UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

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

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

Non-accelerated filer Smaller reporting company

Emerging growth company

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

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

Exchange Act.

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

Act). Yes No 

As of October 15, 2019, there were 650,059,033 shares of the registrant’s common stock outstanding.
Table of Contents

Freddie Mac Form 10-Q i

Table of Contents

Page

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Market Conditions and Economic Indicators

Consolidated Results of Operations

Consolidated Balance Sheets Analysis

Our Business Segments

Risk Management

Liquidity and Capital Resources

Off-Balance Sheet Arrangements

Conservatorship and Related Matters

Regulation and Supervision

Forward-Looking Statements

FINANCIAL STATEMENTS

OTHER INFORMATION

CONTROLS AND PROCEDURES

EXHIBIT INDEX

SIGNATURES

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Table of Contents

Freddie Mac Form 10-Q ii

MD&A TABLE INDEX

Table Description Page

1 Summary of Consolidated Statements of Comprehensive Income (Loss)

2 Components of Net Interest Income

3 Analysis of Net Interest Yield

4 Components of Mortgage Loans Gains (Losses)

5 Components of Debt Gains (Losses)

6 Components of Derivative Gains (Losses)

7 Summarized Consolidated Balance Sheets

8 Single-Family Credit Guarantee Portfolio CRT Issuance

9 Details of Credit Enhanced Loans in Our Single-Family Credit Guarantee Portfolio

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

11 Alt-A Loans in Our Single-Family Credit Guarantee Portfolio

12 Single-Family Credit Guarantee Portfolio Credit Performance Metrics

13 Single-Family Individually Impaired Loans with an Allowance Recorded

14 Single-Family TDR and Non-Accrual Loans

15 Single-Family REO Activity

16 Single-Family Guarantee Segment Financial Results

17 Multifamily Market Support

18 Multifamily Segment Financial Results

19 Capital Markets Segment Financial Results

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

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

22 Duration Gap and PVS Results

23 PVS-L Results Before Derivatives and After Derivatives

24 PVS-L Average, Minimum, and Maximum

25 GAAP Adverse Scenario Before and After Hedge Accounting

26 GAAP Adverse Scenario Average, Minimum, and Maximum

27 Estimated Net Interest Rate Effect on Comprehensive Income (Loss)

28 Estimated Spread Effect on Comprehensive Income (Loss)

29 Sources of Liquidity

30 Other Investments Portfolio

31 Sources of Funding

32 Other Debt Activity

33 Activity for Debt Securities of Consolidated Trusts Held by Third Parties

34 Net Worth Activity

35 Return on Conservatorship Capital

36 Mortgage-Related Investments Portfolio Details

37 2018 Affordable Housing Goal Results

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Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 1

Management's Discussion and Analysis of 

Financial Condition and Results of Operations

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

subject to significant risks and uncertainties. These forward-looking statements are made as of the date of this Form 10-Q. We 

undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 

10-Q. Actual results might differ significantly from those described in or implied by such statements due to various factors and 

uncertainties, including those described in the Forward-Looking Statements section of this Form 10-Q, the Risk Factors

section of our Form 10-Q for the quarter ended June 30, 2019 and the Business, Forward-Looking Statements, and 

Risk Factors sections of our Annual Report on Form 10-K for the year ended December 31, 2018, or 2018 Annual Report.

Throughout this Form 10-Q, we use certain acronyms and terms that are defined in the Glossary of our 2018 Annual Report. 

You should read the following MD&A in conjunction with our 2018 Annual Report and our condensed consolidated financial 

statements and accompanying notes for the three and nine months ended September 30, 2019 included in Financial 

Statements. Throughout this Form 10-Q, we refer to the three months ended September 30, 2019, the three months ended 

June 30, 2019, the three months ended March 31, 2019, the three months ended December 31, 2018, the three months ended 

September 30, 2018, the three months ended June 30, 2018, the three months ended March 31, 2018, and the three months 

ended December 31, 2017 as "3Q 2019," "2Q 2019," "1Q 2019," "4Q 2018," "3Q 2018," "2Q 2018," "1Q 2018," and "4Q 2017," 

respectively. We refer to the nine months ended September 30, 2019 and the nine months ended September 30, 2018 as "YTD 

2019" and "YTD 2018," respectively. 

INTRODUCTION

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

U.S. housing market. We do this primarily by purchasing residential mortgage loans originated by lenders. In most instances, 

we package these loans into mortgage-related securities, which are guaranteed by us and sold in the global capital markets. In 

addition, we transfer mortgage credit risk exposure to private investors through our credit risk transfer programs, which include 

securities- and insurance-based offerings. We also invest in mortgage loans and mortgage-related securities. We do not 

originate loans or lend money directly to mortgage borrowers.

We support the U.S. housing market and the overall economy by enabling America's families to access mortgage loan funding 

with better terms and by providing consistent liquidity to the multifamily mortgage market. We have helped many distressed 

borrowers keep their homes or avoid foreclosure. We are working with FHFA, our customers, and the industry to build a better 

housing finance system for the nation.

Business Results

Consolidated Financial Results(1)

(1) Net revenues consist of net interest income, guarantee fee income, and other income (loss).
Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 2

Comprehensive income for 3Q 2019 was $1.8 billion, demonstrating strong business performance in a challenging interest rate 

environment. Net revenues declined $0.8 billion, or 21%, from 3Q 2018 largely due to lower net interest income. Market-related 

losses were $0.3 billion in 3Q 2019, primarily due to the decline in long-term interest rates.

Our total equity, which is also our Net Worth Amount under the Purchase Agreement with Treasury, was $6.7 billion at 

September 30, 2019. On September 27, 2019, the Conservator, acting on our behalf, entered into a Letter Agreement with 

Treasury (the September 2019 Letter Agreement), increasing the applicable Capital Reserve Amount used in calculating our 

dividend requirement to Treasury from $3.0 billion to $20.0 billion. As a result of this increase in our Capital Reserve Amount, we 

were not required to pay a dividend on the senior preferred stock to Treasury on September 30, 2019 based on our Net Worth 

Amount of $4.8 billion as of June 30, 2019, and we will not have a dividend requirement to Treasury in December 2019 based 

on our Net Worth Amount of $6.7 billion as of September 30, 2019. 

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

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

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

As a result, the liquidation preference of the senior preferred stock increased from $75.6 billion to $77.5 billion on September 

30, 2019 based on the $1.8 billion increase in our Net Worth Amount during 2Q 2019, and will increase to $79.3 billion on 

December 31, 2019 based on the $1.8 billion increase in our Net Worth Amount during 3Q 2019. See Note 2 for more 

information about our Purchase Agreement with Treasury.

The amount of available funding remaining under the Purchase Agreement is $140.2 billion and will be reduced by any future 

draws.

Portfolio Balances

Guarantee Portfolio Investments Portfolio

Total Guarantee Portfolio

Our total guarantee portfolio grew $120 billion, or 6%, from September 30, 2018 to September 30, 2019, driven by a 5% 

increase in our single-family credit guarantee portfolio and a 15% increase in our multifamily guarantee portfolio.

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

mortgage debt outstanding as a result of continued home price appreciation and our overall share of the single-family 
Management's Discussion and Analysis Introduction

Freddie Mac Form 10-Q 3

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

continued to run off.

The growth in our multifamily guarantee portfolio was primarily driven by strong loan purchase and securitization 

activity. Continued strong demand for multifamily financing and healthy multifamily market fundamentals resulted in 

continued growth in overall multifamily mortgage debt outstanding.

Total Investments Portfolio

Our total investments portfolio at September 30, 2019 was relatively unchanged compared to September 30, 2018, 

primarily due to an increase in our other investments portfolio driven by higher near-term cash needs for upcoming debt 

maturities and anticipated calls of other debt, partially offset by a reduction in the balance of our mortgage-related 

investments portfolio pursuant to the portfolio limits established by the Purchase Agreement and FHFA. In February 2019, 

FHFA directed us to maintain the mortgage-related investments portfolio at or below $225 billion at all times.

Conservatorship and Government Support for Our Business

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

related matters significantly affect our management, business activities, financial condition, and results of operations. Our future 

is uncertain, and the conservatorship has no specified termination date. We do not know what changes may occur to our 

business model during or following conservatorship, including whether we will continue to exist.

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

business activities and are critical to keeping us solvent and avoiding the appointment of a receiver by FHFA under statutory 

mandatory receivership provisions. We believe that the support provided by Treasury pursuant to the Purchase Agreement 

currently enables us to have adequate liquidity to conduct normal business activities. 

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

declared by the Conservator, acting as successor to the rights, titles, powers, and privileges of our Board of Directors. The 

dividends we have paid to Treasury on the senior preferred stock have been declared by, and paid at the direction of, the 

Conservator. 

Under the August 2012 amendment to the Purchase Agreement, our cash dividend requirement each quarter is the amount, if 

any, by which our Net Worth Amount at the end of the immediately preceding fiscal quarter, less the applicable Capital Reserve 

Amount, exceeds zero. Pursuant to the September 2019 Letter Agreement, the Capital Reserve Amount is $20.0 billion. If for 

any reason we were not to pay our dividend requirement on the senior preferred stock in full in any future period, the unpaid 

amount would be added to the liquidation preference and our applicable Capital Reserve Amount would thereafter be zero. This 

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

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

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

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

information regarding Treasury's Plan, see Regulation and Supervision - Legislative and Regulatory Developments - 

Treasury Housing Reform Plan.
Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac Form 10-Q 4

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)

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

Unemployment Rate

Source: U.S. Bureau of Labor Statistics.

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. 

Changes in the 10-year and 2-year LIBOR interest 

rates can significantly affect the fair value of our debt, 

derivatives, and mortgage and non-mortgage-related 

securities. In addition, the GAAP accounting treatment 

for our financial assets and liabilities, including 

derivatives (i.e., some are measured at amortized cost, 

while others are measured at fair value) creates 

variability in our GAAP earnings when interest rates 

change. We have elected hedge accounting for certain 

assets and liabilities in an effort to reduce GAAP 

earnings variability and better align GAAP results with 

the economics of our business.

Changes in the 3-month LIBOR rate affect the interest 

earned on our short-term investments and interest 

expense on our short-term funding.

Long-term rates continued their recent downward 

trend, resulting in further inversion of the yield curve. 

The 10-year LIBOR rate decreased 39 and 115 basis 

points during 3Q 2019 and YTD 2019, respectively.

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.

Continued job growth, a declining unemployment rate, 

and generally favorable economic conditions resulted 

in strong credit performance.
Management's Discussion and Analysis Market Conditions and Economic Indicators

Freddie Mac Form 10-Q 5

U.S. Single-Family Home 

Prices

Source: Freddie Mac House Price Index.

U.S. Single-Family Originations

Source: Inside Mortgage Finance dated October 25, 2019 (latest available IMF 

purchase/refinance information).

Changes in home prices affect the amount of equity 

that borrowers have in their homes. As home 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. 

Single-family home prices decreased 0.1% during 3Q 

2019, compared to an increase of 0.3% during 3Q 

2018. We expect home price growth will continue for 

full-year 2019, but grow at a slower pace than in fullyear 2018.

U.S. single-family loan origination volume increased to 

$700 billion in 3Q 2019 from $435 billion in 3Q 2018, 

driven by higher refinance volume as a result of lower 

average mortgage interest rates in 3Q 2019.

We expect U.S. single-family home purchase volume 

to increase in 2019 as a result of market response to 

lower interest rates. Freddie Mac's single-family loan 

purchase volumes typically follow a similar trend.
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 6

CONSOLIDATED RESULTS OF OPERATIONS

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

financial statements and accompanying notes. 

The table below compares our summarized consolidated results of operations.

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

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Net interest income $2,410 $3,257 ($847) (26)% $8,490 $9,278 ($788) (8)%

Guarantee fee income 231 209 22 11 670 603 67 11

Other income (loss) 146 79 67 85 389 648 (259) (40)

Net revenues 2,787 3,545 (758) (21) 9,549 10,529 (980) (9)

Other non-interest income (loss):

Mortgage loans gains (losses) 1,702 94 1,608 1,711 4,174 233 3,941 1,691

Investment securities gains (losses) 164 (443) 607 137 728 (1,024) 1,752 171

Debt gains (losses) (56) 158 (214) (135) 8 445 (437) (98)

Derivative gains (losses) (1,217) 728 (1,945) (267) (4,912) 2,974 (7,886) (265)

Total other non-interest income

(loss) 593 537 56 10 (2) 2,628 (2,630) (100)

Benefit (provision) for credit losses 179 380 (201) (53) 474 377 97 26

Non-interest expense (1,423) (1,200) (223) (19) (4,222) (3,453) (769) (22)

Income (loss) before income tax

(expense) benefit 2,136 3,262 (1,126) (35) 5,799 10,081 (4,282) (42)

Income tax (expense) benefit (427) (556) 129 23 (1,177) (1,946) 769 40

Net income (loss) 1,709 2,706 (997) (37) 4,622 8,135 (3,513) (43)

Total other comprehensive income

(loss), net of taxes and reclassification

adjustments

139 (147) 286 195 717 (991) 1,708 172

Comprehensive income (loss) $1,848 $2,559 ($711) (28)% $5,339 $7,144 ($1,805) (25)%
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 7

Net Interest Income

The table below presents the components of net interest income.

Table 2 - Components of Net Interest Income 

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Guarantee portfolio net interest income:

Contractual net interest income $943 $869 $74 9 % $2,751 $2,561 $190 7 %

Net interest income related to the Temporary

Payroll Tax Cut Continuation Act of 2011 405 364 41 11 1,172 1,067 105 10

Amortization 564 820 (256) (31) 1,521 2,269 (748) (33)

Total guarantee portfolio net interest income 1,912 2,053 (141) (7) 5,444 5,897 (453) (8)

Investments portfolio net interest income:

Contractual net interest income 1,167 1,346 (179) (13) 3,737 4,189 (452) (11)

Amortization (152) (108) (44) (41) (429) (187) (242) (129)

Total investments portfolio net interest

income 1,015 1,238 (223) (18) 3,308 4,002 (694) (17)

Hedge accounting impact (517) (34) (483) (1,421) (262) (621) 359 58

Net interest income $2,410 $3,257 ($847) (26)% $8,490 $9,278 ($788) (8)%

Key Drivers: 

Guarantee portfolio contractual net interest income 

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Increased primarily due to the continued growth of the core 

single-family loan portfolio.

Guarantee portfolio amortization

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Decreased primarily due to the timing differences in amortization 

related to prepayments between debt of consolidated trusts and the underlying mortgage loans. For further discussion 

on timing differences in amortization, see MD&A - Consolidated Results of Operations in our 2018 Annual 

Report.

Investments portfolio contractual net interest income 

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Decreased primarily due to the reduction in the balance of our 

mortgage-related investments portfolio pursuant to the portfolio limits established by the Purchase Agreement and 

FHFA. See Conservatorship and Related Matters - Managing Our Mortgage-Related Investments 

Portfolio for a discussion of the key drivers of the decline in our mortgage-related investments portfolio.

Investments portfolio amortization

YTD 2019 vs. YTD 2018 - Decreased primarily due to lower accretion income related to previously recognized otherthan-temporary impairments as a result of a decline in the population of impaired securities. 

Hedge accounting impact

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Decreased in 3Q 2019 primarily due to amortization of previously 

deferred fair value hedge accounting losses and a negative earnings mismatch related to fair value hedge accounting. 

Increased in YTD 2019 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-related basis 

adjustments. The earnings mismatch is the amount by which the gain or loss on the designated derivative instrument 

does not exactly offset the gain or loss on the hedged item attributable to the hedged risk. 
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 8

Net Interest Yield Analysis

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

Table 3 - Analysis of Net Interest Yield

3Q 2019 3Q 2018

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $10,313 $72 2.75 % $7,114 $15 0.84 %

Securities purchased under agreements to resell 54,238 322 2.37 45,412 235 2.07

Secured lending 3,750 32 3.35 1,626 11 2.48

Mortgage-related securities 133,278 1,435 4.31 143,113 1,495 4.18

Extinguishment of debt securities of consolidated trusts held 

by Freddie Mac (87,159) (883) (4.05) (89,976) (885) (3.93)

Total mortgage-related securities, net 46,119 552 4.79 53,137 610 4.60

Non-mortgage-related securities 24,377 134 2.19 24,799 145 2.33

Loans held by consolidated trusts(1) 1,892,375 15,541 3.28 1,804,347 15,759 3.49

Loans held by Freddie Mac(1) 88,706 887 4.00 97,456 1,028 4.22

Total interest-earning assets 2,119,878 17,540 3.31 2,033,891 17,803 3.50

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

Freddie Mac 1,916,417 (14,207) (2.97) 1,832,707 (13,712) (2.99)

Extinguishment of debt securities of consolidated trusts held

by Freddie Mac (87,159) 883 4.05 (89,976) 885 3.93

Total debt securities of consolidated trusts held by third

parties 1,829,258 (13,324) (2.91) 1,742,731 (12,827) (2.94)

Other debt:

Short-term debt 85,980 (499) (2.28) 69,435 (361) (2.04)

Long-term debt 195,530 (1,307) (2.65) 212,256 (1,358) (2.54)

Total other debt 281,510 (1,806) (2.54) 281,691 (1,719) (2.42)

Total interest-bearing liabilities 2,110,768 (15,130) (2.86) 2,024,422 (14,546) (2.87)

Impact of net non-interest-bearing funding 9,110 — 0.01 9,469 — 0.01

Total funding of interest-earning assets $2,119,878 ($15,130) (2.85)% $2,033,891 ($14,546) (2.86)%

Net interest income/yield $2,410 0.46 % $3,257 0.64 %

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $922 million and $620 million for loans held by consolidated trusts 

and $49 million and $25 million for loans held by Freddie Mac during 3Q 2019 and 3Q 2018, respectively.
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 9

YTD 2019 YTD 2018

(Dollars in millions)

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Average

Balance

Interest

Income

(Expense)(1)

Average

Rate

Interest-earning assets:

Cash and cash equivalents $8,608 $156 2.40 % $6,917 $39 0.74 %

Securities purchased under agreements to resell 52,398 968 2.46 46,743 637 1.82

Secured lending 2,547 72 3.73 1,340 26 2.58

Mortgage-related securities:

Mortgage-related securities 133,585 4,369 4.36 145,965 4,571 4.18

Extinguishment of debt securities of consolidated trusts held

by Freddie Mac (86,341) (2,687) (4.15) (89,861) (2,577) (3.82)

Total mortgage-related securities, net 47,244 1,682 4.74 56,104 1,994 4.74

Non-mortgage-related securities 21,571 378 2.33 18,017 302 2.23

Loans held by consolidated trusts(1) 1,869,628 48,895 3.49 1,789,433 45,908 3.42

Loans held by Freddie Mac(1) 88,191 2,837 4.29 100,382 3,174 4.22

Total interest-earning assets 2,090,187 54,988 3.51 2,018,936 52,080 3.44

Interest-bearing liabilities:

Debt securities of consolidated trusts including those held by

Freddie Mac 1,894,109 (43,688) (3.08) 1,816,897 (40,573) (2.98)

Extinguishment of debt securities of consolidated trusts held

by Freddie Mac (86,341) 2,687 4.15 (89,861) 2,577 3.82

Total debt securities of consolidated trusts held by third

parties 1,807,768 (41,001) (3.02) 1,727,036 (37,996) (2.93)

Other debt:

Short-term debt 78,076 (1,419) (2.40) 63,576 (832) (1.73)

Long-term debt 197,826 (4,078) (2.74) 220,820 (3,974) (2.39)

Total other debt 275,902 (5,497) (2.64) 284,396 (4,806) (2.24)

Total interest-bearing liabilities 2,083,670 (46,498) (2.97) 2,011,432 (42,802) (2.84)

Impact of net non-interest-bearing funding 6,517 — 0.01 7,504 — 0.01

Total funding of interest-earning assets $2,090,187 ($46,498) (2.96)% $2,018,936 ($42,802) (2.83)%

Net interest income/yield $8,490 0.55 % $9,278 0.61 %

(1) Loan fees, primarily consisting of amortization of upfront fees, included in interest income were $2.2 billion and $1.8 billion for loans held by consolidated trusts and 

$88 million and $70 million for loans held by Freddie Mac during YTD 2019 and YTD 2018, respectively.

Guarantee Fee Income

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Increased due to the continued growth in the multifamily guarantee 

portfolio.
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 10

Other Non-Interest Income (Loss) 

Mortgage Loans Gains (Losses)

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

Table 4 - Components of Mortgage Loans Gains (Losses)

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Gains (losses) on certain loan purchase

commitments $641 $267 $374 140% $1,644 $564 $1,080 191%

Gains (losses) on mortgage loans 1,061 (173) 1,234 713 2,530 (331) 2,861 864

Mortgage loans gains (losses) $1,702 $94 $1,608 1,711% $4,174 $233 $3,941 1,691%

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Increased due to fair value gains on multifamily held-for-sale 

mortgage loans and commitments driven by decreasing long-term interest rates, coupled with higher gains on sales of 

single-family seasoned loans.

Investment Securities Gains (Losses)

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Shifted to gains in the 2019 periods from losses in the 2018 periods 

primarily due to gains on trading securities driven by decreasing long-term interest rates.

Debt Gains (Losses)

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

Table 5 - Components of Debt Gains (Losses) 

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Fair value changes $51 $12 $39 325 % $114 $42 $72 171 %

Gains (losses) on extinguishment of debt (107) 146 (253) (173) (106) 403 (509) (126)

Debt gains (losses) ($56) $158 ($214) (135)% $8 $445 ($437) (98)%

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Decreased primarily due to losses from the extinguishment of fixedrate debt securities of consolidated trusts, as long-term interest rates declined between the time of issuance and 

repurchase.

Derivative Gains (Losses)

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

Table 6 - Components of Derivative Gains (Losses) 

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Fair value change in interest-rate swaps ($1,809) $736 ($2,545) (346)% ($4,565) $2,833 ($7,398) (261)%

Fair value change in option-based derivatives 947 (306) 1,253 409 1,408 (1,020) 2,428 238

Fair value change in other derivatives (308) 271 (579) (214) (1,612) 1,322 (2,934) (222)

Accrual of periodic cash settlements (47) 27 (74) (274) (143) (161) 18 11

Derivative gains (losses) ($1,217) $728 ($1,945) (267)% ($4,912) $2,974 ($7,886) (265)%

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Decreased as long-term interest rates declined. The decline in interest 

rates resulted in fair value losses on pay-fixed interest rate swaps, forward commitments to issue debt securities of 

consolidated trusts, and futures, which were partially offset by fair value gains on receive-fixed swaps and certain optionbased derivatives. Additionally, our derivative volume increased beginning in 2Q 2019 as we updated our interest-rate risk 
Management's Discussion and Analysis Consolidated Results of Operations

Freddie Mac Form 10-Q 11

measures to include upfront fees (including buy-downs) related to single-family credit guarantee activity. This update 

introduced additional volatility which resulted in increased losses, partially offset by the effects of hedge accounting.

Benefit (Provision) for Credit Losses

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Remained relatively flat due to the strong credit performance of both 

our single-family and multifamily portfolios.

Other Comprehensive Income (Loss)

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Shifted to gains in the 2019 periods from losses in the 2018 periods 

primarily due to fair value gains on available-for-sale securities as long-term interest rates declined.
Management's Discussion and Analysis Consolidated Balance Sheets Analysis

Freddie Mac Form 10-Q 12

CONSOLIDATED BALANCE SHEETS ANALYSIS

The table below compares our summarized consolidated balance sheets.

Table 7 - Summarized Consolidated Balance Sheets

Change

(Dollars in millions) 9/30/2019 12/31/2018 $ %

Assets:

Cash and cash equivalents $8,708 $7,273 $1,435 20%

Securities purchased under agreements to resell 51,187 34,771 16,416 47

Subtotal 59,895 42,044 17,851 42

Investments in securities, at fair value 72,982 69,111 3,871 6

Mortgage loans, net 1,997,490 1,926,978 70,512 4

Accrued interest receivable 6,790 6,728 62 1

Derivative assets, net 1,592 335 1,257 375

Deferred tax assets, net 5,784 6,888 (1,104) (16)

Other assets 25,713 10,976 14,737 134

Total assets $2,170,246 $2,063,060 $107,186 5%

Liabilities and Equity:

Liabilities:

Accrued interest payable $6,688 $6,652 $36 1%

Debt, net 2,149,259 2,044,950 104,309 5

Derivative liabilities, net 355 583 (228) (39)

Other liabilities 7,270 6,398 872 14

Total liabilities 2,163,572 2,058,583 104,989 5

Total equity 6,674 4,477 2,197 49

Total liabilities and equity $2,170,246 $2,063,060 $107,186 5%

Key Drivers:

As of September 30, 2019 compared to December 31, 2018:

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

primarily due to higher near-term cash needs for upcoming debt maturities and anticipated calls of other debt.

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

reported but not yet remitted at the end of 3Q 2019 and a change in our servicing cycle in 2Q 2019 related to the 

implementation of Release 2 of the CSP and the Single Security Initiative.

Total equity increased primarily as a result of our ability to retain 3Q 2019 earnings as a result of an increase in the 

applicable Capital Reserve Amount from $3.0 billion to $20.0 billion pursuant to the September 2019 Letter Agreement.
Management's Discussion and Analysis Our Business Segments | Segment Earnings

Freddie Mac Form 10-Q 13

OUR BUSINESS SEGMENTS

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

Single-Family Guarantee - Reflects results from our purchase, securitization, and guarantee of 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 spread risk.

Capital Markets - Reflects results from managing our mortgage-related investments portfolio (excluding Multifamily 

segment investments, single-family seriously delinquent loans, and the credit risk of single-family performing and 

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

management for the company.

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

nature and based on decisions outside the control of the management of our reportable segments, are included in the All Other

category.

Segment Earnings

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

between various line items on our GAAP condensed consolidated statements of comprehensive income and allocating certain 

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

13.

Segment Comprehensive Income

The graph below shows our comprehensive income by segment.

(In millions)

 

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

Freddie Mac Form 10-Q 14

Single-Family Guarantee

Business Results

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

New Business Activity

UPB of Single-Family Loan Purchases and Guarantees by Loan Purpose 

(In billions)

Percentage of Single-Family Loan Purchases and Guarantees by Loan Purpose 

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Our loan purchase and guarantee activity increased due to higher 

home purchase volume and increased refinance activity, driven by the declining average mortgage interest rates in recent 

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

Freddie Mac Form 10-Q 15

Single-Family Credit Guarantee Portfolio

Single-Family Credit Guarantee Portfolio 

The single-family credit guarantee portfolio increased at an annualized rate of approximately 5% between December 31, 

2018 and September 30, 2019 driven by an increase in U.S. single-family mortgage debt outstanding as a result of 

continued home price appreciation and our overall share of the single-family mortgage market. New business acquisitions 

had a higher average loan size compared to older vintages that continued to run off. 

The core single-family loan portfolio grew to 84% of the single-family credit guarantee portfolio at September 30, 2019, 

compared to 82% at December 31, 2018.

The legacy and relief refinance single-family loan portfolio declined to 16% of the single-family credit guarantee portfolio at 

September 30, 2019, compared to 18% at December 31, 2018.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 16

Guarantee Fees

We receive fees for guaranteeing the payment of principal and interest to investors in our mortgage-related securities. These 

fees consist primarily of a combination of base contractual guarantee fees paid on a monthly basis and initial upfront payments. 

The average portfolio Segment Earnings guarantee fee rate recognizes upfront fee income over the contractual life of the related 

loans (usually 30 years). If the related loans prepay, the remaining upfront fee income is recognized immediately. In contrast, the 

average guarantee fee rate charged on new acquisitions recognizes upfront fee income over the estimated life of the related 

loans using our expectations of prepayments and other liquidations. See MD&A - Our Business Segments - SingleFamily Guarantee - Business Overview - Guarantee Fees in our 2018 Annual Report for more information on our 

guarantee fees.

Average Portfolio Segment Earnings Guarantee Fee Rate(1)(2) 

(In bps) 

 

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

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

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - The average portfolio Segment Earnings guarantee fee rate increased 

due to an increase in the recognition of upfront fees primarily driven by a higher prepayment rate and an increase in 

average contractual guarantee fees caused by the run off of older vintages with lower contractual guarantee fees.

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

Freddie Mac Form 10-Q 17

Average Guarantee Fee Rate(1) Charged on New Acquisitions 

(In bps)

 

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

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - The average guarantee fee rate charged on new acquisitions 

increased primarily due to an enhancement in our estimation methodology related to recognition of buy-up fees in 2Q 

2019.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 18

CRT Activities 

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

future losses to us and taxpayers when borrowers go into default. See MD&A - Our Business Segments - Single-Family 

Guarantee - Business Overview - Products and Activities - Credit Risk Transfer (CRT) Transactions in our 2018 

Annual Report for more information on our CRT transactions.

The following table presents the issuance amounts during 3Q 2019 on the protected UPB and maximum coverage by loss 

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

Table 8 - Single-Family Credit Guarantee Portfolio CRT Issuance

Issuance for the Three Months Ended September 30, 2019

Protected 

UPB(1) Maximum Coverage(2)

(In millions) Total First Loss(3) Mezzanine Total

CRT Activities:

 STACR Trust transactions $56,654 $480 $1,186 $1,666

 ACIS® transactions 45,917 108 404 512

Senior subordinate securitization structures 3,002 195 269 464

 Other 9,305 243 279 522

Less: UPB with more than one type of CRT activity (37,045) — — —

Total CRT Activities $77,833 $1,026 $2,138 $3,164

(1) For STACR Trust and ACIS transactions, represents the UPB of the assets included in the reference pool. For senior subordinate securitization structure transactions, 

represents the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection provided by the subordinated 

securities.

(2) For STACR Trust transactions, represents the balance held by third parties at issuance. For ACIS transactions, represents the aggregate limit of insurance purchased 

from third parties at issuance. For senior subordinate securitization structure transactions, represents the UPB of the securities that are subordinate to Freddie Mac 

guaranteed securities and held by third parties.

(3) First loss includes the most subordinate securities (i.e., B tranches) in our STACR Trust transactions and their equivalent in ACIS and Other CRT transactions.

We retained exposure to $74.7 billion of the protected UPB for the CRT issuances during 3Q 2019, including first loss and 

mezzanine positions.

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

strategy. The aggregate cost of our CRT activity, as well as the amount of credit risk transferred, will continue to increase as we 

execute new transactions.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 19

Credit Enhancements

To reduce our credit risk exposure, we engage in various credit enhancement arrangements, which include CRT transactions 

and other credit enhancements. 

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, measured by UPB, that were covered by one or more forms of credit 

enhancements as of September 30, 2019 and December 31, 2018, respectively. See MD&A - Risk Management - SingleFamily Mortgage Credit Risk - Transferring Credit Risk of the Single-Family Credit Guarantee Portfolio to 

Investors in New and Innovative Ways in our 2018 Annual Report and Note 6 in this Form 10-Q and our 2018 Annual 

Report for additional information about our single-family credit enhancements.

Table 9 - Details of Credit Enhanced Loans in Our Single-Family Credit Guarantee Portfolio

t Outstanding as of September 30, 2019

Protected 

UPB(1)

Percentage of

Single-Family Credit

Guarantee Portfolio Maximum Coverage(2)

(In millions) Total Total First Loss(3) Mezzanine Total

CRT Activities:

 STACR debt notes $554,572 28% $2,209 $13,753 $15,962

 STACR Trust transactions 280,889 14 3,042 6,112 9,154

 ACIS transactions 869,148 44 2,069 8,012 10,081

Senior subordinate securitization structures 43,552 2 2,331 2,587 4,918

 Other 28,347 1 5,347 723 6,070

Less: UPB with more than one type of 

CRT activity (780,820) (39) — — —

Total CRT Activities $995,688 50% $14,998 $31,187 $46,185

Other Credit Enhancements:

 Primary Mortgage Insurance $410,999 21% $105,171 — $105,171

 Other 2,296 — 1,229 — 1,229

Less: UPB with both CRT and other credit

enhancements (287,231) (14) — — —

Single-family credit guarantee portfolio with

credit enhancement 1,121,752 57 121,398 31,187 152,585

Single-family credit guarantee portfolio without

credit enhancement 839,529 43 — — —

Total $1,961,281 100% $121,398 $31,187 $152,585

Referenced footnotes are included after the next table.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 20

Outstanding as of December 31, 2018

Protected 

UPB(1)

Percentage of

Single-Family Credit

Guarantee Portfolio Maximum Coverage(2)

(In millions) Total Total First Loss(3) Mezzanine Total

CRT Activities:

 STACR debt notes $605,263 32% $2,155 $15,441 $17,596

 STACR Trust transactions 161,152 8 1,622 3,404 5,026

 ACIS transactions 807,885 43 1,552 7,571 9,123

Senior subordinate securitization structures 39,860 2 1,807 2,046 3,853

 Other 18,136 1 5,049 340 5,389

Less: UPB with more than one type of 

CRT activity (736,334) (39) — — —

Total CRT Activities $895,962 47% $12,185 $28,802 $40,987

Other Credit Enhancements:

 Primary Mortgage Insurance $378,594 20% $96,996 — $96,996

 Other 2,642 — 1,341 — 1,341

Less: UPB with both CRT and other credit

enhancements (254,774) (13) — — —

Single-family credit guarantee portfolio with

credit enhancement 1,022,424 54 110,522 28,802 139,324

Single-family credit guarantee portfolio without

credit enhancement 873,762 46 — — —

Total $1,896,186 100% $110,522 $28,802 $139,324

(1) For STACR and ACIS transactions, represents the UPB of the assets included in the reference pool. For senior subordinate securitization structure transactions, 

represents the UPB of the guaranteed securities, which represents the UPB of the assets included in the trust net of the protection provided by the subordinated 

securities.

(2) For STACR transactions, represents the outstanding balance held by third parties. For ACIS transactions, represents the remaining aggregate limit of insurance 

purchased from third parties. For senior subordinate securitization structure transactions, represents the outstanding UPB of the securities that are subordinate to 

Freddie Mac guaranteed securities and held by third parties.

(3) First loss includes the most subordinate securities (i.e., B tranches) in our STACR transactions and their equivalent in ACIS and Other CRT transactions.

We had coverage remaining of $152.6 billion and $139.3 billion on our single-family credit guarantee portfolio as of 

September 30, 2019 and December 31, 2018, respectively. CRT transactions provided 30.3% and 29.4% of the coverage 

remaining at those dates. 

As of September 30, 2019, we had cumulatively transferred a portion of credit risk on nearly $1.4 trillion of our single-family 

mortgages, based upon the UPB at issuance of the CRT transactions.

FHFA's conservatorship capital needed for credit risk was reduced by approximately 75% through CRT transactions 

on new business activity in the twelve months ended September 30, 2018.

The reduction in the amount of conservatorship capital needed for credit risk on new business activity is calculated as 

conservatorship credit capital released from the CRT transactions (primarily through STACR and ACIS) divided by total 

conservatorship credit capital on new business activity at the time of purchase. For more information on the CCF and 

the calculation of conservatorship capital, see Liquidity and Capital Resources - Capital Resources - 

Conservatorship Capital Framework - Return on Conservatorship Capital.

During YTD 2019, we paid $501 million in interest expense, net of reinvestment income, on our outstanding STACR debt 

notes and $507 million in premium expense for ACIS and STACR Trust contracts, compared to $540 million in interest 

expense, net of reinvestment income, on our outstanding STACR debt notes and $249 million in premium expense for ACIS 

and STACR Trust contracts during YTD 2018. 

As of September 30, 2019, we had experienced minimal write-downs on our STACR transactions and filed minimal claims 

for reimbursement of losses under our ACIS transactions. 
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 21

Mortgage Loan Credit Risk 

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

lower credit scores. The following table presents the combination of credit score and current LTV (CLTV) ratio attributes of loans 

in our single-family credit guarantee portfolio. 

