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 JuneÄ30, 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 JulyÄ14, 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 37

l Credit Risk 37

l Operational Risk 56

l Market Risk 57

n Liquidity and Capital Resources 60

n Off-Balance Sheet Arrangements 66

n Critical Accounting Policies and Estimates 67

n Conservatorship and Related Matters 69

n Regulation and Supervision 70

n Forward-Looking Statements 72

FINANCIAL STATEMENTS 75

OTHER INFORMATION 150

CONTROLS AND PROCEDURES 152

EXHIBIT INDEX 153

SIGNATURES 154

FORM 10-Q INDEX 155

Table of Contents

Freddie Mac 2Q 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 33

15 Capital Markets Segment Financial Results 36

16 Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax 36

17 Single-Family New Business Activity 38

18 Single-Family Credit Guarantee Portfolio CRT Issuance 39

19 Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding 40

20 Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Credit Guarantee Portfolio 41

21 Credit Enhancement Coverage by Year of Origination 41

22 Details of Single-Family Credit Enhancement Expenses and Recoveries 41

23 Reduction in Conservatorship Credit Capital as a Result of Certain CRT Transactions 42

24 Single-Family Allowance for Credit Losses Activity 43

25 Single-Family Credit Guarantee Portfolio Credit Performance Metrics 43

26 Single-Family TDR and Non-Accrual Loans 44

27 Single-Family TDR Loan Activity 45

28 Single-Family Loans in Forbearance by Payment Status 47

29 Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio 47

30 Credit Quality Characteristics of Our Single-Family Loans in Forbearance 47

31 Single-Family Credit Guarantee Portfolio Attribute Combinations for Higher Risk Loans 48

32 Alt-A Loans in Our Single-Family Credit Guarantee Portfolio 49

33 Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio 49

34 Single-Family Loans in Forbearance Activity 50

35 Single-Family REO Activity 51

36 Current Credit Quality of Multifamily Loans Under a Forbearance Program 53

37 Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio 53

38 Level of Subordination Outstanding 53

39 Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement 54

40 Single-Family Credit Guarantee Portfolio Non-Depository Servicers 55

41 Single-Family Mortgage Insurers 55

42 PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve 57

43 Duration Gap and PVS Results 58

44 PVS-L Results Before Derivatives and After Derivatives 58

45 Earnings Sensitivity to Changes in Interest Rates 59

46 Liquidity Sources 60

Table of Contents

Freddie Mac 2Q 2020 Form 10-Q ii
Table Description Page

47 Other Investments Portfolio 60

48 Funding Sources 61

49 Other Debt Activity 62

50 Activity for Debt Securities of Consolidated Trusts Held by Third Parties 64

51 Net Worth Activity 64

52 Return on Conservatorship Capital 65

53 Mortgage-Related Investments Portfolio Details 69

54 Current and Proposed 2021 Affordable Housing Goal Benchmark Levels 70

Table of Contents

Freddie Mac 2Q 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 six months ended June 30, 2020 included in Financial Statements.

Management's Discussion and Analysis Introduction

Freddie Mac 2Q 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 2Q 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).

Our business continuity plans have enabled us to continue fulfilling our mission while protecting our staff and community. Our

senior leaders and Crisis Management Team (CMT), consisting of representatives from across the company, are meeting

regularly, closely monitoring the situation, and providing frequent updates to our Board of Directors, our staff, and FHFA. While

more than 95% of our staff continue to work remotely, our CMT has developed a framework focused on returning our staff to

the office in a phased approach. The framework is predicated on several external and internal factors and will allow staff to

return to the office in an organized manner, while not compromising their health, safety, and well-being. For example, we have

implemented a number of measures that include daily temperature checks and required face coverings for all staff on-site. In

addition, a number of new protocols have been established to adhere to best practices, including deep cleaning protocols, an

upgraded air-filtration system, reduced touch points and foot traffic, and visitor restrictions. A number of facilities, such as

cafeterias and fitness centers, will be unavailable in the early stages of re-entry.

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 August 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. We recently extended the
application date window for these measures to August 31, 2020 and also expanded certain of these measures. 

As of June 30, 2020, 3.75% of loans in our single-family credit guarantee portfolio, based on loan count, were delinquent and in

forbearance. 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 loan's original contractual

terms, irrespective of the forbearance agreement. Single-family servicers are not 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 remain 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

with a forbearance plan in place and who continue to be materially 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. 

As of June 30, 2020, 2.43% of the loans in our multifamily mortgage portfolio, based on UPB, were in forbearance,

approximately 83.5% of which are included in securitizations with credit enhancement provided by subordination. 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. Loans in forbearance are therefore not included in our multifamily delinquency rates if the

borrower is in compliance with the 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 recovery, with purchase applications

increasing significantly since early 2Q 2020 and mortgage interest rates remaining at record lows. We expect the low mortgage

rate environment, which led to a significant increase in mortgage refinance activity in the first half of 2020, to continue and

result in high levels of mortgage refinance activity during the second half of 2020, before declining in 2021. However, due to the

impact of the COVID-19 pandemic, we expect full-year home sales to fall in 2020 and then begin to rebound in 2021. While

house prices increased at a solid pace during 1Q 2020, we expect full-year house price growth to slow in 2020 and 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 could flow through to multifamily fundamentals. The lack of ability to move and form new

households, as well as economic uncertainty for renter households, will make it difficult to fill vacancies. As people sheltered in

place, the number of lease renewals increased, partially offsetting the lack of new tenants moving in. 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. Federal

interventions from enhanced unemployment benefits and other forms of direct relief for the multifamily mortgage market helped

lessen the impact of the COVID-19 pandemic on the multifamily sector in 2Q 2020. Many of those benefits are set to expire by

the end of July, and without additional support, and if the unemployment rate remains elevated, there could be a greater impact

to the multifamily sector in future periods. Multifamily delinquency rates could 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 Market Conditions and Economic Indicators.

Management's Discussion and Analysis Introduction

Freddie Mac 2Q 2020 Form 10-Q 2
Our allowance for credit losses 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 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 results of operations, perhaps significantly.

The ultimate success of these programs will depend on the duration and severity of the economic downturn. In addition, our

counterparty credit risk level has increased, particularly with respect to non-depository institutions and credit enhancement

providers, as a result of financial strains and liquidity pressures on our counterparties due to the COVID-19 pandemic. For

additional information, see MD&A - Risk Management - Credit Risk. 

While we continued to successfully transfer multifamily credit risk throughout 2Q 2020, our single-family CRT issuance amounts

declined significantly during 2Q 2020 due to the volatility in the CRT markets driven by the impact of the COVID-19 pandemic.

However, single-family CRT markets recovered substantially by the end of 2Q 2020 and demonstrated an ability to support new

issuances, and we successfully executed new single-family CRT offerings in early 3Q 2020. While 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, it is uncertain if there will be adequate demand for our single-family CRT transactions during the COVID-19

pandemic and shortly thereafter based on its potential effect on mortgage performance.

Our debt funding needs 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 2Q 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)

2Q19 3Q19 4Q19 1Q20 2Q20

$3.2 $3.4

$4.6

$2.4

$4.1

$1.5 $1.7

$2.6

$0.2

$1.8 $1.8 $1.8

$2.4

$0.6

$1.9

n Comprehensive income was $1.9 billion for 2Q 2020, an increase of $0.1 billion, or 6%, from 2Q 2019, driven by higher net

revenues, partially offset by higher expected credit losses due to the COVID-19 pandemic.

n Net revenues increased $0.9 billion compared to 2Q 2019, primarily due to higher guarantee fee income and higher

investment gains (losses), net. 
Total Equity 

(In billions)

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

$4.8

$6.7

$9.1

$9.5

$11.4

Management's Discussion and Analysis Introduction

Freddie Mac 2Q 2020 Form 10-Q 4

n Total equity was $11.4 billion as of June 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

$81.8 billion on March 31, 2020 to $82.2 billion on June 30, 2020 based on the $0.4 billion increase in our Net Worth

Amount during 1Q 2020, and will increase to $84.1 billion on September 30, 2020 based on the $1.9 billion increase in our

Net Worth Amount during 2Q 2020.

Housing Market Support

Housing Market Support 

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

(In thousands)

2Q19 3Q19 4Q19 1Q20 2Q20

253 299 243 217 218

149

215 310 309

194 609

596

296

810

170

723

111

637

202

1,029

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 $253.5 billion in liquidity to the mortgage market in 2Q 2020,

which enabled the financing of 1.0 million home purchases, refinancings, or rental units. Single-family refinance activity

increased significantly during 2Q 2020, as borrowers took advantage of record low mortgage interest rates. In addition,

multifamily new business activity increased during 2Q 2020, due to strong demand for multifamily loan products given the low

interest-rate environment.
Portfolio Balances

Management's Discussion and Analysis Introduction

Freddie Mac 2Q 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)

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

$1,613 $1,654 $1,701 $1,739 $1,794

$322

$307

$293

$281

$267

$249

$2,184

$260

$2,221

$271

$2,265

$275

$2,295

$281

$2,342

Investments Portfolio

Mortgage-related investments portfolio

Other investments portfolio

(UPB in billions)

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

$219 $222 $213 $211 $194

$83

$302

$90

$312

$103

$316

$123

$334

$155

$349

n Our total guarantee portfolio grew $158 billion, or 7%, from June 30, 2019 to June 30, 2020, driven by a 7% increase in our

single-family credit guarantee portfolio and a 13% increase in our multifamily guarantee portfolio.

l The growth in our single-family credit guarantee portfolio continued in 2Q 2020 driven by an increase in U.S. singlefamily mortgage debt outstanding and a higher GSE share of the total market. 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 2Q 2020, primarily driven by strong loan purchase

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

n Our total investments portfolio at June 30, 2020 increased compared to June 30, 2019, primarily due to an increase in our

other investments portfolio driven by higher near-term cash needs for a higher expected single-family cash loan purchase

forecast, coupled with upcoming debt maturities and anticipated calls of other debt. In addition, our custodial trust account

balance increased due to higher loan prepayments. In February 2019, FHFA directed us to maintain the mortgage-related

investments portfolio at or below $225 billion at all times.
Credit Risk Transfer

Management's Discussion and Analysis Introduction

Freddie Mac 2Q 2020 Form 10-Q 6

Single-Family Credit Guarantee Portfolio with Credit Enhancement 

UPB Percentage

(UPB in billions)

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

$1,084

$1,122 $1,121

$1,172

$1,103

56% 57% 56%

58%

54%

Multifamily Mortgage Portfolio with Credit Enhancement

UPB Percentage

(UPB in billions)

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

$246 $255

$267 $269 $273

88% 86% 89% 89% 87%

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 54% and 87%, respectively, as of June 30, 2020. For additional information, see 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.

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.ÄFHFA

is seeking comments on the re-proposed capital rule through August 31, 2020. The re-proposed capital rule, if adopted, would

significantly increase our capital requirements and could affect our business strategies, perhaps significantly. For additional

information regarding the re-proposed capital rule, see MD&A - Regulation and Supervision - Legislative and

Regulatory Developments - FHFA Re-Proposed Capital Rule for the Enterprises.

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 also 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 2Q 2020 Form 10-Q 7

Draw Requests From and Dividend Payments to Treasury

At June 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 and June 30, 2020. The amount of available funding remaining under the Purchase Agreement was $140.2

billion at June 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 2Q20 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 2Q 2020 Form 10-Q 8

Interest Rates(1)

30-year PMMS SOFR

3-month LIBOR 10-year LIBOR

Quarterly Ending Rates

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

4.06%

3.73% 3.64% 3.74%

3.50%

3.13%

2.41% 2.40%

2.19%

1.55%

0.65%

0.08%

2.65%

2.30%

2.09%

1.91%

1.45%

0.30%

2.41%

1.96%

1.57%

1.89%

0.72% 0.64%

(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 continued to decline and remained at or

near record lows during 2Q 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)

2Q19 3Q19 4Q19 1Q20 2Q20

159,000 203,000 210,000

(303,000)

(4,429,000)

3.7% 3.5% 3.5% 4.4%

11.1%

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.
Single-Family Housing and Mortgage Market Conditions

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 2Q 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

2Q19 3Q19 4Q19 1Q20 2Q20

5,293 5,410 5,420 5,483

4,320

663

5,956

698

6,108

711

6,131

701

6,184

676

4,996

2.5%

0.3% (0.1%)

2.4%

1.2%

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

House Price Index.

U.S. Single-Family Mortgage Originations

(UPB in billions)

2Q19 3Q19 4Q19 1Q20 2Q20

$555

$695

$725

$670

$865

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 1.2% during 2Q

2020, compared to an increase of 2.5% during 2Q

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

in 2020 and 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 decline in U.S. singlefamily 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 $865 billion in 2Q 2020 from $555 billion

in 2Q 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

during the second half of 2020, before declining in

2021.
Multifamily Housing and Mortgage Market Conditions

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 2Q 2020 Form 10-Q 10

Apartment vacancy rates

Change in effective rents

Apartment Vacancy Rates and Change in Effective Rents

2Q19 3Q19 4Q19 1Q20 2Q20

4.6% 4.6% 4.7% 4.8% 4.8%

1.5% 1.1%

0.5% 0.4%

(0.4)%

Source: Reis. 

Apartment Completions and Net Absorption

Completions Net absorption

(Units in thousands)

2Q19 3Q19 4Q19 1Q20 2Q20

54

57

50

38

24

59

53

33

24

Source: Reis. 2Q 2020 net absorption data is not yet available.

n Completions in 2Q 2020 totaled nearly 24,000 units,

one of the lowest levels over the past several years,

due to the COVID-19 pandemic slowing construction.

Despite low absorptions, the vacancy rate remained

unchanged from 1Q 2020 at 4.8% 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 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 0.4% in 2Q 2020, the first decline since 2009.

Annual rents increased 1.5% but are expected to

decline given the weakening macroeconomy and labor

market.

 

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 lack of ability to move

and form new households, as well as economic

uncertainty for renter households, will make it difficult

to fill vacancies. As people sheltered in place, the

number of lease renewals increased, partially

offsetting the lack of new tenants moving in. Also, 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 will cause some

tenants to face financial hardships. Federal

interventions from enhanced unemployment benefits

and other forms of direct relief helped lessen the

impact of the COVID-19 pandemic on the multifamily

sector in the second quarter of 2020. However, as

many of those benefits are set to expire by the end of

July 2020, without additional support, and if the

unemployment rate remains elevated, there could be a

greater impact to the multifamily sector in future

periods.
Mortgage Debt Outstanding

Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac 2Q 2020 Form 10-Q 11

Single-Family Mortgage Debt Outstanding 

U.S. single-family mortgage debt outstanding

Freddie Mac share

(UPB in billions)

1Q19 2Q19 3Q19 4Q19 1Q20

$10,899 $10,988 $11,090 $11,159 $11,222

18% 18% 18% 18% 18%

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

 Multifamily Mortgage Debt Outstanding

U.S. multifamily mortgage debt outstanding

Freddie Mac share

(UPB in billions)

1Q19 2Q19 3Q19 4Q19 1Q20

$1,502 $1,530

$1,577 $1,615 $1,639

18% 18% 18% 18% 18%

Source: Federal Reserve Financial Accounts of the United States of America. 2Q

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

n During 2Q 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 Up until 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 2Q 2020 Form 10-Q 12

Total mortgage market

Freddie Mac

Single-Family Serious Delinquency Rates

2Q19 3Q19 4Q19 1Q20 2Q20

1.95% 1.81% 1.76% 1.67%

0.63% 0.61% 0.63% 0.60%

2.48%

Source: National Delinquency Survey from the Mortgage Bankers Association.

2Q 2020 total mortgage market rate is not yet available.

Freddie Mac

Multifamily CMBS market

FDIC insured institutions

ACLI investment bulletin

Multifamily Delinquency Rates

2Q19 3Q19 4Q19 1Q20 2Q20

0.03% 0.04%

0.08% 0.08% 0.10%

1.11% 1.13%

0.91%

1.05%

1.56%

0.13% 0.12% 0.11% 0.12%

0.09% 0.09% 0.08% 0.08%

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 2Q 2020 delinquency rates for FDIC insured

institutions and ACLI investment bulletin are not yet available.

n Our single-family serious delinquency rates are based

on the number of loans in our single-family guarantee

portfolio that are past due as reported to us by our

servicers. 

n We report single-family loans in forbearance as

delinquent during the forbearance period to the extent

that payments are past due based on the loan's

original contractual terms, irrespective of the

forbearance agreement. 

n Our single-family serious delinquency rate was higher

as of June 30, 2020 compared to June 30, 2019 driven

by an increase in loans in forbearance due to the

COVID-19 pandemic. However, 52% of the seriously

delinquent loans at June 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 2Q 2020 multifamily delinquency rate remained

low compared to other market participants, ending the

quarter at 10 basis points, primarily due to our priorapproval underwriting approach. 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.

Loans in forbearance are therefore not included in our

multifamily delinquency rates if the borrower is in

compliance with the forbearance agreement. See Risk

Management - Credit Risk - Multifamily

Mortgage Credit Risk for additional information on

our delinquency and forbearance rates.

n Multifamily delinquency rates could 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.
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 2Q 2020 Form 10-Q 13

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

Change Change

(Dollars in millions) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Net interest income $2,876 $2,927 ($51) (2)% $5,661 $6,080 ($419) (7)%

Guarantee fee income 469 280 189 68 846 570 276 48

Investment gains (losses), net 670 (138) 808 586 (165) (651) 486 75

Other income (loss) 134 143 (9) (6) 229 126 103 82

Net revenues 4,149 3,212 937 29 6,571 6,125 446 7

Benefit (provision) for credit losses (705) 160 (865) (541) (1,938) 295 (2,233) (757)

Credit enhancement expense (233) (177) (56) (32) (464) (339) (125) (37)

Expected credit enhancement

recoveries 221 38 183 482 688 42 646 1,538

REO operations expense (14) (81) 67 83 (99) (114) 15 13

Credit-related expense (731) (60) (671) (1,118) (1,813) (116) (1,697) (1,463)

Administrative expense (601) (619) 18 3 (1,188) (1,197) 9 1

Temporary Payroll Tax Cut Continuation

Act of 2011 expense (442) (399) (43) (11) (874) (789) (85) (11)

Other expense (140) (236) 96 41 (243) (360) 117 33

Operating expense (1,183) (1,254) 71 6 (2,305) (2,346) 41 2

Income (loss) before income tax

(expense) benefit 2,235 1,898 337 18 2,453 3,663 (1,210) (33)

Income tax (expense) benefit (458) (392) (66) (17) (503) (750) 247 33

Net income (loss) 1,777 1,506 271 18 1,950 2,913 (963) (33)

Total other comprehensive income (loss),

net of taxes and reclassification 161 320 (159) (50) 610 578 32 6

Comprehensive income (loss) $1,938 $1,826 $112 6 % $2,560 $3,491 ($931) (27)%
Net Revenues

Net Interest Income

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 2Q 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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Guarantee portfolio net interest income:

Contractual net interest income $1,054 $904 $150 17 % $2,179 $1,808 $371 21 %

Net interest income related to the Temporary

Payroll Tax Cut Continuation Act of 2011 454 389 65 17 883 767 116 15

Amortization 748 475 273 57 1,300 957 343 36

Total guarantee portfolio net interest income 2,256 1,768 488 28 4,362 3,532 830 23

Investments portfolio net interest income:

Contractual net interest income 1,460 1,603 (143) (9) 2,893 3,139 (246) (8)

Amortization (178) (142) (36) (25) (342) (270) (72) (27)

Interest expense related to CRT debt (187) (289) 102 35 (427) (576) 149 26

Total investments portfolio net interest

income 1,095 1,172 (77) (7) 2,124 2,293 (169) (7)

Income (expense) from hedge accounting (475) (13) (462) (3,554) (825) 255 (1,080) (424)

Net interest income $2,876 $2,927 ($51) (2)% $5,661 $6,080 ($419) (7)%

Key Drivers:

n Guarantee portfolio contractual net interest income 

l 2Q 2020 vs. 2Q 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 loan portfolio.

n Guarantee portfolio amortization

l 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019 - Increased primarily due to income from upfront fees due to an

increase in the liquidation rate, partially offset by higher loan premium amortization.

n Investments portfolio contractual net interest income 

l 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019 - Decreased primarily due to the lower interest rate environment,

coupled with a change in our investment mix as the other investments portfolio represented a larger percentage of our

total investments portfolio.

n Investments portfolio amortization

l 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019 - Expense increased primarily due to the change in our investment

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

n Interest expense related to CRT debt

l 2Q 2020 vs. 2Q 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 2Q 2020 vs. 2Q 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.

l YTD 2020 vs. YTD 2019 - Shifted to expense primarily due to amortization of hedge accounting related basis

adjustments and an unfavorable earnings mismatch, partially offset by 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 2Q 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

2Q 2020 2Q 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 $18,656 $3 0.06 % $8,406 $46 2.16 %

Securities purchased under agreements to resell 95,243 30 0.13 55,731 350 2.52

Secured lending 4,574 20 1.83 2,325 24 4.09

Mortgage-related securities:

Mortgage-related securities 115,903 1,225 4.23 133,551 1,472 4.41

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (72,835) (672) (3.69) (87,156) (909) (4.17)

Total mortgage-related securities, net 43,068 553 5.14 46,395 563 4.85

Non-mortgage-related securities 31,632 84 1.05 20,928 121 2.31

Loans held by consolidated trusts(1) 1,992,498 14,260 2.86 1,868,648 16,377 3.51

Loans held by Freddie Mac(1) 88,112 766 3.48 86,716 981 4.53

Total interest-earning assets 2,273,783 15,716 2.76 2,089,149 18,462 3.53

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

FreddieÄMac 2,024,487 (12,647) (2.50) 1,894,064 (14,605) (3.08)

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (72,836) 672 3.69 (87,156) 909 4.17

Total debt securities of consolidated trusts held by third

parties 1,951,651 (11,975) (2.45) 1,806,908 (13,696) (3.03)

