FEDERAL HOME LOAN MORTGAGE CORP [FMCKL] Filings

10-Q 1 fmcc-20230331.htm 10-Q fmcc-20230331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


☐			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 April 11, 2023, there were 650,059,553 shares of the registrant's common stock outstanding.


Table of Contents

Table of Contents


			Page
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			1
n Introduction			1
n Housing and Mortgage Market Conditions			4
n Consolidated Results of Operations			6
n Consolidated Balance Sheets Analysis			9
n Our Portfolios			10
n Our Business Segments			12
n Risk Management			22
l Credit Risk			22
l Market Risk			29
n Liquidity and Capital Resources			32
n Critical Accounting Estimates			39

n Regulation and Supervision			40
n Forward-Looking Statements			42
FINANCIAL STATEMENTS			44
OTHER INFORMATION			90
CONTROLS AND PROCEDURES			92
EXHIBIT INDEX			93
SIGNATURES			94
FORM 10-Q INDEX			95


Freddie Mac 1Q 2023 Form 10-Q						i


Table of Contents

MD&A TABLE INDEX


Table	Description	Page
1	Summary of Consolidated Statements of Income and Comprehensive Income	6
2	Components of Net Interest Income	6
3	Analysis of Net Interest Yield	7
4	Components of Non-Interest Income	7
5	(Provision) Benefit for Credit Losses	8
6	Components of Non-Interest Expense	8
7	Summarized Condensed Consolidated Balance Sheets	9
8	Mortgage Portfolio	10
9	Mortgage-Related Investments Portfolio	11
10	Other Investments Portfolio	11
11	Single-Family Segment Financial Results	17
12	Multifamily Segment Financial Results	21
13	Allowance for Credit Losses Activity	22
14	Allowance for Credit Losses Ratios	22
15	Single-Family New Business Activity	24
16	Single-Family Mortgage Portfolio CRT Issuance	24
17	Single-Family Mortgage Portfolio Credit Enhancement Coverage Outstanding	24
18	Serious Delinquency Rates for Credit-Enhanced and Non-Credit-Enhanced Loans in Our Single-Family Mortgage Portfolio	25
19	Credit Quality Characteristics of Our Single-Family Mortgage Portfolio	26
20	Single-Family Mortgage Portfolio Attribute Combinations	26
21	Multifamily Mortgage Portfolio CRT Issuance	28
22	Credit-Enhanced and Non-Credit-Enhanced Loans Underlying Our Multifamily Mortgage Portfolio	29
23	Credit Quality of Our Multifamily Mortgage Portfolio Without Credit Enhancement	29
24	PVS-YC and PVS-L Results Assuming Shifts of the Yield Curve	30
25	Duration Gap and PVS Results	30
26	PVS-L Results Before Derivatives and After Derivatives	30
27	Earnings Sensitivity to Changes in Interest Rates	31
28	Liquidity Sources	32
29	Funding Sources	33
30	Debt of Freddie Mac Activity	33
31	Maturity and Redemption Dates	34
32	Debt of Consolidated Trusts Activity	34
33	Net Worth Activity	35
34	Regulatory Capital Components	36
35	Statutory Capital Components	36
36	Capital Metrics Under ERCF	37
37	Forecasted House Price Growth Rates	39


Freddie Mac 1Q 2023 Form 10-Q						ii


Management's Discussion and Analysis						Introduction

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 that 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 MD&A - Forward-Looking Statements section of this Form 10-Q and the Introduction and Risk Factors sections of our Annual Report on Form 10-K for the year ended December 31, 2022, or 2022 Annual Report.

Throughout this Form 10-Q, we use certain acronyms and terms that are defined in the Glossary of our 2022 Annual Report.

You should read the following MD&A in conjunction with our 2022 Annual Report and our condensed consolidated financial statements and accompanying notes for the three months ended March 31, 2023 included in Financial Statements.

INTRODUCTION

Freddie Mac is a GSE chartered by Congress in 1970, with a mission to provide liquidity, stability, and affordability to the U.S. housing market. We do this primarily by purchasing single-family and multifamily residential mortgage loans originated by lenders. In most instances, we package these loans into guaranteed mortgage-related securities, which are sold in the global capital markets, and transfer interest-rate and liquidity risks to third-party investors. In addition, we transfer mortgage credit risk exposure to third-party investors through our credit risk transfer programs, which include securities- and insurance-based offerings. We also invest in mortgage loans and mortgage-related securities. We do not originate mortgage 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 single-family and multifamily mortgage markets. We have helped many distressed borrowers keep their homes or avoid foreclosure and have helped many distressed renters avoid eviction.

