UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

 For the fiscal year ended December 31, 2020

or

 

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

For the transition period from to 

Commission File Number: 001-34139

Federal Home Loan Mortgage Corporation

(Exact name of registrant as specified in its charter)

Federally chartered

52-0904874

8200 Jones Branch Drive

22102-3110 (703) 903-2000 corporation McLean, Virginia

(State or other jurisdiction of 

incorporation or organization)

(I.R.S. Employer

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

Securities registered pursuant to Section 12(b) of the Act:

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

None N/A N/A

Securities registered pursuant to Section 12(g) of the Act:

Voting Common Stock, no par value per share (OTCQB: FMCC)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCI)

5% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCKK)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCG)

5.1% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCH)

5.79% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCK)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCL)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCM)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCN)

5.81% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCO)

6% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCP)

Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCCJ)

5.7% Non-Cumulative Preferred Stock, par value $1.00 per share (OTCQB: FMCKP)

Variable Rate, Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCCS)

6.42% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCCT)

5.9% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKO)

5.57% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKM)

5.66% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKN)

6.02% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKL)

6.55% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKI)

Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTCQB: FMCKJ)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 

preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the 

past 90 days. ☒  Yes  ☐ No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 

Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒  Yes

☐ No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging 

growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of 

the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Emerging growth company ☐

Non-accelerated filer ☐ Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 

financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of internal control over 

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit 

report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No  ☒

The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the common stock was last sold on June 30, 

2020 (the last business day of the registrant's most recently completed second fiscal quarter) was $1.4 billion.

As of January 29, 2021, there were 650,059,292 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None
Table of Contents

INTRODUCTION 1

n About Freddie Mac 1

n Our Business 11

n Forward-Looking Statements 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17

n Market Conditions and Economic Indicators 17

n Consolidated Results of Operations 22

n Consolidated Balance Sheets Analysis 34

n Our Business Segments 35

n Risk Management 73

l	Credit Risk 76

l	Operational Risk 118

l	Market Risk 121

n Liquidity and Capital Resources 127

n Conservatorship and Related Matters 140

n Regulation and Supervision 146

n Critical Accounting Policies and Estimates 153

RISK FACTORS 155

LEGAL PROCEEDINGS 170

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER 

MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES 171

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 172

CONTROLS AND PROCEDURES 282

DIRECTORS, CORPORATE GOVERNANCE, AND EXECUTIVE OFFICERS 284

n Directors 284

n Corporate Governance 290

n Executive Officers 298

EXECUTIVE COMPENSATION 300

n Compensation Discussion and Analysis 300

n Compensation and Risk 314

n CEO Pay Ratio 315

n 2020 Compensation Information for NEOs 316

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 

MANAGEMENT AND RELATED STOCKHOLDER MATTERS 323

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 325

PRINCIPAL ACCOUNTING FEES AND SERVICES 327

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 329

GLOSSARY 330

EXHIBIT INDEX 339

SIGNATURES 345

FORM 10-K INDEX 347

Table of Contents

FREDDIE MAC | 2020 Form 10-K i
MD&A TABLE INDEX

Table Description Page

1 Summary of Consolidated Statements of Comprehensive Income (Loss) 22

2 Components of Net Interest Income 24

3 Analysis of Net Interest Yield 26

4 Net Interest Income Rate / Volume Analysis 27

5 Components of Guarantee Fee Income 28

6 Components of Investment Gains (Losses), Net 28

7 Components of Mortgage Loans Gains (Losses) 29

8 Components of Investment Securities Gains (Losses) 29

9 Components of Debt Gains (Losses) 30

10 Components of Derivative Gains (Losses) 31

11 Components of Benefit (Provision) for Credit Losses 32

12 Summarized Consolidated Balance Sheets 34

13 Single-Family Guarantee Segment Financial Results 51

14 Multifamily Portfolio and Market Support 60

15 Multifamily Segment Financial Results 63

16 Capital Markets Segment Financial Results 71

17 Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax 71

18 Single-Family New Business Activity 80

19 Single-Family Credit Guarantee Portfolio CRT Issuance 81

20 Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding 82

21 Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Credit Guarantee Portfolio 83

22 Credit Enhancement by Year of Origination 83

23 Single-Family Credit Guarantee Portfolio Without Credit Enhancement 84

24 Details of Single-Family Credit Enhancement Expenses and Recoveries 85

25 Single-Family Credit Enhancement Receivables 85

26 Credit Quality Characteristics of Our Single-Family Loans in Forbearance 86

27 Single-Family Loans in Forbearance by Payment Status 86

28 Single-Family Loans in Forbearance 87

29 Status of Single-Family Loans That Received Forbearance 87

30 Single-Family Allowance for Credit Losses Activity 88

31 Single-Family Credit Guarantee Portfolio Performance Metrics 89

32 Credit Characteristics of Certain Single-Family Loan Categories 89

33 Single-Family TDR and Non-Accrual Loans 90

34 Single-Family TDR Loan Activity 91

35 Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio 94

36 Characteristics of the Loans in Our Single-Family Credit Guarantee Portfolio 95

37 Single-Family Credit Guarantee Portfolio Higher Risk Loan Data 96

38 Single-Family Credit Guarantee Portfolio Attribute Combinations 96

39 Higher Risk Single-Family Loan Credit Characteristics 97

40 Timing of Scheduled Payment Changes for Certain Single-Family Loan Types 98

41 Alt-A Loans in Our Single Family Credit Guarantee Portfolio 99

42 Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio 99

43 Single-Family Relief Refinance Loans 100

44 Credit Characteristics of Single-Family Modified Loans 102

45 Payment Performance of Single-Family Modified Loans 102

Table of Contents MD&A Table Index

FREDDIE MAC | 2020 Form 10-K ii
Table Description Page

46 Seriously Delinquent Single-Family Loans by Jurisdiction 103

47 Average Length of Foreclosure Process for Single-Family Loans 103

48 Single-Family REO Activity 104

49 Single-Family Severity Ratios 104

50 Multifamily New Business Activity Key Risk Characteristics 106

51 Current Credit Quality of Multifamily Loans Under a Forbearance Program 107

52 Multifamily Allowance for Credit Losses Activity 108

53 Credit-Enhanced and Non-Credit Enhanced Loans Underlying Our Multifamily Mortgage Portfolio 109

54 Level of Subordination Outstanding 109

55 Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement 110

56 Single-Family Credit Guarantee Portfolio Non-Depository Servicers 112

57 Single-Family Mortgage Insurers 113

58 Single-Family ACIS Counterparties 114

59 Derivative Counterparty Credit Exposure 116

60 PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve 123

61 Duration Gap and PVS Results 123

62 PVS-L Results Before Derivatives and After Derivatives 123

63 Earnings Sensitivity to Changes in Interest Rates 125

64 Liquidity Sources 128

65 Other Investments Portfolio 129

66 Funding Sources 130

67 Debt of Freddie Mac Activity 131

68 Short-Term Debt 133

69 Activity for Debt Securities of Consolidated Trusts Held by Third Parties 135

70 Debt Securities of Consolidated Trusts Held by Third Parties 135

71 Freddie Mac Credit Ratings 135 

72 Net Worth Activity 139

73 Mortgage-Related Investments Portfolio Details 143

74 2019 and 2018 Affordable Housing Goal Results 147

75 2020-2021 Affordable Housing Goal Benchmark Results 148

76 Forecasted House Price Growth Rates 153

77 Board Compensation Levels 296

78 Director Compensation 296

79 2020 Target TDC 301

80 2020 Deferred Salary 309

81 CEO Pay Ratio 315

82 Compensation Summary 316

83 Grants of Plan-Based Awards 317

84 SERP and SERP II Benefits 318

85 Compensation and Benefits if NEO Terminated Employment as of December 31, 2020 320

86 Stock Ownership by Directors and Executive Officers 323

87 Stock Ownership by Greater Than 5% Holders 324

88 Auditor Fees 327

Table of Contents MD&A Table Index

FREDDIE MAC | 2020 Form 10-K iii
Introduction

This Annual Report on Form 10-K includes forward-looking statements that are based on current expectations, including with 

respect to 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-K. We undertake no obligation to update any forward-looking statement to 

reflect events or circumstances after the date of this Form 10-K. 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 and Risk Factors sections of this Form 10-K.

Throughout this Form 10-K, we use certain acronyms and terms that are defined in the Glossary.

ABOUT FREDDIE MAC

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 and have helped many distressed renters avoid eviction. 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

Late in 2019, a novel coronavirus disease, later named COVID-19, was detected. The outbreak of COVID-19 was declared a 

pandemic by the World Health Organization on March 11, 2020. The COVID-19 pandemic was declared a national emergency 

in the United States on March 13, 2020 and continued to evolve throughout 2020 and into 2021, both globally and domestically, 

with significant adverse effects on populations and economies. 

We have remained 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. 

CDC. Our Crisis Management Team (CMT), consisting of representatives from across the company, meets regularly, closely 

monitoring the situation, and providing frequent updates to our Board of Directors and staff. We continue to take actions in line 

with guidance from national and state governments and public health authorities to maintain business continuity. In March 

2020, we required more than 95% of our staff to work remotely. While a small number of staff voluntarily returned to the office 

in 4Q 2020, more than 95% of our staff continued to work remotely as of December 31, 2020.

In addition to these actions, we have been engaging with FHFA and third parties to maintain continuity of critical business 

activities that will allow us to serve our mission and support the U.S. housing finance system during this pandemic. 

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

We have taken actions to help homeowners with Freddie Mac-owned mortgages who are directly or indirectly affected by the 

COVID-19 pandemic 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 borrower’s payments are temporarily reduced or suspended. Under FHFA's guidance, we are extending COVID-19 

forbearances up to 15 months for eligible borrowers, and this forbearance term may be further extended by FHFA in the future. 

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 March 31, 2021. 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 other critical participants in the 

mortgage process safe during the COVID-19 pandemic. For additional information on these temporary measures, see MD&A - 

Risk Management - Single-Family Mortgage Credit Risk. 

As of December 31, 2020, 2.70% of loans in our single-family credit guarantee portfolio, based on loan count, were in 

forbearance, including loans where the borrower has continued to make payments in accordance with the loan's original 

contractual terms and remains in current status. All information included in this Form 10-K related to single-family loans in 

forbearance is based on information reported to us by our servicers. Beginning in 4Q 2020, we required single-family servicers 

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 1
to report to us all alternatives to foreclosure, which include forbearance plans on all mortgages, including those where the 

borrower has continued to make payments in accordance with the loan's original contractual terms and remains in current 

status. The forbearance data we reported in prior periods was generally limited to loans in forbearance that were past due 

based on the loan’s original contractual terms. 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 plan. For additional information on our support of the single-family mortgage 

market during the COVID-19 pandemic, see MD&A - Risk Management - 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, which is based on our existing natural disaster response 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 that lenders may use to assist borrowers who have a forbearance 

plan in place and continue to be materially affected by the COVID-19 pandemic. These supplemental relief options added to the 

original renter protections by providing flexibility to renters to repay past due rent over time and not in a lump sum, and 

extended the prohibition on charging renters fees and penalties for past due rent through both the forbearance and repayment 

periods. In December 2020, we extended the deadline to March 31, 2021 for borrowers whose loans have not been more than 

30 days past due to request a new COVID-19 forbearance agreement or supplemental relief. The forbearance program was 

initially set to terminate at the end of 2020.

As of December 31, 2020, 2.01% of the loans in our multifamily mortgage portfolio, based on UPB, were enrolled in our 

forbearance program, approximately 95% of which were in their repayment period. Approximately 82% of the total loans in our 

forbearance program are included in securitizations with first loss credit protection provided by subordination, which reduces 

our credit risk exposure to those loans. We report multifamily loans in forbearance as current as long as the borrowers are in 

compliance with the forbearance agreement, including the agreed upon repayment plan. Loans in forbearance are therefore not 

included in our multifamily delinquency rates if the borrowers are in compliance with their forbearance agreement. For 

additional information on our support of the multifamily mortgage market during the COVID-19 pandemic, see MD&A - Risk 

Management - Multifamily Mortgage Credit Risk. 

Business Outlook

We expect the COVID-19 pandemic to have an adverse effect on our business in 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.

After the sharp decline in economic conditions seen in the first half of 2020, the economy rebounded during the second half of 

the year, although recent data indicates the recovery may be stalling. The housing market, however, is one segment of the 

economy that overall has performed well during the COVID-19 pandemic, with mortgage refinance originations increasing 

significantly during 2020 as many homeowners took advantage of historically low mortgage interest rates. We expect the low 

mortgage interest rate environment to continue through 2021 and 2022 as the Federal Reserve stated that it intends to keep 

interest rates low for an extended period of time. Low interest rates and the ability for many to work remotely have driven home 

sales to levels not seen since 2006. We expect total annual sales to remain strong in 2021 with only a modest decline in 2022. 

Unsold home inventory has hit an all-time low due to the increase in home sales, which in turn has driven increased house 

prices, although we expect house price growth to moderate in 2021 and 2022. Low mortgage interest rates, higher home sales, 

and increasing house prices also increased 2020 mortgage originations. We expect mortgage originations to decline in 2021 

and decrease further in 2022.

Both supply and demand for rental housing will be affected over the next year or two due to the COVID-19 pandemic. However, 

a $900 billion stimulus package was enacted in December 2020, with more stimulus expected in the coming months. The 

additional stimulus packages are expected to boost economic conditions in 2021 and help stabilize the rental market. Longer 

term, labor market conditions will be key to future rental market performance. At a national level, average rents declined in 

2020, with rent growth performance varying by geographic market. Large markets such as San Francisco, New York, Miami, 

and Washington D.C. have been hardest hit, with some experiencing double-digit rent declines; however, rent continues to 

grow in over half of the U.S. markets tracked. Apartment prices have held up as investors continue to believe there is a need for 

additional rental housing in the U.S., both during and after the pandemic, and the investment environment remains attractive 

because of low interest rates. After an initial surge in forbearance requests by borrowers, peaking in July 2020, the number of 

multifamily properties in forbearance has declined slightly over the past several months. While these loans are not considered 

delinquent, they are an indication of stress in the market. For additional information on market and macroeconomic indicators 

that can affect our multifamily business and financial results, see MD&A - Market Conditions and Economic Indicators.

Our single-family allowance for credit losses increased significantly during 2020. 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 

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 2
programs and foreclosure and eviction moratoriums we have announced. While we expect that the actions we have taken to 

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

be as successful as we expect. In addition, 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. For additional information, see MD&A - Risk Management - Credit Risk.

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

2020 with solid investor demand and subscription levels. However, the COVID-19 pandemic continues to impose uncertainties 

and may continue to impact our transactions going forward. We continue to evaluate our CRT strategy and make changes 

depending on market conditions, including the significant market volatility caused by the COVID-19 pandemic, and our 

business strategy. The ERCF specifies substantial capital requirements and could affect our CRT strategy, perhaps 

significantly. In addition, our risk appetite limits are governed by FHFA and these limits may lead us to take actions to comply 

with these limits, including continued execution of CRT transactions. For additional information on the ERCF, see Introduction 

- About Freddie Mac - FHFA Enterprise Regulatory Capital Framework.

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

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

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

future periods.

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 3
Business Results

Consolidated Financial Results

Net Revenues, Net Income, and Comprehensive Income

(In billions)

$15.6

$14.1

$16.7

$9.2

$7.2 $7.3

$8.6 $7.8 $7.5

Net Revenues

Net Income

Comprehensive Income

2018 2019 2020

Total Equity as of December 31,

(In billions)

$4.5

$9.1

$16.4

2018 2019 2020

Key Drivers:

n	 2020 vs. 2019

l Net income was $7.3 billion for 2020, an increase of $0.1 billion, or 2%, from 2019. Comprehensive income was $7.5 

billion for 2020, a decrease of $0.3 billion, or 3%, from 2019. The changes in net income and comprehensive income 

were primarily driven by higher net revenues, partially offset by higher provision for credit losses.

l	 Net revenues increased $2.6 billion, or 18%, compared to 2019, primarily due to higher net interest income and higher 

investment gains (losses), net.

l Total equity was $16.4 billion as of December 31, 2020, up from $9.1 billion as of December 31, 2019. 

l	 We recognized a decrease to retained earnings of $0.2 billion upon our adoption of CECL on January 1, 2020. See 

Note 1 for additional information about our adoption of CECL. 

n	 2019 vs. 2018

l Net income was $7.2 billion for 2019, a decrease of $2.0 billion, or 22%, from 2018. Comprehensive income was 

$7.8 billion for 2019, a decrease of $0.8 billion, or 10%, from 2018. The declines in both net income and 

comprehensive income were primarily due to higher costs related to transferring credit risk and investments to 

improve the efficiency of our business operations.

l	 Net revenues declined $1.5 billion, or 10%, compared to 2018, primarily due to lower investment gains (losses), net, 

partially offset by higher contractual net interest income on the single-family guarantee portfolio and higher income on 

the multifamily guarantee portfolio. The decline in net revenues was also partially offset by a $1.2 billion increase in 

other comprehensive income.

l Total equity was $9.1 billion as of December 31, 2019, up from $4.5 billion as of December 31, 2018.

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 4
Market Liquidity

Market Liquidity

(In thousands)

2,192

2,578

4,601

884 987 1,131

442

782

2,667

866

809

803

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

2018 2019 2020

We support the U.S. housing market by executing our Charter Mission to provide liquidity and help maintain credit availability 

for new and refinanced single-family mortgages as well as for rental housing. Despite the significant challenges presented by 

the COVID-19 pandemic, we provided $1.2 trillion in liquidity to the mortgage market in 2020, which enabled the financing of 

4.6 million home purchases, refinancings, or rental units. Single-family refinance activity increased significantly compared to 

2019, as borrowers took advantage of low mortgage interest rates during 2020.

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 5
Portfolio Balances

Guarantee Portfolio as of December 31, 

(UPB in billions)

$2,133

$2,265

$2,638

$1,550 $1,701

$2,093

$346

$293

$233

$237 $271

$312

Single-family credit guarantee portfolio -

Core (loans originated after 2008)

Single-family credit guarantee portfolio -

Legacy and relief refinance

Multifamily guarantee portfolio

2018 2019 2020

Investments Portfolio as of December 31,

(UPB in billions)

$281

$316

$345

$218 $213 $182

$63

$103 $163

Mortgage-related investments portfolio

Other investments portfolio

2018 2019 2020

n	 The total guarantee portfolio grew $373 billion, or 16%, in 2020, driven by a 17% increase in our single-family credit 

guarantee portfolio and a 15% increase in our multifamily guarantee portfolio. The total guarantee portfolio grew $132 

billion, or 6%, in 2019, driven by a 5% increase in our single-family credit guarantee portfolio and a 14% increase in our 

multifamily guarantee portfolio. 

l	 The growth in our single-family credit guarantee portfolio in 2020 was driven by an increase in U.S. single-family 

mortgage debt outstanding and higher new business activity. Additionally, continued house price appreciation 

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

to run off.

l Our multifamily guarantee portfolio grew in 2020, primarily driven by increased loan purchase and securitization 

activity attributable to continued high demand for multifamily financing.

n	 Our total investments portfolio increased $29 billion, or 9%, in 2020 and $35 billion, or 12%, in 2019, primarily due to an 

increase in our other investments portfolio during both periods. 

l The increase in the other investments portfolio in 2020 was driven by higher loan prepayments and higher near-term 

cash needs for higher expected single-family cash window loan purchases, as well as our transition to comply with 

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

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

l The increase in the other investments portfolio in 2019 was primarily driven by higher loan prepayments, higher nearterm cash needs for upcoming debt maturities and anticipated calls of debt of Freddie Mac, and higher expected cash 

window loan purchases.

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

at all times. In November 2019, FHFA instructed us to include 10% of the notional value of certain interest-only 

securities owned by Freddie Mac in the calculation of this portfolio. In August 2020, FHFA instructed us to further limit 

the amount and type of assets we hold in our mortgage-related investments portfolio. Pursuant to the January 2021 

Letter Agreement, the calculation of mortgage assets subject to the Purchase Agreement cap also includes 10% of the 

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 6
notional value of interest-only securities, and at the end of 2022, the Purchase Agreement cap on our mortgagerelated investments portfolio will be lowered from $250 billion to $225 billion. See MD&A - Conservatorship and 

Related Matters for additional information.

Credit Risk Transfer

Single-Family Credit Guarantee Portfolio with Credit Enhancement 

as of December 31,

(UPB in billions)

$1,022

$1,121 $1,178

54%

56%

51%

UPB Percentage

2018 2019 2020

Multifamily Mortgage Portfolio with Credit Enhancement 

as of December 31, 

(UPB in billions)

$235

$267

$303

87% 89% 88%

UPB Percentage

2018 2019 2020

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

developed CRT programs that distribute mortgage credit risk to third-party investors. 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 51% and 88%, 

respectively, as of December 31, 2020. Credit enhancement coverage of the single-family credit guarantee portfolio decreased 

from December 31, 2019, primarily due to the high volume of new business activity which has not been included in CRT 

transactions but may be included in future periods.

For additional information, see Introduction - About Freddie Mac - COVID-19 Pandemic Response Efforts - Business 

Outlook. See MD&A - Our Business Segments - Single-Family Guarantee - Business Overview - Products and 

Activities and MD&A - Our Business Segments - Multifamily - Business Overview - Products and Activities for 

additional information on our credit enhancements.

New Accounting Guidance for Credit Losses on Financial 

Instruments

On January 1, 2020, we adopted CECL, which replaced the previous incurred loss impairment methodology with a new 

methodology that measures the allowance for credit losses for financial instruments at amortized cost and off-balance sheet 

credit exposures based on current expected credit losses. CECL also changed the methodology for accounting for credit 

losses on debt securities classified as available-for-sale. We recorded a cumulative-effect adjustment on January 1, 2020, to 

recognize the impact of adopting CECL. This adjustment reduced our opening retained earnings balance by $0.2 billion, net of 

income taxes. See Note 1 for additional information on our adoption of CECL. See Note 4, Note 5, Note 6, Note 7, and

Note 8 for additional information on the changes in our significant accounting policies as a result of our adoption of CECL.

The adoption of CECL significantly changed how we measure credit losses on mortgage loans classified as held-for-investment 

and off-balance sheet credit exposures and may result in additional volatility in our credit-related expenses, as our estimate of 

credit losses now incorporates both our forecasts of certain future economic conditions and our expectations of credit losses 

over the entire contractual term of the instruments, which for many of our mortgage loans is 30 years. The length and severity 

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 7
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 such credit losses. These developments may have a material effect on our 

allowance for credit losses in future periods. See Risk Management - Credit Risk and Critical Accounting Policies and 

Estimates for additional information.

FHFA Enterprise Regulatory Capital Framework

In November 2020, FHFA released a final rule that establishes the ERCF as a new regulatory capital framework for Freddie Mac 

and Fannie Mae. This final rule is substantively similar in terms of overall structure and approach to the proposed capital rule 

released in May 2020. The final capital rule, which will become effective on February 16, 2021, has a transition period for 

compliance. In general, the compliance date for the regulatory capital requirements will be the later of the date of termination of 

our conservatorship and any later compliance date provided in a consent order or other transition order; however, we may 

begin implementing the ERCF sooner, upon the direction of FHFA or otherwise. As the ERCF was not yet in effect during 2020, 

we continued to use the guidance issued to us by FHFA under the CCF to evaluate our transactions and businesses. We will be 

required to report our regulatory capital under the new framework beginning on January 1, 2022. The final capital rule specifies 

substantial capital requirements and could affect our business strategies, perhaps significantly. For additional information, see 

MD&A – Liquidity and Capital Resources and MD&A – Regulation and Supervision – Legislative and Regulatory 

Developments – FHFA Enterprise Regulatory Capital Framework.

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. The senior preferred stock and warrant 

were issued as an initial commitment fee in consideration for Treasury's commitment to provide funding to us under the 

Purchase Agreement. 

Our Purchase Agreement with Treasury and the terms of the senior preferred stock we issued to Treasury 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. From 2013 through 2017, the applicable Capital Reserve Amount decreased by $600 million each year, 

from $3 billion in 2013 to $600 million in 2017, limiting our ability to retain earnings and build capital. The applicable Capital 

Reserve Amount was then increased to $3 billion as of January 1, 2018 pursuant to the December 2017 Letter Agreement and 

to $20 billion as of September 30, 2019 pursuant to the September 2019 Letter Agreement. Pursuant to the January 2021 Letter 

Agreement, the applicable Capital Reserve Amount was further increased as of October 1, 2020 to the amount of adjusted total 

capital necessary to meet the capital requirements and buffers set forth in the ERCF. This increased Capital Reserve Amount 

will remain in effect until the last day of the second fiscal quarter during which we have reached and maintained such level of 

capital (the Capital Reserve End Date). As a result of the increases in the applicable Capital Reserve Amount, we have been 

able to retain earnings and build capital, but the increases in our Net Worth Amount from December 31, 2017 until we have built 

sufficient capital to meet the capital requirements and buffers set forth in the ERCF have been, or will be, added to the 

aggregate liquidation preference of the senior preferred stock. If for any reason we were not to pay our dividend requirement on 

the senior preferred stock in full in any future period until the Capital Reserve End Date, the unpaid amount would be added to 

the liquidation preference and the applicable Capital Reserve Amount would thereafter be zero. This would not affect our ability 

to draw funds from Treasury at the request of FHFA, our conservator, under the Purchase Agreement.

Beginning with the first quarter after the Capital Reserve End Date, our cash dividend requirement each quarter will be an 

amount equal to the lesser of (i) 10% per annum on the then-current liquidation preference of the senior preferred stock and (ii) 

a quarterly amount equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. If for any 

reason we were not to pay our dividend requirement in full in any future period after the Capital Reserve End Date, the unpaid 

amount would be added to the liquidation preference and immediately following such failure and for all dividend periods 

thereafter until the dividend period following the date on which we shall have paid in cash full cumulative dividends, the 

dividend amount will be 12% per annum on the then-current liquidation preference of the senior preferred stock.

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 8
The January 2021 Letter Agreement also provides that by the Capital Reserve End Date, we and Treasury, in consultation with 

the Chairman of the Federal Reserve, will mutually agree on a periodic commitment fee that we will pay for Treasury's 

remaining funding commitment with respect to the five-year period commencing on the first January 1 after the Capital Reserve 

End Date. 

Accordingly, after the Capital Reserve End Date, we will be able to retain further earnings and build further capital (or, with 

Treasury's prior written consent, pay dividends on our preferred stock, other than our senior preferred stock, or our common 

stock) only if and to the extent that the increase in the Net Worth Amount in any quarter, after the payment of a new periodic 

commitment fee to Treasury, exceeds 2.5% (10% annualized) of the then-current liquidation preference of the senior preferred 

stock. 

The January 2021 Letter Agreement also establishes new or modified covenants which impose additional requirements for us to 

exit from conservatorship, including with respect to capital and the resolution of currently pending material litigation related to 

our conservatorship and the Purchase Agreement; allows us to issue common stock after Treasury’s exercise in full of its 

warrant to acquire 79.9% of our common stock and resolution of currently pending material litigation relating to our 

conservatorship and the Purchase Agreement and to use up to $70 billion in proceeds from such issuances to build capital; and 

imposes further limits on our business, including limits on our retained mortgage portfolio and indebtedness, secondary market 

activities, and single-family and multifamily loan acquisitions. With respect to capital, we are required to comply with the ERCF 

as reflected in FHFA’s recent final capital rule, disregarding any subsequent amendment or other modifications to that rule. 

Treasury and Freddie Mac also commit to work to restructure Treasury’s investment and dividend amount in a manner that 

facilitates our orderly exit from conservatorship, ensures Treasury is appropriately compensated, and permits us to raise thirdparty capital and make distributions as appropriate. 

We continue to assess the effects of these new Purchase Agreement covenants on our business, and we are developing 

related business processes and controls, including with respect to monitoring and reporting. 

See MD&A - Regulation and Supervision and Note 2 for additional information on our Purchase Agreement with Treasury 

and the January 2021 Letter Agreement.

The graphs below show, as of December 31, 2020, our net worth, the liquidation preference of the senior preferred stock, the 

remaining amount of Treasury's funding commitment to us, the cumulative senior preferred stock dividends we have paid to 

Treasury, and the cumulative funds we have drawn from Treasury pursuant to its funding commitment.

Net Worth Amount, Liquidation Preference, and 

Treasury Commitment

(In billions)

$16.4

$86.5

$140.2

Net Worth Amount

Senior preferred stock liquidation

preference

Remaining Treasury commitment

As of December 31, 2020

Dividend Payments and Draws

(In billions)

$71.6

$119.7

Cumulative draws from Treasury

Cumulative dividend payments to Treasury

As of December 31, 2020

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 9
Pursuant to the Purchase Agreement and terms of the senior preferred stock, both as amended:

n	 Our Net Worth Amount was $16.4 billion as of December 31, 2020, up from $9.1 billion on December 31, 2019. As our Net 

Worth Amount as of December 31, 2020 was below the amount necessary to meet the capital requirements and buffers set 

forth in the ERCF, we will not have a dividend requirement to Treasury on the senior preferred stock for 4Q 2020, and we 

do not expect to have a dividend requirement on the senior preferred stock until we reach such capital levels. 

n	 The liquidation preference of the senior preferred stock increased from $84.1 billion on September 30, 2020 to $86.5 billion 

on December 31, 2020 based on the $2.4 billion increase in our Net Worth Amount during 3Q 2020, and will increase to 

$89.1 billion on March 31, 2021 based on the $2.5 billion increase in the Net Worth Amount during 4Q 2020. 

At December 31, 2020, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury 

under the Purchase Agreement. As of December 31, 2020, our aggregate funding received from Treasury under the Purchase 

Agreement was $71.6 billion. The remaining Treasury commitment under the Purchase Agreement was $140.2 billion at 

December 31, 2020, and will be reduced by any future draws.

For more information on the conservatorship and government support for our business, including our dividend requirements on 

and increases in the liquidation preference of the senior preferred stock, see MD&A - Conservatorship and Related 

Matters, MD&A - Regulation and Supervision, and Note 2.

Introduction About Freddie Mac

FREDDIE MAC | 2020 Form 10-K 10
OUR BUSINESS

Primary Business Strategies

Freddie Mac's overall strategic direction is established by management and affirmed by the Board through its approval of a 

strategic plan, which sets forth our primary business strategies and generally covers a three-year timeframe. FHFA, the 

Administration, or Congress could take actions that cause us to alter our strategic plan. FHFA, as Conservator, has influenced, 

and may in the future influence, our strategic direction, such as through our new initiatives, credit and pricing policies, and 

capital, liquidity, and risk appetite constraints.

Charter Mission

We are a GSE with a specific and limited corporate purpose (i.e., Charter Mission) to support the liquidity, stability, and 

affordability of the U.S. housing market as a participant in the secondary mortgage market, while operating as a commercial 

enterprise earning an appropriate return. Everything we do must be done within the constraints of our Charter Mission. 

Our Strategic Goals

Our primary business strategies are currently focused on three strategic goals: exit conservatorship, create a world class 

operating platform, and become the leader in housing.

Exit Conservatorship

We seek to exit from conservatorship with an attractive, sustainable business model. We are focused on meeting or 

exceeding milestones set by FHFA and Treasury, including those relating to capital, remediation of deficiencies, and risk 

management, as well as our own internal metrics designed to facilitate our exit from conservatorship.

Create a World-Class Operating Platform

We seek to create and operate a modern, resilient, flexible, and efficient platform that allows us to better assess and manage 

risk, while also enabling us to best meet the needs and demands of our company, customers, business partners, and the 

market in a safe, sound, and efficient manner by focusing on activities such as:

n Enhancing our capability to effectively manage risk and capital through our underwriting, purchase, servicing, and credit 

risk distribution activities;

n Increasing the resiliency of our infrastructure and operations; 

n Reducing costs for us and our customers in order to pass through savings to borrowers and renters; and

n	 Managing the risks and opportunities that arise from Environmental, Social, and Governance (ESG) issues in connection 

with executing our mission.

Become the Leader in Housing

We seek to emerge from conservatorship as the leader in housing by continuing to provide leadership through innovation 

and collaboration to enhance liquidity, stability, and affordability. We seek to help the housing industry better serve the 

needs of homebuyers and renters, particularly in the context of the current affordability challenges, including from 

fundamental problems related to housing supply. We intend to do so by identifying and implementing new ways to expand 

fair and responsible access to credit, including achieving the single-family and multifamily housing goals and Duty to Serve 

plan, and engaging in activities to support the UMBS.

Introduction Our Business

FREDDIE MAC | 2020 Form 10-K 11
Our Charter

Our Charter forms the framework for our business activities. Our Charter Mission is to:

n	 Provide stability in the secondary mortgage market for residential loans;

n	 Respond appropriately to the private capital market;

n	 Provide ongoing assistance to the secondary mortgage market for residential loans (including activities relating to loans for 

low- and moderate-income families, involving a reasonable economic return that may be less than the return earned on 

other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital 

available for residential mortgage financing; and

n	 Promote access to mortgage loan credit throughout the United States (including central cities, rural areas, and other 

underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital 

available for residential mortgage financing.

Our Charter permits us to purchase first-lien single-family loans with LTV ratios at the time of our purchase of less than or equal 

to 80%. Our Charter also permits us to purchase first-lien single-family loans that do not meet this criterion if we have certain 

specified credit protections, which include mortgage insurance from a qualified insurer on the portion of the UPB of the loan 

that exceeds an 80% LTV ratio, a seller's agreement to repurchase or replace a defaulted loan, or the retention by the seller of 

at least a 10% participation interest in the loan.

This Charter requirement does not apply to multifamily loans or to loans that have the benefit of any guarantee, insurance, or 

other obligation by the United States or any of its agencies or instrumentalities (e.g., the FHA, VA, or USDA Rural Development). 

Additionally, as part of our Enhanced Relief RefinanceSM program, we purchase single-family refinanced loans we currently own 

or guarantee without obtaining additional credit enhancement in excess of that already in place for any such loan, even when 

the LTV ratio of the new loan is above 80%.

Our Charter does not permit us to originate loans or lend money directly to mortgage borrowers in the primary mortgage 

market. Our Charter limits our purchase of single-family loans to the conforming loan market, which consists of loans originated 

with UPBs at or below limits determined annually based on changes in FHFA's housing price index. In most of the United 

States, the maximum conforming loan limit for a one-family residence has been set at $548,250 for 2021, an increase from 

$510,400 for 2020, $484,350 for 2019, $453,100 for 2018, $424,100 for 2017, and $417,000 from 2006 to 2016. Higher limits 

have been established in certain "high-cost" areas (for 2021, up to $822,375 for a one-family residence). Higher limits also 

apply to two- to four-family residences and to one- to four-family residences in Alaska, Guam, Hawaii, and the U.S. Virgin 

Islands.

Business Segments

We have three reportable segments: Single-family Guarantee, Multifamily, and Capital Markets. Certain activities that are not 

part of a reportable segment are included in the All Other category. For more information on our segments, see MD&A - Our 

Business Segments and Note 17.

Government Regulation and Supervision

Our business is subject to extensive regulation and supervision. The laws and regulations to which we are subject cover all key 

aspects of our business, and directly and indirectly affect our product offerings, pricing, competitive position and strategic plan, 

relationship with sellers and servicers, capital structure, cash needs and uses, borrowers’ and others’ privacy, and information 

security. As a result, such laws and regulations have a significant effect on key drivers of our results of operations, including, for 

example, our capital and liquidity, guarantee fees, product offerings, risk management, and costs of compliance. We could also 

incur fines or other financial penalties for failure to comply with all legal and regulatory requirements. Our business and results 

of operations may also be directly and adversely affected by future legislative, regulatory, or judicial actions. Such actions could 

affect us in a number of ways, including by imposing significant additional legal, compliance, and other costs on us and limiting 

our business activities. For example, recent changes to our capital requirements will affect our business and risk management 

strategies, including our risk appetite, our risk-adjusted returns, and the impact of our CRT transactions on our capital needs, 

and will increase the amount of capital we will be required to retain or raise to exit from conservatorship. 

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

and results of operations. We are under the control of FHFA, as our Conservator, and are not managed to maximize 

stockholder returns. FHFA determines our strategic direction. We face a variety of different, and sometimes competing, 

business objectives and FHFA-mandated activities. FHFA has required us to make changes to our business that have adversely 

affected our financial results and could require us to make additional changes at any time. For example, FHFA may require us 

to undertake activities that reduce our profitability, expose us to additional credit, market, funding, operational, and other risks, 

or provide additional support for the mortgage market that serves our public mission, but adversely affects our financial results. 

Introduction Our Business

FREDDIE MAC | 2020 Form 10-K 12
Further, we can be put into receivership at the discretion of the Director of FHFA at any time for a number of reasons set forth in 

the GSE Act.

FHFA is also Conservator of Fannie Mae, our primary competitor. FHFA’s actions, as Conservator of both companies, could 

affect competition between us. It is also possible that FHFA could require us and Fannie Mae to take a uniform approach to 

certain activities, limiting innovation and competition and possibly putting us at a competitive disadvantage because of 

differences in our respective businesses. FHFA also could limit our ability to compete with new entrants and other institutions. 

For additional information on conservatorship and related risks, see Introduction – About Freddie Mac – Conservatorship 

and Government Support for Our Business and Risk Factors – Conservatorship and Related Matters.

Human Capital Management

Our people are integral to our company’s success. It is our goal to sustain an inclusive culture with a highly engaged workforce 

focused on delivering on our corporate mission. We seek to be an employer of choice that attracts top talent through our 

commitment to inclusion and diversity, employee engagement, training, and other professional development opportunities. We 

also seek to implement appropriate compensation policies and practices within the constraints of our conservatorship status. 

We evaluate the success of our human capital management by measuring and monitoring the performance, development, and 

retention of our employees.

Employees

At January 31, 2021, we had 6,905 full-time and 34 part-time employees. Our headquarters are in McLean, Virginia, and the 

majority of our employees reside in the Washington D.C. metropolitan area.

Board of Directors and FHFA Oversight

We work collaboratively with the Compensation and Human Capital Committee (or CHC Committee) of the Board to support 

the oversight of compensation and benefits, inclusion and diversity, talent development, and strategies to strengthen our 

culture. 

Although the CHC Committee plays a significant role in these matters, FHFA is actively involved in its role as our Conservator 

and as our regulator. For example, while we are in conservatorship, our directors serve on behalf of the Conservator and 

exercise their authority as provided by the Conservator. FHFA retains the authority not only to approve both the terms and 

amount of any compensation prior to payment to any of our executive officers, but also to modify any existing compensation 

arrangements. In addition, under the terms of the Purchase Agreement, FHFA is required to consult with Treasury on any 

increases in compensation or new compensation arrangements for our executive officers. FHFA requires us to submit to it 

proposed new compensation arrangements or increased amounts or benefits payable under existing compensation 

arrangements for executive officers. For more information, see Directors, Corporate Governance, and Executive 

Officers — Board and Committee Information — Authority of the Board and Board Committees.

Attracting, Developing, and Retaining Talent

We seek to be an employer of choice, but the competition for top talent is ever increasing, and our ability to compete could be 

limited as a result of our conservatorship, uncertainty about our future, and limitations on executive and employee 

compensation. For example, Congress by statute has limited the compensation of our CEO. In addition, FHFA has imposed 

limits on both executive and employee compensation, including limiting base salaries for all employees, and has required prior 

approval of certain compensation arrangements. These compensation restrictions could make it harder for us to attract and 

retain well-qualified leadership. For more information, see Executive Compensation. For the majority of employees, who are 

not subject to these restrictions, we seek to offer compensation that is competitive, fair, and equitable. 

We also seek to promote the attraction, development, and retention of employees through comprehensive benefit and wellbeing programs, which have helped support our employees during the COVID-19 pandemic, and professional development 

opportunities to enhance workforce competencies and capabilities. We periodically survey our employees to better understand 

employee engagement and capture insights into our employees' needs and perspectives so that we can shape our workforce 

strategies accordingly. 

We measure the success of our efforts through our workforce turnover. Our turnover was relatively low in 2020. In 4Q 2019, we 

offered a Voluntary Early Retirement Program (VERP) to Vice Presidents and non-officer employees meeting certain age and 

service requirements. On December 31, 2020, the VERP was completed, with over 600 employees accepting the VERP, with 

separation dates occurring throughout 2020. In addition, we have experienced leadership changes, including the hiring of a new 

CFO in June 2020 and the departure of our CEO in January 2021.

Introduction Our Business

FREDDIE MAC | 2020 Form 10-K 13
Inclusion and Diversity

We are committed to embedding inclusion and diversity in our business and culture. FHFA's Office of Minority and Women 

Inclusion has adopted regulations with respect to the promotion of diversity and inclusion and has provided us with guidance 

on areas of improvement. We have partnered with our CHC Committee to enhance our inclusion and diversity strategic plan. 

We place a priority on attracting and recruiting a pipeline of diverse candidates while advancing a culture of inclusion where 

everyone at the company feels welcome and valued. We work with third party partners to help ensure diverse candidate slates 

for open positions. Our diversity efforts are reflected in the composition of our workforce, leadership, and Board. For example, 

we are a majority minority company, and women make up nearly half of our workforce and lead two of our three business lines. 

For additional information on Board composition, see Directors, Corporate Governance, and Executive Officers – 

Directors – Director Criteria, Diversity, Qualifications, Experience, and Tenure.

We have 10 business resource groups (BRGs) as well as division-specific teams that support employee engagement by 

providing learning and networking opportunities that foster an inclusive and diverse workforce. We have also expanded 

diversity through other programs, such as our neurodiversity hiring programs. 

For more information on risks related to workforce attraction and retention, see Risk Factors – Conservatorship and Related 

Matters and Risk Factors – COVID-19 Pandemic.

Properties

Our principal offices consist of four office buildings we own in McLean, Virginia, comprising approximately 1.3 million square 

feet. We operate our business in the United States and its territories, and accordingly, we generate no revenue from and have 

no long-lived assets, other than financial instruments, in geographic locations other than the United States and its territories.

Available Information

We file reports and other information with the SEC. In view of the Conservator's succession to all of the voting power of our 

stockholders, we have not prepared or provided proxy statements for the solicitation of proxies from stockholders since we 

entered into conservatorship, and do not expect to do so while we remain in conservatorship. Pursuant to SEC rules, our 

annual reports on Form 10-K contain certain information typically provided in an annual proxy statement.

We make available, free of charge through our website at www.freddiemac.com, our annual reports on Form 10-K, quarterly 

reports on Form 10-Q, current reports on Form 8-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 are providing our website addresses and the website address of the SEC here and elsewhere in this Form 10-K solely for 

your information. Information appearing on our website or on the SEC's website is not incorporated into this Form 10-K.

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 debt notes is available at crt.freddiemac.com and mf.freddiemac.com/investors, respectively.

We provide disclosure about our mortgage-related securities, some of which are off-balance sheet obligations (e.g., K 

Certificates and SB Certificates), on our website at www.freddiemac.com/mbs and mf.freddiemac.com/investors. From 

these addresses, investors can access information and documents, including offering circulars and offering circular 

supplements, for mortgage-related securities offerings.

We provide additional information, including product descriptions, investor presentations, securities issuance calendars, 

transaction 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.

 

Introduction Our Business

FREDDIE MAC | 2020 Form 10-K 14
FORWARD-LOOKING STATEMENTS

We regularly communicate information concerning our business activities to investors, the news media, securities analysts, and 

others as part of our normal operations. Some of these communications, including this Form 10-K, 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 Risk Factors section of 

this Form 10-K 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, restrict us from taking, or require us 

to take, including actions to support the housing markets (such as programs implemented in response to the COVID-19 

pandemic or to implement the recommendations in 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 any legislation affecting the future 

status of our company);

n	 Changes to our capital requirements and potential effects of the ERCF on our business strategies;

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 

and our ability to apply hedge accounting;

n	 Our operational ability to issue new securities, make timely and correct payments on securities, and provide initial and 

ongoing disclosures;

n	 Our reliance on CSS and the CSP for the operation of the majority of our single-family securitization activities, our reduced 

influence over CSS Board decisions as a result of FHFA-required changes to the CSS LLC agreement in January 2020 and 

FHFA's subsequent appointment of three new CSS Board members, 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;

Introduction Forward-Looking Statements

FREDDIE MAC | 2020 Form 10-K 15
n	 Our ability to maintain market acceptance of the UMBS, including our ability to continue to align the prepayment speeds of 

our and Fannie Mae's respective UMBS;

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 disaster or other catastrophic event 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 Form 10-K, including in the MD&A section.

Forward-looking statements are made only as of the date of this Form 10-K, and we undertake no obligation to update any 

forward-looking statements we make to reflect events or circumstances occurring after the date of this Form 10-K.

Introduction Forward-Looking Statements

FREDDIE MAC | 2020 Form 10-K 16
Management's Discussion and Analysis of 

Financial Condition and Results of Operations

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. 

Interest Rates(1)

Quarterly Ending Rates

4.32%

3.99%

4.55%

3.74%

2.67%

2.32%

1.55%

0.07%

0.97%

1.67%

2.79%

1.91%

0.24%

2.32% 2.39% 2.72%

1.89% 0.93%

30-year PMMS SOFR

3-month LIBOR 10-year LIBOR

4Q16 4Q17 4Q18 4Q19 4Q20

(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 and derivatives.

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 declined significantly early in 2020 as a 

result of the COVID-19 pandemic and the associated 

government response, and ended the year at or near 

historical lows. 

Unemployment Rate and Monthly Net New Jobs

195,000 176,000 193,000 178,000

(781,000)

4.7% 4.1% 3.9% 3.6% 6.7%

Average monthly net new jobs (non-farm)

National unemployment rate (for the month of December)

2016 2017 2018 2019 2020 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 severely curtailed 

economic activity and significantly increased 

unemployment levels. The labor market has recovered 

from the lows reached in April 2020 but continues to 

be weak. The availability of a COVID-19 vaccine and 

its widespread distribution may steer the economy 

towards recovery, but the timeline remains unknown.

Management's Discussion and Analysis Market Conditions and Economic Indicators 

FREDDIE MAC | 2020 Form 10-K 17
Single-Family Housing and Mortgage Market Conditions

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

6,011 6,123 5,957 6,023

6,451

5,450 5,510 5,340 5,340 5,640

561 613

617 683

811

6.1% 6.8% 5.0% 4.3%

11.6%

Sales of existing homes (units in thousands)

Sales of new homes (units in thousands)

Single-family house price growth rate

2016 2017 2018 2019 2020

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

House Price Index.

U.S. Single-Family Mortgage Originations 

(UPB in billions)

$2,065

$1,810 $1,630

$2,325

$4,040

U.S. single-family originations

2016 2017 2018 2019 2020

Source: Inside Mortgage Finance.

n	 Low interest rates and the ability for many to work 

remotely drove significant increases in home sales in 

2020. In 2021, we expect U.S. single-family home 

purchase volume to remain strong due to low 

mortgage interest rates. Freddie Mac's single-family 

loan purchase volumes typically follow a similar trend.

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 grew 11.6% in 2020 

compared to 4.3% during 2019. We expect house 

price growth to moderate in 2021.

n	 U.S. single-family loan origination volumes increased 

in 2020 compared to 2019 as a result of the low 

average mortgage interest rates, higher home sales, 

and increasing house prices.

Management's Discussion and Analysis Market Conditions and Economic Indicators 

FREDDIE MAC | 2020 Form 10-K 18
Multifamily Housing and Mortgage Market Conditions

Apartment Vacancy Rates and Change in Effective

Rents

4.2% 4.6% 4.8% 4.7%

5.2%

3.9% 3.9% 5.0% 3.7%

(3.0)%

Apartment vacancy rates (as of December 31)

Change in effective rents (for the year

ended December 31)

2016 2017 2018 2019 2020

Source: Reis. 

Apartment Completions and Net Absorption 

(Units in thousands)

225

262

280

218

175

219

198

251

291

108

Completions Net absorption

2016 2017 2018 2019 2020

Source: Reis.

n	 Completions in 2020 were at their lowest level over the 

past several years due to the COVID-19 pandemic 

slowing construction. While low absorption levels 

resulted in higher vacancy rates, these rates remain 

below the long-term average (between 2000 and 2020) 

of 5.4%. However, vacancy rates may continue to 

increase in the future as the COVID-19 relief programs, 

including federal stimulus packages, expire.

n	 Effective rent growth (i.e., the average rent paid by the 

renter over the term of the lease, adjusted for 

concessions by the landlord and costs borne by the 

renter) was negative at a national level and declined 

significantly in 2020 due to the COVID-19 pandemic, 

falling below the long-term average (between 2000 

and 2020) of 2.8%. 

n	 Despite lower effective rent growth and higher 

vacancy rates, multifamily property prices grew at an 

8.3% annualized growth rate in 2020, as investors 

continue to believe there is a need for additional rental 

housing in the U.S. and the overall investment 

environment remains attractive given historically low 

interest rates.

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. 

n	 Despite a slow down in completions due to COVID-19, 

the supply of multifamily units exceeded demand in 

2020.

n	 Although we expect the increase in demand observed 

in late 2020 to continue into 2021, new completions 

are expected to be elevated and likely to outpace 

absorptions.

Management's Discussion and Analysis Market Conditions and Economic Indicators 

FREDDIE MAC | 2020 Form 10-K 19
Mortgage Debt Outstanding

Single-Family Mortgage Debt Outstanding as of December 31, 

(UPB in billions)

$10,279 $10,596 $10,899 $11,187 $11,507

17% 17% 17% 18%

20%

U.S. single-family mortgage debt outstanding

Freddie Mac share

2016 2017 2018 2019 2020

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

2020, the amount is as of September 30, 2020 (latest available information).

Multifamily Mortgage Debt Outstanding as of December 31, 

(UPB in billions)

$1,236

$1,363

$1,489

$1,622 $1,716

15%

17%

18% 18% 18%

U.S. multifamily mortgage debt outstanding

Freddie Mac share

2016 2017 2018 2019 2020

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

2020, the amount is as of September 30, 2020 (latest available information).

n	 U.S. single-family mortgage debt outstanding 

increased in 2020 compared to 2019, primarily driven 

by house price appreciation. An increase in U.S. 

single-family mortgage debt outstanding typically 

results in growth of our single-family credit guarantee 

portfolio. 

n	 Prior to March 2020, multifamily market fundamentals 

were driven by a healthy job market, population 

growth, high propensity to rent among young adults, 

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

effects of the COVID-19 pandemic have slowed the 

economy significantly, impacting these market drivers.

n	 While the multifamily mortgage market grew, our share 

of total multifamily mortgage debt outstanding 

remained flat during 2020 due to ongoing competition 

from other market participants and the purchase 

limitations imposed by the multifamily loan purchase 

cap. The loan purchase cap was $100.0 billion for the 

five-quarter period from 4Q 2019 through 4Q 2020 and 

applied to all multifamily business activity, with no 

exclusions. At least 37.5% of new multifamily business 

had to be mission-driven, affordable housing over the 

same five-quarter period.

Management's Discussion and Analysis Market Conditions and Economic Indicators 

FREDDIE MAC | 2020 Form 10-K 20
Delinquency Rates

Single-Family Serious Delinquency Rates 

as of December 31,

3.13% 2.91%

2.06% 1.81%

5.16%

1.00% 1.08% 0.69%

0.63%

2.64%

Total mortgage market

Freddie Mac

2016 2017 2018 2019 2020

Source: National Delinquency Survey from the Mortgage Bankers Association. 

For 2020, the total mortgage market rate is as of September 30, 2020 (latest 

available information).

Multifamily Delinquency Rates

as of December 31,

0.03%

0.02% 0.01%0.08%

0.16%

1.14%

1.05%

1.16%

0.91%

1.95%

0.18%

0.15% 0.15%

0.11%

0.22%

0.00%

0.03% 0.13% 0.08% 0.10%

Freddie Mac

Multifamily CMBS market

FDIC insured institutions

ACLI investment bulletin

2016 2017 2018 2019 2020

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). For 2020, the amounts for FDIC insured 

institutions and ACLI investment bulletin are as of September 30, 2020 (latest 

available information) and the amount for the Multifamily CMBS market is as of 

December 31, 2020.

n	 Our single-family serious delinquency rate is based on 

the number of loans in our single-family guarantee 

portfolio that are three monthly payments or more past 

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

forbearance period to the extent that payments are 

past due based on the loans' original contractual 

terms, irrespective of the forbearance plan.

n	 Our single-family serious delinquency rate was higher 

as of December 31, 2020 compared to December 31, 

2019, driven by loans in forbearance due to the 

COVID-19 pandemic. However, 55% of the seriously 

delinquent loans at December 31, 2020 were covered 

by credit enhancements that may partially reduce our 

credit risk exposure.

n	 We expect our single-family serious delinquency rate 

to remain elevated as a result of the COVID-19 

pandemic and the forbearance programs we are 

offering in response.

n	 Our multifamily delinquency rate is based on the UPB 

of loans in our multifamily mortgage portfolio that are 

two monthly payments or more past due or in the 

process of foreclosure. We report multifamily loans in 

forbearance as current as long as the borrowers are in 

compliance with their forbearance agreement, 

including the agreed upon repayment plan. Loans in 

forbearance are therefore not included in our 

multifamily delinquency rate if the borrowers are in 

compliance with the forbearance agreement.

n	 Our multifamily delinquency rate was higher as of 

December 31, 2020 compared to December 31, 2019, 

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

remains low compared to many other market 

participants. See MD&A - Risk Management -

Multifamily Mortgage Credit Risk for additional 

information on our delinquency and forbearance rates.

n Multifamily delinquency rates could increase further in 

the near term due to the continuing effects of the 

COVID-19 pandemic. However, we currently do not 

expect to experience significant credit losses as a 

large portion of the credit risk exposure on our 

multifamily mortgage portfolio is reduced by first loss 

credit protection provided by subordination from our 

securitizations. See MD&A - Risk Management -

Multifamily Mortgage Credit Risk for additional 

information on the subordination levels of our 

securitizations.

Management's Discussion and Analysis Market Conditions and Economic Indicators 

FREDDIE MAC | 2020 Form 10-K 21
CONSOLIDATED RESULTS OF OPERATIONS

This discussion of our consolidated results of operations should be read in conjunction with our 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, Note 7, and Note 8 for 

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

We have three primary sources of revenue:

n	 Net interest income - Primarily consists of guarantee portfolio net interest income and investments portfolio net interest 

income. Guarantee portfolio net interest income primarily consists of the guarantee fee income from our single-family credit 

guarantee portfolio. We generally consolidate our single-family securitization trusts and, in that case, we record interest 

income on the loans held by the trust and interest expense on the debt securities issued by the trust. The difference 

between these amounts represents the guarantee fee income we receive as compensation for our guarantee of the 

principal and interest payments of the issued debt securities. Investments portfolio net interest income primarily consists of 

the difference between the interest income earned on the assets in our investments portfolio and the interest expense 

incurred on the liabilities used to fund those assets, including amortization of cost basis adjustments.

n	 Guarantee fee income - Primarily consists of the guarantee fee income from our multifamily guarantee portfolio. We 

generally do not consolidate our multifamily securitization trusts, and therefore, we do not recognize either the interest 

income on the loans held by the trust or the interest expense on the debt securities issued by the trust. Rather, we 

separately account for our guarantee to the trust and recognize the revenue from our guarantee as guarantee fee income.

n	 Net investment gains - Primarily consist of revenues from our multifamily loan purchase and securitization activities, sales 

of single-family delinquent and re-performing loans, and realized and unrealized gains (losses) on investment securities, net 

of gains and losses from our debt funding and interest-rate risk management activities. Net investment gains may fluctuate 

significantly from period-to-period based on the volume and nature of our investment, funding, and hedging activities and 

changes in market conditions, such as interest rates and market spreads.

We also earn revenue from fees that we charge to our single-family and multifamily sellers and servicers and other customers, 

which are recognized in other income. 

We have two primary expense items:

n	 Credit-related expenses - Primarily consist of provision for credit losses, credit enhancement expense, benefit for credit 

enhancement recoveries, and REO operations expense. Upon our adoption of CECL, provision for credit losses primarily 

represents changes in expected credit losses on our single-family mortgage loans held-for-investment. The accounting for 

costs and recoveries from credit enhancements varies based on the nature of the contract. Credit enhancement expense 

and benefit for credit enhancement recoveries includes the costs we incur to transfer credit risk and the changes in 

expected recoveries, respectively, from credit enhancements that are accounted for as freestanding contracts, but does 

not include such amounts related to certain other types of credit enhancements that are not accounted for as freestanding 

contracts. See MD&A - Our Business Segments - Single-Family Guarantee - Products and Activities, MD&A - 

Our Business Segments - Multifamily - Products and Activities, and Note 8 for additional information on our 

accounting for credit enhancements. REO operations expense represents expenses related to foreclosed properties.

n	 Operating expenses - Primarily consist of administrative expenses, the 10 basis point fee related to the Temporary Payroll 

Tax Cut Continuation Act of 2011, and other expenses we incur to run our business.

The table below compares our consolidated results of operations for the past three years. Certain amounts in prior periods have 

been reclassified to conform to the current presentation.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 22
Table 1 - Summary of Consolidated Statements of Comprehensive Income (Loss)

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

 Net interest income $12,771 $11,848 $12,021 $923 8 % ($173) (1) %

Guarantee fee income 1,442 1,089 866 353 32 223 26 

Investment gains (losses), net 1,813 818 1,921 995 122 (1,103) (57) 

 Other income (loss) 633 323 762 310 96 (439) (58) 

Net revenues 16,659 14,078 15,570 2,581 18 (1,492) (10) 

 Benefit (provision) for credit losses (1,452) 746 736 (2,198) (295) 10 1 

Credit enhancement expense (1,058) (749) (409) (309) (41) (340) (83) 

Benefit for (decrease in) credit enhancement 

recoveries 323 41 (8) 282 688 49 613 

REO operations expense (149) (229) (169) 80 35 (60) (36) 

Credit-related benefit (expense) (2,336) (191) 150 (2,145) (1,123) (341) (227) 

Administrative expense (2,535) (2,564) (2,293) 29 1 (271) (12) 

Temporary Payroll Tax Cut 

Continuation Act of 2011 expense (1,836) (1,617) (1,484) (219) (14) (133) (9) 

Other expense (723) (657) (469) (66) (10) (188) (40) 

Operating expense (5,094) (4,838) (4,246) (256) (5) (592) (14) 

Income before income tax (expense) benefit 9,229 9,049 11,474 180 2 (2,425) (21) 

Income tax (expense) benefit (1,903) (1,835) (2,239) (68) (4) 404 18 

Net income (loss) 7,326 7,214 9,235 112 2 (2,021) (22) 

Total other comprehensive income (loss), 

net of taxes and reclassification adjustments 205 573 (613) (368) (64) 1,186 193 

Comprehensive income (loss) $7,531 $7,787 $8,622 ($256) (3) % ($835) (10) %

See Critical Accounting Policies and Estimates for information concerning certain significant accounting policies and 

estimates applied in determining our reported results of operations and Note 1 for information on our accounting policies and 

a summary of other significant accounting policies and the related notes in which information about them can be found.

Net Revenues

Net Interest Income

Net interest income consists of guarantee portfolio net interest income, investments portfolio net interest income, and income 

(expense) from hedge accounting. 

n Guarantee portfolio net interest income is primarily generated by our single-family guarantee portfolio, as we generally 

consolidate our single-family securities trusts, and consists of three components:

l	 Contractual net interest income, which is equal to the difference between the interest income on loans held by 

consolidated trusts and the interest expense on debt securities issued by consolidated trusts. This amount represents 

the ongoing contractual monthly guarantee fee we receive for managing the credit risk associated with mortgage loans 

held by consolidated trusts. 

l	 The legislated 10 basis point increase in guarantee fees that is remitted to Treasury as part of the Temporary Payroll 

Tax Cut Continuation Act of 2011.

l	 Deferred fee income, which primarily consists of recognition of premiums and discounts on mortgage loans and debt 

securities of consolidated trusts and the fees that we receive or pay when we acquire single-family loans, which 

represent a portion of the guarantee fee compensation we receive for managing the credit risk associated with 

mortgage loans held by consolidated trusts. These amounts are recognized in net interest income based on the 

effective yield over the contractual life of the associated financial instrument and may vary significantly from period to 

period, primarily based on changes in actual prepayments on the underlying loans. Increases in actual prepayments 

result in a higher rate of amortization, while decreases in actual prepayments result in a lower rate of amortization. The 

timing of amortization of loans may differ from the timing of amortization of the securities backed by the loans, as the 

proceeds from the loans backing these securities are remitted to the security holders at a date subsequent to the date 

these proceeds are received by us.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 23
n Investments portfolio net interest income consists of two components:

l	 The difference between the interest income earned on the assets in our investments portfolio and the interest expense 

incurred on the liabilities used to fund those assets, including amortization of cost basis adjustments. These amounts 

are recognized in net interest income based on the effective yield over the contractual life of the associated financial 

instrument.

l	 Interest expense related to CRT debt (STACR debt notes and SCR debt notes). 

n Income (expense) from hedge accounting primarily consists of amortization of previously deferred hedge accounting 

basis adjustments and the earnings mismatch on qualifying fair value hedge relationships, which is equal to the difference 

between fair value changes for the hedging instrument, including the accrual of periodic cash settlements, and fair value 

changes for the hedged item attributable to the risk being hedged. See Note 10 for additional detail on hedge accounting. 

The table below presents the components of net interest income.

Table 2 - Components of Net Interest Income

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Guarantee portfolio net interest income:

Contractual net interest income $5,014 $3,767 $3,457 $1,247 33% $310 9%

Net interest income related to the Temporary 

Payroll Tax Cut Continuation Act of 2011 1,884 1,590 1,438 294 18 152 11

Deferred fee income 3,787 2,436 2,900 1,351 55 (464) (16)

Total guarantee portfolio net interest income 10,685 7,793 7,795 2,892 37 (2) —

Investments portfolio net interest income:

Contractual net interest income and amortization 5,082 5,411 6,251 (329) (6) (840) (13)

Interest expense related to CRT debt (764) (1,104) (1,094) 340 31 (10) (1)

Total investments portfolio net interest income 4,318 4,307 5,157 11 — (850) (16)

Income (expense) from hedge accounting (2,232) (252) (931) (1,980) (786) 679 73

Net interest income $12,771 $11,848 $12,021 $923 8% ($173) (1%)

Key Drivers:

n Guarantee portfolio contractual net interest income

l	 2020 vs. 2019 - Increased primarily due to the continued growth in the single-family guarantee portfolio coupled with 

higher contractual guarantee fee rates.

l	 2019 vs. 2018 - Increased primarily due to the continued growth of the single-family guarantee portfolio.

n Guarantee portfolio deferred fee income

l	 2020 vs. 2019 - Increased primarily due to higher prepayments due to the low mortgage interest rate environment. 

l	 2019 vs. 2018 - Decreased primarily due to the timing differences in amortization related to prepayments between 

debt of consolidated trusts and the underlying mortgage loans. 

n Investments portfolio contractual net interest income and amortization

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

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

l	 2019 vs. 2018 - Decreased primarily due to the lower and flatter interest rate environment, coupled with a change in 

our investment mix as the lower-yielding other investments portfolio represented a larger percentage of our total 

investments portfolio. 

n Interest expense related to CRT debt

l	 2020 vs. 2019 - Decreased primarily due to lower short-term interest rates and a decline in volume as we no longer 

issue STACR debt notes on a regular basis.

l	 2019 vs. 2018 - Remained relatively flat as higher short-term interest rates were offset by a decline in volume as we no 

longer issue STACR debt notes on a regular basis.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 24
n Income (expense) from hedge accounting

l	 2020 vs. 2019 - Expense increased primarily due to amortization of hedge accounting-related basis adjustments 

driven by higher prepayments, partially offset by higher income related to accruals of periodic cash settlements on 

derivatives in hedging relationships.

l	 2019 vs. 2018 - Expense decreased primarily due to a positive earnings mismatch and lower expense related to 

accruals of periodic cash settlements on derivatives in hedging relationships, partially offset by amortization of hedge 

accounting-related basis adjustments.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 25
Net Interest Yield Analysis

The table below presents an analysis of interest-earning assets and interest-bearing liabilities. To calculate the average 

balances, we generally use a daily weighted average of amortized cost. When daily average balance information is not 

available, such as for mortgage loans, we use monthly averages. Mortgage loans on non-accrual status, where interest income 

is generally recognized when collected, are included in the average balances. 

Table 3 - Analysis of Net Interest Yield 

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)

Average

Rate

Average

Balance

Interest

Income

(Expense)

Average

Rate

Average

Balance

Interest

Income

(Expense)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $24,428 $30 0.12 % $8,925 $187 2.10 % $7,189 $67 0.93 %

Securities purchased under 

agreements to resell 94,350 354 0.38 56,465 1,284 2.27 45,360 880 1.94 

Secured lending 4,752 85 1.79 2,933 104 3.55 1,350 35 2.58 

Mortgage-related securities:

Mortgage-related securities 109,794 4,645 4.23 132,735 5,761 4.34 143,424 6,026 4.20 

Extinguishment of debt securities of 

consolidated trusts held by Freddie 

Mac

 (68,005) (2,377) (3.50) (85,407) (3,524) (4.13) (88,757) (3,437) (3.87) 

Total mortgage-related 

securities, net 41,789 2,268 5.43 47,328 2,237 4.73 54,667 2,589 4.74 

Non-mortgage-related securities 30,053 313 1.04 22,776 500 2.19 18,955 446 2.35 

Loans held by consolidated trusts(1) 2,057,249 56,225 2.73 1,882,802 64,927 3.45 1,799,122 61,883 3.44 

Loans held by Freddie Mac(1) 92,538 3,065 3.31 86,973 3,656 4.20 98,005 4,154 4.24 

Total interest-earning assets 2,345,159 62,340 2.66 2,108,202 72,895 3.46 2,024,648 70,054 3.46 

Interest-bearing liabilities:

Debt securities of consolidated 

trusts including those held by 

Freddie Mac

 2,088,913 (48,658) (2.33) 1,907,818 (57,504) (3.01) 1,826,429 (54,966) (3.01) 

Extinguishment of debt securities of 

consolidated trusts held by Freddie 

Mac

 (68,005) 2,377 3.50 (85,407) 3,524 4.13 (88,757) 3,437 3.87 

Total debt securities of 

consolidated trusts held by 

third parties

 2,020,908 (46,281) (2.29) 1,822,411 (53,980) (2.96) 1,737,672 (51,529) (2.97) 

Debt of Freddie Mac:

Short-term debt 75,668 (606) (0.80) 85,492 (1,910) (2.23) 62,893 (1,193) (1.90) 

Long-term debt 218,447 (2,682) (1.23) 192,100 (5,157) (2.68) 216,484 (5,311) (2.45) 

Total debt of Freddie Mac 294,115 (3,288) (1.12) 277,592 (7,067) (2.55) 279,377 (6,504) (2.33) 

Total interest-bearing liabilities 2,315,023 (49,569) (2.14) 2,100,003 (61,047) (2.91) 2,017,049 (58,033) (2.88) 

Impact of net non-interest-bearing 

funding 30,136 — 0.03 8,199 — 0.01 7,599 — 0.01 

Total funding of interestearning assets 2,345,159 (49,569) (2.11) 2,108,202 (61,047) (2.90) 2,024,648 (58,033) (2.87) 

Net interest income/yield $12,771 0.55 % $11,848 0.56 % $12,021 0.59 %

(1) Loan fees included in interest income were $4.5 billion, $3.2 billion, and $2.6 billion for loans held by consolidated trusts and $86 million, $112 million, and $104 

million for loans held by Freddie Mac during 2020, 2019, and 2018, respectively.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 26
Net Interest Income Rate / Volume Analysis

The table below presents a rate and volume analysis of our net interest income. Our net interest income reflects the reversal of 

interest income accrued, net of interest received on a cash basis, related to mortgage loans that are on non-accrual status.

Table 4 - Net Interest Income Rate / Volume Analysis 

Variance Analysis

2020 vs. 2019 2019 vs. 2018

(Dollars in millions) Rate Volume

Total 

Change Rate Volume

Total 

Change

Interest-earning assets:

Cash and cash equivalents ($249) $92 ($157) $101 $19 $120 

Securities purchased under agreements to resell (1,450) 520 (930) 170 234 404 

Secured lending (66) 47 (19) 17 52 69 

Mortgage-related securities (142) (974) (1,116) 194 (459) (265) 

Extinguishment of debt securities of consolidated trusts 

held by Freddie Mac 492 655 1,147 (220) 133 (87) 

Total mortgage-related securities, net 350 (319) 31 (26) (326) (352) 

Non-mortgage-related securities (314) 127 (187) (31) 85 54 

Loans held by consolidated trusts (14,332) 5,630 (8,702) 159 2,885 3,044 

Loans held by Freddie Mac (813) 222 (591) (34) (464) (498) 

Total interest-earning assets (16,874) 6,319 (10,555) 356 2,485 2,841 

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by 

Freddie Mac 13,939 (5,093) 8,846 (85) (2,453) (2,538) 

Extinguishment of debt securities of consolidated trusts held 

by Freddie Mac (492) (655) (1,147) 220 (133) 87 

Total debt securities of consolidated trusts held by third 

parties 13,447 (5,748) 7,699 135 (2,586) (2,451) 

Debt of Freddie Mac:

Short-term debt 1,105 199 1,304 (237) (480) (717) 

Long-term debt 3,105 (630) 2,475 (476) 630 154 

Total debt of Freddie Mac 4,210 (431) 3,779 (713) 150 (563) 

Total interest-bearing liabilities 17,657 (6,179) 11,478 (578) (2,436) (3,014) 

Net interest income $783 $140 $923 ($222) $49 ($173) 

Guarantee Fee Income 

Guarantee fee income relates primarily to multifamily securitizations, as we generally do not consolidate our multifamily 

securitization trusts. For additional details on our multifamily securitizations, see MD&A - Our Business Segments - 

Multifamily - Products and Activities - Securitizations, Guarantees, and Risk Transfer Products.

Guarantee fee income consists of the following:

n	 Contractual guarantee fees - Consists of the fees earned from guarantees issued to third parties and securitization trusts 

that we do not consolidate.

n	 Guarantee obligation amortization - Represents the amortization of our obligation to perform over the term of the 

guarantee as we are released from risk.

n	 Guarantee asset fair value changes - Represents the change in fair value of our right to receive contractual guarantee 

fees. Because our multifamily loans contain prepayment protection, declining interest rates generally result in a higher 

guarantee asset fair value, with the opposite effect occurring when interest rates increase.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 27
The table below presents the components of guarantee fee income.

Table 5 - Components of Guarantee Fee Income

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Contractual guarantee fees $1,023 $910 $810 $113 12 % $100 12 %

Guarantee obligation amortization 977 813 711 164 20 102 14 

Guarantee asset fair value changes (558) (634) (655) 76 12 21 3 

Guarantee fee income $1,442 $1,089 $866 $353 32 % $223 26 %

Key Drivers:

n	 2020 vs. 2019 and 2019 vs. 2018 - Increased primarily driven by multifamily guarantee portfolio growth, coupled with 

lower fair value losses on our multifamily guarantee assets due to lower interest rates.

Investment Gains (Losses), Net

The table below presents the components of investment gains (losses), net. We use derivatives to economically hedge the 

interest-rate risk of our financial assets and liabilities. As a result, interest-rate-related fair value gains and losses that we 

recognize in mortgage loans gains (losses), investment securities gains (losses), and debt gains (losses) generally have 

offsetting impacts from the derivative instruments that we use to economically hedge interest-rate risk. We recognize these 

offsetting impacts from derivative instruments in derivative gains (losses).

Table 6 - Components of Investment Gains (Losses), Net 

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Mortgage loans gains (losses) $5,372 $4,744 $746 $628 13% $3,998 536% 

Investment securities gains (losses) 778 389 (815) 389 100 1,204 148 

Debt gains (losses) 701 201 720 500 249 (519) (72) 

Derivative gains (losses) (5,038) (4,516) 1,270 (522) (12) (5,786) (456) 

Investment gains (losses), net $1,813 $818 $1,921 $995 122% ($1,103) (57%) 

Mortgage Loans Gains (Losses)

Mortgage loans gains (losses) are primarily generated by our multifamily loan purchase and securitization activities and sales of 

single-family delinquent and re-performing loans, and consist of the following:

n	 Gains (losses) on certain multifamily loan purchase commitments - Represents the change in fair value between the 

commitment date and settlement date for multifamily loan purchase commitments for which we have elected the fair value 

option.

n	 Gains (losses) on mortgage loans - Includes changes in fair value on held-for-sale loans, including loans for which we 

have elected the fair value option, as well as any gains and losses realized on the sales of these loans.

Mortgage loans gains (losses) are affected by a number of factors, including:

n	 Volume of held-for-sale single-family seasoned mortgage loans;

n	 Volume of held-for-sale multifamily loans measured at lower-of-cost-or-fair value;

n	 Volume of multifamily loan purchase commitments and mortgage loans for which we have elected the fair value option; and

n	 Changes in interest rates and market spreads.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 28
The table below presents the components of mortgage loans gains (losses). 

Table 7 - Components of Mortgage Loans Gains (Losses)

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Single-family:

 Gains (losses) on mortgage loans $1,248 $1,902 $712 ($654) (34) % $1,190 167 %

Multifamily:

 Gains (losses) on certain loan purchase 

 commitments 2,288 1,913 $777 375 20 1,136 146 

Gains (losses) on mortgage loans 1,836 929 (743) 907 98 1,672 225 

Total Multifamily 4,124 2,842 34 1,282 45 2,808 8,259 

Mortgage loans gains (losses) $5,372 $4,744 $746 $628 13 % $3,998 536 %

Key Drivers:

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

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

commitments, coupled with realized gains from the sale of a higher volume of loans measured at lower-of-cost-or-fairvalue, resulted in higher gains.

n	2019 vs. 2018 - Single-family mortgage loans gains increased primarily due to a higher volume of loan sales. For 

multifamily, higher initial pricing margins on new loan commitments, coupled with spread-related fair value improvements, 

resulted in higher gains.

Investment Securities Gains (Losses)

Investment securities gains (losses) primarily consist of fair value gains and losses recognized on trading securities and realized 

gains and losses on the sale of available-for-sale securities.

Investment securities gains (losses) are affected by a number of factors, including changes in interest rates and market spreads 

and volume of sales of available-for-sale securities. 

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

Table 8 - Components of Investment Securities Gains (Losses) 

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Realized gains (losses) on sales of available-for-sale 

securities $393 $170 $324 $223 131 % ($154) (48) %

Realized and unrealized gains (losses) on trading 

securities 482 328 (1,007) 154 47 1,335 133 

Other (97) (109) (132) 12 11 23 17 

Investment securities gains (losses) $778 $389 ($815) $389 100 % $1,204 148 %

Key Drivers:

n	2020 vs. 2019 - Increased primarily due to gains on sales of agency mortgage-related securities and higher gains on trading 

securities from the decline in long-term interest rates.

n	2019 vs. 2018 - Shifted to gains during 2019 primarily driven by higher gains on trading securities due to decreasing 

interest rates, partially offset by lower volume of sales at gains of non-agency mortgage-related securities.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 29
Debt Gains (Losses)

Debt gains (losses) are primarily generated by investments in debt securities of consolidated trusts and active management of 

our debt funding costs and consist of the following:

n	 Fair value changes - Include the gains and losses on debt for which we have elected the fair value option, primarily certain 

STACR debt notes. 

n	 Gains (losses) on extinguishment of debt - Represent the difference between the consideration paid and the debt 

carrying value when we purchase debt securities of consolidated trusts as investments in our mortgage-related 

investments portfolio and when we repurchase or call debt of Freddie Mac. 

Debt gains (losses) are affected by a number of factors, including:

n	 Changes in the market spreads between debt yields and benchmark interest rates and

n	 Amount and type of debt selected for repurchase based on our investment and funding strategies, including our efforts to 

support the liquidity and price performance of our mortgage-related securities.

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

Table 9 - Components of Debt Gains (Losses)

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Fair value changes:

 Debt securities of consolidated trusts $4 ($4) $5 $8 200 % ($9) (180) %

 Debt of Freddie Mac 335 136 137 199 146 (1) (1) 

Total fair value changes 339 132 142 207 157 (10) (7) 

Gains (losses) on extinguishment of debt:

 Debt securities of consolidated trusts 124 (258) 564 382 148 (822) (146) 

 Debt of Freddie Mac 238 327 14 (89) (27) 313 2,236 

Total gains (losses) on extinguishment of debt 362 69 578 293 425 (509) (88) 

Debt gains (losses) $701 $201 $720 $500 249 % ($519) (72) %

Key Drivers:

n	2020 vs. 2019 - Increased primarily due to higher gains on extinguishments of debt as a result of more selective debt 

repurchase activity, coupled with 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.

n	2019 vs. 2018 - Decreased primarily due to losses from the extinguishment of fixed-rate debt securities of consolidated 

trusts, as market interest rates declined between the time of issuance and repurchase, partially offset by an increase in 

gains on callable debt due to an increase in call volume.

Derivative Gains (Losses)

Derivative instruments are a key component of our interest-rate risk management strategy. We use derivatives to economically 

hedge our interest-rate risk exposure. We primarily use interest-rate swaps, futures, and option-based derivatives, such as 

swaptions, to manage our exposure to changes in interest-rates. We consider the cost of derivatives used in interest-rate risk 

management to be an inherent part of the cost of funding our mortgage-related investments portfolio. 

In addition, we routinely enter into commitments to purchase and sell loans and mortgage-related securities. The majority of 

these commitments are accounted for as derivative instruments.

We continue to align our derivative portfolio to economically hedge the changing duration of our assets and liabilities. We 

manage our exposure to interest-rate risk on an economic basis to a low level as measured by our models. We believe the 

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

including our PVS and duration gap results. For more information about our interest-rate risk management activities and the 

sensitivity of reported GAAP earnings to those activities, see MD&A - Risk Management - Market Risk.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 30
Derivative gains (losses) consist of the following:

n	 Fair value gains (losses) - Represent changes in the fair value of our derivatives while not designated in hedging 

relationships based on market conditions at the end of the period or at the time the derivative instrument is terminated. 

These amounts may or may not be realized over time, depending on future changes in market conditions and the terms of 

our derivative instruments.

n	 Accrual of periodic cash settlements on swaps - Consists of the net amount we accrue during a period for interest-rate 

swap payments that we will make or receive for derivatives while not designated in hedging relationships. This accrual 

represents the ongoing cost of our hedging activities, and is economically equivalent to interest expense. 

We apply fair value hedge accounting to certain single-family mortgage loans and long-term debt to reduce our GAAP earnings 

volatility. We include gains and losses and the accrual of periodic cash settlements on derivatives designated in qualifying 

hedge relationships in the same line used to present the earnings effect of the hedged item. 

Derivative gains (losses) are affected by a number of factors, including:

n	 Changes in interest rates - Our primary derivative instruments are interest-rate swaps, including pay-fixed and receivefixed interest-rate swaps. With a pay-fixed interest-rate swap, we pay a fixed rate of interest and receive a variable rate of 

interest based on a specified notional balance, which is used for calculation purposes only. As interest rates decline, we 

recognize derivative losses, as the amount of interest we pay remains fixed, and the amount of interest we receive 

declines. As rates rise, we recognize derivative gains, as the amount of interest we pay remains fixed, but the amount of 

interest we receive increases. With a receive-fixed interest-rate swap, the opposite results occur.

n	 Implied volatility - Many of our assets and liabilities have embedded prepayment options. We use option-based 

derivatives, including swaptions, to economically hedge the prepayment options embedded in our mortgage assets and 

callable debt. Fair value gains and losses on swaptions are sensitive to changes in both interest rates and implied volatility, 

which reflects the market's expectation of future changes in interest rates. Assuming all other factors are unchanged, 

including interest rates, purchased swaptions generally become more valuable as implied volatility increases and less 

valuable as implied volatility decreases, with the opposite being true for written swaptions.

n	 Changes in the shape of the yield curve - We own assets and have outstanding debt with cash flows at different tenors 

along the yield curve. We use derivatives to hedge the yield exposure of assets and debt, resulting in derivatives with 

different maturities. As a result, changes in the shape of the yield curve will affect our derivative gains (losses). 

n	 Changes in the composition of our derivative portfolio - The mix and balance of our derivative portfolio changes from 

period to period as we enter into or terminate derivative instruments to respond to changes in interest rates and changes in 

the balances and modeled characteristics of our assets and liabilities. Changes in the composition of our derivative 

portfolio will affect the derivative gains and losses we recognize in a given period, thereby affecting the volatility of 

comprehensive income.

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

Table 10 - Components of Derivative Gains (Losses)

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Fair value gains (losses):

Interest-rate risk management derivatives ($1,826) ($3,843) $849 $2,017 52 % ($4,692) (553) %

Mortgage commitment derivatives (1,856) (452) 606 (1,404) (311) (1,058) (175) 

CRT-related derivatives 163 (1) (38) 164 16,400 37 97 

Other 57 52 (6) 5 10 58 967 

Total fair value gains (losses) (3,462) (4,244) 1,411 782 18 (5,655) (401) 

Accrual of periodic cash settlements on swaps (1,576) (272) (141) (1,304) (479) (131) (93) 

Derivative gains (losses) ($5,038) ($4,516) $1,270 ($522) (12) % ($5,786) (456) %

Key Drivers:

n	 2020 vs. 2019 - Increase in derivative losses, primarily driven by losses on commitments to sell mortgage-related securities 

as prices increased due to spread tightening, partially offset by gains on commitments to purchase mortgage loans.

n	 2019 vs. 2018 - Decreases in long-term rates during 2019 resulted in derivative fair value losses compared to derivative fair 

value gains during 2018. The interest rate decreases during 2019 resulted in fair value losses on our pay-fixed interest rate 

swaps, forward commitments to issue mortgage-related securities, and futures, partially offset by fair value gains on our 

receive-fixed swaps and certain of our option-based derivatives. 

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 31
Credit-Related Expense

Benefit (Provision) for Credit Losses

Our benefit (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-forinvestment 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 MD&A - Critical Accounting Policies and Estimates

for additional information.

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

Table 11 - Components of Benefit (Provision) for Credit Losses

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Benefit (provision) for credit losses:

Single-family ($1,320) $749 $712 ($2,069) (276) % $37 5 %

Multifamily (132) (3) 24 (129) (4,300) (27) (113) 

Benefit (provision) for credit losses ($1,452) $746 $736 ($2,198) (295) % $10 1 %

n	 Single-family

l	 2020 vs. 2019 - Shifted to a provision primarily due to higher expected credit losses as a result of the COVID-19 

pandemic. The higher expected credit losses during 2020 were primarily driven by the following factors:

– Expected credit losses related to COVID-19 relief programs - Our provision for credit losses in 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 2020, with the majority of the increase occurring in 1Q 2020. We recognized 

additional provision for allowances for pre-foreclosure costs and accrued interest receivable related to loans in 

forbearance due to the COVID-19 pandemic. In total, we increased our provision for credit losses during 2020 by 

$2.8 billion as a result of the COVID-19 pandemic.

– Portfolio growth - With the adoption of CECL, we recognize expected credit losses over the entire contractual 

term of the loan at the time of loan acquisition, rather than when it is probable the loan is impaired. In 2020, our 

single family credit guarantee portfolio grew by $332 billion, or 17%, contributing to the increase in provision for 

credit losses.

– Growth in realized and forecasted house prices and declines in forecasted interest rates - During 2020, 

house price appreciation and significant declines in mortgage interest rates partially offset the increase in the 

provision for credit losses as a result of the COVID-19 pandemic and portfolio growth.

l	 2019 vs. 2018 - Remained relatively flat due to the solid credit performance of our single-family portfolio.

n	 Multifamily

l	 2020 vs. 2019 - Increase in provision due to higher expected credit losses as a result of the COVID-19 pandemic.

l	 2019 vs. 2018 - Remained relatively flat due to the stable credit performance of our multifamily portfolio.

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.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 32
Credit Enhancement Expense 

Credit enhancement expense primarily relates to certain single-family CRT transactions and includes the premiums paid to 

transfer credit risk to third parties and transaction and other costs incurred to enter into those transactions. Credit 

enhancement expense does not include costs associated with CRT-related debt, which are primarily recognized in interest 

expense, or the costs associated with CRT-related derivatives, which are recognized in investment gains (losses), net.

Key Drivers:

n	 2020 vs. 2019 and 2019 vs. 2018 - Increased primarily due to higher outstanding cumulative volumes of CRT transactions.

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

Segments - Multifamily - Products and Activities, and Note 8 for additional information on our credit enhancements.

Benefit for (Decrease in) Credit Enhancement Recoveries

Benefit for (decrease in) credit enhancement recoveries primarily relates to certain single-family CRT transactions and 

represents changes in expected recoveries from those transactions. We recognize a benefit for (decrease in) recoveries from 

many of our CRT transactions 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.

Key Drivers:

n 2020 vs. 2019 - Increase in benefit for credit enhancement recoveries as a result of the corresponding increase in expected 

credit losses due to the COVID-19 pandemic.

Operating Expense 

Key Drivers:

n	 2020 vs. 2019 - Increased primarily due to higher Temporary Payroll Tax Cut Continuation Act of 2011 expense driven by 

an increase in single-family business activity in 2020.

n	 2019 vs. 2018 - Increased primarily due to higher salaries and employee benefits driven by the VERP and higher 

technology costs in 2019.

Other Comprehensive Income (Loss)

Our investments in securities classified as available-for-sale are measured at fair value on our consolidated balance sheets. The 

fair value of these securities is primarily affected by changes in interest rates and market spreads. All unrealized gains and 

losses on these securities are excluded from earnings and reported in other comprehensive income until realized, unless we 

determine that a decline in fair value is the result of a credit loss. We reclassify our unrealized gains and losses from AOCI to 

earnings upon the sale of the securities.

Key Drivers:

n	 2020 vs. 2019 - Decrease of $0.4 billion primarily driven by recognition of realized gains due to sales of available-for-sale 

securities.

n	 2019 vs. 2018 - Increase of $1.2 billion primarily due to fair value gains as long-term interest rates declined, partially offset 

by fair value losses due to spread widening on our agency mortgage-related securities.

Management's Discussion and Analysis Consolidated Results of Operations 

FREDDIE MAC | 2020 Form 10-K 33
CONSOLIDATED BALANCE SHEETS ANALYSIS

The table below compares our summarized 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 11 

for additional information.

Table 12 - Summarized Consolidated Balance Sheets 

December 31, Year Over Year Change

(Dollars in millions) 2020 2019 $ % 

Assets:

Cash and cash equivalents $23,889 $5,189 $18,700 360 %

Securities purchased under agreements to resell 105,003 56,271 48,732 87 

Subtotal 128,892 61,460 67,432 110 

Investment securities, at fair value 59,825 75,711 (15,886) (21) 

Mortgage loans, net 2,383,888 2,020,200 363,688 18 

Accrued interest receivable, net 7,754 6,848 906 13 

Derivative assets, net 1,205 844 361 43 

Deferred tax assets, net 6,557 5,918 639 11 

Other assets 39,294 22,799 16,495 72 

Total assets $2,627,415 $2,193,780 $433,635 20 %

Liabilities and Equity:

Liabilities:

Accrued interest payable $6,210 $6,559 ($349) (5) %

Debt 2,592,546 2,169,685 422,861 19 

Derivative liabilities, net 954 372 582 156 

Other liabilities 11,292 8,042 3,250 40 

Total liabilities 2,611,002 2,184,658 426,344 20 

Total equity 16,413 9,122 7,291 80 

Total liabilities and equity $2,627,415 $2,193,780 $433,635 20 %

Key Drivers:

As of December 31, 2020 compared to December 31, 2019:

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

primarily due to higher loan prepayments and a higher cash window loan purchase forecast. In addition, our compliance 

with updated minimum liquidity requirements established by FHFA has increased the size of our other investments 

portfolio. For additional information on the minimum liquidity requirements, see MD&A - Liquidity and Capital 

Resources.

n	 Investment securities, at fair value decreased primarily due to sales of agency securities, which allowed us to maintain 

compliance with the mortgage-related investments portfolio cap imposed by the Purchase Agreement and FHFA while also 

supporting a higher volume of single-family cash window purchases.

n	 Mortgage loans, net increased primarily due to a 17% increase in our single-family credit guarantee portfolio.

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

forward commitments to 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 4Q 2020.

n	 Debt increased primarily due an increase in our debt securities of consolidated trusts held by third parties resulting from 

the increase in our single-family credit guarantee portfolio.

n	 Total equity increased primarily due to our ability to retain earnings as a result of the increase in the applicable Capital 

Reserve Amount pursuant to the September 2019 and January 2021 Letter Agreements.

Management's Discussion and Analysis Consolidated Balance Sheets Analysis

FREDDIE MAC | 2020 Form 10-K 34
OUR BUSINESS SEGMENTS

As shown in the table below, we have three reportable segments, which are based on the way we manage our business. 

Certain activities that are not part of a reportable segment are included in the All Other category.

Segment/Category Description

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

single-family mortgage credit risk

Multifamily

Reflects results from our purchase, sale, securitization, and guarantee of multifamily loans and securities, our 

investments in those loans and securities, and the management of multifamily mortgage credit risk and market 

risk

Capital Markets

Reflects results from managing our mortgage-related investments portfolio (excluding Multifamily segment 

investments, single-family seriously delinquent loans, and the credit risk of single-family performing and 

reperforming loans), single-family securitization activities, and treasury function, which includes interest-rate 

risk management for the company

All Other Consists of material corporate-level activities that are infrequent in nature and based on decisions outside the 

control of the management of our reportable segments

Segment Earnings

We evaluate segment performance and allocate resources based on a Segment Earnings approach:

n	 We make significant reclassifications among certain line items in our GAAP financial statements to reflect measures of 

guarantee fee income on guarantees, net interest income on investments, and benefit (provision) for credit losses on loans 

that are in line with how we manage our business.

n	 We allocate certain revenues and expenses, including certain returns on assets, funding and hedging costs, and all 

administrative expenses to our three reportable segments.

n	 The sum of Segment Earnings for each segment and the All Other category equals GAAP net income (loss). Likewise, the 

sum of comprehensive income (loss) for each segment and the All Other category equals GAAP comprehensive income 

(loss).

Segment Earnings differs significantly from, and should not be used as a substitute for, net income (loss) as determined in 

accordance with GAAP. Our definition of Segment Earnings may differ from similar measures used by other companies. We 

believe that Segment Earnings provides us with meaningful metrics to assess the financial performance of each segment and 

our company as a whole. See Note 17 for additional details on Segment Earnings, including additional financial information for 

our segments.

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

FREDDIE MAC | 2020 Form 10-K 35
Segment Comprehensive Income

The graph below shows our comprehensive income by segment.

(In millions)

$8,622

$7,787 $7,531

$3,905 $4,343 $4,520

$1,236

$1,928

$3,215

$3,481 $1,516

($204)

Single-family Guarantee Multifamily Capital Markets

2018 2019 2020

 

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

FREDDIE MAC | 2020 Form 10-K 36
Single-Family Guarantee

Business Overview 

The Single-family Guarantee segment provides liquidity and support to the single-family market through a variety of activities 

that include the purchase, securitization, and guarantee of single-family loans originated by lenders.

The U.S. residential mortgage market consists of a primary mortgage market that links homebuyers and lenders, and a 

secondary mortgage market that links lenders and investors. The size of the U.S. residential mortgage market is affected by 

many factors, including changes in interest rates, unemployment rates, homeownership rates, housing prices, the supply of 

housing, lender preferences regarding credit risk, and borrower preferences regarding mortgage debt.

In accordance with our Charter, we participate in the secondary mortgage market. The mix of loan products we purchase is 

affected by several factors, including the volume of loans meeting the requirements of our Charter, the volume meeting our risk 

appetite and originated according to our purchase standards, and the loan purchase and securitization activity of other financial 

institutions.

Our primary business model is to acquire loans that lenders originate and then pool those loans into mortgage-related 

securities that transfer interest-rate, prepayment, and liquidity risk to investors and can be sold in the capital markets. To 

reduce our exposure under our guarantees, we transfer credit risk on a portion of our single-family credit guarantee portfolio to 

the private market in certain instances. The returns we generate from these activities are primarily derived from the guarantee 

fees we receive in exchange for providing our guarantee of the principal and interest payments of the issued mortgage-related 

securities. 

In order to issue mortgage-related securities, we establish trusts pursuant to our Master Trust Agreements and serve as the 

trustee of those trusts. The servicer administers the collection of the borrower's loan payment and remits the collected funds to 

us. We administer the distribution of payments to the investors in the mortgage-related securities, net of any applicable 

guarantee fees. 

The diagram below illustrates our primary business model.

When a borrower prepays a loan that we have securitized, the outstanding balance of the security owned by investors is 

reduced by the amount of the prepayment. If the borrower becomes delinquent, we continue to make the applicable payments 

to the investors in the mortgage-related securities pursuant to our guarantee until we purchase the loan from the trust. We have 

the option to purchase specified loans, including certain delinquent loans, from the trust at a purchase price equal to the 

current UPB of the loan, less any outstanding advances of principal that have been previously distributed. At the instruction of 

FHFA, we generally have been purchasing loans from the trust 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 must obtain FHFA's approval to implement changes to our policy to purchase loans from trusts. In response to the 

COVID-19 pandemic, FHFA has instructed us to maintain loans in payment forbearance plans (including COVID-19 payment 

forbearance plans) in mortgage-related security pools for at least the duration of the forbearance plan. Once the forbearance 

period expires, the loans will remain in the related securities pool while they are in certain loan workout programs or offers to 

enter into these programs remain outstanding. Beginning on January 1, 2021, at the instruction of FHFA and in alignment with 

Fannie Mae, we extended the trigger to purchase delinquent single-family loans from the trust to 24 months of delinquency, 

except for loans that meet certain criteria (e.g., permanently modified or foreclosure referral), which may be purchased sooner. 

We work with delinquent borrowers through our servicers to mitigate our losses through our loan workout programs. If we are 

unable to achieve a successful loan workout, we will pursue foreclosure of the underlying property, which will result in a thirdManagement's Discussion and Analysis Our Business Segments | Single-Family Guarantee

FREDDIE MAC | 2020 Form 10-K 37
party sale or our acquisition of the property as REO. For additional details, see MD&A - Risk Management. The purchase 

and sale of delinquent loans are done in conjunction with the Capital Markets segment.

Guarantee Fees 

We enter into loan purchase agreements with many of our single-family customers that outline the terms under which we agree 

to purchase loans from them over a period of time. For most of the loans we purchase, the guarantee fees are not specified 

contractually. Instead, we bid for some or all of the lender's loan volume on a monthly basis at a guarantee fee that we specify. 

As a result, our loan purchase volumes from individual customers can fluctuate significantly.

We seek to issue guarantees with fee terms that are commensurate with the aggregate risks assumed and that will, over the 

long-term, provide guarantee fee income that exceeds the credit-related and administrative expenses on the underlying loans 

and also provide a return on the capital that would be needed to support the related credit risk. The guarantee fees charged on 

new acquisitions generally consist of:

n A contractual monthly fee paid as a percentage of the UPB of the underlying loan, including the legislated 10 basis point 

increase in guarantee fees under the Temporary Payroll Tax Cut Continuation Act of 2011 and

n Fees we receive or pay when we acquire a loan, which include delivery fees and buy-up and buy-down fees. Delivery fees 

are calculated based on credit risk factors such as the loan product type, loan purpose, LTV ratio, and credit score, and 

are charged to compensate us for higher levels of risk in some loan products. Buy-up and buy-down fees are payments 

made or received to buy up or buy down, respectively, the monthly contractual guarantee fee and are paid in conjunction 

with the formation of a security to provide for a uniform coupon rate for the mortgage pool underlying the security. Buy-up 

fees are allocated to the Capital Markets segment.

We must obtain FHFA's approval to implement across-the-board changes to our risk-based guarantee fees. In addition, from 

time to time, FHFA issues directives or guidance to us affecting the levels of guarantee fees that we may charge. 

Products and Activities 

Securitization and Guarantee Products

We offer various types of guarantee and securitization products, primarily Level 1 Securitization Products and Resecuritization 

Products. In these securitization products, Freddie Mac functions in several capacities: depositor, guarantor, administrator, and 

trustee. We retain the credit risk and transfer the interest-rate, prepayment, and liquidity risks to the investors. While the Singlefamily Guarantee segment is responsible for the guarantee of our securities, the Capital Markets segment manages the 

securitization and resecuritization processes.

Level 1 Securitization Products

We offer a variety of Level 1 Securitization Products to our customers. Our Level 1 Securitization Products are pass-through 

securities that represent undivided beneficial interests in trusts that hold pools of loans. For our fixed-rate Level 1 Securitization 

Products, we guarantee the timely payment of principal and interest. For our ARM PCs, we guarantee the timely payment of the 

weighted average coupon interest rate for the underlying loans. We also guarantee the full and final payment of principal, but 

not the timely payment of principal, on ARM PCs. In exchange for our guarantee, we receive fees as described in the 

Guarantee Fees section above.

We issue the following types of Level 1 Securitization Products:

n UMBS - Single-class pass-through securities issued through the CSP with a 55-day payment delay for TBA-eligible fixedrate mortgage loans.

n 55-day MBS - Single-class pass-through securities issued through the CSP with a 55-day payment delay for non-TBAeligible fixed-rate mortgage loans.

n ARM PCs - Single-class pass-through securities with a 75-day payment delay for ARM products. We do not issue these 

products through the CSP.

In prior years, we also issued Gold PCs, which were single-class pass-through securities with a 45-day payment delay for 

fixed-rate mortgage loans. We discontinued the offerings of Gold PCs in 2019. Existing Gold PCs that are not entirely 

resecuritized are eligible for exchange into UMBS (for TBA-eligible securities) or 55-day MBS (for non-TBA-eligible securities). 

All Level 1 Securitization Products are backed only by mortgage loans that we have acquired. We offer (or previously offered) all 

of the above products through both guarantor swap and cash window programs.

In a guarantor swap execution, we offer transactions in which our customers, primarily large mortgage banking companies and 

commercial banks, provide us with loans in exchange for a security backed by those same loans, as shown in the diagram 

below:

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

FREDDIE MAC | 2020 Form 10-K 38
In a cash window execution, we purchase mortgage loans from our customers in exchange for cash consideration. Subsequent 

to purchasing the loans, we typically securitize them for retention in our mortgage-related investments portfolio or for sale to 

third parties. For the period of time between loan purchase and securitization, we refer to the loan as being in our securitization 

pipeline. The purchase of loans and sale of securities are managed by the Capital Markets segment. 

The January 2021 Letter Agreement requires us to purchase loans for cash consideration; operate this cash window with nondiscriminatory pricing; and comply with directives, regulations, restrictions, or other requirements prescribed by FHFA related to 

equitable secondary market access by community lenders. In addition, beginning on January 1, 2022, we will be required to 

limit the volume purchased through the cash window to $1.5 billion per lender during any period comprising four calendar 

quarters. The primary impacts of this requirement will likely be:

n An increase in our counterparty risk as the volume restriction may operationally impact our customers by requiring them to 

seek additional sources of funding; 

n A reduction in our ability to align prepayment profiles and securitization practices with Fannie Mae; and

n A reduction in our cash window loan purchase volume, which may reduce our aggregate single-family loan purchase 

volume and negatively affect our financial position and results of operations.

There may be additional FHFA guidance in the future that provides additional restrictions not included in the January 2021 

Letter Agreement. For additional information about the January 2021 Letter Agreement, see MD&A - Conservatorship and 

Related Matters. 

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

FREDDIE MAC | 2020 Form 10-K 39
The diagram below illustrates a cash window execution. 

Resecuritization Products 

We offer resecuritization products to our customers. Our resecuritization products represent beneficial interests in pools of 

Level 1 Securitization Products and certain other types of mortgage assets. We create these securities by using Level 1 

Securitization Products or our previously issued resecuritization products as the underlying collateral. We leverage the issuance 

of these securities to expand the range of investors in our mortgage-related securities to include those seeking specific security 

attributes. Similar to our Level 1 Securitization Products, we guarantee the payment of principal and interest to the investors in 

our resecuritization products. We do not charge a guarantee fee for these securities if the underlying collateral is already 

guaranteed by us since no additional credit risk is introduced, although we typically receive a transaction fee as compensation 

for creating the security and future administrative responsibilities. 

We have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products. When we 

resecuritize Fannie Mae securities, which are separately guaranteed by Fannie Mae, in our commingled resecuritization 

products, our guarantee covers timely payment of principal and interest on such products from underlying Fannie Mae 

securities. If Fannie Mae were to fail to make a payment on a Fannie Mae security that we resecuritized, we would be 

responsible for making the payment. We do not currently charge an incremental guarantee fee to commingle Fannie Mae 

collateral in resecuritization transactions, although we may do so in the future. However, we are required to hold incremental 

capital for our guarantees of Fannie Mae securities under the ERCF.

All of the cash flows from the collateral underlying our resecuritization products are generally passed through to investors in 

these securities. We do not issue resecuritization products that have concentrations of credit risk beyond those embedded in 

the underlying assets. In many of our resecuritization transactions, securities dealers or investors deliver mortgage assets in 

exchange for the resecuritization product. In certain cases, we may also transfer our own mortgage assets in exchange for the 

resecuritization product. The resecuritization activities are managed by the Capital Markets segment. The following diagram 

provides a general example of how we create resecuritization products.

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FREDDIE MAC | 2020 Form 10-K 40
We offer the following types of resecuritization products:

n Single-class resecuritization products - Involve the direct pass through of all cash flows of the underlying collateral to 

the beneficial interest holders and include:

l Supers - Resecuritizations of UMBS and certain other mortgage securities. This structure allows commingling of 

Freddie Mac and Fannie Mae collateral, where newly issued or exchanged UMBS and Supers issued by us or Fannie 

Mae may be commingled to back Supers issued by us. Fannie Mae also issues Supers. Supers can be backed by:

– UMBS and/or other Supers issued by us or Fannie Mae; 

– Existing TBA-eligible Fannie Mae "MBS" and/or "Megas"; and/or 

– UMBS and Supers that we have issued in exchange for TBA-eligible PCs and Giant PCs that have been delivered 

to us in response to our exchange offer.

l Giant MBS - Resecuritizations of:

– Newly issued 55-day MBS and/or Giant MBS; and/or

– 55-day MBS and/or Giant MBS that we have issued in exchange for non-TBA-eligible PCs and non-TBA-eligible 

Giant PCs that have been delivered to us in response to our exchange offer.

l Giant PCs - Resecuritizations of previously issued PCs or Giant PCs. Although we no longer issue Gold PCs, existing 

Gold PCs may continue to be resecuritized into Giant PCs. In addition, ARM PCs may continue to be resecuritized into 

ARM Giant PCs. Fixed-rate Giant PCs are eligible for exchange into Supers (for TBA-eligible securities) or Giant MBS 

(for non-TBA-eligible securities). 

n Multiclass resecuritization products 

l REMICs - Resecuritizations of previously issued mortgage securities that divide all cash flows of the underlying 

collateral into two or more classes of varying maturities, payment priorities, and coupons. This structure allows 

commingling of TBA-eligible Freddie Mac and Fannie Mae collateral.

l Strips - Resecuritizations of previously issued Level 1 Securitization Products or single-class resecuritization products 

and issuance of stripped securities, including principal-only and interest-only securities or floating rate and inverse 

floating rate securities, backed by the cash flows from the underlying collateral. This structure allows commingling of 

TBA-eligible Freddie Mac and Fannie Mae collateral.

Other Securitization Products

n Senior subordinate securitization structures backed by recently originated loans (consolidated) - In prior years, we 

created senior subordinate securitization structures in which we issued guaranteed senior securities and unguaranteed 

subordinated securities backed by recently originated single-family loans. The unguaranteed subordinated securities 

absorb first losses on the related loans and the loans are serviced in accordance with our Guide. We discontinued regular 

offerings of these transactions in 2019.

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FREDDIE MAC | 2020 Form 10-K 41
n	Other securitization products - Guaranteed mortgage-related securities collateralized by non-Freddie Mac mortgagerelated securities. However, we have not entered into these types of transactions as part of our Single-family Guarantee 

business in several years.

We also securitize certain seasoned loans using senior subordinate securitization structures. See the Sales and Securitization 

of Certain Seasoned Loans section below for additional information.

Long-Term Standby Commitments 

We also offer a guarantee on mortgage assets held by third parties, in exchange for guarantee fees, without securitizing those 

assets. These long-term standby commitments obligate us to purchase seriously delinquent loans that are covered by those 

commitments. From time to time, we have consented to the termination of our long-term standby commitments and 

simultaneously entered into guarantor swap transactions with the same counterparty, issuing securities backed by many of the 

same loans.

CSP

We continue to work with FHFA, Fannie Mae, and CSS to support the CSP and the UMBS market. We use the CSP for many of 

the securities administration activities for our Level 1 Securitization Products and resecuritization products. We and Fannie Mae 

issue a single (common) security called the UMBS through CSP. The UMBS market is designed to enhance the overall liquidity 

of TBA-eligible Freddie Mac and Fannie Mae securities by supporting their fungibility without regard to which company is the 

issuer. SIFMA permits UMBS TBA contracts to be settled by delivery of UMBS issued by either Freddie Mac or Fannie Mae 

under its good-delivery guidelines. In addition, we and Fannie Mae are also able to commingle Freddie Mac and Fannie Mae 

UMBS and other TBA-eligible mortgage securities in certain resecuritization transactions. We have both operational risk and 

counterparty risk exposure to Fannie Mae as a result of commingling securities and operational risk exposure to CSS through 

our use of the CSP for securities administration. For additional information, see MD&A - Risk Management - Counterparty 

Credit Risk and MD&A - Risk Management - Operational Risk.

We no longer issue securities with a 45-day payment delay. As a result, we are offering an optional exchange program for 

security holders to exchange certain existing fixed-rate Gold PCs and Giant PCs for corresponding UMBS and other applicable 

55-day payment delay Freddie Mac mortgage securities. As part of this program, we make a one-time payment to exchanging 

security holders for the value of the 10 additional days of payment delay, based on "float compensation" rates we calculate. We 

do not expect the return from this additional float to fully offset our payments to the security holders. During 2020, we 

exchanged $122.4 billion in UPB of 45-day payment delay securities, including securities owned by Freddie Mac, for 55-day 

payment delay securities, and paid $46 million in float compensation in connection with these exchanges.

The primary impacts to Segment Earnings are:

• Guarantee fee income earned on our guarantee of principal and interest payments on our mortgage-related securities and

• Benefit (provision) for credit losses, which is affected by changes in estimated probabilities of default and estimated loss severities, the actual level of 

loan defaults, the effect of loss mitigation efforts, and payment performance of our mortgage portfolio.

CRT Transactions

To reduce our credit risk exposure, we engage in various types of credit enhancements, including CRT transactions and other 

credit enhancements. We define CRT transactions as those arrangements where we actively transfer the credit risk exposure 

on mortgages that we own or guarantee. We define other credit enhancements as those arrangements, such as traditional 

primary mortgage insurance, where we do not actively take part in the transfer of the credit risk exposure. Our CRT transactions 

are designed to reduce the amount of required capital related to credit risk, to transfer portions of credit losses on groups of 

previously acquired loans to third-party investors, and to reduce the risk of future losses to us and taxpayers if borrowers go 

into default. The costs we incur in exchange for this credit protection effectively reduce our guarantee fee income from the 

associated mortgages.

Each CRT transaction is designed to transfer a certain portion of the credit risk that we assume for loans with certain targeted 

characteristics. Risk positions may be transferred to third-party investors through one or more CRT transactions. The risk 

transfer could occur prior to, or simultaneously with, our purchase of the loan (i.e., front-end coverage) or after the purchase of 

the loan (i.e., back-end coverage). As CRT has become part of our normal business activities, we have established the following 

programs to regularly transfer portions of credit risk to diversified investors:

STACR and ACIS Offerings

Our two primary CRT programs are STACR and ACIS.

n	STACR - Our primary single-family securities-based credit risk sharing vehicle. STACR Trust note transactions transfer risk 

to the private capital markets through the issuance of unguaranteed notes using a third-party trust. In a STACR 

transaction, we create a reference pool of loans from our single-family loan portfolio and a trust issues credit notes linked 

to the reference pool. The trust makes periodic payments of principal and interest on the notes to noteholders, but is not 

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

FREDDIE MAC | 2020 Form 10-K 42
required to repay principal to the extent that the note balance is reduced as a result of specified credit events on the 

mortgage loans in the related reference pool. We make payments to the trust to support payment of the interest due on the 

notes. The amount of risk transferred in each transaction affects the amounts we are required to pay. We receive payments 

from the trust that otherwise would have been made to the noteholders to the extent there are certain defined credit events 

on the mortgage loans in the related reference pool. The note balance is reduced by the amount of the payments to us, 

thereby transferring the related credit risk of the loans in the reference pool to the note investors. Generally, the note 

balance is also reduced based on principal payments that occur on the loans in the reference pool. Starting in 4Q 2019, the 

STACR Trust notes issued may qualify for favorable tax treatment for certain types of investors. The following diagram 

illustrates a typical STACR transaction.

n	ACIS - Our primary insurance-based credit risk sharing vehicle. ACIS transactions are insurance policies we enter into with 

global insurance and reinsurance companies to cover a residual portion of credit risk on the STACR or standalone 

reference pools. We pay monthly premiums to the insurers or reinsurers in exchange for claim coverage on their portion of 

the reference pool. We require our ACIS counterparties to partially collateralize their exposure to reduce the risk that we will 

not be reimbursed for our claims under the policies.

We have established programmatic offerings of STACR and ACIS transactions to regularly transfer credit risk on a targeted 

population of recently acquired mortgage loans (“on-the-run transactions”). STACR and ACIS are generally complementary 

programs issued from the same reference pool for on-the-run transactions. The targeted loan population for on-the-run 

transactions is recently acquired fixed-rate mortgage loans with maturity terms greater than 20 years and LTV ratios between 

60% and 97%, excluding loans acquired under our relief refinance programs, government guaranteed loans, and loans that do 

not meet certain eligibility criteria. Our typical on-the-run transactions are issued on a monthly basis and provide back-end 

coverage for loans that we acquired approximately two quarters prior to issuance (e.g., a transaction in 4Q 2020 would typically 

cover loans acquired in 2Q 2020). In a typical on-the-run transaction, we transfer to third-party investors a portion of the credit 

risk between a specified attachment point and a detachment point which may vary based on numerous factors, such as the 

type of collateral and market conditions. We generally retain the initial loss position and at least 5% of the credit risk of all the 

positions sold to align our interests with those of the investors. We also retain all of the senior credit risk position. On-the-run 

STACR transactions typically have a 30-year maturity and on-the-run ACIS transactions typically have a 12.5-year maturity. The 

diagram below illustrates a typical on-the-run STACR and ACIS structure.

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

FREDDIE MAC | 2020 Form 10-K 43
In addition to our regularly issued on-the-run transactions, we also periodically execute “off-the-run” STACR and ACIS 

transactions that provide back-end coverage on certain loans that are not in the on-the-run transaction targeted loan 

population. For example, we offer STACR and ACIS transactions that provide coverage on HARP and other relief refinance 

loans, STACR and ACIS transactions that provide coverage on unissued portions of the reference pools related to previous 

STACR and ACIS transactions, and ACIS transactions that provide coverage on loans with 15-year maturities not related to any 

STACR offering. 

Prior to 2018, the majority of our STACR transactions were structured as unsecured debt issued directly by us (STACR debt 

notes) rather than as debt issued by a trust. These transactions operate similarly to STACR Trust notes, except that we make 

payments of principal and interest on the issued STACR debt notes and are not required to repay principal to the extent that 

the notional credit risk position is reduced as a result of a specified credit event on a loan in the reference pool. For certain 

STACR debt notes issued in prior years (generally STACR debt notes issued prior to 2015), losses are allocated to the notional 

amounts of the credit risk positions based on calculated losses using a predefined formula when the loans experience a credit 

event, which predominantly occurs when a loan becomes 180 days delinquent. As a result, in these transactions, we receive 

reimbursement of losses based on these calculated loss amounts rather than based on actual losses. While we may issue 

STACR debt notes in the future, we expect to predominantly issue STACR Trust notes. 

Additional Offerings

In addition to our primary offerings, we also offer the following CRT products:

n	 ACIS Forward Risk Mitigation (AFRM) - An additional offering in the ACIS program that provides front-end credit risk 

transfer as loans come into the portfolio. Under each of these insurance policies, we pay monthly premiums that are 

determined based on the outstanding balance of the reference pool. When specific credit events occur, we generally 

receive compensation from the insurance policy up to an aggregate limit based on actual losses.

n	 Integrated Mortgage Insurance (IMAGINSM) - An insurance-based offering that provides loan-level front-end protection 

for loans with 80% and higher LTV ratios. IMAGIN is designed to expand and diversify sources of private capital supporting 

low down payment lending. Mortgage insurance provided to each loan is generally underwritten by a group of insurers and 

reinsurers. IMAGIN is offered to a broad range of Freddie Mac sellers, who can choose IMAGIN or traditional primary 

mortgage insurance at their discretion. IMAGIN remains a pilot program and our ability to expand is limited by FHFA.

n	 Lender risk sharing - A variety of transactions in which lenders may retain a portion of the credit risk on loans they 

originate and/or service. These transactions are generally collateralized so that our exposure to counterparty credit risk is 

not increased. We discontinued offerings of these transactions in 2020.

We also transfer credit risk on newly originated loans and seasoned loans through senior subordinated securitization structures. 

See the Securitization and Guarantee Products section above and the Sales and Securitization of Certain Seasoned 

Loans section below for additional information. For additional information on single-family mortgage loan credit enhancements, 

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

FREDDIE MAC | 2020 Form 10-K 44
see MD&A - Risk Management - Single-Family Mortgage Credit Risk - Transferring Credit Risk to Third-Party 

Investors.

The primary impacts to Segment Earnings are:

• Interest expense on our STACR debt notes, net of reinvestment income;

• Fair value gains and losses recognized on certain CRT transactions;

• Expenses to transfer credit risk for certain CRT transactions; and 

• Benefits recognized from recoveries under certain CRT transactions.

Sales and Securitization of Certain Seasoned Loans

We manage the balance of our less liquid single-family mortgage loans, many of which we acquired by purchasing delinquent 

or modified loans from guaranteed securities. We may offer to sell select seasoned single-family mortgage loans through a 

variety of methods. In these transactions, we may reduce or eliminate our credit risk, in addition to our interest-rate and 

prepayment risk, associated with the underlying mortgage loans. The sales of these mortgage loans are managed by the 

Capital Markets segment. Our seasoned loan transactions include the following: 

n	 Senior subordinate securitization structures backed by seasoned loans (nonconsolidated) - Transactions where we 

issue guaranteed senior securities and unguaranteed subordinated securities. The collateral for these structures primarily 

consists of reperforming loans. The unguaranteed subordinated securities absorb first losses on the related loans. Unlike 

senior subordinate securitization transactions backed by recently originated mortgage loans, in these transactions we 

transfer servicing to servicers that we believe have capabilities and resources necessary to improve the loss mitigation 

associated with these loans. As such, the loans are not serviced in accordance with our Guide and we do not control the 

servicing.

n	 Level 1 Securitization Products - We securitize certain reperforming loans, depending on market conditions, business 

strategy, credit risk considerations, and operational efficiency, using Level 1 Securitization Products through a similar 

process to that discussed above. We may subsequently resecuritize a portion of the guaranteed securities, with some of 

the resulting interests being sold to third parties.

n	 Whole loan sales - Sales of seriously delinquent loans for cash.

The primary impact to Segment Earnings is:

• Gains and losses recognized on the reclassification of loans held-for-investment to held-for-sale and subsequent sale of these loans.

Customers 

Our customers in the Single-family Guarantee segment are predominantly financial institutions that originate, sell, and perform 

the ongoing servicing of loans for new or existing homeowners. These companies include mortgage banking companies, 

commercial banks, regional banks, community banks, credit unions, HFAs, savings institutions, and non-depository financial 

institutions. Many of these companies are both sellers and servicers for us. Our single-family customers also include investors 

in our CRT offerings. In addition, we maintain relationships with investors and dealers in our guaranteed mortgage-related 

securities.

We acquire a significant portion of our loans from several lenders that are among the largest originators in the U.S. In addition, 

a significant portion of our single-family loans is serviced by several large servicers. The following charts show the 

concentration of our 2020 single-family purchase volume by our largest sellers and our loan servicing by our largest servicers 

as of December 31, 2020. Any seller or servicer with a 10% or greater share is listed separately.

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FREDDIE MAC | 2020 Form 10-K 45
Percentage of Single-Family Purchase Volume

(Based on UPB of $1,090 billion)

44%

56%

Top 10 sellers All other sellers

 Percentage of Single-Family Servicing Volume(1)

(Based on UPB of $2,326 billion)

11%

38%

51%

Wells Fargo Bank, N.A.

Other top 10 servicers

All other servicers

(1) 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.

For additional information about seller and servicer concentration risk and our relationships with our seller and servicer 

customers, see MD&A - Risk Management - Counterparty Credit Risk - Sellers and Servicers and Note 18.

Competition 

Our principal competitors in the Single-family Guarantee segment are Fannie Mae, FHA/VA (with Ginnie Mae securitization), and 

other financial institutions that retain or securitize loans, such as commercial and investment banks, dealers, and savings 

institutions. The conservatorship, including direction provided to us by our Conservator, may affect our ability to compete. The 

areas in which we and Fannie Mae compete have been limited as we have been required by FHFA to align certain of our singlefamily mortgage purchase offerings, servicing, and securitization practices with Fannie Mae to achieve market acceptance of 

the UMBS. FHFA has also placed limits on our and Fannie Mae's ability to compete with each other on our returns and in areas 

that affect prepayment speeds of single-family mortgage-related securities.

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FREDDIE MAC | 2020 Form 10-K 46
Business Results

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

New Business Activity

UPB of Single-Family Loan Purchases and Guarantees by Loan 

Purpose and Average Guarantee Fee Rate(1) Charged on New 

Acquisitions

(UPB in billions, guarantee fee rate in bps)

$308

$453

$1,090

$213 $250 $325 $95

$203

$765

41

45 47

Home purchase

Refinance

Average guarantee fee rate charged

on new acquisitions

2018 2019 2020

(1) Guarantee fee excludes legislated 10 basis point increase and includes deferred 

fees recognized over the estimated life of the related loans. We enhanced our 

estimation methodology related to recognition of buy-up fees in 2019. 

Number of Families Helped to Own a Home

(In thousands)

1,326

1,769

3,798

884 987

1,131

442

782

2,667

Home purchase borrowers

Refinance borrowers

2018 2019 2020

n	 As a key player in the secondary mortgage market, we maintain a consistent market presence by providing lenders with a 

constant source of liquidity for conforming loan products. We have funded approximately 22.6 million single-family homes 

since January 1, 2009. Our loan purchase and guarantee activity increased in 2020 compared to 2019 primarily due to an 

increase in refinance activity as a result of the low mortgage interest rate environment. 

n	 The average guarantee fee rate charged on new acquisitions consists of the contractual guarantee fee rate and deferred 

fee income, including the expected gains (losses) from buy-up fees, recognized over the estimated life of the related loans 

using our expectations of prepayments and other liquidations. See MD&A - Our Business Segments - Single-Family 

Guarantee - Business Overview - Guarantee Fees for more information on our guarantee fees. The average guarantee 

fee rate charged on new acquisitions increased in 2020 compared to 2019 primarily due to an increase in contractual 

guarantee fees.

n	 Home sales increased in 2020 compared to 2019 driven by low mortgage interest rates. The low mortgage rate 

environment, which also led to an increase in mortgage refinance activity during 2020, is expected to continue through 

2021 and 2022 as the Federal Reserve stated that it intends to keep interest rates low for an extended period of time.

n	 We continued working to improve access to affordable housing, including through our Home Possible® loan initiatives. Our 

Home Possible loan initiatives offer down payment options as low as 3% and are designed to help qualified borrowers with 

limited savings buy a home. We purchased approximately 145,000 loans under these initiatives in 2020. We also continue 

to implement programs that support responsibly broadening access to affordable housing by:

l	 Improving the effectiveness of pre-purchase and early delinquency counseling for borrowers; 

l	 Expanding our ability to support borrowers who do not have a credit score;

l	 Implementing the Duty to Serve Underserved Markets plan; and 

l	 Increasing support for first-time home buyers and mortgage industry professionals. 

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FREDDIE MAC | 2020 Form 10-K 47
While we are responsibly expanding our programs and outreach capabilities to better serve low- and moderate-income 

borrowers and underserved markets, these loans result in increased credit risk. Expanding access to affordable housing will 

continue to be a top priority in 2021. See MD&A - Regulation and Supervision - Federal Housing Finance Agency - Duty 

to Serve Underserved Markets Plan for more information.

