FMCC US Equity☆

fmcc-20211231

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2021

or

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)

corporation McLean, Virginia

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

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

None N/A N/A

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes

☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Emerging growth company ☐

Non-accelerated filer ☐ Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the common stock was last sold on June 30, 2021 (the last business day of the registrant's most recently completed second fiscal quarter) was $0.9 billion.

As of January 31, 2022, there were 650,059,553 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

Table of Contents

Table of Contents

INTRODUCTION 1

n About Freddie Mac 1

n Our Business 7

n Forward-Looking Statements 11

n Market Conditions and Economic Indicators 13

n Consolidated Results of Operations 18

n Consolidated Balance Sheets Analysis 26

n Our Portfolios 26

n Our Business Segments 28

n Risk Management 57

l Credit Risk 60

l Market Risk 93

l Operational Risk 99

n Liquidity and Capital Resources 102

n Conservatorship and Related Matters 111

n Regulation and Supervision 116

n Critical Accounting Estimates 124

RISK FACTORS 125

LEGAL PROCEEDINGS 143

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 145

n Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 146

n Consolidated Financial Statements 148

CONTROLS AND PROCEDURES 236

OTHER INFORMATION 238

DIRECTORS, CORPORATE GOVERNANCE, AND EXECUTIVE OFFICERS 239

n Corporate Governance 245

n Executive Officers 253

EXECUTIVE COMPENSATION 255

n Compensation Discussion and Analysis 255

n Compensation and Risk 271

n CEO Pay Ratio 272

n 2021 Compensation Information for NEOs 273

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 282

PRINCIPAL ACCOUNTING FEES AND SERVICES 284

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 286

EXHIBIT INDEX 296

Table of Contents MD&A Table Index

MD&A TABLE INDEX

Table Description Page

1 Summary of Consolidated Statements of Comprehensive Income (Loss) 18

2 Components of Net Interest Income 20

3 Analysis of Net Interest Yield 21

4 Net Interest Income Rate / Volume Analysis 22

5 Components of Guarantee Income 23

6 Investment Gains (Losses), Net 24

7 Benefit (Provision) for Credit Losses 24

8 Summarized Consolidated Balance Sheets 26

9 Mortgage Portfolio 27

10 Guarantee Portfolio 28

11 Mortgage-Related Investments Portfolio 28

12 Single-Family Segment Financial Results 46

13 Multifamily Segment Financial Results 56

14 Allowance for Credit Losses Ratios 60

15 Principal Amounts Due for Held-for-Investment Loans 62

16 Single-Family New Business Activity 66

17 Single-Family Mortgage Portfolio CRT Issuance 67

18 Single-Family Mortgage Portfolio Credit Enhancement Coverage Outstanding 68

20 Credit Enhancement Coverage by Year of Origination 69

21 Single-Family Mortgage Portfolio Without Credit Enhancement 69

22 Single-Family Credit Enhancement Receivables 70

23 Credit Quality Characteristics of Our Single-Family Mortgage Portfolio 72

24 Characteristics of the Loans in Our Single-Family Mortgage Portfolio 73

25 Single-Family Mortgage Portfolio Attribute Combinations 74

26 Single-Family Loans in Forbearance Plans by Payment Status 76

27 Single-Family Loans that Received Forbearance Plans 77

28 Single-Family Relief Refinance Loans 77

29 Credit Characteristics of Single-Family Modified Loans 77

30 Payment Performance of Single-Family Modified Loans 78

31 Seriously Delinquent Single-Family Loans by Jurisdiction 79

32 Average Length of Foreclosure Process for Single-Family Loans 79

33 Single-Family REO Activity 79

34 Single-Family Collateral Deficiency Ratios 80

36 Multifamily Mortgage Portfolio CRT Issuance 84

38 Level of Subordination Outstanding 85

40 Single-Family Mortgage Purchases from Non-Depository Sellers 87

41 Single-Family Mortgage Portfolio Non-Depository Servicers 88

42 Single-Family Primary Mortgage Insurers 89

43 Single-Family ACIS Counterparties 90

FREDDIE MAC | 2021 Form 10-K ii

Table of Contents MD&A Table Index

Table Description Page

44 Derivative Counterparty Credit Exposure 91

45 PVS-YC and PVS-L Results Assuming Shifts of the Yield Curve 95

46 Duration Gap and PVS Results 95

47 PVS-L Results Before Derivatives and After Derivatives 96

48 Earnings Sensitivity to Changes in Interest Rates 97

50 Other Investments Portfolio 104

52 Debt of Freddie Mac Activity 106

53 Maturity and Redemption Dates 106

54 Activity for Debt Securities of Consolidated Trusts Held by Third Parties 107

55 Freddie Mac Credit Ratings 107

59 Forecasted House Price Growth Rates 124

60 Board Compensation Levels 251

61 Director Compensation 251

65 Compensation Summary 273

66 Grants of Plan-Based Awards 274

67 SERP and SERP II Benefits 275

69 Stock Ownership by Directors and Executive Officers 280

70 Stock Ownership by Greater Than 5% Holders 280

FREDDIE MAC | 2021 Form 10-K iii

Introduction About Freddie Mac

Introduction

This Annual Report on Form 10-K 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-K. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K. Actual results might differ significantly from those described in or implied by such statements due to various factors and uncertainties, including those described in theForward-Looking Statements and Risk Factors sections of this Form 10-K.

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

ABOUT FREDDIE MAC

Freddie Mac is a GSE chartered by Congress in 1970, 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.

COVID-19 Pandemic Response Efforts

The outbreak of COVID-19, a novel coronavirus disease detected in late 2019, was declared a pandemic by the World Health Organization on March 11, 2020. The COVID-19 pandemic was declared a national emergency in the United States on March 13, 2020 and continued to evolve throughout 2020 and 2021, both globally and domestically, with significant adverse effects on populations and economies. Throughout the COVID-19 pandemic, we have remained focused on serving our mission and the crucial role we play in the U.S. housing finance system while supporting the health and safety of our communities, customers, and staff. We have taken actions to help homeowners with Freddie Mac-owned mortgages who are directly or indirectly affected by the COVID-19 pandemic stay in their homes during this challenging time. We have also provided support to the multifamily mortgage market. For additional information on our support of the mortgage markets during the pandemic, see MD&A - Our Business Segments - Single-Family, MD&A - Our Business Segments - Multifamily, MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk, and MD&A - Risk Management -Credit Risk - Multifamily Mortgage Credit Risk. For more information on risks related to the COVID-19 pandemic, see Risk Factors -COVID-19 Pandemic.

Introduction About Freddie Mac

Business Results

Consolidated Financial Results

Net Revenues, Net Income, and Comprehensive Income

(In billions)

Net Worth as of December 31,

(In billions)

Key Drivers:

n2021 vs. 2020

lNet income was $12.1 billion, an increase of 65% year-over-year. Comprehensive income was $11.6 billion, an increase of 54% year-over-year. The increases in both net income and comprehensive income were primarily driven by higher net revenues and a credit reserve release in Single-Family.

lNet revenues increased 32% year-over-year to $22.0 billion, primarily driven by higher net interest income and higher net investment gains.

lNet worth was $28.0 billion as of December 31, 2021, up from $16.4 billion as of December 31, 2020.

n2020 vs. 2019

lNet income was $7.3 billion, an increase of 2% year-over-year. Comprehensive income was $7.5 billion, a decrease of 3% year-over-year. The changes in net income and comprehensive income were primarily driven by higher net revenues, partially offset by higher provision for credit losses.

lNet revenues increased 18% year-over-year to $16.7 billion, primarily due to higher net interest income and higher net investment gains.

lNet worth was $16.4 billion as of December 31, 2020, up from $9.1 billion as of December 31, 2019.

lWe recognized a decrease in retained earnings of $0.2 billion upon our adoption of CECL on January 1, 2020.

Introduction About Freddie Mac

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 $1.3 trillion in liquidity to the mortgage market in 2021, which enabled the financing of nearly 4.9 million home purchases, refinancings, and rental units.

Introduction About Freddie Mac

Portfolio Balances

Mortgage Portfolio as of December 31,

(UPB in billions)

nOur mortgage portfolio increased 18% year-over-year to $3,207 billion at December 31, 2021, driven by a 20% increase in our Single-Family mortgage portfolio and a 7% increase in our Multifamily mortgage portfolio. Our mortgage portfolio increased 16% year-over-year to $2,714 billion at December 31, 2020, driven by a 17% increase in our Single-Family mortgage portfolio and a 14% increase in our Multifamily mortgage portfolio.

lThe growth in our Single-Family mortgage portfolio in 2021 and 2020 was primarily driven by higher new business activity. Additionally, continued house price appreciation contributed to new business acquisitions having a higher average loan size compared to older vintages that continued to run off.

lThe growth in our Multifamily mortgage portfolio in 2021 and 2020 was primarily driven by ongoing loan purchase and securitization activity attributable to continued high demand for multifamily financing.