Since September 2008, we have been operating in conservatorship, with FHFA as our Conservator. The conservatorship and related matters significantly affect our management, business activities, financial condition, and results of operations. Our future is uncertain, and the conservatorship has no specified termination date. We do not know what changes may occur to our business model during or following conservatorship, including whether we will continue to exist. In connection with our entry into conservatorship, we entered into the Purchase Agreement with Treasury, under which we issued Treasury both senior preferred stock and a warrant to purchase common stock. Our Purchase Agreement with Treasury is critical to keeping us solvent and avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions. We believe the support provided by Treasury pursuant to the Purchase Agreement currently enables us to have adequate liquidity to conduct normal business activities. For additional information on the conservatorship and related matters and the Purchase Agreement, see our 2022 Annual Report.


Freddie Mac 1Q 2023 Form 10-Q						1


Management's Discussion and Analysis						Introduction

Business Results

Consolidated Financial Results

Net Revenues and Net Income

(In billions)

Net Worth

(In billions)

Key Drivers:

n Net income was $2.0 billion, a decrease of 47% year-over-year, primarily driven by lower net revenues and a credit reserve build in the current period compared to a credit reserve release in the prior year period.

n Net revenues were $4.8 billion, a decrease of 17% year-over-year, as higher net interest income was offset by a decline in non-interest income.

n Net worth was $39.1 billion as of March 31, 2023, up from $37.0 billion as of December 31, 2022 and $31.7 billion as of March 31, 2022. The quarterly increases in net worth have been, or will be, added to the aggregate liquidation preference of the senior preferred stock. The liquidation preference of the senior preferred stock was $109.7 billion on March 31, 2023, and will increase to $111.7 billion on June 30, 2023 based on the increase in net worth in 1Q 2023.

Market Liquidity

Market Liquidity

(In thousands)

We support the U.S. housing market by executing our mission to provide liquidity and help maintain credit availability for new and refinanced single-family mortgages as well as for rental housing. We provided $65 billion in liquidity to the mortgage market in 1Q 2023, which enabled the financing of 250,000 home purchases, refinancings, and rental units.


Freddie Mac 1Q 2023 Form 10-Q						2


Management's Discussion and Analysis						Introduction

Mortgage Portfolio Balances

Mortgage Portfolio

(UPB in billions)

Key Drivers:

n Our mortgage portfolio increased 4% year-over-year to $3.4 trillion at March 31, 2023.

l Our Single-Family mortgage portfolio was $3.0 trillion at March 31, 2023, up 4% year-over-year and flat quarter-over-quarter, as portfolio growth has moderated in recent periods due to the slowdown in new business activity as both home purchase activity and refinance activity slowed due to higher mortgage interest rates.

l Our Multifamily mortgage portfolio was $426 billion at March 31, 2023, up 3% year-over-year and down 1% quarter-over-quarter, primarily due to the slowdown in new business activity as higher mortgage interest rates and greater market uncertainty have reduced demand for multifamily mortgage financing.

Credit Risk Transfer

Single-Family Mortgage Portfolio with Credit Enhancement

(UPB in billions)

Multifamily Mortgage Portfolio with Credit Enhancement

(UPB in billions)

In addition to transferring interest-rate and liquidity risk to third-party investors through our securitization activities, we engage in various credit enhancement arrangements to reduce our credit risk exposure. We transfer a portion of the credit risk, primarily on recently acquired loans, through our CRT programs. We also reduce our credit risk exposure through other credit enhancement arrangements, mainly primary mortgage insurance. See MD&A - Risk Management – Credit Risk for additional information on our credit enhancements and CRT programs.


Freddie Mac 1Q 2023 Form 10-Q						3


Management's Discussion and Analysis						Housing and Mortgage Market Conditions

HOUSING AND MORTGAGE MARKET CONDITIONS

The following charts present certain housing and mortgage market indicators that can significantly affect our business and financial results. Certain market and macroeconomic prior period data have been updated to reflect revised historical data. For additional information on the effect of these indicators on our business and financial results, see MD&A – Consolidated Results of Operations and MD&A – Our Business Segments.

Single-Family

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

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

U.S. Single-Family Mortgage Originations

(UPB in billions) 13743895348082

Source: Inside Mortgage Finance. 1Q 2023 U.S. single-family mortgage originations data is not yet available.

Single-Family Serious Delinquency Rates

Source: Freddie Mac and National Delinquency Survey from the Mortgage Bankers Association. 1Q 2023 total mortgage market rate is not yet available.

Single-Family Mortgage Debt Outstanding

(UPB in billions)

Source: Freddie Mac and Federal Reserve Financial Accounts of the United States of America. 1Q 2023 U.S. single-family mortgage debt outstanding data is not yet available.


