fmcc-20241231
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended December 31, 2024
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2024 (the last business day of the registrant's most recently completed second fiscal quarter) was $0.9 billion.
As of January 31, 2025, 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 6
n Forward-Looking Statements 10
n Housing and Mortgage Market Conditions 12
n Consolidated Results of Operations 14
n Consolidated Balance Sheets Analysis 20
n Our Portfolios 21
n Our Business Segments 23
n Risk Management 47
l Credit Risk 48
l Market Risk 75
l Operational Risk 80
l Compliance Risk 83
n Liquidity and Capital Resources 84
n Conservatorship and Related Matters 95
n Regulation and Supervision 98
n Critical Accounting Estimates 106
RISK FACTORS 107
LEGAL PROCEEDINGS 127
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 129
n Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 130
n Consolidated Financial Statements 132
CONTROLS AND PROCEDURES 214
OTHER INFORMATION 216
DIRECTORS, CORPORATE GOVERNANCE, AND EXECUTIVE OFFICERS 217
n Corporate Governance 224
n Executive Officers 234
EXECUTIVE COMPENSATION 237
n Compensation Discussion and Analysis 237
n Compensation and Risk 252
n CEO Pay Ratio 253
n 2024 Compensation Information for NEOs 254
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 265
PRINCIPAL ACCOUNTING FEES AND SERVICES 267
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 269
EXHIBIT INDEX 278
Table of Contents MD&A Table Index
MD&A TABLE INDEX
Table Description Page
1 Summary of Consolidated Statements of Income and Comprehensive Income 14
2 Components of Net Interest Income 14
3 Analysis of Net Interest Yield 16
4 Net Interest Income Rate / Volume Analysis 17
5 Components of Non-Interest Income 18
6 (Provision) Benefit for Credit Losses 18
7 Components of Non-Interest Expense 19
8 Summarized Consolidated Balance Sheets 20
9 Mortgage Portfolio 21
10 Mortgage-Related Investments Portfolio 22
11 Other Investments Portfolio 22
12 Single-Family Segment Financial Results 37
13 Multifamily Segment Financial Results 46
14 Allowance for Credit Losses Activity 50
15 Allowance for Credit Losses Ratios 50
16 Principal Amounts Due for Held-for-Investment Loans 51
17 Single-Family New Business Activity 54
18 Single-Family Mortgage Portfolio Newly Acquired Credit Enhancements 55
19 Single-Family Mortgage Portfolio Credit Enhancement Coverage Outstanding 56
21 Credit Enhancement Coverage by Year of Origination 57
22 Single-Family Mortgage Portfolio Without Credit Enhancement 57
24 Characteristics of the Loans in Our Single-Family Mortgage Portfolio 60
25 Single-Family Mortgage Portfolio Attribute Combinations 61
26 Seriously Delinquent Single-Family Loans 62
27 Single-Family Relief Refinance Loans 63
28 Single-Family Completed Loan Workout Activity 63
29 Credit Characteristics of Single-Family Modified Loans 63
30 Payment Performance of Single-Family Modified Loans 63
31 Single-Family REO Activity 64
32 Single-Family Collateral Deficiency Ratios 64
34 Multifamily Mortgage Portfolio CRT Issuance 67
37 Single-Family Mortgage Purchases from Non-Depository Sellers 71
38 Single-Family Mortgage Portfolio Non-Depository Servicers 71
39 Single-Family Primary Mortgage Insurers 72
40 Single-Family ACIS Counterparties 72
41 Derivative Counterparty Credit Exposure 74
42 PVS-YC and PVS-L Results Assuming Shifts of the Yield Curve 77
43 Duration Gap and PVS Results 78
44 PVS-L Results Before Derivatives and After Derivatives 78
FREDDIE MAC | 2024 Form 10-K ii
Table of Contents MD&A Table Index
Table Description Page
45 GAAP Fair Value Sensitivity to Changes in Interest Rates 80
46 Liquidity Sources 85
47 Funding Sources 86
48 Debt of Freddie Mac Activity 87
49 Maturity and Redemption Dates 88
50 Debt of Consolidated Trusts Activity 88
51 Freddie Mac Credit Ratings 89
52 Net Worth Activity 91
53 Regulatory Capital Components 92
54 Statutory Capital Components 92
55 Capital Metrics Under ERCF 93
57 Current and 2025-2027 Affordable Housing Goal Benchmark Levels 102
58 Forecasted House Price Growth Rates 106
59 Board Compensation Levels 232
60 Director Compensation 233
64 Summary Compensation Table 254
65 Grants of Plan-Based Awards 256
66 SERP Benefit and SERP II Benefit 258
68 Stock Ownership by Directors and Executive Officers 263
69 Stock Ownership by Greater-Than 5% Holders 263
FREDDIE MAC | 2024 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 a portion of our 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, mortgage-related securities, and other types of assets. 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.
Business Results
Consolidated Financial Results
Net Revenues and Net Income
(In billions)
Net Worth as of December 31,
(In billions)
Key Drivers:
n2024 vs. 2023
lNet income was $11.9 billion, an increase of 13% year-over-year, primarily driven by higher net revenues, partially offset by a credit reserve build in Single-Family in 2024 compared to a credit reserve release in Single-Family in 2023.
lNet revenues were $23.9 billion, up 13% year-over-year, driven by higher net interest income and higher non-interest income.
lNet worth was $59.6 billion as of December 31, 2024, up from $47.7 billion as of December 31, 2023.
Introduction About Freddie Mac
n2023 vs. 2022
lNet income was $10.5 billion, an increase of 13% year-over-year, primarily driven by a credit reserve release in Single-Family in 2023 compared to a credit reserve build in Single-Family in 2022, partially offset by higher non-interest expense.
lNet revenues were $21.2 billion, down slightly year-over-year, as higher net interest income was offset by lower non-interest income.
lNet worth was $47.7 billion as of December 31, 2023, up from $37.0 billion as of December 31, 2022.
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 $411 billion in liquidity to the mortgage market in 2024, which enabled the financing of 1.6 million home purchases, refinancings, and rental units.
Introduction About Freddie Mac
Portfolio Balances
Mortgage Portfolio as of December 31,
(UPB in billions)
Key Drivers:
n2024 vs. 2023
lOur mortgage portfolio increased 3% year-over-year to $3.6 trillion at December 31, 2024, continuing to grow at a moderate pace.
–Our Single-Family mortgage portfolio was $3.1 trillion at December 31, 2024, up 2% year-over-year.
