably expect will occur, expected recoveries from

collateral posting requirements, and the expected recoveries from attached credit enhancements. Management adjustments

may be necessary to our model output to take into consideration current economic events and other external factors.

Significant judgment is exercised in making these adjustments.

The following table summarizes the allowance for credit losses on our multifamily mortgage portfolio including our other offbalance sheet credit exposures.
Table 37 - Multifamily Allowance for Credit Losses Activity

Å(Dollar in millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Beginning balance(1) $216 $17 $68 $15

(Benefit) provision for credit losses 7 1 155 3

Charge-offs, net Ä Ä Ä Ä

Ending balance $223 $18 $223 $18

Components of ending balance of allowance for credit losses:

Mortgage loans held-for-investment $126 $13

Off-balance sheet credit exposures 97 5

 Total $223 $18

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 57

Transferring Credit Risk to Third-Party Investors

To reduce our credit risk exposure, we engage in various credit enhancement arrangements, which include securitizations and

other credit enhancements. Our securitizations remain our principal risk transfer mechanism. Through these securitizations, we

have transferred a large majority of the expected and stress credit risk on the multifamily guarantee portfolio, thereby reducing

our overall credit risk exposure and required conservatorship capital. 

The table below presents the UPB, delinquency rates, and forbearance rates for both credit-enhanced and non-credit enhanced

loans underlying our multifamily mortgage portfolio.

Table 38 - Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio

September 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate(1) UPB

Delinquency

Rate

Forbearance

Rate(1)

Credit-enhanced:

Subordination(2) $271,845 0.13% 2.21% $251,008 0.09% Ä%

Other(3) 17,938 0.14 2.14 16,069 0.06 Ä

Total credit-enhanced 289,783 0.13 2.20 267,077 0.09 Ä

Non-credit-enhanced 33,896 0.14 2.25 33,091 Ä Ä

Total $323,679 0.13 2.21 $300,168 0.08 Ä

(1) Forbearance rate includes loans in our forbearance program including loans in their repayment period. 

(2) Represents the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection provided by the subordinated

securities.

(3) Includes lender risk-sharing agreements related to certain securitizations, insurance/reinsurance contracts, SCR, and other credit enhancements.

The following table provides information on the level of subordination outstanding on our securitizations with subordination.

Table 39 - Level of Subordination Outstanding

September 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate UPB

Delinquency

Rate

Forbearance

Rate

Less than 10% $26,434 0.01% 0.03% $2,094 0.04% Ä%

10% or greater 245,411 0.14 2.44 248,914 0.09 Ä

Total $271,845 0.13 2.21 $251,008 0.09 Ä

Weighted average subordination 14% 14%
The table below contains details on the loans underlying our multifamily mortgage portfolio that are not credit-enhanced.

Table 40 - Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement

September 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate UPB

Delinquency

Rate

Forbearance

Rate

Unsecuritized loans:

Held-for-sale $16,313 0.30% 1.11% $15,930 0.01% Ä%

Held-for-investment 7,966 Ä 1.53 9,408 Ä Ä

Securitization-related products 4,647 Ä 9.88 3,656 Ä Ä

Other mortgage-related guarantees 4,970 Ä Ä 4,097 Ä Ä

Total $33,896 0.14 2.25 $33,091 Ä Ä

We continue to develop other strategies to reduce our credit risk exposure to multifamily loans and securities. See Our

Business Segments - Multifamily - Business Overview - Products and Activities - Securitization and

Guarantee Products in our 2019 Annual Report for additional information. 

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 58

Counterparty Credit Risk

We are exposed to counterparty credit risk, which is a type of institutional credit risk, as a result of our contracts with sellers

and servicers, credit enhancement providers (mortgage insurers, investors, etc.), financial intermediaries, clearinghouses, and

other counterparties. Beginning in 1Q 2020, many of our counterparties, primarily non-depository institutions, faced financial

strains and liquidity pressure due to the economic downturn and market volatility caused by the COVID-19 pandemic. If these

financial strains and liquidity pressure continue or increase, some of our counterparties may not be able to perform under their

contracts and our counterparty credit risk exposure may increase. We continue to monitor and assess the impacts of the

COVID-19 pandemic on our counterparty credit risk.

Sellers and Servicers

Single-Family

We perform ongoing monitoring and review of our exposure to individual sellers or servicers in accordance with our institutional

credit risk management framework, including requiring our counterparties to provide regular financial reporting to us. We have

significant exposure to non-depository and smaller depository financial institutions in our single-family business. As the

COVID-19 pandemic evolved rapidly, liquidity concerns primarily regarding non-depository financial institutions arose as market

conditions changed and borrowers affected by COVID-19 were offered widespread forbearance, including forbearance on loans

purchased and securitized by Freddie Mac. Servicers must continue to advance funds during the forbearance period as

discussed below, which may increase liquidity pressures on certain of our counterparties.

For our mortgage-backed securities, we guarantee the payment of principal and interest, and when the underlying borrowers do

not pay their mortgages, our Guide requires single-family servicers to advance the missed mortgage interest payments from

their own funds for up to 120 days. After this time, we will make the missed mortgage principal and interest payments to

security holders until the mortgages are no longer held by the securitization trust. At the instruction of FHFA, our practice

generally has been to purchase loans from the securitization trusts when the loans have been delinquent for 120 days or more.

After the outbreak of COVID-19, FHFA further instructed us to maintain loans in COVID-19 payment forbearance plans in the

securitization trusts for at least the duration of the forbearance. Once the forbearance period expires, the loan will remain in the

related securities pool while:

n An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant

to a loan modification remains outstanding;

n The loan is in an active repayment plan or trial period plan; or 

n A payment deferral solution is in effect.

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we will extend the trigger to

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure. 

In addition to principal and interest payments, borrowers are also responsible for other expenses such as property taxes and

homeowner's insurance premiums. When borrowers do not pay these expenses, our Guide generally requires single-family

servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties.

These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the

missed payments and incurred expenses will be collected from the borrowers. We will reimburse the servicers for the advanced

amounts when uncollected from the borrowers at completion of foreclosures or foreclosure alternatives.
In response to the potential liquidity concerns for certain of our counterparties, we continued our heightened monitoring and

review of the financial stability of our non-depository institutional counterparties. However, if these counterparties experience

financial difficulty, we could see a decline in mortgage servicing quality and/or be less likely to recover losses. In order to

reduce our credit exposure, we may use a variety of tools and techniques to engage our single-family sellers and servicers and

limit our losses, including providing incentives and compensatory fees and facilitating servicing transfers.

The table below summarizes the concentration of non-depository servicers of our single-family credit guarantee portfolio.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 59

Table 41 - Single-Family Credit Guarantee Portfolio Non-Depository Servicers

September 30, 2020 December 31, 2019

% of Portfolio(1) % of Serious Delinquent

Single-Family Loans % of Portfolio(1) % of Serious DelinquentSingle-Family Loans

Top five non-depository servicers 18% 13% 18% 13%

Other non-depository servicers 26 30 20 55

Total 44% 43% 38% 68%

(1) Excludes loans where we do not exercise control over the associated servicing.

Multifamily

The majority of our multifamily loans are securitized using trusts that are administered by master servicers who bear

responsibility to advance funds in the event of payment shortfalls, including principal and interest payments related to loans in

forbearance.ÄIn the majority of our primary securitization transactions, we utilize one of three large financial depository

institutions as master servicers, except for small balance loan securitizations where we serve as master servicer.ÄIn instances

where payment shortfalls occur, the master servicer is required to make advances as long as such advances have not been

deemed non-recoverable. For loans purchased and held in our mortgage-related investment portfolio, the primary servicers are

not required to advance funds in the event of payment shortfalls and therefore do not present significant counterparty credit

risk.

Credit Enhancement Providers

We monitor our exposure to individual insurers by performing periodic analysis of the financial capacity of each insurer under

various adverse economic conditions. The COVID-19 pandemic may increase financial strains on our credit enhancement

providers, and as a result, we continued our close monitoring and active communication with our counterparties to assess

potential risk impacts. If our credit enhancement providers fail to meet their obligations to reimburse us for claims, we could

experience an increase in credit losses.

The table below summarizes our exposure to single-family mortgage insurers as of September 30, 2020. In the event a

mortgage insurer fails to perform, the coverage amounts represent our maximum exposure to credit losses resulting from such

a failure.

Table 42 - Single-Family Mortgage Insurers

September 30, 2020

(In millions) CreditÅRating(1) Credit Rating

Outlook(1) UPB Coverage

Arch Mortgage Insurance Company A- Negative $90,418 $22,751

Radian Guaranty Inc. (Radian) BBB+ Negative 89,092 21,942

Mortgage Guaranty Insurance Corporation (MGIC) BBB+ Negative 79,136 19,880

Essent Guaranty, Inc. BBB+ Negative 72,982 18,211

Genworth Mortgage Insurance Corporation BB+ Watch Neg 70,103 17,667

National Mortgage Insurance (NMI) BBB Negative 42,755 10,842

PMI Mortgage Insurance Co. (PMI) Not Rated N/A 2,199 551

Republic Mortgage Insurance Company (RMIC) Not Rated N/A 1,649 409

Triad Guaranty Insurance Corporation (Triad) Not Rated N/A 987 247

Others N/A N/A 410 77

Total $449,731 $112,577

(1) Ratings and outlooks are for the corporate entity to which we have the greatest exposure. Coverage amounts may include coverage provided by consolidated

affiliates and subsidiaries of the counterparty. Latest rating available as of September 30, 2020. Represents the lower of S&P and Moody's credit ratings and

outlooks stated in terms of the S&P equivalent. 

Other Counterparties

We have exposure to institutions that act as counterparties to other types of transactions that we enter into in the ordinary
course of business, including derivatives, securities purchased under agreements to resell, secured lending transactions, and

forward settlement of loans and securities. We monitor the financial strength of these institutions and may use collateral

maintenance requirements to manage our exposure to individual counterparties. 

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 60

Operational Risk 

Overview

Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people, or systems or

from external events. Operational risk is inherent in all of our activities. For additional discussion of operational risk events and

our operational risk environment, see MD&A - Risk Management - Operational Risk in our 2019 Annual Report.

See below for updates to operational risk since our 2019 Annual Report.

Business Resiliency Risk

As a result of the ongoing COVID-19 pandemic, our business resiliency risk remains elevated. Per the operational changes

instituted in response to the pandemic, we continued to operate remotely for more than 95% of our staff as of the end of

September 2020. We have not experienced significant operational or technological issues associated with these operational

changes. We have modified our processes and adapted to the changed environment to meet the business needs and mostly

conducted our business as usual without difficulty. 

We continue to effectively manage this increased risk by leveraging our business resiliency and crisis management capabilities

and our readiness to mitigate the impact of the COVID-19 pandemic on our operations. Additionally, we remain focused on

maintaining the availability of our systems and continuing to provide the tools and equipment to help staff perform their tasks.

Our business resiliency and executive crisis management teams have been resolving issues as they arise. The crisis

management team and our senior leaders are providing frequent updates to our Board of Directors, our staff, and FHFA. We are

also working with FHFA and third parties to ensure continuity of critical business activities.

Third-Party Risk

While we have not experienced material impacts, we believe that our third-party service providers, sellers, servicers, and other

counterparties are facing challenges due to the unprecedented events surrounding the COVID-19 pandemic. To address the

elevated third-party risks arising from these challenges, we are continuing increased monitoring of third parties we deem to be

critical or high risk to our operations. For example, we are using market intelligence sources to assess a number of risk factors

for certain critical third parties, including financial health, geographic risk, and liquidity risk. We have also evaluated the

contingency plans provided to us by significant third parties as well as our internal plans in the event that these third parties

were to fail. We will continue to assess the contingency plans as the situation evolves and, where necessary, will invoke our

plans to ensure continuity of operations. 

See MD&A - Risk Management - Credit Risk - Counterparty Credit Risk for additional information on our monitoring

of our sellers and servicers.

Model Risk

The unprecedented events surrounding the COVID-19 pandemic have generated an increased degree of model risk and

uncertainty. As a result, some of our models face significant challenges in accurately forecasting key inputs into our financial

projections. These include, but are not limited to, projections of mortgage rates, house prices, credit defaults, negative yields,

prepayments and interest rates. In response, we are attempting to mitigate this increased risk by monitoring model performance

and applying model overlays and adjustments when deemed appropriate. These are driven by the latest developments and

emerging trends in the economy, as well as any additional government interventions and internal policy changes. However,

these adjustments have an element of subjectivity and are based upon difficult and complex judgments. Actual results could

differ from our estimates, and the use of different judgments and assumptions related to these estimates could have a material

impact on our condensed consolidated financial statements.

For additional information on risks associated with our use of models, see Other Information - Risk Factors in our Form 10-

Q for the quarter ended March 31, 2020 and MD&A - Risk Management - Operational Risk - Model Risk and Risk

Factors - Operational Risks - We face risks and uncertainties associated with the models that we use to

inform business and risk management decisions and for financial accounting and reporting purposes in our

2019 Annual Report.
Market Risk

Overview

Our business segments have embedded exposure to market risk, which is the economic risk associated with adverse changes

in interest rates, volatility, and spreads. Interest-rate risk is consolidated and primarily managed by the Capital Markets

segment, while spread risk is owned by each individual business segment. Market risk can adversely affect future cash flows,

or economic value, as well as earnings and net worth.

The majority of our interest-rate risk comes from our investments in mortgage-related assets (securities and loans), the debt we

issue to fund our assets, and upfront fees (including buy-downs) related to our single-family credit guarantee activity. 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 models include the possibility of future negative interest rate scenarios and that

risk is included in our hedging framework.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 61

Interest-Rate Risk

Our primary interest-rate risk measures are duration gap and Portfolio Value Sensitivity (PVS).ÄDuration 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 value of assets.ÄPVS is an estimate of the change in the present value of the cash flows of our financial assets

and liabilities from an instantaneous shock to interest rates, assuming spreads are held constant and no rebalancing actions are

undertaken.ÄPVS is measured in two ways, one measuring the estimated sensitivity of our portfolio value to a 50 basis point

parallel movement in interest rates (PVS-L) and the other to a non-parallel movement resulting from a 25 basis point change in

slope of theÄLIBOR yield curve (PVS-YC).ÄWhile we believe that duration gap and PVS are useful risk management tools, they

should be understood as estimates rather than as precise measurements.

The following tablesÄprovide our duration gap, estimated point-in-time and minimum and maximum PVS-L and PVS-YC results,

and an average of the daily values and standard deviation. The tablesÄbelow also provide PVS-L estimates assuming an

immediate 100Äbasis point shift in the LIBOR yield curve. The interest-rate sensitivity of a mortgage portfolio varies across a

wide range of interest rates.

Table 43 - PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve

September 30, 2020 December 31, 2019

PVS-YC PVS-L PVS-YC PVS-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:

Investments ($280) $4,131 $8,616 ($307) $4,840 $10,011

Guarantees(2) (8) (768) (1,301) (224) 351 706

Total Assets (288) 3,363 7,315 (531) 5,191 10,717

Liabilities (39) (2,663) (5,973) 20 (1,563) (3,413)

Derivatives 331 (664) (1,300) 513 (3,646) (7,409)

Total 4 36 42 2 (18) (105)

PVS 4 36 42 2 Ä Ä

(1) The categorization of the PVS 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.

(2) Represents the interest-rate risk from our single-family guarantee portfolio, which includes buy-ups, float, and upfront fees (including buy-downs). 
Table 44 - Duration Gap and PVS Results

3Q 2020 3Q 2019

(Duration gap in months, dollars in millions)

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Average 0.7 $11 $105 0.5 $17 $54

Minimum (0.1) Ä Ä (0.3) Ä Ä

Maximum 1.5 29 257 1.2 48 130

Standard deviation 0.3 7 65 0.2 12 29

YTD 2020 YTD 2019

(Duration gap in months, dollars in millions)

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Average 0.5 $11 $76 0.9 $43 $116

Minimum (0.6) Ä Ä (0.8) Ä Ä

Maximum 1.5 30 257 8.6 345 950

Standard deviation 0.4 7 66 1.8 81 213

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 62

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 PVS-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.

Table 45 - PVS-L Results Before Derivatives and After Derivatives

PVS-L (50 bps)

(In millions)

Before

Derivatives

After

Derivatives

Effect of

Derivatives

September 30, 2020 $699 $36 ($663)

December 31, 2019 3,628 Ä (3,628)

Earnings Sensitivity to Market Risk

The 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 earnings when interest rates and spreads change. We have elected fair value

hedge accounting for certain assets and liabilities in an effort to reduce this earnings variability and better align our financial

results with the economics of our business. See MD&A - Consolidated Results of Operations and MD&A - Our

Business Segments for additional information on the effect of changes in interest rates and market spreads on our financial

results.

Interest Rate-Related Earnings Sensitivity

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

interest rates may still result in significant earnings variability from period to period. Based upon the composition of our financial

assets and liabilities, including derivatives, at September 30, 2020, we would generally recognize fair value losses when interest

rates decline if we did not apply fair value hedge accounting.

By electing fair value hedge accounting for certain single-family mortgage loans and certain debt instruments, we are able to

reduce the potential variability in our earnings attributable to changes in interest rates. See Note 9 for additional information on

hedge accounting.

Earnings Sensitivity to Changes in Interest Rates

We evaluate a range of interest rate scenarios to determine the sensitivity of our earnings due to changes in interest rates and to

determine our fair value hedge accounting strategies. The interest rate scenarios evaluated include parallel shifts in the yield

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

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

medium-term interest rates increase or decrease by 100 basis points. This evaluation identifies the net effect on comprehensive

income from changes in fair value attributable to changes in interest rates for financial instruments measured at fair value,

including the effects of fair value hedge accounting, for each of the identified scenarios. This evaluation does not include the
net effect on comprehensive income from interest-rate sensitive items that are not measured at fair value (e.g., amortization of

mortgage loan premiums and discounts, previously deferred fair value hedge accounting basis adjustments, changes in fair

value of held-for-sale mortgage loans for which we have not elected the fair value option, etc.) or from changes in our future

contractual net interest income due to repricing of our interest-bearing assets and liabilities. The results of this evaluation are

shown in the table below.

Management's Discussion and Analysis Risk Management

Freddie Mac 3Q 2020 Form 10-Q 63

Table 46 - Earnings Sensitivity to Changes in Interest Rates

Changes in Fair Value Due to Changes in Interest

Rates for Financial Instruments Measured at

Fair Value, Net of Hedge Accounting (Before-Tax)

(In billions) September 30, 2020 September 30, 2019

Interest Rate Scenarios

Parallel yield curve shifts:

 +100 basis points $Ä $0.1

 -100 basis points Ä (0.1)

Non-parallel yield curve shifts - long-term interest rates:

 +100 basis points 0.2 0.1

 -100 basis points (0.2) (0.1)

Non-parallel yield curve shifts - short-term and medium-term interest rates:

 +100 basis points (0.2) (0.1)

 -100 basis points 0.2 0.1

The actual effect of changes in interest rates on our comprehensive income in any given period may vary based on a number of

factors, including, but not limited to, the composition of our assets and liabilities, the actual changes in interest rates that are

realized at different terms along the yield curve, and the effectiveness of our hedge accounting strategies. Even if implemented

properly, our hedge accounting programs may not be effective in reducing earnings volatility, and our hedges may fail in any

given future period, which could expose us to significant earnings variability in that period. See Risk Factors - Market Risk -

Changes in interest rates could negatively affect the fair value of financial assets and liabilities, our results of

operations, and our net worth in our 2019 Annual Report for additional information.

Spread-Related Earnings Sensitivity

We have limited ability to manage our spread risk exposure in a cost beneficial manner, and therefore the changes in market

spreads may contribute to significant earnings variability from period to period. 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. See MD&A - Our Business Segments for additional

information on the impact of market spreads on our results of operations.
LIQUIDITY AND CAPITAL RESOURCES

Our business activities require that we maintain adequate liquidity to meet our financial obligations as they come due and meet

the needs of customers in a timely and cost-efficient manner. 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 2019 Annual Report.

On June 17, 2020, FHFA provided us and Fannie Mae with updated minimum short-, medium-, and long-term liquidity

requirements. These requirements are based on cash flows needed under a stressed scenario that assumes, among other

things, that for short- and medium-term periods, we may not have access to debt funding from the market for an extended

period of time and therefore must fund our cash needs utilizing certain liquid assets in our portfolio.

The updated FHFA minimum liquidity requirements have four components:

n a 30-day cash flow stress test that assumes we continue to provide liquidity to the market while holding a $10 billion buffer

above outflows;

n a 365-day metric that requires us to hold liquidity to meet our expected cash outflows over 365 days and to continue to

provide liquidity to the market under certain stress conditions. This metric is also more prescriptive than our existing

framework regarding the types of liquid assets we hold;

n a specified minimum long-term debt to less-liquid asset ratio. Less-liquid assets are those that are not eligible to be

pledged as collateral to the Fixed Income Clearing Corporation; and

n a requirement that we fund our assets with liabilities that have a specified minimum term relative to the term of the assets.

These updated liquidity requirements are more stringent than our existing liquidity requirements and liquidity requirements of

banks and other depository institutions, which will result in higher funding costs in the future and will negatively affect our net

interest income. In addition, these updated liquidity requirements will impact the size and the allowable investments in our other

investments portfolio. FHFA has extended the date of compliance with these updated liquidity requirements to December 1,

2020.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 64

Liquidity

Primary Sources of Liquidity

The following table lists the sources of our liquidity, the balances as of September 30, 2020, and a brief description of their

importance to Freddie Mac.

Table 47 - Liquidity Sources

Source Balance(1)

 (In billions)

Description

Liquidity

Ñ Other Investments Portfolio -

Liquidity and Contingency

Operating Portfolio

$80.3 Ñ The liquidity and contingency operating portfolio, included within our other

investments portfolio, is primarily used for short-term liquidity management.

Ñ Liquid Portion of the MortgageRelated Investments Portfolio$88.7 Ñ 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.

(1) Represents carrying value for the liquidity and contingency operating portfolio, included within our other investments portfolio, and UPB for the liquid portion of the

mortgage-related investments portfolio.
Other Investments Portfolio

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

management, and ability to provide liquidity and stability to the mortgage market. The table below summarizes the balances in

our other investments portfolio, which includes the liquidity and contingency operating portfolio.

Table 48 - Other Investments Portfolio

September 30, 2020 December 31, 2019

(In billions)

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other

Total Other

Investments

Portfolio (1)

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other

Total Other

Investments

Portfolio (1)

Cash and cash equivalents $6.3 $1.6 $0.2 $8.1 $4.2 $0.9 $0.1 $5.2

Securities purchased under 

agreements to resell 50.7 50.5 0.8 102.0 40.6 23.1 2.4 66.1

Non-mortgage related securities 23.3 Ä 5.2 28.5 23.2 Ä 3.9 27.1

Secured lending and other Ä Ä 8.3 8.3 Ä Ä 5.2 5.2

Total $80.3 $52.1 $14.5 $146.9 $68.0 $24.0 $11.6 $103.6

(1) Represents carrying value.

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 and interest-bearing deposits at

commercial banks. Our interest-bearing deposits at commercial banks totaled $3.1 billion and $3.7 billion as of September 30,

2020 and December 31, 2019, respectively.

The liquidity and contingency operating portfolio also included collateral posted to us in the form of cash primarily by

derivatives counterparties of $3.8 billion and $2.6 billion as of September 30, 2020 and December 31, 2019, respectively. We

have invested this collateral in securities purchased under agreements to resell and non-mortgage-related securities as part of

our liquidity and contingency operating portfolio, although the collateral may be subject to return to our counterparties based on

the terms of our master netting and collateral agreements. 

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 65

Mortgage Loans and Mortgage-Related Securities

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 MD&A Conservatorship and Related Matters for additional details on

the liquidity of our mortgage-related investments portfolio.

Primary Sources of Funding

The following table lists the sources and balances of our funding as of SeptemberÄ30, 2020 and a brief description of their

importance to Freddie Mac.

Table 49 - Funding Sources

Source Balance(1)

 (In billions)

Description

Funding

Ñ Other Debt $284.9 Ñ Other debt is used to fund our business activities, including single-family

guarantee activities not funded by debt securities of consolidated trusts.

Ñ Debt Securities of Consolidated

Trusts

$2,138.4 Ñ Debt securities of consolidated trusts are used primarily to fund our single-family

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 purchasing

modified or seriously delinquent loans from the trusts.

(1) Represents carrying value of debt balances after consideration of offsetting arrangements.
Other Debt Activities

We issue other debt to fund our business activities. 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 term and callable debt to fund our business and manage interest-rate

risk. Our funding costs have increased due to a higher expected single-family loan purchase forecast coupled with an increase

in term debt issuances as we transition to comply with the updated FHFA liquidity requirements. 

The table below summarizes the par value and the average rate of other debt 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 from time to time for a variety of reasons, including managing our funding composition and supporting the

liquidity of our debt.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 66

Table 50 - Other Debt Activity

3Q 2020 YTD 2020

(Dollars in millions) Short-term Average

Rate(1) Long-term AverageRate(1) Short-term AverageRate(1) Long-term AverageRate(1)

Discount notes and Reference BillsÉ

Beginning balance $56,954 0.45% $Ä Ä% $60,830 1.67% $Ä Ä%

Issuances 9,884 0.25 Ä Ä 147,249 0.97 Ä Ä

Repurchases (4,960) 0.27 Ä Ä (4,960) 0.27 Ä Ä

Maturities (51,842) 0.44 Ä Ä (193,083) 1.29 Ä Ä

Ending Balance 10,036 0.35 Ä Ä 10,036 0.35 Ä Ä

Securities sold under 

agreements to repurchase

Beginning balance 8,664 0.04 Ä Ä 9,843 1.46 Ä Ä

Additions 238,023 0.06 Ä Ä 777,000 0.44 Ä Ä

Repayments (243,890) 0.06 Ä Ä (784,046) 0.45 Ä Ä

Ending Balance 2,797 0.06 Ä Ä 2,797 0.06 Ä Ä

Callable debt

Beginning balance Ä Ä 86,781 1.21 1,000 2.36 94,152 2.03

Issuances Ä Ä 67,004 0.63 Ä Ä 147,459 0.89

Repurchases Ä Ä Ä Ä Ä Ä Ä Ä

Calls Ä Ä (34,590) 1.48 (1,000) 2.36 (117,640) 1.85

Maturities Ä Ä (1,473) 1.66 Ä Ä (6,249) 1.55

Ending Balance Ä Ä 117,722 0.80 Ä Ä 117,722 0.80

Non-callable debt

Beginning balance 21,211 1.87 110,583 1.72 39,407 2.31 62,228 2.86

Issuances Ä Ä 37,250 0.30 14,356 1.57 100,454 0.49

Repurchases (5,562) 1.81 (5,149) 2.42 (8,487) 1.91 (5,149) 2.42

Maturities (8,034) 2.20 (4,174) 1.73 (37,661) 2.26 (19,023) 1.71

Ending Balance 7,615 1.57 138,510 1.31 7,615 1.57 138,510 1.31

STACR and SCR Debt(2)

Beginning balance Ä Ä 13,615 4.12 Ä Ä 15,496 5.55

Issuances Ä Ä 191 Ä Ä Ä 769 1.66

Repurchases Ä Ä Ä Ä Ä Ä Ä Ä

Maturities Ä Ä (912) 3.61 Ä Ä (3,371) 3.41

Ending Balance Ä Ä 12,894 4.18 Ä Ä 12,894 4.18

 Total other debt 20,448 0.76% 269,126 1.22% 20,448 0.76% 269,126 1.22%

Offsetting arrangements (2,797) (2,797)

Total other debt, net $17,651 $269,126 $17,651 $269,126

(1) Average rate is weighted based on par value.

(2) STACR debt notes 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 table. 
As of September 30, 2020, our aggregate indebtedness, calculated as the par value of other debt, was $287.0 billion, which

was below the $300.0 billion debt cap limit imposed by the Purchase Agreement. Beginning January 1, 2020, we elected to net

securities sold under agreements to repurchase against securities purchased under agreements to resell when such amounts

meet the conditions for balance sheet offsetting, both on our condensed consolidated balance sheets and for purposes of

measuring our aggregate indebtedness under the debt cap limit.ÄSee Note 10 for additional information.

Our outstanding other debt balance increased during the 2020 periods driven by near-term cash needs resulting from a higher

expected single-family cash loan purchase forecast. In addition, we increased our liquidity and contingency operating portfolio

and the amount of long-term debt issuance as we transition to comply with the updated FHFA minimum liquidity requirements.

However, our aggregate indebtedness to meet these funding needs is constrained by the $300.0 billion cap limit imposed by

the Purchase Agreement. We have maintained adequate access to debt markets to meet our financial obligations as they come

due and to meet the needs of customers in a timely and cost-efficient manner throughout the course of the COVID-19

pandemic, and we expect to continue to do so.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 67

Maturity and Redemption Dates

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 September 30, 2020 (1)

(Par value in billions)

Due in

1 year or less

Due

after 1 year through 2 years

Due

after 2 years

through 3 years

Due

after 3 years

through 4 years

Due

after 4 years

through 5 years

Thereafter

STACR and SCR debt

$57

$71

$56

$22

$43

$28

$13

Earliest Redemption Date as of September 30, 2020 (1)

(Par value in billions)

1 year or less

After 1 year through 2 years

After 2 years

through 3 years

After 3 years

through 4 years

After 4 years

through 5 years

Thereafter

STACR and SCR debt

$162

$63

$27

$1

$11 $13 $13

(1) STACR debt notes 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.