Table 10 - Single-Family Credit Guarantee Portfolio Attribute Combinations for Higher Risk Loans 

September 30, 2019

CLTV > 80 to 100 CLTV > 100 All Loans

(Credit score)

%

Portfolio SDQ Rate

%

Portfolio

SDQ 

Rate(1)

%

Portfolio

SDQ 

Rate(1)

%

Portfolio SDQ Rate

%

Modified

Core single-family loan portfolio:

< 620 0.3% 2.31% —% NM —% NM 0.3% 2.51% 3.6%

620 to 659 2.2 1.15 0.3 1.44 — NM 2.5 1.18 2.0

69.5 0.18 12.0 0.25 — NM 81.5 0.19 0.3

Not available 0.1 1.14 — NM — NM 0.1 1.98 3.5

Total 72.1% 0.23% 12.3% 0.31% —% NM 84.4% 0.24% 0.4%

Legacy and relief refinance singlefamily loan portfolio:

< 620 1.0% 3.88% 0.2% 8.47% 0.1% 14.84% 1.3% 4.56% 19.2%

620 to 659 1.5 2.87 0.2 7.23 0.1 12.14 1.8 3.38 17.4

11.2 1.02 0.9 3.63 0.3 6.10 12.4 1.20 6.3

Not available 0.1 4.38 — NM — NM 0.1 4.66 19.7

Total 13.8% 1.50% 1.3% 4.90% 0.5% 8.59% 15.6% 1.77% 8.9%

(1) NM - Not meaningful due to the percentage of the portfolio rounding to zero.

Alt-A and Subprime Loans 

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

10-Q, there is no universally accepted definition of subprime or Alt-A, and the classification of such loans may differ from 

company to company. We do not rely on these loan classifications to evaluate the credit risk exposure relating to such loans in 

our single-family credit guarantee portfolio. 

Participants in the mortgage market have characterized single-family loans based upon their overall credit quality at the time of 

origination, including as prime or subprime. While we have not historically characterized the loans in our single-family credit 

guarantee portfolio as either prime or subprime, we monitor the amount of loans we have guaranteed with characteristics that 

indicate a higher degree of credit risk. In addition, we estimate that approximately $0.8 billion and $0.9 billion of security 

collateral underlying our other securitization products at September 30, 2019 and December 31, 2018, respectively, were 

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

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

between the prime and subprime categories, if they are underwritten with lower or alternative income or asset documentation 

requirements compared to a full documentation loan, or both. Although we have discontinued new purchases of loans with 

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

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

loan initiative and the pre-existing loan was originated under less than full documentation standards. In the event we purchase a 

refinance loan and the original loan had been previously identified as Alt-A, such refinance loan may no longer be categorized 

or reported as an Alt-A loan in this Form 10-Q and our other financial reports because the new refinance loan replacing the 

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

lower than would otherwise be the case had such refinancing not occurred. From the time the relief refinance initiative began in 

2009 to September 30, 2019, 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 Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 22

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

Table 11 - Alt-A Loans in Our Single-Family Credit Guarantee Portfolio

September 30, 2019 December 31, 2018

(Dollars in billions) UPB CLTV

%

Modified SDQ Rate UPB CLTV

%

Modified SDQ Rate

Alt-A $21.7 62% 20.1% 3.75% $23.9 63% 23.2% 4.13%

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.

Single-Family Loan Performance

 Serious Delinquency Rates Percentage of Single-Family Loans One Month and Two 

Months Past Due 

The total serious delinquency rate on our single-family credit guarantee portfolio was 0.61% as of September 30, 2019. 

However, 37% of the seriously delinquent loans at September 30, 2019 were covered by credit enhancements designed to 

reduce our credit risk exposure. See Note 4 for additional information on our single-family delinquency rates.

Our total single-family serious delinquency rate was lower as of September 30, 2019 compared to September 30, 2018 due 

to our continued loss mitigation efforts, sales of certain seriously delinquent loans, home price appreciation, a low 

unemployment rate, and the reduced impacts from the hurricanes in the third quarter of 2017. This improvement was also 

driven by the continued shift in the single-family credit guarantee portfolio mix, as the legacy and relief refinance singlefamily loan portfolio runs off and we add higher credit quality loans to our core single-family loan portfolio.

The percentage of single-family loans one month past due can be volatile due to servicer reporting methodologies, 

seasonality, and other factors that may not be predictive 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 relatively flat from September 30, 2018 to September 30, 2019.
Management's Discussion and Analysis Our Business Segments | Single-Family Guarantee

Freddie Mac Form 10-Q 23

Credit Performance 

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

Table 12 - Single-Family Credit Guarantee Portfolio Credit Performance Metrics 

(Dollars in millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Charge-offs, gross $407 $1,277 $1,256 $2,248

Recoveries (107) (119) (341) (341)

Charge-offs, net 300 1,158 915 1,907

REO operations expense 58 38 172 87

Total credit losses $358 $1,196 $1,087 $1,994

Total credit losses (in bps) 7.3 25.4 7.4 14.2

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

balance sheets for which we have recorded an allowance determined on an individual basis.

Table 13 - Single-Family Individually Impaired Loans with an Allowance Recorded 

September 30, 2019 September 30, 2018

(Dollars in millions) Loan Count Amount Loan Count Amount

TDRs, at January 1 290,255 $42,254 364,704 $54,415

New additions 23,420 3,696 45,348 7,066

Repayments and reclassifications to held-for-sale (52,970) (8,897) (92,662) (14,875)

Foreclosure sales and foreclosure alternatives (3,673) (496) (5,907) (796)

TDRs, at September 30 257,032 36,557 311,483 45,810

Loans impaired upon purchase 1,909 122 2,814 188

Total impaired loans with an allowance recorded 258,941 36,679 314,297 45,998

Allowance for loan losses (3,326) (5,137)

Net investment, at September 30 $33,353 $40,861

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

consolidated balance sheets. 

Table 14 - Single-Family TDR and Non-Accrual Loans 

(In millions) September 30, 2019 December 31, 2018

TDRs on accrual status $36,845 $41,839

Non-accrual loans 10,131 11,197

Total TDRs and non-accrual loans $46,976 $53,036

Allowance for loan losses associated with:

 TDRs on accrual status $2,847 $3,612

 Non-accrual loans 662 1,003

Total $3,509 $4,615

(In millions) YTD 2019 YTD 2018

Foregone interest income on TDRs and non-accrual loans(1) $680 $965

(1) 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.

As of September 30, 2019, 43% of the allowance for loan losses for single-family mortgage loans related to interest rate 

concessions provided to borrowers as part of loan modifications. 

Most of our modified single-family loans, including TDRs, were current and performing at September 30, 2019.

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

sell reperforming loans. In addition, the allowance for loan losses will decline as borrowers continue to make monthly 

payments under the modified terms and interest rate concessions are amortized into earnings. 

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

Freddie Mac Form 10-Q 24

Loss Mitigation Activities

Loan Workout Activity 

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

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Our loan workout activity decreased driven by the reduced impact 

from the hurricanes in the third quarter of 2017.

We continue our loss mitigation efforts through our relief refinance, modification, and other initiatives.

REO Activity

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

Table 15 - Single-Family REO Activity 

3Q 2019 3Q 2018 YTD 2019 YTD 2018

(Dollars in millions)

Number of

Properties Amount

Number of

Properties Amount

Number of

Properties Amount

Number of

Properties Amount

Beginning balance — REO 5,869 $666 7,135 $777 7,100 $780 8,299 $900

Additions 2,004 203 2,506 247 6,143 605 7,870 759

Dispositions (2,470) (254) (2,622) (256) (7,840) (770) (9,150) (891)

Ending balance — REO 5,403 615 7,019 768 5,403 615 7,019 768

Beginning balance, valuation allowance (6) (6) (11) (14)

Change in valuation allowance (2) (2) 3 6

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

Ending balance — REO, net $607 $760 $607 $760

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Our REO ending inventory declined primarily due to a decrease in 

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

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

Freddie Mac Form 10-Q 25

Financial Results

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

segment. 

Table 16 - Single-Family Guarantee Segment Financial Results 

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Guarantee fee income $2,075 $1,676 $399 24% $5,597 $4,932 $665 13%

Benefit (provision) for credit losses 134 205 (71) (35) 221 366 (145) (40)

Financial instrument gains (losses)(1) 51 (5) 56 1,120 66 43 23 53

Other non-interest income (loss) 318 387 (69) (18) 836 592 244 41

Administrative expense (399) (371) (28) (8) (1,173) (1,070) (103) (10)

REO operations income (expense) (61) (42) (19) (45) (185) (101) (84) (83)

Other non-interest expense (554) (413) (141) (34) (1,667) (1,192) (475) (40)

Segment Earnings before income

tax expense 1,564 1,437 127 9 3,695 3,570 125 4

Income tax (expense) benefit (314) (254) (60) (24) (750) (686) (64) (9)

Segment Earnings, net of taxes 1,250 1,183 67 6 2,945 2,884 61 2

Total other comprehensive income

(loss), net of tax (3) (2) (1) (50) (9) (8) (1) (13)

Total comprehensive income

(loss) $1,247 $1,181 $66 6% $2,936 $2,876 $60 2%

(1) Consists of fair value gains and losses on debt for which we have elected the fair value option and derivatives. 

Key Business Drivers: 

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018

Higher guarantee fee income due to increased upfront fee amortization income driven by higher prepayments and 

continued growth in our single-family credit guarantee portfolio.

Higher other non-interest income during YTD 2019 compared to YTD 2018 primarily due to higher gains on sales of 

single-family held-for-sale loans. Other non-interest income remained relatively flat during 3Q 2019 compared to 3Q 

2018.

Higher other non-interest expense primarily due to higher outstanding cumulative volumes of CRT transactions that 

resulted in increased CRT expense (interest expense on STACR debt notes and premium expense for ACIS and STACR 

Trust contracts).
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 26

Multifamily 

Business Results

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

New Business Activity 

Multifamily New Business Activity

(UPB in billions)

The 2019 Conservatorship Scorecard annual production cap remained at $35.0 billion through the end of 3Q 2019. On 

September 13, 2019, FHFA announced a revised loan purchase cap structure for the multifamily business. The loan 

purchase cap will be $100.0 billion for the five-quarter period from the fourth quarter of 2019 through the fourth quarter of 

2020. The new cap applies to all multifamily business, with no exclusions. To ensure a strong focus on affordable housing 

and traditionally underserved markets, FHFA directed that at least 37.5% of the new multifamily business be missiondriven, affordable housing. Loans that finance energy or water efficiency will be considered conventional business (i.e., 

they will not count towards the 37.5% requirement), unless they meet other mission-driven requirements.

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

assets, were $16.3 billion and $24.3 billion as of September 30, 2019 and September 30, 2018, respectively. Both periodend balances include loan purchase commitments for which we have elected the fair value option.

The combination of our new business activity and outstanding commitments was higher during 3Q 2019 and YTD 2019 

compared to 3Q 2018 and YTD 2018 due to continued strong demand for multifamily financing and healthy multifamily 

market fundamentals resulting in continued growth in overall multifamily mortgage debt outstanding. While our new 
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 27

business activity was higher during 3Q 2019 and YTD 2019, we expect new business activity for full-year 2019 to be similar 

to full-year 2018.

Excluding our LIHTC new business activity, approximately 36% and 40% of our new business activity in 3Q 2019 and YTD 

2019, respectively, counted towards the 2019 Conservatorship Scorecard production cap, while the remaining 64% and 

60% was considered uncapped.

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

pipeline decreased from 95% in 3Q 2018 to 84% in 3Q 2019 due to an increase in the issuance of other risk transfer 

securitizations, specifically our PC executions collateralized by held-for-investment loans. The purchase activity in 3Q 

2019, combined with market demand for our securities, will be a driver for securitizations during the fourth quarter of 2019 

and the first quarter of 2020. 

Multifamily Portfolio and Market Support

Multifamily Market Support

The following table summarizes our support of the multifamily market.

Table 17 - Multifamily Market Support 

(In millions) September 30, 2019 December 31, 2018

Guarantee portfolio $259,630 $237,323

Mortgage-related investments portfolio:

Unsecuritized mortgage loans held-for-sale 25,397 23,959

Unsecuritized mortgage loans held-for-investment 11,291 10,828

Mortgage-related securities(1) 5,663 7,385

Total mortgage-related investments portfolio 42,351 42,172

Other investments(2) 2,564 708

Total multifamily portfolio 304,545 280,203

Add: Unguaranteed securities(3) 38,980 35,835

Less: Acquired mortgage-related securities(4) (5,478) (7,160)

Total multifamily market support $338,047 $308,878

(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 to avoid doublecounting the exposure, as it is already reflected within the guarantee portfolio or unguaranteed securities.

Our total multifamily portfolio increased during YTD 2019, primarily due to our strong loan purchase and securitization 

activity. We expect continued growth in our total portfolio as purchase and securitization activities should outpace run off.

At September 30, 2019, approximately 77% of our held-for-sale loans and held-for-sale loan commitments were fixed-rate, 

while the remaining 23% were floating-rate.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 28

Net Interest Yield

Net Interest Yield Earned & Average Investment Portfolio Balance

(Weighted average balance in billions)

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018

Net interest yield increased during 3Q 2019 due to lower funding costs on our held-for-sale mortgage loans driven by 

lower interest rates, coupled with a higher yield on interest-only securities. Net interest yield remained relatively flat

during YTD 2019 compared to YTD 2018.

The weighted average portfolio balance of interest-earning assets decreased during 3Q 2019 and YTD 2019 due to the 

run-off of our held-for-investment loans, partially offset by an increase in held-for-sale loans.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 29

K Certificate Benchmark Spreads

K Certificate Benchmark Spreads

The valuation of our securitization pipeline and the profitability of our primary risk transfer securitization product, the K 

Certificate, are affected by both changes in K Certificate benchmark spreads and deal-specific attributes, such as tranche 

size, risk distribution, and collateral characteristics (loan term, coupon type, prepayment restrictions, and underlying 

property type). These market spread movements and deal-specific attributes contribute to our earnings volatility, which we 

manage by controlling the size of our securitization pipeline and by entering into certain spread-related derivatives. Spread 

tightening generally results in fair value gains, while spread widening generally results in fair value losses.

K Certificate benchmark spreads generally widened during 3Q 2019 and 3Q 2018, primarily resulting in fair value losses on 

our held-for-sale mortgage loans and commitments.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 30

Risk Transfer Activity

UPB of Assets Subject to Risk Transfer Activity

(UPB in billions)
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 31

Credit Risk Transfer Activity(1) 

(UPB in billions)

(1) The amounts disclosed in the graph above represent the net credit risk transferred to third parties.

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - The UPB of our primary risk transfer securitization transactions 

increased due to a higher average balance in our securitization pipeline, which was driven by strong new loan purchase 

activity during the first half of 2019.

As of September 30, 2019, we had cumulatively transferred a large majority of credit risk on the multifamily guarantee 

portfolio. 

Conservatorship capital needed for credit risk was reduced by approximately 90% through CRT transactions on new 

business activity in the twelve months ended September 30, 2018; we plan similar risk reduction transactions for this 

year's new business activity. 

The reduction in the amount of conservatorship capital needed for credit risk on new business activity is calculated as 

conservatorship credit capital released from CRT transactions (primarily through K Certificates and SB Certificates) 

divided by total conservatorship credit capital on new business activity. For more information on the CCF and the 

calculation of conservatorship capital, see Liquidity and Capital Resources - Capital Resources - 

Conservatorship Capital Framework - Return on Conservatorship Capital.

In addition to transferring a large majority of credit risk, nearly all of our risk transfer securitization activities also shifted 

substantially all of the interest-rate and liquidity risk associated with the underlying collateral away from Freddie Mac to 

third-party investors.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 32

Guarantee Activities

New Guarantee Activity

(In billions)

 Remaining Unearned Guarantee Fees

 (In billions)

We earn guarantee fees in exchange for providing our 

guarantee of some or all of the securities we issue as 

part of our risk transfer securitization activities. Each 

time we enter into a financial guarantee contract, we 

initially recognize an unearned guarantee fee asset on 

our balance sheet, which represents the present value 

of future guarantee fees we expect to receive in cash. 

We recognize these fees in Segment Earnings over the 

remaining average guarantee term, which was eight 

years as of September 30, 2019. While we expect to 

collect these future fees based on historical 

performance, the actual amount collected will depend 

on the credit and prepayment performance of the 

underlying collateral subject to our financial guarantee.

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - 

New unearned guarantee fee assets increased 

primarily due to an increase in guaranteed UPB issued 

by our securitizations.

The balance of unearned guarantee fees increased 

during YTD 2019 due to the continued growth of our 

multifamily guarantee business, as our risk transfer 

securitization volume continued to be strong, 

outpacing run off.
Management's Discussion and Analysis Our Business Segments | Multifamily

Freddie Mac Form 10-Q 33

Financial Results

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

Table 18 - Multifamily Segment Financial Results

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Net interest income $292 $280 $12 4% $805 $846 ($41) (5)%

Guarantee fee income 233 210 23 11 671 609 62 10

Benefit (provision) for credit losses (1) 2 (3) (150) (3) 20 (23) (115)

Financial instrument gains (losses)(1) 256 266 (10) (4) 254 690 (436) (63)

Administrative expense (125) (109) (16) (15) (357) (315) (42) (13)

Other non-interest income (expense) 72 13 59 454 254 96 158 165

Segment Earnings before income

tax expense 727 662 65 10 1,624 1,946 (322) (17)

Income tax (expense) benefit (146) (113) (33) (29) (330) (374) 44 12

Segment Earnings, net of taxes 581 549 32 6 1,294 1,572 (278) (18)

Total other comprehensive income

(loss), net of tax 10 (44) 54 123 132 (136) 268 197

Total comprehensive income

(loss) $591 $505 $86 17% $1,426 $1,436 ($10) (1)%

(1) Primarily consists of fair value gains and losses on loan purchase commitments, mortgage loans and debt for which we have elected the fair value option, certain 

investment securities, and derivatives.

Key Business Drivers:

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018

Net interest income remained relatively flat.

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

Increase in fair value gains during 3Q 2019, primarily driven by fair value gains on held-for-sale commitments due to 

targeted price increases related to changing market conditions. During YTD 2019, fair value gains decreased primarily 

driven by spread-related fair value losses due to spread widening on certain available-for-sale securities (which are 

recorded in other comprehensive income), partially offset by fair value gains on held-for-sale commitments due to 

targeted price increases related to changing market conditions.

Increase in other non-interest income primarily driven by lower losses on the fair value of the recognized unearned 

guarantee fee assets in the 2019 periods due to declining interest rates.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 34

Capital Markets

Business Results

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

Investing Activity

The following graphs present the Capital Markets segment's total investments portfolio and the composition of its mortgage 

investments portfolio by liquidity category. 

 Investments Portfolio Mortgage Investments Portfolio

The balance of our mortgage investments portfolio remained relatively flat from December 31, 2018 to September 30, 

2019. See Conservatorship and Related Matters - Managing Our Mortgage-Related Investments Portfolio

for additional details.

The balance of our other investments portfolio increased by 39.9%, primarily due to higher near-term cash needs as of 

September 30, 2019 compared to December 31, 2018 for upcoming debt maturities and anticipated calls of other debt.

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

3Q 2019. The percentage of less liquid assets relative to our total mortgage investments portfolio declined from 26.6% at 

December 31, 2018 to 20.0% at September 30, 2019, primarily due to repayments, sales, and securitizations. We 

continued to actively reduce our holdings of less liquid assets during 3Q 2019 by selling $3.5 billion of reperforming loans. 

Our sales of reperforming loans involved securitization of the loans using senior subordinate securitization structures.

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

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

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

Freddie Mac Form 10-Q 35

Net Interest Yield and Average Balances

Net Interest Yield & Average Investments Portfolio Balances

(Weighted average balance in billions)

 

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018 - Net interest yield decreased 51 and 17 basis points during 3Q 2019 

compared to 3Q 2018 and YTD 2019 compared to YTD 2018, respectively, primarily due to an increase in amortization 

expense resulting from higher loan liquidation rates, coupled with an increase in the percentage of our other investments 

portfolio relative to our total investments portfolio and the flattening of the yield curve.

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

reclassifications made for Segment Earnings. See Note 13 in our 2018 Annual Report for more information.
Management's Discussion and Analysis Our Business Segments | Capital Markets

Freddie Mac Form 10-Q 36

Financial Results

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

Table 19 - Capital Markets Segment Financial Results 

Change Change

(Dollars in millions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Net interest income $497 $845 ($348) (41)% $2,002 $2,410 ($408) (17)%

Investment securities gains (losses) 136 (336) 472 140 698 (524) 1,222 233

Debt gains (losses) (17) 137 (154) (112) (27) 368 (395) (107)

Derivative gains (losses) (438) 427 (865) (203) (2,095) 2,038 (4,133) (203)

Other non-interest income (expense) (237) 179 (416) (232) 189 535 (346) (65)

Administrative expense (96) (89) (7) (8) (287) (262) (25) (10)

Segment Earnings before income

tax expense (155) 1,163 (1,318) (113) 480 4,565 (4,085) (89)

Income tax (expense) benefit 33 (189) 222 117 (97) (886) 789 89

Segment Earnings, net of taxes (122) 974 (1,096) (113) 383 3,679 (3,296) (90)

Total other comprehensive income

(loss), net of tax 132 (101) 233 231 594 (847) 1,441 170

Total comprehensive income

(loss) $10 $873 ($863) (99)% $977 $2,832 ($1,855) (66)%

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 net interest 

income, investment securities gains (losses), debt gains (losses), derivative gains (losses), income tax (expense) benefit, and 

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

Table 20 - Capital Markets Segment Interest Rate-Related and Market Spread-Related Fair Value Changes, Net of Tax 

Change Change

(Dollars in billions) 3Q 2019 3Q 2018 $ % YTD 2019 YTD 2018 $ %

Interest rate-related ($0.4) ($0.1) ($0.3) (300)% ($0.4) ($0.1) ($0.3) (300)%

Market spread-related 0.2 0.1 0.1 100 % 0.3 0.3 — —

Key Business Drivers:

3Q 2019 vs. 3Q 2018 and YTD 2019 vs. YTD 2018

Net interest income decreased primarily due to an increase in amortization expense resulting from higher loan 

liquidation rates, coupled with a change in our investment mix as the other investments portfolio represents a larger 

percentage of our total investments portfolio and a flattening of the yield curve.

Increase in interest rate-related fair value losses as long-term interest rates decreased during the 2019 periods, 

resulting in fair value gains on many of our investments in securities (some of which are recorded in other 

comprehensive income) and fair value losses on derivatives. The net amount of these changes in fair value was mostly 

offset by the change in the fair value of the hedged items attributable to interest-rate risk in our hedge accounting 

programs. Additionally, our derivative volume, which economically hedges certain financial instruments not recorded 

at fair value, 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 

update introduced additional volatility which resulted in increased losses, partially offset by the effects of hedge 

accounting.

Decrease in debt gains (losses) primarily due to losses from the extinguishment of fixed-rate debt securities of 

consolidated trusts, as long-term interest rates declined between the time of issuance and repurchase.

 Decrease in non-interest 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 mortgage loans, combined 

with the effects of an earnings mismatch related to fair value hedge accounting. For further discussion on timing 

differences in amortization, see MD&A - Consolidated Results of Operations in our 2018 Annual Report. 
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 37

RISK MANAGEMENT

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

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

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

Management in our 2018 Annual Report, Risk Factors in our 2018 Annual Report and our Form 10-Q for the quarter ended 

June 30, 2019, and Liquidity and Capital Resources in this Form 10-Q and our 2018 Annual Report. See below for updates 

since our Form 10-Q for the quarter ended June 30, 2019.

Market Risk

Overview

Our business segments have embedded exposure to market risk, which is the economic risk associated with adverse changes 

in interest rates, volatility, and spreads. Interest-rate risk is consolidated and primarily managed by the Capital Markets 

segment, while spread risk is owned by each individual business segment. Market risk can adversely affect future cash flows, 

or economic value, as well as earnings and net worth.

The majority of our interest-rate risk comes from our investments in mortgage-related assets (securities and loans), the debt we 

issue to fund our assets, and upfront fees (including buy-downs) related to our single-family credit guarantee activity. Our 

primary goal in managing interest-rate risk is to reduce the amount of change in the value of our future cash flows due to future 

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

assets and liabilities over those scenarios.

Interest-Rate Risk

Our primary interest-rate risk measures are duration gap and Portfolio Value Sensitivity (PVS). 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. PVS is our estimate of the change in the value of our financial assets and liabilities from an 

instantaneous shock to interest rates, assuming spreads are held constant and no rebalancing actions are undertaken. PVS is 

measured in two ways, one measuring the estimated sensitivity of our portfolio value to a 50 basis point parallel movement in 

interest rates (PVS-L) and the other to a non-parallel movement resulting from a 25 basis point change in slope of the LIBOR 

yield curve (PVS-YC). While we believe that duration gap and PVS are useful risk management tools, they should be understood 

as estimates rather than as precise measurements.

The following 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. 

We began to include upfront fees (including buy-downs) in our interest-rate metrics in 2Q 2019. Including upfront fees and 

related derivative activities significantly increased the Derivatives PVS-L and PVS-YC results for September 30, 2019 in the 

table below, with an offsetting impact in the Guarantees PVS-L and PVS-YC results.

Table 21 - PVS-YC and PVS-L Results Assuming Shifts of the LIBOR Yield Curve 

September 30, 2019 December 31, 2018

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 ($248) $4,523 $9,314 ($536) $5,792 $11,761

Guarantees(2) (253) 451 943 89 (425) (773)

Total Assets (501) 4,974 10,257 (447) 5,367 10,988

Liabilities 23 (1,492) (3,126) (109) (1,889) (3,948)

Derivatives 491 (3,392) (6,893) 560 (3,446) (6,917)

Total $13 $90 $238 $4 $32 $123

PVS $13 $90 $238 $4 $32 $123
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 38

(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, beginning in 2Q 2019, upfront fees (including buydowns). 

Table 22 - Duration Gap and PVS Results

3Q 2019 3Q 2018

(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 $17 $54 — $12 $18

Minimum (0.3) — — (0.2) — —

Maximum 1.2 48 130 0.3 21 49

Standard deviation 0.2 12 29 0.1 5 15

YTD 2019 YTD 2018

(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 0.9 $43 $116 — $11 $17

Minimum (0.8) — — (0.4) — —

Maximum 8.6 345 950 0.3 31 77

Standard deviation 1.8 81 213 0.1 6 17

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 23 - PVS-L Results Before Derivatives and After Derivatives

PVS-L (50 bps)

(In millions)

Before

Derivatives

After

Derivatives

Effect of

Derivatives

September 30, 2019 $3,482 $90 ($3,392)

December 31, 2018 3,478 32 (3,446)

In April 2019, we updated our interest-rate risk measures and began incorporating upfront fees (including buy-downs) related to 

single-family credit guarantee activity into our asset and liability interest-rate risk management strategy and definition. As a 

result, the PVS-L before derivatives is significantly higher as of September 30, 2019 than it would have been if we had not 

updated our interest-rate risk management strategy and definition to include upfront fees. 

The inclusion of upfront fees increased the volume of derivatives we used to hedge interest-rate risk, and this higher volume of 

derivatives, coupled with the volatility of market interest rates during the period, created variability in our PVS-L during 3Q 2019. 

The table below shows the average, minimum, and maximum PVS-L before derivatives and after derivatives during 3Q 2019.

Table 24 - PVS-L Average, Minimum, and Maximum

3Q 2019

PVS-L (50bps)

(In millions) Before Derivatives After Derivatives

Average $3,883 $54

Minimum 3,477 —

Maximum 4,343 130
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 39

GAAP Earnings Variability

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

are measured at fair value) creates variability in our GAAP earnings when interest rates and spreads change. This variability of 

GAAP earnings, which may not reflect the economics of our business, increases the risk of our having a negative net worth and 

thus being required to draw from Treasury. Although we manage our business on an economic basis, we may execute certain 

transactions on a non-economic basis in an effort to manage our spread and interest-rate risks.

Interest-Rate Volatility

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

financial results are still subject to significant earnings variability from period to period. Based upon the composition of our 

financial assets and liabilities, including derivatives, at September 30, 2019, 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. Beginning in September 2019, 

we implemented a new fair value hedge accounting strategy using single-family mortgage loans that applies certain hedge 

accounting elections allowable under amended hedge accounting guidance we adopted during 4Q 2017. See Note 9 for 

additional information on hedge accounting.

GAAP Adverse Scenario

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

which of those scenarios produces the most adverse GAAP earnings outcome. The interest rate scenarios evaluated include 

parallel shifts in the yield curve of plus and minus 100 basis points, non-parallel yield curve shifts in which long-term interest 

rates increase or decrease by 100 basis points, and non-parallel yield curve shifts in which short-term and medium-term 

interest rates increase or decrease by 100 basis points.

At September 30, 2019, the GAAP adverse scenario before fair value hedge accounting was a parallel shift in which rates 

decrease by 100 basis points, while the adverse scenario after fair value hedge accounting was a non-parallel shift in which 

long-term rates decrease by 100 basis points.

At September 30, 2018, the GAAP adverse scenario before and after fair value hedge accounting was a non-parallel shift in 

which long-term rates decrease by 100 basis points. 

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

Table 25 - GAAP Adverse Scenario Before and After Hedge Accounting

GAAP Adverse Scenario (Before-Tax)

(Dollars in billions)

Before Hedge

Accounting

After Hedge

Accounting % Change

September 30, 2019 ($3.5) ($0.1) 97%

September 30, 2018 (3.3) (0.5) 85

The additional volume of derivatives from updating our interest-rate risk measures to include upfront fees (including buy-downs) 

related to single-family credit guarantee activity, and the volatility in market interest rates in 3Q 2019 created variability in our 

GAAP adverse scenarios during 3Q 2019. While the September 30, 2019 GAAP adverse scenario shows a 97% reduction after 

hedge accounting, this result includes the effect of the new hedge accounting strategy implemented in September 2019, which 

was not in effect for the entire quarter. As a result, the average GAAP adverse scenario after hedge accounting was higher 

during 3Q 2019 than it was as of September 30, 2019. With the implementation of the new hedge accounting strategy in 

September 2019, we expect the GAAP adverse scenario after hedge accounting in future periods to be similar to the result as 

of September 30, 2019. 

The table below shows the average, minimum, and maximum GAAP adverse scenario before hedge accounting and after hedge 

accounting during 3Q 2019.
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 40

Table 26 - GAAP Adverse Scenario Average, Minimum, and Maximum

3Q 2019

GAAP Adverse Scenario (Before-Tax)

(In billions) Before Hedge Accounting After Hedge Accounting

Average ($4.0) ($0.7)

Minimum (3.2) (0.1)

Maximum (5.2) (1.8)

Hedge accounting is designed to reduce the impact to GAAP earnings in the adverse scenario described above. However, the 

after hedge accounting impact may not always result in an improvement over the before hedge accounting impact. For 

example, there are certain interest-rate scenarios in which the after hedge accounting impact would result in a lower gain or a 

larger loss than the before hedge accounting impact. 

Net Interest Rate Effect on Comprehensive Income (Loss)

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

income (loss), net of tax, after considering any offsetting interest rate effects related to financial instruments measured at fair 

value and the effects of fair value hedge accounting. 

Table 27 - Estimated Net Interest Rate Effect on Comprehensive Income (Loss)

(In billions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Interest-rate effect on derivative fair values ($2.8) $1.4 ($9.3) $5.5

Estimate of offsetting interest-rate effect related to financial instruments measured at fair value(1) 1.3 (1.0) 4.4 (3.6)

Gains (losses) on mortgage loans and debt in fair value hedge relationships 1.2 (0.6) 4.5 (2.5)

Amortization of deferred hedge accounting gains and losses (0.2) 0.1 (0.2) 0.2

Income tax (expense) benefit 0.1 — 0.1 0.1

Estimated net interest rate effect on comprehensive income (loss) ($0.4) ($0.1) ($0.5) ($0.3)

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

the fair value option, which is reflected in non-interest income (loss) and total other comprehensive income (loss) on our condensed consolidated statements of 

comprehensive income.

The effect from the change in interest rates on derivative fair values is mostly offset by the effect from the change in interest 

rates related to financial instruments measured at fair value and gains and losses on mortgage loans and debt in fair value 

hedging relationships. However, the estimated net interest rate effect on comprehensive income (loss) in 3Q 2019 was higher 

than in prior periods as a result of the additional volume of derivatives and volatility in market interest rates during 3Q 2019. The 

remaining net interest-rate effect on comprehensive income is largely attributable to the following:

The reversal of previously recognized derivative gains and losses, 

The implied net cost on instruments such as swaptions, futures, and forward purchase and sale commitments from our 

hedging and interest-rate risk management activities, which are recognized in GAAP earnings over time as a component of 

derivative gains and losses as the instruments approach maturity, and 

The amortization of previously deferred hedge accounting gains and losses, which we recognized in interest income over 

the contractual life of the hedged item.
Management's Discussion and Analysis Risk Management

Freddie Mac Form 10-Q 41

Spread Volatility

We have limited ability to manage our spread risk exposure in a cost beneficial manner, and therefore the volatility of market 

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

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

recognize fair value gains when market spreads widen. The table below shows the estimated effect of spreads on our 

comprehensive income (loss), after tax, by segment.

Table 28 - Estimated Spread Effect on Comprehensive Income (Loss) 

(In billions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Capital Markets $0.2 $0.1 $0.3 $0.3

Multifamily (0.1) — (0.2) 0.1

Single-family Guarantee(1) — — — —

Spread effect on comprehensive income (loss) $0.1 $0.1 $0.1 $0.4

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

Freddie Mac Form 10-Q 42

LIQUIDITY AND CAPITAL RESOURCES

Our business activities require that we maintain adequate liquidity to meet our financial obligations as they come due and meet 

the needs of customers in a timely and cost-efficient manner. We also must maintain adequate capital resources to avoid being 

placed into receivership by FHFA. For further discussion of our liquidity framework and profile, see MD&A - Liquidity and 

Capital Resources in our 2018 Annual Report.

Liquidity

Primary Sources of Liquidity

The following table lists the sources of our liquidity, the balances as of September 30, 2019, and a brief description of their 

importance to Freddie Mac.

Table 29 - Sources of Liquidity

Source Balance(1)

 (In billions)

Description

Liquidity

• Other Investments Portfolio -

Liquidity and Contingency

Operating Portfolio

$52.4 • 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$120.8 • The liquid portion of our mortgage-related investments portfolio can be pledged

or sold for liquidity purposes. The amount of cash we may be able to successfully

raise may be substantially less than the balance.

(1) Represents carrying value for the liquidity and contingency operating portfolio, included within our other investments portfolio, and UPB for the liquid portion of the 

mortgage-related investments portfolio.

Other Investments Portfolio

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

management, and ability to provide liquidity and stability to the mortgage market. The table below summarizes the balances in 

our other investments portfolio, which includes the liquidity and contingency operating portfolio.

Table 30 - Other Investments Portfolio

September 30, 2019 December 31, 2018

(In billions)

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other

Total Other

Investments

Portfolio

Liquidity and

Contingency

Operating

Portfolio

Custodial

Account Other

Total Other

Investments

Portfolio

Cash and cash equivalents $5.1 $3.6 $— $8.7 $6.7 $0.6 $— $7.3

Securities purchased under agreements

to resell 27.6 21.4 2.2 51.2 20.2 12.1 2.5 34.8

Non-mortgage related securities 19.7 — 4.6 24.3 16.8 — 2.4 19.2

Secured lending and other — — 5.4 5.4 — — 1.8 1.8

Total $52.4 $25.0 $12.2 $89.6 $43.7 $12.7 $6.7 $63.1

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 $4.0 billion and $1.5 billion as of September 30, 

2019 and December 31, 2018, respectively.