–Our Multifamily mortgage portfolio was $467 billion at December 31, 2024, up 6% year-over-year.
n2023 vs. 2022
lOur mortgage portfolio increased 2% year-over-year to $3.5 trillion at December 31, 2023, as portfolio growth moderated in 2023 due to the slowdown in new business activity driven by higher mortgage interest rates.
–Our Single-Family mortgage portfolio was $3.0 trillion at December 31, 2023, up 2% year-over-year.
–Our Multifamily mortgage portfolio was $441 billion at December 31, 2023, up 3% year-over-year.
Introduction About Freddie Mac
Credit Enhancement Coverage
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 types of credit enhancements, such as primary mortgage insurance and CRT transactions, to reduce our credit risk exposure and transfer a portion of the credit risk on certain loans in our mortgage portfolio to third parties. At December 31, 2024, we had credit enhancement coverage on 62% of our Single-Family mortgage portfolio and 91% of our Multifamily mortgage portfolio. See MD&A - Our Business Segments and MD&A - Risk Management - Credit Risk for additional information on our credit enhancements.
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 in consideration for Treasury's commitment to provide funding to us. The 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.
The Purchase Agreement with Treasury significantly affects our business activities, including by limiting: our secondary market activities; our single-family 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 liquidation preference of the senior preferred stock, and our exit from conservatorship. See our Current Report on Form 8-K filed on January 8, 2025.
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.
Pursuant to the January 2021 Letter Agreement amending 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 net worth to meet the capital requirements and
Introduction About Freddie Mac
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. To the extent our Net Worth Amount exceeds capital requirements and buffers set forth in the ERCF, dividends on the senior preferred stock will be payable to Treasury. 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. Freddie Mac is required to comply with the ERCF as it is amended from time to time pursuant to the January 2025 Letter Agreement. While Freddie Mac is required to comply with the ERCF as it is amended from time to time pursuant to the January 2025 Letter Agreement, compliance with certain provisions of the ERCF is suspended during conservatorship. See MD&A - Liquidity and Capital Resources-Capital Resources - ERCF for additional information.
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 charts 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)
Introduction Our Business
OUR BUSINESS
Primary Business Strategies
Freddie Mac's overall strategic direction is recommended by management and affirmed by the Board of Directors and FHFA through the 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. All actions we take must be conducted 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 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 for the purchase of first-lien single-family loans with LTV ratios at the time of purchase of greater than 80%. 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).
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 $806,500 for 2025, an increase from $766,550 for 2024, $726,200 for 2023, and $647,200 for 2022. Higher limits have been established in certain "high-cost" areas (for 2025, up to $1,209,750 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.
Introduction Our Business
Our Strategic Priorities
We have four strategic priorities, each of which was created to ensure we fully serve our mission:
nDeliver on affordable housing;
nIdentify, assess, and manage our risks;
nGrow, develop, and empower talent for today and tomorrow; and
nBuild financial strength to serve our mission.
These strategic priorities help us create a more liquid, stable, affordable, and equitable housing finance system that serves lenders, families, and the housing market as a whole. And, as with any mission-driven company, our people are at the center of all we do.
Introduction Our Business
Human Capital Management
Attracting, Developing, and Retaining Talent
Our employees are integral to our company’s success. We strive to be an employer of choice that attracts and retains top talent through our commitment to employee well-being and engagement, training, and other professional development opportunities. Our talent retention program focuses on performance and talent, as we are committed to the growth and development of our employees.
We encourage employees to volunteer and engage in community outreach in the neighborhoods where they work and live through our Community Crew program, which focuses on mission-related activities and our SERVE program which provides our employees with additional volunteer opportunities with local organizations.
We aim to support our employees’ overall well-being and enable them to perform at their best. Our wide variety of benefits provide employees with flexibility to manage their lives at home and work. We also offer a variety of ways to support our employees in planning for their financial well-being.
Our culture is anchored in our employee value proposition and embraces our values and competencies to deliver meaningfully on our mission. Our evolving listening strategy includes various forums throughout the year including mini-surveys, town halls, people leader meetings, on-boarding and exit surveys, and an annual employee engagement survey. Employee engagement, one of our Corporate Scorecard goals, is measured through the annual employee engagement survey.
We encourage and support our employees' professional development to help them stay engaged, confident, and credible. Our professional development opportunities include in-person and virtual courses on various topics, such as leadership, business, communications, technology, and individual skill development; our educational assistance program; our student debt repayment program; and our rewards programs for employees to recognize and celebrate their colleagues’ achievements.
We also strive to implement competitive compensation programs and practices within the constraints of the conservatorship. We evaluate the success of our human capital management by measuring and monitoring the performance, development, retention, and engagement of our employees.
Employees
At January 31, 2025, we had 8,076 full-time and 27 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 engage with the CHC Committee by providing workforce insights that support their oversight of compensation and benefits, 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 both our conservator and regulator. For additional 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.
Business Segments
We have two reportable segments: Single-Family and Multifamily. For additional information on our segments, see MD&A - Our Business Segments and Note 14.
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 the key drivers of our results including, for example, our product offerings, guarantee fees, pricing, competitive position and strategic priorities, relationship with sellers and servicers, capital structure, cash needs and uses, liquidity, privacy for borrowers and others, risk management, cybersecurity, and costs of compliance. Failure to comply with our legal and regulatory requirements could result in litigation, investigations, enforcement actions, 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
Introduction Our Business
activities. For example, changes to our capital requirements have affected 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 have increased the amount of capital we will be required to retain or raise to exit from conservatorship.
In addition, our conservatorship and related matters significantly affect our management, business activities, financial condition, and results of operations. We are under the control of FHFA, as our Conservator, and are not managed to maximize stockholder returns. FHFA determines our strategic direction. We face a variety of different, and sometimes competing, business objectives and FHFA-mandated activities. FHFA has required us to make changes to our business that have adversely affected our financial results and could require us to make additional changes at any time. FHFA may require us to undertake activities that reduce our profitability, expose us to additional credit, market, funding, operational, legal, 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, consistent with the GSE Act and the Purchase Agreement, to the extent applicable by law. See our Current Report on Form 8-K filed on January 8, 2025.
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 MD&A - Regulation and Supervision and 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/investors, 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 information on the ERCF on our website at www.freddiemac.com/investors.
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 issuance information for debt securities offerings under Freddie Mac's global debt facility, including any required pricing supplements for individual issuances of debt securities. Similar information about our STACR® transactions and MSCR transactions 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), 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.