Other debt:

Short-term debt 101,989 (130) (0.51) 78,057 (484) (2.46)

Long-term debt 195,573 (735) (1.50) 198,009 (1,355) (2.73)

Total other debt 297,562 (865) (1.16) 276,066 (1,839) (2.65)

Total interest-bearing liabilities 2,249,213 (12,840) (2.28) 2,082,974 (15,535) (2.98)

Impact of net non-interest-bearing funding 24,570 Å 0.02 6,175 Å 0.01

Total funding of interest-earning assets 2,273,783 (12,840) (2.26) 2,089,149 (15,535) (2.97)

Net interest income/yield $2,876 0.50 % $2,927 0.56 %

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $1.2 billion and $749 million for loans held by consolidated trusts

and $20 million and $23 million for loans held by Freddie Mac during 2Q 2020 and 2Q 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 $15,444 $24 0.31% $7,756 $84 2.15%

Securities purchased under agreements to resell 83,767 291 0.69 51,478 647 2.51

Secured lending 4,127 46 2.22 1,946 40 4.09

Mortgage-related securities:

Mortgage-related securities 123,312 2,583 4.19 133,738 2,933 4.39

Extinguishment of debt securities of consolidated trusts held by

Freddie Mac (79,278) (1,501) (3.79) (85,933) (1,804) (4.20)

Total mortgage-related securities, net 44,034 1,082 4.92 47,805 1,129 4.72

Non-mortgage-related securities 30,124 207 1.37 20,168 244 2.42

Loans held by consolidated trusts(1) 1,978,555 30,117 3.04 1,858,254 33,354 3.59

Loans held by Freddie Mac(1) 83,259 1,541 3.70 87,934 1,950 4.44

Total interest-earning assets 2,239,310 33,308 2.97 2,075,341 37,448 3.61

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

FreddieÄMac 2,005,837 (26,923) (2.68) 1,882,956 (29,481) (3.13)

Extinguishment of debt securities of consolidated trusts held

by Freddie Mac (79,278) 1,501 3.79 (85,933) 1,804 4.20

Total debt securities of consolidated trusts held by third

parties 1,926,559 (25,422) (2.64) 1,797,023 (27,677) (3.08)

Other debt:

Short-term debt 110,605 (560) (1.00) 74,125 (920) (2.47)

Long-term debt 183,022 (1,665) (1.81) 198,973 (2,771) (2.78)

Total other debt 293,627 (2,225) (1.51) 273,098 (3,691) (2.70)

Total interest-bearing liabilities 2,220,186 (27,647) (2.49) 2,070,121 (31,368) (3.03)

Impact of net non-interest-bearing funding 19,124 Å 0.02 5,220 Å 0.01

Total funding of interest-earning assets 2,239,310 (27,647) (2.47) 2,075,341 (31,368) (3.02)

Net interest income/yield $5,661 0.50% $6,080 0.59%

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $2.0 billion and $1.3 billion for loans held by consolidated trusts and

$41 million and $39 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 2Q 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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Contractual guarantee fees $245 $222 $23 10% $485 $439 $46 10%

Guarantee obligation amortization 254 195 59 30 474 387 87 22

Guarantee asset fair value changes (30) (137) 107 78 (113) (256) 143 56

Guarantee fee income $469 $280 $189 68% $846 $570 $276 48%

Key Drivers:

n 2Q 2020 vs. 2Q 2019 and 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 2Q 2020 Form 10-Q 17

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

Change Change

(Dollars in millions) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Mortgage loans gains (losses) $1,046 $1,544 ($498) (32)% $2,218 $2,478 ($260) (10)%

Investment securities gains (losses) 65 358 (293) (82) 1,120 502 618 123

Debt gains (losses) 60 49 11 22 760 64 696 1,088

Derivative gains (losses) (501) (2,089) 1,588 76 (4,263) (3,695) (568) (15)

Investment gains (losses), net $670 ($138) $808 586 % ($165) ($651) $486 75 %

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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Gains (losses) on certain multifamily loan

purchase commitments $650 $613 $37 6 % $1,182 $1,003 $179 18 %

Gains (losses) on mortgage loans:

Single-family 103 453 (350) (77) 81 656 (575) (88)

Multifamily 293 478 (185) (39) 955 819 136 17

Total gains (losses) on mortgage loans 396 931 (535) (57) 1,036 1,475 (439) (30)

Mortgage loans gains (losses) $1,046 $1,544 ($498) (32)% $2,218 $2,478 ($260) (10)%

Key Drivers:

n 2Q 2020 vs. 2Q 2019 - Decreased primarily due to a lower volume of sales of single-family held-for-sale loans and lower

interest rate-related fair value gains, partially offset by gains due to higher quoted spreads in our multifamily business

resulting in higher margins on new loan commitments, as well as spread tightening on multifamily loans and commitments.

n YTD 2020 vs. YTD 2019 - Decreased primarily due to spread widening on multifamily loans and commitments, a lower

volume of sales of single-family held-for-sale loans, and lower-of-cost-or-fair-value losses on single-family held-for-sale

loans, partially offset by gains due to higher quoted spreads in our multifamily business resulting in higher margins on new

loan commitments.

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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Realized gains (losses) on sales of

available-for-sale securities $7 $33 ($26) (79)% $17 $67 ($50) (75)%

Realized and unrealized gains (losses) on

trading securities 84 358 (274) (77) 1,153 497 656 132

Other (26) (33) 7 21 (50) (62) 12 19

Investment securities gains (losses) $65 $358 ($293) (82)% $1,120 $502 $618 123 %
Key Drivers:

n 2Q 2020 vs. 2Q 2019 - Decreased primarily due to lower gains on trading securities as long-term interest rates declined

less in 2Q 2020 compared to 2Q 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 2Q 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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Fair value changes:

Debt securities of consolidated trusts ($1) ($2) $1 50% $3 ($4) $7 175%

Other debt (69) 69 (138) (200) 479 67 412 615

Total fair value changes (70) 67 (137) (204) 482 63 419 665

Gains (losses) on extinguishment of debt:

Debt securities of consolidated trusts 35 (42) 77 183 39 (49) 88 180

Other debt 95 24 71 296 239 50 189 378

Total gains (losses) on extinguishment

of debt 130 (18) 148 822 278 1 277 27,700

Debt gains (losses) $60 $49 $11 22% $760 $64 $696 1,088%

Key Drivers:

n 2Q 2020 vs. 2Q 2019 - Remained relatively flat as gains on extinguishments of debt were mostly offset by fair value losses

as a result of spread tightening 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 call volume.

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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Fair value changes:

Interest-rate swaps $1,000 ($1,709) $2,709 159% ($3,863) ($2,756) ($1,107) (40)%

Option-based derivatives (705) 648 (1,353) (209) 3,517 461 3,056 663

Futures (120) (779) 659 85 (2,448) (1,021) (1,427) (140)

Commitments (396) (216) (180) (83) (1,122) (312) (810) (260)

CRT-related derivatives 43 2 41 2,050 121 1 120 12,000

Other 6 7 (1) (14) 37 28 9 32

Total fair value changes (172) (2,047) 1,875 92 (3,758) (3,599) (159) (4)

Accrual of periodic cash settlements (329) (42) (287) (683) (505) (96) (409) (426)

Derivative gains (losses) ($501) ($2,089) $1,588 76% ($4,263) ($3,695) ($568) (15)%

Key Drivers:

n 2Q 2020 vs. 2Q 2019 - Long-term interest rates declined less in 2Q 2020 compared to 2Q 2019 which resulted in lower fair

value losses on pay-fixed interest rate swaps and futures, as well as on certain option-based derivatives, partially offset by

lower fair value gains on receive-fixed swaps.
n YTD 2020 vs. YTD 2019 - The decline in long-term interest rates during YTD 2020 resulted in higher fair value losses on

pay-fixed interest rate swaps, forward commitments to issue mortgage-related securities, and futures, partially offset by fair

value gains on receive-fixed swaps and certain option-based derivatives. These interest rate-related derivative losses offset

the interest rate-related gains on our mortgage loans and investment securities.

Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac 2Q 2020 Form 10-Q 19

Credit-Related Expense

Benefit (Provision) for Credit Losses

Our provision for credit losses relates primarily to single-family loans held-for-investment 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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Benefit (provision) for credit losses:

 Single-family ($624) $161 ($785) (488)% ($1,790) $297 ($2,087) (703)%

 Multifamily (81) (1) (80) (8,000) (148) (2) (146) (7,300)

Benefit (provision) for credit losses ($705) $160 ($865) (541)% ($1,938) $295 ($2,233) (757)%

Key Drivers:

n Single-family

l 2Q 2020 vs. 2Q 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. In total, we have

increased our allowance for credit losses for single-family mortgage loans held-for-investment by $2.1 billion as a

result of the forbearance plans 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.

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 2Q 2020 vs. 2Q 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 2Q 2020 vs. 2Q 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 2Q 2020 Form 10-Q 20

Expected Credit Enhancement Recoveries

Key Drivers:

n 2Q 2020 vs. 2Q 2019 and 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 2Q 2020 vs. 2Q 2019 - Decrease of $0.2 billion primarily driven by lower fair value gains on available-for-sale securities due

to a smaller decline in long-term interest rates in 2Q 2020 compared to 2Q 2019.

n YTD 2020 vs. YTD 2019 - Remained relatively flat.
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) June 30, 2020 December 31, 2019 $ %

Assets:

Cash and cash equivalents $7,605 $5,189 $2,416 47 %

Securities purchased under agreements to resell 100,525 56,271 44,254 79

Subtotal 108,130 61,460 46,670 76

Investment securities, at fair value 77,902 75,711 2,191 3

Mortgage loans, net 2,100,640 2,020,200 80,440 4

Accrued interest receivable, net 7,132 6,848 284 4

Derivative assets, net 1,402 844 558 66

Deferred tax assets, net 5,698 5,918 (220) (4)

Other assets 34,751 22,799 11,952 52

Total assets $2,335,655 $2,193,780 $141,875 6 %

Liabilities and Equity:

Liabilities:

Accrued interest payable $6,246 $6,559 ($313) (5)%

Debt 2,308,301 2,169,685 138,616 6

Derivative liabilities, net 839 372 467 126

Other liabilities 8,827 8,042 785 10

Total liabilities 2,324,213 2,184,658 139,555 6

Total equity 11,442 9,122 2,320 25

Total liabilities and equity $2,335,655 $2,193,780 $141,875 6 %

Key Drivers:

As of JuneÄ30, 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 near-term cash needs for upcoming debt maturities and anticipated calls of other debt and a higher

expected single-family cash loan purchase forecast. In addition, our custodial trust account balance increased due to

higher loan prepayments.

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 2Q 2020.

Management's Discussion and Analysis Consolidated Balance Sheets Analysis

Freddie Mac 2Q 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 2Q 2020 Form 10-Q 22

Single-Family Guarantee Multifamily Capital Markets

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

$953

$1,247

$1,407

$586

$751

$1,689

$1,337

$440

$591

$502

($174)

$1,063

$835

$889

$433

$1,826

$10

$1,848

$539

$2,448

$210

$622

$124

$1,938

$967

$3,491

$334

$2,560

 
Single-Family Guarantee

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

Freddie Mac 2Q 2020 Form 10-Q 23

Business Results

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

New Business Activity

UPB of Single-Family Loan Purchases and Guarantees by Loan

Purpose 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

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

$65 $76 $63 $55 $60

$111 $115

$37

$58 $84 $83

$172 $61

$255

44 45

48 49 48

43

48

$102

$134

$147 $138

$232

$172

$370

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

Number of Families Helped to Own a Home 

(In thousands)

Home purchase borrowers

Refinance borrowers

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

253 299 243 217 218

445 435

149

402

215

514

310

553

309

526

609

827

257

702

918

1,353

2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019

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

average mortgage interest rates in recent quarters. 

n The average guarantee fee rate charged on new acquisitions increased, 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. 

n Home sales fell in 2Q 2020 as a result of the COVID-19 pandemic. The housing market, however, has shown signs of

recovery, with purchase applications increasing significantly since early 2Q 2020 and mortgage rates at record lows. The

low mortgage rate environment, which led to a significant increase in mortgage refinance activity in the first half of 2020, is

expected to continue and result in high levels of mortgage refinance activity for full-year 2020, before declining in 2021.

However, due to the impact of the COVID-19 pandemic, we expect full-year home sales to fall in 2020 and then begin to

rebound in 2021. While house prices increased at a solid pace during 1Q 2020, full-year house price growth is expected to

slow in 2020 and 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

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

$1,613 $1,654 $1,701 $1,739 $1,794

$322

$1,935

$307

$1,961

$293

$1,994

$281

$2,020

$267

$2,061

$1,919 $1,942 $1,971

$2,006

$2,038

 

Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Average loan UPB

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

8.3 8.4 8.6 8.8 9.0

2.8 2.7 2.6 2.5 2.4

$175,000 $176,000 $178,000 $179,000 $181,000

11.1 11.1 11.2 11.3 11.4

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

Freddie Mac 2Q 2020 Form 10-Q 24

n The single-family credit guarantee portfolio increased at an annualized rate of approximately 7% between December 31,

2019 and June 30, 2020, driven by an increase in U.S. single-family mortgage debt outstanding and a higher GSE share of

the total market. 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 87% of the single-family credit

guarantee portfolio at June 30, 2020, compared to 85% at December 31, 2019. Our legacy and relief refinance singlefamily loan portfolio, which generally has a lower credit profile, continued to run off, declining to 13% of the single-family

credit guarantee portfolio at JuneÄ30, 2020, compared to 15% at December 31, 2019.

n The average portfolio Segment Earnings guarantee fee rate was 50 basis points, 39 basis points, 46 basis points, and 37

basis points during 2Q 2020, 2Q 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, driven by a higher prepayment rate and

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)

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

$41.7

$77.8

$42.5

$140.7

$0.6

$133.4

$141.3

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

$2.7

$3.2 $3.2

$5.1

$0.6

$5.9 $5.7

n During 2Q 2020, 2Q 2019, YTD 2020, and YTD 2019, 63%, 72%, 66%, and 70% 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 Our CRT issuance amounts declined significantly during 2Q 2020 due to the volatility in the CRT markets driven by the

impact of the COVID-19 pandemic. However, single-family CRT markets recovered substantially by the end of 2Q 2020

and demonstrated an ability to support new issuances, and we successfully executed new single-family CRT offerings in

early 3Q 2020. While 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, it is uncertain if there will be adequate demand for our singlefamily CRT transactions during the pandemic and shortly thereafter based on the potential impacts on mortgage

performance.

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 2Q 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

agreements, repayment plans, 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 below is

limited to loans in forbearance that are past due based on the loanÇs original contractual terms.

Completed Loan Workout Activity

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

Total single-family loan workouts

Number of loan workouts

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

11 10 11 11

111

26

122

$1.9 $1.7 $1.7 $1.8

$23.2

$4.5

$25.0

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

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

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

approximately 4,000 loans in a trial modification period, 426,000 forbearance agreements, and 2,000 repayment plans that

have been initiated but not completed as of June 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 COVID-19. 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 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019 - Our loan workout activity increased significantly primarily driven by

the increase in completed forbearance agreements related to the COVID-19 pandemic.

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

Freddie Mac 2Q 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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Guarantee fee income $2,528 $1,875 $653 35 % $4,621 $3,510 $1,111 32 %

Investment gains (losses), net 21 256 (235) (92) 458 262 196 75

Other income (loss) (83) 58 (141) (243) (68) 170 (238) (140)

Net revenues 2,466 2,189 277 13 5,011 3,942 1,069 27

Benefit (provision) for credit losses (752) 88 (840) (955) (1,974) 159 (2,133) (1,342)

Credit enhancement expense (399) (349) (50) (14) (810) (669) (141) (21)

Expected credit enhancement recoveries 219 38 181 476 658 42 616 1,467

REO operations expense (14) (86) 72 84 (101) (124) 23 19

Credit-related expense (946) (309) (637) (206) (2,227) (592) (1,635) (276)

Administrative expense (379) (400) 21 5 (751) (774) 23 3

Other expense (195) (277) 82 30 (346) (445) 99 22

Operating expense (574) (677) 103 15 (1,097) (1,219) 122 10

Segment Earnings (Losses) before income tax

(expense) benefit 946 1,203 (257) (21) 1,687 2,131 (444) (21)

Income tax (expense) benefit (193) (248) 55 22 (346) (436) 90 21

Segment Earnings (Losses), net of taxes 753 955 (202) (21) 1,341 1,695 (354) (21)

Total other comprehensive income (loss), net of tax (2) (2) Å Å (4) (6) 2 33

Total comprehensive income (loss) $751 $953 ($202) (21)% $1,337 $1,689 ($352) (21)%

Key Business Drivers: 

n 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019

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

amortization of hedge accounting related basis adjustments, driven by higher prepayments and a higher contractual

guarantee fee rate.

l Lower investment gains in 2Q 2020 primarily due to a lower volume of sales of held-for-sale loans. However,

investment gains increased during YTD 2020 primarily due to higher gains on STACR debt notes and ACIS, 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 higher lower-of-cost-or-fair-value losses related to held-for-sale loans.

l Other income (loss) shifted to a loss primarily due to higher non-cash premium/discount amortization expense driven

by timing differences between liquidations of the loans and liquidations of the securities backed by these 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 Credit enhancement expense increased primarily due to higher outstanding cumulative volumes of CRT transactions. 

l Expected credit enhancement recoveries increased 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 2Q 2020 Form 10-Q 27
Multifamily 

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 2Q 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)

2Q19 3Q19 4Q19 1Q20 2Q20 YTD 19 YTD 20

$17.7

$29.4

$17.5

$9.9

$20.2

$31.0 $30.1

$0.1

$0.1

$0.2

$0.1

$0.2 $0.1

193.9

295.6

171.0

111.2

201.9

342.4

313.1

$17.8

$29.5

$17.7

$10.0

$20.2

$31.2 $30.2

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 business 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 June 30, 2020, the total cumulative new business activity counting toward the cap was $47.6 billion.

Approximately 40% of this activity was mission-driven, affordable housing.

n New business activity increased in 2Q 2020 compared to 2Q 2019 due to strong demand for multifamily loan products

given the low interest-rate environment.

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

assets were $18.0 billion and $24.2 billion as of JuneÄ30, 2020 and JuneÄ30, 2019, respectively. The decline in the

outstanding commitment balance was primarily driven by a temporary decline in multifamily acquisition activity due to the

initial market uncertainty caused by the pandemic.

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

securitization pipeline decreased to 84% in 2Q 2020 from 92% in 2Q 2019. This was due to an increase in the issuance of

fully guaranteed securitizations as we continued to refine the disposition path for certain loan products. The purchase

activity in 2Q 2020, combined with market demand for our securities, will be a driver for our primary securitizations in the

second half of 2020.
Securitization, Guarantee, and Risk Transfer Activities

Securitization and Guarantee Activities

(UPB in billions)

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 2Q 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)

2Q19 3Q19 4Q19 1Q20 2Q20 YTD 19 YTD 20

$14.2

$19.5 $20.4

$10.9 $11.5

$27.1

$22.4

$1.8

$2.4

$2.6

$1.4 $0.9

$3.4

$2.3

$0.1

$0.1

$0.5 $0.4

$0.8

$0.9

37

45

41

46

43

37

44

$16.1

$22.0

$23.0

$12.8 $12.8

$31.3

$25.6

n Total securitization UPB decreased during 2Q 2020 and YTD 2020 compared to 2Q 2019 and YTD 2019, primarily due to a

lower held-for-sale loan portfolio available for securitization during the first half of 2020.

n Approximately 86% and 92% of total securitization UPB related to our primary securitizations during 2Q 2020 and 2Q

2019, respectively.

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 We further reduced our risk exposure through loan sales to whole loan funds of $0.2 billion and $0.5 billion in UPB during

2Q 2020 and 2Q 2019, respectively.

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

strategy. See Risk Management - Multifamily Mortgage Credit Risk - Transferring Credit Risk to Third-Party

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) June 30, 2020 December 31, 2019

Guarantee portfolio:

Primary securitizations $247,221 $240,134

Other securitizations 22,182 20,205

Other mortgage-related guarantees 11,149 10,514

Total guarantee portfolio 280,552 270,853

Mortgage-related investments portfolio:

Unsecuritized mortgage loans held-for-sale 21,873 18,954

Unsecuritized mortgage loans held-for-investment 11,039 10,831

Mortgage-related securities(1) 4,797 5,889

Total mortgage-related investments portfolio 37,709 35,674

Other investments(2) 2,829 2,945

Total multifamily portfolio 321,090 309,472

Add: Unguaranteed securities(3) 41,182 40,666

Less: Acquired mortgage-related securities(4) (4,660) (5,709)

Total multifamily market support $357,612 $344,429

Total units financed 4,370,534 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 2Q 2020 Form 10-Q 30

n Our total multifamily portfolio increased during 2Q 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 JuneÄ30, 2020, approximately 74% of our held-for-sale loans were fixed-rate, while the remaining 26% were floatingrate.

n As of June 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 June 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 2Q 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

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

$31.6 $32.4

$29.3 $29.0 $28.9

$33.3

$28.9

$8.5 $7.5

$6.9 $6.8 $6.7

$9.1

$6.8

$0.8 $1.9

$1.9 $1.7 $1.7

$0.6

$1.7

2.61%

2.80% 2.77% 2.87%

2.45% 2.39%

2.66%

$40.9 $41.8

$38.1 $37.5 $37.3

$43.0

$37.4

n 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019

l Net interest yield decreased in 2Q 2020 due to a decrease in prepayment income. Net interest yield increased during

YTD 2020 primarily due to lower funding costs and higher yields on interest-only securities.