Freddie Mac 1Q 2023 Form 10-Q						4


Management's Discussion and Analysis						Housing and Mortgage Market Conditions

Multifamily

Apartment Vacancy Rates and Change in Effective Rents

Source: Reis.

Multifamily Property Price Growth Rate

Source: Real Capital Analytics Commercial Property Price Index (RCA CPPI).

Multifamily Delinquency Rates

Source: Freddie Mac, FDIC Quarterly Banking Profile, Intex Solutions, Inc., and Wells Fargo Securities (Multifamily CMBS market, excluding REOs). The 1Q 2023 delinquency rate for FDIC insured institutions is not yet available.

Multifamily Mortgage Debt Outstanding

(UPB in billions)

Source: Freddie Mac and Federal Reserve Financial Accounts of the United States of America. 1Q 2023 U.S. multifamily mortgage debt outstanding data is not yet available.


Freddie Mac 1Q 2023 Form 10-Q						5


Management's Discussion and Analysis						Consolidated Results of Operations

CONSOLIDATED RESULTS OF OPERATIONS

The discussion of our consolidated results of operations should be read in conjunction with our condensed consolidated financial statements and accompanying notes. Our financial results and business volumes could be negatively affected by adverse changes in the housing market or economic conditions, including volatility and stress within the banking sector and the measures governments and financial services companies take in response. Stress in U.S. regional banks could drive elevated counterparty credit risk and indirect risk due to financing or banking relationships that our counterparties have with the affected banking organizations. We could also experience declines in the liquidity in the markets for our securities as a result of any such adverse changes or regulatory responses to adverse changes. See Risk Factors in our 2022 Annual Report for additional information.

The table below compares our summarized consolidated results of operations.

Table 1 - Summary of Consolidated Statements of Income and Comprehensive Income


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%
Net interest income	$4,501	$4,104	$397	10	%
Non-interest income	326	1,742	(1,416)	(81)
Net revenues	4,827	5,846	(1,019)	(17)
(Provision) benefit for credit losses	(395)	837	(1,232)	(147)
Non-interest expense	(1,932)	(1,932)	—	—
Income before income tax expense	2,500	4,751	(2,251)	(47)
Income tax expense	(505)	(953)	448	47
Net income	1,995	3,798	(1,803)	(47)
Other comprehensive income (loss), net of taxes and reclassification adjustments	54	(120)	174	145
Comprehensive income	$2,049	$3,678	($1,629)	(44)	%

Net Revenues

Net Interest Income

The table below presents the components of net interest income.

Table 2 - Components of Net Interest Income


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%
Guarantee net interest income:
Contractual net interest income	$3,666	$3,334	$332	10	%
Deferred fee income	207	1,042	(835)	(80)
Total guarantee net interest income	3,873	4,376	(503)	(11)
Investments net interest income	1,432	579	853	147
Impact on net interest income from hedge accounting	(804)	(851)	47	6
Net interest income	$4,501	$4,104	$397	10	%

Key Drivers:

n Guarantee net interest income

l 1Q 2023 vs. 1Q 2022 - Decreased as continued mortgage portfolio growth and higher average portfolio guarantee fee rates were offset by a decline in deferred fee income due to slower prepayments driven by higher mortgage interest rates.

n Investments net interest income

l 1Q 2023 vs. 1Q 2022 - Increased primarily due to higher returns on securities purchased under agreements to resell as a result of higher short-term interest rates.


Freddie Mac 1Q 2023 Form 10-Q						6


Management's Discussion and Analysis						Consolidated Results of Operations

n Impact on net interest income from hedge accounting

l 1Q 2023 vs. 1Q 2022 - Decreased due to a favorable change in the earnings mismatch on qualifying fair value hedge relationships, partially offset by higher interest expense on derivatives in hedge relationships as a result of higher interest rates.

Net Interest Yield Analysis

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

Table 3 - Analysis of Net Interest Yield


	1Q 2023				1Q 2022
(Dollars in millions)	Average Balance	Interest Income (Expense)	Average Rate		Average Balance	Interest Income (Expense)	Average Rate
Interest-earning assets:
Cash and cash equivalents	$13,758	$121	3.51	%	$15,832	$3	0.07	%
Securities purchased under agreements to resell	107,516	1,220	4.54		88,675	23	0.11
Investment securities	38,126	316	3.31		50,373	384	3.05
Mortgage loans(1)	3,042,128	23,304	3.06		2,901,060	17,310	2.39
Other assets	1,930	26	5.30		5,534	20	1.40
Total interest-earning assets	3,203,458	24,987	3.12		3,061,474	17,740	2.32
Interest-bearing liabilities:
Debt of consolidated trusts	2,975,417	(18,261)	(2.45)		2,836,484	(13,249)	(1.87)
Debt of Freddie Mac	187,599	(2,225)	(4.74)		182,580	(387)	(0.85)
Total interest-bearing liabilities	3,163,016	(20,486)	(2.59)		3,019,064	(13,636)	(1.81)
Impact of net non-interest-bearing funding	40,442	—	0.03		42,410	—	0.03
Total funding of interest-earning assets	3,203,458	(20,486)	(2.56)		3,061,474	(13,636)	(1.78)
Net interest income/yield		$4,501	0.56	%		$4,104	0.54	%