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 including, but not limited to, changes in house prices and house price forecasts, our market share, the effect of legislative and regulatory developments, judicial rulings, and new accounting guidance, the credit quality of loans we own or guarantee, the costs and benefits of our CRT transactions, the impact of banking crises or failures, the effects of natural disasters or catastrophic events 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:
nThe actions the federal government (including FHFA, Treasury, and Congress) and state governments may take, require us to take, or restrict us from taking, including actions to promote equitable access to affordable and sustainable housing, such as programs to implement the expectations in FHFA's Conservatorship Scorecards, recent requirements and guidance related to equitable housing and fair lending, consumer protection, and other objectives for us;
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 held by the Federal Reserve;
nThe effect of the restrictions on our business due to the conservatorship and the Purchase Agreement;
nThe impact of any changes in our credit ratings or those of the U.S. government;
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 tax laws;
nChanges in privacy and cybersecurity laws and regulations;
nChanges in accounting policies, practices, standards, or guidance;
nChanges in economic and market conditions, including volatility in the financial services industry, changes in employment rates, inflation, interest rates, spreads, and house prices;
nChanges in the U.S. mortgage market, including the supply of houses available for sale, the supply of multifamily rental housing, and changes in the supply and type of loan products;
nThe success of our efforts to mitigate our losses;
nThe success of our strategy to transfer mortgage credit risk;
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 cybersecurity incidents or other security incidents, whether due to insider error or malfeasance or system errors or vulnerabilities in our or our third parties' systems;
nOur ability to effectively execute our business strategies, implement significant changes, and improve efficiency;
nThe adequacy of our risk management framework, including the adequacy of our regulatory capital framework prescribed by FHFA and internal models for measuring risk;
nOur ability to manage mortgage credit risk, including the effect of changes in underwriting and servicing practices;
nChanges in credit reporting at the credit reporting bureaus due to regulatory and legal developments, as well as lender 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 and spread 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;
nPerformance of and changes 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 and pricing performance of our and Fannie Mae's respective UMBS;
nChanges in the practices or performance of loan originators, servicers, property managers, investors, insurers, and other participants in the secondary mortgage market including as a result of evolving AI regulation;
nCompetition from other market participants, which could affect the pricing we offer for and the performance of our mortgage-related products, the credit characteristics of the loans we purchase, and our ability to meet our affordable housing goals and other mandated activities;
nThe availability of critical third parties, or their vendors and other business partners, to deliver products or services, or to manage risks, including cybersecurity risk, effectively;
nThe occurrence of a catastrophic event or natural disaster in areas in which our offices, significant portions of our total mortgage portfolio, or the offices of critical third parties 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 Housing and Mortgage Market Conditions
Management's Discussion and Analysis of Financial Condition and Results of Operations
HOUSING AND MORTGAGE MARKET CONDITIONS
The following charts present certain housing and mortgage market indicators that can significantly affect our business and financial results. Certain market and macroeconomic prior period data have been updated to reflect revised historical data. For additional information on the effect of these indicators on our business and financial results, see MD&A – Consolidated Results of Operations and MD&A – Our Business Segments.
Single-Family
U.S. Single-Family Home Sales and House Prices___
Sources: National Association of Realtors, U.S. Census Bureau, and Freddie Mac House Price Index (seasonally adjusted annual rate).
U.S. Single-Family Mortgage Originations ___(UPB in billions)
Source: Freddie Mac and Fannie Mae.
Single-Family Serious Delinquency Rates
as of December 31,
Source: Freddie Mac and National Delinquency Survey from the Mortgage Bankers Association. For 2024, the total mortgage market rate is as of September 30, 2024 (latest available information).
Single-Family Mortgage Debt Outstanding
(UPB in trillions)
Source: Freddie Mac and Federal Reserve Financial Accounts of the United States of America. For 2024, the U.S. single-family mortgage debt outstanding balance is as of September 30, 2024 (latest available information).
Management's Discussion and Analysis Housing and Mortgage Market Conditions
Multifamily
Apartment Vacancy Rates and Change in Effective Rents
Source: Moody's.
Multifamily Property Price Growth Rate
Source: Real Capital Analytics Commercial Property Price Index (RCA CPPI).
Multifamily Delinquency Rates as of December 31,
Source: Freddie Mac, FDIC Quarterly Banking Profile, Intex Solutions, Inc., and Wells Fargo Securities (Multifamily CMBS conduit market, excluding REOs). For 2024, the delinquency rate for FDIC insured institutions is as of September 30, 2024 (latest available information).
Multifamily Mortgage Debt Outstanding
(UPB in billions)
Source: Freddie Mac and Federal Reserve Financial Accounts of the United States of America. For 2024, the U.S. multifamily mortgage debt outstanding balance is as of September 30, 2024 (latest available information).
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.
The table below compares our consolidated results of operations for the past three years. During 2024, we adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which, among other amendments, requires additional disclosure about significant segment expenses. In connection with the adoption of these amendments, we have reclassified certain amounts within non-interest expense in our consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. See Note 1 for additional information about our adoption of ASU 2023-07.
Table 1 - Summary of Consolidated Statements of Income and Comprehensive Income
Year Over Year Change
See MD&A - 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 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 sheets. The difference between the interest income on these loans and the interest expense on the related debt securities primarily represents the guarantee fees we receive as compensation for our guarantee of the principal and interest payments of the issued debt securities. Guarantee net interest income includes two components:
nContractual net interest income, which represents the ongoing monthly guarantee fee we receive for managing the credit risk associated with mortgage loans held by consolidated trusts, including the legislated guarantee fees that we are required to remit to Treasury and
nDeferred fee income, which primarily consists of recognition of premiums and discounts on mortgage loans and debt of consolidated trusts and the fees that we receive or pay when we acquire single-family loans. 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.
Net interest income also includes investments net interest income, which 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, and the impact on net interest income from hedge accounting, whichprimarily consists of amortization of previously deferred hedge accounting basis adjustments and the earnings mismatch on qualifying fair value hedge relationships. See Note 9 for additional information on hedge accounting.