Single-Family Credit Guarantee Portfolio

Single-Family Credit Guarantee Portfolio as of December 31,

(UPB in billions)

$1,896 $1,994

$2,326

$1,550 $1,701

$2,093

$346 $293

$233

$1,854 $1,932

$2,103

Core single-family loan portfolio

Legacy and relief refinance

single-family loan portfolio

Average portfolio UPB during

the year

2018 2019 2020

Single-Family Loans as of December 31

(Loan count in millions)

10.9 11.2 12.0

8.0 8.6

9.8

2.9

2.6

2.2

$173,000 $178,000

$194,000

Core single-family loan portfolio

Legacy and relief refinance

single-family loan portfolio

Average loan UPB

2018 2019 2020

n	 The single-family credit guarantee portfolio increased during 2020 by approximately 17%, driven by an increase in U.S. 

single-family mortgage debt outstanding and higher new business activity. Additionally, continued house price appreciation 

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

run off.

n	 As we continued to purchase new loans, our core single-family loan portfolio grew to 90% of the single-family credit 

guarantee portfolio at December 31, 2020, compared to 85% at December 31, 2019. Our legacy and relief refinance singlefamily loan portfolio, which generally has a weaker credit profile, continued to run off, declining to 10% of the single-family 

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

n	 The average portfolio Segment Earnings guarantee fee rate recognizes deferred fee income over the contractual life of the 

related loans (usually 30 years). If the related loans prepay, the remaining fee is recognized immediately. The effect of 

prepayments may be offset by our upfront fee hedging activities. See MD&A - Our Business Segments - SingleFamily Guarantee - Business Overview - Guarantee Fees for more information on our guarantee fees and Note 17 for 

more information on the effect of our upfront fee hedging activities on Segment Earnings. 

n	 The average portfolio Segment Earnings guarantee fee rate was 49 bps, 40 bps, and 35 bps at December 31, 2020, 

December 31, 2019, and December 31, 2018, respectively (all excluding the legislated 10 basis point increase in guarantee 

fees). The rate increased in 2020 compared to 2019 due to an increase in the recognition of deferred fee income driven by 

faster loan prepayments as a result of the low mortgage interest rate environment, and an increase in contractual 

guarantee fees as older vintages were replaced by acquisitions of new loans with higher contractual guarantee fees.

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

FREDDIE MAC | 2020 Form 10-K 48
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 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)

 

$335.9

$252.9

$475.8

2018 2019 2020

$12.4 $12.2

$16.9

2018 2019 2020

n	 During 2020, 2019, and 2018, 62%, 71%, and 74%, 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%). 

The decline from 2019 to 2020 was primarily driven by a decrease in the number of recently acquired loans with maturity 

terms greater than 20 years and improved credit quality of recently acquired loans.

n	 Our CRT issuance amounts increased during 2020 due to our ability to shorten the loan acquisition to CRT issuance 

timeline from approximately three quarters to two quarters, as well as increases in loan purchase and guarantee activity. 

These issuances were supported by solid investor demand and subscription levels even though our ability to execute these 

transactions was negatively impacted by the effects of the COVID-19 pandemic during 2Q 2020. However, the COVID-19 

pandemic continues to impose uncertainties and may continue to adversely impact our transactions going forward. 

n	In November 2020, FHFA released a final rule that establishes the ERCF as a new regulatory capital framework for Freddie 

Mac and Fannie Mae. The ERCF, which will become effective on February 16, 2021, has a transition period for compliance. 

In general, the compliance date for the regulatory capital requirements will be the later of the date of termination of our 

conservatorship and any later compliance date provided in a consent order or other transition order; however, we may 

begin implementing the ERCF sooner, upon the direction of FHFA or otherwise. The ERCF specifies substantial capital 

requirements and could affect our CRT business strategies, perhaps significantly. For additional information, see MD&A – 

Regulation and Supervision – Legislative and Regulatory Developments – FHFA Enterprise Regulatory Capital 

Framework.

n	 We evaluate our CRT strategy and make changes to such strategy depending on market conditions, including the 

significant market volatility caused by the COVID-19 pandemic, and our business strategy. Our risk appetite limits are also 

governed by FHFA and these limits may lead us to take actions to comply with these limits, including continued execution 

of CRT transactions. See MD&A - 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 | 2020 Form 10-K 49
Loss Mitigation Activities

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

limited to loans in forbearance that were past due based on the loan’s original contractual terms. 

Completed Loan Workout Activity

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

90

47

426

$14.8

$7.9

$90.3

Total single-family loan workouts Number of loan workouts

2018 2019 2020

n	 Completed loan workout activity includes forbearance plans where borrowers fully reinstated the loan to current status 

during or at the end of forbearance period, payment deferrals, modifications, successfully completed repayment 

agreements, short sales, and deeds in lieu of foreclosure. Completed loan workout activity excludes active loss mitigation 

activity that was ongoing and had not been completed as of the end of the year, such as forbearance plans that had been 

initiated but not completed and trial period modifications. There were approximately 280,000 loans in forbearance plans

and 10,000 loans in other active loss mitigation activity as of December 31, 2020. 

n	 We continue to help struggling families retain their homes or otherwise avoid foreclosure through loan workouts. Our loan 

workout activity increased significantly in 2020 compared to 2019 primarily driven by the increase in completed 

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

n	 As part of our strategy to mitigate losses and reduce our holdings of less liquid assets, we may pursue sales of certain 

seriously delinquent and reperforming loans depending on market conditions, business strategy, credit risk considerations, 

and operational efficiency. See MD&A - Risk Management - Single-Family Mortgage Credit Risk - Engaging in 

Loss Mitigation Activities for more information on our loss mitigation activities.

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 have been offering forbearance of up to 12 months to single-family borrowers

experiencing a financial hardship, either directly or indirectly, related to COVID-19. Under FHFA’s guidance, we are 

extending COVID-19 forbearances up to 15 months for eligible borrowers, and this forbearance term may be further 

extended by FHFA in the future. On July 1, 2020, we began providing servicers a payment deferral option to offer to eligible 

homeowners. We expect the volume of our loss mitigation activities related to the effects of the pandemic to remain 

elevated in 2021 as a result of the actions we take to support the mortgage market. For additional information on our 

responses to the pandemic, see Introduction - About Freddie Mac - COVID-19 Pandemic Response Efforts.

See MD&A - Risk Management for additional information on our loan workout activities. 

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

FREDDIE MAC | 2020 Form 10-K 50
Financial Results

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

segment.

Table 13 - Single-Family Guarantee Segment Financial Results

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

 Guarantee fee income $10,292 $7,773 $6,581 $2,519 32 % $1,192 18 %

 Investment gains (losses), net 956 964 307 (8) (1) 657 214 

 Other income (loss) 241 391 841 (150) (38) (450) (54) 

Net revenues 11,489 9,128 7,729 2,361 26 1,399 18 

 Benefit (provision) for credit losses (1,680) 418 448 (2,098) (502) (30) (7) 

 Credit enhancement expense (1,696) (1,434) (1,069) (262) (18) (365) (34) 

 Benefit for (decrease in) credit enhancement 

recoveries 305 41 (8) 264 644 49 613 

 REO operations expense (152) (245) (189) 93 38 (56) (30) 

Credit-related expense (3,223) (1,220) (818) (2,003) (164) (402) (49) 

 Administrative expense (1,609) (1,647) (1,491) 38 2 (156) (10) 

 Other expense (943) (786) (568) (157) (20) (218) (38) 

Operating expense (2,552) (2,433) (2,059) (119) (5) (374) (18) 

Segment Earnings (Losses) before income tax 

(expense) benefit 5,714 5,475 4,852 239 4 623 13 

Income tax (expense) benefit (1,178) (1,110) (944) (68) (6) (166) (18) 

Segment Earnings (Losses), net of taxes 4,536 4,365 3,908 171 4 457 12 

Total other comprehensive income (loss), net of tax (16) (22) (3) 6 27 (19) (633) 

Total comprehensive income (loss) $4,520 $4,343 $3,905 $177 4 % $438 11 %

Key Drivers: 

n	 2020 vs. 2019

l Higher guarantee fee income primarily due to portfolio growth, higher deferred fee income recognition driven by faster 

loan prepayments as a result of the low mortgage interest rate environment, and higher contractual guarantee fee 

rates.

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

COVID-19 pandemic and portfolio growth, partially offset by growth in realized and forecasted house prices and 

declines in forecasted interest rates during 2020.

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

l	 Higher benefit for credit enhancement recoveries primarily due to a corresponding increase in expected credit losses 

as a result of the COVID-19 pandemic. 

n	 2019 vs. 2018

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

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

contractual guarantee fee rates.

l	 Higher investment gains primarily due to higher realized gains on a higher volume of sales of, and lower unrealized 

lower-of-cost-or-fair-value losses related to, single-family held-for-sale loans.

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

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

FREDDIE MAC | 2020 Form 10-K 51
Multifamily

Business Overview

The Multifamily segment provides liquidity and support to the multifamily mortgage market through a variety of activities that 

include the purchase, guarantee, sale, and/or securitization of multifamily loans and mortgage-related securities. The overall 

market demand for multifamily loans is generally affected by local and regional economic factors, such as unemployment rates, 

construction cycles, property prices, preferences for homeownership versus renting, and the relative affordability of singlefamily homes, as well as certain macroeconomic factors, such as interest rates. 

While we maintain a variety of products and activities, our primary business model is to acquire multifamily loans for 

aggregation and then securitization. The returns we generate from these activities are primarily derived from (i) the net interest 

income we earn on the loans prior to their securitization, (ii) the price received upon securitization of the loans versus the price 

we paid to acquire the loans, and (iii) the ongoing guarantee fee we receive in exchange for providing our guarantee primarily on 

the issued senior securities. We evaluate these factors collectively to assess the profitability of any given transaction and to 

maximize our returns.

Our securitization activities generally (i) provide us with a mechanism to finance our loan product offerings, (ii) reduce our credit 

risk, interest-rate risk, and liquidity risk exposure on the loans that we purchase, and (iii) reduce our conservatorship capital 

required under CCF. For multifamily loans that we do not intend to securitize, we may pursue other strategies, including the 

execution of other CRT products designed to transfer to third parties all or a portion of the loan's credit risk.

Products and Activities

Our support of the multifamily market generally begins with our underwriting of the loans that we commit to purchase from our 

Optigo® network of approved lenders and typically ends with the disposition of those loans, generally through a borrower 

payoff. Through our support of the multifamily mortgage market, borrowers can obtain lower financing costs, which can benefit 

renters through lower rental rates and/or improved services or amenities. Our commitment to purchase multifamily loans 

generally begins with an index lock agreement or a loan purchase commitment.

Index Lock Agreements

We offer borrowers an option to lock the Treasury index component of their fixed rate loans anytime during the quote or 

underwriting process. This option enables borrowers to lock the most volatile part of their coupon, thereby providing an 

enhanced level of risk mitigation against interest-rate volatility. The index lock period offered for most loans is 60 days and is 

generally followed by a loan purchase commitment. We economically hedge our interest-rate exposure from these agreements 

primarily by entering into pay-fixed, receive-float interest-rate swaps. Index lock agreements do not qualify for accounting 

recognition and therefore our interest-rate risk management activities related to index lock agreements temporarily introduce 

volatility in our financial results until the index lock agreement becomes a loan purchase commitment. 

The primary impact to Segment Earnings is:

• Fair value gains or losses recognized on interest-rate derivatives. These gains or losses are generally offset once an index lock agreement becomes a 

loan purchase commitment and is accounted for at fair value.

Loan Purchase Commitments

Prior to issuing an unconditional commitment to purchase a multifamily loan, we negotiate with the lender the specific 

economic terms and conditions of our commitment, including the loan's purchase price, index, and mortgage spread. We price 

our loans to achieve an initial pricing margin that we expect to realize at securitization. Decisions related to the commitment 

price and/or mortgage spread will affect our initial pricing margin and are generally influenced by our current business strategy, 

the type of loan that we acquire (i.e., whether it qualifies as mission-driven, affordable housing), the amount available under the 

loan purchase cap, current securitization spreads, and changing market conditions. The initial pricing margin, which is based 

on the price we would receive to sell the mortgage loans in a typical securitization transaction, is recognized at the commitment 

date for commitments we measure at fair value and at the time of securitization for loans where we do not elect the fair value 

option. 

At the time we commit to purchase a multifamily loan, we preliminarily determine our intent with respect to that loan. For 

commitments to purchase fixed-rate loans that we intend to sell or securitize (i.e., held-for-sale commitments), we elect the fair 

value option and therefore recognize and measure these commitments at fair value in our consolidated financial statements. We 

do not elect the fair value option for commitments to purchase floating-rate loans or loans that we intend to hold for the 

foreseeable future (i.e., held-for-investment commitments), and therefore these commitments are not recognized in our 

consolidated financial statements.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 52
Our multifamily commitments and loans measured at fair value are subject to changes in fair value due to two main risks: (i) 

interest-rate risk and (ii) spread risk. While we use derivatives to economically hedge the interest rate-related fair value changes 

of these assets measured at fair value, we continue to be exposed to spread-related fair value changes. The fair values of our 

commitments and loans are generally impacted by changes in K Certificate benchmark spreads, which are market-quoted 

spreads over the swap rate. We generally recognize spread-related fair value gains (losses) for our commitments and loans 

measured at fair value when these benchmark spreads tighten (widen). We partially reduce our spread-related fair value 

exposure by purchasing or entering into certain spread-related derivatives, thereby obtaining some protection against 

significant adverse movements in market spreads.

The primary impacts to Segment Earnings are:

• At the commitment date, the initial pricing margin is recognized on held-for-sale commitments where we elected the fair value option; and

• After the commitment date, but prior to purchase, changes in the fair value of commitments where we elected the fair value option are recognized, 

net of interest-rate risk management activities. These fair value adjustments result from changes in the expected pricing of our securitizations due to 

changes in interest rates and securitization market spreads.

Loan Products

Through our Optigo network of approved lenders, we offer borrowers a variety of loan products for the acquisition, refinance, 

and/or rehabilitation of multifamily properties. While our Optigo lenders originate the loans that we purchase, we use a priorapproval underwriting approach, in contrast to the delegated underwriting approach used in our Single-family Guarantee 

segment and Fannie Mae's Delegated Underwriting and Servicing (DUS) program. Under this approach, we maintain credit 

discipline by completing our own underwriting, credit review, and legal review for each loan prior to issuing a loan purchase 

commitment, including reviewing third-party appraisals and performing cash flow analysis. We also price every loan or 

transaction based on the specific terms, structure, and type of execution.

Multifamily loans are typically originated by our Optigo lenders without recourse to the borrower, making repayment dependent 

on the cash flows generated by the underlying property. Cash flows generated by a property are significantly influenced by 

vacancy and rental rates, as well as conditions in the local rental market, the physical condition of the property, the quality of 

property management, and the level of operating expenses.

Our primary multifamily loan products include the following:

n	 Conventional loans - Financing that includes fixed-rate and floating-rate loans, loans in lease-up and with moderate 

property upgrades, manufactured housing community loans, senior housing loans, student housing loans, supplemental 

loans, and certain Green Advantage loans.

n	 Small balance loans - Financing provided to small rental property borrowers for the acquisition or refinance of multifamily 

properties. Financing ranges from $1 million to $7.5 million and is focused on affordable or workforce housing properties 

from 5 to 50 units. 

n	 Targeted affordable housing - Financing provided to borrowers in underserved areas that have restricted units affordable 

to households with low income (earning up to 80% of AMI) and very-low income (earning up to 50% of AMI) and that 

typically receive government subsidies.

We also continue to support the multifamily mortgage market's LIBOR transition efforts by promoting new floating rate loans 

indexed to SOFR. Since September 2020, we have successfully quoted, purchased, and securitized new floating rate loans 

indexed to SOFR. The loans indexed to SOFR will be used as collateral in our SOFR bond offerings, thereby adding liquidity to 

the market and facilitating the transition to SOFR.

The amount and type of multifamily loans that we purchase is significantly influenced by the multifamily loan purchase cap that 

is established by FHFA. In 3Q 2019, FHFA announced a multifamily loan purchase cap of $100.0 billion for the five-quarter 

period from 4Q 2019 through 4Q 2020. This cap applied 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 multifamily business had to be 

mission-driven, affordable housing over the same five-quarter period. Examples of multifamily loans that qualify as missiondriven, affordable housing include certain senior housing loans, small balance loans, manufactured housing loans, and targeted 

affordable housing loans.

In November 2020, FHFA announced that the 2021 multifamily loan purchase cap for the multifamily business will be $70.0 

billion. At least 50% of the multifamily new business activity must be mission-driven, affordable housing, generally defined as 

affordable to renters at 80% of AMI or below, with at least 20% being affordable to renters at 60% of AMI or below. The 

production cap is subject to reassessment throughout the year by FHFA to determine whether an increase in the cap is 

appropriate based on a stronger than expected overall market.

The January 2021 Letter Agreement capped multifamily loan purchases at $80 billion in any 52-week period, subject to annual 

adjustment by FHFA. Based on FHFA guidance, this Purchase Agreement cap is in addition to FHFA's multifamily loan 

purchase cap for 2021 and the measurement period for the Purchase Agreement cap should be applied prospectively (i.e., this 

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 53
cap does not include volumes from the 52 weeks prior to the January 2021 Letter Agreement). At least 50% of the multifamily 

new business activity in any calendar year must be mission-driven, pursuant to FHFA guidelines. For more information on the 

January 2021 Letter Agreement, see MD&A - Conservatorship and Related Matters.

We typically elect the fair value option for fixed-rate held-for-sale loans but do not elect the fair value option for floating-rate 

loans or loans we intend to hold for the foreseeable future or to use as collateral in a PC transaction. The vast majority of all 

new multifamily loan purchases are initially classified as held-for-sale and included in our securitization pipeline. The holding 

period for loans in our securitization pipeline generally ranges between two and five months, as we aggregate sufficient loans 

with similar terms and risk characteristics to securitize. For example, loans purchased during the first quarter will generally be 

used as collateral for securitizations that settle in the second and third quarters of that same year.

The primary impacts to Segment Earnings are:

• While in our securitization pipeline, changes in fair value recognized on loans classified as held-for-sale and measured at fair value, net of interestrate risk management activities. These fair value adjustments result from changes in the expected pricing of our securitizations due to changes in 

interest rates and securitization market spreads; and

• Interest income on loans while held in our mortgage-related investments portfolio.

Securitizations, Guarantees, and Risk Transfer Products

We securitize substantially all of the loans in our securitization pipeline after a short holding period. We enter into various types 

of securitizations that generally result in the transfer of all or a portion of the underlying collateral's interest-rate risk, liquidity 

risk, and/or credit risk to third parties.

In our typical securitizations, we guarantee the issued senior securities. In exchange for providing this guarantee, we receive an 

ongoing guarantee fee that is commensurate with the risks assumed and that will, over the long-term, provide us with 

guarantee fee income that is expected to exceed the credit-related and administrative expenses of the underlying loans. 

Structural deal features, such as term, type of underlying loan product, and subordination levels, generally influence the deal's 

risk profile, which ultimately affects the guarantee fee rate we set at the time of securitization.

For guarantees to non-consolidated entities or other third parties, we generally recognize a guarantee asset at inception. This 

asset, which represents the right to collect contractual guarantee fees, is recorded at fair value with subsequent changes in fair 

value recognized in earnings. The fair value of our guarantee assets may vary significantly from period-to-period based on 

changes in market conditions, including interest rates and credit spreads. Because our multifamily loans contain prepayment 

protection, decreasing interest rates generally result in a higher guarantee asset fair value, with the opposite effect occurring 

when interest rates increase. See Note 5 for additional information on our accounting for guarantees.

Our typical securitization structure and level of subordination are designed to achieve appropriate economic returns when we 

sell loans for securitization. Depending on the securitization product and subordination levels selected, we may realize a higher 

(lower) gain on sale, but recognize lower (higher) ongoing guarantee fee income. 

The ERCF specifies substantial capital requirements and could affect our CRT business strategies, perhaps significantly. We 

are currently evaluating the impact to our business going forward. Additionally, our risk appetite limits are governed by FHFA 

and these limits may lead us to continue executing risk transfer transactions in a similar way as in the past despite not receiving 

as much capital relief under the ERCF. For additional information on ERCF, see MD&A - Introduction – FHFA Enterprise 

Regulatory Capital Framework. 

Primary Securitization Products

Our primary securitization products are K Certificate and SB Certificate transactions, which transfer substantially all of the 

interest-rate risk, liquidity risk, and credit risk of the underlying collateral. The structures of these transactions typically involve 

the issuance of senior, mezzanine, and subordinated securities that represent undivided beneficial interests in trusts that hold 

pools of multifamily loans that we previously purchased. The volume of our primary securitizations is generally influenced by the 

product mix and size of our securitization pipeline, along with market demand for multifamily securities. As shown in the 

diagram below, in a typical K Certificate transaction, we sell multifamily loans to a non-Freddie Mac securitization trust that 

issues senior, mezzanine, and subordinated securities, and simultaneously purchase and place the senior securities into a 

Freddie Mac securitization trust that issues guaranteed K Certificates. In these transactions, we guarantee the senior securities, 

but do not issue or guarantee the mezzanine or subordinated securities. As a result, the interest-rate risk, liquidity risk, and a 

substantial amount of the expected and stressed credit risk is sold to third-party investors through securitization.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 54
n	 K Certificates - Regularly issued structured pass-through securities backed by recently originated multifamily loans. This 

product offers investors a wide range of structural and collateral options that provide for stable cash flows and a structured 

credit enhancement. While the amount of guarantee fee we receive may vary by collateral type, it is generally fixed for 

those K Certificate series that we issue with regular frequency (e.g., 7- and 10-year fixed-rate K Certificates and our 

Floating Rate K Certificates). The guarantee fees received on recently issued standard K Certificates range between 30 

basis points and 50 basis points.

The guarantee fee on K Certificates that we do not issue on a regular basis, such as our single-sponsor K Certificates, is 

determined based on the specific risks associated with the underlying collateral and the structure of the securitization, 

including tranche sizes and risk distribution.

n	 SB Certificates - Regularly issued securities typically backed by multifamily small balance loans that we underwrite at loan 

origination and purchase prior to securitization. Similar to our K Certificate transactions, a non-Freddie Mac trust will issue 

the senior classes of securities, which we guarantee, as well as the unguaranteed subordinated securities. However, unlike 

our K Certificate transactions, while we may purchase a portion of the senior securities, we generally do not place those 

securities into a Freddie Mac trust. The guarantee fee we receive in these transactions is generally 35 basis points.

From time to time, we may undertake certain activities to support the liquidity of K Certificates and SB Certificates. For more 

information, see Risk Factors - Market Risk - The profitability of our multifamily business could be adversely affected 

by a significant decrease in demand for our K Certificates and SB Certificates. Also, we may undertake certain actions to 

support the overall multifamily market, including the market's LIBOR transition efforts. In December 2019, we issued the first 

multifamily real estate securitization with securities indexed to SOFR and have cumulatively issued $9.0 billion in floating rate K 

Certificates indexed to SOFR. These activities have added liquidity to the market and are intended to facilitate the transition to 

SOFR.

Other Securitization Products

Our other securitization products involve the issuance of pass-through securities that represent beneficial interests in trusts that 

hold pools of multifamily loans. The collateral for these securitizations may include loans underwritten and purchased by us at 

loan origination and loans we do not own prior to securitization and that we underwrite after (rather than at) origination. 

Our largest other securitization product is PCs, which are fully guaranteed securities. In these transactions, we securitize 

multifamily loans into pass-through securities that are similar in structure to our Single-family Guarantee segment Level 1 

Securitization Products. Since we guarantee the timely payment of scheduled principal and interest and direct loss mitigation 

activities, we consolidate the securitization trusts used in these transactions. 

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 55
Summary of Our Primary Business Model and Its Impacts to Segment Earnings

The following diagram summarizes the activities included in our primary business model for fixed-rate loans measured at fair 

value and the corresponding impacts to our Segment Earnings. 

Other Guarantee Products

n	 Other mortgage-related guarantees - We guarantee mortgage-related assets held by third parties in exchange for 

guarantee fee income, without securitizing those assets. For example, we provide guarantees on certain tax-exempt 

multifamily housing revenue bonds secured by low- and moderate-income multifamily loans.

Other CRT Products

For the multifamily assets for which we have not transferred credit risk through securitization, we may pursue other strategies to 

reduce our risk exposure. Our other CRT products include the following:

n	 MCIP - We purchase insurance coverage underwritten by a group of insurers and/or reinsurers that generally provide first 

loss and/or mezzanine loss credit protection. These transactions are similar in structure to the ACIS contracts purchased 

by the Single-family Guarantee segment, except the reference pool, in addition to loans, may include bonds underlying our 

other mortgage-related guarantees. When specific credit events occur, we receive compensation from the insurance policy 

up to an aggregate limit based on actual losses. We require our counterparties to partially collateralize their exposure to 

reduce the risk that we will not be reimbursed for our claims under the policies.

n	 SCR debt notes - Through the issuance of our SCR debt notes, which are unsecured and unguaranteed corporate debt 

obligations, we transfer to third parties a portion of the credit risk of the loans underlying certain of our consolidated other 

securitizations and certain of our other mortgage-related guarantees. The interest we pay on our SCR debt notes 

effectively reduces the income we would otherwise earn on the assets underlying the reference pool. SCR debt notes are 

generally similar in structure to our Single-family Guarantee segment's STACR debt notes.

In addition to our other CRT products, we engage in whole loan sales, including sales of loans to funds to which we may also 

provide secured financing, to eliminate our interest-rate risk, liquidity risk, and credit risk exposure to certain loans.

For additional information on multifamily credit enhancements, see MD&A - Risk Management - Multifamily Mortgage 

Credit Risk - Transferring Credit Risk to Third-Party Investors. 

Investing Activities

n	 Mortgage loans - We hold a portfolio of multifamily loans as part of a buy-and-hold investment strategy or to use as 

collateral in our PC transactions. However, this strategy is not part of our primary business model.

n	 Mortgage-related securities - Depending on market conditions and our business strategy, we may purchase or sell 

guaranteed K Certificates or SB Certificates at issuance or in the secondary market, including interest-only securities. 

Through our ownership of the interest-only securities, we are exposed to the credit risk on the loans underlying our 

securitizations.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 56
n	 Other investments - We invest in certain non-mortgage investments, including LIHTC partnerships and other secured 

lending activities. 

Customers

Our multifamily loan activity is generally sourced through our Optigo network of approved lenders, who are primarily non-bank 

real estate finance companies and banks. We generally provide post-construction financing to apartment project operators with 

established performance records. The following charts show the concentration of our 2020 multifamily new business activity by 

our largest sellers and loan servicing by our largest servicers as of December 31, 2020. Any seller or servicer with a 10% or 

greater share is listed separately.

Percentage of New Business Activity(1)

(Based on UPB of $82.5 billion)

16%

14%

11%

10%

31%

18%

CBRE Capital Markets, Inc.

Berkadia Commercial Mortgage LLC

JLL Real Estate Capital, LLC

Walker & Dunlop, LLC

Other top 10 sellers

All other sellers

(1) Excludes LIHTC new business activity.

Percentage of Servicing Volume(2)

(Based on UPB of $345.5 billion)

17%

13%

11%

39%

20%

CBRE Capital Markets, Inc.

Berkadia Commercial Mortgage LLC

JLL Real Estate Capital, LLC

Other top 10 servicers

All other servicers

(2) Percentage of servicing volume is based on the total multifamily mortgage 

portfolio, which includes loans where we do not exercise servicing control. 

Competition

We compete on the basis of price, service and products, including our use of certain securitization structures. Our principal 

competitors in the multifamily market are Fannie Mae, FHA, commercial and investment banks, CMBS conduits, savings 

institutions, and life insurance companies.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 57
Business Results

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

New Business Activity

New Business Activity for the Year Ended December 31,

(UPB in billions)

$78.0 $78.4 $83.0

$77.5 $77.9 $82.5

$0.5 $0.5 $0.5

865.5 809.1 803.0

New loan purchase activity

LIHTC new business activity

Total number of units financed

(in thousands)

2018 2019 2020

Acquisition of Units by AMI for the Year Ended December 31,

(% of eligible units financed by Freddie Mac)

93% 94% 96%

7% 6% 4%

≤120% AMI >120% AMI

2018 2019 2020

n	 As of December 31, 2020, our cumulative new business activity subject to the cap was $100.0 billion. Approximately 39%

of this activity was mission-driven, affordable housing. The 2021 purchase cap for the multifamily business will be $70 

billion as instructed by FHFA. 

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

assets, were $18.7 billion and $14.6 billion as of December 31, 2020 and December 31, 2019, respectively.

n	 Our 2020 new business activity was slightly higher than 2019 due to ongoing demand for multifamily financing driven by 

the low interest-rate environment resulting in continued growth in overall multifamily mortgage debt outstanding.

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

securitization pipeline increased slightly to 88% in 2020 from 87% in 2019. The purchase activity that remained in our 

securitization pipeline as of December 31, 2020, combined with market demand for our securities, will be a driver for our 

primary securitizations in the first two quarters of 2021.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 58
Securitization, Guarantee, and Risk Transfer Activity

Securitization and Guarantee Activities for the Year Ended December 31,

(UPB in billions)

$73.4 $76.3 $76.4

$64.5 $67.0 $69.1

$8.3 $8.4 $5.9

$0.6 $0.9 $1.4

38 40

45

Guaranteed securities issued by our securitizations

Unguaranteed subordinated securities issued by our securitizations

Other mortgage-related guarantees

Average guarantee fee rate (in bps)

2018 2019 2020

n	 Total securitization UPB for 2020 was flat compared to 2019, as the UPB increase attributable to greater PC issuance 

activity was mostly offset by a decline in deal size of our SB Certificate transactions, which was partially limited by the 

composition of our securitization pipeline. 

n	 Approximately 88% and 90% of total securitization UPB related to our primary securitizations during 2020 and 2019, 

respectively.

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

higher guarantee fee rates on new K Certificate securitizations as we reduced subordination levels for certain of these 

transactions by issuing lower amounts of unguaranteed subordinated securities. The lower subordination levels are still 

expected to absorb a substantial amount of expected and stressed credit losses. Additionally, our average guarantee fee 

rate increased as we issued a higher volume of PC securitizations that have higher negotiated guarantee fee rates due to 

the lack of subordination. 

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

to $0.3 billion and $0.2 billion on $4.2 billion and $3.0 billion of UPB through our other CRT products and loss sharing 

arrangements during 2020 and 2019, respectively. 

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 59
Multifamily Portfolio and Market Support

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

Table 14 - Multifamily Portfolio and Market Support

(In millions) December 31, 2020 December 31, 2019

Guarantee portfolio:

Primary securitizations $274,393 $240,134 

Other securitizations 26,967 20,205 

Other mortgage-related guarantees 11,029 10,514 

Total guarantee portfolio 312,389 270,853 

Mortgage-related investments portfolio:

Unsecuritized mortgage loans held-for-sale 23,789 18,954 

Unsecuritized mortgage loans held-for-investment 9,618 10,831 

Mortgage-related securities(1) 4,180 5,889 

Total mortgage-related investments portfolio 37,587 35,674 

Other investments(2) 2,838 2,945 

Total multifamily portfolio 352,814 309,472 

Add: Unguaranteed securities(3) 43,204 40,666 

Less: Acquired mortgage-related securities(4) (4,055) (5,709) 

Total multifamily market support $391,963 $344,429 

Total units financed 4,597,597 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.

n	 Our total multifamily portfolio increased during 2020, primarily due to our loan purchase and securitization activity. We 

expect continued growth in our total portfolio in 2021 as purchase and securitization activities should outpace run off.

n	 At December 31, 2020, approximately 58% of our held-for-sale loans were fixed-rate, while the remaining 42% were 

floating-rate. 

n	 As of December 31, 2020, we had cumulatively transferred a substantial amount of the expected and stressed 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 and for our other mortgage-related guarantees. The average guarantee fee rate on our guarantee portfolio 

was 38 basis points and 37 basis points as of December 31, 2020 and December 31, 2019, respectively, while the average 

remaining guarantee term was eight years as of both December 31, 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.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 60
Net Interest Yield 

Net Interest Yield & Average Investment Portfolio Balance

(Weighted average balance in billions)

$44.9

$41.4

$36.8

$34.6 $32.1 $28.7

$9.9

$8.1

$6.4

$0.4

$1.2

$1.7

2.44%

2.58% 2.56%

Unsecuritized mortgage loans Mortgage-related securities

Other investments portfolio (excludes LIHTC) Net interest yield

2018 2019 2020

n	 2020 vs. 2019

l Net interest yield remained relatively flat. 

l The weighted average investment portfolio balance of interest-earning assets was lower due to a decrease in the 

average balance of unsecuritized held-for-sale loans primarily driven by the timing of loan purchases and 

securitizations.

n	 2019 vs. 2018

l Net interest yield increased primarily due to a higher yield and higher prepayment income received from mortgagerelated securities, coupled with lower funding costs on our held-for-sale mortgage loans driven by lower interest rates.

l The weighted average investment portfolio balance of interest-earning assets decreased due to a reduction of our 

unsecuritized held-for-investment loans as we securitized more of these loans into PC securitizations.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 61
Mortgage Loans Gains (Losses), Net and Initial Pricing Margin on Commitments

 

 Multifamily Segment Mortgage Loans Gains (Losses), Net

(In millions)

$193

$1,202

$2,497

$875 $1,203

$1,925

($172)

$231

$84

($510)

($232)

$488

70

55

28

55

56

26

Initial pricing margin on commitments

Spread-related fair value changes

Other

10-year fixed-rate spread (in bps)

7-year ARM spread (in bps)

2018 2019 2020

Source of spread data in basis points: Independent Dealers

 Initial Pricing Margin on Commitments 

 (In millions)

$875

$1,203

$1,925

1.28%

2.35%

4.56%

Initial pricing margin on commitments

Initial pricing margin on commitments (%)

2018 2019 2020

(Notional in millions) 2018 2019 2020

New loan commitments

measured at fair value $68,439 $51,253 $42,227

n	 We primarily recognize revenue from our mortgage loans as mortgage loans gains (losses), net, which is a component of 

investment gains (losses), net. The amount of mortgage loans gains (losses), net, shown above is net of gains and losses 

on derivative instruments we use to economically hedge the interest-rate risk of the loan commitments and mortgage 

loans.

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

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

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

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

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

n We recognized larger gains in mortgage loans gains (losses), net, during 2020 compared to 2019 primarily due to higher 

initial pricing margins on new loan commitments and greater realized gains from the sale of a higher volume of loans 

measured at the lower-of-cost-or-fair-value. While initial pricing margin remains at record levels, changes in market 

conditions and/or business strategy may reduce these margins in the future.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 62
Financial Results

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

Table 15 - Multifamily Segment Financial Results

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

 Net interest income $943 $1,069 $1,096 ($126) (12) % ($27) (2) %

 Guarantee fee income 1,444 1,101 861 343 31 240 28 

 Mortgage loans gains (losses), net 2,497 1,202 193 1,295 108 1,009 523 

 Other investment gains (losses), net (450) (626) (177) 176 28 (449) (254) 

 Investment gains (losses), net 2,047 576 16 1,471 255 560 3,500 

 Other income (loss) 176 108 129 68 63 (21) (16) 

Net revenues 4,610 2,854 2,102 1,756 62 752 36 

Credit-related expense (136) (18) 9 (118) (656) (27) (300) 

 Administrative expense (514) (503) (437) (11) (2) (66) (15) 

 Other expense (37) (41) (36) 4 10 (5) (14) 

Operating expense (551) (544) (473) (7) (1) (71) (15) 

Segment Earnings (Losses) before income tax 

(expense) benefit 3,923 2,292 1,638 1,631 71 654 40 

Income tax expense (809) (465) (319) (344) (74) (146) (46) 

Segment Earnings (Losses), net of taxes 3,114 1,827 1,319 1,287 70 508 39 

Total other comprehensive income (loss), net of tax 101 101 (83) — — 184 222 

Total comprehensive income (loss) $3,215 $1,928 $1,236 $1,287 67 % $692 56 %

Key Drivers:

n	 2020 vs. 2019

l Decrease in net interest income driven by lower average loan and mortgage-related security balances, coupled with a 

decline in mortgage-related security prepayment income.

l Increase in guarantee fee income driven by continued growth in our guarantee portfolio, coupled with lower fair value 

losses on our multifamily guarantee assets due to lower interest rates.

l Higher investment gains (net of other comprehensive income) driven by strong initial pricing margins on new loan 

commitments, coupled with increased realized gains from the sale of a higher volume of loans measured at lower-ofcost-or-fair-value.

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.

n	 2019 vs. 2018

l Net interest income remained relatively flat.

l Increase in guarantee fee income primarily driven by continued growth in our guarantee portfolio, coupled with lower 

fair value losses on our guarantee assets due to lower interest rates.

l Higher investment gains (net of other comprehensive income) driven by strong initial pricing margins on new loan 

commitments, coupled with spread-related fair value improvements.

Management's Discussion and Analysis Our Business Segments | Multifamily

FREDDIE MAC | 2020 Form 10-K 63
Capital Markets

Business Overview

The Capital Markets segment is responsible for managing the majority of our mortgage-related investments portfolio, and 

providing company-wide treasury and interest-rate risk management functions. In addition, we are responsible for managing 

our securitization and resecuritization activities related to single-family loans, and supporting multifamily securitizations.

Our mortgage portfolio management activities primarily include single-family unsecuritized loans and purchases and sales of 

agency mortgage-related securities. In addition, we actively engage in the structuring of our agency mortgage-related 

securities. Our portfolio management activities also include responsibility for maintaining the other investments portfolio, which 

is primarily used for short-term liquidity management. However, certain portions of the mortgage-related investments portfolio 

are not managed by us, including the portions of the portfolio related to multifamily assets, single-family seriously delinquent 

loans, and the credit risk on single-family performing and reperforming loans. 

We provide a company-wide treasury function, primarily managing our funding and liquidity needs on both a short- and longterm basis. The primary activities of the treasury function include issuing, calling, and repurchasing debt of Freddie Mac and 

maintaining a portfolio of non-mortgage investments. 

Our interest-rate risk management function consolidates and manages the overall interest-rate risk of the company. We actively 

monitor and economically hedge this risk, primarily through the use of derivative instruments. In addition, we further reduce 

these interest-rate exposures through active management of our debt funding mix and through the structuring of our 

investments in mortgage-related securities. We use fair value hedge accounting to reduce the variability in our GAAP earnings 

due to changes in interest rates.

Finally, the Capital Markets segment is responsible for management of our securitization and resecuritization activities related 

to single-family loans, which are discussed in more detail in MD&A - Our Business Segments - Single-Family 

Guarantee.

Certain business activities are significantly constrained by limitations under the Purchase Agreement and limitations imposed 

by FHFA. These constraints reduce the size of our mortgage-related investments portfolio, limit investments used for liquidity 

and contingency, and constrain our future purchase volume through the cash window. These limitations increase our funding 

costs and negatively impact our results of operations. We may also forgo certain investment opportunities due to the risk that 

an accounting treatment may create earnings variability. For additional information on the limits on the mortgage-related 

investments portfolio established by the Purchase Agreement and by FHFA, see MD&A - Conservatorship and Related 

Matters. For additional information on the limits on the investments used for our liquidity and contingency portfolio established 

by FHFA, see MD&A - Liquidity and Capital Resources.

Products and Activities

Investing, Liquidity Management, and Related Activities

In our Capital Markets segment, our objectives are to make appropriate risk and capital management decisions, effectively 

execute our strategy and be responsive to market conditions. We manage the following types of products:

n	 Agency mortgage-related securities - We primarily invest in Freddie Mac mortgage-related securities and may also 

invest in Fannie Mae and Ginnie Mae mortgage-related securities from time to time. Our activities with respect to these 

products may include purchases and sales, dollar roll transactions, and structuring activities (e.g., resecuritizing existing 

agency securities into REMICs and selling some or all of the resulting REMIC tranches).

n	 Single-family unsecuritized loans - We acquire single-family unsecuritized loans in two primary ways:

l	 Loans acquired through our cash window that are awaiting securitization - We securitize most of the loans 

acquired through our cash window into Freddie Mac mortgage-related securities, which may be sold to investors or 

retained in our mortgage-related investments portfolio; and

l	 Seriously delinquent or modified loans that we have removed from our consolidated trusts - Certain of 

these loans may reperform, either on their own or through modification. Reperforming loans are managed by both the 

Capital Markets and Single-family Guarantee segments, but are included in the Capital Markets segment's financial 

results. Loans that remain seriously delinquent are also managed by both the Capital Markets and Single-family 

Guarantee segments, but are included in the Single-family Guarantee segment's financial results. We may continue to 

reduce the balance of our seriously delinquent and reperforming loans through a variety of methods, including loss 

mitigation and foreclosure activities and securitizations and sales. For more information on securitization and sales of 

seasoned loans, see MD&A - Our Business Segments - Single-Family Guarantee - Business Overview - 

Products and Activities - Sales and Securitization of Certain Seasoned Loans.

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

FREDDIE MAC | 2020 Form 10-K 64
n	 Other investments portfolio - We invest in other investments, including: (i) the Liquidity and Contingency Operating 

Portfolio, primarily used for short-term liquidity management, (ii) cash and other investments held by consolidated trusts, 

(iii) investments used to pledge as collateral, and (iv) secured lending activities. 

 In our secured lending activities: (i) we provide funds to lenders for mortgage loans that they will subsequently either sell 

through our cash purchase program or securitize into securities that they will deliver to us, (ii) we enter into securities 

purchased under agreements to resell as a mechanism to provide financing to investors in Freddie Mac securities to 

increase liquidity and expand the investor base for those securities, and (iii) we provide secured term financing through 

revolving lines of credit collateralized by the value of contractual mortgage servicing rights on certain mortgages that we 

own. However, we no longer extend such lines of credit to new customers.

n	 Non-agency mortgage-related securities - We generally no longer purchase non-agency mortgage-related securities, 

and have minimal investments in such securities from our acquisitions in prior years. Our activities with respect to this 

product are primarily sales. However, we may acquire such securities in connection with our senior subordinate 

securitization structures backed by seasoned loans. In recent years, we and FHFA reached settlements with a number of 

institutions to mitigate or recover losses we recognized in prior years. 

The primary impacts to Segment Earnings are:

• Interest income on agency and non-agency mortgage-related securities, unsecuritized loans, and our other investments portfolio;

• Fair value gains and losses due to changes in interest rate and market spreads on our agency and non-agency mortgage-related securities and on 

certain securities held within our other investments portfolio that are accounted for as investment securities. These amounts are recognized in 

Segment Earnings or total other comprehensive income (loss) depending upon their classification (trading or available-for-sale, respectively);

• Amortization of cost basis adjustments, such as net amortization of loans from our cash purchase program and related debt securities in consolidated 

trusts and hedge accounting related basis adjustments; and

• Gains and losses on the sale of unsecuritized loans.

We evaluate the liquidity of our mortgage-related assets based on three categories (in order of liquidity): 

n	 Liquid - Single-class and multi-class agency securities, excluding certain structured agency securities collateralized by 

non-agency mortgage-related securities;

n	 Securitization pipeline - Performing single-family loans purchased for cash and primarily held for a short period until 

securitized, with the resulting Freddie Mac issued securities being sold or retained; and 

n	 Less liquid - Assets that are less liquid than both agency securities and loans in the securitization pipeline (e.g., 

reperforming loans and non-agency mortgage-related securities). 

We may undertake various activities to support our presence in the agency securities market or to support the liquidity of our 

securities, including their price performance relative to comparable Fannie Mae securities. These activities may include the 

purchase and sale of agency securities, dollar roll transactions, and structuring activities, such as resecuritization of existing 

agency securities and the sale of some or all of the resulting securities. Depending upon market conditions, there may be 

substantial variability in any period in the total amount of securities we purchase or sell. The purchase or sale of agency 

securities could, at times, adversely affect the price performance of our securities relative to comparable Fannie Mae securities. 

We may incur costs to support our presence in the agency securities market and to support the liquidity and price performance 

of our securities. For more information, see Risk Factors - Market Risks - A significant decline in the price performance 

of or demand for our UMBS could have an adverse effect on the volume and/or profitability of our new single-family 

guarantee business.

Funding and Liquidity Management Activities

Our treasury function manages the funding needs of the company, including the Capital Markets segment, primarily through the 

issuance of unsecured debt of Freddie Mac. The type and term of debt issued is based on a variety of factors and is designed 

to meet our ongoing cash needs and to comply with our Liquidity Management Framework. This Framework provides a 

mechanism for us to sustain periods of market illiquidity, while being able to maintain certain business activities and remain 

current on our obligations. See MD&A - Liquidity and Capital Resources - Liquidity Management Framework for 

additional discussion of our Liquidity Management Framework. 

We primarily use the following types of products as part of our funding and liquidity management activities:

n	 Discount notes and Reference Bills® - We issue short-term instruments with maturities of one year or less. These 

products are generally sold on a discounted basis, paying principal only at maturity. Reference Bills are auctioned to 

dealers on a regular schedule, while discount notes are issued in response to investor demand and our cash needs. 

n	 Medium-term notes - We issue a variety of fixed-rate and variable-rate medium-term notes, including callable and noncallable securities, and zero-coupon securities, with various maturities. 

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

FREDDIE MAC | 2020 Form 10-K 65
n	 Reference Notes® securities - Reference Notes securities are non-callable fixed-rate securities, which we generally issue 

with original maturities greater than or equal to two years.

n	 Securities sold under agreements to repurchase - Collateralized short-term borrowings where we sell securities to a 

counterparty with an agreement to repurchase those securities at a future date. 

In addition, proceeds from STACR debt notes, SCR debt notes, upfront fees and net worth are used to meet the funding needs 

of the company. We are no longer issuing STACR debt notes on a regular basis as STACR debt note transactions have been 

replaced with STACR Trust note transactions. For a description of STACR transactions, see MD&A - Our Business 

Segments - Single-Family Guarantee - Business Overview - Products and Activities, and for a description of SCR debt 

notes, see MD&A - Our Business Segments - Multifamily - Business Overview - Products and Activities.

The average life of our assets is longer than the average life of our liabilities, which creates liquidity risk. To manage short-term 

liquidity risk, we may hold a combination of cash, cash-equivalent, and non-mortgage-related investments in our Liquidity and 

Contingency Operating Portfolio. These instruments are limited to those we expect to be liquid or mature in the short term. We 

also lend available cash on a short-term basis through transactions where we purchase securities under agreements to resell. 

This portfolio is designed to allow us to meet all of our obligations in the event that we lose access to the unsecured debt 

markets for a period of time. 

See Liquidity and Capital Resources for a further discussion of our funding and liquidity management activities. 

The primary impacts to Segment Earnings are:

• Interest expense on our various funding products and

• Gains and losses on the early termination (call or repurchase) of our funding products.

Interest-Rate Risk Management Activities

We manage the economic interest-rate risk for the company and have management-approved limits for interest-rate risk, as 

measured by our models. See MD&A - Risk Management - Market Risk for additional information, including the 

measurement of the interest-rate sensitivity of our financial assets and liabilities. 

There is a cash flow mismatch between our assets and liabilities that we use to fund those assets. This mismatch in cash flows 

not only leads to liquidity risk, but also results in interest-rate risk. We typically use interest-rate derivatives to reduce the 

economic risk exposure due to this mismatch. Using our risk management practices described in the MD&A - Risk 

Management - Market Risk section, we seek to reduce this impact to low levels. Additionally, assets that are likely to be 

sold prior to their final maturity may have a different debt and derivative mix than assets that we plan to hold for a longer 

period. As a result, interest-rate risk measurements for those assets may include additional assumptions (such as a view on 

expected changes in market spreads) concerning their price sensitivity rather than just a longer-term view of cash flows. 

To manage our interest-rate risk, we primarily use interest rate swaps, options, swaptions, and futures. When we use 

derivatives to mitigate our risk exposures, we consider a number of factors, including cost, exposure to counterparty credit risk, 

and our overall risk management strategy. 

While our interest-rate risk management activities are primarily focused on reducing our economic interest-rate risk, we also 

use hedge accounting strategies to reduce our GAAP earnings variability. We use hedge accounting to better align our earnings 

with the economics of our business. After dedesignation of a fair value hedging relationship, the amount of amortization of the 

fair value hedging basis adjustment associated with the previously designated hedged item that we recognize in a period may 

differ from the change in fair value of the previously designated hedging instrument during that period, which may create 

variability in our earnings. Hedge accounting is not intended to change the investment and portfolio management decisions that 

our segment would otherwise make. For more information on our use of hedge accounting see MD&A - Risk Management - 

Market Risk - Earnings Sensitivity to Market Risk and Note 10.

We have participated in transactions that support the development of the Secured Overnight Financing Rate (SOFR) as an 

alternative rate to LIBOR and expect to continue to do so for the foreseeable future. These transactions include investment in 

and issuance of SOFR indexed floating-rate debt securities and securitizations and execution of SOFR indexed derivatives. For 

additional details on SOFR see Risk Factors - Market Risks - The expected discontinuance of LIBOR could negatively 

affect the fair value of our financial assets and liabilities, results of operations, and net worth. A transition to an 

alternative reference interest rate could present operational problems and subject us to possible litigation risk. We may 

be unable to take a consistent approach across our financial products.

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

FREDDIE MAC | 2020 Form 10-K 66
The primary impacts to Segment Earnings are:

• Fair value gains and losses on derivatives not designated in qualifying hedge relationships;

• Interest income/expense on derivatives; and

• Differences between changes in the fair value of the hedged item attributable to the risk being hedged and changes in the fair value of the hedging 

instrument for derivatives designated in qualifying fair value hedge accounting relationships.

Summary of our Primary Business Model and Its Impacts to Segment Earnings

Securitization Activities

We manage the company's securitization and resecuritization activities related to single-family loans. See MD&A - Our 

Business Segments - Single-Family Guarantee for a discussion of our single-family securitization and guarantee 

products.

Customers

Our customers include banks and other depository institutions, insurance companies, money managers, central banks, pension 

funds, state and local governments, REITs, brokers and dealers, and a variety of lenders as discussed in MD&A - Our 

Business Segments - Single-Family Guarantee - Business Overview - Customers. Our unsecured debt securities and 

structured mortgage-related securities are initially purchased by dealers and redistributed to their customers.

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

FREDDIE MAC | 2020 Form 10-K 67
Competition

Our competitors in the Capital Markets segment are firms that invest in loans and mortgage-related assets and issue corporate 

debt, including Fannie Mae, REITs, supranationals (international institutions that provide development financing for member 

countries), commercial and investment banks, dealers, savings institutions, insurance companies, the Federal Farm Credit 

Banks, the FHLBs, and non-bank loan aggregators, who are both our customers and competitors.

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 as of December 31,

(UPB in billions)

$229.5

$268.7

$294.5

$167.4 $168.4 $134.6

$62.1

$100.3 $159.9

Mortgage investments portfolio

Other investments portfolio

2018 2019 2020

Mortgage Investments Portfolio as of December 31,

(UPB in billions)

$167.4 $168.4

$134.6

$113.8 $119.2

$63.9

$9.0 $19.1

$51.0

$44.6 $30.1

$19.7

Liquid

Securitization pipeline

Less liquid

2018 2019 2020

n	 The balance of our mortgage investments portfolio decreased by $33.8 billion from December 31, 2019 to December 31, 

2020 primarily due to mortgage-related investments portfolio constraints imposed by the Purchase Agreement and FHFA, 

coupled with higher single-family loan purchase volume. See MD&A - Conservatorship and Related Matters for 

additional details.

n	 The balance of our other investments portfolio increased 59.4% from $100.3 billion as of December 31, 2019 to $159.9 

billion as of December 31, 2020, primarily due to higher near-term cash needs driven by a higher expected single-family 

cash window loan purchase forecast, coupled with a larger liquidity and contingency operating portfolio as we transitioned 

to comply with the updated minimum liquidity requirements established by FHFA. In addition, our custodial trust account 

balance increased due to higher loan prepayments.

n	 The overall liquidity of our mortgage investments portfolio continued to improve as our less liquid assets decreased during 

2020. The percentage of less liquid assets relative to our total mortgage investments portfolio declined from 17.9% at 

December 31, 2019 to 14.6% at December 31, 2020, primarily due to securitizations and sales.

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

FREDDIE MAC | 2020 Form 10-K 68
Reduction in Less Liquid Assets

Less Liquid Assets as of December 31,

(UPB in billions)

$44.6

$30.1

$19.7

$39.4

$26.1

$16.3

$5.2

$4.0

$3.4

Reperforming loans

Mortgage-related securities

2018 2019 2020

Sales of Less Liquid Assets for the Year Ended December 31, 

(UPB in billions)

$12.1 $13.4

$8.3

2018 2019 2020

n	 Since 2013, we have focused on reducing, in an economically sensible manner, our holdings of certain less liquid assets, 

including single-family reperforming loans and non-agency mortgage-related securities. Our disposition strategies for our 

less liquid assets include securitizations and sales. 

n	 During 2020, our sales of less liquid assets included $8.3 billion in UPB of reperforming loans using our senior subordinate 

securitization structures. As part of these transactions, we retained certain of the guaranteed senior securities for our 

mortgage-related investments portfolio.

n	 One of our strategies is to securitize reperforming loans into Level 1 Securitization Products. In 2020, we securitized $1.4 

billion of single-family reperforming loans into 55-day MBS. We initially retained the resulting mortgage-related securities 

and may resecuritize or sell them to third parties. 

n	 Our less liquid assets are likely to increase in future periods due to the effects of the COVID-19 pandemic as we will likely 

purchase a higher amount of delinquent and modified loans from securities after borrowers exit forbearance plans.

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

FREDDIE MAC | 2020 Form 10-K 69
Net Interest Yield and Average Balances

Net Interest Yield & Average Investments Portfolio Balances

(Weighted average balance in billions)

$263.2 $265.1

$317.8

$134.9 $125.0 $104.1

$72.5 $89.9 $151.9

$55.8 $50.2

$61.8

1.22%

0.94%

0.16%

Mortgage-related securities Other investments

Single-family unsecuritized loans Net Interest Yield

2018 2019 2020

n	 2020 vs. 2019 - Net interest yield decreased primarily due to higher liquidation rates, driven by lower interest 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. 

n	 2019 vs. 2018 - Net interest yield decreased primarily due to the lower and flatter 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, and an increase in amortization expense resulting from higher loan liquidation rates.

n	 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 17 for more information.

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

FREDDIE MAC | 2020 Form 10-K 70
Financial Results

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

segment. 

Table 16 - Capital Markets Segment Financial Results

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

 Net interest income $522 $2,486 $3,217 ($1,964) (79) % ($731) (23) %

 Investment gains (losses), net (231) (36) 1,803 (195) (542) (1,839) (102) 

 Other income (loss) (266) (700) 340 434 62 (1,040) (306) 

Net revenues 25 1,750 5,360 (1,725) (99) (3,610) (67) 

 Administrative expense (412) (414) (365) 2 — (49) (13) 

 Other expense (21) (54) (11) 33 61 (43) (391) 

Operating expense (433) (468) (376) 35 7 (92) (24) 

Segment Earnings (Losses) before 

income tax (expense) benefit (408) 1,282 4,984 (1,690) (132) (3,702) (74) 

Income tax (expense) benefit 84 (260) (976) 344 132 716 73 

Segment Earnings (Losses), net of taxes (324) 1,022 4,008 (1,346) (132) (2,986) (75) 

Total other comprehensive income (loss), net of tax 120 494 (527) (374) (76) 1,021 194 

Total comprehensive income (loss) ($204) $1,516 $3,481 ($1,720) (113) % ($1,965) (56) %

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

Year Over Year Change

Year Ended December 31, 2020 vs. 2019 2019 vs. 2018

(Dollars in millions) 2020 2019 2018 $ % $ %

Interest rate-related $0.6 ($0.4) ($0.3) $1.0 250 % ($0.1) (33) %

Market spread-related (0.7) 0.2 0.4 (0.9) (450) (0.2) (50) 

Key Drivers:

n	 2020 vs. 2019

l	 Net interest income decreased primarily due to higher liquidation rates, driven by lower interest 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	 Decrease in investment gains (losses), net, primarily due to losses on commitments to sell mortgage-related securities 

as prices increased due to spread tightening, partially offset by gains on commitments to purchase mortgage loans. In 

addition, we recognized interest rate-related fair value gains as long-term interest rates further declined. 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 MD&A - Risk Management - Market Risk for additional information on the effect of market-related items on 

our comprehensive income.

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

securities of consolidated trusts.

n	 2019 vs. 2018

l Net interest income decreased primarily due to the lower and flatter interest rate environment, which also resulted in 

an increase in amortization expense due to higher loan liquidation rates and a change in our investment mix, as the 

other investments portfolio represented a larger percentage of our total investments portfolio.

l	 Decrease in investment gains (losses), net of $1.8 billion, partially offset by an increase of $1.0 billion in other 

comprehensive income.  The remaining decline in investment gains (losses) was primarily due to a decline of 

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

FREDDIE MAC | 2020 Form 10-K 71
approximately $0.5 billion in gains from debt repurchase activity and the $0.3 billion increase in interest rate-related 

and market spread-related fair value losses shown in the table above.  Both of these declines were primarily 

attributable to the decrease in long-term interest rates. Our derivative volume increased beginning in 2Q 2019 as we 

updated our interest-rate risk measures to include upfront fees (including buy-downs) related to single-family credit 

guarantee activity recorded in the single-family segment.  This increase in derivative volume introduced additional 

volatility in our financial results that primarily drove our interest rate-related fair value losses. See MD&A - Risk 

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

income.

l	 Decrease in other income primarily due to lower net amortization income driven by the timing differences in 

amortization related to prepayment between debt of consolidated trusts and the underlying loans from our cash 

purchase program. For further discussion on timing differences in amortization, see MD&A - Consolidated Results 

of Operations.

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

FREDDIE MAC | 2020 Form 10-K 72
RISK MANAGEMENT

Overview 

To achieve our mission of providing liquidity, stability, and affordability to the U.S. housing market, we take risks as an integral 

part of our business activities. Risk is the possibility that events will adversely affect the achievement of our mission, strategy, 

and business objectives. Risk can manifest itself in many ways and the responsibility for risk management resides at all levels 

of the company. We seek to take risks in a safe and sound, well-controlled manner to earn acceptable risk-adjusted returns on 

both a corporate-wide and, where applicable, transaction basis. Our goal is to maintain a strong risk culture where employees 

are risk aware, collaborative, and transparent, individually accountable for their decisions, and conduct business in an effective, 

legal, and ethical manner. 

We utilize a risk taxonomy to define and classify risks that we face in operating our business. These risks have the potential to 

adversely affect our current or projected financial and operational resilience. The risk taxonomy is also the basis for aligning 

corporate risk policies and standards. Risks are classified into the following categories:

n	 Credit Risk; 

n	 Operational Risk;

n	 Market Risk;

n	 Liquidity Risk;

n	 Strategic Risk; and

n	 Reputation Risk.

Strategic and reputation risks are factored into business decisions and are a shared responsibility of senior management. For 

more discussion of these and other risks facing our business, see Risk Factors. See Liquidity and Capital Resources for 

a discussion of liquidity risk. 

Enterprise Risk Framework

The enterprise risk framework is a key component for how we manage risk to achieve our mission, strategy, and business 

objectives. The enterprise risk framework: 

n Defines risk roles and responsibilities across the three lines of defense and

n	 Promotes accountability and transparency in risk management decisions and execution. 

The framework includes the following components: 

n	 Risk Appetite - The risk appetite is the level of risk, both in aggregate and by risk type, within the company's risk capacity 

that the Board and management are willing to assume to achieve the company's strategic goals. The risk appetite is 

influenced by our available capital, and integrated and aligned with the strategic plans for the company and each business 

segment. The risk appetite is approved by the Board of Directors and then by FHFA as Conservator, who may change our 

risk appetite or risk limits.

n	 Capital Framework - We have historically used FHFA's CCF, and internal capital methodologies, where available, to 

measure risk for making economically effective decisions. FHFA issued a new capital rule, the ERCF, under which we will 

be required to report regulatory capital consistent with the new rule beginning January 1, 2022. We are transitioning to 

ERCF and may begin implementing sooner, upon the direction of FHFA. 

n	 Risk Profile - The risk profile is a point-in-time assessment and measurement of inherent and/or residual risk for a specific 

risk type, measured at a divisional or enterprise level for the relevant risk types. The risk profile considers risk trends, 

elevated, emerging, and top risks, control performance, and risk indicators. The risk profile also incorporates results from, 

and may inform, stress testing or scenario analysis, judgmental evaluation of external and internal risk drivers, and any 

development that may affect performance relative to the company's strategy and business objectives. 

n	 Risk Governance - Risk governance defines the way in which we manage risk across the company by articulating specific 

roles and responsibilities across the three lines of defense, including escalation and reporting. It is formalized through the 

delegations of authority, corporate risk policies and standards, and the risk governance structure at the division, enterprise, 

and Board levels. 

l Delegations of Authority - The Board of Directors delegates authority to the CEO (and while that office is vacant, to 

the President), who then delegates to members of executive management.

l Issuance of Corporate Risk Policies and Standards - Corporate risk policies and standards define roles and 

responsibilities with respect to risk management, establish risk approval requirements, and set forth escalation and 

reporting requirements.

Management's Discussion and Analysis Risk Management | Overview

FREDDIE MAC | 2020 Form 10-K 73
l Risk Governance Structure - The risk governance structure consists of management- and Board-level committees 

and their roles and responsibilities are formalized in their charters.

The diagram below illustrates the components of the enterprise risk framework.

FHFA has increased supervisory expectations related to how risk is managed and overseen by management and the Board, 

and specifically the role of ERM to provide independent risk oversight and effective challenge. As a result, we must continue to 

invest in our risk management practices to meet these expectations.

Enterprise Risk Governance Structure

We manage risk using a three-lines-of-defense risk management model and governance structure that includes enterprise-wide 

oversight by the Board and its committees, the CRO, and the CCO.

The information and diagram below present the responsibilities associated with our three-lines-of-defense risk management 

model and our risk governance structure. The risk governance structure also includes division risk committees to actively 

discuss and monitor business-specific risk profiles, risk decisions, and risk appetite metrics, limits and thresholds, and risk type 

committees to oversee specific risk types that are present in and span across business lines.

For more information on the role of the Board and its committees, see Directors, Corporate Governance, and Executive 

Officers - Corporate Governance - Board and Committee Information. 

Management's Discussion and Analysis Risk Management | Overview

FREDDIE MAC | 2020 Form 10-K 74
Management's Discussion and Analysis Risk Management | Overview

FREDDIE MAC | 2020 Form 10-K 75
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.

Counterparty credit risk is the risk associated with the inability or failure of a counterparty to meet its contractual obligations. 

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, Note 5, and Note 7 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 sections below, we provide a general discussion of our enterprise risk framework and current risk environment for 

mortgage credit risk and for counterparty credit risk.

Single-Family Mortgage Credit Risk

We manage our exposure to single-family mortgage credit risk, which is a type of consumer credit risk, using the following 

principal strategies:

n	 Maintaining prudent underwriting standards and quality control practices and managing seller/servicer performance;

n	 Transferring credit risk to third-party investors;

n	 Monitoring loan performance and characteristics;

n	 Engaging in loss mitigation activities; and

n	 Managing foreclosure and REO activities.

Maintaining Prudent Underwriting Standards and Quality Control Practices and 

Managing Seller/Servicer Performance 

We employ multiple strategies to maintain loan quality and data transparency:

n	 Underwriting standards, as published in our Guide and incorporated in Freddie Mac Loan AdvisorSM, establish the 

requirements for eligibility, documentation, and representations and warranties;

n	 Loan quality control practices, including post-close credit review and the underwriting defects repurchase process, help to 

validate that the loan origination process is in compliance with our Guide and that loans perform at or above expected 

levels; and

n	 Seller/servicer management, including in-house quality control and performance monitoring, helps to maintain quality 

control for loans sold and/or serviced by third parties.

Underwriting Standards 

We use a delegated underwriting process in connection with our acquisition of single-family loans whereby we set eligibility and 

underwriting standards, and sellers represent and warrant to us that loans they sell to us meet these standards. Our eligibility 

and underwriting standards are used to assess loans based on a number of characteristics.

Limits are established on the purchase of loans with certain higher risk characteristics. These limits are designed to balance our 

credit risk exposure while supporting affordable housing in a responsible manner. Our purchase guidelines generally provide for 

a maximum original LTV ratio of 97% for creditworthy first-time homebuyers and for a targeted segment of creditworthy 

borrowers meeting certain AMI requirements under our affordable housing initiatives, a maximum original LTV ratio of 95% for 

all other home purchase and no cash out refinance loans, a maximum original LTV ratio of 80% for cash-out refinance loans, no 

maximum LTV ratio for fixed-rate loans, and a 105% maximum LTV ratio for ARMs in our relief refinance programs.

Management's Discussion and Analysis Risk Management | Credit Risk

FREDDIE MAC | 2020 Form 10-K 76
Loan Advisor is our main tool for assessing loan eligibility and documentation. Loan Advisor is a set of integrated software 

applications and services designed to give lenders access to our view of risk, loan quality, and eligibility during the origination 

process, which promotes efficient commerce between lenders and Freddie Mac. As a key component of Loan Advisor, Loan 

Product Advisor® ("LPA") takes advantage of proprietary data models and intelligent automation to help validate all loans meet 

our underwriting standards. LPA features innovative tools and offerings leveraging algorithms to enhance the origination 

process and generates an assessment of a loan’s credit risk and overall quality.

Historically, the majority of our purchase volume was assessed using either LPA, Fannie Mae's comparable software Desktop 

Underwriter (DU), or the seller's proprietary automated underwriting system. We have implemented steps to require the loans 

we purchase to be assessed by one of Freddie Mac's proprietary underwriting software tools, LPA or Loan Quality Advisor®, 

prior to purchase. By the end of 2020, substantially all of the loans we purchase are now assessed by Freddie Mac proprietary 

software, helping validate their compatibility with our risk appetite and reducing the volume of loans we acquire with layered 

risk.

With Loan Advisor, lenders can actively monitor representation and warranty relief earlier in the mortgage loan production 

process. Loan Advisor offers limited representation and warranty relief for certain loan components that satisfy automated data 

analytics related to appraisal quality, valuation, borrower assets, and borrower income. In general, limited representation and 

warranty relief is only offered when information provided by lenders is validated through the use of independent data sources. 

If we discover that the representations or warranties related to a loan were breached (i.e., that contractual standards were not 

followed), we can exercise certain contractual remedies to mitigate our actual or potential credit losses. These contractual 

remedies include the ability to require the seller or servicer to repurchase the loan at its current UPB, reimburse us for losses 

realized with respect to the loan after consideration of any other recoveries, and/or indemnify us. Our current remedies 

framework provides for the categorization of loan origination defects for loans with settlement dates on or after January 1, 

2016. Among other items, the framework provides that "significant defects" will result in a repurchase request or a repurchase 

alternative, such as recourse or indemnification.

Under our current selling and servicing representation and warranty framework for our mortgage loans, we relieve sellers of 

repurchase obligations for breaches of certain selling representations and warranties for certain types of loans, including:

n	 Loans that have established an acceptable payment history for 36 months (12 months for relief refinance loans) of 

consecutive, on-time payments after purchase, subject to certain exclusions and

n	 Loans that have satisfactorily completed a quality control review.

An independent dispute resolution process for alleged breaches of selling or servicing representations and warranties on our 

loans allows for a neutral third party to render a decision on demands that remain unresolved after the existing appeal and 

escalation processes have been exhausted.

Quality Control Practices 

We employ a quality control process to review loan underwriting documentation for compliance with our standards using both 

random and targeted samples. We also perform quality control reviews of many delinquent loans and review loans that have 

resulted in credit losses before the representations and warranties are relieved. Sellers may appeal our ineligible loan 

determinations prior to repurchase of the loan.

We use a standard quality control process that facilitates more timely reviews and is designed to identify breaches of 

representations and warranties early in the life of the loan. Proprietary tools, such as Quality Control Advisor®, provide greater 

transparency into our customer quality control reviews. 

Appraisal Waivers 

Since June 2017, Freddie Mac has permitted sellers to originate certain eligible loans without a traditional appraisal by 

leveraging our proprietary models, along with historical data and public records through our Loan Product Advisor® Automated 

Collateral Evaluator (ACE). For mortgaged properties meeting certain qualifications as specified in the Guide, the property value 

(purchase price for purchase transactions and borrower provided estimated value for refinances) along with condition are 

assessed using ACE. ACE uses our in-house automated valuation model, Home Value Explorer® (HVE). HVE was built and is 

periodically enhanced for the express purpose of managing collateral risk at Freddie Mac. ACE leverages statistically based, 

empirically derived confidence scores to assess collateral risk. 

In response to the COVID-19 pandemic, in March 2020 we introduced expanded eligibility of ACE waivers to include no cashout refinance with LTV up to 90% and cash-out refinances for primary residences up to 70% LTV and second homes up to 

60% LTV. During the pandemic, homeowners and appraisers expressed concerns with entering properties which potentially 

could stall the process of closing loans. As a result of this expansion combined with a historically high refinance market (ACE 

waivers are granted more often for refinanced loans), ACE waiver usage increased substantially during 2020. We monitor the 

size of ACE waivers relative to Fannie Mae’s appraisal waivers to reduce prepayment misalignment risk in UMBS.

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 77
Managing Seller/Servicer Performance

We actively monitor seller and servicer performance, including compliance with our standards. We maintain approval standards 

for our seller/servicers, which include requiring our sellers to maintain an in-house quality control program with written 

procedures that operates independently of the seller’s underwriting and origination functions. We monitor servicer performance 

using our Servicer Success Scorecard and periodically review our seller/servicers’ operational processes. We also periodically 

change seller/servicer guidelines based on the results of our mortgage portfolio monitoring, if warranted. 

Temporary Underwriting Changes Due to COVID-19 Pandemic

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

affect the expected performance of purchased loans that were underwritten under these temporary changes.

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. Certain measures have been revised and 

the application date windows for these measures have been extended as outlined below. These temporary measures include:

n	 Allowing flexibility in demonstrating a borrower's current employment status for applications received through February 28, 

2021.

The following temporary measures are in effect until further notice:

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

the loan closing date in order to verify 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. 

These requirements were revised and became effective for applications dated on or after December 14, 2020; 

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

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

funds due to current market volatility; and

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

three consecutive timely payments under a loss mitigation program.

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

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

applications dated on or before February 28, 2021. 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.

The measures related to use of powers of attorney and remote online notarization have been incorporated into our Guide and 

are therefore no longer temporary. Some of these changes in our underwriting standards due to the COVID-19 pandemic may 

negatively affect the expected performance of loans purchased while these changes are in effect. The pandemic may also 

strain sellers' ability to increase their operational capacity to handle the historically high volume of refinance mortgages while 

maintaining proper quality control, which may further impact the credit quality of the loans we purchase during the affected 

periods. In addition, the CARES Act requires creditors to report to credit bureaus that loans in relief programs, such as 

forbearance plans, repayment plans, and loan modification programs, are current as long as the loans were current prior to 

entering into the relief programs and the borrowers remain in compliance with the programs. This credit reporting requirement 

applies to all mortgage relief programs entered into between January 31, 2020 and the date that is 120 days after the 

declaration of the national emergency related to the COVID-19 pandemic ends. As a result, our ability to evaluate purchases of 

new loans may be adversely affected as credit scores may not fully reflect the impact of relief programs, offered by us or other 

creditors, into which borrowers may have entered.

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

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

mortgage market and allow originators to keep lending. This temporary measure was extended to include mortgage loans with 

note dates on or after April 1, 2020 and on or before December 31, 2020 and with settlement dates on or before February 28, 

2021. The purchases of such loans have been insignificant. We also temporarily halted the purchase of negotiated bulk 

transactions and the purchase of flow loans with more than six months seasoning in May 2020.

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 78
We have also announced that, at the instruction of FHFA and in alignment with Fannie Mae, a 50 basis point adverse market 

refinance fee was implemented for refinance mortgages, excluding those with low balances and certain product types, with 

settlement dates on or after December 1, 2020 in response to projected credit losses related to the COVID-19 pandemic.

Underwriting Restrictions Related to January 2021 Letter Agreement

The January 2021 Letter Agreement requires us to limit our acquisition of certain single-family mortgage loans.

n	 A maximum of 6% of purchase money mortgages and 3% of refinance mortgages over the preceding 52-week period can 

have two or more of the following characteristics at origination: combined LTV ratio greater than 90%; debt-to-income ratio 

greater than 45%; and FICO or equivalent credit score less than 680.

n	 Acquisitions of single-family mortgage loans secured by either second homes or investment properties will be limited to 

7% of the single-family mortgage loan acquisitions over the preceding 52-week period.

n	 Subject to such exceptions as FHFA may prescribe to permit us to acquire single-family mortgage loans that are currently 

eligible for acquisition, we will be required to implement by July 1, 2021 a program reasonably designed to ensure that 

each single-family mortgage loan acquired is: (i) a qualified mortgage; (ii) exempt from the CFPB’s ability-to-repay 

requirements; (iii) secured by an investment property, subject to the restrictions above; (iv) a refinancing with streamlined 

underwriting for high LTV ratios; (v) a loan with temporary underwriting flexibilities due to exigent circumstances, as 

determined in consultation with FHFA; or (vi) secured by manufactured housing.

Loan Purchase Credit Characteristics

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

quality of our single-family loan purchases improved during 2020. The graphs below show the credit profile of the single-family 

loans we purchased or guaranteed.

Weighted Average Original LTV Ratio

77% 77%

71%

2018 2019 2020

Weighted Average Original Credit Score (1) 

746 751 759

2018 2019 2020

(1) Original credit score is based on three credit bureaus (Equifax, Experian, and 

TransUnion).

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 79
The table below contains additional information about the single-family loans we purchased or guaranteed in the last three 

years.

Table 18 - Single-Family New Business Activity

Year Ended December 31,

2020 2019 2018

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

30-year or more amortizing fixed-rate $866,075 80 % $389,515 86 % $266,995 87 %

20-year amortizing fixed-rate 53,094 5 15,381 3 8,373 3 

15-year amortizing fixed-rate 166,814 15 43,164 10 28,878 9 

Adjustable-rate 3,788 — 5,257 1 3,848 1 

FHA/VA and other governmental 296 — 164 — 103 — 

Total $1,090,067 100 % $453,481 100 % $308,197 100 %

Percentage of purchases

 DTI ratio > 45% 10 % 14 % 18 %

Original LTV ratio > 90% 11 19 22 

Original credit score < 680 4 7 9 

Property type:

Detached single-family houses 63 61 60 

Townhouse 30 31 32 

Condominium or co-op 7 8 8 

Occupancy type:

Primary residence 94 92 90 

Second home 3 4 4 

Investment property 3 4 6 

Loan purpose:

Purchase 30 55 69 

Cash-out refinance 18 18 19 

Other refinance 52 27 12 

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 80
Transferring Credit Risk to Third-Party Investors 

Types of Credit Enhancements

Our Charter requires coverage by specified credit enhancements or participation interests on single-family loans with LTV ratios 

above 80% at the time of purchase. Most of our loans with LTV ratios above 80% are protected by primary mortgage 

insurance, which provides loan-level protection against loss up to a specified amount, the premium for which is typically paid 

by the borrower. Generally, an insured loan must be in default and the borrower's interest in the underlying property must have 

been extinguished, such as through a short sale or foreclosure sale, before a claim can be filed under a primary mortgage 

insurance policy. The mortgage insurer has a prescribed period of time within which to process a claim and make a 

determination as to its validity and amount. 

In addition to obtaining credit enhancements required by our Charter, we also enter into various CRT transactions in which we 

transfer mortgage credit risk to third parties. The table below contains a summary of the types of credit enhancements we use 

to transfer credit risk on our single-family loans. See MD&A - Our Business Segments - Single-Family Guarantee -

Business Overview - Products and Activities for more information on our CRT transactions. 

Category Products CRT Coverage type Accounting treatment

Primary mortgage insurance Primary mortgage insurance No Front-end Attached

STACR STACR Trust notes Yes Back-end Freestanding

STACR debt notes Yes Back-end Debt

Insurance/reinsurance 

ACIS Yes Back-end Freestanding

AFRM Yes Front-end Freestanding

IMAGIN Yes Front-end Freestanding

Subordination

Senior subordinate securitization structures backed by 

seasoned loans (nonconsolidated) Yes Back-end Guarantee

Senior subordinate securitization structures backed by 

recently originated loans (consolidated) Yes Back-end Debt

Lender risk sharing Lender risk sharing Yes Front-end Freestanding

Single-Family Credit Guarantee Portfolio CRT Issuance

The table below provides the issuance amounts during the applicable periods, including the protected UPB and maximum 

coverage, associated with CRT transactions for loans in our single-family credit guarantee portfolio. We have enhanced our 

methodology to identify UPB with more than one type of CRT activity and, as a result, certain prior period amounts have been 

revised to conform to the current period presentation. Although the COVID-19 pandemic has caused significant volatility in the 

single-family CRT markets, our CRT issuance amounts increased during 2020 due to our ability to shorten the loan acquisition 

to CRT issuance timeline from approximately three quarters to two quarters and significant increases in loan purchase and 

guarantee activity. These issuances were supported by solid investor demand and subscription levels even though our ability to 

execute these transactions was negatively impacted by the effects of the COVID-19 pandemic during 2Q 2020. However, the 

COVID-19 pandemic continues to impose uncertainties and may continue to adversely impact our transactions going forward.

See Introduction - About Freddie Mac - COVID-19 Pandemic Response Efforts - Business Outlook for additional 

information. 

Table 19 - Single-Family Credit Guarantee Portfolio CRT Issuance

Year Ended December 31,

 2020 2019 2018

(In millions) Protected UPB(1)

Maximum 

Coverage(2) Protected UPB(1)

Maximum 

Coverage(2) Protected UPB(1)

Maximum 

Coverage(2)

STACR $427,155 $11,141 $203,239 $6,671 $243,007 $6,935 

Insurance/reinsurance 422,719 4,181 210,650 2,687 270,084 3,140 

Subordination 7,016 1,254 11,197 1,666 30,911 1,984 

Lender risk sharing 7,293 1,125 31,025 1,860 10,940 345 

Less: UPB with more than 

one type of CRT activity (388,340) (769) (203,239) (723) (219,072) — 

Total CRT Activities $475,843 $16,932 $252,872 $12,161 $335,870 $12,404 

(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.

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(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.

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 December 31, 2020 and December 31, 2019, respectively. The 

percentage of loans in single-family credit guarantee portfolio covered by credit enhancement decreased in 2020 compared to 

2019 primarily due to increased number of recently acquired loans that are targeted to be included in future on-the-run CRT 

transactions and have not been included in a reference pool, as well as improved credit quality of recently acquired loans, 

which results in a lower targeted loan population for on-the-run CRT transactions. 

Table 20 - Single-Family Credit Guarantee Portfolio Credit Enhancement Coverage Outstanding

December 31, 2020

(Dollars in millions) Protected UPB(1)

% of Single-Family 

Credit Guarantee 

Portfolio Maximum Coverage(2)

Primary mortgage insurance $472,881 20% $116,973 

STACR 853,733 37 29,665 

Insurance/reinsurance 876,815 38 11,586 

Subordination 38,074 2 6,182 

Lender risk sharing 5,731 — 4,831 

Other 374 — 371 

Less: UPB with multiple CRT and/or other credit enhancements (1,069,281) (46) — 

Single-family credit guarantee portfolio - covered by credit 

enhancement 1,178,327 51 169,608 

Single-family credit guarantee portfolio - other 1,148,099 49 — 

Total $2,326,426 100% $169,608 

December 31, 2019

(Dollars in millions) Protected UPB(1)

% of Single-Family 

Credit Guarantee 

Portfolio Maximum Coverage(2)

Primary mortgage insurance $421,870 21% $107,690 

STACR 824,359 41 25,112 

Insurance/reinsurance 863,149 43 10,157 

Subordination 44,941 2 5,399 

Lender risk sharing 24,078 1 5,657 

Other 1,056 — 1,051 

Less: UPB with multiple CRT and/or other credit enhancements (1,058,402) (52) — 

Single-family credit guarantee portfolio - covered by credit 

enhancement 1,121,051 56 155,066 

Single-family credit guarantee portfolio - other 873,398 44 — 

Total $1,994,449 100% $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. For certain transactions, 

protected UPB may be different from the UPB of the underlying loans due to timing differences in reporting cycles between the transactions and the loans. 

(2) 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.

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

December 31, 2020 December 31, 2019

(% of portfolio based on UPB)(1)(2) % of Portfolio SDQ Rate % of Portfolio SDQ Rate

Credit-enhanced

 Primary mortgage insurance 21 % 3.77 % 21 % 0.79 %

 CRT and other 41 3.22 55 0.40 

Non-credit-enhanced 50 2.13 45 0.70 

Total N/A 2.64 N/A 0.63 

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

(2) Based on loan UPB, which may be different from the protected UPB of the associated credit enhancement transaction due to timing differences in reporting cycles 

between the transactions and the loans.

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 22 - Credit Enhancement Coverage by Year of Origination

December 31, 2020 December 31, 2019

(Dollars in millions) UPB(1)(2)

% of UPB with 

Credit 

Enhancement UPB(1)(2)

% of UPB with 

Credit 

Enhancement

Year of Loan Origination

 2020 $971,136 36 % N/A N/A

 2019 276,315 73 $383,003 40 %

 2018 118,673 80 221,712 81 

 2017 147,863 75 242,605 77 

 2016 187,085 69 277,762 71 

 2015 and prior 624,956 43 869,043 44 

Total $2,326,028 50 $1,994,125 55 

(1) Excludes $505 million and $555 million UPB of loans underlying certain securitization products for which loan-level data was not available as of December 31, 2020 

and December 31, 2019, respectively.

(2) Based on loan UPB, which may be different from the protected UPB of the associated credit enhancement transaction due to timing differences in reporting cycles 

between the transactions and the loans.

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The following table provides information on the characteristics of the loans in our single-family credit guarantee portfolio 

currently without credit enhancement. 

Table 23 - Single-Family Credit Guarantee Portfolio Without Credit Enhancement(1) 

December 31, 2020 December 31, 2019

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

Low current LTV ratio(1)(2) $784,150 66 % $671,882 75 %

Short-term(1)(3) 81,681 7 39,220 4 

Pre-CRT program inception(1)(4) 11,327 1 31,091 3 

CRT pipeline(1)(5) 276,611 24 134,332 15 

Other(1)(6) 20,414 2 23,616 3 

Total $1,174,183 100 % $900,141 100 %

(1) Loans with multiple characteristics are assigned to categories in this table based on the following order: low current LTV ratio, short-term, pre-CRT program 

inception, and CRT pipeline. 

(2) Represents loans with current LTV ratio less than or equal to 60%.

(3) Represents loans with an original maturity of 20 years or less. 

(4) Represents Relief Refinance loans and loans that were acquired before the inception of our CRT programs in 2013.

(5) Represents recently acquired loans that are targeted to be included in the on-the-run CRT transactions and have not been included in a reference pool. 

(6) Primarily includes government guaranteed loans, ARM loans, loans with a current LTV ratio greater than 97%, and loans that fail the delinquency requirements for 

CRT transactions.

Credit Enhancement Expenses and Recoveries

The recognition of expenses and recoveries associated with credit enhancements in our consolidated financial statements 

depends on the type of credit enhancement as follows:

n	 Attached credit enhancements - Attached credit enhancements are obtained contemporaneously with, and in 

contemplation of, the origination of a financial instrument, and effectively travel with the financial instrument upon sale. 

Attached credit enhancements are accounted for on a net basis with the associated financial instrument. As a result, we do 

not explicitly recognize a separate expense in our consolidated statements of comprehensive income for attached credit 

enhancements. Rather, the cost of attached credit enhancements is reflected as lower revenue. For example, we charge a 

lower guarantee fee for a loan with primary mortgage insurance than we otherwise would for the same loan without primary 

mortgage insurance. Similarly, credit losses on loans with attached credit enhancements are accounted for on a net basis. 

We do not recognize a provision for credit losses on loans with attached credit enhancements unless the expected credit 

loss exceeds the amount of credit protection provided by the attached credit enhancement and do not separately 

recognize a recovery asset until we derecognize the related loans. For additional information on the effect of attached 

credit enhancements on our credit losses, see the Monitoring Loan Performance and Characteristics - Credit Losses 

and Recoveries section below.

n	 Freestanding credit enhancements - Freestanding credit enhancements are contracts that are entered into separately 

and apart from any other financial instruments or entered into in conjunction with some other transaction and are legally 

detachable and separately exercisable. Freestanding credit enhancements are accounted for on a gross basis separately 

from the associated financial instrument. We recognize the payments we make to transfer credit risk under freestanding 

credit enhancements as credit enhancement expense. We recognize expected recoveries from freestanding credit 

enhancements separately in other assets on our 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.

n	 Guarantee Credit Enhancements - We obtain credit enhancements for certain of our guarantees through the issuance of 

subordinated securities that absorb losses prior to our guarantee. The benefit from this type of credit enhancement is 

considered when measuring the allowance for credit losses for off-balance sheet credit exposures and we recognize an 

allowance for credit losses only if expected credit losses exceed the amount of subordination. We recognize the guarantee 

fee income we receive from the guarantee and there is no explicitly recognized separate credit enhancement expense or 

expected credit enhancement recovery.

n	 Credit-linked debt - Credit enhancements that are structured as debt issuances are accounted for on a gross basis 

separately from the associated mortgage loan. We primarily recognize expenses associated with credit-linked debt as 

interest expense. We recognize recoveries from credit-linked debt as debt extinguishment gains within investment gains 

(losses) when the loss confirming event occurs and we are legally released from our debt obligation, which typically occurs 

after we recognize a provision for credit losses on the associated loan. Such recoveries have not been significant. We no 

longer issue credit-linked debt as part of our primary CRT strategy and therefore expect the effect of these transactions on 

our financial results to become less significant over time.

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Certain of our credit enhancements are accounted for at fair value, with changes in fair value recognized in earnings as a 

component of investment gains (losses), net. See Note 8 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 24 - Details of Single-Family Credit Enhancement Expenses and Recoveries 

Year Ended December 31,

(In millions) 2020 2019 2018

Credit enhancement expenses:(1) 

Credit enhancement expense ($1,036) ($734) ($394) 

Interest expense related to CRT debt (736) (1,060) (1,047) 

 Estimated reinvestment income from proceeds of CRT debt issuance 76 360 372 

Single-family credit enhancement expenses ($1,696) ($1,434) ($1,069) 

Single-family benefit for (decrease in) credit enhancement recoveries $305 $41 ($8) 

(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. 

The table below presents the details of the credit enhancement recovery receivables we have recognized within other assets on 

our consolidated balance sheet.

Table 25 - Single-Family Credit Enhancement Receivables

(In millions) December 31, 2020 December 31, 2019

Freestanding credit enhancement expected recovery receivables, net of allowance $653 $71 

Primary mortgage insurance receivables(1), net of allowance 74 76 

Total credit enhancement assets $727 $147 

(1) Excludes $444 million and $464 million of deferred payment obligations associated with unpaid claim amounts as of December 31, 2020 and December 31, 2019, 

respectively. We have reserved substantially all these unpaid amounts as collectability is uncertain.

Monitoring Loan Performance and Characteristics

We review loan performance, including delinquency statistics and related loan characteristics in conjunction with housing 

market and economic conditions, including economic impacts associated with the COVID-19 pandemic, to assess credit risk 

when estimating our allowance for credit losses and to determine if our pricing and eligibility standards reflect the risk 

associated with the loans we purchase and guarantee. We review the payment performance of our loans to facilitate early 

identification of potential problem loans, which could inform our loss mitigation strategies. We also review performance metrics 

for additional loan characteristics that may expose us to concentrations of credit risk, including: 

n	 Higher risk loan attributes and attribute combinations;

n	 Higher risk loan product types; and

n	 Geographic concentrations. 

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 have been offering forbearance of up to 12 months to single-family borrowers

experiencing a financial hardship, either directly or indirectly, related to COVID-19. Under FHFA’s guidance, we are extending 

COVID-19 forbearances up to 15 months for eligible borrowers, and this forbearance term may be further extended by FHFA in 

the future. 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 the date that is 120 days after 

the declaration of the national emergency related to the COVID-19 pandemic ends. Our ability to monitor the credit quality of 

loans in our single-family credit guarantee portfolio may be adversely affected as credit scores may not reflect the impact of 

relief programs, offered by us or other creditors, into which borrowers may have entered.

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The table below contains details on the characteristics of our single-family loans in forbearance that are past due based on the 

loan's original contractual terms.

Table 26 - Credit Quality Characteristics of Our Single-Family Loans in Forbearance

December 31, 2020 December 31, 2019

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

Current LTV ratio:

 ≤ 60 $29.4 49 % $0.2 33 %

 > 60 to 80 23.7 39 0.3 50 

 > 80 to 100 6.9 11 0.1 17 

 > 100 0.3 1 — NM

Total $60.3 100 % $0.6 100 %

(1) NM - not meaningful due to the UPB rounding to zero. 

Beginning in 4Q 2020, we required single-family servicers to report to us all alternatives to foreclosure, which include 

forbearance plans on all mortgages, including those where the borrower has continued to make payments in accordance with 

the loan's original contractual terms and remains in current status. The forbearance data we reported in prior periods was 

generally limited to loans in forbearance that were past due based on the loan’s original contractual terms. 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 plan.

The table below presents payment status information of our single-family loans in forbearance.

Table 27 - Single-Family Loans in Forbearance by Payment Status 

December 31, 2020 December 31, 2019

(Dollars in millions) Current

One Month 

Past Due

Two

Months

Past Due

Three 

Months to 

Six Months 

Past Due(1)

Greater Than 

Six Months 

Past Due(1) Total

One 

Month 

Past Due

Two

Months

Past Due

Three 

Months or 

More Past 

Due Total

UPB $8,907 $5,443 $4,372 $15,366 $35,144 $69,232 $131 $85 $362 $578 

Number of loans (in 

thousands) 44 28 22 75 155 324 1 — 2 3

As a percentage of 

our single-family 

credit guarantee 

portfolio(2)

 0.37 % 0.23 % 0.18 % 0.63 % 1.29 % 2.70 % 0.01 % — % 0.02 % 0.03 %

(1) The UPB of loans in forbearance that were three months to six months past due and accruing and that were greater than six months past due and accruing was 

$13.1 billion and $29.1 billion, respectively, as of December 31, 2020. 

(2) Based on loan count.

The CARES Act, as amended by the Consolidated Appropriations Act, 2021, 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 do 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 because 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. For 

loans in active forbearance plans that were current prior to receiving forbearance, we continue to accrue interest income 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 based on management judgment, taking into consideration 

additional factors, the most important of which is current LTV ratio. 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.

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The table below provides the amount of accrued interest receivable, net of the allowance for credit losses, related to our singlefamily loans in forbearance. Prior period accrued interest receivable balances related to single-family loans in forbearance are 

not material.

Table 28 - Single-Family Loans in Forbearance(1)

(In millions) December 31, 2020

Accrued interest receivable:

Less than three months past due $74 

Three months to six months past due 235 

Greater than six months past due(2) 911 

Accrued interest receivable, gross 1,220 

Allowance for credit losses (138) 

Accrued interest receivable, net $1,082 

(1) Excludes loans in certain legacy securitization products. 

(2) 90% of the accrued interest receivable greater than six months past due is related to loans with current LTV ratios that are less than or equal to 80%.

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. This hierarchy is determined based on certain factors, 

such as the borrowers’ delinquency status, reasons for delinquency, loan types, and types of hardships. Borrowers are not 

required to repay all past due amounts in a single lump sum. Upon expiration of the forbearance plan, borrowers may reinstate 

the loan or enter into either a repayment plan, a payment deferral, or a trial period plan pursuant to a loan modification. If the 

borrower is not eligible for any of the home retention options, we may seek to pursue a foreclosure alternative or foreclosure. As 

a result of loans exiting COVID-19 related forbearance plans through payment deferrals or loan modifications during 2020, we 

deferred $432 million of delinquent interest into non-interest-bearing principal balances that are due at the earlier of the payoff 

date, maturity date, or sale of the property. 

For additional information on actions we have taken in response to the COVID-19 pandemic and on our loss mitigation 

activities, see Introduction - About Freddie Mac - COVID-19 Pandemic Response Efforts and MD&A - Risk 

Management - Single-Family Mortgage Credit Risk - Engaging in Loss Mitigation Activities.

The table below presents a summary of single-family loans that received forbearance during 2020 and were past due based on 

the loans' original contractual terms at some point during the forbearance period.

Table 29 - Status of Single-Family Loans That Received Forbearance 

(Loan count in thousands) 2020

Active forbearance plan as of December 31,2020 280

Active forbearance plan exits:

 Reinstatement(1) 228

 Payment deferral 166

 Other(2) 43

Total forbearance plan exits 437

Total single-family loans that received forbearance during 2020(3) 717

(1) Includes forbearance plans where the borrower brought the mortgage current during forbearance or paid the mortgage in full. 

(2) Primarily includes forbearance plans where the borrowers remained delinquent and the exit paths were not determined at the end of the forbearance periods. Also 

includes other exit paths such as repayment plans, modifications, and foreclosure alternatives.

(3) Based on number of forbearance plans. A loan can receive more than one forbearance plan during the period.

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 loan’s 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 

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 87
for financial accounting and reporting purposes. In particular, the length and severity of the economic downturn caused by the 

COVID-19 pandemic and its impact on house prices and the housing market, the number of borrowers that require assistance 

under the COVID-19 forbearance programs we are offering, and the ultimate success of those programs in resolving borrower 

hardships are all subject to significant uncertainty and may have a material effect on our allowance for credit losses in future 

periods. For further information on our accounting policies and methods for estimating our allowance for credit losses and 

related management judgments, see MD&A - Critical Accounting Policies and Estimates. 

Under CECL, upon reclassification from held-for-investment to held-for-sale, we perform a collectability assessment. When we 

determine that a loan to be reclassified has experienced more-than-insignificant deterioration in credit quality since origination, 

the excess of the loan’s amortized cost basis over its fair value is written off against the allowance for credit losses prior to the 

reclassification. 

The table below summarizes our single-family allowance for credit losses activity.

Table 30 - Single-Family Allowance for Credit Losses Activity

Year Ended December 31,

(Dollars in millions) 2020 2019 2018 2017 2016

Beginning balance(1) $5,233 $6,176 $8,979 $13,463 $15,348 

(Benefit) provision for credit losses 1,320 (749) (712) (97) (781) 

Charge-offs(2) (592) (1,737) (2,885) (5,051) (1,938) 

Recoveries collected 210 452 475 425 497 

Other 182 126 319 239 337 

Ending balance $6,353 $4,268 $6,176 $8,979 $13,463 

Components of ending balance of allowance for credit losses:

Mortgage loans held-for-investment $5,628 $4,222 $6,130 $8,931 $13,411 

Advances of pre-foreclosure costs 536 N/A N/A N/A N/A

Accrued interest receivable 140 N/A N/A N/A N/A

Off-balance sheet credit exposures 49 46 46 48 52 

Total $6,353 $4,268 $6,176 $8,979 $13,463 

As a percentage of our single-family credit guarantee portfolio 0.27% 0.21% 0.33% 0.49% 0.77%

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

(2) 2016 does not include lower-of-cost-or-fair-value adjustments recognized when we transfer loans from held-for-investment to held-for-sale, which totaled $1.2 

billion. 2020, 2019, 2018 and 2017 include charge-offs of $0.3 billion, $1.3 billion, $2.1 billion and $3.8 billion, respectively, related to the transfer of loans from 

held-for-investment to held-for-sale.

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Credit Losses and Recoveries

The table below contains certain credit performance metrics of our single-family credit guarantee portfolio. Credit losses 

declined during 2020 as charge-offs related to reclassification of single-family loans from held-for-investment to held-for-sale 

decreased as a result of a lower volume of reclassifications. Other credit losses also declined as a result of the foreclosure 

moratorium that is in effect until at least March 31, 2021. It is likely that we will incur additional costs in future periods, such as 

higher property preservation and maintenance expenses, due to the foreclosure moratorium as the affected borrowers may 

remain delinquent for an extended period of time.

Table 31 - Single-Family Credit Guarantee Portfolio Credit Performance Metrics

Year Ended December 31,

(Dollars in millions) 2020 2019 2018

Charge-offs(1) $592 $1,737 $2,885 

Recoveries collected(2) (210) (452) (475) 

Charge-offs, net 382 1,285 2,410 

REO operations expense 149 229 170 

Total credit losses $531 $1,514 $2,580 

Total credit losses(1) (in bps) 2.5 7.7 13.7 

Recoveries from (gains) losses on sales of seriously delinquent loans(3) ($54) ($33) ($88) 

Recoveries collected under freestanding credit enhancements and write-offs of CRT debt (13) (14) 22 

(1) 2020, 2019, and 2018 include charge-offs of $0.3 billion, $1.3 billion, and $2.1 billion, respectively, related to the transfer of loans from held-for-investment to heldfor-sale.

(2) Includes cash, REO, or other assets such as receivables from primary mortgage insurance. 

(3) Excludes (gains) losses on securitization of reperforming loans.

Our credit losses are concentrated in the legacy and relief refinance single-family loan portfolio. In addition, our credit losses 

are also concentrated within loans having certain characteristics, as shown in the table below. These categories are not 

mutually exclusive; for example, an Alt-A loan can be associated with a property located in a judicial foreclosure state and/or 

have a CLTV ratio of greater than 100%. Additional detail on loans in judicial foreclosure states is presented in the Managing 

Foreclosure and REO Activities section below.

Table 32 - Credit Characteristics of Certain Single-Family Loan Categories

2020 2019

December 31 Year Ended 

December 31 December 31 Year Ended December 31

% of 

Portfolio SDQ Rate % of Credit Losses(1)

% of 

Portfolio SDQ Rate % of Credit Losses

CLTV > 100% 0.1 % 18.11 % 5 % 0.4 % 8.22 % 16 %

Alt-A loans 1 10.66 9 1 3.75 12 

Judicial foreclosure states 37 2.93 70 38 0.81 61 

(1) Excludes credit losses related to charge-offs of accrued interest receivables.

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 December 31, 2020, 23% 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 December 31, 2020. 

n In general, we expect our allowance for credit losses associated with existing single-family TDRs to decline over time as 

borrowers continue to make monthly payments under the modified terms and interest-rate concessions are amortized into 

earnings. However, the COVID-19 pandemic is likely to cause some borrowers to have difficulty making their monthly 

payments under the modified terms. In addition, our sales of reperforming loans will decrease these allowances for credit 

losses. While our ability to sell these loans was negatively affected by the COVID-19 pandemic during the first half of 2020, 

sales of reperforming loans resumed during the second half of 2020.

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

consolidated balance sheets. 

Table 33 - Single-Family TDR and Non-Accrual Loans

December 31,

2020 2019 2018 2017 2016

(Dollars in millions) 

Mortgage 

Loans 

Held-forInvestment

Mortgage 

Loans 

Held-forSale Total

Mortgage 

Loans 

Held-forinvestment

Mortgage 

Loans 

Held-forSale Total Total Total Total

UPB:

 TDRs on accrual status(1) $28,547 $4,293 $32,840 $32,188 $11,576 $43,764 $41,839 $51,644 $77,122 

 Non-accrual loans 13,679 5,020 18,699 6,529 4,654 11,183 11,197 17,748 16,164

Total TDRs and non-accrual loans $42,226 $9,313 $51,539 $38,717 $16,230 $54,947 $53,036 $69,392 $93,286 

Allowance for credit losses 

associated with: 

 TDRs on accrual status $1,249 $3 $1,252 $2,452 $— $2,452 $3,612 $5,257 $10,295 

 Non-accrual loans 631 228 859 597 — 597 1,003 1,883 2,290 

Total $1,880 $231 $2,111 $3,049 $— $3,049 $4,615 $7,140 $12,585 

Allowance as % of UPB:

 TDRs on accrual status 4% —% 4% 8% —% 6% 9% 10% 13% 

 Non-accrual loans 5 5 5 9 — 5 9 11 14 

Total 4 2 4 8 — 6 9 10 13 

Year Ended December 31,

2020(3) 2019(3)

(In millions)

Mortgage Loans 

Held-forInvestmentMortgage Loans 

Held-for-Sale Total

Mortgage Loans 

Held-forInvestmentMortgage Loans 

Held-for-Sale Total

Interest on TDRs and non-accrual 

loans:

 At original contractual rates $1,905 $504 $2,409 $1,903 $867 $2,770 

 Recognized (1,318) (239) (1,557) (1,444) (536) (1,980) 

Foregone interest income on 

TDRs and non-accrual loans(2) $587 $265 $852 $459 $331 $790 

(1) In prior periods, UPB amounts included only loans classified as held-for-investment.

(2) Represents the amount of interest income that we did not recognize but would have recognized during the period for loans outstanding at the end of each period, 

had the loans performed according to their original contractual terms.

(3) Represents the interest income at original contractual rates, interest income recognized, and foregone interest income based on TDRs and non-accrual loans at the 

end of each period.

Foregone interest income on TDRs and non-accrual loans was $1,122 million, $1,604 million, and $2,109 million during 2018, 

2017, and 2016, respectively.

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 90
The table below summarizes the UPB of single-family held-for-investment TDR loan activity.

Table 34 - Single-Family TDR Loan Activity 

Year Ended December 31,

2020 2019(1) 2018(1)

(Dollars in millions) Loan Count Amount Loan Count Amount Loan Count Amount

Beginning balance, as of January 1 249,182 $35,623 290,255 $42,254 364,704 $54,415 

New additions(2) 26,689 4,624 30,568 4,871 52,300 8,115 

Repayments and reclassifications to held-for-sale (44,614) (7,248) (85,181) (14,016) (119,366) (19,285) 

Foreclosure sales and foreclosure alternatives (1,980) (323) (4,502) (605) (7,383) (991) 

Ending balance, as of December 31 229,277 32,676 231,140 32,504 290,255 42,254 

Loans impaired upon purchase — — 1,600 102 2,555 170 

Total impaired loans with an allowance recorded — — 232,740 32,606 292,810 42,424 

Allowance for credit losses (1,585) (2,872) (4,369) 

Net investment, at December 31 $31,091 $29,734 $38,055 

(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.

(2) Includes certain bankruptcy events and forbearance plans, repayment plans, payment deferrals, and modification activities that do not qualify the temporary relief 

related to TDR provided by the CARES Act based on servicer reporting at the time of TDR event.

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. 

 Portfolio Composition and Credit Losses 

90%

33%

10%

67%

Core single-family loan portfolio

Legacy and relief refinance single-family

loan portfolio

% of Portfolio

As of 12/31/2020

% of Credit Losses

Full Year 2020

Serious Delinquency Rates

0.22% 0.26%

2.04%

1.93% 1.84%

5.30%

0.69% 0.63%

2.64%

Core single-family loan portfolio

Legacy and relief refinance single-family

loan portfolio

Total

4Q18 4Q19 4Q20

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 91
The total serious delinquency rate on our single-family credit guarantee portfolio increased to 2.64% as of December 31, 2020, 

compared to 0.63% as of December 31, 2019, driven by an increase in the number of loans in forbearance related to the 

COVID-19 pandemic. However, 55% of the seriously delinquent loans at December 31, 2020 were covered by credit 

enhancements that may partially reduce our credit risk exposure. Despite the increase in the serious delinquency rate, our core 

single-family loan portfolio continued to perform well through December 31, 2020 and accounted for a relatively low percentage 

of our credit losses. Our legacy and relief refinance single-family loan portfolio continued to decline but also continued to 

account for the majority of our credit losses. See Note 4 for additional information on the payment status of our single-family 

mortgage loans.

The ongoing COVID-19 pandemic has caused delinquencies to increase significantly in the mortgage market. 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.

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 during 2020 compared to December 31, 2019 due to the increase 

in the number of loans that were in forbearance plans related to the COVID-19 pandemic, but generally fell back to prepandemic levels by the end of the year as the impact of the pandemic on early-stage delinquencies started to stabilize. The 

percentage of loans one month past due can be volatile due to servicer reporting methodologies, seasonality, and other factors 

that may not be indicative of default. As a result, the percentage of loans two months past due tends to be a better early 

performance indicator than the percentage of loans one month past due. The percentage of loans two months past due was up 

slightly from 2019 to 2020 but has also generally returned to pre-pandemic levels.

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

1.24% 1.26%

1.01%

0.35% 0.33% 0.38%

One month past due Two months past due

4Q18 4Q19 4Q20

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 92
Loan Characteristics 

The table below contains a description of some of the loan characteristics in our single-family credit guarantee portfolio.

Characteristic Description Impact on Credit Quality

LTV ratio

Ratio of the UPB of the loan to the value of the underlying 

property collateralizing the loan. Original LTV ratio is 

measured at loan origination, while CLTV ratio is defined 

as the ratio of the current loan UPB to the estimated 

current property value.

• Measures ability of the underlying property to cover our 

exposure on the loan

• Higher LTV ratios indicate higher risk, as proceeds from sale of 

the property may not cover our exposure on the loan

• Lower LTV ratios indicate borrowers are more likely to repay

Credit score

Statistically-derived number used by lenders to assess a 

borrower's likelihood to repay debt. We use FICO scores, 

which are currently the most commonly used credit scores 

for mortgages. Original credit score represents each 

borrower's FICO score at the time of origination or our 

purchase, while current credit score represents each 

borrower's most recent FICO score, which is obtained by 

Freddie Mac as of the first month of the most recent 

quarter

• Borrowers with higher credit scores are generally more likely to 

repay or have the ability to refinance their loans than those with 

lower scores

Loan purpose

Indicates how the borrower intends to use the proceeds 

from a loan (i.e., purchase, cash-out refinance, or other 

refinance)

• Cash-out refinancings, which increase the LTV ratios, generally 

have a higher risk of default than loans originated in purchase 

or other refinance transactions

Property type Indicates whether the property is a detached single-family 

house, townhouse, condominium, or co-op

• Detached single-family houses and townhouses are the 

predominant type of single-family property

• Condominiums historically have experienced greater volatility in 

house prices than detached single-family houses, which may 

expose us to more risk

Occupancy type

Indicates whether the borrower intends to use the 

property as a primary residence, second home, or 

investment property

• Loans on primary residence properties tend to have lower credit 

risk than loans on second homes or investment properties

Product type

Indicates the type of loan based on key loan terms, such 

as the contractual maturity, type of interest rate, and 

payment characteristics of the loan

• Loan products that contain terms which result in scheduled 

changes in monthly payments may result in higher risk

• Shorter loan terms result in faster repayment of principal and 

may indicate lower risk

Second liens Indicates whether the underlying property is covered by 

more than one loan at the time of origination

• Second liens can increase the risk of default

• Borrowers are free to obtain second-lien financing after 

origination, and we are not entitled to receive notification when 

a borrower does so

DTI ratio

Ratio of the borrowers' total monthly debt payments to 

gross monthly income. One indicator of the 

creditworthiness of the borrowers, as it measures 

borrowers' ability to manage monthly payments and repay 

debts

• Borrowers with lower DTI ratios are generally more likely to 

repay their loans than those with higher DTI ratios, holding all 

other factors equal

• DTI ratios are at the time of origination and may not be 

indicative of the borrowers' current credit worthiness

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 93
The tables below contain details on characteristics of the loans in our single-family credit guarantee portfolio.

Table 35 - Credit Quality Characteristics of Our Single-Family Credit Guarantee Portfolio 

December 31, 2020

(Dollars in billions) UPB

Original 

Credit

Score (1)

Current 

Credit

Score (1)(2)

Original

LTV Ratio

Current

LTV

Ratio

Current

LTV Ratio

>100% Alt-A %

Core single-family loan portfolio year of origination: 

2020 $971 760 758 71 % 68 % — % — %

2019 276 747 754 77 67 — — 

2018 117 739 739 77 62 — — 

2017 143 743 748 76 56 — — 

2016 180 750 758 73 49 — — 

2015 and prior 406 753 764 71 39 — — 

Total core single-family loan portfolio 2,093 753 757 73 59 — — 

Legacy and relief refinance single-family loan portfolio 233 708 725 82 46 1 8 

Total $2,326 749 754 74 58 — 1 

December 31, 2019

(Dollars in billions) UPB

Original 

Credit

Score (1)

Current 

Credit

Score (1)(2)

Original

LTV Ratio

Current

LTV

Ratio

Current

LTV Ratio

>100% Alt-A %

Core single-family loan portfolio year of origination:

2019 $383 750 746 77 % 76 % — % — %

2018 220 744 745 78 71 — — 

2017 237 746 748 76 64 — — 

2016 269 751 756 74 57 — — 

2015 and prior 592 754 762 72 45 — — 

Total core single-family loan portfolio 1,701 750 752 75 60 — — 

Legacy and relief refinance single-family loan portfolio 293 712 692 83 52 2 7 

Total $1,994 745 749 76 59 — 1 

 (1) Original credit score is based on three credit bureaus (Equifax, Experian, and TransUnion). Current credit score is based on Experian only.

 (2) Credit scores for certain recently acquired loans may not have been updated by the credit bureau since the loan acquisition and therefore the original credit scores 

also represented the current credit scores.

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 94
Table 36 - Characteristics of the Loans in Our Single-Family Credit Guarantee Portfolio 

Year Ended December 31,

(% of portfolio based on UPB) 2020 2019 2018

Original LTV ratio range

60% and below 22 % 18 % 19 %

Above 60% to 80% 51 52 52 

Above 80% to 100% 25 28 26 

Above 100% 2 2 3 

Portfolio weighted average original LTV ratio 74 76 76 

Current LTV ratio range

60% and below 51 51 51 

Above 60% to 80% 37 35 36 

Above 80% to 100% 12 14 12 

Above 100% — — 1 

Portfolio weighted average current LTV ratio 58 59 58 

Original credit score (1)

740 and above 64 61 60 

700 to 739 20 21 22 

660 to 699 11 12 12 

620 to 659 4 4 4 

Less than 620 1 2 2 

Portfolio weighted average original credit score 749 745 743 

Current credit score (1)(2)

740 and above 70 66 66 

700 to 739 15 16 16 

660 to 699 8 9 9 

620 to 659 4 4 4 

Less than 620 3 5 5 

Portfolio weighted average current credit score 754 749 748 

DTI ratio

Above 45% 14 15 15 

Portfolio weighted average DTI ratio 35 35 35 

Loan purpose

Purchase 38 46 45 

Cash-out refinance 19 20 20 

Other refinance 43 34 35 

 (1) Original credit score is based on three credit bureaus (Equifax, Experian, and TransUnion). Current credit score is based on Experian only.

 (2) Credit scores for certain recently acquired loans may not have been updated by the credit bureau since the loan acquisition and therefore the original credit scores 

also represented the current credit scores.

In addition, at December 31, 2020, December 31, 2019, and December 31, 2018:

n	 More than 90% of our loans were secured by detached homes or townhomes; 

n	 Approximately 90% of our loans were secured by properties used as the borrower's primary residence at origination; and

n	 More than 90% of our loans were fixed-rate. 

At December 31, 2020, approximately 5% of our loans had second-lien financing by the originator or other third party at 

origination, and these loans comprised approximately 10% of our seriously delinquent loan population. It is likely that additional 

borrowers have post-origination second-lien financing.

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 95
Higher Risk Loan Attributes and Attribute Combinations

Certain of the loan attributes shown above may indicate a higher risk of default. For example, loans with original LTV ratios over 

90% and/or credit scores below 620 at origination may be higher risk. The tables below provide information on loans in our 

portfolio with these characteristics. The tables include a presentation of each higher risk category in isolation. A single loan may 

fall within more than one category. 

Table 37 - Single-Family Credit Guarantee Portfolio Higher Risk Loan Data

December 31, 2020

(Dollars in billions) UPB CLTV % Modified(1) SDQ Rate

Original LTV ratio greater than 90%, HARP loans $53.3 57 % 1.9 % 4.26 %

Original LTV ratio greater than 90%, all other loans 295.4 77 2.4 4.25 

Loans with credit scores below 620 at origination 30.9 54 10.2 11.00 

December 31, 2019

(Dollars in billions) UPB CLTV % Modified(1) SDQ Rate

Original LTV ratio greater than 90%, HARP loans $71.5 65 % 2.3 % 0.89 %

Original LTV ratio greater than 90%, all other loans 286.0 79 3.0 0.98 

Loans with credit scores below 620 at origination 33.1 60 13.8 4.52 

(1) Primarily includes loans modified through Freddie Mac Flex Modification® program. In prior periods, the percentage included loans in the payment deferrals 

program. Prior periods have been revised to conform to the current period presentation.

In addition, certain combinations of loan attributes can indicate an even higher degree of credit risk, such as loans with both 

higher LTV ratios and lower credit scores. Under the January 2021 Letter Agreement, we are required to limit our acquisition of 

single-family loans with such attributes, including loans with the following characteristics at origination: current LTV ratio over 

90%, DTI above 45%, and FICO or equivalent credit score below 680. For additional information on the January 2021 Letter 

Agreement, see MD&A - Conservatorship and Related Matters.

The following tables show the combination of credit score and CLTV ratio attributes of loans in our single-family credit 

guarantee portfolio.

Table 38 - Single-Family Credit Guarantee Portfolio Attribute Combinations 

December 31, 2020

CLTV ≤ 60 CLTV > 60 to 80 CLTV > 80 to 100 CLTV > 100 All Loans

(Original Credit score)

% 

Portfolio

SDQ 

Rate(1)

% 

Portfolio

SDQ 

Rate(1)

% 

Portfolio

SDQ 

Rate(1)

% 

Portfolio

SDQ 

Rate(1)

% 

Portfolio

SDQ 

Rate

% 

Modified(2)

Core single-family loan 

portfolio:

< 620 0.2 % 9.34 % 0.1 % 13.76 % — % NM — % NM 0.3 % 11.00 % 2.8 %

620 to 659 1.2 5.88 0.9 7.54 0.2 6.80 % — NM 2.3 6.51 1.6 

≥ 660 41.4 1.64 34.6 2.21 11.4 1.90 — NM 87.4 1.86 0.3 

Not available — NM — NM — NM — NM — NM NM

Total 42.8 % 1.82 35.6 % 2.43 11.6 % 2.06 — % NM 90.0 % 2.04 0.3 

Legacy and relief 

refinance single-family 

loan portfolio:

< 620 0.7 % 9.26 0.2 % 15.39 0.1 % 20.77 — % NM 1.0 % 11.01 11.8 

620 to 659 0.8 7.14 0.3 13.40 0.1 19.05 — NM 1.2 8.58 11.8 

≥ 660 6.2 3.35 1.2 8.08 0.2 12.59 0.1 15.35 % 7.7 4.03 4.7 

Not available 0.1 8.53 — NM — NM — NM 0.1 9.43 20.1 

Total 7.8 % 4.35 1.7 % 10.07 0.4 % 15.25 0.1 % 19.38 10.0 % 5.30 6.4 

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 96
December 31, 2019

CLTV ≤ 60 CLTV > 60 to 80 CLTV > 80 to 100 CLTV > 100 All Loans

(Original Credit score)

% of 

Portfolio

SDQ 

Rate

% of 

Portfolio

SDQ 

Rate(1)

% of 

Portfolio

SDQ 

Rate(1)

% of 

Portfolio

SDQ 

Rate(1)

% of 

Portfolio

SDQ 

Rate

% 

Modified(2)

Core single-family loan 

portfolio:

< 620 0.2 % 2.40 % 0.1 % 3.11 % — % NM — % NM 0.3 % 2.87 % 3.1 %

620 to 659 1.1 1.15 1.0 1.42 0.4 1.59 % — NM 2.5 1.30 1.8 

≥ 660 39.6 0.16 30.2 0.26 12.6 0.26 — NM 82.4 0.20 0.3 

Not available 0.1 1.32 — NM — NM — NM 0.1 1.96 3.5 

Total 41.0 % 0.20 31.3 % 0.32 13.0 % 0.33 — % NM 85.3 % 0.26 0.4 

Legacy and relief 

refinance single-family 

loan portfolio:

< 620 0.7 % 3.56 0.4 % 5.95 0.2 % 9.33 0.1 % 15.03 % 1.4 % 4.83 15.8 

620 to 659 1.0 2.53 0.5 4.67 0.2 7.91 0.1 12.84 1.8 3.52 14.8 

≥ 660 7.9 0.86 2.6 2.09 0.7 3.91 0.2 6.32 11.4 1.23 5.5 

Not available 0.1 3.93 — NM — NM — NM 0.1 4.68 19.1 

Total 9.7 % 1.28 3.5 % 2.95 1.1 % 5.39 0.4 % 8.96 14.7 % 1.84 7.7 

(1) NM - not meaningful due to the percentage of the portfolio rounding to zero.

(2) Primarily includes loans modified through the Freddie Mac Flex Modification program. In prior periods, the percentage included loans in the payment deferrals 

program. Prior periods have been revised to conform to the current period presentation.

Higher Risk Loan Product Types

There are several types of loan products that contain terms which result in scheduled changes in the borrower's monthly 

payments after specified initial periods, such as interest-only and option ARM loans. These products may result in higher credit 

risk because the payment changes may increase the borrower's monthly payment, resulting in a higher risk of default. The 

majority of these loans are in our legacy and relief refinance single-family loan portfolio. Only a small percentage of our core 

single-family loan portfolio consists of ARM loans. We fully discontinued purchases of option ARM loans in 2007, Alt-A loans in 

2009, and interest-only loans in 2010.

The balance of our interest-only and option ARM loans has continued to decline in recent years as many of these borrowers 

have repaid or refinanced their loans, received loan modifications, or completed foreclosure alternatives or foreclosure sales. 

While we have not categorized option ARM loans as either subprime or Alt-A for presentation in this Form 10-K and elsewhere 

in our reporting, they could exhibit similar credit performance to collateral sometimes referred to as subprime or Alt-A by market 

participants. For reporting purposes, loans within the option ARM category continue to be presented in that category following 

a modification of the loan, even though the modified loan no longer provides for optional payment provisions.

The tables below provide credit characteristic information on higher risk loan product types.

Table 39 - Higher Risk Single-Family Loan Credit Characteristics

December 31, 2020

(Dollars in billions) UPB CLTV % Modified SDQ Rate

Amortizing ARM and option ARM (1) $28.3 44 % 3.0 % 3.99 %

Interest-only 9.8 59 — 9.88 

Step-rate modified 5.5 52 100 16.02 

December 31, 2019

(Dollars in billions) UPB CLTV % Modified SDQ Rate

Amortizing ARM and option ARM (1) $40.1 49 % 2.2 % 0.84 %

Interest-only 10.9 64 — 2.72 

Step-rate modified 8.7 59 100 6.27 

(1) Includes $2.1 billion and $2.5 billion in UPB of option ARM loans as of December 31, 2020 and December 31, 2019, respectively. As of December 31, 2020 and 

December 31, 2019, the option ARM loans had: (a) current LTV ratios of 46% and 51%, (b) loan modification percentages of 25.0% and 20.4%, and (c) serious 

delinquency rates of 9.46% and 2.94%, respectively. 

Management's Discussion and Analysis Risk Management | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 97
The table below shows the timing of scheduled payment changes for certain types of loans within our single-family credit 

guarantee portfolio. The amounts in the table below are aggregated by product type and categorized by the year in which the 

loan will experience a payment change. The timing of the actual payment change may differ from that presented in the table 

due to a number of factors, including if the borrower refinances the loan. Loans where the year of first payment change is 2020

or prior have already had one or more payment changes as of December 31, 2020; loans where the year of first payment 

change is 2021 or later have not had a payment change as of December 31, 2020 and will not experience a payment change 

until a future period. Step-rate modified loans are shown in each year that the borrower will experience a scheduled interestrate increase; therefore, a single loan may be included in multiple periods. However, the total of step-rate loans in the table 

reflects the ending UPB of such loans as of December 31, 2020.

Table 40 - Timing of Scheduled Payment Changes for Certain Single-Family Loan Types

December 31, 2020

(In millions)

2020  

and Prior 2021 2022 2023 2024 2025 Thereafter Total(1)

ARM/amortizing $8,446 $2,176 $3,020 $2,472 $2,712 $1,625 $5,548 $25,999 

ARM/interest-only 3,572 — — — — — — 3,572 

Fixed/interest-only 393 9 23 1 — — — 426 

Step-rate modified 5,420 542 121 31 14 — — 5,538 

Total $17,831 $2,727 $3,164 $2,504 $2,726 $1,625 $5,548 $35,535 

(1) Excludes loans underlying certain other securitization products since the payment change information is not available to us for these loans.

We believe that the performance of these types of loans has been affected by prior adverse macroeconomic conditions, such 

as unemployment rates and house price declines in many geographic areas, in addition to the increase in the borrower's 

monthly payment. However, we continue to monitor the performance of these loans as many have experienced a payment 

change or are scheduled to have a payment change in 2021 or thereafter, which is likely to subject the borrowers to higher 

monthly payments. Since a substantial portion of these loans were originated in 2005 through 2008 and are located in 

geographic areas that were most affected by declines in house prices that began in 2006, we believe that the serious 

delinquency rate for these types of loans will remain high in 2021.

Other Higher Risk Loans - 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-K, 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 December 31, 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, part 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-K 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 December 31, 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 | Single-Family Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 98
The table below contains information on Alt-A loans in our single-family credit guarantee portfolio.

Table 41 - Alt-A Loans in Our Single-Family Credit Guarantee Portfolio

December 31, 2020 December 31, 2019

(Dollars in billions) UPB CLTV % Modified SDQ Rate UPB CLTV % Modified(1) SDQ Rate

Alt-A $18.4 55 % 14.7 % 10.66 % $21.1 61 % 17.8 % 3.75 %

(1) Primarily includes loans modified through the Freddie Mac Flex Modification program. In prior periods, the percentage included loans in the payment deferrals 

program. Prior periods have been revised to conform to the current period presentation.

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

We purchase mortgage loans from across the U.S. However, local economic conditions can affect the borrower's ability to 

repay and the value of the underlying collateral, leading to concentrations of credit risk in certain geographic areas. In addition, 

certain states and municipalities may pass laws that limit our ability to foreclose or evict and make it more difficult and costly to 

manage our risk.

The table below summarizes the concentration by geographic area of our single-family credit guarantee portfolio as of 

December 31, 2020 and December 31, 2019, respectively. While our portfolio is diversified geographically, the economic effects 

of the COVID-19 pandemic may be disproportionately concentrated in certain geographic regions or areas. See Note 18 for 

more information about credit risk associated with loans that we hold or guarantee. 