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.
K Certificate Benchmark Spreads and Unrealized Spread-Related Fair Value Gains

(Losses) on Loans and Commitments

Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac 2Q 2020 Form 10-Q 32

Quarterly Ending K Certificate Benchmark Spreads

(In bps)

10-year fixed-rate spread (largest guaranteed

security)

7-year ARM spread (largest guaranteed

security)

1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

60

58

60

55

75

45

49

43

53

56

70

45

 Unrealized Spread-Related Fair Value Gains (Losses)

 (In millions)

Unrealized spread-related fair value changes

Ending UPB

2Q19 3Q19 4Q19 1Q20 2Q20

$14

$50 $34

($528)

$220

$30,438

$29,490

$21,570

$19,632

$24,504

n The valuations of held-for-sale loans and loan purchase commitments for which we have elected the fair value option are

affected by both changes in the K Certificate benchmark spreads and deal specific attributes. As the K Certificate

benchmark spreads change, we recognize fair value gains/(losses), which contribute to our earnings volatility. These fair

value adjustments are considered unrealized and subject to further spread movements until the asset is securitized or

otherwise disposed of and the fair value changes are realized. Spread tightening generally results in fair value gains, while

spread widening generally results in fair value losses.

n K Certificate benchmark spreads tightened during 2Q 2020, resulting in spread-related fair value gains on our held-for-sale

loans and commitments and mortgage-related securities. 
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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Net interest income $228 $266 ($38) (14)% $497 $513 ($16) (3)%

Guarantee fee income 442 293 149 51 855 580 275 47

Investment gains (losses), net 761 27 734 2,719 (90) 1 (91) (9,100)

Other income (loss) 51 28 23 82 88 57 31 54

Net revenues 1,482 614 868 141 1,350 1,151 199 17

Credit-related expense (84) (4) (80) (2,000) (127) (9) (118) (1,311)

Administrative expense (124) (120) (4) (3) (244) (232) (12) (5)

Other expense (9) (7) (2) (29) (14) (13) (1) (8)

Operating expense (133) (127) (6) (5) (258) (245) (13) (5)

Segment Earnings (Losses) before

income tax benefit (expense) 1,265 483 782 162 965 897 68 8

Income tax (expense) benefit (260) (100) (160) (160) (198) (184) (14) (8)

Segment Earnings (Losses), net of

taxes 1,005 383 622 162 767 713 54 8

Total other comprehensive income

(loss), net of tax 58 57 1 2 122 122 Å Å

Total comprehensive income

(loss) $1,063 $440 $623 142 % $889 $835 $54 6 %

Key Business Drivers:

n 2Q 2020 vs. 2Q 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, partially offset by higher yields on interest-only securities.

l Increase in guarantee fee income driven by lower fair value losses on our guarantee asset coupled with continued

growth in our multifamily guarantee portfolio.

l Increase in investment gains (net of other comprehensive income) primarily due to higher quoted spreads resulting in

higher 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

partially offset by higher yields on interest-only securities and lower funding costs.

l Increase in guarantee fee income driven by lower fair value losses on our guarantee asset coupled with continued

growth in our multifamily guarantee portfolio.

l Decrease in investment gains (net of other comprehensive income) primarily driven by spread-related fair value losses

on our held-for-sale loans and commitments and mortgage-related securities due to spread widening, partially offset

by higher quoted spreads resulting in higher margins on new loan commitments.

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 2Q 2020 Form 10-Q 33
Capital Markets

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

Freddie Mac 2Q 2020 Form 10-Q 34

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)

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

$173.1 $170.9 $168.4 $171.0

$146.8

$81.3

$254.4

$86.9

$257.8

$100.3

$268.7

$119.7

$290.7

$152.4

$299.2

 

Mortgage Investments Portfolio

Liquid

Securitization pipeline

Less liquid

(UPB in billions)

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

$118.4 $115.9 $119.2 $116.3

$84.1

$16.1 $20.8 $19.1 $26.3

$35.5

$38.6

$173.1

$34.2

$170.9

$30.1

$168.4

$28.4

$171.0

$27.2

$146.8

n The balance of our mortgage investments portfolio decreased by $21.6 billion from December 31, 2019 to JuneÄ30, 2020

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

Conservatorship and Related Matters - Managing Our Mortgage-Related Investments Portfolio for

additional details.

n The balance of our other investments portfolio increased by 51.9% due to higher near-term cash needs as of JuneÄ30,

2020 compared to December 31, 2019 primarily due to a higher expected single-family cash loan purchase forecast,

coupled with upcoming debt maturities and anticipated calls of other debt. In addition, our custodial trust account balance

increased due to higher loan prepayments.

n Our less liquid assets decreased by $2.9 billion from December 31, 2019 to June 30, 2020 primarily due to repayments,

sales, and securitizations. 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. We plan to cease purchasing LIBOR indexed floating-rate loans by the end of 2020

and will begin to phase out the issuance of LIBOR indexed floating-rate securitizations starting in 4Q 2020.
Net Interest Yield and Average Balances

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

Freddie Mac 2Q 2020 Form 10-Q 35

Net Interest Yield & Average Investments Portfolio Balances 

(Weighted average balance in billions) 

 

Mortgage-related securities

Other investments

Single-family unsecuritized loans

Net interest yield

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

$125.5 $126.0 $123.7 $124.7

$110.1

$125.2 $117.4

$86.6 $90.8

$107.1

$115.1 $148.4

$80.7

$131.7

$50.0

$52.2

$50.3

$46.7

$56.5

$49.2

$51.6

1.14%

0.74% 0.69% 0.71%

0.19%

1.18%

0.45%

$262.1

$269.0

$281.1

$286.5

$315.0

$255.1

$300.7

 

n 2Q 2020 vs. 2Q 2019 and YTD 2020 vs. YTD 2019

l Net interest yield decreased 95 basis points and 73 basis points in 2Q 2020 compared to 2Q 2019 and YTD 2020

compared to YTD 2019, respectively, 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 and comprehensive income for our Capital Markets segment.

Table 15 - Capital Markets Segment Financial Results

Change Change

(Dollars in millions) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

 Net interest income $152 $747 ($595) (80)% $661 $1,505 ($844) (56)%

 Investment gains (losses), net 206 (259) 465 180 (221) (295) 74 25

 Other income (loss) (234) (172) (62) (36) (435) (378) (57) (15)

Net revenues 124 316 (192) (61) 5 832 (827) (99)

 Administrative expense (98) (99) 1 1 (193) (191) (2) (1)

 Other expense (2) (5) 3 60 (11) (6) (5) (83)

Operating expense (100) (104) 4 4 (204) (197) (7) (4)

Segment Earnings (Losses) before

income tax (expense) benefit 24 212 (188) (89) (199) 635 (834) (131)

Income tax (expense) benefit (5) (44) 39 89 41 (130) 171 132

Segment Earnings (Losses), net of

taxes 19 168 (149) (89) (158) 505 (663) (131)

Total other comprehensive income

(loss), net of tax 105 265 (160) (60) 492 462 30 6

Total comprehensive income (loss) $124 $433 ($309) (71)% $334 $967 ($633) (65)%

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) 2Q 2020 2Q 2019 $ % YTD 2020 YTD 2019 $ %

Interest rate-related $0.2 ($0.2) $0.4 200% $0.5 ($0.1) $0.6 600%

Market spread-related 0.2 0.1 0.1 100 (0.1) 0.1 (0.2) (200)

Key Drivers:

n 2Q 2020 vs. 2Q 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 Increase in investment gains (losses), net primarily due to interest rate-related fair value gains coupled with active

management of our debt funding costs as long-term interest rates further declined during the 2020 periods as a result

of market volatility caused by the COVID-19 pandemic. The decrease in long-term interest rates resulted in fair value

gains on many of our investments in securities (some of which are recorded in other comprehensive income) partially

offset by derivative losses and amortization expense from previously deferred fair value hedge accounting basis

adjustments related to hedging company-wide interest-rate risk. See Risk Management - Market Risk for

additional information on the effect of market-related items on our comprehensive income.

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

Freddie Mac 2Q 2020 Form 10-Q 36
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 2Q 2020 Form 10-Q 37

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

The credit quality of our single-family loan purchases remained strong during the 2020 periods by historical standards. We

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

have announced temporary changes in our underwriting standards due to the COVID-19 pandemic, which may affect the

expected performance of loans purchased while these changes are in effect.

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 to August 31, 2020. These temporary measures include:

n Allowing flexibility in demonstrating a borrower's current employment status or the existence of a borrower's business;

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

funds due to current market volatility;

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; 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 August 31, 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.

Additionally, we announced in April 2020 that we would temporarily purchase certain single-family mortgage loans that have

entered into forbearance 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 these temporary changes, see MD&A - Introduction - COVID-19 Pandemic Response Efforts. 

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 38

The graphs below show the credit profile of the single-family loans we purchased or guaranteed.

Weighted Average Original LTV Ratio

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

77% 77% 75% 74% 72%77%

73%

 Weighted Average Original Credit Score (1)

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

750 752 752 752 758 749 756

(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

2Q 2020 2Q 2019 YTD 2020 YTD 2019

(Dollars in millions) Amount % of Total Amount % of Total Amount % of Total Amount % of Total

30-year or more amortizing fixed-rate $182,193 78% $89,915 88% $296,444 80% $151,093 88%

20-year amortizing fixed-rate 11,328 5 2,442 2 17,425 5 3,883 2

15-year amortizing fixed-rate 36,371 16 7,977 8 53,771 14 13,577 8

Adjustable-rate 1,932 1 1,713 2 2,581 1 3,530 2

FHA/VA and other governmental 46 Å 29 Å 75 Å 54 Å

Total $231,870 100% $102,076 100% $370,296 100% $172,137 100%

Percentage of purchases

DTI ratio > 45% 10% 14% 12% 15%

Property type:

Detached single-family houses 63 59 63 59

Townhouse 30 32 30 32

Condominium or co-op 7 9 7 9

Occupancy type:

Primary residence 94 91 93 91

Second home 3 4 3 4

Investment property 3 5 4 5

Loan purpose:

Purchase 26 64 31 64

Cash-out refinance 18 18 19 19

Other refinance 56 18 50 17
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 2Q 2020 Form 10-Q 39

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. The COVID-19 pandemic has caused significant

volatility in the single-family CRT markets. As a result, our CRT issuance amounts declined significantly during 2Q 2020. See

MD&A - Introduction - COVID-19 Pandemic Response Efforts - Business Outlook for additional information.

Table 18 - Single-Family Credit Guarantee Portfolio CRT Issuance

Issuance 2Q 2020 Issuance 2Q 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 $17,682 $174 $404 $578 $25,286 $419 $617 $1,036

Insurance/reinsurance 35,439 140 236 376 45,413 245 427 672

Subordination Å Å Å Å 3,105 220 303 523

Lender risk-sharing 246 188 Å 188 7,858 211 241 452

Less: UPB with more than

one type of CRT activity (52,748) (174) (404) (578) (39,986) Å Å Å

Total CRT Activities $619 $328 $236 $564 $41,676 $1,095 $1,588 $2,683

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 $150,253 $1,214 $3,071 $4,285 $100,135 $1,001 $2,277 $3,278

Insurance/reinsurance 133,197 361 869 1,230 110,643 520 1,038 1,558

Subordination 1,688 118 59 177 5,008 335 382 717

Lender risk-sharing 6,453 390 189 579 11,918 211 369 580

Less: UPB with more than

one type of CRT activity (150,253) (174) (404) (578) (94,353) (60) (220) (280)

Total CRT Activities $141,338 $1,909 $3,784 $5,693 $133,351 $2,007 $3,846 $5,853

(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 JuneÄ30, 2020 and December 31, 2019. 

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

Outstanding as of June 30, 2020

Protected

UPB(1)

Percentage of

Single-Family Credit

Guarantee Portfolio Maximum Coverage(2)

(Dollars in millions) Total Total First Loss(3) Mezzanine Total

Primary mortgage insurance $426,954 21% $108,100 $Å $108,100

STACR 826,699 40 7,084 17,794 24,878

Insurance/reinsurance 843,713 41 2,810 6,757 9,567

Subordination 40,483 2 2,705 2,656 5,361

Lender risk-sharing 11,731 1 5,137 191 5,328

Other 761 Å 756 Å 756

Less: UPB with multiple CRT and/or other credit

enhancements (1,047,706) (51) Å Å Å

Single-family credit guarantee portfolio with

credit enhancement 1,102,635 54 126,592 27,398 153,990

Single-family credit guarantee portfolio without

credit enhancement 958,150 46 Å Å Å

Total $2,060,785 100% $126,592 $27,398 $153,990

Outstanding as of December 31, 2019

Protected

UPB(1)

Percentage 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 $Å $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 Å 1,051 Å 1,051

Less: UPB with multiple CRT and/or other credit

enhancements (1,058,402) (52) Å Å Å

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 Å Å Å

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 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 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 $154.0 billion and $155.1 billion on our single-family credit guarantee portfolio as of

June 30, 2020 and December 31, 2019, respectively. CRT transactions provided 29.3% and 29.8% of the outstanding

maximum coverage on those dates. 

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 40
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

June 30, 2020 December 31, 2019

(Percentage of portfolio based on UPB) % of Portfolio SDQ Rate % of Portfolio SDQ Rate

Credit-enhanced

 Primary mortgage insurance 21% 3.39% 21% 0.79%

 Other 44 2.81 55 0.40

Non-credit-enhanced 48 2.16 45 0.70

Total N/A 2.48 N/A 0.63

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 41

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

June 30, 2020 December 31, 2019

(Dollars in millions) UPB(1)

Percentage of

UPB with Credit

Enhancement UPB(1)

Percentage of

UPB with Credit

Enhancement

Year of Loan Origination

 2020 $306,696 24% N/A N/A

 2019 377,076 54 $383,003 40%

 2018 167,888 81 221,712 81

 2017 199,993 77 242,605 77

 2016 242,357 70 277,762 71

 2015 and prior 766,347 43 869,043 44

Total $2,060,357 52 $1,994,125 55

(1) Excludes loans underlying certain securitization products for which loan-level data is not available.

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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Credit enhancement expenses:(1) 

Credit enhancement expense ($230) ($175) ($455) ($332)

Interest expense related to CRT debt (182) (277) (414) (552)

 Estimated reinvestment income from proceeds of CRT debt issuance 13 103 59 215

Single-family credit enhancement expenses (399) (349) (810) (669)

Single-family expected credit enhancement recoveries 219 38 658 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 June 30,

2020 and December 31, 2019, respectively.

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 Liquidity and Capital Resources - Capital Resources - Conservatorship Capital

Framework.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 42

Table 23 - Reduction in Conservatorship Credit Capital(1) as a Result of Certain CRT Transactions

June 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) $33.0 $16.3 $16.7 $32.0 $16.1 $15.9

Conservatorship credit capital reduced by CRT(3) (12.6) (12.6) Å (11.8) (11.8) Å

Conservatorship credit capital needed after CRT $20.4 $3.7 $16.7 $20.2 $4.3 $15.9

Reduction in conservatorship credit capital (%)(4) 38.2% 77.3% Ä% 36.9% 73.3% Ä%

UPB $2,061 $917 $1,144 $1,994 $945 $1,049

% 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 June 30, 2020 was largely unchanged

from the CCF as of December 31, 2019. The conservatorship credit capital figures as of June 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 June 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 COVID-19. The CARES Act requires our servicers to

report to credit bureaus that loans in mortgage 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 mortgage 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 July 25, 2020.

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 loan's original contractual terms, irrespective of the

forbearance agreement. Single-family servicers are not 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 remain in current status.ÄEffective 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 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 2Q 2020 Form 10-Q 43

Table 24 - Single-Family Allowance for Credit Losses Activity

Å(Dollar in millions) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Beginning balance(1) $6,347 $5,582 $5,233 $6,176

(Benefit) provision for credit losses 623 (161) 1,789 (297)

Charge-offs (121) (244) (285) (849)

Recoveries collected 36 128 124 234

Other 31 21 55 62

Ending balance $6,916 $5,326 $6,916 $5,326

Components of ending balance of allowance for credit losses:

Mortgage loans held-for-investment $6,482 $5,280

Advances of pre-foreclosure costs 323 N/A

Accrued interest receivable 57 N/A

Off-balance-sheet credit exposures 54 46

 Total $6,916 $5,326

As a percentage of our single-family credit guarantee portfolio 0.34% 0.27%

(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. 

Table 25 - Single-Family Credit Guarantee Portfolio Credit Performance Metrics

(Dollars in millions) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Charge-offs $121 $244 $285 $849

Recoveries collected (36) (128) (124) (234)

Charge-offs, net 85 116 161 615

REO operations expense 14 81 99 114

Total credit losses $99 $197 $260 $729

Total credit losses (in bps) 1.9 3.6 3.2 7.5

Recoveries from (gains) losses on loan sales $2 $Å ($27) $Å

Recoveries collected under freestanding credit enhancements and write-offs of CRT debt (5) (7) (8) (7)

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 June 30, 2020, 25% of the allowance for credit losses for single-family loans related to interest-rate concessions

provided to borrowers as part of loan modifications. 

n Most of our modified single-family loans, including TDRs, were current and performing at June 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. In addition, our sales of reperforming loans will decrease these allowances for credit losses. However, the

COVID-19 pandemic is likely to cause some borrowers to have difficulty making their monthly payments under the modified

terms, and our ability to sell reperforming loans at acceptable prices has been negatively affected by the pandemic.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 44

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

COVID-19 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 active COVID-19-related 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. 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

June 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) $29,081 $11,000 $40,081 $32,188 $11,576 $43,764

 Non-accrual loans 11,475 5,326 16,801 6,529 4,654 11,183

Total TDRs and non-accrual loans $40,556 $16,326 $56,882 $38,717 $16,230 $54,947

Allowance for credit losses associated with:

 TDRs on accrual status $1,464 $9 $1,473 $2,452 $Å $2,452

 Non-accrual loans 609 143 752 597 Å 597

Total $2,073 $152 $2,225 $3,049 $Ä $3,049

Allowance as % of UPB:

 TDRs on accrual status 5% Å% 4% 8% Å% 6%

 Non-accrual loans 5 3 4 9 Å 5

Total 5 1 4 8 Ä 6
2Q 2020 2Q 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 $365 $230 $595 $595 $252 $847

 Recognized (179) (128) (307) (413) (157) (570)

Foregone interest income on TDRs and

non-accrual loans(2) $186 $102 $288 $182 $95 $277

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 $863 $446 $1,309 $1,170 $456 $1,626

 Recognized (559) (258) (817) (827) (272) (1,099)

Foregone interest income on TDRs and

non-accrual loans(2) $304 $188 $492 $343 $184 $527

(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 as of

June 30, 2020.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 45

The table below summarizes the UPB of single-family held-for-investment TDR loan activity.

Table 27 - Single-Family TDR Loan Activity

June 30, 2020 June 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 13,546 2,230 16,508 2,577

Repayments and reclassifications to held-for-sale (28,055) (4,657) (33,296) (5,764)

Foreclosure sales and foreclosure alternatives (1,120) (170) (2,537) (344)

Ending balance, as of June 30 233,553 33,026 270,930 38,723

Loans impaired upon purchase Å Å 2,331 150

Total impaired loans with an allowance recorded Ä Ä 273,261 38,873

Allowance for credit losses (1,839) (3,599)

Net investment, as of June 30 $31,187 $35,274

(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.

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 2.48% as of June 30, 2020 due to

an increase in the number of loans in forbearance related to the COVID-19 pandemic. However, 52% of the seriously delinquent

loans at June 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 June 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 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 06/30/2020 Six Months Ended 6/30/2020

87%

34%

13%

66%

 

 Serious Delinquency Rates

Core single-family loan portfolio

Legacy and relief refinance single-family loan

portfolio

Total

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

0.23% 0.24% 0.26% 0.26%

1.95% 1.82% 1.77% 1.84% 1.79%

4.44%

0.63% 0.61% 0.63% 0.60%

2.48%

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 46

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 increased compared to June 30, 2019 due to the increase in the number of

loans that are in forbearance related to the COVID-19 pandemic.

Percentage of Single-Family Loans One Month and Two Months Past Due 

One month past due Two months past due

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

1.43%

1.18%

1.26% 1.26%

1.47%

0.34% 0.32% 0.33% 0.30%

1.66%
The table below presents the UPB of single-family loans in forbearance by payment status and the number of single-family

loans in forbearance as a percentage of the total number of loans in our single-family credit guarantee portfolio by payment

status. This table includes only single-family loans in forbearance that are past due based on the loan's original contractual

terms.

Table 28 - Single-Family Loans in Forbearance by Payment Status

June 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

Single-family loans in forbearance $15,893 $31,675 $45,749 $93,317 $131 $85 $362 $578

As a percentage of our single-family credit

guarantee portfolio(1) 0.67% 1.28% 1.80% 3.75% 0.01% Å% 0.02% 0.03%

(1) Based on loan count.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 47

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

June 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 $1,794 751 754 74% 60% Å% Å%

Legacy and relief refinance single-family loan portfolio 267 711 694 83 50 2 7

Total $2,061 746 751 75 59 Ä 1

 Referenced footnotes are 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% Å% Å%

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 that are past due based on the

loan's original contractual terms.