Management's Discussion and Analysis Consolidated Results of Operations
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
l2024 vs. 2023 - Increased primarily due to continued mortgage portfolio growth.
l2023 vs. 2022 - Decreased primarily due to a decline in deferred fee income due to slower prepayments as a result of higher mortgage interest rates, partially offset by continued mortgage portfolio growth.
nInvestments net interest income
l2024 vs. 2023 - Decreased primarily due to higher debt expense from issuance of higher yielding debt, partially offset by the impact of the increase in non-interest bearing funding.
l2023 vs. 2022 - Increased primarily due to higher returns on securities purchased under agreements to resell as a result of higher short-term interest rates.
nImpact on net interest income from hedge accounting
l2024 vs. 2023 - Decreased due to lower expense related to debt in hedge accounting relationships.
l2023 vs. 2022 - Expense increased primarily due to higher interest expense on derivatives in hedge relationships as a result of higher interest rates, partially offset by a favorable change in the earnings mismatch on qualifying fair value hedge 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:
(1) Loan fees included in interest income were $1.1 billion, $1.1 billion, and $1.5 billion during 2024, 2023, and 2022, 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
(In millions) Rate(1) Volume(1) Total Change Rate(1) Volume(1) Total Change
Interest-earning assets:
Interest-bearing liabilities:
(1) The total change variances are allocated between rate and volume based on the relative size of each variance.
Non-Interest Income
Non-interest income primarily consists of guarantee income and investment gains, net.
Guarantee income relates primarily to our Multifamily senior subordinate securitizations. We do not consolidate the trusts used in these transactions and therefore do not recognize the loans held by the trust or the debt securities issued by the trust on our consolidated balance sheets. Rather, we separately account for our guarantee to the trust and recognize the revenue from our guarantee as guarantee income. Guarantee income includes the amortization of our guarantee obligation as we are released from risk under our guarantee and changes in fair value of our guarantee assets, net of contractual guarantee fees received.
Net investment gains primarily consist of the gains on sale of mortgage loans from our multifamily loan purchase and securitization activities. Because we do not consolidate our Multifamily senior subordinate securitization trusts, we account for these transactions as sales of the underlying loans. Net investment gains also include revenues from sales of single-family delinquent and reperforming loans, gains and losses on investment securities, gains and losses from debt extinguishments and debt recorded at fair value, and gains and losses from interest-rate risk management activities. Net investment gains can vary 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.
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. 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 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 additional 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. For additional information on derivative instruments, see Note 9.
Management's Discussion and Analysis Consolidated Results of Operations
The table below presents the components of non-interest income.
Table 5 - Components of Non-Interest Income
Year Over Year Change
Key Drivers:
nGuarantee income
l2023 vs. 2022 - Increased primarily due to higher fair value losses on guarantee assets in 2022 as a result of significant interest rate increases.
nInvestment gains, net
l2024 vs. 2023 - Increased primarily due to higher revenues from held-for-sale loan purchase and securitization activities, lower realized losses on sales of available-for-sale securities, and net impacts from index lock activities.
l2023 vs. 2022 - Net investment gains declined, as the prior year period included spread-related gains on commitments to hedge the Single-Family securitization pipeline that did not recur in 2023.
(Provision) Benefit for Credit Losses
Our provision for credit losses relates primarily to single-family loans held-for-investment and can vary substantially from period to period based on a number of factors, such as changes in house prices and house price forecasts, changes in interest rates, borrower prepayments and delinquency rates, events such as natural disasters and 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 provision for credit losses.
Table 6 - (Provision) Benefit for Credit Losses
Year Over Year Change
Key Drivers:
n2024 vs. 2023 - The provision for credit losses for 2024 was primarily driven by a credit reserve build in Single-Family attributable to new acquisitions.
n2023 vs. 2022 - The benefit for credit losses for 2023 was primarily driven by a credit reserve release in Single-Family due to improvements in house prices.
Management's Discussion and Analysis Consolidated Results of Operations
Non-Interest Expense
Non-interest expense consists of salaries and employee benefits, professional services, technology, and occupancy, credit enhancement expense and benefit for credit enhancement recoveries, legislative and regulatory assessments, and other expenses we incur to run our business.
Credit enhancement expense includes the premiums and other costs related to certain CRT transactions that are accounted for as freestanding contracts, primarily STACR and ACIS transactions in Single-Family. Benefit for credit enhancement recoveries primarily 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.
Legislative and regulatory assessments relate to three fees: (1) the legislated guarantee fees on single-family loans that we are required to remit to Treasury, (2) the fee imposed on Freddie Mac's total new business purchases that is allocated to certain affordable housing funds and remitted to Treasury and HUD, and (3) FHFA regulatory assessment. The legislated guarantee fees relate to the 10 bps increase in guarantee fees implemented at the direction of FHFA pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 as extended by the Infrastructure Investment and Jobs Act of 2021. The affordable housing funds allocation relates to the GSE Act requirement to set aside in each fiscal year an amount equal to 4.2 bps of each dollar of total new business purchases, and pay such amount to certain housing funds. We are prohibited from passing through the costs of the affordable housing funds allocation to the originators of the loans that we purchase. The regulatory assessment relates to FHFA's annual assessment on regulated entities, including Freddie Mac. The assessment, which is required under the GSE Act, is for FHFA's costs and expenses, as well as to maintain FHFA's working capital.
The table below presents the components of non-interest expense.
Table 7 - Components of Non-Interest Expense
Year Over Year Change
Legislative and regulatory assessments:
Key Drivers:
nCredit enhancement expense
l2023 vs. 2022 - Increased primarily due to a higher volume of outstanding cumulative CRT transactions and higher losses on STACR Trust note repurchases.
nBenefit for (decrease in) credit enhancement recoveries
l2024 vs. 2023 and 2023 vs. 2022 - Decreased primarily due to a decrease in expected credit losses on covered loans.
nOther expense
l2023 vs. 2022 - Increased primarily due to a $313 million expense accrual for an adverse judgment at trial in 2023. See Note 17 for additional information regarding our legal proceedings.
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, 2024 compared to December 31, 2023:
nSecurities purchased under agreements to resell increased primarily due to a higher custodial account balance driven by loan prepayments.
nInvestment securities increased primarily due toan increase in purchases of U.S. Treasury securities.
nMortgage loans held-for-investment increased primarily due togrowth in our Single-Family mortgage portfolio.
nDebt increased primarily due to an increase in debt of consolidated trusts driven by growth in our Single-Family mortgage portfolio.