Introduction About Freddie Mac

Credit Risk Transfer

Single-Family Mortgage Portfolio with Credit Enhancement as of December 31,

(UPB in billions)

Multifamily Mortgage Portfolio with Credit Enhancement as of December 31,

(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 - Our Business Segments and MD&A - Risk Management - Credit Risk for additional information on our credit enhancements and CRT programs.

Business Segments

During 2021, our chief operating decision maker began making decisions about allocating resources and assessing segment performance based on two reportable segments, Single-Family and Multifamily. Prior to 2021, we managed our business based on three reportable segments, Single-Family Guarantee, Multifamily, and Capital Markets.

For additional information on our change in segment reporting presentation, see MD&A - Our Business Segments and Note 15.

Conservatorship and Government Support for Our Business

Since September 2008, we have been operating in conservatorship, with FHFA as our Conservator. The conservatorship and related matters significantly affect our management, business activities, financial condition, and results of operations. Our future is uncertain, and the conservatorship has no specified termination date. We do not know what changes may occur to our business model during or following conservatorship, including whether we will continue to exist.

In connection with our entry into conservatorship, we entered into the Purchase Agreement with Treasury under which we issued Treasury both senior preferred stock and a warrant to purchase common stock. The senior preferred stock and warrant were issued as an initial commitment fee in consideration for Treasury's commitment to provide funding to us under the Purchase Agreement. Our Purchase Agreement with Treasury is 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.

Our Purchase Agreement with Treasury significantly affects our business activities, including by limiting: our secondary market activities; our single-family and multifamily loan acquisitions; the amount of indebtedness we can incur; the size of our mortgage-related investments portfolio; and our ability to pay dividends, transfer certain assets, raise capital, pay down the

Introduction About Freddie Mac

liquidation preference of the senior preferred stock, and exit conservatorship. In September 2021, certain limitations on our secondary market activities and single-family and multifamily loan acquisitions were suspended.

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

We have had a net worth sweep dividend requirement to Treasury on the senior preferred stock since the first quarter of 2013, which was implemented pursuant to the August 2012 amendment to the Purchase Agreement. Pursuant to the Purchase Agreement, Freddie Mac will not be required to pay a dividend to Treasury on the senior preferred stock until it has built sufficient capital to meet the capital requirements and buffers set forth in the ERCF. As the company builds capital during this period, increases in our Net Worth Amount have been, or will be, added to the aggregate liquidation preference of the senior preferred stock. After we have maintained the level of capital prescribed in the Purchase Agreement for the requisite time, we will be subject to a new periodic cash dividend requirement, as well as a periodic commitment fee to be agreed upon with Treasury in consultation with the Chairman of the Federal Reserve.

See MD&A - Regulation and Supervision and Note 2 for additional information on the Purchase Agreement, senior preferred stock, and warrant and Risk Factors -Conservatorship and Related Matters for related risks.

The graphs below show our net worth, the liquidation preference of the senior preferred stock, the remaining amount of Treasury's funding commitment to us, the cumulative senior preferred stock dividends we have paid to Treasury, and the cumulative funds we have drawn from Treasury pursuant to its funding commitment.

Net Worth, Liquidation Preference, and Treasury Funding Commitment

(In billions)

Draws and Dividend Payments

(In billions)

nOur Net Worth Amount was $28.0 billion as of December 31, 2021, up from $16.4 billion on December 31, 2020. We did not have a dividend requirement to Treasury on the senior preferred stock for 4Q 2021.

nThe liquidation preference of the senior preferred stock increased from $95.0 billion on September 30, 2021 to $98.0 billion on December 31, 2021 based on the $2.9 billion increase in our Net Worth Amount during 3Q 2021, and will increase to $100.7 billion on March 31, 2022 based on the $2.7 billion increase in our Net Worth Amount during 4Q 2021.

nAt December 31, 2021, our assets exceeded our liabilities under GAAP; therefore, no draw is being requested from Treasury under the Purchase Agreement.

Introduction Our Business

OUR BUSINESS

Primary Business Strategies

Freddie Mac's overall strategic direction is established by management and affirmed by the Board of Directors through its approval of our Strategic Framework, which sets forth our strategic priorities and generally covers a three-year timeframe. FHFA, the Administration, or Congress could take actions that cause us to alter our Strategic Framework. FHFA, as Conservator, has influenced, and may in the future influence, our strategic direction, such as through our new initiatives, credit and pricing policies, and capital, liquidity, and risk appetite constraints.

Our Charter and Mission

We are a GSE with a specific and limited corporate purpose to support the liquidity, stability, and affordability of the U.S. housing market as a participant in the secondary mortgage market, while operating as a commercial enterprise earning an appropriate return. Everything we do must be done within the constraints of our Charter.

As a result, our Charter forms the framework for our business activities. Pursuant to our Charter, our role in the secondary mortgage market is to:

nProvide stability in the secondary mortgage market for residential loans;

nRespond appropriately to the private capital market;

nProvide ongoing assistance to the secondary mortgage market for residential loans (including activities relating to loans for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and

nPromote access to mortgage loan credit throughout the United States (including central cities, rural areas, and other underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.

Our Charter permits us to purchase first-lien single-family loans with LTV ratios at the time of our purchase of less than or equal to 80%. For the purchase of first-lien single-family loans that do not meet this criterion, our Charter requires certain specified credit protections, which include mortgage insurance from a qualified insurer on the portion of the UPB of the loan that exceeds an 80% LTV ratio, a seller's agreement to repurchase or replace a defaulted loan, or the retention by the seller of at least a 10% participation interest in the loan.

This Charter requirement does not apply to multifamily loans or to loans that have the benefit of any guarantee, insurance, or other obligation by the U.S. or any of its agencies or instrumentalities (e.g., the FHA, VA, or USDA Rural Development). Additionally, we purchase single-family refinanced loans we currently own or guarantee without obtaining additional credit enhancement in excess of that already in place for any such loan, even when the LTV ratio of the new loan is above 80%.

Our Charter does not permit us to originate mortgage loans or lend money directly to mortgage borrowers in the primary mortgage market. Our Charter limits our purchase of single-family loans to the conforming loan market, which consists of loans originated with UPBs at or below limits determined annually based on changes in FHFA's housing price index. In most of the U.S., the maximum conforming loan limit for a one-family residence has been set at $647,200 for 2022, an increase from $548,250 for 2021, $510,400 for 2020, and $484,350 for 2019. Higher limits have been established in certain "high-cost" areas (for 2022, up to $970,800 for a one-family residence). Higher limits also apply to two- to four-family residences and to one- to four-family residences in Alaska, Guam, Hawaii, and the U.S. Virgin Islands.

Our Strategic Priorities

Our mission is to provide liquidity, stability, and affordability to the housing market. We interpret this mission expansively to meet the country's broader housing needs in both good times and challenging times by:

nEnhancing liquidity within the mortgage and capital markets;

nStabilizing the housing market throughout the economic cycle, including helping families facing hardship remain in their homes;

nWorking with an array of housing market participants to promote greater access to and supply of affordable and sustainable homes throughout the country;

nAddressing longstanding issues of inequity in housing;

nWorking with lenders of all sizes to better serve their communities; and

nContinuing progress to integrate ESG strategies into our business and operations.

Introduction Our Business

Delivering on our mission requires that we maintain safety and soundness, financial strength, and operational resilience. It requires us to grow our talent for today and tomorrow. It also requires a commitment to examine our company's business and risk environment in search of new and better ways to serve our mission. For these reasons, we have established the following three focus areas to support our mission:

Practice Risk Management Excellence

nImprove our operations and risk management to maintain our safety and soundness;

nSeek to timely remediate outstanding significant safety and soundness issues; and

nEnhance operational resiliency with respect to our people, processes, and recovery capabilities.

Grow Talent for Today and Tomorrow

nDevelop our current and future leaders and team members;

nUphold a culture where talented and committed individuals work together to achieve success; and

nBuild strength through DEI, integrating DEI through all dimensions of our business.

Deliver Results

nGenerate strong financial results, build capital, and excel with respect to our FHFA and Corporate Scorecards;

nDeliver innovative solutions to advance the mission; and

nIncrease efficiency to enhance productivity and bolster our financial results.