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:

n The assets held by the securitization trusts, the majority of which are mortgage loans. We recognized $2,115.5 billion and

$1,940.5 billion of mortgage loans, which represented 86.2% and 88.1% of our total assets, as of September 30, 2020 and

December 31, 2019, respectively.

n The debt securities issued by the securitization trusts, the majority of which are Level 1 securitizations that are passthrough securities, where the cash flows of the mortgage loans held by the securitization trust are passed through to the

holders of the securities. We recognized $2,138.4 billion and $1,898.4 billion of debt securities of consolidated trusts,

which represented 88.2% and 87.1% of our total debt, as of September 30, 2020 and December 31, 2019, 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. In April

2020, FHFA instructed us to maintain loans in payment forbearance plans (including COVID-19 payment forbearance plans) in

mortgage-backed security pools for at least the duration of the forbearance plan. Once the forbearance period expires, the loan

will remain in the related securities pool while:

n An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant

to a loan modification remains outstanding;

n The loan is in an active repayment plan or trial period plan; or 

n A payment deferral solution is in effect.

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we will extend the trigger to

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 68

The table below shows the issuance and extinguishment activity for the debt securities of our consolidated trusts.

Table 51 - Activity for Debt Securities of Consolidated Trusts Held by Third Parties

(In millions) 3Q 2020 YTD 2020

Beginning balance $1,968,663 $1,854,802

Issuances:

New issuances to third parties 195,870 432,145

Additional issuances of securities 164,694 353,631

Total issuances 360,564 785,776

Extinguishments:

Purchases of debt securities from third parties (4,614) (10,686)

Debt securities received in settlement of secured lending (38,980) (81,871)

Repayments of debt securities (207,444) (469,832)

Total extinguishments (251,038) (562,389)

Ending balance 2,078,189 2,078,189

Unamortized premiums and discounts 60,231 60,231

Debt securities of consolidated trusts held by third parties $2,138,420 $2,138,420

Cash Flows

Cash and cash equivalents (including restricted cash and cash equivalents) decreased by $0.6 billion from September 30, 2019

to September 30, 2020, primarily driven by an increase in investments in securities purchased under agreements to resell and

higher single-family cash loan purchases during YTD 2020. 

Capital Resources

Primary Sources of 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 funding, under certain conditions,

to eliminate deficits in our net worth. Pursuant to the September 2019 Letter Agreement, we will not be required to pay a

dividend on the senior preferred stock to Treasury until our Net Worth Amount exceeds $20.0 billion. Based on our Net Worth

Amount of $13.9 billion, no dividend is payable to Treasury for the quarter ending September 30, 2020. See Note 2 for details

of the support we receive from Treasury.
The table below presents activity related to our net worth during 3Q 2020 and YTD 2020. 

Table 52 - Net Worth Activity

(In millions) 3Q 2020 YTD 2020 (1)

Beginning balance $11,442 $8,882

Comprehensive income (loss) 2,449 5,009

Capital draw from Treasury Ä Ä

Senior preferred stock dividends declared Ä Ä

Total equity / net worth $13,891 $13,891

Aggregate draws under Purchase Agreement $71,648 $71,648

Aggregate cash dividends paid to Treasury 119,680 119,680

Liquidation preference of the senior preferred stock 84,090 84,090

(1) Beginning balance includes cumulative-effect adjustment of ($240) million related to our adoption of CECL on January 1, 2020. See Note 1 for additional information

on our adoption of CECL.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 69

Conservatorship Capital Framework

In May 2017, FHFA, as Conservator, issued guidance to us to evaluate and manage our financial risk and to make economic

business decisions, while in conservatorship, utilizing a newly-developed risk-based CCF, a capital system with detailed

formulae provided by FHFA. In May 2020, FHFA released its re-proposed Enterprise Capital Rule for comment. FHFA's reproposed capital rule, if adopted, would significantly increase our capital requirements and, as a result, would significantly

lower our returns on capital. It also could meaningfully affect our business strategies. For additional information on the reproposed capital rule, see MD&A - Regulation and Supervision - Legislative and Regulatory Developments - FHFA

Re-Proposed Capital Rule for the Enterprises.

Until FHFA issues a final Enterprise Capital Rule, we will continue to use the CCF to evaluate business decisions and ensure the

company makes such decisions prudently when pricing transactions and managing its businesses. This framework focuses on

returns on conservatorship capital.

The CCF has been and may be further revised by FHFA from time to time, including in connection with FHFA's consideration

and adoption of a final Enterprise Capital Rule, which could possibly result in material changes in our conservatorship capital,

and, thus, our returns on conservatorship capital. 

The existing regulatory capital requirements have been suspended by FHFA during conservatorship. Consequently, we refer to

the capital needed under the CCF for analysis of transactions and businesses as "conservatorship capital." 

Under the Purchase Agreement and the September 2019 Letter Agreement, we are not able to retain equity, as calculated

under GAAP, in excess of the $20.0 billion Capital Reserve Amount. As a result, we do not have capital sufficient to support our

aggregate risk-taking activities.

Return on Conservatorship Capital

The table below provides the ROCC, calculated as (1) annualized comprehensive income for the period divided by (2) average

conservatorship capital during the period. 

The ROCC shown in the table below is not based on our total equity and does not reflect actual returns on total equity. We do

not believe that returns on total equity are meaningful because of the net worth limit imposed since 2012 under the Purchase

Agreement.

Table 53 - Return on Conservatorship Capital (1)

(Dollars in billions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Comprehensive income $2.4 $1.8 $5.0 $5.3

Conservatorship capital (average during the period)(2) 52.3 51.3 51.3 51.8

ROCC, based on comprehensive income(2) 18.7% 14.4% 13.0% 13.7%

(1) Average conservatorship capital and ROCC for 3Q 2020 and YTD 2020 are preliminary and subject to change until official submission to FHFA. Prior period

preliminary numbers have been updated, as needed, to reflect final data submitted to FHFA.

(2) Average conservatorship capital for each period is based on the CCF in effect during that period. The CCF in effect as of September 30, 2020 was largely unchanged

from the CCF as of September 30, 2019.
Our ROCC for 3Q 2020 increased compared to 3Q 2019, primarily driven by an increase in comprehensive income, partially

offset by a higher level of conservatorship capital needed, resulting from growth in our single-family and multifamily guarantee

portfolios, partially offset by an increase in CRT activity in both the Single-family Guarantee and Multifamily segments, house

price appreciation, the efficient disposition of legacy assets, and a decrease in our deferred tax assets. Our ROCC for YTD

2020 decreased compared to YTD 2019, primarily driven by a decrease in comprehensive income. Our ROCC in future periods

may be affected by the significant adverse effect the COVID-19 pandemic may have on our business for the remainder of 2020

and into 2021, and perhaps beyond. 

We find the returns calculated above, as well as the returns calculated on specific transactions and individual business lines, to

be a reasonable measure of return versus risk to support our decision making while we remain in conservatorship. These

returns may not be indicative of the returns that would be generated if we were to exit conservatorship, especially as the terms

and timing of any such exit are not currently known and will depend upon future actions by the U.S. government. Our belief,

should we leave conservatorship, is that returns at that time would most likely be below the levels calculated above, assuming

the same portfolio of risk assets, as our capital requirements are likely to be significantly higher under the re-proposed capital

rule and we expect that we would hold capital post conservatorship above the minimum required regulatory capital. It is also

likely that we would be required to pay fees for federal government support, thereby reducing our total comprehensive income.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 3Q 2020 Form 10-Q 70
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 on-balance sheet. For a description of our offbalance sheet arrangements, see MD&A - Off-Balance Sheet Arrangements in our 2019 Annual Report. See Note 3 and

Note 5 for more information on our off-balance sheet securitization and guarantee activities. Our adoption of CECL on January

1, 2020 changed how we measure our allowance for credit losses on off-balance sheet credit exposures. See Note 5 for

additional information.

Our maximum potential off-balance sheet exposure to credit losses relating to these securitization activities and guarantees,

which are not accounted for as derivatives, is primarily represented by the UPB of the underlying loans and securities, which

was $322.5 billion and $296.5 billion at September 30, 2020 and December 31, 2019, respectively. These amounts exclude

Fannie Mae securities backing Freddie Mac resecuritization products discussed below. 

We commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products.ÄWhen we resecuritize Fannie Mae

securities in our commingled resecuritization products, our guarantee covers timely payments of principal and interest on such

securities. Accordingly, commingling Fannie Mae collateral in our resecuritization transactions increases our off-balance sheet

exposure as we do not have control over the Fannie Mae collateral. The total amount of our off-balance sheet exposure related

to Fannie Mae securities backing Freddie Mac resecuritization products was $69.0 billion and $27.4 billion at September 30,

2020 and December 31, 2019, respectively. We expect this exposure to increase over time.

Management's Discussion and Analysis Off-Balance Sheet Arrangements

Freddie Mac 3Q 2020 Form 10-Q 71
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires us to make a number of judgments, estimates, and

assumptions that affect the reported amounts within our condensed consolidated financial statements. Certain of our

accounting policies, as well as estimates we make, are critical, as they are both important to the presentation of our financial

condition and results of operations and require management to make difficult, complex, or subjective judgments and estimates,

often regarding matters that are inherently uncertain. Actual results could differ from our estimates, and the use of different

judgments and assumptions related to these policies and estimates could have a material impact on our condensed

consolidated financial statements.

Our critical accounting policies and estimates relate to the single-family allowance for credit losses and fair value

measurements. For additional information about our critical accounting policies and estimates and other significant accounting

policies, as well as recently issued accounting guidance, see Note 1 in this Form 10-Q and MD&A - Critical Accounting

Policies and Estimates and Note 1 in our 2019 Annual Report.

Single-Family Allowance for Credit Losses

Beginning on January 1, 2020, upon the adoption of CECL, the single-family allowance for credit losses represents our estimate

of expected credit losses over the contractual term of the mortgage loans. The single-family allowance for credit losses pertains

to all held-for-investment single-family mortgage loans on our condensed consolidated balance sheets.

Determining the appropriateness of the single-family allowance for credit losses is a complex process that is subject to

numerous estimates and assumptions requiring significant management judgment about matters that involve a high degree of

subjectivity. This process involves the use of models that require us to make judgments about matters that are difficult to

predict, the most significant of which are the probability of default, prepayment, and loss severity. We regularly evaluate the

underlying estimates and models we use when determining the single-family allowance for credit losses and update our

assumptions to reflect our historical experience and current view of economic factors. For additional information on uncertainty

and risks related to models, see Other Information - Risk Factors in our Form 10-Q for the quarter ended March 31, 2020

and Risk Factors - Operational Risks - We face risks and uncertainties associated with the models that we

use to inform business and risk management decisions and for financial accounting and reporting purposes

in our 2019 Annual Report. Upon adoption of CECL, the single-family allowance for credit losses also includes our reasonable

and supportable forecast of certain future economic conditions, such as house prices and interest rates. Changes in our

forecasts or the occurrence of actual economic conditions that differ significantly from our forecast may significantly affect the

measurement of our single-family allowance for credit losses. The length and severity of the economic downturn caused by the

COVID-19 pandemic, and its impact on the housing market, is subject to significant uncertainty, which makes it difficult to

estimate credit losses. These developments may have a material effect on our allowance for credit losses in future periods. 

We believe the level of our single-family allowance for credit losses is appropriate based on internal reviews of the factors and

methodologies used. No single statistic or measurement determines the appropriateness of the allowance for credit losses.

Changes in one or more of the estimates or assumptions used to calculate the single-family allowance for credit losses could

have a material impact on the allowance for credit losses and benefit (provision) for credit losses.

Changes in forecasted house price growth rates can have a significant effect on our allowance for credit losses. Our estimate of

expected credit losses leverages an internally based model and uses a nationwide house price growth forecast for the next

three years. A Monte Carlo simulation generates many possible house price scenarios for up to 40 years for each metropolitan

statistical area (MSA). These scenarios are used to estimate loan-level expected future cash flows and credit losses based on

each loanÇs individual characteristics. The COVID-19 pandemic initially resulted in a decline in our near term forecasted house

price growth rates compared to pre-pandemic estimates, but our forecast has since improved. The table below shows our

nationwide forecasted house price growth rates for both full-year 2020 and 2021 that were used in determining our allowance

for credit losses as of September 30, 2020. These growth rates are used as inputs to our models to develop the detailed

forecasted life-of-loan house price growth rates for each MSA.

Table 54 - Forecasted House Price Growth Rates (1)

2020 2021

Forecasted house price growth rates 5.5% 2.6%

(1) Forecasted house price growth rates are from Freddie Mac's Economic and Housing Research Quarterly Forecast dated October 14, 2020.

Inputs used by the model are regularly updated for changes in the underlying data, assumptions, and market conditions. We

review the output of this model by considering qualitative factors such as macroeconomic and other factors to see whether the

model outputs are consistent with our expectations. Management adjustments may be necessary to take into consideration

external factors and current economic events that have occurred but are not yet reflected in the factors used to derive the

model outputs. Significant judgment is exercised in making these adjustments.

Management's Discussion and Analysis Critical Accounting Policies and Estimates

Freddie Mac 3Q 2020 Form 10-Q 72
Some examples of the qualitative factors considered include:

n Regional housing trends;

n Applicable house price indices;

n Unemployment and employment dislocation trends;

n The effects of changes in government policies and programs;

n Industry trends;

n Consumer credit statistics;

n Third-party credit enhancements;

n Natural disasters (such as hurricanes and wildfires); and

n Other catastrophic events (such as the COVID-19 pandemic and the impact of associated relief programs).

The inability to realize the benefits of our loss mitigation activities, declines in house prices, deterioration in the financial

condition of our mortgage insurers, or increases in delinquency rates would cause our losses to be significantly higher than

those currently estimated.

Management's Discussion and Analysis Critical Accounting Policies and Estimates

Freddie Mac 3Q 2020 Form 10-Q 73
CONSERVATORSHIP AND RELATED MATTERS

Managing Our Mortgage-Related Investments Portfolio

The table below presents the UPB of our mortgage-related investments portfolio. In February 2019, FHFA instructed us to

maintain this portfolio at or below $225 billion at all times. In November 2019, FHFA instructed us, by January 31, 2020, to

include 10% of the notional value of certain interest-only securities we own in the calculation of this portfolio, while continuing

to maintain the portfolio below the limit imposed by FHFA. For this purpose, our mortgage-related investments portfolio was

$203.9 billion as of September 30, 2020, including $5.7 billion representing 10% of the notional amount of the interest-only

securities we held as of September 30, 2020.

With respect to the composition of our mortgage-related investments portfolio, in August 2020, FHFA instructed us to: (1)

reduce the amount of agency MBS to no more than $50 billion by June 30, 2021 and no more than $20 billion by June 30,

2022, with all dollar caps to be based on UPB; and (2) reduce the UPB of our existing portfolio of collateralized mortgage

obligations (CMOs), which are also sometimes referred to as REMICs, to zero by June 30, 2021. We will have a holding period

limit to sell any new CMO tranches created but not sold at issuance. CMOs do not include tranches initially retained from

reperforming loans senior subordinate securitization structures.

Table 55 - Mortgage-Related Investments Portfolio Details

September 30, 2020 December 31, 2019

(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 $Ä $48,781 $Ä $48,781 $Ä $19,144 $Ä $19,144

Reperforming loans Ä Ä 18,927 18,927 Ä Ä 26,134 26,134

Total single-family unsecuritized loans Ä 48,781 18,927 67,708 Ä 19,144 26,134 45,278

Agency securities 84,844 Ä 2,190 87,034 119,156 Ä 2,518 121,674

Non-agency mortgage-related securities Ä Ç 1,346 1,346 Ä Ä 1,458 1,458

Total Capital Markets segment -

Mortgage investments portfolio 84,844 48,781 22,463 156,088 119,156 19,144 30,110 168,410

Single-family Guarantee segment - Singlefamily unsecuritized seriously delinquent

loans Ä Ä 10,126 10,126 Ä Ä 8,589 8,589

Multifamily segment:

Unsecuritized loans Ä 17,701 9,843 27,544 Ä 18,531 11,254 29,785

Mortgage-related securities 3,853 Ä 565 4,418 5,209 Ä 680 5,889

Total Multifamily segment 3,853 17,701 10,408 31,962 5,209 18,531 11,934 35,674

Total mortgage-related investments

portfolio $88,697 $66,482 $42,997 $198,176 $124,365 $37,675 $50,633 $212,673

Percentage of total mortgage-related

investments portfolio 45% 33% 22% 100% 58% 18% 24% 100%

While we continued to purchase new single-family seriously delinquent loans from securities we guarantee and certain

multifamily unsecuritized loans, which are classified as held-for-investment, our active disposition of less liquid assets during

YTD 2020 included the following:

n Sales of $5.9 billion in UPB of single-family reperforming loans and $0.3 billion in UPB of seriously delinquent unsecuritized

single-family loans; 

n Securitizations of $0.3 billion in UPB of single-family reperforming loans and $3.8 billion in UPB of less liquid multifamily

loans; and

n Transfers of $2.0 billion in UPB of less liquid multifamily loans to the securitization pipeline.

The less liquid assets in our mortgage-related investments portfolio decreased in YTD 2020 but are likely to increase in future

periods as we purchase delinquent loans from securities after the forbearance period ends.

Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac 3Q 2020 Form 10-Q 74
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.

Federal Housing Finance Agency

Affordable Housing Fund 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 3Q 2020 and YTD 2020, we completed $353.3

billion and $751.8 billion, respectively, of new business purchases subject to this requirement and accrued $149 million and

$316 million, respectively, of related expense. We are prohibited from passing through these costs to the originators of the

loans that we purchase.

Affordable Housing Goal Results for 2019

In October 2020, FHFA informed us that it had reviewed our performance with respect to affordable housing goals for 2019 and

determined that we achieved all five of our single-family affordable housing goals and all three of our multifamily goals. We may

achieve a single-family or multifamily housing goal by meeting or exceeding the FHFA benchmark for that goal (Goal). We also

may achieve a single-family housing goal by meeting or exceeding the actual share of the market that meets the criteria for that

goal (Market Level). Our performance on the goals, as determined by FHFA, is set forth in the table below.

Management's Discussion and Analysis Regulation and Supervision

Freddie Mac 3Q 2020 Form 10-Q 75

Table 56 - 2019 Affordable Housing Goal Results

Goals for 2019

Market Levels 

for 2019 Results for 2019

Single-family purchase money goals (Benchmark levels):

Low-income goal 24% 26.6% 27.4%

Very low-income goal 6% 6.6% 6.8%

Low-income areas goal 19% 22.9% 22.9%

Low-income areas subgoal 14% 18.1% 18.0%

Single-family refinance low-income goal (Benchmark level) 21% 24% 22.4%

Multifamily (Benchmark levels in units)

Low-income goal 315,000 N/A 455,451

Very low-income subgoal 60,000 N/A 112,773

 Small property low-income subgoal 10,000 N/A 34,847

FHFA's Strategic Plan: Fiscal Years 2021-2024

In October 2020, FHFA released its Strategic Plan for fiscal years 2021-2024. This new Strategic Plan establishes new goals

needed for FHFA to fulfill its statutory duties, which include responsibly ending the conservatorships of Freddie Mac and Fannie

Mae (the Enterprises). 

This new Strategic Plan formalizes the new direction of FHFA, and its regulated entities, by updating FHFAÇs mission, vision, and

values, and by establishing three new strategic goals:

n Ensuring safe and sound regulated entities through world-class supervision;

n Foster competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets; and

n Position FHFA as a model of operational excellence by strengthening its workforce and infrastructure.
Legislative and Regulatory Developments

FHFA Re-Proposed Capital Rule for the Enterprises

On May 20, 2020, FHFA issued a notice of proposed rulemaking for a new Enterprise Regulatory Capital Framework for Freddie

Mac and Fannie Mae.ÄThis proposed rule is a re-proposal of the Enterprise Capital Rule published by FHFA in July 2018.

The re-proposed capital rule significantly expands on the requirements included in the 2018 proposed rule, primarily by

incorporating several bank regulatory concepts that are intended to increase both the quality and quantity of capital that the

Enterprises would be required to hold.ÄThe re-proposed capital rule also includes provisions designed to limit the pro-cyclicality

of the risk-based capital provisions in the 2018 proposed rule. The re-proposed capital rule, if adopted, would significantly

increase our capital requirements and could affect our business strategies, perhaps significantly.

The re-proposed capital rule would establish six capital requirements for the Enterprises: four risk-based requirements, which,

in part, evaluate specified types of capital against a percentage of an EnterpriseÇs risk-weighted assets, and two leverage

requirements, which evaluate specified types of capital against a percentage of an EnterpriseÇs adjusted total assets.ÄThe reproposed capital rule also would specify certain capital buffer amounts. If an Enterprise does not maintain capital levels in

excess of these supplemental buffer requirements, its ability to make certain capital distributions and discretionary executive

bonus payments would be limited.

The re-proposed capital rule includes provisions for an Enterprise to calculate its risk-weighted assets under a Ñstandardized

approach,Ö which specifies requirements, based on relative risk, to determine a risk weight for the EnterpriseÇs assets and

exposures. The standardized approach includes provisions to calculate risk weights for credit exposures to single-family and

multifamily loans, credit risk transfers, derivatives, and other on- and off-balance sheet assets and exposures. The standardized

approach also specifies requirements for including market and operational risks in the calculation of an EnterpriseÇs riskweighted assets. In addition to requiring an Enterprise to use the standardized approach, the re-proposed capital rule also

would require an Enterprise to calculate its risk-weighted assets using an Ñadvanced approach,Ö which would rely entirely on

the EnterpriseÇs models.Ä In determining its risk-weighted assets for evaluating capital adequacy, an Enterprise would use the

higher of the amounts calculated under the standardized approach and the advanced approach.

On August 28, 2020, Freddie Mac submitted a comment letter to FHFA that supported the approach of the re-proposed capital

rule but recommended, among other matters, that FHFA revise the proposal to incorporate more dynamic and risk-based

requirements. Freddie Mac also recommended that FHFA tailor its proposed framework to better reflect the Enterprises' passthrough, monoline business models and the lower risks of the Enterprises compared to U.S. banks.Ä 

On September 25, 2020, the Financial Stability Oversight Council (FSOC) issued a statement summarizing its review of the

secondary mortgage market. Among other matters, the FSOC's statement was generally supportive of the capital quality and

quantity requirements in FHFA's re-proposed rule, noting that the proposal would require a meaningful amount of capital for the

Enterprises, that risk-based capital and leverage ratio requirements that are materially less than those contemplated would

likely not adequately mitigate the potential stability risk posed by the Enterprises, and that it is possible that additional capital

may be required for the Enterprises to remain viable concerns in the event of a severely adverse stress.

We cannot predict whether and when FHFA will finalize new capital requirements for the Enterprises and how much capital any

final requirements would require the Enterprises to hold.

FHFA Proposed Rule for New GSE Products and Activities

Under the Housing and Economic Recovery Act of 2008, Freddie Mac and Fannie Mae are required to obtain FHFA approval of

Ñnew productsÖ after public notice and comment, and to provide FHFA with notice of Ñnew activitiesÖ so that FHFA may

determine whether such new activities are new products meriting public notice and comment, and then FHFA approval. In July

2009, FHFA issued an interim final rule to implement these statutory requirements. On October 19, 2020, FHFA published a

proposed rule that, if adopted, will replace the 2009 interim final rule.Ä 

The proposed rule outlines the process for FHFA review and timelines for approving a new product. It sets forth the criteria for

evaluating whether a new product is within the EnterpriseÇs Charter, is in the public interest, and is consistent with maintaining

the safety and soundness of the Enterprise or the mortgage finance system. It also establishes a new three-part objective test

for determining whether an activity is a new activity.

We cannot predict whether and when FHFA will finalize a new rule, the content of any such final rule that FHFA may adopt, or

the impact that such final rule will have on our business or operations. If the proposed rule is adopted as proposed, it is

possible that it could have an adverse effect on our profitability and ability to attract investors or exit conservatorship.

Management's Discussion and Analysis Regulation and Supervision

Freddie Mac 3Q 2020 Form 10-Q 76
Final Rule Extending a Category of Qualified Mortgages

On October 20, 2020, the CFPB issued a final rule that extends the category of qualified mortgages that consists of loans that

are eligible for purchase or guarantee by either Freddie Mac or Fannie Mae. Under the final rule, this category of qualified

mortgages will expire upon the earlier of the mandatory compliance date of final amendments to the definition of a qualified

mortgage in the ability-to-repay rule (rather than in January 2020 as previously scheduled) or the EnterpriseÇs exit from

conservatorship.

Management's Discussion and Analysis Regulation and Supervision

Freddie Mac 3Q 2020 Form 10-Q 77
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 FormÄ10-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, the effects of the COVID-19 pandemic and actions taken in response thereto on our business, financial

condition, and liquidity, 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 CRT 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

forward-looking statements due to various factors and uncertainties, including those described in the Other Information -

Risk Factors in our Form 10-Q for the quarter ended March 31, 2020, the Risk Factors section in our 2019 Annual Report,

and:

n Uncertainty regarding the duration and severity of the COVID-19 pandemic and the effects of the pandemic and actions

taken in response thereto on the United States economy and housing market, which could, in turn, adversely affect our

business in numerous ways, including, for example, by increasing our credit losses, impairing the value of our mortgagebacked securities, decreasing our liquidity and capital levels, and increasing our credit risk and operational risk;

n The actions the U.S. government (including FHFA, Treasury, and Congress) may take, or require us to take, including to

support the housing markets (such as programs implemented in response to the COVID-19 pandemic) or to implement the

recommendations in the Treasury Housing Reform Plan or FHFA's Conservatorship Scorecards and other objectives for us;

n The effect of the restrictions on our business due to the conservatorship and the Purchase Agreement;

n Changes in our Charter or in applicable legislative or regulatory requirements (including changes to our capital

requirements or changes pursuant to the Treasury Housing Reform Plan or any legislation affecting the future status of our

company);

n Changes in the fiscal and monetary policies of the Federal Reserve (including purchasing agency MBS and agency CMBS

in amounts needed to support the market during the COVID-19 pandemic);

n Changes in tax laws;

n Changes in accounting policies, practices, or guidance, such as our adoption of CECL;

n Changes in economic and market conditions generally, and as a result of the COVID-19 pandemic, including changes in

employment rates, interest rates, spreads, and house prices;

n 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);

n The success of our efforts to mitigate our losses on our single-family credit guarantee portfolio;

n The success of our strategy to transfer mortgage credit risk through STACR debt note, STACR Trust note, ACIS, K

Certificate, SB Certificate, and other CRT transactions;

n Our ability to maintain adequate liquidity to fund our operations;

n Our ability to maintain the security and resiliency of our operational systems and infrastructure, including against

cyberattacks;

n Our ability to effectively execute our business strategies, implement new initiatives, and improve efficiency;

n The adequacy of our risk management framework, including the adequacy of the CCF for measuring risk;

n Our ability to manage mortgage credit risk, including the effect of changes in underwriting and servicing practices;

n 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;

n Our operational ability to issue new securities, make timely and correct payments on securities, and provide initial and

ongoing disclosures;

n Our reliance on CSS and the CSP for the operation of the majority of our single-family securitization activities, our reduced

influence over CSS Board decisions as a result of FHFA-required changes to the CSS LLC agreement in January 2020, and

any additional changes FHFA may require in our relationship with, or support of, CSS;

n Changes or errors in the methodologies, models, assumptions, and estimates we use to prepare our financial statements,

make business decisions, and manage risks;

n Changes in investor demand for our debt or mortgage-related securities;

n Our ability to align pooling practices and the treatment of forbearance loans with Fannie Mae;

Management's Discussion and Analysis Forward-Looking Statements

Freddie Mac 3Q 2020 Form 10-Q 78
n Changes in the practices of loan originators, servicers, investors, and other participants in the secondary mortgage market; 

n The discontinuance of, transition from, or replacement of LIBOR and the adverse consequences it could have on our

business and operations;

n The occurrence of a major natural or other catastrophic event (such as the COVID-19 pandemic) in areas in which our

offices or significant portions of our total mortgage portfolio are located; and 

n Other factors and assumptions described in this FormÄ10-Q and our 2019 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 FormÄ10-Q.

