8-K
Federal Home Loan Mortgage Corp (FMCC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 2021
Federal Home Loan Mortgage Corporation
(Exact name of registrant as specified in its charter)
Freddie Mac
| Federally chartered<br>corporation | 001-34139 | 52-0904874 | ||||
|---|---|---|---|---|---|---|
| (State or other jurisdiction of<br>incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) | 8200 Jones Branch Drive | 22102-3110 | ||
| --- | --- | --- | ||||
| McLean, | Virginia | |||||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (703) 903-2000
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| None | N/A | N/A |
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | ||
| --- | --- | |
| Emerging growth company | ☐ | |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Item 2.02. Results of Operations and Financial Condition.
On February 11, 2021, Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) announced its results of operations for the year ended December 31, 2020. A copy of the related press release for the year ended December 31, 2020 is being filed as Exhibit 99.1 to this report and is incorporated herein by reference. In addition, a copy of the Fourth Quarter 2020 Financial Results Supplement is being furnished as Exhibit 99.2 to this report and is incorporated herein by reference.
Exhibit 99.1 submitted herewith shall be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
Exhibit 99.2 submitted herewith shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed to be incorporated by reference into any disclosure document relating to Freddie Mac, except to the extent, if any, expressly set forth by specific reference in such document.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibits listed in the Exhibit Index below are being filed or furnished as part of this Current Report on Form 8-K:
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press Release, dated February 11, 2021, issued by Freddie Mac |
| 99.2 | Fourth Quarter 2020 Financial Results Supplement |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
| Freddie Mac Form 8-K | |
| --- |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FEDERAL HOME LOAN MORTGAGE CORPORATION | ||
|---|---|---|
| By: | /s/ | Christian M. Lown |
| Christian M. Lown | ||
| Executive Vice President - Chief Financial Officer |
Date: February 11, 2021
| Freddie Mac Form 8-K |
|---|
Document
Exhibit 99.1
Freddie Mac Reports Net Income of $7.3 Billion and
Comprehensive Income of $7.5 Billion for Full-Year 2020
Full-Year 2020 Financial Results
•Net income of $7.3 billion, up $0.1 billion, and comprehensive income of $7.5 billion, down $0.3 billion, from 2019, primarily driven by higher net revenues, partially offset by higher provision for credit losses.
•Total equity/net worth(1) increased to $16.4 billion, from $9.1 billion at December 31, 2019.
Fourth Quarter 2020 Financial Results
•Net income of $2.9 billion and comprehensive income of $2.5 billion, up $0.4 billion and $0.1 billion, respectively, from the prior quarter, driven by a reserve release due primarily to realized house price growth during 4Q 2020.
| "In 2020, Freddie Mac continued to serve the important role for which it was founded: supporting the housing market in all economic conditions. In the face of extraordinary economic uncertainty caused by COVID-19, we provided record liquidity, enabling millions of borrowers to purchase or refinance homes at historically low interest rates. We also helped hundreds of thousands of homeowners and renters affected by the pandemic avoid foreclosure and eviction. Our efforts are a testament to our people, our operating platform, our Conservator, and our many partners across the industry." |
|---|
| Christian M. Lown Chief Financial Officer |
•On January 14, 2021, FHFA, as Conservator, acting on behalf of Freddie Mac, entered into an agreement with Treasury that, among other items, allows Freddie Mac to continue to build capital by retaining earnings until it meets certain requirements in the Enterprise Regulatory Capital Framework (ERCF) and places additional restrictions on certain of its business activities.(2)
Providing Stability to the Housing Market, While Fulfilling Affordable Housing Mission(3)
•Continued to provide mortgage-relief options for borrowers affected by the COVID-19 pandemic, including forbearance programs for both single-family and multifamily borrowers.
•Extended moratorium on foreclosures and evictions until at least March 31, 2021.
•Extended temporary measures designed to provide flexibility to homeowners, sellers, and appraisers to expedite loan closings during the COVID-19 pandemic.
Executing on Business Fundamentals
•Single-Family new business activity of $1.1 trillion, up 141% from the prior year, reflecting higher home purchase and refinance activity.
•Multifamily new business activity of $83 billion, up 6% from the prior year.
•Single-Family and Multifamily guarantee portfolios grew 17% and 15%, respectively, year over year.
•Serious delinquency rate for Single-Family increased to 2.64%, from 0.63% at the end of the prior year, driven by loans in forbearance due to the COVID-19 pandemic.
•Multifamily delinquency rate, which does not include loans in forbearance, increased to 0.16% from 0.08% at the end of the prior year.
Managing Risk
•Completed nearly 426,000 single-family workouts, including forbearance agreements and payment deferrals, versus 47,000 workouts in the prior year.
•2.70% and 2.01% of the loans in the Single-Family guarantee portfolio and the Multifamily mortgage portfolio, respectively, were in forbearance as of December 31, 2020.
•51% and 88% of the loans in the Single-Family guarantee portfolio and the Multifamily mortgage portfolio, respectively, were covered by credit enhancements as of December 31, 2020.
(1) See page 12 for additional information about the company's net worth and increases in the aggregate liquidation preference of the senior preferred stock resulting from increases in the company's net worth pursuant to the September 2019 and January 2021 Letter Agreements.
(2) For additional information on the January 2021 Letter Agreement and ERCF, see the company's Annual Report on Form 10-K for the year ended December 31, 2020.
(3) See the company's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on the company's response efforts related to the COVID-19 pandemic and its outlook for 2021.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 2
McLean, VA — Freddie Mac (OTCQB: FMCC) today reported net income of $7.3 billion for full-year 2020, an increase of 2% compared to net income of $7.2 billion for full-year 2019. The company also reported comprehensive income of $7.5 billion for full-year 2020, a decrease of 3% compared to comprehensive income of $7.8 billion for full-year 2019.