Human Capital Management

Our people are integral to our company’s success. It is our goal to sustain an inclusive and equitable culture with a highly engaged diverse workforce focused on delivering on our mission. We are committed to growing our talent for today and tomorrow and seek to be an employer of choice that attracts top talent through our commitment to DEI, employee engagement, training, and other professional development opportunities. We also seek to implement competitive compensation programs and practices within the constraints of our conservatorship status. We evaluate the success of our human capital management by measuring and monitoring the performance, development, and retention of our employees.

Employees

At January 31, 2022, we had 7,284 full-time and 34 part-time employees. Our headquarters are in McLean, Virginia, and the majority of our employees reside in the Washington, D.C., metropolitan area.

Board and FHFA Oversight

We assist the CHC Committee of the Board of Directors and support them in their oversight of compensation and benefits, DEI, talent development, and strategies to strengthen our culture. Although the CHC Committee plays a significant role in these matters, FHFA is actively involved in its role as our Conservator and as our regulator. For more information, see Directors, Corporate Governance, and Executive Officers - Corporate Governance - Board of Directors and Board Committee Information — Authority of the Board of Directors and Board Committees.

Attracting, Developing, and Retaining Talent

In a marketplace where the competition to attract, develop, and retain talent is ever increasing, we strive to be an employer of choice. In doing so, we offer our employees a comprehensive suite of financial, health, and other benefits to support their financial, physical, and mental well-being at every stage of their career. We use data, analytics, and insights to inform our compensation and talent decisions. We also provide our employees with professional development and training opportunities to enhance their workforce competencies and capabilities.

Throughout the COVID-19 pandemic, we have offered flexible work arrangements and other benefits, such as expanded leave and expanded back-up childcare, to support our employees as they adjusted to all of the ways the COVID-19 pandemic reshaped their lives. In addition, we have continued to support the health and safety of our employees. We have actively monitored the effects of the pandemic and made decisions based on guidance from national, state, and local governments and public health authorities, including the CDC. The majority of our employees continued to work remotely as of December 31, 2021. To prepare for their return to the office, we have developed a hybrid approach where the majority of our employees will spend some of their time working in the office and some working remotely.Our approach seeks to create a more flexible experience for our employees with a continued focus on fostering culture, community, and career development.

Our overall voluntary turnover rate in 2021 increased slightly above our historical experience and has been tracking lower than financial services benchmarks. Certain areas of the company have experienced larger turnover rates, as market demand for certain skills has increased.

Introduction Our Business

DEI

We are committed to embedding DEI in our business and culture. At Freddie Mac, we have long been committed to the belief that our people should reflect the rich diversity of the communities in which we live. We use various types of inclusive engagements to encourage our employees to intentionally cultivate diverse relationships. In doing so, we can continue to build an environment that sparks productive dialogue, addresses unconscious bias, ignites innovation, and challenges the status quo. In addition, we periodically survey our employees to better understand employee engagement and capture insights into their needs and perspectives so that we can consider our workforce strategies accordingly. We believe that the result is a more diverse and engaged community delivering on our mission for our customers.

Freddie Mac has a Board-approved DEI strategic plan that organizes our efforts into three areas: employees, suppliers, and financial transaction counterparties. FHFA's Office of Minority and Women Inclusion has adopted regulations with respect to the promotion of diversity and inclusion and has provided us with guidance on areas of improvement. The CHC Committee is focused on our efforts to enhance DEI by incorporating all three areas of diversity focus into a single comprehensive strategy with annual goals, enhanced oversight, and regular reporting.

We prioritize attracting and recruiting a pipeline of diverse candidates, with the goal of advancing a culture of inclusion where we want everyone at the company to feel valued and like they belong. We reinforce DEI through organizational decisions and business activities, which include:

nWorking toward building a diverse pipeline of talent;

nPromoting a culture of inclusion and allyship;

nOffering targeted development and learning opportunities;

nOrganizing community engagement and volunteer opportunities; and

nMatching eligible charitable contributions.

We have 10 business resource groups as well as division-specific teams that support employee engagement by providing learning and networking opportunities that foster an inclusive workplace. In 2021, as part of our focus on inclusion, we added Juneteenth as a company-paid holiday and continued offering educational opportunities to provide multiple perspectives on social justice and equity issues. We have also expanded diversity through other programs, such as our neurodiversity hiring program.

Our DEI efforts are reflected in the composition of our workforce, leadership, and Board of Directors. For example, we are a majority-minority company, which means that over 50% of our workforce identifies as racially diverse. Our Single-Family business as well as our Human Resources and Internal Audit functions are led by women. For information on the composition of our Board of Directors, see Directors, Corporate Governance, and Executive Officers– Directors – Director Criteria, Diversity, Qualifications, Experience, and Tenure.

Business Segments

We have two reportable segments: Single-Family and Multifamily. For more information on our segments, see MD&A - Our Business Segments and Note 15.

Properties

Our principal offices consist of four office buildings we own in McLean, Virginia, comprising approximately 1.3 million square feet. We operate our business in the United States and its territories, and accordingly, we generate no revenue from and have no long-lived assets, other than financial instruments, in geographic locations other than the United States and its territories.

Government Regulation and Supervision

Our business is subject to extensive laws, regulations, and supervision. The laws and regulations to which we are subject cover all key aspects of our business, and directly and indirectly impact our product offerings, pricing, competitive position and strategic priorities, relationship with sellers and servicers, capital structure, cash needs and uses, privacy for borrowers and others, and cybersecurity. As a result, such laws and regulations have a significant effect on key drivers of our results of operations, including, for example, our capital and liquidity, guarantee fees, product offerings, risk management, and costs of compliance. Failure to comply with our legal and regulatory requirements could result in enforcement actions, investigations, fines, monetary and other penalties, and harm to our reputation. Our business and results of operations may also be directly and adversely affected by future legislative, regulatory, or judicial actions. Such actions could affect us in a number of ways, including by imposing significant additional legal, compliance, and other costs on us and limiting our business activities. For example, recent changes to our capital requirements will affect our business and risk management strategies, including our risk appetite, our risk-adjusted returns, and the impact of our CRT transactions on our capital needs, and will increase the amount

Introduction Our Business

of capital we will be required to retain or raise to exit from conservatorship.

In addition, our conservatorship and related matters significantly affect our management, business activities, financial condition, and results of operations. We are under the control of FHFA, as our Conservator, and are not managed to maximize stockholder returns. FHFA determines our strategic direction. We face a variety of different, and sometimes competing, business objectives and FHFA-mandated activities. FHFA has required us to make changes to our business that have adversely affected our financial results and could require us to make additional changes at any time. For example, FHFA may require us to undertake activities that reduce our profitability, expose us to additional credit, market, funding, operational, and other risks, or provide additional support for the mortgage market that serves our mission but adversely affects our financial results. Further, we can be put into receivership at the discretion of the Director of FHFA at any time for a number of reasons set forth in the GSE Act.

FHFA is also Conservator of Fannie Mae, our primary competitor. FHFA’s actions, as Conservator of both companies, could affect competition between us. It is also possible that FHFA could require us and Fannie Mae to take a uniform approach to certain activities, limiting innovation and competition, and possibly putting us at a competitive disadvantage because of differences in our respective businesses. FHFA also could limit our ability to compete with new entrants and other institutions. For additional information on conservatorship and related risks, see Introduction – About Freddie Mac–Conservatorship and Government Support for Our Business and Risk Factors–Conservatorship and Related Matters.

For additional information on government regulation and supervision and related risks, see Risk Factors -Legal and Compliance Risks.

Available Information

We file reports and other information with the SEC. In view of the Conservator's succession to all of the voting power of our stockholders, we have not prepared or provided proxy statements for the solicitation of proxies from stockholders since we entered into conservatorship, and do not expect to do so while we remain in conservatorship. Pursuant to SEC rules, our annual reports on Form 10-K contain certain information typically provided in an annual proxy statement.

We make available, free of charge through our website at www.freddiemac.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all other SEC reports and amendments to those reports as soon as reasonably practicable after we electronically file the material with the SEC. The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC.

We are providing our website addresses and the website address of the SEC here and elsewhere in this Form 10-K solely for your information. Information appearing on our website or on the SEC's website is not incorporated into this Form 10-K.

We provide disclosure about our debt securities on our website at www.freddiemac.com/debt. From this address, investors can access the offering circular and related supplements for debt securities offerings under Freddie Mac's global debt facility, including pricing supplements for individual issuances of debt securities. Similar information about our STACR® transactions and SCR debt notes is available at crt.freddiemac.com and mf.freddiemac.com/investors, respectively.