Management's Discussion and Analysis Forward-Looking Statements

Freddie Mac 3Q 2020 Form 10-Q 79
Financial Statements

Financial Statements

Freddie Mac 3Q 2020 Form 10-Q 80
FREDDIE MAC 

Condensed Consolidated Statements of Comprehensive Income

(Loss) (Unaudited)

(In millions, except share-related amounts) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Interest income

Mortgage loans $14,134 $16,428 $45,792 $51,732

Investment securities 659 686 1,948 2,059

Other 56 426 417 1,197

Total interest income 14,849 17,540 48,157 54,988

Interest expense (11,392) (15,130) (39,039) (46,498)

Net interest income 3,457 2,410 9,118 8,490

Non-interest income (loss)

Guarantee fee income 315 280 1,161 850

Investment gains (losses), net 1,122 568 957 (83)

Other income (loss) 172 121 401 247

Non-interest income (loss) 1,609 969 2,519 1,014

Net revenues 5,066 3,379 11,637 9,504

Benefit (provision) for credit losses (327) 179 (2,265) 474

Non-interest expense

Salaries and employee benefits (334) (333) (1,002) (983)

Professional services (105) (115) (269) (342)

Other administrative expense (202) (172) (558) (492)

Total administrative expense (641) (620) (1,829) (1,817)

Credit enhancement expense (267) (197) (731) (536)

Expected credit enhancement recoveries 20 Ä 708 42

REO operations expense (40) (58) (139) (172)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (467) (408) (1,341) (1,197)

Other expense (237) (139) (480) (499)

Non-interest expense (1,632) (1,422) (3,812) (4,179)

Income (loss) before income tax (expense) benefit 3,107 2,136 5,560 5,799

Income tax (expense) benefit (644) (427) (1,147) (1,177)

Net income (loss) 2,463 1,709 4,413 4,622

Other comprehensive income (loss), net of taxes and

reclassification adjustments

Changes in unrealized gains (losses) related to available-for-sale

securities (16) 124 576 674

Changes in unrealized gains (losses) related to cash flow hedge

relationships 6 19 30 57

Changes in defined benefit plans (4) (4) (10) (14)

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

reclassification adjustments (14) 139 596 717

Comprehensive income (loss) $2,449 $1,848 $5,009 $5,339

Net income (loss) $2,463 $1,709 $4,413 $4,622

Undistributed net worth sweep, senior preferred stock dividends, or

future increase in senior preferred stock liquidation preference (2,449) (1,848) (4,769) (5,339)

Net income (loss) attributable to common stockholders $14 ($139) ($356) ($717)

Net income (loss) per common share Ä basic and diluted $Ä ($0.04) ($0.11) ($0.22)

Weighted average common shares outstanding (in millions) Ä basic

and diluted 3,234 3,234 3,234 3,234

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Statements of Comprehensive Income

Freddie Mac 3Q 2020 Form 10-Q 81
FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited) 

September 30, December 31,

(In millions, except share-related amounts) 2020 2019

Assets

Cash and cash equivalents (Notes 1, 3, 14) (includes $1,790 and $991 of restricted cash and cash

equivalents) $8,074 $5,189

Securities purchased under agreements to resell (Notes 3, 10) 99,252 56,271

Investment securities, at fair value (Note 7) 71,702 75,711

Mortgage loans held-for-sale (Notes 3, 4) (includes $12,330 and $15,035 at fair value) 30,585 35,288

Mortgage loans held-for-investment (Notes 1, 3, 4) (net of allowance for credit losses of $6,773 and

$4,234) 2,189,656 1,984,912

Accrued interest receivable (Notes 3, 4, 7, 10) (net of allowance of $107 and $0) 7,583 6,848

Derivative assets, net (Notes 9, 10) 1,282 844

Deferred tax assets, net (Note 12) 5,886 5,918

Other assets (Notes 3, 18) (includes $5,591 and $4,627 at fair value) 40,051 22,799

Total assets $2,454,071 $2,193,780

Liabilities and equity

Liabilities

Accrued interest payable (Note 3) $6,020 $6,559

Debt (Notes 3, 8) (includes $2,798 and $3,938 at fair value) 2,423,316 2,169,685

Derivative liabilities, net (Notes 9, 10) 613 372

Other liabilities (Notes 3, 18) 10,231 8,042

Total liabilities 2,440,180 2,184,658

Commitments and contingencies (Notes 5, 9, 16)

Equity (Note 11)

Senior preferred stock (liquidation preference of $84,090 and $79,322) 72,648 72,648

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

650,059,292 shares and 650,059,033 shares outstanding Ä Ä

Additional paid-in capital Ä Ä

Retained earnings (accumulated deficit) (70,015) (74,188)

AOCI, net of taxes, related to:

Available-for-sale securities 1,194 618

Cash flow hedge relationships (214) (244)

Defined benefit plans 54 64

Total AOCI, net of taxes 1,034 438

Treasury stock, at cost, 75,804,594 shares and 75,804,853 shares (3,885) (3,885)

Total equity 13,891 9,122

Total liabilities and equity $2,454,071 $2,193,780

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our condensed consolidated balance

sheets.

September 30, December 31,

(In millions) 2020 2019

Condensed Consolidated Balance Sheet Line Item

Assets: (Note 3)

Mortgage loans held-for-investment $2,115,509 $1,940,523

All other assets 81,970 40,598

Total assets of consolidated VIEs $2,197,479 $1,981,121

Liabilities: (Note 3)

Debt $2,138,420 $1,898,355

All other liabilities 5,604 5,537

Total liabilities of consolidated VIEs $2,144,024 $1,903,892

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Balance Sheets

Freddie Mac 3Q 2020 Form 10-Q 82
FREDDIE MAC

Condensed Consolidated Statements of Equity (Unaudited)

Shares Outstanding

Senior

Preferred

Stock

Preferred

Stock, at

Redemption

Value

Common

Stock, at

ParÅValue

Additional

Paid-In

Capital

Retained

Earnings

(Accumulated

Deficit)

AOCI,

Net of

Tax

Treasury

Stock, at

Cost

Total

(In millions) Equity 

Senior

Preferred

Stock

Preferred

Stock

Common

Stock

Balance at June 30, 2020 1 464 650 $72,648 $14,109 $Ä $Ä ($72,478) $1,048 ($3,885) $11,442

Comprehensive income (loss):

Net income (loss) Ä Ä Ä Ä Ä Ä Ä 2,463 Ä Ä 2,463

Other comprehensive income (loss), net of

taxes Ä Ä Ä Ä Ä Ä Ä Ä (14) Ä (14)

Comprehensive income (loss) Ä Ä Ä Ä Ä Ä Ä 2,463 (14) Ä 2,449

Ending balance at September 30, 2020 1 464 650 $72,648 $14,109 $Ä $Ä ($70,015) $1,034 ($3,885) $13,891

Balance at June 30, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($78,489) $443 ($3,885) $4,826

Comprehensive income (loss):

Net income (loss) Ä Ä Ä Ä Ä Ä Ä 1,709 Ä Ä 1,709

Other comprehensive income (loss), net of

taxes Ä Ä Ä Ä Ä Ä Ä Ä 139 Ä 139

Comprehensive income (loss) Ä Ä Ä Ä Ä Ä Ä 1,709 139 Ä 1,848

Ending balance at September 30, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($76,780) $582 ($3,885) $6,674

Shares Outstanding

Senior

Preferred

Stock

Preferred

Stock, at

Redemption

Value

Common

Stock, at

ParÅValue

Additional

Paid-In

Capital

Retained

Earnings

(Accumulated

Deficit)

AOCI,

Net of

Tax

Treasury

Stock, at

Cost

Total

(In millions) Equity 

Senior

Preferred

Stock

Preferred

Stock

Common

Stock

Balance at DecemberÅ31, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($74,188) $438 ($3,885) $9,122

Comprehensive income (loss):

Net income (loss) Ä Ä Ä Ä Ä Ä Ä 4,413 Ä Ä 4,413

Other comprehensive income (loss), net of

taxes Ä Ä Ä Ä Ä Ä Ä Ä 596 Ä 596

Comprehensive income (loss) Ä Ä Ä Ä Ä Ä Ä 4,413 596 Ä 5,009

Cumulative effect from adoption of CECL Ä Ä Ä Ä Ä Ä Ä (240) Ä Ä (240)

Ending balance at September 30, 2020 1 464 650 $72,648 $14,109 $Ä $Ä ($70,015) $1,034 ($3,885) $13,891

Balance at DecemberÅ31, 2018 1 464 650 $72,648 $14,109 $Ä $Ä ($78,260) ($135) ($3,885) $4,477

Comprehensive income (loss):

Net income (loss) Ä Ä Ä Ä Ä Ä Ä 4,622 Ä Ä 4,622

Other comprehensive income (loss), net of

taxes Ä Ä Ä Ä Ä Ä Ä Ä 717 Ä 717

Comprehensive income (loss) Ä Ä Ä Ä Ä Ä Ä 4,622 717 Ä 5,339

Senior preferred stock dividends paid Ä Ä Ä Ä Ä Ä Ä (3,142) Ä Ä (3,142)

Ending balance at September 30, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($76,780) $582 ($3,885) $6,674

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Statements of Equity

Freddie Mac 3Q 2020 Form 10-Q 83
FREDDIE MAC

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions) YTD 2020 YTD 2019

Net cash provided by (used in) operating activities $6,235 $3,404

Cash flows from investing activities

Purchases of trading securities (111,472) (76,091)

Proceeds from sales of trading securities 86,603 61,398

Proceeds from maturities and repayments of trading securities 24,589 10,733

Purchases of available-for-sale securities (7,851) (6,440)

Proceeds from sales of available-for-sale securities 33,175 9,407

Proceeds from maturities and repayments of available-for-sale securities 2,650 3,201

Purchases of mortgage loans acquired as held-for-investment (439,606) (154,441)

Proceeds from sales of mortgage loans acquired as held-for-investment 7,725 11,063

Proceeds from repayments of mortgage loans acquired as held-for-investment 509,762 232,374

Advances under secured lending arrangements (91,511) (34,627)

Repayments of secured lending arrangements 1,406 1,022

Net proceeds from dispositions of real estate owned and other recoveries 585 891

Net (increase) decrease in securities purchased under agreements to resell (36,189) (16,416)

Derivative premiums and terminations, swap collateral, and exchange settlement payments, net (9,891) (10,536)

Other, net (439) (424)

Net cash provided by (used in) investing activities (30,464) 31,114

Cash flows from financing activities

Proceeds from issuance of debt securities of consolidated trusts held by third parties 502,025 178,248

Repayments and redemptions of debt securities of consolidated trusts held by third parties (480,984) (234,410)

Proceeds from issuance of other debt 409,217 418,369

Repayments of other debt (396,053) (394,777)

Net increase (decrease) in securities sold under agreements to repurchase (7,046) 2,713

Payment of cash dividends on senior preferred stock Ä (3,142)

Other, net (45) (84)

Net cash provided by (used in) financing activities 27,114 (33,083)

Net increase (decrease) in cash and cash equivalents (includes restricted cash and cash equivalents) 2,885 1,435

Cash and cash equivalents (includes restricted cash and cash equivalents) at beginning of year 5,189 7,273

Cash and cash equivalents (includes restricted cash and cash equivalents) at end of period $8,074 $8,708

Supplemental cash flow information

Cash paid for:

Debt interest $53,045 $52,720

Income taxes 740 306

Non-cash investing and financing activities (Note 4, 7, and 8)

The accompanying notes are an integral part of these condensed consolidated financial statements. 

Financial Statements Condensed Consolidated Statements of Cash Flows

Freddie Mac 3Q 2020 Form 10-Q 84
Notes to Condensed Consolidated Financial

Statements

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac 3Q 2020 Form 10-Q 85

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 NoteÄ2 in this Form 10-Q and in our

Annual Report on Form 10-K for the year ended December 31, 2019, or 2019 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 2019 Annual Report. 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited

consolidated financial statements and related notes in our 2019 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 in accordance with the authority provided by FHFA to our Board of Directors to oversee management's conduct of

our business operations. Certain amounts in prior periods' condensed consolidated financial statements have been reclassified

to conform to the current presentation. See Note 1 in our 2019 Annual Report for additional information on these

reclassifications. 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.

Beginning January 1, 2020, we elected to offset payables related to securities sold under agreements to repurchase against

receivables related to securities purchased under agreements to resell, when such amounts meet the conditions for balance

sheet offsetting under GAAP. See Note 10 in this Form 10-Q for additional information. We also began presenting a further

break out of the amount of cash inflows and cash outflows related to securities sold under agreements to repurchase as a

single net line item within the cash flows from financing activities section on our condensed consolidated statements of cash

flows beginning in 3Q 2020. These amounts were previously presented with other debt activity on a gross basis as proceeds

from issuance of other debt and repayments of other debt within the cash flows from financing activities section of our

condensed consolidated statements of cash flows. As a result, the change in presentation did not have any impact on net cash

provided by financing activities. Certain amounts in prior periods' condensed consolidated financial statements related to these

changes have been reclassified to conform to the current presentation. 

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. The financial statements

include certain adjustments to correct immaterial errors related to previously reported periods.

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 and valuing financial instruments and other

assets and liabilities. Actual results could be different from these estimates.

Cash and Cash Equivalents

Upon adoption of CECL on January 1, 2020, we measure an allowance for credit losses on cash equivalents based on

expected credit losses over the contractual term of the instrument. As of September 30, 2020, we did not recognize an
allowance for credit losses on our cash equivalents due to their overall high credit quality and short-term nature.

Recently Issued Accounting Guidance

Recently Adopted Accounting Guidance

Standard Description Date of

Adoption

Effect on Condensed Consolidated

Financial Statements

ASU 2016-13, Financial

Instruments - Credit Losses

(Topic 326): Measurement of

Credit Losses on Financial

Instruments; 

ASU 2019-04, Codification

Improvements to Topic 326,

Financial Instruments - Credit

Losses; and

ASU 2019-11, Codification

Improvements to Topic 326,

Financial Instruments - Credit

Losses

The amendments in these Updates replace the

incurred loss impairment methodology 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 Due to the adoption of these Updates, we

recognized a reduction to retained earnings

of $0.2 billion through a cumulative-effect

adjustment on January 1, 2020. See the

CECL Transition Impacts section below for

additional information on transition impacts.

See Note 4, Note 5, Note 6, and Note 7 for

additional information on the changes in our

significant accounting policies as a result of

our adoption of CECL. 

ASU 2018-13, Fair Value

Measurement (Topic 820):

Disclosure Framework -

Changes to the Disclosure

Requirements for Fair Value

Measurement

The amendments in this Update modify the

disclosure requirements on fair value measurements

in Topic 820, Fair Value Measurements, based on the

concepts in the Concepts Statement, including the

consideration of costs and benefits.ÅCertain

disclosure requirements were either removed,

modified, or added.

January 1, 2020 We added disclosure of the change in

unrealized gains or losses included in other

comprehensive income for recurring Level 3

fair value measurements held at the end of

the reporting period. See Note 15 for

additional information.

ASU 2018-15, Intangibles -

Goodwill and Other - InternalUse Software (Subtopic 350-40):

Customer's Accounting for

Implementation Costs Incurred

in a Cloud Computing

Arrangement That Is a Service

Contract

The amendments in this Update align the

requirements for capitalizing implementation costs

incurred in a hosting arrangement that is a service

contract with the requirements for capitalizing

implementation costs incurred to develop or obtain

internal-use software (and hosting arrangements

that include an internal-use software license). 

January 1, 2020 The adoption of the amendments did not

have a material effect on our consolidated

financial statements or on our disclosures.

ASU 2018-17, Consolidation

(Topic 810): Targeted

Improvements to Related Party

Guidance for Variable Interest

Entities

The amendments in this Update require that indirect

interests held through related parties under

common control be considered on a proportional

basis when determining whether fees paid to

decision makers or service providers are variable

interests. These amendments align with the

determination of whether a reporting entity within a

related party group is the primary beneficiary of a

VIE.

January 1, 2020 The adoption of the amendments did not

have a material effect on our consolidated

financial statements or on our disclosures.

ASU 2019-01, Leases (Topic

842): Codification Improvements

The amendments in this Update provide guidance

for the: (1) lessor's fair value determination of the

lease's underlying asset; (2) lessor's statement of

cash flows presentation of cash received from

sales-type and direct financing leases; and (3)

removal of interim transition disclosure

requirements related to changes in accounting

principles.

January 1, 2020 The adoption of the amendments did not

have a material effect on our consolidated

financial statements or on our disclosures.

ASU 2020-04, Reference Rate

Reform (Topic 848): Facilitation

of the Effects of Reference Rate

Reform on Financial Reporting

The amendments in this Update provide temporary

optional expedients and exceptions for applying

GAAP to contract modifications and hedging

relationships, subject to meeting certain criteria,

that reference LIBOR or other interbank offered

rates expected to be discontinued. 

January 1, 2020 The adoption of the amendments did not

have a material effect on our consolidated

financial statements or on our disclosures.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac 3Q 2020 Form 10-Q 86
CECL Transition Impacts

The table below provides details on the transition impacts of adopting CECL.Other balance sheet lines not presented were not

affected by CECL.

Table 1.1 CECL Transition Impacts

(In millions) December 31, 2019

Transition

Adjustments January 1, 2020

Assets

Mortgage loans held-for-investment:

 Single-family $1,971,657 $199 $1,971,856

 Multifamily 17,489 Ä 17,489

Less allowance for credit losses:

 Single-family (4,222) (668) (4,890)

 Multifamily (12) (24) (36)

 Mortgage loans held-for-investment, net 1,984,912 (493) 1,984,419

Deferred tax assets, net 5,918 64 5,982

Other assets 22,799 193 22,992

 Total transition adjustments ($236)

Liabilities and equity

Other liabilities 8,042 4 8,046

Retained earnings (accumulated deficit) (74,188) (240) (74,428)

 Total transition adjustments ($236)

Upon adoption of CECL on January 1, 2020, we did not recognize an allowance for credit losses on cash equivalents,

investments in debt securities classified as available-for-sale, or securities purchased under agreements to resell. See Note 7

and Note 10, respectively, for additional information.

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Condensed Consolidated Financial Statements

Standard Description Date of Planned

Adoption

Effect on Condensed Consolidated

Financial Statements

ASU 2020-06, Debt - Debt

with Conversion and Other

Options (Subtopic 470-20)

and Derivatives and Hedging -

Contracts in EntityÖs Own

Equity (Subtopic 815-40):

Accounting for Convertible

Instruments and Contracts in

an EntityÖs Own Equity

The amendments in this Update simplify an issuer's

accounting for certain financial instruments with

characteristics of liabilities and equity, primarily by

eliminating many of the current separation models

used to account for convertible debt and convertible

preferred stock.

January 1, 2021 The adoption of these amendments will not

have a material effect on our condensed

consolidated financial statements.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac 3Q 2020 Form 10-Q 87
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 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. 

Purchase Agreement

Treasury, as the holder of the senior preferred stock, is entitled to receive quarterly cash dividends, when, as, and if declared by

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, acting as successor to the rights, titles, powers, and privileges of the Board. 

Under the August 2012 amendment to the Purchase Agreement, for each quarter from JanuaryÄ1, 2013 and thereafter, the

dividend payment will be 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 September 2019 Letter Agreement, the

applicable Capital Reserve Amount is $20.0 billion. As a result, we will not be required to pay a dividend on the senior preferred

stock to Treasury until our Net Worth Amount exceeds $20.0 billion. If for any reason we do not pay the net worth sweep

dividend in full for any period, the applicable Capital Reserve Amount will thereafter be zero. 

In addition, pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred stock will be

increased, at the end of each fiscal quarter, beginning on September 30, 2019, by an amount equal to the increase in the Net

Worth Amount, if any, during the immediately prior fiscal quarter, until the liquidation preference has increased by $17.0 billion.

As a result, the liquidation preference of the senior preferred stock increased from $82.2 billion on June 30, 2020 to $84.1 billion

on September 30, 2020 based on the $1.9 billion increase in our Net Worth Amount during 2Q 2020, and will increase to $86.5

billion on December 31, 2020 based on the $2.4 billion increase in our Net Worth Amount during 3Q 2020. 

Under the September 2019 Letter Agreement, Freddie Mac and Treasury also agreed to negotiate and execute an amendment

to the Purchase Agreement that further enhances taxpayer protections by adopting covenants broadly consistent with

recommendations for administrative reform contained in the Treasury's September 2019 Housing Reform Plan.

Impact of Conservatorship and Related Developments on the MortgageRelated Investments Portfolio

In February 2019, FHFA instructed us to maintain the UPB of our mortgage-related investments portfolio at or below $225

billion at all times. We began including 10% of the notional value of certain interest-only securities owned by Freddie Mac in the

calculation of this portfolio during 1Q 2020 as directed by FHFA in November 2019. The UPB of this portfolio was $203.9 billion

at SeptemberÄ30, 2020, including $5.7 billion representing 10% of the notional amount of the interest-only securities we held as

of September 30, 2020. Our ability to acquire and sell mortgage assets continues to be significantly constrained by limitations

imposed by the Purchase Agreement and FHFA. 

With respect to the composition of our mortgage-related investments portfolio, in August 2020, FHFA instructed us to: (1)

reduce the amount of agency MBS to no more than $50 billion by June 30, 2021 and no more than $20 billion by June 30,

2022, with all dollar caps to be based on UPB; and (2) reduce the UPB of our existing portfolio of CMOs, which are also

sometimes referred to as REMICs, to zero by June 30, 2021. We will have a holding period limit to sell any new CMO tranches

created but not sold at issuance. CMOs do not include tranches initially retained from reperforming loans senior subordinate

securitization structures.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac 3Q 2020 Form 10-Q 88
Government Support for Our Business

We receive substantial support from Treasury and are dependent upon its continued support to continue operating our

business. Our ability to access funds from Treasury under the Purchase Agreement is critical to: 

n Keeping us solvent;

n Allowing us to focus on our primary business objectives under conservatorship; and

n Avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions. 

At June 30, 2020, our assets exceeded our liabilities under GAAP; therefore, FHFA, as Conservator, did not request a draw on

our behalf and, as a result, we did not receive any funding from Treasury under the Purchase Agreement during 3Q 2020. The

amount of available funding remaining under the Purchase Agreement is $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 and is also

deemed a related party. In connection with the formation of CSS, we entered into a limited liability company agreement with

Fannie Mae. We and Fannie Mae have each appointed two executives to the CSS Board of Managers and signed governance

and operating agreements for CSS, including an updated customer services agreement with Fannie Mae and CSS in May of

2019. In June of 2019, we entered into an agreement with Fannie Mae regarding the commingling of certain of our mortgage

securities under the Single Security Initiative and related indemnification obligations. In January 2020, FHFA instructed Freddie

Mac and Fannie Mae to amend the CSS LLC agreement to change the structure of the CSS Board of Managers, appointing a

new independent non-Executive Chair and providing the CSS CEO a seat on the CSS Board. During conservatorship, all CSS

Board decisions will require the affirmative vote of the FHFA-designated CSS Board Chair and FHFA may appoint up to three

additional independent members to the CSS Board. 

We account for our investment in CSS using the equity method. We increase the carrying value of our investment in CSS when

we contribute capital to CSS. We recognize our equity in the net earnings of CSS each period as a component of investment

gains (losses), net on our condensed consolidated statements of comprehensive income (loss). During YTD 2020, we

contributed $67 million of capital to CSS, and we have contributed $637 million since we began making contributions in the

fourth quarter of 2014. The carrying value of our investment in CSS was $20 million and $35 million as of September 30, 2020

and December 31, 2019, respectively, and was included in other assets on our condensed consolidated balance sheets.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac 3Q 2020 Form 10-Q 89
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 mortgagerelated 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 3

Freddie Mac 3Q 2020 Form 10-Q 90

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.

Table 3.1 - Consolidated VIEs

(In millions) September 30, 2020 December 31, 2019

Condensed Consolidated Balance Sheet Line Item

Assets:

Cash and cash equivalents (includes $1,489 and $869 of restricted cash and cash

equivalents) $1,490 $870

Securities purchased under agreements to resell 50,546 23,137

Investment securities, at fair value 1,734 597

Mortgage loans held-for-investment, net 2,115,509 1,940,523

Accrued interest receivable, net 6,954 6,170

Other assets 21,246 9,824

Total assets of consolidated VIEs $2,197,479 $1,981,121

Liabilities:

Accrued interest payable $5,604 $5,536

Debt 2,138,420 1,898,355

Other liabilities Ä 1

Total liabilities of consolidated VIEs $2,144,024 $1,903,892

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. As part of the Single Security Initiative, we have the

ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products that we do not consolidate.

We extend our guarantee of these products to cover principal and interest that are payable from the underlying Fannie Mae

collateral. See Note 5 for additional information on our guarantee of Fannie Mae securities. 

The following table presents the carrying amounts and classification of the assets and liabilities recorded on our condensed

consolidated balance sheets related to 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 and total assets of the VIEs. Our maximum

exposure to loss includes the guaranteed UPB of the securities issued by the non-consolidated VIEs, the UPB of unguaranteed

securities that we acquired from these securitization transactions, and the UPB of master servicer and guarantor advances

made to the holders of the guaranteed securities. While we include the UPB of Fannie Mae securities backing non-consolidated

Freddie Mac resecuritization trusts because we are providing a guaranty for the timely payment and interest on the underlying

Fannie Mae securities that we have not previously guaranteed, we exclude the UPB of Freddie Mac securities backing these

same trusts primarily because we already consolidate the underlying Freddie Mac collateral of these trusts on our condensed

consolidated balance sheets. Our maximum exposure to loss also excludes our interest rate exposure on certain securitization

activity and other mortgage-related guarantees measured at fair value where our interest rate exposure may be unlimited. We

generally reduce our exposure to these guarantees with unlimited interest rate exposure through separate contracts with third

parties. Total assets of non-consolidated VIEs excludes our investments in and obligations to non-consolidated Freddie Mac

resecuritization trusts, including the UPB of Fannie Mae securities, primarily because we already consolidate the underlying

Freddie Mac collateral of these trusts on our condensed consolidated balance sheets. 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 enhancements. See Note 6 for additional information on credit enhancements.

Table 3.2 - Non-Consolidated VIEs

(In millions) September 30, 2020 December 31, 2019

Assets and Liabilities Recorded on our Condensed Consolidated Balance

Sheets(1)

Assets:

Investment securities, at fair value $37,410 $37,918

Accrued interest receivable, net 247 212

Derivative assets, net 49 14

Other assets 5,474 3,951

 Liabilities:

Derivative liabilities, net 50 108

Other liabilities 4,135 3,761

Maximum Exposure to Loss(2) 372,341 307,820

Total Assets of Non-Consolidated VIEs 366,496 335,562

(1) Includes our variable interests in REMICs and Strips, commingled Supers, K Certificates, SB Certificates, certain senior subordinate securitization structures, and

other securitization products that we do not consolidate. 

(2) Includes amounts related to Fannie Mae securities backing non-consolidated Freddie Mac resecuritization trusts. These amounts were previously included in text in

prior periods.

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 3

Freddie Mac 3Q 2020 Form 10-Q 91
NOTE 4

Mortgage Loans and Allowance for Credit Losses

On January 1, 2020, we adopted CECL, which changed certain of our significant accounting policies for mortgage loans heldfor-investment and the associated allowance for credit losses, as discussed further in the sections below. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 92

The table below provides details of the loans on our condensed consolidated balance sheets.

Table 4.1 - Mortgage Loans

September 30, 2020 December 31, 2019

(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 $13,162 $Ä $13,162 $18,543 $Ä $18,543

Multifamily 18,509 Ä 18,509 18,954 Ä 18,954

Total UPB 31,671 Ä 31,671 37,497 Ä 37,497

Cost basis and fair value adjustments, net (1,086) Ä (1,086) (2,209) Ä (2,209)

Total held-for-sale loans, net 30,585 Ä 30,585 35,288 Ä 35,288

Held-for-investment:

Single-family 64,672 2,058,138 2,122,810 35,324 1,902,958 1,938,282

Multifamily 9,035 10,203 19,238 10,831 6,642 17,473

Total UPB 73,707 2,068,341 2,142,048 46,155 1,909,600 1,955,755

Cost basis adjustments 1,442 52,939 54,381 (183) 33,574 33,391

Allowance for credit losses (1,002) (5,771) (6,773) (1,583) (2,651) (4,234)

Total held-for-investment loans, net 74,147 2,115,509 2,189,656 44,389 1,940,523 1,984,912

Total mortgage loans, net $104,732 $2,115,509 $2,220,241 $79,677 $1,940,523 $2,020,200

We own both single-family loans, which are secured by one- to four-unit residential properties, and multifamily loans, which are

secured by properties with five or more residential rental units. Our single-family loans are predominantly first lien, fixed-rate

loans secured by the borrower's primary residence. We do not typically acquire loans that have experienced more-thaninsignificant deterioration in credit quality since origination as of our acquisition date, although we may acquire such loans in

connection with certain of our securitization activities or other mortgage-related guarantees. In addition, in April 2020, we

announced that we would temporarily purchase certain single-family mortgage loans that have entered into forbearance plans

as a result of borrower hardship caused by the COVID-19 pandemic. Our purchases of such loans have been insignificant.

Upon acquisition, we classify a loan as either held-for-investment or held-for-sale based on our intent with respect to the loan.

Loans that we have the ability and intent to hold for the foreseeable future, including loans held by consolidated trusts and

loans we intend to securitize using an entity we will consolidate, are classified as held-for-investment. Loans that we intend to

sell are classified as held-for-sale. 

Held-for-investment loans for which we have not elected the fair value option are reported on our condensed consolidated

balance sheets at their amortized cost basis, net of the allowance for credit losses. The amortized cost basis is based on a

loanÇs outstanding UPB, net of deferred fees and other cost basis adjustments (including unamortized premiums and discounts,

upfront fees, commitment-related derivative basis adjustments, fair value hedge accounting adjustments, and other pricing

adjustments), excluding accrued interest receivable. Accrued interest receivable for both held-for-investment and held-for-sale

loans is separately presented on our condensed consolidated balance sheets and excluded for the purposes of disclosure of

the amortized cost basis of mortgage loans held-for-investment.