Table 42 - Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio

December 31, 2020 December 31, 2019 2020(1) 2019

(Dollars in billions)

Portfolio 

UPB

% of

Portfolio

Serious

Delinquency

Rate

Portfolio 

UPB

% of

Portfolio

Serious

Delinquency

Rate

Credit 

Losses 

Amount

% of 

Credit 

Losses

Credit 

Losses 

Amount

% of 

Credit 

Losses

Region:(2)

West $720 31 % 2.41 % $595 30 % 0.36 % $— 5 % $0.2 12 %

Northeast 549 24 3.16 475 24 0.87 0.2 40 0.5 37 

North Central 357 15 2.06 319 16 0.61 0.1 27 0.3 19 

Southeast 375 16 2.95 326 16 0.73 0.1 18 0.4 24 

Southwest 325 14 2.59 279 14 0.54 — 10 0.1 8 

Total $2,326 100 % 2.64 $1,994 100 % 0.63 $0.4 100 % $1.5 100 %

State:

California $424 18 % 2.64 $347 17 % 0.34 $— 4 % $0.1 8 %

Texas 145 6 3.11 123 6 0.54 — 3 — 3 

Florida 135 6 3.70 116 6 0.77 — 9 0.2 14 

New York 103 4 4.56 94 5 1.21 0.1 13 0.1 7 

Illinois 96 4 2.96 88 4 0.85 0.1 14 0.2 10 

All other 1,423 62 2.34 1,226 62 0.61 0.2 57 0.9 58 

Total $2,326 100 % 2.64 $1,994 100 % 0.63 $0.4 100 % $1.5 100 %

(1) Excludes credit losses related to charge-offs of accrued interest receivables.

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

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

Engaging in Loss Mitigation 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 and to assist borrowers in maintaining home 

ownership or to facilitate foreclosure alternatives. 

We offer a variety of borrower assistance programs, including refinance programs for certain eligible loans and loan workout 

activities for struggling borrowers. Our loan workouts include both home retention options and foreclosure alternatives. We also 

engage in transfers of servicing for and sales of certain seriously delinquent and reperforming loans.

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Relief Refinance Program 

Our relief refinance initiative allows eligible homeowners whose loans we already own or guarantee to refinance with more 

favorable terms (such as reduction in payment, reduction in interest rate or movement to a more stable loan product) and 

without the need to obtain additional mortgage insurance. 

The relief refinance initiative includes the Enhanced Relief Refinance program, which provides liquidity for borrowers who are 

current on their mortgages but are unable to refinance because their LTV ratios exceed our standard refinance limits.

The following table includes information about the performance of our relief refinance mortgage portfolio. 

Table 43 - Single-Family Relief Refinance Loans

December 31,

2020 2019

(Dollars in millions) UPB Loan Count SDQ Rate UPB Loan Count SDQ Rate

Above 125% Original LTV $11,972 83,439 4.41 % $15,906 103,401 0.93 %

Above 100% to 125% Original LTV 23,064 159,542 4.33 31,072 200,227 0.96 

Above 80% to 100% Original LTV 38,994 293,582 3.88 52,020 362,647 0.76 

80% and below Original LTV 55,291 575,708 2.70 70,752 681,232 0.43 

Total $129,321 1,112,271 3.38 $169,750 1,347,507 0.64 

Loan Workout Activities

Home Retention Options 

When refinancing is not practicable, we require our servicers first to evaluate the loan for a forbearance plan, repayment plan, 

payment deferral, or loan modification, because our level of recovery on a loan that reperforms is often higher than for a loan 

that proceeds to a foreclosure alternative or foreclosure. Although workout options are often less costly than a foreclosure, we 

incur costs as a result of our loss mitigation activities. Specifically, payment deferrals result in non-interest-bearing balances we 

have to finance for the life of the mortgage, resulting in economic costs as a result of this program. Additionally, we incur 

economic losses on loan modifications that involve an interest rate reduction or principal forbearance, and we incur expenses 

related to incentive fees we pay to servicers for certain successfully completed loan workouts. 

We offer the following types of home retention options:

n	 Forbearance plans - Arrangements that require reduced or no payments during a defined period, generally less than one 

year, to allow borrowers to return to compliance with the original mortgage terms or to implement another loan workout. 

For agreements completed in 2020, the average time period for reduced or suspended payments was between four and 

five months. 

n	 Repayment plans - Contractual plans that allow borrowers a specific 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. Servicers are paid incentive fees for repayment plans that are paid in full and 

loans brought to current status. For plans completed in 2020, the average time period to repay past due amounts was 

approximately four months. 

n	 Payment deferrals - Arrangements that allow 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. The number of months of payments deferred varies based upon the type of hardship the 

borrower is experiencing.

n	 Loan modifications - Contractual plans that may involve changing the terms of the loan, adding outstanding 

indebtedness, such as delinquent interest, to the UPB of the loan, or a combination of both, including principal 

forbearance. Our modification programs generally require completion of a trial period of at least three months prior to 

receiving the modification. If a borrower fails to complete the trial period, the loan is considered for our other workout 

activities. These modification programs offer eligible borrowers extension of the loan's term up to 480 months and a fixed 

interest rate. Servicers are paid incentive fees for each completed modification, and there are limits on the number of times 

a loan may be modified. Our primary loan modification program is the Freddie Mac Flex Modification® program, which 

targets a 20% payment reduction through interest rate reduction, term extension, and principal forbearance. Under the 

Freddie Mac Flex Modification program, borrowers must complete a 90-day trial period plan prior to permanent 

modification.

The level of our loan workout activity increased significantly in 2020 compared to 2019 due to the COVID-19 pandemic. 

Pursuant to FHFA guidance and the CARES Act, we have been offering mortgage relief options for borrowers affected by the 

COVID-19 pandemic, including forbearance of up to 12 months to single-family borrowers experiencing a related financial 

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hardship, either directly or indirectly, and a payment deferral option for eligible homeowners 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. Under FHFA's guidance, we are extending COVID-19 forbearances up to 15 months for eligible borrowers, and 

this forbearance term may be further extended by FHFA in the future.

Foreclosure Alternatives

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 before we pursue a foreclosure sale. We pay servicers incentive fees for each 

completed foreclosure alternative. In some cases, we provide cash relocation assistance to the borrower, while allowing the 

borrower to exit the home in an orderly manner. We offer the following types of foreclosure alternatives:

n	 Short sale - The borrower sells the property for less than the total amount owed under the terms of the loan. A short sale 

is preferable to a borrower because we provide limited relief to the borrower from repaying the entire amount owed on the 

loan. A short sale allows us to avoid the costs we would otherwise incur to complete the foreclosure and subsequently sell 

the property. 

n	 Deed in lieu of foreclosure - The borrower voluntarily agrees to transfer title of the property to us without going through 

formal foreclosure proceedings.

The volume of foreclosures declined significantly in 2020, primarily due to the foreclosure moratorium that will remain in effect 

until at least March 31, 2021. The volume of our short sale transactions declined in 2020 compared to 2019, continuing the 

trend in recent periods. Similarly, the volume of short sales in the overall market also declined in recent periods as house prices 

have continued to increase. 

The following graphs provide details about our single-family loan workout activities and foreclosure sales. In prior periods, the 

loan modifications included loans in the payment deferrals program. Prior periods have been revised to conform to the current 

period presentation. 

 Home Retention Actions(1)

(In thousands)

16 7

228

11 9 9 9 4

169

51

25 19

87 45

425

Forbearance plans

Repayment plans

Payment deferrals

Loan modifications

Total

2018 2019 2020

(1) Forbearance plans in this graph only include those where borrowers fully 

reinstated the loan to current status during or at the end of forbearance period.

Foreclosure Alternatives and Foreclosure Sales

(In thousands)

3

2 1

16

13

4

Foreclosure alternatives

Foreclosure sales

2018 2019 2020

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The tables below contain credit characteristic data on our single-family modified loans. 

Table 44 - Credit Characteristics of Single-Family Modified Loans

December 31, 2020

(Dollars in billions) UPB % of Portfolio CLTV Ratio SDQ Rate

Loan Modifications(1) $27.6 1 % 58 % 22.39 %

December 31, 2019

(Dollars in billions) UPB % of Portfolio CLTV Ratio SDQ Rate

Loan Modifications(1) $38.3 2 % 65 % 10.67 %

(1) Primarily includes loans modified through the Freddie Mac Flex Modification program. In prior periods, the percentage included loans in the payment deferrals 

program. Prior periods have been revised to conform to the current period presentation.

The table below contains information about the payment performance of modified loans in our single-family credit guarantee 

portfolio, based on the number of loans that were current, sold or paid off one year and, if applicable, two years after 

modification.

Table 45 - Payment Performance of Single-Family Modified Loans(1)

Quarter of Loan Modification Completion

4Q 2019 3Q 2019 2Q 2019 1Q 2019 4Q 2018 3Q 2018 2Q 2018 1Q 2018

Current, sold or paid off

one year after modification: 58 % 59 % 58 % 67 % 67 % 78 % 78 % 65 %

Current, sold or paid off

two years after modification: N/A N/A N/A N/A 71 72 74 73 

(1) Primarily includes loans modified through the Freddie Mac Flex Modification program. In prior periods, the percentage included loans in the payment deferrals 

program. Prior periods have been revised to conform to the current period presentation.

Servicing Transfers and Sales and Securitization of Certain Seasoned Loans

From time to time, we facilitate the transfer of servicing for certain groups of loans that are delinquent or are deemed at risk of 

default to servicers that we believe have capabilities and resources necessary to improve the loss mitigation associated with 

the loans. See Sellers and Servicers in Counterparty Credit Risk for additional information on these activities.

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. The FHFA requirements guiding these transactions include bidder qualifications, loan 

modifications, and performance reporting. Certain seriously delinquent loans may reperform, either on their own or through 

modification. In addition to sales of seriously delinquent loans, we sell certain reperforming loans, which typically involves 

securitization of the loans using our senior subordinate securitization structures or Level 1 Securitization Products, depending 

on market conditions, business strategy, credit risk considerations, and operational efficiency. Of the $10.7 billion in UPB of 

single-family loans classified as held-for-sale at December 31, 2020, $4.8 billion related to loans that were seriously delinquent. 

While our ability to sell these seasoned loans was negatively affected by the COVID-19 pandemic during the first half of 2020, 

the market for certain loans improved during the second half of 2020. We sold $8.3 billion in UPB of reperforming loans through 

securitization during 2020, compared to $12.9 billion during 2019. We completed sales of $0.7 billion in UPB of seriously 

delinquent loans during 2020, compared to sales of $0.2 billion in UPB of such loans during 2019.

Managing Foreclosure and REO Activities

In a foreclosure, we may acquire the underlying property and later sell it, using the proceeds of the sale to reduce our losses. 

We typically acquire properties as a result of borrower defaults and subsequent foreclosures or deeds in lieu of foreclosure on 

loans that we own or guarantee. We evaluate the condition of, and market for, newly acquired REO properties, determine if 

repairs will be performed, determine occupancy status and whether there are legal or other issues to be addressed, and 

determine our sale or disposition strategy. When we sell REO properties, we typically provide an initial period where we 

consider offers by owner occupants and entities engaged in community stabilization activities before offers by investors. We 

also consider disposition strategies, such as auctions, as appropriate to improve collateral recoveries and/or when traditional 

sales strategies (i.e., marketing via Multiple Listing Service and a real estate agent) may not be as effective.

We are subject to various state and local laws that affect the foreclosure process. The pace and volume of REO acquisitions are 

affected not only by the delinquent loan population but also by when we can initiate the foreclosure process and the length of 

the process, which extends the time it takes for loans to be foreclosed upon and the underlying properties to transition to REO.

Pursuant to FHFA guidance and the CARES Act, we are required to suspend foreclosures, other than for vacant or abandoned 

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properties, and evictions due to the COVID-19 pandemic until March 31, 2021, and this suspension period may be extended by 

FHFA, if necessary. 

Delays in Foreclosure Process and Average Length of Foreclosure Process 

Our serious delinquency rates and credit losses may be adversely affected by delays in the foreclosure process, particularly in 

states where a judicial foreclosure process is required. Foreclosures generally take longer to complete in such states, resulting 

in concentrations of delinquent loans in those states, as shown in the table below. At December 31, 2020, loans in states with a 

judicial foreclosure process comprised 37% of our single-family credit guarantee portfolio. 

The table below presents the length of time our loans have been seriously delinquent, by jurisdiction type.

Table 46 - Seriously Delinquent Single-Family Loans by Jurisdiction

Year Ended December 31,

2020 2019 2018

Aging, by locality Loan Count % Loan Count % Loan Count %

Judicial states

<= 1 year 132,103 42 % 26,063 37 % 27,811 37 %

> 1 year and <= 2 years 9,627 3 7,416 11 8,268 11 

> 2 years 6,072 2 5,336 8 6,871 9 

Non-judicial states

<= 1 year 158,563 50 24,997 36 25,675 34 

> 1 year and <= 2 years 6,659 2 3,928 5 4,133 6 

> 2 years 2,283 1 1,981 3 2,382 3 

Combined

<= 1 year 290,666 92 51,060 73 53,486 71 

> 1 year and <= 2 years 16,286 5 11,344 16 12,401 17 

> 2 years 8,355 3 7,317 11 9,253 12 

Total 315,307 100 % 69,721 100 % 75,140 100 %

The longer a loan remains delinquent, the greater the associated costs we incur. Loans that remain delinquent for more than 

one year are more challenging to resolve as many of these borrowers may not be in contact with the servicer, may not be 

eligible for loan modifications, or may determine that it is not economically beneficial for them to enter into a loan modification 

due to the amount of costs incurred on their behalf while the loan was delinquent. We expect the portion of our credit losses 

related to loans in states with judicial foreclosure processes will remain high as loans awaiting court proceedings in those states 

transition to REO or other loss events. The number of our single-family loans delinquent for more than one year increased 32%

during 2020. 

Our servicing guidelines do not allow initiation of the foreclosure process on a primary residence until a loan is at least 121 days 

delinquent, regardless of where the property is located. However, we evaluate the timeliness of foreclosure completion by our 

servicers based on the state where the property is located. Our servicing guide provides for instances of allowable foreclosure 

delays in excess of the expected timelines for specific situations involving delinquent loans, such as when the borrower files for 

bankruptcy or appeals a denial of a loan modification. 

The table below presents average completion times for foreclosures of our single-family loans.

Table 47 - Average Length of Foreclosure Process for Single-Family Loans

Year Ended December 31,

(Average days) 2020 2019 2018

Judicial states

Florida 1,037 1,143 1,173 

New Jersey 983 1,089 1,343 

New York 1,800 1,765 1,790 

All other judicial states 669 692 710 

Judicial states, in aggregate 802 872 926 

Non-judicial states, in aggregate 537 520 530 

Total 690 730 766 

As indicated in the table above, the average length of the foreclosure process for our single-family loans has been trending 

downward in recent years for some jurisdictions but it has remained elevated in others, particularly in states with a judicial 

foreclosure process, such as Florida and New York. 

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Our REO inventory continued to decline in 2020, and the rate of decline significantly increased primarily due to FHFA guidance 

and the CARES Act, which required us to suspend certain foreclosures and evictions due to the COVID-19 pandemic. In 

addition to significantly slower new REO inflows, increased buyer demand resulting from low interest rates and a housing 

shortage kept REO dispositions at a steady pace. Therefore, our REO inventory declined significantly in 2020 as compared to 

2019. Even in the absence of these unique circumstances, the decline of our REO inventory continued to be driven by the 

improved credit quality of our portfolio, effective loss mitigation and REO disposition strategies, and a large proportion of 

property sales to third parties at foreclosure. Third-party sales at foreclosure auction allow us to avoid the REO property 

expenses that we would have otherwise incurred if we held the property in our REO inventory until disposition. 

We expect the rate of decline in our REO inventory to slow as long as the aforementioned foreclosure and eviction suspensions 

remain in effect and inventory available for sale begins to plateau.

The table below shows our single-family REO activity.

Table 48 - Single-Family REO Activity

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

Number of 

Properties Amount

Number of 

Properties Amount

Number of 

Properties Amount

Beginning balance - REO 4,989 $565 7,100 $780 8,299 $900 

Additions 2,361 214 7,910 786 10,442 1,012 

Dispositions (5,584) (580) (10,021) (1,001) (11,641) (1,132) 

Ending balance - REO 1,766 199 4,989 565 7,100 780 

Beginning balance, valuation allowance (10) (11) (14) 

Change in valuation allowance 9 1 3 

Ending balance, valuation allowance (1) (10) (11) 

Ending balance - REO, net $198 $555 $769 

Severity Ratios

Severity ratios are the percentages of our realized losses when loans are resolved by the completion of REO dispositions and 

third-party foreclosure sales or short sales. Severity ratios are calculated as the amount of our recognized losses divided by the 

aggregate UPB of the related loans. The amount of recognized losses is equal to the amount by which the UPB of the loans 

exceeds the amount of sales proceeds from disposition of the properties, net of capitalized repair and selling expenses, if 

applicable. Loss severity excludes the cost of funding the loans after they are repurchased from the associated security pool.

The table below presents single-family severity ratios.

Table 49 - Single-Family Severity Ratios

Year Ended December 31,

2020 2019 2018

REO dispositions and third-party foreclosure sales 20.4 % 21.7 % 24.2 %

Short sales 22.6 24.5 26.6 

Our severity ratios declined during 2020 compared to 2019, primarily driven by house price appreciation as well as effective 

cost control and disposition strategies. 

REO Property Status

A significant portion of our REO portfolio is unable to be marketed at any given time because the properties are occupied, 

involved in legal matters (e.g., bankruptcy, litigation, etc.), or subject to a redemption period, which is a post-foreclosure period 

during which borrowers may reclaim a foreclosed property. Redemption periods increase the average holding period of our 

inventory by as much as 10% or more. As of December 31, 2020, approximately 48% of our REO properties were unable to be 

marketed because the properties were occupied, located in states with a redemption period or subject to other legal matters. 

Another 18% of the properties were being prepared for sale (i.e., valued, marketing strategies determined, and repaired). The 

percentage of REO properties available for sale has declined significantly as new foreclosure inflows have significantly slowed 

due to the foreclosure and eviction suspensions that have been in place since March 2020 and sales have remained steady. 

Thus, as of December 31, 2020, approximately 19% of our REO properties were listed and available for sale, and 15% of our 

inventory was pending the settlement of sales. Though it varied significantly by state, the average holding period of our singlefamily REO properties, excluding any redemption period, was 250 days and 234 days for our REO dispositions during 2020 and 

2019, respectively.

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Multifamily Mortgage Credit Risk

We manage our exposure to multifamily mortgage credit risk, which is a type of commercial real estate credit risk, using the 

following principal strategies:

n	 Maintaining policies and procedures for new business activity, including prudent underwriting standards;

n	 Managing our portfolio, including loss mitigation activities; and

n	 Transferring credit risk to third-party investors.

Maintaining Policies and Procedures for New Business Activity, Including Prudent 

Underwriting Standards

We use a prior approval underwriting approach for multifamily loans, in contrast to the delegated underwriting approach used in 

our Single-family Guarantee segment and Fannie Mae's DUS program. Under this approach, we maintain credit discipline by 

completing our own underwriting and credit review for each new loan prior to issuing a loan purchase commitment, including 

reviewing third-party appraisals and performing cash flow analysis. 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. A higher 

DSCR indicates lower credit risk. Our standards require maximum LTV ratios and minimum DSCRs that vary based on the 

characteristics and features of the loan. Loans are generally underwritten with a maximum original LTV ratio of 80% and a 

DSCR of greater than 1.25, assuming monthly payments that reflect amortization of principal. However, certain loans may have 

a higher LTV ratio and/or a lower DSCR, typically where this will serve our mission and contribute to achieving our affordable 

housing goals. 

Consideration is also given to other qualitative factors, such as borrower experience, the type of loan, location of the property, 

and the strength of the local market. Sellers provide certain representations and warranties regarding the loans they sell to us, 

and are required to repurchase loans for which there has been a breach of representation or warranty. These representations 

and warranties are made as of the date the loan is sold to Freddie Mac and unless Freddie Mac agrees to an exception to the 

representation and warranty at purchase, the repurchase remedy may be implemented upon proof of the breach. However, 

repurchases of multifamily loans have been rare due to our underwriting approach, which is completed prior to issuance of a 

loan purchase commitment.

Multifamily loans may be amortizing or interest-only (for the full term or a portion thereof) and have a fixed or variable rate of 

interest. Multifamily loans generally amortize over a thirty-year period, but have shorter contractual maturity terms than singlefamily loans, typically ranging from five to ten years. As a result, most multifamily loans require a balloon payment at maturity, 

making a borrower's ability to refinance or pay off the loan at maturity a key attribute. Some borrowers may be unable to 

refinance during periods of rising interest rates or adverse market conditions, increasing the likelihood of borrower default.

Occasionally, we securitize loans or bonds contributed by third parties that are underwritten by us after origination. Prior to 

securitization, we are not exposed to the credit risk of these underlying loans or bonds. However, as we may guarantee some 

or all of the securities issued by the trusts used in these transactions, we effectively assume credit risk equal to the guaranteed 

UPB. Similar to our primary securitizations, these other securitizations generally provide for structural credit enhancements 

(e.g., subordination or other loss sharing arrangements) that allocate first loss exposure to third parties.

Notwithstanding the effects of the COVID-19 pandemic on the multifamily market and broader economic environment, the 

credit quality of our multifamily loan purchases and guarantees remained consistent with prior periods.

The graphs below show the original credit profile of the multifamily loans we purchased or guaranteed.

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FREDDIE MAC | 2020 Form 10-K 105
 Weighted Average Original LTV Ratio 

67% 68% 69%

2018 2019 2020

 Weighted Average Original DSCR

1.33 1.33 1.40

2018 2019 2020

The table below presents the percentage of our multifamily new business activity that had certain characteristics that may be 

considered higher risk.

Table 50 - Percentage of Multifamily New Business Activity With Higher Risk Characteristics 

Year Ended December 31,

2020 2019 2018

Original LTV ratio greater than 80%(1) 1 % 2 % 1 %

Original DSCR less than or equal to 1.10(1) 1 1 1 

(1) Shown as a percentage of multifamily new business activity.

Managing Our Portfolio, Including Loss Mitigation Activities

To help mitigate our potential losses, we generally require sellers to act as the primary servicer for loans they have sold to us, 

including property monitoring tasks beyond those typically performed by single-family servicers. We typically transfer the role of 

master servicer in our K Certificate transactions to third parties, while retaining that role in our SB Certificate transactions. 

Servicers for unsecuritized loans over $1 million must generally provide us with an assessment of the mortgaged property at 

least annually based on the servicer's analysis of the property as well as the borrower's financial statements. In situations 

where a borrower or property is in distress, the frequency of communications with the borrower may be increased. We rate 

servicing performance on a regular basis, and we may conduct on-site reviews to confirm compliance with our standards.

Substantially all of our guarantees have first loss credit protection provided by subordination. As a result, our primary credit risk 

exposure stems from unsecuritized loans and consolidated loans underlying our PC securitizations. By their nature, loans 

awaiting securitization that we hold for sale remain on our balance sheet for a shorter period than loans we hold for investment 

and are generally covered by general seller representations and warranties. For unsecuritized loans, we may offer a workout 

option to give the borrower an opportunity to bring the loan current and retain ownership of the property, such as providing a 

short-term extension of up to 12 months. These arrangements are entered into with the expectation that we will recover our 

initial investment or minimize our losses. We do not enter into these arrangements in situations where we believe we would 

experience a loss in the future that is greater than or equal to the loss we would experience if we foreclosed on the property at 

the time of the agreement. Our multifamily loan modification and other workout activities have been minimal in the last three 

years.

For consolidated loans underlying our PC securitizations, we generally retain full credit risk exposure through our guarantee, 

although we may subsequently transfer a portion of that credit risk using other credit risk transfer products.

Various federal, state, and local laws may affect our business processes and financial results. Future changes in these laws 

may adversely impact our borrowers or make it more difficult and costly for us to manage our credit risk. Rent restrictions and 

eviction moratoriums may adversely impact the cash flows generated by the underlying properties, while foreclosure 

moratoriums may limit our ability to pursue certain loss mitigation actions (e.g., foreclosure) upon a borrower default. 

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FREDDIE MAC | 2020 Form 10-K 106
Loans in COVID-19 Related Forbearance Plans

Pursuant to FHFA guidance and the CARES Act, Freddie Mac and Fannie Mae 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 that servicers may use to 

assist borrowers with a forbearance plan who continue to be affected by the COVID-19 pandemic. These supplemental relief 

options added to the original tenant protections by providing flexibility to tenants to repay past due rent over time and not in a 

lump sum, and extended the prohibition on charging tenants fees and penalties for past due rent through both the forbearance 

and repayment periods. The three supplemental relief options include: (i) the option to delay the start of the repayment period 

following the initial 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. In December 2020, we extended the deadline for 

borrowers whose loans have not been more than 30 days past due to request a new COVID-19 forbearance agreement or 

supplemental relief to March 31, 2021. The forbearance program was initially set to terminate at the end of 2020. 

In coordination with FHFA, we have implemented numerous protections for tenants as part of our forbearance program. In May 

2020, pursuant to FHFA guidance, we introduced an online multifamily property lookup tool to help renters determine if they are 

temporarily protected from eviction due to nonpayment of rent during the COVID-19 national health emergency. In August, we 

modified our forbearance program to introduce requirements for borrowers with a forbearance plan to provide notification to 

tenants of certain protections available to those tenants. For additional information on our responses to the COVID-19 

pandemic, see Introduction - COVID-19 Pandemic Response Efforts. 

We report multifamily delinquency rates based on the UPB of loans in our multifamily mortgage portfolio that are two monthly 

payments or more past due based on the loan's current contractual terms, or in the process of foreclosure, as reported by our 

servicers. Loans in forbearance are not considered delinquent as long as the borrower is in compliance with the forbearance 

agreement, including the agreed upon repayment plan.

The following table summarizes the current credit quality of loans under a forbearance program, which includes both the 

forbearance period and the repayment period.

Table 51 - Current Credit Quality of Multifamily Loans Under a Forbearance Program

December 31, 2020

(Dollars in millions) UPB(1) LTV > 80%(2) DSCR < 1.25(2)

Forbearance period $367 $53 $309 

Repayment period 6,678 393 3,699 

Credit-enhanced 7,045 446 4,008 

Forbearance period 3 3 3 

Repayment period 767 78 197 

Non-credit-enhanced 770 81 200 

Total $7,815 $527 $4,208 

Weighted average LTV(2) 64% 

Weighted average DSCR(2) 1.40 

(1) Represents the entire loan UPB underlying our multifamily mortgage portfolio.

(2) Based on the most recent borrower financial information submissions received from the servicers.

Of the loans in forbearance, 82.1% based on UPB are in securitizations with first loss credit protection provided by 

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 14.5% as of 

December 31, 2020. 17.5% of loans in forbearance are scheduled to mature prior to 2024. In addition, as of December 31, 

2020, we have approved supplemental forbearance relief requests totaling $1.2 billion in UPB.

Allowance for Credit Losses

Management's Discussion and Analysis Risk Management | Multifamily Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 107
Upon the adoption of CECL on January 1, 2020, we recognized an increase to the opening balance of the allowance for credit 

losses on multifamily loans classified as held-for-investment and certain other off-balance sheet credit exposures. Under CECL, 

we recognize an allowance for credit losses before a loss event has been incurred, which results in earlier recognition of credit 

losses compared to the previous incurred loss impairment methodology. 

We estimate the allowance for credit losses using a loss-rate method to estimate the net amount of cash flows we expect to 

collect. The loss rate method is based on a probability of default and loss given default framework that estimates credit losses 

by considering a loan’s 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 generally 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 expected recoveries from attached credit enhancements. Management adjustments 

may be necessary to our model output to take into consideration current economic events and other external factors. 

While our estimate of credit losses increased during 2020 due to the effects of the COVID-19 pandemic, a significant portion of 

the credit risk exposure of our multifamily mortgage portfolio is reduced by first loss credit protection provided by subordination 

from our securitizations.

The following table summarizes the allowance for credit losses on our multifamily mortgage portfolio including our off-balance 

sheet credit exposures.

Table 52 - Multifamily Allowance for Credit Losses Activity

 (Dollars in millions) 2020 2019 2018 2017 2016

Beginning balance(1) $68 $15 $44 $35 $59

(Benefit) provision for credit losses 132 3 (24) 13 (22) 

Charge-offs — — (8) (4) (2) 

Recoveries collected — — 3 — — 

Ending balance $200 $18 $15 $44 $35 

Components of ending balance of 

allowance for credit losses:

Mortgage loans held-for-investment $104 $12 $9 $35 $20

Off-balance sheet credit exposures 96 6 6 9 15

 Total $200 $18 $15 $44 $35 

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

Our multifamily credit losses remain low due to the property performance of the loans underlying our multifamily mortgage 

portfolio. See Note 7 for additional information regarding multifamily credit losses and allowance for credit losses.

Transferring Credit Risk to Third-Party Investors 

Types of Credit Enhancements

In connection with the acquisition, guarantee, or securitization of a loan or group of loans, we may obtain various forms of 

credit protection that reduce our credit risk exposure to the underlying mortgage borrower and reduce our required 

conservatorship capital. For example, at the time of loan acquisition or guarantee, we may obtain recourse and/or 

indemnification protection from our lenders or sellers. After acquisition, we primarily reduce our credit risk exposure to the 

underlying borrower by using one or more of our securitization products. 

The following table summarizes our principal types of credit enhancements. See Our Business Segments - Multifamily - 

Business Overview - Products and Activities for additional information on our securitization and credit risk transfer products. 

Management's Discussion and Analysis Risk Management | Multifamily Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 108
Category Products CRT Coverage Type Accounting 

Treatment

Subordination

Primary securitization products Yes Back-end Guarantee

Other securitization products:

• Securitizations of purchased collateral Yes Back-end Guarantee/Debt

• Securitizations of collateral contributed by third parties No Front-end Guarantee

Lender risk-sharing Securitizations in which we issue fully guaranteed securities and 

simultaneously enter into a separate loss sharing agreement. 

Yes Front-end Freestanding

Insurance/reinsurance MCIP Yes Back-end Freestanding

SCR SCR debt notes Yes Back-end Debt

Credit Enhancement Coverage for Multifamily Mortgage Portfolio

The table below presents the UPB, delinquency rates, and forbearance rates for both credit-enhanced and non-credit 

enhanced loans underlying our multifamily mortgage portfolio.

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

December 31,

2020 2019

(Dollars in millions) UPB

Delinquency 

Rate

Forbearance 

Rate(1) UPB

Delinquency 

Rate

Forbearance 

Rate(1)

Credit-enhanced:

Subordination(2) $286,092 0.18 % 1.99 % $251,008 0.09 % — %

Other(3) 17,353 0.17 2.73 16,069 0.06 — 

Total credit-enhanced 303,445 0.18 2.03 267,077 0.09 — 

Non-credit-enhanced 42,098 0.02 1.83 33,091 — — 

Total $345,543 0.16 2.01 $300,168 0.08 — 

(1) Forbearance rate includes loans in our forbearance program including loans in their repayment period. Forbearance loans that fail to comply with the terms of the 

forbearance agreement are reported in our delinquency rate.

(2) Represents the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection provided by the subordinated 

securities.

(3) Includes lender risk-sharing agreements related to certain securitizations, insurance/reinsurance contracts, SCR debt notes and other credit enhancements.

Our securitizations remain our principal risk transfer mechanism. Through securitizations, we have transferred a substantial 

amount of the expected and stressed credit risk on the multifamily guarantee portfolio, thereby reducing our overall credit risk 

exposure and required conservatorship capital. Since 2009, we have transferred a portion of the credit risk related to $460.0 

billion in UPB of multifamily loans through our securitizations, primarily K Certificates and SB Certificates, and other credit risk 

transfer products.

The table below provides information on the level of subordination outstanding on our securitizations with subordination.

Table 54 - Level of Subordination Outstanding

December 31,

2020 2019

(Dollars in millions) UPB

Delinquency 

Rate

Forbearance 

Rate UPB

Delinquency 

Rate

Forbearance 

Rate

Less than 10% $49,227 0.04 % 0.14 % $2,094 0.04 % — %

10% or greater 236,865 0.21 2.38 248,914 0.09 — 

Total $286,092 0.18 1.99 $251,008 0.09 — 

Weighted average subordination level 13% 14% 

The increase in the "Less than 10%" level of subordination outstanding was primarily driven by a reduction in subordination 

levels for new issuances of our typical K Certificate securitizations. The lower subordination levels are still expected to absorb a 

substantial amount of expected and stressed credit losses. We have not experienced significant credit losses associated with 

our guarantees on our primary securitizations.

In addition to the credit enhancements listed above, we have various other credit enhancements related to our multifamily 

unsecuritized loans, securitizations, and other mortgage-related guarantees, in the form of collateral posting requirements, pool 

insurance, bond insurance, loss sharing agreements, and other similar arrangements, that along with the proceeds received 

Management's Discussion and Analysis Risk Management | Multifamily Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 109
from the sale of the underlying mortgage collateral, are designed to enable us 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 paid under our guarantee 

contracts and related recoveries pursuant to these agreements have not been significant. See Note 8 for more information on 

the total current and protected UPB of our multifamily mortgage portfolio that is credit-enhanced and the associated maximum 

coverage.

The table below contains details on the loans underlying our multifamily mortgage portfolio that are not credit-enhanced.

Table 55 - Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement

December 31,

2020 2019

(Dollars in millions) UPB

Delinquency 

Rate

Forbearance 

Rate UPB

Delinquency 

Rate

Forbearance 

Rate

Unsecuritized loans:

Held-for-sale $21,794 0.04 % 0.85 % $15,930 0.01 % — %

Held-for-investment 8,655 — 1.40 9,408 — — 

Securitization-related products 6,711 — 6.84 3,656 — — 

Other mortgage-related guarantees 4,938 — 0.07 4,097 — — 

Total $42,098 0.02 1.83 $33,091 — — 

REO Activity

Our REO activity has remained low in the past several years as a result of the strong property performance of our multifamily 

mortgage portfolio. As of December 31, 2020, we had no REO properties.

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.), guarantees of Fannie Mae securities 

underlying commingled resecuritization transactions, financial intermediaries, clearinghouses, and other counterparties. We 

manage our exposure to counterparty credit risk using the following principal strategies:

n	 Maintaining eligibility standards;

n	 Evaluating creditworthiness and monitoring performance; and

n	 Working with underperforming counterparties and limiting our losses from their nonperformance of obligations, when 

possible.

In the sections below, we discuss our management of counterparty credit risk for each type of counterparty to which we have 

significant exposure.

Sellers and Servicers

Overview 

In our single-family guarantee business, we do not originate loans or have our own loan servicing operation. Instead, our sellers 

and servicers perform the primary loan origination and loan servicing functions on our behalf. We establish underwriting and 

servicing standards for our sellers and servicers to follow and have contractual arrangements with them under which they 

represent and warrant that the loans they sell to us meet our standards and that they will service loans in accordance with our 

standards. If we discover that the representations or warranties related to a loan were breached (i.e., that contractual standards 

were not followed), we can exercise certain contractual remedies to mitigate our actual or potential credit losses. If our sellers 

or servicers lack appropriate controls, experience a failure in their controls, or experience an operating disruption, including as a 

result of financial pressure, legal or regulatory actions or ratings downgrades, we could experience a decline in mortgage 

servicing quality and/or be less likely to recover losses through lender repurchases, recourse agreements, or other credit 

enhancements, where applicable. 

In our multifamily business, we are exposed to the risk that multifamily sellers and servicers could come under financial 

pressure, which could potentially cause degradation in the quality of the servicing they provide us, including their monitoring of 

each property's financial performance and physical condition. This could also, in certain cases, reduce the likelihood that we 

could recover losses through lender repurchases, recourse agreements, or other credit enhancements, where applicable. This 

risk primarily relates to multifamily loans that we hold on our consolidated balance sheets where we retain all of the related 

credit risk.

Management's Discussion and Analysis Risk Management | Multifamily Mortgage Credit Risk

FREDDIE MAC | 2020 Form 10-K 110
In addition, our single-family guarantee business is exposed to settlement risk on the non-performance of sellers and servicers 

as a result of our forward settlement loan purchase programs. For additional details, see the Financial Intermediaries, 

Clearinghouses, and Other Counterparties - Other Counterparties - Forward Settlement Counterparties section below.

Maintaining Eligibility Standards

Our eligibility standards for sellers and servicers require the following: a demonstrated operating history in residential mortgage 

origination and servicing, or an eligible agent acceptable to us; adequate insurance coverage; a quality control program that 

meets our standards; and sufficient net worth, capital, liquidity, and funding sources. We and Fannie Mae are coordinating with 

FHFA to establish new eligibility rules. 

Evaluating Counterparty Creditworthiness and Monitoring Performance

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 also 

monitor and rate our sellers and servicers' compliance with our standards and periodically review their operational processes. 

We may disqualify or suspend a seller or servicer with or without cause at any time. Once a seller or servicer is disqualified or 

suspended, we no longer purchase loans originated by that counterparty and generally no longer allow that counterparty to 

service loans for us, while seeking to transfer servicing of existing portfolios.

As discussed in more detail in MD&A - Our Business Segments, we acquire a significant portion of both our single-family 

and multifamily loan purchase volume from several large lenders, and a large percentage of our loans are also serviced by 

several large servicers. 

We have significant exposure to non-depository and smaller depository financial institutions in our single-family business. 

These institutions may not have the same financial strength or operational capacity, or be subject to the same level of 

regulatory oversight, as large depository institutions.

Although our business with our single-family loan sellers is concentrated, a number of our largest single-family loan seller 

counterparties reduced or eliminated their purchases of loans from mortgage brokers and correspondent lenders in recent 

years. As a result, we acquire a greater portion of our single-family business volume directly from non-depository and smaller 

depository financial institutions. 

For our single-family servicing, we utilize both depository institutions and non-depository institutions. Some of these nondepository institutions service a large share of our loans. 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 us. Servicers 

must continue to advance funds during the forbearance period as discussed below, which may increase liquidity pressures on 

certain of our counterparties.

For our mortgage-backed securities, we guarantee the payment of principal and interest, and when the underlying borrowers 

do not pay their mortgages, our Guide requires single-family servicers to advance the missed mortgage interest payments from 

their own funds for up to 120 days. After this time, we will make the missed mortgage principal and interest payments to 

security holders until the mortgages are no longer held by the securitization trust. At the instruction of FHFA, our practice 

generally has been to purchase loans from the securitization trusts when the loans have been delinquent for 120 days or more. 

After the outbreak of COVID-19, FHFA further instructed us to maintain loans in COVID-19 payment forbearance plans in the 

securitization trusts for at least the duration of the forbearance. Once the forbearance period expires, the loan will remain in the 

related securities pool while:

n	 An offer to reinstate the loan or enter into either a payment deferral, repayment plan or a trial period plan pursuant

to a loan modification remains outstanding;

n The loan is in an active repayment plan or trial period plan; or

n A payment deferral solution is in effect.

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 111
Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we extended the trigger to 

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid 

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure.

In addition to principal and interest payments, borrowers are also responsible for other expenses such as property taxes and 

homeowner's insurance premiums. When borrowers do not pay these expenses, our Guide generally requires single-family 

servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties. 

These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the 

missed payments and incurred expenses will be collected from the borrowers. Should the borrower not reinstate, we will 

reimburse the servicers for the advanced amounts at completion of foreclosures or loan workout activities.

In response to the potential liquidity concerns for certain of our counterparties, we monitor and review 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.

The table below summarizes the concentration of non-depository servicers of our single-family credit guarantee portfolio.

Table 56 - Single-Family Credit Guarantee Portfolio Non-Depository Servicers

December 31, 2020 December 31, 2019

% of Portfolio(1)

% of Serious Delinquent 

Single-Family Loans % of Portfolio(1)

% of Serious Delinquent 

Single-Family Loans

Top five non-depository servicers 18 % 17 % 18 % 13 %

Other non-depository servicers 30 28 20 55 

Total 48 % 45 % 38 % 68 %

(1) Excludes loans where we do not exercise control over the associated servicing.

Working with Underperforming Counterparties and Limiting Our Losses from Their Nonperformance of 

Obligations, When Possible

We actively manage the current quality of loan originations of our largest single-family sellers by performing loan quality control 

sampling reviews and communicating loan defect rates and the causes of those defects to such sellers on a monthly basis. If 

necessary, we work with these sellers to develop an appropriate plan of corrective action.

We use a variety of tools and techniques to engage our single-family sellers and servicers and limit our losses, including the 

following:

n	 Repurchases and other remedies - For certain violations of our single-family selling or servicing policies, we can 

require the counterparty to repurchase loans or provide alternative remedies, such as reimbursement of realized losses or 

indemnification, and/or suspend or terminate the selling and servicing relationship. We typically first issue a notice of 

defect and allow a period of time to correct the problem prior to issuing a repurchase request. The UPB of loans subject to 

repurchase requests issued to our single-family sellers and servicers was $0.5 billion and $0.3 billion at December 31, 2020

and December 31, 2019, respectively. See Note 18 for additional information about loans subject to repurchase requests.

n	 Incentives and compensatory fees - We pay various incentives to single-family servicers for completing workouts of 

problem loans. We also assess compensatory fees if single-family servicers do not achieve certain benchmarks with 

respect to servicing delinquent loans. 

n	 Servicing transfers - From time to time, we may facilitate the transfer of servicing as a result of poor servicer 

performance, or for certain groups of single-family loans that are delinquent or are deemed at risk of default, to servicers 

that we believe have the capabilities and resources necessary to improve the loss mitigation associated with the loans. We 

may also facilitate the transfer of servicing on loans at the request of the servicer.

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. In the majority of our primary securitization transactions, we utilize one of three large financial depository 

institutions as master servicers, except for SB Certificate transactions 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 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 

Overview 

We have exposure to credit enhancement providers through credit enhancements we obtain on single-family loans. If any of our 

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 112
credit enhancement providers fail to fulfill their obligations, we may not receive reimbursement for credit losses to which we are 

contractually entitled pursuant to our credit enhancements.

With respect to primary mortgage insurers, we currently cannot differentiate pricing based on counterparty strength or revoke a 

primary mortgage insurer's status as an eligible insurer without FHFA approval. Further, we generally do not select the 

insurance provider on a specific loan, because the selection is made by the lender at the time the loan is originated. 

Accordingly, we are limited in our ability to manage our concentration risk with respect to primary mortgage insurers. 

As part of our insurance/reinsurance CRT transactions, we regularly obtain insurance coverage from global 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), our insurers and reinsurers generally 

participate in multiple types of insurance businesses, which helps to diversify their risk exposure.

Maintaining Eligibility Standards

We maintain eligibility standards for mortgage insurers and other insurers and reinsurers. Our eligibility requirements include 

financial requirements determined using a risk-based framework and were designed to promote the ability of mortgage insurers 

to fulfill their intended role of providing consistent liquidity throughout the mortgage cycle. Our mortgage insurers are required 

to submit audited financial information and certify compliance with the Private Mortgage Insurer Eligibility Requirements on an 

annual basis. 

Evaluating Counterparty Creditworthiness and Monitoring Our Exposure

We monitor our exposure to individual insurers by performing periodic analysis of the financial capacity of each insurer under 

various adverse economic conditions. Monitoring performance and potentially identifying underperformance allows us to plan 

for loss mitigation. The COVID-19 pandemic may increase financial strains on our credit enhancement providers, and as a 

result, we have 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 December 31, 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 57 - Single-Family Mortgage Insurers

December 31, 2020

(In millions) Credit Rating(1)

Credit Rating

Outlook(1) UPB Coverage 

Arch Mortgage Insurance Company A- Negative $95,324 $23,786 

Radian Guaranty Inc. (Radian) BBB+ Negative 92,906 22,499 

Mortgage Guaranty Insurance Corporation (MGIC) BBB+ Negative 84,164 20,853 

Essent Guaranty, Inc. BBB+ Negative 77,535 19,068 

Genworth Mortgage Insurance Corporation BB+ Watch Negative 72,375 18,089 

National Mortgage Insurance (NMI) BBB Negative 45,757 11,506 

PMI Mortgage Insurance Co. (PMI) Not Rated N/A 1,957 491 

Republic Mortgage Insurance Company (RMIC) Not Rated N/A 1,464 362 

Triad Guaranty Insurance Corporation (Triad) Not Rated N/A 904 226 

Others N/A N/A 495 93 

Total $472,881 $116,973 

(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 December 31, 2020. Represents the lower of S&P and Moody's credit ratings and 

outlooks stated in terms of the S&P equivalent. 

Although the financial condition of our mortgage insurers improved in recent years, there is still a risk that some of these 

counterparties may fail to fully meet their obligations under a stress economic scenario since they are monoline entities 

primarily exposed to mortgage credit risk.

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 113
On October 23, 2016, Genworth Financial, Inc. ("Genworth") 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. On January 4, 2021, Genworth announced 

that Genworth and Oceanwide did not extend the end date, December 31, 2020, under the merger agreement due to 

uncertainty around the completion and timing of the remaining steps required to close the transaction and that Genworth is 

focusing on executing its contingency plan. Freddie Mac is collaborating with FHFA and Fannie Mae to review the contingency 

plan and provide necessary approvals. 

PMI and Triad are both under the control of their state regulators and no longer issue new insurance. Both of these insurers pay 

a substantial portion of their claims as deferred payment obligations. RMIC is under regulatory supervision and is no longer 

issuing new insurance; however, it continues to pay its claims in cash.

If, as we currently expect, PMI and Triad do not pay the full amount of their deferred payment obligations in cash, we would 

lose a portion of the coverage from these insurers shown in the table above. As of December 31, 2020, we had cumulative 

unpaid deferred payment obligations of $0.4 billion from these insurers. We have reserved substantially all of these unpaid 

amounts as collectability is uncertain. 

Except for those insurers under regulatory supervision, which no longer issue new coverage, we continue to acquire new loans 

with mortgage insurance from the mortgage insurers shown in the table above, some of which have credit ratings below 

investment grade. For more information about counterparty credit risk associated with mortgage insurers, see Note 18.

The table below displays the concentration of our single-family credit risk exposure to our ACIS counterparties.

Table 58 - Single-Family ACIS Counterparties

December 31, 2020 December 31, 2019

(Dollars in billions) Maximum Coverage(1) % of Total Maximum Coverage(1) % of Total

Top five ACIS counterparties $5.3 48 % $5.0 51 %

All other ACIS counterparties 5.8 52 4.9 49 

Total $11.1 100 % $9.9 100 %

(1) Represents maximum coverage exclusive of the collateral posted to secure the counterparties' obligations.

As of December 31, 2020 and December 31, 2019, our ACIS counterparties posted collateral of $2.4 billion and $2.0 billion, 

respectively. There is a possibility that if our ACIS counterparties become insolvent, a third-party involved in the restructure 

process could cancel a contract or contracts and prevent us from accessing collateral for future claims despite current 

collateral provisions. We have taken steps to reduce this risk. 

For more information on our single-family CRT transactions, see MD&A - Our Business Segments - Single-Family 

Guarantee - Business Overview - Products and Activities - CRT Transactions, and MD&A - Risk Management - 

Single-Family Mortgage Credit Risk - Transferring Credit Risk to Third-Party Investors.

Fannie Mae

We have counterparty credit risk exposure to Fannie Mae through our ability to commingle TBA-eligible Fannie Mae collateral in 

certain of our resecuritization products. When we resecuritize Fannie Mae securities in our commingled resecuritization 

products, our guarantee covers timely payments of principal and interest on such securities. If Fannie Mae were to fail to make 

a payment on a Fannie Mae security that we resecuritized, we would be responsible for making the payment to the securities 

holders. Our pricing does not currently reflect any incremental credit, liquidity, or operational risk associated with our guarantee 

of resecuritized Fannie Mae securities. We will be dependent on FHFA, Fannie Mae, and Treasury (pursuant to Fannie Mae's 

and our respective Purchase Agreements with Treasury) to avoid a liquidity event or default.

For additional information on commingled resecuritizations and the associated risks, see MD&A - Our Business Segments 

- Single-Family Guarantee and Risk Factors.

Financial Intermediaries, Clearinghouses, and Other Counterparties

Derivative Counterparties

We use cleared derivatives, exchange-traded derivatives, OTC derivatives, and forward sales and purchase commitments to 

mitigate risk, and are exposed to the non-performance of each of the related financial intermediaries and clearinghouses. The 

Capital Markets segment manages this risk for the company. Our financial intermediaries and clearinghouse credit exposure 

relates principally to interest-rate derivative contracts. We maintain internal standards for approving new derivative 

counterparties, clearinghouses, and clearing members. 

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 114
n	 Cleared and exchange-traded derivatives - Cleared and exchange-traded derivatives expose us to counterparty credit 

risk of central clearinghouses and our clearing members. Our exposure to the clearinghouses we use to clear interest-rate 

derivatives has increased. The use of cleared and exchange-traded derivatives mitigates our counterparty credit risk 

exposure to individual counterparties because a central counterparty is substituted for individual counterparties, and 

changes in the value of open contracts are settled daily via payments made through the clearinghouse. We are required to 

post initial and variation margin to the clearinghouses. The amount of initial margin we must post for cleared and 

exchange-traded derivatives may be based, in part, on S&P or Moody's credit rating of our long-term senior unsecured 

debt securities. Our obligation to post margin may increase as a result of the lowering or withdrawal of our credit rating by 

S&P or Moody's or by changes in the potential future exposure generated by the derivative transactions.

n	 OTC derivatives - OTC derivatives expose us to counterparty credit risk of individual counterparties, because these 

transactions are executed and settled directly between us and each counterparty, exposing us to potential losses if a 

counterparty fails to meet its contractual obligations. When a counterparty in OTC derivatives that is subject to a master 

netting agreement has a net obligation to us with a market value above an agreed upon threshold, if any, the counterparty 

is obligated to deliver collateral in the form of cash, securities, or a combination of both to satisfy its obligation to us under 

the master netting agreement. Our OTC derivatives also require us to post collateral to counterparties in accordance with 

agreed upon thresholds, if any, when we are in a derivative liability position. The collateral posting thresholds we assign to 

our OTC counterparties, as well as the ones they assign to us, are generally based on S&P or Moody's credit rating. The 

lowering or withdrawal of our or our counterparty's credit rating by S&P or Moody's may increase our or our counterparty's 

obligation to post collateral, depending on the amount of the counterparty's exposure to Freddie Mac with respect to the 

derivative transactions. Only OTC derivatives transactions executed prior to March 1, 2017 are subject to collateral posting 

thresholds. Based upon regulations that took effect March 1, 2017, OTC derivative transactions executed or materially 

amended after that date require posting of variation margin without the application of any thresholds. Our OTC derivative 

transactions will become subject to new initial margin requirements on September 1, 2021.

Evaluating Counterparty Creditworthiness and Monitoring Performance

Over time, our exposure to derivative counterparties varies depending on changes in fair values, which are affected by changes 

in interest rates and other factors. Due to risk limits with certain counterparties, we may be forced to execute transactions with 

lower returns with other counterparties when managing our interest-rate risk. We manage our exposure through master netting 

and collateral agreements and stress-testing to evaluate potential exposure under possible adverse market scenarios. 

Collateral is typically transferred within one business day based on the values of the related derivatives. We regularly review the 

market values of the securities pledged to us, primarily agency and U.S. Treasury securities, to manage our exposure to loss. 

We conduct additional reviews of our exposure when market conditions dictate or certain events affecting an individual 

counterparty occur. When non-cash collateral is posted to us, we require collateral in excess of our exposure to satisfy the net 

obligation to us in accordance with the counterparty agreement. 

In the event a counterparty defaults, our economic loss may be higher than the uncollateralized exposure of our derivatives if 

we are not able to replace the defaulted derivatives in a timely and cost-effective fashion (e.g., due to a significant interest rate 

movement during the period or other factors). We could also incur economic losses if non-cash collateral posted to us by the 

defaulting counterparty cannot be liquidated at prices that are sufficient to recover the amount of such exposure. 

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 115
The table below compares the gross fair value of our derivative asset positions after counterparty netting with our net exposure 

to these positions after considering cash and non-cash collateral held.

Table 59 - Derivative Counterparty Credit Exposure

December 31, 2020

(Dollars in millions)

Number of 

Counterparties

Fair Value -

Gain positions

 Fair Value - 

 Gain positions, 

 net of collateral 

OTC interest-rate swap and swaption counterparties (by rating):

A+, A, or A- 12 $2,634 $29

Cleared and exchange-traded derivatives 2 17 77 

Total 14 $2,651 $106 

Approximately 99% of our exposure at fair value for OTC interest-rate swap and option-based derivatives, excluding amounts 

related to our posting of cash collateral in excess of our derivative liability determined at the counterparty level, was 

collateralized at December 31, 2020. The remaining exposure was primarily due to market movements between the 

measurement of a derivative at fair value and our receipt of the related collateral, as well as exposure amounts below the then 

applicable counterparty collateral posting threshold, if any. The concentration of our derivative exposure among our primary 

OTC derivative counterparties remains high and could further increase. 

Other Counterparties

We enter into other types of transactions in the ordinary course of business that expose us to counterparty credit risk, including 

those below. An individual counterparty may be included in more than one transaction type below.

n	 Other investments - We are exposed to the non-performance of institutions relating to other investments (including nonmortgage-related securities and cash and cash equivalents) transactions, including those entered into on behalf of our 

securitization trusts. Our policies require that the institution be evaluated using our internal rating model prior to our 

entering into such transactions. We monitor the financial strength of these institutions and may use collateral maintenance 

requirements to manage our exposure to individual counterparties.

 The major financial institutions with which we transact regarding our other investments (including non-mortgage-related 

securities and cash and cash equivalents) include 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. For more information on our other investments portfolio, see MD&A - Liquidity and 

Capital Resources. 

We utilize the GSD/FICC as a clearinghouse to transact many of our trades involving securities purchased under 

agreements to resell, securities sold under agreements to repurchase, and other non-mortgage related securities. As a 

clearing member of GSD/FICC, we are required to post initial and variation margin payments and are exposed to the 

counterparty credit risk of GSD/FICC (including its clearing members). In the event a clearing member fails and causes 

losses to the GSD/FICC clearing system, we could be subject to the loss of the margin that we have posted to the GSD/

FICC. Moreover, our exposure could exceed that amount, as members are generally required to cover losses caused by 

defaulting members on a pro rata basis.

n	 Forward settlement counterparties - We are exposed to the non-performance (settlement risk) of counterparties relating 

to the forward settlement of loans and securities (including agency debt, agency RMBS, and cash window loans). 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 these counterparties and may use collateral maintenance 

requirements or offsetting transactions to manage our exposure to individual counterparties.

We also execute forward purchase and sale commitments of mortgage-related securities, including dollar roll transactions, 

that are treated as derivatives for accounting purposes and 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. In the event a clearing member fails 

and causes losses to the MBSD/FICC clearing system, we could be subject to the loss of the margin that we have posted 

to the MBSD/FICC. Moreover, our exposure could exceed the amount of margin we have posted to the MBSD/FICC, as 

clearing members are generally required to cover losses caused by defaulting members on a pro rata basis. As of 

December 31, 2020, the gross fair value of such forward purchase and sale commitments that were in derivative asset 

positions was $205 million.

n	 Secured lending activities - As part of our other investments portfolio, we enter into secured lending arrangements to 

provide financing for certain Freddie Mac securities and other assets related to our guarantee businesses. These 

transactions differ from those we use for liquidity purposes, as the borrowers may not be major financial institutions, 

potentially exposing us to the institutional credit risk of these institutions. We also provide advances to lenders for 

mortgage loans that they will subsequently either sell through our cash window or securitize into securities that they will 

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 116
deliver to us. In addition, we may invest in other secured lending activities. During 1Q 2020, certain of our counterparties 

that had engaged in securities purchased under agreements to resell on Freddie Mac securities defaulted under the terms 

of the governing legal agreements by failing to meet margin requirements. The transactions were terminated in accordance 

with the terms of the agreements and we recognized the collateral at fair value, which was in excess of the counterparties' 

outstanding obligations. We did not recognize a financial loss as a result of these defaults. For additional information, see 

Note 18. 

Other Market Participants

We have exposure to other market participant counterparties for transactions that we enter into in the ordinary course of 

business, including the following:

n	 Document custodians - We use third-party document custodians to provide loan document certification and custody 

services for the loans that we purchase and securitize. In many cases, our sellers and servicers or their affiliates also serve 

as document custodians for us. Our ownership rights to the loans that we own or that back our securitization products 

could be challenged if a seller or servicer intentionally or negligently pledges, sells, or fails to obtain a release of prior liens 

on the loans that we purchased, which could result in financial losses to us. When a seller or servicer, or one of its affiliates, 

acts as a document custodian for us, the risk that our ownership interest in the loans may be adversely affected is 

increased, particularly in the event the seller or servicer were to become insolvent. To manage these risks, we establish 

qualifying standards for our document custodians and maintain legal and contractual arrangements that identify our 

ownership interest in the loans. We also monitor the financial strength of our document custodians on an ongoing basis in 

accordance with our counterparty credit risk management framework, and we require transfer of documents to a different 

third-party document custodian if we have concerns about the solvency or competency of the document custodian.

n	 The MERS® System - The MERS System is an electronic registry that is widely used by sellers and servicers, Freddie Mac, 

and other participants in the mortgage industry to maintain records of beneficial ownership of mortgage loans. A significant 

portion of the loans we own or guarantee are registered in the MERS System. Our business could be adversely affected if 

we were prevented from using the MERS System, or if our use of the MERS System adversely affects our ability to enforce 

our rights with respect to our loans registered in the MERS System.

Management's Discussion and Analysis Risk Management | Counterparty Credit Risk

FREDDIE MAC | 2020 Form 10-K 117
Operational Risk

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. Operational risk events include breakdowns related to 

people, process, and/or technology that could result in financial loss, legal actions, regulatory fines, and reputational harm.

Operational Risk Management and Risk Profile

Our operational risk management methodology includes risk identification, measurement, monitoring, controlling, and reporting. 

When operational risk events are identified, our policies require that the events be documented and analyzed to determine 

whether changes are required in our systems, people, and/or processes to mitigate the risk of future events. 

In order to evaluate and monitor the risks associated with business processes, each business line periodically completes an 

assessment using the RCSA methodology. The methodology is designed to identify and assess the business line's exposure to 

operational risk and determine if action is required to manage the risk to an acceptable level.

In addition to the RCSA process, we employ several tools to identify, measure, and monitor operational risks, including loss 

event data, key risk indicators, root cause analysis, and testing. Our operational risk methodology requires that the primary 

responsibility for managing both the day-to-day risk and longer-term or emerging risks lies with the business lines, with 

independent oversight performed by the second line of defense.

We continue to face heightened operational risk and expect the risk to remain elevated for the near term. This elevated risk 

profile is due to the layering impact of several factors including: legacy systems requiring upgrade for operational resiliency; 

reliance on manual processes and models; volume and complexity of business initiatives, including the UMBS, as well as new 

initiatives we are pursuing as required by the Conservatorship Scorecard; external events such as cybersecurity threats and 

third-party failures; and issues requiring remediation. Other factors contributing to our heightened operational risk are 

discussed in Risk Factors - Operational Risks. We also continue to manage other operational risks, such as compliance risk.

While our operational risk profile remains elevated, we are continuing to strengthen our operational control environment by 

building out our operational risk resources within the first line of defense and ERM.

Operational Resiliency Risk

The inability to manage resiliency risk of our critical processes and supporting technology can negatively impact our ability to 

meet our business objectives. Our operational resiliency risk has increased as a result of the COVID-19 pandemic and is being 

managed through operational changes. We have successfully completed the company’s infrastructure migration to the cloud 

designed to provide near continuous availability for select applications across primary and alternate data centers. However, 

additional deployment of our technology recovery strategy is necessary to further reduce resiliency risks to mission critical 

processes. A resiliency program is in place that is designed to further help us reduce risk over the next 12 months by achieving 

faster recovery of critical business functions and supporting assets, with the development of failover/failback capabilities, and 

demonstrate our ability to sustain our processes operating out of region.

Common Securitization Platform

We continue to make various multi-year investments to build and support the infrastructure for a better housing finance system, 

including ongoing maintenance and development of the CSP. The CSP is owned and operated by CSS, which is jointly owned 

by Freddie Mac and Fannie Mae. While we exercise influence over CSS through our representation on the CSS Board of 

Managers, we do not control its day-to-day operations. Freddie Mac, Fannie Mae, FHFA, and CSS continue to work together to 

monitor the operational effectiveness of the platform.

We rely on CSS and the CSP for the operation of many of our single-family securitization activities. Our business activities 

would be adversely affected and the market for Freddie Mac securities would be disrupted if the CSP were to fail or otherwise 

become unavailable to us or if CSS were unable to perform its obligations to us, including as a result of an operational failure by 

Fannie Mae. In the event of a CSS operational failure, we may be unable to issue certain new single-family mortgage-related 

securities, and investors in mortgage-related securities hosted on the CSS platform may experience payment delays. 

For additional information, see Risk Factors - Operational Risks - A failure in our operational systems or infrastructure, or 

those of third parties, could impair our ability to provide market liquidity, disrupt our business, damage our reputation, 

and cause financial losses.

Management's Discussion and Analysis Risk Management | Operational Risk

FREDDIE MAC | 2020 Form 10-K 118
Cybersecurity Risk

Our operations rely on the secure, accurate and timely receipt, processing, storage, and transmission of confidential and other 

information in our systems and networks and with customers, counterparties, service providers, and financial 

institutions. Information risks for companies like ours have increased significantly in recent years. Like many companies and 

government entities, from time to time we have been, and likely will continue to be, the target of attempted cyberattacks and 

other information security threats. 

We continue to invest in the information risk and security area to strengthen our capabilities to prevent, detect, respond to and 

mitigate risk, and protect our systems, networks, and other technology assets against unauthorized attempts to access 

confidential information or to disrupt or degrade our business operations. We have obtained insurance coverage relating to 

cybersecurity risks. However, this insurance may not be sufficient to provide adequate loss coverage. Although to date we have 

not experienced any cyberattacks resulting in significant impact to the company, there is no assurance that our cybersecurity 

risk management program will prevent cyberattacks from having significant impacts in the future.

Insider threats remain a top risk as the workforce diversifies to include contractors, third-party vendors, remote workers, and 

part-time employees. Our third-party vendors and their supply chain connections remain another top risk as we continue to 

operate from a heightened awareness position focusing on our cybersecurity posture, including those from nation-state cyber 

threats. We have strengthened our capabilities over critical third-party monitoring with continued focus on our capabilities for 

monitoring and surveillance to detect deliberate actions such as malicious exploitation, theft or destruction of data, or the 

compromise of our networks.

For additional information, see Risk Factors - Operational Risks - Potential cybersecurity threats are changing rapidly 

and growing in sophistication. We may not be able to protect our systems or the confidentiality of our information from 

cyberattack and other unauthorized access, disclosure, and disruption.   

Third-Party Risk

Third party risk is the risk of failure of an individual or entity engaged to deliver a product, service, or process to, or on behalf of, 

Freddie Mac. We rely on third parties, and their supply chains, to support critical processes and core functions, and are 

exposed to operational risks as a result of this reliance. These third parties could experience, directly or through their supply 

chain, failures due to process breakdowns, technology outages, cyberattacks, adverse financial conditions, or other 

disruptions. For example, we are exposed to risks associated with our third parties and their dependencies on technology 

providers supporting their operations. We are enhancing our enterprise capabilities to manage third-party operational risks. 

While we continue to mature our program, we may be exposed to associated elevated risks. Our use of third parties increases 

exposure to data breaches through third parties that access and store our data and their supply chains. Efforts are underway to 

improve our controls related to third-party data sharing. We have not experienced significant issues with our third-party service 

providers, sellers, servicers, or other counterparties during the COVID-19 pandemic. However, our third parties may face 

operational and financial challenges during this period, which could impact our operations. We have increased our monitoring 

of third parties we deem to be critical or high risk to our operations.

In addition to credit risk exposure, sellers and servicers expose us to significant operational risk, including legal/compliance, 

information, and reporting risks. We are enhancing our controls to identify and mitigate operational risks that result from our 

relationships with sellers and servicers. See MD&A - Risk Management - Counterparty Credit Risk for additional 

information on our monitoring of our sellers and servicers.

Model Risk

Model risk is the potential for adverse consequences from model errors in prediction or decisions based on incorrect or 

misused model outputs. 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, yields, prepayments and interest rates. In response, we are mitigating 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 incorporate subjectivity and may be based upon judgment. 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 consolidated financial statements.

Model development, changes to existing models, and model risks are managed in each business line according to our threelines-of-defense framework. New model development and changes to existing models undergo a review process. Each 

business periodically reviews model performance, embedded assumptions, limitations, and modeling techniques, and updates 

its models as it deems appropriate. ERM independently validates the work done by the business lines (e.g., conducting 

independent assessments of ongoing monitoring results, model risk ratings, performance monitoring, and reporting against 

thresholds and alerts).

Management's Discussion and Analysis Risk Management | Operational Risk

FREDDIE MAC | 2020 Form 10-K 119
Given the importance and complexity of models in our business, model development may take significant time to complete. 

Delays in our model development process could affect our ability to make sound business and risk management decisions, and 

increase our exposure to risk. We have procedures designed to mitigate this risk.

We face significant risks associated with our use of models, as discussed in 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.

Compliance Risk

Compliance risk is the risk of non-compliance with applicable laws, rules, regulations, conservator requirements, regulatory 

guidance, internal policies, procedures, standards or ethical codes of conduct (collectively, legal and regulatory obligations). 

We have established a compliance risk management program, leveraging the three lines of defense enterprise risk framework, 

to oversee and manage compliance risk, including effective challenge of our business areas’ compliance with such obligations, 

as appropriate. We maintain policies and procedures that provide the governance framework for the identification, 

measurement, monitoring, control, reporting and remediation of compliance issues. FHFA has raised concerns that we need to 

strengthen our compliance risk management practices by documenting and implementing an effective comprehensive 

framework for identifying, assessing, testing, and reporting compliance risk. As a result, we are focused on strengthening the 

overall compliance risk management program, including the risk of non-compliance with our legal and regulatory obligations, 

through planned enhancements of certain compliance program elements, including risk assessments, monitoring, testing, and 

reporting. Our compliance program is subject to regulatory oversight and examination, which may result in the identification of 

additional program deficiencies or weaknesses. To the extent additional concerns are identified, we will continue to coordinate 

with FHFA and our internal auditors to assess the impact and remediate these concerns, as appropriate. For additional 

information relating to our compliance risk management program, see Risk Factors - Legal and Compliance Risks.

Effectiveness of Our Disclosure Controls and Procedures

Management, including our Principal Executive Officer and CFO, conducted an evaluation of the effectiveness of our disclosure 

controls and procedures as of December 31, 2020. As of December 31, 2020, we had one material weakness related to 

conservatorship, which remained unremediated, causing us to conclude that our disclosure controls and procedures were not 

effective at a reasonable level of assurance. For additional information, see Controls and Procedures.

Management's Discussion and Analysis Risk Management | Operational Risk

FREDDIE MAC | 2020 Form 10-K 120
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 and managed by each individual business segment. Market risk can adversely affect future 

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

A significant source of interest-rate risk is from our investments in mortgage-related assets (securities and loans) and the debt 

we issue to fund our assets. Typically, an existing loan or bond investment is worth less to an investor when interest rates 

(yields) rise and worth more when they decline. In addition, for a majority of our single-family mortgage-related assets, the 

borrower has the option to make unscheduled principal payments at any time before maturity without incurring a prepayment 

penalty. Thus, our mortgage-related asset portfolio is also exposed to uncertainty as to when borrowers will exercise their 

option and pay the outstanding principal balance of their loans. We face similar (and in most cases directionally opposite) 

exposure related to unsecured debt. Unsecured debt is typically worth less to an investor when interest rates (yields) rise and 

worth more when they decline. In addition, we issue debt with embedded options, such as an option to call, which provides us 

flexibility concerning the timing of our debt maturities. 

Another source of interest-rate risk comes from our single-family guarantee portfolio, which includes upfront fees (including 

buy-downs), buy-ups, and float. Upfront fees are cash we receive at loan acquisition as compensation for our guarantee, which 

also typically includes a contractual monthly fee paid as a percentage of the UPB of the underlying loan. The present value of 

the upfront fees cash flows is based on the estimated loan prepayment activity, which varies based on estimates of future 

interest rates. From an interest-rate risk standpoint, receiving upfront fees increases risk as the actual prepayment rate of the 

loans we purchase may be different than our original estimates and may vary based on changes in interest rates. As interest 

rates decrease, loans typically prepay more quickly, resulting in accelerated recognition of upfront fees in earnings and a higher 

annualized rate of income. The opposite occurs as interest rates increase, resulting in slower recognition of upfront fees in 

earnings and a lower annualized rate of income. We incorporate upfront fees in our interest-rate risk metrics by assuming 

upfront fees are equivalent to the sale of an interest-only security, allowing for modeling and aggregation of the interest-rate 

exposure of upfront fees with the rest of our interest-rate exposures. 

Conversely, buy-ups are treated as the purchase of an interest-only security as they represent the excess borrower interest 

payments remaining from the securitization process that we effectively purchase from the seller. Interest-rate risk related to 

float arises from the timing differences between the borrowers' principal payments on the loans and the reduction of the 

security balance. This can lead to significant interest expense if the interest amount paid to a security investor is higher than the 

reinvestment amount earned by the securitization trust on payments received from borrowers and paid to us as trust 

management income. In general, as interest rates decrease and prepayments increase, this expense to Freddie Mac increases. 

Conversely, as interest rates increase and prepayments decrease, this expense to Freddie Mac decreases.

We actively manage our economic exposure to interest rate fluctuations. 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 of Market Risk

We employ risk management practices that seek to maintain certain interest-rate characteristics of our assets and liabilities 

within our risk limits through a number of different strategies, including:

n	 Asset selection and structuring, such as acquiring or structuring mortgage-related securities with certain expected 

prepayment and other characteristics;

n	 Issuance of both callable and non-callable unsecured debt; and

n	 Use of interest-rate derivatives, including swaps, swaptions, and futures.

Our use of derivatives is an important part of our strategy to manage interest-rate risk. When deciding to use derivatives to 

mitigate our exposures, we consider a number of factors, including cost, exposure to counterparty credit risks, and our overall 

risk management strategy. See MD&A - Risk Management - Counterparty Credit Risk and Risk Factors for more 

discussion of our market risk exposures, including those related to derivatives, institutional counterparties, and other market 

risks.

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 121
Although we have limited ability to manage spread risk, we employ the following strategies:

n	 Limiting the size of our assets that are exposed to spread risk;

n	 Using short-TBA positions to hedge certain assets, primarily loans acquired through our cash window that are awaiting 

securitization and portions of our agency mortgage-related securities portfolio; and 

n	 Entering into certain spread-related derivatives to offset our spread exposures.

Interest-Rate Risk

Interest-rate risk is the economic risk related to adverse changes in the level or volatility of interest rates. A change in the level 

of interest rates (represented by a parallel shift of the yield curve, all else constant) exposes our assets and liabilities to risk, 

potentially affecting expected future cash flows and their present values. This is reflected in our PVS-L and duration gap 

disclosures. Similarly, changes in the shape or slope of the yield curve (often reflecting changes in the market's expectation of 

future interest rates) expose our assets and liabilities to risk, potentially affecting expected future cash flows and their present 

values. This is reflected in our PVS-YC disclosure. Volatility risk is the risk that changes in the market's expectation of the 

magnitude of future variations in interest rates will adversely affect our economic value. We are exposed to volatility risk in both 

our mortgage-related assets and liabilities, especially in instruments with embedded options.

Measurement of Interest-Rate Risk

We calculate our exposure to changes in interest rates for our interest rate sensitive assets and liabilities using effective 

duration and effective convexity, based on our models. 

n	 Effective duration measures the percentage change in the price of financial instruments from a 100 basis point change in 

interest rates. Financial instruments with positive duration increase in value as interest rates decline. Conversely, financial 

instruments with negative duration increase in value as interest rates rise. 

n	 Effective convexity measures the change in effective duration for a 100 basis point change in interest rates. Effective 

duration is not constant over the entire yield curve and effective convexity measures how effective duration changes over 

large changes in interest rates.

Together, effective duration and effective convexity provide a measure of an instrument's overall price sensitivity to changes in 

interest rates. We utilize the concepts of effective duration and effective convexity in calculating our primary interest-rate risk 

measures: duration gap and PVS.

n	 Duration gap - The net effective duration of our overall portfolio of interest-rate sensitive assets and liabilities is expressed 

in months as our duration gap. Duration gap measures the difference in price sensitivity to interest rate changes between 

our financial assets and liabilities and is expressed in months relative to the value of assets. For example, assets with a sixmonth duration and liabilities with a five-month duration would result in a positive duration gap of one month.

The table below shows various duration gap measurements and the effects that changes in interest rates would generally have 

on portfolio value.

Negative Duration Gap Zero Duration Gap Positive Duration Gap

Asset Duration < Liability Duration Asset Duration = Liability Duration Asset Duration > Liability Duration

Net portfolio will increase in value when interest 

rates rise and decrease in value when interest 

rates fall.

Net portfolio economic value will be unchanged. 

The change in the value of assets from an 

instantaneous move in interest rates, either up or 

down, would be expected to be accompanied by 

an equal and offsetting change in the value of 

liabilities.

Net portfolio will increase in value when interest 

rates fall and decrease in value when interest 

rates rise.

We actively measure and manage our duration gap exposure on a daily basis. In addition to duration gap management, we also 

measure and manage the price sensitivity of our portfolio to a number of different specific interest rate changes along the yield 

curve. The price sensitivity of an instrument to specific changes in interest rates is known as the instrument's key rate duration 

risk. By managing our duration exposure both in aggregate through duration gap and to specific changes in interest rates 

through key rate duration, we expect to limit our exposure to interest rate changes for a wide range of interest rate yield curve 

scenarios. 

n	 PVS - PVS is an estimate of the change in the present value of the cash flows of our financial assets and liabilities from an 

instantaneous shock to interest rates, assuming spreads are held constant and no rebalancing actions are undertaken. 

PVS is measured in two ways, one measuring the estimated sensitivity of our portfolio's value to a 50 basis point parallel 

movement in interest rates (PVS-L) and the other to a nonparallel movement (PVS-YC), resulting from a 25 basis point 

change in slope of the LIBOR yield curve. The 50 basis point shift and 25 basis point change in slope of the LIBOR yield 

curve used for our PVS measures reflect reasonably possible near-term changes that we believe provide a meaningful 

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 122
measure of our interest-rate risk sensitivity.

To calculate PVS, the interest rate shock is applied to the duration (and convexity for PVS-L) of all interest-rate sensitive 

financial instruments. The resulting change in value for the aggregate portfolio is computed for both the up rate and down 

rate shock, and whichever produces the more adverse outcome is the PVS. In cases where both the up rate and down rate 

shocks result in a positive effect, the PVS is zero. PVS results are shown on a pre-tax basis.

Interest-Rate Risk Results

The following tables provide 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 tables below also provide PVS-L estimates assuming an 

immediate 100 basis point shift in the LIBOR yield curve. The interest-rate sensitivity of a mortgage portfolio varies across a 

wide range of interest rates. 

Table 60 - PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve

December 31, 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 ($286) $3,700 $7,670 ($307) $4,840 $10,011 

Guarantees(2) 165 (1,691) (3,250) (224) 351 706 

Total Assets (121) 2,009 4,420 (531) 5,191 10,717 

Liabilities (54) (3,237) (7,503) 20 (1,563) (3,413) 

Derivatives 185 1,180 2,839 513 (3,646) (7,409) 

Total $10 ($48) ($244) $2 ($18) ($105) 

PVS $10 $— $— $2 $— $— 

(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 61 - Duration Gap and PVS Results

Year Ended December 31,

2020 2019

(Duration gap in months, dollars in millions)

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Duration

Gap

PVS-YC

25 bps

PVS-L

50 bps

Average 0.5 $11 $73 0.8 $34 $96 

Minimum (0.7) — — (0.8) — — 

Maximum 1.5 44 275 8.6 345 950 

Standard deviation 0.4 8 68 1.6 72 189 

The disclosure in our Monthly Volume Summary reports, which are available on our website www.freddiemac.com/investors/

financials/monthly-volume-summaries.html, reflects the average of the daily PVS-L, PVS-YC, and duration gap estimates for 

a given reporting period (a month, a quarter, or a year). 

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 62 - PVS-L Results Before Derivatives and After Derivatives

PVS-L (50 bps)

(In millions)

Before

Derivatives

After

Derivatives

Effect of

Derivatives

December 31, 2020 (1) $601 $— ($601) 

December 31, 2019 $3,628 $— ($3,628) 

(1) Before derivatives, our adverse PVS-L rate movement is -50 bps, whereas after derivatives our adverse PVS-L rate movement is +50 bps.

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 123
Limitations of Interest-Rate Risk Measures

While we believe that PVS and duration gap are useful risk management tools, they should be understood as estimates rather 

than as precise measurements. Mis-estimation of economic market risk could result in over or under hedging of interest-rate 

risk, significant economic losses, and an adverse impact on earnings. The limitations of our economic market risk measures 

include the following:

n	 Our PVS and duration gap estimates are determined using models that involve our judgment of interest-rate and 

prepayment assumptions. 

n	 There could be times when we hedge differently than our model estimates during the period, such as when we are making 

changes or market updates to these models. 

n	 PVS and duration gap do not capture the potential effect of certain other market risks, such as changes in volatility and 

market spread risk. The effect of these other market risks can be significant.

n	 Our sensitivity analyses for PVS and duration gap contemplate only certain movements in interest rates and are performed 

at a particular point in time based on the estimated fair value of our existing portfolio.

n	 Although the mortgage-related investments portfolio is the main contributor of interest-rate risk to the company, other core 

businesses also contribute to our interest-rate risk and may be managed differently. We have certain assets that have a 

relatively short holding period. As a result, we may manage the risk of these assets based on their disposition, while our 

risk measures use long-term cash flows. Hedging these businesses at times requires additional assumptions concerning 

risk metrics to accommodate changes in pricing that may not be related to the future cash flow of the assets. This could 

create a perceived risk exposure as the hedged risk may differ from the modeled risk.

n	 The choice of the benchmark rate used to model and hedge our positions is a significant assumption. The effectiveness of 

our hedges ultimately depends on how closely the different instruments (assets, liabilities, and derivatives) react to the 

underlying chosen benchmark. In the simplest example, all instruments would have interest-rate risk based on the same 

underlying benchmark, in our case, the swap rate. In practice, however, different instruments react differently versus the 

benchmark rate, which creates a market spread between the benchmark rate and the instrument. As the market spreads of 

these instruments move differently, our ability to predict the behavior of each instrument relative to the others is reduced, 

potentially affecting the effectiveness of our hedges.

n	 Our reported measurements do not include the sensitivity to interest-rate changes of net worth and the following assets 

and liabilities:

l	 Credit guarantee activities - We currently do not hedge the interest-rate exposure of our credit guarantees except for 

the interest-rate exposure related to upfront fees (including buy-downs), buy-ups, float, and STACR debt notes.

l	 Other assets and other liabilities - We do not include other miscellaneous assets and liabilities, primarily deferred tax 

assets, accounts payable and receivable, and non-cash basis adjustments.

Spread Risk

Spread risk is the risk that yields in different asset classes may not move together and may adversely affect our economic 

value. This risk arises principally because interest rates on our mortgage-related investments may not move in tandem with 

interest rates on our financial liabilities and derivatives, potentially affecting the effectiveness of our hedges. We are exposed to 

the following types of market spread risk:

n	 Market spread risk arising from mortgage-related investments, including loans and securities, and certain non-mortgage 

investments;

n	 Market spread risk arising from our use of SOFR- or Treasury-based instruments in our risk management activities; and

n	 Market spread risk arising from the difference in time between when we commit to purchase a mortgage loan through our 

pipeline path and when we either securitize the loan or hedge it by using forward TBA securities or derivatives. During this 

time, market spreads can widen, causing losses due to changes in fair value.

Spread duration measures the percentage change in the price of financial instruments from a change in spread over the 

benchmark interest rates. Unlike effective duration, spread duration typically only impacts the discounting of an instrument’s 

cashflows, and not the underlying cashflows themselves. This discounting impact creates a measure that is typically positive, 

where the instrument increases in value as spreads decline and decreases in value as spreads widen.

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 124
Earnings Sensitivity to Market Risk

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

are measured at fair value) creates variability in our GAAP earnings when interest rates and spreads change. We manage this 

variability of GAAP earnings, which may not reflect the economics of our business, using fair value hedge accounting. 

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, our GAAP 

financial results are subject to significant earnings variability from period to period based on changes in market conditions. 

Based upon the composition of our financial assets and liabilities, including derivatives, at December 31, 2020, we generally 

recognize fair value losses in GAAP earnings when interest rates decline. 

In an effort to reduce our GAAP earnings variability and better align our GAAP results with the economics of our business, we 

elect hedge accounting for certain single-family mortgage loans and certain debt instruments. See Note 10 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, 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.

Table 63 - 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) December 31, 2020 December 31, 2019

Interest Rate Scenarios

Parallel yield curve shifts: 

 +100 basis points $0.1 $0.1 

 -100 basis points (0.1) (0.1) 

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

 +100 basis points — — 

 -100 basis points — — 

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

 +100 basis points 0.1 0.1 

 -100 basis points (0.1) (0.1) 

The actual effect of changes in interest rates on our comprehensive income in any given period may vary based on a number of 

factors, including, but not limited to, the composition of our assets and liabilities, the actual changes in interest rates that are 

realized at different terms along the yield curve, and the effectiveness of our hedge accounting strategies. Even if implemented 

properly, our hedge accounting programs may not be effective in reducing earnings volatility, and our hedges may fail in any 

given future period, which could expose us to significant earnings variability in that period. In addition, after dedesignation of a 

fair value hedging relationship, the amount of amortization of the fair value hedging basis adjustment associated with the 

previously designated hedged item that we recognize in a period may differ from the change in fair value of the previously 

designated hedging instrument during that period, which may create variability in our earnings. See Risk Factors - Market 

Risks - Changes in interest rates could negatively affect the fair value of financial assets and liabilities, our results of 

operations, and our net worth for additional information.

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 125
Spread-Related Earnings Sensitivity

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

significant GAAP earnings variability. For financial assets measured at fair value, we generally recognize fair value losses when 

market spreads widen. Conversely, for financial liabilities measured at fair value, we generally recognize fair value gains when 

market spreads widen. Certain accounting elections we make, such as election of the fair value option, may affect the amount 

of spread volatility recognized in our results of operations.

Transition from LIBOR 

In 2017, the Chief Executive of the United Kingdom's Financial Conduct Authority (FCA) announced that the FCA will no longer 

persuade or compel member panel banks to make LIBOR submissions after 2021. He also indicated that market participants 

should expect LIBOR to be subsequently discontinued, or at least to no longer be deemed representative of market interest 

rates, and should proceed expeditiously with preparations for transitioning to an alternative reference interest rate. U.S. 

regulators have made similar statements. In December 2020, the ICE Benchmark Administration Limited, the administrator of 

LIBOR, began a consultation on its intention to cease the publication of the most relevant tenors of U.S. Dollar LIBOR after 

June 2023. As a result, it is likely that LIBOR will be discontinued as a benchmark interest rate after June 2023.

Freddie Mac has exposure to LIBOR, including financial instruments that mature after June 2023. Our exposure arises from 

floating rate securities we issue, loans and securities we acquire (including loans we subsequently resecuritize), and derivatives 

we enter into that reference LIBOR. Senior management is actively evaluating and managing risks related to the LIBOR 

transition. To help prepare for an orderly transition from LIBOR, we established a LIBOR Working Group in 2018 that consists of 

members from the different business areas as well as the Legal and ERM divisions. We also have formed LIBOR transition 

committees across our businesses, functions, and products. Senior management and the LIBOR Working Group provide 

periodic updates to the Board and are working with FHFA on our plans for transition implementation. 

The Federal Reserve Board and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee 

(ARRC) to recommend a set of alternative reference interest rates for possible use as market-accepted benchmarks. Based on 

the ARRC's recommendation, the Federal Reserve Bank of New York began publishing SOFR in April 2018. Since then, certain 

derivative products and debt securities tied to SOFR have been introduced, and various industry groups have continued 

working to develop plans and documentation to facilitate a transition to SOFR as the new market-accepted benchmark. We 

have been a member of the ARRC since 2018 and have participated in many of its working groups. 

We support the ARRC’s recommendation to replace LIBOR with SOFR. We have issued SOFR-based debt securities, and 

executed SOFR-based securitizations and interest-rate derivatives transactions. During 2020, we began purchasing multifamily 

floating-rate loans and single-family ARMs indexed to SOFR. Effective January 1, 2021, we no longer purchase single-family 

ARMs and multifamily floating-rate loans tied to LIBOR. We are working with our customers, investors, and servicers to prepare 

to transition existing LIBOR-based ARM products to SOFR-based ARM products. 

With the implementation of these changes, our purchases of single-family ARMs and multifamily floating-rate loans may 

decrease as affected market participants may need more time to develop the systems and processes necessary to originate 

and sell ARMs and floating-rate loans tied to SOFR or any other new indices that may be developed.

For a discussion of the risks related to the LIBOR transition, see Risk Factors - Market Risks - The expected 

discontinuance of LIBOR could negatively affect the fair value of our financial assets and liabilities, results of 

operations, and net worth. A transition to an alternative reference interest rate could present operational problems and 

subject us to possible litigation risk. We may be unable to take a consistent approach across our financial products.

Management's Discussion and Analysis Risk Management | Market Risk

FREDDIE MAC | 2020 Form 10-K 126
LIQUIDITY AND CAPITAL RESOURCES

Overview

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.

On June 17, 2020, FHFA provided us and Fannie Mae with updated minimum short-, medium-, and long-term liquidity 

requirements. These requirements are based on cash flows needed under a stressed scenario that assumes, among other 

things, that for short- and medium-term debt, we may not have access to funding from the market for an extended period of 

time and therefore must fund our cash needs utilizing certain liquid assets in our portfolio.

The updated FHFA minimum liquidity requirements have four components:

n	A 30-day cash flow stress test that assumes we continue to provide liquidity to the market while holding a $10 billion buffer 

above outflows;

n A 365-day metric that requires us to hold liquidity to meet our expected cash outflows over 365 days and to continue to 

provide liquidity to the market under certain stress conditions. This metric is also more restrictive than our earlier 

framework regarding the types of liquid assets we hold;

n A specified minimum long-term debt to less-liquid asset ratio. Less-liquid assets are those that are not eligible to be 

pledged as collateral to the FICC; and

n	A requirement that we fund our assets with liabilities that have a specified minimum term relative to the term of the assets.

These updated liquidity requirements have been effective since December 1, 2020 and are more stringent than our previous 

liquidity requirements and liquidity requirements of banks and other depository institutions. These updated liquidity 

requirements result in higher funding costs and negatively affect our net interest income. In addition, they have impacted the 

size and the allowable investments in our other investments portfolio.

On December 17, 2020, FHFA issued a notice of proposed rulemaking regarding liquidity requirements for Freddie Mac and 

Fannie Mae. For additional information on the proposed rule, see MD&A – Regulation and Supervision – Legislative and 

Regulatory Developments – FHFA Proposed Rule on Enterprise Liquidity Requirements.

Sources and Uses of Funds

Our primary source of funding for the assets on our balance sheet is the issuance of debt. In addition to the funding provided 

by issuing debt, our other sources of funds include:

n	 Principal payments on and sales of securities and loans that we own;

n	 Repurchase transactions;

n	 Interest income on securities and loans that we own;

n	 Guarantee fees (inclusive of initial upfront fees);

n	 Net worth; and

n	 Draws from Treasury under the Purchase Agreement, which are only made if we have a quarterly deficit in our net worth.

We use these sources to fund the assets on our balance sheet. Our primary uses of funds include:

n	 Principal payments upon the maturity, redemption, or repurchase of our debt;

n	 Payments of interest on our debt and other expenses; 

n	 Purchases of mortgage loans, including purchases of seriously delinquent or modified loans underlying our securities, 

mortgage-related securities, and other investments; and

n	 Payments related to derivative contracts and posting or pledging of collateral to third parties in connection with secured 

financing and daily trade activities.

In addition to the uses and sources of cash described above, we are involved in various legal proceedings, including those 

discussed in Legal Proceedings, which may result in a need to use cash to settle claims or pay certain costs or receipt of 

cash from settlements.

Our securities and other obligations are not guaranteed by the U.S. government and do not constitute a debt or obligation of 

the U.S. government or any agency or instrumentality thereof, other than Freddie Mac. We continue to manage our debt 

issuances to remain in compliance with the aggregate indebtedness limits set forth in the Purchase Agreement. For a 

description of our debt products, see Our Business Segments - Capital Markets.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 127
Liquidity Management Framework

The support provided by Treasury pursuant to the Purchase Agreement enables us to have adequate liquidity to conduct our 

normal business activities. However, the costs and availability of our debt funding could vary for a number of reasons, including 

the uncertainty about the future of the GSEs and any future downgrades in our credit ratings or the credit ratings of the U.S. 

government. 

We make extensive use of the Federal Reserve's payment system in our business activities. The Federal Reserve requires that 

we fully fund our accounts at the Federal Reserve Bank of New York to the extent necessary to cover cash payments on our 

debt and mortgage-related securities each day, before the Federal Reserve Bank of New York, acting as our fiscal agent, will 

initiate such payments. Although we seek to maintain sufficient intraday liquidity to fund our activities through the Federal 

Reserve's payment system, we have limited access to cash once the debt markets are closed for the day. Insufficient cash may 

cause our account to be overdrawn, potentially resulting in penalties and reputational harm.

Maintaining sufficient liquidity is of primary importance to, and a cost of, our business. Under our liquidity management 

practices and policies, we:

n	 Manage intraday cash needs and provide for the contingency of an unexpected cash demand;

n	 Maintain cash and non-mortgage investments to enable us to meet ongoing cash obligations for a limited period of time, 

assuming no access to unsecured debt markets;

n	 Maintain unencumbered securities with a value greater than or equal to the largest projected daily cash shortfall for an 

extended period of time, assuming no access to unsecured debt markets; and

n	 Manage the maturity of our unsecured debt based on our asset profile.

To facilitate cash management, we forecast cash outflows and inflows using assumptions and models. These forecasts help us 

to manage our liabilities with respect to the timing of our cash flows. Differences between actual and forecasted cash flows 

have resulted in higher costs from issuing a higher amount of debt than needed or unexpectedly needing to issue debt, and 

may do so in the future. Differences between actual and forecasted cash flows also could result in our account at the Federal 

Reserve Bank of New York being overdrawn. We maintain daily cash reserves to manage this risk.

Liquidity Profile

Primary Sources of Liquidity

The following table lists the sources of our liquidity, the balances as of December 31, 2020 and a brief description of their 

importance to Freddie Mac. Our ability to maintain sufficient liquidity, including by pledging mortgage-related and other 

securities as collateral to other institutions, could cease or change rapidly and the cost of the available funding could increase 

significantly due to changes in market interest rates, market confidence, operational risks, and other factors.

Table 64 - Liquidity Sources 

Source Balance(1)

 (In billions)

Description

Liquidity

• Other Investments Portfolio - 

Liquidity and Contingency 

Operating Portfolio

 $95.9 • The Liquidity and Contingency Operating Portfolio, included within our other 

investments portfolio, is primarily used for short-term liquidity management.

• Liquid Portion of the MortgageRelated Investments Portfolio

 $67.6 • 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.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 128
Other Investments Portfolio

The table below summarizes the balances in our other investments portfolio, which includes the Liquidity and Contingency 

Operating 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 other investments 

portfolio is primarily used for short-term liquidity management, cash and other investments held by consolidated trusts, and 

other investments, which include investments in debt securities used to pledge as collateral, LIHTC partnerships, and secured 

lending activities.

Table 65 - Other Investments Portfolio

December 31, 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 $6.5 $17.4 $— $23.9 $4.2 $0.9 $0.1 $5.2 

Securities purchased under 

agreements to resell 65.8 38.4 0.8 105.0 40.6 23.1 2.4 66.1 

Non-mortgage related securities 23.6 — 3.3 26.9 23.2 — 3.9 27.1 

Advances to lenders — — 4.2 4.2 — — 1.9 1.9 

LIHTC equity investments — — 1.4 1.4 — — 1.0 1.0 

Secured lending — — 1.7 1.7 — — 2.3 2.3 

Total $95.9 $55.8 $11.4 $163.1 $68.0 $24.0 $11.6 $103.6 

(1) Represents carrying value.

Our non-mortgage-related investments in the Liquidity and Contingency Operating Portfolio consist of U.S. Treasury securities 

and other investments that we could sell to provide us with an additional source of liquidity to fund our business operations. We 

also maintain non-interest-bearing deposits at the Federal Reserve Bank of New York and interest-bearing deposits at 

commercial banks. Our interest-bearing deposits at commercial banks totaled $3.1 billion and $3.7 billion as of December 31, 

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 $2.8 billion and $2.6 billion as of December 31, 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. 

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.

In addition, we hold unsecuritized single-family loans and multifamily held-for-sale loans that could be securitized and would 

then be available for sale or for use as collateral for repurchase agreements. Due to the large size of our portfolio of liquid 

assets, the amount of mortgage-related assets that we may successfully sell or borrow against in the event of a liquidity crisis 

or significant market disruption may be substantially less than the amount of mortgage-related assets we hold. There would 

likely be insufficient market demand for large amounts of these assets over a prolonged period of time, which would limit our 

ability to sell or borrow against these assets.

We hold other mortgage assets, but given their characteristics, they may not be available for immediate sale or for use as 

collateral for repurchase agreements. These assets consist of certain structured agency securities collateralized by non-agency 

mortgage-related securities, non-agency CMBS, non-agency RMBS, and unsecuritized seriously delinquent and modified 

single-family loans.

We are subject to limits on the amount of mortgage assets we can sell in any calendar month without review and approval by 

FHFA and, if FHFA so determines, Treasury. In August 2020, FHFA instructed us to: (1) reduce the amount of agency MBS we 

hold to no more than $50 billion by June 30, 2021 and no more than $20 billion by June 30, 2022, with all dollar caps to be 

based on UPB; and (2) reduce the UPB of our existing portfolio of collateralized mortgage obligations (CMOs), which are also 

sometimes referred to as REMICs, to zero by June 30, 2021. We will have a holding period limit to sell any new CMO tranches 

created but not sold at issuance. CMOs do not include tranches initially retained from reperforming loans senior subordinate 

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 129
securitization structures. See Conservatorship and Related Matters - Managing Our Mortgage-Related 

Investments Portfolio Over Time for additional details.

Primary Sources of Funding

Debt securities that we issue are classified either as debt securities of consolidated trusts held by third parties or debt of 

Freddie Mac. The following table lists the sources and balances of our funding as of December 31, 2020 and a brief description 

of their importance to Freddie Mac. 

Table 66 - Funding Sources 

Source Balance(1)

 (In billions)

Description

Funding

• Debt of Freddie Mac $284.4 • Debt of Freddie Mac is used to fund our business activities.

• Debt Securities of Consolidated 

Trusts

 $2,308.2 • 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 to 

purchase modified or seriously delinquent loans from the trusts.

(1) Represents carrying value of debt balances after consideration of offsetting arrangements.

Debt of Freddie Mac

We issue debt of Freddie Mac to fund our operations. Competition for funding can vary with economic, financial market, and 

regulatory environments.

During 2020, we have had sufficient access to the debt markets, due largely to support from the U.S. government, to meet our 

financial obligations as they come due. We rely significantly on our ability to issue debt on an ongoing basis to refinance our 

effective short-term debt. Our effective short-term debt percentage, which represents the percentage of total debt of Freddie 

Mac that is expected to mature within one year, was 16.9% and 55.2% as of December 31, 2020 and December 31, 2019, 

respectively.

As of December 31, 2020, our aggregate indebtedness, calculated as the par value of debt of Freddie Mac, was $286.5 billion, 

which was below the current $300.0 billion debt cap limit imposed by the Purchase Agreement. Pursuant to the January 2021 

Letter Agreement, the Purchase Agreement debt limit cap will decrease to $270 billion on January 1, 2023 as a result of the 

decrease in the Mortgage Asset limit under the Purchase Agreement to $225.0 billion on December 31, 2022. 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 consolidated balance 

sheets and for the purpose of measuring our aggregate indebtedness under the debt cap limit. See Note 11 for additional 

information. We disclose the amount of our indebtedness on this basis monthly under the caption "Indebtedness Pursuant to 

Purchase Agreement - Total Debt Outstanding" in our Monthly Volume Summary reports, which are available on our website at 

www.freddiemac.com/investors/financials/monthly-volume-summaries.html.

To fund our business activities, we depend on the continuing willingness of investors to purchase our debt securities. Changes 

or perceived changes in the government's support of us could have a severe negative effect on our access to the debt markets 

and on our debt funding costs. 

In addition, any change in applicable legislative or regulatory exemptions, including those described in Regulation and 

Supervision, could adversely affect our access to some debt investors, thereby potentially increasing our debt funding costs.

Beginning in March 2020, we ceased issuing LIBOR-indexed floating-rate unsecured debt securities that mature beyond the 

end of 2021. As of December 31, 2020, we did not have any outstanding LIBOR-indexed unsecured debt securities, except for 

our remaining outstanding STACR debt notes, which we are no longer issuing on a regular basis.

The tables below summarize the par value and the average rate of debt of Freddie Mac securities we issued or paid off, 

including regularly scheduled principal payments, payments resulting from calls, and payments for repurchases. We call, 

exchange, or repurchase our outstanding debt securities from time to time for a variety of reasons, including managing our 

funding composition and supporting the liquidity of our debt securities.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 130
Table 67 - Debt of Freddie Mac Activity

Year Ended December 31, 2020

(Dollars in millions) Short-term Average Rate(1) Long-term Average Rate(1)

Discount notes and Reference Bills

Beginning balance $60,830 1.67 % $— — %

Issuances 147,249 0.97 — — 

Repurchases (5,020) 0.27 — — 

Maturities (203,048) 1.24 — — 

Ending Balance 11 0.69 — — 

Securities sold under agreements to repurchase

Beginning balance 9,843 1.46 — — 

Additions 999,503 0.35 — — 

Repayments (1,009,346) 0.36 — — 

Ending Balance — — — — 

Callable debt

Beginning balance 1,000 2.36 94,152 2.03 

Issuances 685 0.10 191,138 0.83 

Repurchases — — — — 

Calls (1,000) 2.36 (154,096) 1.61 

Maturities — — (7,856) 1.63 

Ending Balance 685 0.10 123,338 0.71 

Non-callable debt

Beginning balance 39,407 2.31 62,228 2.86 

Issuances 14,356 1.57 112,180 0.46 

Repurchases (10,588) 1.85 (5,849) 2.40 

Maturities (38,916) 2.24 (22,999) 1.70 

Ending Balance 4,259 1.51 145,560 1.21 

STACR Debt and SCR Debt Notes(2)

Beginning balance — — 15,496 5.55 

Issuances — — 769 1.66 

Repurchases — — — — 

Maturities — — (3,777) 3.44 

Ending Balance — — 12,488 4.09 

Total debt of Freddie Mac $4,955 1.31 % $281,386 1.12 %

Referenced footnotes are included after the next table.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 131
Year Ended December 31, 2019

(Dollars in millions) Short-term Average Rate(1) Long-term Average Rate(1)

Discount notes and Reference Bills

Beginning balance $28,787 2.36 % $— — %

Issuances 369,992 2.05 — — 

Repurchases — — — — 

Maturities (337,949) 2.20 — — 

Ending Balance 60,830 1.67 — — 

Securities sold under agreements to repurchase

Beginning balance 6,019 2.40 — — 

Additions 325,512 2.04 — — 

Repayments (321,689) 2.07 — — 

Ending Balance 9,842 1.46 — — 

Callable debt

Beginning balance 2,000 2.53 105,206 2.09 

Issuances 13,590 2.48 107,544 2.38 

Repurchases — — — — 

Calls (14,590) 2.52 (95,172) 2.65 

Maturities — — (23,426) 1.35 

Ending Balance 1,000 2.36 94,152 2.03 

Non-callable debt

Beginning balance 14,440 2.04 80,789 2.56 

Issuances 48,984 2.34 15,774 2.43 

Repurchases (345) 1.87 (869) 1.87 

Maturities (23,671) 2.19 (33,465) 1.68 

Ending Balance 39,408 2.31 62,229 2.86 

STACR Debt and SCR Debt Notes(2)

Beginning balance — — 17,729 6.02 

Issuances — — 723 2.09 

Repurchases — — — — 

Maturities — — (2,956) 4.49 

Ending Balance — — 15,496 5.55 

Total debt of Freddie Mac $111,080 1.89 % $171,877 2.65 %

(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.

Our outstanding debt of Freddie Mac balance increased during 2020, driven by near-term cash needs resulting from a higher 

expected single-family cash window purchase forecast. In addition, we increased our liquidity and contingency operating 

portfolio and the amount of long-term debt issuance as we transitioned to comply with the updated minimum liquidity 

requirements established by FHFA. However, our aggregate indebtedness to meet these funding needs is constrained by the 

current $300.0 billion debt cap limit imposed by the Purchase Agreement, which will decrease to $270 billion on January 1, 

2023 pursuant to the January 2021 Letter Agreement.

During 2020, our discount notes issuance declined significantly and the outstanding balance at the end of the year was 

minimal. We replaced a majority of our short-term debt with longer-term callable and non-callable debt in order to comply with 

the updated minimum liquidity requirements established by FHFA. As a result of this funding mix change, we expect our 

funding cost to increase. Our callable debt provides us with the option to repay the outstanding principal balance of the debt 

prior to its contractual maturity date. As of December 31, 2020, $105 billion of the outstanding $124 billion of callable debt may 

be called within one year, not including callable debt due to contractually mature within one year. We expect our STACR debt 

balance to continue to decline as run off will primarily be replaced with STACR Trust note transactions.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 132
Short-Term Debt

The tables below contain details on the characteristics of our short-term debt.

Table 68 - Short-Term Debt

December 31, 2020

Ending Balance Yearly Average

(Dollars in millions)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Maximum Carrying 

Value Outstanding 

at Any Month End

Discount notes and Reference Bills $11 0.69 % $37,391 0.97 % $66,867 

Medium-term notes 4,944 1.31 21,068 1.99 40,310 

Securities sold under agreements to repurchase — — 7,243 0.52 14,305 

Total $4,955 1.31 %

December 31, 2019

Ending Balance Yearly Average

(Dollars in millions)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Maximum Carrying 

Value Outstanding 

at Any Month End

Discount notes and Reference Bills $60,629 1.67 % $44,675 2.16 % $60,629 

Medium-term notes 40,405 2.31 29,781 2.36 43,096 

Securities sold under agreements to repurchase 9,843 1.46 9,928 2.16 14,114 

Total $110,877 1.89 %

December 31, 2018

Ending Balance Yearly Average

(Dollars in millions)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Carrying 

Value

Weighted 

Average 

Effective 

Rate(1)

Maximum Carrying 

Value Outstanding 

at Any Month End

Discount notes and Reference Bills $28,621 2.36 % $35,126 1.79 % $46,892 

Medium-term notes 16,440 2.10 15,403 1.37 18,200 

Securities sold under agreements to repurchase 6,019 2.40 9,411 1.79 11,719 

Total $51,080 2.28 %

(1) Average rate is weighted based on carrying value.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 133
Maturity and Redemption Dates

The following graphs present debt of Freddie Mac 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 of Freddie 

Mac. 

 Contractual Maturity Date as of December 31, 2020(1)

(Par value in billions)

$48

$61 $62

$22

$44

$37

$12

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

Earliest Redemption Date as of December 31, 2020(1)

(Par value in billions)

$153

$61

$35

$2 $11 $12 $12

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

(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 consolidated balance sheets is debt securities of consolidated trusts, which relates to 

securitization transactions that we consolidate 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 consolidated balance sheets:

n	 The assets held by the securitization trusts, the majority of which are mortgage loans. We recognized $2,273.3 billion and 

$1,940.5 billion of mortgage loans, which represented 86.5%% and 88.1% of our total assets, as of December 31, 2020 

and December 31, 2019, respectively.

n	 The debt securities issued by the securitization trusts, the majority of which are Level 1 Securitization Products that are 

pass-through 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 $2,308.2 billion and $1,898.4 billion of debt securities of consolidated trusts, 

which represented 89.0% and 87.1% of our total debt, as of December 31, 2020 and December 31, 2019, respectively.

Debt securities of consolidated trusts represent our liability to third parties that hold beneficial interests in our consolidated 

securitization trusts. 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. For more information on our purchases of loans from trusts, see Our Business Segments - Single-Family 

Guarantee - Business Overview.

At December 31, 2020, our estimated exposure (including the amounts that are due to Freddie Mac for debt securities of 

consolidated trusts that we purchased) to these debt securities is recognized as the allowance for credit losses on mortgage 

loans held by consolidated trusts. See Note 7 for details on our allowance for credit losses.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 134
The table below shows the issuance and extinguishment activity for the debt securities of our consolidated trusts.

Table 69 - Activity for Debt Securities of Consolidated Trusts Held by Third Parties

Year Ended December 31,

(In millions) 2020 2019

Beginning balance $1,854,802 $1,748,738 

Issuances:

New issuances to third parties 669,224 323,860 

Additional issuances of securities 561,784 178,971 

Total issuances 1,231,008 502,831 

Extinguishments: 

Purchases of debt securities from third parties (14,112) (30,306) 

Debt securities received in settlement of secured lending (132,434) (46,670) 

Repayments of debt securities (698,662) (319,791) 

Total extinguishments (845,208) (396,767) 

Ending balance 2,240,602 1,854,802 

Unamortized premiums and discounts 67,574 43,553 

Debt securities of consolidated trusts held by third parties $2,308,176 $1,898,355 

The table below provides information on the UPB of debt securities issued by our consolidated trusts. 

Table 70 - Debt Securities of Consolidated Trusts Held by Third Parties

December 31,

(In millions) 2020 2019

Single-family

Level 1 Securitization Products:

30-year or more amortizing fixed-rate $1,813,658 $1,563,211 

20-year amortizing fixed-rate 103,822 80,340 

15-year amortizing fixed-rate 322,618 241,835 

Adjustable-rate 27,079 38,271 

Interest-only 3,639 4,828 

FHA/VA and other governmental 1,457 1,718 

Total single-family Level 1 Securitization Products 2,272,273 1,930,203 

Other single-family 1,933 2,397 

Total single-family 2,274,206 1,932,600 

Total multifamily 14,303 8,642 

Total Freddie Mac mortgage-related securities 2,288,509 1,941,242 

Freddie Mac mortgage-related securities repurchased or retained at issuance (47,907) (86,440) 

Debt securities of consolidated trusts held by third parties $2,240,602 $1,854,802 

Credit Ratings

Our ability to access the capital markets and other sources of funding, as well as our cost of funds, may be affected by our 

credit ratings. The table below indicates our credit ratings as of January 31, 2021.

Table 71 - Freddie Mac Credit Ratings

Nationally Recognized Statistical Rating

Organization

S&P Moody's Fitch

Senior long-term debt AA+ Aaa AAA

Short-term debt A-1+ P-1 F1+

Preferred stock(1) D Ca C

Outlook Stable Stable Negative

(1) Does not include senior preferred stock issued to Treasury.

Our credit ratings and outlooks are primarily based on the support we receive from Treasury and, therefore, are affected by 

changes in the credit ratings and outlooks of the U.S. government.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 135
A security rating is not a recommendation to buy, sell, or hold securities. It may be subject to revision or withdrawal at any time 

by the assigning rating organization. Each rating should be evaluated independently of any other rating.

Contractual Obligations

Our contractual obligations affect our liquidity and capital resource needs and primarily include the debt (and associated 

interest payments) and derivative liabilities recognized on our consolidated balance sheets. We also have contractual 

obligations recognized in other liabilities on our consolidated balance sheets, including payments to our qualified and nonqualified defined contribution plans and other benefit plans, and future cash payments due under our obligations to make 

delayed equity contributions to LIHTC partnerships. 

We also have contractual obligations associated with our commitments to purchase loans and mortgage-related securities from 

third parties, most of which are accounted for as derivatives, as well as certain off-balance sheet obligations that are 

enforceable and legally binding, including guarantees, unfunded lending arrangements, and obligations to advance funds upon 

the occurrence of certain events. See Off-Balance Sheet Arrangements for additional information on the potential effects of 

our off-balance sheet obligations on our liquidity and capital resources.

The amount and timing of payments due related to debt of Freddie Mac is discussed in Primary Sources of Funding. Most of 

our purchase commitments are scheduled to occur within the next 12 months. The amount and timing of certain other of our 

contractual obligations is uncertain, including future payments of principal and interest related to debt securities of 

consolidated trusts held by third parties, STACR and SCR transactions, cash settlements on derivative agreements not yet 

accrued, guarantee payments, and commitments to advance funds under certain off-balance sheet arrangements.

Off-Balance Sheet Arrangements

We enter into certain business arrangements that are not recorded on our consolidated balance sheets or that may be recorded 

in amounts that differ from the full contractual or notional amount of the transaction that affect our short- and long-term liquidity 

needs. Certain of these arrangements present credit risk exposure. See MD&A - Risk Management - Credit Risk for 

additional information on our credit risk exposure on off-balance sheet arrangements. 

We have certain off-balance sheet arrangements related to our securitization and other mortgage-related guarantee activities. 

Our off-balance sheet arrangements related to securitization activities primarily consist of guaranteed K Certificates and SB 

Certificates. Our guarantee of these securitization activities and other mortgage-related guarantees may result in liquidity needs 

to cover potential cash flow shortfalls from borrower defaults. As of December 31, 2020 and December 31, 2019, the 

outstanding UPB of the guaranteed securities was $337.0 billion and $296.5 billion, respectively. In addition to our 

securitization and other mortgage-related guarantees, we have certain other guarantees that are accounted for as derivative 

instruments and are recognized on our consolidated balance sheets at fair value. See Note 10 for additional information on 

these guarantees, which are not included in the totals above.

We have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products. When 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 liquidity exposure as we do not have control over the Fannie Mae collateral. As of December 

31, 2020 and December 31, 2019, the total amount of our off-balance sheet exposure related to Fannie Mae securities backing 

Freddie Mac resecuritization products was approximately $85.8 billion and $27.4 billion, respectively.

We have entered into certain commitments, including commitments to purchase securities under agreements to resell and firm 

commitments to purchase multifamily loans, for some of which we have elected the fair value option, and unfunded lending 

arrangements that are not recorded on our consolidated balance sheets and are not accounted for as derivative instruments. 

As of December 31, 2020 and December 31, 2019, these commitments and arrangements totaled $59.2 billion and $32.4 billion

in notional amount, respectively. We also have other commitments to purchase or sell mortgage loans or mortgage-related 

securities that are accounted for as derivative instruments and are recognized on our consolidated balance sheets at fair value. 

See Note 10 for additional information on these commitments, which are not included in the totals above.

In addition, as part of our guarantee arrangements pertaining to certain multifamily housing revenue bonds and securities 

backed by multifamily housing revenue bonds, we have provided commitments to advance funds, commonly referred to as 

"liquidity guarantees," which were $4.8 billion and $5.5 billion at December 31, 2020 and December 31, 2019, respectively. 

These guarantees require us to advance funds to third parties that enable them to repurchase tendered bonds or securities that 

are unable to be remarketed. At both December 31, 2020 and December 31, 2019, there were no liquidity guarantee advances 

outstanding.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 136
Cash Flows 

n	2020 vs. 2019 - Cash and cash equivalents (including restricted cash and cash equivalents) increased by $18.7 billion from 

$5.2 billion as of December 31, 2019 to $23.9 billion as of December 31, 2020, primarily due to higher loan prepayments 

and our transition to comply with updated minimum liquidity requirements established by FHFA.

n	2019 vs. 2018 - Cash and cash equivalents (including restricted cash and cash equivalents) decreased by $2.1 billion from 

$7.3 billion as of December 31, 2018 to $5.2 billion as of December 31, 2019, as we invested the proceeds from issuances 

of debt of Freddie Mac in securities purchased under agreements to resell due to higher near-term cash needs for upcoming 

debt maturities and anticipated calls of debt of Freddie Mac and a higher expected loan purchase forecast.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 137
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 equity funding, under certain 

conditions, to eliminate deficits in our net worth. Obtaining equity funding from Treasury pursuant to its commitment under the 

Purchase Agreement enables us to avoid being placed into receivership by FHFA and to maintain the confidence of the debt 

markets as a very high-quality credit, upon which our business model is dependent. 

In connection with the execution of the Purchase Agreement, we, through FHFA, in its capacity as Conservator, issued a 

warrant to Treasury to purchase 79.9% of our common stock outstanding on a fully diluted basis on the date of exercise. See 

Note 13 for further information.

In November 2020, FHFA released a final rule that establishes the ERCF as a new regulatory capital framework for Freddie Mac 

and Fannie Mae. This final rule is substantively similar in terms of overall structure and approach to the proposed capital rule 

released in May 2020. The final capital rule, which will become effective on February 16, 2021, has a transition period for 

compliance. In general, the compliance date for the regulatory capital requirements will be the later of the date of termination of 

our conservatorship and any later compliance date provided in a consent order or other transition order; however, we may 

begin implementing the ERCF sooner, upon the direction of FHFA or otherwise. 

As the ERCF was not yet in effect during 2020, we continued to use the guidance issued to us by FHFA under the CCF to 

evaluate our transactions and businesses. We will be required to report our regulatory capital under the new framework 

beginning on January 1, 2022. The ERCF specifies substantial capital requirements and could affect our business strategies, 

perhaps significantly.

Pursuant to the January 2021 Letter Agreement, the applicable Capital Reserve Amount used in determining the dividend on 

the senior preferred stock payable to Treasury increased as of October 1, 2020 to the amount of adjusted total capital 

necessary to meet capital requirements and buffers set forth in the ERCF, rather than $20.0 billion as previously provided. This 

increased Capital Reserve Amount will remain in effect until the last day of the second fiscal quarter during which we have 

reached and maintained such level of capital (the Capital Reserve End Date). Based on our Net Worth Amount of $16.4 billion 

as of December 31, 2020, no dividend is payable to Treasury for the quarter ended December 31, 2020. Under the Purchase 

Agreement, the payment of dividends does not reduce the outstanding liquidation preference on the senior preferred stock. See 

Introduction - About Freddie Mac - Conservatorship and Government Support for Our Business for more information. 

If for any reason we were not to pay our dividend requirement on the senior preferred stock in full in any future period until the 

Capital Reserve End Date, the unpaid amount would be added to the liquidation preference and our applicable Capital Reserve 

Amount would thereafter be zero, but this would not affect our ability to draw funds from Treasury under the Purchase 

Agreement. Our cumulative senior preferred stock dividend payments totaled $119.7 billion as of December 31, 2020.

The aggregate liquidation preference of the senior preferred stock owned by Treasury was $86.5 billion and the amount of 

available funding remaining under the Purchase Agreement was $140.2 billion as of December 31, 2020. To the extent we draw 

additional funds in the future, the aggregate liquidation preference will increase and the amount of available funding will 

decrease by the amount of those draws. For additional information on the Purchase Agreement and senior preferred stock, 

including other reasons for increases in the aggregate liquidation preference, as well as our dividend requirement and the 

commitment fee to be paid to Treasury after the Capital Reserve End Date, see Introduction - About Freddie Mac - 

Conservatorship and Government Support for Our Business, MD&A - Conservatorship and Related Matters, and 

MD&A - Regulation and Supervision. 

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 138
The table below presents activity related to our net worth.

Table 72 - Net Worth Activity

Year Ended December 31,

(In millions) 2020 2019 2018

Ending balance, December 31 $9,122 $4,477 ($312) 

Cumulative-effect adjustment (1) (240) — — 

Beginning balance, January 1 8,882 4,477 (312) 

Comprehensive income (loss) 7,531 7,787 8,622 

Capital draws from Treasury — — 312 

Senior preferred stock dividends declared — (3,142) (4,145) 

Total equity / net worth $16,413 $9,122 $4,477 

Aggregate draws under Purchase Agreement $71,648 $71,648 $71,648 

Aggregate cash dividends paid to Treasury 119,680 119,680 116,538 

Liquidation preference of the senior preferred stock 86,539 79,322 75,648 

(1) Cumulative-effect adjustment related to our adoption of CECL. See Note 1 for additional information on our adoption of CECL.

Management's Discussion and Analysis Liquidity and Capital Resources 

FREDDIE MAC | 2020 Form 10-K 139
CONSERVATORSHIP AND RELATED MATTERS

Supervision of Our Company During Conservatorship

FHFA has broad powers when acting as our Conservator. Upon its appointment, the Conservator immediately succeeded to all 

rights, titles, powers, and privileges of Freddie Mac and of any stockholder, officer, or director of Freddie Mac with respect to 

Freddie Mac 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. 

Under the GSE Act, the Conservator may take any actions it determines are necessary to put us in a safe and solvent condition 

and appropriate to carry on our business and preserve and conserve our assets and property. The Conservator's powers 

include the ability to transfer or sell any of our assets or liabilities, subject to certain limitations and post-transfer notice 

provisions, without any approval, assignment of rights or consent of any party. However, the GSE Act provides that loans and 

mortgage-related assets that have been transferred to a Freddie Mac securitization trust must be held by the Conservator for 

the beneficial owners of the trust and cannot be used to satisfy our general creditors.

We conduct our business subject to the direction of FHFA as our Conservator. The Conservator has provided authority to the 

Board of Directors to oversee management's conduct of our business operations so we can operate in the ordinary course. The 

directors serve on behalf of, exercise authority as provided by, and owe their fiduciary duties of care and loyalty to the 

Conservator. The Conservator retains the authority to withdraw or revise the authority it has provided at any time. The 

Conservator also retains certain significant authorities for itself, and has not provided them to the Board. The Conservator 

continues to provide strategic direction for the company and directs the efforts of the Board and management to implement its 

strategy. Many management decisions are subject to review and/or approval by FHFA and management frequently receives 

direction from FHFA on various matters involving day-to-day operations. 

Our current business objectives reflect direction we have received from the Conservator including the Conservatorship 

Scorecards. At the direction of the Conservator, we have made changes to certain business practices that are designed to 

provide support for the mortgage market in a manner that serves our public mission and other non-financial objectives. Given 

our public mission and the important role our Conservator has placed on Freddie Mac in addressing housing and mortgage 

market conditions, we sometimes take actions that could have a negative impact on our business, operating results or financial 

condition, and could thus contribute to a need for additional draws under the Purchase Agreement. Certain of these actions are 

intended to help homeowners and the mortgage market. 

Purchase Agreement, Warrant, and Senior Preferred Stock

In connection with our entry into conservatorship, we entered into the Purchase Agreement with Treasury. Under the Purchase 

Agreement, we issued to Treasury both senior preferred stock and a warrant to purchase common stock. The Purchase 

Agreement, the warrant, and the senior preferred stock do not contain any provisions causing them to terminate or cease to 

exist upon the termination of conservatorship. The conservatorship, the Purchase Agreement, the warrant, and the senior 

preferred stock materially limit the rights of our common and preferred stockholders (other than Treasury). 

Pursuant to the Purchase Agreement, which we entered into through FHFA, in its capacity as Conservator, on September 7, 

2008, we issued to Treasury one million shares of Variable Liquidation Preference Senior Preferred Stock with an initial 

liquidation preference of $1 billion and a warrant to purchase, for a nominal price, shares of our common stock equal to 79.9% 

of the total number of shares outstanding. The senior preferred stock and warrant were issued to Treasury as an initial 

commitment fee in consideration of Treasury's commitment to provide funding to us under the Purchase Agreement. We did 

not receive any cash proceeds from Treasury as a result of issuing the senior preferred stock or the warrant. Under the 

Purchase Agreement, our ability to repay the liquidation preference of the senior preferred stock is limited and we will not be 

able to do so for the foreseeable future, if at all. 

The Purchase Agreement provides that, on a quarterly basis, we generally may draw funds up to the amount, if any, by which 

our total liabilities exceed our total assets, as reflected on our GAAP consolidated balance sheet for the applicable fiscal 

quarter, provided that the aggregate amount funded under the Purchase Agreement may not exceed Treasury's commitment. 

The amount of any draw will be added to the aggregate liquidation preference of the senior preferred stock and will reduce the 

amount of available funding remaining. Deficits in our net worth have made it necessary for us to make substantial draws on 

Treasury's funding commitment under the Purchase Agreement. Pursuant to the December 2017 Letter Agreement, the 

liquidation preference of the senior preferred stock increased by $3.0 billion on December 31, 2017. In addition, pursuant to the 

September 2019 and January 2021 Letter Agreements, the liquidation preference of the senior preferred stock has and will be 

increased, at the end of each fiscal quarter, from September 30, 2019 through the Capital Reserve End Date, by an amount 

equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. As of December 31, 2020, the 

aggregate liquidation preference of the senior preferred stock was $86.5 billion, and the amount of available funding remaining 

under the Purchase Agreement was $140.2 billion. 

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 140
Treasury, as the holder of the senior preferred stock, is entitled to receive cumulative 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, 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. Under the December 2017 Letter Agreement, the dividend for the dividend period from October 1, 2017 

through and including December 31, 2017 was reduced to $2.25 billion, and the applicable Capital Reserve Amount from 

January 1, 2018 through June 30, 2019 was $3.0 billion. Pursuant to the September 2019 Letter Agreement, from July 1, 2019 

through September 30, 2020, the applicable Capital Reserve Amount was $20.0 billion. Pursuant to the January 2021 Letter 

Agreement, as of October 1, 2020, the applicable Capital Reserve Amount increased to the amount of adjusted total capital 

necessary to meet capital requirements and buffers set forth in the ERCF. This increased Capital Reserve Amount will remain in 

effect until the last day of the second fiscal quarter during which we have reached and maintained such level of capital (the 

Capital Reserve End Date). As a result, we will not have another dividend requirement on the senior preferred stock until we 

have built sufficient capital to meet the capital requirements and buffers set forth in the ERCF. If for any reason we were not to 

pay our dividend requirement on the senior preferred stock in full in any future period until the Capital Reserve End Date, the 

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

zero.