We provide disclosure about our mortgage-related securities, some of which are off-balance sheet obligations (e.g., K Certificates and SB Certificates), on our website at www.freddiemac.com/mbs and mf.freddiemac.com/investors. From these addresses, investors can access information and documents, including offering circulars and offering circular supplements, for mortgage-related securities offerings.

We provide additional information, including product descriptions, investor presentations, securities issuance calendars, transaction volumes and details, redemption notices, Freddie Mac research, and material developments or other events that may be important to investors, in each case as applicable, on the websites for our business divisions, which can be found at sf.freddiemac.com, mf.freddiemac.com, and capitalmarkets.freddiemac.com/capital-markets.

We provide information on our ESG efforts on our website freddiemac.com/about/esg.

Introduction Forward-Looking Statements

FORWARD-LOOKING STATEMENTS

We regularly communicate information concerning our business activities to investors, the news media, securities analysts, and others as part of our normal operations. Some of these communications, including this Form 10-K, contain "forward-looking statements." Examples of forward-looking statements include, but are not limited to, statements pertaining to the conservatorship, our current expectations and objectives for the Single-Family and Multifamily 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, the effects of natural disasters, other catastrophic events, including the COVID-19 pandemic, and significant climate change effects and actions taken in response thereto on our business, and our results of operations and financial condition. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond our control. Forward-looking statements are often accompanied by, and identified with, terms such as "could," "may," "will," "believe," "expect," "anticipate," "forecast," and similar phrases. These statements are not historical facts, but rather represent our expectations based on current information, plans, judgments, assumptions, estimates, and projections. Actual results may differ significantly from those described in or implied by such forward-looking statements due to various factors and uncertainties, including those described in the Risk Factors section of this Form 10-K and:

nUncertainty regarding the duration and severity of the COVID-19 pandemic and the effects of the pandemic and actions taken in response thereto on the U.S. economy and housing market, which could, in turn, adversely affect our business in numerous ways, including, for example, by increasing our credit losses, impairing the value of our mortgage-related securities, decreasing our liquidity and capital levels, and increasing our credit risk and operational risk;

nThe actions the U.S. government (including FHFA, Treasury, and Congress) may take, require us to take, or restrict us from taking, including actions to support the housing market, such as programs implemented in response to the COVID-19 pandemic or to implement the recommendations in FHFA's Conservatorship Scorecards, recent requirements and guidance related to equitable housing, and other objectives for us;

nThe effect of the restrictions on our business due to the conservatorship and the Purchase Agreement;

nChanges in our Charter, applicable legislative or regulatory requirements (including any legislation affecting the future status of our company), or the Purchase Agreement;

nChanges to our capital requirements and potential effects of such changes on our business strategies;

nChanges in the fiscal and monetary policies of the Federal Reserve, including changes in target interest rates and in the amount of agency MBS and agency CMBS purchased to support the market during the COVID-19 pandemic;

nChanges in tax laws;

nChanges in privacy and cybersecurity laws and regulations;

nChanges in accounting policies, practices, or guidance;

nChanges in economic and market conditions generally, and as a result of the COVID-19 pandemic, including changes in employment rates, interest rates, spreads, and house prices;

nChanges 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);

nThe success of our efforts to mitigate our losses on our Single-Family mortgage portfolio;

nThe success of our strategy to transfer mortgage credit risk through STACR, ACIS®, K Certificate, SB Certificate, and other CRT transactions;

nOur ability to maintain adequate liquidity to fund our operations;

nOur ability to maintain the security and resiliency of our operational systems and infrastructure, including against cyberattacks or other security incidents;

nOur ability to effectively execute our business strategies, implement new initiatives, and improve efficiency;

nThe adequacy of our risk management framework, including the adequacy of our capital framework for measuring risk;

nOur ability to manage mortgage credit risk, including the effect of changes in underwriting and servicing practices;

nOur ability to limit or manage our economic exposure and GAAP earnings exposure to interest-rate volatility and spread volatility, including the availability of derivative financial instruments needed for interest-rate risk management purposes and our ability to apply hedge accounting;

nOur operational ability to issue new securities, make timely and correct payments on securities, and provide initial and ongoing disclosures;

nOur reliance on CSS and the CSP for the operation of the majority of our Single-Family securitization activities, limits on our influence over CSS Board decisions, and any additional changes FHFA may require in our relationship with, or support of, CSS;

nChanges in the methodologies, models, assumptions, and estimates we use to prepare our financial statements, make business decisions, and manage risks;

Introduction Forward-Looking Statements

nChanges in investor demand for our debt or mortgage-related securities;

nOur ability to maintain market acceptance of the UMBS, including our ability to maintain alignment of the prepayment speeds of our and Fannie Mae's respective UMBS;

nChanges in the practices of loan originators, servicers, investors, and other participants in the secondary mortgage market;

nThe discontinuance of, transition from, or replacement of LIBOR and the adverse consequences it could have on our business and operations;

nThe occurrence of a major natural disaster, other catastrophic event, or significant climate change effects in areas in which our offices, significant portions of our total mortgage portfolio, or the offices of our counterparties are located, and for which we may be uninsured or significantly underinsured; and

n Other factors and assumptions described in this Form 10-K, including in the MD&A section.

Forward-looking statements are made only as of the date of this Form 10-K, and we undertake no obligation to update any forward-looking statements we make to reflect events or circumstances occurring after the date of this Form 10-K.

Management's Discussion and Analysis Market Conditions and Economic Indicators

Management's Discussion and Analysis of Financial Condition and Results of Operations

MARKET CONDITIONS AND ECONOMIC INDICATORS

The following graphs and related discussions present certain market and macroeconomic indicators that can significantly affect our business and financial results.

Interest Rates(1)

Quarterly Ending Rates

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

n The 30-year Primary Mortgage Market Survey (PMMS) interest rate is indicative of what a consumer could expect to be offered on a first-lien prime conventional conforming home purchase mortgage with an LTV of 80%. Increases (decreases) in the PMMS rate typically result in decreases (increases) in refinancing activity and total originations.

n Changes in 10-year benchmark interest rates can significantly affect the fair value of our financial instruments. We have elected hedge accounting for certain assets and liabilities in an effort to reduce GAAP earnings variability attributable to changes in benchmark interest rates.

n SOFR is a benchmark rate for secured overnight dollar-denominated financing, identified by certain banking regulators and market participants as a replacement for LIBOR.

n Among other things, changes in SOFR and 3-month LIBOR could affect the interest earned on our short-term investments and/or the interest expense on our debt funding.

Unemployment Rate and Monthly Net New Jobs

Source: U.S. Bureau of Labor Statistics.

nChanges in the national unemployment rate can affect several market factors, including the demand for single-family and multifamily housing and loan delinquency rates.

n The unemployment rate fell below 4% as of December 2021, down nearly three percentage points since December 2020. Many workers have exited the labor force and the labor force participation rate is well below its pre-pandemic peak.

Management's Discussion and Analysis Market Conditions and Economic Indicators

Single-Family Housing and Mortgage Market Conditions

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)

Source: Inside Mortgage Finance.

nDespite low levels of inventory, home sales increased in 2021. In 2022, we expect home sales to remain relatively flat compared to 2021 as higher mortgage interest rates and house prices offset the strong demand for housing.

nSingle-family house prices increased 16.8% in 2021, compared to an increase of 11.3% during 2020. Although supply constraints could continue to exert pressure on house prices, we expect house price growth to moderate in 2022.

nU.S. single-family loan origination volumes increased in 2021 compared to 2020 as a result of the low average mortgage interest rates, higher home sales, and increasing house prices. We expect total originations to decrease in 2022 primarily due to a decrease in refinance originations driven by higher mortgage interest rates.

Management's Discussion and Analysis Market Conditions and Economic Indicators

Multifamily Housing and Mortgage Market Conditions

Apartment Vacancy Rates and Change in Effective Rents

Source: Reis.

Apartment Completions and Net Absorption

(Units in thousands)

Source: Reis.

nVacancy rates returned to pre-pandemic levels during 2021. The decrease in vacancy rates was driven by higher demand for multifamily housing as a result of improving economic conditions.

nEffective rent growth (i.e., the average rent paid by the renter over the term of the lease, adjusted for concessions by the property owner and costs borne by the renter) was positive at the national level and in all of the major geographic markets in 2021.

nMultifamily property prices grew 23.6% in 2021, as investors continued to believe there was a need for additional rental housing in the U.S. and the overall investment environment remained attractive given low interest rates.

nNet absorption rates increased during 2021 driven by improving economic conditions, pent-up demand, increasing house prices, and rising income levels. Net absorptions exceeded completions for full-year 2021.