Held-for-sale loans for which we have not elected the fair value option are reported at lower-of-cost-or-fair-value on our

condensed consolidated balance sheets. Any excess of a held-for-sale loan's cost over its fair value is recognized as a

valuation allowance in investment gains (losses), net on our condensed consolidated statements of comprehensive income

(loss), with subsequent changes in this valuation allowance also being recorded in investment gains (losses), net. Premiums,

discounts, and other cost basis adjustments (including lower-of-cost-or-fair-value adjustments) are deferred and not amortized. 

We elect the fair value option for certain multifamily loans that are originally classified as held-for-sale. Loans for which we have

elected the fair value option are measured at fair value on a recurring basis, with subsequent gains or losses related to changes

in fair value reported in investment gains (losses), net on our condensed consolidated statements of comprehensive income

(loss). All fees, upfront costs, and other cost basis adjustments are recognized in earnings as incurred.
Cash flows related to loans originally classified as held-for-investment are classified as either investing activities (e.g., principal

repayments) or operating activities (e.g., interest payments received from borrowers included within net income (loss)) on our

condensed consolidated statements of cash flows. Cash flows related to loans originally classified as held-for-sale are

classified as operating activities on our condensed consolidated statements of cash flows.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 93

The table below provides details of the UPB of loans we purchased, reclassified from held-for-investment to held-for-sale, and

sold during the periods presented. 

Table 4.2 - Loans Purchased, Reclassified from Held-for-Investment to Held-for-Sale, and Sold

(In billions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Single-family:

Purchases

 Held-for-investment loans $335.4 $133.8 $703.8 $305.0

Reclassified from held-for-investment to held-for-sale(1) 0.5 3.0 3.9 8.1

Sale of held-for-sale loans(2) 4.0 3.7 6.2 9.4

Multifamily:

Purchases

 Held-for-investment loans 1.6 4.4 5.9 6.8

 Held-for-sale loans 14.9 23.1 39.5 50.6

Reclassified from held-for-investment to held-for-sale(1) 1.4 0.4 2.1 1.2

Sale of held-for-sale loans(3) 19.6 19.7 41.3 49.5

(1) We reclassify loans from held-for-investment to held-for-sale when we no longer have both the intent and ability to hold the loans for the foreseeable future. For

additional information regarding the fair value of our loans classified as held-for-sale, see Note 15.

(2) Our sales of single-family loans reflect the sale of seasoned single-family mortgage loans. 

(3) Our sales of multifamily loans occur primarily through the issuance of multifamily K Certificates and SB Certificates. See Note 3 for more information on our K

Certificates and SB Certificates. 

Reclassifications

We reclassify loans from held-for-investment to held-for-sale when we no longer have both the intent and ability to hold the loan

for the foreseeable future. Upon reclassification from held-for-investment to held-for-sale, we perform a collectability

assessment. When we determine that a loan to be transferred has experienced more-than-insignificant deterioration in credit

quality since origination, the excess of the loanÇs amortized cost basis over its fair value is written off against the allowance for

credit losses prior to the transfer. For all other loans, upon a transfer from held-for-investment to held-for-sale, we reverse the

loanÇs existing allowance for credit losses, if any, and establish a held-for-sale valuation allowance if the loanÇs fair value is less

than its amortized cost basis. 

We reclassify loans from held-for-sale to held-for-investment when we have both the intent and ability to hold the loan for the

foreseeable future. Upon a loan reclassification from held-for-sale to held-for-investment, we reverse the loanÇs held-for-sale

valuation allowance, if any, and establish an allowance for credit losses as needed. 

The table below presents the allowance for credit losses or valuation allowance that was reversed or established due to loan

reclassifications between held-for-investment and held-for-sale during the period presented.

Table 4.3 - Loan Reclassifications

3Q 2020 YTD 2020

(In millions) UPB

Allowance for

Credit Losses

Reversed or

(Established)

Valuation

Allowance

(Established)

or Reversed UPB

Allowance for

Credit Losses

Reversed or

(Established)

Valuation

Allowance

(Established)

or Reversed

Single-family reclassifications from:

Held-for-investment to held-for-sale(1) $523 $27 $Ä $3,919 $275 $Ä

Held-for-sale to held-for-investment(2) 1,440 124 30 1,685 144 34

Multifamily reclassifications from:

Held-for-investment to held-for-sale 1,432 8 (6) 2,079 8 (6)

 Held-for-sale to held-for-investment 62 Ä 4 633 (1) 4

(1) Prior to reclassification from held-for-investment to held-for-sale, we charged-off $47 million and $220 million against the allowance for credit losses during 3Q

2020 and YTD 2020.

(2) Allowance for credit losses reversed upon reclassifications from held-for-sale to held-for-investment for loans that were previously charged off and the present

values of expected future cash flows were in excess of the amortized cost basis upon reclassification.
Interest Income

We recognize interest income on an accrual basis except when we believe the collection of principal and interest in full is not

reasonably assured, which generally occurs when a loan is three monthly payments or more past due, at which point we place

the loan on non-accrual status unless the loan is well secured and in the process of collection based upon an individual loan

assessment. A loan is considered past due if a full payment of principal and interest is not received within one month of its due

date. We charge off outstanding accrued interest receivable through interest income when loans are placed on non-accrual

status and recognize interest income on a cash basis while a loan is on non-accrual status.

Cost basis adjustments on held-for-investment loans are amortized into interest income over the contractual life of the loan

using the effective interest method. No amortization is recognized during periods in which a loan is on non-accrual status.

A non-accrual loan is returned to accrual status when the collectability of principal and interest in full is reasonably assured. For

single-family loans, we generally determine that collectability is reasonably assured when the loan returns to current payment

status. For multifamily loans, the collectability of principal and interest is considered reasonably assured based on an analysis

of the factors specific to the loan being assessed. Upon a loan's return to accrual status, all previously reversed interest income

is recognized and amortization of any basis adjustments into interest income is resumed.

We make an exception to our standard non-accrual policy for loans in forbearance plans that were current prior to receiving

forbearance and do not place such loans on non-accrual status based solely on delinquency status. For these loans, we

consider additional factors, such as current LTV ratio, and continue to accrue interest while the loan is in forbearance and is

three or more monthly payments past due when we believe the available evidence indicates that collectability of principal and

interest is reasonably assured. When we accrue interest on loans that are three or more monthly payments past due, we

measure an allowance for expected credit losses on unpaid accrued interest receivable balances such that the balance sheet

reflects the net amount of interest we expect to collect.

The table below presents the amortized cost basis of non-accrual loans as of September 30, 2020 and June 30, 2020, including

the interest income recognized for the periods presented that is related to the loans on non-accrual status as of the period end.

Table 4.4 - Amortized Cost Basis of Held-for-Investment Loans on Non-accrual

Non-accrual Amortized Cost Basis Interest Income Recognized(1)

(In millions) September 30, 2020 June 30, 2020 3Q 2020 YTD 2020

Single-family:

20- and 30-year or more, amortizing fixed-rate $12,376 $10,226 $32 $180

15-year amortizing fixed-rate 788 528 1 9

Adjustable-rate 235 150 Ä 3

Alt-A, interest-only, and option ARM 673 540 1 8

Total single-family 14,072 11,444 34 200

Total multifamily Ä Ä Ä Ä

Total single-family and multifamily $14,072 $11,444 $34 $200

(1) Represents the amount of payments received during the periods, including those received while the loans were on accrual status, for the held-for-investment loans

on non-accrual status as of the period end.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 94

The table below provides the amount of accrued interest receivable, net presented on our condensed consolidated balance

sheets and the amount of accrued interest receivable related to loans on non-accrual status at end of the periods that is written

off through reversal of interest income on our condensed consolidated statements of comprehensive income (loss) by portfolio. 

Table 4.5 - Accrued Interest Receivable, Net and Related Charge-offs Through Reversal of Interest Income

September 30, 2020 3Q 2020 YTD 2020

(In millions)

Accrued Interest Receivable,

Net

Accrued Interest Receivable

Related Charge-offs

Accrued Interest Receivable

Related Charge-offs

Single-family loans $7,114 ($104) ($225)

Multifamily loans 123 Ä Ä

Allowance for Credit Losses

On January 1, 2020, we adopted CECL. The objective of CECL is to recognize an allowance for credit losses that is deducted

from or added to the amortized cost basis of the financial asset to present the net amount expected to be collected on the

financial asset on the condensed consolidated balance sheets. Under CECL, an allowance for credit losses is recognized
before a loss event has been incurred, which results in earlier recognition of credit losses compared to the previous incurred

loss methodology. 

Our allowance for credit losses on mortgage loans pertains to all single-family and multifamily loans classified as held-forinvestment for which we have not elected the fair value option. We recognize changes in the allowance for credit losses by

recording a provision for credit losses (or reversal of a provision for credit losses) on our condensed consolidated statements of

comprehensive income (loss). We measure the allowance for credit losses on a collective basis when our loans share similar

risk characteristics. We record charge-offs in the period in which a loan is deemed uncollectible. Proceeds received in excess of

amounts previously written off are recorded as a decrease to REO operations expense on our condensed consolidated

statements of comprehensive income (loss).

We may incur expenses related to a mortgage loan subsequent to its original acquisition but prior to foreclosure (preforeclosure costs). These expenses are generally to protect or preserve our interest or legal right in or to the property prior to

foreclosure, such as property taxes or homeowner's insurance premiums owed by the borrower. Many of these expenses are

advanced by the servicer and are reimbursable from the borrower. If the borrower ultimately defaults, we reimburse the servicer

for the advances it has made. Upon advance by the servicer, we recognize a receivable for the amounts due from the borrower

and a payable for amounts due to the servicer. We recognize an allowance for credit losses for amounts that we do not

ultimately expect to collect from the borrower (allowance for credit losses on pre-foreclosure costs).

The table below summarizes changes in our allowance for credit losses for single-family and multifamily loans held-forinvestment, single-family advances of pre-foreclosure costs, and single-family accrued interest receivable related to loans in

forbearance plans caused by the COVID-19 pandemic. 

Table 4.6 - Details of the Allowance for Credit Losses

Å(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Single-family:

Beginning balance(1) $6,862 $5,280 $5,184 $6,130

(Benefit) provision for credit losses 310 (181) 2,090 (480)

Charge-offs (121) (406) (401) (1,253)

Recoveries collected 41 107 165 341

Other 45 41 99 103

 Single-family ending balance 7,137 4,841 7,137 4,841

 Multifamily ending balance 126 13 126 13

Total ending balance $7,263 $4,854 $7,263 $4,854

Components of ending balance of single-family allowance for credit losses:

Mortgage loans held-for-investment $6,647 $4,841

Advances of pre-foreclosure costs 383 N/A

Accrued interest receivable 107 N/A

 Total $7,137 $4,841

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

During the 2020 periods, (benefit) provision for credit losses shifted to a provision from a benefit in the 2019 periods primarily

due to higher expected credit losses as a result of the negative economic effects of the COVID-19 pandemic. The higher

expected credit losses during YTD 2020 were primarily driven by the following factors: 

n Expected credit losses related to COVID-19 relief programs - Our provision for credit losses in YTD 2020 required

significant management judgment to estimate the impact of COVID-19-related forbearance and relief programs on our

expected credit losses. These judgments included estimates of the number of loans that will receive forbearance, the likely

exit paths for loans in forbearance plans, and the number of loans where forbearance plans will be unsuccessful and the

borrower will ultimately default. These factors resulted in a significant increase in our provision for credit losses for YTD

2020, with the majority of the increase occurring in 1Q 2020. We recognized additional provision in 3Q 2020 for allowances

for pre-foreclosure costs and accrued interest receivable related to loans in forbearance due to the COVID-19 pandemic. In

total, we have increased our allowance for credit losses by $2.6 billion as a result of the COVID-19 pandemic.

n Changes in forecasted house price growth rates - The overall effect of forecasted house price changes on our provision

for credit losses for YTD 2020 was relatively minor, with an increase in provision in 1Q 2020 being largely offset by the

improvement in 3Q and 2Q 2020.

n Declines in forecasted interest rates - The effect of the significant declines in mortgage interest rates during YTD 2020

partially offset the increase in the provision for credit losses as a result of the COVID-19 pandemic.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 95
In addition, charge-offs decreased in the 2020 periods due to a lower volume of transfers of single-family loans from held-forinvestment to held-for-sale. The decline in economic activity caused by the COVID-19 pandemic, and the corresponding

government response, is unprecedented, and as a result, our estimate of expected credit losses is subject to significant

uncertainty.

Single-Family Loans

We estimate the allowance for credit losses for single-family loans on a pooled basis using a discounted cash flow model that

evaluates a variety of factors to estimate the cash flows we expect to collect. If we determine that foreclosure on the underlying

collateral is probable, we measure the allowance for credit losses for single-family loans based upon the fair value of the

collateral, less costs to sell, adjusted for estimated proceeds from attached credit enhancements.

The discounted cash flow model we use to estimate the single-family loan allowance for credit losses forecasts cash flows over

the loanÇs remaining contractual life, adjusted for expectations of prepayments and TDRs we reasonably expect will occur. We

do not have a reasonable and supportable forecast period beyond which we revert to historical loss information. Cash flow

estimates are discounted at the loanÇs prepayment-adjusted effective interest rate. For adjustable-rate loans, forecasts are

adjusted for projections in the underlying benchmark interest rate. For both fixed-rate and adjustable-rate loans, we forecast

cash flows we expect to collect using our historical experience, such as historical default rates and severity of loss based on

loan characteristics, adjusted for current and future economic forecasts, such as current and projected house price

appreciation and interest rate forecasts, and estimated recoveries from loss mitigation activities, attached credit enhancements,

and disposition of collateral, less estimated disposition costs. We calculate the allowance for credit losses on accrued interest

receivable based on similar default rate assumptions to those used for the related loans. We calculate the allowance for credit

losses for advances of pre-foreclosure costs based on the amounts we expect to collect using our historical experience such as

historical default rates.

These projections require significant management judgment. We rely on third-parties to provide certain model inputs used in

our projections. At loan delivery, the seller provides us with loan data, which includes borrower and loan characteristics and

underwriting information. Each subsequent month, the servicers provide us with monthly loan level servicing data, including

delinquency and loss information.

We measure an allowance for credit losses for TDR loans on a pooled basis when they share similar risk characteristics, using

either the discounted cash flow approach discussed above or based on the fair value of the collateral, less costs to sell when

foreclosure is probable. When using a discounted cash flow approach, the present value of the expected future cash flows is

discounted at the loan's prepayment-adjusted effective interest rate just prior to the restructuring, with no adjustments made to

the effective interest rate for changes in the timing of expected cash flows subsequent to the restructuring. 

We review the outputs of our model by considering qualitative factors such as current economic events and other external

factors, including the economic effects of the COVID-19 pandemic and the impact of associated government relief programs, to

see whether the model outputs are consistent with our expectations. Additionally, we incorporate expected credit losses for

TDRs that are reasonably expected to occur and the incidence of redefault we have experienced on similar loans that have

completed a loan modification. Further management adjustments may be necessary to take into consideration the qualitative

factors that have occurred but that are not yet reflected in the factors used to derive the model outputs or the uncertainty

inherent in our projections. Significant judgment is exercised in making these adjustments. 

Multifamily Loans

We estimate the allowance for credit losses for multifamily loans using a loss-rate method to estimate the net amount of cash

flows we expect to collect. The loss rate method is based on a probability of default and loss given default framework that

estimates credit losses by considering a loanÇs underlying characteristics and current and forecasted economic conditions.

Loan characteristics considered by our model include vintage, loan term, current DSCR, current LTV ratio, occupancy rate, and

interest rate hedges. We forecast economic conditions over a reasonable and supportable two-year period prior to reverting to

historical averages at the model input level over a five-year period, using a linear reversion method. We also consider as model

inputs expected prepayments, contractually specified extensions, modifications we reasonably expect will occur, expected

recoveries from collateral posting requirements, and the expected recoveries from attached credit enhancements.

Our loss rates incorporate published historical commercial loan performance data, which we calibrate for differences between

that data and our portfolio experience. Except for cases of fraud and certain other types of borrower defaults, most multifamily

loans are non-recourse to the borrower. As a result, the cash flows of the underlying property (including any attached credit

enhancements) serve as the primary source of funds for repayment of the loan. For loans where we determined that the

borrower is experiencing financial difficulty and is two monthly payments or more past due, we measure the allowance for

credit losses using the fair value of the underlying collateral, less estimated costs to sell, adjusted for estimated proceeds from

credit enhancements that are not freestanding contracts. Factors considered by management in determining whether a

borrower is experiencing financial difficulty include the borrowerÇs current payment status and an evaluation of the underlying

property's operating performance as represented by its current DSCR, its available credit enhancements, the current LTV ratio,

the management of the underlying property, and the property's geographic location.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 96
We review the outputs of our model considering qualitative factors such as current economic events and other external factors

to determine whether the model outputs are consistent with our expectations. Further management adjustments may be

necessary to take into consideration the qualitative factors that have occurred but that are not yet reflected in the factors used

to derive the model outputs. Significant judgment is exercised in making these adjustments.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 97

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 (outside of the Enhanced Relief Refinance program) 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. 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 NoteÄ14. 

The tables below present the amortized cost basis of single-family held-for-investment loans by current LTV ratio. Our current

LTV ratios are estimates based on available data through the end of each respective period presented. For reporting purposes:

n 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

n 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 provisions.

Table 4.7 - Amortized Cost Basis of Single-Family Held-for-Investment Loans by Current LTV Ratio and Vintage

September 30, 2020

Year of Origination Total

(In millions) 2020 2019 2018 2017 2016 Prior

Current LTV Ratio:

 20- and 30-year or more, amortizing fixed-rate

 Ç 80 $378,844 $198,519 $101,325 $141,534 $180,428 $533,138 $1,533,788

 > 80 to 100 166,082 95,300 25,976 7,190 1,829 6,682 303,059

 > 100(1) 461 39 45 98 94 1,486 2,223

 Total 20- and 30-year or more, amortizing fixed-rate 545,387 293,858 127,346 148,822 182,351 541,306 1,839,070

 15-year amortizing fixed-rate

 Ç 80 90,860 33,429 13,902 22,955 32,940 92,255 286,341

 > 80 to 100 9,607 1,380 89 25 15 31 11,147

 > 100(1) 45 1 4 6 6 11 73

 Total 15-year amortizing fixed-rate 100,512 34,810 13,995 22,986 32,961 92,297 297,561

 Adjustable-rate

 Ç 80 2,453 1,960 1,525 4,149 2,786 15,281 28,154

 > 80 to 100 349 266 99 81 11 15 821

 > 100(1) Ä Ä Ä Ä Ä 2 2

 Total Adjustable-rate 2,802 2,226 1,624 4,230 2,797 15,298 28,977

 Alt-A, Interest-only, and option ARM

 Ç 80 Ä Ä Ä Ä Ä 10,945 10,945

 > 80 to 100 Ä Ä Ä Ä Ä 501 501

 > 100(1) Ä Ä Ä Ä Ä 94 94

 Total Alt-A, Interest-only, and option ARM Ä Ä Ä Ä Ä 11,540 11,540

Total single-family loans $648,701 $330,894 $142,965 $176,038 $218,109 $660,441 $2,177,148

Total for all loan product types by current LTV ratio:

 Ç 80 $472,157 $233,908 $116,752 $168,638 $216,154 $651,619 $1,859,228

 > 80 to 100 176,038 96,946 26,164 7,296 1,855 7,229 315,528

 > 100(1) 506 40 49 104 100 1,593 2,392

Total single-family loans $648,701 $330,894 $142,965 $176,038 $218,109 $660,441 $2,177,148
December 31, 2019

Current LTV Ratio ÅTotal

(In millions) Ç 80 >Å80ÅtoÅ100 >Å100(1)

20- and 30-year or more, amortizing fixed-rate $1,405,562 $267,752 $3,954 $1,677,268

15-year amortizing fixed-rate 236,837 6,797 89 243,723

Adjustable-rate 35,478 1,425 6 36,909

Alt-A, interest-only, and option ARM 12,668 901 188 13,757

Total single-family loans $1,690,545 $276,875 $4,237 $1,971,657

(1) The serious delinquency rate for the single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 10.63% and 4.51% as of

SeptemberÅ30, 2020 and DecemberÅ31, 2019, respectively.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 98

Multifamily

The table below presents the amortized cost basis of 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

and are defined as follows: 

n "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower; 

n "Special mention" has administrative issues that may affect future repayment prospects but does not have current credit 

weaknesses. In addition, this category generally includes loans in forbearance; 

n "Substandard" has a weakness that jeopardizes the timely full repayment; and 

n "Doubtful" has a weakness that makes collection or liquidation in full highly questionable and improbable based on existing

conditions. 

Table 4.8 - Amortized Cost Basis of Multifamily Held-for-Investment Loans by Credit Quality Indicator by Vintage

September 30, 2020 December 31, 2019

Year of Origination

(In millions) 2020 2019 2018 2017 2016 Prior Total Total

Revolving

Loans

Category:

Pass $4,631 $6,791 $1,042 $726 $622 $2,783 $1,843 $18,438 $17,227

Special mention Ä 489 115 Ä Ä 113 Ä 717 141

Substandard Ä Ä 19 36 Ä 71 Ä 126 121

Doubtful Ä Ä Ä Ä Ä Ä Ä Ä Ä

Total $4,631 $7,280 $1,176 $762 $622 $2,967 $1,843 $19,281 $17,489
Past Due Status

The tables below present the amortized cost basis of our single-family and multifamily loans, held-for-investment, by payment

status. Pursuant to FHFA guidance and the CARES Act, we offer mortgage relief options for borrowers affected by the

COVID-19 pandemic. Among other things, we are offering forbearance to single-family and multifamily borrowers experiencing

a financial hardship, either directly or indirectly, related to the COVID-19 pandemic. We report single-family loans in forbearance

plans as past due during the forbearance period to the extent that payments are past due based on the loans' original

contractual terms, irrespective of the forbearance plan, based on the information reported to us by our servicers. We report

multifamily loans in forbearance as current as long as the borrower is in compliance with the forbearance agreement, including

the agreed upon repayment plan. As a result, all multifamily loans in forbearance are reported as current in the tables below,

even if payments are past due based on the loans' original contract terms. 

Table 4.9 - Amortized Cost Basis of Held-for-Investment Loans by Payment Status

September 30, 2020

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

ThreeÅMonthsÅor

More Past Due,

orÅin Foreclosure(1) Total

Three Months or

More Past Due,

and Accruing

Non-accrual

With No

Allowance(2)

Single-family:

20- and 30-year or more, amortizing

fixed-rate $1,754,734 $16,752 $8,190 $59,394 $1,839,070 $47,545 $637

15-year amortizing fixed-rate 291,207 1,456 641 4,257 297,561 3,410 9

Adjustable-rate 27,542 241 121 1,073 28,977 842 5

Alt-A, interest-only, and option ARM 9,738 330 177 1,295 11,540 638 115

Total single-family 2,083,221 18,779 9,129 66,019 2,177,148 52,435 766

Total multifamily(3) 19,274 3 Ä 4 19,281 4 Ä

Total single-family and multifamily $2,102,495 $18,782 $9,129 $66,023 $2,196,429 $52,439 $766

 Referenced footnote is included after the next table

December 31, 2019

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

ThreeÅMonthsÅor

More Past Due,

orÅin Foreclosure(1) Total Non-accrual

Single-family:

20- and 30-year or more, amortizing

fixed-rate $1,653,113 $15,481 $3,326 $5,348 $1,677,268 $5,822

15-year amortizing fixed-rate 242,177 1,131 175 240 243,723 252

Adjustable-rate 36,537 238 45 89 36,909 104

Alt-A, interest-only, and option ARM 12,690 489 161 417 13,757 205

Total single-family 1,944,517 17,339 3,707 6,094 1,971,657 6,383

Total multifamily 17,489 Ä Ä Ä 17,489 13

Total single-family and multifamily $1,962,006 $17,339 $3,707 $6,094 $1,989,146 $6,396

(1) Includes $1.1 billion and $1.8 billion of single-family loans that were in the process of foreclosure as of SeptemberÅ30, 2020 and DecemberÅ31, 2019, respectively.

(2) Loans with no allowance primarily represent those loans that were previously charged-off and therefore the collateral value is sufficiently in excess of the amortized

cost to result in recovery of the entire amortized cost basis if the property were foreclosed upon or otherwise subject to disposition.

(3) As of September 30, 2020, includes $0.7 billion of multifamily loans in forbearance that are reported as current.

FHFA requires us to purchase single-family loans from securities if they are delinquent for 120 days, and we have the option to

purchase sooner under certain circumstances (e.g., imminent default and seller breaches of representations and warranties).

We generally have been purchasing loans from securities when the loans have been delinquent for 120 days or more. In April

2020, we announced that FHFA has instructed us to maintain loans in payment forbearance plans (including COVID-19

payment forbearance plans) in mortgage-backed security pools for at least the duration of the forbearance plan.ÄOnce the

forbearance period expires, the loan will remain in the related securities pool while:

n An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant

to a loan modification remains outstanding; 

n The loan is in an active repayment plan or trial period plan; or 

n A payment deferral solution is in effect.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 99
Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we will extend the trigger to

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 100

Troubled Debt Restructurings

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial

difficulties is considered a TDR. A concession is deemed granted when, as a result of the restructuring, we do not expect to

collect all amounts due, including interest accrued, at the original contractual interest rate. As appropriate, we also consider

other qualitative factors in determining whether a concession is deemed granted, including whether the borrower's modified

interest rate is consistent with that of a non-troubled borrower. We do not consider restructurings that result in an insignificant

delay in payment to be a concession. We generally consider a delay in monthly amortizing payments of three months or less to

be insignificant. A concession typically includes one or more of the following being granted to the borrower:

n A trial period where the expected permanent modification will change our expectation of collecting all amounts due at the

original contract rate;

n A delay in payment that is more than insignificant;

n A reduction in the contractual interest rate;

n Interest forbearance for a period of time that is more than insignificant or forgiveness of accrued but uncollected interest

amounts;

n Principal forbearance that is more than insignificant; and

n Discharge of the borrower's obligation in Chapter 7 bankruptcy.

The assessment as to whether a multifamily loan restructuring is considered a TDR contemplates the unique facts and

circumstances of each loan. This assessment considers qualitative factors such as whether the borrower's modified interest

rate is consistent with that of a non-troubled borrower having a similar credit profile at the time of modification. In certain cases,

for maturing loans we may provide short-term loan extensions of up to one year with no changes to the effective borrowing

rate. In other cases, we may make more significant modifications of terms for borrowers experiencing financial difficulty, such

as reducing the interest rate, extending the maturity for longer than one year, providing principal forbearance, or some

combination of these terms.

Section 4013 of the CARES Act provides temporary relief from the accounting and reporting requirements for TDRs for certain

loan modifications related to the COVID-19 pandemic. Specifically, the CARES Act provides that a qualifying financial institution

may elect to suspend (1) the requirements under U.S. GAAP for certain loan modifications that would otherwise be categorized

as a TDR, and (2) any determination that such loan modifications would be considered a TDR, including the related impairment

for accounting purposes. Section 4013 of the CARES Act applies to any modification related to an economic hardship as a

result of the COVID-19 pandemic, including a forbearance arrangement, an interest rate modification, a repayment plan, or any

similar arrangement that defers or delays payment of principal or interest, that occurs during the period beginning on March 1,

2020 and ending on the earlier of December 31, 2020 or the date that is 60 days after the declaration of the national emergency

related to the COVID-19 pandemic ends for a loan that was not more than 30 days past due as of December 31, 2019. We have

elected to suspend TDR accounting for eligible modifications under Section 4013 of the CARES Act.

In addition, Section 4022 and Section 4023 of the CARES Act require us to offer forbearance to certain single-family and

multifamily borrowers, respectively, with an economic hardship related to the COVID-19 pandemic. Recent guidance issued by

federal banking regulators and endorsed by the FASB staff has indicated that government-mandated modification or deferral

programs related to the COVID-19 pandemic should not be accounted for as TDRs as the lender did not choose to grant a

concession to the borrower. We have concluded that the forbearance programs we are offering under Section 4022 and

Section 4023 of the CARES Act are government-mandated deferral programs related to the COVID-19 pandemic, and therefore

we will not account for such modifications as TDRs.

We recognize an allowance for credit losses on TDRs as discussed in the Allowance for Credit Losses section above. We

recognize interest income at the modified interest rate, subject to our non-accrual policy as discussed in the Interest Income

section above, with all other changes in the present value of expected future cash flows being recognized as a component of

benefit (provision) for credit losses on our condensed consolidated statements of comprehensive income (loss). We report

single-family loans with modifications that were classified as TDRs based on the original product categories of the loans before

modifications and include loans that were reclassified from held-for-investment to held-for-sale after TDR modifications.