(1)Loan fees included in net interest income were $0.3 billion and $0.5 billion during 1Q 2023 and 1Q 2022, respectively.

Non-Interest Income

The table below presents the components of non-interest income.

Table 4 - Components of Non-Interest Income


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%

Guarantee income:
Contractual guarantee fees	324	$318	$6	2	%
Guarantee obligation amortization	279	299	(20)	(7)
Guarantee asset fair value changes	(137)	(547)	410	75
Total guarantee income	466	70	396	566
Investment gains, net:
Single-Family	(179)	1,252	(1,431)	(114)
Multifamily	(46)	261	(307)	(118)
Total investment gains, net	(225)	1,513	(1,738)	(115)
Other income	85	159	(74)	(47)
Non-interest income	$326	$1,742	($1,416)	(81)	%


Freddie Mac 1Q 2023 Form 10-Q						7


Management's Discussion and Analysis						Consolidated Results of Operations

Key Drivers:

n Guarantee income

l 1Q 2023 vs. 1Q 2022 - Increased as 1Q 2022 included fair value losses on guarantee assets due to rising interest rates.

n Investment gains, net

l 1Q 2023 vs. 1Q 2022 - Net investment gains in Single-Family declined from elevated levels in 1Q 2022, which were driven by spread-related gains on commitments to hedge the securitization pipeline during that period. Multifamily net investment gains also declined due to lower revenue from held-for-sale loan purchase and securitization activity as a result of lower volumes and lower margins, coupled with net losses from interest-rate risk management activities.

(Provision) Benefit for Credit Losses

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

Table 5 - (Provision) Benefit for Credit Losses


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%
Single-Family	($318)	$831	($1,149)	(138)	%
Multifamily	(77)	6	(83)	(1,383)
(Provision) benefit for credit losses	($395)	$837	($1,232)	(147)	%

Key Drivers:

n 1Q 2023 vs. 1Q 2022 - The provision for credit losses for 1Q 2023 was driven by a modest credit reserve build primarily attributable to new acquisitions in Single-Family. The benefit for credit losses for 1Q 2022 was primarily driven by a credit reserve release due to higher estimated house prices and an improvement in forecasted economic conditions.

Non-Interest Expense

The table below presents the components of non-interest expense.

Table 6 - Components of Non-Interest Expense


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%

Salaries and employee benefits	($374)	($356)	($18)	(5)	%
Credit enhancement expense	(530)	(459)	(71)	(15)
Benefit for (decrease in) credit enhancement recoveries	49	(17)	66	388
Legislative assessments expense:
Legislated guarantee fees expense	(708)	(666)	(42)	(6)
Affordable housing funds allocation	(27)	(93)	66	71
Total legislative assessments expense	(735)	(759)	24	3
Other expense	(342)	(341)	(1)	—
Non-interest expense	($1,932)	($1,932)	$—	—	%

Key Drivers:

n Credit enhancement expense

l 1Q 2023 vs. 1Q 2022 - Increased primarily due to a higher volume of outstanding cumulative CRT transactions.

n Benefit for (decrease in) credit enhancement recoveries

l 1Q 2023 vs. 1Q 2022 - Increased primarily due to an increase in expected credit losses on covered loans.

n Legislative assessments expense

l 1Q 2023 vs. 1Q 2022 - Decreased primarily due to lower affordable housing funds allocation as a result of lower Single-Family new business activity, partially offset by higher legislated guarantee fees expense due to growth in our Single-Family mortgage portfolio.


Freddie Mac 1Q 2023 Form 10-Q						8


Management's Discussion and Analysis						Consolidated Balance Sheets Analysis

CONSOLIDATED BALANCE SHEETS ANALYSIS

The table below compares our summarized condensed consolidated balance sheets.