Management's Discussion and Analysis Our Portfolios
OUR PORTFOLIOS
Mortgage Portfolio
Our mortgage portfolio includes assets held by both business segments and consists of mortgage loans held-for-investment, mortgage loans held-for-sale, and mortgage loans underlying our mortgage-related guarantees. See Note 4 for additional information on our mortgage loans and Note 5 for additional information on our 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
Mortgage loans held-for-investment:
Mortgage-related guarantees:
Guaranteed mortgage-related securities:
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 $225 billion. The calculation of mortgage assets subject to the Purchase Agreement cap includes the UPB of mortgage assets and 10% of the notional value of interest-only securities. We are also subject to additional limitations on the size and composition of our mortgage-related investments portfolio pursuant to FHFA guidance. For additional information on the restrictions on our mortgage-related investments portfolio, see MD&A - Conservatorship and Related Matters.
Management's Discussion and Analysis Our Portfolios
The table below presents the details of our mortgage-related investments portfolio.
Table 10 - Mortgage-Related Investments Portfolio
(In millions) Single-Family Multifamily Total Single-Family Multifamily Total
Mortgage-related securities:
10% of notional amount of interest-only securities $22,495 $22,186
(1)Includes $30.0 billion and $27.3 billion of single-family loans that we have purchased from securitization trusts as of December 31, 2024 and December 31, 2023, respectively.
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.
The table below presents the details of the carrying value of our other investments portfolio.
Table 11 - Other Investments Portfolio
(1)Primarily consists of U.S. Treasury securities.
(2)Primarily includes LIHTC investments and advances to lenders.
Management's Discussion and Analysis Our Business Segments
OUR BUSINESS SEGMENTS
As shown in the table below, we have two reportable segments, which are based on the way we manage our business. See Note 14 for additional financial information for our reportable segments.
Segment Description
Segment Net Revenues and Net Income
The charts below show our net revenues and net income by segment.
Segment Net Revenues
(In billions)
Segment Net Income
(In billions)
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 mortgage 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 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, the loan purchase and securitization activity of other financial institutions, and instruction from FHFA related to pricing policies and the volume and type of new loans we acquire.
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 such trusts and the debt securities issued by such trusts 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. Most of our loans with LTV ratios above 80% at the time of purchase are also credit enhanced by primary mortgage insurance. The returns we generate from our business 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, while others aim to support housing supply and sustainability efforts.
Management's Discussion and Analysis Our Business Segments | Single-Family
Loan Purchase, Securitization, and Guarantee Activities
Guarantor Swap Transactions
One of the primary ways we acquire mortgage 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:
Cash Window Transactions
In addition to guarantor swap transactions, another primary way we acquire loans and provide liquidity to our Single-Family lender customers is by purchasing loans through our cash window for future aggregation and securitization via our securitization pipeline. 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.
We typically economically hedge the market risk exposure of our forward loan purchase commitments with lenders and 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 and selling the resulting securities to third-party investors, typically through cash auctions. We may also retain certain of these 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 the cash window with non-discriminatory pricing; and comply with directives, regulations, restrictions, and other requirements prescribed by FHFA related to equitable secondary market access by community lenders. We manage cash window activities in accordance with our risk limits and limitations imposed by FHFA. For additional information about the Purchase Agreement, see MD&A - Conservatorship and Related Matters.
Management's Discussion and Analysis Our Business Segments | Single-Family
The diagram below shows the process for acquiring and securitizing loans in our cash window transactions.
Advances to Lenders
We also provide liquidity to certain lenders through our early funding programs, where we advance funds to lenders for mortgage loans prior to the loans being pooled and securitized generally through our guarantor swap transactions. 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
We refer to the securities we issue in guarantor swap transactions and cash window securitizations as Level 1 Securitization Products, which are pass-through securities that represent undivided beneficial interests in trusts that hold pools of loans or participation interests in 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).
All Level 1 Securitization Products we issue 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.
Management's Discussion and Analysis Our Business Segments | Single-Family
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 designed to be commensurate with the 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 guarantee fees 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 rate 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 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, net of servicing fees. 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 and debt issued by those trusts on our consolidated balance sheets. The difference between the interest income on the loans and the interest expense on the debt primarily represents the guarantee fees we receive as compensation for our guarantee. 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 loans from the trusts under certain circumstances (including certain levels of delinquency) 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.
Other Securitization Products
We securitize certain seasoned loans in transactions where we issue guaranteed senior securities and unguaranteed subordinated securities. The collateral for these structures primarily consists of reperforming loans. The unguaranteed subordinated securities absorb first losses on the related loans. After securitization, we do not control the servicing, and the loans are not serviced in accordance with our Guide.
In prior years, we offered additional types of securitization products to our customers, including senior subordinate securitizations backed by recently originated loans and other securitization products collateralized by non-Freddie Mac mortgage-related securities. We no longer offer these products on a regular basis and have not entered into these types of transactions recently.
Resecuritization Products
Resecuritization products represent beneficial interests in pools of Level 1 Securitization Products and certain other types of mortgage assets. We generally 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 issuance and administration activities for our
Management's Discussion and Analysis Our Business Segments | Single-Family
resecuritization products.
We have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products. When we resecuritize Fannie Mae securities, which are separately guaranteed by Fannie Mae, in our commingled resecuritization products, our guarantee covers timely payment of principal and interest on such products from the underlying Fannie Mae securities. If Fannie Mae were to fail to make a payment on a Fannie Mae security that we resecuritized, we would be responsible for making the payment. We are required to hold incremental capital for our guarantees of Fannie Mae securities under the ERCF. We also began to charge a fee for any commingled security issued on or after July 1, 2022.
All of the cash flows from the collateral underlying our resecuritization products are generally passed through to investors in these securities. We do not issue resecuritization products that have concentrations of credit risk beyond those embedded in the underlying assets. In many of our resecuritization transactions, securities dealers or investors deliver mortgage assets in exchange for the resecuritization product. In certain cases, we may also transfer our own mortgage assets in exchange for the resecuritization product. The diagram below provides a general example of how we create resecuritization products.