Of the single-family loans with modifications that were classified as TDRs during 3Q 2020, 3Q 2019, YTD 2020, and YTD 2019,

respectively:

n 16%, 9%, 15%, and 8% involved interest rate reductions and, in certain cases, term extensions;

n 25%, 23%, 20%, and 24% involved principal forbearance in addition to interest rate reductions and, in certain cases, term

extensions;
n The average term extension was 173, 188, 183, and 177 months; and

n The average interest rate reduction was 0.3%, 0.2%, 0.3%, and 0.1%.

Substantially all of our completed single-family loan modifications classified as a TDR during 3Q 2020, 3Q 2019, YTD 2020, and

YTD 2019 resulted in a modified loan with a fixed interest rate.

The table below presents the volume of single-family and multifamily loans that were newly classified as TDRs. 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.

Table 4.10 - TDR Activity

3Q 2020 3Q 2019 YTD 2020 YTD 2019

(Dollars in millions)

NumberÅofÅ

Loans

Post-TDR

Amortized

Cost Basis

NumberÅofÅ

Loans

Post-TDR

Amortized

Cost Basis

NumberÅofÅ

Loans

Post-TDR

Amortized

Cost Basis

NumberÅofÅ

Loans

Post-TDR

Amortized

Cost Basis

Single-family:(1)

20- and 30-year or more, amortizing

fixed-rate 6,432 $1,290 5,908 $998 18,173 $3,360 19,668 $3,262

15-year amortizing fixed-rate 802 97 693 69 2,121 230 2,364 230

Adjustable-rate 89 18 128 22 274 50 403 64

Alt-A, interest-only, and option ARM 307 47 285 45 608 90 1,331 190

Total single-family 7,630 1,452 7,014 1,134 21,176 3,730 23,766 3,746

Multifamily Ä Ä Ä Ä Ä Ä Ä Ä

(1) The pre-TDR amortized cost basis for single-family loans initially classified as TDR during 3Q 2020 and YTD 2020 was $1.4 billion and $3.7 billion, respectively,

compared to $1.1 billion and $3.7 billion during 3Q 2019 and YTD 2019, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 101

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.

Table 4.11 - Payment Defaults of Completed TDR Modifications

3Q 2020 3Q 2019 YTD 2020 YTD 2019

(Dollars in millions)

NumberÅof

ÅLoans

Post-TDR

Amortized

Cost Basis

NumberÅof

ÅLoans

Post-TDR

Amortized

Cost Basis

NumberÅof

ÅLoans

Post-TDR

Amortized

Cost Basis

NumberÅof

ÅLoans

Post-TDR

Amortized

Cost Basis

Single-family:

20- and 30-year or more, amortizing

fixed-rate 2,008 $357 3,256 $407 8,628 $1,575 10,533 $1,237

15-year amortizing fixed-rate 82 9 96 9 398 49 329 24

Adjustable-rate 17 2 33 3 105 16 95 10

Alt-A, interest-only, and option ARM 106 19 178 24 619 123 687 96

Total single-family 2,213 387 3,563 443 9,750 1,763 11,644 1,367

Multifamily Ä Ä Ä Ä Ä Ä Ä Ä

In addition to modifications, loans may be classified as TDRs as a result of other loss mitigation activities (i.e., repayment plans,

forbearance plans, or loans in modification trial periods). During YTD 2020 and YTD 2019, 2,903 and 3,983, respectively, of

such loans (with a post-TDR amortized cost basis of $0.4 billion during both periods) experienced a payment default within a

year after the loss mitigation activity occurred.
Prior Period Allowance for Credit Losses and Related Information

Under the previous incurred loss impairment methodology that was effective prior to January 1, 2020, we assessed loan

impairment on a collective basis unless we considered the loan to be impaired. We assessed loan impairment on an individual

basis when, based on current information, it was probable that we would not receive all amounts due (including both principal

and interest) in accordance with the contractual terms of the original loan agreement. For additional information, see our 2019

Annual Report.

The table below presents our allowance for loan losses and our recorded investment in loans held-for-investment by

impairment evaluation methodology.

Table 4.12 - Net Investment in Loans

December 31, 2019

(In millions) Single-family Multifamily Total

Recorded investment:

Collectively evaluated $1,936,208 $17,408 $1,953,616

Individually evaluated 35,449 81 35,530

Total recorded investment 1,971,657 17,489 1,989,146

Ending balance of the allowance for loan losses:

Collectively evaluated (1,350) (12) (1,362)

Individually evaluated (2,872) Ä (2,872)

Total ending balance of the allowance (4,222) (12) (4,234)

Net investment in loans $1,967,435 $17,477 $1,984,912

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 102
The table below presents the UPB, recorded investment, related allowance for loan losses, average recorded investment, and

interest income recognized for individually impaired loans.

Table 4.13 - Individually Impaired Loans

December 31, 2019

(In millions) UPB Recorded

Investment

Associated

Allowance

Single-family:

With no allowance recorded:(1)

20- and 30-year or more, amortizing fixed-rate $2,431 $1,927 N/A

15-year amortizing fixed-rate 21 20 N/A

Adjustable-rate 169 169 N/A

Alt-A, interest-only, and option ARM 847 727 N/A

Total with no allowance recorded 3,468 2,843 N/A

With an allowance recorded:(2)

20- and 30-year or more, amortizing fixed-rate 28,824 28,667 ($2,416)

15-year amortizing fixed-rate 616 625 (13)

Adjustable-rate 131 130 (7)

Alt-A, interest-only, and option ARM 3,315 3,184 (436)

Total with an allowance recorded 32,886 32,606 (2,872)

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 31,255 30,594 (2,416)

15-year amortizing fixed-rate 637 645 (13)

Adjustable-rate 300 299 (7)

Alt-A, interest-only, and option ARM 4,162 3,911 (436)

Total single-family 36,354 35,449 (2,872)

Multifamily:

With no allowance recorded(1) 86 81 N/A

With an allowance recorded Ä Ä Ä

Total multifamily 86 81 Ä

Total single-family and multifamily $36,440 $35,530 ($2,872)

 Referenced footnotes are included after the next table.

3Q 2019 YTD 2019

(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 $2,450 $59 $1 $2,573 $207 $6

15-year amortizing fixed-rate 19 1 Ä 20 1 Ä

Adjustable-rate 191 3 Ä 209 9 Ä

Alt-A, interest-only, and option ARM 880 16 Ä 932 52 1

Total with no allowance recorded 3,540 79 1 3,734 269 7

With an allowance recorded:(2)

20- and 30-year or more, amortizing fixed-rate 32,618 412 47 34,051 1,394 138

15-year amortizing fixed-rate 641 5 1 665 17 3

Adjustable-rate 129 2 Ä 139 5 1

Alt-A, interest-only, and option ARM 3,866 55 9 4,097 180 18

Total with an allowance recorded 37,254 474 57 38,952 1,596 160

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 35,068 471 48 36,624 1,601 144

15-year amortizing fixed-rate 660 6 1 685 18 3

Adjustable-rate 320 5 Ä 348 14 1

Alt-A, interest-only, and option ARM 4,746 71 9 5,029 232 19

Total single-family 40,794 553 58 42,686 1,865 167

Multifamily:

With no allowance recorded(1) 81 1 1 83 3 1

With an allowance recorded Ä Ä Ä Ä Ä Ä

Total multifamily 81 1 1 83 3 1

Total single-family and multifamily $40,875 $554 $59 $42,769 $1,868 $168

(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 3Q 2020 Form 10-Q 103
The table below summarizes the delinquency rates of loans within our single-family credit guarantee and multifamily mortgage

portfolios.

Table 4.14 - Delinquency Rates

(Dollars in millions) December 31, 2019

Single-family:

Non-credit-enhanced portfolio

Serious delinquency rate 0.70%

Total number of seriously delinquent loans 42,485

Credit-enhanced portfolio:(1)

Primary mortgage insurance:

 Serious delinquency rate 0.79%

 Total number of seriously delinquent loans 15,261

Other credit protection:(2)

 Serious delinquency rate 0.40%

 Total number of seriously delinquent loans 18,143

Total single-family:

Serious delinquency rate 0.63%

Total number of seriously delinquent loans 70,162

Multifamily: (3)

Non-credit-enhanced portfolio:

Delinquency rate Ä%

UPB of delinquent loans $2

Credit-enhanced portfolio:

Delinquency rate 0.09%

UPB of delinquent loans $244

Total multifamily:

Delinquency rate 0.08%

UPB of delinquent loans $246

(1) The credit-enhanced categories are not mutually exclusive, as a single loan may be covered by both primary mortgage insurance and other credit protection.

(2) 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.

(3) Multifamily delinquency performance is based on the UPB of loans that are two monthly payments or more past due or those in the process of foreclosure. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 3Q 2020 Form 10-Q 104

Non-Cash Investing and Financing Activities

During YTD 2020 and YTD 2019, we acquired $293.9 billion and $162.7 billion, respectively, of loans held-for-investment in

exchange for the issuance of debt securities of consolidated trusts in guarantor swap transactions. We received approximately

$84.8 billion and $28.6 billion of loans from sellers in guarantor swap transactions and $2.4 billion and $1.6 billion of loans from

sellers in cash execution transactions during YTD 2020 and YTD 2019, respectively, to satisfy advances to lenders that were

recorded in other assets on our condensed consolidated balance sheets. 
NOTE 5 

Guarantees and Other Off-Balance Sheet Credit Exposures

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 generally 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. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 5

Freddie Mac 3Q 2020 Form 10-Q 105

The table below shows our maximum exposure, recognized liability, and maximum remaining term of our guarantees to nonconsolidated VIEs and other third parties. This table does not include certain of 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

enhancements. See Note 6 for additional information on our credit enhancements.

Table 5.1 - Financial Guarantees

September 30, 2020 December 31, 2019

(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 $29,039 $395 39 $26,818 $361 40

Other mortgage-related guarantees 9,140 194 30 7,492 182 30

Total single-family $38,179 $589 $34,310 $543

Multifamily:

Securitization activity guarantees $273,246 $3,660 39 $252,167 $3,333 39

Other mortgage-related guarantees 11,037 446 34 9,989 416 34

Total multifamily $284,283 $4,106 $262,156 $3,749

Other guarantees measured at fair value $39,820 $669 30 $24,965 $253 30

Fannie Mae securities backing Freddie Mac

resecuritization products 69,010 Ä 30 27,408 Ä 30

(1) The maximum exposure represents the contractual amounts that could be lost if counterparties or borrowers defaulted, without consideration of proceeds from

related collateral liquidation, including possible recoveries under credit enhancements. 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 mortgagerelated asset. For certain of our other guarantees measured at fair value, our exposure may be unlimited and, as a result, the notional value is included. 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 and excludes our allowance for credit losses on off-balance sheet credit exposures. For other guarantees measured at fair value, this amount

represents the fair value of the contract.
The tables below show the payment status of the mortgage loans underlying our guarantees that are not measured at fair value.

Table 5.2 Å UPB of Loans Underlying Our Guarantees by Payment Status

September 30, 2020

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

ThreeÅMonthsÅor

More Past Due,

orÅin Foreclosure Total(1)

Single-family $36,114 $1,830 $1,040 $4,011 $42,995

Multifamily(2) 325,102 45 21 384 325,552

Total $361,216 $1,875 $1,061 $4,395 $368,547

December 31, 2019

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

ThreeÅMonthsÅor

More Past Due,

orÅin Foreclosure Total(1)

Single-family $33,855 $2,264 $760 $840 $37,719

Multifamily 301,428 13 76 198 301,715

Total $335,283 $2,277 $836 $1,038 $339,434

(1) Loan-level payment status is not available for certain guarantees totaling $1.0 billion and $1.6 billion as of SeptemberÅ30, 2020 and DecemberÅ31, 2019,

respectively, and therefore is not included in the tables above.

(2) As of SeptemberÅ30, 2020, includes $7.1 billion of multifamily loans in forbearance that are reported as current.

Other Off-Balance Sheet Credit Exposures

In addition to our guarantees, we enter into other agreements that expose us to off-balance sheet credit risk, primarily related to

our multifamily business, including certain purchase commitments that are not accounted for as derivative instruments,

unfunded lending arrangements, and other commitments. These agreements may require us to transfer cash before or upon

settlement of our contractual obligation. The total notional value of these other off-balance sheet credit exposures was $24.9

billion and $17.1 billion at SeptemberÄ30, 2020 and DecemberÄ31, 2019, respectively.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Upon adoption of CECL on January 1, 2020, we began recognizing an allowance for credit losses on off-balance sheet credit

exposures for our guarantees that are not measured at fair value and other off-balance sheet arrangements based on expected

credit losses over the contractual period in which we are exposed to credit risk via a present contractual obligation to extend

credit, unless that obligation is unconditionally cancellable by us. We include this allowance for credit losses on off-balance

sheet credit exposures within other liabilities on our condensed consolidated balance sheets, with changes recognized through

benefit (provision) for credit losses on our condensed consolidated statements of comprehensive income (loss).

Our methodologies for estimating the allowance for credit losses on off-balance sheet credit exposures for our single-family

and multifamily guarantees are generally consistent with our methodologies for estimating the allowance for credit losses for

single-family mortgage loans and multifamily mortgage loans, respectively. Many of our guarantees have credit enhancement

provided by subordination that exceeds the amount of expected credit losses. See Note 4 for additional information on our

allowance for credit losses methodologies and Note 6 for additional information on our guarantee credit enhancements. We

have not recorded an allowance for credit losses on our guarantees of Fannie Mae securities due to the support provided to

Fannie Mae by the U.S. government, the importance of Fannie Mae to the liquidity and stability of the U.S. housing market, and

the long history of zero credit losses on Fannie Mae securities.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 5

Freddie Mac 3Q 2020 Form 10-Q 106
The table below summarizes changes in our allowance for credit losses on off-balance-sheet credit exposures.

Table 5.3 - Details of the Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Beginning balance(1) $147 $51 $81 $51

(Benefit) provision for credit losses 14 1 85 3

Charge-offs (1) (1) (6) (3)

Other (6) Ä (6) Ä

Ending balance $154 $51 $154 $51

Components of ending balance of allowance for credit losses on off-balance sheet credit exposures:

Single-family $57 $46

Multifamily 97 5

 Total $154 $51

(1) Includes transition adjustments recognized due to the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 5

Freddie Mac 3Q 2020 Form 10-Q 107
NOTE 6

Credit Enhancements

We obtain various forms of credit enhancements that reduce our exposure to credit losses. These credit enhancements may be

associated with mortgage loans or guarantees recognized on our condensed consolidated balance sheets or embedded in debt

recognized on our condensed consolidated balance sheets.

Our adoption of CECL on January 1, 2020 did not result in significant changes to our accounting policies for credit

enhancements. Upon adoption of CECL, we continue to consider expected recoveries from attached credit enhancements in

measuring the allowance for credit losses, resulting in a reduction in the recognized provision for credit losses by the amount of

the expected recoveries. We also continue to recognize expected recoveries from freestanding credit enhancements separately

in other assets on our condensed consolidated balance sheets, with an offsetting reduction to non-interest expense, at the

same time that we recognize an allowance for credit losses on the covered loans, measured on the same basis as the

allowance for credit losses on the covered loans. See Note 6 in our 2019 Annual Report for additional information on our

significant accounting policies for credit enhancements. 

Adoption of CECL resulted in an increase of $0.3 billion in our expected recovery receivable balance as the amount of expected

recoveries from freestanding credit enhancements increased in conjunction with the increase in expected losses on the covered

mortgage loans. Our freestanding credit enhancements expected recovery receivable was $1.0 billion and $0.1 billion as of

September 30, 2020 and December 31, 2019, respectively. Upon adoption of CECL, we measure credit losses on our expected

recovery receivables based on our estimate of current expected credit losses over the contractual term of the contract. For

information about counterparty credit risk associated with mortgage insurers and other credit enhancement providers, see

Note 14.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac 3Q 2020 Form 10-Q 108

Single-Family Credit Enhancements

The table below presents the total current and protected UPB and maximum amounts of potential loss recovery related to our

single-family credit enhancements.

Table 6.1 - Single-Family Credit Enhancements

September 30, 2020 December 31, 2019

(In millions)

Credit Enhancement

Accounting Treatment

Total Current and

Protected UPB(1)

Maximum

Coverage

Total Current and

Protected UPB(1)

Maximum

Coverage

Primary mortgage insurance Attached $449,731 $112,577 $421,870 $107,690

STACR:(2)

 Trust notes Freestanding 434,244 14,695 288,323 9,739

 Debt notes Debt 426,448 12,782 536,036 15,373

Insurance/reinsurance(3) Freestanding 862,054 10,591 863,149 10,157

Subordination:(4)

 Non-consolidated VIEs Attached 28,125 5,442 25,443 4,545

 Consolidated VIEs Debt 11,602 550 19,498 854

Lender risk-sharing Freestanding 5,917 5,158 24,078 5,657

Other Primarily attached 585 580 1,056 1,051

Total single-family credit enhancements $162,375 $155,066

(1) Underlying loans may be covered by more than one form of credit enhancement. For certain transactions, protected UPB may be different from the UPB of the

underlying loans due to timing differences in reporting cycles between the transactions and the loans.

(2) Total current and protected UPB represents the UPB of the assets included in the reference pool. Maximum coverage amount represents the outstanding balance

held by third parties. 

(3) As of September 30, 2020 and December 31, 2019, substantially all of our counterparties posted sufficient collateral on our ACIS transactions to meet the minimum

collateral requirements of the ACIS program. Minimum collateral requirements are assessed on each deal based on a combination of factors, including counterparty

credit risk of the reinsurer, as well as the structure and risk profile of the transaction. Other insurance/reinsurance transactions have similar collateral requirements.

(4) Total current and protected UPB includes the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection

provided by the subordinated securities. For Non-consolidated VIEs, the total current and protected UPB also includes the UPB of guarantor advances made to the

holders of the guaranteed securities. Maximum coverage represents the outstanding UPB of the securities that are subordinate to Freddie Mac guaranteed securities

and held by third parties.
Multifamily Credit Enhancements

The table below presents the total current and protected UPB and maximum amounts of potential loss recovery related to our

multifamily credit enhancements.

Table 6.2 - Multifamily Credit Enhancements

September 30, 2020 December 31, 2019

(In millions)

Credit Enhancement

Accounting Treatment

Total Current and

Protected UPB(1)

Maximum

Coverage

Total Current and

Protected UPB(1)

Maximum

Coverage

Subordination:(2)

Non-consolidated VIEs Attached $271,946 $42,008 $251,008 $40,262

Consolidated VIEs Debt 1,800 200 1,800 200

Lender risk-sharing(3) Freestanding 3,347 579 2,529 381

Insurance/reinsurance(4) Freestanding 5,399 191 2,769 127

SCR debt notes(5) Debt 2,237 112 2,470 123

Other(3) Attached 386 386 467 467

Total multifamily credit enhancements $43,476 $41,560

(1) Underlying loans may be covered by more than one form of credit enhancement.

(2) Total current and protected UPB includes the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection

provided by the subordinated securities, and the UPB of master servicer advances made to the holders of the guaranteed and unguaranteed securities . For nonconsolidated VIEs, the total current and protected UPB also includes the UPB of guarantor advances made to the holders of the guaranteed securities. Maximum

coverage represents the outstanding UPB of the securities that are subordinate to Freddie Mac guaranteed securities and held by third parties.

(3) Maximum coverage represents the remaining amount of loss recovery that is available subject to the terms of counterparty agreements.

(4) As of September 30, 2020 and December 31, 2019, the counterparties to our insurance/reinsurance transactions have complied with the minimum collateral

requirements. Minimum collateral requirements are assessed on each deal based on a combination of factors, including counterparty credit risk of the reinsurer, as

well as the structure and risk profile of the transaction.

(5) Total current and protected UPB represents the UPB of the assets included in the reference pool. Maximum coverage amount represents the outstanding balance of

the SCR notes held by third parties.

We have other multifamily credit enhancements in the form of collateral posting requirements, indemnification, pool insurance,

bond insurance, recourse, and other similar arrangements. These credit enhancements, along with the proceeds received from

the sale of the underlying mortgage collateral, are designed to recover all or a portion of our losses on our mortgage loans or

the amounts paid under our financial guarantee contracts. Our historical losses and related recoveries pursuant to these

agreements have not been significant and therefore these other types of credit enhancements are excluded from the table

above. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac 3Q 2020 Form 10-Q 109
NOTE 7

Investment Securities

The table below summarizes the fair values of our investments in debt securities by classification.

Table 7.1 - Investment Securities

(In millions) September 30, 2020 December 31, 2019

Trading securities $49,558 $49,537

Available-for-sale securities 22,144 26,174

Total fair value of investment securities $71,702 $75,711

As of September 30, 2020 and December 31, 2019, we did not classify any securities as held-to-maturity, although we may

elect to do so in the future.

Allowance for Credit Losses

On January 1, 2020, we adopted CECL, which changes the accounting for credit losses on available-for-sale debt securities

from the other-than-temporary impairment methodology to a new methodology that uses an allowance for credit losses. 

We evaluate available-for-sale securities in an unrealized loss position as of the end of each quarter to determine whether the

decline in value is from a credit loss or other factors. An unrealized loss exists when the fair value of an individual lot is less than

its amortized cost basis.

When qualitative factors indicate that a credit loss may exist, we compare the present value of cash flows expected to be

collected from the security with the amortized cost basis of the security. We recognize an allowance for credit losses measured

as the difference between the present value of expected cash flows and the amortized cost basis of the security, limited by the

amount that the securityÇs fair value is less than its amortized cost basis. The present value of cash flows expected to be

collected represents our best estimate of future contractual cash flows that we expect to collect, discounted at the security's

implicit effective interest rate.

If we intend to sell the security or we believe it is more likely than not we will be required to sell the security before recovery of

its amortized cost basis, we charge-off any allowance for credit losses by writing down the securityÇs amortized basis to its fair

value. Subsequently, increases in fair value are recognized through AOCI. However, if there are significant increases in the cash

flows expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, we

recognize those changes as a prospective adjustment to the yield of the security. 

The evaluation of whether unrealized losses on available-for-sale securities indicate a credit loss exists requires significant

management judgment and assumptions and consideration of numerous factors. We perform an evaluation on a security lot

basis considering all available information. The relative importance of this information varies based on the facts and

circumstances surrounding each security, as well as the economic environment at the time of assessment.

We present accrued interest receivable separately on our condensed consolidated balance sheets and accrued interest

receivable is excluded for the purposes of disclosure of the amortized cost basis of available-for-sale securities. When

collection of interest in full is not reasonably assured, we charge-off outstanding accrued interest receivable through interest

income on our condensed consolidated statements of comprehensive income (loss) and therefore do not recognize an

allowance for credit losses on accrued interest receivable. As of September 30, 2020, no accrued interest receivable was

charged-off.

Agency MBS

Substantially all of our available-for-sale securities are agency MBS issued by us, Fannie Mae, or Ginnie Mae. The principal and

interest on these securities are guaranteed by the issuing agency. We believe that the guarantee provided by the issuing

agency, the support provided to the agencies by the U.S. government, the importance of the agencies to the liquidity and

stability of the U.S. housing market, and the long history of zero credit losses on agency MBS are all indicators that credit

losses on these securities do not exist, even if the security is in an unrealized loss position. In addition, we generally hold these

securities that are in an unrealized loss position to recovery. As a result, unless we intend to sell the security, we do not

recognize an allowance for credit losses on agency MBS.

Non-Agency Residential MBS

We believe the unrealized losses on the non-agency RMBS we hold are mainly attributable to poor underlying collateral

performance, limited liquidity, and risk premiums. In evaluating securities for credit losses, we use management judgment and

historical information in considering the credit performance of the underlying collateral and incorporate assumptions about the

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac 3Q 2020 Form 10-Q 110
economic environment. As of September 30, 2020, substantially all of our non-agency residential MBS were in an unrealized

gain position. As a result, we have not recognized an allowance for credit losses on these securities.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac 3Q 2020 Form 10-Q 111

Trading Securities

The tableÄbelow 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. 

Table 7.2 - Trading Securities

(In millions) September 30, 2020 December 31, 2019

Mortgage-related securities:

Agency $21,060 $22,481

Non-agency 1 1

Total mortgage-related securities 21,061 22,482

Non-mortgage-related securities 28,497 27,055

Total fair value of trading securities $49,558 $49,537

For trading securities held at SeptemberÄ30, 2020, we recorded net unrealized gains (losses) of $(161) million and $171 million

during 3Q 2020 and YTD 2020, respectively. For trading securities held at September 30, 2019, we recorded net unrealized

gains (losses) of $27 million and $310 million during 3Q 2019 and YTD 2019, respectively.

Available-for-Sale Securities

At both SeptemberÄ30, 2020 and December 31, 2019, all available-for-sale securities were mortgage-related securities.

The tablesÄbelow provide details of the securities classified as available-for-sale on our condensed consolidated balance

sheets. 

Table 7.3 - Available-for-Sale Securities

September 30, 2020

Amortized

Cost

Basis

Allowance

for Credit

Losses

Gross

Unrealized

Gains in Other

Comprehensive

Income

Gross

Unrealized

Losses in Other

Comprehensive

Income

Fair

Value

Accrued

Interest

(In millions) Receivable

Available-for-sale securities:

Agency $19,757 $Ä $1,285 ($4) $21,038 $55

Non-agency and other 878 Ä 228 Ä 1,106 4

Total available-for-sale securities $20,635 $Ä $1,513 ($4) $22,144 $59

December 31, 2019

Amortized

Cost

Gross

Unrealized

Gains

Gross Unrealized Losses

Fair

(In millions) Value

Other-ThanTemporary

Impairment(1)

Temporary

Impairment(2)

Available-for-sale securities:

Agency $24,390 $571 $Ä ($74) $24,887

Non-agency and other 1,004 283 Ä Ä 1,287

Total available-for-sale securities $25,394 $854 $Ä ($74) $26,174

(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 SeptemberÄ30, 2020 scheduled to contractually mature after ten years

was $18.4 billion, with an additional $2.7 billion scheduled to contractually mature after five years through ten years.
Available-for-Sale Securities in a Gross Unrealized Loss Position

The tablesÄbelow 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 12Ämonths, or 12Ämonths or greater. 

Table 7.4 - Available-for-Sale Securities in a Gross Unrealized Loss Position

September 30, 2020

Less than 12ÅMonths 12ÅMonths or Greater

(In millions)

Fair

Value

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Available-for-sale securities:

Agency $112 ($1) $271 ($3)

Non-agency and other 19 Ä 1 Ä

Total available-for-sale securities in a gross unrealized loss position $131 ($1) $272 ($3)

December 31, 2019

Less than 12ÅMonths 12ÅMonths or Greater

(In millions)

Fair

Value

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Available-for-sale securities:

Agency $5,778 ($27) $2,934 ($47)

Non-agency and other 1 Ä Ä Ä

Total available-for-sale securities in a gross unrealized loss position $5,779 ($27) $2,934 ($47)

At SeptemberÄ30, 2020, the gross unrealized losses relate to 46 securities.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac 3Q 2020 Form 10-Q 112

Realized Gains and Losses on Sales of Available-for-Sale Securities

The tableÄbelow summarizes the gross realized gains and gross realized losses from the sale of available-for-sale securities. 

Table 7.5 - Gross Realized Gains and Gross Realized Losses from Sales of Available-for-Sale Securities 

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Gross realized gains $53 $68 $130 $169

Gross realized losses (27) (6) (87) (40)

Net realized gains (losses) $26 $62 $43 $129

Non-Cash Investing and Financing Activities 

During YTD 2020, we recognized $22.2 billion of investment securities in exchange for the issuance of debt securities of

consolidated trusts through partial sales of commingled single-class securities that were previously consolidated.

During 3Q 2020, we both purchased and sold $0.2 billion of non-mortgage-related securities that were traded, but not settled at

September 30, 2020. We settled our purchase and sale obligations during the fourth quarter of 2020.
NOTE 8 

Debt

The table below summarizes the balances of total debt per our condensed consolidated balance sheets and the interest

expense per our condensed consolidated statements of comprehensive income (loss).

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac 3Q 2020 Form 10-Q 113

Table 8.1 - Total Debt

Balance Interest Expense

(In millions) September 30, 2020 December 31, 2019 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Debt securities of consolidated trusts held by

third parties $2,138,420 $1,898,355 $10,847 $13,324 $36,269 $41,001

Other debt:

Short-term debt 17,648 101,034 38 499 598 1,419

Long-term debt 267,248 170,296 507 1,307 2,172 4,078

Total other debt 284,896 271,330 545 1,806 2,770 5,497

Total debt $2,423,316 $2,169,685 $11,392 $15,130 $39,039 $46,498

As of September 30, 2020, our aggregate indebtedness was $287.0 billion, which was below the $300.0 billion debt cap limit

imposed by the Purchase Agreement. 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 tableÄbelow summarizes the debt securities of consolidated trusts held by third parties based on underlying loan product

type.