Net revenues were $16.7 billion, an increase of 18% compared to $14.1 billion for the prior year. Net interest income increased 8% to $12.8 billion, primarily driven by growth in the Single-Family guarantee portfolio and higher deferred fee income recognition due to faster loan prepayments as a result of the low mortgage interest rate environment. Investment gains, net increased 122% to $1.8 billion, primarily driven by higher margins on Multifamily loan commitments.
Credit-related expense increased to $2.3 billion from $0.2 billion in the prior year. Benefit (provision) for credit losses shifted to a provision for full-year 2020 due to portfolio growth and higher expected credit losses as a result of the COVID-19 pandemic, partially offset by growth in realized and forecasted house prices during 2020 and a higher benefit for credit enhancement recoveries.
Fourth Quarter 2020 Financial Results
Freddie Mac reported net income of $2.9 billion for the fourth quarter of 2020, an increase of 18% compared to net income of $2.5 billion for the third quarter of 2020. The company also reported comprehensive income of $2.5 billion for the fourth quarter of 2020, an increase of 3% compared to comprehensive income of $2.4 billion for the third quarter of 2020.
Net revenues were $5.0 billion, relatively unchanged from the third quarter of 2020.
Credit-related benefit was $0.1 billion, compared to credit-related expense of $0.6 billion in the prior quarter, driven by realized house price growth in the fourth quarter of 2020, partially offset by a decrease in credit enhancement recoveries.
Summary of Consolidated Statements of Comprehensive Income (Loss)
| Full-Year | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| (In millions) | 2020 | 2019 | Change | 12/31/2020 | 9/30/2020 | Change |
| Net interest income | $12,771 | $11,848 | $923 | $3,653 | $3,457 | $196 |
| Guarantee fee income | 1,442 | 1,089 | 353 | 281 | 315 | (34) |
| Investment gains (losses), net | 1,813 | 818 | 995 | 856 | 1,122 | (266) |
| Other income (loss) | 633 | 323 | 310 | 232 | 172 | 60 |
| Net revenues | 16,659 | 14,078 | 2,581 | 5,022 | 5,066 | (44) |
| Benefit (provision) for credit losses | (1,452) | 746 | (2,198) | 813 | (327) | 1,140 |
| Credit enhancement expense | (1,058) | (749) | (309) | (327) | (267) | (60) |
| Benefit for (decrease in) credit enhancement recoveries | 323 | 41 | 282 | (385) | 20 | (405) |
| Real estate owned (REO) operations expense | (149) | (229) | 80 | (10) | (40) | 30 |
| Credit-related benefit (expense) | (2,336) | (191) | (2,145) | 91 | (614) | 705 |
| Administrative expense | (2,535) | (2,564) | 29 | (706) | (641) | (65) |
| Temporary Payroll Tax Cut Continuation Act of 2011 expense | (1,836) | (1,617) | (219) | (495) | (467) | (28) |
| Other expense | (723) | (657) | (66) | (243) | (237) | (6) |
| Operating expense | (5,094) | (4,838) | (256) | (1,444) | (1,345) | (99) |
| Income (loss) before income tax (expense) benefit | 9,229 | 9,049 | 180 | 3,669 | 3,107 | 562 |
| Income tax (expense) benefit | (1,903) | (1,835) | (68) | (756) | (644) | (112) |
| Net income (loss) | 7,326 | 7,214 | 112 | 2,913 | 2,463 | 450 |
| Total other comprehensive income (loss), net of taxes and reclassification adjustments | 205 | 573 | (368) | (391) | (14) | (377) |
| Comprehensive income (loss) | $7,531 | $7,787 | $(256) | $2,522 | $2,449 | $73 |
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 3
Selected Financial Measures
Net Interest Income and Net Interest Yield
(Dollars in billions)
| Net Interest Income |
|---|
| Net Interest Yield |
Full-Year 2020
•Net interest income increased from the prior year, primarily driven by higher guarantee portfolio net interest income, which was largely attributable to portfolio growth, higher contractual guarantee fee rates, and higher deferred fee income recognition due to faster loan prepayments as a result of the low mortgage rate environment.
Fourth Quarter 2020
•Net interest income increased from the prior quarter, primarily driven by higher guarantee portfolio net interest income, which was largely attributable to portfolio growth and higher contractual guarantee fee rates.
Guarantee Fee Income(1) and
Multifamily Guarantee Portfolio
| Multifamily Guarantee Portfolio ($B) |
|---|
| Guarantee Fee Income ($M) |
(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business.
Full-Year 2020
•Guarantee fee income increased from the prior year, primarily driven by portfolio growth and lower fair value losses on Multifamily guarantee assets due to a decline in interest rates from the prior year.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 4
Fourth Quarter 2020
•Guarantee fee income decreased from the prior quarter, primarily due to higher fair value losses on Multifamily guarantee assets as a result of an increase in interest rates from the prior quarter. Because most multifamily loans are not prepayable without penalty, increases in interest rates generally result in lower Multifamily guarantee asset fair values.
Credit-Related Benefit (Expense)
(In billions)
| Benefit (Provision) for Credit Losses | Credit Enhancement Expense | |
|---|---|---|
| Benefit for (Decrease in) Credit Enhancement Recoveries | ||
| REO Operations Expense |
Amounts may not add due to rounding.
Full-Year 2020
•Credit-related expense increased to $2.3 billion from $0.2 billion in the prior year. Benefit (provision) for credit losses shifted to a provision for full-year 2020 due to portfolio growth and higher expected credit losses as a result of the COVID-19 pandemic, partially offset by growth in realized and forecasted house prices during 2020 and a higher benefit for credit enhancement recoveries.