We offer the following types of resecuritization products:
nSingle-class resecuritization products - Involve the direct pass through of all cash flows of the underlying collateral to the beneficial interest holders and include:
lSupers - Resecuritizations of UMBS and certain other TBA-eligible mortgage securities. This structure allows commingling of Freddie Mac and Fannie Mae collateral, where newly issued or exchanged UMBS and Supers issued by us or Fannie Mae may be commingled to back Supers issued by us. Fannie Mae also issues Supers. Supers can be backed by:
–UMBS and/or other Supers issued by us or Fannie Mae;
–Existing TBA-eligible Fannie Mae "MBS" and/or "Megas"; and/or
–UMBS and Supers that we have issued in exchange for TBA-eligible PCs and Giant PCs that have been delivered to us in response to our offer to exchange 45-day payment delay securities for corresponding 55-day payment delay securities.
lGiant MBS - Resecuritizations of:
–Newly issued 55-day MBS and/or Giant MBS and/or
–55-day MBS and/or Giant MBS that we have issued in exchange for non-TBA-eligible PCs and non-TBA-eligible Giant PCs that have been delivered to us in response to our offer to exchange 45-day payment delay securities for corresponding 55-day payment delay securities.
lGiant PCs - Resecuritizations of previously issued PCs or Giant PCs. Although we no longer issue Gold PCs, existing Gold PCs may continue to be resecuritized into Giant PCs. In addition, ARM PCs may continue to be resecuritized into
Management's Discussion and Analysis Our Business Segments | Single-Family
ARM Giant PCs. Fixed-rate Giant PCs are eligible for exchange into Supers (for TBA-eligible securities) or Giant MBS (for non-TBA-eligible securities).
nMulticlass resecuritization products
lREMICs - Resecuritizations of previously issued mortgage securities that divide all cash flows of the underlying collateral into two or more classes of varying maturities, payment priorities, and coupons. This structure allows commingling of TBA-eligible Freddie Mac and Fannie Mae collateral.
lStrips -Resecuritizations of previously issued Level 1 Securitization Products or single-class resecuritization products and issuance of stripped securities, including principal-only and interest-only securities or floating rate and inverse floating rate securities, backed by the cash flows from the underlying collateral. This structure allows commingling of TBA-eligible Freddie Mac and Fannie Mae collateral.
Other Mortgage-Related Guarantees
We previously offered a guarantee on mortgage assets held by third parties, in exchange for guarantee fees, without securitizing those assets. These arrangements, referred to as long-term standby commitments, have obligated us to purchase seriously delinquent loans that are covered by those commitments. From time to time, we have consented to the termination of our long-term standby commitments and simultaneously entered into guarantor swap transactions with the same counterparty, issuing securities backed by many of the same loans.
Credit EnhancementActivities
To reduce our credit risk exposure, we engage in various types of credit enhancements, including primary mortgage insurance and CRT transactions. Our Charter requires coverage by specified credit enhancements or participation interests on single-family loans with LTV ratios above 80% at the time of purchase. Most of our loans with LTV ratios above 80% are credit enhanced by primary mortgage insurance, which provides loan-level credit enhancement against loss up to a specified amount, the premium for which is typically paid by the borrower. Generally, an insured loan must be in default and the borrower's interest in the underlying property must have been extinguished, such as through a short sale or foreclosure sale, before a claim can be filed under a primary mortgage insurance policy. The mortgage insurer has a prescribed period of time within which to process a claim and make a determination as to its validity and amount.
We define CRT transactions as those arrangements where we actively transfer the credit risk exposure on mortgages that we own or guarantee. Our CRT transactions are designed to reduce the amount of required capital related to credit risk, to transfer portions of credit losses on groups of previously acquired loans to third-party investors, and to reduce the risk of future losses to us when borrowers default. The costs we incur in exchange for this credit protection effectively reduce our guarantee income from the associated mortgages. We evaluate and update our CRT activities as needed depending on our business strategy, market conditions, and regulatory requirements.
Each CRT transaction is designed to transfer a certain portion of the credit risk that we assume for loans with certain targeted characteristics. Risk positions may be transferred to third-party investors through one or more CRT transactions. The risk transfer could occur prior to, or simultaneously with, our purchase of the loan (i.e., front-end coverage) or after the purchase of the loan (i.e., back-end coverage).
STACR and ACIS Offerings
Our two primary CRT programs are STACR and ACIS.
nSTACR - Our primary Single-Family securities-based credit risk sharing transaction. STACR Trust note transactions transfer risk to the private capital markets through the issuance of unguaranteed notes using a third-party trust. In a STACR transaction, we create a reference pool of loans from our Single-Family mortgage portfolio, and a third-party trust issues credit notes linked to the reference pool. The trust makes periodic payments of principal and interest on the notes to noteholders, but is not required to repay principal to the extent that the note balance is reduced as a result of specified credit events on the mortgage loans in the related reference pool. We make payments to the trust to support payment of the interest due on the notes. The amount of risk transferred in each transaction affects the amounts we are required to pay. We receive payments from the trust that otherwise would have been made to the noteholders to the extent there are certain defined credit events on the mortgage loans in the related reference pool. The note balance is reduced by the amount of the payments to us, thereby transferring the related credit risk of the loans in the reference pool to the note
Management's Discussion and Analysis Our Business Segments | Single-Family
investors. Generally, the note balance is also reduced based on principal payments that occur on the loans in the reference pool. The diagram below illustrates a typical STACR transaction.
nACIS - Our primary insurance-based credit risk sharing transaction. ACIS transactions are insurance policies we enter into with global insurance and reinsurance companies to cover a portion of credit risk on the mortgage loans in the related reference pools. We pay monthly premiums to the insurers or reinsurers in exchange for claim coverage on specified credit events on the mortgage loans in the related reference pool. We require our ACIS counterparties to partially collateralize their exposure to reduce the risk that we will not be reimbursed for our claims under the policies.
We primarily use STACR and ACIS transactions to transfer credit risk on certain recently acquired fixed rate mortgage loans with maturity terms greater than 20 years and original LTV ratios between 60% and 97%. In a typical STACR or ACIS transaction, we transfer to third-party investors a portion of the credit risk between a specified attachment point and a detachment point which may vary based on numerous factors, such as the type of collateral and market conditions. We generally retain the initial loss position and at least 5% of the credit risk of all the positions sold to align our interests with those of the investors. The diagram below illustrates a typical STACR and ACIS structure.
We monitor the costs and benefits provided by the CRT coverage we have obtained on a regular basis, including the impact of CRT on our capital requirements under the ERCF. We may periodically terminate certain CRT transactions, through the exercise of contractual call options, repurchases of outstanding securities, or other means, if we determine prior to contractual maturity that they are no longer economically sensible.
Additional Offerings
We also transfer credit risk through issuance of senior subordinate securitizations, additional types of insurance and reinsurance transactions, and risk-sharing arrangements with certain single-family lenders. For additional information on Single-Family mortgage loan credit enhancements, see MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk - Transferring Credit Risk to Third-Party Investors.