Table 8.2 - Debt Securities of Consolidated Trusts Held by Third Parties

September 30, 2020 December 31, 2019

(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 2020 - 2057 $1,679,953 $1,730,866 3.30% 2020 - 2057 $1,516,550 $1,554,095 3.63%

20-year fixed-rate 2020 - 2040 86,028 88,523 3.06 2020 - 2040 70,901 72,558 3.37

15-year fixed-rate 2020 - 2035 270,938 276,998 2.62 2020 - 2035 225,501 229,133 2.87

Adjustable-rate 2020 - 2050 26,396 26,952 2.92 2020 - 2050 30,183 30,756 3.25

Interest-only 2026 - 2041 3,885 3,953 3.52 2026 - 2041 4,244 4,307 4.55

FHA/VA 2020 - 2050 606 622 4.57 2020 - 2049 633 647 4.68

Total single-family 2,067,806 2,127,914 1,848,012 1,891,496

Multifamily 2021-2050 10,383 10,506 2.58 2021 - 2049 6,790 6,859 3.29

Total debt of consolidated trusts

held by third parties $2,078,189 $2,138,420 $1,854,802 $1,898,355

(1) Includes $206 million and $209 million at SeptemberÅ30, 2020 and December 31, 2019, respectively, of debt securities of consolidated trusts that represents the fair

value of debt with the fair value option elected.

(2) The effective interest rate for debt securities of consolidated trusts held by third parties was 2.00% and 2.79% as of SeptemberÅ30, 2020 and December 31, 2019,

respectively.
Other Debt

The table below summarizes the balances and effective interest rates for other debt. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac 3Q 2020 Form 10-Q 114

Table 8.3 - Total Other Debt

September 30, 2020 December 31, 2019

(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 $10,036 $10,034 0.35% $60,830 $60,629 1.67%

Medium-term notes 7,615 7,614 1.57 40,407 40,405 2.31

Securities sold under agreements to repurchase (3) 2,797 2,797 0.06 9,843 9,843 1.46

Total other short-term debt 20,448 20,445 0.76 111,080 110,877 1.89

Other long-term debt:

Original maturities on or before December 31,

2020 5,574 5,574 1.73 45,133 45,127 1.76

2021 45,544 45,539 0.96 30,069 30,072 1.89

2022 65,650 65,671 0.68 23,185 23,166 2.20

2023 52,482 52,421 0.54 13,413 13,393 2.22

2024 20,334 20,305 0.91 26,966 26,924 2.22

Thereafter 66,648 64,413 1.83 17,615 15,294 5.13

STACR and SCR debt(4) 12,894 12,638 4.28 15,496 15,652 5.64

Hedging-related basis adjustments N/A 687 N/A 668

Total other long-term debt 269,126 267,248 1.19 171,877 170,296 2.61

Total other debt(5) $289,574 $287,693 $282,957 $281,173

(1) Represents par value, net of associated discounts or premiums and issuance cost. Includes $2.6 billion and $3.7 billion at SeptemberÅ30, 2020 and December 31,

2019, respectively, of other long-term debt that represents the fair value of debt with the fair value option elected.

(2) Based on carrying amount.

(3) Beginning January 1, 2020, we elected to offset payables related to securities sold under agreements to repurchase against receivables related to securities

purchased under agreements to resell on our condensed consolidated balance sheets, when such amounts meet the conditions for offsetting in the accounting

guidance.

(4) Contractual maturities of these debts 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. 

(5) Carrying amount for other debt includes callable debt of $117.7 billion and $95.1 billion at SeptemberÅ30, 2020 and December 31, 2019, respectively.

Non-Cash Investing and Financing Activities

During 3Q 2020, we issued $0.8 billion of other debt in exchange for cash collateral that was previously pledged by sellers.

These debt issuances represent non-cash transactions.
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: 

n Exchange-traded derivatives; 

n Cleared derivatives; and 

n 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 CFTC 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:

n LIBOR- and SOFR-based interest-rate swaps;

n LIBOR-, Treasury-, and SOFR-based purchased options (including swaptions); and

n LIBOR-, Treasury-, and SOFR-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, and

commitments.

Hedge Accounting

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. If a hedge relationship qualifies for fair value hedge accounting, all changes in fair value of the derivative

hedging instrument, including interest accruals, are recognized in the same condensed consolidated statements of

comprehensive income (loss) 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9 

Freddie Mac 3Q 2020 Form 10-Q 115
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. 

Table 9.1 - Derivative Assets and Liabilities at Fair Value

September 30, 2020 December 31, 2019

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 $282,612 $2,933 ($4) $230,926 $1,990 ($6)

Pay-fixed 329,506 Ä (7,452) 251,392 10 (4,162)

Basis (floating to floating) 5,314 Ä Ä 5,924 Ä Ä

Total interest-rate swaps 617,432 2,933 (7,456) 488,242 2,000 (4,168)

Option-based:

Call swaptions

Purchased 62,200 4,675 Ä 75,325 2,717 Ä

Written 7,050 Ä (387) 3,375 Ä (42)

Put swaptions

Purchased(1) 82,325 978 Ä 67,155 835 Ä

Written 9,205 Ä (220) 7,275 Ä (88)

Options on futures 11,000 2 Ä Ä Ä Ä

Other option-based derivatives(2) 29,234 730 Ä 10,334 646 Ä

Total option-based 201,014 6,385 (607) 163,464 4,198 (130)

Futures 261,661 Ä Ä 210,305 Ä Ä

Commitments 217,051 185 (427) 93,960 61 (126)

CRT-related derivatives 21,832 73 (50) 12,362 15 (116)

Other 9,845 2 (16) 5,984 1 (28)

Total derivatives not designated as hedges 1,328,835 9,578 (8,556) 974,317 6,275 (4,568)

Designated as fair value hedges

Interest-rate swaps:

Receive-fixed 147,875 268 (57) 104,459 104 (75)

Pay-fixed 39,634 Ä (905) 87,907 Ä (639)

Total derivatives designated as fair value hedges 187,509 268 (962) 192,366 104 (714)

Derivative interest and other receivable (payable)(3) 591 (551) 887 (724)

Netting adjustments(4) (9,155) 9,456 (6,422) 5,634

Total derivative portfolio, net $1,516,344 $1,282 ($613) $1,166,683 $844 ($372)

(1) Includes swaptions on credit indices with a notional or contractual amount of $13.1 billion and $11.4 billion at SeptemberÅ30, 2020 and DecemberÅ31, 2019,

respectively, and a fair value of $35.0 million and $3.0 million at SeptemberÅ30, 2020 and DecemberÅ31, 2019, respectively. 

(2) Primarily consists of purchased interest-rate caps and floors.

(3) Includes other derivative receivables and payables.

(4) Represents counterparty netting and cash collateral netting.

See NoteÄ10 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 3Q 2020 Form 10-Q 116
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 (loss) as investment gain (losses), net.

Table 9.2 - Gains and Losses on Derivatives

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Not designated as hedges

Interest-rate swaps:

Receive-fixed ($1,755) $2,060 $13,862 $7,580

Pay-fixed 2,796 (3,866) (16,677) (12,152)

Basis (floating to floating) 7 (3) Ä 7

Total interest-rate swaps 1,048 (1,809) (2,815) (4,565)

Option-based:

Call swaptions

Purchased (533) 1,398 3,733 2,981

Written 52 (109) (340) (343)

Put swaptions

Purchased 43 (355) (579) (1,406)

Written (15) 19 112 83

Options on futures (13) Ä (19) Ä

Other option-based derivatives(1) (77) (6) 67 93

Total option-based (543) 947 2,974 1,408

Other:

Futures (33) (262) (2,481) (1,283)

Commitments (335) (54) (1,457) (366)

CRT-related derivatives 48 Ä 169 1

Other 18 8 55 36

Total other (302) (308) (3,714) (1,612)

Accrual of periodic cash settlements:

Receive-fixed interest-rate swaps 917 39 1,746 (32)

Pay-fixed interest-rate swaps (1,521) (126) (2,959) (220)

Other(2) 64 40 168 109

Total accrual of periodic cash settlements (540) (47) (1,045) (143)

Total ($337) ($1,217) ($4,600) ($4,912)

(1) Primarily consists of purchased interest-rate caps and floors.

(2) Includes interest on variation margin on cleared interest-rate swaps.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9 

Freddie Mac 3Q 2020 Form 10-Q 117
Fair Value Hedges

The tables below present the effects of fair value hedge accounting by condensed consolidated statements of comprehensive

income (loss) 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9 

Freddie Mac 3Q 2020 Form 10-Q 118

Table 9.3 - Gains and Losses on Fair Value Hedges

3Q 2020 3Q 2019

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Interest Income -

Mortgage Loans Interest Expense

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: $14,134 ($11,392) $16,428 ($15,130)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items (121) Ä 1,298 Ä

Derivatives designated as hedging instruments 239 Ä (1,588) Ä

Interest accruals on hedging instruments (128) Ä (48) Ä

Discontinued hedge-related basis adjustments amortization (943) Ä (210) Ä

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items Ä 210 Ä (36)

Derivatives designated as hedging instruments Ä (219) Ä 91

Interest accruals on hedging instruments Ä 266 Ä (18)

Discontinued hedge-related basis adjustments amortization Ä 15 Ä 18

YTD 2020 YTD 2019

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Interest Income -

Mortgage Loans Interest Expense

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: $45,792 ($39,039) $51,732 ($46,498)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items 5,442 Ä 5,691 Ä

Derivatives designated as hedging instruments (5,315) Ä (5,609) Ä

Interest accruals on hedging instruments (313) Ä (4) Ä

Discontinued hedge-related basis adjustments amortization (1,891) Ä (229) Ä

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items Ä (258) Ä (1,141)

Derivatives designated as hedging instruments Ä 254 Ä 1,288

Interest accruals on hedging instruments Ä 553 Ä (230)

Discontinued hedge-related basis adjustments amortization Ä 52 Ä 43
Cumulative Basis Adjustments Due to Fair Value Hedging

The tables below present 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.

Table 9.4 - Cumulative Basis Adjustments Due to Fair Value Hedging 

September 30, 2020

Carrying

Amount

Assets /

(Liabilities)

Cumulative Amount of Fair Value Hedging Basis

Adjustments Included in the Carrying Amount

Closed Portfolio Under the Lastof-Layer Method

(In millions) Total

Under the

Last-of-Layer

Method

Discontinued -

Hedge Related

Total Amount

by Amortized

Cost Basis

Designated

Amount by

UPB

Mortgage loans held-for-investment $425,078 $6,436 $140 $6,296 $367,256 $22,799

Debt (156,871) (687) Ä (45) Ä Ä

December 31, 2019

Carrying

Amount

Assets /

(Liabilities)

Cumulative Amount of Fair Value Hedging Basis

Adjustments Included in the Carrying Amount

Closed Portfolio Under the Lastof-Layer Method

(In millions) Total

Under the

Last-of-Layer

Method

Discontinued -

Hedge Related

Total Amount

by Amortized

Cost Basis

Designated

Amount by

UPB

Mortgage loans held-for-investment $470,889 $2,886 ($943) $3,829 $273,346 $22,747

Debt (122,746) (668) Ä (93) Ä Ä

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9 

Freddie Mac 3Q 2020 Form 10-Q 119
NOTE 10

Collateralized Agreements and Offsetting Arrangements

Derivative Portfolio

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 default simultaneously on SeptemberÄ30, 2020, our maximum

loss for accounting purposes after applying netting agreements and collateral on an individual counterparty basis would have

been approximately $25 million.

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 $185 million and $61 million at SeptemberÄ30, 2020 and DecemberÄ31,

2019, 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 ("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. These agreements may allow us to repledge all or a portion of the collateral

pledged to us, and we may repledge such collateral periodically, although it is not typically our practice to repledge collateral

that has been pledged to us.

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, and our counterparties are typically

required under contract to adjust the amount of collateral based on changes in the fair value of the collateral. As of

SeptemberÄ30, 2020 and December 31, 2019, all of our securities purchased under agreements to resell were fully collateralized

and we expect our counterparties to continue to replenish the collateral as necessary to meet the requirements of the contract.

Therefore, as of SeptemberÄ30, 2020, we did not recognize an allowance for credit losses on our securities purchased under

agreements to resell nor have we recognized any charge-offs of accrued interest receivable. We present accrued interest

receivable separately on our condensed consolidated balance sheets. As of SeptemberÄ30, 2020 and December 31, 2019, we

recognized accrued interest receivable for securities purchased under agreements to resell of $4 million and $18 million,

respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac 3Q 2020 Form 10-Q 120
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 repurchase obligation. 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 Assets and Liabilities

We offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against

fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting and

collateral agreement. Beginning January 1, 2020, we elected to offset payables related to securities sold under agreements to

repurchase against receivables related to securities purchased under agreements to resell when such amounts meet the

conditions for balance sheet offsetting. Certain amounts in prior periods' condensed consolidated financial statements have

been reclassified to conform to the current presentation.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac 3Q 2020 Form 10-Q 121

The tables below display 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.

Table 10.1 - Offsetting and Collateral Information of Financial Assets and Liabilities

September 30, 2020

Gross

Amount

Recognized

AmountÅ

Offset inÅthe

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 $10,047 ($6,600) ($2,659) $788 ($763) $25

Cleared and exchange-traded derivatives 130 (1) 105 234 Ä 234

Commitments 185 Ä Ä 185 Ä 185

Other 75 Ä Ä 75 Ä 75

Total derivatives 10,437 (6,601) (2,554) 1,282 (763) 519

Securities purchased under agreements to resell 102,049 (2,797) Ä 99,252 (99,252) Ä

Total $112,486 ($9,398) ($2,554) $100,534 ($100,015) $519

Liabilities:

Derivatives:

OTC derivatives ($9,559) $6,600 $2,846 ($113) $Ä ($113)

Cleared and exchange-traded derivatives (17) 1 9 (7) Ä (7)

Commitments (427) Ä Ä (427) Ä (427)

Other (66) Ä Ä (66) Ä (66)

Total derivatives (10,069) 6,601 2,855 (613) Ä (613)

Securities sold under agreements to repurchase (2,797) 2,797 Ä Ä Ä Ä

Total ($12,866) $9,398 $2,855 ($613) $Ä ($613)

 Referenced footnotes are included after the next table.
December 31, 2019

Gross

Amount

Recognized

AmountÅ

Offset inÅthe

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 $7,045 ($4,465) ($2,075) $505 ($485) $20

Cleared and exchange-traded derivatives 144 (5) 123 262 Ä 262

Commitments 61 Ä Ä 61 Ä 61

Other 16 Ä Ä 16 Ä 16

Total derivatives 7,266 (4,470) (1,952) 844 (485) 359

Securities purchased under agreements to resell 66,114 (9,843) Ä 56,271 (56,271) Ä

Total $73,380 ($14,313) ($1,952) $57,115 ($56,756) $359

Liabilities:

Derivatives:

OTC derivatives ($5,731) $4,465 $1,164 ($102) $Ä ($102)

Cleared and exchange-traded derivatives (5) 5 Ä Ä Ä Ä

Commitments (126) Ä Ä (126) Ä (126)

Other (144) Ä Ä (144) Ä (144)

Total derivatives (6,006) 4,470 1,164 (372) Ä (372)

Securities sold under agreements to repurchase (9,843) 9,843 Ä Ä Ä Ä

Total ($15,849) $14,313 $1,164 ($372) $Ä ($372)

(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 $2.6 billion and $3.5 billion as of SeptemberÅ30, 2020 and DecemberÅ31, 2019, respectively. For commitments and securities purchased

under agreements to resell, does not include cash and non-cash collateral deposited totaling $0.6 billion and $2.2 billion, respectively, as of SeptemberÅ30, 2020,

and $0.2 billion and $0.3 billion, respectively, as of DecemberÅ31, 2019.

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 SeptemberÄ30, 2020, and DecemberÄ31, 2019, we had $75.9 billion and $52.4 billion, respectively, of

securities pledged to us in these transactions. In addition, at SeptemberÄ30, 2020 and DecemberÄ31, 2019, we had $0.8 billion

and $2.4 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. At SeptemberÄ30, 2020, we repledged

collateral with a fair value of $0.1 billion.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac 3Q 2020 Form 10-Q 122
Collateral Pledged

Collateral Pledged to Freddie Mac

We have cash pledged to us as collateral primarily related to OTC derivative transactions. We had $3.8 billion and $2.6 billion

pledged to us as collateral that was invested as part of our liquidity and contingency operating portfolio as of SeptemberÄ30,

2020 and DecemberÄ31, 2019, respectively.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac 3Q 2020 Form 10-Q 123

Collateral Pledged by Freddie Mac

The tablesÄbelow 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.

Table 10.2 - Collateral in the Form of Securities Pledged

September 30, 2020

(In millions) Derivatives

Securities Sold

Under

Agreements to

Repurchase Other(3) Total

Cash equivalents(1) $Ä $550 $Ä $550

Debt securities of consolidated trusts(2) 602 Ä 180 782

Available-for-sale securities Ä Ä 613 613

Trading securities 2,007 2,115 1,383 5,505

Total securities pledged $2,609 $2,665 $2,176 $7,450

December 31, 2019

(In millions) Derivatives

Securities Sold

Under

Agreements to

Repurchase Other(3) Total

Debt securities of consolidated trusts(2) $562 $Ä $280 $842

Trading securities 2,894 9,346 49 12,289

Total securities pledged $3,456 $9,346 $329 $13,131

(1) Represents U.S. Treasury securities accounted for as cash equivalents.

(2) Represents debt securities of consolidated trusts 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.

(3) 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.

Table 10.3 - Underlying Collateral Pledged

September 30, 2020

(In millions)

Overnight and

Continuous 30 Days or Less

After 30 Days

Through 90 Days

Greater Than 90

Days Total

U.S. Treasury securities and other $2,665 $Ä $Ä $Ä $2,665
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 rate of 21% for the periods presented,

related to available-for-sale securities, cash flow hedges, and our defined benefit plans. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 3Q 2020 Form 10-Q 124

Table 11.1 - Changes in AOCI by Component, Net of Taxes

3Q 2020

(In millions)

AOCIÅRelated

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCIÅRelated

to Defined

Benefit Plans Total

Beginning balance $1,210 ($220) $58 $1,048

Other comprehensive income before reclassifications 4 Ä Ä 4

Amounts reclassified from accumulated other comprehensive income (20) 6 (4) (18)

Changes in AOCI by component (16) 6 (4) (14)

Ending balance $1,194 ($214) $54 $1,034

YTD 2020

(In millions)

AOCIÅRelated

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCIÅRelated

to Defined

Benefit Plans Total

Beginning balance $618 ($244) $64 $438

Other comprehensive income before reclassifications 610 Ä 2 612

Amounts reclassified from accumulated other comprehensive income (34) 30 (12) (16)

Changes in AOCI by component 576 30 (10) 596

Ending balance $1,194 ($214) $54 $1,034

3Q 2019

(In millions)

AOCIÅRelated

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCIÅRelated

to Defined

Benefit Plans Total

Beginning balance $633 ($277) $87 $443

Other comprehensive income before reclassifications 173 Ä Ä 173

Amounts reclassified from accumulated other comprehensive income (49) 19 (4) (34)

Changes in AOCI by component 124 19 (4) 139

Ending balance $757 ($258) $83 $582

YTD 2019

(In millions)

AOCI Related

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $83 ($315) $97 ($135)

Other comprehensive income before reclassifications 776 Ä (2) 774

Amounts reclassified from accumulated other comprehensive income (102) 57 (12) (57)

Changes in AOCI by component 674 57 (14) 717

Ending balance $757 ($258) $83 $582
Reclassifications from AOCI to Net Income

The table below presents reclassifications from AOCI to net income, including the affected line items in our condensed

consolidated statements of comprehensive income (loss). 

Table 11.2 - Reclassifications from AOCI to Net Income

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

AOCIÅrelatedÅtoÅavailable-for-sale securities

Affected line items on the condensed consolidated statements of comprehensive

income (loss):

Investment gains (losses), net $26 $62 $43 $129

Income tax (expense) benefit (6) (13) (9) (27)

Net of tax 20 49 34 102

AOCIÅrelatedÅtoÅcash flow hedge relationships

Affected line items on the condensed consolidated statements of comprehensive

income (loss):

Interest expense (9) (24) (39) (72)

Income tax (expense) benefit 3 5 9 15

Net of tax (6) (19) (30) (57)

AOCI related to defined benefit plans

Affected line items on the condensed consolidated statements of comprehensive

income (loss):

Salaries and employee benefits 5 5 15 15

Income tax (expense) benefit (1) (1) (3) (3)

Net of tax 4 4 12 12

Total reclassifications in the period net of tax $18 $34 $16 $57

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 3Q 2020 Form 10-Q 125

Senior Preferred Stock

Pursuant to the September 2019 Letter Agreement, for each dividend period from July 1, 2019 and thereafter, the applicable

Capital Reserve Amount used in determining the dividend payable to Treasury will be $20.0 billion, rather than $3.0 billion as

previously provided. As a result of this change, we did not have a dividend requirement to Treasury in September 2020, as our

Net Worth Amount of $11.4 billion as of June 30, 2020 was lower than the $20.0 billion applicable Capital Reserve Amount. 

As of SeptemberÄ30, 2020, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury

under the Purchase Agreement. Based on our Net Worth Amount of $13.9 billion as of SeptemberÄ30, 2020 and the applicable

Capital Reserve Amount of $20.0 billion, we will not have a dividend requirement to Treasury in December 2020. See Note 2 for

additional information. Our cumulative senior preferred stock dividend payments remain at $119.7 billion as of September 30,

2020.

The aggregate liquidation preference of the senior preferred stock owned by Treasury was $82.2 billion as of June 30, 2020.

Pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred stock will be increased, at

the end of each fiscal quarter, beginning on September 30, 2019, by an amount equal to the increase in the Net Worth Amount,

if any, during the immediately prior fiscal quarter, until the liquidation preference has increased by $17.0 billion. During 2Q 2020,

our Net Worth Amount increased by $1.9 billion. As a result, the liquidation preference of the senior preferred stock increased to

$84.1 billion on SeptemberÄ30, 2020, and will increase to $86.5 billion on December 31, 2020 based on the $2.4 billion increase

in our Net Worth Amount during 3Q 2020. 
The table below provides a summary of our senior preferred stock outstanding at SeptemberÄ30, 2020.

Table 11.3 - Senior Preferred Stock 

(In millions, except initial liquidation

preference price per share)

Shares

Authorized

Shares

Outstanding

Total

ParÅValue

Initial

Liquidation

Preference

PriceÅperÅShare

Total

Liquidation

Preference

Non-draw Adjustment Dates:

September 8, 2008 1.00 1.00 $1.00 $1,000 $1,000

December 31, 2017 Ä Ä Ä N/A 3,000

September 30, 2019 Ä Ä Ä N/A 1,826

December 31, 2019 Ä Ä Ä N/A 1,848

March 31, 2020 Ä Ä Ä N/A 2,448

June 30, 2020 Ä Ä Ä N/A 382

September 30, 2020 Ä Ä Ä N/A 1,938

Total non-draw adjustments 1.00 1.00 1.00 12,442

Draw Dates:

November 24, 2008 Ä Ä Ä N/A 13,800

March 31, 2009 Ä Ä Ä N/A 30,800

June 30, 2009 Ä Ä Ä N/A 6,100

June 30, 2010 Ä Ä Ä N/A 10,600

September 30, 2010 Ä Ä Ä N/A 1,800

December 30, 2010 Ä Ä Ä N/A 100

March 31, 2011 Ä Ä Ä N/A 500

September 30, 2011 Ä Ä Ä N/A 1,479

December 30, 2011 Ä Ä Ä N/A 5,992

March 30, 2012 Ä Ä Ä N/A 146

June 29, 2012 Ä Ä Ä N/A 19

March 30, 2018 Ä Ä Ä N/A 312

Total draw adjustments Ä Ä Ä 71,648

Total senior preferred stock 1.00 1.00 $1.00 $84,090

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 3Q 2020 Form 10-Q 126

Stock Issuances and Repurchases

We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 3Q 2020.

Earnings Per Share

We have participating securities related to RSUs 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 RSUs 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

weighted-average of RSUs. 
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. 

Dividends and Dividend Restrictions

No common dividends were declared during YTD 2020. As a result of the increase in the applicable Capital Reserve Amount

pursuant to the September 2019 Letter Agreement, we did not declare or pay a dividend on the senior preferred stock during

YTD 2020. We also did not declare or pay dividends on any other series of Freddie Mac preferred stock outstanding during YTD

2020.

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 Note 11 in our 2019 Annual Report.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 3Q 2020 Form 10-Q 127
NOTE 12

Income Taxes

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 12

Freddie Mac 3Q 2020 Form 10-Q 128

Income Tax Expense

For 3Q 2020 and 3Q 2019, we reported income tax expense of $644 million and $427 million, respectively, resulting in effective

tax rates of 20.7% and 20.0%, respectively. For YTD 2020 and YTD 2019, we reported income tax expense of $1.1 billion and

$1.2 billion respectively, resulting in an effective tax rate of 20.6% and 20.3%, respectively. Our effective tax rate differed from

the statutory tax rate of 21% in these periods primarily due to our recognition of low income housing tax credits and taxexempt interest income.

Deferred Tax Assets, Net

We had net deferred tax assets of $5.9 billion as of both SeptemberÄ30, 2020 and DecemberÄ31, 2019, respectively. At

SeptemberÄ30, 2020, 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 SeptemberÄ30, 2020, 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 SeptemberÄ30, 2020, we have a $41 million valuation allowance recorded against our capital loss carryforward

deferred tax asset.

Unrecognized Tax Benefits

We evaluated all income tax positions and determined that there were no uncertain tax positions that required reserves as of

SeptemberÄ30, 2020.

We are under IRS examination for tax years 2013 through 2016 related to the carryback of 2016 capital losses to the prior three

years.
NOTE 13

Segment Reporting

We have three reportable segments, which are based on the type of business activities each performsÄ- Single-family

Guarantee, Multifamily, and Capital Markets. 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. For more

information, see our 2019 Annual Report.

Segment Earnings

We present Segment Earnings byÄreclassifying certain credit guarantee-related activities and investment-related activities

between various line items on our GAAP condensed consolidated statements of comprehensive income (loss) and allocating

certain revenues and expenses, including certain returns on assets, funding and hedging 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 StatesÄand 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 StatesÄand 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 NoteÄ2 for information about the conservatorship. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac 3Q 2020 Form 10-Q 129

The tableÄbelow presents Segment Earnings (Loss) and comprehensive income (loss) by segment.

Table 13.1 - Segment Earnings (Loss) and Comprehensive Income (Loss)

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Segment Earnings (Loss), net of taxes:

Single-family Guarantee $1,311 $1,250 $2,652 $2,945

Multifamily 1,181 581 1,948 1,294

Capital Markets (29) (122) (187) 383

All Other Ä Ä Ä Ä

Total Segment Earnings (Loss), net of taxes $2,463 $1,709 $4,413 $4,622

Net income (loss) per condensed consolidated statements

of comprehensive income (loss) $2,463 $1,709 $4,413 $4,622

Comprehensive income (loss) of segments:

Single-family Guarantee $1,308 $1,247 $2,645 $2,936

Multifamily 1,177 591 2,066 1,426

Capital Markets (36) 10 298 977

All Other Ä Ä Ä Ä

Comprehensive income (loss) of segments $2,449 $1,848 $5,009 $5,339

Comprehensive income (loss) per condensed consolidated

statements of comprehensive income (loss) $2,449 $1,848 $5,009 $5,339
The tablesÄbelow present detailed reconciliations between our GAAP condensed consolidated statements of comprehensive

income (loss) and Segment Earnings (Loss) for our reportable segments and All Other.