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

 June 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 $93.3 720 695 79% 62% $0.6 691 588 82% 65%

June 30, 2020 December 31, 2019

(Dollars in billions) UPB As a Percentage of Total UPB As a Percentage of Total

Current LTV ratio:

 Ç 60 $40.4 43% $0.2 33%

 > 60 to 80 36.3 39 0.3 50

 > 80 to 100 16.0 17 0.1 17

 > 100 0.6 1 Å NM

Total $93.3 100% $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) 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 2Q 2020 Form 10-Q 48

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

June 30, 2020

CLTV ÇÅ80 CLTVÅ>Å80 to 100 CLTVÅ>Å100 All Loans

(Original credit score)

%

Portfolio

SDQ

Rate

%

Portfolio

SDQ

Rate(1)

%

Portfolio

SDQ

Rate(1)

%

Portfolio

SDQ

Rate

%

Modified

Core single-family loan portfolio:

<Ä620 0.3% 8.18% Å% NM Å% NM 0.3% 8.59% 3.6%

620 to 659 2.2 5.64 0.3 7.11% Å NM 2.5 5.80 2.0

ÉÄ660 71.2 1.71 13.0 2.34 Å NM 84.2 1.79 0.3

Not available Å NM Å NM Å NM Å NM NM

Total 73.7% 1.87 13.3% 2.52 Ä% NM 87.0% 1.95 0.4

Legacy and relief refinance single-family

loan portfolio:

<Ä620 1.0% 8.20 0.1% 14.66 Å% NM 1.1% 8.92 17.5

620 to 659 1.5 6.76 0.1 13.61 Å NM 1.6 7.32 16.1

ÉÄ660 9.5 3.22 0.5 8.64 0.2 11.97 10.2 3.47 5.9

Not available 0.1 6.34 Å NM Å NM 0.1 6.64 20.4

Total 12.1% 4.09 0.7% 10.44 0.2% 15.12 13.0% 4.44 8.3

Referenced footnotes are included after the next table.

December 31, 2019

CLTV ÇÅ80 CLTVÅ>Å80 to 100 CLTVÅ>Å100 All Loans

(Original credit score)

%

Portfolio

SDQ

Rate

%

Portfolio

SDQ

Rate(1)

%

Portfolio

SDQ

Rate(1)

%

Portfolio

SDQ

Rate

%

Modified

Core single-family loan portfolio:

<Ä620 0.3% 2.68% Å% NM Å% NM 0.3% 2.87% 3.5%

620 to 659 2.1 1.26 0.4 1.59% Å NM 2.5 1.30 1.9

ÉÄ660 69.8 0.20 12.6 0.26 Å NM 82.4 0.20 0.3

Not available 0.1 1.23 Å NM Å 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:

<Ä620 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

ÉÄ660 10.5 1.06 0.7 3.91 0.2 6.32 11.4 1.23 5.9

Not available 0.1 4.39 Å NM Å 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 June 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 JuneÄ30, 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 2Q 2020 Form 10-Q 49

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

June 30, 2020 December 31, 2019

(Dollars in billions) UPB CLTV

%

Modified SDQ Rate UPB CLTV

%

Modified SDQ Rate

Alt-A $19.8 59% 18.3% 7.70% $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 JuneÄ30,

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

June 30, 2020 December 31, 2019 Percent of Credit Losses

Percentage

of

Portfolio

Serious

Delinquency

Rate

Percentage

of

Portfolio

Serious

Delinquency

Rate YTD 2020 YTD 2019

Region(1)

West 30% 2.29% 30% 0.36% 6% 13%

Northeast 24 3.16 24 0.87 38 39

North Central 16 1.86 16 0.61 27 18

Southeast 16 2.77 16 0.73 20 24

Southwest 14 2.27 14 0.54 9 6

Total 100% 2.48 100% 0.63 100% 100%

State(2)

Illinois 4% 2.61 4% 0.85 14% 10%

Florida 6 3.53 6 0.77 11 16

New York 5 4.95 5 1.21 10 12

New Jersey 3 4.48 3 1.08 9 10

Ohio 3 1.86 3 0.69 5 3

All other 79 2.21 79 0.54 51 49

Total 100% 2.48 100% 0.63 100% 100%

(1) Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI,

MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).

(2) States presented based on those with the highest percentage of credit losses during YTD 2020.
Engaging in Loss Mitigation Activities

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 50

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 COVID-19. 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 COVID-19)

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 Flex 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 that are past due based

on the loan's original contractual terms.

Table 34 - Single-Family Loans in Forbearance Activity

(Loan count in thousands) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Beginning balance 15 4 3 5

New plans 526 3 541 8

 Exits (115) (3) (118) (9)

Ending balance 426 4 426 4

Total ending UPB (in millions) $93,317
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 $18.6 billion in UPB of single-family loans classified as held-for-sale at June 30, 2020, $5.6 billion related to loans that were

seriously delinquent.

We did not sell any seriously delinquent loans or reperforming loans during 2Q 2020 as our ability to sell such loans at

acceptable prices was negatively affected by the COVID-19 pandemic. However, the market for certain loans improved by the

end of 2Q 2020 and we successfully sold reperforming loans in early 3Q 2020. During 2Q 2019, we completed sales of $0.0

billion and $3.6 billion in UPB of seriously delinquent loans and reperforming loans, respectively.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 51

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 August 31, 2020, and this suspension period may be extended by FHFA, if necessary. As a result, our REO

ending inventory declined as of June 30, 2020. The table below presents a summary of our single-family REO activity. 

Table 35 - Single-Family REO Activity 

2Q 2020 2Q 2019 YTD 2020 YTD 2019

(Dollars in millions)

Number of

Properties Amount Number ofProperties Amount Number ofProperties Amount Number ofProperties Amount

Beginning balance Å REO 4,168 $474 6,714 $754 4,989 $565 7,100 $780

Additions 190 15 1,983 194 1,631 151 4,139 402

Dispositions (1,546) (159) (2,828) (282) (3,808) (386) (5,370) (516)

Ending balance Ä REO 2,812 330 5,869 666 2,812 330 5,869 666

Beginning balance, valuation allowance (17) (10) (10) (11)

Change in valuation allowance 9 4 2 5

Ending balance, valuation allowance (8) (6) (8) (6)

Ending balance Ä REO, net $322 $660 $322 $660
Multifamily Mortgage Credit Risk

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 52

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. 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

COVID-19 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

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

69% 69% 69% 69% 69% 67% 69%

 Weighted Average Original Debt Service Coverage Ratio

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

1.31 1.34 1.32

1.42

1.36 1.33

1.38

Managing Our Portfolio, Including Loss Mitigation Activities

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 COVID-19 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 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 2Q 2020 Form 10-Q 53

Table 36 - Current Credit Quality of Multifamily Loans Under a Forbearance Program

June 30, 2020

(Dollars in millions) UPB LTV > 80%(1) DSCR < 1.25(1)

Credit-enhanced(2) $7,680 $347 $3,425

Non-credit-enhanced 876 343 288

Total $8,556 $690 $3,713

Weighted average LTV(1) 63%

Weighted average DSCR(1) 1.47

(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 83.5% of the loans in forbearance by UPB are in securitizations with subordination, with forbearance requests

related to loans underlying our SB Certificate securitizations being the most common. The weighted average subordination level

of securitizations with subordination that have loans in forbearance was 14.4% as of June 30, 2020. 17.6% of loans in

forbearance are scheduled to mature prior to 2024. 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. 

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 delinquency rates, forbearance rates, and current expected credit losses for both credit-enhanced

and non-credit enhanced loans underlying our multifamily mortgage portfolio.

Table 37 - Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio

June 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate(1)

Current

Expected

Credit Losses UPB

Delinquency

Rate

Forbearance

Rate(1)

Credit-enhanced:

Subordination(2) $258,120 0.11% 2.46% $Å $251,008 0.09% Å%

Other(3) 14,806 0.17 2.57 69 16,069 0.06 Å

Total credit-enhanced 272,926 0.12 2.46 69 267,077 0.09 Ä

Non-credit-enhanced 40,149 0.02 2.18 125 33,091 Å Å

Total $313,075 0.10 2.43 $194 $300,168 0.08 Ä

(1) Forbearance rate includes loans in our forbearance program including loans in their repayment period. 

(2) 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.

(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 38 - Level of Subordination Outstanding

June 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate UPB

Delinquency

Rate

Forbearance

Rate

Less than 10% $10,534 0.02% 0.49% $2,094 0.04% Å%

10% or greater 247,586 0.12 2.54 248,914 0.09 Å

Total $258,120 0.11 2.46 $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 39 - Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement

June 30, 2020 December 31, 2019

(Dollars in millions) UPB

Delinquency

Rate

Forbearance

Rate

Current

Expected

Credit Losses UPB

Delinquency

Rate

Forbearance

Rate

Unsecuritized loans:

Held-for-sale $19,116 0.05% 1.51% N/A $15,930 0.01% Å%

Held-for-investment 9,887 Å 1.29 $80 9,408 Å Å

Securitization-related products 6,151 Å 7.47 28 3,656 Å Å

Other mortgage-related 4,995 Å Å 17 4,097 Å Å

Total $40,149 0.02 2.18 $125 $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 2Q 2020 Form 10-Q 54

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. However, despite our active monitoring and communication, as the effect

of COVID-19 continues to evolve, it is difficult to currently assess the impact on our financial results of increased 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 generally 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 (i) 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; (ii) the loan is in an active repayment plan or trial

period plan; or (iii) a payment deferral solution is in effect.

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. If the borrowers ultimately default, we will

reimburse the servicers for the advanced amounts upon foreclosure or a foreclosure alternative.

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 2Q 2020 Form 10-Q 55

Table 40 - Single-Family Credit Guarantee Portfolio Non-Depository Servicers

June 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% 15% 18% 13%

Other non-depository servicers 23 27 20 55

Total 41% 42% 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 June 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 41 - Single-Family Mortgage Insurers

June 30, 2020

(In millions) CreditÅRating(1) Credit Rating

Outlook(1) UPB Coverage

Arch Mortgage Insurance Company A- Negative $89,683 $22,819

Radian Guaranty Inc. (Radian) BBB+ Negative 84,396 21,063

Mortgage Guaranty Insurance Corporation (MGIC) BBB+ Negative 75,036 19,090

Genworth Mortgage Insurance Corporation BB+ Watch Neg 67,128 17,030

Essent Guaranty, Inc. BBB+ Negative 65,471 16,594

National Mortgage Insurance (NMI) BBB Negative 39,463 10,084

PMI Mortgage Insurance Co. (PMI) Not Rated N/A 2,505 626

Republic Mortgage Insurance Company (RMIC) Not Rated N/A 1,857 461

Triad Guaranty Insurance Corporation (Triad) Not Rated N/A 1,089 273

Others N/A N/A 326 60

Total $426,954 $108,100

(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 June 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. 
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 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 COVID-19 pandemic, our business resiliency risk has increased. We have instituted temporary operational

changes, such as shifting to remote work for more than 95% of our staff. We have not yet experienced significant operational or

technological issues associated with these operational changes. However, a prolonged period of remote work for us or our

counterparties or vendors, or any significant technological or infrastructure-related disruptions during this period of remote

work, could affect our ability to conduct normal business operations.

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. Our business resiliency and executive

crisis management teams have been resolving issues as they arise. A number of scenarios with various degrees of impact on

our resources and business operations have been in place with corresponding action plans that can be leveraged, if needed, as

the situation evolves. 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

We anticipate 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 have increased our 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 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, we expect our models to face significant challenges in accurately forecasting key inputs into our

financial projections. These can 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 will be 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.

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 56
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 2Q 2020 Form 10-Q 57

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 our estimate of the change in the value of our financial assets and liabilities from an

instantaneous shock to interest rates, assuming spreads are held constant and no rebalancing actions are undertaken.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 42 - PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve

June 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 $331 $4,320 $8,931 ($307) $4,840 $10,011

Guarantees(2) 171 (56) 124 (224) 351 706

Total Assets 502 4,264 9,055 (531) 5,191 10,717

Liabilities (5) (1,643) (3,297) 20 (1,563) (3,413)

Derivatives (488) (2,571) (5,610) 513 (3,646) (7,409)

Total 9 50 148 2 (18) (105)

PVS 9 50 148 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 43 - Duration Gap and PVS Results

2Q 2020 2Q 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 0.4 $12 $60 2.2 $102 $275

Minimum (0.6) Å Å (0.8) Å Å

Maximum 0.9 30 200 8.6 345 950

Standard deviation 0.3 8 49 2.7 120 310

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 0.4 $11 $61 1.2 $57 $147

Minimum (0.6) Å Å (0.8) Å Å

Maximum 1.5 30 236 8.6 345 950

Standard deviation 0.4 7 62 2.2 97 256

Management's Discussion and Analysis Risk Management

Freddie Mac 2Q 2020 Form 10-Q 58

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 44 - PVS-L Results Before Derivatives and After Derivatives

PVS-L (50 bps)

(In millions)

Before

Derivatives

After

Derivatives

Effect of

Derivatives

June 30, 2020 $2,620 $50 ($2,570)

December 31, 2019 3,628 Å (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 Consolidated Results of Operations and 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 June 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 2Q 2020 Form 10-Q 59

Table 45 - 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) June 30, 2020 June 30, 2019

Interest Rate Scenarios

Parallel yield curve shifts:

 +100 basis points $Å $0.1

 -100 basis points Å (0.1)

Non-parallel yield curve shifts - long-term interest rates:

 +100 basis points 0.3 0.8

 -100 basis points (0.3) (0.8)

Non-parallel yield curve shifts - short-term and medium-term interest rates:

 +100 basis points (0.3) (0.7)

 -100 basis points 0.3 0.7

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 with updated liquidity guidance establishing 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. These

requirements also include issuing sufficient long-term debt to reduce rollover risk. The updated liquidity guidance is more

stringent than our existing liquidity requirements and liquidity requirements of banks and other depository institutions, which

could result in higher funding costs in the future and may negatively affect our net interest income. In addition, the updated

liquidity guidance may impact the size and the allowable investments in our other investments portfolio. We must comply with

these updated liquidity requirements by no later than September 1, 2020.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 2Q 2020 Form 10-Q 60

Liquidity

Primary Sources of Liquidity

The following table lists the sources of our liquidity, the balances as of June 30, 2020, and a brief description of their

importance to Freddie Mac.

Table 46 - Liquidity Sources

Source Balance(1)

 (In billions)

Description

Liquidity

Ñ Other Investments Portfolio -

Liquidity and Contingency

Operating Portfolio

$95.5 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$88.3 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 47 - Other Investments Portfolio

June 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 $6.7 $0.9 $Å $7.6 $4.2 $0.9 $0.1 $5.2

Securities purchased under agreements

to resell 61.0 47.4 0.8 109.2 40.6 23.1 2.4 66.1

Non-mortgage related securities 27.8 Å 4.5 32.3 23.2 Å 3.9 27.1

Secured lending and other Å Å 6.5 6.5 Å Å 5.2 5.2

Total $95.5 $48.3 $11.8 $155.6 $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 $3.8 billion and $3.7 billion as of June 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 $5.1 billion and $2.6 billion as of June 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 2Q 2020 Form 10-Q 61

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 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 JuneÄ30, 2020 and a brief description of their importance

to Freddie Mac.

Table 48 - Funding Sources

Source Balance(1)

 (In billions)

Description

Funding

Ñ Other Debt $287.4 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

$2,020.9 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 shorter-term and callable debt to fund our business and manage

interest-rate risk. Generally, this funding mix is a less expensive method than relying more extensively on long-term debt.

However, our funding costs may increase due to an expected increase in term debt issuance to comply with new FHFA liquidity

guidance. 

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.
Table 49 - Other Debt Activity

2Q 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 $57,822 1.33% $Å Å% $60,830 1.67% $Å Å%

Issuances 37,989 0.22 Å Å 137,366 1.03 Å Å

Repurchases Å Å Å Å Å Å Å Å

Maturities (38,857) 1.53 Å Å (141,242) 1.60 Å Å

Ending Balance 56,954 0.45 Ä Ä 56,954 0.45 Ä Ä

Securities sold under 

agreements to repurchase

Beginning balance 14,305 0.16 Å Å 9,843 1.46 Å Å

Additions 239,297 (0.02) Å Å 538,976 0.60 Å Å

Repayments (244,938) (0.01) Å Å (540,155) 0.63 Å Å

Ending Balance 8,664 0.04 Ä Ä 8,664 0.04 Ä Ä

Callable debt

Beginning balance Å Å 84,869 1.92 1,000 2.36 94,152 2.03

Issuances Å Å 51,366 0.71 Å Å 80,455 1.10

Repurchases Å Å Å Å Å Å Å Å

Calls Å Å (46,947) 1.93 (1,000) 2.36 (83,049) 2.00

Maturities Å Å (2,507) 1.55 Å Å (4,777) 1.52

Ending Balance Ä Ä 86,781 1.21 Ä Ä 86,781 1.21

Non-callable debt

Beginning balance 40,313 2.07 90,295 2.21 39,407 2.31 62,228 2.86

Issuances Å Å 31,548 0.34 14,356 1.57 63,204 0.60

Repurchases (2,925) 2.10 Å Å (2,925) 2.10 Å Å

Maturities (16,177) 2.31 (11,260) 1.76 (29,627) 2.28 (14,849) 1.71

Ending Balance 21,211 1.87 110,583 1.72 21,211 1.87 110,583 1.72

STACR and SCR Debt(2)

Beginning balance Å Å 14,654 5.57 Å Å 15,497 5.55

Issuances Å Å 578 Å Å Å 578 1.62

Repurchases Å Å Å Å Å Å Å Å

Maturities Å Å (1,617) 3.08 Å Å (2,460) 3.34

Ending Balance Ä Ä 13,615 4.12 Å Å 13,615 4.12

 Total other debt 86,829 0.75% 210,979 1.66% 86,829 0.75% 210,979 1.66%

Offsetting arrangements (8,664) (8,664)

Total other debt, net $78,165 $210,979 $78,165 $210,979

(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 June 30, 2020, our aggregate indebtedness, calculated as the par value of other debt, was $289.3 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 primarily due to a higher expected single-family cash

loan purchase forecast, coupled with near-term cash needs for upcoming debt maturities and anticipated calls of other debt.

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 2Q 2020 Form 10-Q 62
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. 

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 2Q 2020 Form 10-Q 63

Contractual Maturity Date as of June 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

$121

$62

$44

$11

$28

$18 $14

Earliest Redemption Date as of June 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

$198

$53

$17

$Å $3

$13 $14

(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 $2,000.6 billion and

$1,940.5 billion of mortgage loans, which represented 85.7% and 88.1% of our total assets, as of June 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 $2,020.9 billion and $1,898.4 billion of debt securities of consolidated trusts,

which represented 87.5% and 87.1% of our total debt, as of June 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 (i) 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; (ii) the loan is in an active repayment

plan or trial period plan; or (iii) a payment deferral solution is in effect.
The table below shows the issuance and extinguishment activity for the debt securities of our consolidated trusts.

Table 50 - Activity for Debt Securities of Consolidated Trusts Held by Third Parties

(In millions) 2Q 2020 YTD 2020

Beginning balance $1,885,771 $1,854,802

Issuances:

New issuances to third parties 132,506 236,275

Additional issuances of securities 146,285 188,937

Total issuances 278,791 425,212

Extinguishments:

Purchases of debt securities from third parties (2,055) (6,072)

Debt securities received in settlement of secured lending (28,126) (42,891)

Repayments of debt securities (165,718) (262,388)

Total extinguishments (195,899) (311,351)

Ending balance 1,968,663 1,968,663

Unamortized premiums and discounts 52,203 52,203

Debt securities of consolidated trusts held by third parties $2,020,866 $2,020,866

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 2Q 2020 Form 10-Q 64

Cash Flows

Cash and cash equivalents (including restricted cash and cash equivalents) increased by $4.2 billion from June 30, 2019 to

June 30, 2020, primarily driven by an increase in proceeds from the issuance of debt due to higher near-term cash needs for

upcoming debt maturities and anticipated calls of other debt. In addition, we carried higher cash and cash equivalents at June

30, 2020 due to a higher expected single-family cash loan purchase forecast. 

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 $11.4 billion, no dividend is payable to Treasury for the quarter ending June 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 2Q 2020 and YTD 2020 

Table 51 - Net Worth Activity

(In millions) 2Q 2020 YTD 2020 (1)

Beginning balance $9,504 $8,882

Comprehensive income (loss) 1,938 2,560

Capital draw from Treasury Å Å

Senior preferred stock dividends declared Å Å

Total equity / net worth $11,442 $11,442

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 82,152 82,152

(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.
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 affect our business strategies, perhaps significantly. For additional information on the

re-proposed 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.

Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac 2Q 2020 Form 10-Q 65

Table 52 - Return on Conservatorship Capital (1)

(Dollars in billions) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Comprehensive income $1.9 $1.8 $2.5 $3.5

Conservatorship capital (average during the period)(2) 49.8 51.7 50.5 52.1

ROCC, based on comprehensive income(2) 15.6% 14.1% 10.1% 13.4%

(1) Average conservatorship capital and ROCC for 2Q 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 June 30, 2020 was largely unchanged from

the CCF as of June 30, 2019.

Our ROCC for 2Q 2020 compared to 2Q 2019 increased, primarily driven by a lower level of conservatorship capital needed,

resulting from 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, partially offset by a lower level of

conservatorship capital needed, resulting from 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 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.
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 is

primarily represented by the UPB of the underlying loans and securities, which was $305.1 billion and $296.5 billion at June 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 $54.3 billion and $27.4 billion at June 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 2Q 2020 Form 10-Q 66
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 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 single-family loans classified as held-for-investment 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 has resulted in a significant decline in our near term forecasted

house price growth rates compared to pre-pandemic estimates, although our forecast has improved since the end of 1Q 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.

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;

Management's Discussion and Analysis Critical Accounting Policies and Estimates

Freddie Mac 2Q 2020 Form 10-Q 67
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 2Q 2020 Form 10-Q 68
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 directed us to

maintain this portfolio at or below $225 billion at all times. In November 2019, FHFA directed us, by January 31, 2020, to

include 10% of the notional value of certain interest-only securities owned by Freddie Mac 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 $199.4 billion as of June 30, 2020, including $5.3 billion representing 10% of the notional amount of the interestonly securities we held as of June 30, 2020.