Management's Discussion and Analysis Our Business Segments | Single-Family
We also periodically sell certain delinquent loans that we have previously repurchased from securitization trusts. See Note 4 for additional information on sales of mortgage loans.
Loss Mitigation Activities
Servicers perform loss mitigation activities as well as foreclosures on loans that they service for us. Our loss mitigation strategy emphasizes early intervention by servicers in delinquent loans and offers alternatives to foreclosure by providing servicers with default management programs designed to manage delinquent loans and to assist borrowers in maintaining homeownership or facilitate foreclosure alternatives. FHFA could require us to make changes to our loss mitigation activities which could make these activities more costly to us.
We offer (or previously offered) a variety of borrower assistance programs, including refinance programs and loan workout activities for eligible borrowers. Our loan workouts include both home retention options and foreclosure alternatives.
Relief Refinance Program
We previously offered relief refinance programs for eligible homeowners whose loans we already owned or guaranteed to refinance with more favorable terms (such as reduction in payment, reduction in interest rate, or movement to a more stable loan product) and without the need to obtain additional mortgage insurance. These programs also provided liquidity for borrowers who were current on their mortgages but were unable to refinance because their LTV ratios exceeded our standard refinance limits. Our most recent relief refinance offering, the Enhanced Relief RefinanceSM program, has been suspended until further notice. However, our single-family mortgage portfolio continues to include loans that we acquired under these programs in prior periods. For additional information on outstanding relief refinance loans, see MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk.
Loan Workout Activities
Home Retention Options
When refinancing is not practicable, we require our servicers to attempt to establish contact with the borrowers to discuss the most appropriate options for delinquency resolution. When the contact is established, we require our servicers first to evaluate the loan for a forbearance plan, repayment plan, payment deferral plan, or loan modification, because our level of recovery on a loan that reperforms is often higher than for a loan that proceeds to a foreclosure alternative or foreclosure. Although workout options are often less costly than a foreclosure, we incur costs as a result of our loss mitigation activities. Specifically, payment deferral plans result in non-interest-bearing balances we have to finance for the life of the mortgage, resulting in economic costs as a result of this program. Additionally, we incur economic losses on loan modifications that involve an interest rate reduction or principal forbearance, and we incur expenses related to incentive fees we pay to servicers for certain successfully completed loan workouts.
We offer the following types of home retention options:
nForbearance plans - Arrangements that require reduced or no payments during a defined period that provides borrowers additional time to return to compliance with the original mortgage terms or to implement another type of loan workout option. Borrowers may exit forbearance by repaying all past due amounts thus fully reinstating the loan, paying off the loan in full, or entering into a repayment plan, a payment deferral plan, or a trial period plan pursuant to a loan modification. We offer forbearance of up to 12 months to single-family borrowers experiencing financial difficulty. Borrowers may receive an initial forbearance term of one to six months and, if necessary, one or more forbearance term extensions of one to six months, as long as the delinquency of the mortgage does not exceed 12 months.
nRepayment plans - Contractual plans that allow borrowers a specific period of time to return to current status by paying the normal monthly payment plus additional agreed upon delinquent amounts. Repayment plans must have a term greater than one month and less than or equal to 12 months and the monthly repayment plan payment amount must not exceed 150% of the contractual mortgage payment.
nPayment deferral plans - Arrangements that allow borrowers to return to current status by deferring delinquent principal and interest into a non-interest-bearing principal balance that is due at the earlier of the payoff date, maturity date, or sale of the property. The remaining mortgage term, interest rate, payment schedule, and maturity date remain unchanged and no trial period plan is required. The number of months of payments deferred varies based upon the type of hardship the borrower is experiencing.
nLoan modifications - Contractual plans that may involve changing the terms of the loan such as payment delays, interest rate reductions, term extensions, or a combination of these items. Payment delays in our loan modification programs most commonly consist of adding outstanding indebtedness, such as delinquent interest, to the UPB of the loan, and may also include principal forbearance, in which a portion of the principal balance becomes non-interest-bearing and is due at the earlier of the payoff date, maturity date, or sale of the property. Our modification programs generally require completion of a trial period of at least three months prior to receiving the modification. If a borrower fails to complete the trial period, the loan is considered for our other workout activities. These modification programs offer eligible borrowers extension of the loan's term up to 480 months and a fixed interest rate. Servicers are paid incentive fees for each completed modification,
Management's Discussion and Analysis Our Business Segments | Single-Family
and there are limits on the number of times a loan may be modified. Our primary loan modification program is the Freddie Mac Flex Modification® program, which intends to create a suitable payment reduction through payment delays, interest rate reduction, and term extension. Freddie Mac announced updates to the Flex Modification® program on May 29, 2024 and those updates went into effect with all new evaluations beginning December 1, 2024. These updates revised how payment delays, rate reductions, and term extensions are determined in order to create greater borrower eligibility and create greater consistency in suitable payment reduction percentages.
Foreclosure Alternatives
When a seriously delinquent single-family loan cannot be resolved through an economically sensible home retention option, we typically seek to pursue a foreclosure alternative before we pursue a foreclosure sale. We pay servicers incentive fees for each completed foreclosure alternative. In some cases, we provide cash relocation assistance to the borrower, while allowing the borrower to exit the home in an orderly manner. We offer the following types of foreclosure alternatives:
nShort sale - The borrower sells the property for less than the total amount owed under the terms of the loan. A short sale is preferable for a borrower because we provide limited relief to the borrower from repaying the entire amount owed on the loan. A short sale allows us to avoid the costs we would otherwise incur to complete the foreclosure and subsequently sell the property.
nDeed in lieu of foreclosure - The borrower voluntarily agrees to transfer title of the property to us without going through formal foreclosure proceedings.
When we are unable to successfully execute a loan workout and the loan remains delinquent, we may ultimately pursue foreclosure. In a foreclosure, we may acquire the underlying property and later sell it, using the proceeds of the sale to reduce our losses. For additional information on our loss mitigation and foreclosure activities, see MD&A - Risk Management - Credit Risk - Single-Family Mortgage Credit Risk andNote 4.
Investing Activities
We primarily use our Single-Family mortgage-related investments portfolio to provide liquidity to the mortgage market by purchasing loans for our securitization pipeline and by purchasing delinquent and modified loans from securitization trusts. We also invest in agency mortgage-related securities. We manage the portfolio's risk-versus-return profile using our internal economic framework and make risk and capital management decisions intended to execute our business strategy and be responsive to market conditions. For additional information on our mortgage-related investments portfolio, see MD&A - Our Portfolios- Investments Portfolio - Mortgage-Related Investments Portfolio.