Fourth Quarter 2020
•Credit-related benefit was $0.1 billion, compared to credit-related expense of $0.6 billion in the prior quarter, driven by realized house price growth in the fourth quarter of 2020, partially offset by a decrease in credit enhancement recoveries.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 5
Non-GAAP Financial Measure Highlights
In addition to analyzing the company’s results on a GAAP basis, management reviews net interest income and guarantee fee income on an “adjusted,” or non-GAAP, basis. These adjusted financial measures are calculated by reclassifying certain credit guarantee-related activities and investment-related activities between various line items on the company’s GAAP consolidated statements of comprehensive income. The company also presents one additional non-GAAP financial measure, adjusted net interest yield, that is calculated based on adjusted net interest income. Management believes that these non-GAAP financial measures are useful because they more clearly reflect the company’s sources of revenue and return.
For additional information about the company's non-GAAP financial measures and reconciliations to the comparable amounts under GAAP, see pages 16-17 of this press release.
Adjusted Net Interest Income(1), Adjusted Net Interest Yield(1), and
Investments Portfolio
(Dollars in billions)
| Mortgage-related Investments Portfolio |
|---|
| Other Investments Portfolio |
| Adjusted Net Interest Yield |
| Adjusted Net Interest Income |
(1)Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 16-17 of this press release.
Amounts may not add due to rounding.
Full-Year 2020
•Adjusted net interest income and adjusted net interest yield decreased from the prior year, primarily driven by higher loan prepayments that resulted in an increase in amortization expense, combined with a change in investment mix as the lower-yielding other investments portfolio represented a larger percentage of the total investments portfolio. In addition, the company's custodial trust account balance increased due to higher prepayments but earned a minimal yield due to the low interest rate environment.
•The mortgage-related investments portfolio was $182 billion, down $31 billion, or 15%, from the prior year. The other investments portfolio was $163 billion, up $60 billion, or 58%, as the company transitions to comply with minimum liquidity requirements established by FHFA.
Fourth Quarter 2020
•Adjusted net interest income and adjusted net interest yield decreased from the prior quarter, primarily driven by higher loan prepayments that resulted in an increase in amortization expense, combined with a change in investment mix as the lower-yielding other investments portfolio represented a larger percentage of the total investments portfolio.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 6
Adjusted Guarantee Fee Income(1) and
Total Guarantee Portfolio
(In billions)
| Single-Family Credit Guarantee Portfolio |
|---|
| Multifamily Guarantee Portfolio |
| Adjusted Guarantee Fee Income |
(1)Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 16-17 of this press release.
Amounts may not add due to rounding.
Full-Year 2020 and Fourth Quarter 2020
•Adjusted guarantee fee income increased from the prior year and prior quarter, primarily due to higher Single-Family guarantee fee income driven by portfolio growth, higher deferred fee income recognition, and higher contractual guarantee fee rates.
•The total guarantee portfolio grew $373 billion, or 16%, from the prior year, driven by increases in both the Single-Family and Multifamily guarantee portfolios.
Segment Financial Results and Business Highlights
Freddie Mac’s operations in 2020 consisted of three reportable segments, which are based on the types of business activities they perform – Single-Family Guarantee, Multifamily, and Capital Markets. The company presents Segment Earnings for each reportable segment by reclassifying certain credit guarantee-related activities and investment-related activities between various line items on its GAAP consolidated statements of comprehensive income and allocating certain revenues and expenses, including funding costs and administrative expenses, to its three reportable segments.
For more information about Segment Earnings, see Note 17 to the financial statements included in the company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 7
Single-Family Guarantee Segment
Financial Results(1)
| Full-Year | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| (In millions) | 2020 | 2019 | Change | 12/31/2020 | 9/30/2020 | Change |
| Guarantee fee income | $10,292 | $7,773 | $2,519 | $2,988 | $2,683 | $305 |
| Investment gains (losses), net | 956 | 964 | (8) | 89 | 409 | (320) |
| Other income (loss) | 241 | 391 | (150) | 185 | 124 | 61 |
| Net revenues | 11,489 | 9,128 | 2,361 | 3,262 | 3,216 | 46 |
| Benefit (provision) for credit losses | (1,680) | 418 | (2,098) | 720 | (426) | 1,146 |
| Credit enhancement expense | (1,696) | (1,434) | (262) | (470) | (416) | (54) |
| Benefit for (decrease in) credit enhancement recoveries | 305 | 41 | 264 | (379) | 26 | (405) |
| REO operations expense | (152) | (245) | 93 | (10) | (41) | 31 |
| Credit-related expense | (3,223) | (1,220) | (2,003) | (139) | (857) | 718 |
| Administrative expense | (1,609) | (1,647) | 38 | (449) | (409) | (40) |
| Other expense | (943) | (786) | (157) | (301) | (296) | (5) |
| Operating expense | (2,552) | (2,433) | (119) | (750) | (705) | (45) |
| Segment Earnings (Losses) before income tax (expense) benefit | 5,714 | 5,475 | 239 | 2,373 | 1,654 | 719 |
| Income tax (expense) benefit | (1,178) | (1,110) | (68) | (489) | (343) | (146) |
| Segment Earnings (Losses), net of taxes | 4,536 | 4,365 | 171 | 1,884 | 1,311 | 573 |
| Total other comprehensive income (loss), net of tax | (16) | (22) | 6 | (9) | (3) | (6) |
| Total comprehensive income (loss) | $4,520 | $4,343 | $177 | $1,875 | $1,308 | $567 |
(1) The financial performance of the company’s Single-Family Guarantee segment is measured based on its contribution to GAAP net income (loss).