The liquidity and contingency operating portfolio also included collateral posted to us in the form of cash primarily by 

derivatives counterparties of $3.1 billion and $3.0 billion as of September 30, 2019 and December 31, 2018, respectively. We 

have invested this collateral in securities purchased under agreements to resell and non-mortgage-related securities as part of 

our liquidity and contingency operating portfolio, although the collateral may be subject to return to our counterparties based on 

the terms of our master netting and collateral agreements. 
Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac Form 10-Q 43

Mortgage Loans and Mortgage-Related Securities

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

and liquid. Our primary source of liquidity among these mortgage assets is our holdings of single-class and multiclass agency 

securities, excluding certain structured agency securities collateralized by non-agency mortgage-related securities. Our ability 

to pledge certain of these assets as collateral or sell them enhances our liquidity profile, although the amount of cash we may 

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

amount of mortgage-related assets we hold. See Conservatorship and Related Matters for additional details on the 

liquidity of our mortgage-related investments portfolio.

Primary Sources of Funding

The following table lists the sources and balances of our funding as of September 30, 2019 and a brief description of their 

importance to Freddie Mac.

Table 31 - Sources of Funding

Source Balance(1)

 (In billions)

Description

Funding

• Other Debt $281.6 • Other debt is used to fund our business activities, including single-family

guarantee activities not funded by debt securities of consolidated trusts.

• Debt Securities of Consolidated

Trusts

$1,869.3 • Debt securities of consolidated trusts are used primarily to fund our single-family

guarantee activities. This type of debt is principally repaid by the cash flows of the

associated mortgage loans. As a result, our repayment obligation is limited to

amounts paid pursuant to our guarantee of principal and interest and purchasing

modified or seriously delinquent loans from the trusts.

(1) Represents UPB of debt balances.

Other Debt Activities

We issue other debt to fund our business activities. Competition for funding can vary with economic, financial market, and 

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

requirements. We currently favor a mix of derivatives and shorter-term and callable debt to fund our business and manage 

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

The table below summarizes the par value and the average rate of other debt securities we issued or paid off, including 

regularly scheduled principal payments, payments resulting from calls, and payments for repurchases. We call, exchange, or 

repurchase our outstanding debt securities from time to time for a 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 Form 10-Q 44

Table 32 - Other Debt Activity

3Q 2019 YTD 2019

(Dollars in millions) Short-term

Average 

Rate(1) Long-term

Average 

Rate(1) Short-term

Average 

Rate(1) Long-term

Average 

Rate(1)

Discount notes and 

Reference Bills®

Beginning balance $35,362 2.41% $— —% $28,787 2.36% $— —%

Issuances 82,414 2.05 — — 267,915 2.24 — —

Repurchases — — — — — — — —

Maturities (75,057) 2.20 — — (253,983) 2.28 — —

Ending Balance 42,719 2.09 — — 42,719 2.09 — —

Securities sold under

agreements to repurchase

Beginning balance 9,549 2.30 — — 6,019 2.40 — —

Additions 111,886 2.19 — — 213,335 2.30 — —

Repayments (112,735) 2.21 — — (210,654) 2.32 — —

Ending Balance 8,700 2.06 — — 8,700 2.06 — —

Callable debt

Beginning balance 12,590 2.49 113,394 2.16 2,000 2.53 105,206 2.09

Issuances 1,000 2.30 28,627 2.22 13,590 2.48 74,293 2.55

Repurchases — — — — — — — —

Calls (10,590) 2.49 (31,077) 2.59 (12,590) 2.53 (59,885) 2.82

Maturities — — (8,494) 1.38 — — (17,164) 1.32

Ending Balance 3,000 2.43 102,450 2.11 3,000 2.43 102,450 2.11

Non-callable debt

Beginning balance 13,596 2.50 77,539 2.75 14,440 2.04 80,789 2.56

Issuances 29,256 2.27 5,485 2.27 47,562 2.35 15,775 2.43

Repurchases (345) 1.87 — — (345) 1.87 (774) 1.82

Maturities (2,409) 2.38 (14,515) 1.33 (21,559) 2.17 (27,281) 1.65

Ending Balance 40,098 2.33 68,509 3.02 40,098 2.33 68,509 3.02

STACR and SCR Debt(2)

Beginning balance — — 16,971 6.16 — — 17,729 6.02

Issuances — — — — — — 280 2.48

Repurchases — — — — — — — —

Maturities — — (883) 4.24 — — (1,921) 4.47

Ending Balance — — 16,088 5.98 — — 16,088 5.98

Total other debt $94,517 2.20% $187,047 2.78% $94,517 2.20% $187,047 2.78%

(1) Average rate is weighted based on par value.

(2) Includes STACR and SCR debt notes and certain multifamily other debt. STACR and SCR debt notes are subject to prepayment risk as their payments are based upon 

the performance of a reference pool of mortgage assets that may be prepaid by the related mortgage borrower at any time generally without penalty.

Our outstanding other debt balance increased during the 2019 periods, driven by an increase in the issuance of short-term 

SOFR debt primarily due to higher near-term cash needs for upcoming debt maturities and anticipated calls.
Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac Form 10-Q 45

Maturity and Redemption Dates

The following graphs present our other debt by contractual maturity date and earliest redemption date. The earliest redemption 

date refers to the earliest call date for callable debt and the contractual maturity date for all other debt. 

Contractual Maturity Date as of September 30, 2019(1) Earliest Redemption Date as of September 30, 2019(1)

(1) STACR and SCR debt notes are subject to prepayment risk as their payments are based upon the performance of a reference pool of mortgage assets that may be 

prepaid by the related mortgage borrower at any time generally without penalty and are therefore included as a separate category in the graphs.

Debt Securities of Consolidated Trusts

The largest component of debt on our condensed consolidated balance sheets is debt securities of consolidated trusts, which 

relates to securitization transactions that we consolidated for accounting purposes. We issue this type of debt by securitizing 

mortgage loans primarily to fund the majority of our single-family guarantee activities. When we consolidate securitization 

trusts, we recognize the following on our condensed consolidated balance sheets:

The assets held by the securitization trusts, the majority of which are mortgage loans. We recognized $1,905.6 billion and 

$1,842.9 billion of mortgage loans, which represented 87.8% and 89.3% of our total assets, as of September 30, 2019 and 

December 31, 2018, respectively.

The debt securities issued by the securitization trusts, the majority of which are Level 1 securitizations that are passthrough securities, where the cash flows of the mortgage loans held by the securitization trust are passed through to the 

holders of the securities. We recognized $1,869.3 billion and $1,792.7 billion of debt securities of consolidated trusts, 

which represented 87.0% and 87.7% of our total debt, as of September 30, 2019 and December 31, 2018, respectively.

Debt securities of consolidated trusts are principally repaid from the cash flows of the mortgage loans held by the securitization 

trusts that issued the debt securities. In circumstances when the cash flows of the mortgage loans are not sufficient to repay 

the debt, we make up the shortfall because we have guaranteed the payment of principal and interest on the debt. In certain 

circumstances, we have the right and/or obligation to purchase the loan from the trust prior to its contractual maturity.
Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac Form 10-Q 46

The table below shows the issuance and extinguishment activity for the debt securities of our consolidated trusts.

Table 33 - Activity for Debt Securities of Consolidated Trusts Held by Third Parties

(In millions) 3Q 2019 YTD 2019

Beginning balance $1,784,229 $1,748,738

Issuances:

New issuances to third parties 100,666 216,071

Additional issuances of securities 56,495 121,537

Total issuances 157,161 337,608

Extinguishments:

Purchases of debt securities from third parties (12,556) (25,526)

Debt securities received in settlement of secured lending (12,816) (28,066)

Repayments of debt securities (91,312) (208,048)

Total extinguishments (116,684) (261,640)

Ending balance 1,824,706 1,824,706

Unamortized premiums and discounts 44,602 44,602

Debt securities of consolidated trusts held by third parties $1,869,308 $1,869,308

Cash Flows 

Cash and cash equivalents (including restricted cash and cash equivalents) increased by $1.7 billion from September 30, 2018 

to September 30, 2019, primarily driven by an increase in proceeds from the issuance of debt for upcoming maturities and 

anticipated calls of other debt.

Capital Resources

Primary Sources of Capital

Our entry into conservatorship resulted in significant changes to the assessment of our capital adequacy and our management 

of capital. Under the Purchase Agreement, Treasury made a commitment to provide us with funding, under certain conditions, 

to eliminate deficits in our net worth. At September 30, 2019, our assets exceeded our liabilities under GAAP; therefore, no 

draw is being requested from Treasury under the Purchase Agreement. Based on our Net Worth Amount of $6.7 billion and the 

applicable Capital Reserve Amount of $20.0 billion, we will not have a dividend requirement to Treasury in December 2019. See 

Note 2 for details of the support we receive from Treasury.

The table below presents activity related to our net worth during 3Q 2019 and YTD 2019. 

Table 34 - Net Worth Activity 

(In millions) 3Q 2019 YTD 2019

Beginning balance $4,826 $4,477

Comprehensive income (loss) 1,848 5,339

Capital draw from Treasury — —

Senior preferred stock dividends declared — (3,142)

Total equity / net worth $6,674 $6,674

Aggregate draws under Purchase Agreement $71,648 $71,648

Aggregate cash dividends paid to Treasury 119,680 119,680

Conservatorship Capital Framework

In May 2017, FHFA, as Conservator, issued guidance to us to evaluate and manage our financial risk and to make economic 

business decisions, while in conservatorship, utilizing a newly-developed risk-based CCF, an economic capital system with 

detailed formulae provided by FHFA. The CCF also provides the foundation for the risk-based component of the proposed 

Enterprise Capital Rule published by FHFA in the Federal Register in July 2018.
Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac Form 10-Q 47

We have adopted the CCF for internal capital measurement to evaluate business decisions and ensure the company makes 

such decisions prudently when pricing transactions and managing its businesses. This framework focuses on the profits earned 

versus an estimated cost of equity capital needed to support the risk assumed to generate those profits. 

The existing regulatory capital requirements have been suspended by FHFA during conservatorship. Consequently, we refer to 

the capital needed under the CCF for analysis of transactions and businesses as "conservatorship capital." 

Under the Purchase Agreement and the September 2019 Letter Agreement, we are not able to retain equity, as calculated 

under GAAP, in excess of the $20.0 billion Capital Reserve Amount. As a result, we do not have capital sufficient to support our 

aggregate risk-taking activities.

Return on Conservatorship Capital

The table below provides the ROCC, calculated as (1) annualized comprehensive income for the period divided by (2) average 

conservatorship capital during the period. Each quarter, we consider whether certain "significant items" occurred that should 

be excluded from comprehensive income for our calculation of ROCC. If we have identified significant items in any of the 

periods presented, we also include comprehensive income excluding significant items as well as an adjusted ROCC based on 

comprehensive income excluding significant items, both non-GAAP measures. We believe that these non-GAAP financial 

measures are useful to investors as they better reflect our on-going financial results. 

The ROCC shown in the table below is not based on our total equity and does not reflect actual returns on total equity. We do 

not believe that returns on total equity are meaningful because of the net worth limit imposed since 2012 under the Purchase 

Agreement.

Table 35 - Return on Conservatorship Capital(1)

(Dollars in billions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

GAAP comprehensive income $1.8 $2.6 $5.3 $7.1

Significant items:

Non-agency mortgage-related securities judgment(2) — — — (0.3)

Tax effect related to judgment(2) — — — 0.1

Total significant items(3) — — — (0.2)

Comprehensive income, excluding significant items(3) $1.8 $2.6 $5.3 $6.9

Conservatorship capital (average during the period)(4) $51.3 $56.5 $51.8 $57.5

ROCC, based on GAAP comprehensive income(4) 14.4% 18.1% 13.7% 16.6%

Adjusted ROCC, based on comprehensive income excluding 

significant items(3)(4) 14.4% 18.1% 13.7% 16.0%

(1) Average conservatorship capital and ROCC for 3Q 2019 and YTD 2019 are preliminary and subject to change until official submission to FHFA.

(2) YTD 2018 GAAP comprehensive income included a benefit of $334 million (pre-tax) from a final judgment against Nomura Holding America, Inc. in litigation 

involving certain of our non-agency mortgage-related securities. The tax effect related to this judgment was ($70) million.

(3) No significant items were identified for the 2019 periods. Numbers for the 2019 periods are included for comparison purposes only.

(4) Average conservatorship capital for each period is based on the CCF in effect during that period, except that the 2018 figures have been revised to include capital 

for deferred tax assets. The CCF in effect as of September 30, 2019 was largely unchanged from the CCF as of June 30, 2019.

Our ROCC and Adjusted ROCC for 3Q 2019 and YTD 2019 decreased compared to the returns for the 2018 periods, primarily 

driven by the decrease in comprehensive income, partially offset by the lower level of conservatorship capital needed, resulting 

from an increase in CRT activity in both our Single-family Guarantee and Multifamily segments, home price appreciation, the 

efficient disposition of legacy assets, and a decrease in our deferred tax assets.

We find the returns calculated above, as well as the returns calculated on specific transactions and individual business lines, to 

be a reasonable measure of return-versus-risk to support our decision-making while we remain in conservatorship. These 

returns may not be indicative of the returns that would be generated if we were to exit conservatorship, especially as the terms 

and timing of any such exit are not currently known and will depend upon future actions by the U.S. government. Our belief, 

should we leave conservatorship, is that returns at that time would most likely be below the levels calculated above, assuming 

the same portfolio of risk assets, as we expect that we would hold capital post-conservatorship above the minimum required 

regulatory capital. It is also likely that we would be required to pay fees for federal government support, thereby reducing our 

total comprehensive income.
Management's Discussion and Analysis Liquidity and Capital Resources

Freddie Mac Form 10-Q 48

OFF-BALANCE SHEET ARRANGEMENTS

We enter into certain off-balance sheet arrangements related to our securitization activities involving guaranteed loans and 

mortgage-related securities, though most of our securitization activities are on-balance sheet. For a description of our offbalance sheet arrangements, see MD&A - Off-Balance Sheet Arrangements in our 2018 Annual Report. See Note 3 and 

Note 5 for more information on our off-balance sheet securitization and guarantee activities.

Our maximum potential off-balance sheet exposure to credit losses relating to these securitization activities and guarantees is 

primarily represented by the UPB of the underlying loans and securities, which was $283.5 billion and $254.9 billion at 

September 30, 2019 and December 31, 2018, respectively. The amount as of September 30, 2019 excludes Fannie Mae 

securities backing Freddie Mac resecuritization products discussed below. 

With the implementation of the Single Security Initiative, we now 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 exposure as we do not 

have control over the Fannie Mae collateral.

As of September 30, 2019, the total amount of our off-balance sheet exposure related to Fannie Mae securities backing Freddie 

Mac resecuritization products was approximately $17 billion. We expect this exposure to increase over time.
Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac Form 10-Q 49

CONSERVATORSHIP AND RELATED MATTERS

Managing Our Mortgage-Related Investments Portfolio

The table below presents the UPB of our mortgage-related investments portfolio. In February 2019, FHFA directed us to 

maintain this portfolio at or below $225 billion at all times.

Table 36 - Mortgage-Related Investments Portfolio Details

September 30, 2019 December 31, 2018

(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 $— $20,823 $— $20,823 $— $8,955 $— $8,955

Reperforming loans — — 29,982 29,982 — — 39,402 39,402

Total single-family unsecuritized loans — 20,823 29,982 50,805 — 8,955 39,402 48,357

Freddie Mac mortgage-related securities 108,282 — 2,665 110,947 109,880 — 3,108 112,988

Non-agency mortgage-related securities — — 1,585 1,585 — — 2,122 2,122

Other Non-Freddie Mac agency mortgagerelated securities 7,583 — — 7,583 3,968 — — 3,968

Total Capital Markets segment -

Mortgage investments portfolio 115,865 20,823 34,232 170,920 113,848 8,955 44,632 167,435

Single-family Guarantee segment - Singlefamily unsecuritized seriously delinquent

loans — — 8,330 8,330 — — 8,473 8,473

Multifamily segment:

Unsecuritized loans — 24,998 11,690 36,688 — 23,203 11,584 34,787

Mortgage-related securities 4,964 — 699 5,663 6,570 — 815 7,385

Total Multifamily segment 4,964 24,998 12,389 42,351 6,570 23,203 12,399 42,172

Total mortgage-related investments

portfolio $120,829 $45,821 $54,951 $221,601 $120,418 $32,158 $65,504 $218,080

Percentage of total mortgage-related

investments portfolio 54% 21% 25% 100% 55% 15% 30% 100%

While we continued to purchase new single-family seriously delinquent loans from securities we guarantee and certain 

multifamily unsecuritized loans, which are classified as held-for-investment, our active disposition of less liquid assets during 

YTD 2019 included the following:

Sales of $3.5 billion in UPB of single-family reperforming loans, $0.2 billion in UPB of seriously delinquent unsecuritized 

single-family loans, and $0.2 billion in UPB of single-family non-agency mortgage-related securities;

Securitizations of $1.5 billion in UPB of less liquid multifamily loans; and

Transfers of $0.4 billion in UPB of less liquid multifamily loans to the securitization pipeline.
Management's Discussion and Analysis Conservatorship and Related Matters

Freddie Mac Form 10-Q 50

FHFA's Strategic Plan and Scorecards for Freddie Mac and Fannie 

Mae Conservatorships

In October 2019, FHFA released a new Strategic Plan for the Conservatorships of Freddie Mac and Fannie Mae. The 2019 

Strategic Plan provides a framework for how FHFA will guide Freddie Mac and Fannie Mae (the Enterprises) to fulfill their 

statutory missions, focus on safety and soundness, and prepare for a responsible end to the conservatorships. 

The three objectives of this new Strategic Plan are to ensure that the Enterprises:

Focus on their core mission responsibilities to foster competitive, liquid, efficient, and resilient (CLEAR) national housing 

finance markets that support sustainable homeownership and affordable rental housing;

Operate in a safe and sound manner appropriate for entities in conservatorship; and

Prepare for the Enterprises' eventual exists from conservatorships.

FHFA also released a new annual Conservatorship Scorecard for Freddie Mac, Fannie Mae, and Common Securitization 

Solutions. This new 2020 Conservatorship Scorecard aligns tactical priorities and execution at the Enterprises to the 2019 

Strategic Plan and serves as a tool in holding the Enterprises accountable for its effective implementation

FHFA issued the 2019 and 2020 Conservatorship Scorecards in December 2018 and October 2019, respectively. We continue 

to align our resources and internal business plans to meet the goals and objectives provided by FHFA.

For information about how the Conservatorship Scorecard affects executive compensation, see the Compensation 

Discussion and Analysis section in our 2018 Annual Report. For information about the 2019 Conservatorship Scorecard, 

see our Current Report on Form 8-K filed on December 20, 2018. For information on the 2020 Conservatorship Scorecard, see 

our Current Report on Form 8-K filed on October 29, 2019.
Management's Discussion and Analysis Regulation and Supervision

Freddie Mac Form 10-Q 51

REGULATION AND SUPERVISION

In addition to our oversight by FHFA as our Conservator, we are subject to regulation and oversight by FHFA under our Charter 

and the GSE Act and to certain regulation by other government agencies. Furthermore, regulatory activities by other 

government agencies can affect us indirectly, even if we are not directly subject to such agencies' regulation or oversight. For 

example, regulations that modify requirements applicable to the purchase or servicing of mortgages can affect us.

Federal Housing Finance Agency

Affordable Housing Fund Allocations

The GSE Act requires us to set aside in each fiscal year an amount equal to 4.2 basis points of each dollar of total new 

business purchases, and pay this amount to certain housing funds. During 3Q 2019 and YTD 2019, we completed $163.2 

billion and $365.4 billion, respectively, of new business purchases subject to this requirement and accrued $68 million and $153 

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

we purchase. 

Legislative and Regulatory Developments

Treasury Housing Reform Plan

On September 5, 2019, Treasury released its plan to reform the housing finance system pursuant to the goals specified in the 

presidential memorandum issued on March 27, 2019. The Treasury Housing Reform Plan (the Plan) includes 49 recommended 

legislative and administrative reforms that would advance the reform goals outlined in the presidential memorandum: ending the 

conservatorships of the GSEs, facilitating competition in the housing finance system, establishing regulation of the GSEs that 

safeguards their safety and soundness and minimizes the risks they pose to the financial stability of the United States, and 

providing that the federal government is properly compensated for any explicit or implicit support it provides to the GSEs or the 

secondary housing finance market. 

Among other things, Treasury states that its preference and recommendation is for Congress to enact comprehensive housing 

finance reform legislation. Specifically, the Plan indicates that legislative reforms should replace the existing GSE Purchase 

Agreements with an explicit, paid-for guarantee backed by the full faith and credit of the federal government that is limited to 

the timely payment of principal and interest on qualifying MBS. The explicit government guarantee should be available to rechartered GSEs and to any other FHFA-approved guarantors of MBS collateralized by eligible conventional mortgage loans or 

eligible multifamily mortgage loans. Further, the government’s guarantee would stand behind significant first-loss private capital 

and would be triggered only in exigent circumstances. 

To ensure stability in the housing finance system pending comprehensive housing finance reform legislation, the Plan indicates 

that it will be necessary to maintain limited and tailored government support for the GSEs by leaving the Purchase Agreement 

commitments in place after the GSE conservatorships. The Plan notes that the government should be compensated for its 

continued support through a periodic commitment fee. 

The Plan also indicates that FHFA should begin the process of ending the GSE conservatorships. It recommends that the 

Purchase Agreements be amended to enhance Treasury’s ability to mitigate the risk of a draw on the commitments after the 

conservatorships have ended. It also indicates that other Purchase Agreement amendments should ensure that each GSE 

continues to be subject to appropriate mission and safety and soundness regulation after conservatorship and that future GSE 

activities are limited to those that have a close nexus to the underlying rationale for government support.

Treasury has indicated that it will continue to support FHFA’s administrative actions to enhance regulation of the GSEs, promote 

private sector competition, and satisfy preconditions for ending the GSEs’ conservatorships. We cannot predict whether 

Congress will enact legislation or FHFA will take administrative action that is consistent with these recommendations.
Management's Discussion and Analysis Regulation and Supervision

Freddie Mac Form 10-Q 52

Affordable Housing Goal Results for 2018

In September 2019, FHFA informed us that it had reviewed our performance with respect to affordable housing goals for 2018 

and preliminarily determined that we achieved all five of our single-family affordable housing goals and all three of our 

multifamily goals. We may achieve a single-family or multifamily housing goal by meeting or exceeding the FHFA benchmark for 

that goal (Goal). We also may achieve a single-family housing goal by meeting or exceeding the actual share of the market that 

meets the criteria for that goal (Market Level). Our performance on the goals, as preliminarily determined by FHFA, is set forth in 

the table below.

Table 37 - 2018 Affordable Housing Goal Results

Goals for 2018

Market Levels

for 2018

Preliminary

Results for 2018

Single-family purchase money goals (benchmark levels)

Low-income goal 24% 25.5% 25.8%

Very low-income goal 6% 6.5% 6.3%

Low-income areas goal 18% 22.6% 22.6%

Low-income areas subgoal 14% 18.0% 17.3%

Single-family refinance (benchmark level)

Low-income goal 21% 30.7% 27.3%

Multifamily (benchmark levels in units)

Low-income goal 315,000 N/A 474,062

Very low-income subgoal 60,000 N/A 105,612

Small property low-income subgoal 10,000 N/A 39,353
Management's Discussion and Analysis Forward-Looking Statements

Freddie Mac Form 10-Q 53

FORWARD-LOOKING STATEMENTS

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

others as part of our normal operations. Some of these communications, including this Form 10-Q, contain "forward-looking 

statements." Examples of forward-looking statements include, but are not limited to, statements pertaining to the 

conservatorship, our current expectations and objectives for the Single-family Guarantee, Multifamily, and Capital Markets 

segments of our business, our efforts to assist the housing market, our liquidity and capital management, economic and market 

conditions and trends, our market share, the effect of legislative and regulatory developments and new accounting guidance, 

the credit quality of loans we own or guarantee, the costs and benefits of our 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 

the Form 10-Q for the quarter ended June 30, 2019 and our 2018 Annual Report, and:

The actions the U.S. government (including FHFA, Treasury, and Congress) may take, or require us to take, including to 

support the housing markets or to implement the recommendations in the Treasury Housing Reform Plan or FHFA's 

Conservatorship Scorecards and other objectives for us;

The effect of the restrictions on our business due to the conservatorship and the Purchase Agreement, including our 

dividend requirement on the senior preferred stock;

Changes in our Charter or in applicable legislative or regulatory requirements (including changes pursuant to the Treasury 

Housing Reform Plan or pursuant to any legislation affecting the future status of our company);

Changes in the fiscal and monetary policies of the Federal Reserve, including the balance sheet normalization program to 

reduce the Federal Reserve's holdings of mortgage-related securities;

Changes in tax laws;

Changes in accounting policies, practices, or guidance (e.g., FASB's accounting standards update related to the 

measurement of credit losses of financial instruments);

Changes in economic and market conditions, including changes in employment rates, interest rates, spreads, and home 

prices;

Changes in the U.S. residential mortgage market, including changes in the supply and type of loan products (e.g., 

refinance vs. purchase and fixed-rate vs. ARM);

The success of our efforts to mitigate our losses on our legacy and relief refinance single-family loan portfolio;

The success of our strategy to transfer mortgage credit risk through STACR debt note, STACR Trust, ACIS, K Certificate, 

SB Certificate, and other CRT transactions;

Our ability to maintain adequate liquidity to fund our operations;

Our ability to maintain the security and resiliency of our operational systems and infrastructure, including against 

cyberattacks;

Our ability to effectively execute our business strategies, implement new initiatives, and improve efficiency;

The adequacy of our risk management framework, including the adequacy of the CCF for measuring risk;

Our ability to manage mortgage credit risk, including the effect of changes in underwriting and servicing practices;

Our ability to limit or manage our economic exposure and GAAP earnings exposure to interest-rate volatility and spread 

volatility, including the availability of derivative financial instruments needed for interest-rate risk management purposes;

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

ongoing disclosures;

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

Changes or errors in the methodologies, models, assumptions, and estimates we use to prepare our financial statements, 

make business decisions, and manage risks;

Changes in investor demand for our debt or mortgage-related securities, as well as market acceptance of the UMBS; 

Changes in the practices of loan originators, servicers, investors, and other participants in the secondary mortgage market; 

The occurrence of a major natural or other disaster in areas in which our offices or significant portions of our total 

mortgage portfolio are located; and 

Other factors and assumptions described in this Form 10-Q and our 2018 Annual Report, including in the MD&A section.

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

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

Freddie Mac Form 10-Q 54

Financial Statements
Financial Statements Condensed Consolidated Statements of Comprehensive Income

Freddie Mac Form 10-Q 55

FREDDIE MAC 

Condensed Consolidated Statements of Comprehensive Income 

(Loss) (Unaudited)

(In millions, except share-related amounts) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Interest income

Mortgage loans $16,428 $16,787 $51,732 $49,082

Investments in securities 686 755 2,059 2,295

Other 426 261 1,197 703

Total interest income 17,540 17,803 54,988 52,080

Interest expense (15,130) (14,546) (46,498) (42,802)

Net interest income 2,410 3,257 8,490 9,278

Benefit (provision) for credit losses 179 380 474 377

Net interest income after benefit (provision) for credit losses 2,589 3,637 8,964 9,655

Non-interest income (loss)

Guarantee fee income 231 209 670 603

Mortgage loans gains (losses) 1,702 94 4,174 233

Investment securities gains (losses) 164 (443) 728 (1,024)

Debt gains (losses) (56) 158 8 445

Derivative gains (losses) (1,217) 728 (4,912) 2,974

Other income (loss) 146 79 389 648

Non-interest income (loss) 970 825 1,057 3,879

Non-interest expense

Salaries and employee benefits (333) (301) (983) (890)

Professional services (115) (120) (342) (335)

Other administrative expense (172) (148) (492) (422)

Total administrative expense (620) (569) (1,817) (1,647)

Real estate owned operations expense (58) (38) (172) (87)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (408) (375) (1,197) (1,100)

Other expense (337) (218) (1,036) (619)

Non-interest expense (1,423) (1,200) (4,222) (3,453)

Income (loss) before income tax (expense) benefit 2,136 3,262 5,799 10,081

Income tax (expense) benefit (427) (556) (1,177) (1,946)

Net income (loss) 1,709 2,706 4,622 8,135

Other comprehensive income (loss), net of taxes and reclassification

adjustments:

Changes in unrealized gains (losses) related to available-for-sale securities 124 (169) 674 (1,065)

Changes in unrealized gains (losses) related to cash flow hedge relationships 19 25 57 87

Changes in defined benefit plans (4) (3) (14) (13)

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

reclassification adjustments 139 (147) 717 (991)

Comprehensive income (loss) $1,848 $2,559 $5,339 $7,144

Net income (loss) $1,709 $2,706 $4,622 $8,135

Undistributed net worth sweep, senior preferred stock dividends, or future

increase in senior preferred stock liquidation preference (1,848) (2,559) (5,339) (4,144)

Net income (loss) attributable to common stockholders ($139) $147 ($717) $3,991

Net income (loss) per common share — basic and diluted ($0.04) $0.05 ($0.22) $1.23

Weighted average common shares outstanding (in millions) — basic and

diluted 3,234 3,234 3,234 3,234

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Condensed Consolidated Balance Sheets

Freddie Mac Form 10-Q 56

FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited)

September 30, December 31,

(In millions, except share-related amounts) 2019 2018

Assets

Cash and cash equivalents (Notes 1, 3, 14) (includes $3,560 and $596 of restricted cash and cash

equivalents) $8,708 $7,273

Securities purchased under agreements to resell (Notes 3, 10) 51,187 34,771

Investments in securities, at fair value (Note 7) 72,982 69,111

Mortgage loans held-for-sale (Notes 3, 4) (includes $21,538 and $23,106 at fair value) 41,118 41,622

Mortgage loans held-for-investment (Notes 3, 4) (net of allowance for loan losses of $4,854 and $6,139) 1,956,372 1,885,356

Accrued interest receivable (Note 3) 6,790 6,728

Derivative assets, net (Notes 9, 10) 1,592 335

Deferred tax assets, net (Note 12) 5,784 6,888

Other assets (Notes 3, 18) (includes $4,590 and $3,929 at fair value) 25,713 10,976

Total assets $2,170,246 $2,063,060

Liabilities and equity

Liabilities

Accrued interest payable (Note 3) $6,688 $6,652

Debt, net (Notes 3, 8) (includes $4,600 and $5,112 at fair value) 2,149,259 2,044,950

Derivative liabilities, net (Notes 9, 10) 355 583

Other liabilities (Notes 3, 18) 7,270 6,398

Total liabilities 2,163,572 2,058,583

Commitments and contingencies (Notes 5, 9, 16)

Equity (Note 11)

Senior preferred stock (redemption value of $77,474 and $75,648) 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

650,059,033 shares and 650,058,775 shares outstanding — —

Additional paid-in capital — —

Retained earnings (accumulated deficit) (76,780) (78,260)

AOCI, net of taxes, related to:

Available-for-sale securities (includes $243 and $221, related to net unrealized gains on securities for

which other-than-temporary impairment has been recognized in earnings) 757 83

Cash flow hedge relationships (258) (315)

Defined benefit plans 83 97

Total AOCI, net of taxes 582 (135)

Treasury stock, at cost, 75,804,853 shares and 75,805,111 shares (3,885) (3,885)

Total equity (See Note 11 for information on our dividend requirement to Treasury) 6,674 4,477

Total liabilities and equity $2,170,246 $2,063,060

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our condensed consolidated balance 

sheets.

September 30, December 31,

(In millions) 2019 2018

Consolidated Balance Sheet Line Item

Assets: (Note 3)

Mortgage loans held-for-investment $1,905,633 $1,842,850

All other assets 43,863 20,237

Total assets of consolidated VIEs $1,949,496 $1,863,087

Liabilities: (Note 3)

Debt, net $1,869,308 $1,792,677

All other liabilities 5,519 5,335

Total liabilities of consolidated VIEs $1,874,827 $1,798,012

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Condensed Consolidated Statements of Equity

Freddie Mac Form 10-Q 57

FREDDIE MAC

Condensed Consolidated Statements of Equity (Unaudited)

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 June 30, 2019 1 464 650 $72,648 $14,109 $— $— ($78,489) $443 ($3,885) $4,826

Comprehensive income (loss):

Net income (loss) — — — — — — — 1,709 — — 1,709

Other comprehensive income (loss), net of

taxes — — — — — — — — 139 — 139

Comprehensive income (loss) — — — — — — — 1,709 139 — 1,848

Ending balance at September 30, 2019 1 464 650 $72,648 $14,109 $— $— ($76,780) $582 ($3,885) $6,674

Balance at June 30, 2018 1 464 650 $72,648 $14,109 $— $— ($77,921) ($366) ($3,885) $4,585

Comprehensive income (loss):

Net income (loss) — — — — — — — 2,706 — — 2,706

Other comprehensive income (loss), net of

taxes — — — — — — — — (147) — (147)

Comprehensive income (loss) — — — — — — — 2,706 (147) — 2,559

Senior preferred stock dividends paid — — — — — — — (1,585) — — (1,585)

Ending balance at September 30, 2018 1 464 650 $72,648 $14,109 $— $— ($76,800) ($513) ($3,885) $5,559

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, 2018 1 464 650 $72,648 $14,109 $— $— ($78,260) ($135) ($3,885) $4,477

Comprehensive income (loss):

Net income (loss) — — — — — — — 4,622 — — 4,622

Other comprehensive income (loss), net of

taxes — — — — — — — — 717 — 717

Comprehensive income (loss) — — — — — — — 4,622 717 — 5,339

Senior preferred stock dividends paid — — — — — — — (3,142) — — (3,142)

Ending balance at September 30, 2019 1 464 650 $72,648 $14,109 $— $— ($76,780) $582 ($3,885) $6,674

Balance at December 31, 2017 1 464 650 $72,336 $14,109 $— $— ($83,261) $389 ($3,885) ($312)

Comprehensive income (loss):

Net income (loss) — — — — — — — 8,135 — — 8,135

Other comprehensive income (loss), net of

taxes — — — — — — — — (991) — (991)

Comprehensive income (loss) — — — — — — — 8,135 (991) — 7,144

Cumulative effect of change in accounting

principle — — — — — — — (89) 89 — —

Increase in liquidation preference — — — 312 — — — — — — 312

Senior preferred stock dividends paid — — — — — — — (1,585) — — (1,585)

Ending balance at September 30, 2018 1 464 650 $72,648 $14,109 $— $— ($76,800) ($513) ($3,885) $5,559

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Condensed Consolidated Statements of Cash Flows

Freddie Mac Form 10-Q 58

FREDDIE MAC

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions) YTD 2019 YTD 2018

Net cash provided by (used in) operating activities $3,404 $2,895

Cash flows from investing activities

Purchases of trading securities (76,091) (101,700)

Proceeds from sales of trading securities 61,398 94,934

Proceeds from maturities and repayments of trading securities 10,733 5,276

Purchases of available-for-sale securities (6,440) (14,308)

Proceeds from sales of available-for-sale securities 9,407 16,976

Proceeds from maturities and repayments of available-for-sale securities 3,201 4,740

Purchases of held-for-investment mortgage loans (154,441) (113,083)

Proceeds from sales of mortgage loans held-for-investment 11,063 7,121

Repayments of mortgage loans held-for-investment 232,374 190,264

Advances under secured lending arrangements (34,627) (19,407)

Repayments of secured lending arrangements 1,022 —

Net proceeds from dispositions of real estate owned and other recoveries 891 1,054

Net (increase) decrease in securities purchased under agreements to resell (16,416) 7,363

Derivative premiums and terminations, swap collateral, and exchange settlement payments, net (10,536) 5,418

Other, net (424) (321)

Net cash provided by (used in) investing activities 31,114 84,327

Cash flows from financing activities

Proceeds from issuance of debt securities of consolidated trusts held by third parties 178,248 158,825

Repayments and redemptions of debt securities of consolidated trusts held by third parties (234,410) (211,729)

Proceeds from issuance of other debt 631,628 444,809

Repayments of other debt (605,323) (480,625)

Increase in liquidation preference of senior preferred stock — 312

Payment of cash dividends on senior preferred stock (3,142) (1,585)

Other, net (84) (2)

Net cash provided by (used in) financing activities (33,083) (89,995)

Net increase (decrease) in cash and cash equivalents (includes restricted cash and cash equivalents) 1,435 (2,773)

Cash and cash equivalents (includes restricted cash and cash equivalents) at beginning of year 7,273 9,811

Cash and cash equivalents (includes restricted cash and cash equivalents) at end of period $8,708 $7,038

Supplemental cash flow information

Cash paid for:

Debt interest $52,720 $48,915

Income taxes 306 2,125

Non-cash investing and financing activities (Note 4)

The accompanying notes are an integral part of these condensed consolidated financial statements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 59

Notes to Condensed Consolidated Financial 

Statements

NOTE 1

Summary of Significant Accounting Policies

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

U.S. housing market. We are regulated by FHFA, the SEC, HUD, and Treasury, and are currently operating under the 

conservatorship of FHFA. For more information on the roles of FHFA and Treasury, see Note 2 in this Form 10-Q and in our 

Annual Report on Form 10-K for the year ended December 31, 2018, or 2018 Annual Report. Throughout our unaudited 

condensed consolidated financial statements and related notes, we use certain acronyms and terms which are defined in the 

Glossary of our 2018 Annual Report. Throughout this Form 10-Q, we refer to the three months ended September 30, 2019, the 

three months ended June 30, 2019, the three months ended March 31, 2019, the three months ended December 31, 2018, the 

three months ended September 30, 2018, the three months ended June 30, 2018, the three months ended March 31, 2018, and 

the three months ended December 31, 2017 as "3Q 2019," "2Q 2019," "1Q 2019," "4Q 2018," "3Q 2018," "2Q 2018," "1Q 

2018," and "4Q 2017," respectively. We refer to the nine months ended September 30, 2019 and the nine months ended 

September 30, 2018 as "YTD 2019" and "YTD 2018," respectively.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited 

consolidated financial statements and related notes in our 2018 Annual Report.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and 

include our accounts as well as the accounts of other entities in which we have a controlling financial interest. All intercompany 

balances and transactions have been eliminated.