Upon the Capital Reserve End Date, our dividend requirement on the senior preferred stock will be an amount equal to the 

lesser of (i) 10% per annum on the then-current liquidation preference of the senior preferred stock and (ii) a quarterly amount 

equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. After the Capital Reserve End 

Date, all or significant portions of our future profits will be distributed to Treasury, and the holders of our common stock and 

non-senior preferred stock will not receive benefits that could otherwise flow from such profits. If for any reason we were not to 

pay our dividend requirement on the senior preferred stock in full in any future period after the Capital Reserve End Date the 

unpaid amount would be added to the liquidation preference and immediately following such failure and for all dividend periods 

thereafter until the dividend period following the date on which we shall have paid in cash full cumulative dividends, the 

dividend amount will be 12% per annum on the then-current liquidation preference of the senior preferred stock. This would not 

affect our ability to draw funds from Treasury under the Purchase Agreement.

The senior preferred stock is senior to our common stock and all other outstanding series of our preferred stock, as well as any 

capital stock we issue in the future, as to both dividends and rights upon liquidation. We are not permitted to redeem the senior 

preferred stock prior to the termination of Treasury's funding commitment under the Purchase Agreement. 

We are also required under the Purchase Agreement to pay a quarterly commitment fee to Treasury, which was to be 

determined in an amount mutually agreed to by us and Treasury with reference to the market value of Treasury's funding 

commitment as then in effect. However, pursuant to the August 2012 amendment to the Purchase Agreement, as further 

amended by the January 2021 Letter Agreement, for each quarter commencing January 1, 2013, no periodic commitment fee 

under the Purchase Agreement will be set, accrue, or be payable. Pursuant to the January 2021 Letter Agreement, by the 

Capital Reserve End Date, we and Treasury, in consultation with the Chairman of the Federal Reserve, will mutually agree on a 

periodic commitment fee that we will pay for Treasury’s remaining funding commitment with respect to the five-year period 

commencing on the first January 1 after the Capital Reserve End Date.

The Purchase Agreement and warrant also contain covenants that significantly restrict our business and capital activities. For 

example, the Purchase Agreement provides that, until the senior preferred stock is repaid or redeemed in full, we may not, 

without the prior written consent of Treasury: 

n	 Pay dividends on our equity securities, other than the senior preferred stock or warrant, or repurchase our equity securities;

n	 Issue any additional equity securities, except in limited instances;

n	 Sell, transfer, lease, or otherwise dispose of any assets, other than dispositions for fair market value in the ordinary course 

of business, consistent with past practices, and in other limited circumstances; and

n	 Issue any subordinated debt.

For more information on the Purchase Agreement covenants, see Note 2.

Limits on Our Mortgage-Related Investments Portfolio and 

Indebtedness

Our ability to acquire and sell mortgage assets is significantly constrained by limitations under the Purchase Agreement and 

other limitations imposed by FHFA:

n	 Since 2014, we have been managing the mortgage-related investments portfolio so that it does not exceed 90% of the cap 

under the Purchase Agreement, which reached $250 billion as of December 31, 2018. In February 2019, FHFA directed us 

to maintain the mortgage-related investments portfolio at or below $225 billion at all times. In November 2019, FHFA 

instructed us, by January 31, 2020, to include 10% of the notional value of certain interest-only securities owned by 

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 141
Freddie Mac in the calculation of this portfolio, while continuing to maintain the portfolio below the limit imposed by FHFA. 

Pursuant to the January 2021 Letter Agreement, the Purchase Agreement cap on our mortgage-related investments 

portfolio will be lowered from $250 billion to $225 billion at the end of 2022, and the calculation of mortgage assets subject 

to the cap will also include 10% of the notional value of interest-only securities. Our mortgage-related investments portfolio 

was $188.8 billion as of December 31, 2020, including $6.6 billion representing 10% of the notional amount of the interestonly securities we held as of December 31, 2020. 

n	 With respect to the composition of our mortgage-related investments portfolio, in August 2020, FHFA instructed us to: (1) 

reduce the amount of agency MBS we hold to no more than $50 billion by June 30, 2021 and no more than $20 billion by 

June 30, 2022, with all dollar caps to be based on UPB; and (2) reduce the UPB of our existing portfolio of collateralized 

mortgage obligations (CMOs), which are also sometimes referred to as REMICs, to zero by June 30, 2021. We will have a 

holding period limit to sell any new CMO tranches created but not sold at issuance. CMOs do not include tranches initially 

retained from reperforming loans senior subordinate securitization structures.

n	 Under the Purchase Agreement, we may not incur indebtedness that would result in the par value of our aggregate 

indebtedness exceeding 120% of the amount of mortgage assets we are permitted to own on December 31 of the 

immediately preceding calendar year. Our debt cap under the Purchase Agreement was $346.1 billion in 2018 and reached 

$300.0 billion on January 1, 2019. As of December 31, 2020, our aggregate indebtedness for purposes of the debt cap was 

$286.5 billion. Our debt cap under the Purchase Agreement will decrease to $270 billion on January 1, 2023 as a result of 

the decrease in the mortgage assets limit under the Purchase Agreement to $225 billion on December 31, 2022 pursuant to 

the January 31, 2021 Letter Agreement.

n	 FHFA has indicated that any portfolio sales should be commercially reasonable transactions that consider impacts to the 

market, borrowers, and neighborhood stability. 

Our decisions with respect to managing the mortgage-related investments portfolio affect all three business segments. In order 

to achieve all of our portfolio goals, it is possible that we may forgo economic opportunities in one business segment in order to 

pursue opportunities in another business segment. 

Our results against the limits imposed on our mortgage-related investments portfolio and aggregate indebtedness for the year 

ended December 31, 2020 are shown below.

Mortgage Assets as of December 31, 

(In billions)

$218 $213 $182

$250 $250 $250

$225 $225 $225

90% of mortgage-related investments

portfolio limit

Mortgage-related investments portfolio

limit

Mortgage-related investments portfolio

ending balance

2018 2019 2020

Indebtedness as of December 31,

(In billions)

$256 $283 $287

$346

$300 $300

Indebtedness limit

Total debt of Freddie Mac outstanding

2018 2019 2020

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 142
Managing Our Mortgage-Related Investments Portfolio Over Time

Our mortgage-related investments portfolio includes assets held by all three business segments and consists of: 

n	 Agency securities, which include both single-family and multifamily Freddie Mac mortgage-related securities and nonFreddie Mac agency mortgage-related securities; 

n	 Non-agency mortgage-related securities, which include single-family non-agency mortgage-related securities, CMBS, 

housing revenue bonds, and other multifamily securities; and 

n	 Single-family and multifamily unsecuritized loans.

We evaluate the liquidity of the assets in our mortgage-related investments portfolio based on three categories (in order of 

liquidity): 

n	 Liquid - Single-class and multi-class agency securities, excluding certain structured agency securities collateralized by 

non-agency mortgage-related securities; 

n	 Securitization Pipeline - Primarily includes performing multifamily and single-family loans purchased for cash and 

primarily held for a short period until securitized, with the resulting Freddie Mac issued securities being sold or retained; 

and 

n	 Less Liquid - Assets that are less liquid than both agency securities and loans in the securitization pipeline (e.g., 

reperforming loans, single-family seriously delinquent loans, and non-agency mortgage-related securities). 

Freddie Mac mortgage-related securities include mortgage-related securities issued or guaranteed by Freddie Mac.

The table below presents the UPB of our mortgage-related investments portfolio. For purposes of the limits imposed by the 

Purchase Agreement and FHFA, our mortgage-related investments portfolio was $188.8 billion as of December 31, 2020, 

including $6.6 billion representing 10% of the notional amount of the interest-only securities we held as of December 31, 2020. 

Table 73 - Mortgage-Related Investments Portfolio Details 

December 31, 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 $— $51,040 $— $51,040 $— $19,144 $— $19,144 

Reperforming loans — — 16,298 16,298 — — 26,134 26,134 

Total single-family unsecuritized loans — 51,040 16,298 67,338 — 19,144 26,134 45,278 

Agency securities 63,892 — 2,062 65,954 119,156 — 2,518 121,674 

Non-agency mortgage-related securities — — 1,300 1,300 — — 1,458 1,458 

Total Capital Markets segment - 

Mortgage investments portfolio 63,892 51,040 19,660 134,592 119,156 19,144 30,110 168,410 

Single-family Guarantee segment - Singlefamily unsecuritized seriously delinquent 

loans — — 10,005 10,005 — — 8,589 8,589 

Multifamily segment

Unsecuritized mortgage loans — 23,068 10,339 33,407 — 18,531 11,254 29,785 

Mortgage-related securities 3,670 — 510 4,180 5,209 — 680 5,889 

Total Multifamily segment 3,670 23,068 10,849 37,587 5,209 18,531 11,934 35,674 

Total mortgage-related investments 

portfolio $67,562 $74,108 $40,514 $182,184 $124,365 $37,675 $50,633 $212,673 

Percentage of total mortgage-related 

investments portfolio 37 % 41 % 22 % 100 % 58 % 18 % 24 % 100 %

While we continued to purchase new single-family seriously delinquent loans from securities we guarantee and certain 

multifamily unsecuritized loans, which are classified as held-for-investment, our active disposition of less liquid assets during 

2020 included the following:

n	 Sales of $8.3 billion in UPB of single-family reperforming loans and $0.7 billion in UPB of seriously delinquent unsecuritized 

single-family loans;

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 143
n	 Securitizations of $1.4 billion in UPB of single-family reperforming loans and $6.0 billion in UPB of less liquid multifamily 

loans; and

n	 Transfers of $2.7 billion in UPB of less liquid multifamily loans to the securitization pipeline.

The less liquid assets in our mortgage-related investments portfolio decreased in 2020 but are likely to increase in future 

periods as we purchase delinquent loans from trusts after the forbearance period ends.

Limits on Certain of Our Other Business Activities

The Purchase Agreement, as amended by the January 2021 Letter Agreement, also established new covenants which placed 

additional restrictions on our secondary market activities and single-family and multifamily loan acquisitions:

n	 Secondary Market Activities - We cannot vary the pricing or any other term of the acquisition of a single-family loan based 

on the size, charter type, or volume of business of the seller of the loan and are required to: 

l	 Purchase loans for cash consideration; 

l	 Operate this cash window with non-discriminatory pricing; 

l	 Beginning on January 1, 2022, limit the volume purchased through the cash window to $1.5 billion per lender during 

any period comprising four calendar quarters; and

l	 Comply with directives, regulations, restrictions, or other requirements prescribed by FHFA related to equitable 

secondary market access by community lenders.

n	 Multifamily New Business Activity - We are required to cap multifamily loan purchases at $80 billion in any 52-week period, 

subject to annual adjustment by FHFA based on changes in the Consumer Price Index. At least 50% of our multifamily loan 

purchases in any calendar year must be, at the time of acquisition, classified as mission-driven pursuant to FHFA 

guidelines.

n	 Single-Family Loan Acquisitions - We are required to limit our acquisition of certain single-family mortgage loans.

l A maximum of 6% of purchase money mortgages and 3% of refinance mortgages over the preceding 52-week period 

can have two or more of the following characteristics at origination: combined LTV ratio greater than 90%; DTI ratio 

greater than 45%; and FICO or equivalent credit score less than 680.

l We are required to limit acquisitions of single-family mortgage loans secured by either second homes or investment 

properties to 7% of the single-family mortgage loan acquisitions over the preceding 52-week period.

l Subject to such exceptions as FHFA may prescribe to permit us to acquire single-family mortgage loans that are 

currently eligible for acquisition, we are required to implement by July 1, 2021 a program reasonably designed to 

ensure that each single-family mortgage is: 

– A qualified mortgage; 

– Exempt from the CFPB’s ability-to-repay requirements; 

– Secured by an investment property, subject to the restrictions above; 

– A refinancing with streamlined underwriting for high LTV ratios; 

– A loan with temporary underwriting flexibilities due to exigent circumstances, as determined in consultation with 

FHFA; or 

– Secured by manufactured housing.

In addition, the Purchase Agreement requires us to comply with the ERCF as currently in effect, disregarding any subsequent 

amendment or other modification to that rule.

We continue to assess the effects of these new Purchase Agreement covenants on our business, and we are developing 

related business processes and controls, including with respect to monitoring and reporting. 

FHFA's Strategic Plan: Fiscal Years 2021-2024 

In October 2020, FHFA released its Strategic Plan for fiscal years 2021-2024. This new Strategic Plan establishes new goals 

needed for FHFA to fulfill its statutory duties, which include responsibly ending the conservatorships of Freddie Mac and Fannie 

Mae.

This new Strategic Plan formalizes the new direction of FHFA, and its regulated entities, by updating FHFA's mission, vision, 

and values, and by establishing three new strategic goals:

n Ensuring safe and sound regulated entities through world-class supervision;

n Fostering competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets; and

n Positioning FHFA as a model of operational excellence by strengthening its workforce and infrastructure.

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 144
For more information on the conservatorship and related matters, see Regulation and Supervision, Risk Factors - 

Conservatorship and Related Matters, Note 2, Note 13, and Directors, Corporate Governance, and Executive 

Officers - Board and Committee Information - Authority of the Board and Board Committees.

Management's Discussion and Analysis Conservatorship and Related Matters

FREDDIE MAC | 2020 Form 10-K 145
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

FHFA is an independent agency of the federal government responsible for oversight of the operations of Freddie Mac, Fannie 

Mae, and the FHLBs.

Under the GSE Act, FHFA has safety and soundness authority that is comparable to, and in some respects broader than, that 

of the federal banking agencies. FHFA is responsible for implementing the various provisions of the GSE Act that were added 

by the Reform Act.

Receivership

Under the GSE Act, FHFA must place us into receivership if FHFA determines in writing that our assets are less than our 

obligations for a period of 60 days. FHFA notified us that the measurement period for any mandatory receivership determination 

with respect to our assets and obligations would commence no earlier than the SEC public filing deadline for our quarterly or 

annual financial statements and would continue for 60 calendar days after that date. FHFA also advised us that, if, during that 

60-day period, we receive funds from Treasury in an amount at least equal to the deficiency amount under the Purchase 

Agreement, the Director of FHFA will not make a mandatory receivership determination. In addition, we could be put into 

receivership at the discretion of the Director of FHFA at any time for other reasons set forth in the GSE Act.

Certain aspects of conservatorship and receivership operations of Freddie Mac, Fannie Mae, and the FHLBs are addressed in 

an FHFA rule. Among other provisions, the rule indicates that FHFA generally will not permit payment of securities litigation 

claims during conservatorship and that claims by current or former shareholders arising as a result of their status as 

shareholders would receive the lowest priority of claim in receivership. In addition, the rule indicates that administrative 

expenses of the conservatorship will also be deemed to be administrative expenses of receivership and that capital 

distributions may not be made during conservatorship, except as specified in the rule.

Capital Standards

FHFA suspended capital classification of us during conservatorship in light of the Purchase Agreement. The existing statutory 

and FHFA regulatory capital requirements are not binding during the conservatorship. These capital standards are described in 

Note 21. Under the GSE Act, FHFA has the authority to increase our minimum capital levels temporarily or to establish 

additional capital and reserve requirements for particular purposes. See Legislative and Regulatory Developments - FHFA 

Enterprise Capital Framework below for additional information on the final capital rule issued by FHFA in November 2020.

Pursuant to an FHFA rule, FHFA-regulated entities are required to conduct annual stress tests to determine whether such 

companies have sufficient capital to absorb losses as a result of adverse economic conditions. Under the rule, Freddie Mac is 

required to conduct annual stress tests using scenarios specified by FHFA that reflect certain economic and financial 

conditions and publicly disclose the results of the stress test under the "severely adverse" scenario. In August 2020, FHFA 

temporarily waived the requirement that we disclose the results of our most recent "severely adverse" scenario stress test so 

that we could include alternative scenarios considered by the Federal Reserve Board following the onset of COVID-19 that were 

not included among the scenarios initially issued by FHFA. 

New Products

The GSE Act requires Freddie Mac and Fannie Mae to obtain the approval of FHFA before initially offering any product (as 

defined in the statute), subject to certain exceptions. The GSE Act also requires us to provide FHFA with written notice of any 

new activity that we consider not to be a product. While FHFA published an interim final rule on prior approval of new products 

to implement these statutory requirements in July 2009, it stated that permitting us to engage in new products is inconsistent 

with the goals of conservatorship and instructed us not to submit such requests under the interim final rule. In October 2020, 

FHFA published a proposed rule that, if adopted, will replace the interim final rule. The proposed rule outlines the process for 

FHFA review and timelines for approving a new product. It sets forth the criteria for evaluating whether a new product is within 

the Enterprise’s Charter, is in the public interest, and is consistent with maintaining the safety and soundness of the Enterprise 

or the mortgage finance system. It also establishes a new three-part objective test for determining whether an activity is a new 

activity. On January 8, 2021, we submitted comments to FHFA regarding the proposed rule. Our comments offered 

Management's Discussion and Analysis Regulation and Supervision

FREDDIE MAC | 2020 Form 10-K 146
suggestions on the proposed definitions and filing requirements, as well as other technical and procedural recommendations. 

Affordable Housing Goals

We are subject to annual affordable housing goals. We view the purchase of loans that are eligible to count toward our 

affordable housing goals to be a principal part of our mission and business, and we are committed to facilitating the financing 

of affordable housing for very low-, low-, and moderate-income families. In light of the affordable housing goals, we may make 

adjustments to our strategies for purchasing loans, which could potentially increase our credit losses. These strategies could 

include entering into purchase and securitization transactions with lower expected economic returns than our typical 

transactions. In February 2010, FHFA stated that it does not intend for us to undertake uneconomic or high-risk activities in 

support of the housing goals nor does it intend for the state of conservatorship to be a justification for withdrawing our support 

from these market segments.

Current FHFA housing goals applicable to our purchases consist of four goals and one subgoal for single-family owneroccupied housing, one multifamily affordable housing goal, and two multifamily affordable housing subgoals. Single-family 

goals are expressed as a percentage of the total number of eligible loans underlying our total single-family loan purchases, 

while the multifamily goals are expressed in terms of minimum numbers of units financed.

Three of the single-family housing goals and the subgoal target purchase mortgage loans for low-income families, very lowincome families, and/or families that reside in low-income areas. The single-family housing goals also include one goal that 

targets refinancing loans for low-income families. The multifamily affordable housing goal targets multifamily rental housing 

affordable to low-income families. The multifamily affordable housing subgoals target multifamily rental housing affordable to 

very low-income families and small (5- to 50-unit) multifamily properties affordable to low-income families. 

We may achieve a single-family or multifamily housing goal by meeting or exceeding the FHFA benchmark for that goal (Goal). 

We also may achieve a single-family goal by meeting or exceeding the actual share of the market that meets the criteria for that 

goal (Market Level). 

If the Director of FHFA finds that we failed (or there is a substantial probability that we will fail) to meet a housing goal and that 

achievement of the housing goal was or is feasible, the Director may require the submission of a housing plan that describes 

the actions we will take to achieve the unmet goal. FHFA has the authority to take actions against us if we fail to submit a 

required housing plan, submit an unacceptable plan, fail to comply with a plan approved by FHFA, or fail to submit certain 

mortgage purchase data, information or reports as required by law. See Risk Factors - Legal And Regulatory Risks - We 

may make certain changes to our business in an attempt to meet our housing goals and duty to serve requirements, 

which may adversely affect our profitability.

Affordable Housing Goal Results

In October 2020, FHFA informed us that, for 2019, we achieved all five of our single-family affordable housing goals and all 

three of our multifamily goals. Our performance compared to our goals, as determined by FHFA for 2019 and 2018, is set forth 

below.

Table 74 - 2019 and 2018 Affordable Housing Goals Results

2019 2018

Affordable Housing Goals Goals 

Market 

Level Results Goals 

Market 

Level Results

Single-family purchase money goals (Benchmark levels)

Low-income goal 24 % 26.6 % 27.4 % 24 % 25.5 % 25.8 %

Very low-income goal 6 % 6.6 % 6.8 % 6 % 6.5 % 6.3 %

Low-income areas goal 19 % 22.9 % 22.9 % 18 % 22.6 % 22.6 %

Low-income areas subgoal 14 % 18.1 % 18.0 % 14 % 18.0 % 17.3 %

Single-family refinance low-income goal (Benchmark level) 21 % 24.0 % 22.4 % 21 % 30.7 % 27.3 %

Multifamily (Benchmark levels in units)

Low-income goal 315,000 N/A 455,451 315,000 N/A 474,062 

Very low-income subgoal 60,000 N/A 112,773 60,000 N/A 105,612 

Small property low-income subgoal 10,000 N/A 34,847 10,000 N/A 39,353 

Management's Discussion and Analysis Regulation and Supervision

FREDDIE MAC | 2020 Form 10-K 147
2020-2021 Affordable Housing Goals 

In December 2020, FHFA announced 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 announced benchmarks for 2021 only, and those levels 

remain the same as they were for 2018-2020.

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

Table 75 - 2020-2021 Affordable Housing Goal Benchmark Levels 

2020 2021

Single-family purchase money goals (Benchmark levels):

Low-income 24 % 24 %

Very low-income 6 % 6 %

Low-income areas 19 % 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 

We expect to report our performance with respect to the 2020 affordable housing goals in March 2021. At this time, based on 

preliminary information, we believe we met four of our five single-family goals and all three of our multifamily goals. We expect 

that FHFA will make a final determination on our 2020 performance following the release of market data in 2021. Our risk 

appetite constraints may make it difficult for us to meet our affordable housing goals in the future.

Duty to Serve Underserved Markets Plan

The GSE Act establishes a duty for Freddie Mac and Fannie Mae to serve three underserved markets (manufactured housing, 

affordable housing preservation, and rural areas) by providing leadership in developing loan products and flexible underwriting 

guidelines to facilitate a secondary market for mortgages for very low-, low-, and moderate-income families in those markets. 

Freddie Mac is currently operating under an underserved markets plan for 2018-2020. In March 2020, we submitted our 2019 

Duty to Serve Annual Report, which included information on activities and objectives undertaken during 2019. 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. In October 2020, we 

proposed modifications to our 2020 Duty to Serve Underserved Markets Plan and additions to our 2021 Duty to Serve 

Underserved Markets Plan. In January 2021, FHFA published our 2021 Duty to Serve Underserved Markets Plan, which 

became effective on January 1, 2021. FHFA expects that Freddie Mac’s next three-year Duty to Serve Underserved Markets 

Plan, covering 2022-2024, will be due in May 2021.

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 such amount to certain housing funds. FHFA suspended this requirement when we were placed 

into conservatorship. However, in December 2014, FHFA terminated the suspension and instructed us to begin setting aside 

and paying amounts into those funds, subject to any subsequent guidance or instruction from FHFA.

During 2020, we completed $1.2 trillion of new business purchases subject to this requirement and accrued $490.7 million of 

related expense, of which $319.0 million is related to the Housing Trust Fund administered by HUD and $171.7 million is related 

to the Capital Magnet Fund administered by Treasury. We are prohibited from passing through the costs of these allocations to 

the originators of the loans that we purchase.

Portfolio Activities

The GSE Act provides FHFA with the power to regulate the size and composition of our mortgage-related investments portfolio. 

The GSE Act requires FHFA to establish, by regulation, criteria governing portfolio holdings to ensure the holdings are backed 

by sufficient capital and consistent with our mission and safe and sound operations. FHFA adopted the portfolio holdings 

criteria established in the Purchase Agreement, as it may be amended from time to time, for so long as we remain subject to 

Management's Discussion and Analysis Regulation and Supervision

FREDDIE MAC | 2020 Form 10-K 148
the Purchase Agreement. See Conservatorship and Related Matters - Limits on Our Mortgage-Related Investments 

Portfolio and Indebtedness for more information.

Department of Housing and Urban Development

HUD has regulatory authority over Freddie Mac with respect to fair lending. Our loan purchase activities are subject to federal 

anti-discrimination laws. In addition, the GSE Act prohibits discriminatory practices in our loan purchase activities, requires us 

to submit data to HUD to assist in its fair lending investigations of primary market lenders with which we do business, and 

requires us to undertake remedial actions against such lenders found to have engaged in discriminatory lending practices. HUD 

periodically reviews and comments on our underwriting and appraisal guidelines for consistency with the Fair Housing Act and 

the anti-discrimination provisions of the GSE Act.

Department of the Treasury

Treasury has significant rights and powers as a result of the Purchase Agreement. In addition, under our Charter, the Secretary 

of the Treasury has approval authority over our issuances of notes, debentures, and substantially identical types of unsecured 

debt obligations (including the interest rates and maturities of these securities), as well as new types of mortgage-related 

securities issued subsequent to the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The 

Secretary of the Treasury has performed this debt securities approval function by coordinating GSE debt offerings with 

Treasury funding activities. Our Charter also authorizes Treasury to purchase Freddie Mac debt obligations not exceeding 

$2.25 billion in aggregate principal amount at any time.

Consumer Financial Protection Bureau

The CFPB regulates consumer financial products and services. The CFPB adopted a number of final rules relating to loan 

origination, finance, and servicing practices that generally went into effect in January 2014. The rules include an ability-to-repay 

rule, which requires loan originators to make a reasonable and good faith determination that a borrower has a reasonable ability 

to repay the loan according to its terms. This rule provides certain protection from liability for originators making loans that 

satisfy the definition of a qualified mortgage. The ability-to-repay rule applies to most loans acquired by Freddie Mac, and for 

loans covered by the rule, FHFA has directed us to limit our single-family acquisitions to loans that generally would constitute 

qualified mortgages under applicable CFPB regulations. The directive generally restricts us from acquiring loans that are not 

fully amortizing, have a term greater than 30 years, or have points and fees in excess of 3% of the total loan amount. Under 

CFPB rules, one category of qualified mortgages consists of loans that are eligible for purchase or guarantee by either Freddie 

Mac or Fannie Mae. In October 2020, the CFPB issued a final rule that extends the category of qualified mortgages that 

consists of loans that are eligible for purchase or guarantee by either Freddie Mac or Fannie Mae. Under the final rule, this 

category of qualified mortgages will expire upon the earlier of the Enterprise’s exit from conservatorship or the mandatory 

compliance date of final amendments to the definition of a qualified mortgage in the ability-to-repay rule, rather than in January 

2021 as previously scheduled. In December 2020, the CFPB issued a final rule that established pricing thresholds for loans to 

qualify as qualified mortgages, eliminated the DTI threshold, and refined the ability-to-repay definition to require lenders to 

consider and verify borrowers’ income, assets, and debts. The mandatory compliance date of these final amendments to the 

definition of qualified mortgage is July 1, 2021. Under the amended ability-to-repay rule, qualified mortgages will include loans 

for which lenders consider the borrower’s income, assets, debts, and DTI or residual income and that comply with our 

Guidelines as well as with the previously mentioned requirements regarding product features, pricing, points, and fees. In 

addition, under the January 2021 Letter Agreement, we are required to implement on or before July 1, 2021 a program that is 

reasonably designed to ensure that each single-family loan acquired falls within certain categories, one of which is "qualified 

mortgages."

Securities and Exchange Commission

We are subject to the reporting requirements applicable to registrants under the Exchange Act, including the requirement to file 

with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Although our 

common stock is required to be registered under the Exchange Act, we continue to be exempt from certain federal securities 

law requirements, including the following:

n	 Securities we issue or guarantee are "exempted securities" and may be sold without registration under the Securities Act 

of 1933;

n	 We are excluded from the definitions of "government securities broker" and "government securities dealer" under the 

Exchange Act;

n	 The Trust Indenture Act of 1939 does not apply to securities issued by us; and

n	 We are exempt from the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as we are an "agency, 

authority, or instrumentality" of the U.S. for purposes of such Acts.

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Legislative and Regulatory Developments

Legislation Related to Freddie Mac and Its Future Status

Our future structure and role will be determined by the Administration, Congress, and FHFA, and it is possible, and perhaps 

likely, that there will be significant changes beyond the near-term. 

Several bills have been introduced in past sessions of Congress concerning the future status of Freddie Mac, Fannie Mae, and 

the mortgage finance system, including bills that provided for the wind down of Freddie Mac and Fannie Mae and modification 

of the terms of the Purchase Agreement. None of these bills have been enacted. It is possible that similar or new bills will be 

introduced and considered in the future. We cannot predict whether any of such bills will be introduced or enacted. 

Treasury Blueprint on Next Steps for GSE Reform

On January 14, 2021, Treasury released a blueprint on next steps for GSE reform, which includes building GSE equity capital, 

determining GSE capital structure, setting a commitment fee for ongoing government support, establishing appropriate pricing 

oversight, and assessing appropriate market concentration. The blueprint states that while Treasury will continue to evaluate 

potential administrative actions to end the conservatorships, Congress is best positioned to adopt comprehensive housing 

finance reform. The goals of the current Administration with respect to the Enterprises and housing market reform are unclear.

January 2021 Letter Agreement with Treasury

On January 14, 2021, we, acting through FHFA as our Conservator, and Treasury entered into a letter agreement to further 

amend the Purchase Agreement and terms of the senior preferred stock. The principal modifications include:

n	 Extend Capital Retention - The net worth sweep dividend requirement has been revised to permit us to continue to build 

capital by retaining our earnings. 

l	 Beginning October 1, 2020, the applicable Capital Reserve Amount used in determining the dividend payable to 

Treasury is the amount of adjusted total capital necessary to meet capital requirements and buffers set forth in the 

ERCF, rather than $20.0 billion as previously provided. This increased Capital Reserve Amount will remain in effect 

until the last day of the second fiscal quarter during which we have reached and maintained such level of capital (the 

Capital Reserve End Date). For additional information on the ERCF, see FHFA Enterprise Regulatory Capital 

Framework. The liquidation preference of the senior preferred stock will be increased, at the end of each fiscal 

quarter, from December 31, 2020 through the Capital Reserve End Date, by the increase in the Net Worth Amount, if 

any, during the immediately prior fiscal period. If for any reason we were not to pay our dividend requirement on the 

senior preferred stock in full in any future period until the Capital Reserve End Date, the unpaid amount would be 

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

l	 Upon the Capital Reserve End Date, our dividend requirement on the senior preferred stock each quarter will be an 

amount equal to the lesser of (i) 10% per annum on the then-current liquidation preference of the senior preferred 

stock and (ii) a quarterly amount equal to the increase in the Net Worth Amount, if any, during the immediately prior 

fiscal quarter. If for any reason we were not to pay our dividend requirement in full in any future period, after the 

Capital Reserve End Date, the unpaid amount would be added to the liquidation preference and immediately following 

such failure and for all dividend periods thereafter until the dividend period following the date on which we shall have 

paid in cash full cumulative dividends, the dividend amount will be 12% per annum on the then-current liquidation 

preference of the senior preferred stock.

l	 By the Capital Reserve End Date, we and Treasury, in consultation with the Chairman of the Federal Reserve, will 

mutually agree on a periodic commitment fee that we will pay for Treasury’s remaining funding commitment with 

respect to the five-year period commencing on the first January 1 after the Capital Reserve End Date.

n	 Allow for Common Stock Issuance at Appropriate Time - Treasury will not allow us to issue common stock until: (i) 

Treasury has exercised in full its warrant to acquire 79.9% of our common stock and (ii) all currently pending material 

litigation relating to the conservatorship and/or the Purchase Agreement has been resolved or settled. Treasury will allow 

us to use up to $70 billion in proceeds of such a common stock issuance(s) to be used to build capital.

n	 Establish Additional Requirements To Exit Conservatorship - FHFA agrees that it will not, without the prior written 

consent of Treasury, terminate our conservatorship (other than in connection with receivership) unless (i) all currently 

pending material litigation relating to the conservatorship and/or the Purchase Agreement has been resolved or settled and 

(ii) for two or more consecutive quarters we have and maintain “common equity tier 1 capital” that (together with any 

stockholder equity that would result from the consummation of a firm commitment public underwritten offering of our 

common stock as set forth in an underwriting agreement with one or more broker-dealers reasonably acceptable to 

Treasury, which is fully consummated concurrently with the termination of conservatorship) is in an amount not less than 

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FREDDIE MAC | 2020 Form 10-K 150
3% of our “adjusted total assets” (both as defined in the ERCF). “Common equity tier 1 capital” shall not include the senior 

preferred stock.

n	 Limit Future Increases to the Retained Mortgage Portfolio - The Purchase Agreement cap on our retained mortgage 

portfolio will be lowered from $250 billion currently to $225 billion at the end of 2022, and the calculation of mortgage 

assets subject to the cap will also include 10% of the notional value of interest-only securities. Our debt cap under the 

Purchase Agreement will decrease to $270 billion on January 1, 2023 as a result of the decrease in the mortgage assets 

limit under the Purchase Agreement to $225 billion on December 31, 2022. Under the Purchase Agreement, our debt cap is 

120% of our mortgage assets limit as of December 31 of the immediately preceding calendar year.

n	 Provide Small Lender Protections - We cannot vary the pricing or any other term of the acquisition of a single-family loan 

based on the size, charter type, or volume of business of the seller of the loan. In addition, we are required to (i) purchase 

loans for cash consideration; (ii) operate the cash window with non-discriminatory pricing; (iii) beginning on January 1, 

2022, limit the volume purchased through the cash window to $1.5 billion per lender during any period comprising four 

calendar quarters; and (iv) comply with directives, regulations, restrictions, or other requirements prescribed by FHFA 

related to equitable secondary market access by community lenders.

n	 Memorialize FHFA Multifamily Lending Caps - We are required to cap multifamily loan purchases at $80 billion in any 

52-week period, subject to annual adjustment by FHFA based on changes in the Consumer Price Index. At least 50% of 

our multifamily loan purchases in any calendar year must be, at the time of acquisition, classified as mission-driven 

pursuant to FHFA guidelines.

n	 Increase Restrictions on Single-Family Loan Acquisitions - We are required to limit our acquisition of certain singlefamily mortgage loans.

l	 A maximum of 6% of purchase money mortgages and 3% of refinance mortgages over the preceding 52-week period 

can have two or more of the following characteristics at origination: combined LTV ratio greater than 90%; debt-toincome ratio greater than 45%; and FICO or equivalent credit score less than 680.

l	 Acquisitions of single-family mortgage loans secured by either second homes or investment properties will be limited 

to 7% of the single-family mortgage loan acquisitions over the preceding 52-week period.

l	 Subject to such exceptions as FHFA may prescribe to permit us to acquire single-family mortgage loans that are 

currently eligible for acquisition, we will be required to implement by July 1, 2021 a program reasonably designed to 

ensure that each single-family mortgage loan acquired is (i) a qualified mortgage; (ii) exempt from the CFPB’s abilityto-repay requirements; (iii) secured by an investment property, subject to the restrictions above; (iv) a refinancing with 

streamlined underwriting for high LTV ratios; (v) a loan with temporary underwriting flexibilities due to exigent 

circumstances, as determined in consultation with FHFA; or (vi) secured by manufactured housing.

n	 Require Compliance with ERCF - For purposes of the Purchase Agreement Capital Covenant, we are required to comply 

with the ERCF as currently in effect (i.e., disregarding any subsequent modification of that rule).

n	 Commit to Develop Proposal to Resolve Conservatorship - We and Treasury commit to work to restructure Treasury’s 

investment and dividend amount in a manner that facilitates our orderly exit from conservatorship, ensures Treasury is 

appropriately compensated, and permits us to raise third-party capital and make distributions as appropriate.

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

FHFA Enterprise Regulatory Capital Framework

On November 18, 2020, FHFA released a final rule that establishes a new ERCF for Freddie Mac and Fannie Mae. This final 

capital rule is substantively similar in terms of overall structure and approach to the proposed capital rule released in May 2020, 

which was a re-proposal of the capital rule published by FHFA in July 2018. 

The final capital rule incorporates several bank regulatory concepts that are intended to increase both the quality and quantity 

of capital that the Enterprises will be required to hold. The final capital rule, which will become effective on February 16, 2021, 

has a transition period for compliance. In general, the compliance date for the regulatory capital requirements will be the later of 

the date of termination of our conservatorship and any later compliance date provided in a consent order or other transition 

order. We will be required to report our regulatory capital beginning on January 1, 2022 and certain buffer requirements 

become effective upon the termination of conservatorship, even if we are operating under a consent order or other transition 

order; however, we may begin implementing the ERCF sooner, upon the direction of FHFA or otherwise. The final capital rule 

specifies substantial capital requirements and could affect our business strategies, perhaps significantly.

The final capital rule establishes six capital requirements for the Enterprises: four risk-based requirements, which, in part, 

evaluate specified types of capital against a percentage of an Enterprise’s risk-weighted assets, and two leverage 

requirements, which evaluate specified types of capital against a percentage of an Enterprise’s adjusted total assets. The final 

capital rule also specifies 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. We may hold capital above the capital requirements and buffers set forth in the ERCF, subject to the 

Management's Discussion and Analysis Regulation and Supervision

FREDDIE MAC | 2020 Form 10-K 151
restrictions on our ability to do so under the Purchase Agreement, such as post-recapitalization dividends and fees we will be 

required to pay to Treasury.

The final capital rule includes provisions for an Enterprise to calculate its risk-weighted assets under a “standardized 

approach,” which requires the Enterprises to determine a risk weight for the Enterprise’s 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 Enterprise’s risk-weighted assets. In 

addition to requiring an Enterprise to use the standardized approach, the final capital rule also requires an Enterprise to 

calculate its risk-weighted assets using an “advanced approach,” which would rely entirely on the Enterprise’s models. 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. We would not be required to comply with advanced 

approach requirements earlier than 2025.

Notable changes from the capital rule proposed in May 2020 include increased risk-weight floors for single-family and 

multifamily exposures from 15% to 20%, some increased capital relief for CRT, and reduced capital requirements for singlefamily mortgage exposures subject to COVID-19 related forbearance.

FHFA Proposed Rule on Enterprise Liquidity Requirements

In December 2020, FHFA issued a notice of proposed rulemaking regarding liquidity requirements for Freddie Mac and Fannie 

Mae. This proposed rule builds on current FHFA requirements and seeks to implement minimum Enterprise liquidity and 

funding requirements, daily management reporting of the Enterprise’s liquidity positions, monthly public disclosure reporting 

requirements, and other cash flow and liquidity-related requirements. The proposed rule has four liquidity requirements: two 

cash-flow based requirements and two long-term liquidity and funding requirements. The proposed requirements could result in 

higher funding costs and could negatively impact our net interest income. In addition, they could impact the size and the 

allowable investments in our other investments portfolio. We cannot predict whether and when FHFA will finalize new liquidity 

requirements for the Enterprises, what these final liquidity requirements will be, or whether FHFA may require us to implement 

additional or different liquidity requirements in the proposed rule or otherwise.

FHFA Proposed Rule on Resolution Planning

In December 2020, FHFA issued a notice of proposed rulemaking that would require Freddie Mac and Fannie Mae to develop 

credible resolution plans, also known as living wills. These resolution plans are intended to facilitate a rapid and orderly 

resolution should FHFA be appointed receiver for Freddie Mac or Fannie Mae. Under the proposed rule, the Enterprises must 

demonstrate how core or important business lines would be maintained to ensure continued support for mortgage finance and 

stabilize the housing finance system, without extraordinary government support to prevent an Enterprise from being placed in 

receivership, indemnify investors against losses, or fund the resolution of an Enterprise. FHFA has instructed us to take actions 

related to developing, in the near term, a resolution planning process and to provide FHFA with support and information related 

to its development of a resolution framework. We cannot predict whether or when FHFA will finalize new resolution planning 

requirements for the Enterprises, what these final resolution planning requirements will be, when we will be required to deliver a 

resolution plan, or the extent to which FHFA may require us to implement additional resolution planning requirements during 

conservatorship. 

Management's Discussion and Analysis Regulation and Supervision

FREDDIE MAC | 2020 Form 10-K 152
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 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 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.

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 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 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. 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 forecasts 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, are 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 loan’s individual characteristics. The COVID-19 pandemic initially resulted in a decline in our near term forecasted house 

price growth rates compared to pre-pandemic estimates, but our forecast has since improved. The table below shows our 

nationwide forecasted house price growth rates for both full-year 2021 and 2022 that were used in determining our allowance 

for credit losses as of December 31, 2020. These growth rates are used as inputs to our models to develop the detailed 

forecasted life-of-loan house price growth rates for each MSA.

Table 76 - Forecasted House Price Growth Rates(1)

2021 2022

Forecasted house price growth rates 5.4 % 3.0 %

(1) Forecasted house price growth rates are from Freddie Mac's Economic and Housing Research Quarterly Forecast dated January 14, 2021.

Inputs used by the model are regularly updated for changes in the underlying data, assumptions, and market conditions. We 

review the output of this model by considering qualitative factors such as macroeconomic and other factors to see whether the 

model outputs are consistent with our expectations. Management adjustments may be necessary to take into consideration 

external factors and current economic events that have occurred but are not yet reflected in the factors used to derive the 

model outputs. Significant judgment is exercised in making these adjustments.

Management's Discussion and Analysis Critical Accounting Policies and Estimates

FREDDIE MAC | 2020 Form 10-K 153
Some examples of the qualitative factors considered include:

n	 Regional housing trends;

n	 Applicable house price indices;

n	 Unemployment and employment dislocation trends;

n	 The effects of changes in government policies and programs;

n	 Industry trends;

n	 Consumer credit statistics;

n	 Third-party credit enhancements; 

n	 Natural disasters (such as hurricanes and wildfires); and

n	 Other catastrophic events (such as the COVID-19 pandemic and the impact of associated relief programs).

The inability to realize the benefits of our loss mitigation activities, declines in house prices, deterioration in the financial 

condition of our mortgage insurers, or increases in delinquency rates would cause our losses to be significantly higher than 

those currently estimated.

Fair Value Measurements

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. Assets and liabilities within our consolidated financial statements 

measured at fair value include:

n Mortgage-related and non-mortgage related securities;

n Certain loans held-for-sale;

n Derivative instruments; and

n Certain debt securities of consolidated trusts held by third parties and certain debt of Freddie Mac.

The accounting guidance for fair value measurements establishes a framework for measuring fair value, and also establishes a 

three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the 

assumptions a market participant would use at the measurement date. Fair value measurements under this hierarchy are 

distinguished among quoted market prices, observable inputs, and unobservable inputs. The measurement of fair value 

requires management to make judgments and assumptions. The process for determining fair value using unobservable inputs is 

generally more subjective and involves a higher degree of management judgment and assumptions than the measurement of 

fair value using observable inputs. These judgments and assumptions may have a significant effect on our measurements of fair 

value, and the use of different judgments and assumptions, as well as changes in market conditions, could have a material 

effect on our consolidated statements of comprehensive income and consolidated balance sheets. See Note 19 for additional 

information regarding fair value hierarchy and measurements, valuation risk, and controls over fair value measurement.

Management's Discussion and Analysis Critical Accounting Policies and Estimates

FREDDIE MAC | 2020 Form 10-K 154
Risk Factors

The following section discusses material risks and uncertainties that could adversely affect our business, financial condition, 

results of operations, cash flows, reputation, strategies, and/or prospects.

CONSERVATORSHIP AND RELATED MATTERS

Freddie Mac's future is uncertain.

Our future structure and role will be determined by the Administration, Congress, and FHFA, and it is possible, and perhaps 

likely, that there will be significant changes beyond the near-term that will materially affect our role in the mortgage industry, 

business model, structure, and results of operations. Some or all of our functions could be transferred to other institutions, and 

we could cease to exist as a stockholder-owned company. If any of these events occur, our shares could diminish in value, or 

cease to have any value. Our stockholders may not receive any compensation for such loss in value.

Several bills have been introduced in past sessions of Congress concerning the future status of Freddie Mac, Fannie Mae, and 

the mortgage finance system, including bills which provided for the wind down of Freddie Mac and Fannie Mae and 

modification of the terms of the Purchase Agreement. While none of these bills has been enacted, it is possible that similar or 

new bills will be introduced and considered in the future. On January 14, 2021, Treasury released a blueprint on next steps for 

GSE reform, which includes building equity capital, determining capital structure, setting a commitment fee for ongoing 

government support, establishing appropriate pricing oversight, and assessing appropriate market concentration. The blueprint 

states that while Treasury will continue to evaluate potential administrative actions to end our conservatorship, Congress is best 

positioned to adopt comprehensive housing finance reform. The goals of the current Congress and Administration with respect 

to the Enterprises and housing market reform are unclear.

The conservatorship is indefinite in duration. The timing, likelihood, and circumstances under which we might emerge from 

conservatorship are uncertain. Under the Purchase Agreement, as amended by the January 2021 Letter Agreement, we cannot 

exit from conservatorship, other than in connection with receivership, unless all currently pending material litigation relating to 

the conservatorship and/or the Purchase Agreement has been resolved or settled and for two or more consecutive periods we 

have common equity tier 1 capital (which does not include our senior preferred stock) of at least 3% of our adjusted total 

assets. While we will continue to increase our capital level as a result of the increase in the applicable Capital Reserve Amount 

under the Purchase Agreement, the increases in our capital level since September 30, 2019 have been or will be added to the 

aggregate liquidation preference of the senior preferred stock. In addition, our ability to increase our capital, other than through 

retained earnings, is limited, and it may not be possible for us to raise private capital on acceptable terms, if at all. We are 

permitted to raise up to $70.0 billion to build capital through the issuance of common stock only after Treasury has exercised in 

full its warrant to purchase 79.9% of our common stock and pending material conservatorship-related litigation has been 

resolved or settled. Treasury’s potential substantial equity ownership in our company, along with new or increased restrictions 

imposed on our business, and post-recapitalization dividends and fees we will be required to pay to Treasury, will reduce our 

attractiveness as an investment opportunity for third-party investors. It is uncertain whether or when we will be able to retain or 

raise sufficient capital to permit an end to our conservatorship, and this may not happen for several years or at all. For 

additional information on the January 2021 Letter Agreement, see MD&A – Regulation and Supervision – January 2021 

Letter Agreement with Treasury. 

Treasury would be required to consent to the termination of our conservatorship other than as discussed above, and there can 

be no assurance Treasury would do so. Even if the conservatorship is terminated, we would remain subject to the Purchase 

Agreement and the terms of the senior preferred stock unless they are terminated or amended. It is possible that the 

conservatorship could end with our being placed into receivership.

Even if the conservatorship ends and the voting rights of common stockholders are restored, we could effectively remain under 

the control of the U.S. government because of the Purchase Agreement, Treasury's warrant to acquire nearly 80% of our 

common stock for nominal consideration, or Treasury’s ownership of our common stock after it exercises its warrant. If 

Treasury exercises the warrant, the ownership interest of our existing common stockholders will be substantially diluted. 

Our current Net Worth Amount may not be sufficient to absorb potential losses and could result in our having to 

request additional draws from Treasury in future periods.

As a result of the net worth sweep dividend requirement, from 2013 to 2017 we could not retain capital from the earnings 

generated by our business operations in excess of the applicable Capital Reserve Amount, which decreased by $600 million 

each year, from $3 billion in 2013 to $600 million in 2017. As a result of increases in the applicable Capital Reserve Amount 

since January 1, 2018, we have been able to retain earnings and build capital, and our Net Worth Amount was $16.4 billion as 

of December 31, 2020. If we were to have a net worth deficit in a future period as a result of significant future comprehensive 

losses, we would be required to draw funds from Treasury under the Purchase Agreement. 

A variety of factors could influence whether we could require a draw, including many of the other risk factors we have identified, 

as well as changes in tax rates and related changes in our deferred tax assets and reserves. Additional draws, which will 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 155
decrease the amount of Treasury's remaining commitment under the Purchase Agreement, may result in reputational risk and 

add to the uncertainty regarding our long-term financial sustainability.

FHFA, as our Conservator, controls our business activities. We may be required to take actions that reduce our 

profitability, are difficult to implement, or expose us to additional risk.

We are under the control of FHFA, as our Conservator, and are not managed to maximize stockholder returns. FHFA 

determines our strategic direction. We face a variety of different, and sometimes competing, business objectives and FHFAmandated activities, such as the initiatives we are pursuing under the Conservatorship Scorecards. Some of the activities FHFA 

has required us to undertake have been costly and/or difficult to implement, such as development and support of the CSP.

FHFA has required us to make changes to our business that have adversely affected our financial results and could require us 

to make additional changes at any time. For example, FHFA may require us to undertake activities that (i) reduce our 

profitability; (ii) expose us to additional credit, market, funding, operational, and other risks; or (iii) provide additional support for 

the mortgage market that serves our public mission, but adversely affects our financial results.

FHFA also has required us to take other actions that may adversely affect our business or financial results, such as requiring us 

to maintain increased liquidity and directing us to amend the CSS LLC agreement in January 2020 in a manner that reduces our 

ability to control CSS Board decisions, even after conservatorship, including decisions about strategy, business operations, and 

funding. FHFA has also appointed three additional CSS Board members, and as a result, the CSS Board members we and 

Fannie Mae appoint could be outvoted by non-GSE designated Board members on any matter during conservatorship and on a 

number of significant matters after conservatorship. It is possible that FHFA may require us to make additional changes to the 

CSS LLC agreement, or may otherwise impose restrictions or provisions relating to CSS or the UMBS, that may adversely 

affect us.

From time to time, FHFA has prevented us from engaging in business activities or transactions that we believe would be 

profitable, and it may do so again in the future. For example, FHFA has limited the size and composition of our mortgagerelated investments portfolio and the amount and type of new single-family and multifamily loans we may acquire. We may be 

required to adopt business practices that help serve our public mission and other non-financial objectives, but that may 

negatively affect our future financial results. Congress or FHFA may require us to set aside or otherwise pay monies to fund 

third-party initiatives, such as the existing requirement under the GSE Act that we allocate amounts for certain housing funds. 

FHFA also could require us to take actions that would adversely affect our ability to compete and innovate, such as through its 

proposed rule for new GSE products and activities; changing our risk appetite and risk limits; and limiting our control over 

pricing. FHFA is also Conservator of Fannie Mae, our primary competitor. FHFA’s actions, as Conservator of both companies, 

could require us and Fannie Mae to take a uniform approach to certain activities, limiting innovation and competition and 

possibly putting us at a competitive disadvantage because of differences in our respective businesses. FHFA also could limit 

our ability to compete with new entrants and other institutions. The combination of the restrictions on our business activities 

and our potential inability to generate sufficient revenue through our guarantee activities to offset the effects of those 

restrictions may have an adverse effect on our results of operations and financial condition.

The Purchase Agreement and the terms of the senior preferred stock significantly limit our business activities. In 

the event of non-compliance with any Purchase Agreement covenants, Treasury may be entitled to specific 

performance, damages, and other remedies, and if the corrective actions we were to take were determined by 

FHFA to be insufficient, FHFA could impose penalties on us or take other remedial actions. 

The Purchase Agreement and the terms of the senior preferred stock place significant restrictions on our ability to manage our 

business, including limiting (i) our secondary market activities; (ii) the amount and type of single-family and multifamily loans we 

may acquire; (iii) the amount of indebtedness we may incur; (iv) the size of our mortgage-related investments portfolio; (v) our 

ability to maintain alignment and competitiveness with Fannie Mae issued UMBS; and (vi) our ability to pay dividends, transfer 

certain assets, raise capital, and pay down the liquidation preference of the senior preferred stock. 

The Purchase Agreement prohibits us from taking a variety of actions without Treasury's consent. Treasury has the right to 

withhold its consent for any reason. The warrant held by Treasury, restrictions on our business under the Purchase Agreement, 

and the senior status and net worth sweep dividend provisions of the senior preferred stock could adversely affect our ability to 

attract capital from the private sector in the future, should we be in a position to do so. For more information, see

Conservatorship and Related Matters - Freddie Mac's Future is Uncertain.

In the event of non-compliance with any Purchase Agreement covenants, Treasury may be entitled to specific performance, 

damages, and other such remedies as may be available at law or in equity. In addition, if the corrective actions we were to take 

or plan to take to comply with such covenants were determined by FHFA to be insufficient or unsuccessful, FHFA could impose 

penalties on us or take other remedial action.

Risk Factors

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If FHFA placed us into receivership, our assets would be liquidated. The liquidation proceeds might not be 

sufficient to pay claims outstanding against Freddie Mac, repay the liquidation preference of our preferred stock, 

or make any distribution to our common stockholders.

We can be put into receivership at the discretion of the Director of FHFA at any time for a number of reasons set forth in the 

GSE Act. Several bills were introduced in past sessions of Congress that provided for Freddie Mac to be placed into 

receivership. In addition, FHFA could be required to place us into receivership if Treasury were unable to provide us with 

funding requested under the Purchase Agreement to address a deficit in our net worth. Treasury might not be able to provide 

the requested funding if, for example, the U.S. government were not fully operational because Congress had failed to approve 

funding or the government had reached its borrowing limit. For more information, see MD&A - Regulation and 

Supervision.

Being placed into receivership would terminate the conservatorship. The purpose of receivership is to liquidate our assets and 

resolve claims against us. The appointment of FHFA as our receiver would terminate all rights and claims that our stockholders 

and creditors might have against our assets or under our Charter as a result of their status as stockholders or creditors, other 

than possible payment upon our liquidation. 

The GSE Act provides that, if we were placed into receivership, the receiver would hold the mortgages underlying our 

mortgage-related securities (and the payments thereon) for the benefit of the holders of those securities. However, payments 

on the mortgages underlying our mortgage-related securities might not be sufficient to make full payments of principal and 

interest on the securities. If we were unable to fulfill our guarantee, the holders of our mortgage-related securities would 

experience delays in receiving payments because the relevant systems are not designed to make partial payments.

If our assets were liquidated, the liquidation proceeds might not be sufficient to pay the secured and unsecured claims against 

us (including claims on our guarantees), repay the liquidation preference on any series of our preferred stock, or make any 

distribution to our common stockholders. Proceeds would first be applied to the secured and unsecured claims against us, the 

administrative expenses of the receiver, and the liquidation preference of the senior preferred stock. Any remaining proceeds 

would then be available to repay the liquidation preference of other series of preferred stock. Only after the liquidation 

preference of all series of preferred stock is repaid would any proceeds be available for distribution to the holders of our 

common stock.

Our business and results of operations may be materially adversely affected if we are unable to attract and retain 

well-qualified, talented employees across the company. The conservatorship, the uncertainty of our future, and 

limitations on our compensation structure may put us at a disadvantage compared to other companies in 

attracting and retaining employees.

Our business is highly dependent on the talents and efforts of our employees. We face competition, particularly from the 

financial services and technology industries, for qualified talent. If we are unable to attract and retain talent, we increase our risk 

of operational failures. 

Restrictions on employee compensation have been and may be imposed on us, while we remain in conservatorship, by 

Congress, FHFA, or Treasury. For example, FHFA as Conservator has the authority to approve the terms and amount of our 

executive compensation and may require us to make changes to our executive and employee compensation programs. For 

example, FHFA has imposed limits on executive and employee compensation and has required prior approval of certain 

compensation arrangements. Such limitations on our executive and employee compensation structure, as well as the ongoing 

conservatorship and uncertainty about our future, could have an adverse effect on our ability to attract and retain talent. 

Leadership departures, such as the recent departure of our former CEO, or a combination of such departures at approximately 

the same time, could materially adversely affect our business, results of operations, and financial condition. For example, 

turnover in key positions and challenges in integrating new leaders could harm our ability to manage our business effectively 

and successfully implement current strategic initiatives and could adversely affect our financial performance.

COVID-19 PANDEMIC

The COVID-19 pandemic has significantly and adversely affected general economic conditions and the housing 

market. These adverse changes, as well as the effects of actions taken in response to the pandemic, such as 

forbearance for Freddie Mac-owned mortgages and other relief measures, have significantly and adversely 

affected our business, results of operations, and financial condition and elevated our credit, market, and 

operational risk levels in 2020 and will likely continue to do so in 2021, and perhaps beyond.

In response to the COVID-19 pandemic, Freddie Mac has taken several steps to support the mortgage market, such as 

forbearance for Freddie Mac-owned mortgages and other measures to assist homeowners, renters, multifamily property 

owners, lenders, and sellers. For additional information on our relief efforts, see MD&A - Introduction - COVID-19 Pandemic 

Response Efforts. These actions may not be successful and may negatively affect our financial condition and results of 

operations, perhaps significantly. Borrowers that obtain forbearance may be unable to resume making payments on their 

mortgage loans at the end of the forbearance period, which could result in losses. We expect serious delinquency rates and the 

volume of loss mitigation activity to remain elevated as a result of the pandemic and our forbearance programs, and we expect 

Risk Factors

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to advance significant amounts to cover principal and interest payments to security holders for loans in forbearance in the 

coming months. The pandemic and forbearance programs have caused a significant increase in our allowance for credit losses. 

Estimates of expected credit losses are subject to significant uncertainty and may increase in the future depending on the 

depth and severity of the economic downturn caused by the pandemic.

The government has taken several actions to provide relief to those negatively affected by COVID-19, such as direct payments 

and federal unemployment insurance. In addition, the Federal Reserve has supported the financial markets, including by 

purchasing Freddie Mac mortgage-related securities. If the Federal Reserve discontinued or lessened this support, it could 

negatively affect our financial position and results of operations. For additional information on federal government relief efforts, 

see MD&A - Introduction - COVID-19 Pandemic Response Efforts. Current and future government relief efforts taken in 

response to the COVID-19 pandemic may provide insufficient support for the economy and the housing market.

Our credit risk and market risk levels have increased as a result of the COVID-19 pandemic, and may increase further 

depending on the duration and severity of the pandemic. For example:

n Our mortgage credit risk level is heightened, as a result of increased forbearance, modifications, and defaults due to the 

COVID-19 pandemic. These trends have adversely affected our results of operations through increased expected credit 

losses and are expected to continue. Payment defaults on mortgages could result in accelerated prepayments of certain of 

our securities as a result of our repurchase practices relating to seriously delinquent mortgages and mortgage 

modifications, foreclosures, and workouts.

n Our ability to transfer single-family credit risk was, and may in the future be, negatively affected by adverse market 

conditions resulting from the COVID-19 pandemic.

n We generally fund our obligations to advance principal and interest to security holders for loans in forbearance and our 

purchase of delinquent and modified loans from our securities trusts through debt issuances. Depending on the extent of 

forbearance and delinquencies as a result of the COVID-19 pandemic, it is possible that we may not be able to meet our 

contractual obligations as a result of the aggregate indebtedness limit and mortgage-related investments portfolio limit 

under the Purchase Agreement, without breaching limits or obtaining the prior written consent of Treasury and FHFA to 

increase these limits.

n	 Increased market instability and uncertainty associated with the volume of loans we may purchase from trusts may 

adversely affect our ability to hedge, and demand for Freddie Mac securities, other than from the Federal Reserve, may 

decrease substantially.

Our operational risk level has increased as a result of the COVID-19 pandemic. Freddie Mac has instituted temporary 

operational changes, such as shifting to remote work for the majority of our employees. While we have not experienced material 

impacts to operations, it is possible that certain procedures we have in place to monitor our employees may not be effective, or 

any significant technological or infrastructure-related disruptions during this period of remote work could adversely affect our 

ability to conduct normal business operations. The COVID-19 pandemic has presented potential risks to staffing, such as stress 

on our workforce as a result of home schooling, caring for themselves and loved ones, and potential burnout, and it is possible 

that key employees or a significant number of employees may be adversely affected by the virus. In addition, model risk levels 

are heightened. There is an increased degree of uncertainty concerning key inputs into our financial cash flows, such as 

projections of mortgage interest rates, house prices, credit defaults, negative yields, prepayments, and interest rates, and we 

expect our models to face significant challenges in accurately forecasting these inputs. We are attempting to mitigate this 

increased risk by applying model overlays and adjustments, where deemed appropriate, but 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 consolidated 

financial statements. For additional information on operational risk, see MD&A - Risk Management - Operational Risk.

CREDIT RISKS

We are subject to mortgage credit risk. Credit losses and costs related to this risk could adversely affect our 

financial results.

Mortgage credit risk is the risk that a borrower will fail to make timely payments on a loan we own or guarantee. This exposes 

us to the risk of credit losses and credit-related expenses, which could adversely affect our financial results. We are primarily 

exposed to mortgage credit risk with respect to the single-family and multifamily loans and securities reflected as assets on our 

consolidated balance sheets. We are also exposed to mortgage credit risk with respect to guaranteed securities and guarantee 

arrangements that are not reflected as assets on our consolidated balance sheets, including K Certificates, SB Certificates, and 

certain senior subordinate securitization structures. 

We continue to have loans in our single-family credit guarantee portfolio with certain characteristics, such as Alt-A loans, 

interest-only loans, option ARM loans, loans with original LTV ratios greater than 90%, and loans to borrowers with credit 

scores less than 620 at the time of origination, that expose us to greater credit risk than other types of loans. See MD&A - 

Risk Management - Single-Family Mortgage Credit Risk - Monitoring Loan Performance and Characteristics. We 

also expect to continue acquiring loans with higher LTV ratios through our Home Possible and Home One initiatives, as well as 

Risk Factors

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loans with higher DTI ratios, generally up to 50%, which will increase our exposure to credit risk. Our efforts to increase eligible 

borrowers' access to single-family mortgage credit, including our affordable housing program and our plan for fulfilling our duty 

to serve underserved markets, expose us to increased mortgage credit risk.

We face significant risks related to our delegated underwriting process for single-family loans, including risks 

related to data accuracy, mortgage fraud, and our sellers' origination operations. Changes to the process could 

increase our risks.

We delegate to our sellers the underwriting for the single-family loans we purchase or securitize. Our contracts with sellers 

describe mortgage eligibility and underwriting standards, and the sellers represent and warrant to us that the loans they deliver 

to us meet these standards. 

We rely on the strength of our sellers' origination processes and controls. We perform risk-based audits to test our 

counterparties' control environments. However, our review may not detect weak operations that could lead to errors in seller 

decisions like correspondent approvals, property valuations, and insurance coverage.

We do not independently verify most of the information provided to us before we purchase or securitize a loan. This exposes us 

to the risk that one or more of the parties involved in a transaction (such as the borrower, property seller, broker, appraiser, title 

agent, loan officer, or lender) misrepresented facts about the borrower, property, or loan, or otherwise engaged in fraud. 

We review a sample of loans after we purchase them to determine if they comply with our contractual standards. However, our 

review may not detect any misrepresentations by the parties involved in the transaction, deter loan fraud, or reduce our 

exposure to these risks. 

We can exercise certain contractual remedies, including requiring repurchase of the loan, for loans that do not meet our 

standards. However, at the direction of FHFA, we have significantly revised our representation and warranty framework 

(including changes to remedies for certain defects) to relieve sellers of certain repurchase obligations in specific cases with 

respect to single-family loans. As a result, we may face greater exposure to credit and other losses under this revised 

framework, because our ability to seek recovery or repurchase from sellers is more limited and we must identify breaches of 

representations and warranties early in the life of the loan. 

Our suite of tools, collectively referred to as Loan Advisor, offers limited representation and warranty relief for certain loan 

components that satisfy automated data analytics related to appraisal quality, collateral valuation, borrower assets, and 

borrower income. In general, limited representation and warranty relief is offered when information provided by the lender is 

validated against independent data sources. However, there is a risk that the enhanced tools and processes provided by Loan 

Advisor will not enable us to identify all breaches in a timely manner. In turn, this could increase our exposure to credit and 

other losses. For more information, see MD&A - Risk Management - Single-Family Mortgage Credit Risk. 

Declines in national or regional house prices or other adverse changes in the housing market could negatively 

affect both our single-family and multifamily businesses.

Our financial results and business volumes can be negatively affected by declines in house prices and other adverse changes in 

the housing market. This could (i) significantly increase our expected credit losses; (ii) result in higher stress losses for both the 

single-family and multifamily portfolios; (iii) increase our losses on foreclosure alternatives, third-party sales, and dispositions of 

REO properties; (iv) reduce our return or result in losses on our single-family and multifamily guarantee business, as default 

rates could be higher than we expected when we issued the guarantees; (v) negatively affect loan pricing, which could cause us 

to change our disposition strategies for our single-family seasoned loans; or (vi) adversely impact our ability to transfer credit 

risk.

For more information regarding these risks, see MD&A - Risk Management - Credit Risk.

The proportion of our refinance loan purchases to total loan purchases could decrease if mortgage interest rates increase. This 

could increase our exposure to mortgage credit risk, as refinance loans (particularly those that do not involve "cash-out") 

generally present less credit risk than purchase loans. Some of our seller/servicer counterparties are highly dependent on 

refinance loan volumes. A decrease in such volumes could adversely affect these counterparties, which could increase our 

exposure to counterparty credit risk.

We are exposed to counterparty credit risk with respect to our business counterparties. Our financial results may 

be adversely affected if one or more of our counterparties fail to meet their contractual obligations to us. 

We depend on our institutional counterparties to provide services that are critical to our business. We face the risk that one or 

more of our counterparties may fail to meet their contractual obligations to us. Our major counterparties include seller/servicers, 

credit enhancement providers, and counterparties to derivatives, short-term lending, and other funding transactions (e.g., cash 

and other investments transactions). For more information, see MD&A - Counterparty Credit Risk.

Many of our major counterparties provide several types of services to us. The concentration of our exposure to our 

counterparties remains high. Efforts we take to reduce exposure to financially weak counterparties could increase the relative 

concentration of our exposure to other counterparties, increase our costs, and reduce our revenue. It is possible that our 

counterparties could experience challenging market conditions that could adversely affect their liquidity and financial condition 

Risk Factors

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and cause some of them to fail. Many of our counterparties are subject to increasingly complex regulatory requirements and 

oversight, which place additional stress on their resources and may affect their ability or willingness to do business with us.

Credit risk related to single-family seller/servicers 

We are exposed to credit risk from the seller/servicers of our single-family loans, as described below. 

n	 A decline in servicing performance - A decline in a servicer's performance, such as delayed foreclosures or missed 

opportunities for loan modifications, could significantly affect our ability to mitigate credit losses and could affect the 

overall credit performance of our single-family credit guarantee portfolio. A large volume of seriously delinquent loans, the 

complexity of the servicing function, and heightened liquidity requirements are significant factors contributing to the risk of 

a decline in performance by servicers. Servicers may experience financial and other difficulties due to the advances they 

are required to make to us on delinquent single-family mortgages, including mortgages subject to forbearance plans. We 

could be adversely affected if our servicers lack appropriate controls, experience a failure in their controls, or experience a 

disruption in their ability to service loans, including as a result of legal or regulatory actions or ratings downgrades. We also 

are exposed to fraud by third parties in the loan servicing function, particularly with respect to short sales and other 

dispositions of non-performing assets.

 We could attempt to mitigate our exposure to a poorly performing servicer by terminating its right to service our loans; 

however, in a highly adverse economic environment, there could be a scarce capacity in the marketplace and we may not 

be able to find successor servicers who have the capacity to service the affected loans and who are also willing to assume 

the representations and warranties of the terminated servicer. In addition, terminating a large servicer may not be feasible 

because of the operational and capacity challenges related to transferring large servicing portfolios. There is also a 

possibility that the performance of some loans may degrade during the transition to new servicers. During a period of 

heightened delinquencies, we may incur costs and potential increases in servicing fees if we replace a servicer with a high 

concentration of loans in default which are more costly to service. We may also be exposed to concentrations of credit risk 

among certain servicers.

n	 A failure by seller/servicers to fulfill their obligations to repurchase loans or indemnify us as a result of breaches of 

representations and warranties - While we may have the contractual right to require a seller or servicer to repurchase 

loans from us, it may be difficult, expensive, and time-consuming to enforce such repurchase obligations. We could enter 

into settlements to resolve repurchase obligations; however, the amounts we receive under any such settlements may be 

less than the losses we ultimately incur on the underlying loans.

 Under our representation and warranty framework, revised as directed by FHFA, we are required in some cases to utilize 

an alternative remedy, such as indemnification, in lieu of repurchase. The amount we recover under an alternative remedy 

may be less than the amount we could have recovered in a repurchase.

n	 Increased exposure to non-depository and smaller financial institutions - A large and increasing volume of our singlefamily loans is acquired from and serviced by non-depository and smaller financial institutions. Some of these institutions 

may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight, as 

large depository institutions. As a result, we face increased risk that these counterparties could fail to perform their 

obligations to us. In particular, non-depository servicers rapidly grew their servicing portfolios in the last several years. This 

appears to have resulted in operational strains that have subjected some of these servicers to regulatory scrutiny. This 

rapid growth could expose us to increased risks if any operational strain adversely affects these servicers' servicing 

performance or their financial strength. These institutions also service portfolios for other investors and guarantors and 

operational issues related to those portfolios could affect the performance of our portfolio. In addition, these servicers may 

not always have ready access to appropriate sources of liquidity to finance their operations, particularly during periods 

when the mortgage market is experiencing a downturn. If these servicers reduce their servicing portfolios, overall servicing 

capacity may be constrained. 

Our seller/servicers also have a significant role in servicing loans in our multifamily mortgage portfolio. We are exposed to the 

risk that multifamily seller/servicers could come under financial pressure, which could potentially cause a decline in their 

servicing performance and cause us to terminate their right to service our loans, potentially resulting in further concentration of 

exposure to other seller/servicers.

We are also exposed to settlement risk on the non-performance of sellers and servicers as a result of our forward settlement 

loan purchase programs in our single-family and multifamily businesses.

Credit risk related to counterparties to derivatives, funding, short-term lending, securities, and other transactions 

We have significant exposure to institutions in the financial services industry relating to derivatives, funding, short-term lending, 

securities, securities purchased under agreements to resell, secured lending transactions and forward settlement of our loans 

and securities, and other transactions (e.g., cash and other investments transactions). These transactions are critical to our 

business, including our ability to: 

n	 Manage interest-rate risk and other risks related to our investments in mortgage-related assets;

n	 Fund our business operations; and

Risk Factors

FREDDIE MAC | 2020 Form 10-K 160
n	 Service our customers. 

We face the risk of operational failure of the clearing members, exchanges, clearinghouses, or other financial intermediaries we 

use to facilitate derivatives, short-term lending, securities, and other transactions. If a clearing member or clearinghouse were 

to fail, we could lose the collateral or margin posted with the clearing member or clearinghouse. 

We are a clearing member of the clearinghouses through which we execute mortgage-related and Treasury securities 

transactions. As a result, we could be subject to losses because we are required to participate in the coverage of losses 

incurred by other clearing members if they fail to meet their obligations to the clearinghouse.

If our counterparties to short-term lending transactions fail, we are exposed to losses to the extent the transaction is unsecured 

or the collateral posted to us is insufficient.

Credit risk related to credit enhancement providers

If a mortgage insurer fails to meet its obligations to reimburse us for claims, our credit losses could increase. In addition, if a 

regulator determines that a mortgage insurer lacks sufficient capital to pay all claims when due, the regulator could take action 

that might affect the timing and amount of claim payments made to us. We face similar risks with respect to our counterparties 

on ACIS transactions. 

We cannot differentiate pricing based on the strength of a mortgage insurer or revoke a mortgage insurer's status as an eligible 

insurer without FHFA approval. In addition, we generally do not select the mortgage insurance provider on a specific loan 

because the selection is usually made by the lender at the time the loan is originated. As a result, we could acquire a 

concentration of risk to certain insurance providers. We continue to acquire new loans with mortgage insurance from mortgage 

insurers that have credit ratings below investment grade.

Our loss mitigation activities may be unsuccessful or costly and may adversely affect our financial results. 

Our loss mitigation activities may not be successful. The costs we incur related to loan modifications and other loss mitigation 

activities have been, and could continue to be, significant. For example, we generally bear the full cost of the monthly payment 

reductions related to modifications of loans we own or guarantee, as well as all applicable servicer incentive fees for our 

mortgage modifications. 

We could be required to make changes to our loss mitigation activities that could make these activities more costly to us. 

FHFA, as Conservator, may continue to issue directives and Advisory Bulletins to assist borrowers and align servicing practices 

for the GSEs. These directives could make these activities more costly to us, especially with regard to loan modification 

initiatives. FHFA may continue to issue these directives for a variety of reasons, including consumer relief and alignment of the 

prepayment behavior of our and Fannie Mae's respective UMBS.

We have loans on trial period plans as required under certain loan modification programs. Some of these loans will fail to 

complete the trial period or fail to qualify for our other borrower assistance programs. For these loans, the trial period will have 

effectively delayed the foreclosure process and could increase our costs.

Many of our HAMP loans, which initially were set at a below-market interest rate, have provisions for the interest rates to 

increase gradually until they reach the market rate that was in effect at the time of the modification. The resulting increase in the 

borrowers' payments may increase the risk that these borrowers will default.

The type of loss mitigation activities we pursue could affect prepayments on our single-family securities (e.g., UMBS, 55-day 

MBS, PCs, and REMICs), which could affect the value of these securities or the earnings from mortgage-related assets in our 

Capital Markets segment mortgage investments portfolio. In addition, loss mitigation activities may adversely affect our ability 

to securitize, resecuritize, and sell the loans subject to those activities.

We devote significant resources to our borrower assistance initiatives. The size and scope of these efforts may compete with 

other business opportunities or corporate initiatives.

For more information on our loss mitigation activities, see MD&A - Our Business Segments - Single-Family Guarantee 

- Business Results - Loss Mitigation Activities and MD&A - Risk Management - Single-Family Mortgage Credit 

Risk - Engaging in Loss Mitigation Activities.

We have been, and will continue to be, adversely affected by delays and deficiencies in the single-family 

foreclosure process.

The average length of time for foreclosure of a Freddie Mac single-family loan has significantly increased since 2008, 

particularly in states that require a judicial foreclosure process, and may further increase. Delays in the foreclosure process 

could:

n	 Cause our expenses to increase. For example, properties awaiting foreclosure could deteriorate until we acquire them, 

resulting in increased expenses to repair and maintain the properties and

n	 Adversely affect trends in house prices regionally or nationally, which could adversely affect our financial results.

Risk Factors

FREDDIE MAC | 2020 Form 10-K 161
We are exposed to increased credit losses and credit-related expenses in the event of a major natural disaster, 

other catastrophic event, including a pandemic, or significant climate change effects.

The occurrence, severity, and duration of a major natural or environmental disaster or other catastrophic event, including a 

pandemic, as well as significant climate change effects such as rising sea levels or wildfires, in an area where we own or 

guarantee mortgage loans or REO properties, especially in densely populated geographic areas, could increase our credit 

losses and credit related expenses. A natural disaster or catastrophic event or other significant climate change effect that either 

damages or destroys single-family or multifamily real estate underlying mortgage loans or REO properties we own or guarantee, 

or negatively affects the ability of borrowers to continue to make payments on mortgage loans we own or guarantee, could 

increase our serious delinquency rates and average loan loss severity in the affected areas. Such events could have a material 

adverse effect on our business and financial results. We may not have adequate insurance coverage for some of these natural, 

catastrophic, or climate change-related events. 

Our CRT transactions may not be available to us in adverse economic conditions. These transactions also lower 

our profitability.

Our ability to transfer credit risk (and the cost to us of doing so) could change rapidly depending on market conditions. Adverse 

market conditions may result in insufficient investor demand for CRT transactions at acceptable prices. It is possible that our 

CRT strategies may not prevent us from incurring substantial losses. Some of our CRT transactions have termination dates that 

are earlier than the maturities of the reference mortgage loans, and we are exposed to credit risk on those mortgage loans after 

termination of such transactions. The costs associated with CRT transactions are significant and may increase. For some CRT 

transactions, there may be a significant difference in time between when we recognize a credit loss in earnings and when we 

recognize the related recovery in earnings, and this lag could adversely affect our financial results in the earlier period. In 

addition, the implementation of the ERCF or additional guidance from FHFA may cause us to modify our credit risk transfer 

activities and could affect our risk appetite and our capital requirements. For more information regarding these transactions, 

see Note 8. 

MARKET RISKS

Changes in interest rates could negatively affect the fair value of financial assets and liabilities, our results of 

operations, and our net worth. 

Our financial results can be significantly affected by changes in interest rates.

Interest rates can fluctuate for many reasons, including changes in the fiscal and monetary policies of the federal government 

and its agencies as well as geopolitical events or changes in general economic conditions. 

Changes in interest rates could adversely affect the cash flows and prepayment rates on assets that we own and related debt 

and derivatives. In addition, changes in interest rates could adversely affect the prepayment rate or default rate on the loans 

that we guarantee. For example:

n	 When interest rates decrease, borrowers are more likely to prepay their loans by refinancing them at a lower rate. An 

increased likelihood of prepayment on the loans underlying our mortgage-related securities may adversely affect the value 

of these securities.

n	 When interest rates increase:

l	 Borrowers with higher risk adjustable-rate loans may have fewer opportunities to refinance into fixed-rate loans and

l	 A borrower's payments on loans with adjustable payment terms, including any additional debt obligations (such as 

home equity lines of credit and second liens) with such terms, may increase, which in turn increases the risk that the 

borrower may default on a loan we own or guarantee.

Additionally, we issue callable debt instruments to manage the duration and prepayment risk of expected cash flows of the 

mortgage assets we own. We may exercise the option to repay the outstanding principal balance when interest rates decrease. 

However, we may replace the called debt at a higher spread rate due to the market conditions at that time. In the event we 

decide not to call our debt, we may incur higher hedging costs.

We incur costs as a result of our risk management activities, which may not be successful. Our interest-rate risk management 

activities are designed to reduce our economic exposure to changes in interest rates to a low level as measured by our models. 

However the accounting treatment for certain of our assets and liabilities, including derivatives, creates variability in our 

earnings that may not be indicative of the economics of our business when interest rates fluctuate, as some assets and 

liabilities are measured at amortized cost and some are measured at fair value, while all derivatives are measured at fair value. 

In addition, differences in amortization between our assets and the liabilities we use to fund them, including amortization of fair 

value hedging basis adjustments, may also contribute to earnings variability.

We use hedge accounting for certain single-family mortgage loans and long-term debt, which is intended to reduce the 

interest-rate volatility in our GAAP earnings. Our single-family mortgage hedge accounting program is complex and unique in 

the industry. We may fail to properly execute this program and related changes to systems and processes. Even if implemented 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 162
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. 

Changes in market spreads could negatively affect the fair value of financial assets and liabilities, our results of 

operations, and net worth.

Changes in market conditions, including changes in interest rates, liquidity, prepayment, and/or default expectations and the 

level of uncertainty in the market for a particular asset class, may cause fluctuations in market spreads (also referred to as 

OAS). Our financial results and net worth can be significantly affected by changes in market spreads, especially results driven 

by financial instruments that are measured at fair value. These instruments include trading securities, available-for-sale 

securities, derivatives, loans held-for-sale, and loans and debt with the fair value option elected. 

A widening of the market spreads on a given asset is typically associated with a decline in the fair value of that asset or 

tightening of the market spread on a given liability is typically associated with a decline in the fair value of that liability, which 

may adversely affect our near-term financial results and net worth. While wider market spreads may create favorable 

investment opportunities, our ability to take advantage of any such opportunities is limited due to various restrictions on our 

mortgage-related investments portfolio activities. See MD&A - Conservatorship and Related Matters.

A narrowing or tightening of the market spreads on a given asset is typically associated with an increase in the fair value of that 

asset. Narrowing market spreads may reduce the number of attractive investment opportunities and could increase the cost of 

our activities to support the liquidity and price performance of our UMBS and other securities. Consequently, a tightening of the 

market spreads on our assets may adversely affect our future financial results and net worth. 

Changes in market spreads also affect the fair value of our debt with the fair value option elected. A narrowing or tightening of 

the market spreads on a given liability is typically associated with an increase in the fair value of that liability, which is 

recognized as a loss by us.

A significant decline in the price performance of or demand for our UMBS could have an adverse effect on the 

volume and/or profitability of our new single-family guarantee business. 

Our UMBS are an integral part of our loan purchase program. Our competitiveness in purchasing single-family loans from our 

sellers and the volume and profitability of our new single-family guarantee business are directly affected by the price 

performance of UMBS issued by us relative to comparable Fannie Mae-issued UMBS. If our UMBS were to trade at a discount 

relative to comparable Fannie Mae securities due to prepayment performance or other factors, such a difference in relative 

pricing may create an incentive for sellers to conduct a disproportionate share of their single-family business with Fannie Mae.

It is possible that a liquid market for our UMBS may not be sustained over the short- or long-term, which could adversely affect 

their price performance and our single-family market share. A significant reduction in our market share, and thus in the volume 

of loans that we securitize, or a reduction in the trading volume of our UMBS could reduce the liquidity of our UMBS. While we 

may decide to employ various strategies to support the liquidity and price performance of our UMBS, any such strategies may 

fail or adversely affect our business and financial results. We may cease any such activities at any time, or FHFA could require 

us to do so, which could adversely affect the liquidity and price performance of our UMBS. We may incur costs to support our 

presence in the agency securities market and to support the liquidity and price performance of our securities.

Liquidity-related price differences could occur between UMBS issued by us and comparable Fannie Mae-issued UMBS due to 

factors that are largely outside of our control. For example, the level of the Federal Reserve’s purchases and sales of agency 

mortgage-related securities could affect the demand for and values of our UMBS. Therefore, any strategies we employ to 

reduce any liquidity-related price differences may not reduce or eliminate any such price differences over the long term.

We may experience price differences with Fannie Mae on individual new production pools of TBA-eligible mortgages, 

particularly with respect to specified pools and our multilender securities. From time to time, we may need to adjust our pricing 

for a particular new production pool category to maintain alignment and competitiveness with Fannie Mae with respect to the 

acquisition of such pools. Depending on the amount of pricing adjustments in any period, it is possible they could adversely 

affect the profitability of our single-family guarantee business for that period. This risk is heightened with diminished cash 

window volumes per the amended Purchase Agreement, and FHFA restrictions on pooling, limiting our pooling flexibility and 

ability to manage alignment. For more information, see MD&A - Our Business Segments - Capital Markets Segment - 

Business Overview - Products and Activities.

If the UMBS does not continue to receive widespread market acceptance, the liquidity and price performance of 

our single-family mortgage-related securities and our market share and profitability could be adversely affected. 

Commingling certain Fannie Mae securities in resecuritizations has increased our counterparty risk. 

As part of the combined UMBS market, we have been required by FHFA to align certain of our single-family mortgage purchase 

offerings, servicing, and securitization programs, policies and practices with Fannie Mae to achieve market acceptance of the 

UMBS. We cannot provide any assurance that these efforts will reduce the pricing disparities discussed above over the longterm. Aligning prepayment outcomes of Freddie Mac UMBS with Fannie Mae UMBS is the focus of the FHFA Uniform 

Mortgage-Backed Security Final Rule issued in February 2019. This alignment is more challenging during periods of increased 

refinances, automation, innovation, and change in the industry, which we experienced in 2020. These alignment activities may 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 163
adversely affect our business and our ability to compete with Fannie Mae. We may be required to further align our business 

processes with those of Fannie Mae. Uncertainty concerning the extent of the alignment between Freddie Mac's and Fannie 

Mae's mortgage purchase, servicing, and securitization programs, policies, and practices may affect the degree to which the 

UMBS receives widespread market acceptance.

If investors do not continue to accept the fungibility of Freddie Mac and Fannie Mae UMBS and instead prefer Fannie Mae 

UMBS over Freddie Mac UMBS, it could have a significant adverse impact on our business, liquidity, financial condition, net 

worth, and results of operations, and could affect the liquidity or market value of our single-family mortgage-related securities.

We have counterparty credit exposure to Fannie Mae due to investors' ability to commingle certain Freddie Mac and Fannie 

Mae securities in resecuritizations. When we resecuritize Fannie Mae securities, our guarantee of timely principal and interest 

extends to the underlying Fannie Mae securities. In the event Fannie Mae were to fail to make a payment on a Fannie Mae 

security that we resecuritized, Freddie Mac would be responsible for making the payment. We do not control or limit the 

amount of resecuritized Fannie Mae securities that we could be required to guarantee. We are dependent on FHFA, Fannie 

Mae, and Treasury (pursuant to Fannie Mae's and our respective Purchase Agreements with Treasury) to avoid a liquidity event 

or default. We have not modified our liquidity strategies to address the possibility of non-timely payment by Fannie Mae, but we 

may do so in the future.

We and Fannie Mae both rely on the Federal Reserve Banks to make payments on our respective mortgage-related securities. 

As noted above, in the event Fannie Mae were to fail to make a payment on a Fannie Mae security that we resecuritized, 

Freddie Mac would be responsible for providing the Federal Reserve Banks with the funds to make the payment. If we failed to 

provide the Federal Reserve Banks with all funds to make such payment on such resecuritized Fannie Mae securities, the 

Federal Reserve Banks would not make any payment on any of our outstanding Freddie Mac-issued UMBS, Supers, REMICs, 

or other securities to be paid on that payment date, regardless of whether such Freddie Mac-issued securities were backed by 

Fannie Mae-issued securities.

The profitability of our multifamily business could be adversely affected by a significant decrease in demand for 

our K Certificates and SB Certificates.

Our current multifamily business model is highly dependent on our ability to finance purchased multifamily loans through 

securitization into K Certificates and SB Certificates. A significant decrease in demand for K Certificates and SB Certificates 

could have an adverse impact on the profitability of the multifamily business to the extent that our holding period for the loans 

increases and we are exposed to credit, spread, and other market risks for a longer period of time or receive reduced proceeds 

from securitization. We employ various strategies to support the liquidity of our K Certificates and SB Certificates, but those 

strategies may fail or adversely affect our business. We may cease such activities at any time, or FHFA could require us to do 

so, which could adversely affect the liquidity and price performance of our K Certificates and SB Certificates.

The expected discontinuance of LIBOR could negatively affect the fair value of our financial assets and liabilities, 

results of operations, and net worth. A transition to an alternative reference interest rate could present 

operational problems and subject us to possible litigation risk. We may be unable to take a consistent approach 

across our financial products.

We are not able to predict whether LIBOR will actually cease to exist in the future, whether SOFR will become the marketaccepted benchmark in its place, or what impact such a transition may have on our business, results of operations, and 

financial condition. In early December 2020, the ICE Benchmark Administration Limited, the administrator of LIBOR, began a 

consultation on its intention to cease the publication of the most relevant tenors of U.S. Dollar LIBOR after June 2023. The 

transition from LIBOR could affect the financial performance of instruments we hold, require changes to hedging strategies, and 

adversely affect our financial performance. For example, if for market or regulatory reasons we are required to prematurely 

unwind our existing LIBOR-based derivatives or are not allowed to engage in new LIBOR-based derivatives without adequate 

liquidity in alternate indices such as SOFR, we may incur economic costs. We have various financial products, including 

mortgage loans, mortgage-related securities, and derivatives, that are tied to LIBOR, and many of these products will mature 

after June 2023. While the documentation for certain of these products provides us with discretion to select an alternative 

reference rate if LIBOR is discontinued, there is a possibility of disputes arising with investors and counterparties concerning 

our exercise of this discretion. In certain cases, the documentation may not provide us with discretion to select an alternative 

reference rate if LIBOR is discontinued or our discretion may be limited, creating uncertainty and the risk of legal disputes. 

These potential challenges in implementing an alternative reference rate could result in investors and counterparties acquiring 

fewer products and entering into fewer transactions, which could adversely affect our business. The large volume of products 

and transactions that may require changes to documentation or remediation could present substantial operational and legal 

challenges and result in significant costs. We may be unable to have a consistent approach to a LIBOR transition, including 

within a particular class of products, which could disrupt the market for that product. It is possible that actions we take in 

connection with the discontinuance of LIBOR, including the adoption of SOFR or an alternative reference rate for certain 

products, could subject us to basis risk, monetary losses, and possible litigation.

The use of SOFR as the alternative reference rate for LIBOR-based products may present certain market concerns. Among the 

concerns, a term structure for SOFR has not yet been developed and there is not yet a generally accepted or endorsed 

methodology for adjusting SOFR for all our products so that it will be substantially comparable to LIBOR. SOFR represents an 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 164
overnight, risk-free rate, whereas LIBOR has various tenors and reflects a credit risk component. There is no guarantee that a 

market-accepted term structure for SOFR will exist prior to the expected discontinuance of LIBOR. It is still uncertain how soon 

widespread market adoption of SOFR will occur.

As described above, we have identified material exposures to LIBOR but cannot reasonably estimate the expected impact of 

such exposure. For additional information regarding the actions we have taken to prepare for an orderly transition from LIBOR, 

see MD&A - Risk Management - Market Risk - Transition from LIBOR.

LIQUIDITY RISKS

Our activities may be adversely affected by limited availability of financing and increased funding costs.

The amount, type, and cost of our unsecured funding directly affects our interest expense and results of operations. A number 

of factors could make such financing more difficult to obtain, more expensive, or unavailable on any terms, including market 

and other factors; changes in U.S. government support for us; and reduced demand for our debt securities.

Market and Other Factors

Our ability to obtain funding in the public unsecured debt markets or by selling or pledging mortgage-related and other 

securities as collateral to other institutions could change rapidly or cease. The cost of available funding could increase 

significantly due to changes in interest rates, market confidence, operational risks, regulatory requirements, or other factors. 

Prolonged wide market spreads on long-term debt could cause us to reduce our long-term debt issuances and increase our 

reliance on short-term and callable debt issuances. Such increased reliance on short-term and callable debt could increase the 

risk that we may be unable to refinance our debt when it becomes due and result in a greater use of derivatives. Greater 

derivatives use could increase the variability of our comprehensive income or increase our credit exposure to our 

counterparties. Additionally, we may incur higher hedging costs in the event we decide not to call our debt.

We may incur higher funding costs due to our liquidity management requirements, practices, and procedures. For example, in 

June 2020, FHFA provided us with updated minimum short-, medium-, and long-term liquidity requirements. These updated 

requirements have been effective since December 1, 2020, and are more stringent than our previous liquidity requirements and 

result in higher funding costs. In addition, the updated requirements have impacted the size and the allowable investments in 

our other investments portfolio. 

Our practices and procedures may not provide us with sufficient liquidity to meet our ongoing cash obligations under all 

circumstances. In particular, we believe that our liquidity contingency plans may be inadequate or difficult to execute during a 

liquidity crisis or period of significant market turmoil. If we cannot access the unsecured debt markets, our ability to repay 

maturing indebtedness and fund our operations could be significantly impaired or eliminated, as our alternative sources of 

liquidity (e.g., cash and other investments) may not be sufficient to meet our liquidity needs. We have limited ability to use the 

less liquid assets in our mortgage-related investments portfolio as a significant source of liquidity (e.g., through sales or as 

collateral in secured borrowing transactions).

We make extensive use of the Federal Reserve's payment system in our business activities. The Federal Reserve requires that 

we fully fund accounts at the Federal Reserve Bank of New York to the extent necessary to cover cash payments on our debt 

and mortgage-related securities each day, before the Federal Reserve Bank of New York, acting as our fiscal agent, will initiate 

such payments. Although we seek to maintain sufficient intraday liquidity to fund our activities through the Federal Reserve's 

payment system, we have limited access to cash once the debt markets are closed for the day. Insufficient cash may cause our 

account to be overdrawn, potentially resulting in penalties and reputational harm. Unlike certain of our competitors, we do not 

have access to the Federal Reserve's discount window.

Changes in U.S. Government Support

Treasury supports us through the Purchase Agreement and Treasury's ability to purchase up to $2.25 billion of our obligations 

under its permanent statutory authority. Changes or perceived changes in the U.S. government's support for us could have a 

severe negative effect on our access to the unsecured debt markets and our debt funding costs. Our access to the unsecured 

debt markets and the costs of our debt funding could be adversely affected by several factors relating to U.S. government 

support, including uncertainty about the future of the GSEs; any concerns by debt investors that we face increasing risk of 

being placed in receivership; and future draws that significantly reduce the amount of available funding remaining under the 

Purchase Agreement. 

Pursuant to the January 2021 Letter Agreement, it is possible that we may be required to pay a dividend to Treasury in the 

future that would cause us to fall below our capital requirements under the ERCF. In addition, we and Treasury are required to 

agree to a periodic commitment fee that we will pay to Treasury for a five-year period (after we have reached prescribed capital 

levels) in return for Treasury's remaining funding commitment.

Reduced Demand for Debt Securities

If investor demand for our debt securities were to decrease, our liquidity, business, and results of operations could be materially 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 165
adversely affected. The willingness of investors to purchase and hold our debt securities can be influenced by many factors, 

including changes in the world economy, changes in exchange rates, and regulatory and political factors, as well as the 

availability of and investor preferences for other investments. We compete for debt funding with Fannie Mae, the FHLBs, and 

other institutions. Our funding costs and liquidity contingency plans may also be affected by changes in the amount of, and 

demand for, debt issued by Treasury.

If investors were to reduce their purchases of our debt securities or divest their holdings, our funding costs could increase and 

our business activities could be curtailed. The market for our debt securities may become less liquid as a result of our having 

reached the Purchase Agreement limits on the size of our mortgage-related investments portfolio and the amount of our 

unsecured debt. This could lead to a decrease in demand for our debt securities and an increase in our funding costs.

Any downgrade in the credit ratings of the U.S. government would likely be followed by a downgrade in our credit 

ratings. A downgrade in the credit ratings of our debt could adversely affect our liquidity and other aspects of 

our business.

Our credit ratings are important to our liquidity. We currently receive ratings for our unsecured debt from three nationally 

recognized statistical rating organizations (S&P, Moody's, and Fitch). These ratings are primarily based on the support we 

receive from Treasury, and therefore are affected by changes in the credit ratings of the U.S. government. Any downgrade in 

the credit ratings of the U.S. government would be expected to be accompanied by a downgrade in our credit ratings. 

In addition to a downgrade in the credit ratings of or outlook on the U.S. government, several other events could adversely 

affect our debt credit ratings, including actions by governmental entities, changes in government support for us, future GAAP 

losses, and additional draws under the Purchase Agreement. Any such downgrades could lead to major disruptions in the 

mortgage and financial markets and to our business due to lower liquidity, higher borrowing costs, lower asset values, and 

higher credit losses, and could cause us to experience net losses and net worth deficits.

For more information, see MD&A - Liquidity and Capital Resources.

OPERATIONAL RISKS

A failure in our operational systems or infrastructure, or those of third parties, could impair our ability to provide 

market liquidity, disrupt our business, damage our reputation, and cause financial losses.

Operational risk is elevated due to the volume, complexity, and pace of change across the company. We face significant levels 

of operational risk due to a variety of factors, including the size and complexity of our business operations, the amount of 

change to our core systems required to keep pace with market demands, regulatory requirements, and business initiatives, and 

the ever-changing cybersecurity landscape. Shortcomings or failures in our internal processes, people, or systems, or those of 

third parties with which we interact, could lead to impairment of our liquidity, disruption of our business (e.g., issuing mortgage 

and/or debt securities), incorrect payments to investors in our securities, errors in our financial statements, liability to customers 

or investors, further legislative or regulatory intervention, reputational damage, and financial and economic loss. 

Our business is highly dependent on our ability to process a large number of transactions on a daily basis and manage and 

analyze significant amounts of information, much of which is provided by third parties. This information may be incorrect, or we 

may fail to properly manage or analyze it.

The transactions we process are complex and are subject to various legal, accounting, tax, and regulatory standards, which 

can change rapidly in response to external events, such as the implementation of government-mandated programs and 

changes in market conditions. Our financial, accounting, data processing, or other operating systems and facilities may contain 

design flaws or may fail to operate properly, adversely affecting our ability to process these transactions, including our ability to 

compile and process legally required information. We have certain systems that require manual support and intervention, which 

may lead to heightened risk of system failures. The inability of our systems to accommodate an increasing volume of 

transactions or new types of transactions or products could constrain our ability to pursue new business initiatives or improve 

existing business activities. 

Our technological connections with our customers, counterparties, service providers, and other financial institutions continue to 

increase, which increases our risk exposure with respect to an operational failure of their infrastructure systems. We have 

developed, and expect to continue to develop, software tools for use by our customers in the customers' loan production and 

other processes. These tools may fail to operate properly, which could disrupt our or our customers' business and adversely 

affect our relationships with our customers.

We continue to increase our use of a third-party cloud infrastructure platform for both customer-facing applications as well as 

internal-use applications. If we do not implement changes to this platform in a well-managed, secure, and effective manner, we 

may experience unplanned service disruption or unplanned costs which may harm our business and operating results. In 

addition, our cloud infrastructure providers, or other service providers, could experience system breakdowns or failures, 

outages, downtime, cyber-attacks, adverse changes to financial condition, bankruptcy, or other adverse conditions, which 

could have a material adverse effect on our business and reputation. Thus, our plans to increase the amount of our 

infrastructure that we outsource to the cloud or to other third parties may increase our risk exposure.

Risk Factors

FREDDIE MAC | 2020 Form 10-K 166
We face increased operational risk due to the magnitude and complexity of the new initiatives we are undertaking, including our 

efforts to help build a better housing finance system. Some of these initiatives require significant changes to our operational 

systems. In some cases, the changes must be implemented within a short period of time. Our legacy systems may create 

increased operational risk for these new initiatives. Internal corporate reorganizations may also increase our operational risk, 

particularly during the period of implementation. 

We also face significant risks related to CSS and the operation and continued development of the CSP. We rely on CSS and 

the CSP (which is owned and operated by CSS) for the operation of many of our single-family securitization activities. Our 

business activities would be adversely affected and the market for Freddie Mac securities would be disrupted if the CSP were 

to fail or otherwise become unavailable to us or if CSS were unable to perform its obligations to us, including as a result of an 

operational failure by Fannie Mae. In the event of a CSS operational failure, we may be unable to issue certain new single-family 

mortgage-related securities, and investors in mortgage-related securities hosted on the CSS platform may experience payment 

delays. Any measures we could take to mitigate these risks might not be sufficient to prevent our business from being harmed. 

We update our internal systems and processes on a regular basis, including to improve existing processes and respond to 

market and regulatory developments. We could be adversely affected if CSS and/or the CSP are unable to make any necessary 

corresponding changes to their systems and processes in a timely manner. CSS could adopt or prioritize strategies that could 

adversely affect its ability to perform its obligations to us. Amendments to the CSS LLC agreement in January 2020 reduced 

Freddie Mac's and Fannie Mae's ability to control CSS Board decisions, even after conservatorship, including decisions about 

strategy, business operations, and funding.

Our employees could act improperly for their own or third-party gain and cause unexpected losses or reputational damage. 

While we have processes and systems in place designed to prevent and detect fraud, these processes may not be successful.

Most of our key business activities are conducted in the Washington D.C. metropolitan area and represent a concentrated risk 

of people, technology, and facilities. As a result, an infrastructure disruption in or around our offices or affecting the power grid, 

such as from a terrorist event, active shooter, or natural disaster, could significantly adversely affect our ability to conduct 

normal business operations. Any measures we take to mitigate this risk may not be sufficient to respond to the full range of 

events that may occur or allow us to resume normal business operations in a timely manner.

Potential cybersecurity threats are changing rapidly and growing in sophistication. We may not be able to protect 

our systems or the confidentiality of our information from cyberattack and other unauthorized access, disclosure, 

and disruption.

Our operations rely on the secure, accurate, and timely receipt, processing, storage, and transmission of confidential and other 

information in our systems and networks and with counterparties, service providers, and financial institutions. 

Information risks for companies like ours have significantly increased in recent years, in part because of the proliferation of new 

technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased 

sophistication and activities of organized crime, hackers, terrorists, and other external parties, including foreign statesponsored actors. There have been several highly publicized cases involving financial services companies, consumer-based 

companies, and other organizations reporting the unauthorized disclosure of client, customer, or other confidential information, 

as well as cyberattacks involving the dissemination, theft, or destruction of corporate information, intellectual property, cash, or 

other valuable assets. There have also been several highly publicized cases where hackers have requested "ransom" payments 

in exchange for not disclosing customer information or for not making the targets' computer systems unavailable. In addition, 

there have been cases where hackers have misled company personnel into making unauthorized transfers of funds to the 

hackers' accounts.

Like many companies and government entities, from time to time we have been, and likely will continue to be, the target of 

attempted cyberattacks, including malware, denial-of-service, and phishing, as part of an effort to disrupt operations, 

potentially test cybersecurity capabilities, or obtain confidential, proprietary, or other information. We could also be adversely 

affected by cyberattacks that target the infrastructure of the internet, as such attacks could cause widespread unavailability of 

websites and degrade website performance. Our risk and exposure to these matters remain heightened because of, among 

other things, the evolving nature of these threats, our role in the financial services industry, the outsourcing of some of our 

business operations, and the current global economic and political environment. 

Because we are interconnected with and dependent on third-party vendors, exchanges, clearinghouses, fiscal and paying 

agents, and other financial institutions, we could be adversely affected if any of them is subject to a successful cyberattack or 

other information security event. Third parties with which we do business may also be sources of cybersecurity or other 

technology risks. We routinely transmit and receive personal, confidential, and proprietary information by electronic means. This 

information could be subject to interception, misuse, or mishandling. Our exposure to these risks could increase as a result of 

our migration of core systems and applications to a third-party cloud environment.

Although we devote significant resources to protecting our critical assets and provide employee awareness training about 

phishing, malware, and other cyber risks, these measures may not provide effective security. Our computer systems, software, 

end point devices, and networks may be vulnerable to cyberattack, unauthorized access, supply chain disruptions, computer 

viruses or other malicious code, or other attempts to harm them or misuse or steal information. We routinely identify cyber 

Risk Factors

FREDDIE MAC | 2020 Form 10-K 167
threats as well as vulnerabilities in our systems and work to address them, but these efforts may be insufficient. Breaches of 

our security measures may result from employee error or misconduct. Outside parties may attempt to induce employees, 

customers, counterparties, service providers, financial institutions, or other users of our systems to disclose sensitive 

information in order to gain access to our systems and the information they contain. We may not be able to anticipate, detect, 

or recognize threats to our systems and assets, or implement effective preventative measures against security breaches, 

especially because the techniques used change frequently or are not recognized until launched. 

A cyberattack could occur and persist for an extended period of time without detection. We expect that any investigation of a 

cyberattack would take time, during which we would not necessarily know the extent of the harm or how best to remediate it. 

Although to date we have not experienced any cyberattacks resulting in significant impacts to the company, our cybersecurity 

risk management program may not prevent cyberattacks from having significant impacts in the future. We have obtained 

insurance coverage relating to cybersecurity risks, but this insurance may not be sufficient to provide adequate loss coverage.

The occurrence of one or more cyberattacks could result in thefts of important assets (such as cash or source code) or the 

unauthorized disclosure, misuse, or corruption of confidential and other information (including information about our borrowers, 

our customers, or our counterparties) or could otherwise cause interruptions or malfunctions in our operations or the operations 

of our customers or counterparties. This could result in significant losses or reputational damage, adversely affect our 

relationships with our customers and counterparties, negatively affect our competitive position, or otherwise harm our business. 

We could also face regulatory and other legal action, including for any failure to provide timely disclosure concerning, or 

appropriately to limit trading in our securities following, an attack. We might be required to expend significant additional 

resources to modify our internal controls and other protective measures or to investigate and remediate vulnerabilities or other 

exposures, and we might be subject to litigation and financial losses that are not fully insured. In addition, customers, 

counterparties, financial intermediaries, and governmental organizations may not be adequately protecting the information that 

we share with them. As a result, a cyberattack on their systems and networks, or a breach of their security measures, may 

result in harm to our business and business relationships.

We rely on third parties, or their vendors and other business partners, for certain important functions. Any 

failures by those third parties to deliver products or services, or to manage risks effectively, could disrupt our 

business operations, or expose us to other operational risks.

Our use of third-parties, including service providers, sellers, servicers and other financial counterparties, exposes us to the risk 

of failures in their risk and control environments. We outsource certain key functions to these external parties, including some 

that are critical to financial reporting (including our use of hedge accounting), valuations, our mortgage-related investment 

activity, loan underwriting, loan servicing, and UMBS issuance and administration (i.e., CSS). We may enter into other key 

outsourcing relationships in the future and continue to expand our existing reliance on public cloud services. If one or more of 

these key external parties were not able to perform their functions for a period of time, perform them at an acceptable service 

level or handle increased volumes, or if one of them experiences a disruption in its own business or technology from any cause, 

our business operations could be constrained, disrupted, or otherwise negatively affected. Our use of third-parties also 

exposes us to other harm, such as breach of our data, fraud or damage to our reputation if one or more of these third parties 

fails to maintain adequate risk and control environments. Our ability to monitor the activities or performance of third-parties may 

be constrained, which may make it difficult for us to assess and manage the risks associated with these relationships.

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.

We use models to project significant factors in our businesses, including, but not limited to, interest rates and house prices 

under a variety of scenarios. We also use models to project borrower prepayment and default behavior and loss severity over 

long periods of time. Models are inherently imperfect predictors of actual results. There is inherent uncertainty associated with 

model projections of economic variables and the downstream projections of prepayment and default behavior dependent on 

these variables. 

Uncertainty and risks related to models may arise from a number of sources, including the following:

n	 We could fail to design, implement, operate, adjust, or use our models as intended. We may fail to code a model correctly, 

we could use incorrect or insufficient data inputs or fail to fully understand the data inputs, or model implementation 

software could malfunction. We may not have performed user acceptance testing appropriately or correctly, including 

allowing sufficient testing time and resources and using the right subject matter experts before deploying the model. The 

complexity and interconnectivity of our models create additional risk regarding the accuracy of model output. We may not 

be able to deploy or update models in a timely manner.

n When market conditions change in unforeseen ways, our model projections may not accurately reflect these conditions, or 

we may not fully understand the model outputs. For example, models may not fully reflect the effect of certain government 

policy changes or new industry trends. In such cases, it is often necessary to make assumptions and judgments to 

accommodate the effect of scenarios that are not sufficiently well represented in the historical data. While we may adjust 

our models in response to new events, considerable residual uncertainty remains.

Risk Factors

FREDDIE MAC | 2020 Form 10-K 168
n We also use selected third-party models. While the use of such models may reduce our risk where no internal model is 

available, it exposes us to additional risk, as third parties typically do not provide us with proprietary information regarding 

their models. We have little control over the processes by which these models are adjusted or changed. As a result, we 

may be unable to fully evaluate the risks associated with the use of such models.

Our use of models could affect decisions concerning the purchase, sale, securitization, and credit risk transfer of loans; the 

purchase and sale of securities; funding; the setting of guarantee fee prices; and the management of interest-rate, market, and 

credit risk. Our use of models also affects our quality-control sampling strategies for loans in our single-family credit guarantee 

portfolio and potential settlements with our counterparties. We also use models in our financial reporting process, including 

when measuring our allowance for credit losses and applying hedge accounting. See MD&A - Risk Management - Market 

Risk and Critical Accounting Policies and Estimates for more information on our use of models.

LEGAL AND COMPLIANCE RISKS

Legislative or regulatory actions could adversely affect our business activities and financial results. We face risk 

of non-compliance with our legal and regulatory obligations as a result of identified weaknesses in our 

compliance program.

We operate in a highly regulated industry and are subject to heightened supervision from FHFA, as our Conservator. Our 

compliance systems and programs may not be adequate to ensure that we are in compliance with all legal and other 

requirements. We could incur fines or other negative consequences for violations. For example, FHFA has raised concerns that 

we need to strengthen our compliance risk management practices by documenting and implementing an effective 

comprehensive framework for identifying, assessing, testing and reporting compliance risk. Although we are taking steps to 

strengthen our compliance program and address FHFA’s concerns, our efforts may not be successful. Until we satisfactorily 

remediate FHFA’s concerns, we may be subject to continued regulatory criticism. We also rely upon third parties and their 

respective compliance risk management programs, and the failure or limits of any such third-party compliance programs may 

expose us to legal and compliance risk.

Our business may be directly adversely affected by future legislative, regulatory, or judicial actions at the federal, state, and 

local levels. Such actions could affect us in a number of ways, including by imposing significant additional legal, compliance, 

and other costs on us, limiting our business activities, and diverting management attention or other resources. Such actions, 

and any required changes to our business or operations or those of third parties upon whom we rely in response thereto, could 

result in reduced profitability and increased compliance risk, particularly because of the identified weaknesses in our 

compliance program noted above. If we were not to comply with our legal and regulatory obligations, this could result in fines 

and penalties and harm to our reputation. 

We may make certain changes to our business in an attempt to meet our housing goals and duty to serve 

requirements, which may adversely affect our profitability.

We may make adjustments to our loan sourcing and purchase strategies in an effort to meet our housing goals and subgoals, 

including modifying some of our underwriting standards and expanding the use of targeted initiatives to reach underserved 

populations. For example, we may purchase loans that offer lower expected returns on our investment and potentially increase 

our exposure to credit losses. We may also make changes to our business in response to our duty to serve underserved 

markets that could adversely affect our profitability.

If we do not meet our housing goals or duty to serve requirements, and FHFA finds that the goals or requirements were 

feasible, we may become subject to a housing plan that could require us to take additional steps that could potentially 

adversely affect our profitability. At this time, based on preliminary information, we believe we met four of our five single-family 

goals and all three of our multifamily goals. We expect that FHFA will make a final determination on our 2020 performance 

following the release of market data in 2021. In addition, our risk appetite constraints may make it difficult for us to meet our 

affordable housing goals in the future.

Risk Factors

FREDDIE MAC | 2020 Form 10-K 169
Legal Proceedings

We are involved as a party to a variety of legal proceedings arising from time to time in the ordinary course of business. See 

Note 20 for more information regarding our involvement as a party to various legal proceedings. We discuss below certain 

litigation against the U.S. government concerning conservatorship and the Purchase Agreement.

Over the last several years, numerous lawsuits have been filed against the U.S. government and, in some cases, the Secretary 

of the Treasury and the Director of FHFA. These lawsuits challenge certain government actions related to the conservatorship 

(including actions taken in connection with the imposition of conservatorship) and the Purchase Agreement. Several of the 

lawsuits seek to invalidate the net worth sweep dividend provisions of the senior preferred stock, which were implemented 

pursuant to the August 2012 amendment to the Purchase Agreement. Some of these cases also have challenged the 

constitutionality of the structure of FHFA. A number of cases have been dismissed. Cases are currently pending in the U.S. 

Court of Federal Claims and the U.S. District Court for the Eastern District of Pennsylvania. One 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. The plaintiffs and defendants filed 

separate petitions for writ of certiorari to the U.S. Supreme Court seeking review of the Fifth Circuit's decision, which the 

Supreme Court granted on July 9, 2020. Oral arguments were held on December 9, 2020. In addition, plaintiffs are appealing a 

July 2018 order by the U.S. District Court for the District of Minnesota to dismiss the case in that Court, a September 2020 

order by the U.S. District Court for the Western District of Michigan to dismiss the case in that Court, and several orders by the 

U.S. Court of Federal Claims dismissing certain claims filed in that Court. 

Freddie Mac is not a party to any of these lawsuits. However, a number of other lawsuits have been filed against Freddie Mac 

concerning the August 2012 amendment to the Purchase Agreement. See Note 20 for information on the lawsuits filed against 

Freddie Mac. Pershing Square Capital Management, L.P. (Pershing) is a plaintiff in one of the lawsuits filed against Freddie 

Mac. Pershing has filed reports with the SEC, most recently in March 2014, indicating that it beneficially owned more than 5% 

of our common stock. We do not know Pershing's current beneficial ownership of our common stock. For more information, 

see Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

It is not possible for us to predict the outcome of these lawsuits (including the outcome of any appeal), or the actions the U.S. 

government (including Treasury and FHFA) might take in response to any ruling or finding in any of these lawsuits or any future 

lawsuits. However, it is possible that we could be adversely affected by these events, including, for example, by changes to the 

Purchase Agreement, or any resulting actual or perceived changes in the level of U.S. government support for our business. 

Pursuant to the January 2021 Letter Agreement, all currently pending material litigation related to our conservatorship and/or 

the Purchase Agreement must be resolved or settled and we must indemnify Treasury and the United States from and against 

any loss, cost, or damage of any kind arising out of our placement into conservatorship or the August 2012 amendment to the 

Purchase Agreement in order to (i) use up to $70 billion in proceeds from issuances of common stock to build capital or (ii) exit 

from conservatorship. 

Legal Proceedings

FREDDIE MAC | 2020 Form 10-K 170
Market for Registrant's Common Equity, Related 

Stockholder Matters, and Issuer Purchases of 

Equity Securities

MARKET INFORMATION

Common Stock

Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets Group Inc., 

under the ticker symbol "FMCC." Over-the-counter market quotations for our common stock reflect inter-dealer prices, without 

retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

Holders

As of January 29, 2021, we had 1,584 common stockholders of record. 

Recent Sales of Unregistered Securities

The securities we issue are "exempted securities" under the Securities Act of 1933. 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 these plans to employees and members of our 

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. At December 31, 2020, no stock options were outstanding. See Note 13 for 

more information.

ISSUER PURCHASES OF EQUITY SECURITIES

We did not repurchase any of our common or preferred stock during 2020. Additionally, we do not currently have any 

outstanding authorizations to repurchase common or preferred stock. Under the Purchase Agreement, we cannot repurchase 

our common or preferred stock without Treasury's prior consent, and we may only purchase or redeem the senior preferred 

stock in certain limited circumstances set forth in the certificate of designation of the senior preferred stock.

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company, N.A.

P.O. Box 505000

Louisville, KY 40233-5000

Telephone: 877-373-6374

https://www-us.computershare.com/investor

Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

FREDDIE MAC | 2020 Form 10-K 171
Financial Statements and Supplementary Data

Financial Statements

FREDDIE MAC | 2020 Form 10-K 172
Report of Independent Registered Public 

Accounting Firm

To the Board of Directors and Stockholders of Freddie Mac

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Freddie Mac, a stockholder-owned government sponsored 

enterprise, and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of 

comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, 

including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the 

Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - 

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial 

position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the 

three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United 

States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over 

financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) 

issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to 

disclosure controls and procedures that do not provide adequate mechanisms for information known to the Federal Housing 

Finance Agency (FHFA) that may have financial statement disclosure ramifications to be communicated to management of 

Freddie Mac.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there 

is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or 

detected on a timely basis. The material weakness referred to above is described in Management’s Report on Internal Control 

over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and 

extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the 

effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated 

financial statements.

Change in Accounting Principle

As discussed in Notes 1 and 7 to the consolidated financial statements, the Company changed the manner in which it accounts 

for credit losses in 2020.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal 

control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included 

in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial 

statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm 

registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent 

with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the 

Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform 

the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material 

misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all 

material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material 

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond 

to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 

consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates 

made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of 

internal control over financial reporting included obtaining an understanding of internal control over financial reporting, 

assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal 

control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in 

the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Financial Statements Report of Independent Registered Public Accounting Firm

FREDDIE MAC | 2020 Form 10-K 173
Emphasis of Matter – Conservatorship

As discussed in Note 2, in September 2008, the Company was placed into conservatorship by FHFA. The U.S. Department of 

the Treasury (Treasury) has committed financial support to the Company, and FHFA, as 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 during conservatorship. The Company is dependent upon the continued support of Treasury and 

FHFA. 

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures 

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and 

dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to 

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 

expenditures of the company are being made only in accordance with authorizations of management and directors of the 

company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or 

disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate 

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters 

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial 

statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or 

disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or 

complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated 

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate 

opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses - Single-Family Mortgage Loans Held-for-Investment

As described in Note 7 to the consolidated financial statements, as of December 31, 2020, the allowance for credit losses for 

single-family mortgage loans held-for-investment was $5.6 billion. Management estimates 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 they expect to collect. Management forecasts cash flows they expect to collect using historical experience, such as 

historical default rates and severity of loss based on loan characteristics, adjusted for current and future economic forecasts. 

As disclosed by management, the process involves the use of models that require management to make judgments about 

matters that are difficult to predict, the most significant of which are the probability of default, prepayment, and loss severity, 

which are based on management’s reasonable and supportable forecast of certain future economic conditions, such as house 

prices and interest rates. 

The principal considerations for our determination that performing procedures relating to the allowance for credit losses for 

single-family mortgage loans held-for-investment is a critical audit matter are (i) the significant judgment and estimation by 

management when determining the probability of default, prepayment, and loss severity assumptions, which in turn led to a 

high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to 

management’s determination, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall 

opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the 

determination of the allowance for credit losses, including controls over the models, data, and significant assumptions. These 

procedures also included, among others (i) testing management’s process for determining the allowance for credit losses, (ii) 

testing the completeness, accuracy, reliability and relevance of data used by management, including underlying loan portfolio 

data, historical loan data, macroeconomic data, and industry data, (iii) evaluating the reasonableness of significant assumptions 

related to the probability of default, prepayment, and loss severity through comparison to historical loan data, macroeconomic 

data, and industry data, as applicable, and (iv) involving professionals with specialized skill and knowledge to assist in 

evaluating the appropriateness of the models used in the allowance for credit losses and the reasonableness of significant 

assumptions related to the probability of default, prepayment, and loss severity, as well as management’s forecast of house 

prices.

/s/ PricewaterhouseCoopers LLP

McLean, Virginia

February 11, 2021

We have served as the Company's auditor since 2002.

Financial Statements Report of Independent Registered Public Accounting Firm

FREDDIE MAC | 2020 Form 10-K 174
FREDDIE MAC

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,

(In millions, except share-related amounts) 2020 2019 2018

Net interest income

Interest income $62,340 $72,895 $70,054

Interest expense (49,569) (61,047) (58,033) 

Net interest income 12,771 11,848 12,021 

Non-interest income (loss)

Guarantee fee income 1,442 1,089 866 

Investment gains (losses), net 1,813 818 1,921 

Other income (loss) 633 323 762 

Non-interest income (loss) 3,888 2,230 3,549 

Net revenues 16,659 14,078 15,570 

Benefit (provision) for credit losses (1,452) 746 736 

Non-interest expense

Salaries and employee benefits (1,344) (1,434) (1,227) 

Professional services (398) (445) (486) 

Other administrative expense (793) (685) (580) 

Total administrative expense (2,535) (2,564) (2,293) 

Credit enhancement expense (1,058) (749) (409) 

Benefit for (decrease in) credit enhancement recoveries 323 41 (8) 

REO operations expense (149) (229) (169) 

Temporary Payroll Tax Cut Continuation Act of 2011 expense (1,836) (1,617) (1,484) 

Other expense (723) (657) (469) 

Non-interest expense (5,978) (5,775) (4,832) 

Income (loss) before income tax (expense) benefit 9,229 9,049 11,474 

Income tax (expense) benefit (1,903) (1,835) (2,239) 

Net income (loss) 7,326 7,214 9,235 

Other comprehensive income (loss), net of taxes and reclassification adjustments

Changes in unrealized gains (losses) related to available-for-sale securities 192 535 (722) 

Changes in unrealized gains (losses) related to cash flow hedge relationships 38 71 114 

Changes in defined benefit plans (25) (33) (5) 

Total other comprehensive income (loss), net of taxes and reclassification adjustments 205 573 (613) 

Comprehensive income (loss) $7,531 $7,787 $8,622 

Net income (loss) $7,326 $7,214 $9,235 

Undistributed net worth sweep, senior preferred stock dividends, or future increase in senior 

preferred stock liquidation preference (7,291) (7,787) (5,623) 

Net income (loss) attributable to common stockholders $35 ($573) $3,612 

Net income (loss) per common share — basic and diluted $0.01 ($0.18) $1.12 

Weighted average common shares outstanding (in millions) — basic and diluted 3,234 3,234 3,234 

The accompanying notes are an integral part of these consolidated financial statements.

Financial Statements Consolidated Statements of Comprehensive Income

FREDDIE MAC | 2020 Form 10-K 175
FREDDIE MAC

Consolidated Balance Sheets

December 31,

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

Assets

Cash and cash equivalents (Notes 1, 3, 18) (includes $17,379 and $991 of restricted cash and cash 

equivalents) $23,889 $5,189 

Securities purchased under agreements to resell (Notes 3, 11, 18) 105,003 56,271 

Investment securities, at fair value (Notes 3, 6) 59,825 75,711 

Mortgage loans held-for-sale (Notes 3, 4) (includes $14,199 and $15,035 at fair value) 33,652 35,288 

Mortgage loans held-for-investment (Notes 1, 3, 4) (net of allowance for credit losses of $5,732 and $4,234) 2,350,236 1,984,912 

Accrued interest receivable (Note 3, 4, 6, 11) (net of allowance of $140 and $0) 7,754 6,848 

Derivative assets, net (Notes 10, 11) 1,205 844 

Deferred tax assets, net (Note 16) 6,557 5,918 

Other assets (Notes 3, 12) (includes $5,775 and $4,627 at fair value) 39,294 22,799 

Total assets $2,627,415 $2,193,780 

Liabilities and equity

Liabilities

Accrued interest payable (Note 3) $6,210 $6,559 

Debt (Notes 3, 9) (includes $2,592 and $3,938 at fair value) 2,592,546 2,169,685 

Derivative liabilities, net (Notes 10, 11) 954 372 

Other liabilities (Notes 3, 12) 11,292 8,042 

Total liabilities 2,611,002 2,184,658 

Commitments and contingencies (Notes 5, 10, 20)

Equity (Note 13)

Senior preferred stock (liquidation preference of $86,539 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 — — 

Additional paid-in capital — — 

Retained earnings (accumulated deficit) (67,102) (74,188) 

AOCI, net of taxes, related to:

Available-for-sale securities 810 618 

Cash flow hedge relationships (206) (244) 

Defined benefit plans 39 64 

Total AOCI, net of taxes 643 438 

Treasury stock, at cost, 75,804,594 shares and 75,804,853 shares (3,885) (3,885) 

Total equity 16,413 9,122 

Total liabilities and equity $2,627,415 $2,193,780 

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our consolidated balance sheets.