Key Drivers - 2020 vs. 2019
Comprehensive income increased from the prior year, primarily driven by:
•Higher guarantee fee income primarily due to portfolio growth, higher deferred fee income recognition driven by faster loan prepayments as a result of the low mortgage interest rate environment, and higher contractual guarantee fee rates.
•Higher credit-related expense driven by a shift to a provision for credit losses as a result of the COVID-19 pandemic and portfolio growth, partially offset by a higher benefit for credit enhancement recoveries.
2020 Business Highlights
•New business activity of $1.1 trillion, an increase of $637 billion, or 141%, from the prior year, driven by higher refinance and purchase activity resulting from the low mortgage interest rate environment.
▪The weighted average original loan-to-value (LTV) ratio of new business activity improved to 71% from 77% for the prior year, while the weighted average original credit score was 759, up from 751 for the prior year.
▪The average guarantee fee rate charged on new acquisitions was 47 basis points, up from 45 basis points for the prior year.
▪First-time homebuyers represented 46% of new single-family purchase loans.
▪The company provided funding for nearly 3.8 million single-family homes, approximately 2.7 million of which were refinance loans.
•The Single-Family guarantee portfolio increased 17% from the prior year to $2.3 trillion at December 31, 2020, driven by an increase in U.S. single-family mortgage debt outstanding and higher new business activity.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 8
▪The average guarantee fee rate on the Single-Family guarantee portfolio was 49 basis points, up from 40 basis points for the prior year.
•The Single-Family serious delinquency rate increased to 2.64%, from 0.63% at the end of the prior year, driven by loans in forbearance due to the COVID-19 pandemic.
▪Single-Family loans in forbearance are reported as delinquent during the forbearance period to the extent that payments are past due based upon the loans' original contractual terms.
•Single-Family loan workout activity increased to nearly 426,000, from 47,000 in the prior year, driven by completed forbearance agreements and payment deferrals primarily related to the COVID-19 pandemic.
•2.70% of loans in the Single-Family guarantee portfolio, based on loan count, were in forbearance as of December 31, 2020.
•Credit enhancement coverage of the Single-Family guarantee portfolio decreased to 51% from 56% in the prior year, driven by the high volume of new business activity, which has not been included in credit risk transfer (CRT) transactions but may be included in future periods.
Multifamily Segment
Financial Results(1)
| Full-Year | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| (In millions) | 2020 | 2019 | Change | 12/31/2020 | 9/30/2020 | Change |
| Net interest income | $943 | $1,069 | $(126) | $236 | $210 | $26 |
| Guarantee fee income | 1,444 | 1,101 | 343 | 286 | 303 | (17) |
| Investment gains (losses), net | 2,047 | 576 | 1,471 | 1,046 | 1,091 | (45) |
| Other income (loss) | 176 | 108 | 68 | 45 | 43 | 2 |
| Net revenues | 4,610 | 2,854 | 1,756 | 1,613 | 1,647 | (34) |
| Credit-related expense | (136) | (18) | (118) | 11 | (20) | 31 |
| Administrative expense | (514) | (503) | (11) | (142) | (128) | (14) |
| Other expense | (37) | (41) | 4 | (14) | (9) | (5) |
| Operating expense | (551) | (544) | (7) | (156) | (137) | (19) |
| Segment Earnings (Losses) before income tax (expense) benefit | 3,923 | 2,292 | 1,631 | 1,468 | 1,490 | (22) |
| Income tax (expense) benefit | (809) | (465) | (344) | (302) | (309) | 7 |
| Segment Earnings (Losses), net of taxes | 3,114 | 1,827 | 1,287 | 1,166 | 1,181 | (15) |
| Total other comprehensive income (loss), net of tax | 101 | 101 | 0 | (17) | (4) | (13) |
| Total comprehensive income (loss) | $3,215 | $1,928 | $1,287 | $1,149 | $1,177 | $(28) |
(1) The financial performance of the company’s Multifamily segment is measured based on its contribution to GAAP comprehensive income (loss).
Key Drivers - 2020 vs. 2019
Comprehensive income increased from the prior year, mainly driven by:
•Higher investment gains primarily driven by higher margins on Multifamily loan commitments.
•Higher guarantee fee income driven by portfolio growth and lower fair value losses on guarantee assets due to a decline in interest rates from the prior year.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 9
2020 Business Highlights
•New business activity of $83 billion, up 6% from $78 billion in the prior year.
▪The weighted average original LTV ratio of new business activity was 69%, up from 68% for the prior year.
▪The company provided financing for nearly 803,000 multifamily rental units.
▪96% of the eligible multifamily rental units financed were affordable to families earning at or below 120% of area median income.
•The Multifamily guarantee portfolio increased 15% from December 31, 2019, to $312 billion, driven by new securitization activity.
•The Multifamily delinquency rate, which does not include loans in forbearance, increased to 0.16% from 0.08% at December 31, 2019.
•As of December 31, 2020, 2.01% of the loans in the Multifamily mortgage portfolio, based on UPB, were in a forbearance program, approximately 95% of which were in the repayment period. Approximately 82% of the total loans in a Multifamily forbearance program are included in securitizations with first loss credit protection provided by subordination.
▪A multifamily loan in forbearance is reported as current as long as the borrower is in compliance with the forbearance agreement, including the agreed upon repayment plan. A loan in forbearance is therefore not included in the Multifamily delinquency rate if the borrower is in compliance with the forbearance agreement.
•While credit enhancement coverage of the Multifamily mortgage portfolio decreased to 88% from 89% in the prior year, the company continued to successfully transfer multifamily credit risk during 2020.