We are operating under the basis that we will realize assets and satisfy liabilities in the normal course of business as a going 

concern and in accordance with the authority provided by FHFA to our Board of Directors to oversee management's conduct of 

our business operations. Certain amounts in prior periods' condensed consolidated financial statements have been reclassified 

to conform to the current presentation. In the opinion of management, our unaudited condensed consolidated financial 

statements contain all adjustments, which include only normal recurring adjustments, necessary for a fair statement of our 

results.

We evaluate the materiality of identified errors in the financial statements using both an income statement, or "rollover," and a 

balance sheet, or "iron curtain," approach, based on relevant quantitative and qualitative factors. Net income includes certain 

adjustments to correct immaterial errors related to previously reported periods.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 60

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.

Recently Issued Accounting Guidance

Recently Adopted Accounting Guidance

Standard Description Date of

Adoption

Effect on Condensed Consolidated

Financial Statements

ASU 2016-02, Leases (Topic 

842)

The amendment in this Update addresses the

accounting for lease arrangements.

January 1, 2019 The adoption of the amendment did not

have a material effect on our condensed

consolidated financial statements or on our

disclosures.

ASU 2018-16, Derivatives and 

Hedging (Topic 815): Inclusion of 

the Secured Overnight Financing 

Rate (SOFR) Overnight Index 

Swap (OIS) Rate as a Benchmark 

Interest Rate for Hedge 

Accounting Purposes

The amendments in this Update permit the OIS rate

based on SOFR, as an eligible U.S. benchmark

interest rate for purposes of applying hedge

accounting under Topic 815.

January 1, 2019 The adoption of the amendment did not 

have a material effect on our condensed 

consolidated financial statements or on our 

disclosures.

ASU 2018-20, Leases (Topic 

842): Narrow-Scope 

Improvements for Lessors

The amendments in this Update address certain ASU

2016-02 implementation issues including the

recognition of taxes collected from lessees, lessor

costs paid directly by a lessee, and recognition of

variable payments for contracts with lease and nonlease components.

January 1, 2019 The adoption of the amendments did not

have a material effect on our condensed

consolidated financial statements or on our

disclosures.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 61

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Condensed Consolidated Financial Statements

Standard Description Date of Planned

Adoption

Effect on Consolidated Financial

Statements

ASU 2016-13, Financial 

Instruments—Credit Losses 

(Topic 326): Measurement of 

Credit Losses on Financial 

Instruments

The amendments in this Update replace the

incurred loss impairment methodology in current

GAAP with a methodology that reflects lifetime

expected credit losses and requires consideration of

a broader range of reasonable and supportable

information to inform credit loss estimates.

January 1, 2020 We have developed our models to estimate 

lifetime expected credit losses on our 

financial instruments measured at 

amortized cost primarily using a discounted 

cash flow methodology. We are using these 

models to execute our process for 

estimating the allowance for credit losses 

under the new standard in parallel with our 

existing process for estimating the 

allowance for credit losses under current 

GAAP and are developing an appropriate 

governance process for our estimate of 

expected credit losses under the new 

standard. The amendments will be applied 

through a cumulative effect adjustment to 

retained earnings as of the beginning of the 

year of adoption. 

While we continue to evaluate the effect 

that ASU 2016-13, Financial Instruments - 

Credit Losses, and related amendments will 

have on our consolidated financial 

statements, we expect the transition impact 

to result in an immaterial change in 

retained earnings. The increase in the 

allowance for credit losses from 

incorporating lifetime losses is generally 

offset by recoveries and a positive impact 

from including forecasts of economic 

conditions. 

The actual impact at adoption will depend 

upon the nature and characteristics of the 

portfolio at the adoption date, as well as 

macroeconomic conditions and forecasts at 

that time.

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 On October 1, 2018, we early adopted the

amendments to remove or modify certain

disclosures, which did not have a material

effect on our consolidated financial

statements. We are delaying adoption of the

amendments to add certain disclosures

until their effective date. We do not expect

that the adoption of the additional

disclosures will have a material effect on

our consolidated financial statements.

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 We do not expect that the adoption of these

amendments will have a material effect on

our consolidated financial statements.

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 We do not expect that the adoption of these

amendments will have a material effect on

our consolidated financial statements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 1

Freddie Mac Form 10-Q 62

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Condensed Consolidated Financial Statements

Standard Description Date of Planned

Adoption

Effect on Consolidated Financial

Statements

ASU 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 We do not expect that the adoption of these

amendments will have a material effect on

our consolidated financial statements.

ASU 2019-04, Codification 

Improvements to Financial 

Instruments - Credit Losses 

(Topic 326), Derivatives and 

Hedging (Topic 815), and 

Financial Instruments (Topic 

825)

The amendments in this Update clarify certain

aspects of Topic 326 guidance issued in ASU

2016-13 including the scope of the credit losses

standard and issues related to accrued interest

receivable balances, recoveries, variable interest

rates and prepayments. The other amendments in

this update clarify certain aspects of Topic 815 and

Topic 825.

January 1, 2020 We are assessing the impact of adopting 

the Topic 326 amendments as part of our 

assessment of the adoption impact of ASU 

2016-13, Financial Instruments-Credit 

Losses. We do not expect that the adoption 

of the Topic 815 and Topic 825 

amendments will have a material effect on 

our consolidated financial statements.

ASU 2019-05, Financial 

Instruments - Credit Losses 

(Topic 326): Measurement of 

Credit Losses on Financial 

Instruments

The amendments in this Update provides entities

with transition relief upon the adoption of ASU

2016-13 by providing an option to elect fair value

option on certain financial instruments measured at

amortized cost.

January 1, 2020 We do not expect that the adoption of these

amendments will have a material effect on

our consolidated financial statements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac Form 10-Q 63

NOTE 2

Conservatorship and Related Matters

Business Objectives

We operate under the conservatorship that commenced on September 6, 2008, conducting our business under the direction of 

FHFA, as our Conservator. The conservatorship and related matters significantly affect our management, business activities, 

financial condition, and results of operations. Upon its appointment, FHFA, as Conservator, immediately succeeded to all rights, 

titles, powers, and privileges of Freddie Mac, and of any stockholder, officer, or director thereof, with respect to the company 

and its assets. The Conservator also succeeded to the title to all books, records, and assets of Freddie Mac held by any other 

legal custodian or third party. The Conservator provided for the Board of Directors to perform certain functions and to oversee 

management, and the Board delegated to management authority to conduct business operations so that the company can 

continue to operate in the ordinary course. The directors serve on behalf of, and perform such functions as provided by, the 

Conservator.

We are subject to certain constraints on our business activities under the Purchase Agreement. However, the support provided 

by Treasury pursuant to the Purchase Agreement currently enables us to maintain our access to the debt markets and to have 

adequate liquidity to conduct our normal business activities, although the costs of our debt funding could vary. Our ability to 

access funds from Treasury under the Purchase Agreement is critical to keeping us solvent. 

Purchase Agreement 

Treasury, as the holder of the senior preferred stock, is entitled to receive quarterly cash dividends, when, as, and if declared by 

our Board of Directors. The dividends we have paid to Treasury on the senior preferred stock have been declared by, and paid 

at the direction of, the Conservator, acting as successor to the rights, titles, powers, and privileges of the Board. 

Under the August 2012 amendment to the Purchase Agreement, for each quarter from January 1, 2013 and thereafter, the 

dividend payment will be the amount, if any, by which our Net Worth Amount at the end of the immediately preceding fiscal 

quarter, less the applicable Capital Reserve Amount, exceeds zero. Pursuant to the September 2019 Letter Agreement, the 

applicable Capital Reserve Amount is $20.0 billion. If for any reason we do not pay the net worth sweep dividend in full for any 

period, the applicable Capital Reserve Amount will thereafter be zero. 

In addition, pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred stock will be 

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

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

As a result, the liquidation preference of the senior preferred stock increased from $75.6 billion to $77.5 billion on September 

30, 2019 based on the $1.8 billion increase in our Net Worth Amount during 2Q 2019, and will increase to $79.3 billion on 

December 31, 2019 based on the $1.8 billion increase in our Net Worth Amount during 3Q 2019. 

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

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

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

Impact of Conservatorship and Related Developments on the MortgageRelated Investments Portfolio

In February 2019, FHFA directed us to maintain the UPB of our mortgage-related investments portfolio at or below $225 billion

at all times. The UPB of this portfolio was $221.6 billion at September 30, 2019. Our ability to acquire and sell mortgage assets 

continues to be significantly constrained by limitations imposed by the Purchase Agreement and FHFA. 

Government Support for Our Business

We receive substantial support from Treasury and are dependent upon its continued support to continue operating our 

business. Our ability to access funds from Treasury under the Purchase Agreement is critical to: 

Keeping us solvent;

Allowing us to focus on our primary business objectives under conservatorship; and

Avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 2

Freddie Mac Form 10-Q 64

At June 30, 2019, our assets exceeded our liabilities under GAAP; therefore, FHFA, as Conservator, did not request a draw on 

our behalf and, as a result, we did not receive any funding from Treasury under the Purchase Agreement during 3Q 2019. The 

amount of available funding remaining under the Purchase Agreement is $140.2 billion and will be reduced by any future draws.

See Note 8 and Note 11 for more information on the conservatorship and the Purchase Agreement.

Related Parties As a Result of Conservatorship

We are deemed related parties with Fannie Mae as both we and Fannie Mae have the same relationships with FHFA and 

Treasury. CSS was formed in 2013 as a limited liability company equally-owned by Freddie Mac and Fannie Mae and is also 

deemed a related party. In connection with the formation of CSS, we entered into a limited liability company agreement with 

Fannie Mae. We and Fannie Mae have each appointed two executives to the CSS Board of Managers and signed governance 

and operating agreements for CSS, including an updated customer services agreement with Fannie Mae and CSS in May of 

2019. In June of 2019, we entered into an agreement with Fannie Mae regarding the commingling of certain of our mortgage 

securities under the Single Security Initiative and related indemnification obligations. During YTD 2019, we contributed $84 

million of capital to CSS, and we have contributed $548 million since the fourth quarter of 2014. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 3

Freddie Mac Form 10-Q 65

NOTE 3

Securitization Activities and Consolidation

Our primary business activities in our Single-family Guarantee and Multifamily segments involve the securitization of loans or 

other mortgage-related assets using trusts that are VIEs. These trusts issue beneficial interests in the loans or other mortgagerelated assets that they own. We guarantee the principal and interest payments on some or all of the issued beneficial interests 

in substantially all of our securitization transactions. We consolidate VIEs when we have a controlling financial interest in the VIE 

and are therefore considered the primary beneficiary of the VIE. See Note 5 for additional information on our guarantee 

activities.

Consolidated VIEs 

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our 

condensed consolidated balance sheets.

Table 3.1 - Consolidated VIEs

(In millions) As of September 30, 2019 As of December 31, 2018

Condensed Consolidated Balance Sheet Line Item

Assets:

Cash and cash equivalents (includes $3,494 and $566 of restricted cash and cash

equivalents) $3,495 $567

Securities purchased under agreements to resell 21,400 12,125

Investments in securities, at fair value 766 —

Mortgage loans held-for-investment 1,905,633 1,842,850

Accrued interest receivable 6,109 5,914

Other assets 12,093 1,631

Total assets of consolidated VIEs $1,949,496 $1,863,087

Liabilities:

Accrued interest payable $5,519 $5,335

Debt, net 1,869,308 1,792,677

Total liabilities of consolidated VIEs $1,874,827 $1,798,012

Non-Consolidated VIEs

Our involvement with VIEs for which we are not the primary beneficiary takes one or both of two forms - purchasing an 

investment in these entities or providing a guarantee to these entities. As part of the Single Security Initiative, we have the 

ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products that we do not consolidate. 

We extend our guarantee of these products to cover principal and interest that are payable from the underlying Fannie Mae 

collateral. See Note 5 for additional information on our guarantee of Fannie Mae securities. 

The following table presents the carrying amounts and classification of the assets and liabilities recorded on our condensed 

consolidated balance sheets related to non-consolidated VIEs with which we were involved in the design and creation and have 

a significant continuing involvement, as well as our maximum exposure to loss and total assets of the VIEs. Our maximum 

exposure to loss includes the guaranteed UPB of assets held by the non-consolidated VIEs, the UPB of unguaranteed 

securities that we acquired from these securitization transactions, and the UPB of guarantor advances made to the holders of 

the guaranteed securities. Our maximum exposure to loss and total assets of non-consolidated VIEs excludes our investments 

in and obligations to non-consolidated Freddie Mac resecuritization trusts because we already consolidate the underlying 

Freddie Mac collateral of these trusts on our condensed consolidated balance sheets and for commingled resecuritization 

trusts, we view the likelihood of being required to perform on our guarantee of the underlying Fannie Mae collateral as remote. 

Our maximum exposure to loss also excludes our interest rate exposure on certain securitization activity and other mortgagerelated guarantees measured at fair value where our interest rate exposure may be unlimited. We generally reduce our exposure 

to these guarantees with unlimited interest rate exposure through separate contracts with third parties. 

We do not believe the maximum exposure to loss disclosed in the table below is representative of the actual loss we are likely 

to incur, based on our historical loss experience and after consideration of proceeds from related collateral liquidation, including 

possible recoveries under credit enhancement arrangements. See Note 6 for additional information on credit enhancement 

arrangements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 3

Freddie Mac Form 10-Q 66

Table 3.2 - Non-Consolidated VIEs

(In millions) As of September 30, 2019 As of December 31, 2018

Assets and Liabilities Recorded on our Condensed Consolidated Balance 

Sheets(1)

Assets:

Investments in securities, at fair value $39,091 $44,020

Accrued interest receivable 214 235

Derivative assets, net 12 1

Other assets 3,737 3,119

 Liabilities:

Derivative liabilities, net 89 88

Other liabilities 3,511 3,049

Maximum Exposure to Loss 268,269 241,055

Total Assets of Non-Consolidated VIEs 320,221 284,724

(1) Includes our variable interests in REMICs and Strips, commingled Supers, K Certificates, SB Certificates, certain senior subordinate securitization structures, other 

securitization products, and other risk transfer securitizations that we do not consolidate. 

We also obtain interests in various other VIEs created by third parties through the normal course of business. To the extent that 

we were not involved in the design and creation of these VIEs, they are excluded from the table above. Our interests in these 

VIEs are generally passive in nature and are not expected to result in us obtaining a controlling financial interest in these VIEs in 

the future. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 67

NOTE 4

Mortgage Loans and Allowance for Credit Losses

The table below provides details of the loans on our condensed consolidated balance sheets as of September 30, 2019 and 

December 31, 2018.

Table 4.1 - Mortgage Loans

September 30, 2019 December 31, 2018

(In millions)

Held by

Freddie Mac

Held by

Consolidated

Trusts Total

Held by

Freddie Mac

Held by

Consolidated

Trusts Total

Held-for-sale:

Single-family $17,249 $— $17,249 $20,946 $— $20,946

Multifamily 25,397 — 25,397 23,959 — 23,959

Total UPB 42,646 — 42,646 44,905 — 44,905

Cost basis and fair value adjustments, net (1,528) — (1,528) (3,283) — (3,283)

Total held-for-sale loans, net 41,118 — 41,118 41,622 — 41,622

Held-for-investment:

Single-family 41,886 1,867,906 1,909,792 35,885 1,814,008 1,849,893

Multifamily 11,291 5,591 16,882 10,828 4,220 15,048

Total UPB 53,177 1,873,497 1,926,674 46,713 1,818,228 1,864,941

Cost basis adjustments (421) 34,973 34,552 (1,198) 27,752 26,554

Allowance for loan losses (2,017) (2,837) (4,854) (3,009) (3,130) (6,139)

Total held-for-investment loans, net 50,739 1,905,633 1,956,372 42,506 1,842,850 1,885,356

Total mortgage loans, net $91,857 $1,905,633 $1,997,490 $84,128 $1,842,850 $1,926,978

The table below provides details of the UPB of loans we purchased, reclassified from held-for-investment to held-for-sale, and 

sold.

Table 4.2 - Loans Purchased, Reclassified from Held-for-Investment to Held-for-Sale, and Sold

(In billions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Single-family:

Purchases

 Held-for-investment loans $133.8 $81.6 $305.0 $231.5

Reclassified from held-for-investment to held-for-sale (1) 3.0 13.3 8.1 17.6

Sale of held-for-sale loans(2) 3.7 2.3 9.4 6.5

Multifamily:

Purchases

 Held-for-investment loans 4.4 0.9 6.8 2.6

 Held-for-sale loans 23.1 16.3 50.6 42.5

Reclassified from held-for-investment to held-for-sale (1) 0.4 0.2 1.2 0.7

Sale of held-for-sale loans (3) 19.7 14.4 49.5 44.8

(1) We reclassify loans from held-for-investment to held-for-sale when we no longer have the intent or ability to hold for the foreseeable future. For additional 

information regarding the fair value of our loans classified as held-for-sale, see Note 15.

(2) Our sales of single-family loans reflect the sale of seasoned single-family mortgage loans. The sale of seasoned single-family mortgage loans is part of our strategy 

to mitigate and reduce our holdings of less liquid assets.

(3) Our sales of multifamily loans occur primarily through the issuance of multifamily K Certificates and SB Certificates. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 68

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 14.

The table below presents the recorded investment of single-family held-for-investment loans by current LTV ratios. Our current 

LTV ratios are estimates based on available data through the end of each respective period presented. 

Table 4.3 - Recorded Investment of Single-Family Held-for-Investment Loans by Current LTV Ratios

September 30, 2019 December 31, 2018

Current LTV Ratio Total Current LTV Ratio Total

(In millions) > 80 to 100 > 100(1) > 80 to 100 > 100(1)

20- and 30-year or more, amortizing

fixed-rate $1,388,311 $255,880 $4,689 $1,648,880 $1,336,310 $214,703 $6,654 $1,557,667

15-year amortizing fixed-rate 235,185 5,604 103 240,892 251,152 4,522 157 255,831

Adjustable-rate 37,659 1,660 6 39,325 42,117 1,883 7 44,007

Alt-A, interest-only, and option ARM 13,743 1,198 289 15,230 16,498 1,903 559 18,960

Total single-family loans $1,674,898 $264,342 $5,087 $1,944,327 $1,646,077 $223,011 $7,377 $1,876,465

(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 5.18% and 7.24% as of 

September 30, 2019 and December 31, 2018, respectively.

For reporting purposes:

Loans within the Alt-A category continue to be presented in that category following modification, even though the borrower 

may have provided full documentation of assets and income to complete the modification and

Loans within the option ARM category continue to be presented in that category following modification, even though the 

modified loan no longer provides for optional payment provisions.

Multifamily

The table below presents the recorded investment in our multifamily held-for-investment loans, by credit quality indicator based 

on available data through the end of each period presented. These indicators involve significant management judgment. 

Table 4.4 - Recorded Investment of Multifamily Held-for-Investment Loans by Credit Quality Indicator 

(In millions) September 30, 2019 December 31, 2018

Credit risk profile by internally assigned grade:(1)

Pass $16,684 $14,648

Special mention 66 201

Substandard 149 181

Doubtful — —

Total $16,899 $15,030

(1) A loan categorized as: "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower; "Special mention" has 

administrative issues that may affect future repayment prospects but does not have current credit weaknesses; "Substandard" has a weakness that jeopardizes the 

timely full repayment; and "Doubtful" has a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 69

Mortgage Loan Performance

The tables below present the recorded investment of our single-family and multifamily loans, held-for-investment, by payment 

status.

Table 4.5 - Recorded Investment of Held-for-Investment Loans by Payment Status

September 30, 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 $1,624,964 $14,846 $3,495 $5,575 $1,648,880 $5,573

15-year amortizing fixed-rate 239,460 1,025 170 237 240,892 237

Adjustable-rate 38,928 249 53 95 39,325 95

Alt-A, interest-only, and option ARM 13,855 608 228 539 15,230 538

Total single-family 1,917,207 16,728 3,946 6,446 1,944,327 6,443

Total multifamily 16,896 3 — — 16,899 13

Total single-family and multifamily $1,934,103 $16,731 $3,946 $6,446 $1,961,226 $6,456

December 31, 2018

(In millions) Current

One

Month

Past Due

Two

Months

Past Due

Three Months or

More Past Due,

or in Foreclosure(1) Total Non-accrual

Single-family:

20- and 30-year or more, amortizing

fixed-rate $1,532,499 $14,683 $3,602 $6,883 $1,557,667 $6,881

15-year amortizing fixed-rate 254,376 1,021 171 263 255,831 263

Adjustable-rate 43,549 287 58 113 44,007 113

Alt-A, interest-only, and option ARM 16,975 793 327 865 18,960 864

Total single-family 1,847,399 16,784 4,158 8,124 1,876,465 8,121

Total multifamily 15,030 — — — 15,030 17

Total single-family and multifamily $1,862,429 $16,784 $4,158 $8,124 $1,891,495 $8,138

(1) Includes $1.9 billion and $2.9 billion of single-family loans that were in the process of foreclosure as of September 30, 2019 and December 31, 2018, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 70

The table below summarizes the delinquency rates of loans within our single-family credit guarantee and multifamily mortgage 

portfolios.

Table 4.6 - Delinquency Rates

(Dollars in millions) September 30, 2019 December 31, 2018

Single-family:

Non-credit-enhanced portfolio

Serious delinquency rate 0.72% 0.83%

Total number of seriously delinquent loans 42,758 51,197

Credit-enhanced portfolio:(1)

Primary mortgage insurance:

 Serious delinquency rate 0.76% 0.86%

 Total number of seriously delinquent loans 14,358 15,287

Other credit protection:(2)

 Serious delinquency rate 0.34% 0.31%

 Total number of seriously delinquent loans 15,736 12,920

Total single-family:

Serious delinquency rate 0.61% 0.69%

Total number of seriously delinquent loans 67,991 75,649

Multifamily: (3)

Non-credit-enhanced portfolio:

Delinquency rate 0.01% —%

UPB of delinquent loans $3 $2

Credit-enhanced portfolio:

Delinquency rate 0.04% 0.01%

UPB of delinquent loans $103 $28

Total multifamily:

Delinquency rate 0.04% 0.01%

UPB of delinquent loans $106 $30

(1) The credit-enhanced categories are not mutually exclusive, as a single loan may be covered by both primary mortgage insurance and other credit protection.

(2) Consists of single-family loans covered by financial arrangements (other than primary mortgage insurance) that are designed to reduce our credit risk exposure. See 

Note 6 for additional information on our credit enhancements.

(3) Multifamily delinquency performance is based on the UPB of loans that are two monthly payments or more past due or those in the process of foreclosure. 

Allowance for Credit Losses

The allowance for credit losses represents estimates of probable incurred credit losses which we recognize by recording a 

charge to the provision for credit losses on our condensed consolidated statements of comprehensive income. The allowance 

for credit losses includes:

Our allowance for loan losses, which pertains to all single-family and multifamily loans classified as held-for-investment on 

our condensed consolidated balance sheets and

Our reserve for guarantee losses, which pertains to single-family and multifamily loans underlying our senior subordinate 

securitization structures (non-consolidated), other securitization products, and other mortgage-related guarantees.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 71

Table 4.7 - Details of Allowance for Credit Losses

The table below summarizes changes in our allowance for credit losses.

3Q 2019 3Q 2018

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

 (In millions)

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Single-family:

Beginning balance $2,238 $3,042 $46 $5,326 $4,887 $3,497 $49 $8,433

Provision (benefit) for credit losses (84) (97) 1 (180) (522) 143 1 (378)

Charge-offs (394) (12) (1) (407) (1,262) (13) (2) (1,277)

Recoveries 104 3 — 107 117 2 — 119

Transfers, net (1) 103 (103) — — 306 (306) — —

Other (2) 41 — — 41 76 11 — 87

Single-family ending balance 2,008 2,833 46 4,887 3,602 3,334 48 6,984

Multifamily ending balance 9 4 5 18 8 2 8 18

Total ending balance $2,017 $2,837 $51 $4,905 $3,610 $3,336 $56 $7,002

YTD 2019 YTD 2018

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

Allowance for Loan Losses Reserve 

for

Guarantee

Losses

Total

 (In millions)

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Held by

Freddie

Mac

Held By

Consolidated

Trusts

Single-family:

Beginning balance $3,003 $3,127 $46 $6,176 $5,251 $3,680 $48 $8,979

Provision (benefit) for credit losses (509) 29 3 (477) (629) 266 6 (357)

Charge-offs (1,208) (45) (3) (1,256) (2,198) (44) (6) (2,248)

Recoveries 331 10 — 341 336 5 — 341

Transfers, net (1) 291 (291) — — 597 (597) — —

Other (2) 100 3 — 103 245 24 — 269

Single-family ending balance 2,008 2,833 46 4,887 3,602 3,334 48 6,984

Multifamily ending balance 9 4 5 18 8 2 8 18

Total ending balance $2,017 $2,837 $51 $4,905 $3,610 $3,336 $56 $7,002

(1) Relates to removal of delinquent loans from consolidated trusts and resecuritization after such removal. 

(2) Primarily includes capitalization of past due interest on modified loans.

A significant number of unsecuritized single-family loans on our condensed consolidated balance sheets are individually 

evaluated for impairment while substantially all single-family loans held by our consolidated trusts are collectively evaluated for 

impairment. The allowance for loan losses associated with our held-for-investment unsecuritized loans represented 

approximately 3.8% and 6.6% of the recorded investment in such loans at September 30, 2019 and December 31, 2018, 

respectively, and a substantial portion of the allowance associated with these loans represented interest rate concessions 

provided to borrowers as part of loan modifications. The allowance for loan losses associated with loans held by our 

consolidated trusts represented approximately 0.1% and 0.2% of the recorded investment in such loans as of September 30, 

2019 and December 31, 2018, respectively.

The table below presents our allowance for loan losses and our recorded investment in loans, held-for-investment, by 

impairment evaluation methodology.

Table 4.8 - Net Investment in Loans

September 30, 2019 December 31, 2018

(In millions) Single-family Multifamily Total Single-family Multifamily Total

Recorded investment:

Collectively evaluated $1,904,203 $16,818 $1,921,021 $1,830,044 $14,945 $1,844,989

Individually evaluated 40,124 81 40,205 46,421 85 46,506

Total recorded investment 1,944,327 16,899 1,961,226 1,876,465 15,030 1,891,495

Ending balance of the allowance for loan losses:

Collectively evaluated (1,515) (13) (1,528) (1,761) (9) (1,770)

Individually evaluated (3,326) — (3,326) (4,369) — (4,369)

Total ending balance of the allowance (4,841) (13) (4,854) (6,130) (9) (6,139)

Net investment in loans $1,939,486 $16,886 $1,956,372 $1,870,335 $15,021 $1,885,356
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 72

Allowance for Loan Losses Determined on an Individual Basis

Impaired Loans

The tables below present the UPB, recorded investment, related allowance for loan losses, average recorded investment, and 

interest income recognized for individually impaired loans.

Table 4.9 - Individually Impaired Loans

September 30, 2019 December 31, 2018

(In millions) UPB

Recorded

Investment

Associated

Allowance UPB

Recorded

Investment

Associated

Allowance

Single-family:

With no allowance recorded: (1)

20- and 30-year or more, amortizing fixed-rate $3,008 $2,390 N/A $3,335 $2,666 N/A

15-year amortizing fixed-rate 20 20 N/A 23 22 N/A

Adjustable-rate 183 182 N/A 227 226 N/A

Alt-A, interest-only, and option ARM 1,004 853 N/A 1,286 1,083 N/A

Total with no allowance recorded 4,215 3,445 N/A 4,871 3,997 N/A

With an allowance recorded: (2)

20- and 30-year or more, amortizing fixed-rate 32,441 32,118 ($2,784) 37,579 36,959 ($3,660)

15-year amortizing fixed-rate 641 650 (14) 703 713 (19)

Adjustable-rate 133 132 (7) 164 162 (8)

Alt-A, interest-only, and option ARM 3,962 3,779 (521) 4,867 4,590 (682)

Total with an allowance recorded 37,177 36,679 (3,326) 43,313 42,424 (4,369)

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 35,449 34,508 (2,784) 40,914 39,625 (3,660)

15-year amortizing fixed-rate 661 670 (14) 726 735 (19)

Adjustable-rate 316 314 (7) 391 388 (8)

Alt-A, interest-only, and option ARM 4,966 4,632 (521) 6,153 5,673 (682)

Total single-family 41,392 40,124 (3,326) 48,184 46,421 (4,369)

Multifamily:

With no allowance recorded (1) 87 81 N/A 89 82 N/A

With an allowance recorded — — — 3 3 —

Total multifamily 87 81 — 92 85 —

Total single-family and multifamily $41,479 $40,205 ($3,326) $48,276 $46,506 ($4,369)

Referenced footnotes are included after the last table in the Impaired Loans section.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 73

3Q 2019 3Q 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 $59 $1 $3,142 $83 $3

15-year amortizing fixed-rate 19 1 — 20 — —

Adjustable rate 191 3 — 238 3 —

Alt-A, interest-only, and option ARM 880 16 — 1,159 21 1

Total with no allowance recorded 3,540 79 1 4,559 107 4

With an allowance recorded: (2)

20- and 30-year or more, amortizing fixed-rate 32,618 412 47 42,393 520 52

15-year amortizing fixed-rate 641 5 1 740 7 2

Adjustable rate 129 2 — 183 2 —

Alt-A, interest-only, and option ARM 3,866 55 9 5,622 72 7

Total with an allowance recorded 37,254 474 57 48,938 601 61

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 35,068 471 48 45,535 603 55

15-year amortizing fixed-rate 660 6 1 760 7 2

Adjustable rate 320 5 — 421 5 —

Alt-A, interest-only, and option ARM 4,746 71 9 6,781 93 8

Total single-family 40,794 553 58 53,497 708 65

Multifamily:

With no allowance recorded (1) 81 1 1 112 2 1

With an allowance recorded — — — 3 — —

Total multifamily 81 1 1 115 2 1

Total single-family and multifamily $40,875 $554 $59 $53,612 $710 $66

Referenced footnotes are included after the last table in the Impaired Loans section

YTD 2019 YTD 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 $2,573 $207 $6 $3,399 $268 $13

15-year amortizing fixed-rate 20 1 — 21 3 —

Adjustable rate 209 9 — 255 9 —

Alt-A, interest-only, and option ARM 932 52 1 1,319 68 3

Total with no allowance recorded 3,734 269 7 4,994 348 16

With an allowance recorded: (2)

20- and 30-year or more, amortizing fixed-rate 34,051 1,394 138 46,140 1,621 217

15-year amortizing fixed-rate 665 17 3 830 21 8

Adjustable rate 139 5 1 210 4 2

Alt-A, interest-only, and option ARM 4,097 180 18 6,357 205 24

Total with an allowance recorded 38,952 1,596 160 53,537 1,851 251

Combined single-family:

20- and 30-year or more, amortizing fixed-rate 36,624 1,601 144 49,539 1,889 230

15-year amortizing fixed-rate 685 18 3 851 24 8

Adjustable rate 348 14 1 465 13 2

Alt-A, interest-only, and option ARM 5,029 232 19 7,676 273 27

Total single-family 42,686 1,865 167 58,531 2,199 267

Multifamily:

With no allowance recorded (1) 83 3 1 132 5 2

With an allowance recorded — — — 3 — —

Total multifamily 83 3 1 135 5 2

Total single-family and multifamily $42,769 $1,868 $168 $58,666 $2,204 $269

(1) Individually impaired loans with no allowance primarily represent those loans for which the collateral value is sufficiently in excess of the loan balance to result in 

recovery of the entire recorded investment if the property were foreclosed upon or otherwise subject to disposition.

(2) Consists primarily of loans classified as TDRs.

(3) Consists of income recognized during the period related to loans on non-accrual status.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 74

Troubled Debt Restructurings (TDRs)

The table below presents the volume of single-family and multifamily loans that were newly classified as TDRs, based on the 

original product category of the loan before the loan was classified as a TDR. Loans classified as a TDR in one period may be 

subject to further action (such as a modification or remodification) in a subsequent period. In such cases, the subsequent 

action would not be reflected in the table below since the loan would already have been classified as a TDR.

Table 4.10 - TDR Activity

3Q 2019 3Q 2018 YTD 2019 YTD 2018

(Dollars in millions)

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Single-family: (1)

20- and 30-year or more,

amortizing fixed-rate 5,908 $998 7,157 $1,091 19,668 $3,262 37,847 $6,159

15-year amortizing fixed-rate 693 69 909 83 2,364 230 5,194 514

Adjustable-rate 128 22 197 27 403 64 773 122

Alt-A, interest-only, and option

ARM 285 45 414 65 1,331 190 2,294 379

Total single-family 7,014 1,134 8,677 1,266 23,766 3,746 46,108 7,174

Multifamily — $— — $— — $— 1 $15

(1) The pre-TDR recorded investment for single-family loans initially classified as TDR during 3Q 2019 and YTD 2019 was $1.1 billion and $3.7 billion, respectively, 

compared to $1.3 billion and $7.2 billion during 3Q 2018 and YTD 2018, respectively.

Of the single-family loan modifications that were classified as TDRs during 3Q 2019, 3Q 2018, YTD 2019 and YTD 2018, 

respectively:

9%, 9%, 8%, and 12% involved interest rate reductions and, in certain cases, term extensions; 

23%, 21%, 24%, and 24% involved principal forbearance in addition to interest rate reductions and, in certain cases, term 

extensions; 

The average term extension was 188, 110, 177, and 126 months; and

The average interest rate reduction was 0.2%, 0.2%, 0.1%, and 0.3%.

The table below presents the volume of our TDR modifications that experienced payment defaults (i.e., loans that became two 

months delinquent or completed a loss event) during the applicable periods and had completed a modification during the year 

preceding the payment default. The table presents loans based on their original product category before modification.