Table 13.2 - Segment Earnings (Loss) and Reconciliations to GAAP Condensed Consolidated Statements of

Comprehensive Income (Loss)

3Q 2020

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total

Segment

Earnings

(Loss) Reclassifications

Total per

Condensed

Consolidated

Statements of

Comprehensive

Income (Loss) (In millions)

Net interest income $Ä $210 $20 $Ä $230 $3,227 $3,457

Guarantee fee income 2,683 303 Ä Ä 2,986 (2,671) 315

Investment gains (losses), net 409 1,091 15 Ä 1,515 (393) 1,122

Other income (loss) 124 43 37 Ä 204 (32) 172

Benefit (provision) for credit losses (426) (7) Ä Ä (433) 106 (327)

Administrative expense (409) (128) (104) Ä (641) Ä (641)

Credit enhancement expense (416) (7) Ä Ä (423) 156 (267)

Expected credit enhancement recoveries 26 (6) Ä Ä 20 Ä 20

REO operations expense (41) Ä Ä Ä (41) 1 (40)

Other expense (296) (9) (5) Ä (310) (394) (704)

Income tax (expense) benefit (343) (309) 8 Ä (644) Ä (644)

Net income (loss) 1,311 1,181 (29) Ä 2,463 Ä 2,463

Changes in unrealized gains (losses)

related to available-for-sale securities Ä (4) (12) Ä (16) Ä (16)

Changes in unrealized gains (losses)

related to cash flow hedge relationships Ä Ä 6 Ä 6 Ä 6

Changes in defined benefit plans (3) Ä (1) Ä (4) Ä (4)

Total other comprehensive income

(loss), net of taxes (3) (4) (7) Ä (14) Ä (14)

Comprehensive income (loss) $1,308 $1,177 ($36) $Ä $2,449 $Ä $2,449

YTD 2020

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total

Segment

Earnings

(Loss) Reclassifications

Total per

Condensed

Consolidated

Statements of

Comprehensive

Income (Loss) (In millions)

Net interest income $Ä $707 $681 $Ä $1,388 $7,730 $9,118

Guarantee fee income 7,304 1,158 Ä Ä 8,462 (7,301) 1,161

Investment gains (losses), net 867 1,001 (206) Ä 1,662 (705) 957

Other income (loss) 56 131 (398) Ä (211) 612 401

Benefit (provision) for credit losses (2,400) (155) Ä Ä (2,555) 290 (2,265)

Administrative expense (1,160) (372) (297) Ä (1,829) Ä (1,829)

Credit enhancement expense (1,226) (16) Ä Ä (1,242) 511 (731)

Expected credit enhancement recoveries 684 24 Ä Ä 708 Ä 708

REO operations expense (142) Ä Ä Ä (142) 3 (139)

Other expense (642) (23) (16) Ä (681) (1,140) (1,821)

Income tax (expense) benefit (689) (507) 49 Ä (1,147) Ä (1,147)

Net income (loss) 2,652 1,948 (187) Ä 4,413 Ä 4,413

Changes in unrealized gains (losses)

related to available-for-sale securities Ä 119 457 Ä 576 Ä 576

Changes in unrealized gains (losses)

related to cash flow hedge relationships Ä Ä 30 Ä 30 Ä 30

Changes in defined benefit plans (7) (1) (2) Ä (10) Ä (10)

Total other comprehensive income

(loss), net of taxes (7) 118 485 Ä 596 Ä 596

Comprehensive income (loss) $2,645 $2,066 $298 $Ä $5,009 $Ä $5,009

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac 3Q 2020 Form 10-Q 130
3Q 2019

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total

Segment

Earnings

(Loss) Reclassifications

Total per

Condensed

Consolidated

Statements of

Comprehensive

Income (Loss) (In millions)

Net interest income $Ä $292 $497 $Ä $789 $1,621 $2,410

Guarantee fee income 2,064 294 Ä Ä 2,358 (2,078) 280

Investment gains (losses), net 377 258 (292) Ä 343 225 568

Other income (loss) 55 27 (261) Ä (179) 300 121

Benefit (provision) for credit losses 81 (1) Ä Ä 80 99 179

Administrative expense (399) (125) (96) Ä (620) Ä (620)

Credit enhancement expense (373) (4) Ä Ä (377) 180 (197)

Expected credit enhancement recoveries Ä Ä Ä Ä Ä Ä Ä

REO operations expense (61) Ä Ä Ä (61) 3 (58)

Other expense (180) (14) (3) Ä (197) (350) (547)

Income tax (expense) benefit (314) (146) 33 Ä (427) Ä (427)

Net income (loss) 1,250 581 (122) Ä 1,709 Ä 1,709

Changes in unrealized gains (losses)

related to available-for-sale securities Ä 10 114 Ä 124 Ä 124

Changes in unrealized gains (losses)

related to cash flow hedge relationships Ä Ä 19 Ä 19 Ä 19

Changes in defined benefit plans (3) Ä (1) Ä (4) Ä (4)

Total other comprehensive income

(loss), net of taxes (3) 10 132 Ä 139 Ä 139

Comprehensive income (loss) $1,247 $591 $10 $Ä $1,848 $Ä $1,848

YTD 2019

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total

Segment

Earnings

(Loss) Reclassifications

Total per

Condensed

Consolidated

Statements of

Comprehensive

Income (Loss) (In millions)

Net interest income $Ä $805 $2,002 $Ä $2,807 $5,683 $8,490

Guarantee fee income 5,574 874 Ä Ä 6,448 (5,598) 850

Investment gains (losses), net 639 259 (587) Ä 311 (394) (83)

Other income (loss) 225 84 (639) Ä (330) 577 247

Benefit (provision) for credit losses 240 (3) Ä Ä 237 237 474

Administrative expense (1,173) (357) (287) Ä (1,817) Ä (1,817)

Credit enhancement expense (1,042) (11) Ä Ä (1,053) 517 (536)

Expected credit enhancement recoveries 42 Ä Ä Ä 42 Ä 42

REO operations expense (185) Ä Ä Ä (185) 13 (172)

Other expense (625) (27) (9) Ä (661) (1,035) (1,696)

Income tax (expense) benefit (750) (330) (97) Ä (1,177) Ä (1,177)

Net income (loss) 2,945 1,294 383 Ä 4,622 Ä 4,622

Changes in unrealized gains (losses)

related to available-for-sale securities Ä 134 540 Ä 674 Ä 674

Changes in unrealized gains (losses)

related to cash flow hedge relationships Ä Ä 57 Ä 57 Ä 57

Changes in defined benefit plans (9) (2) (3) Ä (14) Ä (14)

Total other comprehensive income

(loss), net of taxes (9) 132 594 Ä 717 Ä 717

Comprehensive income (loss) $2,936 $1,426 $977 $Ä $5,339 $Ä $5,339

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac 3Q 2020 Form 10-Q 131
NOTE 14

Concentration of Credit and Other Risks

Single-Family Credit Guarantee Portfolio

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 3Q 2020 Form 10-Q 132

The table below summarizes the concentration by loan portfolio and geographic area of the approximately $2.2 trillion and $2.0

trillion UPB of our single-family credit guarantee portfolio as of SeptemberÄ30, 2020 and December 31, 2019. See NoteÄ4 and

NoteÄ7 for more information about credit risk associated with loans and mortgage-related securities that we hold or guarantee.

Table 14.1 - Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio

September 30, 2020 December 31, 2019 Percent of Credit Losses(1)

%Å of

Portfolio

Serious

Delinquency

Rate

%Å of

Portfolio

Serious

Delinquency

Rate YTD 2020 YTD 2019

Core single-family loan portfolio 89% 2.44% 85% 0.26% 33% 16%

Legacy and relief refinance single-family loan portfolio 11 5.47 15 1.84 67 84

Total 100% 3.04 100% 0.63 100% 100%

Region:(2)

West 30% 2.84 30% 0.36 5% 12%

Northeast 24 3.70 24 0.87 40 40

North Central 16 2.31 16 0.61 27 19

Southeast 16 3.42 16 0.73 18 22

Southwest 14 2.89 14 0.54 10 7

Total 100% 3.04 100% 0.63 100% 100%

State:(3)

Illinois 4% 3.36 4% 0.85 14% 10%

New York 5 5.26 5 1.21 12 12

Florida 6 4.39 6 0.77 10 14

New Jersey 3 5.09 3 1.08 9 10

Pennsylvania 3 3.01 3 0.89 5 4

All other 79 2.71 79 0.53 50 50

Total 100% 3.04 100% 0.63 100% 100%

(1) Excludes credit losses related to charge-offs of accrued interest receivables.

(2) 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).

(3) States presented based on those with the highest percentage of credit losses during YTD 2020.

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: 

n Purchased pursuant to a previously issued other mortgage-related guarantee;

n Part of our relief refinance initiative; or 

n 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. The

CARES Act requires creditors to report to credit bureaus that loans in relief programs, such as forbearance plans, repayment

plans, and loan modification programs, are current as long as the loans were current prior to entering into the relief programs

and the borrowers remain in compliance with the programs. This credit reporting requirement applies to all mortgage relief

programs entered into between January 31, 2020 and the date that is 120 days after the declaration of the national emergency

related to the COVID-19 pandemic ends. Our ability to evaluate purchases of new loans and monitor the credit quality of loans

in our single-family credit guarantee portfolio may be affected as credit scores may not reflect the impact of relief programs,

offered by us or other creditors, into which borrowers may have entered.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 3Q 2020 Form 10-Q 133

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.

Table 14.2 - Certain Higher Risk Categories in Our Single-Family Credit Guarantee Portfolio

% of Portfolio(1) SeriousÅDelinquencyÅRate(1)

(Percentage of portfolio based on UPB) September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

Interest-only Ä% 1% NM 2.72%

Alt-A 1 1 11.05 3.75

Original LTV ratio greater than 90%(2) 16 18 4.52 0.96

Lower credit scores at origination (less than 620) 1 2 10.96 4.52

(1) Excludes loans underlying certain other securitization products for which data was not available. 

(2) Includes HARP loans, which we purchased as part of our participation in the MHA Program. 

(3) NM - not meaningful due to the percentage of the portfolio rounding to zero.

Sellers and Servicers

We are exposed to counterparty credit risk arising from the potential insolvency or non-performance by our sellers and

servicers of their obligations to repurchase loans or (at our option) indemnify us in the event of breaches of the representations

and warranties they made when they sold the loans to us or failure to comply with our servicing requirements. 

The ultimate amounts of recovery payments we receive from seller/servicers related to their repurchase obligations may be

significantly less than the amount of our estimates of potential exposure to losses. Our exposure to seller/servicers for their

repurchase obligations is considered in our allowance for credit losses. See Note 4 for further information.

Sellers

We acquire a significant portion of our single-family and multifamily loan purchase volume from several large sellers. The tables

below summarize the concentration of single-family and multifamily sellers who provided 10% or more of our purchase volume

during YTD 2020 or YTD 2019.

Table 14.3 - Seller Concentration

Single-family Sellers YTD 2020 YTD 2019

JPMorgan Chase Bank, N.A. 5% 16%

Other top 10 sellers 39 40

Top 10 single-family sellers 44% 56%

Multifamily Sellers(1) YTD 2020 YTD 2019

CBRE Capital Markets, Inc. 15% 16%

Berkadia Commercial Mortgage LLC 14 15

Other top 10 sellers 48 48

Top 10 multifamily sellers 77% 79%

(1) Sellers presented based on those with the highest percentage of purchase volume during YTD 2020.
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 in recent years, and we purchase a

significant share of our loans from them. Our top five non-depository sellers provided approximately 24% and 26% of our

single-family purchase volume during YTD 2020 and YTD 2019, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 3Q 2020 Form 10-Q 134

Servicers

Significant portions of our single-family and multifamily loans are serviced by several large servicers. The tables below

summarize the concentration of single-family and multifamily servicers who serviced 10% or more of our single-family credit

guarantee portfolio and multifamily mortgage portfolio as of September 30, 2020 or December 31, 2019.

Table 14.4 - Servicer Concentration

Single-family Servicers(1) September 30, 2020(2) December 31, 2019(2)

Wells Fargo Bank, N.A. 12% 15%

JPMorgan Chase Bank, N.A. 8 10

Other top 10 servicers 31 32

Top 10 single-family servicers 51% 57%

Multifamily Servicers(1)(3) September 30, 2020 December 31, 2019

CBRE Capital Markets, Inc. 17% 17%

Berkadia Commercial Mortgage LLC 13 13

Other top 10 servicers 46 46

Top 10 multifamily servicers 76% 76%

(1) Servicers presented based on those with the highest percentage of servicing volume as of September 30, 2020.

(2) Percentage of servicing volume is based on the total single-family credit guarantee portfolio, which includes loans where we do not exercise servicing control.

However, loans where we do not exercise servicing control are not included for purposes of determining the concentration of servicers who serviced more than 10%

of our single-family credit guarantee portfolio.

(3) Represents multifamily primary servicers.

In recent years, there has been a shift in our single-family servicing from depository institutions to non-depository servicers.

Some of these non-depository servicers have grown in recent years and now service a large share of our loans. As of both

SeptemberÄ30, 2020 and DecemberÄ31, 2019, approximately 18% of our single-family credit guarantee portfolio, excluding

loans where we do not exercise control over the associated servicing, was serviced by our five largest non-depository servicers,

on a combined basis. We routinely monitor the performance of our largest non-depository servicers. 

For our mortgage-backed securities, we guarantee the payment of principal and interest, and when the underlying borrowers do

not pay their mortgages, our Guide requires single-family servicers to advance the missed mortgage interest payments for up to

120 days. After this time, Freddie Mac will make the missed mortgage principal and interest payments to security holders until

the mortgages are no longer held by the securitization trust. At the instruction of FHFA, we generally have been purchasing

loans from securities when the loans have been delinquent for 120 days or more. After the outbreak of COVID-19, FHFA further

instructed us to maintain loans in COVID-19 payment forbearance plans in the securitization trusts for at least the duration of

the forbearance. Once the forbearance period expires, the loan will remain in the related securities pool while: 

n An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant

to a loan modification remains outstanding; 

n The loan is in an active repayment plan or trial period plan; or 

n A payment deferral solution is in effect. 

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we will extend the trigger to

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure. 

In addition to principal and interest payments, borrowers are also responsible for other expenses such as property taxes and

homeowner's insurance premiums. When borrowers do not pay these expenses, our Guide generally requires single-family

servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties.

These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the

missed payments and incurred expenses will be collected from the borrowers. We will reimburse the servicers for the advanced

amounts when uncollected from the borrowers at completion of foreclosures or foreclosure alternatives.

In March 2020, as the COVID-19 pandemic evolved rapidly, liquidity concerns primarily regarding non-depository financial

institutions arose as market conditions changed and borrowers affected by the COVID-19 pandemic were offered widespread

forbearance, including forbearance on loans purchased and securitized by Freddie Mac. The increase in delinquency volume

and the obligation for single-family servicers to continue to advance funds during the forbearance period as discussed above

may increase liquidity pressures on certain of our counterparties. In response to these potential liquidity concerns, we have

heightened our monitoring and review of the financial stability of our non-depository institutional counterparties.
Multifamily primary servicers included in the table above present potential operational risk and impact to the borrowers if the

servicing needs to be transferred to another servicer. We also have exposure to the master servicers of our multifamily

securitization transactions who bear responsibility to advance funds in the event of payment shortfalls, including principal and

interest payments related to loans in forbearance. In the majority of our primary multifamily securitizations, we utilize one of

three large financial depository institutions, except for small balance loan securitizations where we serve as master servicer. In

instances where payment shortfalls occur, the master servicer is required to make advances as long as such advances have not

been deemed non-recoverable. For multifamily loans purchased and held in our mortgage-related investments portfolio, the

primary servicers are not required to advance funds in the event of payment shortfalls and therefore do not present significant

counterparty credit risk.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 3Q 2020 Form 10-Q 135

Credit Enhancement Providers

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 also have similar exposure to insurers and reinsurers through our ACIS and

other insurance transactions where we purchase insurance policies as part of our CRT activities.

In March 2019, we implemented a set of revised Private Mortgage Insurer Eligibility Requirements (PMIERs) with enhancements

to the risk-based capital requirements for mortgage insurers. In addition, we revised master policies with mortgage insurers

which provide contract certainty and improve our ability to collect claims for mortgage insurance obligations. These policies

were approved by FHFA and became effective on March 1, 2020.

We evaluate the expected 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 SeptemberÄ30, 2020, mortgage insurers provided coverage with maximum

loss limits of $112.6 billion, for $449.8 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 other types of insurance. Changes in our expectations related to recovery and collectability from our credit

enhancement providers may affect our estimates of expected credit losses, perhaps significantly.

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. Because Genworth Mortgage Insurance Corporation, a

subsidiary of Genworth Financial, Inc., is an approved mortgage insurer, Freddie Mac evaluated the planned acquisition and

approved China Oceanwide Holdings Group's control of Genworth Mortgage Insurance Corporation. In January 2020, Freddie

Mac reapproved the acquisition and in September 2020 completed a revised and updated approval. The transaction is

expected to be closed on November 30, 2020.

Table 14.5 - Mortgage Insurer Concentration

Mortgage Insurance Coverage(2)

Mortgage Insurer CreditÅRating(1) September 30, 2020 December 31, 2019

Arch Mortgage Insurance Company A- 20% 22%

Radian Guaranty Inc. BBB+ 19 20

Mortgage Guaranty Insurance Corporation BBB+ 18 17

Essent Guaranty, Inc. BBB+ 16 15

Genworth Mortgage Insurance Corporation BB+ 16 15

Total 89% 89%

(1) Ratings are for the corporate entity to which we have the greatest exposure. Latest rating available as of September 30, 2020. Represents the lower of S&P and

MoodyÖs credit ratings stated in terms of the S&P equivalent.

(2) Coverage amounts may include coverage provided by affiliates and subsidiaries of the counterparty. 

During both YTD 2020 and YTD 2019, we received proceeds of $0.1 billion from our 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 SeptemberÄ30, 2020 and DecemberÄ31, 2019. The

balance of these receivables, net of associated reserves, was approximately $0.1 billion at both SeptemberÄ30, 2020 and

DecemberÄ31, 2019.

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 SeptemberÄ30, 2020 and

DecemberÄ31, 2019, we had cumulative unpaid deferred payment obligations of $0.4 billion and $0.5 billion, respectively, from

these insurers. We have reserved substantially all of these unpaid amounts as collectability is uncertain. It is not clear how the

regulators of these companies will administer their respective deferred payment plans in the future, nor when or if those

obligations will be paid.
As part of our insurance/reinsurance CRT transactions, we regularly obtain insurance coverage from insurers and reinsurers.

These transactions incorporate several features designed to increase the likelihood that we will recover on the claims we file

with the insurers and reinsurers, including the following:

n In each transaction, we require the individual insurers and reinsurers to post collateral to cover portions of their exposure,

which helps to promote certainty and timeliness of claim payment and 

n While private mortgage insurance companies are required to be monoline (i.e., to participate solely in the mortgage

insurance business, although the holding company may be a diversified insurer), many of our insurers and reinsurers in

these transactions participate in multiple types of insurance business, which helps diversify their risk exposure.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 3Q 2020 Form 10-Q 136

Other Investments Counterparties

We are exposed to the non-performance of counterparties relating to 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 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, GSD/FICC, highly-rated

supranational institutions, depository and non-depository institutions, brokers and dealers, and government money market

funds. As of SeptemberÄ30, 2020 and DecemberÄ31, 2019, including amounts related to our consolidated VIEs, the balance in

our other investments was $146.9 billion and $103.6 billion, respectively. The balances consist primarily ofÄcash, securities

purchased under agreements to resell invested with counterparties, U.S. Treasury securities,Äcash deposited with the Federal

Reserve Bank of New York, and secured lending activities. As of SeptemberÄ30, 2020 and December 31, 2019, $0.8 billion and

$2.4 billion, respectively, 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.ÄThese 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.
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:

n Level 1 - inputs to the valuation techniques are based on quoted prices in active markets for identical assets or liabilities. 

n Level 2 - inputs to the valuation techniques are based on observable inputs other than quoted prices in active markets for

identical assets or liabilities. 

n 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 137
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.

Table 15.1 - Assets and Liabilities Measured at Fair Value on a Recurring Basis

September 30, 2020

(In millions) LevelÅ1 LevelÅ2 LevelÅ3

Netting

Adjustment(1) Total

Assets:

Investment securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Agency $Ä $20,403 $635 $Ä $21,038

Non-agency and other Ä 1 1,105 Ä 1,106

Total available-for-sale securities, at fair value Ä 20,404 1,740 Ä 22,144

Trading, at fair value:

Mortgage-related securities:

Agency Ä 17,812 3,248 Ä 21,060

Non-agency Ä Ä 1 Ä 1

Total mortgage-related securities Ä 17,812 3,249 Ä 21,061

Non-mortgage-related securities 27,728 769 Ä Ä 28,497

Total trading securities, at fair value 27,728 18,581 3,249 Ä 49,558

Total investments in securities 27,728 38,985 4,989 Ä 71,702

Mortgage loans:

Held-for-sale, at fair value Ä 12,330 Ä Ä 12,330

Derivative assets, net:

Interest-rate swaps Ä 3,201 Ä Ä 3,201

Option-based derivatives 2 6,383 Ä Ä 6,385

Other Ä 185 75 Ä 260

Subtotal, before netting adjustments 2 9,769 75 Ä 9,846

Netting adjustments(1) Ä Ä Ä (8,564) (8,564)

Total derivative assets, net 2 9,769 75 (8,564) 1,282

Other assets:

Guarantee asset, at fair value Ä Ä 5,179 Ä 5,179

Non-derivative held-for-sale purchase commitments, at fair value Ä 302 Ä Ä 302

All other, at fair value Ä Ä 110 Ä 110

Total other assets Ä 302 5,289 Ä 5,591

Total assets carried at fair value on a recurring basis $27,730 $61,386 $10,353 ($8,564) $90,905

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $Ä $3 $203 $Ä $206

Other debt, at fair value Ä 2,457 135 Ä 2,592

Derivative liabilities, net:

Interest-rate swaps Ä 8,418 Ä Ä 8,418

Option-based derivatives Ä 607 Ä Ä 607

Other Ä 478 15 Ä 493

Subtotal, before netting adjustments Ä 9,503 15 Ä 9,518

Netting adjustments(1) Ä Ä Ä (8,905) (8,905)

Total derivative liabilities, net Ä 9,503 15 (8,905) 613

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value Ä 2 Ä Ä 2

All other, at fair value Ä Ä 1 Ä 1

Total other liabilities Ä 2 1 Ä 3

Total liabilities carried at fair value on a recurring basis $Ä $11,965 $354 ($8,905) $3,414

Referenced footnote is included after the next table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 138
December 31, 2019

(In millions) LevelÅ1 LevelÅ2 LevelÅ3

Netting

Adjustment(1) Total

Assets:

Investment securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Agency $Ä $22,927 $1,960 $Ä $24,887

Non-agency and other Ä 20 1,267 Ä 1,287

Total available-for-sale securities, at fair value Ä 22,947 3,227 Ä 26,174

Trading, at fair value:

Mortgage-related securities:

Agency Ä 19,772 2,709 Ä 22,481

Non-agency Ä Ä 1 Ä 1

Total mortgage-related securities Ä 19,772 2,710 Ä 22,482

Non-mortgage-related securities 25,108 1,947 Ä Ä 27,055

Total trading securities, at fair value 25,108 21,719 2,710 Ä 49,537

Total investment securities 25,108 44,666 5,937 Ä 75,711

Mortgage loans:

Held-for-sale, at fair value Ä 15,035 Ä Ä 15,035

Derivative assets, net:

Interest-rate swaps Ä 2,104 Ä Ä 2,104

Option-based derivatives Ä 4,198 Ä Ä 4,198

Other Ä 61 16 Ä 77

Subtotal, before netting adjustments Ä 6,363 16 Ä 6,379

Netting adjustments(1) Ä Ä Ä (5,535) (5,535)

Total derivative assets, net Ä 6,363 16 (5,535) 844

Other assets:

Guarantee asset, at fair value Ä Ä 4,426 Ä 4,426

Non-derivative held-for-sale purchase commitments, at fair value Ä 81 Ä Ä 81

All other, at fair value Ä Ä 120 Ä 120

Total other assets Ä 81 4,546 Ä 4,627

Total assets carried at fair value on a recurring basis $25,108 $66,145 $10,499 ($5,535) $96,217

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $Ä $6 $203 $Ä $209

Other debt, at fair value Ä 3,600 129 Ä 3,729

Derivative liabilities, net:

Interest-rate swaps Ä 4,882 Ä Ä 4,882

Option-based derivatives Ä 130 Ä Ä 130

Other Ä 233 37 Ä 270

Subtotal, before netting adjustments Ä 5,245 37 Ä 5,282

Netting adjustments(1) Ä Ä Ä (4,910) (4,910)

Total derivative liabilities, net Ä 5,245 37 (4,910) 372

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value Ä 7 Ä Ä 7

All other, at fair value Ä Ä 1 Ä 1

Total other liabilities Ä 7 1 Ä 8

Total liabilities carried at fair value on a recurring basis $Ä $8,858 $370 ($4,910) $4,318

(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 3Q 2020 Form 10-Q 139
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 on our condensed consolidated statements of comprehensive income (loss) for Level 3 assets and liabilities. 

Table 15.2 - Fair Value Measurements of Assets and Liabilities Using Significant Unobservable Inputs

3Q 2020

Balance,

July 1,

2020

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2020

Change in

Unrealized

Gains (Losses)

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2020(2)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of

September 30,

2020 (In millions)

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $814 $Ä $Ä $54 $Ä ($72) ($34) $Ä ($127) $635 $Ä ($1)

Non-agency and

other 1,106 5 34 Ä Ä Ä (40) Ä Ä 1,105 5 28

Total available-forsale mortgagerelated securities 1,920 5 34 54 Ä (72) (74) Ä (127) 1,740 5 27

Trading, at fair value:

Mortgage-related

securities:

Agency 3,052 (78) Ä 919 Ä (212) (16) Ä (417) 3,248 (50) Ä

Non-agency 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Total trading

mortgage-related

securities 3,053 (78) Ä 919 Ä (212) (16) Ä (417) 3,249 (50) Ä

Derivative assets 61 1 Ä Ä 13 Ä Ä Ä Ä 75 1 Ä

Other assets:

Guarantee asset 4,824 25 Ä Ä 538 Ä (208) Ä Ä 5,179 25 Ä

All other, at fair value 114 4 Ä (6) 8 (7) (3) Ä Ä 110 4 Ä

Total other

assets 4,938 29 Ä (6) 546 (7) (211) Ä Ä 5,289 29 Ä

Balance,

July 1,

2020

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2020

Change in

Unrealized

(Gains) Losses

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2020(2)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

September 30,

2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts

held by third parties, at

fair value $202 $1 $Ä $Ä $Ä $Ä $Ä $Ä $Ä $203 $1 $Ä

Other debt, at fair value 123 (2) Ä Ä 17 Ä (3) Ä Ä 135 (2) Ä

Derivative liabilities 16 2 Ä Ä Ä Ä (3) Ä Ä 15 (1) Ä

All other, at fair value 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Referenced footnotes are included after the prior period table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 140
YTD 2020

Balance,

January 1,

2020

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2020

Change in

Unrealized

Gains (Losses)

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2020(2)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of

September 30,

2020 (In millions)

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $1,960 $12 $44 $54 $Ä ($218) ($122) $Ä ($1,095) $635 $Ä $3

Non-agency and

other 1,267 12 (52) Ä Ä Ä (122) Ä Ä 1,105 12 (41)

Total available-forsale mortgage-related

securities 3,227 24 (8) 54 Ä (218) (244) Ä (1,095) 1,740 12 (38)

Trading, at fair value:

Mortgage-related

securities:

Agency 2,709 (86) Ä 1,187 Ä (110) (55) Ä (397) 3,248 (93) Ä

Non-agency 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Total trading

mortgage-related

securities 2,710 (86) Ä 1,187 Ä (110) (55) Ä (397) 3,249 (93) Ä

Derivative assets 16 45 Ä Ä 14 Ä Ä Ä Ä 75 44 Ä

Other assets:

Guarantee asset 4,426 289 Ä Ä 1,048 Ä (584) Ä Ä 5,179 289 Ä

All other, at fair value 120 (7) Ä (12) 20 (15) 4 Ä Ä 110 (7) Ä

Total other assets 4,546 282 Ä (12) 1,068 (15) (580) Ä Ä 5,289 282 Ä

Balance,

January 1,

2020

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2020

Change in

Unrealized

(Gains) Losses

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2020(2)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

September 30,

2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts held

by third parties, at fair

value $203 $Ä $Ä $Ä $Ä $Ä $Ä $Ä $Ä $203 $Ä $Ä

Other debt, at fair value 129 (2) Ä Ä 18 Ä (10) Ä Ä 135 (2) Ä

Derivative liabilities 37 (12) Ä Ä 2 Ä (12) Ä Ä 15 (23) Ä

All other, at fair value 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 141
3Q 2019

Balance,

July 1,

2019

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Change in

Unrealized

Gains (Losses)

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019(2)

Change in

Unrealized

Gains (Losses),

Net of Tax,

Included in OCI

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019 (In millions)

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $2,780 $23 $16 $Ä $Ä ($531) ($104) $Ä $Ä $2,184 1 $19

Non-agency and

other 1,494 26 (10) Ä Ä (87) (56) Ä Ä 1,367 3 4

Total available-forsale mortgagerelated securities 4,274 49 6 Ä Ä (618) (160) Ä Ä 3,551 4 23

Trading, at fair value:

Mortgage-related

securities:

Agency 3,033 (30) Ä 287 Ä (21) (35) Ä (299) 2,935 (31) Ä

Non-agency 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Total trading

mortgage-related

securities 3,034 (30) Ä 287 Ä (21) (35) Ä (299) 2,936 (31) Ä

Derivative assets 10 3 Ä Ä Ä Ä 3 Ä Ä 16 4 Ä

Other assets:

Guarantee asset 3,941 15 Ä Ä 439 Ä (170) Ä Ä 4,225 15 Ä

All other, at fair value 126 12 Ä 24 12 (27) (5) Ä Ä 142 (3) Ä

Total other assets 4,067 27 Ä 24 451 (27) (175) Ä Ä 4,367 12 Ä

Balance,

July 1,

2019

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Change in

Unrealized

(Gains) Losses

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019(3)

Change in

Unrealized

(Gains) Losses,

Net of Tax,

Included in OCI

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts

held by third parties, at

fair value $733 $Ä $Ä $Ä $Ä $Ä $Ä $Ä $Ä $733 $Ä $Ä

Other debt, at fair value 129 Ä Ä 2 Ä Ä (1) Ä Ä 130 Ä Ä

Derivative liabilities 50 (5) Ä Ä Ä Ä (5) Ä Ä 40 (9) Ä

All other, at fair value Ä 2 Ä 2 Ä (2) Ä Ä Ä 2 Ä Ä

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 142
YTD 2019

Balance,

January

1,

2019

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Change in

Unrealized

Gains (Losses)

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019(2)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of

September 30,

2019 (In millions)

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $4,135 $13 $116 $202 $Ä ($1,724) ($295) $Ä ($263) $2,184 $2 $42

Non-agency and

other 1,640 52 25 Ä Ä (174) (176) Ä Ä 1,367 12 40

Total available-forsale mortgagerelated securities 5,775 65 141 202 Ä (1,898) (471) Ä (263) 3,551 14 82

Trading, at fair value:

Mortgage-related

securities:

Agency 3,293 (113) Ä 1,242 Ä (732) 95 8 (858) 2,935 (69) Ä

Non-agency 1 Ä Ä Ä Ä Ä Ä Ä Ä 1 Ä Ä

Total trading

mortgage-related

securities 3,294 (113) Ä 1,242 Ä (732) 95 8 (858) 2,936 (69) Ä

Derivative assets 1 15 Ä Ä Ä Ä Ä Ä Ä 16 15 Ä

Other assets:

Guarantee asset 3,633 75 Ä Ä 1,005 Ä (488) Ä Ä 4,225 75 Ä

All other, at fair value 137 (31) Ä 75 29 (59) (9) Ä Ä 142 (51) Ä

Total other assets 3,770 44 Ä 75 1,034 (59) (497) Ä Ä 4,367 24 Ä

Balance,

January

1,

2019

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Change in

Unrealized

(Gains) Losses

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

September 30,

2019(2)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

September 30,

2019

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts

held by third parties, at

fair value $728 $5 $Ä $Ä $Ä $Ä $Ä $Ä $Ä $733 $5 $Ä

Other debt, at fair value 134 Ä Ä Ä 2 Ä (6) Ä Ä 130 Ä Ä

Derivative liabilities 92 (39) Ä Ä Ä Ä (13) Ä Ä 40 (51) Ä

All other, at fair value Ä Ä Ä 4 Ä (2) Ä Ä Ä 2 (2) Ä

(1) Transfers out of Level 3 during 3Q 2020 and YTD 2020 and 3Q 2019 and YTD 2019 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 3Q 2020 and YTD 2020 and 3Q 2019 and YTD

2019 consisted primarily of certain mortgage-related securities due to a decrease in market activity and the availability of relevant price quotes from dealers and

third-party pricing services.