•As of December 31, 2020, the company had cumulatively transferred a substantial amount of the expected and stress credit risk on the Multifamily guarantee portfolio, primarily through subordination in its securitizations.
▪In addition, nearly all of the company's securitization activities shifted substantially all the interest-rate and liquidity risk associated with the underlying collateral away from Freddie Mac to third-party investors.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 10
Capital Markets Segment
Financial Results(1)
| Full-Year | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| (In millions) | 2020 | 2019 | Change | 12/31/2020 | 9/30/2020 | Change |
| Net interest income | $522 | $2,486 | $(1,964) | $(159) | $20 | $(179) |
| Investment gains (losses), net | (231) | (36) | (195) | (25) | 15 | (40) |
| Other income (loss) | (266) | (700) | 434 | 132 | 37 | 95 |
| Net revenues | 25 | 1,750 | (1,725) | (52) | 72 | (124) |
| Administrative expense | (412) | (414) | 2 | (115) | (104) | (11) |
| Other expense | (21) | (54) | 33 | (5) | (5) | 0 |
| Operating expense | (433) | (468) | 35 | (120) | (109) | (11) |
| Segment Earnings (Losses) before income tax (expense) benefit | (408) | 1,282 | (1,690) | (172) | (37) | (135) |
| Income tax (expense) benefit | 84 | (260) | 344 | 35 | 8 | 27 |
| Segment Earnings (Losses), net of taxes | (324) | 1,022 | (1,346) | (137) | (29) | (108) |
| Total other comprehensive income (loss), net of tax | 120 | 494 | (374) | (365) | (7) | (358) |
| Total comprehensive income (loss) | $(204) | $1,516 | $(1,720) | $(502) | $(36) | $(466) |
(1) The financial performance of the company’s Capital Markets segment is measured based on its contribution to GAAP comprehensive income (loss).
Key Drivers - 2020 vs. 2019
•Comprehensive loss compared to comprehensive income in the prior year, primarily due to lower net interest income, driven by an increase in amortization expense due to higher loan prepayments, coupled with additional expense due to payments to security holders of the full monthly coupon rate when loans pay off mid-month. In addition, the company's custodial trust account balance increased due to higher prepayments but earned a minimal yield due to the low interest rate environment.
2020 Business Highlights
•Freddie Mac continued to maintain a presence in the agency mortgage-related securities market to strategically support the guarantee business.
•FHFA has instructed the company to maintain loans in COVID-19 payment forbearance plans in mortgage-backed security pools for at least the duration of the forbearance plan. The company's less liquid assets are likely to increase in future periods as it will likely purchase a higher amount of delinquent and modified loans from securities after borrowers exit forbearance plans.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 11
Market Liquidity
Freddie Mac supports the U.S. housing market by executing its Charter Mission to provide liquidity and help maintain credit availability for new and refinanced single-family mortgages as well as for rental housing. Despite the significant challenges presented by the COVID-19 pandemic, the company continues to provide funding and stability to the housing market.
Freddie Mac provided approximately $1.2 trillion in liquidity to the market in 2020 funding:
•Nearly 3.8 million single-family homes, approximately 2.7 million of which were refinance loans; and
•Approximately 803,000 multifamily rental units.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 12
About Freddie Mac’s Conservatorship
Since September 2008, Freddie Mac has been operating under conservatorship with FHFA as Conservator. The support provided by Treasury pursuant to the Purchase Agreement enables the company to maintain access to the debt markets and have adequate liquidity to conduct its normal business operations.
Net Worth Amount, Liquidation Preference, and Dividend Payments and Draws Treasury Commitment
(In billions) (In billions)
As a result of increases to the Capital Reserve Amount pursuant to the September 2019 and January 2021 Letter Agreements, the company was not required to pay a dividend to Treasury on the senior preferred stock in December 2020, and it will not be required to pay a dividend to Treasury until it has built sufficient capital to meet the capital requirements and buffers set forth in the ERCF.
The quarterly increases in the company's Net Worth Amount as the company builds capital during this period will continue to be added to the aggregate liquidation preference of the senior preferred stock. As a result, the liquidation preference of the senior preferred stock increased from $84.1 billion on September 30, 2020 to $86.5 billion on December 31, 2020 based on the $2.4 billion increase in the Net Worth Amount during the third quarter of 2020, and will increase to $89.1 billion on March 31, 2021 based on the $2.5 billion increase in the Net Worth Amount during the fourth quarter of 2020.
The remaining Treasury commitment available to Freddie Mac under the Purchase Agreement was $140.2 billion at December 31, 2020.
For additional information on the Purchase Agreement, January 2021 Letter Agreement, senior preferred stock, and ERCF, see the company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 13
Additional Information
For more information, including information related to Freddie Mac’s financial results, conservatorship, and related matters, see the company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the company’s Financial Results Supplement. These documents are available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors.
Additional information about Freddie Mac and its business is also set forth in the company’s other filings with the SEC, which are available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors and the SEC’s website at www.sec.gov. Freddie Mac encourages all investors and interested members of the public to review these materials for a more complete understanding of the company’s financial results and related disclosures.