Management's Discussion and Analysis Market Conditions and Economic Indicators

Mortgage Debt Outstanding

Single-Family Mortgage Debt Outstanding as of December 31,

(UPB in billions)

Source: Federal Reserve Financial Accounts of the United States of America. For 2021, the amount is as of September 30, 2021 (latest available information).

Multifamily Mortgage Debt Outstanding as of December 31,

(UPB in billions)

Source: Federal Reserve Financial Accounts of the United States of America. For 2021, the amount is as of September 30, 2021 (latest available information).

nU.S. single-family mortgage debt outstanding is expected to increase year-over-year, driven by house price appreciation and first-time homebuyers. An increase in U.S. single-family mortgage debt outstanding typically results in the growth of our Single-Family mortgage portfolio.

nWhile the multifamily mortgage market grew, our share of multifamily mortgage debt outstanding remained relatively flat in 2021 due to a reduced FHFA Multifamily loan purchase cap for 2021.

Management's Discussion and Analysis Market Conditions and Economic Indicators

Delinquency Rates

Single-Family Serious Delinquency Rates

as of December 31,

Source: National Delinquency Survey from the Mortgage Bankers Association. For 2021, the total mortgage market rate is as of September 30, 2021 (latest available information).

Multifamily Delinquency Rates as of December 31,Source: Freddie Mac, FDIC Quarterly Banking Profile, Intex Solutions, Inc., and Wells Fargo Securities (Multifamily CMBS market, excluding REOs), American Council of Life Insurers (ACLI). For 2021, the amounts for FDIC insured institutions and ACLI investment bulletin are as of September 30, 2021 (latest available information) and the amount for the Multifamily CMBS market is as of December 31, 2021.

nOur Single-Family serious delinquency rate is based on the number of loans in our Single-Family mortgage portfolio that are three monthly payments or more past due or in the process of foreclosure. We report single-family loans in forbearance as delinquent during the forbearance period to the extent that payments are past due based on the loans' original contractual terms, irrespective of the forbearance plan.

nOur Single-Family serious delinquency rate declined year-over-year, due primarily to an increase in the number of borrowers exiting forbearance and completing loan workout solutions that return their mortgages to current status. 56% of the seriously delinquent loans at December 31, 2021 were covered by credit enhancements that are designed to partially reduce our credit risk exposure from these loans.

nWhile our Single-Family serious delinquency rate has declined since the peak in 2020, we expect the rate to remain above pre-pandemic levels as a result of the COVID-19 pandemic and the forbearance programs we are offering in response. Our Single-Family serious delinquency rate as of February 29, 2020 was 0.60%.

nOur Multifamily delinquency rate is based on the UPB of loans in our Multifamily mortgage portfolio that are two monthly payments or more past due or in the process of foreclosure. We report multifamily loans in forbearance as current as long as the borrowers are in compliance with their forbearance agreement, including the agreed upon repayment plan.

nOur Multifamily delinquency rate returned to pre-pandemic levels and remains low compared to many other market participants. Our credit enhancement coverage partially reduces our credit risk exposure from current and future delinquencies. For additional information on our delinquency and forbearance rates and credit enhancement coverage, see MD&A - Risk Management - Credit Risk - Multifamily Mortgage Credit Risk.

Management's Discussion and Analysis Consolidated Results of Operations

CONSOLIDATED RESULTS OF OPERATIONS

This discussion of our consolidated results of operations should be read in conjunction with our consolidated financial statements and accompanying notes.

We have three primary sources of revenue:

nNet interest income - Primarily consists of guarantee net interest income in Single-Family. We consolidate most of our Single-Family securitization trusts and, therefore, we recognize the loans held by the trust and the debt securities issued by the trust on our consolidated balance sheet. The difference between the interest income on these loans and the interest expense on the related debt represents the guarantee fees we receive as compensation for our guarantee of the principal and interest payments of the issued debt securities.

nGuarantee income - Primarily consists of guarantee income in Multifamily. We do not consolidate most of our Multifamily securitization trusts, and therefore, we do not recognize the loans held by the trust or the debt securities issued by the trust on our consolidated balance sheet. Rather, we separately account for our guarantee to the trust and recognize the revenue from our guarantee as guarantee income.

nInvestment gains (losses), net - Primarily consist of gains on sale of mortgage loans, net of interest-rate risk management activities, from our purchase and securitization activities in Multifamily. Because we do not consolidate most of our Multifamily securitization trusts, we account for most of our Multifamily securitizations as sales of the underlying loans. Net investment gains may fluctuate significantly from period-to-period based on the pricing of our new multifamily loan purchases, the volume and nature of our investment, funding, and hedging activities, and changes in market conditions, such as interest rates and market spreads.

We have two primary expense items:

nCredit-related expenses - Primarily consist of benefit (provision) for credit losses, credit enhancement expense, benefit for credit enhancement recoveries, and REO operations expense. Benefit (provision) for credit losses primarily represents changes in expected credit losses on our single-family mortgage loans held-for-investment. Credit enhancement expense and benefit for credit enhancement recoveries include the costs we incur to transfer credit risk and the changes in expected recoveries, respectively, from certain contracts that are accounted for as freestanding credit enhancements. See MD&A - Our Business Segments - Single-Family- Products and Activities, MD&A - Our Business Segments - Multifamily- Products and Activities, and Note 6 for additional information on our accounting for credit enhancements. REO operations expense represents expenses related to foreclosed properties.

nOperating expenses - Primarily consist of administrative expenses, the legislated 10 basis point fee, and other expenses we incur to run our business.

Management's Discussion and Analysis Consolidated Results of Operations

The table below compares our consolidated results of operations for the past three years.

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

Year Over Year Change

See Critical Accounting Estimates for information concerning certain significant accounting policies and estimates applied in determining our reported results of operations and Note 1 for a summary of our accounting policies and the related notes in which information about them can be found.

Net Revenues

Net Interest Income

Net interest income consists of guarantee net interest income, investments net interest income, and income (expense) from hedge accounting.

n We refer to the net interest income generated by our consolidated securitization trusts as guarantee net interest income. Guarantee net interest incomeprimarily consists of the guarantee fees in Single-Family, as we consolidate most of our Single-Family securitization trusts, and consists of three components:

lContractual net interest income, which is equal to the difference between the interest income on loans held by consolidated trusts and the interest expense on debt securities issued by consolidated trusts. This amount represents the ongoing contractual monthly guarantee fee we receive for managing the credit risk associated with mortgage loans held by consolidated trusts.

lThe legislated 10 basis point fee on single-family loans that is remitted to Treasury as required by law.

lDeferred fee income, which primarily consists of recognition of premiums and discounts on mortgage loans and debt securities of consolidated trusts and the fees that we receive or pay when we acquire single-family loans, which represent a portion of the guarantee fee compensation we receive for managing the credit risk associated with mortgage loans held by consolidated trusts. These amounts are recognized in net interest income based on the effective yield over the contractual life of the associated financial instrument and may vary significantly from period to period, primarily based on changes in actual prepayments on the underlying loans. Increases in actual prepayments result in a faster rate of deferred fee income recognition, while decreases in actual prepayments result in a slower rate of deferred fee income recognition. In addition, there is a difference in the timing of deferred fee income recognition

Management's Discussion and Analysis Consolidated Results of Operations

between debt securities of consolidated trusts and the underlying loans due to the payment delay associated with the pass-through of principal payments on the underlying loans to the security holders.

n We refer to the net interest income generated by our investments portfolio as investments net interest income. Investments net interest income primarily consists of the difference between the interest income earned on the assets in our investments portfolio and the interest expense incurred on the liabilities used to fund those assets.

n Income (expense) from hedge accountingprimarily consists of amortization of previously deferred hedge accounting basis adjustments and the earnings mismatch on qualifying fair value hedge relationships, which is equal to the difference between fair value changes for the hedging instrument, including the accrual of periodic cash settlements, and fair value changes for the hedged item attributable to the risk being hedged. See Note 9 for additional information on hedge accounting.

The table below presents the components of net interest income.