Table 7 - Summarized Condensed Consolidated Balance Sheets


			Change
(Dollars in millions)	March 31, 2023	December 31, 2022	$	%
Assets:
Cash and cash equivalents	$5,873	$6,360	($487)	(8)	%
Securities purchased under agreements to resell	108,036	87,295	20,741	24
Investment securities, at fair value	37,712	38,701	(989)	(3)
Mortgage loans held-for-sale	12,782	12,197	585	5
Mortgage loans held-for-investment	3,024,249	3,022,318	1,931	—
Accrued interest receivable, net	8,662	8,529	133	2
Deferred tax assets, net	5,329	5,777	(448)	(8)
Other assets	22,337	27,156	(4,819)	(18)
Total assets	$3,224,980	$3,208,333	$16,647	1	%

Liabilities and Equity:
Liabilities:
Accrued interest payable	$7,507	$7,309	$198	3	%
Debt	3,167,514	3,145,832	21,682	1
Other liabilities	10,892	18,174	(7,282)	(40)
Total liabilities	3,185,913	3,171,315	14,598	—
Total equity	39,067	37,018	2,049	6
Total liabilities and equity	$3,224,980	$3,208,333	$16,647	1	%

Key Drivers:

As of March 31, 2023 compared to December 31, 2022:

n Securities purchased under agreements to resell and debt increased primarily due to an increase in debt issuance to prefund upcoming debt maturities and anticipated calls of outstanding debt.

n Other assets decreased primarily due to a decline in receivables related to U.S. Treasury securities sold but not yet settled.

n Other liabilities decreased primarily due to a decline in payables related to U.S. Treasury securities purchased but not yet settled.


Freddie Mac 1Q 2023 Form 10-Q						9


Management's Discussion and Analysis						Our Portfolios

OUR PORTFOLIOS

Mortgage Portfolio

The table below presents the UPB of our mortgage portfolio by segment.

Table 8 - Mortgage Portfolio


	March 31, 2023			December 31, 2022
(In millions)	Single-Family	Multifamily	Total	Single-Family	Multifamily	Total
Mortgage loans held-for-investment:
By consolidated trusts	$2,909,802	$34,978	$2,944,780	$2,907,999	$30,574	$2,938,573
By Freddie Mac	35,147	12,375	47,522	33,506	17,805	51,311
Total mortgage loans held-for-investment	2,944,949	47,353	2,992,302	2,941,505	48,379	2,989,884
Mortgage loans held-for-sale	3,373	10,255	13,628	3,564	9,544	13,108
Total mortgage loans	2,948,322	57,608	3,005,930	2,945,069	57,923	3,002,992
Mortgage-related guarantees:
Mortgage loans held by nonconsolidated trusts	31,023	357,747	388,770	31,500	360,869	392,369
Other mortgage-related guarantees	9,290	10,684	19,974	9,476	10,510	19,986
Total mortgage-related guarantees	40,313	368,431	408,744	40,976	371,379	412,355
Total mortgage portfolio	$2,988,635	$426,039	$3,414,674	$2,986,045	$429,302	$3,415,347
Guaranteed mortgage-related securities:
Issued by consolidated trusts	$2,920,201	$34,978	$2,955,179	$2,916,038	$30,813	$2,946,851
Issued by nonconsolidated trusts	25,329	316,606	341,935	25,772	319,117	344,889
Total guaranteed mortgage-related securities	$2,945,530	$351,584	$3,297,114	$2,941,810	$349,930	$3,291,740

Investments Portfolio

Our investments portfolio consists of our mortgage-related investments portfolio and our other investments portfolio.

Mortgage-Related Investments Portfolio

The Purchase Agreement limits the size of our mortgage-related investments portfolio to a maximum amount of $225 billion. The calculation of mortgage assets subject to the Purchase Agreement cap includes the UPB of mortgage assets and 10% of the notional value of interest-only securities. We are also subject to additional limitations on the size and composition of our mortgage-related investments portfolio pursuant to FHFA guidance. For additional information on the restrictions on our mortgage-related investments portfolio, see the MD&A - Conservatorship and Related Matters section in our 2022 Annual Report.


Freddie Mac 1Q 2023 Form 10-Q						10


Management's Discussion and Analysis						Our Portfolios

The table below presents the details of our mortgage-related investments portfolio.

Table 9 - Mortgage-Related Investments Portfolio


	March 31, 2023			December 31, 2022
(In millions)	Single-Family	Multifamily	Total	Single-Family	Multifamily	Total
Unsecuritized mortgage loans:
Securitization pipeline and other loans	$10,863	$22,630	$33,493	$10,093	$27,349	$37,442
Seasoned loans	27,657	—	$27,657	26,977	—	26,977
Total unsecuritized mortgage loans	38,520	22,630	61,150	37,070	27,349	64,419
Mortgage-related securities:
Investment securities	3,988	6,183	10,171	3,440	6,396	9,836
Debt of consolidated trusts	17,077	698	17,775	17,939	536	18,475
Total mortgage-related securities	21,065	6,881	27,946	21,379	6,932	28,311
Mortgage-related investments portfolio	$59,585	$29,511	$89,096	$58,449	$34,281	$92,730
10% of notional amount of interest-only securities			$21,554			$21,758
Mortgage-related investments portfolio for purposes of Purchase Agreement cap			110,650			114,488

Other Investments Portfolio

The table below presents the details of our other investments portfolio.