Table 4.11 - Payment Defaults of Completed TDR Modifications

3Q 2019 3Q 2018 YTD 2019 YTD 2018

(Dollars in millions)

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Number of 

Loans

Post-TDR

Recorded

Investment

Single-family:

20- and 30-year or more,

amortizing fixed-rate 3,256 $407 3,584 $512 10,533 $1,237 9,671 $1,435

15-year amortizing fixed-rate 96 9 116 10 329 24 435 36

Adjustable-rate 33 3 53 9 95 10 139 21

Alt-A, interest-only, and option

ARM 178 24 302 55 687 96 827 154

Total single-family 3,563 443 4,055 586 11,644 1,367 11,072 1,646

Multifamily — $— — $— — $— — $—

In addition to modifications, loans may be classified as TDRs as a result of other loss mitigation activities (i.e., repayment plans, 

forbearance agreements, or trial period modifications). During YTD 2019 and YTD 2018, 3,983 and 6,487, respectively, of such 

loans (with a post-TDR recorded investment of $0.4 billion and $0.8 billion, respectively) experienced a payment default within a 

year after the loss mitigation activity occurred.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 4

Freddie Mac Form 10-Q 75

Non-Cash Investing and Financing Activities 

During YTD 2019 and YTD 2018, we acquired $162.7 billion and $122.6 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 

$28.6 billion and $18.8 billion of loans from sellers in guarantor swap transactions and $1.6 billion and $0.1 billion of loans from 

sellers in cash execution transactions during YTD 2019 and YTD 2018, respectively, to satisfy advances to lenders that were 

recorded in other assets on our condensed consolidated balance sheets. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 5

Freddie Mac Form 10-Q 76

NOTE 5 

Guarantee Activities

We generate revenue through our guarantee activities by agreeing to absorb the credit risk associated with certain financial 

instruments that are owned or held by third parties. In exchange for providing this guarantee, we receive an ongoing guarantee 

fee that is commensurate with the risks assumed and that will, over the long-term, provide us with cash flows that are expected 

to exceed the credit-related and administrative expenses of the underlying financial instruments. The profitability of our 

guarantee activities may vary and will be dependent on our guarantee fee and the actual credit performance of the underlying 

financial instruments that we have guaranteed.

The table below shows our maximum exposure, recognized liability, and maximum remaining term of our recognized 

guarantees to non-consolidated VIEs and other third parties. This table does not include our unrecognized guarantees, such as 

guarantees to consolidated VIEs or to resecuritization trusts that do not expose us to incremental credit risk. The maximum 

exposure disclosed in the table is not representative of the actual loss we are likely to incur, based on our historical loss 

experience and after consideration of proceeds from related collateral liquidation, including possible recoveries under credit 

enhancement arrangements. See Note 6 for additional information on our credit enhancement arrangements.

As part of the Single Security Initiative, 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, 

and we exclude from the following table approximately $17 billion of Fannie Mae securities backing Freddie Mac resecuritization 

products as of September 30, 2019.

Table 5.1 - Financial Guarantees

September 30, 2019 December 31, 2018

(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 $24,387 $317 40 $17,783 $220 40

Other mortgage-related guarantees 7,139 180 30 6,139 167 30

Total single-family $31,526 $497 $23,922 $387

Multifamily:

Securitization activity guarantees $241,853 $3,128 40 $221,245 $2,746 40

Other mortgage-related guarantees 10,122 430 35 9,779 428 35

Total multifamily $251,975 $3,558 $231,024 $3,174

Other guarantees measured at fair value $24,976 $183 30 $16,251 $242 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 enhancement arrangements, such as recourse provisions, third-party insurance contracts, or from collateral held or pledged. For other guarantees 

measured at fair value, this amount represents the notional value if it relates to our market value guarantees or guarantees of third-party derivative instruments or 

the UPB if it relates to a guarantee of a mortgage-related asset. For certain of our other guarantees measured at fair value, our exposure may be unlimited. We 

generally reduce our exposure to these guarantees with unlimited exposure through separate contracts with third parties.

(2) For securitization activity guarantees and other mortgage-related guarantees, this amount represents the guarantee obligation on our condensed consolidated 

balance sheets. This amount excludes our reserve for guarantee losses, which totaled $51 million and $52 million as of September 30, 2019 and December 31, 

2018, respectively, and is included within other liabilities on our condensed consolidated balance sheets. For other guarantees measured at fair value, this amount 

represents the fair value of the contract.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac Form 10-Q 77

NOTE 6

Credit Enhancements

In connection with many of our mortgage loans, securitization activity guarantees, other mortgage-related guarantees, and 

other credit risk transfer transactions, we obtain various forms of credit enhancements that reduce our exposure to credit 

losses. These credit enhancements may be associated with mortgage loans or guarantees recognized on our condensed 

consolidated balance sheets or embedded in debt instruments recognized on our condensed consolidated balance sheets. 

Mortgage Loan Credit Enhancements 

The table below presents the total current and protected UPB and maximum amounts of potential loss recovery related to our 

mortgage loan credit enhancements. For information about counterparty credit risk associated with credit enhancement 

providers, see Note 14.

Table 6.1 - Mortgage Loan Credit Enhancements 

September 30, 2019 December 31, 2018

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum

Coverage

Total Current 

and Protected 

UPB(1)

Maximum

Coverage

Single-family:

Primary mortgage insurance $410,999 $105,171 $378,594 $96,996

ACIS transactions(2) 869,148 10,081 807,885 9,123

STACR Trust transactions 280,889 9,154 161,152 5,026

Other 28,347 6,070 18,136 5,389

Total mortgage loan credit enhancements $130,476 $116,534

(1) Underlying loans may be covered by more than one form of credit enhancement.

(2) As of September 30, 2019 and December 31, 2018, our counterparties posted collateral on our ACIS transactions of $2.0 billion and $1.5 billion, respectively.

Guarantee Credit Enhancements 

The table below presents the total current and protected UPB and maximum amounts of potential loss recovery related to our 

single-family and multifamily guarantee credit enhancements.

Table 6.2 - Guarantee Credit Enhancements

September 30, 2019 December 31, 2018

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Single-family:

Subordination (non-consolidated VIEs) $22,876 $4,076 $16,271 $2,933

Other 1,129 1,129 1,226 1,226

 Total single-family 5,205 4,159

Multifamily:

Subordination (non-consolidated VIEs) 240,485 38,645 220,733 35,661

Other 3,204 919 2,349 815

 Total multifamily 39,564 36,476

Total guarantee credit enhancements $44,769 $40,635

(1) Underlying loans may be covered by more than one form of credit enhancement. For subordination, 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 

guarantor advances made to the holders of the guaranteed securities.

(2) For subordination, maximum coverage represents the outstanding UPB of the securities that are subordinate to Freddie Mac guaranteed securities and held by third 

parties. For all other credit enhancements, maximum coverage represents the remaining amount of loss recovery that is available subject to the terms of 

counterparty agreements.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 6

Freddie Mac Form 10-Q 78

Debt with Embedded Credit Enhancements 

The table below presents the total current and protected UPB and maximum amounts of potential loss recovery related to debt 

with embedded credit enhancements.

Table 6.3 - Debt with Embedded Credit Enhancements

September 30, 2019 December 31, 2018

(In millions)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Total Current 

and Protected 

UPB(1)

Maximum 

Coverage(2)

Single-family:

STACR debt notes $554,572 $15,962 $605,263 $17,596

Subordination (consolidated VIEs) 21,843 943 25,006 1,036

Total single-family 16,905 18,632

Multifamily:

SCR notes 2,523 126 2,667 133

Subordination (consolidated VIEs) 2,700 280 2,700 280

Total multifamily 406 413

Total debt with embedded credit enhancements $17,311 $19,045

(1) Underlying loans may be covered by more than one form of credit enhancement. For STACR debt notes and SCR notes, total current and protected UPB represents 

the UPB of the assets included in the reference pool. For subordination, total current and protected UPB represents the UPB of the guaranteed securities, which 

represents the UPB of the assets included in the trust net of the protection provided by the subordinated securities.

(2) For STACR debt notes and SCR notes, maximum coverage amount represents the outstanding balance of the STACR debt notes and SCR notes held by third parties. 

For subordination, maximum coverage amount represents the outstanding UPB of the securities that are subordinate to Freddie Mac guaranteed securities and held 

by third parties. 

Other Credit Enhancements 

The Multifamily segment also has other 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 tables above.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 79

NOTE 7

Investments in Securities

The table below summarizes the fair values of our investments in debt securities by classification.

Table 7.1 - Investments in Securities 

(In millions) September 30, 2019 December 31, 2018

Trading securities $44,449 $35,548

Available-for-sale securities 28,533 33,563

Total fair value of investments in securities $72,982 $69,111

As of September 30, 2019 and December 31, 2018, we did not classify any securities as held-to-maturity, although we may 

elect to do so in the future. 

Trading Securities 

The table below presents the estimated fair values of our trading securities by major security type. Our non-mortgage-related 

securities primarily consist of investments in U.S. Treasury securities. 

Table 7.2 - Trading Securities 

(In millions) September 30, 2019 December 31, 2018

Mortgage-related securities:

Freddie Mac $12,972 $13,821

Other agency 7,194 2,551

Non-agency 1 1

Total mortgage-related securities 20,167 16,373

Non-mortgage-related securities 24,282 19,175

Total fair value of trading securities $44,449 $35,548

For trading securities held at September 30, 2019, we recorded net unrealized gains (losses) of $27 million and $310 million

during 3Q 2019 and YTD 2019, respectively. For trading securities held at September 30, 2018, we recorded net unrealized 

gains (losses) of ($305) million and ($951) million during 3Q 2018 and YTD 2018, respectively.

Available-for-Sale Securities 

At September 30, 2019 and December 31, 2018, 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 7.3 - Available-for-Sale Securities 

September 30, 2019

Amortized

Cost

Gross

Unrealized

Gains

Gross Unrealized Losses

Fair

(In millions) Value

Other-ThanTemporary 

Impairment(1)

Temporary 

Impairment(2)

Available-for-sale securities:

Freddie Mac $25,492 $707 $— ($80) $26,119

Other agency 1,005 26 — (5) 1,026

Non-agency and other 1,078 310 — — 1,388

Total available-for-sale securities $27,575 $1,043 $— ($85) $28,533
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 80

December 31, 2018

Amortized

Cost

Gross

Unrealized

Gains

Gross Unrealized Losses

Fair

(In millions) Value

Other-ThanTemporary 

Impairment(1)

Temporary 

Impairment(2)

Available-for-sale securities:

Freddie Mac $30,407 $320 $— ($528) $30,199

Other agency 1,675 38 — (7) 1,706

Non-agency and other 1,378 282 — (2) 1,658

Total available-for-sale securities $33,460 $640 $— ($537) $33,563

(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 September 30, 2019 scheduled to contractually mature after ten years 

was $24.0 billion, with an additional $4.1 billion scheduled to contractually mature after five years through ten years.

Available-for-Sale Securities in a Gross Unrealized Loss Position

The tables below present available-for-sale securities in a gross unrealized loss position and whether such securities have been 

in an unrealized loss position for less than 12 months, or 12 months or greater. 

Table 7.4 - Available-for-Sale Securities in a Gross Unrealized Loss Position 

September 30, 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:

Freddie Mac $5,312 ($41) $2,951 ($39)

Other agency 56 — 531 (5)

Non-agency and other — — — —

Total available-for-sale securities in a gross unrealized loss

position

$5,368 ($41) $3,482 ($44)

December 31, 2018

Less than 12 Months 12 Months or Greater

(In millions)

Fair

Value

Gross Unrealized

Losses

Fair

Value

Gross Unrealized

Losses

Available-for-sale securities:

Freddie Mac $4,259 ($38) $14,751 ($490)

Other agency 351 (1) 638 (6)

Non-agency and other 43 (1) 6 (1)

Total available-for-sale securities in a gross unrealized loss

position

$4,653 ($40) $15,395 ($497)

At September 30, 2019, the gross unrealized losses relate to 150 separate securities. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 7

Freddie Mac Form 10-Q 81

Realized Gains and Losses on Sales of Available-for-Sale Securities

The table below summarizes the gross realized gains and gross realized losses from the sale of available-for-sale securities. 

Table 7.5 - Gross Realized Gains and Gross Realized Losses from Sales of Available-for-Sale Securities

(In millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Gross realized gains $68 $69 $169 $544

Gross realized losses (6) (131) (40) (232)

Net realized gains (losses) $62 ($62) $129 $312
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac Form 10-Q 82

NOTE 8 

Debt Securities and Subordinated Borrowings

The table below summarizes the balances of total debt, net per our condensed consolidated balance sheets and the interest 

expense per our condensed consolidated statements of comprehensive income.

Table 8.1 - Total Debt, Net 

Balance, Net Interest Expense

(In millions) September 30, 2019 December 31, 2018 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Debt securities of consolidated trusts held by third

parties $1,869,308 $1,792,677 $13,324 $12,827 $41,001 $37,996

Other debt:

Short-term debt 94,344 51,080 499 361 1,419 832

Long-term debt 185,607 201,193 1,307 1,358 4,078 3,974

Total other debt 279,951 252,273 1,806 1,719 5,497 4,806

Total debt, net $2,149,259 $2,044,950 $15,130 $14,546 $46,498 $42,802

As of September 30, 2019, our aggregate indebtedness was $282.3 billion, which was below the $300.0 billion debt cap limit 

imposed by the Purchase Agreement for 2019. Our aggregate indebtedness calculation primarily includes the par value of other 

short- and long-term debt.

Debt Securities of Consolidated Trusts Held by Third Parties

The table below summarizes the debt securities of consolidated trusts held by third parties based on underlying loan product 

type.

Table 8.2 - Debt Securities of Consolidated Trusts Held by Third Parties 

September 30, 2019 December 31, 2018

(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 2019 - 2057 $1,487,105 $1,525,505 3.69% 2019 - 2057 $1,389,113 $1,426,060 3.72%

20-year fixed-rate 2019 - 2039 69,068 70,764 3.42 2019 - 2039 70,547 72,354 3.43

15-year fixed-rate 2019 - 2034 224,190 227,915 2.89 2019 - 2034 240,310 244,587 2.89

Adjustable-rate 2019 - 2049 32,837 33,474 3.28 2019 - 2049 38,361 39,153 3.12

Interest-only 2026 - 2041 4,608 4,677 4.72 2026 - 2048 5,322 5,386 4.41

FHA/VA 2020 - 2049 665 680 4.69 2019 - 2046 720 736 4.78

Total single-family 1,818,473 1,863,015 1,744,373 1,788,276

Multifamily 2020-2049 6,233 6,293 3.14 2019 - 2047 4,365 4,401 4.02

Total debt securities of consolidated

trusts held by third parties $1,824,706 $1,869,308 $1,748,738 $1,792,677

(1) Includes $737 million and $755 million at September 30, 2019 and December 31, 2018, respectively, of debt of consolidated trusts that represents the fair value of 

debt securities with the fair value option elected.

(2) The effective interest rate for debt securities of consolidated trusts held by third parties was 2.81% and 3.07% as of September 30, 2019 and December 31, 2018, 

respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 8

Freddie Mac Form 10-Q 83

Other Debt

The table below summarizes the balances and effective interest rates for other debt. 

Table 8.3 - Total Other Debt 

September 30, 2019 December 31, 2018

(Dollars in millions) Par Value

Carrying 

Amount(1)

Weighted

Average

Effective Rate(2) Par Value

Carrying 

Amount(1)

Weighted

Average

Effective Rate(2)

Other short-term debt:

Discount notes and Reference Bills $42,719 $42,550 2.09% $28,787 $28,621 2.36%

Medium-term notes 43,098 43,094 2.34 16,440 16,440 2.10

Securities sold under agreements to repurchase 8,700 8,700 2.06 6,019 6,019 2.40

Total other short-term debt 94,517 94,344 2.20 51,246 51,080 2.28

Other long-term debt:

Original maturities on or before December 31,

2019 12,442 12,435 1.63 58,002 57,968 1.54

2020 48,348 48,337 2.00 42,296 42,275 1.78

2021 36,669 36,669 2.05 30,898 30,901 2.06

2022 26,044 26,022 2.34 20,802 20,775 2.46

2023 10,064 10,045 2.65 15,929 15,906 3.09

Thereafter 37,392 34,994 3.68 18,068 15,579 5.91

STACR and SCR debt(3) 16,088 16,257 6.03 17,729 18,004 6.04

Hedging-related basis adjustments N/A 848 N/A (215)

Total other long-term debt 187,047 185,607 2.74 203,724 201,193 2.58

Total other debt(4) $281,564 $279,951 $254,970 $252,273

(1) Represents par value, net of associated discounts or premiums and issuance cost. Includes $3.9 billion and $4.4 billion at September 30, 2019 and December 31, 

2018, respectively, of other long-term debt that represents the fair value of debt securities with the fair value option elected.

(2) Based on carrying amount.

(3) Contractual maturities of these debt securities are not presented because they are subject to prepayment risk, as their payments are based upon the performance of 

a pool of mortgage assets that may be prepaid by the related mortgage borrower at any time generally without penalty. 

(4) Carrying amount for other debt includes callable debt of $105.5 billion and $107.2 billion at September 30, 2019 and December 31, 2018, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 84

NOTE 9

Derivatives

Use of Derivatives

We use derivatives primarily to hedge interest-rate sensitivity mismatches between our financial assets and liabilities. We 

analyze the interest-rate sensitivity of financial assets and liabilities on a daily basis across a variety of interest-rate scenarios 

based on market prices, models, and economics. When we use derivatives to mitigate our exposures, we consider a number of 

factors, including cost, exposure to counterparty risk, and our overall risk management strategy.

We classify derivatives into three categories: 

Exchange-traded derivatives; 

Cleared derivatives; and 

OTC derivatives.

Exchange-traded derivatives include standardized interest-rate futures contracts and options on futures contracts. Cleared 

derivatives refer to those interest-rate swaps that the U.S. Commodity Futures Trading Commission has determined are subject 

to the central clearing requirement of the Dodd-Frank Act. OTC derivatives refer to those derivatives that are neither exchangetraded derivatives nor cleared derivatives.

Types of Derivatives

We principally use the following types of derivatives:

LIBOR- and SOFR-based interest-rate swaps;

LIBOR- and Treasury-based purchased options (including swaptions); and

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, 

commitments, and credit derivatives.

Hedge Accounting

Fair Value Hedges

We apply fair value hedge accounting to certain single-family mortgage loans and certain issuances of debt where we hedge 

the changes in fair value of these items attributable to the designated benchmark interest rate (i.e., LIBOR), using LIBOR-based 

interest-rate swaps. Beginning in September 2019, we implemented a new fair value hedge accounting strategy for singlefamily mortgage loans that applies certain hedge accounting elections, including the last-of-layer method, allowable under 

amended hedge accounting guidance we adopted during 4Q 2017. Under the last-of-layer method, 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 new 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.

If a hedge relationship qualifies for fair value hedge accounting, all changes in fair value of the derivative hedging instrument, 

including interest accruals, are recognized in the same condensed consolidated statements of comprehensive income 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.

Cash Flow Hedges

There are amounts recorded in AOCI related to discontinued cash flow hedges which are recognized in earnings when the 

originally forecasted transactions affect earnings. Amounts reclassified from AOCI are recorded in interest expense. During YTD 

2019 and YTD 2018, we reclassified from AOCI into earnings, pre-tax losses of $72 million and $106 million, respectively, 

related to closed cash flow hedges. See Note 11 for information about future reclassifications of deferred net losses related to 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 85

closed cash flow hedges to net income.

Derivative Assets and Liabilities at Fair Value

The table below presents the notional value and fair value of derivatives reported on our condensed consolidated balance 

sheets. 

Table 9.1 - Derivative Assets and Liabilities at Fair Value 

September 30, 2019 December 31, 2018

Notional or

Contractual

Amount

Derivatives at Fair Value Notional or

Contractual

Amount

Derivatives at Fair Value

(In millions) Assets Liabilities Assets Liabilities

Not designated as hedges

Interest-rate swaps:

Receive-fixed $217,377 $2,346 ($10) $145,386 $1,380 ($181)

Pay-fixed 246,557 6 (4,381) 170,899 476 (2,287)

Basis (floating to floating) 5,924 — — 5,404 1 —

Total interest-rate swaps 469,858 2,352 (4,391) 321,689 1,857 (2,468)

Option-based:

Call swaptions

Purchased 61,275 3,963 — 43,625 2,007 —

Written 2,500 — (37) 4,400 — (133)

Put swaptions

Purchased(1) 63,600 512 — 88,075 1,565 —

Written 8,700 — (41) 1,750 — (4)

Other option-based derivatives(2) 10,368 721 — 10,481 628 —

Total option-based 146,443 5,196 (78) 148,331 4,200 (137)

Futures 181,479 — — 161,185 — —

Commitments 152,300 195 (171) 36,044 90 (179)

Credit derivatives 1,822 1 (23) 2,030 — (35)

Other 16,991 12 (103) 12,212 1 (103)

Total derivatives not designated as hedges 968,893 7,756 (4,766) 681,491 6,148 (2,922)

Designated as fair value hedges

Interest-rate swaps:

Receive-fixed 113,425 145 (91) 117,038 23 (935)

Pay-fixed 78,966 7 (1,620) 77,513 247 (571)

Total derivatives designated as fair value hedges 192,391 152 (1,711) 194,551 270 (1,506)

Derivative interest and other receivable (payable) 912 (872) 889 (1,096)

Netting adjustments(3) (7,228) 6,994 (6,972) 4,941

Total derivative portfolio, net $1,161,284 $1,592 ($355) $876,042 $335 ($583)

(1) Includes swaptions on credit indices with a notional or contractual amount of $17.3 billion and $45.9 billion at September 30, 2019 and December 31, 2018, 

respectively, and a fair value of $6.0 million and $113.0 million at September 30, 2019 and December 31, 2018, respectively. 

(2) Primarily consists of purchased interest-rate caps and floors.

(3) Represents counterparty netting and cash collateral netting.

See Note 10 for information related to our derivative counterparties and collateral held and posted.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 86

Gains and Losses on Derivatives

The table below presents the gains and losses on derivatives, including the accrual of periodic cash settlements, while not 

designated in qualifying hedge relationships and reported on our condensed consolidated statements of comprehensive 

income as derivative gains (losses).

Table 9.2 - Gains and Losses on Derivatives 

(In millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Not designated as hedges

Interest-rate swaps:

Receive-fixed $2,060 ($1,004) $7,580 ($5,080)

Pay-fixed (3,866) 1,721 (12,152) 7,922

Basis (floating to floating) (3) 19 7 (9)

Total interest-rate swaps (1,809) 736 (4,565) 2,833

Option-based:

Call swaptions

Purchased 1,398 (402) 2,981 (1,392)

Written (109) 35 (343) 76

Put swaptions

Purchased (355) 136 (1,406) 524

Written 19 (2) 83 (23)

Other option-based derivatives(1) (6) (73) 93 (205)

Total option-based 947 (306) 1,408 (1,020)

Other:

Futures (262) 277 (1,283) 728

Commitments (54) 69 (366) 672

Credit derivatives 6 (4) 1 (14)

Other 2 (71) 36 (64)

Total other (308) 271 (1,612) 1,322

Accrual of periodic cash settlements:

Receive-fixed interest-rate swaps 39 39 (32) 335

Pay-fixed interest-rate swaps (126) (50) (220) (536)

Other 40 38 109 40

Total accrual of periodic cash settlements (47) 27 (143) (161)

Total ($1,217) $728 ($4,912) $2,974

(1) Primarily consists of purchased interest-rate caps and floors.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 87

Fair Value Hedges 

The tables below present the effects of fair value hedge accounting by condensed consolidated statements of comprehensive 

income line, including the gains and losses on derivatives and hedged items designated in qualifying hedge relationships and 

other components due to the application of hedge accounting.

Table 9.3 - Gains and Losses on Fair Value Hedges 

3Q 2019 3Q 2018

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Interest Income -

Mortgage Loans Interest Expense

Total amounts of income and expense line items presented in

our condensed consolidated statements of comprehensive

income in which the effects of fair value hedges are recorded: $16,428 ($15,130) $16,787 ($14,546)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items 1,298 — (755) —

Derivatives designated as hedging instruments (1,588) — 776 —

Interest accruals on hedging instruments (48) — (96) —

Discontinued hedge-related basis adjustments amortization (210) — 38 —

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items — (36) — 121

Derivatives designated as hedging instruments — 91 — (50)

Interest accruals on hedging instruments — (18) — (96)

Discontinued hedge-related basis adjustments amortization — 18 — (1)

YTD 2019 YTD 2018

(In millions)

Interest Income -

Mortgage Loans Interest Expense

Interest Income -

Mortgage Loans Interest Expense

Total amounts of income and expense line items presented in

our condensed consolidated statements of comprehensive

income in which the effects of fair value hedges are recorded: $51,732 ($46,498) $49,082 ($42,802)

Interest contracts on mortgage loans held-for-investment:

Gain (loss) on fair value hedging relationships:

Hedged items 5,691 — (3,441) —

Derivatives designated as hedging instruments (5,609) — 3,087 —

Interest accruals on hedging instruments (4) — (373) —

Discontinued hedge-related basis adjustments amortization (229) — 86 —

Interest contracts on debt:

Gain (loss) on fair value hedging relationships:

Hedged items — (1,141) — 931

Derivatives designated as hedging instruments — 1,288 — (728)

Interest accruals on hedging instruments — (230) — (219)

Discontinued hedge-related basis adjustments amortization — 43 — (2)
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 9

Freddie Mac Form 10-Q 88

Cumulative Basis Adjustments Due to Fair Value Hedging

The tables below present the hedged item cumulative basis adjustments due to qualifying fair value hedging and the related 

hedged item carrying amounts by their respective balance sheet line item.

Table 9.4 - Cumulative Basis Adjustments Due to Fair Value Hedging 

September 30, 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 $470,584 $4,225 ($379) $4,604 $266,975 $20,472

Debt (130,653) (848) — (114) — —

December 31, 2018

Carrying

Amount

Assets /

(Liabilities)

Cumulative Amount of Fair Value Hedging Basis

Adjustment Included in the Carrying Amount

Closed Portfolio Under the Lastof-Later 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 $193,547 ($1,237) $— ($1,237) $— $—

Debt (127,215) 216 — (8) — —
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 89

NOTE 10

Collateralized Agreements and Offsetting Arrangements

Derivative Portfolio

Derivative Counterparties

Our use of cleared derivatives, exchange-traded derivatives, and OTC derivatives exposes us to counterparty credit risk. Our 

use of interest-rate swaps and option-based derivatives is subject to internal credit and legal reviews. On an ongoing basis, we 

review the credit fundamentals of all of our derivative counterparties, clearinghouses, and clearing members to confirm that 

they continue to meet our internal risk management standards.

Over-the-Counter Derivatives

We use master netting and collateral agreements to reduce our credit risk exposure to our OTC derivative counterparties. In the 

event that all of our counterparties for OTC derivatives were to default simultaneously on September 30, 2019, our maximum 

loss for accounting purposes after applying netting agreements and collateral on an individual counterparty basis would have 

been approximately $44 million.

Cleared and Exchange-Traded Derivatives

The majority of our interest-rate swaps are subject to the central clearing requirement of the Dodd-Frank Act. A reduction in our 

credit ratings could cause the clearinghouses or clearing members we use for our cleared and exchange-traded derivatives to 

demand additional collateral. 

Other Derivatives

We also execute forward purchase and sale commitments of loans and mortgage-related securities, including dollar roll 

transactions, that are treated as derivatives for accounting purposes. The total net exposure on our forward purchase and sale 

commitments, which are treated as derivatives, was $195 million and $90 million at September 30, 2019 and December 31, 

2018, respectively. 

Many of our transactions involving forward purchase and sale commitments of mortgage-related securities utilize the Mortgage 

Backed Securities Division of the Fixed Income Clearing Corporation ("MBSD/FICC") as a clearinghouse. As a clearing member 

of the clearinghouse, we post margin to the MBSD/FICC and are exposed to the counterparty credit risk of the organization 

(including its clearing members). 

Securities Purchased Under Agreements to Resell

As an investor, we enter into arrangements to purchase securities under agreements to subsequently resell the identical or 

substantially the same securities to our counterparty. Our counterparties to these transactions are required to pledge the 

purchased securities as collateral for their obligation to repurchase those securities at a later date. While such transactions 

involve the legal transfer of securities, they are accounted for as secured financings because the transferor does not relinquish 

effective control over the securities transferred. These agreements may allow us to repledge all or a portion of the collateral 

pledged to us, and we may repledge such collateral periodically, although it is not typically our practice to repledge collateral 

that has been pledged to us.

We consider the types of securities being pledged to us as collateral when determining how much we lend in transactions 

involving securities purchased under agreements to resell. Additionally, we regularly review the market values of these 

securities compared to amounts loaned in an effort to manage our exposure to losses. 

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 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 90

accounted for as secured financings because they require the identical or substantially the same securities to be subsequently 

repurchased. These agreements may allow our counterparties to repledge all or a portion of the collateral.

Offsetting of Financial Assets and Liabilities

At September 30, 2019 and December 31, 2018, all amounts of cash collateral related to derivatives with master netting and 

collateral agreements were offset against derivative assets, net or derivative liabilities, net, as applicable.

The tables below display offsetting and collateral information related to derivatives, securities purchased under agreements to 

resell, and securities sold under agreements to repurchase which are subject to enforceable master netting agreements or 

similar arrangements. Securities sold under agreements to repurchase are included in debt, net on our condensed consolidated 

balance sheets. 

Table 10.1 - Offsetting and Collateral Information of Financial Assets and Liabilities

September 30, 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 $8,583 ($5,373) ($1,975) $1,235 ($1,191) $44

Cleared and exchange-traded derivatives 29 (1) 121 149 — 149

Other 208 — — 208 — 208

Total derivatives 8,820 (5,374) (1,854) 1,592 (1,191) 401

Securities purchased under agreements to resell(3) 51,187 — — 51,187 (51,187) —

Total $60,007 ($5,374) ($1,854) $52,779 ($52,378) $401

Liabilities:

Derivatives:

OTC derivatives ($7,029) $5,373 $1,601 ($55) $— ($55)

Cleared and exchange-traded derivatives (23) 1 19 (3) — (3)

Other (297) — — (297) — (297)

Total derivatives (7,349) 5,374 1,620 (355) — (355)

Securities sold under agreements to repurchase(3) (8,700) — — (8,700) 8,700 —

Total ($16,049) $5,374 $1,620 ($9,055) $8,700 ($355)

Referenced footnotes are included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 91

December 31, 2018

Gross

Amount

Recognized

Amount 

Offset in the

Consolidated

Balance Sheets Net Amount

Presented in the 

Consolidated

Balance Sheets

Gross Amount

Not Offset in the 

Consolidated

Balance 

Sheets(2)

Net

(In millions) Amount

Counterparty

Netting

Cash 

Collateral 

Netting(1)

Assets:

Derivatives:

OTC derivatives $7,213 ($4,544) ($2,448) $221 ($173) $48

Cleared and exchange-traded derivatives 3 — 20 23 — 23

Other 91 — — 91 — 91

Total derivatives 7,307 (4,544) (2,428) 335 (173) 162

Securities purchased under agreements to resell(3) 34,771 — — 34,771 (34,771) —

Total $42,078 ($4,544) ($2,428) $35,106 ($34,944) $162

Liabilities:

Derivatives:

OTC derivatives ($4,963) $4,544 $296 ($123) $— ($123)

Cleared and exchange-traded derivatives (244) — 101 (143) — (143)

Other (317) — — (317) — (317)

Total derivatives (5,524) 4,544 397 (583) — (583)

Securities sold under agreements to repurchase(3) (6,019) — — (6,019) 6,019 —

Total ($11,543) $4,544 $397 ($6,602) $6,019 ($583)

(1) Excess cash collateral held is presented as a derivative liability, while excess cash collateral posted is presented as a derivative asset.

(2) Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability, netted by counterparty, presented on 

the condensed consolidated balance sheets. For cleared and exchange-traded derivatives, does not include non-cash collateral posted by us as initial margin with an 

aggregate fair value of $4.0 billion and $2.5 billion as of September 30, 2019 and December 31, 2018, respectively.

(3) Does not include the impacts of netting by central clearing organizations.

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 September 30, 2019, and December 31, 2018, we had $27.6 billion and $20.1 billion, respectively, of 

securities pledged to us in these transactions. In addition, at September 30, 2019 and December 31, 2018, we had $2.2 billion

and $2.5 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. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 10

Freddie Mac Form 10-Q 92

Collateral Pledged

Collateral Pledged to Freddie Mac

We have cash pledged to us as collateral primarily related to OTC derivative transactions. At September 30, 2019, we had $3.1 

billion pledged to us as collateral that was invested as part of our liquidity and contingency operating portfolio.

Collateral Pledged by Freddie Mac

The tables below summarize the fair value of the securities pledged as collateral by us for derivatives and collateralized 

borrowing transactions, including securities that the secured party may repledge.

Table 10.2 - Collateral in the Form of Securities Pledged 

September 30, 2019

(In millions) Derivatives

Securities sold

under

agreements to

repurchase Other(3) Total

Cash equivalents(1) $— $284 $— $284

Debt securities of consolidated trusts(2) 747 — 169 916

Available-for-sale securities — — 3 3

Trading securities 3,228 8,429 57 11,714

Total securities pledged $3,975 $8,713 $229 $12,917

December 31, 2018

(In millions) Derivatives

Securities sold

under

agreements to

repurchase Other(3) Total

Cash equivalents(1) $— $2,595 $— $2,595

Debt securities of consolidated trusts(2) 362 — 179 541

Available-for-sale securities — — 1 1

Trading securities 2,160 3,432 73 5,665

Total securities pledged $2,522 $6,027 $253 $8,802

(1) Represents U.S. Treasury securities accounted for as cash equivalents.

(2) Represents debt securities of consolidated trusts held by us in our Capital Markets segment mortgage investments portfolio which are recorded as a reduction to 

debt securities of consolidated trusts held by third parties on our condensed consolidated balance sheets.

(3) Includes other collateralized borrowings and collateral related to transactions with certain clearinghouses.

The table below summarizes the underlying collateral pledged and the remaining contractual maturity of our gross obligations 

under securities sold under agreements to repurchase.

Table 10.3 - Underlying Collateral Pledged 

September 30, 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 $2,684 $5,112 $917 $— $8,713
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 93

NOTE 11

Stockholders' Equity and Earnings Per Share

Accumulated Other Comprehensive Income

The tables below present changes in AOCI after the effects of our federal statutory tax rate of 21% for YTD 2019 and YTD 2018, 

related to available-for-sale securities, closed cash flow hedges, and our defined benefit plans. 

Table 11.1 - Changes in AOCI by Component, Net of Taxes

YTD 2019

(In millions)

AOCI Related

to AvailableFor-Sale

Securities

AOCI Related

to Cash Flow

Hedge

Relationships

AOCI Related

to Defined

Benefit Plans Total

Beginning balance $83 ($315) $97 ($135)

Other comprehensive income before

reclassifications 776 — (2) 774

Amounts reclassified from accumulated other

comprehensive income (102) 57 (12) (57)

Changes in AOCI by component 674 57 (14) 717

Ending balance $757 ($258) $83 $582

YTD 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 (821) — (1) (822)

Amounts reclassified from accumulated other

comprehensive income (244) 87 (12) (169)

Changes in AOCI by component (1,065) 87 (13) (991)

Cumulative effect of change in accounting 

principle(1) 143 (73) 19 89

Ending balance ($260) ($342) $89 ($513)

(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.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 94

Reclassifications from AOCI to Net Income

The table below presents reclassifications from AOCI to net income, including the affected line item in our condensed 

consolidated statements of comprehensive income. 