December 31,

(In millions) 2020 2019

Consolidated Balance Sheet Line Item (Note 3)

Assets:

Mortgage loans held-for-investment $2,273,347 $1,940,523 

All other assets 83,982 40,598 

Total assets of consolidated VIEs $2,357,329 $1,981,121 

Liabilities:

Debt $2,308,176 $1,898,355 

All other liabilities 5,610 5,537 

Total liabilities of consolidated VIEs $2,313,786 $1,903,892 

The accompanying notes are an integral part of these consolidated financial statements.

Financial Statements Consolidated Balance Sheets

FREDDIE MAC | 2020 Form 10-K 176
FREDDIE MAC

Consolidated Statements of Equity 

Shares Outstanding

Senior

Preferred

Stock

Preferred

Stock, at

Redemption

Value

Common

Stock, at

Par Value

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 December 31, 2017 1 464 650 $72,336 $14,109 $— $— ($83,261) $389 ($3,885) ($312) 

Comprehensive income (loss):

Net income (loss) — — — — — — — 9,235 — — 9,235 

Other comprehensive income (loss), net of 

taxes — — — — — — — — (613) — (613) 

Comprehensive income (loss) — — — — — — — 9,235 (613) — 8,622 

Cumulative effect of change in accounting 

principle(1) — — — — — — — (89) 89 — — 

Increase in liquidation preference 312 — — — 312 

Senior preferred stock dividends paid — — — — — — — (4,145) — — (4,145) 

Ending balance at December 31, 2018 1 464 650 $72,648 $14,109 $— $— ($78,260) ($135) ($3,885) $4,477 

Balance at December 31, 2018 1 464 650 $72,648 $14,109 $— $— ($78,260) ($135) ($3,885) $4,477 

Comprehensive income (loss):

Net income (loss) — — — — — — — 7,214 — — 7,214 

Other comprehensive income (loss), net of 

taxes — — — — — — — — 573 — 573 

Comprehensive income (loss) — — — — — — — 7,214 573 — 7,787 

Senior preferred stock dividends paid — — — — — — — (3,142) — — (3,142) 

Ending balance at December 31, 2019 1 464 650 $72,648 $14,109 $— $— ($74,188) $438 ($3,885) $9,122 

Balance at December 31, 2019 1 464 650 $72,648 $14,109 $— $— ($74,188) $438 ($3,885) $9,122 

Comprehensive income (loss):

Net income (loss) — — — — — — — 7,326 — — 7,326 

Other comprehensive income (loss), net of 

taxes — — — — — — — — 205 — 205 

Comprehensive income (loss) — — — — — — — 7,326 205 — 7,531 

Cumulative effect from adoption of CECL — — — — — — — (240) — — (240) 

Ending balance at December 31, 2020 1 464 650 $72,648 $14,109 $— $— ($67,102) $643 ($3,885) $16,413 

(1) Includes the effect of adopting the accounting guidance on reclassification of stranded tax effects of the Tax Cuts and Jobs Act. See Note 13 for additional 

information.

The accompanying notes are an integral part of these consolidated financial statements.

Financial Statements Consolidated Statements of Equity

FREDDIE MAC | 2020 Form 10-K 177
FREDDIE MAC

Consolidated Statements of Cash Flows

 

Year Ended December 31,

(In millions) 2020 2019 2018

Cash flows from operating activities

Net income (loss) $7,326 $7,214 $9,235 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Amortization of cost basis adjustments 214 (466) (2,117) 

(Benefit) provision for credit losses 1,452 (746) (736) 

Investment (gains) losses, net (3,390) (1,100) (2,084) 

(Benefit for) decrease in credit enhancement recoveries (289) (2) (18) 

Hedge accounting earnings mismatch (162) (288) 658 

Deferred income tax expense (benefit) (590) 817 1,391 

Purchases of mortgage loans acquired as held-for-sale (69,908) (65,516) (70,482) 

Proceeds from sales of mortgage loans acquired as held-for-sale 68,065 71,557 66,889 

Proceeds from repayments of mortgage loans acquired as held-for-sale 116 517 494 

Payments to servicers for pre-foreclosure expense and servicer incentive fees (232) (282) (282) 

Change in accrued interest receivable (1,046) (120) (373) 

Change in interest payable (238) 177 440 

Change in income taxes receivable 845 712 (1,269) 

Other, net (1,256) (277) (1,072) 

Net cash provided by (used in) operating activities 907 12,197 674 

Cash flows from investing activities

Purchases of trading securities (146,074) (102,169) (131,977) 

Proceeds from sales of trading securities 129,035 84,296 126,012 

Proceeds from maturities and repayments of trading securities 27,850 14,528 11,375 

Purchases of available-for-sale securities (13,128) (8,967) (19,701) 

Proceeds from sales of available-for-sale securities 46,387 12,978 21,952 

Proceeds from maturities and repayments of available-for-sale securities 3,654 4,258 6,002 

Purchases of mortgage loans acquired as held-for-investment (695,645) (228,628) (151,836) 

Proceeds from sales of mortgage loans acquired as held-for-investment 11,657 15,218 10,661 

Proceeds from repayments of mortgage loans acquired as held-for-investment 744,571 348,387 248,115 

Advances under secured lending arrangements (144,828) (54,176) (27,463) 

Repayments of secured lending arrangements 1,515 1,275 1,592 

Net proceeds from dispositions of real estate owned and other recoveries 670 1,150 1,336 

Net (increase) decrease in securities purchased under agreements to resell (39,143) (31,343) 21,132 

Derivative premiums and terminations, swap collateral, and exchange settlement payments, net (9,185) (8,163) 3,020 

Other, net (691) (492) (572) 

Net cash provided by (used in) investing activities (83,355) 48,152 119,648 

Cash flows from financing activities

Proceeds from issuance of debt securities of consolidated trusts held by third parties 811,707 264,373 217,574 

Repayments and redemptions of debt securities of consolidated trusts held by third parties (713,382) (351,099) (275,402) 

Proceeds from issuance of debt of Freddie Mac 465,260 554,812 411,948 

Repayments of debt of Freddie Mac (452,548) (531,103) (469,483) 

Net increase (decrease) in securities sold under agreements to repurchase (9,843) 3,856 (3,662) 

Increase in liquidation preference of senior preferred stock — — 312 

Payment of cash dividends on senior preferred stock — (3,142) (4,145) 

Other, net (46) (130) (2) 

Net cash provided by (used in) financing activities 101,148 (62,433) (122,860) 

Net (decrease) increase in cash and cash equivalents (includes restricted cash and cash equivalents) 18,700 (2,084) (2,538) 

Cash and cash equivalents (includes restricted cash and cash equivalents) at the beginning of year 5,189 7,273 9,811 

Cash and cash equivalents (includes restricted cash and cash equivalents) at end of period $23,889 $5,189 $7,273 

Supplemental cash flow information

Cash paid for:

Debt interest $70,073 $70,918 $65,721 

Income taxes 1,690 306 2,125 

Non-cash investing and financing activities (Notes 4, 6, and 9)

The accompanying notes are an integral part of these consolidated financial statements.

Financial Statements Consolidated Statements of Cash Flows

FREDDIE MAC | 2020 Form 10-K 178
Notes to Consolidated Financial Statements

NOTE 1 

Summary of Significant Accounting Policies

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

U.S. housing market. We are regulated by FHFA, the SEC, HUD, and Treasury, and are currently operating under the 

conservatorship of FHFA. For more information on the roles of FHFA and Treasury, see Note 2. Throughout our consolidated 

financial statements and related notes, we use certain acronyms and terms which are defined in the Glossary.

Basis of Presentation

The accompanying 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. 

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

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

sheet offsetting under GAAP. See Note 11 for additional information. We also began presenting a further break out of the 

amount of cash inflows and cash outflows related to securities purchased under agreements to resell as a single net line item 

within the cash flows from financing activities section on our consolidated statements of cash flows beginning 3Q 2020. These 

amounts were previously presented with other debt activity on a gross basis as proceeds from issuance of debt of Freddie Mac 

and repayments of debt of Freddie Mac within the cash flows from financing activities section of our consolidated statements of 

cash flows. As a result, the change in presentation did not have any impact on net cash provided by financing activities. Certain 

amounts in prior periods' consolidated financial statements have been reclassified to conform to the current presentation.

We evaluate the materiality of identified errors in the financial statements using both an income statement, or "rollover," and a 

balance sheet, or "iron curtain," approach, based on relevant quantitative and qualitative factors. The financial statements 

include certain adjustments to correct immaterial errors related to previously reported periods.

Use of Estimates

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of 

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported 

amounts of revenues, expenses, gains, and losses during the reporting period. Management has made significant estimates in 

preparing the financial statements for establishing the allowance for credit losses and valuing financial instruments and other 

assets and liabilities. Actual results could be different from these estimates.

Consolidation and Equity Method Accounting

For each entity with which we are involved, we determine whether the entity should be consolidated in our financial statements. 

We generally consolidate entities in which we have a controlling financial interest. The method for determining whether a 

controlling financial interest exists varies depending on whether the entity is a VIE. For entities that are not VIEs, we hold a 

controlling financial interest in entities where we hold a majority of the voting rights or a majority of a limited partnership's kickout rights through voting interests. We do not currently consolidate any entities which are not VIEs. We use the equity method 

to account for our interests in entities in which we do not have a controlling financial interest, but over which we have significant 

influence.

Cash and Cash Equivalents

Highly liquid investment securities that have an original maturity of three months or less are accounted for as cash equivalents.

Original maturity means the original maturity to us when we acquire the investment, not the original maturity of the instrument 

itself. Cash collateral accepted from counterparties that we do not have the right to use for general corporate purposes is 

classified as restricted cash and cash equivalents on our consolidated balance sheets. Restricted cash and cash equivalents 

include cash remittances received from servicers of the underlying assets of our consolidated trusts which are deposited into a 

separate custodial account. We invest the cash held in the custodial account in short-term investments and are entitled to the 

interest income earned on these short-term investments, which is recorded as interest income on our consolidated statements 

of comprehensive income.

Financial Statements Notes to the Consolidated Financial Statements | Note 1

FREDDIE MAC | 2020 Form 10-K 179
Comprehensive Income

Comprehensive income includes all changes in equity during a period, except those resulting from investments by 

stockholders. We define comprehensive income as consisting of net income (loss) plus after-tax changes in:

n	Unrealized gains and losses on available-for-sale securities;

n	Unrealized gains and losses related to cash flow hedge relationships; and

n	Defined benefit plans.

Other Significant Accounting Policies

The table below identifies our other significant accounting policies and the related note in which information about them can be 

found. 

Note Accounting Policy

Note 3 Variable Interest Entities

Note 4 Mortgage Loans

Note 5 Guarantees and Other Off-Balance Sheet Credit Exposures

Note 6 Investments in Securities

Note 7 Allowance for Credit Losses

Note 8 Credit Enhancements

Note 9 Debt

Note 10 Derivatives

Note 11 Collateralized Agreements and Offsetting Arrangements

Note 13 Stockholder's Equity 

Note 13 Earnings Per Share

Note 16 Income Taxes

Note 17 Segment Reporting

Note 19 Fair Value Disclosures

Financial Statements Notes to the Consolidated Financial Statements | Note 1

FREDDIE MAC | 2020 Form 10-K 180
Recently Adopted Accounting Guidance

Standard Description Date of 

Adoption

Effect on 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 this Update replace the incurred 

loss impairment methodology in GAAP with a 

methodology that reflects lifetime expected credit losses 

and requires consideration of a broader range of 

reasonable and supportable information to inform credit 

loss estimates.

January 1, 

2020

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, Note 

7, and Note 8 or 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. Certain 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 19 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): Narrow-Scope 

Improvements for Lessors

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 Consolidated Financial Statements | Note 1

FREDDIE MAC | 2020 Form 10-K 181
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 — 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 6

and Note 11, respectively, for additional information.

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements

Standard Description

Date of 

Planned 

Adoption

Effect on Consolidated Financial Statements

ASU 2020-06, Debt - Debt

with Conversion and Other

Options (Subtopic 470-20)

and Derivatives and Hedging -

Contracts in Entity’s Own

Equity (Subtopic 815-40):

Accounting for Convertible

Instruments and Contracts in

an Entity’s Own Equity

The amendments in this Update simplify an issuer's

accounting for certain financial instruments with

characteristics of liabilities and equity, primarily by

eliminating many of the current separation models

used to account for convertible debt and convertible

preferred stock.

January 1, 

2021

The adoption of these amendments will not

have a material effect on our consolidated 

financial statements.

ASU 2020-08, Codification 

Improvements to Subtopic 

310-20, Receivables - 

Nonrefundable Fees and Other 

Costs

The amendments in this Update clarify the guidance 

for the reevaluation of whether a callable debt 

security’s amortized cost basis exceeds the amount 

repayable by the issuer at the next call date. 

January 1, 

2021

The adoption of these amendments will not 

have a material effect on our consolidated 

financial statements.

Financial Statements Notes to the Consolidated Financial Statements | Note 1

FREDDIE MAC | 2020 Form 10-K 182
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.

Our current business objectives reflect direction we have received from the Conservator (including the Conservatorship 

Scorecards). At the direction of the Conservator, we have made changes to certain business practices that are designed to 

provide support for the mortgage market in a manner that serves our public mission and other non-financial objectives but may 

not contribute to our profitability. Certain of these objectives are intended to help homeowners and the mortgage market and 

may help to mitigate future credit losses. Some of these initiatives affect our near- and long-term financial results. Given our 

public mission and the important role the Administration and our Conservator have placed on Freddie Mac in addressing 

housing and mortgage market conditions, we may be required to take actions that could have a negative impact on our 

business, operating results, or financial condition, and thus contribute to a need for additional draws under the Purchase 

Agreement.

In October 2020, FHFA released its Strategic Plan for fiscal years 2021-2024. This new Strategic Plan establishes new goals 

needed for FHFA to fulfill its statutory duties, which include responsibly ending the conservatorships of Freddie Mac and Fannie 

Mae. 

This new Strategic Plan formalizes the new direction of FHFA, and its regulated entities, by updating FHFA's mission, vision, 

and values, and by establishing three new strategic goals:

n Ensuring safe and sound regulated entities through world-class supervision;

n Fostering competitive, liquid, efficient, and resilient (CLEAR) national housing finance markets; and

n Positioning FHFA as a model of operational excellence by strengthening its workforce and infrastructure.

We continue to align our resources and internal business plans to meet the objectives provided to us by FHFA.

Under the Purchase Agreement, we cannot return capital to stockholders other than Treasury, the holder of our senior preferred 

stock. Our future is uncertain, and the conservatorship has no specified termination date. We do not know what changes may 

occur to our business model during or following conservatorship, including whether we will continue to exist. Our Conservator 

has not made us aware of any plans to make any significant changes that would affect our ability to continue as a going 

concern. Our future structure and role will be determined by the Administration, Congress, and FHFA, and the goals of the 

current Congress and Administration with respect to Freddie Mac and the secondary mortgage market are unclear. It is 

possible, and perhaps likely, that there will be significant changes to our business beyond the near term.

On January 14, 2021, we, acting through FHFA as our Conservator, and Treasury entered into a letter agreement to further 

amend the Purchase Agreement and the terms of the senior preferred stock. The January 2021 Letter Agreement establishes 

additional requirements for us to exit from conservatorship, including with respect to capital and the resolution of currently 

pending material litigation related to our conservatorship and the Purchase Agreement; allows us to (i) issue common stock 

after Treasury's exercise in full of its warrant to acquire 79.9% of common stock and resolution of currently pending material 

litigation relating to our conservatorship and the Purchase Agreement and (ii) use up to $70 billion in proceeds from such 

issuances to build capital; and imposes further limits on our business, including limits on our retained mortgage portfolio, cash 

window activities, and single-family and multifamily loan acquisitions. Pursuant to the January 2021 Letter Agreement, Treasury 

and Freddie Mac also commit to work to restructure Treasury’s investment and dividend amount in a manner that facilitates our 

orderly exit from conservatorship, ensures Treasury is appropriately compensated, and permits us to raise third-party capital 

and make distributions as appropriate. We are still evaluating the effect that the January 2021 Letter Agreement will have on our 

financial statements. 

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 183
Purchase Agreement and Warrant

Overview

On September 7, 2008, we, through FHFA, in its capacity as Conservator, entered into the Purchase Agreement with Treasury. 

The Purchase Agreement was subsequently amended and restated on September 26, 2008, and further amended on May 6, 

2009, December 24, 2009, August 17, 2012, December 21, 2017, September 27, 2019, and January 14, 2021. The amount of 

available funding remaining under the Purchase Agreement was $140.2 billion as of December 31, 2020. This amount will be 

reduced by any future draws. 

The Purchase Agreement requires Treasury, upon the request of the Conservator, to provide funds to us after any quarter in 

which we have a negative net worth (that is, our total liabilities exceed our total assets, as reflected on our consolidated balance 

sheets). In addition, the Purchase Agreement requires Treasury, upon the request of the Conservator, to provide funds to us if 

the Conservator determines, at any time, that it will be mandated by law to appoint a receiver for us unless we receive these 

funds from Treasury. In exchange for Treasury's funding commitment, we issued to Treasury, as an aggregate initial 

commitment fee, one million shares of Variable Liquidation Preference Senior Preferred Stock (with an initial liquidation 

preference of $1 billion), which we refer to as the senior preferred stock, and a warrant to purchase, for a nominal price, shares 

of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis at 

the time the warrant is exercised, which we refer to as the warrant. We received no cash proceeds or other consideration from 

Treasury for issuing the senior preferred stock or the warrant. The amount of any draw will be added to the aggregate 

liquidation preference of the senior preferred stock. Deficits in our net worth have made it necessary for us to make substantial 

draws on Treasury's funding commitment under the Purchase Agreement. Pursuant to the December 2017 Letter Agreement, 

the liquidation preference of the senior preferred stock increased by $3.0 billion on December 31, 2017, and pursuant to the 

September 2019 and January 2021 Letter Agreements, the liquidation preference of the senior preferred stock has and will be 

increased, at the end of each fiscal quarter, from September 30, 2019 through the Capital Reserve End Date, by an amount 

equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. As a result, the liquidation 

preference of the senior preferred stock increased from $84.1 billion on September 30, 2020 to $86.5 billion on December 31, 

2020 based on the $2.4 billion increase in our Net Worth Amount during 3Q 2020 and will increase to $89.1 billion on March 31, 

2021 based on the $2.5 billion increase in our Net Worth Amount during 4Q 2020. Under the Purchase Agreement, our ability to 

repay the liquidation preference of the senior preferred stock is limited, and we will not be able to do so for the foreseeable 

future, if at all. In addition to increases based on quarterly increases in our Net Worth Amount, as discussed above, the 

liquidation preference will increase if we receive additional draws under the Purchase Agreement or if any dividends or quarterly 

commitment fees payable under the Purchase Agreement are not paid in cash. 

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. Through 

December 31, 2012, the senior preferred stock accrued quarterly cumulative dividends at a rate of 10% per year. However, 

under the August 2012 amendment to the Purchase Agreement, the fixed dividend rate was replaced with a net worth sweep 

dividend beginning in the first quarter of 2013. 

Under the August 2012 amendment to the Purchase Agreement, for each quarter from January 1, 2013, 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. The term Net Worth Amount is defined as the total assets of Freddie Mac 

(excluding Treasury's commitment and any unfunded amounts thereof), less our total liabilities (excluding any obligation in 

respect of capital stock), in each case as reflected on our consolidated balance sheets prepared in accordance with GAAP. If 

the calculation of the dividend payment for a quarter does not exceed zero, then no dividend will accrue or be payable for that 

quarter. Pursuant to the January 2021 Letter Agreement, the applicable Capital Reserve Amount from October 1, 2020 is the 

amount of adjusted total capital necessary to meet capital requirements and buffers set forth in the ERCF. This increased 

Capital Reserve Amount will remain in effect until the last day of the second fiscal quarter during which we have reached and 

maintained such level of capital (the Capital Reserve End Date). As a result, we will not be required to pay a dividend on the 

senior preferred stock to Treasury until we have built sufficient capital to meet the capital requirements and buffers set forth in 

the ERCF. If for any reason we were not to pay our dividend requirement on the senior preferred stock in full in any future 

period until the Capital Reserve End Date, the unpaid amount would be added to the liquidation preference and the applicable 

Capital Reserve Amount would thereafter be zero.

Upon the Capital Reserve End Date, our quarterly senior preferred stock dividend requirement will be an amount equal to the 

lesser of (i) 10% per annum on the then-current liquidation preference of the senior preferred stock and (ii) a quarterly amount 

equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. If for any reason we were not 

to pay our dividend requirement on the senior preferred stock in full in any future period after the Capital Reserve End Date, the 

unpaid amount would be added to the liquidation preference and immediately following such failure and for all dividend periods 

thereafter until the dividend period following the date on which we shall have paid in cash full cumulative dividends, the 

dividend amount will be 12% per annum on the then-current liquidation preference of the senior preferred stock. The amounts 

payable for dividends on the senior preferred stock could be substantial and will have an adverse impact on our financial 

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 184
position and net worth. The senior preferred stock is senior in liquidation preference to our common stock and all other series 

of preferred stock.

In addition to the issuance of the senior preferred stock and warrant, we are required under the Purchase Agreement to pay a 

quarterly commitment fee to Treasury. Under the Purchase Agreement, the fee was to be determined in an amount mutually 

agreed to by us and Treasury with reference to the market value of Treasury's funding commitment as then in effect. However, 

pursuant to the August 2012 amendment to the Purchase Agreement, as further amended by the January 2021 Letter 

Agreement, for each quarter commencing January 1, 2013, no periodic commitment fee under the Purchase Agreement will be 

set, accrue, or be payable. Pursuant to the January 2021 Letter Agreement, by the Capital Reserve End Date, we and Treasury, 

in consultation with the Chairman of the Federal Reserve, will mutually agree on a periodic commitment fee that we will pay for 

Treasury's remaining funding commitment with respect to the five-year period commencing on the first January 1 after the 

Capital Reserve End Date. 

The Purchase Agreement includes significant restrictions on our ability to manage our business, including limits on the amount 

of indebtedness we can incur, the size of our mortgage-related investments portfolio, our secondary market activities, and our 

single-family and multifamily loan acquisitions. 

The Purchase Agreement has an indefinite term and can terminate only in limited circumstances, which do not include the end 

of the conservatorship. The Purchase Agreement therefore could continue after the conservatorship ends. However, Treasury's 

consent is required for a termination of conservatorship other than in connection with receivership or under the limited 

circumstances specified in the Purchase Agreement as mandated by the January 2021 Letter Agreement involving maintenance 

of certain capital and resolution of currently pending material litigation related to our conservatorship and the Purchase 

Agreement. Treasury has the right to exercise the warrant, in whole or in part, at any time on or before September 7, 2028.

Purchase Agreement Covenants

The Purchase Agreement provides that, until the senior preferred stock is repaid or redeemed in full, we may not, without the 

prior written consent of Treasury:

n	 Declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to any Freddie Mac equity 

securities (other than with respect to the senior preferred stock or warrant);

n	 Redeem, purchase, retire, or otherwise acquire any Freddie Mac equity securities (other than the senior preferred stock or 

warrant);

n	 Sell or issue any Freddie Mac equity securities (other than the senior preferred stock, the warrant, and the common stock 

issuable upon exercise of the warrant; provided that issuance(s) of common stock with aggregate gross proceeds of up to 

$70.0 billion after Treasury's exercise in full of its warrant to acquire 79.9% of our common stock and resolution of 

currently pending material litigation relating to our conservatorship and the Purchase Agreement are permitted pursuant to 

the January 2021 Letter Agreement; and as required by the terms of any binding agreement in effect on the date of the 

Purchase Agreement);

n	 Terminate the conservatorship (other than in connection with a receivership or under the limited circumstances specified in 

the Purchase Agreement as amended by the January 2021 Letter Agreement involving maintenance of certain capital and 

resolution of currently pending material litigation related to our conservatorship and the Purchase Agreement);

n	 Sell, transfer, lease, or otherwise dispose of any assets, other than dispositions for fair market value:

l	 To a limited life regulated entity (in the context of a receivership);

l	 Of assets and properties in the ordinary course of business, consistent with past practice;

l	 Of assets and properties having fair market value individually or in aggregate less than $250 million in one transaction 

or a series of related transactions;

l	 In connection with our liquidation by a receiver; 

l	 Of cash or cash equivalents for cash or cash equivalents; or

l	 To the extent necessary to comply with the covenant described below relating to the reduction of our mortgagerelated investments portfolio;

n	 Issue any subordinated debt;

n	 Enter into a corporate reorganization, recapitalization, merger, acquisition, or similar event; or

n	 Engage in transactions with affiliates unless the transaction is: 

l	 Pursuant to the Purchase Agreement, the senior preferred stock, or the warrant; 

l	 Upon arm's length terms; or 

l	 A transaction undertaken in the ordinary course or pursuant to a contractual obligation or customary employment 

arrangement in existence on the date of the Purchase Agreement.

The Purchase Agreement also required us to reduce the UPB of our mortgage assets to a limit of $250 billion at December 31, 

2018. Pursuant to the January 2021 Letter Agreement, the calculation of mortgage assets subject to the Purchase Agreement 

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 185
cap also includes 10% of the notional value of interest-only securities, and at the end of 2022, the Purchase Agreement cap on 

our mortgage-related investments portfolio will be lowered from $250 billion to $225 billion.

Under the Purchase Agreement, we also may not, without the prior written consent of Treasury, incur indebtedness that would 

result in the par value of our aggregate indebtedness exceeding 120% of the amount of mortgage assets we are permitted to 

own on December 31 of the immediately preceding calendar year. Our debt cap under the Purchase Agreement is currently 

$300 billion and will decrease to $270 billion on January 1, 2023 as a result of the decrease in the mortgage assets limit under 

the Purchase Agreement to $225 billion on December 31, 2022 pursuant to the January 2021 Letter Agreement. The mortgage 

asset and indebtedness limitations are determined without giving effect to the changes to the accounting guidance for transfers 

of financial assets and consolidation of VIEs, under which we consolidated certain VIEs in our financial statements as of 

January 1, 2010.

In addition, the Purchase Agreement provides that we may not enter into any new compensation arrangements or increase 

amounts or benefits payable under existing compensation arrangements of any named executive officer or other executive 

officer (as such terms are defined by SEC rules) without the consent of the Director of FHFA, in consultation with the Secretary 

of the Treasury.

The Purchase Agreement also provides that, on an annual basis, we are required to deliver a risk management plan to Treasury 

setting out our strategy for reducing our enterprise-wide risk profile and the actions we will take to reduce the financial and 

operational risk associated with each of our reportable business segments.

The Purchase Agreement, as amended by the January 2021 Letter Agreement, also established new covenants which placed 

additional restrictions on our secondary market activities and single-family and multifamily loan acquisitions:

n	 Secondary Market Activities - We cannot vary the pricing or any other term of the acquisition of a single-family loan based 

on the size, charter type, or volume of business of the seller of the loan and are required to: 

l	 Purchase loans for cash consideration; 

l	 Operate this cash window with non-discriminatory pricing; 

l	 Beginning on January 1, 2022, limit the volume purchased through the cash window to $1.5 billion per lender during 

any period comprising four calendar quarters; and

l	 Comply with directives, regulations, restrictions, or other requirements prescribed by FHFA related to equitable 

secondary market access by community lenders.

n	 Multifamily New Business Activity - We are required to cap multifamily loan purchases at $80 billion in any 52-week period, 

subject to annual adjustment by FHFA based on changes in the Consumer Price Index. At least 50% of our multifamily loan 

purchases in any calendar year must be, at the time of acquisition, classified as mission-driven pursuant to FHFA 

guidelines.

n	 Single-Family Loan Acquisitions - We are required to limit our acquisition of certain single-family mortgage loans.

l A maximum of 6% of purchase money mortgages and 3% of refinance mortgages over the preceding 52-week period 

can have two or more of the following characteristics at origination: combined LTV ratio greater than 90%; DTI ratio 

greater than 45%; and FICO or equivalent credit score less than 680.

l We are required to limit acquisitions of single-family mortgage loans secured by either second homes or investment 

properties to 7% of the single-family mortgage loan acquisitions over the preceding 52-week period.

l Subject to such exceptions as FHFA may prescribe to permit us to acquire single-family mortgage loans that are 

currently eligible for acquisition, we are required to implement by July 1, 2021 a program reasonably designed to 

ensure that each single-family mortgage is: 

– A qualified mortgage; 

– Exempt from the CFPB’s ability-to-repay requirements; 

– Secured by an investment property, subject to the restrictions above; 

– A refinancing with streamlined underwriting for high LTV ratios; 

– A loan with temporary underwriting flexibilities due to exigent circumstances, as determined in consultation with 

FHFA; or 

– Secured by manufactured housing.

In addition, the Purchase Agreement requires us to comply with the ERCF as currently in effect, disregarding any subsequent 

amendment or other modification to that rule.

We continue to assess the effects of these new Purchase Agreement covenants on our business, and we are developing 

related business processes and controls, including with respect to monitoring and reporting. 

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 186
Warrant Covenants

The warrant we issued to Treasury includes, among others, the following covenants: 

n	 Our SEC filings under the Exchange Act will comply in all material respects as to form with the Exchange Act and the rules 

and regulations thereunder; 

n	 Without the prior written consent of Treasury, we may not permit any of our significant subsidiaries to issue capital stock or 

equity securities, or securities convertible into or exchangeable for such securities, or any stock appreciation rights or other 

profit participation rights to any person other than Freddie Mac or its wholly-owned subsidiaries; 

n	 We may not take any action that will result in an increase in the par value of our common stock; 

n	 Unless waived or consented to in writing by Treasury, we may not take any action to avoid the observance or performance 

of the terms of the warrant and we must take all actions necessary or appropriate to protect Treasury's rights against 

impairment or dilution; and 

n	 We must provide Treasury with prior notice of specified actions relating to our common stock, such as setting a record 

date for a dividend payment, granting subscription or purchase rights, authorizing a recapitalization, reclassification, 

merger or similar transaction, commencing a liquidation of the company, or any other action that would trigger an 

adjustment in the exercise price or number or amount of shares subject to the warrant.

Termination Provisions

The Purchase Agreement provides that the Treasury's funding commitment will terminate under any of the following 

circumstances:

n	 The completion of our liquidation and fulfillment of Treasury's obligations under its funding commitment at that time;

n	 The payment in full of, or reasonable provision for, all of our liabilities (whether or not contingent, including mortgage 

guarantee obligations); and 

n	 The funding by Treasury of the maximum amount of the commitment under the Purchase Agreement. 

In addition, Treasury may terminate its funding commitment and declare the Purchase Agreement null and void if a court 

vacates, modifies, amends, conditions, enjoins, stays, or otherwise affects the appointment of the Conservator or otherwise 

curtails the Conservator's powers. Treasury may not terminate its funding commitment under the Purchase Agreement solely by 

reason of our being in conservatorship, receivership or other insolvency proceeding, or due to our financial condition or any 

adverse change in our financial condition.

Waivers and Amendments

The Purchase Agreement provides that most provisions of the agreement may be waived or amended by mutual written 

agreement of the parties; however, no waiver or amendment of the agreement is permitted that would decrease Treasury's 

aggregate funding commitment or add conditions to Treasury's funding commitment if the waiver or amendment would 

adversely affect in any material respect the holders of our debt securities or mortgage guarantee obligations.

Third-Party Enforcement Rights

In the event of our default on payments with respect to our debt securities or mortgage guarantee obligations, if Treasury fails 

to perform its obligations under its funding commitment and if we and/or the Conservator are not diligently pursuing remedies 

in respect of that failure, the holders of these debt securities or mortgage guarantee obligations may file a claim in the United 

States Court of Federal Claims for relief requiring Treasury to fund to us the lesser of:

n	 The amount necessary to cure the payment defaults on our debt securities and mortgage guarantee obligations and

n	 The lesser of:

l	 The deficiency amount and

l	 The maximum amount of the commitment less the aggregate amount of funding previously provided under the 

commitment. 

Any payment that Treasury makes under those circumstances will be treated for all purposes as a draw under the Purchase 

Agreement that will increase the liquidation preference of the senior preferred stock.

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 187
Impact of Conservatorship and Related Developments on the MortgageRelated Investments Portfolio

In February 2019, FHFA directed us to maintain the 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 instructed by FHFA in November 2019. 

Pursuant to the January 2021 Letter Agreement, the Purchase Agreement cap on our mortgage-related investments portfolio 

will be lowered from $250 billion to $225 billion at the end of 2022, and the calculation of mortgage assets subject to the cap 

will include 10% of the notional value of interest-only securities. The UPB of this portfolio was $188.8 billion at December 31, 

2020, including $6.6 billion representing 10% of the notional amount of the interest-only securities we held as of December 31, 

2020. Our ability to acquire and sell mortgage assets continues to be significantly constrained by limitations imposed by the 

Purchase Agreement and FHFA. 

With respect to the composition of our mortgage-related investments portfolio, in August 2020, FHFA instructed us to: (1) 

reduce the amount of agency MBS we hold to no more than $50 billion by June 30, 2021 and no more than $20 billion by June 

30, 2022, with all dollar caps to be based on UPB; and (2) reduce the UPB of our existing portfolio of collateralized mortgage 

obligations (CMOs), which are also sometimes referred to as REMICs, to zero by June 30, 2021. We will have a holding period 

limit to sell any new CMO tranches created but not sold at issuance. CMOs do not include tranches initially retained from 

reperforming loans senior subordinate securitization structures.

Government Support for Our Business

We receive substantial support from Treasury and are dependent upon its continued support in order to continue operating our 

business. Our ability to access funds from Treasury under the Purchase Agreement is critical to:

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 September 30, 2020, our assets exceeded our liabilities under GAAP; therefore, FHFA 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 the three months ended 

December 31, 2020. Since conservatorship began through December 31, 2020, we have paid cash dividends of $119.7 billion

to Treasury at the direction of the Conservator.

At December 31, 2020, our assets exceeded our liabilities under GAAP. As a result, FHFA will not submit a draw request from 

Treasury on our behalf. Based on our Net Worth Amount at December 31, 2020 and the applicable Capital Reserve Amount, we 

will not have a dividend requirement to Treasury in March 2021.

Additionally, in recent years, the Federal Reserve purchased significant amounts of mortgage-related securities issued by us, 

Fannie Mae and Ginnie Mae.

See Note 9 and Note 13 for more information on the conservatorship and the Purchase Agreement.

Related Parties as a Result of Conservatorship

As a result of our issuance to Treasury of the warrant to purchase shares of our common stock equal to 79.9% of the total 

number of shares of our common stock outstanding, on a fully diluted basis, we are deemed a related party to the U.S. 

government. During the years ended December 31, 2020, 2019, and 2018, no transactions outside of normal business activities 

have occurred between us and the U.S. government (or any of its related parties), except for the following:

n	 The transactions with Treasury discussed above in Purchase Agreement and Warrant and Government Support 

for Our Business; 

n	 The transactions entered into whereby we and Fannie Mae, in conjunction with Treasury, provided assistance to state and 

local HFAs. Treasury will reimburse Freddie Mac for initial guarantee losses on these transactions;

n	 The transactions discussed in Note 4, Note 9, and Note 13; and

n	 The allocation or transfer of 4.2 basis points of each dollar of new business purchases to certain housing funds as required 

under the GSE Act.

In addition, we are deemed a related party with Fannie Mae as both we and Fannie Mae have the same relationships with FHFA 

and Treasury. All transactions between us and Fannie Mae have occurred in the normal course of business in conservatorship.

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 188
In October 2013, FHFA announced the formation of CSS. CSS is a limited liability company equally-owned by Freddie Mac and 

Fannie Mae, and CSS is also deemed a related party. In connection with the formation of CSS, we entered into a limited liability 

company (LLC) agreement with Fannie Mae. Additionally, we and Fannie Mae 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 2019. In June 2019, we entered into an agreement with Fannie Mae regarding the 

commingling of certain of our mortgage securities and related indemnification obligations. During the year ended December 31, 

2020, we contributed $88 million of capital to CSS, and we have contributed $658 million since the fourth quarter of 2014. The 

carrying value of our investment in CSS was $16 million and $35 million as of December 31, 2020 and December 31, 2019, 

respectively, and was included in other assets on our consolidated balance sheets. 

In January 2020, FHFA directed Freddie Mac and Fannie Mae to amend the LLC agreement for CSS to change the structure of 

the Board of Managers (CSS Board). The revised LLC agreement also removed the requirement that any CSS Board decision 

must be approved by at least one of the CSS Board members appointed by Freddie Mac and one appointed by Fannie Mae. 

These amendments reduce Freddie Mac’s and Fannie Mae’s ability to control CSS Board decisions, even after conservatorship, 

including decisions about strategy, business operations, and funding. 

Under the revised CSS LLC agreement, the CSS Board will continue to include two Freddie Mac and two Fannie Mae 

representatives, and it will also include two additional members: the Chief Executive Officer of CSS and an independent, nonExecutive Chair. During conservatorship, the CSS Board Chair shall be designated by FHFA, and all CSS Board decisions will 

require the affirmative vote of the Board Chair. During conservatorship, FHFA also may appoint up to three additional 

independent members to the CSS Board, who along with the Board Chair and the Chief Executive Officer of CSS may continue 

to serve on the CSS Board after conservatorship. FHFA appointed a CSS Board member to serve as Chair in January 2020, 

and FHFA subsequently appointed three additional CSS Board members, one in June 2020 and two in January 2021. As a 

result, the CSS Board members we and Fannie Mae appoint could be outvoted by non-GSE designated Board members on any 

matter during conservatorship and on a number of significant matters, including approval of the annual budget and strategic 

plan for CSS, if either we or Fannie Mae exits from conservatorship. Certain material post-conservatorship decisions, however, 

would require approval of at least one Board member designated by us and one designated by Fannie Mae, including those 

decisions involving a material change in CSS’s functionality, such as the addition of a new business line or reduction in CSS’s 

support of the UMBS, capital contributions beyond those necessary to support CSS’s ordinary business operations, 

appointment or removal of the Chief Executive Officer of CSS, and admission of new members.

Financial Statements Notes to the Consolidated Financial Statements | Note 2

FREDDIE MAC | 2020 Form 10-K 189
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. See Note 5 for additional information on our guarantee activities. We also 

use trusts that are VIEs in certain single-family credit risk transfer products.

We consolidate VIEs when we have a controlling financial interest in the VIE and are therefore considered the primary 

beneficiary of the VIE. We are the primary beneficiary of a VIE when we have both the power to direct the activities of the VIE 

that most significantly impact its economic performance and exposure to losses or benefits of the VIE that could potentially be 

significant to the VIE. We evaluate whether we are the primary beneficiary of VIEs in which we have interests at both inception 

and on an ongoing basis, and the primary beneficiary determination may change over time as our interest in the VIE changes.

We do not believe the maximum exposure to loss from our involvement with VIEs for which we are not the primary beneficiary 

discussed 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 8 for additional information on credit enhancements. Certain of our interest-rate risk-related guarantees to VIEs for which 

we are not the primary beneficiary may create exposure to loss that is unlimited. We account for these interest-rate risk-related 

guarantees at fair value as discussed further in Note 5 and generally reduce our exposure to these guarantees with unlimited 

interest rate exposure through separate derivative contracts with third parties. See Note 10 for additional information on 

derivatives.

Securitization Activities

Single-family Guarantee

Level 1 Securitization Products

Level 1 Securitization Products consist of UMBS, 55-day MBS, and PCs, which are all pass-through debt securities that 

represent undivided beneficial interests in a pool of loans held by a securitization trust. All Level 1 Securitization Products are 

backed only by mortgage loans we have acquired. We serve as both administrator and guarantor for these trusts. As 

administrator, we have the right to establish servicing terms and direct loss mitigation activities for the loans held by these 

trusts. As guarantor, we guarantee the payment of principal and interest on these securities in exchange for a guarantee fee, 

and we have the right to purchase delinquent loans from the trust to help improve the economic performance of the trust. We 

absorb all credit losses of these trusts through our guarantee of the principal and interest payments. 

The economic performance of these trusts is most significantly affected by the performance of the underlying loans. Our rights 

as administrator and guarantor provide us with the power to direct the activities that most significantly affect the performance 

of the underlying loans. We also have the obligation to absorb losses of these trusts that could potentially be significant through 

our guarantee of principal and interest payments. Accordingly, we concluded that we are the primary beneficiary of, and 

therefore, consolidate these trusts.

Loans held by these trusts are recognized on our consolidated balance sheets as mortgage loans held-for-investment. The 

corresponding securities held by third parties are recognized on our consolidated balance sheets as debt. We extinguish the 

outstanding debt securities of the related consolidated trust and recognize gains or losses on debt extinguishment for the 

difference between the consideration paid and the debt carrying value when we purchase these securities as investments in our 

mortgage-related investments portfolio. Sales of these securities that were previously held as investments in our mortgagerelated investments portfolio are accounted for as debt issuances. 

We no longer issue securities with a 45-day payment delay. As a result, we are offering an optional exchange program for 

security holders to exchange certain existing fixed-rate Gold PCs and Giant PCs for corresponding UMBS and other applicable 

55-day payment delay Freddie Mac securities. We make a one-time payment to exchanging security holders for the value of the 

10 additional days of payment delay based on float compensation rates we calculate. When existing PCs are exchanged for 

UMBS or 55-day MBS under our exchange program, we account for the exchange as a debt modification, as the terms of the 

securities are not substantially different and the exchange does not result in a change in the creditor. The float compensation 

we pay in conjunction with the exchange is deferred as a basis adjustment to the debt and amortized into interest expense over 

the remaining life of the debt. See Note 4 and Note 9 for additional information on loans and debt securities of consolidated 

trusts.

At December 31, 2020 and December 31, 2019, we were the primary beneficiary of, and therefore consolidated, Level 1 

securitization trusts with assets totaling $2.3 trillion and $1.9 trillion, respectively. During 2020 and 2019, we issued 

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 190
approximately $1.1 trillion and $0.4 trillion, respectively, of guaranteed Level 1 Securitization Products. Our exposure for 

guarantees to consolidated securitization trusts is generally equal to the UPB of the loans recorded on our consolidated 

balance sheets. 

Resecuritization Products

We create resecuritization products primarily by using Level 1 Securitization Products or our previously issued resecuritization 

products (or similar TBA-eligible products issued and guaranteed by Fannie Mae) as the underlying collateral. In a typical 

resecuritization transaction, previously issued Level 1 Securitization Products or resecuritization products are transferred to a 

resecuritization trust that issues beneficial interests in the underlying collateral. We establish parameters that define eligibility 

standards for assets that may be used as collateral for each of our resecuritization programs. Resecuritization products can 

then be created based on the parameters that we have established. Similar to our Level 1 Securitization Products, we 

guarantee the full payment of principal and interest to the investors in our resecuritization products. When we issue 

resecuritization products that do not use Fannie Mae securities as collateral, we do not assume any incremental credit risk as 

we have already guaranteed the underlying assets. When we issue commingled resecuritization products, our guarantee of the 

Fannie Mae securities used as collateral creates incremental exposure to loss, but we view the likelihood of being required to 

perform on our guarantee as remote due to Fannie Mae's status as a GSE and the funding commitment available to it through 

its senior preferred stock purchase agreement with Treasury.

We have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products. When we 

resecuritize Fannie Mae securities in our commingled resecuritization products, our guarantee covers timely payment of 

principal and interest on such products from underlying Fannie Mae securities. If Fannie Mae were to fail to make a payment on 

a Fannie Mae security that we resecuritized, we would be responsible for making the payment. We do not charge an 

incremental guarantee fee to commingle Fannie Mae collateral in resecuritization transactions. 

The main types of resecuritization products we create are single-class resecuritization products (Supers, Giant MBS, and Giant 

PCs) and multiclass resecuritization products (REMICs and Strips). 

n Single-class resecuritization products - These securities are direct pass-throughs of the cash flows of the underlying 

collateral, which may be previously issued Level 1 Securitization Products or single-class resecuritization products (or 

similar TBA-eligible products issued and guaranteed by Fannie Mae). We do not consolidate these securities as their 

resecuritization does not result in any new or incremental risk to the holders of the securities issued by the resecuritization 

trust and because we are not exposed to any incremental rights to receive benefits or obligations to absorb losses that 

could be significant to the resecuritization trust.

We account for purchases of single-class resecuritization products that we issue that are substantially the same as the 

underlying collateral as debt extinguishment of a pro-rata portion of the underlying Level 1 Securitization Product. We 

account for purchases of single-class resecuritization products that we issue that are not considered substantially the 

same as the underlying collateral as investments in debt securities. Single-class resecuritization products that we issue 

that are backed entirely by Freddie Mac collateral are considered substantially the same as the underlying collateral, while 

commingled single-class resecuritization products that we issue are not considered substantially the same as the 

underlying collateral.

n Multiclass resecuritization products - These securities are multiclass resecuritizations of the cash flows of the underlying 

collateral, which may be previously issued Level 1 Securitization Products, single-class resecuritization products, or 

multiclass resecuritization products (or similar TBA-eligible products issued and guaranteed by Fannie Mae). The activity 

that most significantly impacts the economic performance of our multiclass resecuritization trusts is typically the initial 

design and structuring of the trust. Substantially all multiclass resecuritization trusts are created as part of customer-driven 

transactions in which an investor or dealer participates in the decisions made during the design and establishment of the 

trust. As a result, we do not have the unilateral ability to direct the activities of our multiclass resecuritization trusts that 

most significantly impact the economic performance of those trusts. In addition, unless we retain a portion of the issued 

multiclass resecuritization products, we do not have the right to receive benefits or the obligation to absorb losses that 

could potentially be significant to the trusts because we have already provided a guarantee on the underlying assets. As a 

result, we have concluded that we are not the primary beneficiary of our multiclass resecuritization trusts and, therefore, do 

not consolidate those trusts. 

Because we (or Fannie Mae) have already guaranteed the underlying assets, we do not receive any incremental guarantee 

fees in exchange for our guarantee, and, accordingly, we do not recognize any additional guarantee assets, guarantee 

obligations or reserves for guarantee losses related to multiclass resecuritization trusts. Instead, we receive a one-time 

transaction fee which represents compensation for both the structuring and creation of the securities and for our ongoing 

administrative responsibilities to service the securities. We recognize the portion of the transaction fee related to creation 

of the securities immediately in earnings. We defer the portion of the fee related to ongoing administrative responsibilities 

and amortize it over the life of the associated trust. 

When we purchase a multiclass resecuritization product as an investment in our mortgage-related investments portfolio, 

we generally record the security as an investment in debt securities rather than extinguishment of debt since we are 

generally investing in the debt securities of a nonconsolidated entity. We do not consolidate multiclass resecuritization 

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 191
trusts in which we hold variable interests, as we are not deemed to be the primary beneficiary of the trusts, unless we have 

the unilateral ability to liquidate the trust. Similarly, sales of multiclass resecuritization products previously held as 

investments in our mortgage-related investments portfolio are accounted for as sales of investments in debt securities. See 

Note 6 for additional information on accounting for investments in debt securities.

With the exception of commingled securities, our investments in and guarantees of securities issued by resecuritization trusts 

for which we are not the primary beneficiary typically do not create any incremental exposure to loss because we already 

guarantee and consolidate the underlying collateral. The fair value of these investments in our resecuritization trusts for which 

we are not the primary beneficiary was $28.5 billion and $37.9 billion as of December 31, 2020 and December 31, 2019, 

respectively. While our guarantee of Fannie Mae securities underlying commingled resecuritization products creates 

incremental exposure to loss, we view the likelihood of being required to perform on our guarantee as remote due to Fannie 

Mae’s status as a GSE and the funding commitment available to it through its senior preferred stock purchase agreement with 

Treasury. The UPB of Fannie Mae securities underlying commingled Freddie Mac resecuritization trusts for which we are not 

the primary beneficiary totaled $85.3 billion and $26.8 billion as of December 31, 2020 and December 31, 2019, respectively. 

See Note 5 for additional information on our guarantee of Fannie Mae securities.

Senior Subordinate Securitization Structures

We are the primary beneficiary of and, therefore, consolidate our single-family senior subordinate securitization structures 

backed by recently originated loans because we have both the ability to direct the loss mitigation activities of the underlying 

loans and the obligation to absorb credit losses through our guarantee of the issued senior securities. As a result, we 

consolidated the trusts used in these senior subordinate securitization structures with underlying assets totaling $8.9 billion and 

$19.9 billion, at December 31, 2020 and December 31, 2019, respectively. We no longer issue these products on a regular 

basis.

We do not consolidate our single-family senior subordinate securitization structures backed by seasoned loans because we do 

not have the ability to direct the loss mitigation activities of the underlying loans, which is the most significant activity affecting 

the economic performance of the VIE. For those securitizations that we do not consolidate where we sell loans to the VIE, we 

derecognize the transferred loans and account for our guarantee to the nonconsolidated VIE. We account for our investments in 

the beneficial interests issued by the nonconsolidated VIE, if any, as investments in debt securities. During 2020 and 2019, we 

issued approximately $7.0 billion and $11.2 billion, respectively, of guaranteed securities in these senior subordinate 

securitization structures for which a guarantee asset and guarantee obligation were generally recognized. The maximum 

exposure to loss for our single-family senior subordinate securitization structures for which we are not the primary beneficiary 

totaled $28.1 billion and $24.3 billion at December 31, 2020 and December 31, 2019, respectively, and represents the 

guaranteed UPB of the assets held by these unconsolidated VIEs. The total assets of these unconsolidated VIEs totaled 

$33.7 billion and $28.8 billion at December 31, 2020 and December 31, 2019, respectively. 

Other Securitization Products

We are the primary beneficiary of and, therefore, consolidate the trusts used to issue our single-family other securitization 

products when we have the ability to direct the activities that most significantly affect the economic performance of the trusts 

and we have the obligation to absorb credit losses through our guarantee of some or all of the issued securities. As a result, we 

consolidated trusts used to issue these products with underlying assets totaling $2.3 billion and $2.8 billion at December 31, 

2020 and December 31, 2019, respectively. We do not consolidate the trusts used to issue our single-family other securitization 

products that do not meet these conditions. The maximum exposure to loss for these single-family securitizations for which we 

are not the primary beneficiary totaled $1.7 billion and $2.5 billion at December 31, 2020 and December 31, 2019, respectively. 

The total assets of these unconsolidated VIEs totaled $1.8 billion and $2.6 billion at December 31, 2020 and December 31, 

2019, respectively. We have not entered into single-family other securitization products in several years.

Multifamily

K Certificates

In a K Certificate transaction, we sell multifamily loans to a non-Freddie Mac securitization trust that issues senior, mezzanine, 

and subordinate securities, and simultaneously purchase and place the senior securities into a Freddie Mac securitization trust 

that issues guaranteed K Certificates. In these transactions, we guarantee the senior securities issued by the Freddie Mac 

securitization trust and do not issue or guarantee the mezzanine or subordinate securities issued by the non-Freddie Mac 

securitization trust. We receive a guarantee fee in exchange for our guarantee. We serve as guarantor of our K Certificate trusts 

and, from time to time, as master servicer. However, in contrast to single-family transactions, the rights to direct loss mitigation 

activities of the underlying loans and to purchase delinquent loans from the securitization trust are generally held by the 

investor in the most subordinate remaining securities issued by the non-Freddie Mac trust, and therefore we do not have any 

power to direct those activities unless we are the investor in the most subordinate remaining securities. We do not typically 

invest in the subordinate securities issued in K Certificate transactions.

The economic performance of our K Certificate trusts is most significantly affected by the performance of the underlying loans. 

Because our rights in a K Certificate transaction do not provide us with the power to direct the activities that most significantly 

affect the performance of the underlying loans if we do not hold the most subordinate remaining securities, we are not the 

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 192
primary beneficiary of our K Certificate trusts and, therefore, do not consolidate those trusts.

When we sell loans in a K Certificate transaction, we derecognize the transferred loans and account for our guarantee to the 

nonconsolidated K Certificate trust. We account for our investments in the beneficial interests issued by the trusts used in our K 

Certificate transactions as investments in debt securities.

During 2020 and 2019, we issued approximately $55.6 billion and $53.6 billion, respectively, of K Certificates for which a 

guarantee asset and guarantee obligation were generally recognized. The maximum exposure to loss for our K Certificate 

securitizations for which we are not the primary beneficiary totaled $253.0 billion and $220.7 billion at December 31, 2020 and 

December 31, 2019, respectively, and primarily represents the UPB of the beneficial interests that we have guaranteed. The 

total assets of these nonconsolidated VIEs totaled $291.3 billion and $256.9 billion at December 31, 2020 and December 31, 

2019, respectively. 

SB Certificates

In SB Certificate transactions, we securitize multifamily small balance loans using a non-Freddie Mac SB Certificate trust that 

issues senior classes of securities that we guarantee, as well as subordinated classes of securities that we do not guarantee. 

Similar to our K Certificate transactions, we are not the primary beneficiary of and, therefore, do not consolidate our SB 

Certificate trusts, as we do not have the ability to direct loss mitigation activities of the underlying loans, which is the most 

significant activity affecting the economic performance of the VIE.

In a typical SB Certificate transaction, we sell loans to a SB Certificate trust, derecognize the transferred loans and account for 

our guarantee to the nonconsolidated SB Certificate trust. We account for our investments in the beneficial interests issued by 

nonconsolidated SB Certificate trusts as investments in debt securities.

During 2020 and 2019, we issued approximately $4.4 billion and $6.2 billion, respectively, of SB Certificates for which a 

guarantee asset and guarantee obligation were recognized. The maximum exposure to loss for our SB Certificate 

securitizations for which we are not the primary beneficiary totaled $21.5 billion and $19.4 billion at December 31, 2020 and 

December 31, 2019, respectively, and primarily represents the UPB of the beneficial interests that we have guaranteed. The 

total assets of these nonconsolidated VIEs totaled $23.9 billion and $21.6 billion at December 31, 2020 and December 31, 

2019, respectively.

Other Securitization Products 

We are the primary beneficiary of and, therefore, consolidate the trusts used to issue certain of our other securitization products 

because we have the ability to direct the activities that most significantly affect the economic performance of the trusts and we 

have the obligation to absorb credit losses through our guarantee of some or all of the issued securities. As a result, we 

consolidated trusts used in these other securitization products with underlying assets totaling $14.3 billion and $8.7 billion at 

December 31, 2020 and December 31, 2019, respectively. During 2020 and 2019, we issued approximately $6.0 billion and 

$4.0 billion, respectively, of other securitization products that we consolidated.

We do not consolidate the trusts used to issue our other securitization products when we do not meet the above conditions. 

For those products, we account for our guarantee to the nonconsolidated VIE. We issued approximately $3.1 billion of these 

securities, during both 2020 and 2019, for which a guarantee asset and guarantee obligation were generally recognized.

The maximum exposure to loss for our other securitization products for which we are not the primary beneficiary totaled 

$14.9 billion and $14.0 billion at December 31, 2020 and December 31, 2019, respectively, and primarily represents the UPB of 

the beneficial interests that we have guaranteed. The total assets of these nonconsolidated VIEs totaled $16.9 billion and 

$16.0 billion at December 31, 2020 and December 31, 2019, respectively.

CRT Activities

STACR Trust Notes

In a STACR Trust note transaction, a trust issues credit-linked notes whose repayments are based on the credit performance of 

a reference pool of mortgage loans. The trust makes periodic payments of principal and interest on the notes to investors. We 

make payments to the trust to support payment of the interest due on the notes, and we receive payments from the trust that 

otherwise would have been made to the noteholders to the extent there are credit events on the mortgages in the reference 

pool. The note balances are reduced by the amount of the payments to us. STACR Trust was designed to create and pass 

along to its interest holders the variability related to the credit risk of the mortgages in the reference pool. Because our credit 

risk transfer arrangement is a creator rather than an absorber of that variability, we do not have a variable interest in the risk 

that the STACR Trust was designed to create and pass along to its interest holders and do not consolidate the trusts used in 

the STACR Trust note transactions. The maximum exposure to loss for our STACR Trust Notes for which we are not the 

primary beneficiary represents our recorded expected recovery receivable totaled $420 million and $21 million at December 31, 

2020 and December 31, 2019, respectively. The total assets of these nonconsolidated VIEs totaled $17.3 billion and $9.7 billion

at December 31, 2020 and December 31, 2019, respectively. See Note 8 for additional information on the amount of available 

coverage.

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 193
Consolidated VIEs

We consolidated the VIEs for which we are the primary beneficiary as discussed above. Our exposure on debt securities of 

consolidated trusts represents our liability to third parties that hold beneficial interests in our consolidated securitization trusts. 

When we consolidate a VIE, we recognize the assets and liabilities of the VIE on our consolidated balance sheets and account 

for those assets and liabilities based on the applicable GAAP for each specific type of asset or liability. Assets and liabilities that 

we transfer to a VIE at, after or shortly before the date we become the primary beneficiary of the VIE are initially measured at 

the same amounts that they would have been measured if they had not been transferred, and no gain or loss is recognized on 

these transfers. For all other VIEs that we consolidate, we recognize the assets and liabilities of the VIE at fair value, and we 

recognize a gain or loss for the difference between:

n The sum of the fair value of the consideration paid, the fair value of any noncontrolling interests, and the reported amount 

of any previously held interests and

n The net fair value of the assets and liabilities recognized. Guarantees to consolidated VIEs are eliminated in consolidation 

and are therefore not separately recognized on our consolidated balance sheets.

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our 

consolidated balance sheets.

Table 3.1 - Consolidated VIEs

(In millions) December 31, 2020 December 31, 2019

Consolidated Balance Sheet Line Item

Assets:

Cash and cash equivalents (includes $17,289 and $869 of restricted cash and cash 

equivalents) $17,290 $870 

Securities purchased under agreements to resell 38,487 23,137 

Investment securities, at fair value 591 597 

Mortgage loans held-for-investment 2,273,347 1,940,523 

Accrued interest receivable, net 7,134 6,170 

Other assets 20,480 9,824 

Total assets of consolidated VIEs $2,357,329 $1,981,121 

Liabilities:

Accrued interest payable $5,610 $5,536 

Debt 2,308,176 1,898,355 

Other liabilities — 1 

Total liabilities of consolidated VIEs $2,313,786 $1,903,892 

Nonconsolidated VIEs

The following table presents the carrying amounts and classification of the assets and liabilities recorded on our consolidated 

balance sheets related to VIEs for which we are not the primary beneficiary and with which we were involved in the design and 

creation and have a significant continuing involvement. Our involvement with such VIEs primarily consists of investments in 

debt securities issued by resecuritization trusts and guarantees of senior securities issued by certain Multifamily securitization 

trusts. 

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 194
Table 3.2 - Nonconsolidated VIEs

(In millions) December 31, 2020 December 31, 2019

Assets and Liabilities Recorded on our Consolidated Balance Sheets(1)

Assets:

Investment securities, at fair value $28,459 $37,918 

Accrued interest receivable, net 239 212 

Derivative assets, net 61 14 

Other assets 5,553 3,951 

 Liabilities:

Derivative liabilities, net 47 108 

Other liabilities 4,515 3,761 

(1) Includes our variable interests in REMICs and Strips, K Certificates, SB Certificates, certain senior subordinate securitization structures, and other securitization 

products that we do not consolidate.

We also obtain interests in various other entities created by third parties through the normal course of business that may be 

VIEs, such as through our investments in certain non-Freddie Mac mortgage-related securities, purchases of multifamily loans, 

guarantees of multifamily housing revenue bonds, as a derivative counterparty or through other activities. To the extent that we 

were not involved in the design or 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. As a result, we do not consolidate these VIEs and we account for our interests in these VIEs in the same manner that we 

account for our interests in other third-party transactions. See Note 6 for additional information regarding our investments in 

non-Freddie Mac mortgage-related securities. See Note 4 for more information regarding multifamily loans.

Financial Statements Notes to the Consolidated Financial Statements | Note 3

FREDDIE MAC | 2020 Form 10-K 195
NOTE 4

Mortgage Loans

On January 1, 2020, we adopted CECL, which changed certain of our significant accounting policies for mortgage loans heldfor-investment, as discussed further in the sections below.

The table below provides details of the loans on our consolidated balance sheets as of December 31, 2020 and December 31, 

2019. 

Table 4.1 - Mortgage Loans

December 31, 2020 December 31, 2019

(In millions) Single-family Multifamily Total Single-family Multifamily Total

Held-for-sale UPB $10,702 $23,789 $34,491 $18,543 $18,954 $37,497 

Cost basis and fair value adjustments, net (1,637) 798 (839) (2,800) 591 (2,209) 

 Total held-for-sale loans, net 9,065 24,587 33,652 15,743 19,545 35,288 

Held-for-investment UPB 2,271,576 21,923 2,293,499 1,938,282 17,473 1,955,755 

Cost basis adjustments 62,415 54 62,469 33,375 16 33,391 

Allowance for credit losses (5,628) (104) (5,732) (4,222) (12) (4,234) 

 Total held-for-investment loans, net 2,328,363 21,873 2,350,236 1,967,435 17,477 1,984,912 

Total mortgage loans, net $2,337,428 $46,460 $2,383,888 $1,983,178 $37,022 $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. 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 consolidated balance sheets 

at their amortized cost basis, net of the allowance for credit losses. The amortized cost basis is based on a loan's outstanding 

UPB, net of deferred fees and other cost basis adjustments (including unamortized premiums and discounts, fees we receive or 

pay when we acquire loans, commitment-related derivative basis 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 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 determined on 

an individual loan basis on our 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 consolidated statements of comprehensive 

income, 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 consolidated statements of comprehensive income. 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 

consolidated statements of cash flows. Cash flows related to loans originally classified as held-for-sale are classified as 

operating activities on our consolidated statements of cash flows.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 196
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

Year Ended December 31,

(In billions) 2020 2019 2018

Single-family:

Purchases

 Held-for-investment loans $1,085.9 $451.2 $307.7 

Reclassified from held-for-investment to held-for-sale(1) 4.6 13.6 21.7 

Sale of held-for-sale loans(2) 9.0 13.1 10.2 

Multifamily:

Purchases

 Held-for-investment loans 9.6 9.5 5.0 

 Held-for-sale loans 69.7 65.3 70.3 

Reclassified from held-for-investment to held-for-sale(1) 2.7 1.9 1.8 

Sale of held-for-sale loans(3) 66.7 71.3 68.1 

(1) We reclassify loans from held-for-investment to held-for-sale when we no longer have both the intent and ability to hold for the foreseeable future. For additional 

information regarding the fair value of our loans classified as held-for-sale, see Note 19.

(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 reclassified has experienced more-than-insignificant deterioration in credit 

quality since origination, the excess of the loan’s amortized cost basis over its fair value is written off against the allowance for 

credit losses prior to the reclassification. 

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 loan’s held-for-sale 

valuation allowance, if any, and establish an allowance for credit losses as needed. 

Prior to adoption of CECL, when we reclassified a loan from held-for-investment to held-for-sale, we wrote off the entire 

difference between the loan's amortized cost basis and its fair value if the loan had a history of credit-related issues. If the 

write-off amount exceeded the existing allowance for credit losses amount, an additional provision for credit losses was 

recorded. Any declines in loan fair value after the date of reclassification were recognized as a valuation allowance, with an 

offset recorded to investment gains (losses), net.

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

2020

(In millions) UPB

Allowance for 

Credit Losses 

Reversed or 

(Established)

Valuation 

Allowance 

(Established) 

or Reversed

Single-family reclassifications from:

Held-for-investment to held-for-sale(1) $4,628 $300 $— 

Held-for-sale to held-for-Investment(2) 1,721 147 34 

Multifamily reclassifications from:

Held-for-investment to held-for-sale 2,703 9 (6) 

 Held-for-sale to held-for-Investment 775 (1) 4 

(1) Prior to reclassification from held-for-investment to held-for-sale, we charged off $264 million against the allowance for credit losses during 2020.

(2) Allowance for credit losses reversed upon reclassifications from held-for-sale to held-for-investment for loans that were previously charged off and the present 

values of expected future cash flows were in excess of the amortized cost basis upon reclassification.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 197
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.

For loans in active forbearance plans that were current prior to receiving forbearance, we continue to accrue interest income 

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 based on management judgment, taking into 

consideration additional factors, the most important of which is current LTV ratio. 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 7 for 

additional information on the allowance for credit losses on accrued interest receivable and Note 14 for additional information 

on interest income on mortgage loans.

The table below presents the amortized cost basis of non-accrual loans as of January 1, 2020 and December 31, 2020, 

including the interest income recognized during 2020 that is related to the loans on non-accrual status as of December 31, 

2020. 

Table 4.4 - Amortized Cost Basis of Held-for-Investment Loans on Non-accrual 

Non-accrual Amortized Cost Basis

Interest Income 

Recognized(1)

(In millions) January 1, 2020 December 31, 2020

Year Ended December 

31, 2020

Single-family:

20- and 30-year or more, amortizing fixed-rate $5,598 $12,151 $235 

15-year amortizing fixed-rate 242 696 10 

Adjustable-rate 91 193 3 

Alt-A, interest-only, and option ARM 439 637 10 

Total single-family 6,370 13,677 258 

Total multifamily 13 — — 

Total single-family and multifamily $6,383 $13,677 $258 

(1) Represents the amount of payments received during 2020, including those received while the loans were on accrual status, for the held-for-investment loans on 

non-accrual status as of December 31, 2020.

The table below provides the amount of accrued interest receivable, net presented on our consolidated balance sheets and the 

amount of accrued interest receivable related to loans on non-accrual status as of December 31, 2020 that was written off 

through reversal of interest income on our consolidated statements of comprehensive income (loss) by portfolio. 

Table 4.5 - Accrued Interest Receivable, Net and Related Charge-offs Through Reversal of Interest Income

December 31, 2020

Year Ended December 31, 

2020

(In millions)

Accrued Interest Receivable, 

Net 

Accrued Interest Receivable 

Related Charge-offs

Single-family loans $7,292 ($333) 

Multifamily loans 139 — 

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 198
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 Note 18.

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.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 199
Table 4.6 - Amortized Cost Basis of Single-Family Held-for-Investment Loans by Current LTV Ratio and Vintage

December 31, 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

 ≤ 60 $203,333 $52,820 $33,139 $64,834 $115,978 $431,406 $901,510 

 > 60 to 80 437,107 141,094 64,236 59,110 40,614 44,636 786,797 

 > 80 to 100 206,457 53,926 8,822 2,117 654 3,983 275,959 

 > 100(1) 202 7 25 64 61 948 1,307 

 Total 20- and 30-year or more, amortizing fixed-rate 847,099 247,847 106,222 126,125 157,307 480,973 1,965,573 

 15-year amortizing fixed-rate

 ≤ 60 78,269 17,753 9,914 19,650 29,916 83,842 239,344 

 > 60 to 80 67,904 12,169 2,195 961 215 135 83,579 

 > 80 to 100 8,553 400 17 12 9 17 9,008 

 > 100(1) 21 — 3 5 3 7 39 

 Total 15-year amortizing fixed-rate 154,747 30,322 12,129 20,628 30,143 84,001 331,970 

 Adjustable-rate 

 ≤ 60 1,427 850 731 2,429 2,042 12,993 20,472 

 > 60 to 80 1,403 877 537 1,061 329 528 4,735 

 > 80 to 100 232 125 34 29 2 8 430 

 > 100(1) — — — — — 1 1 

 Total Adjustable-rate 3,062 1,852 1,302 3,519 2,373 13,530 25,638 

 Alt-A, Interest-only, and option ARM

 ≤ 60 — — — — — 8,620 8,620 

 > 60 to 80 — — — — — 1,818 1,818 

 > 80 to 100 — — — — — 314 314 

 > 100(1) — — — — — 58 58 

 Total Alt-A, Interest-only, and option ARM — — — — — 10,810 10,810 

Total single-family loans $1,004,908 $280,021 $119,653 $150,272 $189,823 $589,314 $2,333,991 

Total for all loan product types by Current LTV ratio:

 ≤ 60 $283,029 $71,423 $43,784 $86,913 $147,936 $536,861 $1,169,946 

 > 60 to 80 506,414 154,140 66,968 61,132 41,158 47,117 876,929 

 > 80 to 100 215,242 54,451 8,873 2,158 665 4,322 285,711 

 > 100(1) 223 7 28 69 64 1,014 1,405 

Total single-family loans $1,004,908 $280,021 $119,653 $150,272 $189,823 $589,314 $2,333,991 

Referenced footnotes are included after the next table.

December 31, 2019

Current LTV Ratio Total

(In millions) ≤ 80 > 80 to 100 > 100(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 total of single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 11.17% and 4.51% as 

of December 31, 2020 and December 31, 2019, respectively.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 200
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 4.7 - Amortized Cost Basis of Multifamily Held-for-Investment Loans by Credit Quality Indicator by Vintage

December 31, 2020 December 31, 2019

Year of Origination

(In millions) 2020 2019 2018 2017 2016 Prior Total Total

Revolving 

Loans

Category:

Pass $7,486 $6,491 $1,075 $722 $590 $2,715 $2,024 $21,103 $17,227 

Special mention — 524 115 — 8 108 — 755 141 

Substandard — — 6 41 — 72 — 119 121 

Doubtful — — — — — — — — — 

Total $7,486 $7,015 $1,196 $763 $598 $2,895 $2,024 $21,977 $17,489 

Past Due Status

The tables below present the amortized cost basis of our single-family and multifamily loans, held-for-investment, by payment 

status. Pursuant to FHFA guidance and the CARES Act, we offer mortgage relief options for borrowers affected by the 

COVID-19 pandemic. Among other things, we are offering forbearance to single-family and multifamily borrowers experiencing 

a financial hardship, either directly or indirectly, related to 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 plan, based on the information reported to us by our servicers. We report multifamily loans in 

forbearance as current as long as the borrower is in compliance with the forbearance agreement, including the agreed upon 

repayment plan. As a result, all multifamily loans in forbearance are reported as current in the tables below, even if payments 

are past due based on the loan's original contractual terms. 

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 201
Table 4.8 - Amortized Cost Basis of Held-for-Investment Loans by Payment Status

December 31, 2020

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or 

More Past Due, 

or in 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 $1,891,981 $15,798 $5,941 $51,853 $1,965,573 $40,162 $648 

15-year amortizing fixed-rate 326,651 1,439 429 3,451 331,970 2,723 11 

Adjustable-rate 24,483 192 79 884 25,638 690 5 

Alt-A, interest-only, and option ARM 9,227 292 130 1,161 10,810 538 115 

 Total single-family 2,252,342 17,721 6,579 57,349 2,333,991 44,113 779 

 Total multifamily(3) 21,977 — — — 21,977 — — 

Total single-family and multifamily $2,274,319 $17,721 $6,579 $57,349 $2,355,968 $44,113 $779 

December 31, 2019

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in Foreclosure(1) Total Non-accrual

Single-family:

20- and 30-year or more, amortizing 

fixed-rate $1,653,113 $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 — — — 17,489 13 

Total single-family and multifamily $1,962,006 $17,339 $3,707 $6,094 $1,989,146 $6,396 

(1) Includes $1.0 billion and $1.8 billion of loans that were in the process of foreclosure as of December 31, 2020 and December 31, 2019, respectively.

(2) Loans with no allowance primarily represent those loans that were previously charged off and 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 December 31, 2020, includes $0.7 billion of multifamily loans in forbearance that are reported as current.

FHFA requires us to purchase single-family loans from the trust 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 the trust 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-related security pools for at least the duration of the forbearance plan. Once the 

forbearance period expires, the loan will remain in the related securities pool while: 

n	 An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or trial period plan pursuant to 

a loan modification remains outstanding; 

n	 The loan is in an active repayment plan or trial period plan; or 

n	 A payment deferral solution is in effect.

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we extended the trigger to 

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid 

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure.

When we purchase loans from the trust, we record an extinguishment of the corresponding portion of the debt securities of the 

consolidated trusts and we reclassify the loans from mortgage loans held-for-investment by consolidated trusts to mortgage 

loans held-for-investment by Freddie Mac. We purchased $5.6 billion in UPB of loans from consolidated trusts (or purchased 

delinquent loans associated with other mortgage-related guarantees) during both the years ended December 31, 2020 and 

December 31, 2019, respectively.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 202
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:

n	 The requirements under U.S. GAAP for certain loan modifications that would otherwise be categorized as a TDR and

n	 Any determination that such loan modifications would be considered a TDR, including the related impairment for 

accounting purposes.

The relief provided by Section 4013 of the CARES Act is extended by the Consolidated Appropriations Act, 2021. As a result, 

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 January 1, 2022 or the date that is 60 days after the declaration of the national emergency related to the COVID-19 

pandemic ends for a loan that was not more than 30 days past due as of December 31, 2019. We have elected to suspend TDR 

accounting for eligible modifications under Section 4013 of the CARES Act.

In addition, Section 4022 and Section 4023 of the CARES Act require us to offer forbearance to certain single-family and 

multifamily borrowers, respectively, with an economic hardship related to the COVID-19 pandemic. Recent guidance issued by 

federal banking regulators and endorsed by the FASB staff has indicated that government-mandated modification or deferral 

programs related to the COVID-19 pandemic should not be accounted for as TDRs as the lender did not choose to grant a 

concession to the borrower. We have concluded that the forbearance programs we are offering under Section 4022 and 

Section 4023 of the CARES Act are government-mandated deferral programs related to the COVID-19 pandemic, and therefore 

we will not account for such modifications as TDRs.

We recognize an allowance for credit losses on TDRs as discussed in Note 7. 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 

consolidated statements of comprehensive income (loss). We report single-family loans with modifications that were classified 

as TDRs based on the original product categories of the loans before modifications. The tables below include loans that were 

reclassified from held-for-investment to held-for-sale after TDR modifications.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 203
The table below provides details of our single-family loan modifications that were classified as TDRs during the periods 

presented.

Table 4.9 - Single-Family TDR Modification Metrics

2020 2019 2018

Percentage of TDRs with:

 Interest rate reductions and related term extensions 15% 9% 12% 

 Principal forbearance and related interest rate reductions and term extensions 22 23 24 

Average coupon interest rate reduction 0.3 % 0.1 % 0.2 %

Average months of term extension 179 180 132

Substantially all of our completed single-family loan modifications classified as a TDR during 2020 resulted in a modified loan 

with a fixed interest rate.

The table below presents the volume of single-family and multifamily loans that were newly classified as TDRs. Loans classified 

as a TDR in one period may be subject to further action (such as a modification or remodification) in a subsequent period. In 

such cases, the subsequent action would not be reflected in the table below since the loan would already have been classified 

as a TDR.

Table 4.10 - TDR Activity

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Single-family:(1)(2)

20- and 30-year or more, amortizing fixed-rate 22,471 $4,169 25,924 $4,331 43,742 $7,084 

15-year amortizing fixed-rate 2,584 283 3,018 296 5,944 584 

Adjustable-rate 334 59 529 86 902 140 

Alt-A, interest-only, and option ARM 1,300 204 1,523 219 2,602 432 

Total single-family 26,689 4,715 30,994 4,932 53,190 8,240 

Multifamily — $— — $— 1 $15 

(1) The pre-TDR amortized cost basis for single-family loans initially classified as TDR during the years ended December 31, 2020, December 31, 2019, and December 

31, 2018 was $4.7 billion, $4.9 billion, and $8.3 billion, respectively.

(2) Includes certain bankruptcy events and forbearance plans, repayment plans, payment deferrals, and modification activities that do not qualify the temporary relief 

related to TDR provided by the CARES Act based on servicer reporting at the time of TDR event.

The table below presents the volume of our TDR modifications that experienced payment defaults (i.e., loans that became two 

months delinquent or completed a loss event) during the applicable periods and had completed a modification during the year 

preceding the payment default. 

Table 4.11 - Payment Defaults of Completed TDR Modifications

Year Ended December 31,

2020 2019 2018

(Dollars in millions)

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Number of 

Loans

Post-TDR

Amortized 

Cost Basis

Single-family:

20- and 30-year or more, amortizing fixed-rate 10,339 $1,869 13,428 $1,702 13,548 $1,847 

15-year amortizing fixed-rate 482 58 451 36 565 44 

Adjustable-rate 130 19 132 15 176 25 

Alt-A, interest-only, and option ARM 749 144 871 129 1,178 199 

Total single-family 11,700 2,090 14,882 1,882 15,467 2,115 

Multifamily — $— — $— — $— 

In addition to modifications, loans may be classified as TDRs as a result of other loss mitigation activities (i.e., repayment plans, 

forbearance plans, or loans in modification trial periods). During the years ended December 31, 2020, December 31, 2019, and 

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 204
December 31, 2018, 3,862, 5,158, and 8,488, respectively, of such loans (with a post-TDR amortized cost basis of $0.6 billion, 

$0.6 billion, and $1.0 billion, respectively) experienced a payment default within a year after the loss mitigation activity occurred.

Non-Cash Investing and Financing Activities

During the years ended December 31, 2020, December 31, 2019, and December 31, 2018, we acquired $435.5 billion, $238.4 

billion, and $164.0 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 $141.7 billion, $50.0 billion, and $25.8 billion of 

loans held-for-investment from sellers during the years ended December 31, 2020, December 31, 2019, and December 31, 

2018, respectively, to satisfy advances to lenders that were recorded in other assets on our consolidated balance sheets. 

In addition, we acquired REO properties through foreclosure sales or by deed in lieu of foreclosure. These acquisitions 

represent non-cash transfers. During the years ended December 31, 2020, December 31, 2019, and December 31, 2018, we 

had transfers of $0.2 billion, $0.8 billion, and $1.0 billion, respectively, from loans to REO.

Financial Statements Notes to the Consolidated Financial Statements | Note 4

FREDDIE MAC | 2020 Form 10-K 205
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 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.

Guarantees to consolidated entities are eliminated in consolidation and therefore are not separately recognized on our 

consolidated balance sheets. The accounting treatment for guarantees provided to nonconsolidated entities or other third 

parties will depend on whether the guarantee contract qualifies as a financial guarantee. 

If the guarantee contract qualifies as a financial guarantee and exposes us to incremental credit risk, we will recognize both a 

guarantee obligation at fair value and the consideration we receive for providing the guarantee, which typically consists of a 

guarantee asset that represents the fair value of future guarantee fees. As a practical expedient, the measurement of the fair 

value of the guarantee obligation is set equal to the consideration we receive to provide the guarantee, and no gain or loss is 

recognized upon issuance of the guarantee. Subsequently, we recognize changes in the fair value of the guarantee asset in 

current period earnings and amortize the guarantee obligation into earnings as we are released from risk under the guarantee. 

We also recognize a reserve for guarantee losses based on expected credit losses over the contractual period in which we are 

exposed to credit risk. See Note 7 for additional information on our allowance for credit losses.

If the guarantee contract provided to nonconsolidated entities does not qualify as a financial guarantee, that contract will 

generally be accounted for as a derivative instrument and measured at fair value with changes in fair value recognized 

immediately in earnings.

Guarantee Activities

Our principal guarantee activities include the following:

Securitization Activity Guarantees

For substantially all of our securitization transactions, we guarantee the principal and interest payments on some or all of the 

issued beneficial interests. Typically, these guarantees will cover the senior classes of beneficial interests issued by the 

securitization trust(s). Securitization activity guarantees provided to nonconsolidated trusts will generally qualify as, and be 

accounted for, as financial guarantees. Our maximum exposure on these guarantees is generally limited to the UPB of the 

beneficial interests that we have guaranteed.

Guarantees of Fannie Mae Securities

We have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products. We extend our 

guarantee of these products to cover principal and interest that are payable from the underlying Fannie Mae collateral. Because 

both Freddie Mac and Fannie Mae are under the common control of FHFA, and due to Fannie Mae’s status as a GSE and the 

funding commitment available to it through its senior preferred stock purchase agreement with Treasury, we view the likelihood 

of being required to perform on our guarantee of Fannie Mae collateral as remote and do not charge an incremental guarantee 

fee to include Fannie Mae securities in our resecuritization products. Thus, we do not record a guarantee obligation with 

respect to Fannie Mae securities backing Freddie Mac resecuritization products. 

Other Mortgage-Related Guarantees

In certain circumstances, we provide a credit guarantee of mortgage-related assets held by third parties, in exchange for a 

guarantee fee, without securitizing those assets. These guarantees consist of the following:

n	 Long-term standby commitments of single-family loans which obligate us to purchase the covered loans when they 

become seriously delinquent. Periodically, certain of our customers seek to terminate long-term standby commitments and 

simultaneously enter into guarantor swap transactions to obtain our securities backed by many of the same loans. During 

2020 and 2019, we guaranteed $4.2 billion and $2.3 billion, respectively, of loans under new long-term standby 

commitments and

n	 Guarantees of the timely payment of principal and interest for certain multifamily bonds, which primarily consist of 

multifamily housing revenue bonds that were issued by HFAs. During 2020 and 2019, we guaranteed $1.4 billion and $0.9 

billion, respectively, of multifamily bonds.

Our other mortgage-related guarantees will generally qualify and be accounted for as financial guarantees. Our maximum 

Financial Statements Notes to the Consolidated Financial Statements | Note 5

FREDDIE MAC | 2020 Form 10-K 206
exposure on these guarantees is limited to the UPB of the mortgage-related assets that we have guaranteed.

Other Guarantees Measured at Fair Value 

Other guarantees that do not qualify as financial guarantees are generally accounted for as derivative instruments and 

measured at fair value. These guarantees primarily include:

n	 Certain interest-rate guarantees related to our securitization and guarantee activities that do not qualify as financial 

guarantees;

n	 Certain market value guarantees, including written options and written swaptions; and

n	 Guarantees of third-party derivative instruments.

Other Indemnifications

In connection with certain business transactions, we may provide indemnification to counterparties for claims arising out of 

breaches of certain obligations (e.g., those arising from representations and warranties) in contracts entered into in the normal 

course of business. Our assessment is that the risk of any material loss from such a claim for indemnification is remote and 

there are no significant probable and estimable losses associated with these contracts. In addition, we provided indemnification 

for litigation defense costs to certain former officers who are subject to ongoing litigation. See Note 20 for information on 

ongoing litigation. These indemnification obligations will generally be accounted for and qualify as financial guarantees. The 

recognized liabilities on our consolidated balance sheets related to indemnifications were not significant at both December 31, 

2020 and December 31, 2019.

The table below shows our maximum exposure, recognized liability, and maximum remaining term of our recognized 

guarantees to nonconsolidated VIEs and other third parties. This table does not include our unrecognized guarantees, such as 

guarantees to consolidated VIEs or to resecuritization trusts that do not expose us to incremental credit risk. The maximum 

exposure disclosed in the table is not representative of the actual loss we are likely to incur, based on our historical loss 

experience and after consideration of proceeds from related collateral liquidation, including possible recoveries under credit 

enhancements. See Note 8 for additional information on our credit enhancements. 

Table 5.1 - Financial Guarantees 

December 31, 2020 December 31, 2019

(Dollars in millions, terms in years)

Maximum

Exposure(1)

Recognized

Liability(2)

Maximum

Remaining

Term

Maximum

Exposure(1)

Recognized

Liability(2)

Maximum

Remaining

Term

Single-family:

Securitization activity guarantees $29,739 $401 39 $26,818 $361 40

Other mortgage-related guarantees 9,215 193 30 7,492 182 30

Total single-family $38,954 $594 $34,310 $543 

Multifamily:

Securitization activity guarantees $287,334 $4,031 39 $252,167 $3,333 39

Other mortgage-related guarantees 10,721 425 33 9,989 416 34

Total multifamily $298,055 $4,456 $262,156 $3,749 

Other guarantees measured at fair value $47,703 $794 30 $24,965 $253 30

Fannie Mae securities backing Freddie Mac 

resecuritization products 85,841 — 41 27,408 — 30

(1) The maximum exposure represents the contractual amounts that could be lost if counterparties or borrowers defaulted, without consideration of possible recoveries 

under credit enhancements. For other guarantees measured at fair value, this amount primarily represents the notional value if it relates to our market value 

guarantees or guarantees of third-party derivative instruments or the UPB if it relates to a guarantee of a mortgage-related asset. For certain of our other guarantees 

measured at fair value, our exposure may be unlimited 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 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.

Financial Statements Notes to the Consolidated Financial Statements | Note 5

FREDDIE MAC | 2020 Form 10-K 207
The tables below show the payment status of the mortgage loans underlying our securitization guarantees and other mortgagerelated guarantees that are not measured at fair value.

Table 5.2 – UPB of Loans Underlying Our Guarantees by Payment Status 

December 31, 2020

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in Foreclosure Total(1)

Single-family $37,187 $2,204 $945 $3,922 $44,258 

Multifamily(2) 339,614 87 62 557 340,320 

Total $376,801 $2,291 $1,007 $4,479 $384,578 

December 31, 2019

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in 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 $0.7 billion and $1.6 billion as of December 31, 2020 and December 31, 2019, 

respectively, and therefore is not included in the tables above.

(2) As of December 31, 2020, includes $6.9 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, liquidity 

guarantees, unfunded lending arrangements and other similar commitments. These agreements may require us to transfer cash 

before or upon settlement of our contractual obligation. We recognize an allowance for credit losses for those agreements not 

measured at fair value or otherwise recognized in the financial statements. The total notional value of off-balance sheet credit 

exposures was $15.4 billion and $13.8 billion at December 31, 2020 and December 31, 2019, respectively. See Note 7 for 

additional discussion of our allowance for credit losses on our off-balance sheet credit exposures. 

We also have certain multifamily purchase commitments, a majority of which we have elected the fair value option, totaling 

$5.5 billion and $3.3 billion at December 31, 2020 and December 31, 2019, respectively, that are excluded from the amounts 

above as they are not included in our allowance for credit losses. 

Financial Statements Notes to the Consolidated Financial Statements | Note 5

FREDDIE MAC | 2020 Form 10-K 208
NOTE 6

Investment Securities

The table below summarizes the fair values of our investments in debt securities by classification.

Table 6.1 - Investment Securities 

(In millions) December 31, 2020 December 31, 2019

Trading securities $44,458 $49,537 

Available-for-sale securities 15,367 26,174 

Total fair value of investment securities $59,825 $75,711 

We currently classify and account for our securities as either available-for-sale or trading. As of December 31, 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. 

Securities classified as available-for-sale and trading are reported at fair value with changes in fair value included in AOCI, net 

of income taxes and investment gains (losses), net, respectively. See Note 19 for more information on how we determine the 

fair value of securities.

We generally record purchases and sales of securities on the trade date when the related forward commitments are exempt 

from the accounting guidance for derivatives. Alternatively, we record purchases and sales of securities on the expected 

settlement date, with a corresponding derivative recorded on the trade date, when the related forward commitments are not 

exempt from the accounting guidance for derivatives.

We include interest on securities on our consolidated statements of comprehensive income. For most of our securities, interest 

income is recognized using the effective interest method, which considers the contractual terms of the security. Deferred items, 

including premiums, discounts, and other basis adjustments, are amortized into interest income over the contractual lives of the 

securities.

For certain securities, interest income is recognized using the prospective effective interest method. We apply this method to 

securities that: 

n	 Can contractually be prepaid or otherwise settled in such a way that we may not recover substantially all of our recorded 

investment;

n	 Are not of high credit quality at acquisition; or 

n	 Have been determined to be other-than-temporarily impaired.

Under this method, we recognize as interest income, over the expected life of the securities, the excess of the cash flows 

expected to be collected over the securities' carrying value. We update our estimates of expected cash flows periodically and 

recognize changes in the calculated effective interest rate on a prospective basis.

For securities classified as trading or available-for-sale, we classify the cash flows as investing activities because we hold these 

securities for investment purposes. In cases where the transfer of a security represents a secured borrowing, we classify the 

related cash flows as financing activities.

Trading Securities

The table below presents the estimated fair values by major security type for our securities classified as trading. Our nonmortgage-related securities primarily consist of investments in U.S. Treasury securities.

Table 6.2 - Trading Securities 

(In millions) December 31, 2020 December 31, 2019

Mortgage-related securities:

Agency $17,504 $22,481 

Non-agency 1 1 

Total mortgage-related securities 17,505 22,482 

Non-mortgage-related securities 26,953 27,055 

Total fair value of trading securities $44,458 $49,537 

For trading securities held at December 31, 2020, 2019, and 2018, we recorded net unrealized gains (losses) of ($296) million, 

($8) million, and ($479) million during 2020, 2019 and 2018, respectively.

Financial Statements Notes to the Consolidated Financial Statements | Note 6

FREDDIE MAC | 2020 Form 10-K 209
Available-for-Sale Securities

At both December 31, 2020 and December 31, 2019, all available-for-sale securities were mortgage-related securities.

The tables below present the amortized cost, gross unrealized gains and losses, and fair value by major security type for our 

securities classified as available-for-sale.

Table 6.3 - Available-for-Sale Securities 

December 31, 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 $13,514 $— $794 ($4) $14,304 $36 

Non-agency and other 830 — 233 — 1,063 4 

Total available-for-sale securities $14,344 $— $1,027 ($4) $15,367 $40 

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 $— ($74) $24,887 

Non-agency and other 1,004 283 — — 1,287 

Total available-for-sale securities $25,394 $854 $— ($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 December 31, 2020 scheduled to contractually mature after ten years 

was $12.1 billion, with an additional $2.2 billion scheduled to contractually mature after five years through ten years.

We present accrued interest receivable separately on our 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 

consolidated statements of comprehensive income (loss) and therefore do not recognize an allowance for credit losses on 

accrued interest receivable. As of December 31, 2020 no accrued interest receivable was charged off. 

Available-for-Sale Securities in a Gross Unrealized Loss Position

The tables below present available-for-sale securities in a gross unrealized loss position, and whether such securities have 

been in a gross unrealized loss position for less than 12 months, or 12 months or greater.

Table 6.4 - Available-for-Sale Securities in a Gross Unrealized Loss Position

December 31, 2020

Less than 12 Months 12 Months or Greater

(In millions) Fair Value

Gross 

Unrealized 

Losses Fair Value

Gross 

Unrealized 

Losses

Available-for-sale securities:

Agency $223 ($2) $144 ($2) 

Non-agency and other 17 — — — 

Total available-for-sale securities in a gross unrealized loss position $240 ($2) $144 ($2) 

Financial Statements Notes to the Consolidated Financial Statements | Note 6

FREDDIE MAC | 2020 Form 10-K 210
December 31, 2019

Less than 12 Months 12 Months 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 — — — 

Total available-for-sale securities in a gross unrealized loss position $5,779 ($27) $2,934 ($47) 

At December 31, 2020, the gross unrealized losses relate to 44 separate securities. We purchase multiple lots of individual 

securities at different times and at different costs. We determine gross unrealized gains and gross unrealized losses by 

specifically evaluating investment positions at the lot level; therefore, some of the lots we hold for an individual security may be 

in a gross unrealized gain position, while other lots for that security may be in a gross unrealized loss position.

Realized Gains and Losses on Sales of Available-for-Sale Securities

Gains and losses on the sale of securities are included in investment securities gains (losses), including those gains (losses) 

reclassified into earnings from AOCI. We use the specific identification method for determining the cost basis of a security in 

computing the gain or loss.

The table below summarizes the gross realized gains and gross realized losses from the sale of available-for-sale securities.

Table 6.5 - Gross Realized Gains and Gross Realized Losses from Sales of Available-for-Sale Securities

Year Ended December 31,

(In millions) 2020 2019 2018

Gross realized gains $501 $219 $627 

Gross realized losses (108) (49) (303) 

Net realized gains $393 $170 $324 

Non-Cash Investing and Financing Activities 

During the years ended December 31, 2020 and December 31, 2019, we recognized $30.8 billion and $10.9 billion, 

respectively, of investments in securities in exchange for the issuance of debt securities of consolidated trusts through partial 

sales of commingled single-class securities that were previously consolidated.

Financial Statements Notes to the Consolidated Financial Statements | Note 6

FREDDIE MAC | 2020 Form 10-K 211
NOTE 7

Allowance for Credit Losses

On January 1, 2020, we adopted CECL. The general 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 balance sheet. 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.

The table below summarizes changes in our allowance for credit losses. 

Table 7.1 - Details of the Allowance for Credit Losses 

December 31, 2020 December 31, 2019 December 31, 2018

 (In millions) 

Singlefamily Multifamily TotalSinglefamily Multifamily TotalSinglefamily Multifamily Total

Beginning balance(1) $5,233 $68 $5,301 $6,176 $15 $6,191 $8,979 $44 $9,023 

Provision (benefit) for 

credit losses 1,320 132 1,452 (749) 3 (746) (712) (24) (736) 

Charge-offs (592) — (592) (1,737) — (1,737) (2,885) (8) (2,893) 

Recoveries collected 210 — 210 452 — 452 475 3 478 

Other 182 — 182 126 — 126 319 — 319 

Ending balance $6,353 $200 $6,553 $4,268 $18 $4,286 $6,176 $15 $6,191 

Components of ending balance of allowance for credit losses:

Mortgage loans heldfor-investment $5,628 $104 $5,732 $4,222 $12 $4,234 $6,130 $9 $6,139 

Advances of preforeclosure costs 536 — 536 — — — — — — 

Accrued interest 

receivable on mortgage 

loans

 140 — 140 — — — — — — 

Off-balance sheet credit 

exposures

 49 96 145 46 6 52 46 6 52 

 Total $6,353 $200 $6,553 $4,268 $18 $4,286 $6,176 $15 $6,191 

(1) Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

Current Period Changes

During 2020, provision (benefit) for credit losses shifted to a provision from a benefit in 2019 and 2018 due to higher expected 

credit losses as a result of the COVID-19 pandemic. The higher expected credit losses during 2020 were primarily driven by the 

following factors:

n	 Expected credit losses related to COVID-19 relief programs - Our provision for credit losses during 2020 required 

significant management judgment to estimate the impact of COVID-19-related forbearance and relief programs on our 

expected credit losses. These judgments included estimates of the number of loans that will receive forbearance, the likely 

exit paths for loans in forbearance plans, and the number of loans where forbearance plans will be unsuccessful and the 

borrower will ultimately default. These factors resulted in a significant increase in our provision for credit losses for 2020, 

with the majority of the increase occurring in 1Q 2020. We recognized additional provision for allowances for preforeclosure costs and accrued interest receivable related to loans in forbearance due to the COVID-19 pandemic. In total, 

we increased our provision for credit losses during 2020 by $2.8 billion as a result of the COVID-19 pandemic.

n	 Portfolio growth - With the adoption of CECL, we recognize expected credit losses over the entire contractual term of the 

loan at the time of loan acquisition, rather than when it is probable the loan is impaired. In 2020, our single family credit 

guarantee portfolio grew by $332 billion or 17%, contributing to the increase in provision for credit losses.

n	 Growth in realized and forecasted house prices and declines in forecasted interest rates - During 2020, house price 

appreciation and significant declines in mortgage interest rates partially offset the increase in the provision for credit losses 

as a result of the COVID-19 pandemic and portfolio growth.

In addition, charge-offs decreased in 2020 due to a lower volume of transfers of single-family loans from held-for investment to 

held-for-sale. The decline in economic activity caused by the COVID-19 pandemic, and the corresponding government 

response, is unprecedented, and as a result, our estimate of expected credit losses is subject to significant uncertainty.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 212
Allowance for Credit Losses Methodology

Upon adoption of CECL on January 1, 2020, we began applying the below allowance for credit losses methodologies. We 

recognize changes in the allowance for credit losses through benefit (provision) for credit losses on our consolidated 

statements of comprehensive income (loss).

Mortgage Loans Held-for-Investment

Our allowance for credit losses on mortgage loans pertains to single-family and multifamily loans classified as held-forinvestment for which we have not elected the fair value option. We measure the allowance for credit losses on a pooled 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 

consolidated statements of comprehensive income (loss).

Single-Family

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 loan’s remaining contractual term, adjusted for expectations of prepayments and TDRs we reasonably expect will occur. As 

a result, we do not revert to historical loss information for single-family loans. Cash flow estimates are discounted at the loan’s 

prepayment-adjusted effective interest rate, which is adjusted for projections in the underlying benchmark interest rate for 

adjustable-rate loans. We project cash flows we expect to collect using our historical experience, such as historical default 

rates and severity of loss, based on loan characteristics, such as current LTV ratios, delinquency status, geography and 

borrowers' credit scores. These cash flow estimates are adjusted for current and future economic forecasts, such as current 

and forecasted interest rates and house price growth rates, and estimated recoveries from loss mitigation activities, attached 

credit enhancements, and disposition of collateral, less estimated disposition costs. 

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 declining (increasing) 

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

lower (higher) expected credit losses. Our forecast of house price growth rates 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 loan’s individual characteristics. Our forecast of interest rates 

incorporates various interest rate scenarios over the remaining contractual life of the loan based on current interest rates and 

implied market volatilities. 

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 

determine 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.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 213
Multifamily

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 loan’s 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 generally 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 nonrecourse 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 repayment of the loan is expected to be provided substantially through the 

operation or sale of the collateral, 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 borrower’s 

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 

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.

Advances of Pre-foreclosure Costs 

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. As of December 31, 2020, the balance of such receivables due from the 

borrower was $1.4 billion, which is included in other assets on our consolidated balance sheets. We recognize an allowance for 

credit losses for amounts that we do not ultimately expect to collect from the borrower.

Accrued Interest Receivable

When we accrue interest on mortgage loans that are three or more monthly payments past due, we measure an allowance for 

expected credit losses on the unpaid accrued interest receivable balances such that the balance sheet reflects the net amount 

of accrued interest we expect to collect. The assumptions we use for measuring the allowance for credit losses on accrued 

interest receivable are generally consistent with the assumptions used for measuring the allowance for credit losses on the 

underlying loans. For additional information on our policy for recognition of interest income on mortgage loans, see Note 4. 

Off-Balance Sheet Credit Exposures 

We recognize 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 through 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 consolidated balance sheets, with changes recognized through benefit (provision) for credit losses on our 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. 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 

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 214
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.

Available-for-Sale Securities 

The adoption of CECL changed the accounting for credit losses on available-for-sale debt securities from the other-thantemporary impairment methodology to a 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 period 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 security’s 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 security’s 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.

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. For our available-for-sale securities in an unrealized loss position at December 31, 2020, we have 

asserted that we have no intent to sell or believe it is not more likely than not that we will be required to sell the security before 

recovery of its amortized cost basis. 

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. See Note 6 for additional details on our agency MBS portfolio. 

Non-Agency RMBS

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 December 31, 2020, substantially all of our non-agency residential MBS were in an unrealized 

gain position. As a result, we have not recognized an allowance for credit losses on these securities. See Note 6 for additional 

details on our non-agency MBS portfolio.

Cash Equivalents 

We assess cash equivalents for expected credit losses over the contractual term of the instrument. As of December 31, 2020, 

we did not recognize an allowance for credit losses on our cash equivalents due to their overall high credit quality and shortterm nature.

Securities Purchased Under Agreements to Resell 

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 

contractually required to adjust the amount of collateral based on changes in the fair value of the collateral. As of December 31, 

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 

December 31, 2020, we did not recognize an allowance for credit losses on our securities purchased under agreements to 

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 215
resell nor have we recognized any charge-offs of accrued interest receivable. See Note 10 for additional information on 

securities purchased under agreements to resell. 

Other Assets 

We assess certain other assets measured at amortized cost for expected credit losses, such as advances to lenders and other 

secured lending arrangements, credit enhancement recovery receivables, servicer receivables, and other accounts receivable. 

Many of these assets are collateralized and require the counterparties to continue to replenish the collateral as market values 

change. Our allowance for credit losses on other assets is insignificant.

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. 

The table below presents our allowance for loan losses and our recorded investment in loans, held-for-investment, by 

impairment evaluation methodology.

Table 7.2 - 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) — (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 

Allowance for Loan Losses Determined on a Collective Basis 

Single-Family Loans

Prior to our implementation of CECL on January 1, 2020, we estimated allowance for loan losses on homogeneous pools of 

single-family loans using a model that evaluated a variety of factors affecting collectability. We reviewed the outputs of this 

model by considering qualitative factors such as macroeconomic and other factors to see whether the model outputs were 

consistent with our expectations. Management adjustments were made as necessary to take into consideration external factors 

and current economic events that had occurred but that were not yet reflected in the factors used to derive the model outputs. 

Significant judgment was exercised in making these adjustments. The homogeneous pools of single-family loans were 

determined based on common underlying characteristics, including current LTV ratios, trends in house prices, loan product 

type, and geographic region.

We rely upon third parties to service our loans. At loan delivery, the seller provides us with loan data, which includes 

characteristics and underwriting information. Each subsequent month, the servicers provide us with monthly loan-level 

servicing data, including delinquency and loss information. Our single-family allowance for loan losses default models produced 

estimates based on 12 months of loan-level performance data, which included a history of delinquency, foreclosures, 

foreclosure alternatives, and modifications. Our allowance for loan losses estimate included projections of: 

n	 Loss mitigation activities when a loss was incurred, including loan modifications for troubled borrowers and the incidence 

of redefault we had experienced on similar loans that had completed a loan modification and 

n	 Defaults we believed were likely to occur as a result of loss events that had occurred through the respective balance sheet 

date. 

We also considered macroeconomic and other factors that affect the quality of the loans underlying our portfolio, including 

regional housing trends, applicable house price indices, unemployment and employment dislocation trends, the effects of 

changes in government policies and programs, consumer credit statistics, and the extent of third-party insurance.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 216
Our single-family allowance for loan losses severity was based on actual REO dispositions, short sales, and third-party sales 

that incorporated the most recent:

n	 Twelve months of sales experience realized on our distressed property dispositions and

n	 Twelve months of pre-foreclosure expenses on our distressed properties, including REO, short sales, and third-party sales.

Our single-family allowance for loan losses severity estimate also captured expectations about recoveries from the collateral 

and attached credit enhancements, such as primary mortgage insurance. We used historical trends in house prices in our 

single-family allowance for loan losses process, primarily through the use of current LTV ratios in our default models and 

through the use of recent house price sales experience in our severity estimate. However, we did not use a forecast of trends in 

house prices in our single-family allowance for loan losses process.

For loans where foreclosure was probable, we measured impairment based upon an estimate of the fair value of the underlying 

collateral less estimated disposition costs. Our estimate also considered the effect of historical house price changes on 

borrower behavior.

We applied proceeds from attached credit enhancements (e.g., primary mortgage insurance) entered into contemporaneously 

with, and in contemplation of, a guarantee or loan purchase transaction as a recovery of our recorded investment in a chargedoff loan, up to the amount of loss recognized as a charge-off. Proceeds received in excess of our recorded investment in loans 

were recorded as a decrease to REO operations expense on our consolidated statements of comprehensive income.

Multifamily Loans

Multifamily loans evaluated collectively for impairment were aggregated into book year vintage portfolios. Potential impairment 

related to these portfolios was measured by benchmarking published historical commercial loan performance data to those 

vintages based upon available economic data related to multifamily real estate, including apartment vacancy and rental rates.

Allowance for Loan Losses Determined on an Individual Basis 

We considered a loan to be impaired 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.

Single-family loans individually evaluated for impairment included TDRs, as well as loans acquired under our financial 

guarantees with deteriorated credit quality prior to 2010. Impairment of a single-family loan having undergone a TDR was 

generally measured as the excess of our recorded investment in the loan over the present value of the expected future cash 

flows, discounted at the loan's effective interest rate. Our expectation of future cash flows incorporated, among other items, an 

estimated probability of default which was based on a number of market factors as well as the characteristics of the loan, such 

as past due status. If we determined that foreclosure on the underlying collateral was probable, we measured impairment 

based upon the fair value of the collateral, as reduced by estimated disposition costs and adjusted for estimated proceeds from 

primary mortgage insurance and similar sources. Multifamily loans individually evaluated for impairment included TDRs, loans 

three monthly payments or more past due, and loans that were impaired based on management judgment. Multifamily loans 

were generally measured individually for impairment based on the fair value of the underlying collateral, as reduced by 

estimated disposition costs.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 217
The tables below present the UPB, recorded investment, the related allowance for loan losses, average recorded investment, 

and interest income recognized for individually impaired loans.

Table 7.3 - 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 — — — 

 Total multifamily 86 81 — 

Total single-family and multifamily $36,440 $35,530 ($2,872) 

Referenced footnotes are included after the next table.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 218
Year Ended December 31,

2019 2018

(In millions)

Average 

Recorded 

Investment

Interest 

Income 

Recognized

Interest 

Income 

Recognized on 

Cash Basis(3)

Average

Recorded

Investment

Interest

Income

Recognized

Interest 

Income 

Recognized on 

Cash Basis(3)

Single-family:

With no allowance recorded:(1)

20- and 30-year or more, amortizing fixed-rate $2,450 $262 $7 $3,236 $346 $16 

15-year amortizing fixed-rate 20 1 — 21 3 — 

 Adjustable rate 200 11 — 248 12 1 

Alt-A, interest-only, and option ARM 891 66 1 1,264 88 4 

 Total with no allowance recorded 3,561 340 8 4,769 449 21 

With an allowance recorded:(2)

20- and 30-year or more, amortizing fixed-rate 32,960 1,805 156 44,055 2,156 274 

15-year amortizing fixed-rate 653 22 4 798 28 9 

 Adjustable rate 135 6 2 197 6 3 

Alt-A, interest-only, and option ARM 3,917 226 20 5,953 273 30 

 Total with an allowance recorded 37,665 2,059 182 51,003 2,463 316 

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 35,410 2,067 163 47,291 2,502 290 

15-year amortizing fixed-rate 673 23 4 819 31 9 

 Adjustable rate 335 17 2 445 18 4 

Alt-A, interest-only, and option ARM 4,808 292 21 7,217 361 34 

 Total single-family 41,226 2,399 190 55,772 2,912 337 

Multifamily:

With no allowance recorded (1) 83 5 1 131 6 2 

With an allowance recorded — — — 3 — — 

 Total multifamily 83 5 1 134 6 2 

Total single-family and multifamily $41,309 $2,404 $191 $55,906 $2,918 $339 

(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 Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 219
The table below summarizes the delinquency rates of loans within our single-family credit guarantee and multifamily mortgage 

portfolios.

Table 7.4 - 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 — %

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 8 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. 

Prior Period Other-Than-Temporary Impairment on Investments in 

Securities

Under the previous other-than-temporary impairment methodology that was effective prior to January 1, 2020, we evaluated 

available-for-sale securities in an unrealized loss position as of the end of each quarter to determine whether the decline in 

value was other-than-temporary. An unrealized loss existed when the fair value of an individual lot was less than its amortized 

cost basis. Other-than-temporary impairment was considered to have occurred if the fair value of the security lot was less than 

its amortized cost basis and we either intended to sell the security lot or more likely than not would be required to sell the 

security lot prior to recovery of its amortized cost basis. Under these circumstances, the security lot's entire decline in fair value 

was deemed to be other-than-temporary and was recorded within our consolidated statements of comprehensive income as 

investment gains (losses), net. If we did not intend to sell the security or we believed it was not more likely than not that we 

would be required to sell prior to recovery of the security's amortized cost basis, we recognized only the credit component of 

other-than-temporary impairment in earnings and the amounts attributable to all other factors were recorded in AOCI. The 

credit component represented the amount by which the present value of cash flows expected to be collected from the security 

was less than its amortized cost basis. 

The ending balance of remaining credit losses on available-for-sale securities where a portion of other-than-temporary 

impairment was recognized in other comprehensive income was $0.6 billion, and $0.8 billion as of December 31, 2019, and 

December 31, 2018, respectively.

Financial Statements Notes to the Consolidated Financial Statements | Note 7

FREDDIE MAC | 2020 Form 10-K 220
NOTE 8

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 consolidated balance sheets or embedded in debt recognized 

on our consolidated balance sheets.

Accounting for Credit Enhancements 

Attached Credit Enhancements 

Attached credit enhancements are obtained contemporaneously with, and in contemplation of, the origination of a financial 

instrument, and effectively travel with the financial instrument upon sale. Attached credit enhancements include primary 

mortgage insurance, which provides us with loan-level protection up to a specified percentage. 

Expected recoveries from attached credit enhancements are considered in determining the allowance for loan losses, resulting 

in a reduction in the recognized provision for credit losses by the amount of the expected recoveries. Subsequent to 

foreclosure and charge-off of the allowance for credit losses, we reclassify expected recoveries from attached credit 

enhancements that were previously offset against the allowance for credit losses as separate receivables. See Note 7 for 

additional information concerning the determination of our allowance for credit losses.

Freestanding Credit Enhancements

Freestanding credit enhancements are contracts that are entered into separately and apart from any other financial instruments 

or entered into in conjunction with some other transaction and are legally detachable and separately exercisable. Freestanding 

credit enhancements include insurance/reinsurance transactions, STACR Trust notes, and lender risk-sharing transactions and 

are accounted for separately from the underlying mortgage loans or guarantees.

Our primary insurance/reinsurance transactions are single-family ACIS transactions. ACIS transactions are insurance policies 

we purchase, generally underwritten by a group of insurers and reinsurers, that provide credit protection for certain specified 

credit events that occur on a reference pool of mortgage loans. Under the ACIS contracts, we pay insurers and reinsurers 

premiums for insurance coverage. Each month, we accrue for our obligation to make such payments for all tranches covered 

by the ACIS contracts. When specific credit events occur, we generally receive compensation from the insurance policy up to 

an aggregate limit based on actual losses. We require our counterparties to partially collateralize their exposure to reduce the 

risk that we will not be reimbursed for our claims under the policies. In addition to ACIS, our single-family insurance/reinsurance 

credit enhancements include AFRM, which is similar to ACIS but provides credit protection immediately upon acquisition of the 

loan, and IMAGIN, which provides loan-level protection in lieu of traditional primary mortgage insurance. Our multifamily 

insurance/reinsurance credit enhancements include MCIP transactions, which are similar to ACIS transactions and provide 

credit protection for certain specified credit events that occur on a reference pool of multifamily mortgage assets.

STACR Trust notes transfer credit risk on a reference pool of mortgage loans to investors through the issuance of notes linked 

to notional credit risk positions of the reference pool by a third-party trust. The trust issues the notes and makes periodic 

payments of principal and interest on the notes to investors. Under this structure, we make payments to the trust to support 

payment of the interest due on the notes, and we receive payments from the trust that otherwise would have been made to the 

noteholders as a result of defined credit events on the reference pool. Each month, we accrue for our obligation to make such 

payments to the trust. The note balances are reduced by the amount of the payments to us. Certain STACR Trust notes may 

qualify as interests in a REMIC.

Lender risk-sharing transactions are agreements that require a lender to repurchase a loan upon default or to reimburse us for 

realized credit losses. These transactions are entered into as an alternative to requiring primary mortgage insurance or in 

exchange for a lower guarantee fee. The loss sharing amount may be fully or partially collateralized. We no longer enter into 

lender risk-sharing transactions with single-family lenders on a regular basis.

We recognize the payments we make to transfer credit risk under freestanding credit enhancements in credit enhancement 

expense in our consolidated statements of comprehensive income when they are incurred. We recognize expected recoveries 

from freestanding credit enhancements separately in other assets on our consolidated balance sheets, with an offsetting 

reduction to benefit for (decrease in) credit enhancement recoveries, 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.

Our adoption of CECL on January 1, 2020 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. 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. 

Financial Statements Notes to the Consolidated Financial Statements | Note 8

FREDDIE MAC | 2020 Form 10-K 221
The table below presents details of our credit enhancement recovery receivables. These amounts are recognized within other 

assets on our consolidated balance sheets. 

Table 8.1 - Credit Enhancement Receivables

(In millions) December 31, 2020 December 31, 2019

Freestanding credit enhancement expected recovery receivables, net of allowance $677 $71 

Primary mortgage insurance receivables(1), net of allowance 74 76 

Total credit enhancement assets $751 $147 

(1) Excludes $444 million and $464 million of deferred payment obligations associated with unpaid claim amounts as of December 31, 2020 and December 31, 2019, 

respectively. We have reserved substantially all these unpaid amounts as collectability is uncertain.

For information about counterparty credit risk associated with mortgage insurers and other credit enhancement providers, see 

Note 18.

Guarantee Credit Enhancements 

Guarantee credit enhancements primarily consist of subordination we obtain through the creation of unguaranteed 

subordinated securities issued by nonconsolidated securitization trusts that absorb first losses prior to us having to perform on 

our guarantee of the senior securities. Guarantee credit enhancements include multifamily K Certificate and SB Certificate 

transactions and single-family senior subordinate securitization structures backed by seasoned loans. 

Expected recoveries from guarantee credit enhancements are considered when measuring the allowance for loan losses. As a 

result, we recognize an allowance for credit losses on off-balance sheet credit exposures only if expected credit losses exceed 

the amount of subordination. We recognize guarantee fee income and there is no explicitly recognized separate credit 

enhancement expense or expected credit enhancement recoveries. See Note 7 for additional information concerning the 

measurement of our allowance for credit losses.

Credit-Linked Debt

We also transfer credit risk after our acquisition or guarantee of mortgage assets by either issuing unsecured credit-linked debt 

or recognizing debt of consolidated VIEs that includes subordination.

For certain of our unsecured debt issuances, we create a reference pool of mortgage assets (generally loans) to which we 

currently have credit risk exposure and an associated securitization-like structure with notional credit risk positions. To the 

extent a specified credit event occurs on the mortgage assets in the reference pool, the outstanding balance of our debt 

obligations is written down, thereby reducing our future principal and interest payment obligations. The principal types of 

unsecured credit-linked debt are single-family STACR debt notes and multifamily SCR debt notes.

Most of our STACR debt notes are recorded as other debt on our consolidated balance sheets and accounted for at amortized 

cost. When the realized loss events (e.g., third-party foreclosure sale, short sale, or REO disposition) occur on the underlying 

loans in the reference pool, the STACR debt notes are written down and the benefits are recognized as investment gains 

(losses), net on our consolidated statements of comprehensive income.

The structure of multifamily SCR debt notes is similar to STACR debt notes, although the mortgage assets within the reference 

pool may be loans or multifamily housing revenue bonds to which we have credit exposure. While our SCR debt notes are 

recorded as other debt on our consolidated balance sheets, these debt obligations are measured at fair value, as we elected 

the fair value option. Fair value changes are recorded in investment gains (losses), net on our consolidated statements of 

comprehensive income.

Similar to our nonconsolidated VIEs, we obtain credit enhancement on certain of our consolidated securitization products 

through the creation of unguaranteed subordinated securities. These unguaranteed subordinated securities will absorb first 

losses on the underlying loans prior to us performing pursuant to our guarantee obligation. The unguaranteed subordinated 

debt securities held by third parties are recorded as debt of consolidated trusts on our consolidated balance sheets and 

generally accounted for at amortized cost. When losses are realized on the loans underlying the securities, the subordinated 

debt is written down and the benefits are recognized as investment gains (losses), net on our consolidated statements of 

comprehensive income.

Financial Statements Notes to the Consolidated Financial Statements | Note 8

FREDDIE MAC | 2020 Form 10-K 222
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 8.2 - Single-Family Credit Enhancements 

December 31, 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 $472,881 $116,973 $421,870 $107,690 

STACR:(2)

 Trust notes Freestanding 488,251 17,288 288,323 9,739 

 Debt notes Debt 365,482 12,377 536,036 15,373 

Insurance/reinsurance(3) Freestanding 876,815 11,586 863,149 10,157 

Subordination:(4)

 Nonconsolidated VIEs Guarantee 29,039 5,718 25,443 4,545 

 Consolidated VIEs Debt 9,035 464 19,498 854 

Lender risk sharing Freestanding 5,731 4,831 24,078 5,657 

Other Primarily attached 374 371 1,056 1,051 

Total single-family credit enhancements $169,608 $155,066 

(1) Underlying loans may be covered by more than one form of credit enhancement. For certain transactions, protected UPB may be different from the UPB of the 

underlying loans due to timing differences in reporting cycles between the transactions and the loans.

(2) Total current and protected UPB represents the UPB of the assets included in the reference pool. Maximum coverage amount represents the outstanding balance 

held by third parties.

(3) As of December 31, 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 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.

Financial Statements Notes to the Consolidated Financial Statements | Note 8

FREDDIE MAC | 2020 Form 10-K 223
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 8.3 - Multifamily Credit Enhancements 

December 31, 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)

 Nonconsolidated VIEs Guarantee $286,199 $42,712 $251,008 $40,262 

 Consolidated VIEs Debt 1,800 200 1,800 200 

Lender risk sharing(3) Freestanding 3,321 598 2,529 381 

Insurance/reinsurance(4) Freestanding 5,383 190 2,769 127 

SCR debt notes(5) Debt 2,217 111 2,470 123 

Other(3) Attached 253 253 467 467 

Total multifamily credit enhancements $44,064 $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 December 31, 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 debt 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 Consolidated Financial Statements | Note 8

FREDDIE MAC | 2020 Form 10-K 224
NOTE 9

Debt

The table below summarizes the balances of total debt per our consolidated balance sheets.

Table 9.1 - Total Debt 

December 31,

(In millions) 2020 2019

Debt securities of consolidated trusts held by third parties $2,308,176 $1,898,355 

Debt of Freddie Mac:

Short-term debt 4,955 101,034 

Long-term debt 279,415 170,296 

Total Debt of Freddie Mac 284,370 271,330 

Total debt $2,592,546 $2,169,685 

Debt securities that we issue are classified as either debt securities of consolidated trusts held by third parties or debt of 

Freddie Mac. We issue debt of Freddie Mac to fund our operations. 

Our debt is reported at amortized cost, with the exception of certain debt for which we elected the fair value option. Deferred 

items, including premiums, discounts, issuance costs, and hedge accounting-related basis adjustments, are reported as a 

component of total debt. These items are amortized and reported through interest expense using the effective interest method 

over the contractual life of the related indebtedness. Amortization of premiums, discounts, and issuance costs begins at the 

time of debt issuance. Amortization of hedge accounting-related basis adjustments begins upon the discontinuation of the 

related hedge relationship.

We elected the fair value option on debt that contains embedded derivatives, including certain STACR debt notes and SCR 

debt notes. For additional information on STACR debt notes and SCR debt notes, see Note 8. Changes in the fair value of 

these debt obligations are recorded in investment gains (losses), net, with any upfront costs and fees incurred or received in 

exchange for the issuance of the debt being recognized in earnings as incurred and not deferred. Related interest expense 

continues to be reported as interest expense based on the stated terms of the debt securities. For additional information on our 

election of the fair value option, see Note 19. 

When we repurchase or call outstanding debt securities, we recognize the difference between the amount paid to redeem the 

debt security and the carrying value in earnings as a component of investment gains (losses), net. Contemporaneous transfers 

of cash between us and a creditor in connection with the issuance of the new debt security and satisfaction of an existing debt 

security are accounted for as either an extinguishment or a modification of an existing debt security. If the debt securities have 

substantially different terms, the transaction is accounted for as an extinguishment of the existing debt security. The issuance 

of a new debt security is recorded at fair value, fees paid to the creditor are expensed as incurred, and fees paid to third parties 

are deferred and amortized into interest expense over the life of the new debt security using the effective interest method. If the 

terms of the existing debt security and the new debt security are not substantially different, the transaction is accounted for as 

a modification of the existing debt. Fees paid to the creditor are deferred and amortized into interest expense over the life of the 

modified debt security using the effective interest method and fees paid to third parties are expensed as incurred.

We also engage in dollar roll transactions whereby we enter into an agreement to sell and subsequently repurchase (or 

purchase and subsequently resell) agency securities. When these transactions involve securities issued by consolidated 

entities, they are treated as issuances and extinguishments of debt.

Under the Purchase Agreement, without the prior written consent of Treasury, we may not incur indebtedness that would result 

in the par value of our aggregate indebtedness exceeding 120% of the amount of mortgage assets we are allowed to own on 

December 31 of the immediately preceding calendar year. Because of this debt limit, we may be restricted in the amount of 

debt we are allowed to issue to fund our operations. Under the Purchase Agreement, the amount of our "indebtedness" is 

determined without giving effect to the January 1, 2010 change in the accounting guidance related to transfers of financial 

assets and consolidation of VIEs. Therefore, "indebtedness" generally does not include debt securities of consolidated trusts 

held by third parties. We also cannot become liable for any subordinated indebtedness without the prior consent of Treasury. 

See Note 2 for information regarding restrictions on the amount of mortgage-related securities that we may own.

Beginning January 1, 2019, our debt cap under the Purchase Agreement is $300 billion. Our debt cap under the Purchase 

Agreement will decrease to $270 billion on January 1, 2023 pursuant to the January 2021 Letter Agreement. As of 

December 31, 2020, our aggregate indebtedness for purposes of the debt cap was $286.5 billion. Our aggregate indebtedness 

primarily includes the par value of short- and long-term debt.

Financial Statements Notes to the Consolidated Financial Statements | Note 9

FREDDIE MAC | 2020 Form 10-K 225
Debt Securities of Consolidated Trusts Held By Third Parties

Debt securities of consolidated trusts held by third parties represent our liability to third parties that hold beneficial interests in 

our consolidated securitization trusts. Debt securities of consolidated trusts held by third parties are subject to prepayment risk 

as their payments are based upon the performance of the underlying mortgage loans that may be prepaid by the related 

mortgage borrower at any time without penalty.

The table below summarizes the debt securities of consolidated trusts held by third parties based on underlying loan product 

type.