Table 10 - Other Investments Portfolio


	March 31, 2023				December 31, 2022
(In millions)	Liquidity and Contingency Operating Portfolio	Custodial Account	Other	Total Other Investments Portfolio (1)	Liquidity and Contingency Operating Portfolio	Custodial Account	Other	Total Other Investments Portfolio (1)
Cash and cash equivalents	$5,038	$741	$94	$5,873	$5,652	$611	$97	$6,360
Securities purchased under agreements to resell	100,948	10,881	859	112,688	88,499	9,703	1,084	99,286
Non-mortgage-related securities	17,531	—	4,738	22,269	20,188	—	3,645	23,833
Other assets	—	—	5,644	5,644	—	—	4,565	4,565
Other investments portfolio	$123,517	$11,622	$11,335	$146,474	$114,339	$10,314	$9,391	$134,044

(1)Represents carrying value.


Freddie Mac 1Q 2023 Form 10-Q						11


Management's Discussion and Analysis						Our Business Segments

OUR BUSINESS SEGMENTS

As shown in the table below, we have two reportable segments, which are based on the way we manage our business.


Segment			Description
Single-Family			Reflects results from our purchase, securitization, and guarantee of single-family loans, our investments in single-family loans and mortgage-related securities, the management of Single-Family mortgage credit risk and market risk, and any results of our treasury function that are not allocated to each segment.


Multifamily			Reflects results from our purchase, securitization, and guarantee of multifamily loans, our investments in multifamily loans and mortgage-related securities, and the management of Multifamily mortgage credit risk and market risk.

Segment Net Revenues and Net Income

The charts below show our net revenues and net income by segment.

Segment Net Revenues

(In billions)

Segment Net Income

(In billions)


Freddie Mac 1Q 2023 Form 10-Q						12


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

Single-Family

Business Results

The charts, tables, and related discussion below present the business results of our Single-Family segment.

New Business Activity

UPB of Single-Family Loan Purchases and Guarantees by Loan Purpose and Average Estimated Guarantee Fee Rate(1) on New Acquisitions

(UPB in billions) 178

(1)Estimated guarantee fee rate calculation excludes the legislated guarantee fees and includes deferred fees recognized over the estimated life of the related loans.

Number of Families Helped to Own a Home and Average Loan UPB of New Acquisitions

(Loan count in thousands)

n 1Q 2023 vs. 1Q 2022

l Our loan purchase and guarantee activity slowed due to higher mortgage interest rates. We expect volume for the remainder of the year to be lower than 2022 due in part to higher mortgage interest rates.

l The average loan size of new acquisitions increased due to a higher conforming loan limit and house price appreciation in recent quarters.

l The average estimated guarantee fee rate on new acquisitions increased primarily due to higher contractual guarantee fees and faster expected credit fee recognition driven by higher estimated prepayments on new acquisitions. This increase was partially offset by a shift in the business mix of new acquisitions.

For additional information on credit fee changes, see the MD&A - Regulation and Supervision section in this Form 10-Q and our 2022 Annual Report.


Freddie Mac 1Q 2023 Form 10-Q						13


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

Single-Family Mortgage Portfolio

Single-Family Mortgage Portfolio and Average Estimated Guarantee Fee Rate(1) on Mortgage Portfolio

(UPB in billions) 145

(1)Estimated guarantee fee rate is calculated as of acquisition and excludes the legislated guarantee fees. Estimated guarantee fee rate calculation also excludes certain loans, the majority of which are held by VIEs that we do not consolidate. The UPB of these excluded loans was $43 billion as of March 31, 2023.

Single-Family Mortgage Loans

(Loan count in millions) 464

n The Single-Family mortgage portfolio was $3.0 trillion at March 31, 2023, up 4% year-over-year and flat quarter-over-quarter, as portfolio growth has moderated in recent periods due to the slowdown in new business activity as both home purchase activity and refinance activity slowed due to higher mortgage interest rates.

n The average estimated guarantee fee rate on the Single-Family mortgage portfolio increased year-over-year as older vintages with lower estimated guarantee fee rates were replaced by acquisitions of new loans with higher estimated guarantee fee rates.


Freddie Mac 1Q 2023 Form 10-Q						14


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

CRT Activities

We transfer credit risk on a portion of our Single-Family mortgage portfolio to the private market, reducing the risk of future losses to us when borrowers default. The charts below show the issuance amounts associated with CRT transactions for loans in our Single-Family mortgage portfolio.