Table 11.2 - Reclassifications from AOCI to Net Income 

(In millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

AOCI related to available-for-sale securities

Affected line items in the consolidated statements of comprehensive income:

Investment securities gains (losses) $62 ($64) $129 $309

Income tax (expense) or benefit (13) 13 (27) (65)

Net of tax 49 (51) 102 244

AOCI related to cash flow hedge relationships

Affected line items in the consolidated statements of comprehensive income:

Interest expense (24) (31) (72) (106)

Income tax (expense) or benefit 5 6 15 19

Net of tax (19) (25) (57) (87)

AOCI related to defined benefit plans

Affected line items in the consolidated statements of comprehensive income:

Salaries and employee benefits 5 5 15 15

Income tax (expense) or benefit (1) (1) (3) (3)

Net of tax 4 4 12 12

Total reclassifications in the period net of tax $34 ($72) $57 $169

Future Reclassifications from AOCI to Net Income Related to Closed Cash 

Flow Hedges

The total AOCI related to derivatives designated as cash flow hedges was a loss of $0.3 billion at both September 30, 2019 and 

September 30, 2018, composed of deferred net losses on closed cash flow hedges. Closed cash flow hedges involve 

derivatives that have been terminated or are no longer designated as cash flow hedges. Fluctuations in prevailing market 

interest rates have no effect on the deferred portion of AOCI relating to losses on closed cash flow hedges.

The previously deferred amount related to closed cash flow hedges remains in our AOCI balance and will be recognized into 

earnings over the expected time period for which the forecasted transactions affect earnings, unless it is deemed probable that 

the forecasted transactions will not occur. Over the next 12 months, we estimate that approximately $49 million, net of taxes, of 

the $0.3 billion of cash flow hedge losses in AOCI at September 30, 2019 will be reclassified into earnings. The maximum 

remaining length of time over which we have hedged the exposure related to the variability in future cash flows on forecasted 

transactions, primarily forecasted debt issuances, is 14 years.

Senior Preferred Stock

Pursuant to the September 2019 Letter Agreement, for each dividend period from July 1, 2019 and thereafter, the applicable 

Capital Reserve Amount used in determining the dividend payable to Treasury will be $20.0 billion, rather than $3.0 billion as 

previously provided. As a result of this change, we did not have a dividend requirement to Treasury in September 2019, as our 

Net Worth Amount of $4.8 billion as of June 30, 2019 was lower than the $20.0 billion applicable Capital Reserve Amount. 

As of September 30, 2019, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury 

under the Purchase Agreement. Based on our Net Worth Amount of $6.7 billion as of September 30, 2019 and the applicable 

Capital Reserve Amount of $20.0 billion, we will not have a dividend requirement to Treasury in December 2019. See Note 2

for additional information. Our cumulative senior preferred stock dividend payments remain at $119.7 billion as of September 

30, 2019.

The aggregate liquidation preference of the senior preferred stock owned by Treasury was $75.6 billion as of June 30, 2019. 

Pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred stock will be increased, at 

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

if any, during the immediately prior fiscal quarter, until the liquidation preference has increased by $17.0 billion. During 2Q 2019, 

our Net Worth Amount increased by $1.8 billion. As a result, the liquidation preference of the senior preferred stock increased to 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 95

$77.5 billion on September 30, 2019, and will increase to $79.3 billion on December 31, 2019 based on the $1.8 billion increase 

in our Net Worth Amount during 3Q 2019. 

The table below provides a summary of our senior preferred stock outstanding at September 30, 2019.

Table 11.3 - 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

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 senior preferred stock 1.00 1.00 $1.00 $77,474

Stock Issuances and Repurchases

We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 3Q 2019.

Earnings Per Share

We have participating securities related to restricted stock units with dividend equivalent rights that receive dividends as 

declared on an equal basis with common shares but are not obligated to participate in undistributed net losses. These 

participating securities consist of vested 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. 

There were no stock options outstanding at both September 30, 2019 and September 30, 2018.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 11

Freddie Mac Form 10-Q 96

Dividends and Dividend Restrictions

No common dividends were declared during YTD 2019. At the direction of our Conservator, we paid dividends of $1.5 billion

and $1.7 billion on the senior preferred stock during 1Q 2019 and 2Q 2019, respectively. As a result of the increase in the 

applicable Capital Reserve Amount pursuant to the September 2019 Letter Agreement, we did not declare or pay a dividend on 

the senior preferred stock during 3Q 2019. We also did not declare or pay dividends on any other series of Freddie Mac 

preferred stock outstanding during YTD 2019.

Our payment of dividends on Freddie Mac common stock or any series of Freddie Mac preferred stock (other than senior 

preferred stock) is subject to certain restrictions as described in Note 11 in our 2018 Annual Report.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 12

Freddie Mac Form 10-Q 97

NOTE 12

Income Taxes

Income Tax Expense

For 3Q 2019 and 3Q 2018, we reported income tax expense of $0.4 billion and $0.6 billion, respectively, resulting in effective 

tax rates of 20.0% and 17.0%, respectively. For YTD 2019 and YTD 2018, we reported income tax expense of $1.2 billion and 

$1.9 billion, respectively, resulting in effective tax rates of 20.3% and 19.3%, respectively. Our effective tax rates differed from 

the statutory tax rate of 21% in these periods primarily due to our recognition of low income housing tax credits and taxexempt interest income.

Deferred Tax Assets, Net

We had net deferred tax assets of $5.8 billion and $6.9 billion as of September 30, 2019 and December 31, 2018, respectively. 

At September 30, 2019, our net deferred tax assets consisted primarily of basis differences related to derivative instruments 

and deferred fees.

Based on all positive and negative evidence available at September 30, 2019, we determined that it is more likely than not that 

our net deferred tax assets, except for a portion of the deferred tax asset related to our capital loss carryforward, will be 

realized. As of September 30, 2019, we have a $37 million valuation allowance recorded against our capital loss carryforward 

deferred tax asset.

Unrecognized Tax Benefits 

We evaluated all income tax positions and determined that there were no uncertain tax positions that required reserves as of 

September 30, 2019.

We are under IRS examination for tax years 2013 through 2016 related to the carryback of 2016 capital losses to the prior three 

years.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 98

NOTE 13

Segment Reporting

We have three reportable segments, which are based on the type of business activities each performs - Single-family 

Guarantee, Multifamily, and Capital Markets. Material corporate-level activities that are infrequent in nature and based on 

decisions outside the control of the management of our reportable segments are included in the All Other category. For more 

information, see our 2018 Annual Report.

Segment Earnings

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

between various line items on our GAAP condensed consolidated statements of comprehensive income and allocating certain 

revenues and expenses, including 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 table below presents Segment Earnings by segment.

Table 13.1 - Segment Earnings 

(In millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Segment Earnings (loss), net of taxes:

Single-family Guarantee $1,250 $1,183 $2,945 $2,884

Multifamily 581 549 1,294 1,572

Capital Markets (122) 974 383 3,679

All Other — — — —

Total Segment Earnings, net of taxes 1,709 2,706 4,622 8,135

Net income (loss) $1,709 $2,706 $4,622 $8,135

Comprehensive income (loss) of segments:

Single-family Guarantee $1,247 $1,181 $2,936 $2,876

Multifamily 591 505 1,426 1,436

Capital Markets 10 873 977 2,832

All Other — — — —

Comprehensive income (loss) of segments 1,848 2,559 5,339 7,144

Comprehensive income (loss) $1,848 $2,559 $5,339 $7,144
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 99

The tables below present detailed reconciliations between our GAAP condensed consolidated statements of comprehensive 

income and Segment Earnings for our reportable segments and All Other.

Table 13.2 - Segment Earnings and Reconciliations to GAAP Condensed Consolidated Statements of Comprehensive 

Income 

3Q 2019

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $292 $497 $— $789 $1,621 $2,410

Guarantee fee income 2,075 233 — — 2,308 (2,077) 231

Benefit (provision) for credit losses 134 (1) — — 133 46 179

Mortgage loans gains (losses) — 1,087 — — 1,087 615 1,702

Investment securities gains (losses) — 31 136 — 167 (3) 164

Debt gains (losses) 51 (69) (17) — (35) (21) (56)

Derivative gains (losses) — (793) (438) — (1,231) 14 (1,217)

Other income (loss) 318 89 (234) — 173 (27) 146

Administrative expense (399) (125) (96) — (620) — (620)

REO operations (expense) income (61) — — — (61) 3 (58)

Other non-interest (expense) income (554) (17) (3) — (574) (171) (745)

Income tax (expense) benefit (314) (146) 33 — (427) — (427)

Net income (loss) 1,250 581 (122) — 1,709 — 1,709

Changes in unrealized gains (losses)

related to available-for-sale securities — 10 114 — 124 — 124

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 19 — 19 — 19

Changes in defined benefit plans (3) — (1) — (4) — (4)

Total other comprehensive income

(loss), net of taxes (3) 10 132 — 139 — 139

Comprehensive income (loss) $1,247 $591 $10 $— $1,848 $— $1,848

YTD 2019

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $805 $2,002 $— $2,807 $5,683 $8,490

Guarantee fee income 5,597 671 — — 6,268 (5,598) 670

Benefit (provision) for credit losses 221 (3) — — 218 256 474

Mortgage loans gains (losses) — 2,909 — — 2,909 1,265 4,174

Investment securities gains (losses) — 41 698 — 739 (11) 728

Debt gains (losses) 113 (46) (27) — 40 (32) 8

Derivative gains (losses) (47) (2,650) (2,095) — (4,792) (120) (4,912)

Other income (loss) 836 292 198 — 1,326 (937) 389

Administrative expense (1,173) (357) (287) — (1,817) — (1,817)

REO operations (expense) income (185) — — — (185) 13 (172)

Other non-interest (expense) income (1,667) (38) (9) — (1,714) (519) (2,233)

Income tax (expense) benefit (750) (330) (97) — (1,177) — (1,177)

Net income (loss) 2,945 1,294 383 — 4,622 — 4,622

Changes in unrealized gains (losses)

related to available-for-sale securities — 134 540 — 674 — 674

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 57 — 57 — 57

Changes in defined benefit plans (9) (2) (3) — (14) — (14)

Total other comprehensive income

(loss), net of taxes (9) 132 594 — 717 — 717

Comprehensive income (loss) $2,936 $1,426 $977 $— $5,339 $— $5,339
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 13

Freddie Mac Form 10-Q 100

3Q 2018

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $280 $845 $— $1,125 $2,132 $3,257

Guarantee fee income 1,676 210 — — 1,886 (1,677) 209

Benefit (provision) for credit losses 205 2 — — 207 173 380

Mortgage loans gains (losses) — (17) — — (17) 111 94

Investment securities gains (losses) — (97) (336) — (433) (10) (443)

Debt gains (losses) 20 5 137 — 162 (4) 158

Derivative gains (losses) (25) 375 427 — 777 (49) 728

Other income (loss) 387 27 179 — 593 (514) 79

Administrative expense (371) (109) (89) — (569) — (569)

REO operations (expense) income (42) — — — (42) 4 (38)

Other non-interest (expense) income (413) (14) — — (427) (166) (593)

Income tax (expense) benefit (254) (113) (189) — (556) — (556)

Net income (loss) 1,183 549 974 — 2,706 — 2,706

Changes in unrealized gains (losses)

related to available-for-sale securities — (44) (125) — (169) — (169)

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 25 — 25 — 25

Changes in defined benefit plans (2) — (1) — (3) — (3)

Total other comprehensive income

(loss), net of taxes (2) (44) (101) — (147) — (147)

Comprehensive income (loss) $1,181 $505 $873 $— $2,559 $— $2,559

YTD 2018

Singlefamily

Guarantee Multifamily

Capital

Markets

All

Other

Total 

Segment

Earnings 

(Loss) Reclassifications

Total per

Consolidated

Statements of

Comprehensive

(In millions) Income

Net interest income $— $846 $2,410 $— $3,256 $6,022 $9,278

Guarantee fee income 4,932 609 — — 5,541 (4,938) 603

Benefit (provision) for credit losses 366 20 — — 386 (9) 377

Mortgage loans gains (losses) — (233) — — (233) 466 233

Investment securities gains (losses) — (353) (524) — (877) (147) (1,024)

Debt gains (losses) 80 22 368 — 470 (25) 445

Derivative gains (losses) (37) 1,254 2,038 — 3,255 (281) 2,974

Other income (loss) 592 128 541 — 1,261 (613) 648

Administrative expense (1,070) (315) (262) — (1,647) — (1,647)

REO operations (expense) income (101) 1 — — (100) 13 (87)

Other non-interest (expense) income (1,192) (33) (6) — (1,231) (488) (1,719)

Income tax (expense) benefit (686) (374) (886) — (1,946) — (1,946)

Net income (loss) 2,884 1,572 3,679 — 8,135 — 8,135

Changes in unrealized gains (losses)

related to available-for-sale securities — (134) (931) — (1,065) — (1,065)

Changes in unrealized gains (losses)

related to cash flow hedge relationships — — 87 — 87 — 87

Changes in defined benefit plans (8) (2) (3) — (13) — (13)

Total other comprehensive income

(loss), net of taxes (8) (136) (847) — (991) — (991)

Comprehensive income (loss) $2,876 $1,436 $2,832 $— $7,144 $— $7,144
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 101

NOTE 14

Concentration of Credit and Other Risks

Single-Family Credit Guarantee Portfolio

The table below summarizes the concentration by loan portfolio and geographic area of the approximately $2.0 trillion and $1.9 

trillion UPB of our single-family credit guarantee portfolio as of September 30, 2019 and December 31, 2018, respectively. See 

Note 4 and Note 7 for more information about credit risk associated with loans and mortgage-related securities that we hold 

or guarantee.

Table 14.1 - Concentration of Credit Risk of Our Single-Family Credit Guarantee Portfolio

September 30, 2019 December 31, 2018 Percent of Credit Losses

Percentage 

of

Portfolio

Serious

Delinquency

Rate

Percentage 

of

Portfolio

Serious

Delinquency

Rate YTD 2019 YTD 2018

Core single-family loan portfolio 84% 0.24% 82% 0.22% 16% 12%

Legacy and relief refinance single-family loan portfolio 16 1.77 18 1.93 84 88

Total 100% 0.61 100% 0.69 100% 100%

Region(1)

West 30% 0.35 30% 0.38 12% 17%

Northeast 24 0.86 24 0.96 40 40

North Central 16 0.60 16 0.63 19 18

Southeast 16 0.72 16 0.90 22 18

Southwest 14 0.51 14 0.57 7 7

Total 100% 0.61 100% 0.69 100% 100%

State(2)

Florida 6% 0.75 6% 1.01 14% 10%

New York 5 1.20 5 1.37 12 12

New Jersey 3 1.07 3 1.24 10 10

Illinois 4 0.82 5 0.86 10 9

California 18 0.33 18 0.35 7 10

All other 64 0.57 63 0.64 47 49

Total 100% 0.61% 100% 0.69% 100% 100%

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

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

(2) States presented based on those with the highest percentage of credit losses during YTD 2019.

Credit Performance of Certain Higher Risk Single-Family Loan Categories

Participants in the mortgage market have characterized single-family loans based upon their overall credit quality at the time of 

origination, including as prime or subprime. Mortgage market participants have classified single-family loans as Alt-A if these 

loans have credit characteristics that range between their prime and subprime categories, if they are underwritten with lower or 

alternative income or asset documentation requirements compared to a full documentation loan, or both. Although we 

discontinued new purchases of loans with lower documentation standards beginning March 1, 2009, we continued to purchase 

certain amounts of these loans in cases where the loan was either: 

Purchased pursuant to a previously issued other mortgage-related guarantee;

Part of our relief refinance initiative; or 

In another refinance loan initiative and the pre-existing loan (including Alt-A loans) was originated under less than full 

documentation standards. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 102

In the event we purchase a refinance loan and the original loan had been previously identified as Alt-A, such refinance loan may 

no longer be categorized or reported as Alt-A in the table below because the new refinance loan replacing the original loan 

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

otherwise be the case had such refinancing not occurred.

Although we do not categorize single-family loans we purchase or guarantee as prime or subprime, we recognize that there are 

a number of loan types with certain characteristics that indicate a higher degree of credit risk.

For example, a borrower's credit score is a useful measure for assessing the credit quality of the borrower. Statistically, 

borrowers with higher credit scores are more likely to repay or have the ability to refinance than those with lower scores.

Presented below is a summary of the serious delinquency rates of certain higher-risk categories (based on characteristics of the 

loan at origination) of loans in our single-family credit guarantee portfolio. The table includes a presentation of each higher-risk 

category in isolation. A single loan may fall within more than one category (for example, an interest-only loan may also have an 

original LTV ratio greater than 90%). Loans with a combination of these attributes will have an even higher risk of delinquency 

than those with an individual attribute.

Table 14.2 - Certain Higher Risk Categories in Our Single-Family Credit Guarantee Portfolio

Percentage of Portfolio(1) Serious Delinquency Rate(1)

(Percentage of portfolio based on UPB) September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018

Interest-only 1% 1% 2.72% 3.43%

Alt-A 1 1 3.75 4.13

Original LTV ratio greater than 90%(2) 18 18 0.92 1.04

Lower credit scores at origination (less than 620) 2 2 4.24 4.59

(1) Excludes loans underlying certain other securitization products for which data was not available. 

(2) Includes HARP loans, which we purchased as part of our participation in the MHA Program.

Sellers and Servicers

Sellers

We acquire a significant portion of our single-family and multifamily loan purchase volume from several large sellers. The tables 

below summarize the concentration of single-family and multifamily sellers who provided 10% or more of our purchase volume 

during YTD 2019 or YTD 2018.

Table 14.3 - Seller Concentration

Single-family Sellers(1) YTD 2019 YTD 2018

JPMorgan Chase Bank, N.A. 16% 5%

Wells Fargo Bank, N.A. 7 12

Other top 10 sellers 33 32

Top 10 single-family sellers 56% 49%

Multifamily Sellers(1) YTD 2019 YTD 2018

CBRE Capital Markets, Inc. 16% 19%

Berkadia Commercial Mortgage LLC 15 12

Other top 10 sellers 48 47

Top 10 multifamily sellers 79% 78%

(1) Sellers presented based on those with the highest percentage of purchase volume during YTD 2019.

In recent years, there has been a shift in our single-family purchase volume from depository institutions to non-depository and 

smaller depository financial institutions. Some of these non-depository sellers have grown in recent years, and we purchase a 

significant share of our loans from them. Our top five non-depository sellers provided approximately 26% and 22% of our 

single-family purchase volume during YTD 2019 and YTD 2018, respectively.

Servicers

Significant portions of our single-family and multifamily loans are serviced by several large servicers. The tables below 

summarize the concentration of single-family and multifamily servicers who serviced 10% or more of our single-family credit 

guarantee portfolio and our multifamily mortgage portfolio as of September 30, 2019 or December 31, 2018. For purposes of 

determining the concentration of servicers in the tables below, our multifamily mortgage portfolio excludes loans underlying 

multifamily securitizations where we are not in first loss position, primarily K Certificates and SB Certificates.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 103

Table 14.4 - Servicer Concentration

Single-family Servicers(2) September 30, 2019(1) December 31, 2018(1)

Wells Fargo Bank, N.A. 15% 17%

JPMorgan Chase Bank, N.A. 10 8

Other top 10 servicers 31 31

Top 10 single-family servicers 56% 56%

Multifamily Servicers(2) September 30, 2019 December 31, 2018

Wells Fargo Bank, N.A. 15% 14%

Berkadia Commercial Mortgage LLC 11 11

CBRE Capital Markets, Inc. 11 14

Other top 10 servicers 40 36

Top 10 multifamily servicers 77% 75%

(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 because we do not know which entity serves as the primary servicer for such loans.

(2) Servicers presented based on those with the highest percentage of servicing volume as of September 30, 2019.

In recent years, there has been a shift in our single-family servicing from depository institutions to non-depository servicers. 

Some of these non-depository servicers have grown in recent years and now service a large share of our loans. As of 

September 30, 2019 and December 31, 2018, approximately 18% and 16%, respectively, of our single-family credit guarantee 

portfolio was serviced by our top five non-depository servicers. We actively manage the performance of our largest nondepository servicers. Additionally, as part of our efforts on home ownership retention and loss mitigation, we have been 

consolidating a portion of our default servicing with Freddie Mac selected specialty servicers.

Credit Enhancement Providers

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, mortgage insurers that insure 

single-family loans we purchase or guarantee. We also have similar exposure to insurers and reinsurers through our ACIS 

transactions where we purchase insurance policies as part of our CRT activities.

In March 2019, we implemented a set of revised Private Mortgage Insurer Eligibility Requirements (PMIERs) with enhancements 

to the risk-based capital requirements for mortgage insurers. In addition, we revised master policies with mortgage insurers 

which provide contract certainty and improve our ability to collect claims for mortgage insurance obligations. These policies 

were approved by FHFA and are expected to become effective during 2020.

We evaluate the recovery and collectability from mortgage insurers as part of the estimate of our allowance for credit losses. 

See Note 4 for additional information. As of September 30, 2019, mortgage insurers provided coverage with maximum loss 

limits of $105.2 billion, for $411.0 billion of UPB, in connection with our single-family credit guarantee portfolio. These amounts 

are based on gross coverage without regard to netting of coverage that may exist to the extent an affected loan is covered 

under both primary and pool insurance.

The table below summarizes the concentration of mortgage insurer counterparties who provided 10% or more of our overall 

mortgage insurance coverage. On October 23, 2016, Genworth Financial, Inc. announced that it had entered into an agreement 

to be acquired by China Oceanwide Holdings Group Co., Ltd. Because Genworth Mortgage Insurance Corporation, a 

subsidiary of Genworth Financial, Inc., is an approved mortgage insurer, Freddie Mac has evaluated the planned acquisition 

and approved China Oceanwide Holdings Group's control of Genworth Mortgage Insurance Corporation. Regulatory and other 

approvals of the acquisition are still pending.

Table 14.5 - Mortgage Insurer Concentration

Mortgage Insurance Coverage(2)

Mortgage Insurer Credit Rating(1) September 30, 2019 December 31, 2018

Arch Mortgage Insurance Company A- 22% 24%

Radian Guaranty Inc. BBB 20 20

Mortgage Guaranty Insurance Corporation BBB 18 19

Genworth Mortgage Insurance Corporation BB+ 15 14

Essent Guaranty, Inc. BBB+ 15 14

Total 90% 91%

(1) Ratings are for the corporate entity to which we have the greatest exposure. Latest rating available as of September 30, 2019. Represents the lower of S&P and 

Moody’s credit ratings stated in terms of the S&P equivalent.

(2) Includes primary mortgage insurance and pool insurance. Coverage amounts may include coverage provided by affiliates and subsidiaries of the counterparty. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 14

Freddie Mac Form 10-Q 104

We received proceeds of $0.1 billion and $0.2 billion during YTD 2019 and YTD 2018, respectively, from our primary and pool 

mortgage insurance policies for recovery of losses on our single-family loans. We had outstanding receivables from mortgage 

insurers of $0.1 billion (excluding deferred payment obligations associated with unpaid claim amounts) as of both 

September 30, 2019 and December 31, 2018. The balance of these receivables, net of associated reserves, was approximately 

$0.1 billion at both September 30, 2019 and December 31, 2018.

PMI Mortgage Insurance Co. and Triad Guaranty Insurance Corp. are both under the control of their state regulators and are in 

run-off. A substantial portion of their claims is recorded by us as deferred payment obligations. As of both September 30, 2019

and December 31, 2018, we had cumulative unpaid deferred payment obligations of $0.5 billion from these insurers. We have 

reserved substantially all of these unpaid amounts as collectability is uncertain. It is not clear how the regulators of these 

companies will administer their respective deferred payment plans in the future, nor when or if those obligations will be paid.

As part of our ACIS and other CRT transactions, we regularly obtain insurance coverage from insurers and reinsurers. These 

transactions incorporate several features designed to increase the likelihood that we will recover on the claims we file with the 

insurers and reinsurers, including the following:

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 

While private mortgage insurance companies are required to be monoline (i.e., to participate solely in the mortgage 

insurance business, although the holding company may be a diversified insurer), many of our insurers and reinsurers in 

these transactions participate in multiple types of insurance business, which helps diversify their risk exposure. 

Other Investments Counterparties

We are exposed to the non-performance of counterparties relating to other investments (including non-mortgage-related 

securities and cash equivalents) transactions, including those entered into on behalf of our securitization trusts. Our policies 

require that the counterparty be evaluated using our internal counterparty rating model prior to our entering into such 

transactions. We monitor the financial strength of our counterparties to these transactions and may use collateral maintenance 

requirements to manage our exposure to individual counterparties. The permitted term and dollar limits for each of these 

transactions are also based on the counterparty's financial strength.

Our other investments (including non-mortgage-related securities and cash equivalents) counterparties are primarily major 

financial institutions, including other GSEs, Treasury, the Federal Reserve Bank of New York, GSD/FICC, highly-rated 

supranational institutions, depository and non-depository institutions, brokers and dealers, and government money market 

funds. As of September 30, 2019 and December 31, 2018, including amounts related to our consolidated VIEs, the balance in 

our other investments was $89.6 billion and $63.1 billion, respectively. The balances consist primarily of cash and securities 

purchased under agreements to resell invested with counterparties, U.S. Treasury securities, cash deposited with the Federal 

Reserve Bank of New York, and secured lending activities. As of September 30, 2019, all of our securities purchased under 

agreements to resell were fully collateralized. As of September 30, 2019 and December 31, 2018, $2.2 billion and $2.5 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 risk of these institutions. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 105

NOTE 15

Fair Value Disclosures

The accounting guidance for fair value measurements and disclosures defines fair value, establishes a framework for measuring 

fair value, and sets forth disclosure requirements regarding fair value measurements. This guidance applies whenever other 

accounting guidance requires or permits assets or liabilities to be measured at fair value. Fair value represents the price that 

would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the 

measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place 

either in the principal market for the asset or liability, or, in the absence of a principal market, in the most advantageous market 

for the asset or liability.

We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain 

assets and liabilities on a recurring or non-recurring basis.

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy that 

prioritizes the inputs into the valuation techniques used to measure fair value. The levels of the fair value hierarchy are defined 

as follows in priority order:

Level 1 - inputs to the valuation techniques are based on quoted prices in active markets for identical assets or liabilities. 

Level 2 - inputs to the valuation techniques are based on observable inputs other than quoted prices in active markets for 

identical assets or liabilities. 

Level 3 - one or more inputs to the valuation technique are unobservable and significant to the fair value measurement.

We use quoted market prices and valuation techniques that seek to maximize the use of observable inputs, where available, 

and minimize the use of unobservable inputs. Our inputs are based on the assumptions a market participant would use in 

valuing the asset or liability. Assets and liabilities are classified in their entirety within the fair value hierarchy based on the 

lowest level input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present our assets and liabilities measured on our condensed consolidated balance sheets at fair value on a 

recurring basis subsequent to initial recognition, including instruments where we have elected the fair value option.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 106

Table 15.1 - Assets and Liabilities Measured at Fair Value on a Recurring Basis 

September 30, 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:

Freddie Mac $— $23,969 $2,150 $— $26,119

Other agency — 992 34 — 1,026

Non-agency and other — 21 1,367 — 1,388

Total available-for-sale securities, at fair value — 24,982 3,551 — 28,533

Trading, at fair value:

Mortgage-related securities:

Freddie Mac — 10,042 2,930 — 12,972

Other agency — 7,189 5 — 7,194

All other — — 1 — 1

Total mortgage-related securities — 17,231 2,936 — 20,167

Non-mortgage-related securities 21,952 2,330 — — 24,282

Total trading securities, at fair value 21,952 19,561 2,936 — 44,449

Total investments in securities 21,952 44,543 6,487 — 72,982

Mortgage loans:

Held-for-sale, at fair value — 21,538 — — 21,538

Derivative assets, net:

Interest-rate swaps — 2,504 — — 2,504

Option-based derivatives — 5,196 — — 5,196

Other — 192 16 — 208

Subtotal, before netting adjustments — 7,892 16 — 7,908

Netting adjustments(1) — — — (6,316) (6,316)

Total derivative assets, net — 7,892 16 (6,316) 1,592

Other assets:

Guarantee asset, at fair value — — 4,225 — 4,225

Non-derivative held-for-sale purchase commitments, at fair value — 223 — — 223

All other, at fair value — — 142 — 142

Total other assets — 223 4,367 — 4,590

Total assets carried at fair value on a recurring basis $21,952 $74,196 $10,870 ($6,316) $100,702

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $— $4 $733 $— $737

Other debt, at fair value — 3,733 130 — 3,863

Derivative liabilities, net:

Interest-rate swaps — 6,102 — — 6,102

Option-based derivatives — 78 — — 78

Other — 257 40 — 297

Subtotal, before netting adjustments — 6,437 40 — 6,477

Netting adjustments(1) — — — (6,122) (6,122)

Total derivative liabilities, net — 6,437 40 (6,122) 355

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 1 — — 1

All other, at fair value — — 2 — 2

Total liabilities carried at fair value on a recurring basis $— $10,175 $905 ($6,122) $4,958

Referenced footnote is included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 107

December 31, 2018

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustment(1) Total

Assets:

Investments in securities:

Available-for-sale, at fair value:

Mortgage-related securities:

Freddie Mac $— $26,102 $4,097 $— $30,199

Other agency — 1,668 38 — 1,706

Non-agency and other — 18 1,640 — 1,658

Total available-for-sale securities, at fair value — 27,788 5,775 — 33,563

Trading, at fair value:

Mortgage-related securities:

Freddie Mac — 10,535 3,286 — 13,821

Other agency — 2,544 7 — 2,551

All other — — 1 — 1

Total mortgage-related securities — 13,079 3,294 — 16,373

Non-mortgage-related securities 15,885 3,290 — — 19,175

Total trading securities, at fair value 15,885 16,369 3,294 — 35,548

Total investments in securities 15,885 44,157 9,069 — 69,111

Mortgage loans:

Held-for-sale, at fair value — 23,106 — — 23,106

Derivative assets, net:

Interest-rate swaps — 2,127 — — 2,127

Option-based derivatives — 4,200 — — 4,200

Other — 90 1 — 91

Subtotal, before netting adjustments — 6,417 1 — 6,418

Netting adjustments(1) — — — (6,083) (6,083)

Total derivative assets, net — 6,417 1 (6,083) 335

Other assets:

Guarantee asset, at fair value — — 3,633 — 3,633

Non-derivative held-for-sale purchase commitments, at fair value — 159 — — 159

All other, at fair value — — 137 — 137

Total other assets — 159 3,770 — 3,929

Total assets carried at fair value on a recurring basis $15,885 $73,839 $12,840 ($6,083) $96,481

Liabilities:

Debt securities of consolidated trusts held by third parties, at fair

value $— $27 $728 $— $755

Other debt, at fair value — 4,223 134 — 4,357

Derivative liabilities, net:

Interest-rate swaps — 3,974 — — 3,974

Option-based derivatives — 137 — — 137

Other — 225 92 — 317

Subtotal, before netting adjustments — 4,336 92 — 4,428

Netting adjustments(1) — — — (3,845) (3,845)

Total derivative liabilities, net — 4,336 92 (3,845) 583

Other liabilities:

Non-derivative held-for-sale purchase commitments, at fair value — 17 — — 17

Total liabilities carried at fair value on a recurring basis $— $8,603 $954 ($3,845) $5,712

(1) Represents counterparty netting, cash collateral netting, and net derivative interest receivable or payable.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 108

Level 3 Fair Value Measurements

The tables below present a reconciliation of all assets and liabilities measured on our condensed consolidated balance sheets 

at fair value on a recurring basis using significant unobservable inputs (Level 3), including transfers into and out of Level 3. The 

tables also present gains and losses due to changes in fair value, including both realized and unrealized gains and losses, 

recognized on our condensed consolidated statements of comprehensive income for Level 3 assets and liabilities. 

Table 15.2 - Fair Value Measurements of Assets and Liabilities Using Significant Unobservable Inputs

3Q 2019

Balance,

July 1,

2019

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $2,744 $23 $16 $39 $— $— ($531) ($102) $— $— $2,150 $1

Other agency 36 — — — — — — (2) — — 34 —

Non-agency and other 1,494 26 (10) 16 — — (87) (56) — — 1,367 3

Total available-for-sale

mortgage-related securities 4,274 49 6 55 — — (618) (160) — — 3,551 4

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 3,028 (30) — (30) 287 — (21) (35) — (299) 2,930 (31)

Other agency 5 — — — — — — — — — 5 —

All other 1 — — — — — — — — — 1 —

Total trading mortgagerelated securities 3,034 (30) — (30) 287 — (21) (35) — (299) 2,936 (31)

Other assets:

Guarantee asset 3,941 15 — 15 — 439 — (170) — — 4,225 15

All other, at fair value 126 12 — 12 24 12 (27) (5) — — 142 (3)

Total other assets $4,067 $27 $— $27 $24 $451 ($27) ($175) $— $— $4,367 $12

Balance,

July 1,

2019

Realized and unrealized (gains) losses

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Unrealized

(gains) 

losses

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of

consolidated trusts held by

third parties, at fair value $733 $— $— $— $— $— $— $— $— $— $733 $—

Other debt, at fair value 129 — — — 2 — — (1) — — 130 —

Net derivatives(2) 40 (8) — (8) — — — (8) — — 24 (13)

All other, at fair value — 2 — 2 2 — (2) — — — 2 —

Referenced footnotes are included after the prior period tables.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 109

YTD 2019

Balance,

January 1,

2019

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $4,097 $13 $115 $128 $202 $— ($1,724) ($290) $— ($263) $2,150 $2

Other agency 38 — 1 1 — — — (5) — — 34 —

Non-agency and other 1,640 52 25 77 — — (174) (176) — — 1,367 12

Total available-for-sale

mortgage-related securities 5,775 65 141 206 202 — (1,898) (471) — (263) 3,551 14

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 3,286 (113) — (113) 1,242 — (730) 95 8 (858) 2,930 (68)

Other agency 7 — — — — — (2) — — — 5 (1)

All other 1 — — — — — — — — — 1 —

Total trading mortgagerelated securities 3,294 (113) — (113) 1,242 — (732) 95 8 (858) 2,936 (69)

Other assets:

Guarantee asset 3,633 75 — 75 — 1,005 — (488) — — 4,225 75

All other, at fair value 137 (31) — (31) 75 29 (59) (9) — — 142 (51)

Total other assets $3,770 $44 $— $44 $75 $1,034 ($59) ($497) $— $— $4,367 $24

Balance,

January 1,

2019

Realized and unrealized (gains) losses

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2019

Unrealized

(gains) 

losses

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of

consolidated trusts held by

third parties, at fair value $728 $5 $— $5 $— $— $— $— $— $— $733 $5

Other debt, at fair value 134 — — — — 2 — (6) — — 130 —

Net derivatives(2) 91 (54) — (54) — — — (13) — — 24 (66)

All other, at fair value — — — — 4 — (2) — — — 2 (2)

Referenced footnotes are included after the prior period tables.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 110

3Q 2018

Balance,

July 1,

2018

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2018

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $6,004 ($3) ($68) ($71) $684 $— ($237) ($199) $— ($91) $6,090 ($4)

Other agency 270 — — — — — — (2) — (228) 40 —

Non-agency and other 2,535 383 (66) 317 — — (660) (134) — — 2,058 10

Total available-for-sale

mortgage-related securities 8,809 380 (134) 246 684 — (897) (335) — (319) 8,188 6

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 3,711 (140) — (140) 623 — (875) (31) — (108) 3,180 (136)

Other agency 17 (1) — (1) — — — 1 — — 17 (1)

All other 1 — — — — — — — — — 1 —

Total trading mortgagerelated securities 3,729 (141) — (141) 623 — (875) (30) — (108) 3,198 (137)

Other assets:

Guarantee asset 3,363 (28) — (28) — 255 — (147) — — 3,443 (28)

All other, at fair value 103 1 — 1 (3) (11) — — — — 90 (4)

Total other assets $3,466 ($27) $— ($27) ($3) $244 $— ($147) $— $— $3,533 ($32)

Balance,

July 1,

2018

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2018

Unrealized

gains 

(losses)

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of

consolidated trusts held by

third parties, at fair value $629 ($1) $— ($1) $— $100 $— $— $— $— $728 ($1)

Other debt, at fair value 135 — — — — — — (1) — — 134 —

Net derivatives(2) 42 8 — 8 — 41 — (4) — — 87 3

Referenced footnotes are included after the following table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 111

YTD 2018

Balance,

January 1,

2018

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2018

Unrealized

gains 

(losses)

still held(3) (In millions)

Included in

earnings

Included in

other

comprehensive

income Total

Assets

Investments in securities:

Available-for-sale, at fair

value:

Mortgage-related

securities:

Freddie Mac $6,751 ($13) ($267) ($280) $684 $— ($293) ($772) $— $— $6,090 ($13)

Other agency 46 — (1) (1) — — — (5) — — 40 —

Non-agency and other 4,291 876 (538) 338 — — (2,160) (411) — — 2,058 31

Total available-for-sale

mortgage-related securities 11,088 863 (806) 57 684 — (2,453) (1,188) — — 8,188 18

Trading, at fair value:

Mortgage-related

securities:

Freddie Mac 2,907 (383) — (383) 1,027 — (863) (55) 579 (32) 3,180 (362)

Other agency 9 (2) — (2) 30 — (21) 1 — — 17 (2)

All other 1 — — — — — — — — — 1 —

Total trading mortgagerelated securities 2,917 (385) — (385) 1,057 — (884) (54) 579 (32) 3,198 (364)

Other assets:

Guarantee asset 3,171 (48) — (48) — 745 — (425) — — 3,443 (48)

All other, at fair value 45 31 — 31 38 (24) — — — — 90 11

Total other assets $3,216 ($17) $— ($17) $38 $721 $— ($425) $— $— $3,533 ($37)

Balance,

January 1,

2018

Realized and unrealized gains (losses)

Purchases Issues Sales

Settlements,

net

Transfers

into

Level 3(1)

Transfers

out of

Level 3(1)

Balance,

September

30,

2018

Unrealized

gains 

(losses)

still held(3)

Included in

earnings

Included in

other

comprehensive

income Total

Liabilities

Debt securities of

consolidated trusts held by

third parties, at fair value $630 ($2) $— ($2) $— $100 $— $— $— $— $728 ($2)

Other debt, at fair value 137 — — — — — — (3) — — 134 —

Net derivatives(2) 57 28 — 28 — 15 — (13) — — 87 15

(1) Transfers out of Level 3 during 3Q 2019 and YTD 2019 and 3Q 2018 and YTD 2018 consisted primarily of certain mortgage-related securities due to an increased 

volume and level of activity in the market and availability of price quotes from dealers and third-party pricing services. Certain Freddie Mac securities are classified 

as Level 3 at issuance and generally are classified as Level 2 when they begin trading. Transfers into Level 3 during 3Q 2019 and YTD 2019 and 3Q 2018 and YTD 

2018 consisted primarily of certain mortgage-related securities due to a decrease in market activity and the availability of relevant price quotes from dealers and 

third-party pricing services.