Table 53 - Mortgage-Related Investments Portfolio Details

June 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 $Å $35,493 $Å $35,493 $Å $19,144 $Å $19,144

Reperforming loans Å Å 23,517 23,517 Å Å 26,134 26,134

Total single-family unsecuritized loans Ä 35,493 23,517 59,010 Ä 19,144 26,134 45,278

Agency securities 84,113 Å 2,271 86,384 119,156 Å 2,518 121,674

Non-agency mortgage-related securities Å Ç 1,385 1,385 Å Å 1,458 1,458

Total Capital Markets segment -

Mortgage investments portfolio 84,113 35,493 27,173 146,779 119,156 19,144 30,110 168,410

Single-family Guarantee segment - Singlefamily unsecuritized seriously delinquent

loans Å Å 9,622 9,622 Å Å 8,589 8,589

Multifamily segment:

Unsecuritized loans Å 20,712 12,200 32,912 Å 18,531 11,254 29,785

Mortgage-related securities 4,199 Å 598 4,797 5,209 Å 680 5,889

Total Multifamily segment 4,199 20,712 12,798 37,709 5,209 18,531 11,934 35,674

Total mortgage-related investments

portfolio $88,312 $56,205 $49,593 $194,110 $124,365 $37,675 $50,633 $212,673

Percentage of total mortgage-related

investments portfolio 45% 29% 26% 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 $1.9 billion in UPB of single-family reperforming loans and $0.3 billion in UPB of seriously delinquent unsecuritized

single-family loans; 

n Securitizations of $2.6 billion in UPB of less liquid multifamily loans; and

n Transfers of $0.6 billion in UPB of less liquid multifamily loans to the securitization pipeline.

The less liquid assets in our mortgage-related investments portfolio increased in YTD 2020 and may continue to do so as we

purchase delinquent loans from securities after the forbearance period ends. 

Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac 2Q 2020 Form 10-Q 69
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 2Q 2020 and YTD 2020, we completed $250.9

billion and $398.5 billion, respectively, of new business purchases subject to this requirement and accrued $105 million and

$168 million, respectively, of related expense. We are prohibited from passing through these costs to the originators of the

loans that we purchase.

Proposed Affordable Housing Goals for 2021

On July 20, 2020, FHFA proposed its single-family and multifamily affordable housing goals for Freddie Mac for 2021. Due to

the economic uncertainty related to the COVID-19 pandemic, FHFA is proposing benchmarks for 2021 only, and those levels

will remain the same as they were for 2018-2020.

Our current and proposed affordable housing goal benchmark levels are set forth below.

Table 54 - Current and Proposed 2021 Affordable Housing Goal Benchmark Levels

Current 

Benchmark

Levels for 2020

Proposed

Benchmark

Levels for 2021

Single-family purchase money goals (Benchmark levels):

Low-income 24% 24%

Very low-income 6% 6%

Low-income areas 18% TBD

Low-income areas subgoal 14% 14%

Single-family refinance low-income goal (Benchmark level) 21% 21%

Multifamily low-income goal (In units) 315,000 315,000

Multifamily very low-income subgoal (In units) 60,000 60,000

Multifamily small property low-income subgoal (In units) 10,000 10,000

Duty to Serve Underserved Markets

In July 2020, FHFA announced that, due to the market disruption and uncertainty caused by the COVID-19 pandemic, it has

made temporary adjustments to the Duty to Serve program for 2020 and 2021 by amending the 2020 modification process and

extending our 2018-2020 Duty to Serve Underserved Markets Plan by one year to include 2021 activities and objectives.ÄFHFA

has instructed us to submit 2020 modification requests and proposed 2021 activities and objectives by September 15, 2020.

FHFA expects that Freddie MacÇs next three-year Duty to Serve Underserved Markets Plan, covering 2022-2024, will be due in

May 2021.

Management's Discussion and Analysis Regulation and Supervision

Freddie Mac 2Q 2020 Form 10-Q 70
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.Ä FHFA

is seeking comments on the re-proposed capital rule through August 31, 2020.Ä 

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.Ä 

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.

Proposed Rule to Extend Qualified Mortgage Definition

On June 22, 2020, the CFPB issued a proposed rule to extend the category of qualified mortgages that consists of loans that

are eligible for purchase or guarantee by either Freddie Mac or Fannie Mae until the effective date of final amendments to the

definition of a qualified mortgage in the ability-to-repay rule. This category of qualified mortgages is currently scheduled to

expire in January 2021. The CFPB also proposed amendments to the general qualified mortgage definition to replace the 43%

DTI limit with a price-based threshold, as measured by comparing a loanÇs annual percentage rate (APR) to the average prime

offer rate (APOR) for a comparable transaction. 

Derivative Margin Requirements

On July 1, 2020, FHFA and certain banking agencies (the Office of the Comptroller of the Currency, Board of Governors of the

Federal Reserve System, Federal Deposit Insurance Corporation, and Farm Credit Administration) published in the Federal

Register a rule extending the implementation deadlines for swap dealers, security-based swap dealers, major swap

participants, and major security-based swap participants to exchange collateral with their counterparties as initial margin for

swaps that are not centrally cleared. The Commodity Futures Trading Commission (CFTC) and regulators in other jurisdictions

whose rules are relevant to Freddie MacÇs derivatives trading relationships (as a result of direct application to Freddie MacÇs

counterparties) have similarly delayed implementation or are expected to do so. As a result, Freddie Mac now anticipates that

our OTC derivative transactions will become subject to the initial margin requirements on September 1, 2021.

Management's Discussion and Analysis Regulation and Supervision

Freddie Mac 2Q 2020 Form 10-Q 71
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 pursuant to the Treasury

Housing Reform Plan or pursuant to 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 recent FHFA-required changes to the CSS LLC agreement, 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 2Q 2020 Form 10-Q 72
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 2Q 2020 Form 10-Q 73
Financial Statements

Financial Statements

Freddie Mac 2Q 2020 Form 10-Q 74
FREDDIE MAC 

Condensed Consolidated Statements of Comprehensive Income

(Loss) (Unaudited)

(In millions, except share-related amounts) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Interest income

Mortgage loans $15,026 $17,358 $31,658 $35,304

Investment securities 637 684 1,289 1,373

Other 53 420 361 771

Total interest income 15,716 18,462 33,308 37,448

Interest expense (12,840) (15,535) (27,647) (31,368)

Net interest income 2,876 2,927 5,661 6,080

Non-interest income (loss)

Guarantee fee income 469 280 846 570

Investment gains (losses), net 670 (138) (165) (651)

Other income (loss) 134 143 229 126

Non-interest income (loss) 1,273 285 910 45

Net revenues 4,149 3,212 6,571 6,125

Benefit (provision) for credit losses (705) 160 (1,938) 295

Non-interest expense

Salaries and employee benefits (327) (328) (668) (650)

Professional services (88) (122) (164) (227)

Other administrative expense (186) (169) (356) (320)

Total administrative expense (601) (619) (1,188) (1,197)

Credit enhancement expense (233) (177) (464) (339)

Expected credit enhancement recoveries 221 38 688 42

REO operations expense (14) (81) (99) (114)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (442) (399) (874) (789)

Other expense (140) (236) (243) (360)

Non-interest expense (1,209) (1,474) (2,180) (2,757)

Income (loss) before income tax (expense) benefit 2,235 1,898 2,453 3,663

Income tax (expense) benefit (458) (392) (503) (750)

Net income (loss) 1,777 1,506 1,950 2,913

Other comprehensive income (loss), net of taxes and

reclassification adjustments

Changes in unrealized gains (losses) related to available-for-sale

securities 154 304 592 550

Changes in unrealized gains (losses) related to cash flow hedge

relationships 11 20 24 38

Changes in defined benefit plans (4) (4) (6) (10)

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

reclassification adjustments 161 320 610 578

Comprehensive income (loss) $1,938 $1,826 $2,560 $3,491

Net income (loss) $1,777 $1,506 $1,950 $2,913

Undistributed net worth sweep, senior preferred stock dividends, or

future increase in senior preferred stock liquidation preference (1,938) (1,826) (2,320) (3,491)

Net income (loss) attributable to common stockholders ($161) ($320) ($370) ($578)

Net income (loss) per common share Ä basic and diluted ($0.05) ($0.10) ($0.11) ($0.18)

Weighted average common shares outstanding (in millions) Å 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 2Q 2020 Form 10-Q 75
FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited)

June 30, December 31,

(In millions, except share-related amounts) 2020 2019

Assets

Cash and cash equivalents (Notes 1, 3, 14) (includes $908 and $991 of restricted cash and cash

equivalents) $7,605 $5,189

Securities purchased under agreements to resell (Notes 3, 10) 100,525 56,271

Investment securities, at fair value (Note 7) 77,902 75,711

Mortgage loans held-for-sale (Notes 3, 4) (includes $17,526 and $15,035 at fair value) 38,887 35,288

Mortgage loans held-for-investment (Notes 1, 3, 4) (net of allowance for credit losses of $6,606 and

$4,234) 2,061,753 1,984,912

Accrued interest receivable (Notes 3, 4, 7, 10) (net of allowance of $57 and $0) 7,132 6,848

Derivative assets, net (Notes 9, 10) 1,402 844

Deferred tax assets, net (Note 12) 5,698 5,918

Other assets (Notes 3, 18) (includes $5,141 and $4,627 at fair value) 34,751 22,799

Total assets $2,335,655 $2,193,780

Liabilities and equity

Liabilities

Accrued interest payable (Note 3) $6,246 $6,559

Debt (Notes 3, 8) (includes $3,086 and $3,938 at fair value) 2,308,301 2,169,685

Derivative liabilities, net (Notes 9, 10) 839 372

Other liabilities (Notes 3, 18) 8,827 8,042

Total liabilities 2,324,213 2,184,658

Commitments and contingencies (Notes 5, 9, 16)

Equity (Note 11)

Senior preferred stock (liquidation preference of $82,152 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 Å Å

Additional paid-in capital Å Å

Retained earnings (accumulated deficit) (72,478) (74,188)

AOCI, net of taxes, related to:

Available-for-sale securities 1,210 618

Cash flow hedge relationships (220) (244)

Defined benefit plans 58 64

Total AOCI, net of taxes 1,048 438

Treasury stock, at cost, 75,804,594 shares and 75,804,853 shares (3,885) (3,885)

Total equity 11,442 9,122

Total liabilities and equity $2,335,655 $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.

June 30, December 31,

(In millions) 2020 2019

Condensed Consolidated Balance Sheet Line Item

Assets: (Note 3)

Mortgage loans held-for-investment $2,000,649 $1,940,523

All other assets 74,186 40,598

Total assets of consolidated VIEs $2,074,835 $1,981,121

Liabilities: (Note 3)

Debt $2,020,866 $1,898,355

All other liabilities 5,617 5,537

Total liabilities of consolidated VIEs $2,026,483 $1,903,892

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Balance Sheets

Freddie Mac 2Q 2020 Form 10-Q 76
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 March 31, 2020 1 464 650 $72,648 $14,109 $Å $Å ($74,255) $887 ($3,885) $9,504

Comprehensive income (loss):

Net income (loss) Å Å Å Å Å Å Å 1,777 Å Å 1,777

Other comprehensive income (loss), net of

taxes Å Å Å Å Å Å Å Å 161 Å 161

Comprehensive income (loss) Å Å Å Å Å Å Å 1,777 161 Å 1,938

Ending balance at June 30, 2020 1 464 650 $72,648 $14,109 $Ä $Ä ($72,478) $1,048 ($3,885) $11,442

Balance at March 31, 2019 1 464 650 $72,648 $14,109 $Å $Å ($78,330) $123 ($3,885) $4,665

Comprehensive income (loss):

Net income (loss) Å Å Å Å Å Å Å 1,506 Å Å 1,506

Other comprehensive income (loss), net of

taxes Å Å Å Å Å Å Å Å 320 Å 320

Comprehensive income (loss) Å Å Å Å Å Å Å 1,506 320 Å 1,826

Senior preferred stock dividends paid Å Å Å Å Å Å Å (1,665) Å Å (1,665)

Ending balance at June 30, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($78,489) $443 ($3,885) $4,826

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 $Å $Å ($74,188) $438 ($3,885) $9,122

Comprehensive income (loss):

Net income (loss) Å Å Å Å Å Å Å 1,950 Å Å 1,950

Other comprehensive income (loss), net of

taxes Å Å Å Å Å Å Å Å 610 Å 610

Comprehensive income (loss) Å Å Å Å Å Å Å 1,950 610 Å 2,560

Cumulative effect from adoption of CECL Å Å Å Å Å Å Å (240) Å Å (240)

Ending balance at June 30, 2020 1 464 650 $72,648 $14,109 $Ä $Ä ($72,478) $1,048 ($3,885) $11,442

Balance at DecemberÅ31, 2018 1 464 650 $72,648 $14,109 $Å $Å ($78,260) ($135) ($3,885) $4,477

Comprehensive income (loss):

Net income (loss) Å Å Å Å Å Å Å 2,913 Å Å 2,913

Other comprehensive income (loss), net of

taxes Å Å Å Å Å Å Å Å 578 Å 578

Comprehensive income (loss) Å Å Å Å Å Å Å 2,913 578 Å 3,491

Senior preferred stock dividends paid Å Å Å Å Å Å Å (3,142) Å Å (3,142)

Ending balance at June 30, 2019 1 464 650 $72,648 $14,109 $Ä $Ä ($78,489) $443 ($3,885) $4,826

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Statements of Equity

Freddie Mac 2Q 2020 Form 10-Q 77
FREDDIE MAC

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions) YTD 2020 YTD 2019

Net cash provided by (used in) operating activities $428 $5,610

Cash flows from investing activities

Purchases of trading securities (78,316) (49,153)

Proceeds from sales of trading securities 58,808 39,094

Proceeds from maturities and repayments of trading securities 11,172 5,786

Purchases of available-for-sale securities (5,668) (4,074)

Proceeds from sales of available-for-sale securities 24,810 6,864

Proceeds from maturities and repayments of available-for-sale securities 1,737 2,041

Purchases of mortgage loans acquired as held-for-investment (221,933) (85,212)

Proceeds from sales of mortgage loans acquired as held-for-investment 2,706 5,975

Proceeds from repayments of mortgage loans acquired as held-for-investment 294,343 128,451

Advances under secured lending arrangements (47,276) (18,759)

Repayments of secured lending arrangements 964 488

Net proceeds from dispositions of real estate owned and other recoveries 446 599

Net (increase) decrease in securities purchased under agreements to resell (43,234) (17,927)

Derivative premiums and terminations, swap collateral, and exchange settlement payments, net (9,273) (7,418)

Other, net (292) (302)

Net cash provided by (used in) investing activities (11,006) 6,453

Cash flows from financing activities

Proceeds from issuance of debt securities of consolidated trusts held by third parties 267,231 93,610

Repayments and redemptions of debt securities of consolidated trusts held by third parties (268,704) (130,056)

Proceeds from issuance of other debt 834,121 373,249

Repayments of other debt (819,614) (349,517)

Payment of cash dividends on senior preferred stock Å (3,142)

Other, net (40) (53)

Net cash provided by (used in) financing activities 12,994 (15,909)

Net increase (decrease) in cash and cash equivalents (includes restricted cash and cash equivalents) 2,416 (3,846)

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 $7,605 $3,427

Supplemental cash flow information

Cash paid for:

Debt interest $35,486 $34,715

Income taxes 340 306

Non-cash investing and financing activities (Note 4, 7, 8, and 10)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Financial Statements Condensed Consolidated Statements of Cash Flows

Freddie Mac 2Q 2020 Form 10-Q 78
Notes to Condensed Consolidated Financial

Statements

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac 2Q 2020 Form 10-Q 79

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. Certain amounts in prior periods' condensed financial statements have been reclassified to

conform to the current presentation. See Note 10 in this Form 10-Q for additional information.

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 June 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.ÄCertain

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 2Q 2020 Form 10-Q 80
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 Å 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac 2Q 2020 Form 10-Q 81
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 $81.8 billion on March 31, 2020 to $82.2

billion on June 30, 2020 based on the $0.4 billion increase in our Net Worth Amount during 1Q 2020, and will increase to $84.1

billion on September 30, 2020 based on the $1.9 billion increase in our Net Worth Amount during 2Q 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 directed 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 $199.4 billion

at JuneÄ30, 2020, including $5.3 billion representing 10% of the notional amount of the interest-only securities we held as of

June 30, 2020. Our ability to acquire and sell mortgage assets continues to be significantly constrained by limitations imposed

by the Purchase Agreement and FHFA. 

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: 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac 2Q 2020 Form 10-Q 82
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 March 31, 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 2Q 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 directed 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 $48 million of capital to CSS, and we have contributed $618 million since we began making contributions in the

fourth quarter of 2014. The carrying value of our investment in CSS was $29 million and $35 million as of June 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 2Q 2020 Form 10-Q 83
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 2Q 2020 Form 10-Q 84

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) June 30, 2020 December 31, 2019

Condensed Consolidated Balance Sheet Line Item

Assets:

Cash and cash equivalents (includes $820 and $869 of restricted cash and cash

equivalents) $821 $870

Securities purchased under agreements to resell 47,364 23,137

Investment securities, at fair value 988 597

Mortgage loans held-for-investment, net 2,000,649 1,940,523

Accrued interest receivable, net 6,481 6,170

Other assets 18,532 9,824

Total assets of consolidated VIEs $2,074,835 $1,981,121

Liabilities:

Accrued interest payable $5,617 $5,536

Debt 2,020,866 1,898,355

Other liabilities Å 1

Total liabilities of consolidated VIEs $2,026,483 $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 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) June 30, 2020 December 31, 2019

Assets and Liabilities Recorded on our Condensed Consolidated Balance

Sheets(1)

Assets:

Investment securities, at fair value $40,939 $37,918

Accrued interest receivable, net 244 212

Derivative assets, net 33 14

Other assets 5,050 3,951

 Liabilities:

Derivative liabilities, net 72 108

Other liabilities 3,835 3,761

Maximum Exposure to Loss(2) 341,655 307,820

Total Assets of Non-Consolidated VIEs 344,652 335,562

(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 2Q 2020 Form 10-Q 85
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 2Q 2020 Form 10-Q 86

The table below provides details of the loans on our condensed consolidated balance sheets.

Table 4.1 - Mortgage Loans

June 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 $18,569 $Å $18,569 $18,543 $Å $18,543

Multifamily 21,873 Å 21,873 18,954 Å 18,954

Total UPB 40,442 Ä 40,442 37,497 Ä 37,497

Cost basis and fair value adjustments, net (1,555) Å (1,555) (2,209) Å (2,209)

Total held-for-sale loans, net 38,887 Ä 38,887 35,288 Ä 35,288

Held-for-investment:

Single-family 50,062 1,952,767 2,002,829 35,324 1,902,958 1,938,282

Multifamily 11,039 9,064 20,103 10,831 6,642 17,473

Total UPB 61,101 1,961,831 2,022,932 46,155 1,909,600 1,955,755

Cost basis adjustments 1,102 44,325 45,427 (183) 33,574 33,391

Allowance for credit losses (1,099) (5,507) (6,606) (1,583) (2,651) (4,234)

Total held-for-investment loans, net 61,104 2,000,649 2,061,753 44,389 1,940,523 1,984,912

Total mortgage loans, net $99,991 $2,000,649 $2,100,640 $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 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 2Q 2020 Form 10-Q 87

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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Single-family:

Purchases

 Held-for-investment loans $230.7 $101.6 $368.4 $171.2

Reclassified from held-for-investment to held-for-sale(1) 0.8 1.0 3.4 5.1

Sale of held-for-sale loans(2) Å 3.6 2.2 5.7

Multifamily:

Purchases

 Held-for-investment loans 3.1 1.4 4.3 2.5

 Held-for-sale loans 16.4 15.9 24.6 27.4

Reclassified from held-for-investment to held-for-sale(1) 0.6 0.3 0.6 0.8

Sale of held-for-sale loans(3) 11.0 15.2 21.7 29.9

(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

2Q 2020 YTD 2020

(In millions)

Unpaid

Principal

Balance

Allowance for

Credit Losses

Reversed or

(Established)

Valuation

Allowance

(Established)

or Reversed

Unpaid

Principal

Balance

Allowance for

Credit Losses

Reversed or

(Established)

Valuation

Allowance

(Established)

or Reversed

Single-family reclassifications from:

Held-for-investment to held-for-sale(1) $759 $34 $Å $3,396 $248 $Å

Held-for-sale to held-for-investment 244 20 4 245 20 4

Multifamily reclassifications from:

Held-for-investment to held-for-sale 615 Å Å 647 Å Å

 Held-for-sale to held-for-investment 89 Å Å 571 (1) Å

(1) Prior to reclassification from held-for-investment to held-for-sale, we charged-off $94 million and $173 million against the allowance for credit losses during 2Q

2020 and YTD 2020.
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 active COVID-19-related 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 March 31, 2020 and June 30, 2020, including the

interest income recognized for the periods presented that is related to the loans on non-accrual status at end of the periods.

Table 4.4 - Amortized Cost Basis of Held-for-Investment Loans on Non-accrual

Non-accrual Amortized Cost Basis Interest Income Recognized

(In millions) March 31, 2020 June 30, 2020 2Q 2020 YTD 2020(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate $5,494 $10,226 ($35) $30

15-year amortizing fixed-rate 241 528 (2) 1

Adjustable-rate 83 150 Å Å

Alt-A, interest-only, and option ARM 389 540 (1) 2

Total single-family 6,207 11,444 (38) 33

Total multifamily 13 Ä Ä Ä

Total single-family and multifamily $6,220 $11,444 ($38) $33

(1) Represents the amount of interest income recognized for the held-for-investment loans on non-accrual status as of June 30, 2020

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 88

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

June 30, 2020 2Q 2020 YTD 2020

(In millions)

Accrued Interest Receivable,

Net

Accrued Interest Receivable

Related Charge-offs

Accrued Interest Receivable

Related Charge-offs

Single-family loans $6,639 ($92) ($121)

Multifamily loans 132 Å Å

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 caused by the COVID-19 pandemic. 