Table 2 - Components of Net Interest Income

Year Over Year Change

Guarantee net interest income:

Key Drivers:

nGuarantee net interest income

l2021 vs. 2020 - Increased primarily due to continued mortgage portfolio growth, higher average portfolio guarantee fee rates, and higher deferred fee income recognition in Single-Family.

l2020 vs. 2019 - Increased primarily due to continued mortgage portfolio growth coupled with higher contractual guarantee fee rates in Single-Family.

nInvestments net interest income

l2021 vs. 2020 - Decreased primarily due to a decline in the size of the mortgage-related investments portfolio, partially offset by lower funding costs.

l2020 vs. 2019 - Increased primarily due to lower funding costs, partially offset by a change in our investment mix as the lower-yielding other investments portfolio represented a larger percentage of our total investments portfolio.

nIncome (expense) from hedge accounting

l2021 vs. 2020 - Expense decreased primarily due to lower amortization of hedge accounting-related basis adjustments driven by a decline in the unamortized balance.

l2020 vs. 2019 - Expense increased primarily due to higher amortization of hedge accounting-related basis adjustments driven by higher prepayments, partially offset by higher income related to accruals of periodic cash settlements on derivatives in hedging relationships.

Management's Discussion and Analysis Consolidated Results of Operations

Net Interest Yield Analysis

The table below presents an analysis of interest-earning assets and interest-bearing liabilities. To calculate the average balances, we generally use a daily weighted average of amortized cost. When daily average balance information is not available, such as for mortgage loans, we use monthly averages. Mortgage loans on non-accrual status, where interest income is generally recognized when collected, are included in the average balances.

Table 3 - Analysis of Net Interest Yield

Year Ended December 31,

Interest-earning assets:

Interest-bearing liabilities:

Debt of Freddie Mac:

(1) Loan fees included in interest income were $3.1 billion, $4.6 billion, and $3.3 billion during 2021, 2020, and 2019, respectively.

Management's Discussion and Analysis Consolidated Results of Operations

Net Interest Income Rate / Volume Analysis

The table below presents a rate and volume analysis of our net interest income. Our net interest income reflects the reversal of interest income accrued, net of interest received on a cash basis, related to mortgage loans that are on non-accrual status.

Table 4 - Net Interest Income Rate / Volume Analysis

Variance Analysis

Interest-earning assets:

Interest-bearing liabilities:

Debt of Freddie Mac:

(1) The total change variances are allocated between rate and volume based on the relative size of each variance.

Guarantee Income

Guarantee income relates primarily to our Multifamily securitizations, as we do not consolidate most of our Multifamily securitization trusts. For additional details on our Multifamily securitizations, see MD&A -Our Business Segments - Multifamily - Products and Activities - Loan Purchase, Securitization, and Guarantee Activities.

Guarantee income consists of the following:

nContractual guarantee fees - Consists of the fees earned from guarantees issued to third parties and securitization trusts that we do not consolidate.

nGuarantee obligation amortization - Represents the amortization of the initial fair value of the guarantee, which is typically equal to the compensation we received for issuing the guarantee, over the term of the guarantee as we are released from risk.

nGuarantee asset fair value changes - Represents the change in fair value of our right to receive contractual guarantee fees. Because our Multifamily loans contain prepayment protection, declining interest rates generally result in a higher guarantee asset fair value, with the opposite effect occurring when interest rates increase.

Management's Discussion and Analysis Consolidated Results of Operations

The table below presents the components of guarantee income.

Table 5 - Components of Guarantee Income

Year Over Year Change

Key Drivers:

n2021 vs. 2020- Decreased as continued growth in our Multifamily guarantee portfolio was offset by the impacts of higher interest rates on the fair values of our guarantee assets.

n2020 vs. 2019- Increased primarily driven by continued growth in our Multifamily guarantee portfolio, coupled with lower fair value losses on our guarantee assets due to lower interest rates.

Investment Gains (Losses), Net

Net investment gains primarily consist of the gains on sale of mortgage loans from our multifamily loan purchase and securitization activities. Net investment gains also include revenues from sales of single-family delinquent and reperforming loans and gains and losses on investments in mortgage-related and other investments securities. These amounts are shown net of gains and losses from the related debt funding and interest-rate risk management activities, as applicable. Net investment gains can vary significantly from period-to-period based on a number of factors, such as:

nPricing of new multifamily mortgage loans;

nThe nature and volume of our investment, funding, and interest-rate risk management activities, including the volume of multifamily loan purchase commitments and mortgage loans for which we have elected the fair value option; the volume of held-for-sale multifamily loans measured at lower-of-cost-or-fair value; the volume of held-for-sale single-family mortgage loans; the size of our investments portfolios and volume of sales of available-for-sale securities; the volume and type of debt selected for repurchase based on our investment and funding strategies, including our efforts to support the liquidity and price performance of our mortgage-related securities; and changes in the composition of our derivative portfolio; and

nChanges in market conditions, such as interest rates, market spreads, and implied volatility.

Derivative instruments are a key component of our interest-rate risk management strategy. We use derivatives to economically hedge the interest-rate risk of our financial assets and liabilities and manage our exposure to interest-rate risk on an economic basis to a low level as measured by our models. In addition, we routinely enter into commitments to purchase and sell mortgage loans and mortgage-related securities. The majority of these commitments are accounted for as derivative instruments. For additional information on derivative instruments, see Note 9.

We align our derivative portfolio to economically hedge the changing duration of our assets and liabilities and apply fair value hedge accounting to certain single-family mortgage loans and long-term debt to reduce our GAAP earnings variability. As a result, interest-rate-related fair value gains and losses that we recognize on financial instruments that we measure at fair value generally have offsetting impacts from the derivative instruments that we use to economically hedge interest-rate risk. For more information about our interest-rate risk management activities and the sensitivity of reported GAAP earnings to those activities, see MD&A - Risk Management- Market Risk.

Management's Discussion and Analysis Consolidated Results of Operations

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

Table 6 - Investment Gains (Losses), Net

Year Over Year Change

Key Drivers:

n2021 vs. 2020 - Increased primarily due to higher gains in Multifamily from higher pricing margins for new loan purchases and greater spread tightening, partially offset by a smaller volume of new loan purchases as a result of a reduced Multifamily loan purchase cap in 2021.

n2020 vs. 2019 - Increased primarily due to higher gains in Multifamily from higher pricing margins and greater volume of new loan purchases.

Credit-Related Expense

Benefit (Provision) for Credit Losses

Our benefit (provision) for credit losses relates primarily to single-family loans held-for-investment and can vary substantially from period to period based on a number of factors, such as changes in actual and forecasted house prices and interest rates, borrower prepayments and delinquency rates, events such as pandemics, the type and volume of our loss mitigation and foreclosure activity, and government assistance provided to borrowers. See MD&A - Critical Accounting Estimates for additional information.

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

Table 7 - Benefit (Provision) for Credit Losses

Year Over Year Change

Single-Family

n2021 vs. 2020 - A benefit for credit losses in 2021 compared to a provision for credit losses in 2020 driven by the following factors:

lA reserve release due to reduced expected credit losses related to COVID-19 during 2021 as economic conditions improved. Our provision for credit losses increased during 2020 due to the increase in expected credit losses related to the economic effects of the pandemic.

lThis was partially offset by an increase in expected losses on new single-family loans due to growth in our Single-Family mortgage portfolio. We recognize expected credit losses at the time of loan acquisition.

n2020 vs. 2019 - A provision for credit losses in 2020 compared to a benefit for credit losses in 2019 primarily driven by the following factors:

lA provision for credit losses due to:

–Increased expected credit losses related to COVID-19 - Our provision for credit losses increased due to the increase in expected credit losses related to the economic effects of the COVID-19 pandemic.

–Portfolio growth - The expected losses on new single-family loans increased due to growth in our Single-Family mortgage portfolio. We recognize expected credit losses at the time of loan acquisition.

lThis was partially offset by a decrease in expected losses driven by growth in realized and forecasted house prices and declines in forecasted interest rates.

Management's Discussion and Analysis Consolidated Results of Operations

Multifamily

n2021 vs. 2020 - A benefit for credit losses in 2021 compared to a provision for credit losses in 2020 driven by improved actual and forecasted economic factors.

n2020 vs. 2019 - An increase in provision due to higher expected credit losses as a result of the COVID-19 pandemic.

Credit Enhancement Expense

Credit enhancement expense primarily relates to certain single-family CRT transactions that are accounted for as freestanding credit enhancements and includes the premiums paid to transfer credit risk to third parties and transaction and other costs incurred to enter into those transactions.

Key Drivers:

n2021 vs. 2020 and 2020 vs. 2019 - Increased $460 million and $309 million, respectively, primarily due to higher outstanding cumulative volumes of CRT transactions.

See MD&A - Our Business Segments - Single-Family -Products and Activities andMD&A - Our Business Segments - Multifamily -Products and Activities for additional information on our credit enhancements.