Webcast Announcement
Management will host a conference call at 9 a.m. Eastern Time on February 11, 2021 to share the company’s results with the media. The call will be concurrently webcast. To access the audio webcast, use the following link: https://edge.media-server.com/mmc/p/s5quqmi4. The replay will be available on the company’s website at www.FreddieMac.com/investors for approximately 30 days. All materials related to the call will be available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors.
| Media Contact: Frederick Solomon (703) 903-3861 | Investor Contact: Laurie Garthune (571) 382-4732 |
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* * * *
This press release contains forward-looking statements, which may include statements pertaining to the conservatorship, the company’s current expectations and objectives for its Single-Family Guarantee, Multifamily, and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends, the effects of the COVID-19 pandemic and actions taken in response thereto on its business, financial condition, and liquidity, its market share, the effect of legislative and regulatory developments and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of the company’s CRT transactions, and results of operations and financial condition on a GAAP, Segment Earnings, non-GAAP, and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments, and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, uncertainty about the duration, severity, and effects of the COVID-19 pandemic and actions taken in response thereto, by the U.S. government (including FHFA, Treasury, and Congress) and state and local governments, and the impacts of legislation or regulations and new or amended accounting guidance, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates, and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2020, which is available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this press release.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since its creation by Congress in 1970, the company has made housing more accessible and affordable for homebuyers and renters in communities nationwide. The company is building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 14
FREDDIE MAC
Consolidated Statements of Comprehensive Income (Loss)
| Twelve Months Ended | Three Months Ended | |||
|---|---|---|---|---|
| (In millions, except share-related amounts) | December 31, <br>2020 | December 31, <br>2019 | December 31, <br>2020 | September 30, <br>2020 |
| Net interest income | ||||
| Interest income | $62,340 | $72,895 | $14,183 | $14,849 |
| Interest expense | (49,569) | (61,047) | (10,530) | (11,392) |
| Net interest income | 12,771 | 11,848 | 3,653 | 3,457 |
| Non-interest income (loss) | ||||
| Guarantee fee income | 1,442 | 1,089 | 281 | 315 |
| Investment gains (losses), net | 1,813 | 818 | 856 | 1,122 |
| Other income (loss) | 633 | 323 | 232 | 172 |
| Non-interest income (loss) | 3,888 | 2,230 | 1,369 | 1,609 |
| Net revenues | 16,659 | 14,078 | 5,022 | 5,066 |
| Benefit (provision) for credit losses | (1,452) | 746 | 813 | (327) |
| Non-interest expense | ||||
| Salaries and employee benefits | (1,344) | (1,434) | (342) | (334) |
| Professional services | (398) | (445) | (129) | (105) |
| Other administrative expense | (793) | (685) | (235) | (202) |
| Total administrative expense | (2,535) | (2,564) | (706) | (641) |
| Credit enhancement expense | (1,058) | (749) | (327) | (267) |
| Benefit for (decrease in) credit enhancement recoveries | 323 | 41 | (385) | 20 |
| REO operations expense | (149) | (229) | (10) | (40) |
| Temporary Payroll Tax Cut Continuation Act of 2011 expense | (1,836) | (1,617) | (495) | (467) |
| Other expense | (723) | (657) | (243) | (237) |
| Non-interest expense | (5,978) | (5,775) | (2,166) | (1,632) |
| Income (loss) before income tax (expense) benefit | 9,229 | 9,049 | 3,669 | 3,107 |
| Income tax (expense) benefit | (1,903) | (1,835) | (756) | (644) |
| Net income (loss) | 7,326 | 7,214 | 2,913 | 2,463 |
| Other comprehensive income (loss), net of taxes and reclassification adjustments | ||||
| Changes in unrealized gains (losses) related to available-for-sale securities | 192 | 535 | (384) | (16) |
| Changes in unrealized gains (losses) related to cash flow hedge relationships | 38 | 71 | 8 | 6 |
| Changes in defined benefit plans | (25) | (33) | (15) | (4) |
| Total other comprehensive income (loss), net of taxes and reclassification adjustments | 205 | 573 | (391) | (14) |
| Comprehensive income (loss) | $7,531 | $7,787 | $2,522 | $2,449 |
| Net income (loss) | $7,326 | $7,214 | $2,913 | $2,463 |
| Undistributed net worth sweep, senior preferred stock dividends, or future increase in senior preferred stock liquidation preference | (7,291) | (7,787) | (2,522) | (2,449) |
| Net income (loss) attributable to common stockholders | $35 | $(573) | $391 | $14 |
| Net income (loss) per common share — basic and diluted | $0.01 | $(0.18) | $0.12 | $0.00 |
| Weighted average common shares outstanding (in millions) — basic and diluted | 3,234 | 3,234 | 3,234 | 3,234 |
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 15
FREDDIE MAC
Consolidated Balance Sheets
| December 31, | ||
|---|---|---|
| (In millions, except share-related amounts) | 2020 | 2019 |
| Assets | ||
| Cash and cash equivalents (include $17,379 and $991 of restricted cash and cash equivalents) | $23,889 | $5,189 |
| Securities purchased under agreements to resell | 105,003 | 56,271 |
| Investment securities, at fair value | 59,825 | 75,711 |
| Mortgage loans held-for-sale (includes $14,199 and $15,035 at fair value) | 33,652 | 35,288 |
| Mortgage loans held-for-investment (net of allowance for loan losses of $5,732 and $4,234) | 2,350,236 | 1,984,912 |
| Accrued interest receivable (net of allowance of $140 and $0) | 7,754 | 6,848 |