Table 4.6 - Details of the Allowance for Credit Losses

Å(In millions) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Single-family:

Beginning balance(1) $6,298 $5,536 $5,184 $6,130

(Benefit) provision for credit losses 615 (162) 1,779 (299)

Charge-offs (118) (243) (280) (847)

Recoveries collected 36 128 124 234

Other 31 21 55 62

 Single-family ending balance 6,862 5,280 6,862 5,280

 Multifamily ending balance 124 12 124 12

Total ending balance $6,986 $5,292 $6,986 $5,292

Components of ending balance of single-family allowance for credit losses:

Mortgage loans held-for-investment $6,482 $5,280

Advances of pre-foreclosure costs 323 N/A

Accrued interest receivable 57 N/A

 Total $6,862 $5,280

(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, 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. In total, we have increased our allowance for credit losses for single-family

mortgage loans held-for-investment by $2.1 billion as a result of the forbearance plans related to 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 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.

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

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 89
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.

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

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 90
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 2Q 2020 Form 10-Q 91

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

June 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 $174,328 $217,266 $110,270 $158,778 $203,787 $588,770 $1,453,199

 > 80 to 100 92,443 122,693 40,856 14,087 3,280 9,110 282,469

 > 100(1) 496 192 76 131 126 1,963 2,984

 Total 20- and 30-year or more, amortizing fixed-rate 267,267 340,151 151,202 172,996 207,193 599,843 1,738,652

 15-year amortizing fixed-rate

 Ç 80 41,123 36,883 15,881 25,373 35,694 100,826 255,780

 > 80 to 100 5,813 2,718 246 48 24 48 8,897

 > 100(1) 39 7 5 9 7 15 82

 Total 15-year amortizing fixed-rate 46,975 39,608 16,132 25,430 35,725 100,889 264,759

 Adjustable-rate

 Ç 80 1,782 2,237 1,833 4,856 3,254 17,363 31,325

 > 80 to 100 416 393 190 155 18 26 1,198

 > 100(1) 2 1 Å Å Å 3 6

 Total Adjustable-rate 2,200 2,631 2,023 5,011 3,272 17,392 32,529

 Alt-A, Interest-only, and option ARM

 Ç 80 Å Å Å Å Å 11,523 11,523

 > 80 to 100 Å Å Å Å Å 635 635

 > 100(1) Å Å Å Å Å 118 118

 Total Alt-A, Interest-only, and option ARM Ä Ä Ä Ä Ä 12,276 12,276

Total single-family loans $316,442 $382,390 $169,357 $203,437 $246,190 $730,400 $2,048,216

Total for all loan product types by CLTV ratio:

 Ç 80 $217,233 $256,386 $127,984 $189,007 $242,735 $718,482 $1,751,827

 > 80 to 100 98,672 125,804 41,292 14,290 3,322 9,819 293,199

 > 100(1) 537 200 81 140 133 2,099 3,190

Total single-family loans $316,442 $382,390 $169,357 $203,437 $246,190 $730,400 $2,048,216

 Referenced footnotes are included after the next table.

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 9.23% and 4.51% as of

JuneÄ30, 2020 and DecemberÄ31, 2019, respectively.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 92

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

June 30, 2020 December 31, 2019

Year of Origination

(In millions) 2020 2019 2018 2017 2016 Prior Total Total

Revolving

Loans

Category:

Pass $3,796 $7,438 $1,224 $824 $618 $3,084 $2,286 $19,270 $17,227

Special mention Å 489 115 20 Å 107 Å 731 141

Substandard Å 11 18 36 Å 77 Å 142 121

Doubtful Å Å Å Å Å Å Å Å Å

Total $3,796 $7,938 $1,357 $880 $618 $3,268 $2,286 $20,143 $17,489

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 93

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 COVID-19. We report single-family loans in forbearance as past due

during the forbearance period to the extent that payments are past due based on the loan's original contractual terms,

irrespective of the forbearance agreement, 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 loan's original contract terms. 

Table 4.9 - Amortized Cost Basis of Held -for-Investment Loans by Payment Status

June 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 $1,635,356 $23,630 $32,285 $47,381 $1,738,652 $37,452 $493

15-year amortizing fixed-rate 256,539 2,060 2,932 3,228 264,759 2,649 6

Adjustable-rate 30,623 403 641 862 32,529 711 5

Alt-A, interest-only, and option ARM 10,110 518 549 1,099 12,276 571 103

Total single-family 1,932,628 26,611 36,407 52,570 2,048,216 41,383 607

Total multifamily(3) 20,143 Ä Ä Ä 20,143 Ä Ä

Total single-family and multifamily $1,952,771 $26,611 $36,407 $52,570 $2,068,359 $41,383 $607
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 $1.4 billion and $1.8 billion of single-family loans that were in the process of foreclosure as of JuneÄ30, 2020 and DecemberÄ31, 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 June 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 (i) 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; (ii)

the loan is in an active repayment plan or trial period plan; or (iii) a payment deferral solution is in effect.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 94

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 COVID-19. 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 COVID-19. Recent guidance issued by federal

banking regulators and endorsed by the FASB staff has indicated that government-mandated modification or deferral programs

related to COVID-19 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 COVID-19, 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). 

Of the single-family loans with modifications that were classified as TDRs during 2Q 2020, 2Q 2019, YTD 2020, and YTD 2019,

respectively:

n 15%, 8%, 15%, and 8% involved interest rate reductions and, in certain cases, term extensions;

n 18%, 24%, 19%, and 24% involved principal forbearance in addition to interest rate reductions and, in certain cases, term

extensions;

n The average term extension was 187, 183, 187, and 173 months; and

n The average interest rate reduction was 0.3%, 0.1%, 0.3%, and 0.1%.

Substantially all of our completed single-family loan modifications classified as a TDR during 2Q 2020, 2Q 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, based on the

original product category of the loan before the loan was classified as a TDR. Loans classified as a TDR in one period may be

subject to further action (such as a modification or remodification) in a subsequent period. In such cases, the subsequent

action would not be reflected in the table below since the loan would already have been classified as a TDR.

Table 4.10 - TDR Activity

2Q 2020 2Q 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 5,309 $943 6,301 $1,064 11,741 $2,070 13,760 $2,264

15-year amortizing fixed-rate 590 61 725 69 1,319 133 1,671 161

Adjustable-rate 88 15 118 17 185 32 275 42

Alt-A, interest-only, and option ARM 135 19 717 92 301 43 1,046 145

Total single-family 6,122 1,038 7,861 1,242 13,546 2,278 16,752 2,612

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 2Q 2020 and YTD 2020 was $1.0 billion and $2.3 billion, respectively,

compared to $1.2 billion and $2.6 billion during 2Q 2019 and YTD 2019, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 95

The table below presents the volume of our TDR modifications that experienced payment defaults (i.e., loans that became two

months delinquent or completed a loss event) during the applicable periods and had completed a modification during the year

preceding the payment default. The table presents loans based on their original product category before modification and

includes loans that were reclassified from held-for-investment to held-for-sale after TDR modifications.
Table 4.11 - Payment Defaults of Completed TDR Modifications

2Q 2020 2Q 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 4,116 $791 3,421 $421 6,620 1,218 7,277 $830

15-year amortizing fixed-rate 197 26 108 8 316 40 233 15

Adjustable-rate 59 10 28 4 88 14 62 7

Alt-A, interest-only, and option ARM 349 72 199 28 513 104 509 72

Total single-family 4,721 899 3,756 461 7,537 1,376 8,081 924

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 agreements, or loans in modification trial periods). During YTD 2020 and YTD 2019, 1,936 and 2,818, respectively,

of such loans (with a post-TDR amortized cost basis of $0.3 billion during both periods) experienced a payment default within a

year after the loss mitigation activity occurred.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac 2Q 2020 Form 10-Q 96

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) Å (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
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 Å Å Å

Total multifamily 86 81 Ä

Total single-family and multifamily $36,440 $35,530 ($2,872)

 Referenced footnotes are included after the last table in the Impaired Loans section.

2Q 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 $2,582 $75 $1 $2,634 $148 $5

15-year amortizing fixed-rate 19 Å Å 20 Å Å

Adjustable-rate 212 3 Å 218 6 Å

Alt-A, interest-only, and option ARM 934 18 Å 958 36 1

Total with no allowance recorded 3,747 96 1 3,830 190 6

With an allowance recorded: (2)

20- and 30-year or more, amortizing fixed-rate 34,196 498 34 34,767 982 91

15-year amortizing fixed-rate 669 6 1 677 12 2

Adjustable-rate 141 2 Å 144 3 1

Alt-A, interest-only, and option ARM 4,101 63 2 4,213 125 9

Total with an allowance recorded 39,107 569 37 39,801 1,122 103

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 36,778 573 35 37,401 1,130 96

15-year amortizing fixed-rate 688 6 1 697 12 2

Adjustable-rate 353 5 Å 362 9 1

Alt-A, interest-only, and option ARM 5,035 81 2 5,171 161 10

Total single-family 42,854 665 38 43,631 1,312 109

Multifamily:

With no allowance recorded (1) 66 1 Å 66 2 Å

With an allowance recorded 17 Å Å 16 Å Å

Total multifamily 83 1 Ä 82 2 Ä

Total single-family and multifamily $42,937 $666 $38 $43,713 $1,314 $109

(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 2Q 2020 Form 10-Q 97
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 Å%

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 2Q 2020 Form 10-Q 98

Non-Cash Investing and Financing Activities

During YTD 2020 and YTD 2019, we acquired $162.4 billion and $91.0 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

$44.3 billion and $15.5 billion of loans from sellers in guarantor swap transactions and $0.8 billion and $1.3 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 2Q 2020 Form 10-Q 99

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

June 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 $26,889 $345 39 $26,818 $361 40

Other mortgage-related guarantees 8,722 194 30 7,492 182 30

Total single-family $35,611 $539 $34,310 $543

Multifamily:

Securitization activity guarantees $258,739 $3,361 39 $252,167 $3,333 39

Other mortgage-related guarantees 10,706 450 34 9,989 416 34

Total multifamily $269,445 $3,811 $262,156 $3,749

Other guarantees measured at fair value $29,075 $421 30 $24,965 $253 30

Fannie Mae securities backing Freddie Mac

resecuritization products 54,287 Å 30 27,408 Å 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

June 30, 2020

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

ThreeÅMonthsÅor

More Past Due,

orÅin Foreclosure Total(1)

Single-family $32,634 $2,515 $2,854 $1,486 $39,489

Multifamily(2) 309,240 148 95 262 309,745

Total $341,874 $2,663 $2,949 $1,748 $349,234

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 $1.2 billion and $1.6 billion as of June 30, 2020 and December 31, 2019, respectively, and

therefore is not included in the tables above.

(2) As of June 30, 2020, includes $7.5 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 $19.2

billion and $17.1 billion at June 30, 2020 and December 31, 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 2Q 2020 Form 10-Q 100
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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Beginning balance(1) $107 $51 $81 $51

(Benefit) provision for credit losses 42 1 71 2

Charge-offs (2) (1) (5) (2)

Ending balance $147 $51 $147 $51

Components of ending balance of allowance for credit losses on off-balance sheet credit exposures:

Single-family $54 $46

Multifamily 93 5

 Total $147 $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 2Q 2020 Form 10-Q 101
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 $1.1 billion and $0.1 billion as of

June 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 2Q 2020 Form 10-Q 102

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

June 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 $426,954 $108,100 $421,870 $107,690

STACR: (2)

 Trust notes Freestanding 346,363 11,378 288,323 9,739

 Debt notes Debt 480,336 13,500 536,036 15,373

Insurance/reinsurance (3) Freestanding 843,713 9,567 863,149 10,157

Subordination:(4)

 Non-consolidated VIEs Attached 25,805 4,696 25,443 4,545

 Consolidated VIEs Debt 14,678 665 19,498 854

Lender risk-sharing Freestanding 11,731 5,328 24,078 5,657

Other Primarily attached 761 756 1,056 1,051

Total single-family credit enhancements $153,990 $155,066

(1) Underlying loans may be covered by more than one form of credit enhancement.

(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 June 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

June 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 $258,179 $40,898 $251,008 $40,262

Consolidated VIEs Debt 1,800 200 1,800 200

Lender risk-sharing(3) Freestanding 2,072 377 2,529 381

Insurance/reinsurance(4) Freestanding 2,758 126 2,769 127

SCR debt notes(5) Debt 2,291 115 2,470 123

Other(3) Attached 389 389 467 467

Total multifamily credit enhancements $42,105 $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 June 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 2Q 2020 Form 10-Q 103
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) June 30, 2020 December 31, 2019

Trading securities $53,942 $49,537

Available-for-sale securities 23,960 26,174

Total fair value of investment securities $77,902 $75,711

As of June 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 June 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

economic environment. As of June 30, 2020, substantially all of our non-agency residential MBS were in an unrealized gain

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac 2Q 2020 Form 10-Q 104
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 2Q 2020 Form 10-Q 105

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) June 30, 2020 December 31, 2019

Mortgage-related securities:

Agency $21,654 $22,481

Non-agency 1 1

Total mortgage-related securities 21,655 22,482

Non-mortgage-related securities 32,287 27,055

Total fair value of trading securities $53,942 $49,537

For trading securities held at JuneÄ30, 2020, we recorded net unrealized gains (losses) of $120 million and $638 million during

2Q 2020 and YTD 2020, respectively. For trading securities held at JuneÄ30, 2019, we recorded net unrealized gains (losses) of

$373 million and $412 million during 2Q 2019 and YTD 2019, respectively.

Available-for-Sale Securities

At both JuneÄ30, 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

June 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 $21,516 $Å $1,344 ($7) $22,853 $59

Non-agency and other 914 Å 193 Å 1,107 4

Total available-for-sale securities $22,430 $Ä $1,537 ($7) $23,960 $63

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 $Å ($74) $24,887

Non-agency and other 1,004 283 Å Å 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 JuneÄ30, 2020 scheduled to contractually mature after ten years was

$19.9 billion, with an additional $3.3 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

June 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 $317 ($2) $498 ($5)

Non-agency and other 21 Å 1 Å

Total available-for-sale securities in a gross unrealized loss position $338 ($2) $499 ($5)

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 Å Å Å

Total available-for-sale securities in a gross unrealized loss position $5,779 ($27) $2,934 ($47)

At JuneÄ30, 2020, the gross unrealized losses relate to 66 securities.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac 2Q 2020 Form 10-Q 106

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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Gross realized gains $44 $38 $77 $101

Gross realized losses (37) (5) (60) (34)

Net realized gains (losses) $7 $33 $17 $67

Non-Cash Investing and Financing Activities

During YTD 2020, we recognized $12.7 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 2Q 2020, we purchased $0.3 billion of non-mortgage-related securities that were traded, but not settled at June 30,

2020. We settled our purchase obligation during the third 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 2Q 2020 Form 10-Q 107

Table 8.1 - Total Debt

Balance Interest Expense

(In millions) June 30, 2020 December 31, 2019 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Debt securities of consolidated trusts held by

third parties $2,020,866 $1,898,355 $11,975 $13,696 $25,422 $27,677

Other debt:

Short-term debt 78,134 101,034 130 484 560 920

Long-term debt 209,301 170,296 735 1,355 1,665 2,771

Total other debt 287,435 271,330 865 1,839 2,225 3,691

Total debt $2,308,301 $2,169,685 $12,840 $15,535 $27,647 $31,368

As of June 30, 2020, our aggregate indebtedness was $289.3 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 short- and longterm 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

June 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 $1,606,560 $1,651,436 3.49% 2020 - 2057 $1,516,550 $1,554,095 3.63%

20-year fixed-rate 2020 - 2040 78,199 80,268 3.23 2020 - 2040 70,901 72,558 3.37

15-year fixed-rate 2020 - 2035 242,746 247,281 2.77 2020 - 2035 225,501 229,133 2.87

Adjustable-rate 2020 - 2050 27,125 27,661 3.11 2020 - 2050 30,183 30,756 3.25

Interest-only 2026 - 2041 4,164 4,238 3.97 2026 - 2041 4,244 4,307 4.55

FHA/VA 2020 - 2050 633 647 4.53 2020 - 2049 633 647 4.68

Total single-family 1,959,427 2,011,531 1,848,012 1,891,496

Multifamily 2021-2050 9,236 9,335 2.75 2021 - 2049 6,790 6,859 3.29

Total debt of consolidated trusts

held by third parties $1,968,663 $2,020,866 $1,854,802 $1,898,355

(1) Includes $206 million and $209 million at JuneÄ30, 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 2.29% and 2.79% as of JuneÄ30, 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 2Q 2020 Form 10-Q 108

Table 8.3 - Total Other Debt

June 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 $56,954 $56,925 0.45% $60,830 $60,629 1.67%

Medium-term notes 21,211 21,209 1.87 40,407 40,405 2.31

Securities sold under agreements to repurchase (3) 8,664 8,664 0.04 9,843 9,843 1.46

Total other short-term debt 86,829 86,798 0.75 111,080 110,877 1.89

Other long-term debt:

Original maturities on or before December 31,

2020 16,360 16,359 1.94 45,133 45,127 1.76

2021 45,939 45,934 0.97 30,069 30,072 1.89

2022 46,242 46,279 1.03 23,185 23,166 2.20

2023 37,090 37,040 0.91 13,413 13,393 2.22

2024 13,303 13,274 1.74 26,966 26,924 2.22

Thereafter 38,430 36,170 2.81 17,615 15,294 5.13

STACR and SCR debt(4) 13,615 13,311 4.21 15,496 15,652 5.64

Hedging-related basis adjustments N/A 934 N/A 668

Total other long-term debt 210,979 209,301 1.62 171,877 170,296 2.61

Total other debt(5) $297,808 $296,099 $282,957 $281,173

(1) Represents par value, net of associated discounts or premiums and issuance cost. Includes $2.9 billion and $3.7 billion at JuneÄ30, 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 $86.7 billion and $95.1 billion at JuneÄ30, 2020 and December 31, 2019, respectively.

Non-Cash Investing and Financing Activities

During 2Q 2020, we issued $0.6 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 2Q 2020 Form 10-Q 109
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

June 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 $258,034 $3,161 $Å $230,926 $1,990 ($6)

Pay-fixed 313,717 Å (8,337) 251,392 10 (4,162)

Basis (floating to floating) 5,924 1 Å 5,924 Å Å

Total interest-rate swaps 577,675 3,162 (8,337) 488,242 2,000 (4,168)

Option-based:

Call swaptions

Purchased 74,275 5,773 Å 75,325 2,717 Å

Written 3,650 Å (287) 3,375 Å (42)

Put swaptions

Purchased(1) 83,035 870 Å 67,155 835 Å

Written 7,955 Å (49) 7,275 Å (88)

Options on futures 91,705 15 Å Å Å Å

Other option-based derivatives(2) 10,271 789 Å 10,334 646 Å

Total option-based 270,891 7,447 (336) 163,464 4,198 (130)

Futures 239,462 Å Å 210,305 Å Å

Commitments 188,487 353 (528) 93,960 61 (126)

CRT-related derivatives 15,708 60 (72) 12,362 15 (116)

Other 9,370 1 (16) 5,984 1 (28)

Total derivatives not designated as hedges 1,301,593 11,023 (9,289) 974,317 6,275 (4,568)

Designated as fair value hedges

Interest-rate swaps:

Receive-fixed 109,605 320 (4) 104,459 104 (75)

Pay-fixed 52,645 Å (696) 87,907 Å (639)

Total derivatives designated as fair value hedges 162,250 320 (700) 192,366 104 (714)

Derivative interest and other receivable (payable)(3) 629 (582) 887 (724)

Netting adjustments(4) (10,570) 9,732 (6,422) 5,634

Total derivative portfolio, net $1,463,843 $1,402 ($839) $1,166,683 $844 ($372)

(1) Includes swaptions on credit indices with a notional or contractual amount of $3.6 billion and $11.4 billion at JuneÄ30, 2020 and DecemberÄ31, 2019, respectively,

and a fair value of $7.0 million and $3.0 million at JuneÄ30, 2020 and DecemberÄ31, 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 2Q 2020 Form 10-Q 110
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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Not designated as hedges

Interest-rate swaps:

Receive-fixed $1,722 $3,683 $15,617 $5,520

Pay-fixed (732) (5,398) (19,473) (8,286)

Basis (floating to floating) 10 6 (7) 10

Total interest-rate swaps 1,000 (1,709) (3,863) (2,756)

Option-based:

Call swaptions

Purchased (641) 1,129 4,266 1,583

Written 38 (178) (392) (234)

Put swaptions

Purchased (95) (425) (622) (1,051)

Written 17 48 127 64

Options on futures 1 Å (6) Å

Other option-based derivatives(1) (25) 74 144 99

Total option-based (705) 648 3,517 461

Other:

Futures (120) (779) (2,448) (1,021)

Commitments (396) (216) (1,122) (312)

CRT-related derivatives 43 2 121 1

Other 6 7 37 28

Total other (467) (986) (3,412) (1,304)

Accrual of periodic cash settlements:

Receive-fixed interest-rate swaps 594 (20) 829 (71)

Pay-fixed interest-rate swaps (966) (58) (1,438) (94)

Other(2) 43 36 104 69

Total accrual of periodic cash settlements (329) (42) (505) (96)

Total ($501) ($2,089) ($4,263) ($3,695)

(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 2Q 2020 Form 10-Q 111
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 2Q 2020 Form 10-Q 112

Table 9.3 - Gains and Losses on Fair Value Hedges

2Q 2020 2Q 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: $15,026 ($12,840) $17,358 ($15,535)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items 670 Å 2,851 Å

Derivatives designated as hedging instruments (474) Å (2,778) Å

Interest accruals on hedging instruments (122) Å 6 Å

Discontinued hedge-related basis adjustments amortization (695) Å (47) Å

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items Å 37 Å (600)

Derivatives designated as hedging instruments Å (81) Å 651

Interest accruals on hedging instruments Å 187 Å (87)

Discontinued hedge-related basis adjustments amortization Å 17 Å 16

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: $31,658 ($27,647) $35,304 ($31,368)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items 5,563 Å 4,393 Å