Benefit for (Decrease in) Credit Enhancement Recoveries

Benefit for (decrease in) credit enhancement recoveries primarily relates to certain single-family CRT transactions that are accounted for as freestanding credit enhancements and represents changes in expected recoveries from those transactions. We recognize expected recoveries from freestanding credit enhancements at the same time that we recognize an allowance for credit losses on the covered loans, measured on the same basis as the allowance for credit losses on the covered loans.

Key Drivers:

n2021 vs. 2020 - Decreased $865 million as a result of the corresponding decrease in expected credit losses.

n2020 vs. 2019-Increased $282 million as a result of the corresponding increase in expected credit losses due to the COVID-19 pandemic.

Management's Discussion and Analysis Consolidated Balance Sheets Analysis

CONSOLIDATED BALANCE SHEETS ANALYSIS

The table below compares our summarized consolidated balance sheets.

Table 8 - Summarized Consolidated Balance Sheets

December 31, Year Over Year Change

Assets:

Liabilities and Equity:

Liabilities:

Key Drivers:

As of December 31, 2021 compared to December 31, 2020:

nCash and cash equivalents and securities purchased under agreements to resell decreased on a combined basis primarily due to a decrease in trust cash driven by lower loan prepayments and a decline in our operating cash due to a lower cash window purchase forecast and continued funding of maturities, calls, and buybacks of debt of Freddie Mac without issuing new debt.

nMortgage loans, net and debt increased primarily due to the increase in the size of the Single-Family mortgage portfolio.

nOther assets decreased primarily due to lower servicer receivables driven by a decrease in loan prepayments.

Management's Discussion and Analysis Our Portfolios

OUR PORTFOLIOS

In connection with the change in our reportable segments, we updated the definitions of our portfolio balances and aligned the definitions across our two reportable segments. Prior periods have been revised to conform to the current period presentation.

Mortgage Portfolio

Our mortgage portfolio includes assets held by both business segments and consists of:

nSecuritized mortgage loans - Loans held by securitization trusts that issue securities that we guarantee.

nUnsecuritized mortgage loans

lSecuritization pipeline and other loans - Single-family and multifamily loans that we have purchased for cash and aggregate on our balance sheet prior to securitization and other multifamily loans we intend to hold for the foreseeable future.

lSeasoned loans - Delinquent and modified single-family loans that we have purchased from securitization trusts. Certain of these loans have re-performed, either on their own or through modification or other loss mitigation activity.

nOther - Primarily consists of other mortgage-related guarantees.

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

Table 9 - Mortgage Portfolio

(In millions) Single-Family Multifamily Total Single-Family Multifamily Total

Securitized mortgage loans:

Unsecuritized mortgage loans:

Guarantee Portfolio

Our guarantee portfolio primarily consists of mortgage-related securities guaranteed by Freddie Mac in exchange for guarantee fees. This amount differs from the securitized mortgage loans amount included in the mortgage portfolio because of two primary factors: (1) it includes only the UPB of securities guaranteed by Freddie Mac and excludes the UPB of any unguaranteed securities issued by securitization trusts and (2) it reflects timing differences between the receipt of mortgage payments and the pass-through of those payments to security holders. The other category primarily consists of other mortgage-related guarantees.

Management's Discussion and Analysis Our Portfolios

The table below presents the guarantee portfolio by segment.

Table 10 - Guarantee Portfolio

(In millions) Single-Family Multifamily Total Single-Family Multifamily Total

Guaranteed mortgage-related securities:

Our guarantee portfolio excludes guarantees of Fannie Mae securities and other similar transactions in which we do not directly guarantee mortgage credit risk in exchange for guarantee fees. See Note 5for additional information on our guarantee activities.

Investments Portfolio

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

Mortgage-Related Investments Portfolio

We primarily use our mortgage-related investments portfolio to provide liquidity to the mortgage market and support our loss mitigation activities. Our mortgage-related investments portfolio includes assets held by both business segments and consists of unsecuritized mortgage loans and mortgage-related securities. We primarily invest in mortgage-related securities that we issue or guarantee, although we may also invest in other agency mortgage-related securities.

The Purchase Agreement limits the size of our mortgage-related investments portfolio to a maximum amount of $250 billion, which will be reduced to $225 billion on December 31, 2022. 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 Conservatorship and Related Matters.

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

Table 11 - Mortgage-Related Investments Portfolio

(In millions) Single-Family Multifamily Total Single-Family Multifamily Total

10% of notional amount of interest-only securities $12,517 $6,586

Other Investments Portfolio

Our other investments portfolio, which includes the liquidity and contingency operating portfolio, is primarily used for short-term liquidity management, collateral management, and asset and liability management. The assets in the other investments portfolio are primarily allocated to the Single-Family segment. See Liquidity and Capital Resources for additional information on our other investments portfolio.

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 our chief operating decision maker manages our business.

During 2021, our chief operating decision maker began making decisions about allocating resources and assessing segment performance based on two reportable segments, Single-Family and Multifamily. In prior periods, we managed our business based on three reportable segments, Single-Family Guarantee, Multifamily, and Capital Markets. As our mortgage-related investments portfolio has declined over time, our capital markets activities have become increasingly focused on supporting our Single-Family and Multifamily businesses. As a result, we determined that, effective in 2021, our Capital Markets segment should no longer be considered a separate reportable segment, and our chief operating decision maker no longer reviews separate financial results or discrete financial information for our capital markets activities. Substantially all of the revenues and expenses that were previously directly attributable to our Capital Markets segment are now included in our Single-Family segment, while certain administrative expenses and other centrally-incurred costs previously allocated to the Capital Markets segment are now allocated between the Single-Family and Multifamily segments using various methodologies depending on the nature of the expense.

In connection with this change, we also changed the measure of segment profit and loss for each segment to be based on net income and comprehensive income calculated using the same accounting policies we use to prepare our general purpose financial statements in conformity with generally accepted accounting principles. The financial results of each reportable segment include directly attributable revenue and expenses. We allocate interest expense and other funding and hedging-related costs and returns on certain investments to each reportable segment using a funds transfer pricing process. We fully allocate to each reportable segment the administrative expenses and other centrally-incurred costs that are not directly attributable to a particular segment using various methodologies depending on the nature of the expense. As a result, the sum of each income statement line item for the two reportable segments is equal to that same income statement line item for the consolidated entity. We have discontinued the reclassifications of certain activities between various line items that were included in our previous measure of segment profit and loss. Prior period information has been revised to conform to the current period presentation. See Note 15 for additional information on the change in our segment reporting presentation.

Segment Description

Management's Discussion and Analysis Our Business Segments

Segment Net Income (Loss) and Comprehensive Income (Loss)

The graphs below show our net income (loss) and comprehensive income (loss) by segment.

Segment Net Income (Loss)

(In millions)

Segment Comprehensive Income (Loss)

(In millions)

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

Single-Family

Business Overview

Our Single-Family segment provides liquidity and support to the single-family market through a variety of activities that include the purchase, securitization, and guarantee of single-family loans originated by lenders. Central to our mission is our commitment to helping more families attain affordable and sustainable housing and to increasing equitable access to housing finance.

The U.S. residential mortgage market consists of a primary mortgage market that links homebuyers and lenders, and a secondary mortgage market that links lenders and investors. The size of the U.S. residential mortgage market is affected by many factors, including changes in interest rates, unemployment rates, homeownership rates, house prices, the supply of housing, lender preferences regarding credit risk, and borrower preferences regarding mortgage debt.

In accordance with our Charter, we participate in the secondary mortgage market. The mix of loan products we purchase is affected by several factors, including the volume of loans meeting the requirements of our Charter, the volume meeting our risk appetite and originated according to our purchase standards, and the loan purchase and securitization activity of other financial institutions.

Our primary business model is to acquire loans that lenders originate and then pool those loans into guaranteed mortgage-related securities that transfer interest-rate, prepayment, and liquidity risk to investors and can be sold in the capital markets. We consolidate most of our Single-Family securitization trusts and, therefore, we recognize the loans held by the trust and the debt securities issued by the trust on our balance sheet and recognize the guarantee fees we receive as net interest income. To reduce our exposure under our guarantees, we transfer credit risk on a portion of our Single-Family mortgage portfolio to the private market in certain instances. The returns we generate from these activities are primarily derived from the guarantee fees we receive in exchange for providing our guarantee of the principal and interest payments of the issued mortgage-related securities.

The diagram below illustrates our primary business model.

Products and Activities

Our Single-Family business primarily consists of activities related to providing market liquidity by purchasing and securitizing mortgage loans and issuing guaranteed mortgage-related securities, transferring credit risk, performing loss mitigation activities, and investing in mortgage-related and other investments. Certain of our loan products and programs have been designed to address affordability challenges, particularly in underserved markets.