Table 9.2 - Debt Securities of Consolidated Trusts Held by Third Parties

December 31, 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 2021 - 2060 $1,799,065 $1,855,438 3.07 % 2020 - 2057 $1,516,550 $1,554,095 3.63 %

20-year fixed-rate 2021 - 2041 97,520 100,498 2.84 2020 - 2040 70,901 72,558 3.37 

15-year fixed-rate 2021 - 2036 303,142 310,612 2.46 2020 - 2035 225,501 229,133 2.87 

Adjustable-rate 2021 - 2051 23,964 24,484 2.76 2020 - 2050 30,183 30,756 3.25 

Interest-only 2026 - 2041 3,671 3,736 3.15 2026 - 2041 4,244 4,307 4.55 

FHA/VA 2021 - 2050 752 769 4.04 2020 - 2049 633 647 4.68 

Total Single-family 2,228,114 2,295,537 1,848,012 1,891,496 

Multifamily 2021-2050 12,488 12,639 2.43 2021 - 2049 6,790 6,859 3.29 

Total debt securities of consolidated 

trusts held by third parties $2,240,602 $2,308,176 $1,854,802 $1,898,355 

(1) Includes $205 million and $209 million at December 31, 2020 and December 31, 2019, respectively, of debt of consolidated trusts that represents the fair value of 

debt securities with the fair value option elected.

(2) The effective rate for debt securities of consolidated trusts held by third parties was 1.76% and 2.79% as of December 31, 2020 and December 31, 2019, 

respectively.

Short-Term Debt

Discount notes, Reference Bills securities, and medium-term notes are unsecured general corporate obligations. Discount 

notes and Reference Bills securities pay only principal at maturity. 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. 

Certain medium-term notes that have original maturities of one year or less are classified as short-term debt for purposes of 

this presentation. 

The table below summarizes the balances and effective interest rates for short-term debt. 

Table 9.3 - Short-Term Debt

December 31, 2020 December 31, 2019

(Dollars in millions) Par Value

Carrying 

Amount

Weighted

Average

Effective Rate Par Value

Carrying 

Amount

Weighted

Average

Effective Rate

Short-term debt:

Discount notes and Reference Bills $11 $11 0.69 % $60,830 $60,629 1.67 %

Medium-term notes 4,944 4,944 1.31 40,407 40,405 2.31 

Securities sold under agreements to repurchase — — — 9,843 9,843 1.46 

Total short-term debt $4,955 $4,955 1.31 % $111,080 $110,877 1.89 %

Financial Statements Notes to the Consolidated Financial Statements | Note 9

FREDDIE MAC | 2020 Form 10-K 226
Long-Term Debt

The table below summarizes our long-term debt.

Table 9.4 - Long-Term Debt

December 31, 2020 December 31, 2019

(Dollars in millions)

Contractual 

Maturity Par Value

Carrying 

Amount(1)

Weighted 

Average

Effective 

Rate(2)

Contractual 

Maturity Par Value

Carrying 

Amount(1)

Weighted

 Average

Effective 

Rate(2)

Long-term debt:

Fixed-rate:

Medium-term notes — callable 2021-2050 $122,967 $122,895 0.71 % 2020 - 2037 $83,470 $83,433 2.01 %

Medium-term notes — non-callable 2021-2028 7,710 7,758 0.75 2020 - 2028 2,498 2,519 2.14 

Reference Notes securities — noncallable 2021-2032 64,162 64,124 1.55 2020 - 2032 39,124 39,176 2.71 

STACR and SCR debt notes 2031-2042 111 114 12.71 2031 - 2042 123 126 12.74 

Variable-rate:

Medium-term notes — callable 2021-2025 371 371 1.93 2020 - 2034 10,682 10,668 2.18 

Medium-term notes — non-callable 2021-2026 68,838 68,824 0.63 2020 - 2026 15,727 15,724 2.45 

STACR 2023-2042 12,377 12,228 4.10 2023 - 2042 15,373 15,526 5.58 

Zero-coupon:

Medium-term notes — non-callable 2021-2039 4,850 2,578 5.99 2020 - 2039 4,880 2,450 5.94 

Other 2047-2050 — 57 0.49 2047 - 2049 — 6 0.63 

Hedging-related basis adjustments N/A 466 N/A 668 

Total long-term debt $281,386 $279,415 1.09 % $171,877 $170,296 2.61 %

(1) Represents par value, net of associated discounts or premiums and issuance costs. Includes $2.4 billion and $3.7 billion at December 31, 2020 and December 31, 

2019, respectively, of long term-debt that represents the fair value of debt securities with the fair value option elected. 

(2) Based on carrying amount, excluding hedge-related basis adjustments.

A portion of our long-term debt is callable. Callable debt gives us the option to redeem the debt security at par on one or more 

specified call dates or at any time on or after a specified call date.

The table below summarizes the contractual maturities of long-term debt securities at December 31, 2020.

Table 9.5 - Contractual Maturities of Long-Term Debt and Debt Securities 

(In millions) Amounts

Annual Maturities

Long-term debt (excluding STACR and SCR debt notes):

2021 $43,422 

2022 61,071 

2023 61,998 

2024 21,679 

2025 44,342 

Thereafter 36,386 

Debt securities of consolidated trusts held by third parties, STACR, and SCR debt notes(1) 2,253,090 

Total 2,521,988 

Net discounts, premiums, debt issuance costs, hedge-related, and other basis adjustments(2) 65,603 

Total debt securities of consolidated trusts held by third parties, STACR, SCR and long-term debt $2,587,591 

(1) Contractual maturities of these debt securities are not presented because they are subject to prepayment risk, as their payments are based upon the performance of 

a pool of mortgage assets that may be prepaid by the related mortgage borrower at any time without penalty.

(2) Other basis adjustments primarily represent changes in fair value on debt where we have elected the fair value option.

Non-Cash Investing and Financing Activities

During the years ended December 31, 2020 and December 31, 2019, we issued $0.8 billion and $0.7 billion, respectively, of 

debt of Freddie Mac in exchange for cash collateral that was previously pledged by sellers. These debt issuances represent 

non-cash transactions. 

Financial Statements Notes to the Consolidated Financial Statements | Note 9

FREDDIE MAC | 2020 Form 10-K 227
NOTE 10

Derivatives

Derivatives are reported at their fair value on our consolidated balance sheets. Changes in fair value and interest accruals on 

derivatives not in qualifying fair value hedge relationships are recorded as investment gains (losses), net on our consolidated 

statements of comprehensive income. Derivatives in a net asset position, including net derivative interest receivable or payable, 

are reported as derivative assets, net. Similarly, derivatives in a net liability position, including net derivative interest receivable 

or payable, are reported as derivative liabilities, net. 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 agreement. Non-cash collateral held is not recognized on our consolidated 

balance sheets as we do not obtain effective control over the collateral, and non-cash collateral posted is not de-recognized 

from our consolidated balance sheets as we do not relinquish effective control over the collateral. Therefore, non-cash collateral 

held or posted is not presented as an offset against derivative assets or derivative liabilities on our consolidated balance 

sheets.

We evaluate whether financial instruments that we purchase or issue contain embedded derivatives. We generally elect to 

measure newly acquired or issued financial instruments that contain embedded derivatives at fair value, with changes in fair 

value recorded in earnings.

On our consolidated statements of cash flows, cash flows related to the acquisition and termination of derivatives, other than 

forward commitments, are generally classified in investing activities. Cash flows related to forward commitments are classified 

within the section of the consolidated statements of cash flows in accordance with the cash flows of the financial instruments 

to which they relate.

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 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 credit 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 include interest-rate swaps that the U.S. Commodity Futures Trading Commission has determined are subject to the 

central clearing requirement of the Dodd-Frank Act. OTC derivatives refer to those derivatives that are neither exchange-traded 

derivatives nor cleared derivatives.

Types of Derivatives

We principally use the following types of derivatives:

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.

Written Options and Swaptions

Written call and put swaptions are sold to counterparties allowing them the option to enter into receive-fixed and pay-fixed 

interest rate swaps, respectively. Written call and put options on mortgage-related securities give the counterparty the right to 

execute a contract under specified terms, which generally occurs when we are in a liability position. We may, from time to time, 

write other derivative contracts such as interest-rate futures.

Financial Statements Notes to the Consolidated Financial Statements | Note 10

FREDDIE MAC | 2020 Form 10-K 228
Commitments

We routinely enter into commitments that include commitments to:

n	 Purchase and sell investments in securities; 

n	 Purchase and sell loans; and 

n	 Purchase and extinguish or issue debt securities of our consolidated trusts. 

Most of these commitments are considered derivatives and therefore are subject to the accounting guidance for derivatives and 

hedging.

Hedge Accounting

Fair Value Hedges

We apply fair value hedge accounting to certain single-family mortgage loans where we hedge the changes in fair value of 

these loans attributable to the designated benchmark interest rate (i.e., LIBOR), using LIBOR-based interest-rate swaps. We 

also apply fair value hedge accounting to certain issuances of debt where we hedge the changes in fair value of the debt 

attributable to the designated benchmark interest rate (i.e., LIBOR), using LIBOR-based interest-rate swaps. Under the last-oflayer fair value hedge accounting strategy, we hedge the changes in fair value of a portion of a closed pool of single-family 

mortgage loans that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount 

of cash flows. As part of this strategy, we have also elected to measure the change in fair value of the hedged item on the basis 

of the benchmark rate component of the contractual coupon cash flows determined at the hedge inception and by assuming 

the hedged item has a term that reflects only the designated cash flows being hedged.

We apply hedge accounting to qualifying hedge relationships. A qualifying hedge relationship exists when changes in the fair 

value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair value of the hedged 

item attributable to the risk being hedged during the term of the hedge relationship. No amounts have been excluded from the 

assessment of hedge effectiveness. To assess hedge effectiveness, we use a statistical regression analysis.

At inception of the hedge relationship, we prepare formal contemporaneous documentation of our risk management objective 

and strategies for undertaking the hedge. 

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 consolidated statements of comprehensive income line item used to 

present the earnings effect of the hedged item. Therefore, changes in the fair value of the hedged item, mortgage loans and 

debt, attributable to the risk being hedged are recognized in interest income - mortgage loans and interest expense, 

respectively, along with the changes in the fair value of the respective derivative hedging instruments. 

Changes in the fair value of the hedged item attributable to the risk being hedged are recognized as a cumulative basis 

adjustment against the mortgage loans and debt. The cumulative basis adjustments are amortized to the same consolidated 

statements of comprehensive income line item used to present the changes in fair value of the hedged item using the effective 

interest method considering the contractual terms of the hedged item, with amortization beginning no later than the period in 

which hedge accounting was discontinued.

Cash Flow Hedges

There are amounts recorded in AOCI related to discontinued cash flow hedges which are recognized in earnings when the 

originally forecasted transactions affect earnings. If it becomes probable the originally forecasted transaction will not occur, the 

associated deferred gain or loss in AOCI would be reclassified to earnings immediately. Amounts reclassified from AOCI are 

recorded in interest expense. See Note 13 for information about future reclassifications of deferred net losses related to 

closed cash flow hedges to net income.

Financial Statements Notes to the Consolidated Financial Statements | Note 10

FREDDIE MAC | 2020 Form 10-K 229
Derivative Assets and Liabilities at Fair Value

The table below presents the notional value and fair value of derivatives reported on our consolidated balance sheets.

Table 10.1 - Derivative Assets and Liabilities at Fair Value

December 31, 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 risk management derivatives:

Swaps $559,596 $2,639 ($7,091) $488,242 $2,000 ($4,168) 

Written options 18,259 — (735) 10,984 — (130) 

Purchased options (1) 169,995 5,265 — 152,480 4,198 — 

Futures 181,702 — — 210,305 — — 

Total interest-rate risk management derivatives 929,552 7,904 (7,826) 862,011 6,198 (4,298) 

Mortgage commitment derivatives:

Forward contracts to purchase mortgage loans 37,122 183 — 8,028 11 (8) 

Forward contracts to purchase mortgage-related securities 45,185 203 — 28,194 44 (5) 

Forward contracts to sell mortgage-related securities 136,802 2 (759) 57,738 6 (113) 

Total mortgage commitment derivatives 219,109 388 (759) 93,960 61 (126) 

CRT-related derivatives 28,949 61 (47) 12,362 15 (116) 

Other 4,029 2 (16) 5,984 1 (28) 

Total derivatives not designated as hedges 1,181,639 8,355 (8,648) 974,317 6,275 (4,568) 

Designated as fair value hedges

Interest-rate risk management derivatives:

Swaps 180,686 224 (500) 192,366 104 (714) 

Total derivatives designated as fair value hedges 180,686 224 (500) 192,366 104 (714) 

Derivative interest receivable (payable)(2) 455 (523) 887 (724) 

Netting adjustments(3) (7,829) 8,717 (6,422) 5,634 

Total derivative portfolio, net $1,362,325 $1,205 ($954) $1,166,683 $844 ($372) 

(1) Includes swaptions on credit indices with a notional or contractual amount of $16.8 billion and $11.4 billion at December 31, 2020 and December 31, 2019, 

respectively, and a fair value of $9.0 million and $3.0 million at December 31, 2020 and December 31, 2019, respectively.

(2) Includes other derivative receivables and payables.

(3) Represents counterparty netting and cash collateral netting. 

See Note 11 for information related to our derivative counterparties and collateral held and posted.

Financial Statements Notes to the Consolidated Financial Statements | Note 10

FREDDIE MAC | 2020 Form 10-K 230
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 consolidated statements of comprehensive income (loss) as 

investment gains (losses), net. 

Table 10.2 - Gains and Losses on Derivatives 

Year Ended December 31,

(In millions) 2020 2019 2018

Not designated as hedges

Interest-rate risk management derivatives:

Swaps ($1,627) ($3,085) $1,422 

Written options (161) (235) 18 

Purchased options 2,404 423 (648) 

Futures (2,442) (946) 57 

Total interest-rate risk management derivatives fair value gains (losses) (1,826) (3,843) 849 

Mortgage commitment derivatives (1,856) (452) 606 

CRT-related derivatives 163 (1) (38) 

 Other 57 52 (6) 

Total derivatives not designated as hedges fair value gains (losses) (3,462) (4,244) 1,411 

Accrual of periodic cash settlements on swaps(1) (1,576) (272) (141) 

Total ($5,038) ($4,516) $1,270 

(1) Includes interest on variation margin on cleared interest-rate swaps.

Financial Statements Notes to the Consolidated Financial Statements | Note 10

FREDDIE MAC | 2020 Form 10-K 231
Fair Value Hedges 

The table below presents the effects of fair value hedge accounting by 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.

Table 10.3 - Gains and Losses on Fair Value Hedges 

Year Ended December 31,

2020 2019 2018

(In millions)

Interest 

Income

Interest 

Expense

Interest 

Income

Interest 

Expense

Interest 

Income

Interest 

Expense

Total amounts of income and expense line items 

presented on our consolidated statements of 

comprehensive income in which the effects of fair 

value hedges are recorded:

 $62,340 ($49,569) $72,895 ($61,047) $70,054 ($58,033) 

Interest contracts on mortgage 

loans held-for-investment:

 Gain or (loss) on fair value hedging relationships:

Hedged items 5,071 — 4,569 — (1,776) — 

Derivatives designated as hedging instruments (4,836) — (4,309) — 1,091 — 

 Interest accruals on hedging instruments (434) — (48) — (439) — 

 Discontinued hedge related basis

 adjustment amortization (2,840) — (446) — 133 — 

Interest contracts on debt:

 Gain or (loss) on fair value hedging relationships: 

Hedged Items — (49) — (1,038) — 145 

Derivatives designated as hedging instruments — 11 — 1,231 — 155 

 Interest accruals on hedging instruments — 835 — (184) — (313) 

 Discontinued hedge related basis adjustment

 amortization — 60 — 63 — (3) 

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 10.4 - Cumulative Basis Adjustments due to Fair Value Hedging

December 31, 2020

Carrying 

Amount 

Assets / 

(Liabilities)

Cumulative Amount of Fair Value Hedging Basis 

Adjustment 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 $478,077 $5,117 ($318) $5,435 $220,301 $9,112 

Debt (176,512) (466) — (38) — — 

December 31, 2019

Carrying 

Amount 

Assets / 

(Liabilities)

Cumulative Amount of Fair Value Hedging Basis 

Adjustment 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) — (93) — — 

Financial Statements Notes to the Consolidated Financial Statements | Note 10

FREDDIE MAC | 2020 Form 10-K 232
NOTE 11

Collateralized Agreements and Offsetting Arrangements

Derivative Portfolio

Our use of cleared derivatives, exchange-traded derivatives, and OTC derivatives exposes us to counterparty credit risk. We 

are required to post margin in connection with our derivatives transactions. This requirement exposes us to counterparty credit 

risk in the event that our counterparties fail to meet their obligations. However, the use of cleared and exchange-traded 

derivatives decreases our credit risk exposure to individual counterparties because a central counterparty is substituted for 

individual counterparties. OTC derivatives expose us to the credit risk of individual counterparties because transactions are 

executed and settled between us and each counterparty, exposing us to potential losses if a counterparty fails to meet its 

obligations. 

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 for 

interest-rate swap and option-based derivatives. Master netting agreements provide for the netting of amounts receivable and 

payable from an individual counterparty, as well as posting of collateral in the form of cash, Treasury securities or agency 

mortgage-related or debt securities, or a combination of both by either the counterparty or us, depending on which party is in a 

liability position. Although it is our practice not to repledge assets held as collateral, these agreements may allow us or our 

counterparties to repledge all or a portion of the collateral.

We have master netting agreements in place with all of our OTC derivative counterparties. On a daily basis, the market value of 

each counterparty's derivatives outstanding is calculated to determine the amount of our net credit exposure, which is equal to 

the market value of derivatives in a net gain position by counterparty after giving consideration to collateral posted. In the event 

a counterparty defaults on its obligations under the derivatives agreement and the default is not remedied in the manner 

prescribed in the agreement, we have the right under the agreement to sell the collateral. As a result, our use of master netting 

and collateral agreements reduces our exposure to our counterparties in the event of default.

In the event that all of our counterparties for OTC interest-rate swaps and option-based derivatives were to have defaulted 

simultaneously on December 31, 2020, our maximum loss for accounting purposes after applying netting agreements and 

collateral on an individual counterparty basis would have been approximately $29 million. A significant majority of our net 

uncollateralized exposure to OTC derivative counterparties is concentrated with four counterparties, all of which were 

investment grade as of December 31, 2020. We regularly review the market value of securities pledged as collateral and 

derivative counterparty collateral posting thresholds, where applicable, in an effort to manage our exposure to losses.

Regulations adopted by certain financial institution regulators (including FHFA) that became effective March 1, 2017 require 

posting of variation margin without the application of any thresholds for OTC derivative transactions executed after that date. 

However, for OTC derivative transactions executed before March 1, 2017 the amount of collateral we pledge to counterparties 

related to our derivative instruments is determined after giving consideration to our credit rating. The aggregate fair value of our 

OTC derivative instruments containing credit-risk related contingent features, netted by counterparty, that were in a liability 

position on December 31, 2020 was $3.5 billion for which we posted cash and non-cash collateral of $3.4 billion in the normal 

course of business. A reduction in our credit ratings may trigger additional collateral requirements related to these OTC 

derivative instruments. If a reduction in our credit ratings had triggered additional collateral requirements related to these OTC 

derivative instruments on December 31, 2020, the maximum additional collateral we would have been required to post to our 

counterparties would be $0.1 billion. Our OTC derivative transactions will now become subject to new initial margin 

requirements starting September 1, 2021.

Cleared and Exchange-Traded Derivatives

The majority of our interest-rate swaps are subject to the central clearing requirement. Changes in the value of open exchangetraded contracts and cleared derivatives are settled daily via payments made through the clearinghouse. We net our exposure 

to cleared derivatives by clearinghouse and clearing member. 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. 

Financial Statements Notes to the Consolidated Financial Statements | Note 11

FREDDIE MAC | 2020 Form 10-K 233
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 exposure on our forward purchase and sale 

commitments was $388 million and $61 million at December 31, 2020 and December 31, 2019, respectively. 

Many of our transactions involving forward purchase and sale commitments of mortgage-related securities utilize the 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). In the event a clearing member fails and causes 

losses to the MBSD/FICC clearing system, we could be subject to the loss of the margin that we have posted to the MBSD/

FICC. Moreover, our exposure could exceed that amount, as members are generally required to cover losses caused by 

defaulting members on a pro rata basis. It is difficult to estimate our maximum exposure under these transactions, as this 

would require an assessment of transactions that we and other members of the MBSD/FICC may execute in the future.

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. 

We present accrued interest receivable separately on our consolidated balance sheets. As of December 31, 2020 and 

December 31, 2019, we recognized accrued interest receivable for securities purchased under agreements to resell of $2 

million and $18 million, respectively. 

We utilize the GSD/FICC as a clearinghouse to transact many of our trades involving securities purchased under agreements to 

resell, securities sold under agreements to repurchase, and other non-mortgage related securities. As a clearing member of 

GSD/FICC, we are required to post initial and variation margin payments and are exposed to the counterparty credit risk of 

GSD/FICC (including its clearing members). In the event a clearing member fails and causes losses to the GSD/FICC clearing 

system, we could be subject to the loss of the margin that we have posted to the GSD/FICC. Moreover, our exposure could 

exceed that amount, as members are generally required to cover losses caused by defaulting members on a pro rata basis. It is 

difficult to estimate our maximum exposure under these transactions, as this would require an assessment of transactions that 

we and other members of the GSD/FICC may execute in the future. 

During 1Q 2020, certain of our counterparties engaged in securities purchased under agreements to resell on Freddie Mac 

securities defaulted under the terms of the governing legal agreements by failing to meet margin requirements. The transactions 

were terminated in accordance with the terms of the agreements and we recognized the collateral at fair value, which was in 

excess of the counterparties' outstanding obligations. We did not recognize a financial loss as a result of these defaults.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are effectively collateralized borrowings where we sell securities with an 

agreement to repurchase such securities at a future date. We are required to pledge the sold securities to the counterparties to 

these transactions as collateral for our obligation to repurchase these securities at a later date. Similar to the securities 

purchased under agreements to resell transactions, these transactions involve the legal transfer of securities. However, they are 

accounted for as secured financings because the transferor does not relinquish effective control over the securities transferred. 

These agreements may allow our counterparties to repledge all or a portion of the collateral.

Financial Statements Notes to the Consolidated Financial Statements | Note 11

FREDDIE MAC | 2020 Form 10-K 234
Offsetting of Financial Assets and Liabilities

When we receive cash collateral, we recognize the amount received along with a corresponding obligation to return the 

collateral. When we post cash collateral, we derecognize the amount posted along with a corresponding asset for our right to 

receive the return of the collateral. We generally do not recognize or derecognize collateral received or pledged in the form of 

securities as the transferor in such arrangements does not relinquish effective control over the securities transferred. See Note 

10 for additional information on our consolidated balance sheets presentation of collateral related to derivatives transactions. 

At December 31, 2020 and December 31, 2019, all amounts of cash collateral related to derivatives with master netting and 

collateral agreements were offset against derivative assets, net or derivative liabilities, net, as applicable.

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' consolidated financial statements have been reclassified to conform to the 

current presentation.

The tables below present 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.

Financial Statements Notes to the Consolidated Financial Statements | Note 11

FREDDIE MAC | 2020 Form 10-K 235
Table 11.1 - Offsetting and Collateral Information of Financial Assets and Liabilities

December 31, 2020

Gross

Amount

Recognized

Amount Offset in the 

Consolidated

Balance Sheets Net Amount

Presented in

the Consolidated

Balance Sheets

Gross Amount

Not Offset in

the Consolidated

Balance Sheets(2)

Net

(In millions) Amount

Counterparty 

Netting

Cash 

Collateral 

Netting(1)

Assets:

Derivatives:

OTC derivatives $8,566 ($5,932) ($1,957) $677 ($648) $29 

Cleared and exchange-traded derivatives 17 — 60 77 — 77 

Mortgage commitment derivatives 388 — — 388 — 388 

Other 63 — — 63 — 63 

Total derivatives 9,034 (5,932) (1,897) 1,205 (648) 557 

Securities purchased under agreements to resell 105,003 — — 105,003 (105,003) — 

Total $114,037 ($5,932) ($1,897) $106,208 ($105,651) $557 

Liabilities:

Derivatives:

OTC derivatives ($8,812) $5,932 $2,759 ($121) $— ($121) 

Cleared and exchange-traded derivatives (37) — 26 (11) — (11) 

Mortgage commitment derivatives (759) — — (759) — (759) 

Other (63) — — (63) — (63) 

Total derivatives (9,671) 5,932 2,785 (954) — (954) 

Securities sold under agreements to repurchase — — — — — — 

Total ($9,671) $5,932 $2,785 ($954) $— ($954) 

December 31, 2019

Gross

Amount

Recognized

Amount Offset in the 

Consolidated

Balance Sheets Net Amount

Presented in

the Consolidated

Balance Sheets

Gross Amount

Not Offset in

the Consolidated

Balance Sheets(2)

Net

(In millions) Amount

Counterparty 

Netting

Cash 

Collateral 

Netting(1)

Assets:

Derivatives:

OTC derivatives $7,045 ($4,465) ($2,075) $505 ($485) $20 

Cleared and exchange-traded derivatives 144 (5) 123 262 — 262 

Mortgage commitment derivatives 61 — — 61 — 61 

Other 16 — — 16 — 16 

Total derivatives 7,266 (4,470) (1,952) 844 (485) 359 

Securities purchased under agreements to resell 66,114 (9,843) — 56,271 (56,271) — 

Total $73,380 ($14,313) ($1,952) $57,115 ($56,756) $359 

Liabilities:

Derivatives:

OTC derivatives ($5,731) $4,465 $1,164 ($102) $— ($102) 

Cleared and exchange-traded derivatives (5) 5 — — — — 

Mortgage commitment derivatives (126) — — (126) — (126) 

Other (144) — — (144) — (144) 

Total derivatives (6,006) 4,470 1,164 (372) — (372) 

Securities sold under agreements to repurchase (9,843) 9,843 — — — — 

Total ($15,849) $14,313 $1,164 ($372) $— ($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 consolidated balance sheets.

Financial Statements Notes to the Consolidated Financial Statements | Note 11

FREDDIE MAC | 2020 Form 10-K 236
Collateral Pledged

Collateral Pledged to Freddie Mac

We have cash pledged to us as collateral primarily related to OTC derivative transactions. We had $2.8 billion and $2.6 billion

pledged to us as collateral that was invested as part of our liquidity and contingency operating portfolio as of December 31, 

2020 and December 31, 2019, respectively. 

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 December 31, 2020 and December 31, 2019, we had $85.8 billion and $52.4 billion, respectively, of securities 

pledged to us in these transactions. In addition, at December 31, 2020 and December 31, 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. 

Collateral Pledged by Freddie Mac

We deposited cash collateral totaling $1.3 billion and $0.2 billion as of December 31, 2020 and December 31, 2019, 

respectively, related to commitments and securities purchased under agreements to resell transactions with central clearing 

organizations. 

The tables below summarize the fair value of the securities pledged as collateral by us for derivatives and collateralized 

borrowing transactions, including securities that the secured party may repledge.

Table 11.2 - Collateral in the Form of Securities Pledged

December 31, 2020

(In millions) Derivatives

Securities Sold 

Under Agreements 

to Repurchase Other(2) Total

Debt securities of consolidated trusts(1) $121 $— $345 $466 

Trading securities 1,920 — 1,163 3,083 

Total securities pledged $2,041 $— $1,508 $3,549 

December 31, 2019

(In millions) Derivatives

Securities Sold 

Under Agreements 

to Repurchase Other(2) Total

Debt securities of consolidated trusts(1) $562 $— $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 consolidated balance sheets.

(2) Includes other collateralized borrowings and collateral related to transactions with certain clearinghouses.

The table below presents the underlying collateral pledged and the remaining contractual maturity of our gross obligations 

under securities sold under agreements to repurchase as of December 31, 2019. We had no outstanding securities sold under 

agreements to repurchase as of December 31, 2020.

Table 11.3 - Underlying Collateral Pledged

December 31, 2019

(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 $— $9,081 $265 $— $9,346 

Financial Statements Notes to the Consolidated Financial Statements | Note 11

FREDDIE MAC | 2020 Form 10-K 237
NOTE 12

Other Assets and Other Liabilities

The table below presents the components of other assets and other liabilities on our consolidated balance sheets.

Table 12.1 - Significant Components of Other Assets and Other Liabilities 

December 31,

(In millions) 2020 2019

Other assets:

Real estate owned, net $198 $555 

Guarantee asset 5,509 4,426 

Servicer receivables 20,926 10,112 

Advances to lenders 4,162 1,873 

Secured lending 1,680 2,313 

LIHTC equity investments 1,410 972 

All other 5,409 2,548 

Total other assets $39,294 $22,799 

Other liabilities:

Guarantee obligation $5,050 $4,292 

All other 6,242 3,750 

Total other liabilities $11,292 $8,042 

Financial Statements Notes to the Consolidated Financial Statements | Note 12

FREDDIE MAC | 2020 Form 10-K 238
NOTE 13

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 three years 

presented below, related to available-for-sale securities, closed cash flow hedges, and our defined benefit plans.

Table 13.1 - Changes in AOCI by Component, Net of Taxes 

Year Ended December 31, 2020

(In millions)

AOCI Related

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $618 ($244) $64 $438 

Other comprehensive income before reclassifications 502 — (9) 493 

Amounts reclassified from accumulated other comprehensive income (310) 38 (16) (288) 

Changes in AOCI by component 192 38 (25) 205 

Ending balance $810 ($206) $39 $643 

Year Ended December 31, 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 668 — (17) 651 

Amounts reclassified from accumulated other comprehensive income (133) 71 (16) (78) 

Changes in AOCI by component 535 71 (33) 573 

Ending balance $618 ($244) $64 $438 

Year Ended December 31, 2018

(In millions)

AOCI Related

to Availablefor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $662 ($356) $83 $389 

Other comprehensive income before reclassifications (476) — 11 (465) 

Amounts reclassified from accumulated other comprehensive income (246) 114 (16) (148) 

Changes in AOCI by component (722) 114 (5) (613) 

Cumulative effect of change in accounting principle (1) 143 (73) 19 89 

Ending balance $83 ($315) $97 ($135) 

(1) Includes the effect of adopting the accounting guidance on reclassification of stranded tax effects of the Tax Cuts and Jobs Act in 1Q 2018.

In 1Q 2018, we adopted the accounting guidance related to the reclassification of stranded tax effects resulting from the Tax 

Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The reclassification includes stranded 

tax effects related to unrealized gains and losses on available-for-sale securities, deferred net losses on closed cash flow 

hedges, and our defined benefit plans.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 239
Reclassifications from AOCI to Net Income

The table below presents reclassifications from AOCI to net income, including the affected line item on our consolidated 

statements of comprehensive income (loss).

Table 13.2 - Reclassifications from AOCI to Net Income 

Year Ended December 31,

(In millions) 2020 2019 2018

AOCI related to available-for-sale securities

Affected line items on the consolidated statements of comprehensive income (loss):

Investment gains (losses), net $393 $168 $312 

Income tax (expense) benefit (83) (35) (66) 

Net of tax 310 133 246 

AOCI related to cash flow hedge relationships

Affected line items on the consolidated statements of comprehensive income (loss):

Interest expense (50) (90) (133) 

Income tax (expense) benefit 12 19 19 

Net of tax (38) (71) (114) 

AOCI related to defined benefit plans

Affected line items on the consolidated statements of comprehensive income (loss):

Salaries and employee benefits 20 20 20 

Income tax (expense) benefit (4) (4) (4) 

Net of tax 16 16 16 

Total reclassifications in the period net of tax $288 $78 $148 

Senior Preferred Stock

Pursuant to the Purchase Agreement described in Note 2, we issued one million shares of senior preferred stock to Treasury 

on September 8, 2008, in partial consideration of Treasury's commitment to provide funds to us.

Shares of the senior preferred stock have a par value of $1, and have a stated value and initial liquidation preference of $1 

billion, or $1,000 per share. The liquidation preference of the senior preferred stock is subject to adjustment. Dividends that are 

not paid in cash for any dividend period will accrue and be added to the liquidation preference of the senior preferred stock. In 

addition, any amounts Treasury pays to us pursuant to its funding commitment under the Purchase Agreement and any 

quarterly commitment fees that are not paid in cash to Treasury nor waived by Treasury will be added to the liquidation 

preference of the senior preferred stock. The liquidation preference of the senior preferred stock also increased by $3.0 billion

on December 31, 2017 pursuant to the December 2017 Letter Agreement. Pursuant to the September 2019 and January 2021 

Letter Agreements, the liquidation preference of the senior preferred stock will be increased, at the end of each fiscal quarter, 

from September 30, 2019 through the Capital Reserve End Date, by an amount equal to the increase in the Net Worth Amount, 

if any, during the immediately prior fiscal quarter. During 3Q 2020, our Net Worth Amount increased by $2.4 billion. As a result, 

the liquidation preference of the senior preferred stock increased to $86.5 billion on December 31, 2020 and will increase to 

$89.1 billion on March 31, 2021 based on the $2.5 billion increase in our Net Worth Amount during 4Q 2020. As described 

below, we may make payments to reduce the liquidation preference of the senior preferred stock in limited circumstances. As 

discussed in Note 2, the quarterly commitment fee has been suspended until the Capital Reserve End Date. By the Capital 

Reserve End Date, we and Treasury, in consultation with the Chairman of the Federal Reserve, will mutually agree on a periodic 

commitment fee we will pay for Treasury's remaining funding commitment with respect to the five-year period commencing on 

the first January 1 after the Capital Reserve Date.

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. The dividend 

is presented in the period in which it is determinable for the senior preferred stock, as a reduction to net income (loss) available 

to common stockholders and net income (loss) per common share. The dividend is declared and paid in the following period 

and recorded as a reduction to equity in the period declared. There were no cash dividends paid in 2020. Total dividends paid 

in cash during 2019 and 2018 at the direction of the Conservator were $3.1 billion and $4.1 billion, respectively. See Note 2 for 

a discussion of our net worth sweep dividend.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 240
The senior preferred stock is senior to our common stock and all other outstanding series of our preferred stock, as well as any 

capital stock we issue in the future, as to both dividends and rights upon liquidation. The senior preferred stock provides that 

we may not, at any time, declare or pay dividends on, make distributions with respect to, redeem, purchase or acquire, or make 

a liquidation payment with respect to, any common stock or other securities ranking junior to the senior preferred stock unless: 

n Full cumulative dividends on the outstanding senior preferred stock (including any unpaid dividends added to the liquidation 

preference) have been declared and paid in cash and 

n All amounts required to be paid with the net proceeds of any issuance of capital stock for cash (as described below) have 

been paid in cash. 

Shares of the senior preferred stock are not convertible. Shares of the senior preferred stock have no general or special voting 

rights, other than those set forth in the certificate of designation for the senior preferred stock or otherwise required by law. The 

consent of holders of at least two-thirds of all outstanding shares of senior preferred stock is generally required to amend the 

terms of the senior preferred stock or to create any class or series of stock that ranks prior to or on parity with the senior 

preferred stock.

We are not permitted to redeem the senior preferred stock prior to the termination of Treasury's funding commitment set forth 

in the Purchase Agreement; however, we are permitted to pay down the liquidation preference of the outstanding shares of 

senior preferred stock to the extent of accrued and unpaid dividends previously added to the liquidation preference and not 

previously paid down and quarterly commitment fees previously added to the liquidation preference and not previously paid 

down. Pursuant to the January 2021 Letter Agreement, we are permitted to issue common stock with aggregate gross 

proceeds of up to $70.0 billion after Treasury's exercise in full of its warrant to acquire 79.9% of our common stock and 

resolution of currently pending material litigation related to our conservatorship and the Purchase Agreement, and we are 

permitted to use the net proceeds of such issuance(s) to build capital. If we issue any other shares of capital stock for cash 

while the senior preferred stock is outstanding, the net proceeds of such issuances must be used to pay down the liquidation 

preference of the senior preferred stock; however, the liquidation preference of each share of senior preferred stock may not be 

paid down below $1,000 per share prior to the termination of Treasury's funding commitment. Following the termination of 

Treasury's funding commitment, we may pay down the liquidation preference of all outstanding shares of senior preferred stock 

at any time, in whole or in part. If, after termination of Treasury's funding commitment, we pay down the liquidation preference 

of each outstanding share of senior preferred stock in full, the shares will be deemed to have been redeemed as of the payment 

date.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 241
The table below provides a summary of our senior preferred stock outstanding at December 31, 2020.

Table 13.3 - Senior Preferred Stock 

(In millions, except initial liquidation 

preference price per share)

Shares

Authorized

Shares

Outstanding

Total

Par Value

Initial

Liquidation

Preference

Price per Share

Total

Liquidation

Preference

Non-draw Adjustment Dates:

September 8, 2008 1.00 1.00 $1.00 $1,000 $1,000 

December 31, 2017 — — — N/A 3,000 

September 30, 2019 — — — N/A 1,826 

December 31, 2019 — — — N/A 1,848 

March 31, 2020 — — — N/A 2,448 

June 30, 2020 — — — N/A 382 

September 30, 2020 — — — N/A 1,938 

December 31, 2020 — — — N/A 2,449 

Total non-draw adjustments 1.00 1.00 1.00 14,891 

Draw Dates:

November 24, 2008 — — — N/A 13,800 

March 31, 2009 — — — N/A 30,800 

June 30, 2009 — — — N/A 6,100 

June 30, 2010 — — — N/A 10,600 

September 30, 2010 — — — N/A 1,800 

December 30, 2010 — — — N/A 100 

March 31, 2011 — — — N/A 500 

September 30, 2011 — — — N/A 1,479 

December 30, 2011 — — — N/A 5,992 

March 30, 2012 — — — N/A 146 

June 29, 2012 — — — N/A 19 

March 30, 2018 — — — N/A 312 

Total draw adjustments — — — 71,648 

Total senior preferred stock 1.00 1.00 $1.00 $86,539 

No cash was received from Treasury under the Purchase Agreement in 2020 because we had positive net worth at December 

31, 2019, March 31, 2020, June 30, 2020, and September 30, 2020 and, consequently, FHFA did not request a draw on our 

behalf in 2020. At December 31, 2020, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested 

from Treasury under the Purchase Agreement. The aggregate liquidation preference of the senior preferred stock owned by 

Treasury was $86.5 billion as of December 31, 2020 and $79.3 billion as of December 31, 2019.

Our quarterly senior preferred stock dividend requirement is currently 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 

January 2021 Letter Agreement, the applicable Capital Reserve Amount as of October 1, 2020 is the amount of adjusted total 

capital necessary to meet the capital requirements and buffers set forth in the ERCF. This increased Capital Reserve Amount 

will remain in effect until the last day of the second fiscal quarter during which we have reached and maintained such level of 

capital (the Capital Reserve End Date). As a result, we will not have a dividend requirement on the senior preferred stock until 

we have built sufficient capital to meet the capital requirements and buffers set forth in the ERCF. If, for any reason, we were 

not to pay our dividend requirement on the senior preferred stock in full in any future period until the Capital Reserve End Date, 

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

be zero. 

Upon the Capital Reserve End Date, our quarterly senior preferred stock dividend requirement will be an amount equal to the 

lesser of (i) 10% per annum on the then-current liquidation preference of the Senior Preferred Stock and (ii) a quarterly amount 

equal to the increase in the Net Worth Amount, if any, during the immediately prior fiscal quarter. If for any reason we were not 

to pay our dividend requirement on the senior preferred stock in full in any future period after the Capital Reserve End Date, the 

unpaid amount would be added to the liquidation preference and immediately following such failure and for all dividend periods 

thereafter until the dividend period following the date on which we shall have paid in cash full cumulative dividends, the 

dividend amount will be 12% per annum on the then-current liquidation preference of the senior preferred stock. See Note 2

for additional information.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 242
Common Stock Warrant

Pursuant to the Purchase Agreement described in Note 2, on September 7, 2008, we issued a warrant to purchase common 

stock to Treasury, in partial consideration of Treasury's commitment to provide funds to us.

The warrant may be exercised in whole or in part at any time on or before September 7, 2028, by delivery to us of a notice of 

exercise, payment of the exercise price of $0.00001 per share and the warrant. If the market price of one share of our common 

stock is greater than the exercise price, then, instead of paying the exercise price, Treasury may elect to receive shares equal to 

the value of the warrant (or portion thereof being canceled) pursuant to the formula specified in the warrant. Upon exercise of 

the warrant, Treasury may assign the right to receive the shares of common stock issuable upon exercise to any other person.

We account for the warrant in permanent equity. At issuance on September 7, 2008, we recognized the warrant at fair value, 

and we do not recognize subsequent changes in fair value while the warrant remains classified in equity. We recorded an 

aggregate fair value of $2.3 billion for the warrant as a component of additional paid-in-capital. We derived the fair value of the 

warrant using a modified Black-Scholes model. If the warrant is exercised, the stated value of the common stock issued will be 

reclassified to common stock on our consolidated balance sheets. The warrant was determined to be in-substance non-voting 

common stock, because the warrant's exercise price of $0.00001 per share is considered non-substantive (compared to the 

market price of our common stock). As a result, the shares associated with the warrant are included in the computation of basic 

and diluted earnings (loss) per share. The weighted average shares of common stock outstanding for the years ended 

December 31, 2020, 2019, and 2018 included shares of common stock that would be issuable upon full exercise of the warrant 

issued to Treasury.

Preferred Stock

We have the option to redeem our preferred stock on specified dates, at their redemption price plus dividends accrued through 

the redemption date. However, without the consent of Treasury, we are restricted from making payments to purchase or 

redeem preferred stock as well as paying any preferred dividends, other than dividends on the senior preferred stock. All 24

classes of preferred stock are perpetual and non-cumulative, and carry no significant voting rights or rights to purchase 

additional Freddie Mac stock or securities. Costs incurred in connection with the issuance of preferred stock are charged to 

additional paid-in capital.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 243
The table below provides a summary of our preferred stock outstanding at their redemption values at December 31, 2020. 

Table 13.4 - Preferred Stock 

(In millions, except 

redemption price per share) Issue Date

Shares

Authorized

Shares

Outstanding

Total

Par Value

Redemption

Price per

Share

Total

Outstanding

Balance

Redeemable

On or After

OTCQB

Symbol

Preferred stock:

1996 Variable-rate(1) April 26, 1996 5.00 5.00 $5.00 $50.00 $250 June 30, 2001 FMCCI

5.81% October 27, 1997 3.00 3.00 3.00 50.00 150 October 27, 1998 (2)

5% March 23, 1998 8.00 8.00 8.00 50.00 400 March 31, 2003 FMCKK

1998 Variable-rate(3) September 23 and 29, 1998 4.40 4.40 4.40 50.00 220 September 30, 2003 FMCCG

5.10% September 23, 1998 8.00 8.00 8.00 50.00 400 September 30, 2003 FMCCH

5.30% October 28, 1998 4.00 4.00 4.00 50.00 200 October 30, 2000 (2)

5.10% March 19, 1999 3.00 3.00 3.00 50.00 150 March 31, 2004 (2)

5.79% July 21, 1999 5.00 5.00 5.00 50.00 250 June 30, 2009 FMCCK

1999 Variable-rate(4) November 5, 1999 5.75 5.75 5.75 50.00 287 December 31, 2004 FMCCL

2001 Variable-rate(5) January 26, 2001 6.50 6.50 6.50 50.00 325 March 31, 2003 FMCCM

2001 Variable-rate(6) March 23, 2001 4.60 4.60 4.60 50.00 230 March 31, 2003 FMCCN

5.81% March 23, 2001 3.45 3.45 3.45 50.00 173 March 31, 2011 FMCCO

6% May 30, 2001 3.45 3.45 3.45 50.00 173 June 30, 2006 FMCCP

2001 Variable-rate(7) May 30, 2001 4.02 4.02 4.02 50.00 201 June 30, 2003 FMCCJ

5.70% October 30, 2001 6.00 6.00 6.00 50.00 300 December 31, 2006 FMCKP

5.81% January 29, 2002 6.00 6.00 6.00 50.00 300 March 31, 2007 (2)

2006 Variable-rate(8) July 17, 2006 15.00 15.00 15.00 50.00 750 June 30, 2011 FMCCS

6.42% July 17, 2006 5.00 5.00 5.00 50.00 250 June 30, 2011 FMCCT

5.90% October 16, 2006 20.00 20.00 20.00 25.00 500 September 30, 2011 FMCKO

5.57% January 16, 2007 44.00 44.00 44.00 25.00 1,100 December 31, 2011 FMCKM

5.66% April 16, 2007 20.00 20.00 20.00 25.00 500 March 31, 2012 FMCKN

6.02% July 24, 2007 20.00 20.00 20.00 25.00 500 June 30, 2012 FMCKL

6.55% September 28, 2007 20.00 20.00 20.00 25.00 500 September 30, 2017 FMCKI

2007 Fixed-to-floating rate(9) December 4, 2007 240.00 240.00 240.00 25.00 6,000 December 31, 2012 FMCKJ

Total, preferred stock 464.17 464.17 $464.17 $14,109 

(1) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377, and is capped at 9.00%.

(2) Issued through private placement.

(3) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377, and is capped at 7.50%.

(4) Dividend rate resets on January 1 every five years after January 1, 2005 based on a five-year Constant Maturity Treasury rate, and is capped at 11.00%. Optional 

redemption on December 31, 2004 and on December 31 every five years thereafter. 

(5) Dividend rate resets on April 1 every two years after April 1, 2003 based on the two-year Constant Maturity Treasury rate plus 0.10%, and is capped at 11.00%.

Optional redemption on March 31, 2003 and on March 31 every two years thereafter. 

(6) Dividend rate resets on April 1 every year based on 12-month LIBOR minus 0.20%, and is capped at 11.00%. Optional redemption on March 31, 2003 and on 

March 31 every year thereafter.

(7) Dividend rate resets on July 1 every two years after July 1, 2003 based on the two-year Constant Maturity Treasury rate plus 0.20%, and is capped at 11.00%.

Optional redemption on June 30, 2003 and on June 30 every two years thereafter. 

(8) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 0.50% but not less than 4.00%. 

(9) Dividend rate is set at an annual fixed rate of 8.375% from December 4, 2007 through December 31, 2012. For the period beginning on or after January 1, 2013, 

dividend rate resets quarterly and is equal to the higher of: (a) the sum of three-month LIBOR plus 4.16% per annum or (b) 7.875% per annum. Optional redemption 

on December 31, 2012 and on December 31 every five years thereafter. 

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 244
Stock-Based Compensation

Following the implementation of the conservatorship in September 2008, we suspended the operation of and/or ceased making 

grants under our stock-based compensation plans. 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.

We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 2020 and 2019, except for 

issuances of treasury stock as reported on our consolidated statements of equity relating to stock-based compensation 

granted prior to conservatorship. Common stock delivered under these stock-based compensation plans consists of treasury 

stock or shares acquired in market transactions on behalf of the participants. During 2020, the deferral period lapsed on 351

RSUs. At December 31, 2020, 351 RSUs remained outstanding. In addition, there were 41,160 shares of restricted stock 

outstanding at both December 31, 2020 and December 31, 2019. At December 31, 2020, no stock options were 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. 

For purposes of the earnings-per-share calculation, antidilutive potential common shares excluded from the computation of 

dilutive potential common shares were 0 at December 31, 2020, December 31, 2019, and December 31, 2018.

Dividends and Dividend Restrictions

No common dividends were declared in 2020, 2019, and 2018. No dividends were paid during 2020 on the senior preferred 

stock as a result of the increase in the applicable Capital Reserve Amount pursuant to the September 2019 and January 2021 

Letter Agreements. In 2019 and 2018, we paid dividends of $3.1 billion and $4.1 billion, respectively, in cash on the senior 

preferred stock at the direction of our Conservator. We did not declare or pay dividends on any other series of Freddie Mac 

preferred stock outstanding during 2020.

Our payment of dividends is subject to the following restrictions:

n	Restrictions Relating to the Conservatorship - The Conservator has prohibited us from paying any dividends on our 

common stock or on any series of our preferred stock (other than the senior preferred stock). FHFA has instructed our 

Board of Directors that it should consult with and obtain the approval of FHFA before taking actions involving dividends. In 

addition, FHFA has adopted a regulation prohibiting us from making capital distributions during conservatorship, except as 

authorized by the Director of FHFA.

n	Restrictions Under the Purchase Agreement - The Purchase Agreement prohibits us and any of our subsidiaries from 

declaring or paying any dividends on Freddie Mac equity securities (other than with respect to the senior preferred stock or 

warrant) without the prior written consent of Treasury.

n	Restrictions Under the GSE Act - Under the GSE Act, FHFA has authority to prohibit capital distributions, including 

payment of dividends, if we fail to meet applicable capital requirements. However, our capital requirements have been 

suspended during conservatorship.

n Restrictions Under our Charter - Without regard to our capital classification, we must obtain prior written approval of 

FHFA to make any capital distribution that would decrease total capital to an amount less than the risk-based capital level 

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 245
or that would decrease core capital to an amount less than the minimum capital level. As noted above, our capital 

requirements have been suspended during conservatorship.

n	Restrictions Relating to Preferred Stock - Payment of dividends on our common stock is also subject to the prior 

payment of dividends on our 24 series of preferred stock and one series of senior preferred stock, representing an 

aggregate of 464,170,000 shares and 1,000,000 shares outstanding, respectively, as of December 31, 2020. Payment of 

dividends on all outstanding preferred stock, other than the senior preferred stock, is subject to the prior payment of 

dividends on the senior preferred stock. 

Delisting of Common Stock and Preferred Stock from NYSE

On July 8, 2010, we delisted our common and 20 previously listed classes of preferred stock from the NYSE pursuant to a 

directive by our Conservator.

Our common stock and the classes of preferred stock that were previously listed on the NYSE are traded exclusively in the 

OTCQB Marketplace. Shares of our common stock now trade under the ticker symbol FMCC. We expect that our common 

stock and the previously listed classes of preferred stock will continue to trade in the OTCQB Marketplace so long as market 

makers demonstrate an interest in trading the common and preferred stock.

Financial Statements Notes to the Consolidated Financial Statements | Note 13

FREDDIE MAC | 2020 Form 10-K 246
NOTE 14

Net Interest Income

The table below presents the components of net interest income per our consolidated statements of comprehensive income 

(loss).

Table 14.1 - Components of Net Interest Income 

Year Ended December 31,

(Dollars in millions) 2020 2019 2018

Interest income

Mortgage loans $59,290 $68,583 $66,037 

Investment securities 2,581 2,737 3,035 

Other 469 1,575 982 

Total interest income 62,340 72,895 70,054 

Interest expense

Debt securities of consolidated trusts held by third parties (46,281) (53,980) (51,529) 

Debt of Freddie Mac:

Short-term debt (606) (1,910) (1,193) 

Long-term debt (2,682) (5,157) (5,311) 

Total interest expense (49,569) (61,047) (58,033) 

Net interest income 12,771 11,848 12,021 

Benefit (provision) for credit losses (1,452) 746 736 

Net interest income after benefit (provision) for credit losses $11,319 $12,594 $12,757 

Financial Statements Notes to the Consolidated Financial Statements | Note 14

FREDDIE MAC | 2020 Form 10-K 247
NOTE 15

Investment Gains (Losses), Net

The table below presents the components of investment gains (losses), net on our consolidated statements of comprehensive 

income (loss).

Table 15.1 - Components of Investment Gains (Losses), Net 

Year Ended December 31,

(In millions) 2020 2019 2018

Investment gains (losses), net:

Mortgage loans gains (losses) $5,372 $4,744 $746 

Investment securities gains (losses) 778 389 (815) 

Debt gains (losses) 701 201 720 

Derivative gains (losses) (5,038) (4,516) 1,270 

Investment gains (losses), net $1,813 $818 $1,921 

Financial Statements Notes to the Consolidated Financial Statements | Note 15

FREDDIE MAC | 2020 Form 10-K 248
NOTE 16

Income Taxes

Income Tax Expense

Total income tax expense includes: 

n	 Current income tax expense, which represents the amount of federal tax currently payable to or receivable from the 

Internal Revenue Service, including interest and penalties and amounts accrued for unrecognized tax benefits, if any, and

n	 Deferred income tax expense, which represents the net change in the deferred tax asset or liability balance during the year, 

including any change in the valuation allowance.

Income tax expense excludes the tax effects related to adjustments recorded to other comprehensive income, such as 

unrealized gains and losses on available-for-sale securities. In addition, income tax expense includes our investment in LIHTC 

partnerships, which are accounted for under the proportional amortization method and generate federal income tax credits and 

deductible operating losses.

The table below presents the components of our federal income tax expense for the past three years. We are exempt from 

state and local income taxes.

Table 16.1 - Federal Income Tax Expense

Year Ended December 31,

(In millions) 2020 2019 2018

Current income tax (expense) benefit ($2,493) ($1,018) ($848) 

Deferred income tax (expense) benefit 590 (817) (1,391) 

Total income tax (expense) benefit ($1,903) ($1,835) ($2,239) 

Income tax expense increased from 2019 to 2020 primarily due to an increase in pre-tax book income, and decreased from 

2018 to 2019, primarily due to a decrease in pre-tax book income.

The table below presents the reconciliation between our federal statutory income tax rate and our effective tax rate for the past 

three years.

Table 16.2 - Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate 

Year Ended December 31,

2020 2019 2018

(Dollars in millions) Amount Percent Amount Percent Amount Percent

Statutory corporate tax rate ($1,938) 21.0 % ($1,900) 21.0 % ($2,410) 21.0 %

Tax-exempt interest 25 (0.3) 18 (0.2) 19 (0.2) 

Tax credits 55 (0.6) 48 (0.5) 56 (0.5) 

Valuation allowance (4) 0.1 9 (0.1) (13) 0.1 

Revaluation of deferred tax asset to enacted 

rate — — — — 184 (1.6) 

Other (includes proportional amortization of 

affordable housing investments) (41) 0.4 (10) 0.1 (75) 0.7 

Effective tax rate ($1,903) 20.6 % ($1,835) 20.3 % ($2,239) 19.5 %

Deferred Tax Assets, Net

We use the asset and liability method of accounting for income taxes for financial reporting purposes. Under this method, 

deferred tax assets and liabilities are recognized based upon the expected future tax consequences of existing temporary 

differences between the financial reporting and the tax reporting basis of assets and liabilities using enacted statutory tax rates 

as well as tax net operating loss and tax credit carryforwards, if any. To the extent tax laws change, deferred tax assets and 

liabilities are adjusted in the period that the tax change is enacted. The realization of our net deferred tax assets is dependent 

upon the generation of sufficient taxable income.

Financial Statements Notes to the Consolidated Financial Statements | Note 16

FREDDIE MAC | 2020 Form 10-K 249
The table below presents the balance of significant deferred tax assets and liabilities at December 31, 2020 and December 31, 

2019. The valuation allowance relates to capital loss carryforwards included in Other items, net that we expect to expire 

unused.

Table 16.3 - Deferred Tax Assets and Liabilities 

Year Ended December 31,

(In millions) 2020 2019

Deferred tax assets:

Deferred fees $3,354 $3,529 

Basis differences related to derivative instruments 1,810 1,398 

Credit related items and allowance for loan losses 844 79 

Basis differences related to assets held for investment 999 921 

Other items, net 134 56 

Total deferred tax assets 7,141 5,983 

Deferred tax liabilities:

Unrealized gains related to available-for-sale securities (543) (28) 

Total deferred tax liabilities (543) (28) 

Valuation allowance (41) (37) 

Deferred tax assets, net $6,557 $5,918 

Valuation Allowance

A valuation allowance is recorded to reduce the net deferred tax asset when it is more likely than not that all or part of our tax 

benefits will not be realized. On a quarterly basis, we determine whether a valuation allowance is necessary. In doing so, we 

consider all evidence available, both positive and negative, in determining whether, based on the weight of the evidence, it is 

more likely than not that the net deferred tax asset will be realized.

We are not permitted to consider in our analysis the impacts proposed legislation may have on our business because the timing 

and certainty of those actions are unknown and beyond our control.

Based on all positive and negative evidence available at December 31, 2020, we determined that it is more likely than not that 

our net deferred tax assets, except for the deferred tax asset related to our capital loss carryforwards, will be realized. A 

valuation allowance of $41 million has been recorded against our capital loss carryforward deferred tax asset.

Unrecognized Tax Benefits

We recognize a tax position taken or expected to be taken (and any associated interest and penalties) if it is more likely than 

not that it will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the 

technical merits of the position. We measure the tax position at the largest amount of benefit that is greater than 50% likely of 

being realized upon ultimate settlement. We evaluated all income tax positions and determined that there were no uncertain tax 

positions that required reserves as of December 31, 2020.

Financial Statements Notes to the Consolidated Financial Statements | Note 16

FREDDIE MAC | 2020 Form 10-K 250
NOTE 17

Segment Reporting

We have three reportable segments, which are based on the type of business activities each performs - Single-family 

Guarantee, Multifamily, and Capital Markets. Certain activities that are not part of a reportable segment are included in the All 

Other category. The chart below provides a summary of our three reportable segments and the All Other category.

Segment/

Category Description

Financial 

Performance 

Measurement 

Basis

Single-family 

Guarantee

The Single-family Guarantee segment reflects results from our purchase of single-family loans, our guarantee of 

principal and interest payments on securitized mortgage loans in exchange for guarantee fees, and the 

management of single-family mortgage credit risk. The Single-family Guarantee segment manages single-family 

mortgage credit risk through risk transfer transactions, performing loss mitigation activities, and managing 

foreclosure and REO activities. 

• Contribution to 

GAAP net income 

(loss)

Multifamily

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

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

credit risk and market risk. Our primary business model is to purchase multifamily loans for aggregation and then 

securitization through issuance of multifamily K Certificates and SB Certificates. We also issue and guarantee 

other securitization products, issue other credit risk transfer products, and provide other guarantee activities.

• Contribution to 

GAAP 

comprehensive 

income (loss)

Capital 

Markets

The Capital Markets segment reflects results from managing the company's 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.

• Contribution to 

GAAP 

comprehensive 

income (loss) 

All Other

The All Other category consists of material corporate-level activities that are infrequent in nature and based on 

decisions outside the control of the management of our reportable segments. N/A

Segment Earnings

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

between various line items on our GAAP consolidated statements of comprehensive income 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 States and its territories, and accordingly, we generate no revenue from and have no long-lived assets, 

other than financial instruments, in geographic locations other than the United States and its territories.

We evaluate segment performance and allocate resources based on a Segment Earnings approach, subject to the conduct of 

our business under the direction of the Conservator. See Note 2 for information about the conservatorship. 

The sum of Segment Earnings for each segment and the All Other category equals GAAP net income (loss). Likewise, the sum 

of comprehensive income (loss) for each segment and the All Other category equals GAAP comprehensive income (loss). 

However, the accounting principles we apply to present certain financial statement line items in Segment Earnings for our 

reportable segments differ significantly from those applied in preparing the comparable line items on our consolidated financial 

statements prepared in accordance with GAAP in order to reflect the business activities each segment performs. The significant 

reclassifications are discussed below.

Credit Activity-Related Reclassifications

Certain credit activity-related income and costs are included in Segment Earnings guarantee fee income or benefit (provision) 

for credit losses.

n	 Net guarantee fees, including certain fee amortization and implied guarantee fee income related to single-family 

unsecuritized loans held in the mortgage-related investments portfolio, are reclassified in Segment Earnings from net 

interest income to guarantee fee income.

Financial Statements Notes to the Consolidated Financial Statements | Note 17

FREDDIE MAC | 2020 Form 10-K 251
n	 Short-term returns on cash received related to certain upfront fees on single-family loans are reclassified in Segment 

Earnings from net interest income to guarantee fee income.

n	 The revenue and expense related to the 10 basis point increase which was legislated in the Temporary Payroll Tax Cut 

Continuation Act of 2011 are netted within guarantee fee income.

n	 A portion of the amount reversed for accrued but uncollected interest upon placing loans on non-accrual status and related 

recoveries (if any) is reclassified in Segment Earnings from net interest income to benefit (provision) for credit losses.

n	 We began hedging cash flows related to upfront fees (including buy-downs) in 2019. Amortization of the hedge gains 

(losses) is reclassified in Segment Earnings from net interest income to guarantee fee income.

n	 Property tax and insurance expenses associated with held-for-sale loans accrued after the reclassification of loans from 

held-for-investment to held-for-sale is reclassified in Segment Earnings from other expense to benefit (provision) for credit 

losses.

Investment Activity-Related Reclassifications

We move certain items into or out of net interest income so that, on a Segment Earnings basis, net interest income reflects how 

we measure the effective yield earned on securities held in our mortgage investments portfolio and our other investments 

portfolio.

We use derivatives extensively in our investment activity. The reclassifications described below allow us to reflect, in Segment 

Earnings net interest income, the costs associated with this use of derivatives.

n	 The accrual of periodic cash settlements of derivatives while not in qualifying hedge relationships is reclassified from 

investment gains (losses) to net interest income for Segment Earnings.

n	 For Segment Earnings, changes in the fair value of the hedging instrument and changes in the fair value of the hedged item 

attributable to the risk being hedged are reclassified to investment gains (losses), net from net interest income. 

Amortization related to certain items is not relevant to how we measure the effective yield earned on the securities held in our 

investments portfolio. Therefore, as described below, we reclassify the following items in Segment Earnings from net interest 

income to non-interest income:

n	 Amortization related to derivative commitment basis adjustments associated with mortgage-related and non-mortgagerelated securities.

n	 Amortization related to accretion of other-than-temporary impairments on available-for-sale securities.

n	 Amortization of discounts on loans purchased with deteriorated credit quality that are on accrual status.

n	 Amortization related to premiums and discounts, including non-cash premiums and discounts, on single-family loans in 

trusts and on the associated consolidated securities. 

n	 Amortization related to premiums and discounts associated with securities issued by our consolidated trusts that we 

previously held and subsequently transferred to third parties.

Certain debt-related costs are not relevant to how we measure the effective yield earned on the securities held in our 

investments portfolio. Therefore, as described below, we reclassify the following items in Segment Earnings:

n	 Costs associated with STACR debt note expenses are reclassified from net interest income to credit enhancement 

expense.

Segment Allocations

The results of each reportable segment include directly attributable revenues and expenses. Administrative expenses that are 

not directly attributable to a segment are allocated to our segments using various methodologies, depending on the nature of 

the expense. Net interest income for each segment includes allocated debt funding and hedging costs related to certain assets 

of each segment. Funding and interest-rate risk is consolidated and primarily managed by the Capital Markets segment for all 

other business segments. In connection with this activity, the Capital Markets segment transfers costs or income to the other 

segments. The actual costs or income may vary relative to these intra-company transfers. In addition, the financial statement 

variability associated with the use of derivatives to hedge certain assets outside the Capital Markets segment and other activity 

that results in GAAP variability is not fully allocated to other segments. These allocations do not include the effects of dividends 

paid on our senior preferred stock.

Financial Statements Notes to the Consolidated Financial Statements | Note 17

FREDDIE MAC | 2020 Form 10-K 252
The table below presents Segment Earnings by segment.

Table 17.1 - Segment Earnings (Loss) and Comprehensive Income (Loss)

Year Ended December 31,

(In millions) 2020 2019 2018

Segment Earnings (Loss), net of taxes:

Single-family Guarantee $4,536 $4,365 $3,908 

Multifamily 3,114 1,827 1,319 

Capital Markets (324) 1,022 4,008 

All Other — — — 

Total Segment Earnings (Loss), net of taxes $7,326 $7,214 $9,235

Net income (loss) per consolidated statements of comprehensive income (loss) $7,326 $7,214 $9,235 

Comprehensive income (loss) of segments:

Single-family Guarantee $4,520 $4,343 $3,905 

Multifamily 3,215 1,928 1,236 

Capital Markets (204) 1,516 3,481 

All Other — — — 

Comprehensive income (loss) of segments $7,531 $7,787 $8,622

Comprehensive income (loss) per consolidated statements of comprehensive income 

(loss) $7,531 $7,787 $8,622 

The tables below present detailed reconciliations between our GAAP consolidated statements of comprehensive income (loss) 

and Segment Earnings (Loss) for our reportable segments and All Other.

Table 17.2 - Segment Earnings (Loss) and Reconciliations to GAAP Consolidated Statements of Comprehensive Income 

(Loss) 

Year Ended December 31, 2020

Singlefamily

Guarantee Multifamily

Capital 

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income (Loss)

Net interest income $— $943 $522 $— $1,465 $11,306 $12,771 

Guarantee fee income 10,292 1,444 — — 11,736 (10,294) 1,442 

Investment gains (losses), net 956 2,047 (231) — 2,772 (959) 1,813 

Other income (loss) 241 176 (266) — 151 482 633 

Benefit (provision) for credit losses (1,680) (132) — — (1,812) 360 (1,452) 

Administrative expense (1,609) (514) (412) — (2,535) — (2,535) 

Credit enhancement expense (1,696) (22) — — (1,718) 660 (1,058) 

Benefit for (decrease in) credit 

enhancement recoveries 305 18 — — 323 — 323 

REO operations expense (152) — — — (152) 3 (149) 

Other expense (943) (37) (21) — (1,001) (1,558) (2,559) 

Income tax (expense) benefit (1,178) (809) 84 — (1,903) — (1,903) 

Net income (loss) 4,536 3,114 (324) — 7,326 — 7,326 

Changes in unrealized gains (losses) 

related to available-for-sale securities — 105 87 — 192 — 192 

Changes in unrealized gains (losses) 

related to cash flow hedge relationships — — 38 — 38 — 38 

Changes in defined benefit plans (16) (4) (5) — (25) — (25) 

Total other comprehensive income 

(loss), net of taxes (16) 101 120 — 205 — 205 

Comprehensive income (loss) $4,520 $3,215 ($204) $— $7,531 $— $7,531 

Financial Statements Notes to the Consolidated Financial Statements | Note 17

FREDDIE MAC | 2020 Form 10-K 253
Year Ended December 31, 2019

Singlefamily

Guarantee Multifamily

Capital 

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income (Loss)

Net interest income $— $1,069 $2,486 $— $3,555 $8,293 $11,848 

Guarantee fee income 7,773 1,101 — — 8,874 (7,785) 1,089 

Investment gains (losses), net 964 576 (36) — 1,504 (686) 818 

Other income (loss) 391 108 (700) — (201) 524 323 

Benefit (provision) for credit losses 418 (3) — — 415 331 746 

Administrative expense (1,647) (503) (414) — (2,564) — (2,564) 

Credit enhancement expense (1,434) (15) — — (1,449) 700 (749) 

Benefit for (decrease in) credit enhancement 

recoveries 41 — — — 41 — 41 

REO operations expense (245) — — — (245) 16 (229) 

Other expense (786) (41) (54) — (881) (1,393) (2,274) 

Income tax (expense) benefit (1,110) (465) (260) — (1,835) — (1,835) 

Net income (loss) 4,365 1,827 1,022 — 7,214 — 7,214 

Changes in unrealized gains (losses) 

related to available-for-sale securities — 105 430 — 535 — 535 

Changes in unrealized gains (losses) 

related to cash flow hedge relationships — — 71 — 71 — 71 

Changes in defined benefit plans (22) (4) (7) — (33) — (33) 

Total other comprehensive income 

(loss), net of taxes (22) 101 494 — 573 — 573 

Comprehensive income (loss) $4,343 $1,928 $1,516 $— $7,787 $— $7,787 

Year Ended December 31, 2018

Singlefamily

Guarantee Multifamily

Capital 

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income (Loss)

Net interest income $— $1,096 $3,217 $— $4,313 $7,708 $12,021 

Guarantee fee income 6,581 861 — — 7,442 (6,576) 866 

Investment gains (losses), net 307 16 1,803 — 2,126 (205) 1,921 

Other income (loss) 841 129 340 — 1,310 (548) 762 

Benefit (provision) for credit losses 448 24 — — 472 264 736 

Administrative expense (1,491) (437) (365) — (2,293) — (2,293) 

Credit enhancement expense (1,069) (16) — — (1,085) 676 (409) 

Benefit for (decrease in) credit enhancement 

recoveries (8) — — — (8) — (8) 

REO operations expense (189) 1 — — (188) 19 (169) 

Other expense (568) (36) (11) — (615) (1,338) (1,953) 

Income tax (expense) benefit (944) (319) (976) — (2,239) — (2,239) 

Net income (loss) 3,908 1,319 4,008 — 9,235 — 9,235 

Changes in unrealized gains (losses)

 related to available-for-sale securities — (82) (640) — (722) — (722) 

Changes in unrealized gains (losses) 

related to cash flow hedge relationships — — 114 — 114 — 114 

Changes in defined benefit plans (3) (1) (1) — (5) — (5) 

Total other comprehensive income

 (loss), net of taxes (3) (83) (527) — (613) — (613) 

Comprehensive income (loss) $3,905 $1,236 $3,481 $— $8,622 $— $8,622 

Financial Statements Notes to the Consolidated Financial Statements | Note 17

FREDDIE MAC | 2020 Form 10-K 254
NOTE 18

Concentration of Credit and Other Risks

Concentrations of credit risk may arise when we do business with a number of customers or counterparties that engage in 

similar activities or have similar economic characteristics that make them vulnerable in similar ways to changes in industry 

conditions, which could affect their ability to meet their contractual obligations. Concentrations of credit risk may also arise 

when there are a limited number of counterparties in a certain industry. Based on our assessment of business conditions that 

could affect our financial results, we have determined that concentrations of credit risk exist among certain borrowers (including 

geographic concentrations and loans with certain higher risk characteristics), loan sellers and servicers, credit enhancement 

providers, and other investment counterparties. In the sections below, we discuss our concentration of credit risk for each of 

the groups to which we are exposed. For a discussion of our derivative counterparties, as well as related master netting and 

collateral agreements, see Note 11.

Single-Family Credit Guarantee Portfolio

Regional economic conditions may affect a borrower's ability to repay his or her loan and/or the property value underlying the 

loan. Geographic concentrations increase the exposure of our portfolio to changes in credit risk. Single-family borrowers are 

primarily affected by house prices and interest rates.

The table below summarizes the concentration by loan portfolio and geographic area of the approximately $2.3 trillion and $2.0 

trillion UPB of our single-family credit guarantee portfolio at December 31, 2020 and December 31, 2019, respectively. See 

Note 4, Note 6, and Note 7 for more information about credit risk associated with loans and mortgage-related securities that 

we hold or guarantee. 

Table 18.1 - Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio

December 31, 2020 December 31, 2019 2020(1) 2019

(Dollars in billions)

Portfolio 

UPB

% of

Portfolio

Serious

Delinquency

Rate

Portfolio 

UPB

% of

Portfolio

Serious

Delinquency

Rate

Credit 

Losses 

Amount

% of 

Credit 

Losses

Credit 

Losses 

Amount

% of 

Credit 

Losses

Core single-family 

loan portfolio $2,093 90 % 2.04 % $1,701 85 % 0.26 % $0.1 33 % $0.3 18 %

Legacy and relief 

refinance singlefamily loan portfolio 233 10 5.30 293 15 1.84 0.3 67 1.2 82 

Total $2,326 100 % 2.64 $1,994 100 % 0.63 $0.4 100 % $1.5 100 %

Region:(2)

West $720 31 % 2.41 $595 30 % 0.36 $— 5 % $0.2 12 %

Northeast 549 24 3.16 475 24 0.87 0.2 40 0.5 37 

North Central 357 15 2.06 319 16 0.61 0.1 27 0.3 19 

Southeast 375 16 2.95 326 16 0.73 0.1 18 0.4 24 

Southwest 325 14 2.59 279 14 0.54 — 10 0.1 8 

Total $2,326 100 % 2.64 $1,994 100 % 0.63 $0.4 100 % $1.5 100 %

State:

California $424 18 % 2.64 $347 17 % 0.34 $— 4 % $0.1 8 %

Texas 145 6 3.11 123 6 0.54 — 3 — 3 

Florida 135 6 3.70 116 6 0.77 — 9 0.2 14 

New York 103 4 4.56 94 5 1.21 0.1 13 0.1 7 

Illinois 96 4 2.96 88 4 0.85 0.1 14 0.2 10 

All other 1,423 62 2.34 1,226 62 0.61 0.2 57 0.9 58 

Total $2,326 100 % 2.64 $1,994 100 % 0.63 $0.4 100 % $1.5 100 %

(1) Excludes credit losses related to charge-offs of accrued interest receivables.

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

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

The REO balance, net at December 31, 2020 and December 31, 2019 associated with single-family properties was $0.2 billion

and $0.6 billion, respectively, and the balance associated with multifamily properties was $0 million at both dates. Our singleFinancial Statements Notes to the Consolidated Financial Statements | Note 18

FREDDIE MAC | 2020 Form 10-K 255
family REO inventory consisted of 1,766 properties and 4,989 properties at December 31, 2020 and December 31, 2019, 

respectively. Although the average length of the foreclosure process has been trending downward in recent years for some 

jurisdictions, it remained elevated in others, particularly states with a judicial foreclosure process, which extends the time it 

takes for loans to be foreclosed upon and the underlying property to transition to REO.

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 the date that is 120 days after the declaration of the 

national emergency related to the COVID-19 pandemic ends. Our ability to evaluate purchases of new loans and monitor the 

credit quality of loans in our single-family credit guarantee portfolio may be affected as credit scores may not reflect the impact 

of relief programs, offered by us or other creditors, into which borrowers may have entered.

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 may have an even higher risk of delinquency 

than those with an individual attribute.

Table 18.2 - Certain Higher Risk Categories in Our Single-Family Credit Guarantee Portfolio

% of Portfolio(1) Serious Delinquency Rate(1)

(Percentage of portfolio based on UPB) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019

Interest-only — % 1 % NM 2.72 %

Alt-A 1 1 10.66 % 3.75 

Original LTV ratio greater than 90%(2) 15 18 4.25 0.96 

Lower credit scores at origination (less than 620) 1 2 11.00 4.52 

(1) Excludes $505 million and $555 million UPB of loans underlying certain other securitization products for which data was not available as of December 31, 2020 and 

December 31, 2019, respectively. 

(2) Includes HARP loans, which we purchased as part of our participation in the MHA Program.

(3) NM - not meaningful due to the percentage of the portfolio rounding to zero. 

We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or Alt-A if the securities 

were identified as such based on information provided to us when we entered into these transactions. We do not consider 

option ARM, CMBS, obligations of states and political subdivisions, and manufactured housing securities as either subprime or 

Alt-A securities. See Note 6 for further information on these categories and other concentrations in our investments in 

securities.

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Multifamily Mortgage Portfolio

Numerous factors affect a multifamily borrower's ability to repay the loan and the value of the property underlying the loan. The 

most significant factors affecting credit risk are rental rates and capitalization rates for the mortgaged property. Rental rates 

vary among geographic regions of the United States. The average UPB for multifamily loans is significantly larger than for 

single-family loans and, therefore, individual defaults for multifamily borrowers can result in more significant losses.

The table below summarizes the concentration of multifamily loans in our multifamily mortgage portfolio classified by legal 

structure, based on UPB.

Table 18.3 - Concentration of Credit Risk of Our Multifamily Mortgage Portfolio

December 31, 2020 December 31, 2019

(Dollars in billions) UPB

Delinquency

Rate(1) UPB

Delinquency

Rate(1)

Unsecuritized loans $33.4 0.04 % $29.8 0.01 %

Securitization-related products 301.4 0.18 260.3 0.09 

Other mortgage-related guarantees 10.7 0.06 10.0 0.09 

Total $345.5 0.16 $300.1 0.08 

(1) Based on loans two monthly payments or more delinquent or in foreclosure.

In the multifamily mortgage portfolio, the primary concentration of credit risk is based on the legal structure of the investments 

we hold. Our exposure to credit risk in our securitization-related products is minimal, as the expected credit risk is generally 

absorbed by the subordinate tranches, which are typically sold to third-party investors. As a result, our multifamily mortgage 

credit risk is primarily related to loans that have not been securitized.

Sellers and Servicers

We acquire a significant portion of our single-family and multifamily loan purchase and guarantee 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 and guarantee volume.

Table 18.4 - Seller Concentration

Single-family Sellers 2020 2019

JPMorgan Chase Bank, N.A. 5 % 14 %

Other top 10 sellers 39 42 

Top 10 single-family sellers 44 % 56 %

Multifamily Sellers 2020 2019

CBRE Capital Markets, Inc. 16 % 15 %

Berkadia Commercial Mortgage LLC 14 15 

JLL Real Estate Capital LLC 11 3 

Walker & Dunlop LLC 10 8 

Other top 10 sellers 31 36 

Top 10 multifamily sellers 82 % 77 %

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. As a result, we have significant exposure to non-depository institutions in our singlefamily business. Our top five non-depository sellers provided approximately 26% of our single-family purchase volume during 

both 2020 and 2019.

We are exposed to counterparty credit risk arising from the potential insolvency or nonperformance 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. Our contracts require 

that a seller/servicer repurchase a loan after we issue a repurchase request, unless the seller/servicer avails itself of an appeals 

process provided for in our contracts, in which case the deadline for repurchase is extended until we decide on the appeal. As 

of December 31, 2020 and December 31, 2019, the UPB of loans subject to our repurchase requests issued to our single-family 

sellers and servicers was approximately $0.5 billion and $0.3 billion, respectively (these figures include repurchase requests for 

Financial Statements Notes to the Consolidated Financial Statements | Note 18

FREDDIE MAC | 2020 Form 10-K 257
which appeals were pending). During 2020 and 2019, we recovered amounts with respect to $0.9 billion and $0.4 billion, 

respectively, in UPB of loans subject to our repurchase requests. 

At the direction of FHFA, we and Fannie Mae revised our representation and warranty framework for conventional loans 

purchased by the GSEs on or after January 1, 2013. The objective of the revised framework is to clarify lenders' repurchase 

exposures and liability on future sales of loans to Freddie Mac and Fannie Mae. This framework does not affect seller/servicers' 

obligations under their contracts with us with respect to loans sold to us prior to January 1, 2013. This framework also does not 

affect their obligation to service these loans in accordance with our servicing standards. Under this framework, sellers are 

relieved of certain repurchase obligations for loans that meet specific payment requirements. This includes, subject to certain 

exclusions, loans with 36 months (12 months for relief refinance loans) of consecutive, on-time payments after we purchase 

them. 

In May 2014, we announced changes to our representation and warranty framework for loans acquired on and after July 1, 

2014. These changes relieve sellers of additional representations and warranties for these loans and provide relief for loans we 

have fully reviewed in our quality control process and determined to be acceptable. As of December 31, 2020, approximately 

87% in UPB of loans in our single-family credit guarantee portfolio were purchased since January 1, 2013.

At the direction of FHFA, we implemented a new remedies framework for the categorization of loan origination defects for loans 

with settlement dates on or after January 1, 2016. Among other items, the framework provides that "significant defects" will 

result in a repurchase request or a repurchase alternative, such as recourse or indemnification. We may require the seller to pay 

us additional fees or provide us with additional data on the loan.

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 estimate of probable incurred losses for 

exposure to seller/servicers for their repurchase obligations is considered in our allowance for loan losses. See Note 7 for 

further information. 

We are also exposed to the risk that servicers might fail to service loans in accordance with the contractual requirements, 

resulting in increased credit losses. For example, our servicers have an active role in our loss mitigation efforts, and we 

therefore have exposure to them to the extent a decline in their performance results in a failure to realize the anticipated 

benefits of the loss mitigation plans. Since we do not have our own servicing operation, if our servicers lack appropriate 

controls, experience a failure in their controls, or experience an operating disruption in their ability to service loans, our business 

and financial results could be adversely affected.

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.

Table 18.5 - Servicer Concentration

Single-family Servicers December 31, 2020(1) December 31, 2019(1)

Wells Fargo Bank, N.A. 11 % 15 %

JPMorgan Chase Bank, N.A. 8 10 

Other top 10 servicers 30 32 

Top 10 single-family servicers 49 % 57 %

Multifamily Servicers(2) December 31, 2020 December 31, 2019

CBRE Capital Markets, Inc. 17 % 17 %

Berkadia Commercial Mortgage LLC 13 13 

JLL Real Estate Capital LLC 11 3 

Other top 10 servicers 39 43 

Top 10 multifamily servicers 80 % 76 %

(1) 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.

(2) 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 rapidly in recent years and now service a large share of our loans. As of 

both December 31, 2020 and December 31, 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.

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For our mortgage-related 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 until 

the mortgages are no longer held by the securitization trust. At the instruction of FHFA, we generally have been purchasing 

loans from the trust when the loans have been delinquent for 120 days or more. After the outbreak of COVID-19, FHFA further 

instructed us to maintain loans in COVID-19 payment forbearance plans in the securitization trusts for at least the duration of 

the forbearance. Once the forbearance period expires, the loan will remain in the related securities pool while: 

n	 An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant 

to a loan modification remains outstanding; 

n	 The loan is in an active repayment plan or trial period plan; or 

n	 A payment deferral solution is in effect.

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we extended the trigger to 

purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid 

off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure.

In addition to principal and interest payments, borrowers are also responsible for other expenses such as property taxes and 

homeowner's insurance premiums. When borrowers do not pay these expenses, our Guide generally requires single-family 

servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties. 

These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the 

missed payments and incurred expenses will be collected from the borrowers. We will reimburse the servicers for the advanced 

amounts when uncollected from the borrowers at completion of foreclosures or foreclosure alternatives.

In March 2020, as the COVID-19 pandemic evolved rapidly, liquidity concerns primarily regarding non-depository financial 

institutions arose as market conditions changed and borrowers affected by the COVID-19 pandemic were offered widespread 

forbearance, including forbearance on loans purchased and securitized by Freddie Mac. The increase in delinquency volume 

and the obligation for single-family servicers to continue to advance funds during the forbearance period as discussed above 

may increase liquidity pressures on certain of our counterparties. In response to these potential liquidity concerns, we have 

heightened our monitoring and review of the financial stability of our non-depository institutional counterparties.

Multifamily loans utilize both primary and master servicers. Primary servicers service unsecuritized mortgage loans and are also 

typically engaged by master servicers to service on their behalf the mortgage loans underlying securitizations. Third party 

master servicers are utilized in our primary securitizations, except for small balance loan securitizations where we serve as 

master servicer. Multifamily primary servicers included in the table above present potential operational risk and impact to the 

borrowers if the servicing needs to be transferred to another servicer. We also have exposure to the master servicers of our 

multifamily securitization transactions who bear responsibility to advance funds in the event of payment shortfalls, including 

principal and interest payments related to loans in forbearance. In the majority of our primary multifamily securitizations, we 

utilize one of three large financial depository institutions as master servicers. In instances where payment shortfalls occur, the 

master servicer is required to make advances as long as such advances have not been deemed unrecoverable. 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.

Credit Enhancement Providers 

We have counterparty credit risk relating to the potential insolvency of, or nonperformance 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. See Note 8 for additional 

information on our credit enhancements.

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 recovery and collectability from mortgage insurers as part of the estimate of our allowance for credit losses. 

See Note 7 for additional information. As of December 31, 2020, mortgage insurers provided coverage with maximum loss 

limits of $117.0 billion, for $472.9 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. ("Genworth") announced that it had entered into 

an agreement to be acquired by China Oceanwide Holdings Group Co., Ltd. ("Oceanwide"). Because Genworth Mortgage 

Financial Statements Notes to the Consolidated Financial Statements | Note 18

FREDDIE MAC | 2020 Form 10-K 259
Insurance Corporation, a subsidiary of Genworth, is an approved mortgage insurer, Freddie Mac evaluated the planned 

acquisition and approved Oceanwide's control of Genworth Mortgage Insurance Corporation. On January 4, 2021, Genworth 

announced that Genworth and Oceanwide did not extend the end date, December 31, 2020, under the merger agreement due 

to uncertainty around the completion and timing of the remaining steps required to close the transaction and that Genworth is 

focusing on executing its contingency plan. Freddie Mac is collaborating with FHFA and Fannie Mae to review the contingency 

plan and provide necessary approvals.

Table 18.6 - Mortgage Insurer Concentration

Mortgage Insurance Coverage(2)

Mortgage Insurer Credit Rating(1) December 31, 2020 December 31, 2019

Arch Mortgage Insurance Company A- 20 % 22 %

Radian Guaranty Inc. BBB+ 19 20 

Mortgage Guaranty Insurance Corporation BBB+ 18 17 

Essent Guaranty, Inc. BBB+ 16 15 

Genworth Mortgage Insurance BB+ 15 15 

Total 88 % 89 %

(1) Ratings are for the corporate entity to which we have the greatest exposure. Latest rating available as of December 31, 2020. Represents the lower of S&P and 

Moody's credit ratings stated in terms of the S&P equivalent.

(2) Coverage amounts may include coverage provided by affiliates and subsidiaries of the counterparty. 

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. These insurers no longer issue 

new insurance but continue to pay a portion of their respective claims in cash. In 2014, PMI began paying valid claims 67% in 

cash, 33% in deferred payment obligations, and made a one-time cash payment to us for claims that were previously settled 

for 55% in cash. In 2015, PMI began paying valid claims 70% in cash, 30% in deferred payment obligations, and made a onetime cash payment to us for claims that were previously settled for 67% in cash. In 2013, Triad began paying valid claims 75%

in cash, 25% in deferred payment obligations, and made a one-time cash payment to us for claims that were previously settled 

for 60% in cash. If, as we currently expect, these insurers do not pay the full amount of their deferred payment obligations in 

cash, we would lose a portion of the coverage from these insurers. As of December 31, 2020 and December 31, 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.

RMIC is under regulatory supervision and is no longer issuing new insurance. In 2014, RMIC resumed paying valid claims at 

100% of the claim amount. Previously, RMIC had been paying all valid claims 60% in cash and 40% in deferred payment 

obligations. 

As part of our insurance/reinsurance CRT transactions, we regularly obtain insurance coverage from global 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), our insurers and reinsurers generally 

participate in multiple types of insurance businesses, which helps diversify their risk exposure.

Other Investment Counterparties

We are exposed to the nonperformance 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 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 December 31, 2020 and December 31, 2019, including amounts related to our consolidated VIEs, the balance of 

our other investments portfolio was $163.1 billion and $103.6 billion, respectively. The balance consists primarily of cash, 

securities purchased under agreements to resell invested with counterparties, U.S. Treasury securities, cash deposited with the 

Financial Statements Notes to the Consolidated Financial Statements | Note 18

FREDDIE MAC | 2020 Form 10-K 260
Federal Reserve Bank of New York, and secured lending activities. As of December 31, 2020, all of our securities purchased 

under agreements to resell were fully collateralized. As of December 31, 2020 and December 31, 2019, $0.8 billion, and $2.4 

billion of our securities purchased under agreements to resell were used to provide financing to investors in Freddie Mac 

securities to increase liquidity and expand the investor base for those securities. These transactions differ from the securities 

purchased under agreements to resell that we use for liquidity purposes as the counterparties we face may not be major 

financial institutions and we are exposed to the counterparty credit risk of these institutions. Due to the economic downturn and 

market volatility caused by the COVID-19 pandemic, certain of our counterparties engaging in these securities purchased under 

agreements to resell defaulted under the terms of the governing legal agreements by failing to meet margin requirements in 1Q 

2020. The transactions were terminated in accordance with the terms of the agreements, and we recognized the collateral at 

fair value, which was in excess of the counterparties' outstanding obligations. We did not recognize a financial loss as a result 

of these defaults.

Financial Statements Notes to the Consolidated Financial Statements | Note 18

FREDDIE MAC | 2020 Form 10-K 261
NOTE 19

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.

Valuation Risk and Controls Over Fair Value Measurements

Valuation risk is the risk that fair values used for financial disclosures, risk metrics, and performance measures do not 

reasonably reflect market conditions and prices.

We designed our control processes so that our fair value measurements are appropriate and reliable, that they are based on 

observable inputs where possible, and that our valuation approaches are consistently applied and the assumptions and inputs 

are reasonable. Our control processes provide a framework for segregation of duties and oversight of our fair value 

methodologies, techniques, validation procedures, and results.

Groups within our Finance Division, independent of our business functions, execute and validate the valuation processes and 

are responsible for determining the fair values of the majority of our financial assets and liabilities. In determining fair value, we 

consider the credit risk of our counterparties in estimating the fair values of our assets and our own credit risk in estimating the 

fair values of our liabilities. The fair values determined by our Finance Division are further verified by an independent group 

within our ERM Division.

The independent validation procedures performed by the ERM Division are intended to monitor that the prices we receive from 

third parties are consistent with our observations of market activity, and that fair value measurements developed using internal 

data reflect the assumptions that a market participant would use in pricing our assets and liabilities. These validation 

procedures include performing a daily price review and a monthly independent verification of fair value measurements through 

independent modeling, analytics, and comparisons to other market source data, if available. If we are unable to validate the 

reasonableness of a given price, we ultimately do not use that price for fair value measurements on our consolidated financial 

statements. These procedures are risk-based and are executed before we finalize the prices used in preparing our fair value 

measurements for our financial statements.

In addition to performing the validation procedures noted above, the ERM Division provides independent risk governance over 

all valuation processes by establishing and maintaining a corporate-wide valuation risk policy. The ERM Division also 

independently reviews significant judgments, methodologies, and valuation techniques to monitor compliance with established 

policies.

Our Valuation Risk Committee, which includes representation from our business lines, the ERM Division, and the Finance 

Division, provides senior management's governance over valuation processes, methodologies, controls, and fair value 

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 262
measurements. Identified exceptions are reviewed and resolved through the verification process and reviewed at the Valuation 

Risk Committee.

Where models are employed to assist in the measurement and verification of fair values, changes made to those models during 

the period are reviewed and approved according to the corporate model change governance process, with material changes 

reviewed at the Valuation Risk Committee. Inputs used by models are regularly updated for changes in the underlying data, 

assumptions, valuation inputs, and market conditions and are subject to the valuation controls noted above.

Use of Third-Party Pricing Data in Fair Value Measurement

Many of our valuation techniques use, either directly or indirectly, data provided by third-party pricing services or dealers. The 

techniques used by these pricing services and dealers to develop the prices generally are either: 

n	 A comparison to transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on 

specific characteristics of the asset or liability being valued or

n	 Industry-standard modeling, such as a discounted cash flow model.

The prices provided by the pricing services and dealers reflect their observations and assumptions related to market activity, 

including risk premiums and liquidity adjustments. The models and related assumptions used by the pricing services and 

dealers are owned and managed by them and, in many cases, the significant inputs used in the valuation techniques are not 

reasonably available to us. However, we have an understanding of the processes and assumptions used to develop the prices 

based on our ongoing due diligence, which includes discussions with our vendors at least annually and often more frequently. 

We believe that the procedures executed by the pricing services and dealers, combined with our internal verification and 

analytical procedures, provide assurance that the prices used in our financial statements comply with the accounting guidance 

for fair value measurements and disclosures and reflect the assumptions that a market participant would use in pricing our 

assets and liabilities. The price quotes we receive are non-binding both to us and to our counterparties.

In many cases, we receive quotes from third-party pricing services or dealers and use those prices without adjustment. For a 

large majority of the assets and liabilities we value using pricing services and dealers, we obtain quotes from multiple external 

sources and use the median of the prices to measure fair value. This technique is referred to below as "median of external 

sources." The significant inputs used in the fair value measurement of assets and liabilities that are valued using the median of 

external sources pricing technique are the third-party quotes. Significant increases (decreases) in any of the third-party quotes 

in isolation may result in a significantly higher (lower) fair value measurement. In limited circumstances, we may be able to 

receive pricing information from only a single external source. This technique is referred to below as "single external source."

Valuation Techniques

The following table contains a description of the valuation techniques we use for fair value measurement and disclosure; the 

significant inputs used in those techniques (if applicable); the classification within the fair value hierarchy; and, for those 

measurements that we report on our consolidated balance sheets and are classified as Level 3 of the hierarchy, a narrative 

description of the uncertainty of the fair value measurement to changes in significant unobservable inputs. Although the 

uncertainties of the unobservable inputs are discussed below in isolation, interrelationships exist among the inputs such that a 

change in one unobservable input can result in a change to one or more of the other inputs. For example, the most common 

interrelationship that affects the majority of our fair value measurements is between future interest rates, prepayment speeds, 

and probabilities of default. Generally, a change in the assumption used for future interest rates results in a directionally 

opposite change in the assumption used for prepayment speeds and a directionally similar change in the assumption used for 

probabilities of default.

Each technique discussed below may not be used in a given reporting period, depending on the composition of our assets and 

liabilities measured at fair value and relevant market activity during that period.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 263
Instrument Valuation Technique Classification in the 

Fair Value Hierarchy

Securities

U.S. Treasury Securities Quoted prices in active markets Level 1

Agency mortgagerelated securitiesFixed-rate single-class Median of external sources Level 2

Adjustable-rate single-class and 

majority of multi-class securities

Median of external sources Predominantly Level 2

Certain multi-class securities Single external source Levels 2 and 3

Certain multi-class securities with 

limited market activity

Discounted cash flows or risk metric pricing. 

Significant inputs used in the discounted cash flow technique 

include OAS. Significant increases (decreases) in the OAS in 

isolation would result in a significantly lower (higher) fair value 

measurement.

Significant inputs used in the risk metric pricing technique 

include key risk metrics, such as key rate durations. 

Significant increases (decreases) in key rate durations in 

isolation would result in a significant increase (decrease) in 

the magnitude of change of fair value measurement in 

response to key rate movements. Under risk metric pricing, 

securities are valued by starting with a prior period price and 

adjusting that price for market changes in the key risk metric 

input used. 

Level 3

Commercial mortgage-related securities Single external source or, in limited circumstances, a median 

of external sources

Predominantly Level 3

Other non-agency mortgage-related securities Median of external sources Level 3

Derivatives

Exchange-traded futures Quoted prices in active markets Level 1

Interest-rate swaps Discounted cash flows. Significant inputs include marketbased interest rates.Level 2

Option-based derivatives Option-pricing models. Significant inputs include interest-rate 

volatility matrices.

Level 2

Purchase and sale commitments See Agency mortgage-related securities Level 2

Debt

Debt securities of consolidated trusts

held by third parties

See Agency mortgage-related securities Level 2 or 3

Debt of Freddie Mac Median of external sources Predominantly Level 2

Single external source

Published yield matrices

Mortgage Loans

Single-family loans GSE securitization market Benchmark security pricing for actively traded mortgagerelated securities with similar characteristics, adjusting for the 

value of our guarantee fee and our credit obligation related to 

performing our guarantee (see Guarantee obligation). The 

credit obligation is based on: delivery and guarantee fees we 

charge under current market pricing for loans that qualify 

under our current underwriting standards (Level 2) and 

internal credit models for loans that do not qualify under our 

current underwriting standards (Level 3).

Level 2 or 3

Whole loan market Median of external sources, referencing market activity for 

deeply delinquent and modified loans, where available

Level 3

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 264
Instrument Valuation Technique Classification in the 

Fair Value Hierarchy

Certain held-for-investment Internal models that estimate the fair value of the underlying 

collateral for impaired loans. Significant inputs used by our 

internal models include REO disposition, short sale, and thirdparty sale values, combined with mortgage loan level 

characteristics using the repeat housing sales index to 

estimate the current fair value of the mortgage loan. 

Significant increases (decreases) in the historical average 

sales proceeds per mortgage loan in isolation would result in 

significantly higher (lower) fair value measurements.

Level 3

Multifamily loans Held-for-sale Discounted cash flows based on observable K Certificate and 

SB Certificate market spreads

Level 2

Held-for-investment Market prices from a third-party pricing service using 

discounted cash flows incorporating credit spreads for similar 

loans based on the loan's LTV and DSCR

Predominantly Level 3

Non-derivative Purchase Commitments

Multifamily loan purchase commitments See Multifamily loans Level 2 or 3

Other Assets

Guarantee assets Single-family Median of external sources with adjustments for specific loan 

characteristics

Level 3

Multifamily Discounted cash flows. Significant inputs include current OASto-benchmark interest rates for new guarantees. Significant 

increases (decreases) in the OAS in isolation would result in a 

significantly lower (higher) fair value measurement.

Level 3

Mortgage servicing rights Market prices from a third party or internally developed prices 

using discounted cash flows. Significant inputs include:

Level 3

 Estimated prepayment rates,

 Estimated costs to service both performing and non-accrual 

loans, and

 Estimated servicing income per loan (including ancillary 

income).

Significant increases (decreases) in cost to service per loan 

and prepayment rate in isolation would result in a significantly 

lower (higher) fair value measurement. Significant increases 

(decreases) in servicing income per loan in isolation would 

result in a significantly higher (lower) fair value measurement.

Other Liabilities

Guarantee obligations Single-family Delivery and guarantee fees that we charge under our current 

market pricing

Level 2

Internal credit models. Significant inputs include loan 

characteristics, loan performance, and status information.

Level 3

Multifamily Discounted cash flows. Significant inputs are similar to those 

used in the valuation technique for the Multifamily guarantee 

assets.

Level 3

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 265
Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present our assets and liabilities measured on our 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 19.1 - Assets and Liabilities Measured at Fair Value on a Recurring Basis

December 31, 2020

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustment(1) Total

Assets:

Investments in securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Agency $— $13,778 $526 $— $14,304 

Non-agency and other — 1 1,062 — 1,063 

Total available-for-sale securities, at fair value — 13,779 1,588 — 15,367 

Trading, at fair value:

Mortgage-related securities:

Agency — 14,246 3,258 — 17,504 

Non-agency — — 1 — 1 

Total mortgage-related securities — 14,246 3,259 — 17,505 

Non-mortgage-related securities 26,255 698 — — 26,953 

Total trading securities, at fair value 26,255 14,944 3,259 — 44,458 

Total investments in securities 26,255 28,723 4,847 — 59,825 

Mortgage loans:

Held-for-sale, at fair value — 14,199 — — 14,199 

 Derivative assets, net — 8,516 63 — 8,579 

Netting adjustments(1) — — — (7,374) (7,374) 

Total derivative assets, net — 8,516 63 (7,374) 1,205 

Other assets:

Guarantee assets, at fair value — — 5,509 — 5,509 

Non-derivative held-for-sale purchase commitments, at fair value — 158 — — 158 

All other, at fair value — — 108 — 108 

Total other assets — 158 5,617 — 5,775 

Total assets carried at fair value on a recurring basis $26,255 $51,596 $10,527 ($7,374) $81,004 

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair 

value $— $2 $203 $— $205 

Debt of Freddie Mac, at fair value — 2,267 120 — 2,387 

 Derivative liabilities, net — 9,132 16 — 9,148 

Netting adjustments(1) — — — (8,194) (8,194) 

Total derivative liabilities, net — 9,132 16 (8,194) 954 

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 1 — — 1 

All other, at fair value — — 3 — 3 

Total other liabilities — 1 3 — 4 

Total liabilities carried at fair value on a recurring basis $— $11,402 $342 ($8,194) $3,550 

Referenced footnote is included after the next table.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 266
December 31, 2019

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustment(1) Total

Assets:

Investments in securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Agency $— $22,927 $1,960 $— $24,887 

Non-agency and other — 20 1,267 — 1,287 

Total available-for-sale securities, at fair value — 22,947 3,227 — 26,174 

Trading, at fair value:

Mortgage-related securities:

Agency — 19,772 2,709 — 22,481 

Non-agency — — 1 — 1 

Total mortgage-related securities — 19,772 2,710 — 22,482 

Non-mortgage-related securities 25,108 1,947 — — 27,055 

Total trading securities, at fair value 25,108 21,719 2,710 — 49,537 

Total investments in securities 25,108 44,666 5,937 — 75,711 

Mortgage loans:

Held-for-sale, at fair value — 15,035 — — 15,035 

 Derivative assets, net — 6,363 16 — 6,379 

Netting adjustments(1) — — — (5,535) (5,535) 

Total derivative assets, net — 6,363 16 (5,535) 844 

Other assets:

Guarantee assets, at fair value — — 4,426 — 4,426 

Non-derivative held-for-sale purchase commitments, at fair value — 81 — — 81 

All other, at fair value — — 120 — 120 

Total other assets — 81 4,546 — 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 $— $6 $203 $— $209 

Debt of Freddie Mac, at fair value — 3,600 129 — 3,729 

 Derivative liabilities, net — 5,245 37 — 5,282 

Netting adjustments(1) — — — (4,910) (4,910) 

Total derivative liabilities, net — 5,245 37 (4,910) 372 

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 7 — — 7 

All other, at fair value — — 1 — 1 

Total other liabilities — 7 1 — 8 

Total liabilities carried at fair value on a recurring basis $— $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 Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 267
Level 3 Fair Value Measurements

The tables below present a reconciliation of all assets and liabilities measured on our 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 consolidated statements of comprehensive income for Level 3 assets and liabilities.

Table 19.2 - Fair Value Measurements of Assets and Liabilities Using Significant Unobservable Inputs

Year Ended December 31, 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,

December 

31,

2020

Change in 

Unrealized 

Gains (Losses) 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2020(2)

Change in 

Unrealized 

Gains (Losses), 

Net of Tax, 

Included in OCI 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

(In millions) 2020

Included 

in

Earnings

Included in 

Other

Comprehensive

Income

Assets

Investments in 

securities:

Available-for-sale, at 

fair value:

Mortgage-related 

securities:

Agency $1,960 $12 $38 $— $— ($218) ($170) $— ($1,096) $526 $— ($2) 

Non-agency and 

other 1,267 15 (46) — — — (174) — — 1,062 15 (36) 

Total available-forsale mortgage-related 

securities 3,227 27 (8) — — (218) (344) — (1,096) 1,588 15 (38) 

Trading, at fair value:

Mortgage-related 

securities:

Agency 2,709 (251) — 1,555 — (281) (77) — (397) 3,258 (241) — 

Non-agency 1 — — — — — — — — 1 — — 

Total trading 

mortgage-related 

securities 2,710 (251) — 1,555 — (281) (77) — (397) 3,259 (241) — 

Derivative assets 15 22 — — 26 — — — — 63 21 — 

Other assets:

Guarantee assets 4,426 250 — — 1,641 — (808) — — 5,509 250 — 

All other, at fair value 120 (3) — (15) 27 (19) (2) — — 108 (3) — 

Total other assets 4,546 247 — (15) 1,668 (19) (810) — — 5,617 247 — 

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,

December 

31,

2020

Change in 

Unrealized 

(Gains) Losses 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2020 (2)

Change in 

Unrealized 

(Gains) Losses, 

Net of Tax, 

Included in OCI 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2020

Included 

in

Earnings

Included in

other

comprehensive

income

Liabilities

Debt securities of 

consolidated trusts held 

by third parties, at fair 

value $203 $— $— $— $— $— $— $— $— $203 $— $— 

Debt of Freddie Mac, at 

fair value 129 (1) — — 4 — (12) — — 120 (1) — 

Derivative liabilities 36 (8) — — 2 — (14) — — 16 (23) — 

All other, at fair value 1 — — 1 — 1 — — — 3 — — 

Referenced footnotes are included after the prior period table.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 268
Year Ended December 31, 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,

December 

31,

2019

Change in 

Unrealized 

Gains(Losses) 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2019 (2)

Change in 

Unrealized 

Gains (Losses), 

Net of Tax, 

Included in OCI 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

(In millions) 2019

Included 

in

Earnings

Included in 

Other

Comprehensive

Income

Assets

Investments in 

securities:

Available-for-sale, at 

fair value:

Mortgage-related 

securities:

Agency $4,135 $23 $108 $— $— ($1,883) ($367) $2 ($58) $1,960 $2 $40 

Non-agency and 

other 1,640 82 (1) — — (238) (216) — — 1,267 14 35 

Total available-forsale mortgage-related 

securities 5,775 105 107 — — (2,121) (583) 2 (58) 3,227 16 75 

Trading, at fair value:

Mortgage-related 

securities:

Agency 3,293 (280) — 596 — (616) (104) — (180) 2,709 (248) — 

Non-agency 1 — — — — — — — — 1 — — 

Total trading 

mortgage-related 

securities 3,294 (280) — 596 — (616) (104) — (180) 2,710 (248) — 

Derivative assets 1 14 — — — — — — — 15 14 — 

Other assets:

Guarantee assets 3,633 33 — — 1,427 — (667) — — 4,426 33 — 

All other, at fair value 137 (38) — 85 36 (85) (15) — — 120 (70) — 

Total other 

assets 3,770 (5) — 85 1,463 (85) (682) — — 4,546 (37) — 

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,

December 

31,

2019

Change in 

Unrealized 

(Gains) Losses 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2019 (2)

Change in 

Unrealized 

(Gains) Losses, 

Net of Tax, 

Included in OCI 

Related to 

Assets and 

Liabilities Still 

Held as of 

December 31, 

2019

Included 

in

Earnings

Included in 

Other

Comprehensive

Income

Liabilities

Debt securities of 

consolidated trusts held 

by third parties, at fair 

value $728 $5 $— $— $— $— ($530) $— $— $203 $5 $— 

Debt of Freddie Mac, at 

fair value 134 — — — 4 — (9) — — 129 — — 

Derivative liabilities 92 (37) — — — — (19) — — 36 (54) — 

All other, at fair value — (3) — 6 — (2) — — — 1 (5) — 

(1) Transfers out of Level 3 during 2020 and 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 2019 consisted primarily of certain mortgage-related securities due to a 

decrease in market activity and the availability of relevant price quotes from dealers and third-party pricing services.

(2) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains and losses related to assets and 

liabilities classified as Level 3 that were still held at December 31, 2020 and December 31, 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 Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 269
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 consolidated balance sheets at fair value on a recurring basis.

Table 19.3 - Quantitative Information about Recurring Level 3 Fair Value Measurements 

December 31, 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(2)

Assets

Available-for-sale, at fair value

Mortgage-related securities

Agency $410 Discounted cash flows OAS 90 - 90 bps 90 bps

 116 Other

Non-agency and other 875 

Median of external 

sources

External pricing 

sources $67.1 - $79.1 $72.8 

 187 Other

Trading, at fair value

Mortgage-related securities

Agency 2,204 Single external source

External pricing 

sources $0.0 - $8,894.6 $947.8 

 472 Discounted cash flows OAS (951) - 2,910 bps 834 bps

 583 Other

Guarantee assets, at fair value 5,195 Discounted cash flows OAS 15 - 186 bps 38 bps

 314 Other

Insignificant Level 3 assets(1) 171 

Total level 3 assets $10,527 

Liabilities

Debt securities of consolidated trusts held by third 

parties, at fair value $203 Single External Source

External Pricing 

Sources $97.3 - $ 107.0 $101.7 

Insignificant Level 3 liabilities(1) 139 

Total level 3 liabilities $342 

Referenced footnotes are included after the next table.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 270
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(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 assets, 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 Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 271
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 an allowance for credit losses 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 consolidated balance sheets at fair value on a non-recurring basis. 

Table 19.4 - Assets Measured at Fair Value on a Non-Recurring Basis

December 31, 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) $— $6 $2,241 $2,247 $— $22 $4,059 $4,081 

(1) Includes loans that are classified as held-for-investment and have an allowance for credit losses based on the fair value of the underlying collateral and held-for-sale 

loans where the fair value is below cost.

The tables below provide valuation techniques, the range, and the weighted average of significant unobservable inputs for Level 

3 assets and liabilities measured on our consolidated balance sheets at fair value on a non-recurring basis.

Table 19.5 - Quantitative Information about Non-Recurring Level 3 Fair Value Measurements

December 31, 2020

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except 

for certain unobservable 

inputs as shown) Type Range

Weighted

Average(1)

Non-recurring fair value 

measurements

Mortgage loans $2,241 

Internal model Historical sales proceeds $3,001 - $696,004 $202,539

Internal model Housing sales index 66 - 345 bps 119 bps

Median of external sources External pricing sources $59.5 - $104.0 $92.1

December 31, 2019

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except 

for certain unobservable 

inputs as shown) Type Range

Weighted

Average(1)

Non-recurring fair value 

measurements

Mortgage loans $4,059 

Internal model Historical sales proceeds $3,000 - $765,000 $186,234

Internal model Housing sales index 46 - 420 bps 112 bps

Median of external sources External pricing sources $66.5 - $105.4 $95.0

(1) Unobservable inputs were weighted primarily by the relative fair value of the financial instruments.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 272
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 19.6 - Fair Value of Financial Instruments

December 31, 2020

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 $23,889 $23,889 $— $— $— $23,889 

Securities purchased under agreements 

to resell Amortized cost 105,003 — 105,003 — — 105,003 

Investments in securities:

Available-for-sale, at fair value FV - OCI 15,367 — 13,779 1,588 — 15,367 

Trading, at fair value FV - NI 44,458 26,255 14,944 3,259 — 44,458 

Total investments in securities 59,825 26,255 28,723 4,847 — 59,825 

Mortgage loans:

Loans held by consolidated trusts 2,273,347 — 2,080,687 262,309 — 2,342,996 

Loans held by Freddie Mac 110,541 — 76,917 36,578 — 113,495 

Total mortgage loans Various(3) 2,383,888 — 2,157,604 298,887 — 2,456,491 

Derivative assets, net FV - NI 1,205 — 8,516 63 (7,374) 1,205 

Guarantee assets FV - NI 5,509 — — 5,515 — 5,515 

Non-derivative purchase commitments, 

at fair value FV - NI 158 — 246 — — 246 

Advances to lenders Amortized cost 4,162 — — 4,162 — 4,162 

Secured lending Amortized cost 1,680 — 1,427 89 — 1,516 

Total financial assets $2,585,319 $50,144 $2,301,519 $313,563 ($7,374) $2,657,852 

Financial Liabilities

Debt:

Debt securities of consolidated trusts 

held by third parties $2,308,176 $— $2,382,157 $852 $— $2,383,009 

Debt of Freddie Mac 284,370 — 286,634 4,088 — 290,722 

Total debt Various(4) 2,592,546 — 2,668,791 4,940 — 2,673,731 

Derivative liabilities, net FV - NI 954 — 9,132 16 (8,194) 954 

Guarantee obligations Amortized cost 5,050 — — 5,378 — 5,378 

Non-derivative purchase commitments, 

at fair value FV - NI 20 — 1 143 — 144 

Total financial liabilities $2,598,570 $— $2,677,924 $10,477 ($8,194) $2,680,207 

(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, 2020, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value and FV - NI were $2.4 trillion, $19.5 billion and 

$14.2 billion, respectively. 

(4) As of December 31, 2020, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.6 trillion and $2.6 billion, respectively. 

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 273
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 $— $— $— $5,189 

Securities purchased under agreements 

to resell Amortized cost 56,271 — 66,114 — (9,843) 56,271 

Investments in securities:

Available-for-sale, at fair value FV - OCI 26,174 — 22,947 3,227 — 26,174 

Trading, at fair value FV - NI 49,537 25,108 21,719 2,710 — 49,537 

Total investments in securities 75,711 25,108 44,666 5,937 — 75,711 

Mortgage loans:

Loans held by consolidated trusts 1,940,523 — 1,732,434 244,500 — 1,976,934 

Loans held by Freddie Mac 79,677 — 38,100 45,588 — 83,688 

Total mortgage loans Various(3) 2,020,200 — 1,770,534 290,088 — 2,060,622 

Derivative assets, net FV - NI 844 — 6,363 16 (5,535) 844 

Guarantee assets FV - NI 4,426 — — 4,433 — 4,433 

Non-derivative purchase commitments, 

at fair value FV - NI 81 — 90 72 — 162 

Advances to lenders Amortized cost 1,873 — — 1,873 — 1,873 

Secured lending Amortized cost 2,313 — 1,874 258 — 2,132 

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 $— $1,931,473 $1,277 $— $1,932,750 

Debt of Freddie Mac 271,330 — 282,431 3,619 (9,843) 276,207 

Total debt Various(4) 2,169,685 — 2,213,904 4,896 (9,843) 2,208,957 

Derivative liabilities, net FV - NI 372 — 5,245 37 (4,910) 372 

Guarantee obligations Amortized cost 4,292 — — 4,527 — 4,527 

Non-derivative purchase commitments, 

at fair value FV - NI 7 — 7 67 — 74 

Total financial liabilities $2,174,356 $— $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.

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. 

Multifamily Held-for-Sale Loans and Held-for-Sale Commitments

We elected the fair value option for certain multifamily loan purchase commitments and the related loans that were acquired for 

securitization. We use derivatives to economically hedge the interest rate-related fair value changes and a portion of the 

spread-related fair value changes of the multifamily commitments and loans for which we have elected the fair value option. 

These loans are classified as held-for-sale loans on our consolidated balance sheets to reflect our intent to sell in the future and 

are measured at fair value on a recurring basis, with subsequent gains or losses related to changes in fair value (net of accrued 

interest income) reported in investment gains (losses), net, on our consolidated statements of comprehensive income. We 

elected to report separately the portion of the changes in fair value of the loans related to accrued interest from the remaining 

changes in fair value. Related interest income continues to be reported, based on the stated terms of the loans, as interest 

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 274
income on our consolidated statements of comprehensive income. 

Debt Securities of Consolidated Trusts Held by Third Parties and Debt of Freddie 

Mac

We elected the fair value option on debt that contains embedded derivatives, primarily certain STACR debt notes. Fair value 

changes are recorded in investment gains (losses), net, on our consolidated statements of comprehensive income. For debt 

where we have elected the fair value option, upfront costs and fees are recognized in earnings as incurred and not deferred. 

Related interest expense continues to be reported as interest expense based on the stated terms of the debt securities.

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 debt of 

Freddie Mac held by third parties with a fair value of $173 million and $146 million and multifamily held-for-sale loan purchase 

commitments with a fair value of $157 million and $74 million, as of December 31, 2020 and December 31, 2019, respectively.

Table 19.7 - Difference between Fair Value and UPB for Certain Financial Instruments with Fair Value Option Elected 

December 31, 2020 December 31, 2019

(In millions)

Multifamily

Held-For-Sale

 Loans

Debt of Freddie 

Mac -

Long Term

Debt Securities of 

Consolidated 

Trusts Held by 

Third Parties

Multifamily

Held-For-Sale

 Loans

Debt of Freddie 

Mac -

Long Term

Debt Securities of 

Consolidated 

Trusts Held by 

Third Parties

Fair value $14,199 $2,216 $203 $15,035 $3,589 $203 

UPB 13,400 2,189 200 14,444 3,329 200 

Difference $799 $27 $3 $591 $260 $3 

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) on our consolidated statements of 

comprehensive income, related to items for which we have elected the fair value option. 

Table 19.8 - Changes in Fair Value under the Fair Value Option Election

December 31, 2020 December 31, 2019 December 31, 2018

(In millions) Gains (Losses) 

Multifamily held-for-sale loans $1,247 $853 ($745) 

Multifamily held-for-sale loan purchase commitments 2,288 1,913 777 

Debt of Freddie Mac - long term 335 136 138 

Debt securities of consolidated trusts held by third parties 4 (4) 5 

Changes in fair value attributable to instrument-specific credit risk were not material for the years ended December 31, 2020, 

2019 or 2018 for any assets or liabilities for which we elected the fair value option.

Financial Statements Notes to the Consolidated Financial Statements | Note 19

FREDDIE MAC | 2020 Form 10-K 275
NOTE 20

Legal Contingencies

We are involved as a party in a variety of legal and regulatory proceedings arising from time to time in the ordinary course of 

business including, among other things, contractual disputes, personal injury claims, employment-related litigation, and other 

legal proceedings incidental to our business. We are frequently involved, directly or indirectly, in litigation involving mortgage 

foreclosures. From time to time, we are also involved in proceedings arising from our termination of a seller's or servicer's 

eligibility to sell loans to, and/or service loans for, us. In these cases, the former seller or servicer sometimes seeks damages 

against us for wrongful termination under a variety of legal theories. In addition, we are sometimes sued in connection with the 

origination or servicing of loans. These suits typically involve claims alleging wrongful actions of sellers and servicers. Our 

contracts with our sellers and servicers generally provide for indemnification of Freddie Mac against liability arising from sellers' 

and servicers' wrongful actions with respect to loans sold to or serviced for Freddie Mac.

Litigation and claims resolution are subject to many uncertainties and are not susceptible to accurate prediction. In accordance 

with the accounting guidance for contingencies, we reserve for litigation claims and assessments asserted or threatened 

against us when a loss is probable (as defined in such guidance) and the amount of the loss can be reasonably estimated.

Putative Securities Class Action Lawsuit: Ohio Public Employees 

Retirement System vs. Freddie Mac, Syron, Et Al.

This putative securities class action lawsuit was filed against Freddie Mac and certain former officers on January 18, 2008 in the 

U.S. District Court for the Northern District of Ohio purportedly on behalf of a class of purchasers of Freddie Mac stock from 

August 1, 2006 through November 20, 2007. FHFA later intervened as Conservator, and the plaintiff amended its complaint on 

several occasions. The plaintiff alleged, among other things, that the defendants violated federal securities laws by making false 

and misleading statements concerning our business, risk management, and the procedures we put into place to protect the 

company from problems in the mortgage industry. The plaintiff seeks unspecified damages and interest, and reasonable costs 

and expenses, including attorney and expert fees.

In October 2013, defendants filed motions to dismiss the complaint. In October 2014, the District Court granted defendants' 

motions and dismissed the case in its entirety against all defendants, with prejudice. In November 2014, plaintiff filed a notice of 

appeal in the U.S. Court of Appeals for the Sixth Circuit. On July 20, 2016, the Sixth Circuit reversed the District Court's 

dismissal and remanded the case to the District Court for further proceedings. On August 14, 2018, the District Court denied 

the plaintiff's motion for class certification. On January 23, 2019, the Sixth Circuit denied plaintiff's petition for leave to appeal 

that decision. On September 17, 2020, the District Court granted a request from the plaintiff for summary judgment and entered 

final judgment in favor of Freddie Mac and the other defendants. On October 9, 2020, the plaintiff filed a notice of appeal with 

the Sixth Circuit. On January 27, 2021, Freddie Mac filed a motion to dismiss the appeal.

At present, it is not possible for us to predict the probable outcome of this lawsuit or any potential effect on our business, financial 

condition, liquidity, or results of operations. In addition, we are unable to reasonably estimate the possible loss or range of 

possible loss in the event of an adverse judgment in the foregoing matter due to the following factors, among others: the inherent 

uncertainty of the appellate process, and the inherent uncertainty of pre-trial litigation in the event the case is ultimately 

remanded to the District Court in whole or in part. In particular, while the District Court denied plaintiff's motion for class 

certification, this decision and the entry of final judgment in defendants’ favor have been appealed. 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 March 14, 2013, Freddie Mac filed a lawsuit in the U.S. District Court for the Eastern District of Virginia against the British 

Bankers Association and the 16 U.S. Dollar LIBOR panel banks and a number of their affiliates. The case was subsequently 

transferred to the U.S. District Court for the Southern District of New York. The complaint alleges, among other things, that the 

defendants fraudulently and collusively depressed LIBOR, a benchmark interest rate indexed to trillions of dollars of financial 

products, and asserts claims for antitrust violations, breach of contract, tortious interference with contract, and fraud. Freddie 

Mac filed an amended complaint in July 2013, and a second amended complaint in October 2014. In August 2015, the District 

Court dismissed the portion of our claim related to antitrust violations and fraud and we filed a motion for reconsideration. On 

March 31, 2016, the District Court granted a portion of our motion, finding personal jurisdiction over certain defendants, and 

denied the portion of our motion with respect to statutes of limitation for our fraud claims. Subsequently, in a related case, the 

U.S. Court of Appeals for the Second Circuit reversed the District Court's dismissal of certain plaintiffs' antitrust claims and 

remanded the case to the District Court for consideration of whether, among other things, the plaintiffs are "efficient enforcers" 

of the antitrust laws. 

Financial Statements Notes to the Consolidated Financial Statements | Note 20 

FREDDIE MAC | 2020 Form 10-K 276
On December 20, 2016, after briefing and argument on the defendants' renewed motions to dismiss on personal jurisdiction 

and efficient enforcer grounds, the District Court denied defendants' motions in part and granted them in part. The District 

Court held that Freddie Mac is an efficient enforcer of the antitrust laws, but dismissed on personal jurisdiction grounds Freddie 

Mac's antitrust claims against all defendants except HSBC USA, N.A. Then, in an order issued February 2, 2017, the District 

Court effectively dismissed Freddie Mac's remaining antitrust claim against HSBC USA, N.A. At present, Freddie Mac's breach 

of contract actions against Bank of America, N.A., Barclays Bank, Citibank, N.A., Credit Suisse, Deutsche Bank, Royal Bank of 

Scotland, and UBS AG are its only claims remaining in the District Court.

On February 23, 2018, the Second Circuit reversed the District Court's dismissal of certain plaintiffs' state law fraud and unjust 

enrichment claims on statutes of limitations grounds. While Freddie Mac was not a party to the appeal, this decision could have 

the effect of reinstating Freddie Mac's fraud claims against the above-named defendants. The Second Circuit also reversed 

certain aspects of the District Court's personal jurisdiction rulings and remanded with instructions to allow the named appellant 

to amend its complaint. The District Court subsequently granted in part Freddie Mac's motion for leave to amend its complaint, 

and Freddie Mac amended its complaint on April 16, 2019.

Litigation Concerning the Purchase Agreement

Since July 2013, a number of lawsuits have been filed against us concerning the August 2012 amendment to the Purchase 

Agreement, which created the net worth sweep dividend provisions of the senior preferred stock. The plaintiffs in the lawsuits 

allege that they are holders of common stock and/or junior preferred stock issued by Freddie Mac and Fannie Mae. (For 

purposes of this discussion, junior preferred stock refers to the various series of preferred stock of Freddie Mac and Fannie 

Mae other than the senior preferred stock issued to Treasury.) It is possible that similar lawsuits will be filed in the future. The 

lawsuits against us are described below.

Litigation in the U.S. District Court for the District of Columbia

In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations. This case is 

the result of the consolidation of three putative class action lawsuits: Cacciapelle and Bareiss vs. Federal National Mortgage 

Association, Federal Home Loan Mortgage Corporation and FHFA, filed on July 29, 2013; American European Insurance 

Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and FHFA, filed on July 30, 

2013; and Marneu Holdings, Co. vs. FHFA, Treasury, Federal National Mortgage Association and Federal Home Loan Mortgage 

Corporation, filed on September 18, 2013. (The Marneu case was also filed as a shareholder derivative lawsuit.) A consolidated 

amended complaint was filed in December 2013. In the consolidated amended complaint, plaintiffs alleged, among other items, 

that the August 2012 amendment to the Purchase Agreement breached Freddie Mac's and Fannie Mae's respective contracts 

with the holders of junior preferred stock and common stock and the covenant of good faith and fair dealing inherent in such 

contracts. Plaintiffs sought unspecified damages, equitable and injunctive relief, and costs and expenses, including attorney 

and expert fees. 