| Derivative assets, net | 1,205 | 844 |
| Deferred tax assets, net | 6,557 | 5,918 |
| Other assets (includes $5,775 and $4,627 at fair value) | 39,294 | 22,799 |
| Total assets | $2,627,415 | $2,193,780 |
| Liabilities and equity | ||
| Liabilities | ||
| Accrued interest payable | $6,210 | $6,559 |
| Debt (includes $2,592 and $3,938 at fair value) | 2,592,546 | 2,169,685 |
| Derivative liabilities, net | 954 | 372 |
| Other liabilities | 11,292 | 8,042 |
| Total liabilities | 2,611,002 | 2,184,658 |
| Commitments and contingencies | ||
| Equity | ||
| Senior preferred stock (liquidation preference of $86,539 and $79,322) | 72,648 | 72,648 |
| Preferred stock, at redemption value | 14,109 | 14,109 |
| Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares issued and 650,059,292 shares and 650,059,033 shares outstanding | — | — |
| Additional paid-in capital | — | — |
| Retained earnings (accumulated deficit) | (67,102) | (74,188) |
| AOCI, net of taxes, related to: | ||
| Available-for-sale securities | 810 | 618 |
| Cash flow hedge relationships | (206) | (244) |
| Defined benefit plans | 39 | 64 |
| Total AOCI, net of taxes | 643 | 438 |
| Treasury stock, at cost, 75,804,594 shares and 75,804,853 shares | (3,885) | (3,885) |
| Total equity | 16,413 | 9,122 |
| Total liabilities and equity | $2,627,415 | $2,193,780 |
| The table below presents the carrying value and classification of the assets and liabilities of consolidated variable-interest entities (VIEs) on the company's consolidated balance sheets. | ||
| December 31, | ||
| (In millions) | 2020 | 2019 |
| Consolidated Balance Sheet Line Item | ||
| Assets: | ||
| Mortgage loans held-for-investment | $2,273,347 | $1,940,523 |
| All other assets | 83,982 | 40,598 |
| Total assets of consolidated VIEs | $2,357,329 | $1,981,121 |
| Liabilities: | ||
| Debt | $2,308,176 | $1,898,355 |
| All other liabilities | 5,610 | 5,537 |
| Total liabilities of consolidated VIEs | $2,313,786 | $1,903,892 |
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 16
FREDDIE MAC
Non-GAAP Reconciliations
| The company’s GAAP net interest income includes the spread earned on its investments activities plus the guarantee fees earned by its Single-Family business. Adjusted net interest income is the net spread earned on the company’s investment activities, including the cost of funds associated with using derivatives. Net interest yield, GAAP and adjusted, is calculated as annualized quarterly GAAP or adjusted net interest income divided by the average balance of the underlying assets and liabilities. | ||||||
|---|---|---|---|---|---|---|
| Reconciliation of GAAP Net Interest Income to Adjusted Net Interest Income (pre-tax) | ||||||
| (In millions) | 1Q 2020 | 2Q 2020 | 3Q 2020 | 4Q 2020 | 2019 | 2020 |
| GAAP net interest income | $2,785 | $2,876 | $3,457 | $3,653 | $11,848 | $12,771 |
| Reclassifications: | ||||||
| Guarantee fee income reclassified to adjusted guarantee fee income (1) (2) | (2,561) | (2,943) | (3,138) | (3,488) | (9,402) | (12,130) |
| Accrual of periodic cash settlements reclassified from derivative gain (loss) (3) | (176) | (329) | (540) | (531) | (272) | (1,576) |
| Hedge accounting impact (4) | 350 | 475 | 690 | 717 | 252 | 2,232 |
| Other reclassifications (5) | 380 | 301 | (239) | (274) | 1,129 | 168 |
| Total reclassifications | (2,007) | (2,496) | (3,227) | (3,576) | (8,293) | (11,306) |
| Adjusted net interest income | $778 | $380 | $230 | $77 | $3,555 | $1,465 |
| Average balance of assets and liabilities, GAAP (in billions) | $2,205 | $2,274 | $2,376 | $2,526 | $2,108 | $2,345 |
| Average balance of assets and liabilities, adjusted (in billions) | $324 | $352 | $364 | $379 | $307 | $355 |
| The company's GAAP guarantee fees are primarily those generated by the company's Multifamily business. Adjusted guarantee fee income consists of the revenues from guarantee fees from both the Single-Family and Multifamily businesses, net of the 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011. | ||||||
| Reconciliation of GAAP Guarantee Fee Income to Adjusted Guarantee Fee Income (pre-tax) | ||||||
| (In millions) | 1Q 2020 | 2Q 2020 | 3Q 2020 | 4Q 2020 | 2019 | 2020 |
| GAAP guarantee fee income | $377 | $469 | $315 | $281 | $1,089 | $1,442 |
| Reclassifications: | ||||||
| Guarantee fee income reclassified from net interest income (1) (2) | 2,561 | 2,943 | 3,138 | 3,488 | 9,402 | 12,130 |
| Temporary Payroll Tax Cut Continuation Act of 2011 expense reclassified from other non-interest expense (6) | (432) | (442) | (467) | (495) | (1,617) | (1,836) |
| Total reclassifications | 2,129 | 2,501 | 2,671 | 2,993 | 7,785 | 10,294 |
| Adjusted guarantee fee income | $2,506 | $2,970 | $2,986 | $3,274 | $8,874 | $11,736 |
Columns may not add due to rounding.
For notes on reclassifications, see page 17 of this press release.
Freddie Mac Full-Year and Fourth Quarter 2020 Financial Results
February 11, 2021
Page 17
Notes on Significant Reclassifications
(1) Net guarantee fees, including certain fees and related hedge amortization and implied guarantee fee income related to unsecuritized loans held in the mortgage-related investments portfolio, are reclassified from GAAP net interest income to adjusted guarantee fee income.
(2) Short-term returns on cash received related to certain upfront fees on single-family loans are reclassified from GAAP net interest income to adjusted guarantee fee income.
(3) The accrual of periodic cash settlements of derivatives is reclassified from GAAP investment gains (losses) to adjusted net interest income to fully reflect the periodic cost associated with the protection provided by these contracts.
(4) Hedge accounting impact consists of removing the effects of hedge accounting including deferred gains and losses on closed cash flow hedges related to forecasted debt issuances.