UPB Covered by New CRT Issuance

(In billions) 347

New CRT Issuance Maximum Coverage

(In billions) 348

n 1Q 2023 vs. 1Q 2022

l The UPB of mortgage loans covered by CRT transactions and related maximum coverage issued during 1Q 2023 decreased compared to 1Q 2022 due to a decrease in loan acquisition activity in recent quarters and changes in business strategy and market conditions.

l Our percentage of Single-Family acquisitions targeted for CRT transactions (primarily 30-year fixed rate loans with LTV ratios between 60% and 97%) increased to 81% during 1Q 2023, from 67% during 1Q 2022, primarily driven by an increase in the percentage of recently acquired loans with original LTV ratios above 60% and an increase in the percentage of 30-year loan acquisitions.

See MD&A - Risk Management - Single-Family Mortgage Credit Risk - Transferring Credit Risk to Third-Party Investors for additional information on our CRT activities and other credit enhancements.


Freddie Mac 1Q 2023 Form 10-Q						15


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

Loss Mitigation Activities

The following chart provides details about the single-family loan workout activities that were completed during the periods presented. The forbearance data included below is limited to loans in forbearance that are past due based on the loans' original contractual terms and excludes both loans for which we do not control servicing and loans included in certain legacy transactions, as the forbearance data for such loans is either not reported to us by the servicers or is otherwise not readily available to us.

Completed Loan Workout Activity

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

(1)Other includes repayment plans and foreclosure alternatives.

n Completed loan workout activity includes forbearance plans where borrowers fully reinstated the loan to current status during or at the end of the forbearance period, payment deferral plans, loan modifications, successfully completed repayment plans, short sales, and deeds in lieu of foreclosure. Completed loan workout activity excludes active loss mitigation activity that was ongoing and had not been completed as of the end of the period, such as forbearance plans that had been initiated but not completed and trial period modifications. There were approximately 27,000 loans in active forbearance plans and approximately 13,000 loans in other active loss mitigation activity as of March 31, 2023.

n 1Q 2023 vs. 1Q 2022 - Our loan workout activity decreased as the overall forbearance population continued to decline.


Freddie Mac 1Q 2023 Form 10-Q						16


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

Financial Results

The table below presents the results of operations for our Single-Family segment. See Note 11 for additional information about segment financial results.

Table 11 - Single-Family Segment Financial Results


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%
Net interest income	$4,296	$3,806	$490	13	%
Non-interest income	(93)	1,408	(1,501)	(107)
Net revenues	4,203	5,214	(1,011)	(19)
(Provision) benefit for credit losses	(318)	831	(1,149)	(138)
Non-interest expense	(1,783)	(1,778)	(5)	—
Income before Income tax expense	2,102	4,267	(2,165)	(51)
Income tax expense	(425)	(856)	431	50
Net income	1,677	3,411	(1,734)	(51)
Other comprehensive income (loss), net of taxes and reclassification adjustments	(1)	(12)	11	92
Comprehensive income	$1,676	$3,399	($1,723)	(51)	%

Key Business Drivers:

n 1Q 2023 vs. 1Q 2022

l Net income of $1.7 billion, down 51% year-over-year.

–Net revenues were $4.2 billion, down 19% year-over-year.

◦Net interest income was $4.3 billion, up 13% year-over-year, primarily driven by mortgage portfolio growth, higher average portfolio guarantee fee rates, and higher investments net interest income due to higher interest rates. These increases were partially offset by a decline in deferred fee income due to slower prepayments driven by higher mortgage interest rates.

◦Non-interest income was a loss of $0.1 billion for 1Q 2023, compared to non-interest income of $1.4 billion for 1Q 2022, which was primarily driven by spread-related gains on commitments to hedge the securitization pipeline during that period.

–Provision for credit losses was $0.3 billion for 1Q 2023, driven by a modest credit reserve build primarily attributable to new acquisitions. The benefit for credit losses of $0.8 billion for 1Q 2022 was driven by a credit reserve release due to higher estimated house prices and an improvement in forecasted economic conditions.


Freddie Mac 1Q 2023 Form 10-Q						17


Management's Discussion and Analysis						Our Business Segments \| Multifamily

Multifamily

Business Results

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

New Business Activity

New Business Activity

(In billions)

Total Number of Rental Units Financed(1)

(In thousands) 340

(1) Includes rental units financed by supplemental loans.

n As of March 31, 2023, the multifamily new business activity subject to the FHFA 2023 loan purchase cap of $75 billion was $5.7 billion. Approximately 60% of this activity, based on UPB, was mission-driven, affordable housing, currently exceeding FHFA's minimum requirement of 50%.

n Our new business activity was lower year-over-year as higher mortgage interest rates and greater market uncertainty have reduced demand for multifamily mortgage financing.

n Our index lock agreements and outstanding commitments to purchase or guarantee multifamily assets were $19.2 billion and $19.9 billion as of March 31, 2023 and March 31, 2022, respectively.