(2) 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 SeptemberÅ30, 2020 and SeptemberÅ30, 2019, respectively. This amount includes any allowance for credit

losses recorded on available-for-sale securities and amortization of basis adjustments.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 143
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.

Table 15.3 - Quantitative Information about Recurring Level 3 Fair Value Measurements

September 30, 2020

LevelÅ3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for certain unobservable

inputs as shown) Type Range

Weighted

Average(2)

Assets

Available-for-sale, at fair value

Mortgage-related securities

Agency $446 Discounted cash flows OAS 91 - 91 bps 91 bps

189 Other

Non-agency and other 932

Median of external

sources

External pricing

sources $64.8 - $78.1 $71.9

173 Other

Trading, at fair value

Mortgage-related securities

Agency 2,547 Single external source

External pricing

sources $0.0 - $9,221.1 $969.8

701 Discounted cash flows OAS 197 - 1,269 bps 791 bps

Guarantee asset, at fair value 4,860 Discounted cash flows OAS 17 - 186 bps 40 bps

319 Other

Insignificant Level 3 assets(1) 186

Total level 3 assets $10,353

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value $203 Single external source

External pricing

sources $96.8 - $107.0 $101.6

Insignificant Level 3 liabilities(1) 151

Total level 3 liabilities $354

Referenced footnote is included after the next table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 144
December 31, 2019

LevelÅ3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for certain unobservable

inputs as shown) Type Range

Weighted

Average(2)

Assets

Available-for-sale, at fair value

Mortgage-related securities

Agency $1,960 Discounted cash flows OAS 30 - 261 bps 80 bps

Non-agency and other 886

Median of external

sources

External pricing

sources $71.9 - $78.2 $75.0

381 Other

Trading, at fair value

Mortgage-related securities

Agency 1,948 Single external source

External pricing

sources $0.0 - $100.7 $36.6

761 Discounted cash flows OAS (1,201) - 8,095 bps 611 bps

Guarantee asset, at fair value 4,141 Discounted cash flows OAS 17 - 186 bps 40 bps

285 Other

Insignificant Level 3 assets(1) 137

Total level 3 assets $10,499

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value $203 Single external source

External pricing

sources $99.4 - $103.6 $101.4

Insignificant Level 3 liabilities(1) 167

Total level 3 liabilities $370

(1) Represents the aggregate amount of Level 3 assets or liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant.

(2) Unobservable inputs were weighted primarily by the relative fair value of the financial instruments.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 145
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. These adjustments

usually result from the application of lower-of-cost-or-fair-value accounting or measurement of impairment based on the fair

value of the underlying collateral. Certain of the fair values in the tables below were not obtained as of the period end, but were

obtained during the period.

The table below presents assets measured on our condensed consolidated balance sheets at fair value on a non-recurring

basis. 

Table 15.4 - Assets Measured at Fair Value on a Non-Recurring Basis

September 30, 2020 December 31, 2019

(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) $Ä $70 $3,286 $3,356 $Ä $22 $4,059 $4,081

(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-forsale loans where the fair value is below cost.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 146

The tables below provide valuation techniques, the range, and the weighted average of significant unobservable inputs for Level

3 assets measured on our condensed consolidated balance sheets at fair value on a non-recurring basis.

Table 15.5 - Quantitative Information About Non-Recurring Level 3 Fair Value Measurements

September 30, 2020

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for

certain unobservable inputs as

shown) Type Range

Weighted

Average(1)

Non-recurring fair value

measurements

Mortgage loans $3,286

Internal model Historical sales proceeds $3,001 - $696,004 $187,935

Internal model Housing sales index 65 - 405 bps 115 bps

Median of external sources External pricing sources $57.0 - $102.5 $91.0

December 31, 2019

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for

certain unobservable inputs as

shown) Type Range

Weighted

Average(1)

Non-recurring fair value

measurements

Mortgage loans $4,059

Internal model Historical sales proceeds $3,000 - $765,000 $186,234

Internal model Housing sales index 46 - 420 bps 112 bps

Median of external sources External pricing sources $66.5 - $105.4 $95.0

(1) Unobservable inputs were weighted primarily by the relative fair value of the financial instruments.
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, secured lending and other,

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 fair value volatility. 

Table 15.6 - Fair Value of Financial Instruments

September 30, 2020

GAAP

Measurement

Category(1)

GAAP

Carrying

Amount

Fair Value

(In millions) Level 1 Level 2 Level 3

NettingÅ

Adjustments(2) Total

Financial Assets

Cash and cash equivalents Amortized cost $8,074 $8,074 $Ä $Ä $Ä $8,074

Securities purchased under agreements

to resell Amortized cost 99,252 Ä 102,049 Ä (2,797) 99,252

Investment securities:

Available-for-sale, at fair value FV - OCI 22,144 Ä 20,404 1,740 Ä 22,144

Trading, at fair value FV - NI 49,558 27,728 18,581 3,249 Ä 49,558

Total investment securities 71,702 27,728 38,985 4,989 Ä 71,702

Mortgage loans:

Loans held by consolidated trusts 2,115,509 Ä 1,892,801 289,868 Ä 2,182,669

Loans held by Freddie Mac 104,732 Ä 68,622 38,850 Ä 107,472

Total mortgage loans Various(3) 2,220,241 Ä 1,961,423 328,718 Ä 2,290,141

Derivative assets, net FV - NI 1,282 2 9,769 75 (8,564) 1,282

Guarantee asset FV - NI 5,179 Ä Ä 5,171 Ä 5,171

Non-derivative purchase commitments Various 302 Ä 439 Ä Ä 439

Secured lending and other Amortized cost 7,091 Ä 1,371 5,549 Ä 6,920

Total financial assets $2,413,123 $35,804 $2,114,036 $344,502 ($11,361) $2,482,981

Financial Liabilities

Debt:

Debt securities of consolidated trusts

held by third parties $2,138,420 $Ä $2,215,485 $924 $Ä $2,216,409

Other debt 284,896 Ä 289,794 4,135 (2,797) 291,132

Total debt Various(4) 2,423,316 Ä 2,505,279 5,059 (2,797) 2,507,541

Derivative liabilities, net FV - NI 613 Ä 9,503 15 (8,905) 613

Guarantee obligation Amortized cost 4,695 Ä Ä 5,200 Ä 5,200

Non-derivative purchase commitments Various 47 Ä 2 204 Ä 206

Total financial liabilities $2,428,671 $Ä $2,514,784 $10,478 ($11,702) $2,513,560

(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) As of SeptemberÅ30, 2020, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value, and FV - NI were $2.2 trillion, $18.3 billion, and

$12.3 billion, respectively. 

(4) As of SeptemberÅ30, 2020, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.4 trillion and $2.8 billion, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 147
December 31, 2019

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 Amortized cost $5,189 $5,189 $Ä $Ä $Ä $5,189

Securities purchased under agreements

to resell Amortized cost 56,271 Ä 66,114 Ä (9,843) 56,271

Investment securities:

Available-for-sale, at fair value FV - OCI 26,174 Ä 22,947 3,227 Ä 26,174

Trading, at fair value FV - NI 49,537 25,108 21,719 2,710 Ä 49,537

Total investment securities 75,711 25,108 44,666 5,937 Ä 75,711

Mortgage loans:

Loans held by consolidated trusts 1,940,523 Ä 1,732,434 244,500 Ä 1,976,934

Loans held by Freddie Mac 79,677 Ä 38,100 45,588 Ä 83,688

Total mortgage loans Various(3) 2,020,200 Ä 1,770,534 290,088 Ä 2,060,622

Derivative assets, net FV - NI 844 Ä 6,363 16 (5,535) 844

Guarantee asset FV - NI 4,426 Ä Ä 4,433 Ä 4,433

Non-derivative purchase commitments Various 81 Ä 90 72 Ä 162

Secured lending and other Amortized cost 4,186 Ä 1,874 2,131 Ä 4,005

Total financial assets $2,166,908 $30,297 $1,889,641 $302,677 ($15,378) $2,207,237

Financial Liabilities

Debt:

Debt securities of consolidated trusts

held by third parties $1,898,355 $Ä $1,931,473 $1,277 $Ä $1,932,750

Other debt 271,330 Ä 282,431 3,619 (9,843) 276,207

Total debt Various(4) 2,169,685 Ä 2,213,904 4,896 (9,843) 2,208,957

Derivative liabilities, net FV - NI 372 Ä 5,245 37 (4,910) 372

Guarantee obligation Amortized cost 4,292 Ä Ä 4,527 Ä 4,527

Non-derivative purchase commitments Various 7 Ä 7 67 Ä 74

Total financial liabilities $2,174,356 $Ä $2,219,156 $9,527 ($14,753) $2,213,930

(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) As of December 31, 2019, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value, and FV - NI were $2.0 trillion, $20.3 billion, and

$15.0 billion, respectively. 

(4) As of December 31, 2019, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.2 trillion and $3.9 billion, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 148

Fair Value Option

We elected the fair value option for certain multifamily held-for-sale loans, multifamily held-for-sale loan purchase

commitments, and 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. This table does not include interest-only securities related to debt securities of consolidated trusts and other debt

held by third parties with a fair value of $177 million and $146 million and multifamily held-for-sale loan purchase commitments

with a net fair value of $300 million and $74 million, as of SeptemberÄ30, 2020 and December 31, 2019, respectively.
Table 15.7 - Difference between Fair Value and UPB for Certain Financial Instruments with Fair Value Option Elected

September 30, 2020 December 31, 2019

(In millions)

Multifamily

Held-For-Sale

ÅLoans

OtherÅDebtÅLong Term

Debt Securities of

Consolidated

Trusts Held by

Third Parties

Multifamily

Held-For-Sale

 Loans

OtherÅDebtÅLong Term

Debt Securities of

Consolidated

Trusts Held by

Third Parties

Fair value $12,330 $2,418 $203 $15,035 $3,589 $203

UPB 11,434 2,502 200 14,444 3,329 200

Difference $896 ($84) $3 $591 $260 $3

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 3Q 2020 Form 10-Q 149

Changes in Fair Value Under the Fair Value Option Election

The table below presents the changes in fair value included in non-interest income (loss) in our condensed consolidated

statements of comprehensive income (loss), related to items for which we have elected the fair value option. 

Table 15.8 - Changes in Fair Value Under the Fair Value Option Election

3Q 2020 3Q 2019 YTD 2020 YTD 2019

(In millions) Gains (Losses) Gains (Losses)

Multifamily held-for-sale loans $209 $398 $1,160 $1,216

Multifamily held-for-sale loan purchase commitments 614 641 1,796 1,644

Other debt - long term (37) 49 441 116

Debt securities of consolidated trusts held by third parties Ä (1) 4 (6)

Changes in fair value attributable to instrument-specific credit risk were not material for 3Q 2020 and YTD 2020 and for 3Q

2019 and YTD 2019 for any assets or liabilities for which we elected the fair value option.
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 Sixth Circuit reversed the District Court's

dismissal and remanded the case to the District Court for further proceedings. On August 14, 2018, the District Court denied

the plaintiff's motion for class certification. On January 23, 2019, the Sixth Circuit denied plaintiff's petition for leave to appeal

that decision. On September 17, 2020, the District Court granted a request from the plaintiff for summary judgment and entered

final judgment in favor of Freddie Mac and the other defendants. On October 9, 2020, the plaintiff filed a notice of appeal with

the Sixth Circuit.

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:

pre-trial litigation is inherently uncertain; while the District Court denied plaintiff's motion for class certification, this decision and

the entry of final judgment in defendants' favor is subject to appeal. In particular, absent a final resolution of whether a class will

be certified, the identification of a class if one is certified, and the identification of the alleged statement or statements that

survive dispositive motions, we cannot reasonably estimate any possible loss or range of possible loss.

LIBOR Lawsuit

On MarchÄ14, 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.ÄDollar 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 JulyÄ2013, 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. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac 3Q 2020 Form 10-Q 150
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. The District Court subsequently granted in part Freddie Mac's motion for leave to amend its complaint,

and Freddie Mac amended its complaint on April 16, 2019.

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 alleged, 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. 

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 DC Circuit 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac 3Q 2020 Form 10-Q 151
On July 17, 2017, the DC Circuit 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 DC Circuit 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. On

September 28, 2018, the District Court dismissed all of the claims except those alleging breach of the implied covenant of good

faith and fair dealing. Discovery is ongoing.

Angel vs. The Federal Home Loan Mortgage Corporation et al. This case was filed pro se on May 21, 2018 against

Freddie Mac, Fannie Mae, certain current and former directors of Freddie Mac and Fannie Mae, and FHFA as a nominal

defendant. The original complaint alleges, among other things, breach of contract, breach of the implied covenant of good faith

and fair dealing, and that defendants aided and abetted the government's "avoidance" of plaintiff's dividend rights. On March

6, 2019, the U.S. District Court for the District of Columbia granted the defendants' motion to dismiss the case. On March 18,

2019, Mr. Angel filed a motion seeking to alter or amend the judgment and for leave to file an amended complaint. On May 24,

2019, the District Court denied Mr. Angel's motion, and on June 19, 2019, Mr. Angel filed a notice of appeal to the U.S. Court of

Appeals for the District of Columbia Circuit. On April 24, 2020, the DC Circuit affirmed the District Court's dismissal of the case. 

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, with a redacted copy filed on November 14, 2018. The United States

filed a motion to dismiss on August 1, 2018 and an amended motion to dismiss on October 1, 2018. The court denied the

motion to dismiss on May 8, 2020 and granted plaintiffs' motion to certify the decisions for interlocutory appeal on June 11,

2020. The Federal Circuit denied the petition for interlocutory appeal on August 21, 2020.

Fairholme Funds, Inc., et al. vs. the United States of America, Federal National Mortgage Association, and Federal

Home Loan Mortgage Corporation. This case was originally filed on July 9, 2013 against the United States of America. On

March 8, 2018, plaintiffs filed an amended complaint under seal. A redacted public version was filed on May 11, 2018 and adds

Freddie Mac and Fannie Mae as nominal defendants. The amended complaint alleges, among other items, that the net worth

sweep dividend provisions of the senior preferred stock constitute an unlawful taking or exaction of private property for public

use without just compensation, and that by enacting the net worth sweep, the government breached the fiduciary duty it owed

to Freddie Mac and Fannie Mae, and implied-in-fact contracts between the United States on the one hand and Freddie Mac and

Fannie Mae on the other. The plaintiffs ask that plaintiffs, Freddie Mac, and Fannie Mae be awarded (1) just compensation for

the government's alleged taking or exaction of their property, (2) damages for the government's breach of fiduciary duties, and

(3) damages for the government's breach of the alleged implied-in-fact contracts. In addition, plaintiffs seek pre- and postjudgment interest, attorneys' fees, costs, and other expenses. The United States filed a motion to dismiss on August 1, 2018

and an amended motion to dismiss on October 1, 2018. On December 6, 2019, the Court dismissed the claims plaintiffs

labeled as direct claims and denied defendant's motion to dismiss with respect to the claims plaintiffs labeled as derivative.

Accordingly, derivative takings, exaction, breach of fiduciary duty, and breach of implied-in-fact contract claims remain. By

order dated March 9, 2020, the Court granted unopposed motions by plaintiffs and defendant to certify the December 6 opinion

for interlocutory review, modified its December 6 opinion to include the language necessary for an interlocutory appeal to the

U.S. Court of Appeals for the Federal Circuit, and stayed further proceedings in the case pending the completion of the

interlocutory appeal process. The Federal Circuit granted the petition for interlocutory appeal on June 18, 2020.

Perry Capital LLC vs. the United States of America, Federal National Mortgage Association, and Federal Home

Loan Mortgage Corporation. This case was filed as a derivative lawsuit, purportedly on behalf of Freddie Mac and Fannie

Mae as "nominal" defendants, on August 15, 2018. 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 or an illegal exaction in violation of the Fifth Amendment, and that by enacting the net worth sweep, the

government breached the fiduciary duty it owed to Freddie Mac and Fannie Mae, and implied-in-fact contracts between the

United States on the one hand and Freddie Mac and Fannie Mae on the other. The plaintiff asks that it, Freddie Mac, and Fannie

Mae be awarded just compensation for the government's alleged taking of its property or damages for the illegal exaction;

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac 3Q 2020 Form 10-Q 152
damages for the government's breach of fiduciary duties; and damages for the government's breach of the alleged implied-infact contracts. The proceedings have been stayed pending the appeals in the Fairholme Funds matter.

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 pre-trial 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 16

Freddie Mac 3Q 2020 Form 10-Q 153
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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 17

Freddie Mac 3Q 2020 Form 10-Q 154

We continue to provide quarterly submissions to FHFA on minimum capital. The tableÄbelow summarizes our minimum capital

requirements and deficits and net worth. 

Table 17.1 - Net Worth and Minimum Capital

(In millions) September 30, 2020 December 31, 2019

GAAP net worth (deficit) $13,891 $9,122

Core capital (deficit)(1)(2) (59,791) (63,964)

Less: Minimum capital requirement(1) 21,302 19,123

Minimum capital surplus (deficit)(1) ($81,093) ($83,087)

(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 senior preferred stock) as these items do not meet the statutory definition of core

capital.

In May 2017, FHFA, as Conservator, issued guidance to us to evaluate and manage our financial risk and to make economic

business decisions, while in conservatorship, utilizing a newly-developed risk-based CCF, a capital system with detailed

formulae provided by FHFA. We use the CCF to measure risk for making economically effective decisions. We are required to

submit quarterly reports to FHFA related to the CCF requirements. 

In May 2020, FHFA released its re-proposed Enterprise Capital Rule for comment. FHFAÇs re-proposed Enterprise Capital Rule,

if adopted, would significantly increase our capital requirements and, as a result, would significantly lower our returns on

capital. Until FHFA issues a final Enterprise Capital Rule, we will continue to use the CCF to evaluate business decisions and

ensure the company makes such decisions prudently when pricing transactions and managing its businesses. 
NOTE 18

Selected Financial Statement Line Items

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 18

Freddie Mac 3Q 2020 Form 10-Q 155

The table below presents the significant components of investment gains (losses), net on our condensed consolidated

statements of comprehensive income (loss).

Table 18.1 - Significant Components of Investment Gains (Losses), Net

(In millions) 3Q 2020 3Q 2019 YTD 2020 YTD 2019

Investment gains (losses), net:

Mortgage loans gains (losses) $1,769 $1,705 $3,987 $4,183

Investment securities gains (losses) (285) 136 835 638

Debt gains (losses) (25) (56) 735 8

Derivative gains (losses) (337) (1,217) (4,600) (4,912)

Investment gains (losses), net $1,122 $568 $957 ($83)

The table below presents the significant components of other assets and other liabilities on our condensed consolidated

balance sheets.

Table 18.2 - Significant Components of Other Assets and Other Liabilities

(In millions) September 30, 2020 December 31, 2019

Other assets:

Real estate owned, net $234 $555

Accounts and other receivables(1) 24,112 10,780

Guarantee asset 5,179 4,426

Secured lending and other 8,310 5,158

All other 2,216 1,880

Total other assets $40,051 $22,799

Other liabilities:

Guarantee obligation $4,695 $4,292

All other 5,536 3,750

Total other liabilities $10,231 $8,042

(1) Primarily consists of servicer receivables and other non-interest receivables.

END OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
Other Information

Other Information

Freddie Mac 3Q 2020 Form 10-Q 156

LEGAL PROCEEDINGS 

We are involved as a party to a variety of legal proceedings. For more information, see Note 16 in this Form 10-Q, our 2019

Annual Report, and our Form 10-Qs for the first quarter of 2020 and second quarter of 2020.

In addition, a number of lawsuits have been filed against the U.S. government related to the conservatorship and the Purchase

Agreement. Some of these cases also have challenged the constitutionality of the structure of FHFA. For information on these

lawsuits, see the Legal Proceedings section in our 2019 Annual Report. One such case was filed in the U.S. Court of Federal

Claims. On May 15, 2020, the Court of Federal Claims dismissed this case. On June 29, 2020, plaintiffs appealed to the U.S.

Court of Appeals for the Federal Circuit. Another such case, filed in the U.S. District Court for the Southern District of Texas,

was appealed to the U.S. Court of Appeals for the Fifth Circuit. On September 6, 2019, the Fifth Circuit, en banc, held that the

plaintiffs plausibly alleged that FHFA exceeded its conservator powers by transferring Freddie Mac's future value (i.e., profits via

the net worth sweep) to a single shareholder, Treasury, and remanded that cause of action to the District Court. The Fifth Circuit

also held that the "for cause" removal provision for the director of FHFA was unconstitutional, and that the provision should be

struck from the statute.ÄThe plaintiffs and defendants filed separate petitions for writ of certiorari to the U.S. Supreme Court

seeking review of the Fifth CircuitÇs decision, which the Supreme Court granted on July 9, 2020. Another such case, filed in the

U.S. District Court for the Western District of Michigan, was dismissed on September 8, 2020. In addition, on June 12, 2020, a

class action lawsuit was filed in the U.S. Court of Federal Claims against the United States. This new lawsuit seeks damages

from the United States as a result of Treasury's involvement in the alleged taking of funds from Freddie Mac via the Third

Amendment. The complaint asserts causes of action for breach of contract and the implied covenant of good faith and fair

dealing based on the alleged disregard by Treasury of an implicit guarantee of dividend payments to stockholders. Freddie Mac

is not a party to any of these lawsuits.

RISK FACTORS 

This Form 10-Q should be read together with the Other Information - Risk Factors section of our Form 10-Q for the quarter

ended March 31, 2020 and the Risk Factors section in our 2019 Annual Report, which describe 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.

Information About Certain Securities Issuances by Freddie Mac

We make available, free of charge through our website at www.freddiemac.com, our annual reports on FormÄ10-K, quarterly

reports on FormÄ10-Q, current reports on FormÄ8-K, and all other SEC reports and amendments to those reports as soon as

reasonably practicable after we electronically file the material with the SEC. The SEC also maintains an internet site

(www.sec.gov) that contains reports, proxy and information statements, and other information regarding companies that file

electronically with the SEC. 

We provide disclosure about our debt securities on our website at 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 transactions and

SCR notes is available at crt.freddiemac.com and mf.freddiemac.com/investors, respectively.
We provide disclosure about our mortgage-related securities, some of which are off-balance sheet obligations (e.g., K

Certificates and SB Certificates), on our website at www.freddiemac.com/mbs and mf.freddiemac.com/investors. From

these addresses, investors can access information and documents, including offering circulars and offering circular

supplements, for mortgage-related securities offerings.

We provide additional information, including product descriptions, investor presentations, securities issuance calendars,

transactions volumes and details, redemption notices, Freddie Mac research, and material developments or other events that

may be important to investors, in each case as applicable, on the websites for our business segments, which can be found at

sf.freddiemac.com, mf.freddiemac.com, and www.freddiemac.com/capital-markets.

Other Information

Freddie Mac 3Q 2020 Form 10-Q 157

EXHIBITS

The exhibits are listed in the Exhibit Index of this FormÄ10-Q.
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 SeptemberÄ30, 2020. 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 SeptemberÄ30, 2020, 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 3Q 2020

We evaluated the changes in our internal control over financial reporting that occurred during 3Q 2020 and concluded that

there were no changes that materially affected, or are reasonably likely to materially affect, our internal control over financial

reporting.

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 SeptemberÄ30, 2020 that we have not remediated.

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:

n FHFA has established the Division of Resolutions, which is intended to facilitate operation of the company with the

oversight of the Conservator.

n We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also provide drafts

of certain external press releases and statements to FHFA personnel for their review and comment prior to release.

n FHFA personnel, including senior officials, review our SEC filings prior to filing, including this FormÄ10-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 FormÄ10-Q, was not aware of any material

misstatements or omissions in the FormÄ10-Q, and had no objection to our filing the FormÄ10-Q.

n 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.

n 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.

n Senior officials within FHFA's accounting groupÄmeet 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 3Q 2020 have been prepared in conformity with GAAP.

Controls and Procedures

Freddie Mac 3Q 2020 Form 10-Q 158
Exhibit Index

Exhibit Description*

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

31.2 Certification of Executive Vice President and 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 and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within

the Inline XBRL document

101.SCH XBRL Taxonomy Extension Schema

101. CAL XBRL Taxonomy Extension Calculation

101.DEF XBRL Taxonomy Extension Definition

101.LAB XBRL Taxonomy Label

101. PRE XBRL Taxonomy Extension Presentation

104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are

embedded within the Inline XBRL document

* The SEC file numbers for the RegistrantÖs 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.

Exhibit Index

Freddie Mac 3Q 2020 Form 10-Q 159
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/ David M. Brickman

David M. Brickman

Chief Executive Officer

Date: OctoberÄ29, 2020

By: /s/ Christian M. Lown

Christian M. Lown

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: OctoberÄ29, 2020

Signatures

Freddie Mac 3Q 2020 Form 10-Q 160
Form 10-Q Index

Item Number Page(s)

PART I FINANCIAL INFORMATION

Item 1. Financial Statements 80 - 155

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 - 79

Item 3. Quantitative and Qualitative Disclosures About Market Risk 61 - 63

Item 4. Controls and Procedures 158

PART II OTHER INFORMATION

Item 1. Legal Proceedings 156

Item 1A. Risk Factors 156

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 156

Item 6. Exhibits 157

Exhibit Index 159

Signatures 160

Form 10-Q Index

Freddie Mac 3Q 2020 Form 10-Q 161
Exhibit 31.1

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, David M. Brickman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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 registrantÖs 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 registrantÖs 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 registrantÖs internal control over financial reporting that occurred during the registrantÖs most

recent fiscal quarter (the registrantÖs fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely

to materially affect, the registrantÖs internal control over financial reporting; and

5. The registrantÖs other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to

the registrantÖs auditors and the audit committee of the registrantÖs 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 registrantÖs 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 registrantÖs internal

control over financial reporting.

Date: OctoberÅ29, 2020

/s/ David M. Brickman

David M. Brickman

Chief Executive Officer
Exhibit 31.2

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Christian M. Lown, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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 registrantÖs 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 registrantÖs 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 registrantÖs internal control over financial reporting that occurred during the registrantÖs most

recent fiscal quarter (the registrantÖs fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely

to materially affect, the registrantÖs internal control over financial reporting; and

5. The registrantÖs other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to

the registrantÖs auditors and the audit committee of the registrantÖs 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 registrantÖs 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 registrantÖs internal

control over financial reporting.

Date: OctoberÅ29, 2020

/s/ Christian M. Lown

Christian M. Lown

Executive Vice President and 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 September 30, 2020 of the Federal Home Loan Mortgage Corporation (the

"Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David M. Brickman, Chief Executive Officer of the

Company, certify, pursuant to 18 U.S.C. SectionÅ1350, as adopted pursuant to SectionÅ906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of SectionÅ13(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: OctoberÅ29, 2020

/s/ David M. Brickman

David M. Brickman

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 September 30, 2020 of the Federal Home Loan Mortgage Corporation (the

"Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Christian M. Lown, Executive Vice President and

Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SectionÅ1350, as adopted pursuant to SectionÅ906 of the Sarbanes-Oxley Act of

2002, that to my knowledge:

1. The Report fully complies with the requirements of SectionÅ13(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: OctoberÅ29, 2020

/s/ Christian M. Lown

Christian M. Lown

Executive Vice President and Chief Financial Officer