(2) Amounts are the net of derivative assets and liabilities prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable, and net derivative 

interest receivable or payable.

(3) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in unrealized gains and losses related to assets and 

liabilities classified as Level 3 that were still held at September 30, 2019 and September 30, 2018, respectively. Included in these amounts are other-than temporary 

impairments recorded on available-for-sale securities.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 112

The tables below provide valuation techniques, the range, and the weighted average of significant unobservable inputs for Level 

3 assets and liabilities measured on our condensed consolidated balance sheets at fair value on a recurring basis.

Table 15.3 - Quantitative Information about Recurring Level 3 Fair Value Measurements 

September 30, 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

Assets

Available-for-sale, at fair value

Mortgage-related securities

Freddie Mac $2,150 Discounted cash flows OAS 30 - 261 bps 81 bps

Non-agency and other 979 Median of external

sources

External pricing

sources $70.3 - $76.7 $73.5

388 Other

Trading, at fair value

Mortgage-related securities

Freddie Mac 2,047 Single external source External pricing

sources $0.0 - $102.4 $36.1

883 Discounted cash flows OAS (831) - 8,095 bps 555 bps

Guarantee asset, at fair value 3,970 Discounted cash flows OAS 17-186 bps 43 bps

255 Other

Insignificant Level 3 assets(1) 182

Total level 3 assets $10,854

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value $733 Single External Source External PricingSources $99.5 - $103.9 $100.4

Insignificant Level 3 liabilities(1) 156

Referenced footnote is included after the next table.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 113

December 31, 2018

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for certain unobservable 

inputs as shown) Type Range

Weighted

Average

Assets

Available-for-sale, at fair value

Mortgage-related securities

Freddie Mac $2,838 Discounted cash flows OAS 30 - 325 bps 81 bps

1,259 Single external source

External pricing

sources $96.1 - $104.1 $102.3

Non-agency and other 1,403

Median of external

sources

External pricing

sources $64.3 - $71.1 $67.3

237 Single external source

External pricing

sources $93.1 - $110.7 $100.7

Trading, at fair value

Mortgage-related securities

Freddie Mac 1,587 Single external source

External pricing

sources $0.0 - $99.2 $56.6

1,178 Discounted cash flows OAS (21,945) - 6,639 bps 90 bps

521 Other

Guarantee asset, at fair value 3,391 Discounted cash flows OAS 17-198 bps 49 bps

242 Other

Insignificant Level 3 assets(1) 184

Total level 3 assets $12,840

Liabilities

Debt securities of consolidated trusts held by third

parties, at fair value $728 Single External Source

External Pricing

Sources $97.4 - $101.1 $99.6

Insignificant Level 3 liabilities(1) 226

(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.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 114

Assets Measured at Fair Value on a Non-Recurring Basis

We may be required, from time to time, to measure certain assets at fair value on a non-recurring basis. These adjustments 

usually result from the application of lower-of-cost-or-fair-value accounting or measurement of impairment based on the fair 

value of the underlying collateral. Certain of the fair values in the tables below were not obtained as of the period end, but were 

obtained during the period.

The table below presents assets measured on our condensed consolidated balance sheets at fair value on a non-recurring 

basis. 

Table 15.4 - Assets Measured at Fair Value on a Non-Recurring Basis 

September 30, 2019 December 31, 2018

(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) $— $429 $3,301 $3,730 $— $24 $7,519 $7,543

(1) Includes loans that are classified as held-for-investment and have been measured for impairment based on the fair value of the underlying collateral and held-forsale loans where the fair value is below cost.

The tables below provide valuation techniques, the range, and the weighted average of significant unobservable inputs for Level 

3 assets measured on our condensed consolidated balance sheets at fair value on a non-recurring basis.

Table 15.5 - Quantitative Information about Non-Recurring Level 3 Fair Value Measurements 

September 30, 2019

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for 

certain unobservable inputs as 

shown) Type Range

Weighted

Average

Non-recurring fair value

measurements

Mortgage loans $3,301

Internal model Historical sales proceeds $3,110 - $671,825 $185,551

Internal model Housing sales index 45 - 352 bps 113 bps

Median of external sources External pricing sources $30.4 - $95.0 $85.1

December 31, 2018

Level 3

Fair

Value

Predominant

Valuation

Technique(s)

Unobservable Inputs

(Dollars in millions, except for 

certain unobservable inputs as 

shown) Type Range

Weighted

Average

Non-recurring fair value

measurements

Mortgage loans $7,519

Internal model Historical sales proceeds $3,000 - $750,500 $177,725

Internal model Housing sales index 44 - 480 bps 108 bps

Median of external sources External pricing sources $36.2 - $94.6 $82.5
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 115

Fair Value of Financial Instruments

The tables below present the carrying value and estimated fair value of our financial instruments. For certain types of financial 

instruments, such as cash and cash equivalents, securities purchased under agreements to resell, secured lending and other, 

and certain debt, the carrying value on our GAAP balance sheets approximates fair value, as these assets and liabilities are 

short-term in nature and have limited fair value volatility. 

Table 15.6 - Fair Value of Financial Instruments

September 30, 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 $8,708 $8,693 $15 $— $— $8,708

Securities purchased under agreements

to resell Amortized cost 51,187 — 51,187 — — 51,187

Investments in securities:

Available-for-sale, at fair value FV - OCI 28,533 — 24,982 3,551 — 28,533

Trading, at fair value FV - NI 44,449 21,952 19,561 2,936 — 44,449

Total investments in securities 72,982 21,952 44,543 6,487 — 72,982

Mortgage loans:

Loans held by consolidated trusts 1,905,633 — 1,714,292 223,324 — 1,937,616

Loans held by Freddie Mac 91,857 — 46,636 48,517 — 95,153

Total mortgage loans Various(3) 1,997,490 — 1,760,928 271,841 — 2,032,769

Derivative assets, net FV - NI 1,592 — 7,892 16 (6,316) 1,592

Guarantee asset FV - NI 4,225 — — 4,233 — 4,233

Non-derivative purchase commitments,

at fair value FV - NI 223 — 229 1 — 230

Secured lending and other Amortized cost 5,439 — 1,728 2,745 — 4,473

Total financial assets $2,141,846 $30,645 $1,866,522 $285,323 ($6,316) $2,176,174

Financial Liabilities

Debt, net:

Debt securities of consolidated trusts

held by third parties $1,869,308 $— $1,898,887 $2,068 $— $1,900,955

Other debt 279,951 — 281,229 3,757 — 284,986

Total debt, net Various(4) 2,149,259 — 2,180,116 5,825 — 2,185,941

Derivative liabilities, net FV - NI 355 — 6,437 40 (6,122) 355

Guarantee obligation Amortized cost 4,055 — — 4,416 — 4,416

Non-derivative purchase commitments,

at fair value FV - NI 1 — 1 12 — 13

Total financial liabilities $2,153,670 $— $2,186,554 $10,293 ($6,122) $2,190,725

(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 September 30, 2019, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value, and FV - NI were $2.0 trillion, $19.6 billion, and 

$21.5 billion, respectively. 

(4) As of September 30, 2019, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.1 trillion and $4.6 billion, respectively. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 116

December 31, 2018

GAAP 

Measurement 

Category(1)

GAAP

Carrying 

Amount

Fair Value

(In millions) Level 1 Level 2 Level 3

Netting 

Adjustments(2) Total

Financial Assets

Cash and cash equivalents Amortized cost $7,273 $7,273 $— $— $— $7,273

Securities purchased under agreements

to resell Amortized cost 34,771 — 34,771 — — 34,771

Investments in securities:

Available-for-sale, at fair value FV - OCI 33,563 — 27,788 5,775 — 33,563

Trading, at fair value FV - NI 35,548 15,885 16,369 3,294 — 35,548

Total investments in securities 69,111 15,885 44,157 9,069 — 69,111

Mortgage loans:

Loans held by consolidated trusts 1,842,850 — 1,605,874 209,542 — 1,815,416

Loans held by Freddie Mac 84,128 — 33,946 52,212 — 86,158

Total mortgage loans Various(3) 1,926,978 — 1,639,820 261,754 — 1,901,574

Derivative assets, net FV - NI 335 — 6,417 1 (6,083) 335

Guarantee asset FV - NI 3,633 — — 3,642 — 3,642

Non-derivative purchase commitments,

at fair value FV - NI 159 — 159 2 — 161

Secured lending and other Amortized cost 1,805 — 195 873 — 1,068

Total financial assets $2,044,065 $23,158 $1,725,519 $275,341 ($6,083) $2,017,935

Financial Liabilities

Debt, net:

Debt securities of consolidated trusts

held by third parties $1,792,677 $— $1,759,911 $2,698 $— $1,762,609

Other debt 252,273 — 251,543 3,629 — 255,172

Total debt, net Various(4) 2,044,950 — 2,011,454 6,327 — 2,017,781

Derivative liabilities, net FV - NI 583 — 4,336 92 (3,845) 583

Guarantee obligation Amortized cost 3,561 — — 4,146 — 4,146

Non-derivative purchase commitments,

at fair value FV - NI 17 — 17 11 — 28

Total financial liabilities $2,049,111 $— $2,015,807 $10,576 ($3,845) $2,022,538

(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, 2018, the GAAP carrying amounts measured at amortized cost, lower-of-cost-or-fair-value, and FV - NI were $1.9 trillion, $18.5 billion, and 

$23.1 billion, respectively. 

(4) As of December 31, 2018, the GAAP carrying amounts measured at amortized cost and FV - NI were $2.0 trillion and $5.1 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. 

The table below presents the fair value and UPB related to certain loans and long-term debt for which we have elected the fair 

value option. This table does not include interest-only securities related to debt securities of consolidated trusts and other debt 

held by third parties with a fair value of $61 million and $26 million and multifamily held-for-sale loan purchase commitments 

with a fair value of $222 million and $142 million, as of September 30, 2019 and December 31, 2018, respectively.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 15

Freddie Mac Form 10-Q 117

Table 15.7 - Difference between Fair Value and UPB for Certain Financial Instruments with Fair Value Option Elected 

September 30, 2019 December 31, 2018

(In millions)

Multifamily

Held-For-Sale

 Loans

Other Debt -

Long Term

Debt Securities Of

Consolidated

Trusts Held By

Third Parties

Multifamily

Held-For-Sale

 Loans

Other Debt -

Long Term

Debt Securities Of

Consolidated

Trusts Held By

Third Parties

Fair value $21,538 $3,806 $733 $23,106 $4,357 $728

UPB 20,152 3,538 730 22,693 3,998 730

Difference $1,386 $268 $3 $413 $359 ($2)

Changes in Fair Value Under the Fair Value Option Election

The table below presents the changes in fair value included in non-interest income (loss) in our condensed consolidated 

statements of comprehensive income, related to items for which we have elected the fair value option. 

Table 15.8 - Changes in Fair Value Under the Fair Value Option Election

3Q 2019 3Q 2018 YTD 2019 YTD 2018

(In millions) Gains (Losses) Gains (Losses)

Multifamily held-for-sale loans $398 ($285) $1,216 ($797)

Multifamily held-for-sale loan purchase commitments 641 267 1,644 564

Other debt - long term 49 10 116 38

Debt securities of consolidated trusts held by third parties (1) 2 (6) 4

Changes in fair value attributable to instrument-specific credit risk were not material for 3Q 2019 and YTD 2019 and for 3Q 

2018 and YTD 2018 for any assets or liabilities for which we elected the fair value option.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 118

NOTE 16

Legal Contingencies

We are involved as a party in a variety of legal and regulatory proceedings arising from time to time in the ordinary course of 

business including, among other things, contractual disputes, personal injury claims, employment-related litigation, and other 

legal proceedings incidental to our business. We are frequently involved, directly or indirectly, in litigation involving mortgage 

foreclosures. From time to time, we are also involved in proceedings arising from our termination of a seller's or servicer's 

eligibility to sell loans to, and/or service loans for, us. In these cases, the former seller or servicer sometimes seeks damages 

against us for wrongful termination under a variety of legal theories. In addition, we are sometimes sued in connection with the 

origination or servicing of loans. These suits typically involve claims alleging wrongful actions of sellers and servicers. Our 

contracts with our sellers and servicers generally provide for indemnification of Freddie Mac against liability arising from sellers' 

and servicers' wrongful actions with respect to loans sold to or serviced for Freddie Mac.

Litigation and claims resolution are subject to many uncertainties and are not susceptible to accurate prediction. In accordance 

with the accounting guidance for contingencies, we reserve for litigation claims and assessments asserted or threatened 

against us when a loss is probable (as defined in such guidance) and the amount of the loss can be reasonably estimated.

Putative Securities Class Action Lawsuit: Ohio Public Employees 

Retirement System vs. Freddie Mac, Syron, Et Al.

This putative securities class action lawsuit was filed against Freddie Mac and certain former officers on January 18, 2008 in the 

U.S. District Court for the Northern District of Ohio purportedly on behalf of a class of purchasers of Freddie Mac stock from 

August 1, 2006 through November 20, 2007. FHFA later intervened as Conservator, and the plaintiff amended its complaint on 

several occasions. The plaintiff alleged, among other things, that the defendants violated federal securities laws by making false 

and misleading statements concerning our business, risk management, and the procedures we put into place to protect the 

company from problems in the mortgage industry. The plaintiff seeks unspecified damages and interest, and reasonable costs 

and expenses, including attorney and expert fees.

In October 2013, defendants filed motions to dismiss the complaint. In October 2014, the District Court granted defendants' 

motions and dismissed the case in its entirety against all defendants, with prejudice. In November 2014, plaintiff filed a notice of 

appeal in the U.S. Court of Appeals for the Sixth Circuit. On July 20, 2016, the Court of Appeals reversed the District Court's 

dismissal and remanded the case to the District Court for further proceedings. On August 14, 2018, the District Court denied 

the plaintiff's motion for class certification. On January 23, 2019, the Court of Appeals denied plaintiff's petition for leave to 

appeal that decision.

At present, it is not possible for us to predict the probable outcome of this lawsuit or any potential effect on our business, 

financial condition, liquidity, or results of operations. In addition, we are unable to reasonably estimate the possible loss or 

range of possible loss in the event of an adverse judgment in the foregoing matter due to the following factors, among others: 

pre-trial litigation is inherently uncertain; while the District Court denied plaintiff's motion for class certification, this denial may 

be appealed upon the entry of final judgment; and the District Court has not yet ruled upon motions for summary judgment. In 

particular, absent a final resolution of whether a class will be certified, the identification of a class if one is certified, and the 

identification of the alleged statement or statements that survive dispositive motions, we cannot reasonably estimate any 

possible loss or range of possible loss.

LIBOR Lawsuit

On 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 Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 119

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 allege, among other items, 

that the August 2012 amendment to the Purchase Agreement breached Freddie Mac's and Fannie Mae's respective contracts 

with the holders of junior preferred stock and common stock and the covenant of good faith and fair dealing inherent in such 

contracts. Plaintiffs sought unspecified damages, equitable and injunctive relief, and costs and expenses, including attorney 

and expert fees. 

The Cacciapelle and American European Insurance Company lawsuits were filed purportedly on behalf of a class of purchasers 

of junior preferred stock issued by Freddie Mac or Fannie Mae who held stock prior to, and as of, August 17, 2012. The Marneu 

lawsuit was filed purportedly on behalf of a class of purchasers of junior preferred stock and purchasers of common stock 

issued by Freddie Mac or Fannie Mae over a not-yet-defined period of time. 

Arrowood Indemnity Company vs. Federal National Mortgage Association, Federal Home Loan Mortgage 

Corporation, FHFA, and Treasury. This case was filed on September 20, 2013. The allegations and demands made by 

plaintiffs in this case were generally similar to those made by the plaintiffs in the In re Fannie Mae/Freddie Mac Senior Preferred 

Stock Purchase Agreement Class Action Litigations case described above. Plaintiffs in the Arrowood lawsuit also requested 

that, if injunctive relief were not granted, the Arrowood plaintiffs be awarded damages against the defendants in an amount to 

be determined including, but not limited to, the aggregate par value of their junior preferred stock, the total of which they stated 

to be approximately $42 million. 

American European Insurance Company, Cacciapelle, and Miller vs. Treasury and FHFA. This case was filed as a 

shareholder derivative lawsuit, purportedly on behalf of Freddie Mac as a "nominal" defendant, on July 30, 2014. The complaint 

alleged that, through the August 2012 amendment to the Purchase Agreement, Treasury and FHFA breached their respective 

fiduciary duties to Freddie Mac, causing Freddie Mac to suffer damages. The plaintiffs asked that Freddie Mac be awarded 

compensatory damages and disgorgement, as well as attorneys' fees, costs, and other expenses. 

FHFA, joined by Freddie Mac and Fannie Mae, moved to dismiss the In re Fannie Mae/Freddie Mac Senior Preferred Stock 

Purchase Agreement Class Action Litigations case and the other related cases in January 2014. Treasury filed a motion to 

dismiss the same day. In September 2014, the District Court granted the motions and dismissed the plaintiffs' claims. All 

plaintiffs appealed that decision, and on February 21, 2017, the U.S. Court of Appeals for the District of Columbia Circuit 

affirmed in part and remanded in part the decision granting the motions to dismiss. The Court of Appeals affirmed dismissal of 

all claims except certain claims seeking monetary damages for breach of contract and breach of implied duty of good faith and 

fair dealing. In March 2017, certain institutional and class plaintiffs filed petitions for panel rehearing with respect to certain 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 120

claims. On July 17, 2017, the Court of Appeals granted the petitions for rehearing and issued a modified decision, which 

permitted the institutional plaintiffs to pursue the breach of contract and breach of implied duty of good faith and fair dealing 

claims that had been remanded. The Court of Appeals also removed language related to the standard to be applied to the 

implied duty claims, leaving that issue for the District Court to determine on remand. On October 16, 2017, certain institutional 

and class plaintiffs filed petitions for a writ of certiorari in the U.S. Supreme Court challenging whether HERA's prohibition on 

injunctive relief against FHFA bars judicial review of the net worth sweep dividend provisions of the August 2012 amendment to 

the Purchase Agreement, as well as whether HERA bars shareholders from pursuing derivative litigation where they allege the 

conservator faces a conflict of interest. The Supreme Court denied the petitions on February 20, 2018. On November 1, 2017, 

certain institutional and class plaintiffs and plaintiffs in another case in which Freddie Mac was not originally a defendant, 

Fairholme Funds, Inc. v. FHFA, Treasury, and Federal National Mortgage Association, filed proposed amended complaints in the 

District Court. Each of the proposed amended complaints names Freddie Mac as a defendant for breach of contract and 

breach of the covenant of good faith and fair dealing claims as well as for new claims alleging breach of fiduciary duty and 

breach of Virginia corporate law. On January 10, 2018, FHFA, Freddie Mac, and Fannie Mae moved to dismiss the amended 

complaints. On September 28, 2018, the District Court dismissed all of the claims except those alleging breach of the implied 

covenant of good faith and fair dealing. Discovery is ongoing.

Angel vs. The Federal Home Loan Mortgage Corporation et al. This case was filed pro se on May 21, 2018 against 

Freddie Mac, Fannie Mae, certain current and former directors of Freddie Mac and Fannie Mae, and FHFA as a nominal 

defendant. The complaint alleged, among other things, breach of contract, breach of the implied covenant of good faith and fair 

dealing, and that defendants aided and abetted the government's "avoidance" of plaintiff's dividend rights. On March 6, 2019, 

the U.S. District Court for the District of Columbia granted the defendants' motion to dismiss the case. On March 18, 2019, Mr. 

Angel filed a motion seeking to alter or amend the judgment and for leave to file an amended complaint. On May 24, 2019, the 

District Court denied Mr. Angel's motion, and on June 19, 2019, Mr. Angel filed a notice of appeal to the U.S. Court of Appeals 

for the District of Columbia Circuit. 

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. Defendants filed 

a motion to dismiss on August 1, 2018 and an amended motion to dismiss on October 1, 2018.

Fairholme Funds, Inc., et al. vs. the United States of America, Federal National Mortgage Association, and Federal 

Home Loan Mortgage Corporation. This case was originally filed on July 9, 2013 against the United States of America. On 

March 8, 2018, plaintiffs filed an amended complaint under seal. A redacted public version was filed on May 11, 2018 and adds 

Freddie Mac and Fannie Mae as nominal defendants. The amended complaint alleges, among other items, that the net worth 

sweep dividend provisions of the senior preferred stock constitute an unlawful taking or exaction of private property for public 

use without just compensation, and that by enacting the net worth sweep, the government breached the fiduciary duty it owed 

to Freddie Mac and Fannie Mae, and implied-in-fact contracts between the United States on the one hand and Freddie Mac and 

Fannie Mae on the other. The plaintiffs ask that plaintiffs, Freddie Mac, and Fannie Mae be awarded (1) just compensation for 

the government's alleged taking or exaction of their property, (2) damages for the government's breach of fiduciary duties, and 

(3) damages for the government's breach of the alleged implied-in-fact contracts. In addition, plaintiffs seek pre- and postjudgment interest, attorneys' fees, costs, and other expenses. Defendants filed a motion to dismiss on August 1, 2018 and an 

amended motion to dismiss on October 1, 2018.

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 plaintiffs ask that plaintiffs, 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 a ruling on defendants' motion to dismiss in the 

Fairholme Funds, Inc. litigation.

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 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 16

Freddie Mac Form 10-Q 121

Agreement Class Action Litigations case, the plaintiffs have not demanded a stated amount of damages they believe are due, 

and the Court has not certified a class.
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 17

Freddie Mac Form 10-Q 122

NOTE 17

Regulatory Capital

In October 2008, FHFA announced that it was suspending capital classification of us during conservatorship in light of the 

Purchase Agreement. FHFA continues to monitor our capital levels, but the existing statutory and FHFA regulatory capital 

requirements are not binding during conservatorship.

We continue to provide quarterly submissions to FHFA on minimum capital. The table below summarizes our minimum capital 

requirements and deficits and net worth. 

Table 17.1 - Net Worth and Minimum Capital

(In millions) September 30, 2019 December 31, 2018

GAAP net worth (deficit) $6,674 $4,477

Core capital (deficit)(1)(2) (66,556) (68,036)

Less: Minimum capital requirement(1) 18,817 17,553

Minimum capital surplus (deficit)(1) ($85,373) ($85,589)

(1) Core capital and minimum capital figures are estimates and represent amounts submitted to FHFA. FHFA is the authoritative source for our regulatory capital.

(2) Core capital excludes certain components of GAAP total equity (i.e., AOCI and the liquidation preference of the senior preferred stock) as these items do not meet the 

statutory definition of core capital.

In May 2017, FHFA, as Conservator, issued guidance to us to evaluate and manage our financial risk and to make economic 

business decisions, while in conservatorship, utilizing a newly-developed risk-based CCF, an economic capital system with 

detailed formulae provided by FHFA. We use the CCF to measure risk for making economically effective decisions. We are 

required to submit quarterly reports to FHFA related to the CCF requirements. 
Financial Statements Notes to the Condensed Consolidated Financial Statements | Note 18

Freddie Mac Form 10-Q 123

NOTE 18

Selected Financial Statement Line Items

The table below presents the significant components of other income (loss) on our condensed consolidated statements of 

comprehensive income (loss).

Table 18.1 - Significant Components of Other Income (Loss)

(In millions) 3Q 2019 3Q 2018 YTD 2019 YTD 2018

Other income (loss):

Income on guarantee obligation $206 $176 $593 $524

All other (60) (97) (204) 124

Total other income (loss) $146 $79 $389 $648

The table below presents the significant components of other assets and other liabilities on our condensed consolidated 

balance sheets.

Table 18.2 - Significant Components of Other Assets and Other Liabilities

(In millions) September 30, 2019 December 31, 2018

Other assets:

Real estate owned, net $607 $769

Accounts and other receivables(1) 12,816 2,447

Guarantee asset 4,225 3,633

Secured lending and other 5,439 1,805

All other 2,626 2,322

Total other assets $25,713 $10,976

Other liabilities:

Guarantee obligation $4,055 $3,561

All other 3,215 2,837

Total other liabilities $7,270 $6,398

(1) Primarily consists of servicer receivables and other non-interest receivables.

END OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
Other Information

Freddie Mac Form 10-Q 124

Other Information

LEGAL PROCEEDINGS 

We are involved as a party to a variety of legal proceedings. For more information, see Note 16 in this Form 10-Q and our 2018 

Annual Report.

In addition, a number of lawsuits have been filed against the U.S. government related to the conservatorship and the Purchase 

Agreement. Some of these cases also have challenged the constitutionality of the structure of FHFA. For information on these 

lawsuits, see the Legal Proceedings section in our 2018 Annual Report. 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. On September 25, 2019, the plaintiffs filed a petition 

for writ of certiorari to the U.S. Supreme Court seeking review of the Fifth Circuit’s decision. On October 25, 2019, the 

defendants also filed a petition for writ of certiorari seeking review of the Fifth Circuit's decision. Freddie Mac is not a party to 

any of these lawsuits.

RISK FACTORS

This Form 10-Q should be read together with the Risk Factors section in our 2018 Annual Report and in our Form 10-Q for the 

quarter ended June 30, 2019, which describe various risks and uncertainties to which we are or may become subject. These 

risks and uncertainties could, directly or indirectly, adversely affect our business, financial condition, results of operations, cash 

flows, strategies, and/or prospects.

UNREGISTERED SALES OF EQUITY SECURITIES AND 

USE OF PROCEEDS

Recent Sales of Unregistered Securities

The securities we issue are "exempted securities" under the Securities Act of 1933, as amended. As a result, we do not file 

registration statements with the SEC with respect to offerings of our securities.

Following our entry into conservatorship, we suspended the operation of, and ceased making grants under, equity 

compensation plans. Previously, we had provided equity compensation under those plans to employees and members of the 

Board of Directors. Under the Purchase Agreement, we cannot issue any new options, rights to purchase, participations, or 

other equity interests without Treasury's prior approval. However, grants outstanding as of the date of the Purchase Agreement 

remain in effect in accordance with their terms.

Information About Certain Securities Issuances by Freddie Mac

We make available, free of charge through our website at www.freddiemac.com, our annual reports on 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 provide disclosure about our debt securities on our website at www.freddiemac.com/debt. From this address, investors 

can access the offering circular and related supplements for debt securities offerings under Freddie Mac's global debt facility, 

including pricing supplements for individual issuances of debt securities. Similar information about our STACR transactions and 

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

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

Certificates and SB Certificates), on our website at www.freddiemac.com/mbs. From this address, investors can access 

information and documents, including offering circulars and offering circular supplements, for mortgage-related securities 

offerings.

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

transactions volumes and details, redemption notices, Freddie Mac research, and material developments or other events that 
Other Information

Freddie Mac Form 10-Q 125

may be important to investors, in each case as applicable, on the websites for our business segments, which can be found at 

www.freddiemac.com/singlefamily, mf.freddiemac.com, and www.freddiemac.com/capital-markets.

OTHER INFORMATION

Executive Management Compensation Program For 2020

As discussed in our Current Report on Form 8-K filed on August 27, 2019, FHFA, acting as Conservator, directed Freddie Mac 

to make specified changes to our executive compensation program for so long as we are in conservatorship, including 

increasing the mandatory deferral period for at-risk deferred salary for named executive officers, other than our Chief Executive 

Officer, from one year to two years and limiting base salaries for all employees, including named executive officers, to 

$600,000. Our Chief Executive Officer does not receive deferred salary, and therefore his compensation was not affected by 

this change. We have revised our executive management compensation program accordingly.

EXHIBITS

The exhibits are listed in the Exhibit Index of this Form 10-Q.
Controls and Procedures

Freddie Mac Form 10-Q 126

Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND 

PROCEDURES

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information 

we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and 

reported within the time periods specified by the SEC's rules and forms and that such information is accumulated and 

communicated to management of the company, including the company's Chief Executive Officer and Chief Financial Officer, as 

appropriate, to allow timely decisions regarding required disclosure. In designing our disclosure controls and procedures, we 

recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable 

assurance of achieving the desired control objectives, and we must apply judgment in implementing possible controls and 

procedures.

Management, including the company's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the 

effectiveness of our disclosure controls and procedures as of September 30, 2019. As a result of management's evaluation, our 

Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as 

of September 30, 2019, at a reasonable level of assurance, because we have not been able to update our disclosure controls 

and procedures to provide reasonable assurance that information known by FHFA on an ongoing basis is communicated from 

FHFA to Freddie Mac's management in a manner that allows for timely decisions regarding our required disclosure under the 

federal securities laws. We consider this situation to be a material weakness in our internal control over financial reporting. 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL 

REPORTING DURING 3Q 2019

We evaluated the changes in our internal control over financial reporting that occurred during 3Q 2019 and concluded that 

there were no changes that materially affected, or are reasonably likely to materially affect, our internal control over financial 

reporting.

MITIGATING ACTIONS RELATED TO THE MATERIAL 

WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL 

REPORTING

As described above under Evaluation of Disclosure Controls and Procedures, we have one material weakness in 

internal control over financial reporting as of September 30, 2019 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:

FHFA has established the Division of Conservatorship, which is intended to facilitate operation of the company with the 

oversight of the Conservator.

We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also provide drafts 

of external press releases, statements, and certain speeches to FHFA personnel for their review and comment prior to 

release.

FHFA personnel, including senior officials, review our SEC filings prior to filing, including this Form 10-Q, and engage in 

discussions with us regarding issues associated with the information contained in those filings. Prior to filing this Form 10-

Q, FHFA provided us with a written acknowledgment that it had reviewed the Form 10-Q, was not aware of any material 

misstatements or omissions in the Form 10-Q, and had no objection to our filing the Form 10-Q.

The Director of FHFA is in frequent communication with our Chief Executive Officer, typically meeting (in person or by 

phone) on at least a bi-weekly basis.

FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of 

information and to provide oversight on a variety of matters, including accounting, credit and capital markets management, 

external communications, and legal matters.
Controls and Procedures

Freddie Mac Form 10-Q 127

Senior officials within FHFA's accounting group meet frequently with our senior financial executives regarding our 

accounting policies, practices, and procedures.

In view of our mitigating actions related to this material weakness, we believe that our condensed consolidated financial 

statements for 3Q 2019 have been prepared in conformity with GAAP.
Exhibit Index

Freddie Mac Form 10-Q 128

Exhibit Index

Exhibit Description*

4.1

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

10.1

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)

10.2 2020 Executive Management Compensation Program†

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

31.2 Certification of Executive Vice President —Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2 Certification of Executive Vice President —Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within

the Inline XBRL document

101.SCH XBRL Taxonomy Extension Schema

101. CAL XBRL Taxonomy Extension Calculation

101.DEF XBRL Taxonomy Extension Definition

101.LAB XBRL Taxonomy Label

101. PRE XBRL Taxonomy Extension Presentation

104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are

embedded within the Inline XBRL document

* The SEC file numbers for the 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.
Signatures

Freddie Mac Form 10-Q 129

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on 

its behalf by the undersigned thereunto duly authorized.

Federal Home Loan Mortgage Corporation

By: /s/ David M. Brickman

David M. Brickman

Chief Executive Officer

Date: October 30, 2019

By: /s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial Officer

(Principal Financial Officer)

Date: October 30, 2019
Form 10-Q Index

Freddie Mac Form 10-Q 130

Form 10-Q Index

Item Number Page(s)

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 5. Other Information

Item 6. Exhibits

Exhibit Index

Signatures

54 - 123

1 - 53

37 - 41

126 - 127

124

124

124

125

125

128

129
 EXHIBIT 4.1

 EXECUTION VERSION

FREDDIE MAC 

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) 

The Federal Housing Finance Agency, as Conservator of the Federal Home Loan Mortgage Corporation, a governmentsponsored enterprise of the United States of America (the “Company”), does hereby certify that, pursuant to authority vested in 

the Board of Directors of the Company by Section 306(f) of the Federal Home Loan Mortgage Corporation Act, and pursuant to 

the authority vested in the Conservator of the Company by Section 1367(b) of the Federal Housing Enterprises Financial Safety 

and Soundness Act of 1992 (12 U.S.C. §4617), as amended, the Conservator adopted Resolution FHLMC 2008-24 on 

September 7, 2008, which resolution is now, and at all times since such date has been, in full force and effect, and that the 

Conservator approved the final terms of the issuance and sale of the preferred stock of the Company designated above. 

As amended and restated, effective September 30, 2019, in accordance with the Letter Agreement dated September 27, 

2019, and the Third Amendment dated as of August 17, 2012, to the Amended and Restated Senior Preferred Stock Purchase 

Agreement dated as of September 26, 2008, the Senior Preferred Stock shall have the following designation, powers, 

preferences, rights, privileges, qualifications, limitations, restrictions, terms and conditions: 

1. Designation, Par Value, Number of Shares and Seniority 

The class of preferred stock of the Company created hereby (the “Senior Preferred Stock”) shall be designated “Variable 

Liquidation Preference Senior Preferred Stock,” shall have a par value of $1.00 per share and shall consist of 1,000,000 shares. 