Freddie Mac 1Q 2023 Form 10-Q						18


Management's Discussion and Analysis						Our Business Segments \| Multifamily

Multifamily Mortgage Portfolio and Guarantee Portfolio

Mortgage Portfolio

(UPB in billions)

Guarantee Portfolio

(In billions) 546

n Our Multifamily mortgage portfolio was $426 billion at March 31, 2023, up 3% year-over-year and down 1% quarter-over-quarter, primarily due to the slowdown in new business activity as higher mortgage interest rates and greater market uncertainty have reduced demand for multifamily mortgage financing. Our guarantee portfolio was $362 billion at March 31, 2023, up 3% year-over-year as our securitization activities outpaced payoffs.

n In addition to our Multifamily mortgage portfolio, we have investments in LIHTC fund partnerships with carrying values totaling $2.9 billion and $2.8 billion as of March 31, 2023 and December 31, 2022, respectively.


Freddie Mac 1Q 2023 Form 10-Q						19


Management's Discussion and Analysis						Our Business Segments \| Multifamily

CRT Activities

UPB Covered by New CRT Issuance New CRT Issuance Maximum Coverage

(In billions) (In billions)

n 1Q 2023 vs. 1Q 2022

l The UPB of mortgage loans covered by new CRT transactions and the maximum coverage decreased year-over-year, primarily due to fewer securitizations with subordination as a result of a smaller average held-for-sale securitization pipeline.

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


Freddie Mac 1Q 2023 Form 10-Q						20


Management's Discussion and Analysis						Our Business Segments \| Multifamily

Financial Results

The table below presents the results of operations for our Multifamily segment. See Note 11 for additional information about segment financial results.

Table 12 - Multifamily Segment Financial Results


			Change
(Dollars in millions)	1Q 2023	1Q 2022	$	%
Net interest income	$205	$298	($93)	(31)	%
Non-interest income	419	334	85	25



Net revenues	624	632	(8)	(1)
(Provision) benefit for credit losses	(77)	6	(83)	(1,383)
Non-interest expense	(149)	(154)	5	3





Income before income tax expense	398	484	(86)	(18)
Income tax expense	(80)	(97)	17	18
Net income	318	387	(69)	(18)
Other comprehensive income (loss), net of taxes and reclassification adjustments	55	(108)	163	151
Comprehensive income	$373	$279	$94	34	%

Key Business Drivers:

n 1Q 2023 vs. 1Q 2022

l Net income of $0.3 billion, down 18% year-over-year.

–Net revenues were $0.6 billion, down 1% year-over-year.

–Net interest income was $0.2 billion, down 31% year-over-year, primarily due to lower prepayment income driven by higher mortgage interest rates.

–Non-interest income was $0.4 billion, up 25% year-over-year, primarily driven by higher guarantee income, partially offset by lower net investment gains. Guarantee income increased as 1Q 2022 included fair value losses on guarantee assets due to rising interest rates. Net investment gains declined due to lower revenue from held-for-sale loan purchase and securitization activity as a result of lower volumes and lower margins, coupled with net losses from interest-rate risk management activities.

–Provision for credit losses was $0.1 billion for 1Q 2023, compared to a small benefit for credit losses for 1Q 2022, primarily due to a credit reserve build to reflect increased uncertainty in forecasted economic conditions.


Freddie Mac 1Q 2023 Form 10-Q						21


Management's Discussion and Analysis						Risk Management

RISK MANAGEMENT

To achieve our mission, we take risks as an integral part of our business activities. We are exposed to the following key types of risk: credit risk, market risk, liquidity risk, operational risk, compliance risk, legal risk, strategic risk, and reputation risk.

Credit Risk

Allowance for Credit Losses

The tables below present a summary of the changes in our allowance for credit losses and key allowance for credit losses ratios.

Table 13 - Allowance for Credit Losses Activity


	1Q 2023			1Q 2022
(Dollars in millions)	Single-Family	Multifamily	Total	Single-Family	Multifamily	Total
Allowance for credit losses:
Beginning balance	$7,746	$147	$7,893	$5,440	$78	$5,518
Provision (benefit) for credit losses	318	77	395	(831)	(6)	(837)
Charge-offs	(90)	—	(90)	(173)	—	(173)
Recoveries collected	32

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