The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf of a class of purchasers 

of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock prior to, and as of, August 17, 2012. The Marneu 

lawsuit was filed purportedly on behalf of a class of purchasers of junior preferred stock and purchasers of common stock 

issued by Freddie Mac or Fannie Mae over a not-yet-defined period of time. 

Arrowood Indemnity Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage 

Corporation, FHFA, and Treasury. This case was filed on September 20, 2013. The allegations and demands made by 

plaintiffs in this case were generally similar to those made by the plaintiffs in the In re Fannie Mae/Freddie Mac Senior Preferred 

Stock Purchase Agreement Class Action Litigations case described above. Plaintiffs in the Arrowood lawsuit also requested 

that, if injunctive relief were not granted, the Arrowood plaintiffs be awarded damages against the defendants in an amount to 

be determined including, but not limited to, the aggregate par value of their junior preferred stock, the total of which they stated 

to be approximately $42 million. 

American European Insurance Company, Cacciapelle, and Miller vs. Treasury and FHFA. This case was filed as a 

shareholder derivative lawsuit, purportedly on behalf of Freddie Mac as a nominal defendant, on July 30, 2014. The complaint 

alleged that, through the August 2012 amendment to the Purchase Agreement, Treasury and FHFA breached their respective 

fiduciary duties to Freddie Mac, causing Freddie Mac to suffer damages. The plaintiffs asked that Freddie Mac be awarded 

compensatory damages and disgorgement, as well as attorneys' fees, costs, and other expenses. 

FHFA, joined by Freddie Mac and Fannie Mae, moved to dismiss the In re Fannie Mae/Freddie Mac Senior Preferred Stock 

Purchase Agreement Class Action Litigations case and the other related cases in January 2014. Treasury filed a motion to 

dismiss the same day. In September 2014, the District Court granted the motions and dismissed the plaintiffs' claims. All 

plaintiffs appealed that decision, and on February 21, 2017, the U.S. Court of Appeals for the District of Columbia Circuit 

affirmed in part and remanded in part the decision granting the motions to dismiss. The DC Circuit affirmed dismissal of all 

claims except certain claims seeking monetary damages for breach of contract and breach of implied duty of good faith and 

fair dealing. In March 2017, certain institutional and class plaintiffs filed petitions for panel rehearing with respect to certain 

Financial Statements Notes to the Consolidated Financial Statements | Note 20 

FREDDIE MAC | 2020 Form 10-K 277
claims. On July 17, 2017, the DC Circuit granted the petitions for rehearing and issued a modified decision, which permitted the 

institutional plaintiffs to pursue the breach of contract and breach of implied duty of good faith and fair dealing claims that had 

been remanded. The DC Circuit also removed language related to the standard to be applied to the implied duty claims, leaving 

that issue for the District Court to determine on remand. On October 16, 2017, certain institutional and class plaintiffs filed 

petitions for a writ of certiorari in the U.S. Supreme Court challenging whether HERA's prohibition on injunctive relief against 

FHFA bars judicial review of the net worth sweep dividend provisions of the August 2012 amendment to the Purchase 

Agreement, as well as whether HERA bars shareholders from pursuing derivative litigation where they allege the conservator 

faces a conflict of interest. The Supreme Court denied the petitions on February 20, 2018. On November 1, 2017, certain 

institutional and class plaintiffs and plaintiffs in another case in which Freddie Mac was not originally a defendant, Fairholme 

Funds, Inc. v. FHFA, Treasury, and Federal National Mortgage Association, filed proposed amended complaints in the District 

Court. Each of the proposed amended complaints names Freddie Mac as a defendant for breach of contract and breach of the 

covenant of good faith and fair dealing claims as well as for new claims alleging breach of fiduciary duty and breach of Virginia 

corporate law. On January 10, 2018, FHFA, Freddie Mac, and Fannie Mae moved to dismiss the amended complaints. On 

September 28, 2018, the District Court dismissed all of the claims except those alleging breach of the implied covenant of good 

faith and fair dealing. Discovery is ongoing.

Litigation in the U.S. Court of Federal Claims

Reid and Fisher vs. the United States of America and Federal Home Loan Mortgage Corporation. This case was filed 

as a derivative lawsuit, purportedly on behalf of Freddie Mac as a "nominal" defendant, on February 26, 2014. The complaint 

alleges, among other items, that the net worth sweep dividend provisions of the senior preferred stock constitute an unlawful 

taking of private property for public use without just compensation. The plaintiffs ask that Freddie Mac be awarded just 

compensation for the U.S. government's alleged taking of its property, attorneys' fees, costs, and other expenses. On March 8, 

2018, the plaintiffs filed an amended complaint under seal, with a redacted copy filed on November 14, 2018. The United States 

filed a motion to dismiss on August 1, 2018 and an amended motion to dismiss on October 1, 2018. The court denied the 

motion to dismiss on May 8, 2020 and granted plaintiffs' motion to certify the decisions for interlocutory appeal on June 11, 

2020. The Federal Circuit denied the petition for interlocutory appeal on August 21, 2020.

Fairholme Funds, Inc., et al. vs. the United States of America, Federal National Mortgage Association, and 

Federal Home Loan Mortgage Corporation. This case was originally filed on July 9, 2013 against the United States of 

America. On March 8, 2018, plaintiffs filed an amended complaint under seal. A redacted public version was filed on May 11, 

2018 and adds Freddie Mac and Fannie Mae as nominal defendants. The amended complaint alleges, among other items, that 

the net worth sweep dividend provisions of the senior preferred stock constitute an unlawful taking or exaction of private 

property for public use without just compensation, and that by enacting the net worth sweep, the government breached the 

fiduciary duty it owed to Freddie Mac and Fannie Mae, and implied-in-fact contracts between the United States on the one 

hand and Freddie Mac and Fannie Mae on the other. The plaintiffs ask that plaintiffs, Freddie Mac, and Fannie Mae be awarded 

(1) just compensation for the government's alleged taking or exaction of their property, (2) damages for the government's 

breach of fiduciary duties, and (3) damages for the government's breach of the alleged implied-in-fact contracts. In addition, 

plaintiffs seek pre- and post-judgment 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 their property or damages for the illegal 

exaction; damages for the government's breach of fiduciary duties; and damages for the government's breach of the alleged 

implied-in-fact contracts. The proceedings have been stayed pending the appeals in the Fairholme Funds matter.

Financial Statements Notes to the Consolidated Financial Statements | Note 20 

FREDDIE MAC | 2020 Form 10-K 278
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 Consolidated Financial Statements | Note 20 

FREDDIE MAC | 2020 Form 10-K 279
NOTE 21

Regulatory Capital

In October 2008, FHFA announced that it was suspending capital classification of us during conservatorship in light of the 

Purchase Agreement. FHFA continues to monitor our capital levels, but the existing statutory and FHFA regulatory capital 

requirements are not binding during conservatorship. We continue to provide quarterly submissions to FHFA on minimum 

capital.

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 risk-based CCF, a capital system with detailed formulae provided by 

FHFA. In November 2020, FHFA released a final rule that establishes the ERCF as a new regulatory capital framework for 

Freddie Mac and Fannie Mae. The ERCF, which will become effective on February 16, 2021, has a transition period for 

compliance. In general, the compliance date for the regulatory capital requirements will be the later of the date of termination of 

our conservatorship and any later compliance date provided in a consent order or other transition order; however, we may 

begin implementing the ERCF sooner, upon the direction of FHFA or otherwise. The ERCF specifies substantial capital 

requirements and could affect our business strategies, perhaps significantly.

As the ERCF was not yet in effect during 2020, we continued to use the guidance issued to us by FHFA under the CCF to 

evaluate our transactions and businesses.

Regulatory Capital Standards

The GSE Act established minimum, critical, and risk-based capital standards for us. However, per guidance received from 

FHFA, we no longer are required to submit risk-based capital reports to FHFA.

Prior to our entry into conservatorship, those standards determined the amounts of core capital that we were to maintain to 

meet regulatory capital requirements. Core capital consisted of the par value of outstanding common stock (common stock 

issued less common stock held in treasury), the par or stated value of outstanding non-cumulative, perpetual preferred stock, 

additional paid-in capital, and retained earnings (accumulated deficit), as determined in accordance with GAAP.

Minimum Capital

The minimum capital standard required us to hold an amount of core capital that was generally equal to the sum of 2.50% of 

aggregate on-balance sheet assets and approximately 0.45% of the sum of our guaranteed securities held by third parties and 

other aggregate off-balance sheet obligations.

Pursuant to regulatory guidance from FHFA, our minimum capital requirement was not affected by adoption of amendments to 

the accounting guidance for transfers of financial assets and consolidation of VIEs effective January 1, 2010. Specifically, upon 

adoption of these amendments, FHFA directed us, for purposes of minimum capital, to continue reporting guaranteed 

securities held by third parties using a 0.45% capital requirement. FHFA reserves the authority under the GSE Act to raise the 

minimum capital requirement for any of our assets or activities.

Critical Capital

The critical capital standard required us to hold an amount of core capital that was generally equal to the sum of 1.25% of 

aggregate on-balance sheet assets and approximately 0.25% of the sum of our guaranteed securities held by third parties and 

other aggregate off-balance sheet obligations.

Performance Against Regulatory Capital Standards

The table below summarizes our minimum capital requirements and deficits and net worth. 

Table 21.1 - Net Worth and Minimum Capital 

(In millions) December 31, 2020 December 31, 2019

GAAP net worth (deficit) $16,413 $9,122 

Core capital (deficit)(1)(2) (56,878) (63,964) 

Less: Minimum capital requirement(1) 22,694 19,123 

Minimum capital surplus (deficit)(1) ($79,572) ($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.

The Purchase Agreement provides that, if FHFA determines as of quarter end that our liabilities have exceeded our assets 

Financial Statements Notes to the Consolidated Financial Statements | Note 21

FREDDIE MAC | 2020 Form 10-K 280
under GAAP, Treasury will contribute funds to us in an amount at least equal to the difference between such liabilities and 

assets.

Under the GSE Act, FHFA must place us into receivership if FHFA determines that our assets are and have been less than our 

obligations for a period of 60 days. FHFA has notified us that the measurement period for any mandatory receivership 

determination with respect to our assets and obligations would commence no earlier than the SEC public filing deadline for our 

quarterly or annual financial statements and would continue for 60 calendar days after that date. FHFA has advised us that, if, 

during that 60-day period, we receive funds from Treasury in an amount at least equal to the deficiency amount under the 

Purchase Agreement, the Director of FHFA will not make a mandatory receivership determination. If funding has been 

requested under the Purchase Agreement to address a deficit in our net worth, and Treasury is unable to provide us with such 

funding within the 60-day period specified by FHFA, FHFA would be required to place us into receivership if our assets remain 

less than our obligations during that 60-day period.

At December 31, 2020, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury 

under the Purchase Agreement. As of December 31, 2020, our aggregate funding received from Treasury under the Purchase 

Agreement was $71.6 billion. This aggregate funding amount does not include the initial $1.0 billion liquidation preference of 

senior preferred stock that we issued to Treasury in September 2008 as an initial commitment fee and for which no cash was 

received, the additional $3.0 billion increase in the liquidation preference pursuant to the December 2017 Letter Agreement, nor 

the increases in liquidation preference pursuant to the September 2019 and January 2021 Letter Agreements that are not drawrelated.

Financial Statements Notes to the Consolidated Financial Statements | Note 21

FREDDIE MAC | 2020 Form 10-K 281
Controls and Procedures

MANAGEMENT'S REPORT ON INTERNAL CONTROL 

OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is 

defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed by, or under the 

supervision of, our Principal Executive Officer and Chief Financial Officer and effected by the Board of Directors, management, 

and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of 

financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It is a 

process that involves human diligence and compliance and is, therefore, subject to lapses in judgment and breakdowns 

resulting from human error. It also can be circumvented by collusion or improper management override. Because of its 

limitations, there is a risk that internal control over financial reporting may not prevent or detect, on a timely basis, errors that 

could cause a material misstatement of the financial statements.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making our 

assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or 

COSO, in Internal Control — Integrated Framework (2013 Framework). A material weakness is a deficiency, or a combination of 

deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement 

of the company's annual or interim financial statements will not be prevented or detected on a timely basis by a company's 

internal controls. Based on our assessment, we identified a material weakness related to our inability to update our disclosure 

controls and procedures in a manner that adequately ensures the accumulation and communication to management of 

information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws, including 

disclosures affecting our consolidated financial statements.

We have been under conservatorship of FHFA since September 6, 2008. FHFA is an independent agency that currently 

functions as both our Conservator and our regulator with respect to our safety, soundness, and mission. Because we are in 

conservatorship, some of the information that we may need to meet our disclosure obligations may be solely within the 

knowledge of FHFA. As our Conservator, FHFA has the power to take actions without our knowledge that could be material to 

investors and could significantly affect our financial performance. Although we and FHFA have attempted to design and 

implement disclosure policies and procedures to account for the conservatorship and accomplish the same objectives as 

disclosure controls and procedures for a typical reporting company, there are inherent structural limitations on our ability to 

design, implement, test, or operate effective disclosure controls and procedures under the circumstances of conservatorship. 

As our Conservator and regulator, FHFA is limited in its ability to design and implement a complete set of disclosure controls 

and procedures relating to us, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated 

entity, we are limited in our ability to design, implement, operate, and test the controls and procedures for which FHFA is 

responsible. For example, FHFA may formulate certain intentions with respect to the conduct of our business that, if known to 

management, would require consideration for disclosure or reflection in our financial statements, but that FHFA, for regulatory 

reasons, may be constrained from communicating to management. As a result of these considerations, we have concluded that 

this control deficiency constitutes a material weakness in our internal control over financial reporting.

Because of this material weakness, we have concluded that our internal control over financial reporting was not effective as of 

December 31, 2020 based on the COSO criteria (2013 Framework). PricewaterhouseCoopers LLP, an independent registered 

public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2020 and 

also determined that our internal control over financial reporting was not effective. PricewaterhouseCoopers LLP's report 

appears in Financial Statements — Report of Independent Registered Public Accounting Firm.

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 Principal 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 

Controls and Procedures

FREDDIE MAC | 2020 Form 10-K 282
reasonable assurance of achieving the desired control objectives, and we must apply judgment in implementing possible 

controls and procedures.

Management, including the company's Principal Executive Officer and Chief Financial Officer, conducted an evaluation of the 

effectiveness of our disclosure controls and procedures as of December 31, 2020. As a result of management's evaluation, our 

Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective 

as of December 31, 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. As discussed above, we consider this situation to be a material weakness in our internal control over 

financial reporting. Based on discussions with FHFA and the structural nature of this continuing weakness, we believe it is likely 

that we will not remediate this material weakness while we are under conservatorship.

MITIGATING ACTIONS RELATED TO THE MATERIAL 

WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL 

REPORTING 

As described above under Management's Report on Internal Control Over Financial Reporting, we have one material 

weakness in internal control over financial reporting as of December 31, 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 Form 10-K, and engage in 

discussions with us regarding issues associated with the information contained in those filings. Prior to filing this Form 10-

K, FHFA provided us with a written acknowledgment that it had reviewed the Form 10-K, was not aware of any material 

misstatements or omissions in the Form 10-K, and had no objection to our filing the Form 10-K.

n	 The Director of FHFA is in frequent communication with our Chief Executive Officer (or if that office is vacant, with our 

President), 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 group meet frequently with our senior financial executives regarding our 

accounting policies, practices, and procedures.

In view of our mitigating actions related to this material weakness, we believe that our consolidated financial statements for the 

year ended December 31, 2020 have been prepared in conformity with GAAP.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL 

REPORTING DURING THE QUARTER ENDED 

DECEMBER 31, 2020

We evaluated the changes in our internal control over financial reporting that occurred during the quarter ended December 31, 

2020 and concluded that there were no changes that materially affected, or are reasonably likely to materially affect, our internal 

control over financial reporting.

Controls and Procedures

FREDDIE MAC | 2020 Form 10-K 283
Directors, Corporate Governance, and Executive 

Officers

DIRECTORS

Election of Directors

As Conservator, FHFA determines the size of the Board and the scope of its authority. At the start of the conservatorship, FHFA 

determined that the Board is to have a Non-Executive Chair and is to consist of a minimum of 9 and not more than 13 directors. 

FHFA determined that the CEO (when that office is filled) is the only corporate officer allowed to serve as a member of the 

Board. The Board currently has ten members. 

In addition, because FHFA as Conservator has succeeded to the rights of all stockholders of the company, the Conservator 

elects the directors. Accordingly, we will not solicit proxies, distribute a proxy statement to stockholders, or hold an annual 

meeting of stockholders to elect directors in 2021. Instead, the Conservator has elected directors by written consent in lieu of 

an annual meeting. Annually, the Board identifies director nominees for the Conservator to consider for election by written 

consent. When there is a vacancy on the Board, the Board may exercise the authority provided to it by the Conservator to fill 

such vacancy, subject to review by the Conservator.

On February 9, 2021, the Conservator executed a written consent, effective as of February 9, 2021, re-electing the ten directors 

submitted by the company for election as members of our Board. The individuals re-elected as directors by the Conservator are 

listed below:

n Mark H. Bloom n Mark B. Grier n Sara Mathew

n Kathleen L. Casey n Christopher E. Herbert n Allan P. Merrill

n Lance F. Drummond n Grace A. Huebscher n Saiyid T. Naqvi

n Aleem Gillani

The company did not submit for re-election, and FHFA did not re-elect, (i) David M. Brickman, our former CEO, who left the 

Board on January 8, 2021, the effective date of his resignation, and (ii) Paul T. Schumacher, who left the Board on February 9, 

2021, the effective date of the Conservator's written consent.

See Director Biographical Information for information about each of our current directors. The terms of the directors reelected by FHFA will end on the date of the next annual meeting of our stockholders or the effective date of the Conservator's 

next election of directors by written consent, whichever occurs first.

Director Criteria, Diversity, Qualifications, Experience, and Tenure

Our Board seeks candidates for directorship who have achieved a high level of stature, success, and respect in their principal 

occupations. 

Each of our current directors was selected as a candidate because of his or her character, judgment, experience, and expertise. 

Their selection was consistent with our Charter and FHFA's rule regarding the Responsibilities of Boards of Directors, 

Corporate Practices and Corporate Governance Matters, or the Corporate Governance Rule. The factors considered in 

determining whether candidates meet our criteria include the knowledge directors would have, as a group, in the areas of 

business, finance, accounting, risk management, technology (including cybersecurity), public policy, mortgage lending, real 

estate, low-income housing, homebuilding, regulation of financial institutions, and any other areas that may be relevant to our 

safe and sound operation. We also considered whether a candidate's other commitments, including the number of other board 

memberships held by the candidate, would permit the candidate to devote sufficient time to the candidate's duties and 

responsibilities as a director. Our Charter provides that our Board have at least one person from each of the homebuilding, 

mortgage lending, and real estate industries and at least one person from an organization representing community or consumer 

interests or one person who has demonstrated a career commitment to the provision of housing for low-income households. 

FHFA's rule requiring us to ensure, to the maximum extent possible in balance with financially safe and sound business 

practices, the diversity and inclusion of minorities, women, and individuals with disabilities generally applies to all activities, 

including in our process of nominating directors. In addition, the Board has adopted a policy with regard to the consideration of 

diversity in identifying director nominees and candidates. As articulated in our Corporate Governance Guidelines, or the 

Guidelines, the Board seeks to have a diversity of talent, perspectives, expertise, experience, and cultures among its members 

by including minorities, women, and individuals with disabilities. The Guidelines explain that, when identifying director 

Directors, Corporate Governance, and Executive Officers Directors

FREDDIE MAC | 2020 Form 10-K 284
nominees, the Nominating and Governance Committee considers, among other factors, the talents and skills then available on 

the Board, the continued involvement of incumbent directors in business and professional activities relevant to us, the skills and 

experience that should be represented on the Board, the availability of other individuals with desirable skills to join the Board, 

and the desire to maintain a diverse Board.

Our directors have a variety of backgrounds and overall experience. Nearly half of our Board are women, minorities, or both. 

Our Non-Executive Chair is a woman, and women and minorities serve in leadership positions as the Chairs of the Audit, 

Compensation and Human Capital (CHC), Executive, Nominating and Governance, and Risk Committees. Our Board also 

values having a balance of longer-serving directors with institutional knowledge and newer directors that bring fresh 

perspectives and ideas. The charts below provide information on the composition of our Board by demographic background 

and Board tenure. 

Gender

7

3

Men

Women

Race/Ethnicity

6

1

3

White

African American

Asian

Tenure

4

3

3

< 2 Years

2 < 5 Years

> 5 Years

Age

4

5

1

50s

60s

70s

Director Biographical Information

The following summarizes each director's Board service, experience, qualifications, attributes, and/or skills that led to his or her 

selection as a director, and provides other biographical information, as of February 9, 2021. 

Mark H. Bloom

Age Director Since Freddie Mac Committees Public Company Directorships

56 November 2019 • Compensation and Human Capital None

• Risk

Mr. Bloom is an experienced executive who has held a variety of leadership positions at the intersection of finance, technology, 

and risk management. He brings to the Board technological expertise to drive efficiency and enhance the customer experience.

Experience and Qualifications

n Global Chief Technology Officer and a member of the Management Board of Aegon N.V. (2016-present)

n Various positions at Citigroup, Inc., including Managing Director, Head of Global Consumer Technology Delivery Services 

(2007-2016)

n Various positions at JPMorgan Chase & Company, including Senior Vice President, Chase Home Financial Technology 

(2001-2007)

n Senior Vice President, eBusiness Solutions at CACI International, Inc. (1999-2001)

Kathleen L. Casey

Age Director Since Freddie Mac Committees Public Company Directorships

54 October 2019 • Audit • None

• Nominating and Governance

Ms. Casey is an experienced leader with extensive financial regulatory policy experience. She brings high-level regulatory and 

financial oversight experience as well as a deep understanding of financial markets and governance to the Board.

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Experience and Qualifications

n Senior Advisor with Patomak Global Partners, a financial services consulting firm (2012-present)

n Member of the Board of HSBC Holdings Plc (2014-2020), including service during her tenure on the Group Audit, Financial 

System Vulnerabilities, Nominations & Corporate Governance, and Group Risk Committees

n Commissioner of the Securities and Exchange Commission (2006-2011)

n Various roles with the U.S. Senate, including Staff Director and Counsel of the Senate Banking, Housing, and Urban Affairs 

Committee and Staff Director of the Senate Banking Committee's Subcommittee on Financial Institutions and Regulatory 

Relief (1993-2006)

n Member of the Financial Accounting Foundation Board of Trustees (2018-present); Chair (2020-present)

n Member of the Board of Sepio Systems Inc. (2020-present)

n Member of the International Valuation Standards Council Board of Trustees (2016-present)

n Member of the Library of Congress Trust Fund Board (2011-present)

n Chair of the Alternative Investment Management Association Council (2012-2016)

Lance F. Drummond

Age Director Since Freddie Mac Committees Public Company Directorships

66 July 2015 • Audit • United Community Banks, Inc.

• Compensation and Human Capital, Chair

• Executive

Mr. Drummond is a senior business leader with extensive experience, specializing in business transforming strategy 

development and execution, operations, technology, and process re-engineering.

Experience and Qualifications

n Executive in Residence, Christopher Newport University (2015-2017)

n Executive Vice President of Operations and Technology of TD Canada Trust (2011-2014)

n Executive Vice President of Human Resources and Shared Services of Fiserv Inc. (2009-2011)

n Senior Vice President and Supply Chain Executive, Service and Fulfillment Executive for Global Technology and 

Operations, and eCommerce and ATM Executive of Bank of America (2002-2008)

n Various positions with Eastman Kodak Company, including Chief Operating Officer and Corporate Vice President of Kodak 

Professional Division (1976-2002)

n Member of the Board and Executive, Risk, and Talent & Compensation Committees and Chair of the Nominating and 

Governance Committee of United Community Banks, Inc. (2018-present)

n Member of the Board of AvidXchange (2020-present)

n Member of the Board and Management Compensation Committee and Chair of the Audit Committee of the Financial 

Industry Regulatory Authority (2018-present)

n Member of the Board and Audit Committee of CurAegis Technologies, Inc. (2018-2020)

Aleem Gillani

Age Director Since Freddie Mac Committees Public Company Directorships

58 January 2019 • Audit, Chair None 

• Compensation and Human Capital 

• Executive

Mr. Gillani is an executive with extensive experience at sophisticated financial institutions. He brings a blend of industry, 

financial, and risk management experience to the Board. 

Experience and Qualifications

n Chief Financial Officer and Corporate Executive Vice President of SunTrust Banks, Inc. (2011-2018)

n Executive Vice President and Corporate Treasurer of SunTrust Banks, Inc. (2010-2011)

n Senior Vice President and Chief Market Risk Officer of SunTrust Banks, Inc. (2007-2010)

n Senior Vice President and Chief Market Risk Officer of PNC Financial Services Group, Inc. (2004-2007)

Directors, Corporate Governance, and Executive Officers Directors

FREDDIE MAC | 2020 Form 10-K 286
n Chief Market Risk Officer of BankBoston and FleetBoston Corp. (1996-2004)

n Member of the Board of SunTrust Robinson Humphrey (2011-2018)

n Founding Chair of the Market Risk Council for the Risk Management Association (1998)

Mark B. Grier

Age Director Since Freddie Mac Committees Public Company Directorships

68 February 2020 • Nominating and Governance None

• Risk

Mr. Grier is an executive with decades of finance, risk, and capital markets experience and contributes his deep expertise in 

capital management to the Board. 

Experience and Qualifications

n Various positions with Prudential Financial, Inc., including Vice Chairman, Member of the Office of the Chairman, and Chief 

Financial Officer (1995-2019)

n Various positions with The Chase Manhattan Corporation and its predecessors, including Executive Vice President, CoHead, Global Markets and Executive Vice President, Global Risk Management (1978-1995)

n Chair of the Board of the Global Impact Investing Network (2017-present)

n Member of the Board of Trustees of Eisenhower Fellowships (2013-present)

n Member of the Board of Achieve (2009-2020); Chair (2014-2020)

n Member of the Board of Trustees of the Tragedy Assistance Program for Survivors (2013-2020)

n Member of the Board of Directors of Prudential Financial, Inc. (2008-2019)

Christopher E. Herbert 

Age Director Since Freddie Mac Committees Public Company Directorships

60 March 2018 • Compensation and Human Capital None

• Risk

Mr. Herbert is an experienced leader in the governmental and educational sectors, with in-depth knowledge of housing policy, 

including low-income housing, and urban development, including the financial and demographic dimensions of home 

ownership.

Experience and Qualifications

n Managing Director for Harvard University's Joint Center for Housing Studies and Lecturer in Urban Planning and Design at 

the Harvard Graduate School of Design (2015-present)

n Research Director for Harvard University's Joint Center for Housing Studies (2010-2014)

n Senior Associate at Abt Associates, Inc. (1997-2010)

n Member of the Board of the Homeownership Preservation Foundation (2011-2019)

n Member of the Research Advisory Council for the Center for Responsible Lending (2006-2019)

n Member of the Board of GreenPath Financial Wellness (2017-2019)

n Member of the Federal Reserve Bank of Boston's Community Development Research Advisory Council (2014-2016)

Grace A. Huebscher

Age Director Since Freddie Mac Committees Public Company Directorships

61 December 2017 • Executive None

• Nominating and Governance, Chair

• Risk

Ms. Huebscher is an executive with extensive experience in capital markets and real estate. She brings to the Board deep 

multifamily industry knowledge, entrepreneurship, and business savvy.

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FREDDIE MAC | 2020 Form 10-K 287
Experience and Qualifications

n Advisor to Capital One Commercial Bank (2017)

n President of Capital One Multifamily Finance, LLC (2013-2017)

n Co-Founder and Chief Executive Officer of Beech Street Capital, LLC (2009-2013)

n Various positions with Fannie Mae, including Vice President, Capital Markets (1997-2009)

n Member of the Board of The Kenyon Review (1998-present)

n Member of the Commercial Board of Governors of the Mortgage Bankers Association (2014-2017)

Sara Mathew

Age Director Since Freddie Mac Committees Public Company Directorships

65 December 2013 • Executive, Chair • NextGen Acquisition Corporation

• Reckitt Benckiser Group plc

• State Street Corporation

Ms. Mathew is an executive with global financial and general management experience. Ms. Mathew's extensive business, 

financial, and management experience, and her public company board and audit committee experience, enable her to 

contribute to the Board's oversight of our internal control over financial reporting and compliance matters. 

Experience and Qualifications

n Various positions with Dun & Bradstreet Corporation (2001-2013), including Chairman and Chief Executive Officer 

(2010-2013); President and Chief Operating Officer (2007-2010); and Senior Vice President and CFO (2001-2006)

n Various finance and management positions with The Procter & Gamble Company, including Vice President of Finance for 

Australia, Asia, and India (1983-2001)

n Member of the Board, Audit, and Nominating and Corporate Governance Committees, and Chair of the Compensation 

Committee of NextGen Acquisition Corporation (2020-present)

n Member of the Board and Audit Committee of Reckitt Benckiser Group plc (2019-present)

n Member of the Board, Executive and Risk Committees, Chair of the Human Resources Committee, and former member of 

the Nominating and Corporate Governance Committee of State Street Corporation (2018-present)

n Member of the Board and Audit and Finance and Corporate Development Committees of Campbell Soup Company 

(2005-2019)

n Member of the Board, Chair of the Audit, Compliance and Risk Committee, member of the Nomination and Governance 

Committee, and former member of the Remuneration Committee of Shire plc (2015-2019)

n Member of the Board and Finance and Nominating and Corporate Governance Committees of Avon Products, Inc. 

(2014-2016)

n Member of the Board of Dun & Bradstreet Corporation (2008-2013)

n Member of the International Advisory Council of Zurich Financial Services Group (2012-2017)

Allan P. Merrill

Age Director Since Freddie Mac Committees Public Company Directorships

54 September 2020 • Audit • Beazer Homes USA, Inc.

• Nominating and Governance

Mr. Merrill is an executive with deep experience in and understanding of the homebuilding industry as well as considerable 

executive leadership and financial experience.

Experience and Qualifications

n Various positions with Beazer Homes USA, Inc., including Chairman of the Board, President, and Chief Executive Officer, 

and Executive Vice President and Chief Financial Officer (2007-present)

n Various leadership positions with Move, Inc., including Executive Vice President of Corporate Development and Strategy, 

and President of Homebuilder.com, a division of Move, Inc. (2000-2007)

n Various positions with UBS Group AG and its predecessors, including Managing Director and Co-Head of the Global 

Resources Group (1987-2000)

Directors, Corporate Governance, and Executive Officers Directors

FREDDIE MAC | 2020 Form 10-K 288
n Member of the Board of Builder Homesite, Inc. (2011-present) 

n Member of the Board of the Leading Builders of America (2011-present) 

n Member of the Board of Harvard University's Joint Center for Housing Studies (1992-present) 

Saiyid T. Naqvi

Age Director Since Freddie Mac Committees Public Company Directorships

71 August 2013 • Executive None

• Nominating and Governance

• Risk, Chair

Mr. Naqvi is a seasoned financial executive with proven leadership experience and detailed knowledge of mortgage and 

consumer financial operations, as well as a deep background in risk and operational management.

Experience and Qualifications

n President and Chief Executive Officer of PNC Mortgage, a division of PNC Bank, National Association, which is a 

subsidiary of PNC Financial Services Group (2009-2013)

n President of Harley-Davidson Financial Services, Inc. (2007-2009)

n Chief Executive Officer of DeepGreen Financial, Inc. (2005-2006)

n President and Chief Executive Officer of PNC Mortgage Corporation of America (1995-2001)

n Member of the Board of Genworth Financial (2005-2009)

n Member of the Board of Hanover Mortgage Capital Holdings, Inc. (1998-2006)

n Member of the Housing Council of the Financial Services Roundtable (2009-2013)

Directors, Corporate Governance, and Executive Officers Directors

FREDDIE MAC | 2020 Form 10-K 289
CORPORATE GOVERNANCE

Our Corporate Governance Practices

The company is committed to best practices in corporate governance. The Board regularly reviews our governance practices, 

assesses the regulatory and legislative environment, and adopts governance practices that are in the best interests of the 

company.

Our Board has adopted the Guidelines, which are available on our website at www.freddiemac.com/governance/pdf/

gov_guidelines.pdf. The Guidelines are reviewed annually by our Board and were last updated in June 2020. The Guidelines 

establish corporate governance practices, and include: qualifications for directors; a limitation on the number of boards on 

which a director may serve; term limits; director orientation and continuing education; and a requirement that the Board and 

each of its committees perform an annual self-evaluation.

Our practices are designed to provide for effective collaboration of management and the Board and are reviewed regularly. We 

have instituted the following specific corporate governance practices:

n Our Board has an independent Non-Executive Chair, whose responsibilities include presiding over meetings of the Board 

and executive sessions of the non-employee or independent directors. 

n Each of the Board's directors is independent, except for the CEO (when that office is filled).

n Our directors are elected annually.

n Each of the Audit, CHC, Nominating and Governance, and Risk Committees consists entirely of independent directors.

n Each committee operates pursuant to a written charter that has been approved by the Board (these charters are available 

at http://www.freddiemac.com/governance/board-committees.html).

n Independent directors meet regularly without management.

n The Board and each of the Audit, CHC, Nominating and Governance, and Risk Committees conduct an annual selfevaluation.

n New directors receive a full orientation regarding the company and issues specific to the committees to which they have 

been appointed.

n All directors are provided with access to, and are encouraged to utilize, third-party continuing education.

n Management provides the Board and committees with in-depth technical briefings on substantive issues affecting the 

company.

n The Board reviews management talent and succession planning at least annually.

Director Independence and Relevant Considerations 

Our non-employee Board members have evaluated the independence, as defined in Sections 4 and 5 of the Guidelines and in 

Section 303A.02 of the NYSE Listed Company Manual, of each of our Board members and determined that all current members 

of our Board are, and that former members of our Board, Mr. Steven W. Kohlhagen and Mr. Paul T. Schumacher were, 

independent. Mr. Brickman, our former CEO, was not considered to be an independent director due to his service as our CEO. 

Our non-employee Board members concluded that all current members of our Audit, CHC, Nominating and Governance and 

Risk Committees are independent within the meaning of Sections 4 and 5 of the Guidelines and Section 303A.02 of the NYSE 

Listed Company Manual. Our Board also determined that: (i) all current members of our Audit Committee are independent 

within the meaning of Exchange Act Rule 10A-3 and Section 303A.06 of the NYSE Listed Company Manual; and (ii) all current 

members of our CHC Committee are independent within the meaning of Exchange Act Rule 10C-1 and Section 303A.02(a)(ii) of 

the NYSE Listed Company Manual.

In determining the independence of each Board member, our non-employee Board members reviewed the following categories 

or types of relationships, in addition to those specifically addressed by the standards contained in Section 5 of the Guidelines, 

to determine whether those relationships, either individually or in aggregate, would constitute a material relationship between 

the director and us that would impair the director's judgment as a member of the Board or create the perception or appearance 

of such an impairment:

n Employment Affiliations with Business Partners - Messrs. Bloom and Herbert are employed by organizations that 

engage or have engaged in business with us resulting in payments between us and such organizations. Under the 

Guidelines, no specific independence determination is required with respect to these payments because they do not 

exceed the greater of $1 million or 2% of the firm's consolidated gross revenues for each of the last three fiscal years. After 

considering the nature and extent of the specific relationships between these organizations and us, our non-employee 

Board members concluded that the business relationships do not constitute material relationships between either Mr. 

Bloom or Mr. Herbert and us that would impair their respective independence as our directors.

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n Employment Affiliations with Competitors - An immediate family member of Ms. Huebscher is employed by a company 

that is a competitor of Freddie Mac. After considering the nature and extent of the specific relationship between the 

competitor and the immediate family member and between the competitor and Freddie Mac, our non-employee Board 

members concluded that the business relationship does not constitute a material relationship that would impair Ms. 

Huebscher's independence as our director.

n Board Memberships with Business Partners - Ms. Casey and Messrs. Drummond, Herbert, and Merrill serve or have 

served as directors of other organizations that engage or have engaged in business with us resulting in payments between 

us and such organizations during the past three fiscal years. After considering the nature and extent of the specific 

relationship between each of those organizations and us, and the fact that these current or past Board members are or 

were directors of these other organizations rather than employees, our non-employee Board members concluded that 

those business relationships do not constitute material relationships that would impair their independence as our directors.

n Financial Relationships with Business Partners - Messrs. Bloom, Gillani, and Grier, and former director Mr. Kohlhagen 

each own stock in companies with which we conduct significant business, and such ownership represents a material 

portion of their respective net worth. To eliminate any potential conflict of interest that might arise as a result of their 

respective stock ownership, we have established mechanisms pursuant to which they will be recused from discussing and 

acting upon any matters considered by the Board or any of the committees of which they are or were a member and that 

directly relate to the company in which they have such stock ownership. In situations where matters are frequently 

presented to the Board regarding these companies, we have established formal recusal arrangements. The Audit 

Committee Chair, in consultation with the Non-Executive Chair, addresses any questions regarding whether recusal from a 

particular discussion or action is appropriate. 

 In evaluating the independence of Messrs. Bloom, Gillani, Grier, and Kohlhagen in light of their stock ownership of our 

business partners, our non-employee Board members considered the nature and extent of our business relationships with 

such business partners and any potential impact that their respective stock ownership may have on their independent 

judgment as our directors, taking into account the relevant recusal mechanisms. Our non-employee Board members 

concluded that these mechanisms addressed any actual or potential conflicts of interest with respect to the stock 

ownership. Accordingly, our non-employee Board members concluded that the stock ownership of our business partners 

of Messrs. Bloom, Gillani, and Grier do not, and of Mr. Kohlhagen did not, constitute material relationships that would, or 

did, impair their independence as our directors.

Directors, Corporate Governance, and Executive Officers Corporate Governance

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Board and Committee Information

Authority of the Board and Board Committees

The directors serve on behalf of, and exercise authority as directed by, the Conservator and owe their fiduciary duties of care 

and loyalty to the Conservator. Although the Conservator has provided authority for the Board and its committees to function in 

accordance with the duties and authorities set forth in applicable statutes, regulations, guidance, orders, and directives, and our 

Bylaws and committee charters, the Conservator has reserved certain powers of approval for itself. The Conservator provided 

instructions to the Board in 2008, 2012, and 2017 to consult with and obtain the Conservator's decision before taking certain 

actions.

The Conservator's instructions as currently revised require that we obtain the Conservator's decision before taking action on 

any matters that require the consent of or consultation with Treasury under the Purchase Agreement. See Note 2: 

Conservatorship and Related Matters for a list of matters that require the approval of Treasury under the Purchase 

Agreement.

The Conservator's revised instructions also require us to obtain the Conservator's decision before taking action in the areas 

identified in the table below. For some matters, the Conservator's revised instructions specify that our Board must review and 

approve the matter before we request the Conservator's decision, and for other matters the Board is expected to determine the 

appropriate level of its engagement.

Matters Requiring Prior Board Review and Approval Other Matters

• Redemptions or repurchases of our subordinated debt, except as may 

be necessary to comply with Section 5.7 of the Purchase Agreement;

• Creation of any subsidiary or affiliate, or entering into a substantial 

transaction with a subsidiary or affiliate, except for routine, ongoing 

transactions with CSS or the creation of, or a transaction with, a 

subsidiary or affiliate undertaken in the ordinary course of business;

• Changes to, or removal of, Board risk limits that would result in an 

increase in the amount of risk that may be taken by us;

• Retention and termination of external auditors to perform an integrated 

audit of our financial statements and internal controls over financial 

reporting; 

• Termination of law firms serving as consultants to the Board;

• Proposed amendments to our bylaws or Board committee charters;

• Setting or increasing the compensation or benefits payable to 

members of the Board; and

• Establishing the annual operating budget.

• Material changes in accounting policy;

• Proposed changes in our business operations, activities, and transactions 

that, in the reasonable business judgment of our management, are more 

likely than not to result in a significant increase in credit, market, 

reputational, operational, or other key risks;

• Matters, including our initiation or substantive response to litigation, that 

impact or question the Conservator's powers, our status in 

conservatorship, the legal effect of the conservatorship, interpretations of 

the Purchase Agreement or terms and conditions of the Financial Agency 

Agreement with Treasury or our performance under the Financial Agency 

Agreement;

• Agreements with respect to any securities litigation claim and agreements 

pursuant to which we settle, resolve, or compromise demands, claims, 

litigation, lawsuits, prosecutions, regulatory proceedings, or tax matters 

when the amount in dispute is more than $50 million, including each 

separate agreement with the same counterparty involving the same 

dispute or common facts when the aggregate amount in dispute totals 

more than $50 million (this provision excludes loan workouts, which are 

conducted in the ordinary course of business);

• Mergers, acquisitions and changes in control of a Key Counterparty where 

we have a direct contractual right to cease doing business with such Key 

Counterparty or object to the merger or acquisition of such entity;

• Changes to requirements, policies, frameworks, standards, or products 

that are aligned with Fannie Mae, pursuant to FHFA's direction;

• Credit risk transfers that are new transaction types, recurring transactions 

with any material change in terms, and transactions that involve collateral 

types not previously included in a risk transfer transaction;

• Mortgage servicing rights sales and transfers involving:

◦ 100,000 or more loans to a non-bank transferee; or

◦ 25,000 or more loans to any transferee servicer when the transfer 

would increase the number of the transferee's Freddie Mac- and 

Fannie Mae-owned seriously delinquent loans by at least 25 percent 

and the servicing transfer has a minimum of 500 seriously delinquent 

loans; and

• Changes in employee compensation that could significantly impact our 

employees, including, but not limited to, retention awards, special 

incentive plans, and merit increase pool funding.

In addition, FHFA requires us to provide it with timely notice of: (i) activities that represent a significant change in current 

business practices, operations, policies, or strategies not otherwise addressed in the Conservator decision items referenced 

above; (ii) exceptions and waivers to aligned requirements, policies, frameworks, standards, or products if not otherwise 

submitted to FHFA for Conservator approval as required above; and (iii) accounting error corrections to previously issued 

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FREDDIE MAC | 2020 Form 10-K 292
financial statements that are not de minimis. FHFA will then determine whether any such items require Conservator approval. 

For more information on the conservatorship, see MD&A - Conservatorship and Related Matters.

Board Committees

The Board has five standing committees: Audit, CHC, Executive, Nominating and Governance, and Risk. All standing 

committees, other than the Executive Committee, meet regularly and are chaired by, and consist entirely of, independent 

directors. The Committees perform essential functions on behalf of the Board. The Committee Chairs review and approve 

agendas for all meetings of their respective Committees. Charters for the standing committees describe each committee's 

responsibilities and have been adopted by the Board and approved by the Conservator. These charters are available on our 

website at http://www.freddiemac.com/governance/board-committees.html. The membership of each committee as of 

February 9, 2021 and the number of meetings held by each committee in 2020 are set forth below, together with a description 

of the primary responsibilities of each committee. 

Committee Meetings in 2020 Chair Members

Audit Committee 9 Committee meetings Aleem Gillani

• Kathleen L. Casey

• Lance F. Drummond

• Allan P. Merrill

Compensation and Human 

Capital Committee 7 Committee meetings Lance F. Drummond

• Mark H. Bloom

• Aleem Gillani

• Christopher E. Herbert

Executive Committee None Sara Mathew

• Lance F. Drummond

• Aleem Gillani

• Grace A. Huebscher

• Saiyid T. Naqvi

Nominating and Governance 

Committee 5 Committee meetings Grace A. Huebscher

• Kathleen L. Casey

• Mark B. Grier

• Allan P. Merrill

• Saiyid T. Naqvi

Risk Committee 6 Committee meetings Saiyid T. Naqvi

• Mark H. Bloom

• Mark B. Grier

• Christopher E. Herbert

• Grace A. Huebscher

Audit Committee

The Audit Committee provides oversight of the company's accounting and financial reporting and disclosure processes, the 

adequacy of the systems of disclosure and internal control established by management, and the audit of the company's 

financial statements. Among other things, the Audit Committee: (i) appoints the independent auditor and evaluates its 

independence and performance; (ii) reviews the audit plans for and results of the independent audit and internal audits; and (iii) 

reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. 

The Audit Committee's activities during 2020 with respect to the oversight of the independent auditor are described in more 

detail in Principal Accounting Fees and Services — Approval of Independent Auditor Services and Fees. The Audit 

Committee also periodically reviews the company's guidelines and policies governing the processes for assessing and 

managing the company's risks and generally reviews the company's major financial risk exposures and the steps taken to 

monitor and control such exposures. The Audit Committee also approves all decisions regarding the appointment, removal, and 

Directors, Corporate Governance, and Executive Officers Corporate Governance

FREDDIE MAC | 2020 Form 10-K 293
compensation of the General Auditor, who reports independently to the Audit Committee, as well as the annual incentive 

funding level for our Internal Audit division. 

Our Audit Committee satisfies the definition of "audit committee" in Exchange Act Section 3(a)(58)(A) and the requirements of 

Exchange Act Rule 10A-3. Although our stock is no longer listed on the NYSE, certain of the corporate governance 

requirements of the NYSE Listed Company Manual, including those relating to audit committees, continue to apply to us 

because they are incorporated by reference in the Corporate Governance Rule. Our Audit Committee satisfies the "audit 

committee" requirements in Sections 303A.06 and 303A.07 of the NYSE Listed Company Manual. The Board has determined 

that all members of our Audit Committee are independent and that Mr. Gillani, a member of the Audit Committee since January 

2019 and its current chair, meets the definition of an "audit committee financial expert" under SEC regulations. 

Compensation and Human Capital Committee

The CHC Committee oversees the company's compensation and benefits policies and programs, as well as other human capital 

processes, including: (i) an annual review of talent development programs and initiatives, including succession planning; (ii) 

oversight of our diversity and inclusion programs and policies, and related management strategies; and (iii) the design and 

execution of initiatives to strengthen our culture. The company's processes for consideration and determination of executive 

compensation, and the role of the CHC Committee in those processes, are further described in Executive Compensation — 

CD&A. The CHC Committee Report is included in Executive Compensation — CD&A — Compensation and Human 

Capital Committee Report. 

For a discussion of the CHC Committee's conclusion that our compensation policies and practices do not create risks that are 

reasonably likely to have a material adverse effect on us, see Executive Compensation — Compensation and Risk.

For a discussion of the CHC Committee's role with respect to human capital generally, see Introduction — Our Business — 

Primary Business Strategies — Human Capital Management.

The CHC Committee consists entirely of independent directors. None of the members of the CHC Committee during 2020 were 

officers or employees of Freddie Mac or had any relationship with us that would be required to be disclosed by us under 

Item 407(e)(4) of Regulation S-K. 

Executive Committee

The Executive Committee consists of the Non-Executive Chair, the chair of each other standing committee, and our CEO, when 

such office is filled. Given the current vacancy in our CEO position, each member is independent. The Executive Committee is 

authorized to exercise the corporate powers of the Board between meetings of the Board, except for those powers reserved to 

the Board by our Charter and Bylaws or otherwise. 

Nominating and Governance Committee

The Nominating and Governance Committee, which consists entirely of independent directors, oversees the company's 

corporate governance, including reviewing the company's Bylaws and the Guidelines. It also assists the Board and its 

committees in conducting annual self-evaluations and identifying qualified individuals to become members of the Board; 

reviews Board member independence and qualifications and recommends membership of the Board committees; and reviews 

potential conflicts of interest for members of senior management as well as certain related person transactions. 

Risk Committee

The Risk Committee, which consists entirely of independent directors, oversees on an enterprise-wide basis the company's risk 

management framework, including credit risk, market risk, liquidity risk, operational risk, and enterprise-wide strategic risk. The 

Risk Committee reviews and recommends the company's enterprise risk policy and Board-level risk appetite metrics and limits 

to the Board for approval and, among other responsibilities, reviews significant: (i) enterprise risk exposures; (ii) risk 

management strategies; (iii) results of risk management reviews and assessments; and (iv) emerging risks. The Risk Committee 

also approves all decisions regarding the appointment or removal of the CRO, and the CRO reports independently to the Risk 

Committee. 

Directors, Corporate Governance, and Executive Officers Corporate Governance

FREDDIE MAC | 2020 Form 10-K 294
Additional Board Oversight

The Board and Risk Committee provide oversight of the company's information and cybersecurity operations by receiving 

periodic reports from the Chief Information Officer and other senior officers. These updates include information regarding 

management's ongoing efforts to manage cybersecurity risk and the steps management has taken to address and mitigate the 

evolving cybersecurity threat environment. In addition, the Risk Committee receives updates regarding any assessments by 

external parties about the company's cybersecurity program. Senior management discusses cybersecurity developments with 

the Chair of the Risk Committee and other Board members between Board and committee meetings, as necessary. The 

company has procedures to escalate information regarding certain cybersecurity incidents to the appropriate members of the 

Board in a timely fashion. The Board and its committees also have authority, as they deem appropriate to fulfill Board or 

committee responsibilities, to engage outside consultants or advisors, including technology and cybersecurity experts, and 

evaluate the company's information security program. See MD&A — Risk Management — Overview for more information 

on the Board's role in risk oversight.

Directors, Corporate Governance, and Executive Officers Corporate Governance

FREDDIE MAC | 2020 Form 10-K 295
Board Leadership Structure

The leadership structure established by the Conservator requires that the positions of CEO and chair of the Board be held by 

different individuals. In addition, FHFA's Corporate Governance Rule requires that the position of chair of the Board be filled by 

an independent director as defined under the rules of the NYSE. 

Communications with Directors

Interested parties wishing to communicate any concerns or questions about Freddie Mac to the Board or its directors may do 

so by U.S. mail, addressed to the Corporate Secretary, Freddie Mac, 8200 Jones Branch Drive, McLean, VA 22102-3110 or by 

email at boardofdirectors@freddiemac.com. Communications may be directed to the Non-Executive Chair, to any other 

director or directors, or to groups of directors, such as the independent or non-employee directors.

Codes of Conduct

We have separate codes of conduct for our employees and Board members. The employee code of conduct serves as the 

code of ethics for senior executives and financial officers. All employees, including senior executives and financial officers, are 

required to sign an annual acknowledgment that they have read the employee code of conduct and agree to abide by it and will 

report suspected deviations from the employee code of conduct. When joining our Board, our directors acknowledge that they 

have reviewed and understand the director code of conduct and agree to be bound by its provisions, and each director reexecutes such confirmation annually.

Copies of our employee and director codes of conduct are available, and any amendments or waivers that would be required to 

be disclosed are posted, on our website at www.freddiemac.com.

Director Compensation

Non-employee Board members receive compensation in the form of cash retainers, paid on a quarterly basis. Non-employee 

directors are also reimbursed for reasonable out-of-pocket costs for attending meetings of the Board or a Board committee of 

which they are a member and for other reasonable expenses associated with carrying out their responsibilities as directors.

Our directors are compensated entirely in cash because the Purchase Agreement prohibits us from issuing any shares of our 

equity securities without the prior written consent of Treasury. See Executive Compensation — CD&A — Overview of 

Executive Management Compensation Program. Unlike compensation for our executives, there is no provision in the 

director compensation program for pay that varies depending on business results. Although such incentive compensation is 

deemed appropriate to give management strong incentives to devise and execute business plans and achieve positive financial 

results, it is viewed as inconsistent with the oversight role of directors.

2020 Non-Employee Director Compensation Levels

Board compensation levels during conservatorship are shown in the table below.

Table 77 - Board Compensation Levels

Board Service Cash Compensation

Annual Retainer for Non-Executive Chair $290,000 

Annual Retainer for Non-Employee Directors (other than the Non-Executive Chair) 160,000 

Committee Service Cash Compensation

Annual Retainer for Audit Committee Chair $25,000 

Annual Retainer for Risk Committee Chair 15,000 

Annual Retainer for Committee Chairs (other than Audit or Risk) 10,000 

Annual Retainer for Audit Committee Members 10,000 

Directors, Corporate Governance, and Executive Officers Corporate Governance

FREDDIE MAC | 2020 Form 10-K 296
2020 Director Compensation

The following table summarizes the 2020 compensation earned by all persons who served as non-employee directors during 

2020.

Table 78 - Director Compensation

Non-Employee Director Fees Earned or

Paid in Cash(1) Total

Sara Mathew $290,000 $290,000

Mark H. Bloom 160,000 160,000 

Kathleen L. Casey(2) 168,242 168,242 

Lance F. Drummond(2) 178,901 178,901 

Aleem Gillani 185,000 185,000 

Mark B. Grier(3) 138,901 138,901 

Christopher E. Herbert 160,000 160,000 

Grace A. Huebscher(2) 176,685 176,685 

Steven W. Kohlhagen(4) 18,681 18,681 

Allan P. Merrill(2)(3) 56,359 56,359 

Saiyid T. Naqvi 175,000 175,000 

Paul T. Schumacher(2)(3)(4) 56,359 56,359 

(1) We do not have pension or retirement plans for our non-employee directors, and all compensation is paid in cash with no additional compensation paid. Therefore, 

the "Change in Pension Value and Non-qualified Deferred Compensation Earnings" and "All Other Compensation" columns have been omitted.

(2) In addition to the annual Board service and appropriate Committee Chair retainers, the amount reflects partial annual compensation for service as a member of the 

Audit Committee or as a Committee Chair during 2020. In February 2020, Mr. Drummond became the Chair of the CHC Committee, and in March 2020, Ms. Casey 

became a member of the Audit Committee. In September 2020, Messrs. Merrill and Schumacher became members of, and Ms. Huebscher left, the Audit 

Committee.

(3) Mr. Grier joined the Board in February 2020 and Messrs. Merrill and Schumacher joined the Board in September 2020.

(4) Messrs. Kohlhagen and Schumacher left the Board in February 2020 and February 2021, respectively.

Indemnification

We have made arrangements to indemnify our directors against certain liabilities which are similar to the terms on which our 

executive officers are indemnified. For a description of such terms, see Executive Compensation — CD&A — Written 

Agreements Relating to NEO Employment — Indemnification Agreements.

Directors, Corporate Governance, and Executive Officers Corporate Governance

FREDDIE MAC | 2020 Form 10-K 297
EXECUTIVE OFFICERS

As of February 9, 2021, our executive officers are as follows:

Michael T. Hutchins

Age Year of Affiliation Position

65 2013 President

Mr. Hutchins has served as our President since December 2020 after serving as our interim President beginning in November 

2020. In this role, he continues to lead the Investments and Capital Markets division, and the leaders of the company’s SingleFamily, Multifamily, Human Resources, Information Technology, Administration, and Enterprise Operations divisions report to 

him. He previously served as EVP - Investments and Capital Markets from January 2015 to November 2020 and as SVP - 

Investments and Capital Markets from July 2013 to January 2015. Prior to joining Freddie Mac, Mr. Hutchins was Co-Founder 

and Chief Executive Officer of PrinceRidge, a financial services firm, from 2007 to 2013. Prior to founding PrinceRidge, he was 

with UBS Group AG from 1996 to 2007, holding a variety of senior management positions, including the Global Head of the 

Fixed Income Rates & Currencies Group. Prior to UBS, Mr. Hutchins worked at Salomon Brothers, Inc. from 1986 to 1996, 

where he held a number of management positions, including Co-Head of Fixed Income Capital Markets.

Christian M. Lown

Age Year of Affiliation Position

51 2020 Executive Vice President & Chief Financial Officer

Mr. Lown has served as our EVP & Chief Financial Officer since June 2020. In this role, he is responsible for the company's 

financial controls, accounting, investor relations, financial planning and reporting, tax, and capital oversight. Mr. Lown joined 

Freddie Mac from Navient Corporation where he served as Executive Vice President and Chief Financial Officer from March 

2017 to June 2020. Prior to that, he served as Managing Director of the Financial Institutions Group and Co-Head of Global 

Financial Technology, North America Banks, and Diversified Finance at Morgan Stanley from 2006 to 2017; Director, Financial 

Institutions Group, at UBS AG from 2003 to 2006; and Associate, Financial Institutions Group, at Credit Suisse First Boston 

from 2001 to 2003.

Ricardo A. Anzaldua

Age Year of Affiliation Position

67 2018 Executive Vice President & General Counsel

Mr. Anzaldua has served as our EVP & General Counsel since January 2019 as well as serving as Corporate Secretary from 

January 2019 to April 2020. In this role, he is responsible for the company's legal division, advising the Board and senior 

management on legal and governance matters, litigation strategy, and leading the company's efforts to navigate complex 

business and regulatory initiatives. He joined Freddie Mac in May 2018 as EVP - Senior Legal Advisor. Previously, he was 

Executive Vice President and General Counsel of MetLife, Inc., from 2012 until 2017. From 2007 to 2012, he held senior 

positions in the legal department of the Hartford Financial Services Group. He began his legal career at the law firm of Cleary, 

Gottlieb, Steen & Hamilton LLP, where he became a partner in 1999. 

Donna M. Corley

Age Year of Affiliation Position

47 1995 Executive Vice President - Single-Family Business

Ms. Corley has served as our EVP - Single-Family Business since February 2020 after serving as SVP & Interim Head of SingleFamily from November 2019 to February 2020. In this role, she is responsible for managing our relationships with our Seller/

Servicers, the performance of our guarantee book of business, and all sourcing, servicing, risk management, and business 

operations. Previously, she served as SVP & Chief Risk Officer of Single-Family Business, where she led the team responsible 

for analyzing and managing the risks that affect Freddie Mac's Single-Family business of financing more than 1.5 million homes 

annually. She joined Freddie Mac in 1995 as a research analyst and since then has held various portfolio manager positions 

within the Investment and Capital Markets division and has also led Freddie Mac’s credit pricing, risk transfer, and 

securitization teams.

Directors, Corporate Governance, and Executive Officers Executive Officers

FREDDIE MAC | 2020 Form 10-K 298
Anil D. Hinduja

Age Year of Affiliation Position

57 2015 Executive Vice President - Chief Risk Officer

Mr. Hinduja has served as our EVP - Chief Risk Officer and head of Enterprise Risk Management since July 2015. In this role, 

he provides overall direction and leadership for the risk function and is responsible for the company's enterprise-wide risk 

framework. He joined Freddie Mac from Barclays PLC, where he served in increasingly broader risk management roles 

beginning in 2009, including Chief Risk Officer for Barclays Africa Group Limited, Group Credit Director for Retail Credit Risk, 

and Chief Risk Officer for Barclays' retail bank in the U.K. Prior to joining Barclays, he spent 19 years at Citigroup in diverse 

roles with increasing responsibility across finance, operations, sales and distribution, business, and risk management in global 

consumer businesses. In risk, he was Director for Global Consumer Credit Risk and then Chief Risk Officer for the Consumer 

Lending Group, where he was responsible for managing risk in the mortgage, auto, and student loan businesses. His tenure at 

Citigroup culminated in his term as President and CEO of Citi Home Equity.

Deborah L. Jenkins

Age Year of Affiliation Position

53 2008 Executive Vice President - Multifamily

Ms. Jenkins has served as our EVP - Multifamily since November 2018. In this role, she leads a team of more than 900 people 

tasked with providing liquidity and stability to multifamily mortgage markets while supporting affordable rental housing 

throughout the country. She previously served as SVP - Multifamily Underwriting and Credit — the principal manager of 

underwriting and credit approvals for all Multifamily debt investments, credit policy governance, and asset level securitization 

activities. Ms. Jenkins spearheaded enhancements in the Multifamily division’s underwriting process specifically to stand up its 

securitization program, including its K- and SB-Deals. She was a Senior Vice President with Wells Fargo National Bank in 

Michigan before joining Freddie Mac in March 2008.

Frank Nazzaro

Age Year of Affiliation Position

59 2018 Executive Vice President - Chief Information Officer

Mr. Nazzaro has served as our EVP - Chief Information Officer since October 2019 after serving as Acting Chief Information 

Officer from May 2019 to October 2019. He leads the Information Technology (IT) division and provides corporate-wide 

leadership for the company’s technology strategy. Mr. Nazzaro is an accomplished senior technology executive with more than 

20 years of experience in the financial services industry. With an in-depth knowledge in infrastructure and applications, he 

brings a wealth of experience in transformational IT activities and strong leadership capabilities essential to IT’s strategic 

initiatives, including Cloud migration, Modern Delivery, and Employee Technology Experience. He joined Freddie Mac in 2018 

as Senior Vice President and Chief Technology Officer leading Enterprise Technology Solutions. From 2016 to 2018, he was 

Group Vice President and CTO for Travelport LLC, where he led Cloud Architecture, Infrastructure, and Operations globally. 

From 2012 to 2016, he was CTO at CIT Group where he was responsible for Transformation, Architecture, Technology 

Strategy, and IT Infrastructure. He has held several senior technology and management roles at RBC Capital Markets, 

Bridgewater, and UBS.

Jerry Weiss

Age Year of Affiliation Position

62 2003 Executive Vice President - Chief Administrative Officer

Mr. Weiss has served as our EVP - Chief Administrative Officer since August 2010. In this role, he serves as the company's 

senior executive liaison to FHFA and Treasury. He oversees the Government and Industry Relations and Public Policy, Public 

Relations and Corporate Marketing, Internal Communications, Conservatorship Affairs and Initiatives, Economic and Housing 

Research, Regulatory Affairs, Corporate Services, and Making Home Affordable - Compliance organizations. In addition, since 

November 2014 he has served as a member of the Board of Managers of CSS. He also served as our CCO from August 2010 

until June 2011. Prior to August 2010, Mr. Weiss served as our SVP and CCO and in various other senior management 

capacities since joining us in October 2003. Before that, Mr. Weiss worked from 1990 at Merrill Lynch Investment Managers, 

including as First Vice President and Global Head of Compliance. From 1982 to 1990, Mr. Weiss was with a national law 

practice in Washington, D.C., where he specialized in securities regulation and corporate finance matters.

Directors, Corporate Governance, and Executive Officers Executive Officers

FREDDIE MAC | 2020 Form 10-K 299
Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This section contains information regarding our compensation programs (all of which have been approved by FHFA) and the 

compensation of the following individuals who we determined to be our Named Executive Officers, or NEOs, for the year ended 

December 31, 2020.

Named Executive Officers

David M. Brickman Chief Executive Officer(1)

Michael T. Hutchins President

Christian M. Lown Executive Vice President & Chief Financial Officer

Ricardo A. Anzaldua Executive Vice President & General Counsel

Anil D. Hinduja Executive Vice President - Chief Risk Officer

Donald F. Kish Senior Vice President - Corporate Controller & Principal Accounting Officer, former Interim Chief Financial Officer

(1) Mr. Brickman resigned from the company effective January 8, 2021.

For information on our primary business objectives and the progress we made during 2020 toward accomplishing those 

objectives, see Introduction — About Freddie Mac.

Overview of Executive Management Compensation Program

Compensation in 2020 for each NEO, other than Mr. Brickman, whose compensation is discussed below, was governed by the 

Executive Management Compensation Program, or EMCP. The EMCP balances our need to retain and attract executive talent 

with promoting the conservatorship objectives included in FHFA's Conservatorship Scorecard, as well as goals separately 

established by management related to the commercial aspects of our business, which are included in our Corporate Scorecard. 

All compensation under the EMCP is delivered in cash because the Purchase Agreement does not permit us to provide equitybased compensation to our employees unless approved by Treasury. 

Effective January 1, 2020, the company amended the EMCP in response to changes directed by FHFA, acting as Conservator, 

for so long as we are in conservatorship, as described in Executive Compensation—Elements of Target TDC. 

Elements of Target TDC

For all NEOs other than the CEO, compensation under the EMCP in 2020 consisted of the following elements: 

Base Salary Rate

Deferred Salary

n The amount earned in each quarter, including interest, is paid (i) on the last pay date of the corresponding quarter in 

the first year following the performance period for Fixed Deferred Salary; and (ii) on the last pay date of the 

corresponding quarter in either the first or second year following the performance period for At-Risk Deferred Salary(1)

Fixed Deferred Salary

At-Risk Deferred Salary

n To encourage achievement of conservatorship, corporate, and individual 

performance goals

Conservatorship Scorecard and 

Assessment Criteria Corporate Scorecard / Individual

n Cannot exceed $600,000 

without approval from 

FHFA

n To encourage executive 

retention

n Subject to reduction based on 

Conservatorship Scorecard 

performance and the Assessment 

Criteria

n Subject to reduction based on 

performance against both the 

Corporate Scorecard and individual 

objectives n Earned and paid biweekly

n Equal to total Deferred Salary 

less the At-Risk portion

(1) As discussed below, pursuant to an update to the EMCP effective January 1, 2020, At-Risk Deferred Salary will be paid on the last pay date of the corresponding 

quarter of the second year following the performance period for Mr. Lown, who joined us as our CFO in June 2020. For executives hired before December 31, 2019, 

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 300
including all other eligible NEOs, the increase in mandatory deferral period for At-Risk Deferred Salary from one year to two years will take effect beginning with 

amounts earned in the 2022 performance period.

As in past years, 30% of target TDC for each NEO (other than our CEO) is At-Risk Deferred Salary that is subject to reduction 

based on Conservatorship Scorecard performance as well as Corporate Scorecard and individual performance. This At-Risk 

Deferred Salary has been paid in end-of-quarter installments in the year following the performance year. In 2019, FHFA directed 

us to increase the mandatory deferral period for At-Risk Deferred Salary received by certain executives (including our NEOs) 

from one year to two years. For executives hired before December 31, 2019, this change will be effective for At-Risk Deferred 

Salary earned beginning January 1, 2022. For executives hired on or after December 31, 2019, the change became effective 

immediately. Accordingly, At-Risk Deferred Salary earned beginning January 1, 2022 by our current eligible NEOs (other than 

Mr. Lown) will be paid in quarterly installments in the corresponding calendar quarter in the second year following the 

performance year. Therefore, At-Risk Deferred Salary earned in 2022 by these NEOs will be paid in quarterly installments in 

2024. For Mr. Lown, who was hired on or after December 31, 2019, all At-Risk Deferred Salary earned will be paid in quarterly 

installments in the second year following the performance year, resulting in his At-Risk Deferred Salary earned in 2020 being 

paid in quarterly installments in 2022.

The objectives against which 2020 corporate performance was measured, together with the assessment of actual performance 

against those objectives and the Assessment Criteria used by FHFA, are described in Determination of 2020 At-Risk 

Deferred Salary — At-Risk Deferred Salary Based on Conservatorship Scorecard Performance and 

Determination of 2020 At-Risk Deferred Salary — At-Risk Deferred Salary Based on Corporate Scorecard 

Goals and Individual Performance. These performance measures were chosen because they reflected our 2020 goals 

during conservatorship.

See Other Executive Compensation Considerations — Effect of Termination of Employment for information on 

the effect of a termination of employment, including the timing and payment of any unpaid portion of Deferred Salary and 

related interest. 

Executive Compensation Best Practices

What We Do What We Don't Do

n Clawback provisions with a significant portion of compensation 

subject to recapture and/or forfeiture

n No agreements that guarantee a specific amount of compensation for 

a specified term of employment

n Use of an independent compensation consultant by the Compensation 

and Human Capital Committee

n No golden parachute payments or other similar change in control 

provisions

n Annual compensation risk review n No tax "gross-ups"

n Single executive perquisite, reimbursement of tax, estate, and/or 

personal financial planning expenses (up to $4,500 annually, with an 

additional $2,500 in the first year of eligibility) 

n No hedging or pledging of company securities permitted

n Evaluation of company performance against multiple measures, 

including non-financial measures

CEO Compensation

Mr. Brickman's compensation in 2020 included a Base Salary level of $600,000, in compliance with the Equity in Government 

Compensation Act of 2015. He did not participate in the EMCP and, therefore, did not receive any compensation subject to 

either corporate or individual performance. Mr. Brickman was eligible to participate in all employee benefit plans offered to 

Freddie Mac's other senior executives under the terms of those plans. See Summary Compensation Table for additional 

information.

Determination of 2020 Target TDC for Eligible NEOs 

Role of Compensation Consultant

As part of the annual process to determine the Target TDC for each of the eligible NEOs, the CHC Committee receives 

guidance from Meridian Compensation Partners, LLC, or Meridian, its independent compensation consultant. In addition to the 

annual process to determine Target TDC, Meridian provides guidance to the CHC Committee throughout the year on other 

executive compensation matters.

Meridian has not provided the CHC Committee with any non-executive compensation services, nor has the firm provided any 

consulting or other services to our management. During 2020, the CHC Committee reviewed Meridian's independence based 

on the factors outlined in Exchange Act Rule 10C-1(b)(4) and determined that Meridian continues to be independent.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 301
2020 Comparator Group Companies

The CHC Committee annually evaluates each eligible NEO's Target TDC in relation to the compensation of executives in 

comparable positions at companies that are either in a similar line of business or are otherwise comparable for purposes of 

recruiting and retaining individuals with the necessary skills and capabilities. We refer to this group of companies as the 

Comparator Group.

When there is either no reasonable match or insufficient data from the Comparator Group for a position, or if Meridian believes 

that additional data sources would strengthen the analysis of competitive market compensation levels, the CHC Committee 

may use alternative survey sources.

At FHFA's recommendation, Freddie Mac and Fannie Mae have aligned their Comparator Groups so that consistent 

compensation data is used by both companies for the same or similar senior officer positions.

The Comparator Group used in determining compensation for 2020 consisted of the following companies:

The Allstate Corporation    Fannie Mae    Prudential Financial, Inc.

Ally Financial Inc.    Fifth Third Bancorp    Regions Financial Corporation

American Express Company    The Hartford Financial Services Group, Inc.    State Street Corporation

American International Group, Inc. JPMorgan Chase & Co* Synchrony Financial

Bank of America Corporation*    KeyCorp    Truist Financial Corporation

The Bank of New York Mellon Corporation    Mastercard Incorporated    U.S. Bancorp

Capital One Financial Corporation    MetLife, Inc.    Visa, Inc.

Citigroup Inc.* Northern Trust Corporation Voya Financial, Inc.

Citizens Financial Group, Inc.    PNC Financial Services Group, Inc.    Wells Fargo & Company*

Discover Financial Services

* Only mortgage or real estate division-level compensation data from these diversified banking firms may be utilized where available and appropriate 

for the position being benchmarked.

The CHC Committee has determined that these same companies will comprise the 2021 Comparator Group. 

Establishing Target TDC

The CHC Committee developed its 2020 Target TDC recommendations for the eligible NEOs, other than Mr. Hutchins, by 

reviewing data from the Comparator Group. For Mr. Hutchins, the CHC Committee reviewed data from a broader financial 

services survey reflecting companies with significant assets under management. The CHC Committee's 2020 Target TDC 

recommendation for each of the eligible NEOs was reviewed and approved by FHFA. 

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 302
2020 Target TDC

The following table sets forth the components of 2020 Target TDC for each of our eligible NEOs.

Table 79 - 2020 Target TDC

2020 Target TDC

Named 

Executive 

Officer(1)

Base

Salary Rate

Fixed

Deferred 

Salary

At-Risk

Deferred 

Salary

Target TDC

Michael T. 

Hutchins $600,000 $1,675,000 $975,000 $3,250,000

Christian M. 

Lown(2) 327,869 815,934 489,560 1,633,363 

Ricardo A. 

Anzaldua 500,000 1,250,000 750,000 2,500,000 

Anil D. Hinduja 600,000 1,220,000 780,000 2,600,000 

Donald F. 

Kish(3) 425,000 257,500 292,500 975,000 

(1) Mr. Brickman did not participate in the EMCP in 2020 and therefore is not included in this table. For a discussion of Mr. Brickman's compensation, see CEO 

Compensation.

(2) Mr. Lown was appointed Chief Financial Officer effective June 15, 2020. Amounts in this table reflect his prorated Target TDC. His annualized Target TDC is 

$3,000,000, consisting of Base Salary of $600,000, Fixed Deferred Salary of $1,500,000, and At-Risk Deferred Salary of $900,000. In addition, Mr. Lown will 

receive a cash sign-on award of $1,275,000 in recognition of forfeited compensation at his previous employer. This award will be paid in three installments: 

$475,000 in February 2021; $475,000 in February 2022; and $325,000 in February 2023. If Mr. Lown is not an employee of Freddie Mac on an installment payment 

date because he voluntarily resigns from the company or if the company terminates his employment due to the occurrence of any of the Forfeiture Events described 

in the Recapture Agreement, the installment will be forfeited. Each installment is subject to repayment if, prior to the first anniversary of an installment payment, Mr. 

Lown voluntarily resigns from the company or if the company terminates his employment due to the occurrence of any of the Forfeiture Events described in the 

Recapture Agreement.

(3) In addition to Target TDC, Mr. Kish accrued a special cash award at a rate of $50,000 per month, beginning December 19, 2019 and continuing through June 14, 

2020, in recognition of his service as Interim Chief Financial Officer. The award was payable in two equal installments: the first was paid in June 2020 and the 

second was paid in August 2020. He also accrued a special cash award at a rate of $30,000 per month, in recognition of his increased responsibilities in support of 

our Chief Financial Officer, Mr. Lown, from June 15, 2020 to December 31, 2020, payable in two equal installments: the first was paid in January 2021 and the 

second will be paid in March 2021. Mr. Kish must remain employed by the company to receive the second installment payment, except in certain termination events 

including death, disability, and involuntary non-performance-based termination by Freddie Mac. See Written Agreements Relating to NEO Employment.

Determination of 2020 At-Risk Deferred Salary

The CHC Committee and FHFA considered our achievements in pursuing our primary business objectives, as well as other 

factors, in determining the funding level for At-Risk Deferred Salary in 2020. FHFA determined the funding level for the portion 

of At-Risk Deferred Salary based on Conservatorship Scorecard performance and Assessment Criteria, and the CHC 

Committee determined, with FHFA's review and approval, the amounts payable to each eligible NEO for the portion of At-Risk 

Deferred Salary based on Corporate Scorecard goals and individual performance.

At-Risk Deferred Salary Based on Conservatorship Scorecard 

Performance

Half of each eligible NEO's 2020 At-Risk Deferred Salary, or 15% of Target TDC, was subject to reduction based on FHFA's 

assessment of (i) the company's performance against the goals in the 2020 Conservatorship Scorecard and (ii) the Assessment 

Criteria described below. FHFA independently assessed our performance against the 2020 Conservatorship Scorecard and the 

Assessment Criteria and determined that an 80% funding level was justified for the portion of the eligible NEOs' At-Risk 

Deferred Salary. In assessing our performance against the 2020 Conservatorship Scorecard, the factors considered by FHFA 

included our completion of all of the Conservatorship Scorecard objectives and our performance against the Assessment 

Criteria.

In making its assessment, FHFA used the following criteria (collectively, the Assessment Criteria):

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 303
n The extent to which our activities foster Competitive, Liquid, Efficient, And Resilient (CLEAR) national housing finance 

markets that support homeowners and renters with responsible and sustainable products and programs; 

n The extent to which we conduct business in a safe and sound manner, anticipate and mitigate emerging risk issues, and 

remediate identified risk concerns on a timely basis;

n	 The extent to which we meet expectations under all of FHFA’s requirements, including the Conservatorship Capital 

Framework (CCF);

n The extent to which we conduct initiatives with consideration for diversity and inclusion under statutory requirements 

consistent with FHFA's expectations; 

n The extent to which we cooperate and collaborate with Fannie Mae, CSS, the industry, and other stakeholders, in 

consultation with FHFA; and

n The extent to which we deliver work products that are high quality, thorough, creative, effective, and timely.

The table below presents the Conservatorship Scorecard objectives and FHFA's assessment of our achievement against those 

objectives. 

Performance Goals FHFA's Summary of Performance

I. Foster CLEAR National Housing Finance Markets

• Housing Goals / Duty-to-Serve: Fulfill Freddie Mac’s Housing Goals and Duty-toServe plans by offering sustainable mortgage programs and conducting effective 

outreach.

Goal was achieved.

• Uniform Mortgage-Backed Security (UMBS): Carefully monitor and maintain UMBS 

cash flow alignment and take such further steps as necessary to ensure a wellfunctioning To-Be-Announced (TBA) securitization market.

Goal was achieved.

• Credit Score Final Rule Implementation: Implement the final Credit Score Rule with 

adherence to the regulation’s requirements in a timely and effective manner.

Goal was achieved.

• Key On-going Initiatives: Successfully continue to implement key on-going 

initiatives.

All goals were achieved.

○ Multifamily Caps - manage to new multifamily cap requirements announced 

September 13, 2019

○ LIBOR Transition - prepare for an effective transition from LIBOR to approved 

alternative reference rates.

Freddie Mac achieved this sub-goal through 

ceasing to purchase or issue LIBOR-indexed 

single-family and multifamily mortgages, LIBORindexed collateralized mortgage obligations 

(CMOs), LIBOR-indexed single-family credit risk 

transfer (CRT) securitizations, and LIBOR-indexed 

floating rate unsecured debt that matures beyond 

the end of 2021; commenced the purchase and 

issuance of SOFR-indexed single-family and 

multifamily mortgages; SOFR-indexed CMOs, 

SOFR-indexed multifamily and single-family CRT 

securitizations, and SOFR-indexed floating rate 

unsecured debt.

○ Limited English Proficiency (LEP) - continue to support the needs of lenders and 

other market participants serving borrowers with limited English proficiency 

through continued progress on multi-year language access plans.

Freddie Mac achieved this sub-goal through the 

addition of Vietnamese, Korean, and Tagalog 

language resources with the existing Spanish and 

Chinese language resources to the FHFA’s 

Mortgage Translations clearinghouse.

○ Uniform Residential Loan Application (URLA) - fully implement new URLA.

• Level Playing Field Standards and Increased Transparency: All goals were achieved.

○ Support strategies that enhance a level playing field for a wide range of mortgage 

market participants.

○ Provide any requested assistance toward the development of a new Qualified 

Mortgage (QM) standard by the Consumer Financial Protection Bureau.

○ Assess additional data that could be made publicly available to enhance risk 

transfer markets and foster a competitive mortgage market that does not crowd 

out private capital.

• Efficient Operation of State and Local Housing Markets: Assess opportunities to 

support and encourage state and local policies that enable the housing market to 

function more efficiently by (1) reducing the cost of housing production and/or (2) 

lowering the cost of providing mortgage financing.

Goal was achieved.

II. Ensure Safety and Soundness

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Performance Goals FHFA's Summary of Performance

• Risk Profile: Review Freddie Mac’s risk profiles across all business activities and 

reduce risk and complexity to levels more appropriate for conservatorship status and 

a limited capital cushion.

Goal was achieved.

• Risk Transfer: Continue to transfer a significant amount of credit risk to private 

markets in a commercially reasonable and safe and sound manner.

All goals were achieved.

○ Undertake actions to meet single-family and multifamily credit risk transfer 

objectives established by FHFA.

○ Actively pursue legacy asset risk transfer activities, including sales of nonperforming loans (NPL) and re-performing loans (RPL).

○ Under FHFA direction, undertake a comprehensive review of the CRT program, 

including a cost-benefit analysis.

• CCF: Develop and implement business management and capital planning capabilities 

to fully operationalize the CCF requirements.

Goal was achieved.

• Mortgage Servicing: Continue mortgage servicing and asset management efforts 

that promote stability and readiness for more challenging market conditions.

Servicer Eligibility Requirements 2.0 was not 

implemented in 2020, per FHFA’s direction. All 

○ other goals were achieved. Implement Servicer Eligibility Requirements 2.0

○ Assess readiness of servicers and servicing policies and processes for an 

economically-stressed environment.

• Core Operations and Technology: Increase focus on core Freddie Mac operational 

and technology management to ensure stability, resiliency, efficiency, and risk 

reduction.

All goals were achieved.

○ Continue efforts to enhance business resiliency and recovery management 

capabilities to minimize the impact of disruptions and maintain business 

operations at pre-defined levels.

○ Continue efforts to protect the availability, integrity, and confidentiality of 

information.

○ Continue efforts to improve the efficiency and effectiveness of operations, 

including legacy system modernization where necessary.

○ Prudently oversee CSS and the CSP to ensure that they support the securitization 

needs of the Enterprises and operate in an efficient and safe and sound manner.

III. Prepare for a Transition Out of Conservatorship

• Roadmap Toward End of Conservatorship: Provide support to FHFA as needed to 

develop a roadmap with milestones for exiting conservatorship.

Goal was achieved.

• Treasury and HUD Reform Plan Coordination and Alignment: Conduct such 

activities as directed by FHFA arising from recommendations in the Treasury and HUD 

Reform Plans.

Goal was achieved.

• Efficient Utilization of Capital: Develop and implement FHFA-approved strategies 

that ensure the efficient utilization of capital targeted to support the core guaranty 

business with adequate returns to attract the private capital necessary to enable an 

exit from the conservatorship.

Goal was achieved.

• Common Securitization Platform Strategy: Develop a post-conservatorship 

strategy and governance framework for CSS/CSP, including an assessment of any 

additional capabilities beneficial for the CSS/CSP to perform, to support a competitive 

mortgage market.

Goal was achieved.

• Address Identified Areas in Need of Improvement: Maintain an effective process to 

ensure that internal audit and supervisory findings are remediated by management in 

a timely fashion with appropriate board oversight.

Goal was achieved.

• Fair Lending: Maintain a sustainable, effective process for fair lending risk 

assessment, monitoring, and mitigation, and work with the FHFA’s Office of Fair 

Lending Oversight to prepare for transition to post-conservatorship fair lending 

supervision and oversight.

Goal was achieved.

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FREDDIE MAC | 2020 Form 10-K 305
At-Risk Deferred Salary Based on Corporate Scorecard Goals and 

Individual Performance

The other half of each eligible NEO's At-Risk Deferred Salary, also equal to 15% of Target TDC, was subject to reduction based 

on the company's performance against the Corporate Scorecard goals and the NEO's individual performance. The Corporate 

Scorecard goals drive how we manage and improve the commercial aspects of our business and are intended to complement 

the FHFA Strategic Plan and Conservatorship Scorecard. Certain of the individual performance objectives for the eligible NEOs 

were either Conservatorship Scorecard objectives or Corporate Scorecard goals, or directly supported their achievement. 

No weightings were assigned to the Corporate Scorecard goals. As a result, it was necessary for the CHC Committee to use its 

judgment in determining the overall level of performance. In making its determination, the CHC Committee primarily considered 

the fact that almost all of the Corporate Scorecard goals were achieved or exceeded. The CHC Committee determined that, 

based on the company's performance against the Corporate Scorecard, no reduction should be applied due to company 

performance for this portion of At-Risk Deferred Salary.

The Board has adopted Corporate Scorecard goals for 2021 that align with our Strategic Plan.

The table below presents the Corporate Scorecard goals and the CHC Committee's assessment of our achievement against 

those goals. 

Corporate Scorecard Goal Assessment of Performance

Exit Conservatorship The company achieved or exceeded all elements of this goal, including major milestones relating to capital 

restoration and management in anticipation of a potential exit from conservatorship, remediation of 

significant issues, and positive financial results.

Create a World-Class Platform The company achieved or exceeded all elements of this goal through a transformation of the company's 

infrastructure and information security, adoption of modern delivery, and improvements in business 

resiliency and related initiatives.

Become the Leader in Housing The company achieved or exceeded all but one element of this goal through increased diversity and 

inclusion efforts, progress towards achieving affordable housing goals, and supporting the adoption of 

UMBS. Based on preliminary information, the company believes it met four of five single-family affordable 

housing goals and all three of its multifamily affordable housing goals.

The CHC Committee also assessed the individual performance of each eligible NEO. In making its assessments, the CHC 

Committee took into consideration input from Mr. Brickman, prior to his departure, as well as the company's Corporate 

Scorecard performance. In each case, the CHC Committee's determination was consistent with Mr. Brickman's 

recommendation. FHFA reviewed and approved the compensation associated with these determinations.

Each eligible NEO's individual performance is discussed below.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 306
Michael T. Hutchins, President

Performance Highlights

n

Strong leadership of the company’s market activities, including successfully decreasing less liquid assets in an economically efficient manner and 

being responsive to market conditions in debt funding and interest-rate hedging while leading efforts to comply with new liquidity requirements. 

n

Partnered with the Single-Family business to accommodate record loan purchase volumes through the Cash Window channel and continued to 

enhance the liquidity of Freddie Mac’s traded Single-Family bonds in the secondary mortgage market.

n Led cross-divisional efforts to transition from LIBOR to SOFR, including the launch of several SOFR-based offerings.

n

Partnered with other leaders to achieve milestones in preparation of a potential conservatorship exit, including enhancing the company’s financial 

forecasting and analytic processes.

n

Continued to improve operational capabilities, including strengthening data management, modernizing payment processes, and enhancing 

remediation management.

n

Successfully transitioning to the role of President, including gaining a deeper understanding of all aspects of the company and providing leadership in 

developing the company’s business plan, financial budget, and key priorities for 2021.

At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision

The CHC Committee determined that Mr. Hutchins should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the 

company's performance against the Corporate Scorecard and his individual performance.

Christian M. Lown, Executive Vice President & Chief Financial Officer

Performance Highlights

n

Provided leadership since joining the company in June 2020 identifying the range of tasks necessary to help facilitate the company’s recapitalization 

and potential conservatorship exit as well as reorganizing functions to increase service, reduce costs, and enhance our control structure.

n

Strengthened capital management framework through build-out of governance and enterprise activities capabilities and recruitment of seasoned 

leaders into the company and partnered with other leaders to analyze FHFA’s re-proposed capital rule.

n

Identified and implemented operational and productivity improvements, which included enhanced financial analysis and business insight capabilities 

for internal and external reporting; revised enterprise supply chain risk assessment and operating processes; and achieved remediation and risk 

reduction milestones. 

At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision

The CHC Committee determined that Mr. Lown should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the 

company's performance against the Corporate Scorecard and his individual performance.

Ricardo A. Anzaldua, Executive Vice President & General Counsel

Performance Highlights

n

Provided guidance to the Board, senior management, FHFA, and financial advisor on a wide variety of legal and governance issues associated with 

potential conservatorship exit. 

n

Effectively supported a variety of business initiatives, including: COVID-related business decisions on forbearance adaptations and moratoriums on 

foreclosures and evictions; implementation of initiatives to reduce risk and increase efficiency during the COVID-19 pandemic while aligning with 

direction provided by FHFA; and a variety of complex business-line legal initiatives.

n

Partnered with other leaders to analyze FHFA’s re-proposed capital rule; led final stages of comment process; and managed legal risk arising from 

the mandate to transition away from LIBOR-based floating-rate contractual arrangements.

n

Provided effective legal advice and support to senior management and Freddie Mac’s Board of Directors with respect to the transition in leadership of 

Freddie Mac and the addition of new members to its Board of Directors.

n

Strong leadership in the ongoing development of Legal Division staff with an increased focus on continuous learning, professional development, 

social responsibility, and the creation of appropriate spans of authority. 

At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision

The CHC Committee determined that Mr. Anzaldua should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the 

company's performance against the Corporate Scorecard and his individual performance.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 307
Anil D. Hinduja, Executive Vice President - Chief Risk Officer

Performance Highlights

n Advanced the company’s risk framework through design of a firm-wide risk maturity program. 

n Enhanced risk appetite framework to incorporate earnings and capital planning, while making progress on capital-related projects. 

n

Provided leadership to address remediation of supervisory and control issues and partnered with Internal Audit to strengthen assurance of 

operations.

n

Strengthened capabilities within the independent risk function through build-out of risk and control capabilities and recruitment of seasoned leaders 

into the company. 

At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision

The CHC Committee determined that Mr. Hinduja should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the 

company's performance against the Corporate Scorecard and his individual performance.

Donald F. Kish, Senior Vice President, Corporate Controller, Principal Accounting Officer, former Interim Chief Financial Officer

Performance Highlights

n

Served as Interim CFO and member of the Senior Operating Committee of the company for the first half of the year, while also fulfilling 

responsibilities as the Corporate Controller and Principal Accounting Officer.

n

Provided strong leadership to the Finance Division, including divisional risk oversight, migration to a full work-from-home environment during the 

pandemic, and reorganizing certain functions within the division to clarify roles and responsibilities.

n Supported adoption of the new CECL accounting standard, effective January 1, 2020, from a tax, accounting, and reporting perspective.

n

Partnered with other leaders to determine the impacts of the CARES Act and other COVID-related programs and confirmed the impacts were 

appropriately reflected within the company’s financial statements, including appropriate reserve levels for potential credit losses.

n Initiated cross-divisional operational controls testing service to achieve efficiency in testing approach and costs.

At-Risk Deferred Salary (Corporate Scorecard/Individual) Funding Decision

The CHC Committee determined that Mr. Kish should receive 100% of his At-Risk Deferred Salary that was subject to reduction based on the company's 

performance against the Corporate Scorecard and his individual performance.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 308
2020 Deferred Salary

The following chart reports the actual amounts of 2020 Deferred Salary for each NEO, other than Mr. Brickman who was not 

eligible for 2020 Deferred Salary. The actual amount earned in each calendar quarter is scheduled to be paid on the last pay 

date of the corresponding calendar quarter in 2021, except for Mr. Lown, whose At-Risk Deferred Salary earned in 2020 will be 

paid on the last pay date of the corresponding calendar quarter in 2022. See Overview of Executive Management 

Compensation Program for additional information.

Table 80 - 2020 Deferred Salary

   2020 Actual Deferred Salary

Fixed

At-Risk

Named Executive 

Officer

Conservatorship 

Scorecard

Corporate 

Scorecard/ 

Individual

Mr. Hutchins $1,675,000 $390,000 $487,500

Mr. Lown 815,934 195,824 244,780 

Mr. Anzaldua 1,250,000 300,000 375,000 

Mr. Hinduja 1,220,000 312,000 390,000 

Mr. Kish 257,500 117,000 146,250 

Written Agreements Relating to NEO Employment

We entered into letter agreements with each of our NEOs, other than Mr. Brickman and Mr. Kish, in connection with their hiring. 

The letter agreements set forth specific initial levels of Base Salary and, where applicable, Target TDC. The compensation of 

each NEO is subject to change by FHFA and the terms of the EMCP. See Determination of 2020 Target TDC for 2020 Target 

TDC including Base Salary amounts for the NEOs. Other than the letter agreement entered into with Mr. Lown described below, 

there are no remaining material provisions of any of the letter agreements in effect as they have either been superseded by the 

EMCP, as described above, or the provisions are no longer effective, such as sign-on bonuses that have been paid and are no 

longer subject to repayment. 

We entered into a compensation arrangement with Mr. Kish in recognition of his service from December 19, 2019 through June 

14, 2020 as Interim Chief Financial Officer. Pursuant to this arrangement, Mr. Kish accrued a special award at a rate of $50,000 

per month, pro-rated for any partial month of service as Interim Chief Financial Officer. Mr. Kish received the award in two equal 

installments in June and August 2020. We also entered into a compensation arrangement with Mr. Kish in recognition of his 

increased responsibilities in support of our Chief Financial Officer, Mr. Lown, from June 15, 2020 to December 31, 2020. 

Pursuant to this arrangement, Mr. Kish accrued a special cash award at a rate of $30,000 per month, pro-rated for any partial 

month of service, payable in two equal installments: the first in January 2021 and the second in March 2021. To be eligible to 

receive the second installment, Mr. Kish must remain an employee at the time such installment is payable, except in certain 

termination events including death, disability, and involuntary non-performance-based termination by Freddie Mac.

We entered into a letter agreement with Mr. Lown in connection with his employment as our EVP & Chief Financial Officer. The 

terms of Mr. Lown's agreement provided him with an annual Target TDC opportunity of $3,000,000, consisting of Base Salary 

of $600,000, Fixed Deferred Salary of $1,500,000, and At-Risk Deferred Salary of $900,000, as well as the opportunity to 

participate in all employee benefit plans offered to our executive officers pursuant to the terms of those plans, and certain 

relocation benefits. The letter agreement with Mr. Lown also provides for a cash sign-on award of $1,275,000 in recognition of 

forfeited compensation at his previous employer. This award will be paid in three installments: $475,000 in February 2021; 

$475,000 in February 2022; and $325,000 in February 2023. If Mr. Lown is not an employee of Freddie Mac on an installment 

payment date due to his voluntary resignation or Freddie Mac terminates his employment due to the occurrence of any of the 

Forfeiture Events described in the Recapture Agreement, the installment will be forfeited. Each installment will be subject to 

repayment in the event that, prior to the first anniversary of an installment payment date, Mr. Lown voluntarily resigns from his 

employment with Freddie Mac for any reason or Freddie Mac terminates his employment due to the occurrence of any of the 

Forfeiture Events described in the Recapture Agreement.

We have also entered into restrictive covenant and confidentiality agreements with each of our NEOs. The non-competition and 

non-solicitation provisions included in the restrictive covenant and confidentiality agreements are described in Restrictive 

Covenant and Confidentiality Agreements.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 309
The NEOs (other than Mr. Kish) are not currently entitled to severance benefits upon any type of termination event. For 

additional information on compensation and benefits payable in the event of a termination of employment, see Potential 

Payments Upon Termination of Employment.

Restrictive Covenant and Confidentiality Agreements

Each of our NEOs is subject to a restrictive covenant and confidentiality agreement with us. Each agreement provides that the 

NEO will not seek or accept employment with designated competitors that involves performing similar duties for 12 months 

immediately following termination of employment, regardless of whether the executive's employment is terminated by the 

executive, by us, or by mutual agreement. During this period, each NEO agrees not to solicit or recruit any of our managerial 

employees. The agreements also provide for the confidentiality of information that constitutes trade secrets or proprietary or 

other confidential information. Effective January 1, 2021, the restrictive covenant and confidentiality agreement added a 

provision that provides for a 90-day “cooling off” period after a separation from employment, during which the NEO will be 

prohibited from participating directly or indirectly in a transaction involving Freddie Mac. Each of the NEOs (other than Mr. 

Brickman) entered into that updated restrictive covenant and confidentiality agreement. Because Mr. Brickman, as CEO, did not 

participate in the company's incentive program (which was the consideration for entering into the agreement) he did not enter 

into that updated restrictive covenant and confidentiality agreement, but subsequently entered into an additional agreement, 

effective as of February 10, 2021, pursuant to which he agreed to this additional provision. A copy of the form of the restrictive 

covenant and confidentiality agreements for our NEOs other than Mr. Brickman and a copy of the restrictive covenant and 

confidentiality agreement for Mr. Brickman are filed as exhibits, as reflected in the Exhibit Index. 

Recapture and Forfeiture Agreement

Freddie Mac has adopted, after FHFA review, the Recapture and Forfeiture Agreement, or the Recapture Agreement. In order to 

participate in the EMCP, each of our NEOs has entered into a Recapture Agreement. 

The Recapture Agreement provides for the recapture and/or forfeiture of Deferred Salary (including related interest) earned, 

paid, or to be paid pursuant to the terms of the EMCP if, after providing the required notice, our Board of Directors, in the good 

faith exercise of its sole discretion, determines that a Forfeiture Event has occurred. The Forfeiture Events and compensation 

subject to recapture and/or forfeiture are described below. 

Materially Inaccurate Information

n Forfeiture Event - The NEO has earned or obtained the legally binding right to a payment of Deferred Salary based on 

materially inaccurate financial statements or any other materially inaccurate performance measure.

n Compensation Subject to Recapture and/or Forfeiture - Any Deferred Salary in excess of the amount that the Board 

determines would likely have been otherwise earned using accurate measures during the two years prior to the Forfeiture 

Event.

Termination for Felony Conviction or Willful Misconduct

n Forfeiture Event - The NEO's employment is terminated in any of the following circumstances:

l Termination of employment because the NEO is convicted of, or pleads guilty or nolo contendere to, a felony;

l Subsequent to termination of employment, the NEO is convicted of, or pleads guilty or nolo contendere to, a felony, 

based on conduct occurring prior to termination, and within one year of such conviction or plea, the Board determines 

that such conduct is materially harmful to Freddie Mac; or

l Termination of employment because, or, within two years of termination, the Board determines that, the NEO engaged 

in willful misconduct in the performance of his or her duties that was materially harmful to Freddie Mac.

n Compensation Subject to Recapture and/or Forfeiture - Any Deferred Salary earned during the two years prior to the 

date that the NEO is terminated, any Deferred Salary scheduled to be paid within two years after termination, and any cash 

payment made or to be made as consideration for any release of claims agreement.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 310
Gross Neglect or Gross Misconduct

n Forfeiture Event - The NEO's employment is terminated because, in carrying out his or her duties, the NEO engages in 

conduct that constitutes gross neglect or gross misconduct that is materially harmful to Freddie Mac, or, within two years 

after the NEO's termination of employment, the Board determines that the NEO, prior to his or her termination, engaged in 

such conduct.

n Compensation Subject to Recapture and/or Forfeiture - Any Deferred Salary paid at the time of termination or 

subsequent to the date of termination, including any cash payment made as consideration for any release of claims 

agreement.

Violation of a Post-Termination Non-Competition Covenant 

n Forfeiture Event - The NEO violates a post-termination non-competition covenant set forth in the restrictive covenant and 

confidentiality agreement in effect when a payment of Deferred Salary is scheduled to be made.

n Compensation Subject to Recapture and/or Forfeiture - 50% of the Deferred Salary paid during the twelve months 

immediately preceding the violation and 100% of any unpaid Deferred Salary.

Under the Recapture Agreement, the Board has discretion to determine the appropriate dollar amount, if any, to be recaptured 

from and/or forfeited by the NEO, which is intended to be the gross amount of compensation in excess of what Freddie Mac 

would have paid the NEO had Freddie Mac taken the Forfeiture Event into consideration at the time such compensation 

decision was made.

A copy of the form of the Recapture Agreement is filed as an exhibit, as reflected in the Exhibit Index.

The following additional event is applicable only to the CEO and CFO, to the extent they have compensation subject to 

reimbursement in accordance with Section 304 of the Sarbanes-Oxley Act.

n Accounting Restatement Resulting from Misconduct - If, as a result of misconduct, we are required to prepare an 

accounting restatement due to material non-compliance with financial reporting requirements, the CEO and CFO are 

required to reimburse us for amounts determined in accordance with Section 304.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers (including each of our 

NEOs), each an indemnitee. For indemnification agreements entered into with executive officers after August 2011, the form of 

agreement has been revised to provide that indemnification rights under the agreement would terminate if and when the 

executive officer remained with Freddie Mac after ceasing to report directly to the CEO with respect to any claims arising from 

matters occurring after the officer no longer reported directly to the CEO. Similar indemnification rights would continue to be 

available to such executive officers under the Bylaws going forward. The indemnification agreements provide that we will 

indemnify the indemnitee to the fullest extent permitted by our Bylaws and Virginia law. This obligation includes, subject to 

certain terms and conditions, indemnification against all liabilities and reasonable expenses (including attorneys' fees) actually 

incurred by the indemnitee in connection with any threatened or pending action, suit, or proceeding, except such liabilities and 

expenses as are incurred because of the indemnitee's willful misconduct or knowing violation of criminal law. The 

indemnification agreements provide that if requested by the indemnitee, we will advance expenses, subject to repayment by 

the indemnitee of any funds advanced if it is ultimately determined that the indemnitee is not entitled to indemnification. The 

rights to indemnification under the indemnification agreements are not exclusive of any other right the indemnitee may have 

under any statute, agreement, or otherwise. Our obligations under the indemnification agreements will continue after the 

indemnitee is no longer a director or officer of the company with respect to any possible claims based on the fact that the 

indemnitee was a director or officer, and the indemnification agreements will remain in effect in the event the conservatorship is 

terminated. The indemnification agreements also provide that indemnification for actions instituted by FHFA will be governed by 

the standards set forth in FHFA's Notice of Proposed Rulemaking, published in the Federal Register on November 14, 2008.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 311
Other Executive Compensation Considerations

Effect of Termination of Employment

The timing and payment of any unpaid portion of Deferred Salary and related interest is based upon the reason for termination, 

as discussed in Potential Payments Upon Termination of Employment.

Perquisites

We believe that perquisites should be a minimal part of the compensation package for our NEOs. Total annual perquisites for 

any NEO cannot exceed $25,000 without FHFA approval, and we do not provide a gross-up to cover any taxes due on the 

perquisite itself. The only perquisite provided to our NEOs during 2020 was reimbursement for assistance with personal 

financial planning, tax planning, and/or estate planning, up to an annual maximum benefit of $4,500, with an additional $2,500 

allowance provided in the first year in which an NEO becomes eligible for the benefit.

SERP and SERP II 

After our NEOs have satisfied the one-year service requirement, they are eligible to participate in our SERP. The SERP is 

designed to provide participants with the full amount of benefits to which they would have been entitled under our Thrift/401(k) 

Plan if that plan was not subject to certain dollar limits under the Internal Revenue Code. This is referred to as the "SERP 

Benefit." For participants in the EMCP, no SERP Benefit is accrued with respect to annual pay in excess of two times a 

participant's Base Salary.

The SERP II was available to employees who were participants in the company’s Pension Plan as of the date the Pension Plan 

was terminated. It was intended to provide participants with the full amount of the benefits to which they would have been 

entitled under the tax-qualified Transitional Plan (see our Annual Report on Form 10-K filed on February 19, 2015 for additional 

information) if that plan was not subject to certain dollar limits under the Internal Revenue Code. This was referred to as the 

"SERP II Benefit." Messrs. Brickman and Kish were the only NEOs who were eligible for the SERP II Benefit.

For additional information regarding these benefits, see 2020 Compensation Information for NEOs and Nonqualified 

Deferred Compensation.

Stock Ownership, Hedging, and Pledging Policies

Our stock ownership guidelines were suspended when conservatorship began because we ceased paying our executives 

stock-based compensation. The Purchase Agreement prohibits us from issuing any shares of our equity securities without the 

prior written consent of Treasury. The suspension of stock ownership requirements is expected to continue through 

conservatorship and until such time that we resume granting stock-based compensation.

Pursuant to our company policy, all employees, including our NEOs, and our directors are prohibited from: 

n Engaging in all transactions (including purchasing and selling equity and non-equity securities) involving our securities 

(except selling company securities owned prior to the implementation of the policy and then only with pre-clearance);

n Purchasing or selling derivative securities related to our equity securities or dealing in any derivative securities related to 

our equity securities;

n Transacting in options (other than options granted by us, and then only with pre-clearance) or other hedging instruments 

related to our securities; and

n Holding our securities in a margin account or pledging our securities as collateral for a loan.

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 312
FHFA's Role in Setting Executive Compensation

Although the CHC Committee plays a significant role in considering and recommending executive compensation, FHFA is 

actively involved in determining such compensation in its role as our Conservator and as our regulator. The CHC Committee's 

authority and flexibility is, therefore, subject to certain limitations, including:

n The powers of FHFA as our Conservator include the authority to set executive compensation. Under the terms of the 

Purchase Agreement, FHFA is required to consult with Treasury on any increases in compensation or new compensation 

arrangements for our executive officers.

n Our directors serve on behalf of the Conservator and exercise their authority as provided by the Conservator. More 

information about the role of our directors is provided above in Directors, Corporate Governance, and Executive 

Officers — Board and Committee Information — Authority of the Board and Board Committees.

n FHFA requires us to submit to it proposed new compensation arrangements or increased amounts or benefits payable 

under existing compensation arrangements for executive officers.

n FHFA retains the authority not only to approve both the terms and amount of any compensation prior to payment to any of 

our executive officers, but also to modify any existing compensation arrangements.

Section 162(m) Limits on the Tax Deductibility of Compensation Expenses

Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that we may annually deduct for 

compensation to anyone serving as CEO or CFO at any time during the year, certain other NEOs employed by us at any time 

during the year and any individual who was a CEO, CFO, or NEO after 2016 and who is receiving Freddie Mac compensation 

(unless pursuant to a binding contract in effect on November 2, 2017 that is eligible for grandfathering). For calendar years after 

2017 (pursuant to the Tax Cuts and Jobs Act), this limit applies even if the compensation is "performance-based." 

Compensation and Human Capital Committee Report

The Compensation and Human Capital Committee has reviewed and discussed the Compensation Discussion and 

Analysis with management and, based on such review and discussion, has recommended to the Board that the 

Compensation Discussion and Analysis be included in this Form 10-K.

This report is respectfully submitted by the members of the Compensation and Human Capital Committee.

Lance F. Drummond, Chair

Mark H. Bloom

Aleem Gillani

Christopher E. Herbert

Executive Compensation Compensation Discussion and Analysis

FREDDIE MAC | 2020 Form 10-K 313
COMPENSATION AND RISK

Our management conducted an assessment of our compensation policies and practices that apply to employees at all levels, 

including those participating in the EMCP. The assessment was conducted by members of our ERM and human resources 

divisions, and included an evaluation of: 

n The types of compensation offered (including fixed, variable, and deferred);

n Eligibility for participation in compensation programs;

n Compensation program design and governance;

n The process for establishing performance objectives; and

n Processes and program approvals for our compensation programs.

The assessment was discussed with the CHC Committee in January 2021. Management's conclusion, with which the CHC 

Committee concurred, is that the company's compensation programs and practices do not encourage unnecessary or 

excessive risk behaviors in pursuit of Corporate or Conservatorship Scorecard objectives or otherwise, and the programs and 

practices would not be reasonably likely to have a material adverse effect on Freddie Mac.

Executive Compensation Compensation and Risk

FREDDIE MAC | 2020 Form 10-K 314
 CEO PAY RATIO

SEC rules require annual disclosure of the ratio of a company's CEO's total annual compensation to that of its median 

employee. For 2020, we used the 2018 median employee who we identified as of November 25, 2018 using payroll data as 

reported on Form W-2, Box 5 and annualized the compensation for individuals that had not worked the full year. In December 

2020, after internal review and analysis and pursuant to SEC rules, we determined to use the same median employee for the 

calculation of the 2020 CEO Pay Ratio as we did for the calculation of the 2018 CEO Pay Ratio because we have not made 

significant recent changes to our compensation programs and the median employee identified in 2018 remains representative 

of our employee population. Except as noted below, we calculated that employee's total annual compensation for 2020 using 

the same method required for calculating the CEO's (and other NEOs') total annual compensation for purposes of Table 82 - 

Summary Compensation Table. 

The table below sets forth the total annual compensation for our CEO and median employee and the ratio between the two.

Table 81 - CEO Pay Ratio

CEO Pay Ratio

Employee Total Compensation Ratio 

David M. Brickman (CEO) $702,000(1)

4.56 to 1

Median Employee 153,970(2)

(1) The total compensation of $702,000 for Mr. Brickman includes base salary and other benefits, including contributions made under the tax-qualified Thrift/401(k) 

Plan and accruals earned pursuant to the SERP Benefit. See CEO Compensation and Summary Compensation Table for further discussion.

(2) Reflects actual 2020 total compensation for the median employee except for estimated incentive compensation payment because, as of the filing of this Form 10-K, 

we have not concluded our performance year 2020 compensation planning process for employees other than our NEOs. This estimate includes the projected 

incentive payout for individuals in comparable positions with similar performance ratings.

Given the different methodologies that companies may use to determine their CEO pay ratio, the ratio reported above should 

not be used as a basis for comparison between companies.

Executive Compensation CEO Pay Ratio

FREDDIE MAC | 2020 Form 10-K 315
2020 COMPENSATION INFORMATION FOR NEOs

The following sections set forth compensation information for our NEOs: Mr. Brickman (who served as CEO until January 8, 

2021); Mr. Lown (who has served as our CFO since June 15, 2020); the three other most highly compensated executive officers 

who were serving as executive officers as of December 31, 2020; and Mr. Kish, who served as our Interim CFO until June 14, 

2020.

Summary Compensation Table

Table 82 - Compensation Summary 

   Salary

Bonus

Non-Equity 

Incentive Plan 

Compensation(3)

All Other 

Compensation(4) Total

Named Executive Officer Year

Earned During 

Year(1)

Deferred(2)

David M. Brickman(5) 2020 $600,000 $— $— $— $102,000 $702,000 

Chief Executive Officer 2019 600,000 837,500 — 456,867 112,621 2,006,988 

2018 500,000 1,507,478 — 867,919 163,266 3,038,663

Michael T. Hutchins 2020 623,077 1,675,000 — 884,476 119,239 3,301,792 

President 2019 600,000 1,675,000 — 913,735 123,634 3,312,369 

2018 500,000 1,575,208 — 897,202 98,862 3,071,272 

Christian M. Lown (6) 2020 334,616 815,934 — 447,610 48,706 1,646,866 

EVP & Chief Financial Officer

Ricardo A. Anzaldua(6) 2020 519,231 1,250,000 — 680,366 98,207 2,547,804 

EVP & General Counsel 2019 500,000 1,250,000 702,873 68,745 2,521,618 

Anil D. Hinduja(6) 2020 623,077 1,220,000 — 707,581 115,622 2,666,280 

EVP - Chief Risk Officer 2019 600,000 1,220,000 — 730,988 117,651 2,668,639 

Donald F. Kish(6) 2020 441,346 257,500 490,301(7) 265,343 77,076 1,531,566 

SVP - Corporate Controller, 

Principal Accounting Officer, 

former Interim Chief Financial 

Officer

2019 414,712 235,865 — 260,603 73,227 984,407 

(1) Amounts shown in this sub-column consist of base salary paid during the year on a bi-weekly basis. Calendar year 2020 contained 27 bi-weekly pay periods, rather 

than the usual 26 bi-weekly pay periods. This additional pay period occurs approximately once every 11 years because we pay on a bi-weekly basis. As a result of 

the additional bi-weekly pay period in 2020, salary amounts for 2020 for Messrs. Hutchins, Lown, Anzaldua, Hinduja and Kish are slightly higher than the annual 

base salary rate. The 2020 base salary rate for each executive was as follows: for Mr. Hutchins: $600,000; for Mr. Lown: $600,000; for Mr. Anzaldua: $500,000; for 

Mr. Hinduja: $600,000; and for Mr. Kish: $425,000. In February, FHFA requested that Mr. Brickman repay the amount he received for the 27th pay period, and Mr. 

Brickman voluntarily agreed to do so.

(2) Amounts shown reflect Fixed Deferred Salary earned during the year. The interest rate for Fixed Deferred Salary earned during 2020, 2019, and 2018 was 0.795%, 

1.315%, and 0.880%, respectively, which is equal to 50% of the one-year Treasury Bill rate as of December 31 of the applicable prior year. Fixed Deferred Salary 

earned during each quarter is paid in cash on the last pay date of the corresponding quarter in the following year, along with accrued interest. Interest on Fixed 

Deferred Salary earned during 2020, 2019, and 2018 is included in All Other Compensation. 

(3) Amounts shown reflect At-Risk Deferred Salary earned during each year as well as interest on that At-Risk Deferred Salary. The interest rate for At-Risk Deferred 

Salary earned during 2020, 2019, and 2018 was the same as noted for the interest rate for the Fixed Deferred Salary. Except in the case of Mr. Lown, At-Risk 

Deferred Salary earned during each quarter will be paid in cash on the last pay date of the corresponding quarter in the following year. For Mr. Lown, At-Risk 

Deferred Salary earned during each quarter will be paid in cash on the last pay date of the corresponding quarter in the second calendar year. See Determination 

of 2020 At-Risk Deferred Salary and Executive Management Compensation Program Overview.

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 316
(4) Amounts for 2020 reflect: (i) contributions made under our tax-qualified Thrift/401(k) Plan for plan year 2020; (ii) accruals earned pursuant to the SERP Benefit for 

plan year 2020; (iii) interest on Fixed Deferred Salary earned during 2020 and (iv) reimbursement of certain relocation expenses incurred by Mr. Lown. The amounts 

for 2020 are as follows:

Named Executive Officer Thrift/401(k) Plan

Contributions

SERP Benefit

Accruals

Interest on Fixed 

Deferred Salary Relocation Expenses

Mr. Brickman $24,225 $77,775 — 

Mr. Hutchins 24,225 81,698 13,316 — 

Mr. Lown — — 6,487 42,219 

Mr. Anzaldua 24,225 64,044 9,938 — 

Mr. Hinduja 24,225 81,698 9,699 — 

Mr. Kish 24,225 50,804 2,047 — 

Employer contributions to the Thrift/401(k) Plan are generally available on the same terms to all our employees. After the first year of employment, we match up to 

6% of eligible compensation at 100% of the employee's contributions. Also, after their first year of employment, employees receive an additional employer 

contribution to our Thrift/401(k) Plan equal to 2.5% of compensation earned in the prior year. Employee contributions, our matching contributions, and the 2.5% 

employer contribution are invested in accordance with the employee's investment elections and are immediately vested. For additional information regarding the 

SERP Benefit, see Nonqualified Deferred Compensation.

Perquisites are valued at their aggregate incremental cost to us. During the years reported, the aggregate value of perquisites received by any NEO was less than 

$10,000. Therefore, in accordance with SEC rules, amounts shown under "All Other Compensation" do not include perquisites.

(5) Mr. Brickman resigned effective January 8, 2021. Mr. Brickman became CEO in July 2019 and during his tenure as CEO his compensation consisted solely of an 

annual Base Salary of $600,000. Prior to his service as CEO, he participated in the EMCP and was eligible for Deferred Salary. 

(6) Pursuant to SEC reporting requirements, because Messrs. Anzaldua, Hinduja, and Kish were not NEOs in 2018, information for that year is not required to be 

disclosed. Because Mr. Lown first joined the company and became an NEO in 2020, information for 2018 and 2019 is not required to be disclosed.

(7) Mr. Kish accrued a special cash award of $294,301, representing $50,000 per month, beginning December 19, 2019 and continuing through June 14, 2020, in 

recognition of his service as Interim Chief Financial Officer. The award was payable in two equal installments: the first was paid in June 2020 and the second was 

paid in August 2020. He also accrued a special cash award of $196,000, representing $30,000 per month, in recognition of his increased responsibilities in support 

of our Chief Financial Officer, Mr. Lown, from June 15, 2020 to December 31, 2020, payable in two equal installments: the first was paid in January 2021 and the 

second will be paid in March 2021. Mr. Kish must remain employed by the company to receive the second installment payment, except in certain termination events 

including death, disability, and involuntary non-performance-based termination by Freddie Mac. See Written Agreements Relating to NEO Employment.

Grants of Plan-Based Awards

The following table contains information concerning grants of plan-based awards to each of the NEOs during 2020. The 

Purchase Agreement prohibits us from issuing equity securities without Treasury's prior written consent. No stock awards were 

granted during 2020. For a description of the performance and other measures used to determine payouts, see Elements of 

Target Total Direct Compensation, Determination of 2020 Target TDC for NEOs, Determination of 2020 At-Risk 

Deferred Salary, and 2020 Deferred Salary.

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 317
Table 83 - Grants of Plan-Based Awards

  

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards(2)

Named Executive Officer(1) At-Risk Deferred Salary Award Threshold Target/Maximum

Mr. Hutchins Conservatorship Scorecard — $487,500

Corporate Scorecard/Individual — 487,500 

Total — 975,000 

Mr. Lown Conservatorship Scorecard — 244,780 

Corporate Scorecard/Individual — 244,780 

Total — 489,560 

Mr. Anzaldua Conservatorship Scorecard — 375,000 

Corporate Scorecard/Individual — 375,000 

Total — 750,000 

Mr. Hinduja Conservatorship Scorecard — 390,000 

Corporate Scorecard/Individual — 390,000 

Total — 780,000 

Mr. Kish Conservatorship Scorecard — 146,250 

Corporate Scorecard/Individual — 146,250 

Total — 292,500 

(1) Mr. Brickman was not eligible to receive Deferred Salary in 2020 and therefore is not included in this table.

(2) The amounts reported reflect At-Risk Deferred Salary granted in 2020 which is subject to reduction based on: (i) corporate performance against the Conservatorship 

Scorecard; and (ii) the company's performance against the Corporate Scorecard goals and an officer's individual performance. The amount of At-Risk Deferred 

Salary actually earned can range from 0% of target (reported in the Threshold column) to a maximum of 100% of target (reported in the Target/Maximum column). 

Actual At-Risk Deferred Salary amounts earned during 2020 are reported in the Non-Equity Incentive Plan Compensation column of Table 82 - Summary 

Compensation Table.

Outstanding Equity Awards at Fiscal Year-End

None of the NEOs had unexercised options or unvested RSUs as of December 31, 2020.

Option Exercises and Stock Vested

None of the NEOs exercised options or had RSUs vest during 2020.

Pension Benefits

No Pension Benefits table is presented here as the Pension Plan termination was completed in 2015. For additional information, 

see Other Executive Compensation Considerations.

Nonqualified Deferred Compensation

Non-qualified deferred compensation for the NEOs consists of the SERP Benefit and, for those NEOs who were eligible for the 

Transitional Plan (or those NEOs who may have deferred Roth contributions into their Thrift/401(k) Plan account), the SERP II 

Benefit. The SERP and SERP II are unfunded, non-qualified defined contribution plans designed to provide participants with the 

full amount of benefits to which they would have been entitled under the Thrift/401(k) Plan and Transitional Plan (for those 

NEOs eligible) if these plans were not subject to certain dollar limits under the Internal Revenue Code. 

The SERP Benefit equals the amount of the employer matching and 2.5% contributions for each NEO that would have been 

made to the Thrift/401(k) Plan during the year, based upon the participant's eligible compensation, without application of those 

limits, less the amount of the matching contributions and 2.5% contributions made to the Thrift/401(k) Plan during the year, but 

does not take into account pay that exceeds two times the NEO's Base Salary. We believe the SERP Benefit is an appropriate 

benefit because offering such a benefit helps us remain competitive with the companies in our Comparator Group.

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 318
To be eligible for the SERP Benefit, the NEO must be eligible for matching contributions and the 2.5% contribution under the 

Thrift/401(k) Plan for part of the year, as discussed in Footnote 4 to Table 82 - Summary Compensation Table. In addition, to 

be eligible for the portion of the SERP Benefit attributable to employer matching contributions, the NEO must contribute the 

maximum amount permitted under the terms of the Thrift/401(k) Plan on either a pre- or post-tax basis.

The SERP II Benefit provided an accrual for each year an NEO participated in the Transitional Plan equal to the amount of the 

employer contribution that would have been made to the Transitional Plan for the year, without application of the Internal 

Revenue Code limits, less the amount of the contribution actually made to the Transitional Plan, but does not take into account 

pay that exceeds two times the NEO's Base Salary. The SERP II also provides participants with the flexibility to make Roth 

contributions to the Thrift/401(k) Plan and still receive employer matching contributions as noted above. 

Participants are credited with earnings or losses in their SERP and SERP II Benefit accounts based upon each participant's 

individual direction of the investment of such notional amounts among the virtual investment funds available under the SERP 

and SERP II, which are the same as the investment options available under the Thrift/401(k) Plan. SERP and SERP II Benefits 

are generally distributed in a lump sum 90 days after the end of the calendar year in which a separation from service occurs. A 

six-month delay in the commencement of distributions on account of a separation from service applies to key employees, in 

accordance with Internal Revenue Code Section 409A. If the NEO dies, the vested SERP Benefit is paid in the form of a lump 

sum within 90 days of death, and the SERP II Benefit is paid by March 31st following the year the NEO dies.

The following table shows the contributions, earnings, withdrawals and distributions, and accumulated balances under the 

SERP and SERP II Benefits for each NEO. 

Table 84 - SERP and SERP II Benefits

Named Executive 

Officer

Executive

Contribution in

Last FY ($)(1)

Freddie Mac

Accruals in

Last FY ($)(2)

Aggregate

Earnings in

Last FY ($)(3)

Aggregate

Withdrawals/

Distributions ($)

Balance at

Last FYE ($)(4)

Mr. Brickman

SERP Benefit $— $77,775 $21,887 $— $995,370 

SERP II Benefit — — 51,051 — 420,070 

Mr. Hutchins

SERP Benefit — 81,698 93,816 0 563,814 

Mr. Lown(5)

SERP Benefit — — — — — 

Mr. Anzaldua

SERP Benefit — 64,044 251 — 104,545 

Mr. Hinduja

SERP Benefit — 81,698 88,763 — 451,686 

Mr. Kish

SERP Benefit — 50,804 56,282 — 435,804 

SERP II Benefit — — 17,823 — 137,235 

(1) The SERP and SERP II do not allow for employee contributions.

(2) Amounts reported reflect accruals under the SERP during 2020, including the 2.5% contribution accruals which will be allocated to NEO accounts in 2021. These 

amounts are also reported in the "All Other Compensation" column in Table 82 - Summary Compensation Table.

(3) Amounts reported represent the total interest and other earnings credited to each NEO under the SERP and SERP II Benefits.

(4) Amounts reported reflect the accumulated balances under the SERP and SERP II Benefits for each NEO and include the plan year 2020 accruals noted in footnote 2 

above. All NEOs are fully vested in their SERP and, for Messrs. Brickman and Kish, their SERP II Benefit account balances. 

The following 2019 SERP Benefit accrual amounts were reported in the "All Other Compensation" column in the 2019 Summary Compensation Table as 

compensation for each NEO for whom accruals were made during 2019: Mr. Hutchins: $77,808, Mr. Anzaldua: $40,046, Mr. Hinduja: $77,808, Mr. Brickman: 

$77,808, and Mr. Kish: $46,325. See our Annual Report on Form 10-K filed on February 13, 2020. 

The following 2018 SERP Benefit accrual amounts were reported in the "All Other Compensation" column in the 2018 Summary Compensation Table as 

compensation for each NEO for whom accruals were made during 2018: Mr. Hutchins: $61,625; and Mr. Brickman: $108,750. See our Annual Report on Form 10-K 

filed on February 14, 2019. 

(5) Mr. Lown has not satisfied the one-year service requirement and, therefore, was not eligible for the SERP Benefit in 2020.