Derivatives designated as hedging instruments (5,554) Å (4,021) Å

Interest accruals on hedging instruments (185) Å 44 Å

Discontinued hedge-related basis adjustments amortization (948) Å (19) Å

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items Å (468) Å (1,105)

Derivatives designated as hedging instruments Å 473 Å 1,197

Interest accruals on hedging instruments Å 287 Å (212)

Discontinued hedge-related basis adjustments amortization Å 37 Å 25
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 

June 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 $392,674 $7,502 $540 $6,962 $275,001 $21,259

Debt (123,651) (934) Å (60) Å Å

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) Å (93) Å Å

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac 2Q 2020 Form 10-Q 113
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 JuneÄ30, 2020, our maximum loss for

accounting purposes after applying netting agreements and collateral on an individual counterparty basis would have been

approximately $13 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 $353 million and $61 million at JuneÄ30, 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 June 30,

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

June 30, 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 June 30, 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 2Q 2020 Form 10-Q 114
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 2Q 2020 Form 10-Q 115

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

June 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 $11,427 ($7,005) ($3,700) $722 ($709) $13

Cleared and exchange-traded derivatives 131 (1) 136 266 Å 266

Commitments 353 Å Å 353 Å 353

Other 61 Å Å 61 Å 61

Total derivatives 11,972 (7,006) (3,564) 1,402 (709) 693

Securities purchased under agreements to resell 109,189 (8,664) Å 100,525 (100,525) Å

Total $121,161 ($15,670) ($3,564) $101,927 ($101,234) $693

Liabilities:

Derivatives:

OTC derivatives ($9,951) $7,004 $2,724 ($223) $Å ($223)

Cleared and exchange-traded derivatives (4) 1 3 Å Å Å

Commitments (528) Å Å (528) Å (528)

Other (88) Å Å (88) Å (88)

Total derivatives (10,571) 7,005 2,727 (839) Ä (839)

Securities sold under agreements to repurchase (8,664) 8,664 Å Å Å Å

Total ($19,235) $15,669 $2,727 ($839) $Ä ($839)

 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 Å 262

Commitments 61 Å Å 61 Å 61

Other 16 Å Å 16 Å 16

Total derivatives 7,266 (4,470) (1,952) 844 (485) 359

Securities purchased under agreements to resell 66,114 (9,843) Å 56,271 (56,271) Å

Total $73,380 ($14,313) ($1,952) $57,115 ($56,756) $359

Liabilities:

Derivatives:

OTC derivatives ($5,731) $4,465 $1,164 ($102) $Å ($102)

Cleared and exchange-traded derivatives (5) 5 Å Å Å Å

Commitments (126) Å Å (126) Å (126)

Other (144) Å Å (144) Å (144)

Total derivatives (6,006) 4,470 1,164 (372) Ä (372)

Securities sold under agreements to repurchase (9,843) 9,843 Å Å Å Å

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 $3.6 billion and $3.5 billion as of JuneÄ30, 2020 and DecemberÄ31, 2019, respectively. For commitments and securities purchased under

agreements to resell, does not include cash and non-cash collateral deposited totaling $0.4 billion and $1.5 billion, respectively, as of June 30, 2020, and $0.2

billion and $0.3 billion, respectively, as of December 31, 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 JuneÄ30, 2020, and DecemberÄ31, 2019, we had $92.6 billion and $52.4 billion, respectively, of securities

pledged to us in these transactions. In addition, at JuneÄ30, 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 June 30, 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 2Q 2020 Form 10-Q 116
Collateral Pledged

Collateral Pledged to Freddie Mac

We have cash pledged to us as collateral primarily related to OTC derivative transactions. We had $5.1 billion and $2.6 billion

pledged to us as collateral that was invested as part of our liquidity and contingency operating portfolio as of June 30, 2020

and December 31, 2019, respectively.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac 2Q 2020 Form 10-Q 117

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

June 30, 2020

(In millions) Derivatives

Securities Sold

Under

Agreements to

Repurchase Other(2) Total

Cash equivalents $Å $950 $Å $950

Debt securities of consolidated trusts(1) 638 Å 73 711

Available-for-sale securities 51 Å 466 517

Trading securities 2,906 7,102 956 10,964

Total securities pledged $3,595 $8,052 $1,495 $13,142

December 31, 2019

(In millions) Derivatives

Securities Sold

Under

Agreements to

Repurchase Other(2) Total

Debt securities of consolidated trusts(1) $562 $Å $280 $842

Trading securities 2,894 9,346 49 12,289

Total securities pledged $3,456 $9,346 $329 $13,131

(1) 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.

(2) Includes other collateralized borrowings and collateral related to transactions with certain clearinghouses.

The table below summarizes the underlying collateral pledged and the remaining contractual maturity of our gross obligations

under securities sold under agreements to repurchase.

Table 10.3 - Underlying Collateral Pledged 

June 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 $1,953 $3,302 $2,797 $Å $8,052

Non-Cash Investing and Financing Activities

During 2Q 2020, we recognized securities purchased under agreements to resell of $0.1 billion as a result of entering into a

transaction that did not settle in the current period.Ä
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 2Q 2020 Form 10-Q 118

Table 11.1 - Changes in AOCI by Component, Net of Taxes

2Q 2020

(In millions)

AOCIÅRelated

to AvailableFor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCIÅRelated

to Defined

Benefit Plans Total

Beginning balance $1,056 ($231) $62 $887

Other comprehensive income before reclassifications 160 Å Å 160

Amounts reclassified from accumulated other comprehensive income (6) 11 (4) 1

Changes in AOCI by component 154 11 (4) 161

Ending balance $1,210 ($220) $58 $1,048

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 606 Å 2 608

Amounts reclassified from accumulated other comprehensive income (14) 24 (8) 2

Changes in AOCI by component 592 24 (6) 610

Ending balance $1,210 ($220) $58 $1,048

2Q 2019

(In millions)

AOCIÅRelated

to AvailableFor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCIÅRelated

to Defined

Benefit Plans Total

Beginning balance $329 ($297) $91 $123

Other comprehensive income before reclassifications 330 Å Å 330

Amounts reclassified from accumulated other comprehensive income (26) 20 (4) (10)

Changes in AOCI by component 304 20 (4) 320

Ending balance $633 ($277) $87 $443

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 603 Å (2) 601

Amounts reclassified from accumulated other comprehensive income (53) 38 (8) (23)

Changes in AOCI by component 550 38 (10) 578

Ending balance $633 ($277) $87 $443
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) 2Q 2020 2Q 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 $7 $33 $17 $67

Income tax (expense) benefit (1) (7) (3) (14)

Net of tax 6 26 14 53

AOCIÅrelatedÅtoÅcash flow hedge relationships

Affected line items on the condensed consolidated statements of comprehensive

income (loss):

Interest expense (14) (25) (30) (48)

Income tax (expense) benefit 3 5 6 10

Net of tax (11) (20) (24) (38)

AOCI related to defined benefit plans

Affected line items on the condensed consolidated statements of comprehensive

income (loss):

Salaries and employee benefits 5 5 10 10

Income tax (expense) benefit (1) (1) (2) (2)

Net of tax 4 4 8 8

Total reclassifications in the period net of tax ($1) $10 ($2) $23

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 2Q 2020 Form 10-Q 119

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 June 2020, as our Net

Worth Amount of $9.5 billion as of March 31, 2020 was lower than the $20.0 billion applicable Capital Reserve Amount. 

As of JuneÄ30, 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 $11.4 billion as of JuneÄ30, 2020 and the applicable Capital

Reserve Amount of $20.0 billion, we will not have a dividend requirement to Treasury in September 2020. See Note 2 for

additional information. Our cumulative senior preferred stock dividend payments remain at $119.7 billion as of June 30, 2020.

The aggregate liquidation preference of the senior preferred stock owned by Treasury was $81.8 billion as of March 31, 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 1Q 2020,

our Net Worth Amount increased by $0.4 billion. As a result, the liquidation preference of the senior preferred stock increased to

$82.2 billion on JuneÄ30, 2020, and will increase to $84.1 billion on September 30, 2020 based on the $1.9 billion increase in

our Net Worth Amount during 2Q 2020. 
The table below provides a summary of our senior preferred stock outstanding at JuneÄ30, 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 Å Å Å N/A 3,000

September 30, 2019 Å Å Å N/A 1,826

December 31, 2019 Å Å Å N/A 1,848

March 31, 2020 Å Å Å N/A 2,448

June 30, 2020 Å Å Å N/A 382

Total non-draw adjustments 1.00 1.00 1.00 10,504

Draw Dates:

November 24, 2008 Å Å Å N/A 13,800

March 31, 2009 Å Å Å N/A 30,800

June 30, 2009 Å Å Å N/A 6,100

June 30, 2010 Å Å Å N/A 10,600

September 30, 2010 Å Å Å N/A 1,800

December 30, 2010 Å Å Å N/A 100

March 31, 2011 Å Å Å N/A 500

September 30, 2011 Å Å Å N/A 1,479

December 30, 2011 Å Å Å N/A 5,992

March 30, 2012 Å Å Å N/A 146

June 29, 2012 Å Å Å N/A 19

March 30, 2018 Å Å Å N/A 312

Total draw adjustments Ä Ä Ä 71,648

Total senior preferred stock 1.00 1.00 $1.00 $82,152

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac 2Q 2020 Form 10-Q 120

Stock Issuances and Repurchases

We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 2Q 2020, except for

issuances of treasury stock relating to stock-based compensation granted prior to Conservatorship. During 2Q 2020, the

deferral period lapsed on 351 RSUs. At June 30, 2020, 351 RSUs remained outstanding.

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 2Q 2020 Form 10-Q 121
NOTE 12

Income Taxes

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 12

Freddie Mac 2Q 2020 Form 10-Q 122

Income Tax Expense

For 2Q 2020 and 2Q 2019, we reported income tax expense of $458 million and $392 million, respectively, resulting in effective

tax rates of 20.5% and 20.7%, respectively. For YTD 2020 and YTD 2019, we reported income tax expense of $503 million and

$750 million, respectively, resulting in an effective tax rate of 20.5% for both periods. 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 tax-exempt

interest income.

Deferred Tax Assets, Net

We had net deferred tax assets of $5.7 billion and $5.9 billion as of JuneÄ30, 2020 and DecemberÄ31, 2019, respectively. At

JuneÄ30, 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 JuneÄ30, 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

JuneÄ30, 2020, we have a $37 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

JuneÄ30, 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 2Q 2020 Form 10-Q 123

The tableÄbelow presents Segment Earnings by segment.

Table 13.1 - Segment Earnings

(In millions) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Segment Earnings (Loss), net of taxes:

Single-family Guarantee $753 $955 $1,341 $1,695

Multifamily 1,005 383 767 713

Capital Markets 19 168 (158) 505

All Other Å Å Å Å

Total Segment Earnings (Loss), net of taxes $1,777 $1,506 $1,950 $2,913

Net income (loss) per condensed consolidated statements

of comprehensive income (loss) $1,777 $1,506 $1,950 $2,913

Comprehensive income (loss) of segments:

Single-family Guarantee $751 $953 $1,337 $1,689

Multifamily 1,063 440 889 835

Capital Markets 124 433 334 967

All Other Å Å Å Å

Comprehensive income (loss) of segments $1,938 $1,826 $2,560 $3,491

Comprehensive income (loss) per condensed consolidated

statements of comprehensive income (loss) $1,938 $1,826 $2,560 $3,491
The tablesÄbelow present detailed reconciliations between our GAAP condensed consolidated statements of comprehensive

income (loss) and Segment Earnings for our reportable segments and All Other.

Table 13.2 - Segment Earnings and Reconciliations to GAAP Condensed Consolidated Statements of Comprehensive

Income (Loss)

2Q 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 $Å $228 $152 $Å $380 $2,496 $2,876

Guarantee fee income 2,528 442 Å Å 2,970 (2,501) 469

Investment gains (losses), net 21 761 206 Å 988 (318) 670

Other income (loss) (83) 51 (234) Å (266) 400 134

Benefit (provision) for credit losses (752) (81) Å Å (833) 128 (705)

Administrative expense (379) (124) (98) Å (601) Å (601)

Credit enhancement expense (399) (5) Å Å (404) 171 (233)

Expected credit enhancement recoveries 219 2 Å Å 221 Å 221

REO operations expense (14) Å Å Å (14) Å (14)

Other expense (195) (9) (2) Å (206) (376) (582)

Income tax (expense) benefit (193) (260) (5) Å (458) Å (458)

Net income (loss) 753 1,005 19 Ä 1,777 Ä 1,777

Changes in unrealized gains (losses)

related to available-for-sale securities Å 59 95 Å 154 Å 154

Changes in unrealized gains (losses)

related to cash flow hedge relationships Å Å 11 Å 11 Å 11

Changes in defined benefit plans (2) (1) (1) Å (4) Å (4)

Total other comprehensive income

(loss), net of taxes (2) 58 105 Ä 161 Ä 161

Comprehensive income (loss) $751 $1,063 $124 $Ä $1,938 $Ä $1,938

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 $Å $497 $661 $Å $1,158 $4,503 $5,661

Guarantee fee income 4,621 855 Å Å 5,476 (4,630) 846

Investment gains (losses), net 458 (90) (221) Å 147 (312) (165)

Other income (loss) (68) 88 (435) Å (415) 644 229

Benefit (provision) for credit losses (1,974) (148) Å Å (2,122) 184 (1,938)

Administrative expense (751) (244) (193) Å (1,188) Å (1,188)

Credit enhancement expense (810) (9) Å Å (819) 355 (464)

Expected credit enhancement recoveries 658 30 Å Å 688 Å 688

REO operations expense (101) Å Å Å (101) 2 (99)

Other expense (346) (14) (11) Å (371) (746) (1,117)

Income tax (expense) benefit (346) (198) 41 Å (503) Å (503)

Net income (loss) 1,341 767 (158) Ä 1,950 Ä 1,950

Changes in unrealized gains (losses)

related to available-for-sale securities Å 123 469 Å 592 Å 592

Changes in unrealized gains (losses)

related to cash flow hedge relationships Å Å 24 Å 24 Å 24

Changes in defined benefit plans (4) (1) (1) Å (6) Å (6)

Total other comprehensive income

(loss), net of taxes (4) 122 492 Ä 610 Ä 610

Comprehensive income (loss) $1,337 $889 $334 $Ä $2,560 $Ä $2,560

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac 2Q 2020 Form 10-Q 124
2Q 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 $Å $266 $747 $Å $1,013 $1,914 $2,927

Guarantee fee income 1,875 293 Å Å 2,168 (1,888) 280

Investment gains (losses), net 256 27 (259) Å 24 (162) (138)

Other income (loss) 58 28 (172) Å (86) 229 143

Benefit (provision) for credit losses 88 (1) Å Å 87 73 160

Administrative expense (400) (120) (99) Å (619) Å (619)

Credit enhancement expense (349) (3) Å Å (352) 175 (177)

Expected credit enhancement recoveries 38 Å Å Å 38 Å 38

REO operations expense (86) Å Å Å (86) 5 (81)

Other expense (277) (7) (5) Å (289) (346) (635)

Income tax (expense) benefit (248) (100) (44) Å (392) Å (392)

Net income (loss) 955 383 168 Ä 1,506 Ä 1,506

Changes in unrealized gains (losses)

related to available-for-sale securities Å 58 246 Å 304 Å 304

Changes in unrealized gains (losses)

related to cash flow hedge relationships Å Å 20 Å 20 Å 20

Changes in defined benefit plans (2) (1) (1) Å (4) Å (4)

Total other comprehensive income

(loss), net of taxes (2) 57 265 Ä 320 Ä 320

Comprehensive income (loss) $953 $440 $433 $Ä $1,826 $Ä $1,826

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 $Å $513 $1,505 $Å $2,018 $4,062 $6,080

Guarantee fee income 3,510 580 Å Å 4,090 (3,520) 570

Investment gains (losses), net 262 1 (295) Å (32) (619) (651)

Other income (loss) 170 57 (378) Å (151) 277 126

Benefit (provision) for credit losses 159 (2) Å Å 157 138 295

Administrative expense (774) (232) (191) Å (1,197) Å (1,197)

Credit enhancement expense (669) (7) Å Å (676) 337 (339)

Expected credit enhancement recoveries 42 Å Å Å 42 Å 42

REO operations expense (124) Å Å Å (124) 10 (114)

Other expense (445) (13) (6) Å (464) (685) (1,149)

Income tax (expense) benefit (436) (184) (130) Å (750) Å (750)

Net income (loss) 1,695 713 505 Ä 2,913 Ä 2,913

Changes in unrealized gains (losses)

related to available-for-sale securities Å 124 426 Å 550 Å 550

Changes in unrealized gains (losses)

related to cash flow hedge relationships Å Å 38 Å 38 Å 38

Changes in defined benefit plans (6) (2) (2) Å (10) Å (10)

Total other comprehensive income

(loss), net of taxes (6) 122 462 Ä 578 Ä 578

Comprehensive income (loss) $1,689 $835 $967 $Ä $3,491 $Ä $3,491

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac 2Q 2020 Form 10-Q 125
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 2Q 2020 Form 10-Q 126

The table below summarizes the concentration by loan portfolio and geographic area of the approximately $2.1 trillion and $2.0

trillion UPB of our single-family credit guarantee portfolio as of JuneÄ30, 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

June 30, 2020 December 31, 2019 Percent of Credit Losses

Percentage

of

Portfolio

Serious

Delinquency

Rate

Percentage

of

Portfolio

Serious

Delinquency

Rate YTD 2020 YTD 2019

Core single-family loan portfolio 87% 1.95% 85% 0.26% 34% 13%

Legacy and relief refinance single-family loan portfolio 13 4.44 15 1.84 66 87

Total 100% 2.48 100% 0.63 100% 100%

Region(1)

West 30% 2.29 30% 0.36 6% 13%

Northeast 24 3.16 24 0.87 38 39

North Central 16 1.86 16 0.61 27 18

Southeast 16 2.77 16 0.73 20 24

Southwest 14 2.27 14 0.54 9 6

Total 100% 2.48 100% 0.63 100% 100%

State(2)

Illinois 4% 2.61 4% 0.85 14% 10%

Florida 6 3.53 6 0.77 11 16

New York 5 4.95 5 1.21 10 12

New Jersey 3 4.48 3 1.08 9 10

Ohio 3 1.86 3 0.69 5 3

All other 79 2.21 79 0.54 51 49

Total 100% 2.48 100% 0.63 100% 100%

(1) Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI,

MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY).

(2) States presented based on those with the highest percentage of credit losses during 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 our servicers to report to credit bureaus that loans in mortgage 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

mortgage 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 July 25, 2020.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 2Q 2020 Form 10-Q 127

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

Percentage of Portfolio(1) SeriousÅDelinquencyÅRate(1)

(Percentage of portfolio based on UPB) June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019

Interest-only Å% 1% 6.51% 2.72%

Alt-A 1 1 7.70 3.75

Original LTV ratio greater than 90%(2) 17 18 3.58 0.96

Lower credit scores at origination (less than 620) 2 2 8.86 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. 

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(1) YTD 2020 YTD 2019

JPMorgan Chase Bank, N.A. 7% 16%

United Shore Financial Services, LLC 7 10

Other top 10 sellers 32 31

Top 10 single-family sellers 46% 57%

Multifamily Sellers(1) YTD 2020 YTD 2019

Berkadia Commercial Mortgage LLC 15% 15%

CBRE Capital Markets, Inc. 14 19

Other top 10 sellers 48 46

Top 10 multifamily sellers 77% 80%

(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 27% of our

single-family purchase volume during YTD 2020 and YTD 2019, respectively. 
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 June 30, 2020 or December 31, 2019.

Table 14.4 - Servicer Concentration

Single-family Servicers(1) June 30, 2020(2) December 31, 2019(2)

Wells Fargo Bank, N.A. 14% 15%

JPMorgan Chase Bank, N.A. 9 10

Other top 10 servicers 31 32

Top 10 single-family servicers 54% 57%

Multifamily Servicers(1)(3) June 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 June 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

JuneÄ30, 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 generally 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 (i) 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; (ii) the loan is in an active repayment plan or trial period plan; or (iii) a

payment deferral solution is in effect.

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. If the borrowers ultimately default, we will

reimburse the servicers for the advanced amounts upon foreclosure or a foreclosure alternative.

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 COVID-19 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 moved 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 2Q 2020 Form 10-Q 128
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 JuneÄ30, 2020, mortgage insurers provided coverage with maximum loss

limits of $108.1 billion, for $427.0 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. Regulatory and other approvals of the acquisition are still pending.