The Senior Preferred Stock shall rank prior to the common stock of the Company as provided in this Certificate and shall rank, 

as to both dividends and distributions upon liquidation, prior to (a) the Fixed-to-Floating Rate Non-Cumulative Perpetual 

Preferred Stock issued on December 4, 2007, (b) the 6.55% Non-Cumulative Preferred Stock issued on September 28, 2007, 

(c) the 6.02% Non-Cumulative Preferred Stock issued on July 24, 2007, (d) the 5.66% Non-Cumulative Preferred Stock issued 

on April 16, 2007, (e) the 5.57% Non-Cumulative Preferred Stock issued on January 16, 2007, (f) the 5.9% Non-Cumulative 

Preferred Stock issued on October 16, 2006, (g) the 6.42% Non-Cumulative Preferred Stock issued on July 17, 2006, (h) the 

Variable Rate, Non-Cumulative Preferred Stock issued on July 17, 2006, (i) the 5.81% Non-Cumulative Preferred Stock issued 

on January 29, 2002, (j) the 5.7% Non-Cumulative Preferred Stock issued on October 30, 2001, (k) the 6% Non-Cumulative 

Preferred Stock issued on May 30, 2001, (l) the Variable Rate, Non-Cumulative Preferred Stock issued on May 30, 2001 and 

June 1, 2001, (m) the 5.81% Non-Cumulative Preferred Stock issued on March 23, 2001, (n) the Variable Rate, Non-Cumulative 

Preferred Stock issued on March 23, 2001, (o) the Variable Rate, Non-Cumulative Preferred Stock issued on January 26, 2001, 

(p) the Variable Rate, Non-Cumulative Preferred Stock issued on November 5, 1999, (q) the 5.79% Non-Cumulative Preferred 

Stock issued on July 21, 1999, (r) the 5.1% Non-Cumulative Preferred Stock issued on March 19, 1999, (s) the 5.3% NonCumulative Preferred Stock issued on October 28, 1998, (t) the 5.1% Non-Cumulative Preferred Stock issued on 

September 23, 1998, (u) the Variable Rate, Non-Cumulative Preferred Stock issued on September 23, 1998 and September 29, 

1998, (v) the 5% Non-Cumulative Preferred Stock issued on March 23, 1998, (w) the 5.81% Non-Cumulative Preferred Stock 

issued on October 27, 1997, (x) the Variable Rate, Non-Cumulative Preferred Stock issued on April 26, 1996, (y) any other 

capital stock of the Company outstanding on the date of the initial issuance of the Senior Preferred Stock, and (z) any capital 

stock of the Company that may be issued after the date of initial issuance of the Senior Preferred Stock. 

2. Dividends 

(a) For each Dividend Period from the date of the initial issuance of the Senior Preferred Stock through and including 

December 31, 2012, holders of outstanding shares of Senior Preferred Stock shall be entitled to receive, ratably, when, as and 

if declared by the Board of Directors, in its sole discretion, out of funds legally available therefor, cumulative cash dividends at 

the annual rate per share equal to the then-current Dividend Rate on the then-current Liquidation Preference. For each Dividend 

Period from January 1, 2013, holders of outstanding shares of Senior Preferred Stock shall be entitled to receive, ratably, when, 

as and if declared by the Board of Directors, in its sole discretion, out of funds legally available therefor, cumulative cash 

dividends in an amount equal to the then-current Dividend Amount. Dividends on the Senior Preferred Stock shall accrue from 

but not including the date of the initial issuance of the Senior Preferred Stock and will be payable in arrears when, as and if 

declared by the Board of Directors quarterly on March 31, June 30, September 30 and December 31 of each year (each, a 

“Dividend Payment Date”), commencing on December 31, 2008. If a Dividend Payment Date is not a “Business Day,” the 

related dividend will be paid not later than the next Business Day with the same force and effect as though paid on the 

Dividend Payment Date, without any increase to account for the period from such Dividend Payment Date through the date of 

actual payment. “Business Day” means a day other than (i) a Saturday or Sunday, (ii) a day on which New York City banks are 

closed, or (iii) a day on which the offices of the Company are closed. 
If declared, the initial dividend will be for the period from but not including the date of the initial issuance of the Senior 

Preferred Stock through and including December 31, 2008. Except for the initial Dividend Payment Date, the “Dividend Period” 

relating to a Dividend Payment Date will be the period from but not including the preceding Dividend Payment Date through 

and including the related Dividend Payment Date. For each Dividend Period from the date of the initial issuance of the Senior 

Preferred Stock through and including December 31, 2012, the amount of dividends payable on the initial Dividend Payment 

Date or for any Dividend Period through and including December 31, 2012, that is not a full calendar quarter shall be computed 

on the basis of 30-day months, a 360-day year and the actual number of days elapsed in any period of less than one month. 

For the avoidance of doubt, for each Dividend Period from the date of the initial issuance of the Senior Preferred Stock through 

and including December 31, 2012, in the event that the Liquidation Preference changes in the middle of a Dividend Period, the 

amount of dividends payable on the Dividend Payment Date at the end of such Dividend Period shall take into account such 

change in Liquidation Preference and shall be computed at the Dividend Rate on each Liquidation Preference based on the 

portion of the Dividend Period that each Liquidation Preference was in effect. 

(b) To the extent not paid pursuant to Section 2(a) above, dividends on the Senior Preferred Stock shall accrue and shall 

be added to the Liquidation Preference pursuant to Section 8, whether or not there are funds legally available for the payment 

of such dividends and whether or not dividends are declared. 

(c) For each Dividend Period from the date of the initial issuance of the Senior Preferred Stock through and including 

December 31, 2012, “Dividend Rate” means 10.0 percent; provided, however, that if at any time the Company shall have for 

any reason failed to pay dividends in cash in a timely manner as required by this Certificate, then immediately following such 

failure and for all Dividend Periods thereafter until the Dividend Period following the date on which the Company shall have paid 

in cash full cumulative dividends (including any unpaid dividends added to the Liquidation Preference pursuant to Section 8), 

the “Dividend Rate” shall mean 12.0 percent. 

For each Dividend Period from January 1, 2013, and thereafter, the “Dividend Amount” for a Dividend Period means the 

amount, if any, by which the Net Worth Amount at the end of the immediately preceding fiscal quarter, less the Applicable 

Capital Reserve Amount for such Dividend Period, exceeds zero. In each case, “Net Worth Amount” means (i) the total assets 

of the Company (such assets excluding the Commitment and any unfunded amounts thereof) as reflected on the balance sheet 

of the Company as of the applicable date set forth in this Certificate, prepared in accordance with GAAP, less (ii) the total 

liabilities of the Company (such liabilities excluding any obligation in respect of any capital stock of the Company, including this 

Certificate), as reflected on the balance sheet of the Company as of the applicable date set forth in this Certificate, prepared in 

accordance with GAAP. “Applicable Capital Reserve Amount” means, as of any date of determination, (A) for each Dividend 

Period from January 1, 2013, through and including December 31, 2013, $3,000,000,000; (B) for each Dividend Period 

occurring within each 12-month period thereafter, through and including December 31, 2017, $3,000,000,000 reduced by 

$600,000,000 for each such 12-month period, so that for each Dividend Period from January 1, 2017, through and including 

December 31, 2017, the Applicable Capital Reserve Amount shall be $600,000,000; (C) for each Dividend Period from 

January 1, 2018, through and including June 30, 2019, $3,000,000,000; and (D) for each Dividend Period from July 1, 2019, and 

thereafter, $20,000,000,000. Notwithstanding the foregoing, for each Dividend Period from January 1, 2018, and thereafter, 

following any Dividend Payment Date with respect to which the Board of Directors does not declare and pay a dividend or 

declares and pays a dividend in an amount less than the Dividend Amount, the Applicable Capital Reserve Amount shall 

thereafter be zero. For the avoidance of doubt, if the calculation of the Dividend Amount for a Dividend Period does not exceed 

zero, then no Dividend Amount shall accrue or be payable for such Dividend Period. 

(d) Each such dividend shall be paid to the holders of record of outstanding shares of the Senior Preferred Stock as they 

appear in the books and records of the Company on such record date as shall be fixed in advance by the Board of Directors, 

not to be earlier than 45 days nor later than 10 days preceding the applicable Dividend Payment Date. The Company may not, 

at any time, declare or pay dividends on, make distributions with respect to, or 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 

(i) full cumulative dividends on the outstanding Senior Preferred Stock in respect of the then-current Dividend Period and all 

past Dividend Periods (including any unpaid dividends added to the Liquidation Preference pursuant to Section 8) have been 

declared and paid in cash (including through any pay down of Liquidation Preference pursuant to Section 3) and (ii) all amounts 

required to be paid pursuant to Section 4 (without giving effect to any prohibition on such payment under any applicable law) 

have been paid in cash. 

(e) Notwithstanding any other provision of this Certificate, the Board of Directors, in its discretion, may choose to pay 

dividends on the Senior Preferred Stock without the payment of any dividends on the common stock, preferred stock or any 

other class or series of stock from time to time outstanding ranking junior to the Senior Preferred Stock with respect to the 

payment of dividends. 

(f) If and whenever dividends, having been declared, shall not have been paid in full, as aforesaid, on shares of the 

Senior Preferred Stock, all such dividends that have been declared on shares of the Senior Preferred Stock shall be paid to the 

holders pro rata based on the aggregate Liquidation Preference of the shares of Senior Preferred Stock held by each holder, 

and any amounts due but not paid in cash shall be added to the Liquidation Preference pursuant to Section 8. 
3. Optional Pay Down of Liquidation Preference 

(a) Following termination of the Commitment (as defined in the Preferred Stock Purchase Agreement referred to in 

Section 8 below), and subject to any limitations which may be imposed by law and the provisions below, the Company may 

pay down the Liquidation Preference of all outstanding shares of the Senior Preferred Stock pro rata, at any time, in whole or in 

part, out of funds legally available therefor, with such payment first being used to reduce any accrued and unpaid dividends 

previously added to the Liquidation Preference pursuant to Section 8 below and, to the extent all such accrued and unpaid 

dividends have been paid, next being used to reduce any Periodic Commitment Fees (as defined in the Preferred Stock 

Purchase Agreement referred to in Section 8 below) previously added to the Liquidation Preference pursuant to Section 8 

below. Prior to termination of the Commitment, and subject to any limitations which may be imposed by law and the provisions 

below, the Company may pay down the Liquidation Preference of all outstanding shares of the Senior Preferred Stock pro rata, 

at any time, out of funds legally available therefor, but only to the extent of (i) accrued and unpaid dividends previously added 

to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference and 

(ii) Periodic Commitment Fees previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by 

any prior pay down of Liquidation Preference. Any pay down of Liquidation Preference permitted by this Section 3 shall be paid 

by making a payment in cash to the holders of record of outstanding shares of the Senior Preferred Stock as they appear in the 

books and records of the Company on such record date as shall be fixed in advance by the Board of Directors, not to be earlier 

than 45 days nor later than 10 days preceding the date fixed for the payment. 

(b) In the event the Company shall pay down of the Liquidation Preference of the Senior Preferred Stock as aforesaid, 

notice of such pay down shall be given by the Company by first class mail, postage prepaid, mailed neither less than 10 nor 

more than 45 days preceding the date fixed for the payment, to each holder of record of the shares of the Senior Preferred 

Stock, at such holder’s address as the same appears in the books and records of the Company. Each such notice shall state 

the amount by which the Liquidation Preference of each share shall be reduced and the pay down date. 

(c) If after termination of the Commitment the Company pays down the Liquidation Preference of each outstanding share 

of Senior Preferred Stock in full, such shares shall be deemed to have been redeemed as of the date of such payment, and the 

dividend that would otherwise be payable for the Dividend Period ending on the pay down date will be paid on such date. 

Following such deemed redemption, the shares of the Senior Preferred Stock shall no longer be deemed to be outstanding, and 

all rights of the holders thereof as holders of the Senior Preferred Stock shall cease, with respect to shares so redeemed, other 

than the right to receive the pay down amount (which shall include the final dividend for such shares). Any shares of the Senior 

Preferred Stock which shall have been so redeemed, after such redemption, shall no longer have the status of authorized, 

issued or outstanding shares. 

4. Mandatory Pay Down of Liquidation Preference Upon Issuance of Capital Stock 

(a) If the Company shall issue any shares of capital stock (including without limitation common stock or any series of 

preferred stock) in exchange for cash at any time while the Senior Preferred Stock is outstanding, then the Company shall, 

within 10 Business Days, use the proceeds of such issuance net of the direct costs relating to the issuance of such securities 

(including, without limitation, legal, accounting and investment banking fees) to pay down the Liquidation Preference of all 

outstanding shares of Senior Preferred Stock pro rata, out of funds legally available therefor, by making a payment in cash to 

the holders of record of outstanding shares of the Senior Preferred Stock as they appear in the books and records of the 

Company on such record date as shall be fixed in advance by the Board of Directors, not to be earlier than 45 days nor later 

than 10 days preceding the date fixed for the payment, with such payment first being used to reduce any accrued and unpaid 

dividends previously added to the Liquidation Preference pursuant to Section 8 below and, to the extent all such accrued and 

unpaid dividends have been paid, next being used to reduce any Periodic Commitment Fees (as defined in the Preferred Stock 

Purchase Agreement referred to in Section 8 below) previously added to the Liquidation Preference pursuant to Section 8 

below; provided that, prior to the termination of the Commitment (as defined in the Preferred Stock Purchase Agreement 

referred to in Section 8 below), the Liquidation Preference of each share of Senior Preferred Stock shall not be paid down below 

$1,000 per share. 

(b) If the Company shall not have sufficient assets legally available for the pay down of the Liquidation Preference of the 

shares of Senior Preferred Stock required under Section 4(a), the Company shall pay down the Liquidation Preference per share 

to the extent permitted by law, and shall pay down any Liquidation Preference not so paid down because of the unavailability of 

legally available assets or other prohibition as soon as practicable to the extent it is thereafter able to make such pay down 

legally. The inability of the Company to make such payment for any reason shall not relieve the Company from its obligation to 

effect any required pay down of the Liquidation Preference when, as and if permitted by law. 

(c) If after the termination of the Commitment the Company pays down the Liquidation Preference of each outstanding 

share of Senior Preferred Stock in full, such shares shall be deemed to have been redeemed as of the date of such payment, 

and the dividend that would otherwise be payable for the Dividend Period ending on the pay down date will be paid on such 

date. Following such deemed redemption, the shares of the Senior Preferred Stock shall no longer be deemed to be 

outstanding, and all rights of the holders thereof as holders of the Senior Preferred Stock shall cease, with respect to shares so 

redeemed, other than the right to receive the pay down amount (which shall include the final dividend for such redeemed 

shares). Any shares of the Senior Preferred Stock which shall have been so redeemed, after such redemption, shall no longer 

have the status of authorized, issued or outstanding shares. 
5. No Voting Rights 

Except as set forth in this Certificate or otherwise required by law, the shares of the Senior Preferred Stock shall not have 

any voting powers, either general or special. 

6. No Conversion or Exchange Rights 

The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such 

shares for any other class or series of stock or obligations of the Company. 

7. No Preemptive Rights 

No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any 

other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale 

by the Company. 

8. Liquidation Rights and Preference 

(a) Except as otherwise set forth herein, upon the voluntary or involuntary dissolution, liquidation or winding up of the 

Company, the holders of the outstanding shares of the Senior Preferred Stock shall be entitled to receive out of the assets of 

the Company available for distribution to stockholders, before any payment or distribution shall be made on the common stock 

or any other class or series of stock of the Company ranking junior to the Senior Preferred Stock upon liquidation, the amount 

per share equal to the Liquidation Preference plus an amount, determined in accordance with Section 2(a) above, equal to the 

dividend otherwise payable for the then-current Dividend Period accrued through and including the date of payment in respect 

of such dissolution, liquidation or winding up; provided, however, that if the assets of the Company available for distribution to 

stockholders shall be insufficient for the payment of the amount which the holders of the outstanding shares of the Senior 

Preferred Stock shall be entitled to receive upon such dissolution, liquidation or winding up of the Company as aforesaid, then, 

all of the assets of the Company available for distribution to stockholders shall be distributed to the holders of outstanding 

shares of the Senior Preferred Stock pro rata based on the aggregate Liquidation Preference of the shares of Senior Preferred 

Stock held by each holder. 

(b) “Liquidation Preference” shall initially mean $1,000 per share and shall be: 

(i) increased each time a Deficiency Amount (as defined in the Preferred Stock Purchase Agreement) is paid to the 

Company by an amount per share equal to the aggregate amount so paid to the Company divided by the number of 

shares of Senior Preferred Stock outstanding at the time of such payment; 

(ii) increased each time the Company does not pay the full Periodic Commitment Fee (as defined in the Preferred 

Stock Purchase Agreement) in cash by an amount per share equal to the amount of the Periodic Commitment Fee that is 

not paid in cash divided by the number of shares of Senior Preferred Stock outstanding at the time such payment is due; 

(iii) increased on the Dividend Payment Date if the Company fails to pay in full the dividend payable for the 

Dividend Period ending on such date by an amount per share equal to the aggregate amount of unpaid dividends divided 

by the number of shares of Senior Preferred Stock outstanding on such date; and 

(iv) decreased each time the Company pays down the Liquidation Preference pursuant to Section 3 or Section 4 of 

this Certificate by an amount per share equal to the aggregate amount of the pay down divided by the number of shares 

of Senior Preferred Stock outstanding at the time of such pay down. 

(c) “Preferred Stock Purchase Agreement” means the Preferred Stock Purchase Agreement, dated September 7, 2008, 

between the Company and the United States Department of the Treasury. 

(d) Neither the sale of all or substantially all of the property or business of the Company, nor the merger, consolidation or 

combination of the Company into or with any other corporation or entity, shall be deemed to be a dissolution, liquidation or 

winding up for the purpose of this Section 8. 

9. Additional Classes or Series of Stock 

The Board of Directors shall have the right at any time in the future to authorize, create and issue, by resolution or 

resolutions, one or more additional classes or series of stock of the Company, and to determine and fix the distinguishing 

characteristics and the relative rights, preferences, privileges and other terms of the shares thereof; provided that, any such 

class or series of stock may not rank prior to or on parity with the Senior Preferred Stock without the prior written consent of 

the holders of at least two-thirds of all the shares of Senior Preferred Stock at the time outstanding. 

10. Miscellaneous 

(a) The Company and any agent of the Company may deem and treat the holder of a share or shares of Senior Preferred 

Stock, as shown in the Company’s books and records, as the absolute owner of such share or shares of Senior Preferred Stock 

for the purpose of receiving payment of dividends in respect of such share or shares of Senior Preferred Stock and for all other 

purposes whatsoever, and neither the Company nor any agent of the Company shall be affected by any notice to the contrary. 

All payments made to or upon the order of any such person shall be valid and, to the extent of the sum or sums so paid, 
effectual to satisfy and discharge liabilities for moneys payable by the Company on or with respect to any such share or shares 

of Senior Preferred Stock. 

 (b) The shares of the Senior Preferred Stock, when duly issued, shall be fully paid and non-assessable. 

(c) The Senior Preferred Stock may be issued, and shall be transferable on the books of the Company, only in whole 

shares. 

(d) For purposes of this Certificate, the term “the Company” means the Federal Home Loan Mortgage Corporation and 

any successor thereto by operation of law or by reason of a merger, consolidation, combination or similar transaction. 

(e) This Certificate and the respective rights and obligations of the Company and the holders of the Senior Preferred 

Stock with respect to such Senior Preferred Stock shall be construed in accordance with and governed by the laws of the 

United States, provided that the law of the Commonwealth of Virginia shall serve as the federal rule of decision in all instances 

except where such law is inconsistent with the Company’s enabling legislation, its public purposes or any provision of this 

Certificate. 

(f) Any notice, demand or other communication which by any provision of this Certificate is required or permitted to be 

given or served to or upon the Company shall be given or served in writing addressed (unless and until another address shall 

be published by the Company) to Freddie Mac, 8200 Jones Branch Drive, McLean, Virginia 22102, Attn: Executive Vice 

President and General Counsel. Such notice, demand or other communication to or upon the Company shall be deemed to 

have been sufficiently given or made only upon actual receipt of a writing by the Company. Any notice, demand or other 

communication which by any provision of this Certificate is required or permitted to be given or served by the Company 

hereunder may be given or served by being deposited first class, postage prepaid, in the United States mail addressed (i) to the 

holder as such holder’s name and address may appear at such time in the books and records of the Company or (ii) if to a 

person or entity other than a holder of record of the Senior Preferred Stock, to such person or entity at such address as 

reasonably appears to the Company to be appropriate at such time. Such notice, demand or other communication shall be 

deemed to have been sufficiently given or made, for all purposes, upon mailing. 

(g) The Company, by or under the authority of the Board of Directors, may amend, alter, supplement or repeal any 

provision of this Certificate pursuant to the following terms and conditions: 

(i) Without the consent of the holders of the Senior Preferred Stock, the Company may amend, alter, supplement or 

repeal any provision of this Certificate to cure any ambiguity, to correct or supplement any provision herein which may be 

defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or 

questions arising under this Certificate, provided that such action shall not adversely affect the interests of the holders of 

the Senior Preferred Stock. 

(ii) The consent of the holders of at least two-thirds of all of the shares of the Senior Preferred Stock at the time 

outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the 

holders of shares of the Senior Preferred Stock shall vote together as a class, shall be necessary for authorizing, effecting 

or validating the amendment, alteration, supplementation or repeal (whether by merger, consolidation or otherwise) of the 

provisions of this Certificate other than as set forth in subparagraph (i) of this paragraph (g). The creation and issuance of 

any other class or series of stock, or the issuance of additional shares of any existing class or series of stock, of the 

Company ranking junior to the Senior Preferred Stock shall not be deemed to constitute such an amendment, alteration, 

supplementation or repeal. 

(iii) Holders of the Senior Preferred Stock shall be entitled to one vote per share on matters on which their consent 

is required pursuant to subparagraph (ii) of this paragraph (g). In connection with any meeting of such holders, the Board 

of Directors shall fix a record date, neither earlier than 60 days nor later than 10 days prior to the date of such meeting, 

and holders of record of shares of the Senior Preferred Stock on such record date shall be entitled to notice of and to 

vote at any such meeting and any adjournment. The Board of Directors, or such person or persons as it may designate, 

may establish reasonable rules and procedures as to the solicitation of the consent of holders of the Senior Preferred 

Stock at any such meeting or otherwise, which rules and procedures shall conform to the requirements of any national 

securities exchange on which the Senior Preferred Stock may be listed at such time. 

(h) RECEIPT AND ACCEPTANCE OF A SHARE OR SHARES OF THE SENIOR PREFERRED STOCK BY OR ON 

BEHALF OF A HOLDER SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER (AND ALL 

OTHERS HAVING BENEFICIAL OWNERSHIP OF SUCH SHARE OR SHARES) OF ALL OF THE TERMS AND PROVISIONS 

OF THIS CERTIFICATE. NO SIGNATURE OR OTHER FURTHER MANIFESTATION OF ASSENT TO THE TERMS AND 

PROVISIONS OF THIS CERTIFICATE SHALL BE NECESSARY FOR ITS OPERATION OR EFFECT AS BETWEEN THE 

COMPANY AND THE HOLDER (AND ALL SUCH OTHERS). 
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the Company this 30th day of September, 2019. 

[Seal] 

FEDERAL HOME LOAN MORTGAGE CORPORATION,

 by

The Federal Housing Finance Agency, its Conservator

By: /s/ Mark A. Calabria

Mark A. Calabria

Director
Exhibit 10.2

2020 EXECUTIVE MANAGEMENT COMPENSATION PROGRAM (“2020 EMCP”)

Program Document

Effective January 1, 2020

Covered

Positions

A “Covered Officer” is any Freddie Mac1 officer at the Senior Vice President (“SVP”) level and above other 

than the Chief Executive Officer (“CEO”).

Covered

Position

Participation

Requirement

Participation in the 2020 EMCP is conditioned on the Covered Officer’s agreement to the terms and 

conditions set forth herein and in the EMCP Recapture and Forfeiture Agreement (“Recapture 

Agreement”). A Covered Officer who does not agree to the terms of both the 2020 EMCP and the 

Recapture Agreement will receive only Base Salary. The terms and conditions set forth in the Recapture 

Agreement are incorporated in and made a part of this 2020 EMCP.

Target Total 

Direct 

Compensation2

A Covered Officer’s target total direct compensation (“Target TDC”) is the sum of Base Salary and

Deferred Salary, each of which is paid in cash.

Base Salary Base Salary is earned and paid on the company’s standard payroll cycle and cannot exceed $600,000

without Federal Housing Finance Agency (“FHFA”) approval.

Deferred

Salary

The portion of Target TDC not paid in Base Salary is Deferred Salary, which is earned on the company’s 

standard payroll cycle. The amount earned in each quarter, plus interest earned on that amount as 

described below under “Interest on Deferred Salary,” will be paid in cash according to the “Approved 

Payment Schedule”. Deferred Salary consists of the following two elements:

At-Risk Deferred Salary - At-Risk Deferred Salary shall be equal to 30% of the Covered Officer’s 

Target TDC. The amount of At-Risk Deferred Salary earned in a calendar year is subject to reduction 

based on corporate and individual performance as follows:

• One-half of At-Risk Deferred Salary (or 15% of Target TDC) is subject to reduction based on an 

assessment by FHFA of performance against Conservatorship Scorecard objectives relevant 

for the calendar year in which the At-Risk Deferred Salary is earned.3 The reduction can range 

from 0% (no reduction) to 100% (the maximum reduction).

• One-half of At-Risk Deferred Salary (or 15% of Target TDC) is subject to reduction based on 

the Covered Officer’s performance against individual objectives and an assessment of the 

company’s performance against Corporate Scorecard objectives, each relevant to the calendar 

year in which the At-Risk Deferred Salary is earned. The total reduction can range from 0% (no 

reduction) to 100% (the maximum reduction).

A Covered Officer’s performance during the calendar year will be assessed by the CEO, in his/

her sole discretion, pursuant to the performance assessment and reduction process in effect 

for such year.

 ________________________

1 For purposes of this Program Document, Freddie Mac refers to the Federal Home Loan Mortgage Corporation and any of its wholly-owned 

subsidiaries.

2 Initially expressed as an annual rate. Amount will be prorated, as appropriate, to reflect date of hire, promotion into a Covered Position, date 

of termination, or other adjustment to Target TDC.

3 For the Covered Officer leading the Internal Audit function, the reduction will be based on the appropriate Board committee's and FHFA's 

assessment of performance against the Internal Audit Scorecard objectives.
Deferred

Salary

(continued) At-Risk Deferred Salary payments for Covered Officers are subject to review and approval by the 

Committee and FHFA, as appropriate.

Fixed Deferred Salary - Fixed Deferred Salary shall be equal to the Covered Officer’s Target TDC less 

Base Salary and less At-Risk Deferred Salary and is not subject to reduction based on either 

corporate or individual performance.

Payment of both At-Risk and Fixed Deferred Salary is also subject, if applicable, to the “Treatment Upon 

Termination” provisions set forth below.

Deferred

Salary

Approved

Payment

Schedule

At-Risk Deferred Salary - For Covered Officers hired after December 31, 2019, At-Risk Deferred Salary 

earned in each quarter will be paid on the last regular pay date in the corresponding quarter of the 

second calendar year following the quarter in which it was earned. 

For Covered Officers hired prior to December 31, 2019, At-Risk Deferred Salary earned in each quarter 

prior to January 1, 2022, will be paid on the last regular pay date in the corresponding quarter of the 

following calendar year. At-Risk Deferred Salary earned in each quarter after January 1, 2022, will be paid 

on the last regular pay date in the corresponding quarter of the second calendar year following the 

quarter in which it was earned.

Fixed Deferred Salary - Fixed Deferred Salary earned in each quarter will be paid on the last regular pay 

date within the corresponding quarter of the following calendar year.

Interest on

Deferred

Salary

Interest will be credited on the amount of a Covered Officer’s At-Risk and Fixed Deferred Salary earned 

during each calendar quarter. The interest rate used is one-half the one-year Treasury Bill rate in effect on 

the last business day immediately preceding the year in which Deferred Salary is earned. The amount on 

which interest is accrued will take into account any reduction for corporate and/or individual performance 

applicable to a Covered Officer’s At-Risk Deferred Salary and any reduction applicable to a Covered 

Officer’s Fixed Deferred Salary resulting from certain terminations of employment as described in 

“Treatment Upon Termination: Fixed Deferred Salary.” Interest is earned from the first day of the calendar 

quarter following the quarter during which the Deferred Salary is earned through the payment date under 

the Approved Payment Schedule or, in the event of death, the actual payment date.

The amount of interest payable with respect to a Covered Officer’s Deferred Salary will be determined as 

of the payment date and will be paid at the same time as the Deferred Salary to which it relates. If 

Deferred Salary is forfeited or recaptured for any of the reasons described in the Recapture Agreement, 

the related interest will also be forfeited or recaptured.

Impact on

Retirement,

Executive, and

Welfare Plans

The treatment of Base Salary and Deferred Salary as compensation for purposes of Freddie Mac’s 

retirement and welfare benefit plans is governed by the actual terms of those plans. The table below 

summarizes whether the Base Salary and Deferred Salary a Covered Officer receives while an active

employee are treated as compensation for purposes of the following Freddie Mac retirement and welfare 

benefit plans. Freddie Mac retains the right to amend, revise or discontinue any of the retirement and 

welfare benefit plans and the terms of each plan will prevail in the event that there is any conflict between 

those terms and the table below.
Impact on Retirement,

Executive, and Welfare

Plans (continued) Freddie Mac's Retirement and Welfare

Benefit Plans

Base Salary

Considered

Compensation?

Deferred Salary Considered

Compensation?

Tax-Qualified Thrift/401(k) Yes Yes

Non-Qualified Thrift/401(k) Supplemental 

Executive Retirement Plan (SERP)4 Yes Yes

Group Term Life Insurance Yes No

Group Universal Life Insurance Yes No

Long-Term Disability Plan Yes No

Accidental Death and Personal Loss

Insurance

Yes No

Business Travel Accident Insurance Yes No

Worker’s Compensation Yes No

Purchase/Payout of Vacation Yes No

Interest earned on Deferred Salary, as well as any Base Salary or Deferred Salary a Covered

Officer receives after termination of employment are not treated as compensation for purposes

of any Freddie Mac retirement or welfare benefit plan.

Treatment Upon 

Termination:

Base Salary

Base Salary will cease upon termination of employment, regardless of the reason for such

termination.

____________________________

4 Compensation for purposes of the Non-Qualified Thrift/401(k) SERP may not exceed two times a Covered Officer’s Base Salary.
Treatment Upon 

Termination:

At-Risk Deferred Salary

The timing and payment of any unpaid portion of At-Risk Deferred Salary is based on the 

reason for termination of employment, as follows:

• Forfeiture Event - All earned but unpaid At-Risk Deferred Salary and related interest is 

subject to forfeiture if a Covered Officer is terminated due to the occurrence of an event or 

conduct described in the Recapture Agreement;

• Death - All earned but unpaid At-Risk Deferred Salary and related interest is paid as soon 

as administratively possible, but not later than 90 calendar days after the date of death, 

subject to the terms and conditions of the Recapture Agreement; and 

• Any Other Reason5 - All earned but unpaid At-Risk Deferred Salary and related interest is 

paid in accordance with the Approved Payment Schedule, subject to the terms and 

conditions of the Recapture Agreement.

Payment of earned but unpaid At-Risk Deferred Salary and related interest following a 

termination of employment shall be subject to the performance assessment and reduction 

process. The performance assessment and reduction process for At-Risk Deferred Salary is 

waived, however, in cases of death or Long-Term Disability (as defined in the Long-Term 

Disability Plan in effect on the date of termination) if the process is not complete as of the 

termination date.

Treatment Upon 

Termination:

Fixed Deferred Salary 

The timing and payment of any unpaid portion of Fixed Deferred Salary is based on the reason 

for termination of employment, as follows: 

• Forfeiture Event - All earned but unpaid Fixed Deferred Salary and related interest is 

subject to forfeiture if a Covered Officer is terminated due to the occurrence of an event or 

conduct described in the Recapture Agreement; 

• Death - All earned but unpaid Fixed Deferred Salary and related interest is paid in full as 

soon as administratively possible, but not later than 90 calendar days after the date of 

death, subject to the terms and conditions of the Recapture Agreement; and 

• Any Other Reason5 - All earned but unpaid Fixed Deferred Salary and related interest is 

paid in accordance with the Approved Payment Schedule, subject to the terms and 

conditions of the Recapture Agreement.

A Covered Officer’s earned but unpaid Fixed Deferred Salary will be reduced by 2% for each 

full or partial month by which the termination precedes January 31 of the second calendar year 

following the calendar year in which the Fixed Deferred Salary is earned. 

This reduction will not be applied in cases of death, Long-Term Disability, a severance-eligible 

termination, as defined in the severance plan applicable to Covered Officers who are not 

executive officers, or retirement. A Covered Officer is considered to have retired when s/he 

voluntarily terminates employment after attaining or exceeding 62 years of age, regardless of 

length of service, or attaining or exceeding 55 years of age with 10 or more years of continuous 

service.

_______________________

5 Any Other Reason includes, but is not limited to, voluntary terminations, retirement, Long-Term Disability, and involuntary termination for any 

reason other than a Forfeiture Event.
Reservation of

Rights and

Applicable Law

Each Covered Officer’s employment with Freddie Mac is “at-will,” meaning that either the Covered Officer 

or Freddie Mac may terminate such employment at any time with or without cause or notice. Nothing in 

this Program Document or any other document referred to or incorporated by reference herein shall be 

held or construed to change the at-will nature of any Covered Officer’s employment with Freddie Mac.

Nothing in this Program Document is intended or shall be construed to abrogate FHFA’s authority to 

either: (i) modify or terminate any compensation plan or program (including the 2020 EMCP); or (ii) 

disapprove the actual payment of any form of compensation to be paid pursuant to the 2020 EMCP.

FHFA retains the right to modify any of the terms and conditions of your employment, including the right 

to modify or rescind the terms and conditions of the 2020 EMCP as well as the actual payment of 

compensation to you pursuant thereto, without giving rise to liability on the part of Freddie Mac.

The 2020 EMCP is subject to and shall be construed in accordance with: (i) any applicable law and any 

applicable regulation, guidance or interpretation of FHFA and/or the United States Department of the 

Treasury; and (ii) the substantive laws of the Commonwealth of Virginia, excluding provisions of the 

Virginia law concerning choice-of-law that would result in the law of any state other than Virginia being 

applied.

Payment of Deferred Salary under the 2020 EMCP is intended to comply with the requirements of Section 

409A of the Internal Revenue Code of 1986 (“Section 409A”), as amended, and, specifically, with the 

separation pay exemption and short-term deferral exemption of Section 409A, and shall in all respects be 

construed, interpreted, and administered in accordance with Section 409A. Notwithstanding anything in 

the 2020 EMCP to the contrary, payments may only be made pursuant to the 2020 EMCP upon an event 

and in a manner permitted by Section 409A or an applicable exemption. All payments to be made upon a 

termination of employment under this Program Document may only be made upon a “separation from 

service” under section 409A. If a Covered Officer is a “specified employee” (within the meaning of 

Section 409A(a)(2)(B)(i)) at the time of a separation from service, payments scheduled to be made during 

the six months following the separation from service shall, to the extent required by Section 409A, be 

deferred to and payable on the first day of the seventh month following the separation from service.

This 2020 EMCP will be in effect for 2020 and subsequent years unless and until amended or superseded. By signing below, I 

acknowledge that I understand and voluntarily agree to the terms of this 2020 EMCP:

___________________________________________ _____________________

Covered Officer’s Signature Date

___________________________________________

Printed Name

___________________________________________

Title
Exhibit 31.1

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, David M. Brickman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 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: October 30, 2019

/s/ David M. Brickman

David M. Brickman

Chief Executive Officer
Exhibit 31.2

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, James G. Mackey, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 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: October 30, 2019

/s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial Officer
Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of the Federal Home Loan 

Mortgage Corporation (the "Company"), as filed with the Securities and Exchange Commission on the date hereof (the 

"Report"), I, David M. Brickman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 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: October 30, 2019

/s/ David M. Brickman

David M. Brickman

Chief Executive Officer
Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of the Federal Home Loan 

Mortgage Corporation (the "Company"), as filed with the Securities and Exchange Commission on the date hereof (the 

"Report"), I, James G. Mackey, Executive Vice President – Chief Financial Officer of the Company, certify, pursuant to 18 

U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 30, 2019

/s/ James G. Mackey

James G. Mackey

Executive Vice President — Chief Financial Officer