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 319
Potential Payments Upon Termination of Employment

The EMCP addresses the treatment of Base Salary and Deferred Salary upon various termination events. Base Salary ceases 

upon an NEO's termination of employment, regardless of the termination reason. An NEO generally does not need to be 

employed by us on the payment date to receive payments of Deferred Salary (including related interest) that are unpaid at the 

time of termination of employment. The following table describes the effect of various termination events upon unpaid Deferred 

Salary. The actual payment of any level of termination benefits that is not otherwise provided for in the EMCP is subject to 

FHFA review and approval.

n Forfeiture Event — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is subject to 

forfeiture upon the occurrence of a Forfeiture Event, as described above under Written Agreements Relating to NEO 

Employment — Recapture and Forfeiture Agreement.

n Death — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is paid in full as soon as 

administratively possible, but not later than 90 calendar days after the date of death. Any earned but unpaid At-Risk 

Deferred Salary is not subject to reduction based on corporate and individual performance if the reduction has not been 

determined as of the date of death.

n Long-Term Disability — All earned but unpaid Fixed and At-Risk Deferred Salary (including related interest) is paid in full 

in accordance with the Approved Payment Schedule. Any earned but unpaid At-Risk Deferred Salary is not subject to 

reduction based on corporate and individual performance if the reduction has not been determined as of the termination 

date.

n Any Other Reason (including, but not limited to, voluntary termination, retirement, and involuntary termination for 

any reason other than a Forfeiture Event) — All earned but unpaid Deferred Salary (including related interest) is paid in 

accordance with the Approved Payment Schedule, and earned but unpaid At-Risk Deferred Salary remains subject to the 

performance assessment and reduction process. Except in the case of retirement, the amount of earned but unpaid Fixed 

Deferred Salary will be reduced by 2% for each full or partial month by which the NEO's termination precedes January 31 

of the second calendar year following the calendar year in which the Fixed Deferred Salary is earned. No such reduction is 

applicable if an NEO retires, which is deemed to have occurred upon a voluntary termination of employment after attaining 

or exceeding 62 years of age, without regard to length of service, or attaining or exceeding 55 years of age with 10 or more 

years of service.

The table below describes the compensation and benefits that would have been payable to each NEO had the officer 

terminated his employment under various circumstances as of December 31, 2020. 

The table below does not address changes in control, as we are not obligated to provide any additional compensation to our 

NEOs in connection with a change in control. The table also does not address potential payments upon a termination for cause, 

which is a termination resulting from the occurrence of an event or conduct described in the Recapture Agreement. All earned 

but unpaid Deferred Salary is subject to forfeiture upon the occurrence of such a termination. However, the amount of 

compensation, if any, to be recaptured and/or forfeited is determined by the Board of Directors, which can only occur following 

the occurrence of a for cause termination. See Written Agreements Relating to NEO Employment — Recapture and 

Forfeiture Agreement.

The table below also does not include vested balances in the SERP and SERP II. All NEOs are fully vested in their account 

balances. Amounts shown in the table also do not include certain items available to all employees generally upon a termination 

event.

The table below also does not include stock options or RSUs, as there were no outstanding stock options or RSUs held by 

NEOs as of December 31, 2020. 

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 320
Table 85 - Compensation and Benefits if NEO Terminated Employment as of December 31, 2020

Named Executive Officer(1) Death Disability Retirement(2)

All Other Not

For Cause

Terminations(3)

Michael T. Hutchins

Deferred Salary:

Fixed $1,675,000 $1,675,000 $1,675,000 

At Risk-Conservatorship Scorecard(4) 487,500 487,500 390,000 

At Risk-Corporate Scorecard/Individual(5) 487,500 487,500 487,500 

Interest on Deferred Salary(6) 13,146 21,068 20,292 

Total $2,663,146 $2,671,068 $2,572,792 

Christian M. Lown

Deferred Salary:

Fixed $815,934 $815,934 $603,791 

At Risk-Conservatorship Scorecard(4) 244,780 244,780 195,824 

At Risk-Corporate Scorecard/Individual(5) 244,780 244,780 244,780 

Interest on Deferred Salary(6) 4,184 14,271 11,806 

Total $1,309,678 $1,319,765 $1,056,201 

Ricardo A. Anzaldua

Deferred Salary:

Fixed $1,250,000 $1,250,000 $1,250,000 

At Risk-Conservatorship Scorecard(4) 375,000 375,000 300,000 

At Risk-Corporate Scorecard/Individual(5) 375,000 375,000 375,000 

Interest on Deferred Salary(6) 9,921 15,900 15,304 

Total $2,009,921 $2,015,900 $1,940,304 

Anil Hinduja

Deferred Salary:

Fixed $1,220,000 $1,220,000 $902,800 

At Risk-Conservatorship Scorecard(4) 390,000 390,000 312,000 

At Risk-Corporate Scorecard/Individual(5) 390,000 390,000 390,000 

Interest on Deferred Salary(6) 9,921 15,900 12,758 

Total $2,009,921 $2,015,900 $1,617,558 

Donald F. Kish

Base Salary: $637,500(7)

Deferred Salary:

Fixed $257,500 $257,500 $257,500 

At Risk-Conservatorship Scorecard(4) 146,250 146,250 117,000 

At Risk-Corporate Scorecard/Individual(5) 146,250 146,250 146,250 

Interest on Deferred Salary(6) 2,728 4,373 4,140 

Total $552,728 $554,373 $1,162,390 

(1) Mr. Brickman is excluded from this table because he was not eligible for any additional compensation in connection with a termination of employment.

(2) Messrs. Hutchins and Anzaldua are the only retirement-eligible NEOs under the EMCP.

(3) All Other Not For Cause Terminations refer to (i) voluntary terminations other than for retirement or (ii) involuntary terminations other than for cause. No amount is 

shown for Messrs. Hutchins and Anzaldua because they are retirement eligible. In accordance with early termination provisions in the EMCP, the amounts disclosed 

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 321
for Deferred Salary: Fixed for all other NEOs have been reduced by 26% to reflect a December 31, 2020 termination event. Mr. Kish, who is not an Executive Officer, 

is not subject to such reduction upon a severance-eligible termination. 

(4) The amounts reported for Deferred Salary: At Risk-Conservatorship Scorecard reflect the funding level determined by FHFA with respect to performance against the 

2020 Conservatorship Scorecard. In cases of death or disability, the process for determining funding level is waived if the funding level has not been determined at 

the date of termination.

(5) The amounts reported for Deferred Salary: At Risk-Corporate Scorecard/Individual in the Retirement and All Other Not For Cause Terminations columns reflect the 

assessment of 2020 performance approved by the CHC Committee and FHFA. For death or disability, the provisions are the same as for the amounts reported for 

Deferred Salary: At Risk-Conservatorship Scorecard.

(6) Interest on Deferred Salary is accrued and paid in accordance with the terms of the EMCP. The amount of interest in the Death column assumes that payment 

occurs on the 90th day following the date of death, which is assumed to be December 31, 2020. For Mr. Lown, the interest on At-Risk Deferred Salary in the case of 

disability and all other not for cause terminations is calculated for two years based on the two-year deferral period in accordance with the EMCP for executives hired 

on or after December 31, 2019.

(7) Represents amounts payable to Mr. Kish in accordance with the terms of severance applicable to certain officers in the event that he was involuntarily terminated 

for reasons other than cause. Mr. Kish would not be eligible for this amount in the event of a voluntary termination. Executive Officers, or those serving as interim 

Executive Officers, are not eligible for severance. Mr. Kish was not eligible for this amount as of December 31, 2019 because he was serving as Interim Chief 

Financial Officer. 

Executive Compensation 2020 Compensation Information for NEOs

FREDDIE MAC | 2020 Form 10-K 322
Security Ownership of Certain Beneficial Owners 

and Management and Related Stockholder 

Matters

SECURITY OWNERSHIP

Our only class of voting stock is our common stock. Upon its appointment as Conservator, FHFA immediately succeeded to the 

voting rights of holders of our common stock. The following table shows the beneficial ownership of our common stock as of 

February 10, 2021 by our current directors, our NEOs, all of our directors and executive officers as a group, and holders of 

more than 5% of our common stock. Beneficial ownership is determined in accordance with SEC rules for computing the 

number of shares of common stock beneficially owned by a person and the percentage ownership of that person. As of 

February 10, 2021, each director and NEO, and all of our directors and executive officers as a group, owned less than 1% of 

our outstanding common stock. We ceased paying our executives and directors stock-based compensation when we entered 

conservatorship. In addition, the Purchase Agreement prohibits us from issuing any of our equity securities, including as 

compensation to our directors and executive officers, without the prior written consent of Treasury, and no equity securities, 

other than the senior preferred stock issued to Treasury, have been issued since we entered conservatorship. In addition, 

company policy prohibits directors and executive officers from engaging in transactions involving our equity securities, except 

selling company securities owned prior to the implementation of the policy. See Executive Compensation - Other Executive 

Compensation Considerations - Stock Ownership, Hedging and Pledging Policies for additional information. Unless 

otherwise noted, the information presented below is based on information provided to us by the individuals or entities specified 

in the table. 

Stock Ownership By Directors and Executive Officers

Table 86 - Stock Ownership by Directors and Executive Officers

Directors and Named 

Executive Officers Position

Common Stock

Beneficially Owned

Excluding

Stock Options(1)

Stock Options

Exercisable

Within 60 Days of

Feb. 9, 2021

Total Common Stock 

Beneficially Owned

Mark H. Bloom Director — — — 

Kathleen L. Casey Director — — — 

Lance F. Drummond Director — — — 

Aleem Gillani Director — — — 

Mark B. Grier Director — — — 

Christopher E. Herbert Director — — — 

Grace A. Huebscher Director — — — 

Sara Mathew Director — — — 

Allan P. Merrill Director — — — 

Saiyid T. Naqvi Director — — — 

Michael T. Hutchins President — — — 

Christian M. Lown EVP & Chief Financial Officer — — — 

Ricardo A. Anzaldua EVP & General Counsel — — — 

Anil D. Hinduja EVP - Chief Risk Officer — — — 

David M. Brickman(3) Former Chief Executive Officer 3,395 — 3,395(2)

Donald F. Kish

SVP, Corporate Controller, Principal 

Accounting Officer, former Interim 

Chief Financial Officer — — — 

All directors and executive officers as a group (20 persons) 9,932 — 9,932(2)

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

FREDDIE MAC | 2020 Form 10-K 323
(1) Includes shares of stock beneficially owned as of February 9, 2021.

(2) Represents shares of stock beneficially owned prior to the company's entry into conservatorship.

(3) Mr. Brickman resigned from the company effective January 8, 2021.

Stock Ownership by Greater-Than 5% Holders

Table 87 - Stock Ownership by Greater Than 5% Holders

5% Holders(1)

Common Stock  

Beneficially Owned Percent of Class

U.S. Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Variable(2) 79.9%

(1) Pershing Square Capital Management, L.P., PS Management GP, LLC, and William A. Ackman ("Pershing") have filed certain reports on Schedule 13D, the latest of 

which was filed on March 31, 2014. In that report, Pershing reported a beneficial ownership percentage calculation of 9.78%, based solely on the 650,039,533 

shares of our common stock outstanding as reported in our Annual Report on Form 10-K filed on February 27, 2014, and excluding the shares issuable to Treasury 

pursuant to the warrant. The Schedule 13D indicated that Pershing also had additional economic exposure to approximately 8,434,958 notional shares of common 

stock, bringing the total aggregate economic exposure on the date of that filing to 72,010,523 shares of common stock (approximately 11.08% of the outstanding 

common stock). In that filing, Pershing indicated that because it believes our common stock is not a voting security, it had determined not to file future reports on 

Schedule 13D. We do not know Pershing's current beneficial ownership of our common stock.

(2) In September 2008, we issued Treasury a warrant to purchase, for one one-thousandth of a cent ($0.00001) per share, shares of our common stock equal to 79.9% 

of the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is exercised. The warrant may be exercised in whole 

or in part at any time until September 7, 2028. As of the date of this filing, Treasury has not exercised the warrant. The information above assumes Treasury 

beneficially owns no other shares of our common stock.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER 

EQUITY COMPENSATION PLANS

We have no shares of common stock available for issuance upon the exercise of options, warrants, and rights under our 

existing equity compensation plans at December 31, 2020. Prior to conservatorship, stockholders approved the Employee 

Stock Purchase Plan, the 2004 Stock Compensation Plan, and the 1995 Stock Compensation Plan (together, the Employee 

Plans), and the 1995 Directors' Stock Compensation Plan (the Directors' Plan). The authorizations to issue shares of common 

stock under the Employee Plans and Directors' Plan have expired pursuant to their respective terms. Therefore, we are not 

providing an Equity Compensation Table.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

FREDDIE MAC | 2020 Form 10-K 324
Certain Relationships And Related Transactions

POLICY GOVERNING RELATED PERSON 

TRANSACTIONS

The Board has adopted a written policy governing the approval of related person transactions. This policy sets forth procedures 

for the review and approval or ratification of transactions involving related persons. Under the policy, "related person" means 

any person who is, or was at any time since the beginning of our last completed fiscal year, a director, a director nominee, an 

executive officer, or an immediate family member of any of the foregoing persons.

Under authority delegated by the Board, the Nominating and Governance Committee, or its Chair or other designated member 

under certain circumstances, each an Authorized Approver, is responsible for applying the Related Person Transactions Policy. 

Transactions covered by the Related Person Transactions Policy consist of any transaction, arrangement, or relationship or 

series of similar transactions, arrangements, or relationships, in which: 

n The aggregate amount involved exceeded or is expected to exceed $120,000; 

n We were or are expected to be a participant; and 

n Any related person had or will have a direct or indirect material interest. 

The Related Person Transactions Policy includes a list of categories of transactions identified by the Board as having no 

significant potential for an actual conflict of interest or the appearance of a conflict or improper benefit to a related person, and 

thus such transactions are not considered potential related person transactions subject to review.

Our Legal division (or our Compliance department in certain limited circumstances) assesses whether any proposed transaction 

involving a related person is covered by the Related Person Transactions Policy. If so, the transaction is reviewed by the 

appropriate Authorized Approver. 

If possible, approval of a related person transaction is obtained prior to the effectiveness or consummation of the transaction. If 

advance approval of a related person transaction by the Authorized Approver is not feasible or is otherwise not obtained, then 

the transaction is considered promptly by the Authorized Approver to determine whether ratification is warranted.

In determining whether to approve or ratify a related person transaction covered by the Related Person Transactions Policy, the 

Authorized Approver reviews and considers all relevant information, which may include: 

n The nature of the related person's interest in the transaction; 

n The approximate total dollar value of, and extent of the related person's interest in, the transaction;

n Whether the transaction was or would be undertaken in the ordinary course of our business; 

n Whether the transaction is proposed to be, or was, entered into on terms no less favorable to us than terms that could 

have been reached with an unrelated third party; and 

n The purpose, and potential benefits to us, of the transaction.

TRANSACTIONS WITH 5% SHAREHOLDERS

In connection with our entry into conservatorship, we issued a warrant to Treasury to purchase shares of our common stock 

equal to 79.9% of the total number of shares of our common stock outstanding, on a fully diluted basis. There have been a 

number of transactions between us and Treasury since the beginning of 2020, as discussed in MD&A — Consolidated 

Results of Operations, MD&A — Liquidity and Capital Resources, MD&A — Conservatorship and Related 

Matters, MD&A — Regulation and Supervision, Note 2, Note 9, and Note 13. 

We are the compliance agent for Treasury for certain foreclosure avoidance activities under HAMP. Among other duties, as the 

program compliance agent, we conduct examinations and review servicer compliance with the published requirements for the 

program.

FHFA, as Conservator, approved the Purchase Agreement and our role as compliance agent in the MHA Program and the 

Memorandum of Understanding with Treasury, FHFA, and Fannie Mae under the HFA Initiative. FHFA also instructed us to 

implement a $5,000 principal reduction incentive under HAMP in which Treasury will pay the incentive for borrowers with 

certain of our HAMP modified loans. The remaining transactions described in the sections referenced above did not require 

review and approval under any of our policies and procedures relating to transactions with related persons.

Certain Relationships and Related Transactions

FREDDIE MAC | 2020 Form 10-K 325
TRANSACTIONS WITH INSTITUTIONS RELATED TO 

DIRECTORS

In the ordinary course of business, we were a party during 2020, and expect to continue to be a party during 2021, to certain 

business transactions with institutions affiliated with members of our Board. Management believes that the terms and 

conditions of the transactions were no more and no less favorable to us than the terms of similar transactions with unaffiliated 

institutions to which we are, or expect to be, a party. None of these transactions were required to be disclosed under SEC 

rules.

TRANSACTIONS WITH INSTITUTIONS RELATED TO 

EXECUTIVE OFFICERS

Mr. Lown’s brother, Jeffrey Lown, serves as the Chief Executive Officer and President of Cherry Hill Mortgage Investment 

Corporation (“Cherry Hill”), from which he receives equity compensation. Cherry Hill is externally managed by Cherry Hill 

Mortgage Management, LLC (or CHMM). CHMM provides or obtains the personnel and services necessary for Cherry Hill to 

conduct its business through a contractual arrangement with Freedom Mortgage Corporation. Freedom Mortgage sets and 

pays the cash compensation for Cherry Hill’s named executive officers, including Jeffrey Lown. 

Freedom Mortgage and its wholly-owned subsidiary, RoundPoint Mortgage, are single-family seller/servicers. Freedom 

Mortgage is a single-family seller/servicer and had an Early Funding Facility with us. Since January 1, 2020, the largest 

aggregate amount outstanding under the Early Funding Facility was $2.4 million, which was allocated into, and settled pursuant 

to, a cash window contract. Freedom Mortgage paid $2,287 in interest under the Early Funding Facility in 2020. The current 

aggregate amount outstanding under the Early Funding Facility is $0. 

In 2020, Freedom Mortgage and its affiliates sold us approximately $5.0 billion of single-family mortgages. In addition, Freedom 

Mortgage services approximately 138,000 loans, with a UPB as of December 31, 2020 of approximately $28.6 billion. Our 

company's current contracts with Freedom Mortgage and its affiliates contemplate sales of up to $10 billion of single-family 

mortgages annually.

In addition, in 2020, Freedom Mortgage had a Mortgage Servicing Rights financing line with us, but Freedom Mortgage 

terminated such financing line effective May 28, 2020, before Mr. Lown joined the company as its Chief Financial Officer.

Jeffrey Lown’s cash and equity compensation are not directly derived from or affected by the size or nature of Freedom 

Mortgage’s or Cherry Hill’s relationship with the company.

Jeffrey Lown is also a director of one of Cherry Hill’s subsidiaries, Aurora Financial Group Inc. (“Aurora”). Aurora is also a 

single-family servicer servicing approximately 30,000 loans with a UPB as of December 31, 2020 of $7.0 billion. Jeffrey Lown’s 

compensation is not directly derived from or affected by the size or nature of Aurora’s relationship with us.

In connection with Mr. Lown’s appointment as our CFO, the Nominating and Governance Committee reviewed our relationship 

with Cherry Hill, Freedom Mortgage, and Aurora. In addition, the Nominating and Governance Committee approved the 

company’s proposed mitigation plan which includes establishing controls designed to prevent Mr. Lown from any direct 

engagement with, access to information regarding, or otherwise influencing Freddie Mac’s current and future business dealings 

with any entity in which Jeffrey Lown has direct or indirect financial interests.

CONSERVATORSHIP AGREEMENTS

Treasury, FHFA, and the Federal Reserve have taken a number of actions to support us during conservatorship, including 

entering into the Purchase Agreement, described in this Form 10-K. See MD&A — Conservatorship and Related Matters

and Note 2.

Certain Relationships and Related Transactions

FREDDIE MAC | 2020 Form 10-K 326
Principal Accounting Fees and Services

DESCRIPTION OF FEES

PricewaterhouseCoopers LLP has served as our independent public accountants since 2002. The following is a description of 

fees billed to us by PricewaterhouseCoopers LLP during 2020 and 2019.

Auditor Fees(1)

Table 88 - Auditor Fees

(In thousands) 2020 2019

Audit Fees(2) $20,550 $19,861 

Audit-Related Fees(3) 7,180 7,220 

Tax Fees(4) 48 128 

All Other Fees(5) 10 49 

Total $27,788 $27,258 

(1) These fees represent amounts billed (including reimbursable expenses within the designated year).

(2) Audit fees include fees in connection with quarterly reviews of our Interim financial information and the audit of our annual consolidated financial statements.

(3) Audit-related fees include: (i) fees for the performance of certain agreed-upon procedures regarding aspects of compliance with the Purchase Agreement covenants; 

(ii) compliance evaluation of the minimum servicing standards as set forth in the Uniform Single Attestation Program for Mortgage Bankers; (iii) fees for preimplementation assistance for current expected credit losses accounting in 2019; (iv) fees related to accounting policy consultations; and (v) fees for the 

performance of certain agreed-upon procedures related to our risk transfer and structured transactions, pursuant to engagement letters with the company, including 

where the fees are billed to and paid by unconsolidated trusts created in connection with such transactions.  

(4) The tax fees billed relate to non-audit tax compliance and consulting services to provide advice and recommendations related to tax planning or reporting matters.

(5) All other fees include: (i) our subscription to a web-based suite of human resources benchmark data; and (ii) our subscription to accounting research and disclosure 

software.

APPROVAL OF INDEPENDENT AUDITOR SERVICES 

AND FEES

Under its charter, the Audit Committee is responsible for the following: 

n Appointing our independent public accounting firm (subject to FHFA approval as required); 

n Approving all audit and non-audit services permitted under applicable law to be performed by the independent public 

accounting firm (subject to FHFA approval as required);

n Approving our independent public accounting firm's proposed risk assessment, scope, and audit approach with respect to 

the annual audit; and

n Overseeing the performance of, and relationship with, our independent public accounting firm.

The Sarbanes-Oxley Act of 2002 and related SEC rules require that all services provided to companies subject to the reporting 

requirements of the Exchange Act by their independent auditors be pre-approved by their audit committee or by authorized 

members of the committee, with certain exceptions. The Audit Committee's charter requires that the Audit Committee preapprove any audit services, and any non-audit services permitted under applicable law, to be performed by our independent 

auditors (or to designate one or more members of the Audit Committee to pre-approve such services and report such preapproval to the Audit Committee). 

Audit services that are within the scope of an auditor's engagement approved by the Audit Committee prior to the performance 

of those services are deemed pre-approved and do not require separate pre-approval. Audit services not within the scope of an 

Audit Committee-approved engagement, as well as permissible non-audit services, must be separately pre-approved by the 

Audit Committee.

When the Audit Committee pre-approves a service, it sets a dollar limit for such service. Management obtains pre-approval of 

the Audit Committee, or of the Chair of the Audit Committee (when the Chair of the Audit Committee has been delegated such 

authority), before it incurs fees exceeding the dollar limit. If the Chair of the Audit Committee approves the increase, the Chair 

will report such approval at the Audit Committee's next scheduled meeting. The Audit Committee has delegated to the Chair 

the authority to address requests to pre-approve certain additional audit and non-audit services to be performed by the 

Principal Accounting Fees and Services

FREDDIE MAC | 2020 Form 10-K 327
company's independent auditor with fees totaling up to a maximum of $250,000 per quarter, with reporting of any such 

approval decisions to the Audit Committee at its next scheduled meeting. The pre-approval procedure is administered by our 

senior financial management, which reports throughout the year to the Audit Committee. The Audit Committee pre-approved all 

audit, audit-related, tax, and other services performed by our independent public accounting firm in 2020 and 2019.

The Audit Committee appoints the independent public accounting firm on an annual basis. In connection with applicable 

partner rotation requirements, the Audit Committee and its Chair are involved in considering the selection of the independent 

registered public accounting firm’s new lead partner and concurring/reviewing partner. In evaluating the performance of the 

independent public accounting firm, the Audit Committee considers a number of factors, including the following:

n The firm's status as a registered public accounting firm with the Public Company Accounting Oversight Board (United 

States), or PCAOB, as required by the Sarbanes-Oxley Act of 2002 and the Rules of the PCAOB; 

n Its independence and processes for maintaining its independence;

n Its approach to resolving significant accounting and auditing matters;

n Its capability and expertise in handling the complexity of the company's business, including the capability and expertise of 

the lead audit partner and of the key members of the engagement team;

n Historical and recent performance, including the extent and quality of the independent public accounting firm's 

communications with the Audit Committee, and the results of a management survey of the independent public accounting 

firm's overall performance;

n Data related to audit quality and performance, including recent PCAOB inspection reports on the firm; and

n The appropriateness of its fees, both on an absolute basis and as compared with peers.

The Audit Committee has determined that the non-audit services rendered by PricewaterhouseCoopers during its most recent 

fiscal year are compatible with maintaining PricewaterhouseCoopers' independence.

Principal Accounting Fees and Services

FREDDIE MAC | 2020 Form 10-K 328
Exhibits and Financial Statement Schedules

 (a) Documents filed as part of this report:

 (1) Consolidated Financial Statements

The consolidated financial statements required to be filed in this Form 10-K are included in 

Financial Statements and Supplementary Data.

 (2) Financial Statement Schedules

 None.

 (3) Exhibits

An Exhibit Index has been filed as part of this Form 10-K beginning on page 339.

Exhibits and Financial Statement Schedules

FREDDIE MAC | 2020 Form 10-K 329
Glossary

This Glossary includes acronyms and defined terms that are used throughout this report.

n	 ACIS - Agency Credit Insurance Structure - Transactions in which we purchase insurance policies that provide credit 

protection for certain specified credit events that occur and are typically allocated to the non-issued notional credit risk 

positions of a STACR transaction. We also enter into other ACIS transactions that provide credit protection for certain 

specified credit events on loans not included in a reference pool created for a STACR transaction, or provide front-end 

credit risk transfer as loans come into the portfolio. Under each of these insurance policies, we pay monthly premiums that 

are determined based on the outstanding balance of the reference pool. When specific credit events occur, we generally 

receive compensation from the insurance policy up to an aggregate limit based on actual losses.

n Administration - Executive branch of the U.S. government.

n	 Agency securities - Generally refers to mortgage-related securities issued or guaranteed by the GSEs or government 

agencies.

n	 Alt-A loan - Although there is no universally accepted definition of Alt-A, many 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 these loans are underwritten with lower or alternative income or asset documentation requirements 

compared to a full documentation loan, or both. We categorize loans in our single-family credit guarantee portfolio as Alt-A 

if the lender that delivers them to us classified the loans as Alt-A, or if the loans had reduced documentation requirements 

as well as a combination of certain credit characteristics and expected performance characteristics at acquisition which, 

when compared to full documentation loans in our portfolio, indicate that the loan should be classified as Alt-A. 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 as an Alt-A loan because the refinance loan is not identified by the servicer as an Alt-A loan. We 

categorize our investments in non-agency mortgage-related securities as Alt-A if the securities were identified as such 

based on information provided to us when we entered into these transactions.

n	 AMI - Area Median Income.

n	 AOCI - Accumulated other comprehensive income (loss), net of taxes.

n	 ARM - Adjustable-rate mortgage - A mortgage loan with an interest rate that adjusts periodically over the life of the loan 

based on changes in a benchmark index.

n	 ASC - Accounting Standards Codification.

n	 ASU - Accounting Standards Update.

n	 Back-end coverage type - Applies to transactions in which the credit risk transfer occurs after our purchase of the loan or 

guarantee of a security.

n	 Board - Board of Directors.

n	 Bps - Basis points - One one-hundredth of 1%. This term is commonly used to quote the yields of debt instruments or 

movements in interest rates.

n	 Capital Reserve Amount - See Net worth sweep dividend, Net Worth Amount, Capital Reserve Amount, and Capital 

Reserve End Date for additional information.

n	 Capital Reserve End Date - See Net worth sweep dividend, Net Worth Amount, Capital Reserve Amount, and 

Capital Reserve End Date for additional information.

n	 CARES Act - Coronavirus Aid, Relief, and Economic Security Act- An economic stimulus bill signed into law on March 27, 

2020, designed to mitigate the negative economic effects of the COVID-19 pandemic in the United States.

n	 CCF - Conservatorship Capital Framework - An economic capital system with detailed formulae provided by FHFA that is 

used to evaluate and manage our financial risk and to make economic business decisions while in conservatorship.

n	 CCO - Chief Compliance Officer.

n	 CD&A - Compensation Discussion and Analysis.

n	 CDC - Centers for Disease Control and Prevention

n	 CECL - The Current Expected Credit Losses impairment model as defined by FASB ASC Topic 326, Financial Instruments 

- Credit Losses, pursuant to ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit 

Losses on Financial Instruments; ASU 2019-04, Codification Improvements to Financial Instruments - Credit Losses (Topic 

326); ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial 

Instrument; and ASU 2019-11, Codification Improvements to Financial Instruments - Credit Losses (Topic 326).

n	 CEO - Chief Executive Officer.

n	 CFO - Chief Financial Officer.

n	 CFPB - Consumer Financial Protection Bureau.

Glossary

FREDDIE MAC | 2020 Form 10-K 330
n	 Charge-offs, gross - Represent the amount of a loan that has been discharged in order to remove the loan from our 

consolidated balance sheets when the loan is deemed uncollectible, regardless of when the impact of the credit loss was 

recorded on our consolidated statements of comprehensive income. Generally the amount of a charge-off is the recorded 

investment in excess of the fair value of the loan's collateral.

n	 Charter - The Federal Home Loan Mortgage Corporation Act, as amended, 12 U.S.C. § 1451 et seq.

n	 CHC Committee - The Compensation and Human Capital Committee of the Board.

n	 CMBS - Commercial mortgage-backed security - A security backed by loans on commercial property (often including 

multifamily rental properties) as opposed to one-to-four family residential real estate. Although the loan pools underlying 

CMBS can include loans financing multifamily properties and commercial properties, such as office buildings and hotels, 

the classes of CMBS that we hold receive distributions of scheduled cash flows only from multifamily properties.

n	 Comprehensive income (loss) - Consists of net income (loss) plus other comprehensive income (loss).

n	 Conforming loan/Conforming loan limit - A conventional single-family loan with an original principal balance that is equal 

to or less than the applicable statutory conforming loan limit, which is a dollar amount cap on the original principal balance 

of single-family loans we are permitted by law to purchase or securitize. The conforming loan limit is determined annually 

based on changes in FHFA's house price index.

n	 Conservator - The FHFA, acting in its capacity as Conservator of Freddie Mac.

n	 Conservatorship Capital - The capital needed under the CCF for analysis of transactions and business.

n	 Conservatorship Scorecard - FHFA's mechanism for outlining specific conservatorship priorities for Freddie Mac, Fannie 

Mae, and their joint venture, Common Securitization Solutions, LLCSM.

n	 Convexity - A measure of how much a financial instrument's duration changes as interest rates change.

n	 Core single-family loan portfolio - Consists of loans in our single-family credit guarantee portfolio that were originated 

after 2008. We do not include relief refinance loans, including HARP loans, in this loan portfolio as underwriting procedures 

for relief refinance loans are limited, and, in many cases, do not include all of the changes in underwriting standards we 

have implemented since 2008.

n	 Credit enhancement - A financial arrangement that is designed to reduce credit risk by partially or fully compensating an 

investor in a mortgage or security (e.g., Freddie Mac) in the event of specified losses. Examples of credit enhancements 

include insurance, CRT transactions, overcollateralization, indemnification agreements, and government guarantees.

n	 Credit losses - Consists of charge-offs and REO operations (income) expense, which are both net of recoveries.

n	 Credit-related expense - Consists of our benefit (provision) for credit losses, credit enhancement expense, benefit for 

(decrease in) credit enhancement recoveries, and REO operations expense.

n	 Credit risk transfer (CRT) transactions - Arrangements where we actively transfer the credit risk exposure on mortgages 

that we own or guarantee.

n	 Credit score - Credit score data is based on FICO scores, a credit scoring system developed by Fair, Isaac and Co. FICO 

scores are currently the most commonly used credit scores. FICO scores are ranked on a scale of approximately 300 to 

850 points with a higher value indicating a lower likelihood of credit default. 

l Original credit score - The credit score of the borrower at the time of loan origination or our purchase.

l Current credit score - The credit score of the borrower as of the first month of the most recent quarter.

n	 CRO - Chief Risk Officer.

n	 CSS - Common Securitization Solutions, LLC.

n	 CSP - Common Securitization Platform.

n Current LTV Ratio or CLTV - The current LTV ratios are management estimates, which are updated on a monthly basis. 

Current market values are estimated by adjusting the value of the property at origination based on changes in the market 

value of homes in the same geographic area since that time. Changes in market value are derived from our internal index, 

which measures price changes for repeat sales and refinancing activity on the same properties using Freddie Mac and 

Fannie Mae single-family loan acquisitions. Estimates of the current LTV ratio exclude any secondary financing by third 

parties.

n	 December 2017 Letter Agreement - An agreement that we through the Conservator, acting on our behalf, entered into 

with Treasury on December 21, 2017 to amend the Amended and Restated Certificate of Creation, Designation, Powers, 

Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms, and Conditions of Variable Liquidation 

Preference Senior Preferred Stock (Par Value $1.00 Per Share) dated September 27, 2012.

n	 Deed in lieu of foreclosure - An alternative to foreclosure in which the borrower voluntarily conveys title to the property to 

the lender and the lender accepts such title (sometimes together with an additional payment by the borrower) in full 

satisfaction of the mortgage indebtedness.

n	 Delinquency - A failure to make timely payments of principal and/or interest on a loan. For single-family loans, we 

generally report delinquency rate information based on the number of loans that are seriously delinquent. For multifamily 

loans, we report delinquency rate information based on the UPB of loans that are two monthly payments or more past due 

Glossary

FREDDIE MAC | 2020 Form 10-K 331
or in the process of foreclosure. Loans that have been modified are not counted as delinquent as long as the borrower is 

not delinquent under the modified terms. Unless stated otherwise, multifamily delinquency rates presented in this Form 10-

K refer to gross delinquency rates before consideration of risk transfers.

n	 Delivery fee - A fee charged to sellers above base contractual guarantee fees to compensate us for higher levels of risk in 

some loan products.

n	 Derivative - A financial instrument whose value depends upon the characteristics and value of an underlying such as a 

financial asset or index. Examples of an underlying include a security or commodity price, interest or currency rates, and 

other financial indices.

n	 Dodd-Frank Act - Dodd-Frank Wall Street Reform and Consumer Protection Act.

n	 Dollar roll transactions - Transactions whereby we enter into an agreement to sell and subsequently repurchase (or 

purchase and subsequently resell) agency securities.

n	 DSCR - Debt Service Coverage Ratio - An indicator of future credit performance for multifamily loans. The DSCR estimates 

a multifamily borrower's ability to service its mortgage obligation using the secured property's cash flow, after deducting 

non-mortgage expenses from income. The higher the DSCR, the more likely a multifamily borrower will be able to continue 

servicing its loan obligation.

n	 DTI - Debt-to-income.

n	 Duration - Duration is a measure of a financial instrument's price sensitivity to changes in interest rates.

n	 Duration gap - One of our primary interest-rate risk measures. Duration gap is a measure of the difference between the 

estimated durations of our interest rate sensitive assets and liabilities. We present the duration gap of our financial 

instruments in units expressed as months. A duration gap of zero implies that the change in value of our interest rate 

sensitive assets from an instantaneous change in interest rates would be expected to be accompanied by an equal and 

offsetting change in the value of our interest rate sensitive liabilities, thus leaving economic value unchanged.

n	 DUS - Fannie Mae's Delegated Underwriting and Servicing program.

n	 EMCP - Executive Management Compensation Program.

n	 Enhanced Relief Refinance - Provides liquidity for borrowers who are current on their mortgages but unable to refinance 

because their LTV ratios exceed standard refinance limits. This program became available in January 2019 for loans 

originated on or after October 1, 2017.

n	 Enterprises - Freddie Mac and Fannie Mae.

n	 ERC - Enterprise Risk Committee.

n	 ERCF - Enterprise Regulatory Capital Framework - Final rule released by FHFA in November 2020 and published in the 

Federal Register on December 17, 2020, that establishes a new regulatory capital framework for Freddie Mac and Fannie 

Mae.

n	 ERM - Enterprise Risk Management.

n	 ERP - Enterprise Risk Policy - The ERP sets forth the core components of the enterprise risk framework that defines how 

we identify, assess, manage, control, and report on risks.

n	 EVP - Executive Vice President.

n	 Exchange Act - Securities Exchange Act of 1934, as amended.

n	 Fannie Mae - Federal National Mortgage Association.

n	 FASB - Financial Accounting Standards Board.

n	 Federal Reserve - Board of Governors of the Federal Reserve System.

n FHA - Federal Housing Administration.

n	 FHFA - Federal Housing Finance Agency - An independent agency of the U.S. government with responsibility for regulating 

Freddie Mac, Fannie Mae, and the FHLBs.

n	 FHLB - Federal Home Loan Bank.

n	 55-day MBS - A single-class pass-through security with a 55-day payment delay for non-TBA-eligible fixed-rate mortgage 

loans. Freddie Mac began issuing 55-day MBS on and after June 3, 2019.

n	 Fixed-rate loan - Refers to a loan originated at a specific rate of interest that remains constant over the life of the loan. For 

purposes of presentation in this report, we have categorized a number of modified loans as fixed-rate loans, even though 

the modified loans have rate adjustment provisions. In these cases, while the terms of the modified loans provide for the 

interest rate to adjust in the future, such future rates are determined at the time of the modification rather than at a 

subsequent date.

n	 Foreclosure alternative - A workout option pursued when a home retention action is not successful or not possible. A 

foreclosure alternative is either a short sale or deed in lieu of foreclosure.

n	 Foreclosure or foreclosure sale - Refers to our completion of a transaction provided for by the foreclosure laws of the 

applicable state, in which a delinquent borrower's ownership interest in a mortgaged property is terminated and title to the 

Glossary

FREDDIE MAC | 2020 Form 10-K 332
property is transferred to us or to a third party. When we, as loan holder, acquire a property in this manner, we pay for it by 

extinguishing some or all of the mortgage debt.

n	 Freddie Mac mortgage-related securities - Securities we issue and guarantee that are backed by mortgages.

n	 Front-end coverage type - Applies to transactions in which the credit risk transfer occurs prior to, or simultaneously with, 

our purchase of the loan.

n	 GAAP - Generally accepted accounting principles in the United States of America.

n	 Giant MBS - Resecuritizations of newly issued 55-day MBS (and/or Giant MBS), and/or 55-day MBS (and/or Giant MBS) 

that Freddie Mac has issued in exchange for non-TBA-eligible PCs and non-TBA-eligible Giant PCs that have been 

delivered to Freddie Mac in response to the exchange offer. Giant MBS are single-class securities that involve the direct 

pass-through of all cash flows of the underlying collateral to holders of the beneficial interests.

n	 Giant PCs - Resecuritizations of previously issued PCs or Giant PCs. Giant PCs are single-class securities that involve the 

direct pass through of all cash flows of the underlying collateral to holders of the beneficial interests.

n	 Ginnie Mae - Government National Mortgage Association, which guarantees the timely payment of principal and interest 

on mortgage-related securities backed by federally insured or guaranteed loans, primarily those insured by FHA or 

guaranteed by the VA.

n	 Green Advantage loan - A multifamily loan that we offer under our Green Advantage initiative, whereby borrowers finance 

the installation of green technologies that reduce energy and water consumption.

n GSD/FICC - Government Securities Division of Fixed Income Clearing Corporation.

n	 GSE Act - The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Reform Act.

n	 GSEs - Government sponsored enterprises - Refers to certain legal entities created by the U.S. government, including 

Freddie Mac, Fannie Mae, and the FHLBs.

n	 Guarantee fee - The fee that we receive for guaranteeing the payment of principal and interest to mortgage security 

investors, which consists primarily of a combination of a monthly guarantee fee paid as a percentage of the UPB of the 

underlying loans, and initial upfront payments, such as delivery fees.

n	 Guidelines - Corporate Governance Guidelines, as revised.

n	 HAMP - Home Affordable Modification Program - Refers to the effort under the MHA Program whereby the 

U.S. government, Freddie Mac, and Fannie Mae committed funds to help eligible homeowners avoid foreclosure and keep 

their homes through loan modifications. HAMP ended in December 2016.

n	 HARP - Home Affordable Refinance Program - Refers to the effort under the MHA Program that sought to help eligible 

borrowers with existing loans that are guaranteed by us or Fannie Mae to refinance into loans with more affordable monthly 

payments and/or fixed-rate terms without obtaining new mortgage insurance in excess of the insurance coverage, if any, 

that was already in place. HARP was targeted at borrowers with current LTV ratios above 80%. The HARP program ended 

in December 2018 and has been replaced by Freddie Mac's Enhanced Relief Refinance program. 

n	 HFA - State or local Housing Finance Agency.

n	 HUD - U.S. Department of Housing and Urban Development - HUD has authority over Freddie Mac with respect to fair 

lending. 

n	 Implied volatility - A measurement of how the value of a financial instrument changes due to changes in the market's 

expectation of potential changes in future interest rates. A decrease in implied volatility generally increases the estimated 

fair value of our mortgage-related assets and decreases the estimated fair value of our callable debt and option-based 

derivatives, while an increase in implied volatility generally has the opposite effect.

n	 Initial margin - The collateral that we post with a derivatives clearinghouse in order to do business with such 

clearinghouse. The amount of initial margin varies over time.

n	 Integrated Mortgage Insurance (IMAGIN) - An insurance-based offering that provides loan-level protection for loans with 

80% and higher LTV ratios. IMAGIN is designed to expand and diversify sources of private capital supporting low down 

payment lending. Mortgage insurance provided for each loan is generally underwritten by a group of insurers and 

reinsurers. IMAGIN is offered to a broad range of Freddie Mac sellers, who can choose IMAGIN or traditional primary 

mortgage insurance at their discretion.

n	 Interest-only loan - A loan that allows the borrower to pay only interest (either fixed-rate or adjustable-rate) for a fixed 

period of time before payments of principal begin. After the interest-only period, the borrower may choose to refinance the 

loan, pay off the principal balance in total, or pay the scheduled principal and interest payment due on the loan.

n	 Investment gains (losses), net - Consists of gains and losses from mortgage loans, investment securities, debt, and 

derivatives.

n	 January 2021 Letter Agreement - An agreement that we through the Conservator, acting on our behalf, entered into with 

Treasury on January 14, 2021 to further amend (i) the Amended and Restated Certificate of Creation, Designation, Powers, 

Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms, and Conditions of Variable Liquidation 

Preference Senior Preferred Stock (Par Value $1.00 Per Share) dated September 30, 2019 and (ii) the Purchase Agreement.

Glossary

FREDDIE MAC | 2020 Form 10-K 333
n	 K Certificates - Structured pass-through certificates backed primarily by recently originated multifamily loans purchased 

by Freddie Mac.

n	 Legacy and relief refinance single-family loan portfolio - Consists of loans in our single-family credit guarantee portfolio 

that were originated in 2008 and prior, as well as relief refinance loans, including HARP loans that were originated after 

2008.

n	 Level 1 Securitization Products - Single-class pass-through securities that represent undivided beneficial interests in 

trusts that hold pools of loans. These products include UMBS, 55-day MBS, and PCs.

n	 LIBOR - London Interbank Offered Rate.

n	 LIHTC partnerships - Low-income housing tax credit partnerships - These LIHTC partnerships invest directly in limited 

partnerships that own and operate affordable multifamily rental properties that generate federal income tax credits and 

deductible operating losses.

n	 Liquidation preference - Generally refers to an amount that holders of preferred securities are entitled to receive out of 

available assets upon liquidation of a company. The initial liquidation preference of our senior preferred stock was 

$1.0 billion. The aggregate liquidation preference of our senior preferred stock includes the initial liquidation preference 

plus amounts funded by Treasury under the Purchase Agreement, as well as $3.0 billion added pursuant to the December 

2017 Letter Agreement. In addition pursuant to the September 2019 and January 2021 Letter Agreements, the liquidation 

preference of the senior preferred stock has and will be increased at the end of each fiscal quarter, from September 30, 

2019 through the Capital Reserve End Date, by an amount equal to the increase in the Net Worth Amount, if any during the 

immediately prior fiscal quarter. We may make payments to reduce the liquidation preference of the senior preferred stock 

only in limited circumstances.

n	 Liquidity and Contingency Operating Portfolio - Subset of our other investments portfolio. Consists of cash and cash 

equivalents, certain securities purchased under agreements to resell, and certain non-mortgage-related securities.

n	 LLC - Limited liability company.

n	 Loan liquidations - Loans removed from the pools underlying Freddie Mac mortgage-related securities and other 

mortgage-related guarantees due to prepayment, maturity, repurchase or charge-off, foreclosure alternatives, third-party 

sales, and loans going into REO. Loans are also terminated through sales of seriously delinquent loans and nonconsolidated senior subordinate securitization structure transactions collateralized by reperforming loans. In addition, 

periodic paydown of loan principal is also included in loan liquidations.

n	 Long-term debt - Debt due after one year based on the original contractual maturity of the debt instrument. Our long-term 

debt issuances include medium-term notes, Reference Notes securities, STACR debt notes, and SCR debt notes.

n	 LTV ratio - Loan-to-value ratio - The ratio of the unpaid principal amount of a loan to the value of the property that serves 

as collateral for the loan, expressed as a percentage. We report LTV ratios based solely on the amount of the loan 

purchased or guaranteed by us, generally excluding any second-lien loans (unless we own or guarantee the second lien).

n Market spread - The difference between the yields of two debt securities, or the difference between the yield of a debt 

security and a benchmark yield, such as LIBOR. We measure market spreads primarily using our models.

n MBS - Mortgage-backed security.

n	 MBSD/FICC - Mortgage Backed Securities Division of the Fixed Income Clearing Corporation.

n	 MCIP - Multifamily Credit Insurance Pool.

n	 MD&A - Management's Discussion and Analysis of Financial Condition and Results of Operations.

n	 MHA Program - Making Home Affordable Program - The MHA Program was designed to help in the housing recovery, 

promote liquidity and housing affordability, expand foreclosure prevention efforts, and set market standards. The MHA 

Program included HARP and HAMP.

n	 Mortgage assets - Refers to both loans and the mortgage-related securities we hold in our mortgage-related investments 

portfolio.

n	 Mortgage-related investments portfolio - Our mortgage investment portfolio, which consists of mortgage-related 

securities and unsecuritized single-family and multifamily loans. The size of our mortgage-related investments portfolio 

under the Purchase Agreement is determined without giving effect to the January 1, 2010 change in accounting guidance 

related to transfers of financial assets and consolidation of VIEs.

n	 MSA - Metropolitan Statistical Area.

n	 Multifamily loan - A loan secured by a property with five or more residential rental units or by a manufactured housing 

community.

n	 Multifamily mortgage portfolio - Consists of multifamily mortgage loans held by us on our consolidated balance sheets 

as well as our guarantee of securitization products, primarily K Certificates, SB Certificates, and other mortgage-related 

guarantees that are held by third parties. It excludes loans underlying our guarantees of HFA bonds.

n	 Multifamily new business activity - Represents loan purchases, issuances of other mortgage-related guarantees, and 

issuances of other securitization products for which we have not previously purchased the underlying loans.

Glossary

FREDDIE MAC | 2020 Form 10-K 334
n	 Net Worth Amount - See Net worth sweep dividend, Net Worth Amount, Capital Reserve Amount, and Capital 

Reserve End Date for additional information.

n	 Net worth (deficit) - The amount by which our total assets exceed (or are less than) our total liabilities as reflected on our 

consolidated balance sheets prepared in conformity with GAAP.

n	 Net worth sweep dividend, Net Worth Amount, Capital Reserve Amount, and Capital Reserve End Date - For each 

quarter from January 1, 2013 through the Capital Reserve End Date, the dividend payment on the senior preferred stock 

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. The term Net Worth Amount is defined as the total assets of Freddie 

Mac (excluding Treasury's commitment and any unfunded amounts thereof), less our total liabilities (excluding any 

obligation in respect of capital stock), in each case as reflected on our consolidated balance sheets prepared in conformity 

with GAAP. If the calculation of the dividend payment for a quarter does not exceed zero, then no dividend shall accrue or 

be payable for that quarter. The applicable Capital Reserve Amount was $600 million for 2017, increased to $3.0 billion in 

2018 pursuant to the December 2017 Letter Agreement, increased to $20.0 billion pursuant to the September 2019 Letter 

Agreement, and increased further to the amount of adjusted total capital necessary to meet capital requirements and 

buffers set forth in the ERCF pursuant to the January 2021 Letter Agreement (if we were not to pay our dividend 

requirement on the senior preferred stock in full in any future period until the Capital Reserve End Date, the applicable 

Capital Reserve Amount would thereafter be zero). The Capital Reserve End Date is the last day of the second consecutive 

fiscal quarter during which Freddie Mac has had and maintained capital equal to or in excess of all of the capital 

requirements and buffers under the ERCF.

n	 Non-accrual loan - A loan for which we are not accruing interest income. We place loans on non-accrual status when we 

believe collectability of principal and interest in full is not reasonably assured, which generally occurs when a loan is three 

monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan 

assessment.

n	 Non-performing loan - A loan where the borrower is three months or more past due or is in the process of foreclosure.

n	 NYSE - New York Stock Exchange.

n	 OAS - Option-adjusted spread - An estimate of the incremental yield spread between a particular financial instrument (e.g., 

a security, loan, or derivative contract) and a benchmark yield curve (e.g., LIBOR, agency, or U.S. Treasury securities). This 

includes consideration of potential variability in the instrument's cash flows resulting from any options embedded in the 

instrument, such as prepayment options. When the OAS on a given asset widens, the fair value of that asset will typically 

decline, all other market factors being equal. The opposite is true when the OAS on a given asset tightens.

n	 Optigo® - Freddie Mac's Multifamily lender network and loan offerings.

n	 Option ARM loan - Loans that permit a variety of repayment options, including minimum, interest-only, fully amortizing 30-

year, and fully amortizing 15-year payments. The minimum payment alternative for option ARM loans allows the borrower 

to make monthly payments that may be less than the interest accrued for the period. The unpaid interest is added to the 

principal balance of the loan, known as negative amortization. For our non-agency mortgage-related securities that are 

backed by option ARM loans, we categorize securities as option ARM if the securities were identified as such based on 

information provided to us when we entered into these transactions. We have not identified option ARM securities as either 

subprime or Alt-A securities.

n	 Original LTV ratio - A credit measure for loans, calculated as the UPB of the loan divided by the lesser of the appraised 

value of the property at the time of loan origination or the borrower's purchase price. Second liens not owned or 

guaranteed by us are excluded from the LTV ratio calculation. The existence of a second-lien loan reduces the borrower's 

equity in the home and, therefore, can increase the risk of default and the amount of the gross loss if a default occurs.

n	 OTC - Over-the-counter.

n	 OTCQB - A marketplace, operated by the OTC Markets Group Inc., for OTC-traded U.S. companies that are registered and 

current in their reporting with the SEC or a U.S. banking or insurance regulator.

n	 PCs - Participation Certificates - Single-class pass-through securities that we issue and guarantee as part of a 

securitization transaction. Typically we purchase loans from sellers, place a pool of loans into a PC trust, and issue PCs 

from that trust. The PCs are generally transferred to the seller of the loans as consideration for the loans or are sold to 

third-party investors or retained by us if we purchased the loans for cash.

l Gold PCs - Single-class pass-through securities with a 45-day payment delay that Freddie Mac issued for fixed-rate 

mortgage loans prior to June 3, 2019. Freddie Mac no longer issues Gold PCs. Existing Gold PCs are eligible for 

exchange into UMBS (for TBA-eligible securities) or 55-day MBS (for non-TBA-eligible securities).

l ARM PCs - Single-class pass-through securities with a 75-day payment delay for ARM products. 

n	 Pension Plan - The Federal Home Loan Mortgage Corporation Employees' Pension Plan.

n	 Performing loan - A loan where the borrower is less than three months past due and is not in the process of foreclosure.

n	 Primary mortgage market - The market where lenders originate loans by lending funds to borrowers. We do not lend 

money directly to homeowners and do not participate in this market.

n	 Purchase Agreement / Senior Preferred Stock Purchase Agreement - An agreement that we through the Conservator, 

Glossary

FREDDIE MAC | 2020 Form 10-K 335
acting on our behalf, entered into with Treasury on September 7, 2008, relating to Treasury's purchase of senior preferred 

stock and warrant, which was subsequently amended and restated on September 26, 2008 and further amended on 

May 6, 2009, December 24, 2009, August 17, 2012, December 21, 2017, September 27, 2019, and January 14, 2021.

n	 PVS - Portfolio Value Sensitivity - One of our primary interest-rate risk measures. PVS measures are estimates of the 

amount of average potential pre-tax loss in the value of our financial assets and liabilities due to parallel (PVS-L) and nonparallel (PVS-YC) changes in LIBOR.

n	 RCSA - Risk and Control Self-Assessment.

n	 Reform Act - The Federal Housing Finance Regulatory Reform Act of 2008, which, among other things, amended the GSE 

Act by establishing a single regulator, FHFA, for Freddie Mac, Fannie Mae, and the FHLBs.

n	 REIT - Real estate investment trust.

n	 Relief refinance loan - A single-family loan delivered to us for purchase or guarantee that meets the criteria of the Freddie 

Mac Relief Refinance Mortgage SM initiative. Part of this initiative was our implementation of HARP for our loans, and relief 

refinance options are also available for certain non-HARP loans. Although HARP was targeted at borrowers with current 

LTV ratios above 80%, our initiative also allows borrowers with LTV ratios of 80% and below to participate.

n	 REMIC - Real Estate Mortgage Investment Conduit - A type of multiclass mortgage-related security that divides the cash 

flows (principal and interest) of the underlying mortgage-related assets into two or more classes that meet the investment 

criteria and portfolio needs of different investors. This structure allows commingling of TBA-eligible Freddie Mac and 

Fannie Mae collateral.

n	 REO - Real estate owned - Real estate which we have acquired through a foreclosure sale or through a deed in lieu of 

foreclosure.

n	 Reperforming loan - An unsecuritized loan that was previously three months or more past due based on the loan’s 

original contractual terms or in the process of foreclosure, but the borrower subsequently made payments or entered into 

payment deferrals such that the loan returns to less than three months past due, or a performing modified loan, which is a 

loan that was modified and is less than three months past due and is not in the process of foreclosure.

n	 Reputation risk - The risk of damage to the Freddie Mac brand and reputation from any action, inaction, or association 

that is perceived to be inappropriate, unethical, or inconsistent with our mission.

n	 RMBS - Residential mortgage-backed security - A security backed by loans on one-to-four family residential real estate.

n	 RSU - Restricted stock unit.

n	 S&P - Standard & Poor's.

n	 SB Certificates - Structured pass-through certificates backed primarily by recently originated small balance multifamily 

loans purchased by Freddie Mac.

n	 SCR debt note - Structured Credit Risk debt note - A debt security where the principal balance is subject to the 

performance of a reference pool of multifamily loans guaranteed by Freddie Mac.

n	 SEC - U.S. Securities and Exchange Commission.

n	 Seasoned single-family mortgage loans - Includes seriously delinquent and reperforming loans.

n	 Secondary mortgage market - A market consisting of institutions engaged in buying and selling loans in the form of 

whole loans (i.e., loans that have not been securitized) and mortgage-related securities. We participate in the secondary 

mortgage market by issuing guaranteed mortgage-related securities and by purchasing loans and mortgage-related 

securities for investment.

n	 Segment Earnings - Segment Earnings are presented for each segment by reclassifying certain credit guarantee-related 

activities and investment-related activities between various line items on our GAAP consolidated statements of 

comprehensive income and allocating certain revenues and expenses, including certain returns on assets, funding and 

hedging costs, and administrative expenses, to our three reportable segments - Single-family Guarantee, Multifamily, and 

Capital Markets. Certain activities that are not part of a reportable segment are included in the All Other category. 

n	 Seller/Servicer Guide (Guide) - The Guide consists of Freddie Mac's requirements relating to the purchase, sale, and 

servicing of single-family mortgages. The Guide reflects how and when sellers and servicers interact with Freddie Mac.

n	 Senior preferred stock - The shares of Variable Liquidation Preference Senior Preferred Stock issued to Treasury under 

the Purchase Agreement.

n	 Senior subordinate securitization structures - Structures in which we issue guaranteed senior securities and 

unguaranteed subordinated securities backed by reperforming single-family loans or recently originated single-family 

loans.

n	 September 2019 Letter Agreement - An agreement that we through the Conservator, acting on our behalf, entered into 

with Treasury on September 27, 2019 to amend the Amended and Restated Certificate of Creation, Designation, Powers, 

Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms, and Conditions of Variable Liquidation 

Preference Senior Preferred Stock (Par Value $1.00 Per Share) dated September 27, 2012.

n	 Seriously delinquent or SDQ - Single-family loans that are three monthly payments or more past due or in the process of 

Glossary

FREDDIE MAC | 2020 Form 10-K 336
foreclosure as reported to us by our servicers. Unless stated otherwise, SDQ rates presented in this Form 10-K refer to 

gross SDQ rates before consideration of credit enhancements.

n	 SERP - The Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan.

n	 Short sale - An alternative to foreclosure consisting of a sale of a mortgaged property in which the homeowner sells the 

home at market value and the lender accepts proceeds (sometimes together with an additional payment or promissory 

note from the borrower) that are less than the outstanding loan indebtedness in full satisfaction of the loan.

n	 Short-term debt - Debt due within one year based on the original contractual maturity of the debt instrument. Our shortterm debt issuances primarily include discount notes and Reference Bills securities.

n	 SIFMA - Securities Industry and Financial Markets Association.

n	 Single-family credit guarantee portfolio - Consists of unsecuritized single-family loans, single-family loans held by 

consolidated trusts, single-family loans underlying nonconsolidated resecuritization products, single-family loans covered 

by long-term standby commitments, and certain mortgage-related securities not issued by us that we guarantee that are 

collateralized by single-family loans. Excludes our resecuritizations of Ginnie Mae Certificates because these guarantees 

do not expose us to meaningful amounts of credit risk due to the credit enhancement provided on them by the U.S. 

government.

n	 Single-family loan - A loan secured by a property containing four or fewer residential dwelling units.

n	 Single-family new business activity - Single-family loans we purchased or guaranteed.

n	 SOFR - Secured Overnight Financing Rate.

n	 STACR debt note - Structured Agency Credit Risk debt note - A Freddie Mac issued debt security where the principal 

balance is linked to the credit performance of a reference pool of single-family loans owned or guaranteed by Freddie Mac.

n	 STACR Trust note - Structured Agency Credit Risk Trust note - A debt security issued by an unconsolidated trust where 

the principal balance is linked to the credit performance of a reference pool of single-family loans owned or guaranteed by 

Freddie Mac. We make payments to the trust to support payment of the interest due on the notes, and we receive 

payments from the trust as a result of defined credit events on the reference pool. 

n	 Step-rate modified loan - A term that we generally use to refer to our HAMP loans that have provisions for reduced 

interest rates that remain fixed for the first five years and then increase over a period of time to a market rate.

n	 Strategic risk - The risk to earnings, capital, profitability, mission, or reputation arising from adverse business decisions, or 

the improper implementation of those decisions, that may negatively affect the company's strategy.

n	 Strips - Multiclass securities that are formed by resecuritizing previously issued Level 1 Securitization Products or singleclass resecuritization products and issuing principal-only and interest-only securities backed by the cash flows from the 

underlying collateral. This structure allows commingling of TBA-eligible Freddie Mac and Fannie Mae collateral.

n	 Subprime - Participants in the mortgage market may characterize single-family loans, based upon their overall credit 

quality at the time of origination, generally considering them to be prime or subprime. Subprime generally refers to the 

credit risk classification of a loan. There is no universally accepted definition of subprime. The subprime segment of the 

mortgage market primarily serves borrowers with poorer credit payment histories and such loans typically have a mix of 

credit characteristics that indicate a higher likelihood of default and higher loss severities than prime loans. Such 

characteristics might include, among other factors, a combination of high LTV ratios, low credit scores, or originations 

using lower underwriting standards, such as limited or no documentation of a borrower's income. 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. Certain security 

collateral underlying our other securitization products has been identified as subprime based on information provided to 

Freddie Mac when the transactions were entered into. We also categorize our investments in non-agency mortgage-related 

securities as subprime if they were identified as such based on information provided to us when we entered into these 

transactions.

n	 Supers - Resecuritizations of UMBS and certain other mortgage securities. Supers are single-class securities that involve 

the direct pass-through of all cash flows of the underlying collateral to holders of the beneficial interests. This structure 

allows commingling of TBA-eligible Freddie Mac and Fannie Mae collateral.

n	 SVP - Senior Vice President.

n	 Swaption - An option contract to enter into an interest-rate swap. In exchange for an option premium, a buyer obtains the 

right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date.

n	 Target TDC - Target total direct compensation.

n	 TBA - To be announced.

n	 The Tax Cuts and Jobs Act - The tax reform bill ("An Act to Provide for Reconciliation Pursuant to Titles II and V of the 

Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. Law No. 115-97") enacted on December 22, 2017, which 

included a reduction of the statutory corporate income tax rate from 35% to 21%.

n	 TDR - Troubled debt restructuring - A restructuring of a debt constitutes a TDR if the creditor, for economic or legal 

reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Glossary

FREDDIE MAC | 2020 Form 10-K 337
n	 Thrift/401(k) Plan - The Federal Home Loan Mortgage Corporation Thrift/401(k) Savings Plan.

n	 Top risk - Enterprise-wide elevated risk or emerging risk that could significantly affect the organization's ability to achieve 

its strategic objectives, has the potential to create significant financial, operational, or reputational risk, and requires an 

appropriate risk response by senior management and reporting to the Risk Committee of the Board. 

n	 Total mortgage portfolio - Includes loans and mortgage-related securities held on our consolidated balance sheets as 

well as our nonconsolidated issued and guaranteed single-class and multiclass securities, and other mortgage-related 

guarantees issued to third parties.

n	 Total other comprehensive income (loss) (or other comprehensive income (loss)) - Consists of the after-tax changes 

in the unrealized gains and losses on available-for-sale securities, the effective portion of derivatives accounted for as cash 

flow hedge relationships, and defined benefit plans.

n	 Treasury - U.S. Department of the Treasury.

n	 UMBS - Uniform mortgage-backed security - A single (common) mortgage-related security with a 55-day payment delay 

for TBA-eligible fixed-rate mortgage loans. Freddie Mac and Fannie Mae began issuing UMBS on and after June 3, 2019. 

The UMBS represents undivided beneficial ownership interest in, and the right to receive payments from, pools of one- to 

four- family residential mortgages that are held in trust for investors. 

n	 UPB - Unpaid principal balance - Loan UPB amounts in this report have not been reduced by charge-offs recognized prior 

to the loan being subject to a foreclosure sale, deed in lieu of foreclosure, or short sale transaction.

n	 Upfront fee - A fee charged to sellers that primarily includes delivery fees that are calculated based on credit risk factors 

such as the loan product type, loan purpose, LTV ratio, and credit score.

n	 USDA - U.S. Department of Agriculture.

n	 VA - U.S. Department of Veterans Affairs.

n	 Variation margin - Payments we make to or receive from a derivatives clearinghouse or counterparty based on the change 

in fair value of a derivative instrument. Variation margin is typically transferred within one business day.

n	 VERP - Voluntary Early Retirement Program.

n	 VIE - Variable Interest Entity - A VIE is an entity that has a total equity investment at risk that is not sufficient to finance its 

activities without additional subordinated financial support provided by another party, or where the group of equity holders 

does not have: (i) the ability to make significant decisions about the entity's activities; (ii) the obligation to absorb the 

entity's expected losses; or (iii) the right to receive the entity's expected residual returns.

n	 Warrant - Refers to the warrant we issued to Treasury on September 7, 2008 pursuant to the Purchase Agreement. The 

warrant provides Treasury the ability to purchase, for a nominal price, shares of our common stock equal to 79.9% of the 

total number of shares of Freddie Mac common stock outstanding on a fully diluted basis on the date of exercise.

n	 Workforce housing - Multifamily housing that is affordable to the majority of low to middle income households.

n	 Workout, or loan workout - A workout is either a home retention action, which is either a loan modification, repayment 

plan, or forbearance plan, or a foreclosure alternative, which is either a short sale or a deed in lieu of foreclosure.

n	 XBRL - eXtensible Business Reporting Language.

n	 Yield curve - A graphical display of the relationship between yields and maturity dates for bonds of the same credit quality. 

The slope of the yield curve is an important factor in determining the level of net interest yield on a new mortgage asset, 

both initially and over time. For example, if a mortgage asset is purchased when the yield curve is inverted (i.e., short-term 

interest rates higher than long-term interest rates), our net interest yield on the asset will tend to be lower initially and then 

increase over time. Likewise, if a mortgage asset is purchased when the yield curve is steep (i.e., short-term interest rates 

lower than long-term interest rates), our net interest yield on the asset will tend to be higher initially and then decrease over 

time. 

Glossary

FREDDIE MAC | 2020 Form 10-K 338
Exhibit Index

Exhibit Description*

3.1

Federal Home Loan Mortgage Corporation Act (12 U.S.C. §1451 et seq.), as amended by the Economic Growth, Regulatory Relief, and 

Consumer Protection Act (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on July 31, 2018)

3.2

Bylaws of the Federal Home Loan Mortgage Corporation, as amended and restated December 22, 2020 (incorporated by reference to 

Exhibit 3.1 to the Registrant’s Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on December 23, 2020)

4.1

Eighth Amended and Restated Certificate of Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, 

Terms and Conditions of Voting Common Stock (no par value per share) dated September 10, 2008 (incorporated by reference to Exhibit 

4.1 to the Registrant’s Current Report on Form 8-K filed on September 11, 2008)

4.2

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated April 23, 1996 (incorporated by reference to Exhibit 

4.2 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.3

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 27, 1997 (incorporated by reference to Exhibit 4.3 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.4

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 1998 (incorporated by reference to Exhibit 4.4 to the 

Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.5

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.1% Non-Cumulative Preferred Stock (par value $1.00 per share), dated September 23, 1998 (incorporated by reference to Exhibit 4.5 

to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.6

Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, 

Restrictions, Terms and Conditions of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated September 29, 

1998 (incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.7

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.3% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 28, 1998 (incorporated by reference to Exhibit 4.7 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.8

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.1% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 19, 1999 (incorporated by reference to Exhibit 4.8 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.9

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.79% Non-Cumulative Preferred Stock (par value $1.00 per share), dated July 21, 1999 (incorporated by reference to Exhibit 4.9 to the 

Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.10

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated November 5, 1999 (incorporated by reference to 

Exhibit 4.10 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

* The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 339
Exhibit Description*

4.11

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated January 26, 2001 (incorporated by reference to Exhibit 

4.11 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.12

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 2001 (incorporated by reference to Exhibit 

4.12 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.13

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated March 23, 2001 (incorporated by reference to Exhibit 4.13 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.14

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Preferred Stock (par value $1.00 per share), dated May 30, 2001 (incorporated by reference to Exhibit 

4.14 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.15

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 6% Non-Cumulative Preferred Stock (par value $1.00 per share), dated May 30, 2001 (incorporated by reference to Exhibit 4.15 to the 

Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.16

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.7% Non-Cumulative Preferred Stock (par value $1.00 per share), dated October 30, 2001 (incorporated by reference to Exhibit 4.16 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.17

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.81% Non-Cumulative Preferred Stock (par value $1.00 per share), dated January 29, 2002 (incorporated by reference to Exhibit 4.17 

to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.18

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Variable Rate, Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 17, 2006 (incorporated by reference to 

Exhibit 4.18 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.19

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 6.42% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 17, 2006 (incorporated by reference to Exhibit 

4.19 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.20

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.9% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated October 16, 2006 (incorporated by reference to 

Exhibit 4.20 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.21

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.57% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated January 16, 2007 (incorporated by reference to 

Exhibit 4.21 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.22

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 5.66% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated April 16, 2007 (incorporated by reference to Exhibit 

4.22 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.23

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 6.02% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated July 24, 2007 (incorporated by reference to Exhibit 

4.23 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

* The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 340
Exhibit Description*

4.24

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of 6.55% Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated September 28, 2007 (incorporated by reference to 

Exhibit 4.24 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.25

Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions 

of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock (par value $1.00 per share), dated December 4, 2007 (incorporated by 

reference to Exhibit 4.25 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)

4.26

Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, 

Restrictions, Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (par value $1.00 per share), dated 

September 27, 2012 (incorporated by reference to Exhibit 4.26 to the Registrant's Annual Report on Form 10-K filed on February 28, 2013)

4.27

Second Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, 

Restrictions, Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (par value $1.00 per share), dated January 1, 

2018 (incorporated by reference to Exhibit 4.27 to the Registrant's Annual Report on Form 10-K filed on February 15, 2018)

4.28

Third Amended and Restated Certificate of Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, 

Restrictions, Terms and Conditions of Variable Liquidation Preference Senior Preferred Stock (par value $1.00 per share), dated September 

30, 2019 (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q filed on October 30, 2019)

4.29

Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

4.30

Federal Home Loan Mortgage Corporation Global Debt Facility Agreement, dated February 13, 2020 (incorporated by reference to Exhibit 

4.1 to the Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2020)

10.1

Federal Home Loan Mortgage Corporation Executive Deferred Compensation Plan (as amended and restated effective January 1, 2008) 

(incorporated by reference to Exhibit 10.28 the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)†

10.2

First Amendment to the Federal Home Loan Mortgage Corporation Executive Deferred Compensation Plan (as amended and restated 

effective January 1, 2008) (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on November 

14, 2008)†

10.3

Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2008) 

(incorporated by reference to Exhibit 10.33 to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)†

10.4

First Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated 

January 1, 2008) (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K filed on February 24, 2010)†

10.5

Second Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated 

January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 28, 2011)†

10.6

Third Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated 

January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 6, 2012)†

* The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

† This exhibit is a management contract or compensatory plan, contract, or arrangement.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 341
Exhibit Description*

10.7

Fourth Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated 

January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 7, 2013)†

10.8

Fifth Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan (as amended and restated 

January 1, 2008) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 25, 2013)†

10.9

Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan II (effective January 1, 2014) (incorporated by reference 

to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed on February 19, 2015)†

10.10

First Amendment to the Federal Home Loan Mortgage Corporation Supplemental Executive Retirement Plan II (effective January 1, 

2014)(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on August 4, 2015)†

10.11

Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s 

Registration Statement on Form 10 filed on July 18, 2008)†

10.12

First Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.35 to 

the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)†

10.13

Second Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.36 

to the Registrant’s Registration Statement on Form 10 filed on July 18, 2008)†

10.14

Third Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.21 to 

the Registrant's Annual Report on Form 10-K filed on February 18, 2016)†

10.15

Fourth Amendment to the Federal Home Loan Mortgage Corporation Long-Term Disability Plan (incorporated by reference to Exhibit 10.17 

to the Registrant's Annual Report on Form 10-K filed on February 16, 2017)†

10.16

Executive Management Compensation Program Recapture and Forfeiture Agreement (incorporated by reference to Exhibit 10.18 to the 

Registrant's Annual Report on Form 10-K filed on February 16, 2017)†

10.17

2015 Executive Management Compensation Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on 

Form 10-Q filed on August 4, 2015)†

10.18

2020 Executive Management Compensation Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 

10-Q filed on October 30, 2019)†

10.19

Restrictive Covenant and Confidentiality Agreement, dated September 6, 2018, between Freddie Mac and David Brickman (incorporated by 

reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on September 5, 2018)†

10.20 Form of Restrictive Covenant and Confidentiality Agreement between the Federal Home Loan Mortgage Corporation and Executive Officers†

10.21

Memorandum Agreement, dated June 24, 2013, between Freddie Mac and Michael Hutchins (incorporated by reference to Exhibit 10.32 to 

the Registrant's Annual Report on Form 10-K filed on February 18, 2016)†

10.22

Memorandum Agreement, dated May 22, 2020, between Freddie Mac and Christian M. Lown (incorporated by reference to Exhibit 10.1 to 

the Registrant's Current Report on Form 8-K filed on June 2, 2020)†

* The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

† This exhibit is a management contract or compensatory plan, contract, or arrangement.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 342
Exhibit Description*

10.23 Memorandum Agreement, dated April 20, 2018, between Freddie Mac and Ricardo A. Anzaldua (incorporated by reference to Exhibit 10.21 

to the Registrant's Annual Report on Form 10-K filed on February 13, 2020)†

10.24 Memorandum Agreement, dated April 6, 2015, between Freddie Mac and Anil Hinduja (incorporated by reference to Exhibit 10.28 to the 

Registrant's Annual Report on Form 10-K filed on February 16, 2017)†

10.25

Memorandum Agreement, dated February 19, 2020, between Freddie Mac and Donnie Kish (incorporated by reference to Exhibit 10.1 to 

the Registrant's Current Report on Form 8-K filed on February 21, 2020)†

10.26 Memorandum Agreement, dated January 7, 2021, between Freddie Mac and Donnie Kish (incorporated by reference to Exhibit 10.1 to the 

Registrant's Current Report on Form 8-K filed on January 8, 2021)†

10.27

Description of Non-Employee Director Compensation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 

8-K filed on December 23, 2008)†

10.28

Form of Indemnification Agreement between the Federal Home Loan Mortgage Corporation and executive officers (for agreements with 

officers entered into prior to August 2011) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed 

on December 23, 2008)†

10.29

Form of Indemnification Agreement between the Federal Home Loan Mortgage Corporation and executive officers (for agreements with 

officers entered into beginning in August 2011) (incorporated by reference to Exhibit 10.54 to the Registrant’s Annual Report on Form 10-K 

filed on March 9, 2012)†

10.30

Form of Indemnification Agreement between the Federal Home Loan Mortgage Corporation and Outside Directors (incorporated by 

reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 27, 2017)†

10.31 PC Master Trust Agreement, dated May 16, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 

10-Q filed July 31, 2019)

10.32

UMBS and MBS Master Trust Agreement, dated April 30, 2019 (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly 

Report on Form 10-Q filed on July 31, 2019)

10.33

Amended and Restated Senior Preferred Stock Purchase Agreement dated as of September 26, 2008, between the United States 

Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly 

appointed Conservator (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 

2008)

10.34

Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States 

Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through the Federal Housing Finance Agency as its duly 

appointed Conservator (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on May 12, 2009)

10.35

Second Amendment dated as of December 24, 2009, to the Amended and Restated Senior Preferred Stock Purchase Agreement dated as 

of September 26, 2008, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting 

through the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.1 to the 

Registrant’s Current Report on Form 8-K filed on December 29, 2009)

10.36

Third Amendment dated as of August 17, 2012, to the Amended and Restated Senior Preferred Stock Purchase Agreement dated as of 

September 26, 2008, between the United States Department of the Treasury and Federal Home Loan Mortgage Corporation, acting through 

the Federal Housing Finance Agency as its duly appointed Conservator (incorporated by reference to Exhibit 10.1 to the Registrant’s 

Current Report on Form 8-K filed on August 17, 2012)

10.37

Letter Agreement dated December 21, 2017 between the United States Department of the Treasury and the Federal Home Loan Mortgage 

Corporation, acting through the Federal Housing Finance Agency as its Conservator (incorporated by reference to Exhibit 10.1 to the 

Registrant's Current Report on Form 8-K filed on December 21, 2017)

10.38

Letter Agreement dated September 27, 2019 between the United States Department of the Treasury and the Federal Home Loan Mortgage 

Corporation, acting through the Federal Housing Finance Agency as its Conservator (incorporated by reference to Exhibit 10.1 to the 

Registrant's Current Report on Form 8-K filed on October 1, 2019)

* The SEC file numbers for the Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

† This exhibit is a management contract or compensatory plan, contract, or arrangement.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 343
Exhibit Description*

10.39

Letter Agreement dated January 14, 2021 between the United States Department of the Treasury and the Federal Home Loan Mortgage 

Corporation, acting through the Federal Housing Finance Agency as its Conservator (incorporated by reference to Exhibit 10.1 to the 

Registrant's Current Report on Form 8-K filed on January 19, 2021)

10.40 Warrant to Purchase Common Stock, dated September 7, 2008 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current 

Report on Form 8-K filed on September 11, 2008)

24.1 Powers of Attorney

31.1 Certification of Principal 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 Principal 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

99.1 Third Amended and Restated Limited Liability Company Agreement of Common Securitization Solutions, LLC, dated as of January 9, 2020 

(incorporated by reference to Exhibit 99.1 to the Registrant's Annual Report on Form 10-K filed on February 13, 2021)

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 Extension 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 Registrant's Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 

10-Q, and Current Reports on Form 8-K are 000-53330 and 001-34139.

Exhibit Index

FREDDIE MAC | 2020 Form 10-K 344
Signatures

Pursuant to the requirements of Section 13 or 15(d) 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/ Michael T. Hutchins

Michael T. Hutchins

President

Date: February 11, 2021

Signatures

FREDDIE MAC | 2020 Form 10-K 345
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following 

persons on behalf of the registrant and in the capacities and on the dates indicated. 

Signature Capacity Date

/s/ Sara Mathew* Non-Executive Chair of the Board February 11, 2021

Sara Mathew

/s/ Michael T. Hutchins President February 11, 2021

Michael T. Hutchins (Principal Executive Officer)

/s/ Christian M. Lown Executive Vice President and Chief Financial Officer February 11, 2021

Christian M. Lown (Principal Financial Officer)

/s/ Donald F. Kish Senior Vice President — Corporate Controller and February 11, 2021

Donald F. Kish Principal Accounting Officer (Principal Accounting Officer)

/s/ Mark H. Bloom* Director February 11, 2021

Mark H. Bloom

/s/ Kathleen L. Casey* Director February 11, 2021

Kathleen L. Casey

/s/ Launcelot F. Drummond* Director February 11, 2021

Launcelot F. Drummond

/s/ Aleem Gillani* Director February 11, 2021

Aleem Gillani

/s/ Mark B. Grier* Director February 11, 2021

Mark B. Grier

/s/ Christopher E. Herbert* Director February 11, 2021

Christopher E. Herbert

/s/ Grace A. Huebscher* Director February 11, 2021

Grace A. Huebscher

/s/ Allan P. Merrill* Director February 11, 2021

Allan P. Merrill

/s/ Saiyid T. Naqvi* Director February 11, 2021

Saiyid T. Naqvi

*By: /s/ Alicia S. Myara

Alicia S. Myara

Attorney-in-Fact

Signatures

FREDDIE MAC | 2020 Form 10-K 346
Form 10-K Index

Item Number Page(s)

PART I

Item 1 Business 1-3, 7-14, 37-46, 

52-57, 64-68, 140-152

Item 1A Risk Factors 155-169

Item 1B Unresolved Staff Comments Not Applicable

Item 2 Properties 14

Item 3 Legal Proceedings 170

Item 4 Mine Safety Disclosures Not Applicable

PART II

Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer 

Purchases of Equity Securities 171

Item 6 Selected Financial Data Removed and Reserved

Item 7 Management's Discussion and Analysis of Financial Condition and Results of 

Operations

4-10, 15-36, 47-51, 

58-63, 68-139, 

153-154

Item 7A Quantitative and Qualitative Disclosures About Market Risk 121-126

Item 8 Financial Statements and Supplementary Data 172-281

Item 9 Changes in and Disagreements With Accountants on Accounting and Financial 

Disclosure Not Applicable

Item 9A Controls and Procedures 120, 173-174, 282-283

Item 9B Other Information 284

PART III

Item 10 Directors, Executive Officers and Corporate Governance 73-75, 284-299

Item 11 Executive Compensation 296-297, 300-322

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related 

Stockholder Matters 323-324

Item 13 Certain Relationships and Related Transactions, and Director Independence 290-291, 325-326

Item 14 Principal Accounting Fees and Services 327-328

PART IV

Item 15 Exhibits and Financial Statement Schedules 329, 339-344

Item 16 Form 10-K Summary Not Applicable

Signatures 345-346

Index

FREDDIE MAC | 2020 Form 10-K 347
Exhibit 4.29

Description of Registrant’s Securities

Registered Pursuant to Section 12 of

The Securities Exchange Act of 1934

As of December 31, 2020, Federal Home Loan Mortgage Corporation (Freddie Mac) had 21 classes of securities registered 

under Section 12 of the Securities Exchange Act of 1934, as amended: (1) our voting common stock, no par value per share 

(Common Stock) and (2) twenty series of perpetual, non-cumulative preferred stock, par value of $1.00 per share (Preferred 

Stock). We also have four classes of perpetual, non-cumulative preferred stock outstanding that were issued through private 

placement and are not registered under Section 12.

Since September 2008, we have been operating in conservatorship, with the Federal Housing Finance Agency (FHFA) as our 

Conservator. In connection with our entry into conservatorship, we, through FHFA, in its capacity as Conservator, entered into 

the Senior Preferred Stock Purchase Agreement with the U.S. Department of the Treasury (Treasury). Under this Purchase 

Agreement, we issued Treasury one million shares of Variable Liquidation Preference Senior Preferred Stock (Senior Preferred 

Stock) and a warrant to purchase, for a nominal price, shares of our Common Stock equal to 79.9% of the total number of 

shares of our Common Stock outstanding on a fully diluted basis at the time the warrant is exercised (Warrant). The 

conservatorship, Purchase Agreement as amended and restated (Purchase Agreement), Senior Preferred Stock, and Warrant 

have a significant impact on the rights, preferences, and privileges of the holders of our Common Stock and Preferred Stock.

The following description is a summary and does not purport to be complete. It is subject to and qualified in its entirety by 

reference to the Certificate of Designation for the Common Stock or class of Preferred Stock (as applicable, each a Certificate 

of Designation), Federal Home Loan Mortgage Corporation Act, as amended (our Charter), and our Amended and Restated 

Bylaws (Bylaws), each of which are incorporated by reference as an exhibit to this Annual Report on Form 10-K. We encourage 

you to read the Certificates of Designation, Charter, Bylaws, Purchase Agreement, and applicable provisions of Virginia law for 

additional information.

I. Description of Common Stock

General

Under Section 304 of our Charter, we are authorized to issue an unlimited number of shares of Common Stock. The Common 

Stock has the terms set forth in the Certificate of Designation. Computershare Trust Company, N.A., is the transfer agent, 

dividend disbursing agent, and registrar for the Common Stock.

Authorized Issuance

Our Common Stock was created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Under 

Section 731(d) of this Act, shares of our then-outstanding senior participating preferred stock were automatically converted into 

an equivalent number of shares of Common Stock. 

There are currently 4,000,000,000 shares of Common Stock issued or authorized for issuance by our Board of Directors. As of 

December 31, 2020, there were 725,863,886 shares of Common Stock issued and 650,059,292 shares outstanding. The 

outstanding shares of our Common Stock are fully paid and non-assessable. Any additional shares of Common Stock that we 

issue will be fully paid and non-assessable. Our Board of Directors may increase the authorized number of shares of Common 

Stock at any time, without the consent of the holders of Common Stock.

Under the Purchase Agreement, we cannot repurchase our Common Stock without Treasury’s consent.

Dividends

Dividends on shares of our Common Stock are not mandatory. Holders of our Common Stock are entitled to receive dividends 

when, as, and if declared by our Board of Directors out of assets legally available therefor. The Board of Directors fixes both the 

amount of dividends, if any, to be paid to holders of our outstanding Common Stock and the dates of payment. We will pay 

each dividend on shares of Common Stock to the holders of record of outstanding shares as they appear in our books and 

records on the record date fixed by our Board of Directors. The record date must not be earlier than 45 days or later than ten 

days before a dividend payment date. 

Our payment of dividends is subject to the following restrictions:

• Restrictions Relating to the Conservatorship - During conservatorship, any dividends will be declared by, and paid 

at the direction of, the Conservator, acting as successor to the rights, titles, powers, and privileges of the Board of 

Directors. The Conservator has prohibited us from paying any dividends on our Common Stock. FHFA has instructed 

our Board of Directors that it should consult with and obtain the approval of FHFA before taking actions involving 

dividends. In addition, FHFA has adopted a regulation prohibiting us from making capital distributions during 

conservatorship, except as authorized by the Director of FHFA.
• Restrictions Under the Purchase Agreement - The Purchase Agreement prohibits us and any of our subsidiaries 

from declaring or paying any dividends on the Common Stock without the prior written consent of the Treasury.

• Restrictions Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended 

(GSE Act) - Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if 

we fail to meet applicable capital requirements. However, our capital requirements have been suspended during 

conservatorship.

• Restrictions Under our Charter - Without regard to our capital classification, we must obtain prior written approval of 

FHFA to make any capital distribution that would decrease total capital to an amount less than the risk-based capital 

level or that would decrease core capital to an amount less than the minimum capital level. As noted above, our capital 

requirements have been suspended during conservatorship.

• Restrictions Relating to Preferred Stock - Payment of dividends on our Common Stock is also subject to the prior 

payment of dividends on our 24 series of preferred stock and one series of Senior Preferred Stock outstanding, 

representing an aggregate of 464,170,000 shares and 1,000,000 shares, respectively, as of December 31, 2020. 

Payment of dividends on all outstanding preferred stock, other than the Senior Preferred Stock, is subject to the prior 

payment of dividends on the Senior Preferred Stock.

Voting Rights

During conservatorship, the holders of our Common Stock have no voting rights. Upon its appointment as Conservator, FHFA 

immediately succeeded to the voting rights of holders of our Common Stock, including the right to elect members of our Board 

of Directors.

If the company was not in conservatorship, holders of our Common Stock would have the right to vote:

• For the election of members of our Board of Directors, to the extent prescribed by applicable federal law;

• With respect to amendment, alteration, supplementation, or repeal of the provisions of the Certificate of Designation 

(described below);

• With respect to such other matters, if any, as may be prescribed by our Board of Directors, in its sole discretion, or by 

applicable federal law. 

Holders of our Common Stock are not granted any right under our Charter or the Certificate of Designation to vote on specified 

matters in which stockholders in business corporations under state law are typically entitled to vote, such as amendments to 

our Charter or changes in our capital structure.

Holders of our Common Stock entitled to vote are entitled to one vote per share on all matters presented to them for their vote. 

Holders may cast votes in person or by proxy at a meeting of the holders of our Common Stock or, if so determined by our 

Board of Directors, by written consent of the holders of the requisite number of shares of our Common Stock. In connection 

with any meeting of the holders of shares of our Common Stock, our Board of Directors will fix a record date, which must not 

be earlier than 60 days or later than 10 days before the date of such meeting. The holders of record of shares of our Common 

Stock on the record date are entitled to notice of, and to vote at, any such meeting and any adjournment. We may establish 

reasonable rules and procedures regarding the solicitation of the vote of holders of our Common Stock at any such meeting or 

otherwise, the conduct of such vote, quorum requirements and the requisite number or percentage of affirmative votes required 

for the approval of any matter and as to all related questions. Such rules and procedures shall conform to the requirements of 

any national securities exchange on which our Common Stock may be listed.

Ownership Reports

The Certificate of Designation includes provisions that require certain persons to report to us their beneficial ownership of our 

Common Stock. Except as otherwise provided in the Certificate of Designation, any “beneficial owner” (as that term is defined 

in Rule 13d-3 under the Exchange Act) of the outstanding Common Stock must report such ownership to us and the NYSE (and 

to any other exchange on which our Common Stock is then listed). The required reports of beneficial ownership and any 

amendments must be submitted in writing to us and each exchange where the Common Stock is listed on the forms, in the 

time periods, and in the manner as would be required by Sections 13(d) and 13(g) of the Exchange Act and the rules and 

regulations thereunder if the Common Stock were registered under Section 12 of the Exchange Act. 

To ensure compliance with the beneficial ownership reporting requirements relating to our Common Stock, we may refuse to 

permit the voting of any shares of Common Stock in excess of 5% beneficially owned by any person who fails to comply with 

those requirements. Any beneficial owner of our Common Stock that we believe to be in violation of the beneficial ownership 

reporting requirements must respond to our inquiries for the purpose of determining the existence, nature, or extent of any such 

violation. If a response satisfactory to us has not been received within five business days after the date on which the inquiry 

was mailed, the shares of our Common Stock to which the inquiry relates will be considered for all purposes to be beneficially 

owned in violation of the reporting requirements, and we are authorized to take appropriate remedial actions, including the 

refusal to permit the voting of those excess shares. 
No Preemptive Rights and No Conversion  

No holder of our Common Stock has any preemptive right to purchase or subscribe for any of our other shares, rights, options, 

or other securities. The holders of shares of our Common Stock do not have any right to convert their shares into or exchange 

their shares for any of our other classes or series of stock or other securities or other obligations of Freddie Mac. 

No Redemption  

We do not have the right to redeem any shares of our Common Stock, and no holders of our Common Stock have the right to 

require us to redeem their shares. 

No Sinking Fund

Our Common Stock is not subject to any sinking fund, which is a separate capital reserve maintained to pay stockholders with 

preferred rights for their investment in the event of liquidation or redemption.

Liquidation Rights  

Upon our dissolution, liquidation, or winding up, after payment of or provision for our liabilities and the expenses of our 

dissolution, liquidation, or winding up, and after any payment or distribution has been made on any of our other classes or 

series of stock ranking prior to our Common Stock upon liquidation, the holders of the outstanding shares of our Common 

Stock will be entitled to receive out of our assets available for distribution to stockholders, before any payment or distribution is 

made on any of our other classes or series of stock ranking junior to Common Stock upon liquidation, the amount of $0.21 per 

share, plus a sum equal to all dividends declared but unpaid on their shares to the date of final distribution. The holders of the 

outstanding shares of any class or series of our stock ranking prior to, on a parity with, or junior to our Common Stock upon 

liquidation will also receive out of those assets payment of any corresponding preferential amount to which the holders of that 

stock may, by the terms thereof, be entitled. No stock with that corresponding right currently exists. The remaining balance of 

any of our assets available for distribution to stockholders upon a dissolution, liquidation or winding up will be distributed to the 

holders of our outstanding Common Stock in the aggregate. As of December 31, 2020, the Senior Preferred Stock had an 

aggregate liquidation preference of $86.5 billion, and the 24 outstanding classes of our preferred stock, other than the Senior 

Preferred Stock, had an aggregate liquidation preference of $14.1 billion plus any then-current dividends, which would have 

priority over our Common Stock upon liquidation. We are authorized to issue an unlimited amount of preferred stock.

Neither the sale of all or substantially all of our property or business, nor our merger, consolidation, or combination into or with 

any other corporation or entity, will be deemed to be a dissolution, liquidation, or winding up for the purpose of these provisions 

on liquidation rights. 

Additional Classes or Series of Stock

We have the right to create and issue additional classes or series of stock ranking prior to, on a parity with, or junior to our 

Common Stock, as to dividends, liquidation, or otherwise, without the consent of holders of our Common Stock. 

Amendments  

Without the consent of the holders of our Common Stock, we have the right to amend, alter, supplement, or repeal any terms of 

our Common Stock in the Certificate of Designation to cure any ambiguity, to correct or supplement any term that may be 

defective or inconsistent with any other term, or to make any other provisions so long as such action does not materially and 

adversely affect the interests of the holders of our Common Stock. Otherwise, the Certificate of Designation may be amended, 

altered, supplemented, or repealed only with the consent of the holders of at least two-thirds of the outstanding shares of our 

Common Stock. The creation of additional classes and series of stock whether ranking prior to, on a parity with, or junior to our 

Common Stock, or a split or reverse split of our Common Stock (including an attendant adjustment to its par value), does not 

require any consent. As a consequence, the rights of holders of our Common Stock could be adversely affected by the creation 

of additional classes or series of stock. The Conservator currently holds voting rights on any such matters requiring consent of 

the holders of our Common Stock. 

Listing

On July 8, 2010, we delisted our Common Stock from the NYSE pursuant to a directive by our Conservator. Our Common 

Stock is traded exclusively in the OTCQB Marketplace under the ticker symbol FMCC. We expect that our Common Stock will 

continue to trade in the OTCQB Marketplace so long as market makers demonstrate an interest in trading the Common Stock.

II. Description of Preferred Stock

Summary of Key Terms and Listing 

Under Section 306(f) of our Charter, we are authorized to issue an unlimited number of shares of preferred stock, on such terms 

and conditions as the Board of Directors shall prescribe. Each class of the Preferred Stock has the terms set forth in its 

Certificate of Designation. Computershare Trust Company, N.A., is the transfer agent, dividend disbursing agent, and registrar 

for the Preferred Stock.
On July 8, 2010, we delisted our Preferred Stock from the NYSE pursuant to a directive by our Conservator. Our Preferred 

Stock is traded exclusively in the OTCQB Marketplace. We expect that our Preferred Stock will continue to trade in the OTCQB 

Marketplace so long as market makers demonstrate an interest in trading the Preferred Stock.

The table below provides a summary of the Preferred Stock outstanding as of December 31, 2020, including dividend rates, 

issue dates, shares authorized and outstanding, redemption prices per share, total outstanding balances, earliest redemption 

dates, and ticker symbols. 

(In millions, except 

redemption price per share) Issue Date

Shares

Authorized

Shares

Outstanding

Redemption

Price per

Share

Total

Outstanding

Balance

Redeemable

On or After

OTCQB

Symbol

1996 Variable-rate(1) April 26, 1996 5.00 5.00 $50.00 $250 June 30, 2001 FMCCI

5% March 23, 1998 8.00 8.00 50.00 400 March 31, 2003 FMCKK

1998 Variable-rate(2) Sept 23/29, 1998 4.40 4.40 50.00 220 Sept 30, 2003 FMCCG

5.10% Sept 23, 1998 8.00 8.00 50.00 400 Sept 30, 2003 FMCCH

5.79% July 21, 1999 5.00 5.00 50.00 250 June 30, 2009 FMCCK

1999 Variable-rate(3) November 5, 1999 5.75 5.75 50.00 287 December 31, 2004 FMCCL

2001 Variable-rate(4) January 26, 2001 6.50 6.50 50.00 325 March 31, 2003 FMCCM

2001 Variable-rate(5) March 23, 2001 4.60 4.60 50.00 230 March 31, 2003 FMCCN

5.81% March 23, 2001 3.45 3.45 50.00 173 March 31, 2011 FMCCO

6% May 30, 2001 3.45 3.45 50.00 173 June 30, 2006 FMCCP

2001 Variable-rate(6) May 30, 2001 4.02 4.02 50.00 201 June 30, 2003 FMCCJ

5.70% October 30, 2001 6.00 6.00 50.00 300 December 31, 2006 FMCKP

2006 Variable-rate(7) July 17, 2006 15.00 15.00 50.00 750 June 30, 2011 FMCCS

6.42% July 17, 2006 5.00 5.00 50.00 250 June 30, 2011 FMCCT

5.90% October 16, 2006 20.00 20.00 25.00 500 Sept 30, 2011 FMCKO

5.57% January 16, 2007 44.00 44.00 25.00 1,100 December 31, 2011 FMCKM

5.66% April 16, 2007 20.00 20.00 25.00 500 March 31, 2012 FMCKN

6.02% July 24, 2007 20.00 20.00 25.00 500 June 30, 2012 FMCKL

6.55% Sept 28, 2007 20.00 20.00 25.00 500 Sept 30, 2017 FMCKI

2007 Fixed-to-floating rate(8) December 4, 2007 240.00 240.00 25.00 6,000 December 31, 2012 FMCKJ

(1) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377. The dividend rate is capped at 9.00%. 

(2) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 1% divided by 1.377. The dividend rate is capped at 7.50%. 

(3) Dividend rate resets on January 1 every five years after January 1, 2005 based on a five-year Constant Maturity Treasury (CMT) rate. The dividend rate is capped at 

11.00%. Optional redemption on December 31, 2004 and on December 31 every five years thereafter. 

(4) Dividend rate resets on April 1 every two years after April 1, 2003 based on the two-year CMT rate plus 0.10%. The dividend rate is capped at 11.00%. Optional 

redemption on March 31, 2003 and on March 31 every two years thereafter. 

(5) Dividend rate resets on April 1 every year based on 12-month LIBOR minus 0.20%. The dividend rate is capped at 11.00%. Optional redemption on March 31, 2003 

and on March 31 every year thereafter. 

(6) Dividend rate resets on July 1 every two years after July 1, 2003 based on the two-year CMT rate plus 0.20%. The dividend rate is capped at 11.00%. Optional 

redemption on June 30, 2003 and on June 30 every two years thereafter. 

(7) Dividend rate resets quarterly and is equal to the sum of three-month LIBOR plus 0.50% but not less than 4.00%. 

(8) Dividend rate is set at an annual fixed rate of 8.375% from December 4, 2007 through December 31, 2012. For the period beginning on or after January 1, 2013, 

dividend rate resets quarterly and is equal to the higher of: (a) the sum of three-month LIBOR plus 4.16% per annum or (b) 7.875% per annum. Optional redemption 

on December 31, 2012 and on December 31 every five years thereafter. 

The outstanding shares of our Preferred Stock are fully paid and non-assessable. Any additional shares of Preferred Stock that 

we issue will be fully paid and non-assessable. Our Board of Directors may increase the authorized number of shares of any 

class of our Preferred Stock at any time, without the consent of the holders of any class of our Preferred Stock.

The Preferred Stock shall rank prior to the Common Stock to the extent provided in the Certificate of Designation; shall rank, as 

to both dividends and distributions upon liquidation, on a parity with the other classes of Preferred Stock as well as the four 

classes of perpetual, non-cumulative preferred stock that we issued through private placements; and shall rank junior to the 

Senior Preferred Stock.
Dividends and Dividend Restrictions

Dividends on shares of our Preferred Stock are not mandatory and are non-cumulative. Holders of our Preferred Stock are 

entitled to receive dividends when, as, and if declared by our Board of Directors out of assets legally available therefor on the 

payment dates as prescribed in the applicable Certificate of Designation. The Preferred Stock has the dividend rates as 

described in the table above. We will pay each dividend on shares of Preferred Stock to the holders of record of outstanding 

shares as they appear in our books and records on the record date fixed by our Board of Directors. The record date must not 

be earlier than 45 days or later than 10 days before a dividend payment date. 

Our payment of dividends is subject to the following restrictions:

• Restrictions Relating to the Conservatorship - During conservatorship, any dividends will be declared by, and paid 

at the direction of, the Conservator, acting as successor to the rights, titles, powers, and privileges of the Board of 

Directors. The Conservator has prohibited us from paying any dividends on our Preferred Stock. FHFA has instructed 

our Board of Directors that it should consult with and obtain the approval of FHFA before taking actions involving 

dividends. In addition, FHFA has adopted a regulation prohibiting us from making capital distributions during 

conservatorship, except as authorized by the Director of FHFA.

• Restrictions Under the Purchase Agreement - The Purchase Agreement prohibits us and any of our subsidiaries 

from declaring or paying any dividends on our Preferred Stock without the prior written consent of Treasury.

• Restrictions Under the GSE Act - Under the GSE Act, FHFA has authority to prohibit capital distributions, including 

payment of dividends, if we fail to meet applicable capital requirements. However, our capital requirements have been 

suspended during conservatorship.

• Restrictions Under our Charter - Without regard to our capital classification, we must obtain prior written approval of 

FHFA to make any capital distribution that would decrease total capital to an amount less than the risk-based capital 

level or that would decrease core capital to an amount less than the minimum capital level. As noted above, our capital 

requirements have been suspended during conservatorship.

• Restrictions Relating to Senior Preferred Stock - Payment of dividends on our Preferred Stock is subject to the 

prior payment of dividends on our Senior Preferred Stock.

Optional Redemption

Freddie Mac has the option to redeem the Preferred Stock, in whole or in part, out of funds legally available therefor, at the 

redemption price prescribed in the applicable Certificate of Designation plus the amount of any dividend that would otherwise 

be payable for the dividend period that ends on the date of redemption, whether or not declared. The Preferred Stock has the 

redemption prices and timing limitations as described in the table above. The dividend that would otherwise be payable will be 

included in the redemption price of the shares and will not be separately payable. 

If less than all of the outstanding shares are to be redeemed, Freddie Mac will select shares to be redeemed from the 

outstanding shares by lot or pro rata or by any other method which Freddie Mac in its sole discretion decides equitable.

During conservatorship and pursuant to the Purchase Agreement, we cannot redeem the Preferred Stock without FHFA and 

Treasury consent.

No Voting Rights

The shares of Preferred Stock shall not have any voting rights, general or special, other than with respect to amendment, 

alteration, supplementation, or repeal of the provisions of the applicable Certificate of Designation (described below).

During conservatorship, the holders of Preferred Stock have no voting rights. Upon its appointment as Conservator, FHFA 

immediately succeeded to the voting rights of holders of our Preferred Stock.

No Preemptive Rights and No Conversion

No holder of our Preferred Stock has any preemptive right to purchase or subscribe for any other shares, rights, options, or 

other securities. The holders of shares of our Preferred Stock do not have any right to convert their shares into or exchange 

their shares for any of our other classes or series of stock or other securities or other obligations of Freddie Mac. 

Liquidation Rights and Preference  

Upon our dissolution, liquidation, or winding up, after payment of or provision for our liabilities and the expenses of our 

dissolution, liquidation, or winding up, and after any payment or distribution has been made on any of our other classes or 

series of stock ranking prior to our Preferred Stock upon liquidation, the holders of the outstanding shares of our Preferred 

Stock will be entitled to receive out of our assets available for distribution to stockholders, before any payment or distribution is 

made on the Common Stock or any of our other classes or series of stock ranking junior to the Preferred Stock upon 

liquidation, the amount of the liquidation preference in the applicable Certificate of Designation (which amount equals the 

redemption price per share summarized in the table above), plus a sum equal to any dividend that would otherwise be payable 

for the dividend period through and including the date of final distribution. The holders of the outstanding shares of any class or 

series of our stock ranking on parity with the Preferred Stock upon liquidation shall be entitled to receive out of our assets 
available for distribution to shareholders, before any such payment or distribution shall be made on the Common Stock or any 

other class or series of stock of Freddie Mac ranking junior to the Preferred Stock and to such parity stock upon liquidation, any 

corresponding preferential amount to which the holders of that stock may, by the terms thereof, be entitled. The remaining 

balance of any of our assets available for distribution to stockholders upon a dissolution, liquidation, or winding up will be 

distributed to the holders of our outstanding Common Stock in the aggregate. If our assets available for distribution to 

stockholders shall be insufficient for the payment of the amount which the holders of the outstanding Preferred Stock shall be 

entitled to receive upon such dissolution, liquidation, or winding up, all of our assets available for distribution to stockholders 

shall be distributed to the holders of outstanding shares of Preferred Stock pro rata, so that the amounts so distributed shall 

bear to each other the same ratio that the respective distributive amounts to which they are so entitled bear to each other, and 

the holders of outstanding shares of Preferred Stock shall not be entitled to any further participation in any distribution of our 

assets. As of December 31, 2020, the Senior Preferred Stock had an aggregate liquidation preference of $86.5 billion, which 

would have priority over our Preferred Stock upon liquidation, and the 24 outstanding classes of our preferred stock, other than 

the Senior Preferred Stock, had an aggregate liquidation preference of $14.1 billion plus any then-current dividends. We are 

authorized to issue an unlimited amount of preferred stock.

Neither the sale of all or substantially all of our property or business, nor our merger, consolidation, or combination into or with 

any other corporation or entity, will be deemed to be a dissolution, liquidation, or winding up for the purpose of these provisions 

on liquidation rights. 

Additional Classes or Series of Stock

We have the right to authorize, create, and issue additional classes or series of stock ranking prior to, on a parity with, or junior 

to our Preferred Stock, as to dividends, liquidation, or otherwise, without the consent of holders of our Preferred Stock. 

Amendments

Without the consent of the holders of the Preferred Stock, we have the right to amend, alter, supplement, or repeal the terms of 

any series of our Preferred Stock to cure any ambiguity, to correct or supplement any provision that may be defective or 

inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the 

applicable Certificate of Designation so long as such action does not materially and adversely affect the interests of the holders 

of the applicable series of Preferred Stock. Otherwise, the terms of any series of our Preferred Stock may be amended, altered, 

supplemented, or repealed only with the consent of the holders of at least two-thirds of the outstanding shares of the 

applicable series of our Preferred Stock. The creation and issuance of additional classes and series of stock, or the issuance of 

additional shares of any existing class or series of our stock, whether ranking prior to, on a parity with, or junior to our Preferred 

Stock does not require any consent. As a consequence, the rights of holders of our Preferred Stock could be adversely affected 

by the creation of additional classes or series of stock. The Conservator currently holds voting rights on any such matters 

requiring consent of the holders of our Preferred Stock.
Exhibit 10.20

RESTRICTIVE COVENANT AND CONFIDENTIALITY AGREEMENT

In exchange for the mutual promises and consideration set forth below, this Restrictive Covenant and Confidentiality 

Agreement (“Agreement”) is entered into by and between the Federal Home Loan Mortgage Corporation (“Freddie Mac” or 

“Company”) and the undersigned employee (“you”), effective on the date you assign a personal signature at the conclusion of 

this Agreement. This Agreement supersedes any previous Restrictive Covenant and Confidentiality Agreement between the 

above parties.

I. Definitions

The following terms shall have the meanings indicated when used in this Agreement.

A. Competitor: The following entities, and their respective parents, successors, subsidiaries, and affiliates are competitors: (i) 

Fannie Mae (ii) all Federal Home Loan Banks (including the Office of Finance); and (iii) such other entities to which you and the 

Company may agree in writing from time-to-time.

B. Confidential Information: Information or materials in written, oral, magnetic, digital, computer, photographic, optical, 

electronic, or other form, whether now existing or developed or created during the period of your employment with Freddie 

Mac, that constitutes trade secrets and/or proprietary or confidential information. This information includes, but is not limited 

to: (i) all information marked Proprietary or Confidential; (ii) information concerning the components, capabilities, and attributes 

of Freddie Mac’s business plans, methods, and strategies; (iii) information relating to tactics, plans, or strategies concerning 

shareholders, investors, pricing, investment, marketing, sales, trading, funding, hedging, modeling, sales and risk management; 

(iv) financial or tax information and analyses, including but not limited to, information concerning Freddie Mac’s capital structure 

and tax or financial planning; (v) confidential information about Freddie Mac’s customers, borrowers, employees, or others; (vi) 

pricing and quoting information, policies, procedures, and practices; (vii) confidential customer lists; (viii) proprietary algorithms; 

(ix) confidential contract terms; (x) confidential information concerning Freddie Mac’s policies, procedures, and practices or the 

way in which Freddie Mac does business; (xi) proprietary or confidential data bases, including their structure and content; (xii) 

proprietary Freddie Mac business software, including its design, specifications and documentation; (xiii) information about 

Freddie Mac products, programs, and services which has not yet been made public; (xiv) confidential information about Freddie 

Mac’s dealings with third parties, including dealers, customers, vendors, and regulators; and/or (xv) confidential information 

belonging to third parties to which you received access in connection with your employment with Freddie Mac. Confidential 

Information does not include general skills, experience, or knowledge acquired in connection with your employment with 

Freddie Mac that otherwise are generally known to the public or within the industry or trade in which Freddie Mac operates.

II. Compliance with the Code of Conduct and Corporate Policies & Procedures, Including the Personal 

Investments Policy, Following Commencement of Employment With Freddie Mac

As a Freddie Mac employee, you will be subject to Freddie Mac’s Code of Conduct (“Code”) and to Corporate Policy 3-206, 

Personal Investments Policy (“Policy”) that, among other things, limit the investment activities of Freddie Mac employees. You 

agree to fully comply with the Code and the Policy, copies of which are enclosed for your review. 

You agree to consult with Freddie Mac’s Chief Compliance Officer as soon as practical prior to beginning employment with 

Freddie Mac about any investments that you or a “covered household member,” as that term is defined in the Policy, may have 

that may be prohibited by the Policy. You also agree to disclose prior to beginning employment with Freddie Mac any other 

matter or situation that may create a conflict of interest as such term is defined in the Code. 

In addition, prior to beginning employment with Freddie Mac, you agree to disclose to Freddie Mac's Human Resources 

Division the terms of any employment, confidentiality or stock grant agreements to which you may currently be subject that 

may affect your future employment or recruiting activities so that Freddie Mac may ensure that your employment by Freddie 

Mac and conduct as a Freddie Mac employee are not inconsistent with any of their terms. 

III. Non-Competition

You recognize that as a result of your employment with Freddie Mac, you have access to and knowledge of Confidential 

Information, the improper disclosure or use of which would result in grave competitive harm to Freddie Mac. Therefore, you 

agree that neither during your employment with Freddie Mac, nor for the twelve (12) months immediately following termination 

of your employment for any reason, will you consider offers of employment from, seek or accept employment with, or otherwise 
directly or indirectly provide professional services to any Competitor, if you will be rendering duties, responsibilities or services 

for the Competitor that are of the type and nature rendered or performed by you during the past two years of your employment 

with Freddie Mac. You acknowledge and agree that this covenant has unique, substantial and immeasurable value to Freddie 

Mac, that you have sufficient skills to provide a livelihood for yourself while this covenant remains in force, and that this 

covenant will not interfere with your ability to work consistent with your experience, training and education. This noncompetition covenant applies regardless of whether your employment is terminated by you, by Freddie Mac, or by a joint 

decision. 

If you are a licensed lawyer, this non-competition covenant shall be interpreted in a manner consistent with any rule applicable 

to a licensed legal professional in the jurisdiction(s) of your licensure or registration that concerns your employment as counsel 

with, or provision of legal services to, a Competitor.

IV. Non-Solicitation and Non-Recruitment

During Your employment with Freddie Mac and for a period of twelve (12) months after your termination date, you will not solicit 

or recruit, attempt to solicit or recruit or assist another in soliciting or recruiting any Freddie Mac managerial employee 

(including manager-level, Executive-level, or officer-level employee) with whom you worked, or any employee whom you 

directly or indirectly supervised at Freddie Mac, to leave the employee’s employment with Freddie Mac for purposes of 

employment or for the rendering of professional services. This prohibition against solicitation does not apply if Freddie Mac has 

notified the employee being solicited or recruited that his/her employment with the Company will be terminated pursuant to a 

corporate reorganization, reduction-in-force, involuntary termination or voluntary early retirement program.

If you are a licensed lawyer, this non-solicitation covenant shall be interpreted in a manner consistent with any rule applicable to 

a licensed legal professional in the jurisdiction(s) of your licensure or registration.

V. Treatment of Confidential Information During and Following Employment With Freddie Mac

A. Non-Disclosure. You recognize that Freddie Mac is engaged in an extremely competitive business and that, in the course 

of performing your job duties, you will have access to and gain knowledge about Confidential Information. You further 

recognize the importance of carefully protecting this Confidential Information in order for Freddie Mac to compete 

successfully. Therefore, you agree that both during and following your employment with Freddie Mac, you will neither 

divulge Confidential Information to any persons, including to other Freddie Mac employees who do not have a Freddie Mac 

business-related need to know, nor make use of the Confidential Information for your own benefit or for the benefit of 

anyone else other than Freddie Mac. You further agree to take all reasonable precautions to prevent the disclosure of 

Confidential Information to unauthorized persons or entities, and to comply with all Company policies, procedures, and 

instructions regarding the treatment of such information.

B. Disclosure of Trade Secrets to Government. As required by federal law, and notwithstanding anything to the contrary in 

this Agreement:

i. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade 

secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the 

purpose of reporting or investigating a suspected violation of law.

ii. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade 

secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if the filing is made under 

seal. 

iii. If you file a lawsuit for retaliation by Freddie Mac for reporting a suspected violation of law, you may (a) disclose trade 

secrets to your attorney, and (b) use the trade secret information in the court proceeding if you file any document 

containing the trade secret under seal and do not disclose the trade secret except pursuant to court order.

C. Ability to Enforce Agreement and Assist Government Investigations. Nothing in this Agreement prohibits or otherwise 

restricts you from: (1) making any disclosure of information required by law; (2) assisting any regulatory or law enforcement 

agency or legislative body to the extent you maintain a legal right to do so notwithstanding this Agreement; (3) filing, testifying, 

participating in or otherwise assisting in a proceeding relating to the alleged violation of any federal, state, or local law, 

regulation, or rule, to the extent you maintain a legal right to do so notwithstanding this Agreement; or (4) filing, testifying, 

participating in or otherwise assisting the Securities and Exchange Commission or any other proper authority in a proceeding 

relating to allegations of fraud.

VI. Additional Post-Employment Obligations

A. Return of Materials. You agree that upon termination of your employment with Freddie Mac for any reason whatsoever, you 

will deliver to your immediate supervisor all tangible materials embodying Confidential Information, including, but not limited to, 

any documentation, records, listings, notes, files, data, sketches, memoranda, models, accounts, reference materials, samples, 

machine-readable media, computer disks, tapes, and equipment which in any way relate to Confidential Information, whether 

developed by you or not. You further agree not to retain any copies of any materials embodying Confidential Information.
B. Disclosure of Future Employment. To enable Freddie Mac to monitor compliance with the obligations imposed by this 

Agreement, you further agree to notify Freddie Mac by email to Term_notification@freddiemac.com the identity of your 

subsequent employer(s) and your prospective job title and responsibilities prior to beginning employment, if you did not 

disclose this information to the Human Resources Division at the conclusion of your employment with Freddie Mac. You agree 

that this notice requirement shall remain in effect for twelve (12) months following the termination of your Freddie Mac 

employment.

C. Contact With Future Employers. You agree that, in order to assure the continued confidentiality of the Confidential 

Information, Freddie Mac may correspond with your future employers to advise them generally of your exposure to and 

knowledge of Confidential Information, and your obligations and responsibilities regarding the Confidential Information. You 

understand and agree that any such contact may include a request for assurance and confirmation from such employer(s) that 

you will not disclose Confidential Information to such employer(s), nor will such employer(s) permit any use whatsoever of the 

Confidential Information.

D. Participation in Business Transactions Involving Freddie Mac. In order to protect Freddie Mac’s Confidential Information as 

defined herein, after your separation of employment from Freddie Mac, you are prohibited from participating directly or 

indirectly in any Business Transaction involving Freddie Mac, on behalf of yourself or a third party, for a period of ninety (90) 

calendar days following your date of termination of employment. For purposes of this paragraph, “Business Transaction” shall 

mean business engagements between Freddie Mac and third parties involving the purchase or sale of securities, properties or 

mortgages. Questions regarding the scope of this prohibition should be directed to the Compliance Helpline. 

VII. Consideration Given to You

In exchange for agreeing to be bound by the terms, conditions, and restrictions stated in this Agreement, Freddie Mac will 

provide you with:

A. Employment (offer of employment or continued employment), and

B. Participation in either Freddie Mac’s Incentive Program for Vice Presidents and Non-Officers (if you are a Vice 

President), or Freddie Mac’s Executive Management Compensation Program (if you are a Senior Vice President or 

above).

which you agree is adequate consideration for your agreement to be bound by the provisions of this Agreement.

VIII. Reservation of Rights

You agree that nothing in this Agreement constitutes a contract or commitment by Freddie Mac to continue your employment in 

any job position for any period of time, nor does anything in this Agreement limit in any way Freddie Mac’s right to terminate 

your employment at any time for any reason.

IX. Absence of Any Conflict of Interest

You represent that you do not have any confidential information, trade secrets or other proprietary information that you 

obtained as the result of your employment with another employer that you will be using in your position at Freddie Mac. You 

also represent that you are not subject to any employment, confidentiality or stock grant agreements, or any other restrictions 

or limitations imposed by a prior employer, which would affect your ability to perform the duties and responsibilities for Freddie 

Mac in the job position offered, and further represent that you have provided Freddie Mac with copies of any non-competition, 

non-solicitation or similar agreements or limitations that have not expired, so that Freddie Mac can make an independent 

judgment that your employment with Freddie Mac is not inconsistent with any of its terms.

X. Enforcement

A. You acknowledge that during your employment with Freddie Mac, you may be subject to corrective action, up to and 

including termination of employment, for your breach or threat of breach of any provision of this Agreement. You further agree 

that, following the conclusion of your employment with Freddie Mac, Freddie Mac may contact your future employers or take 

other legal steps necessary to protect Freddie Mac Confidential Information from improper use or disclosure.

B. You acknowledge that in the event that you breach any provision of this Agreement during or after your employment 

with Freddie Mac, you may be subject to a recapture or forfeiture of i) any incentive pay under the Incentive Program for Vice 

Presidents and Non-Officers or ii) any Deferred Salary pay under the Executive Management Compensation Program, 

notwithstanding the terms of any program, plan, agreement or award to the contrary. Such recapture or forfeiture shall be 

limited to such pay earned within three years prior to or two years after the date of the breach, or any severance pay paid or 

payable to you by Freddie Mac, This recapture and forfeiture provision shall not apply to incentive, Deferred Salary or 

severance pay paid or earned prior to 2021. The Board of Directors, in the case of senior officers, and the CEO, in the case of 

vice presidents, in the good faith exercise of their sole discretion shall determine the appropriate dollar amount and type of 

compensation to be recaptured from and/or forfeited by you, if any. The Board of Directors, in the case of senior officers, and 

the CEO, in the case of vice presidents, will consider certain factors when determining the dollar amount for recapture and 

forfeiture including: materiality of the violation and proportionality of the violation as compared to the amount of compensation 

subject to recapture and forfeiture.
C. You agree that irreparable injury will result to Freddie Mac’s business interests in the event of breach or threatened 

breach of this Agreement, the full extent of Freddie Mac’s damages will be impossible to ascertain, and monetary damages will 

not be an adequate remedy for Freddie Mac. Therefore, you agree that in the event of a breach or threat of breach of any 

provision(s) of this Agreement, Freddie Mac, in addition to any other relief available, shall be entitled to temporary, preliminary, 

and permanent equitable relief to restrain any such breach or threat of breach by you and all persons acting for and/or in 

concert with you, without the necessity of posting bond or security, which you expressly waive.

D. You agree that each of your obligations specified in this Agreement is a separate and independent covenant, and that 

all of your obligations set forth herein shall survive any termination, for any reason, of your Freddie Mac employment. To the 

extent that any provision of this Agreement is determined by a court of competent jurisdiction to be unenforceable because it is 

overbroad, that provision shall be limited and enforced to the extent permitted by applicable law. Should any provision of this 

Agreement be declared or determined by any court of competent jurisdiction to be unenforceable or invalid under applicable 

law, the validity of the remaining obligations will not be affected thereby and only the unenforceable or invalid obligation will be 

deemed not to be a part of this Agreement.

E. This Agreement is governed by, and will be construed in accordance with, the laws of the Commonwealth of Virginia, 

without regard to its or any other jurisdiction’s conflict-of-law provisions. You agree that any action related to or arising out of 

this Agreement shall be brought exclusively in the United States District Court for the Eastern District of Virginia, and you 

hereby irrevocably consent to personal jurisdiction and venue in such court and to service of process by United States Mail or 

express courier service in any such action.

F. If any dispute(s) arise(s) between Freddie Mac and you with respect to any matter which is the subject of this 

Agreement, the prevailing party in such dispute(s) shall be entitled to recover from the other party all of its costs and expenses, 

including its reasonable attorneys’ fees.

XI. At-Will Employment Relationship

Nothing in this Agreement is intended or shall be construed to abrogate the “at will” employment relationship between you and 

Freddie Mac, and both you and Freddie Mac retain the right to terminate the employment relationship at any time for any lawful 

reason with or without notice.
Exhibit 24.1

Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

 KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

/s/ Mark H. Bloom 

Mark H. Bloom
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 9, 2021.

/s/ Kathleen L. Casey 

Kathleen L. Casey
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ Launcelot F. Drummond 

Launcelot F. Drummond
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 9, 2021.

 /s/ Aleem Gillani 

Aleem Gillani
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 9, 2021.

 /s/ Mark B. Grier 

Mark B. Grier
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ Christopher E. Herbert 

Christopher E. Herbert
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ Grace A. Huebscher 

Grace A. Huebscher
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ S. Sara Mathew 

 S. Sara Mathew
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ Allan P. Merrill 

 Allan P. Merrill
Power of Attorney

Annual Report on Form 10-K 

Freddie Mac

KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a director of Freddie Mac (formally known as 

the Federal Home Loan Mortgage Corporation), a federally chartered corporation, hereby constitute and appoint Michael T. 

Hutchins, Christian M. Lown, Ricardo A. Anzaldua, Alicia S. Myara, and Prabha Sipi Bhandari, and each of them severally, my 

true and lawful attorney-in-fact with power of substitution and resubstitution to sign in my name, place and stead, in any and all 

capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable 

under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange 

Commission in connection with the Annual Report on Form 10-K for the year ended December 31, 2020 and any and all 

amendments thereto, as fully for all intents and purposes as I might or could do in person, and hereby ratify and confirm all said 

attorneys-in-fact, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue 

hereof.

 IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 8, 2021.

 /s/ Saiyid T. Naqvi 

Saiyid T. Naqvi
Exhibit 31.1

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Michael T. Hutchins, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 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 registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 

Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 

15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 

supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by 

others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 

supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for 

external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the 

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most 

recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely 

to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to 

the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 

reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal 

control over financial reporting.

Date: February 11, 2021

/s/ Michael T. Hutchins

Michael T. Hutchins

President
Exhibit 31.2

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Christian M. Lown, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 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 registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 

Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 

15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our 

supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by 

others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 

supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for 

external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the 

effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most 

recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely 

to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to 

the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 

reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal 

control over financial reporting.

Date: February 11, 2021

/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 Annual Report on Form 10-K for the year ended December 31, 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, 

Michael T. Hutchins, President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to 

Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of 

operations of the Company.

Date: February 11, 2021

/s/ Michael T. Hutchins

Michael T. Hutchins

President
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 Annual Report on Form 10-K for the year ended December 31, 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. 

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of 

operations of the Company.

Date: February 11, 2021

/s/ Christian M. Lown

Christian M. Lown

Executive Vice President and Chief Financial Officer