Loan Purchase, Securitization, and Guarantee Activities

Cash Window Transactions

One of the primary ways we acquire mortgage loans and provide liquidity to our Single-Family lender customers is by purchasing loans for aggregation in our securitization pipeline through our cash window. In these transactions, we purchase mortgage loans from our customers in exchange for cash consideration. We enter into forward commitments with lenders in advance of the loan purchase date to purchase loans through our cash window at a fixed price for our securitization pipeline, allowing lenders to offer borrowers the opportunity to lock in the interest rate on the mortgage prior to loan origination. We refer to the loan as being in our securitization pipeline for the period of time between loan purchase and securitization.

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

We typically economically hedge the market risk exposure of our securitization pipeline by entering into forward sale commitments and obtain permanent financing for the loans in our securitization pipeline after a short aggregation period by securitizing the loans into guaranteed mortgage-related securities. We sell the resulting securities to third-party investors, typically through cash auctions, and may also retain certain of the securities in our mortgage-related investments portfolio prior to selling them to third parties.

The Purchase Agreement requires us to purchase loans for cash consideration; operate this cash window with non-discriminatory pricing; and comply with directives, regulations, restrictions, or other requirements prescribed by FHFA related to equitable secondary market access by community lenders. In September 2021, the $1.5 billion Purchase Agreement limit on cash window volumes that was to begin on January 1, 2022 was suspended. We will continue to manage cash window activities in accordance with our risk limits and guidance from FHFA. For additional information about the Purchase Agreement, see MD&A - Conservatorship and Related Matters.

The diagram below shows the process for acquiring and securitizing loans in our cash window transactions.

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

Guarantor Swap Transactions

In addition to cash window transactions, another primary way we acquire loans and provide liquidity to our Single-Family lender customers is by securitizing loans into guaranteed mortgage-related securities in guarantor swap transactions. Our largest guarantor swap customers are primarily large mortgage banking companies and commercial banks. In these transactions, we purchase mortgage loans from our customers in exchange for a security backed by those same loans, as shown in the diagram below:

Advances to Lenders

We also provide liquidity to certain of our small and medium-sized lenders through our early funding programs, where we advance funds to lenders for mortgage loans prior to the loans being pooled and securitized. In some cases, the early funded mortgages are ultimately delivered through cash window purchase transactions. We account for these transactions as advances that are fully collateralized by the mortgage loans and recognize the associated fees as interest income on the advances from the early funding date to the final settlement date.

SecuritizationProducts

We offer the following types of securitization products to our customers.

Level 1 Securitization Products

The securities we issue in cash window securitizations and guarantor swap transactions are Level 1 Securitization Products, which are pass-through securities that represent undivided beneficial interests in trusts that hold pools of loans.

We issue the following types of Level 1 Securitization Products:

nUMBS - Single-class pass-through securities issued through the CSP with a 55-day payment delay for TBA-eligible fixed-rate mortgage loans. The UMBS is a single (common) security that is issued by either Fannie Mae or us. The UMBS market is designed to enhance the overall liquidity of TBA-eligible Freddie Mac and Fannie Mae securities by supporting their fungibility without regard to which company is the issuer. SIFMA permits UMBS TBA contracts to be settled by delivery of UMBS issued by either Freddie Mac or Fannie Mae under its good-delivery guidelines.

n55-day MBS - Single-class pass-through securities issued through the CSP with a 55-day payment delay for non-TBA-eligible fixed-rate mortgage loans.

n ARM PCs - Single-class pass-through securities with a 75-day payment delay for ARM products. We do not use the CSP to issue ARM PCs.

In prior years, we also issued Gold PCs, which weresingle-class pass-through securities with a 45-day payment delay for fixed-rate mortgage loans. We discontinued the issuance of Gold PCs in 2019. Existing Gold PCs that are not entirely resecuritized are eligible for exchange into UMBS (for TBA-eligible securities) or 55-day MBS (for non-TBA-eligible securities).

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

All Level 1 Securitization Products are backed only by mortgage loans that we have acquired. We offer (or previously offered) all of the above products through both guarantor swap and cash window programs.

We also periodically use Level 1 Securitization Products to securitize certain reperforming loans subsequent to purchasing them from the original securities pool, depending on market conditions, business strategy, credit risk considerations, and operational efficiency.

When we issue a Level 1 Securitization Product, we retain the credit risk of the underlying mortgage loans by guaranteeing the principal and interest payments of the issued securities and transfer the interest-rate, prepayment, and liquidity risks of those loans to the investors in the securities. For our fixed-rate Level 1 Securitization Products, we guarantee the timely payment of principal and interest. For our ARM PCs, we guarantee the timely payment of the weighted average coupon interest rate for the underlying loans, and we also guarantee the full and final payment of principal, but not the timely payment of principal. In exchange for our guarantee of Level 1 securitization products, we receive guarantee fees that are commensurate with the aggregate risks assumed and that we expect will, over the long-term, provide income that exceeds the credit-related and administrative expenses on the underlying loans and also provide a return on the capital that would be needed to support the related credit risk. The guarantee fees charged on new acquisitions generally consist of:

n A contractual monthly fee paid as a percentage of the UPB of the underlying loan, including the legislated 10 basis point fee and

n Fees we receive or pay when we acquire a loan, which include credit fees and buy-up and buy-down fees. Credit fees are calculated based on credit risk factors such as the loan product type, loan purpose, LTV ratio, and credit score, and are charged to compensate us for higher levels of risk in some loan products. Buy-up and buy-down fees are payments made or received to buy up or buy down, respectively, the monthly contractual guarantee fee and are paid in conjunction with the formation of a security to provide for a uniform net coupon rate for the mortgage pool underlying the security.

In general, we must obtain FHFA's approval to implement significant across-the-board changes to our credit fees. In addition, from time to time, FHFA issues directives or guidance to us affecting the levels of guarantee fees that we may charge. In January 2022, FHFA announced targeted increases to Freddie Mac's and Fannie Mae’s credit fees for certain high balance loans and second home loans, effective for deliveries and acquisitions beginning April 1, 2022.

In order to issue mortgage-related securities, we establish trusts pursuant to our Master Trust agreements and place the mortgage loans in the trust, which issues securities backed by those mortgage loans. The servicer administers the collection of borrowers' payments on their loans and remits the collected funds to us. We administer the distribution of payments to the investors in the mortgage-related securities, net of any applicable guarantee fees. When we securitize mortgage loans using trusts, Freddie Mac typically functions in its capacity as depositor, guarantor, administrator, and trustee of the trusts. We consolidate our Single-Family Level 1 Securitization Product trusts and recognize the mortgage loans held by and debt issued by those trusts on our consolidated balance sheets. As a result, we recognize guarantee fees for these products as the difference between the interest income on the loans held by the trusts and the interest expense on the debt issued by the trusts. This amount is referred to as guarantee net interest income.

When a borrower prepays a loan that we have securitized, the outstanding balance of the security owned by investors is reduced by the amount of the prepayment. If the borrower becomes delinquent, we continue to make the applicable payments to the investors in the mortgage-related securities pursuant to our guarantee until we purchase the loan out of the securitization trust. We have the option to purchase specified loans, including certain delinquent loans, from the trust at a purchase price equal to the current UPB of the loan, less any outstanding advances of principal that have been previously distributed. At the instruction of FHFA, we purchase loans from trusts when they reach 24 months of delinquency, except for loans that meet certain criteria (e.g., permanently modified or foreclosure referral), which may be purchased sooner. Many delinquent loans are purchased from trusts before they reach 24 months of delinquency under one of the exceptions provided. We must obtain FHFA’s approval to implement changes to our policy to purchase loans from trusts. We implemented the 24-month policy on January 1, 2021. Prior to that time, in accordance with FHFA instruction, we generally purchased loans from trusts if they were delinquent for 120 days, subject to certain exceptions.

Resecuritization Products

Resecuritization products represent beneficial interests in pools of Level 1 Securitization Products and certain other types of mortgage assets. We create these securities by using Level 1 Securitization Products or our previously issued resecuritization products as the underlying collateral. We leverage the issuance of these securities to expand the range of investors in our mortgage-related securities to include those seeking specific security attributes. Similar to our Level 1 Securitization Products, we guarantee the payment of principal and interest to the investors in our resecuritization products. We do not charge a guarantee fee for these securities if the underlying collateral is already guaranteed by us since no additional credit risk is introduced, although we typically receive a transaction fee as compensation for creating the security and future administrative responsibilities. We use the CSP for many of the securities administration activities for our resecuritization products.