Table 14.5 - Mortgage Insurer Concentration

Mortgage Insurance Coverage(2)

Mortgage Insurer CreditÅRating(1) June 30, 2020 December 31, 2019

Arch Mortgage Insurance Company A- 21% 22%

Radian Guaranty Inc. BBB+ 19 20

Mortgage Guaranty Insurance Corporation BBB+ 18 17

Genworth Mortgage Insurance Corporation BB+ 16 15

Essent Guaranty, Inc. BBB+ 15 15

Total 89% 89%

(1) Ratings are for the corporate entity to which we have the greatest exposure. Latest rating available as of June 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 JuneÄ30, 2020 and DecemberÄ31, 2019. The balance of

these receivables, net of associated reserves, was approximately $0.1 billion at both JuneÄ30, 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 JuneÄ30, 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 2Q 2020 Form 10-Q 129
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 JuneÄ30, 2020 and DecemberÄ31, 2019, including amounts related to our consolidated VIEs, the balance in our

other investments was $155.6 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 JuneÄ30, 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.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac 2Q 2020 Form 10-Q 130
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 2Q 2020 Form 10-Q 131
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

June 30, 2020

(In millions) LevelÅ1 LevelÅ2 LevelÅ3

Netting

Adjustment(1) Total

Assets:

Investment securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Agency $Å $22,039 $814 $Å $22,853

Non-agency and other Å 1 1,106 Å 1,107

Total available-for-sale securities, at fair value Ä 22,040 1,920 Ä 23,960

Trading, at fair value:

Mortgage-related securities:

Agency Å 18,602 3,052 Å 21,654

Non-agency Å Å 1 Å 1

Total mortgage-related securities Ä 18,602 3,053 Ä 21,655

Non-mortgage-related securities 29,838 2,449 Å Å 32,287

Total trading securities, at fair value 29,838 21,051 3,053 Ä 53,942

Total investments in securities 29,838 43,091 4,973 Ä 77,902

Mortgage loans:

Held-for-sale, at fair value Å 17,526 Å Å 17,526

Derivative assets, net:

Interest-rate swaps Å 3,482 Å Å 3,482

Option-based derivatives 15 7,432 Å Å 7,447

Other Å 353 61 Å 414

Subtotal, before netting adjustments 15 11,267 61 Ä 11,343

Netting adjustments(1) Å Å Å (9,941) (9,941)

Total derivative assets, net 15 11,267 61 (9,941) 1,402

Other assets:

Guarantee asset, at fair value Å Å 4,824 Å 4,824

Non-derivative held-for-sale purchase commitments, at fair value Å 203 Å Å 203

All other, at fair value Å Å 114 Å 114

Total other assets Ä 203 4,938 Ä 5,141

Total assets carried at fair value on a recurring basis $29,853 $72,087 $9,972 ($9,941) $101,971

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $Å $4 $202 $Å $206

Other debt, at fair value Å 2,757 123 Å 2,880

Derivative liabilities, net:

Interest-rate swaps Å 9,037 Å Å 9,037

Option-based derivatives Å 336 Å Å 336

Other Å 600 16 Å 616

Subtotal, before netting adjustments Ä 9,973 16 Ä 9,989

Netting adjustments(1) Å Å Å (9,150) (9,150)

Total derivative liabilities, net Ä 9,973 16 (9,150) 839

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value Å 1 Å Å 1

All other, at fair value Å Å 1 Å 1

Total other liabilities Ä 1 1 Ä 2

Total liabilities carried at fair value on a recurring basis $Ä $12,735 $342 ($9,150) $3,927

Referenced footnote is included after the next table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 132
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 $Å $22,927 $1,960 $Å $24,887

Non-agency and other Å 20 1,267 Å 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 Å 19,772 2,709 Å 22,481

Non-agency Å Å 1 Å 1

Total mortgage-related securities Ä 19,772 2,710 Ä 22,482

Non-mortgage-related securities 25,108 1,947 Å Å 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 Å 15,035 Å Å 15,035

Derivative assets, net:

Interest-rate swaps Å 2,104 Å Å 2,104

Option-based derivatives Å 4,198 Å Å 4,198

Other Å 61 16 Å 77

Subtotal, before netting adjustments Ä 6,363 16 Ä 6,379

Netting adjustments(1) Å Å Å (5,535) (5,535)

Total derivative assets, net Ä 6,363 16 (5,535) 844

Other assets:

Guarantee asset, at fair value Å Å 4,426 Å 4,426

Non-derivative held-for-sale purchase commitments, at fair value Å 81 Å Å 81

All other, at fair value Å Å 120 Å 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 $Å $6 $203 $Å $209

Other debt, at fair value Å 3,600 129 Å 3,729

Derivative liabilities, net:

Interest-rate swaps Å 4,882 Å Å 4,882

Option-based derivatives Å 130 Å Å 130

Other Å 233 37 Å 270

Subtotal, before netting adjustments Ä 5,245 37 Ä 5,282

Netting adjustments(1) Å Å Å (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 Å 7 Å Å 7

All other, at fair value Å Å 1 Å 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 2Q 2020 Form 10-Q 133
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

2Q 2020

Balance,

April 1,

2020

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

June 30,

2020

Change in

Unrealized

Gains (Losses)

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2020

(3)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of (In millions) June 30, 2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $650 $Å $8 $197 $Å ($10) ($31) $Å $Å $814 $Å $6

Non-agency and

other 1,101 4 41 Å Å Å (40) Å Å 1,106 4 32

Total available-forsale mortgagerelated securities 1,751 4 49 197 Ä (10) (71) Ä Ä 1,920 4 38

Trading, at fair value:

Mortgage-related

securities:

Agency 2,544 (53) Å 742 Å (170) (11) Å Å 3,052 (49) Å

Non-agency 1 Å Å Å Å Å Å Å Å 1 Å Å

Total trading

mortgage-related

securities 2,545 (53) Ä 742 Ä (170) (11) Ä Ä 3,053 (49) Ä

Other assets:

Guarantee asset 4,565 163 Å Å 289 Å (193) Å Å 4,824 163 Å

All other, at fair value 106 (3) Å (6) 6 Å 11 Å Å 114 (3) Å

Total other

assets 4,671 160 Ä (6) 295 Ä (182) Ä Ä 4,938 160 Ä

Balance,

April 1,

2020

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

June 30,

2020

Change in

Unrealized

(Gains) Losses

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2020

(3)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

June 30, 2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts

held by third parties, at

fair value $199 $3 $Å $Å $Å $Å $Å $Å $Å $202 $3 $Å

Other debt, at fair value 151 1 Å Å 1 Å (7) Å (23) 123 1 Å

Net derivatives(2) (39) (4) Å Å Å Å (2) Å Å (45) (79) Å

All other, at fair value 1 Å Å Å Å Å Å Å Å 1 Å Å

Referenced footnotes are included after the prior period table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 134
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,

June 30,

2020

Change in

Unrealized

Gains (Losses)

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2020

(3)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of (In millions) June 30, 2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Assets

Investment securities:

Available-for-sale, at

fair value:

Mortgage-related

securities:

Agency $1,960 $12 $46 $197 $Å ($218) ($88) $Å ($1,095) $814 $Å $4

Non-agency and

other 1,267 7 (86) Å Å Å (82) Å Å $1,106 7 (68)

Total available-forsale mortgage-related

securities 3,227 19 (40) 197 Ä (218) (170) Ä (1,095) 1,920 7 (64)

Trading, at fair value:

Mortgage-related

securities:

Agency 2,709 (37) Å 923 Å (104) (42) Å (397) 3,052 (44) Å

Non-agency 1 Å Å Å Å Å Å Å Å 1 Å Å

Total trading

mortgage-related

securities 2,710 (37) Ä 923 Ä (104) (42) Ä (397) 3,053 (44) Ä

Other assets:

Guarantee asset 4,426 262 Å Å 512 Å (376) Å Å 4,824 262 Å

All other, at fair value 120 (11) Å (6) 12 (8) 7 Å Å 114 (11) Å

Total other assets 4,546 251 Ä (6) 524 (8) (369) Ä Ä 4,938 251 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,

June 30,

2020

Change in

Unrealized

(Gains) Losses

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2020

(3)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

June 30, 2020

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts held

by third parties, at fair

value $203 ($1) $Å $Å $Å $Å $Å $Å $Å $202 ($1) $Å

Other debt, at fair value 129 Å Å Å 2 Å (8) Å Å 123 Å Å

Net derivatives(2) 21 (59) Å Å 1 Å (8) Å Å (45) (66) Å

All other, at fair value 1 Å Å Å Å Å Å Å Å 1 Å Å

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 135
2Q 2019

Balance,

April 1,

2019

Total Realized/Unrealized

Gains (Losses)

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

June 30,

2019

Change in

Unrealized

Gains (Losses)

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2019

(3)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of

June 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 $3,599 $8 $23 $Å $Å ($707) ($91) $Å ($52) $2,780 Å $21

Non-agency and

other 1,633 22 (15) Å Å (88) (58) Å Å $1,494 4 8

Total available-forsale mortgage-related

securities 5,232 30 8 Ä Ä (795) (149) Ä (52) 4,274 4 29

Trading, at fair value:

Mortgage-related

securities:

Agency 3,058 (15) Å 360 Å (511) 162 Å (21) 3,033 15 Å

Non-agency 1 Å Å Å Å Å Å Å Å 1 Å Å

Total trading

mortgage-related

securities 3,059 (15) Ä 360 Ä (511) 162 Ä (21) 3,034 15 Ä

Other assets:

Guarantee asset 3,795 24 Å Å 284 Å (162) Å Å 3,941 24 Å

All other, at fair value 150 (10) Å Å 8 (20) (2) Å Å 126 (15) Å

Total other assets 3,945 14 Ä Ä 292 (20) (164) Ä Ä 4,067 9 Ä

Balance,

April 1,

2019

Total Realized/Unrealized

(Gains) Losses

Purchases Issues Sales

Settlements,

Net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

June 30,

2019

Change in

Unrealized

(Gains) Losses

Included in

Net Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2019

(3)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

June 30, 2019

Included

in

Earnings

Included in

Other

Comprehensive

Income

Liabilities

Debt securities of

consolidated trusts held

by third parties, at fair

value $730 $3 $Å $Å $Å $Å $Å $Å $Å $733 $3 $Å

Other debt, at fair value 214 Å Å Å 1 Å (5) Å (81) 129 Å Å

Net derivatives(2) 48 (6) Å Å Å Å (2) Å Å 40 (11) Å

All other, at fair value 1 (1) Å Å Å Å Å Å Å Å Å Å

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 136
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,

June 30,

2019

Change in

Unrealized

Gains (Losses)

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2019

(3)

Change in

Unrealized

Gains

(Losses), Net

of Tax,

Included in

OCI Related to

Assets and

Liabilities Still

Held as of

June 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 ($10) $96 $Å $Å ($1,193) ($190) $Å ($58) $2,780 ($1) $75

Non-agency and

other 1,640 26 35 Å Å (87) (120) Å Å 1,494 8 48

Total available-forsale mortgagerelated securities 5,775 16 131 Ä Ä (1,280) (310) Ä Ä 4,274 7 123

Trading, at fair value:

Mortgage-related

securities:

Agency 3,293 (73) Å 372 Å (517) 138 Å (180) 3,033 (39) Å

Non-agency 1 Å Å Å Å Å Å Å Å 1 Å Å

Total trading

mortgage-related

securities 3,294 (73) Ä 372 Ä (517) 138 Ä (180) 3,034 (39) Ä

Other assets:

Guarantee asset 3,633 60 Å Å 565 Å (317) Å Å 3,941 60 Å

All other, at fair value 137 (43) Å 51 17 (32) (4) Å Å 126 (48) Å

Total other assets 3,770 17 Ä 51 582 (32) (321) Ä Ä 4,067 12 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,

June 30,

2019

Change in

Unrealized

(Gains) Losses

Included in Net

Income

Related to

Assets and

Liabilities Still

Held as of

June 30, 2019

(3)

Change in

Unrealized

(Gains)

Losses, Net of

Tax, Included

in OCI Related

to Assets and

Liabilities Still

Held as of

June 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 $Å $Å $Å $Å $Å $Å $Å $733 $5 $Å

Other debt, at fair value 134 Å Å Å 1 Å (6) Å Å 129 Å Å

Net derivatives(2) 91 (42) Å Å Å Å (9) Å Å 40 (52) Å

All other, at fair value Å (3) Å 3 Å Å Å Å Å Å Å Å

(1) Transfers out of Level 3 during 2Q 2020 and YTD 2020 and 2Q 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 2Q 2020 and YTD 2020 and 2Q 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) Amounts are the net of derivative assets and liabilities prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable, and net derivative

interest receivable or payable.

(3) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains and losses related to assets and

liabilities classified as Level 3 that were still held at June 30, 2020 and June 30, 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 2Q 2020 Form 10-Q 137
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

June 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 $651 Discounted cash flows OAS 37 - 93 bps 79 bps

163 Other

Non-agency and other 923

Median of external

sources

External pricing

sources $62.6 - $76.2 $69.5

183 Other

Trading, at fair value

Mortgage-related securities

Agency 2,055 Single external source

External pricing

sources $0.0 - $8,476.8 $900.7

997 Discounted cash flows OAS 85 - 1,646 bps 615 bps

Guarantee asset, at fair value 4,548 Discounted cash flows OAS 17 - 186 bps 41 bps

276 Other

Insignificant Level 3 assets(1) 176

Total level 3 assets $9,972

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value 202 Single external source

External pricing

sources $93.6 - $106.9 $101.2

Insignificant Level 3 liabilities(1) 140

Total level 3 liabilities $342

Referenced footnote is included after the next table.

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 138
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 2Q 2020 Form 10-Q 139
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

June 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) $Å $789 $5,781 $6,570 $Å $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 2Q 2020 Form 10-Q 140

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

June 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

Non-recurring fair value

measurements

Mortgage loans $5,781

Internal model Historical sales proceeds $3,097 - $700,000 $180,921

Internal model Housing sales index 53 - 417 bps 113 bps

Median of external sources External pricing sources $54.8 - $101.0 $89.7

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

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
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

June 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 $7,605 $7,605 $Å $Å $Å $7,605

Securities purchased under agreements

to resell Amortized cost 100,525 Å 109,189 Å (8,664) 100,525

Investment securities:

Available-for-sale, at fair value FV - OCI 23,960 Å 22,040 1,920 Å 23,960

Trading, at fair value FV - NI 53,942 29,838 21,051 3,053 Å 53,942

Total investment securities 77,902 29,838 43,091 4,973 Ä 77,902

Mortgage loans:

Loans held by consolidated trusts 2,000,649 Å 1,773,169 305,974 Å 2,079,143

Loans held by Freddie Mac 99,991 Å 59,018 42,845 Å 101,863

Total mortgage loans Various(3) 2,100,640 Ä 1,832,187 348,819 Ä 2,181,006

Derivative assets, net FV - NI 1,402 15 11,267 61 (9,941) 1,402

Guarantee asset FV - NI 4,824 Å Å 4,831 Å 4,831

Non-derivative purchase commitments Various 203 Å 284 Å Å 284

Secured lending and other Amortized cost 5,415 Å 1,680 3,557 Å 5,237

Total financial assets $2,298,516 $37,458 $1,997,698 $362,241 ($18,605) $2,378,792

Financial Liabilities

Debt:

Debt securities of consolidated trusts

held by third parties $2,020,866 $Å $2,101,807 $1,023 $Å $2,102,830

Other debt 287,435 Å 298,055 4,105 (8,664) 293,496

Total debt Various(4) 2,308,301 Ä 2,399,862 5,128 (8,664) 2,396,326

Derivative liabilities, net FV - NI 839 Å 9,973 16 (9,150) 839

Guarantee obligation Amortized cost 4,350 Å Å 4,905 Å 4,905

Non-derivative purchase commitments Various 24 Å 1 218 Å 219

Total financial liabilities $2,313,514 $Ä $2,409,836 $10,267 ($17,814) $2,402,289

(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 June 30, 2020, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value, and FV - NI were $2.1 trillion, $21.4 billion, and $17.5

billion, respectively. 

(4) As of June 30, 2020, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.3 trillion and $3.1 billion, respectively. 

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 141
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 $Å $Å $Å $5,189

Securities purchased under agreements

to resell Amortized cost 56,271 Å 66,114 Å (9,843) 56,271

Investment securities:

Available-for-sale, at fair value FV - OCI 26,174 Å 22,947 3,227 Å 26,174

Trading, at fair value FV - NI 49,537 25,108 21,719 2,710 Å 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 Å 1,732,434 244,500 Å 1,976,934

Loans held by Freddie Mac 79,677 Å 38,100 45,588 Å 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 Å 6,363 16 (5,535) 844

Guarantee asset FV - NI 4,426 Å Å 4,433 Å 4,433

Non-derivative purchase commitments Various 81 Å 90 72 Å 162

Secured lending and other Amortized cost 4,186 Å 1,874 2,131 Å 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 $Å $1,931,473 $1,277 $Å $1,932,750

Other debt 271,330 Å 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 Å 5,245 37 (4,910) 372

Guarantee obligation Amortized cost 4,292 Å Å 4,527 Å 4,527

Non-derivative purchase commitments Various 7 Å 7 67 Å 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 2Q 2020 Form 10-Q 142

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 $153 million and $146 million and multifamily held-for-sale loan purchase commitments

with a net fair value of $202 million and $74 million, as of June 30, 2020 and December 31, 2019, respectively.
Table 15.7 - Difference between Fair Value and UPB for Certain Financial Instruments with Fair Value Option Elected

June 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 $17,526 $2,731 $202 $15,035 $3,589 $203

UPB 16,200 2,886 200 14,444 3,329 200

Difference $1,326 ($155) $2 $591 $260 $3

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac 2Q 2020 Form 10-Q 143

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

2Q 2020 2Q 2019 YTD 2020 YTD 2019

(In millions) Gains (Losses) Gains (Losses)

Multifamily held-for-sale loans $313 $477 $951 $818

Multifamily held-for-sale loan purchase commitments 650 613 1,182 1,003

Other debt - long term (70) 69 478 67

Debt securities of consolidated trusts held by third parties Å (3) 4 (5)

Changes in fair value attributable to instrument-specific credit risk were not material for 2Q 2020 and YTD 2020 and for 2Q

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 Court of Appeals 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 Court of Appeals denied plaintiff's petition for leave to

appeal that decision.

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 denial may

be appealed upon the entry of final judgment; and the District Court has not yet ruled upon motions for summary judgment. 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 2Q 2020 Form 10-Q 144
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 Court of Appeals affirmed dismissal of

all claims except certain claims seeking monetary damages for breach of contract and breach of implied duty of good faith and

fair dealing. In March 2017, certain institutional and class plaintiffs filed petitions for panel rehearing with respect to certain

Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac 2Q 2020 Form 10-Q 145
claims. On July 17, 2017, the Court of Appeals granted the petitions for rehearing and issued a modified decision, which

permitted the institutional plaintiffs to pursue the breach of contract and breach of implied duty of good faith and fair dealing

claims that had been remanded. The Court of Appeals also removed language related to the standard to be applied to the

implied duty claims, leaving that issue for the District Court to determine on remand. On October 16, 2017, certain institutional

and class plaintiffs filed petitions for a writ of certiorari in the U.S. Supreme Court challenging whether HERA's prohibition on

injunctive relief against FHFA bars judicial review of the net worth sweep dividend provisions of the August 2012 amendment to

the Purchase Agreement, as well as whether HERA bars shareholders from pursuing derivative litigation where they allege the

conservator faces a conflict of interest. The Supreme Court denied the petitions on February 20, 2018. On November 1, 2017,

certain institutional and class plaintiffs and plaintiffs in another case in which Freddie Mac was not originally a defendant,

Fairholme Funds, Inc. v. FHFA, Treasury, and Federal National Mortgage Association, filed proposed amended complaints in the

District Court. Each of the proposed amended complaints names Freddie Mac as a defendant for breach of contract and

breach of the covenant of good faith and fair dealing claims as well as for new claims alleging breach of fiduciary duty and

breach of Virginia corporate law. On January 10, 2018, FHFA, Freddie Mac, and Fannie Mae moved to dismiss the amended

complaints. 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.

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 2Q 2020 Form 10-Q 146
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 2Q 2020 Form 10-Q 147
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 2Q 2020 Form 10-Q 148

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) June 30, 2020 December 31, 2019

GAAP net worth (deficit) $11,442 $9,122

Core capital (deficit)(1)(2) (62,254) (63,964)

Less: Minimum capital requirement(1) 20,230 19,123

Minimum capital surplus (deficit)(1) ($82,484) ($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 2Q 2020 Form 10-Q 149

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) 2Q 2020 2Q 2019 YTD 2020 YTD 2019

Investment gains (losses), net:

Mortgage loans gains (losses) $1,046 $1,544 $2,218 $2,478

Investment securities gains (losses) 65 358 1,120 502

Debt gains (losses) 60 49 760 64

Derivative gains (losses) (501) (2,089) (4,263) (3,695)

Investment gains (losses), net $670 ($138) ($165) ($651)

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) June 30, 2020 December 31, 2019

Other assets:

Real estate owned, net $322 $555

Accounts and other receivables(1) 20,996 10,780

Guarantee asset 4,824 4,426

Secured lending and other 6,465 5,158

All other 2,144 1,880

Total other assets $34,751 $22,799

Other liabilities:

Guarantee obligation $4,350 $4,292

All other 4,477 3,750

Total other liabilities $8,827 $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 2Q 2020 Form 10-Q 150

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-Q for the first 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. 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. From this address, 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 2Q 2020 Form 10-Q 151

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 JuneÄ30, 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

JuneÄ30, 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 2Q 2020

We evaluated the changes in our internal control over financial reporting that occurred during 2Q 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 JuneÄ30, 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 2Q 2020 have been prepared in conformity with GAAP.

Controls and Procedures

Freddie Mac 2Q 2020 Form 10-Q 152
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 2Q 2020 Form 10-Q 153
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: JulyÄ30, 2020

By: /s/ Christian M. Lown

Christian M. Lown

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: JulyÄ30, 2020

Signatures

Freddie Mac 2Q 2020 Form 10-Q 154
Form 10-Q Index

Item Number Page(s)

PART I FINANCIAL INFORMATION

Item 1. Financial Statements 74 - 149

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1 - 73

Item 3. Quantitative and Qualitative Disclosures About Market Risk 57 - 59

Item 4. Controls and Procedures 152

PART II OTHER INFORMATION

Item 1. Legal Proceedings 150

Item 1A. Risk Factors 150

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 150

Item 6. Exhibits 151

Exhibit Index 153

Signatures 154

Form 10-Q Index

Freddie Mac 2Q 2020 Form 10-Q 155
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 June 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: JulyÄ30, 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 June 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: JulyÄ30, 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 June 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. SectionÄ1350, as adopted pursuant to SectionÄ906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of SectionÄ13(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: JulyÄ30, 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 June 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. SectionÄ1350, as adopted pursuant to SectionÄ906 of the Sarbanes-Oxley Act of

2002, that to my knowledge:

1. The Report fully complies with the requirements of SectionÄ13(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: JulyÄ30, 2020

/s/ Christian M. Lown

Christian M. Lown

Executive Vice President and Chief Financial Officer