We may use our Single-Family mortgage-related investments portfolio to undertake various activities to support our presence in the agency securities market or to support the liquidity of our securities, including their price performance relative to comparable Fannie Mae securities. Depending upon market conditions, there may be substantial variability in any period in the total amount of securities we purchase or sell. The purchase or sale of agency securities could, at times, adversely affect the price performance of our securities relative to comparable Fannie Mae securities. We may incur costs to support our presence in the agency securities market and to support the liquidity and price performance of our securities. For additional information, see Risk Factors- Market Risks - A significant decline in the price performance of, or demand for, our UMBS could have an adverse effect on the volume and/or profitability of our Single-Family business activity. For additional information on the limits on the mortgage-related investments portfolio established by the Purchase Agreement and by FHFA, see MD&A - Conservatorship and Related Matters- Limits on Our Mortgage-Related Investments Portfolio and Indebtedness. In addition, we may forgo investment opportunities for a variety of reasons, including the limits on our mortgage-related investments portfolio or the risk that an accounting treatment may create earnings variability.
Our company-wide Treasury function primarily includes issuing, calling, and repurchasing debt of Freddie Mac, managing our other investments portfolio, and managing interest-rate risk, which includes monitoring and economically hedging interest-rate risk for the entire company, primarily through the use of derivative instruments. We allocate debt funding costs and interest-rate risk management gains and losses to specific assets and liabilities included in each segment. The residual financial impact of our company-wide Treasury function and interest-rate risk management function is primarily allocated to the Single-Family segment. For additional information on the company-wide Treasury function, see MD&A - Liquidity and Capital Resources. For additional information on interest-rate risk management, see MD&A - Risk Management - Market Risk.
Management's Discussion and Analysis Our Business Segments | Single-Family
Customers
Our Single-Family customers are investors in our mortgage-related securities, CRT offerings, and Freddie Mac debt securities, including banks and other depository institutions, insurance companies, money managers, central banks, pension funds, state and local governments, REITs, non-depository institutions, and brokers and dealers. We also maintain relationships with dealers in our guaranteed mortgage-related securities and Freddie Mac debt securities. Our unsecured Freddie Mac debt securities and structured mortgage-related securities are initially purchased by dealers and redistributed to their customers. Our Single-Family customers also include institutions that originate, sell, and perform the ongoing servicing of loans for new or existing homeowners. These companies include mortgage banking companies, commercial banks, regional banks, community banks, credit unions, HFAs, savings institutions, and non-depository institutions. Many of these companies are both sellers and servicers for us.
We enter into loan purchase agreements with many of our Single-Family customers that outline the terms under which we agree to purchase loans from them over a period of time. For most of the loans we purchase, the guarantee fees are not specified contractually. Instead, we bid for some or all of the lender's loan volume on a monthly basis at a guarantee fee that we specify. As a result, our loan purchase volumes from individual customers can fluctuate significantly.
We acquire a significant portion of our loans from several lenders that are among the largest originators in the U.S. In addition, a significant portion of our single-family loans is serviced by several large servicers. The following charts show the concentration of our 2024 Single-Family purchase volume by our largest sellers and our Single-Family loan servicing by our largest servicers as of December 31, 2024. Any seller or servicer with a 10% or greater share is listed separately.
Percentage of Single-Family Purchase Volume
Percentage of Single-Family Servicing Volume(1)
(1) Percentage of servicing volume is based on the total Single-Family mortgage portfolio, which includes loans for which we do not exercise servicing control. However, loans for which we do not exercise servicing control are not included for purposes of determining the concentration of servicers who serviced more than 10% of our Single-Family mortgage portfolio.
For additional information about seller and servicer concentration risk and our relationships with our seller and servicer customers, see MD&A - Risk Management - Counterparty Credit Risk -Single-Family Sellers and Servicers and Note 15.
Management's Discussion and Analysis Our Business Segments | Single-Family
Competition
Our principal competitors in the single-family mortgage market are Fannie Mae and FHA/VA (with Ginnie Mae securitization). Other institutions, such as commercial and investment banks, dealers, savings institutions, REITs, insurance companies, the Federal Farm Credit Banks, the FHLBs, and independent mortgage companies, also compete with us by retaining or securitizing loans that would otherwise be eligible for purchase by us.
We operate in a competitive market by varying our pricing for different customers, loan products, and underwriting characteristics. We seek to maintain a broad mix of loan quality for the loans we purchase. However, sellers may elect to retain loans with better credit characteristics. A seller's decision to retain these loans, or its decision concerning the loans it sells to Freddie Mac based on the credit standards and pricing policies of other secondary market participants, could result in Freddie Mac purchasing loans with a more adverse credit profile.
The conservatorship, including direction provided to us by our Conservator, may affect our ability to compete. The areas in which we and Fannie Mae compete have been limited as we have been required by FHFA to align certain of our Single-Family mortgage purchase offerings, servicing, and securitization practices with Fannie Mae to achieve and maintain market acceptance of the UMBS. FHFA has also placed limits on our and Fannie Mae's ability to compete with each other on pricing.
Management's Discussion and Analysis Our Business Segments | Single-Family
Business Results
The charts, tables, and related discussion below present the business results of our Single-Family segment.
New Business Activity
UPB of Single-Family Loan Purchases and Guarantees by Loan Purpose and Average Estimated Guarantee Fee Rate(1) on New Acquisitions
(UPB in billions)
(1)Estimated guarantee fee rate calculations exclude the legislated guarantee fees and include deferred fees recognized over the estimated life of the related loans based on month-end market rates for the month of acquisition.
Number of Families Helped to Own a Home and Average Loan UPB of New Acquisitions
(Loan count in thousands)
nOur loan purchase and guarantee activity increased in 2024 compared to 2023 as both home purchase and refinance volume increased due to lower mortgage interest rates during the second half of 2024.
nThe average loan size of new acquisitions increased in 2024 compared to 2023 due to a higher conforming loan limit and house price appreciation in recent periods.
nThe average estimated guarantee fee rate on new acquisitions consists of the contractual guarantee fee rate and deferred fee income, including the expected gains (losses) from buy-up and buy-down fees, recognized over the estimated life of the related loans based on our expectations of prepayments and other liquidations. The average estimated guarantee fee rate on new acquisitions decreased slightly in 2024 compared to 2023.