(5) Other reclassifications primarily relate to items reclassified out of GAAP net interest income, including the amortization related to derivative commitment basis adjustments associated with mortgage-related and non-mortgage- related securities, amortization related to accretion of other-than-temporary impairments on available-for-sale securities, amortization of discounts on loans purchased with deteriorated credit quality that are on accrual status, amortization related to premiums and discounts, including non-cash premiums and discounts, on single-family loans in trusts and on the associated consolidated securities, amortization related to premiums and discounts associated with securities issued by consolidated trusts that were previously held and subsequently transferred to third parties, and costs associated with STACR debt note expenses.
(6) The expense related to the Temporary Payroll Tax Cut Continuation Act of 2011 is reclassified from GAAP other non-interest expense to adjusted guarantee fee income. As a result of the reclassification, the revenue and expense related to the legislated 10 basis point increase are netted within adjusted guarantee fee income.
a20204qerexhibit992
Exhibit 99.2 Fourth Quarter 2020 Financial Results Supplement February 11, 2021
2© Freddie Mac Financial Highlights $2.6 $0.2 $1.8 $2.5 $2.9 $2.4 $0.6 $1.9 $2.4 $2.5 Net income Comprehensive income 4Q19 1Q20 2Q20 3Q20 4Q20 $0.7 $0.8 $0.4 $0.2 $0.1 $2.4 $2.5 $3.0 $3.0 $3.3 Adjusted net interest income Adjusted guarantee fee income 4Q19 1Q20 2Q20 3Q20 4Q20 Adjusted Net Interest Income and Adjusted Guarantee Fee Income $ Billions Net Income and Comprehensive Income $ Billions ▪ Adjusted net interest income decreased from the prior quarter, primarily driven by higher loan prepayments that resulted in an increase in amortization expense, combined with a change in investment mix as the lower-yielding other investments portfolio represented a larger percentage of the total investments portfolio. ▪ Adjusted guarantee fee income increased from the prior quarter, primarily due to higher Single-Family guarantee fee income driven by portfolio growth, higher deferred fee income recognition, and higher contractual guarantee fees rates. ▪ Net income of $2.9 billion and comprehensive income of $2.5 billion, up $0.4 billion and $0.1 billion, respectively, from the prior quarter, driven by a reserve release primarily due to realized house price growth during 4Q 2020. 11 Note: Totals may not add due to rounding.
3© Freddie Mac $316 $334 $349 $345 $345 $213 $211 $194 $198 $182 $103 $123 $155 $147 $163 Mortgage-related investments portfolio Other investments portfolio 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 $2,265 $2,295 $2,342 $2,476 $2,638 $1,994 $2,020 $2,061 $2,179 $2,326 $271 $275 $281 $297 $312 Single-Family credit guarantee portfolio Multifamily guarantee portfolio 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 Total Portfolio Balances Total debt outstanding4,6 $ Billions Portfolio balance highlightsTotal guarantee portfolio2 $ Billions Total investments portfolio $ Billions 16% YoY increase ▪ Total guarantee portfolio: • Single-Family - grew $332 billion, or 17% year-over- year. • Multifamily - grew $41 billion, or 15% year-over- year. ▪ Total investments portfolio: • Mortgage-related investments portfolio - decreased $31 billion, or 15% year-over-year. • Other investments portfolio - increased $60 billion, or 58% year-over-year. 9% YoY increase 22% 20% 20% 3% 35% 30% 30% 41% 43% 37% 45% 45% 51% 52% 6% 5% 5% 5% 4% 2.4 2.4 2.5 3.4 3.6 Discount notes Callable debt Non-callable debt Other Weighted average maturity in years 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 3 2,4 Note: Totals may not add due to rounding. *In February 2019, FHFA directed the company to maintain the mortgage-related investments portfolio at or below $225 billion at all times. Purchase Agreement Debt Cap $300B $273 $288 $289 $287 FHFA Limit $225B* 5 $287
4© Freddie Mac Multifamily8Single-Family7 Percentage of Loans in Forbearance 0.10% 1.91% 2.01% Forbearance Period Repayment Period Total 0.37% 0.23% 0.18% 0.63% 1.29% 2.70% Current One Month Two Months Three Months to Six Months Greater Than Six Months Total Percentage of loans in the single-family guarantee portfolio that were in forbearance by payment status as of December 31, 2020 (based on loan count). Percentage of loans in the multifamily mortgage portfolio currently under a forbearance program (based on UPB). Past Due
5© Freddie Mac Conservatorship Matters • The January 2021 Letter Agreement increased the Capital Reserve Amount used for purposes of calculating the dividend requirement on the senior preferred stock from $20 billion to the amount of adjusted total capital necessary to meet the capital requirements and buffers set forth in the Enterprise Regulatory Capital Framework (ERCF). As a result, the company will not be required to pay a dividend to Treasury again until the company has built sufficient capital to meet the capital requirements and buffers set forth in the ERCF. Dividend Payments and Draws9 $ Billions $16.4 $86.5 $140.2 Net Worth Amount Senior Preferred Stock Liquidation Preference Remaining Treasury commitment As of December 31, 2020 $71.6 $119.7 Cumulative draws from Treasury Cumulative dividend payments to Treasury As of December 31, 2020 Net Worth Amount, Liquidation Preference, and Treasury Commitment $ Billions
6© Freddie Mac 210,000 (303,000) (4,427,000) 1,322,000 283,000 3.6% 4.4% 11.1% 7.8% 6.7% Average monthly net new jobs (non-farm) National unemployment rate (as of the last month in each quarter) 4Q19 1Q20 2Q20 3Q20 4Q20 Key Economic Indicators National home prices increased by an average of 11.6% over the past year Quarterly ending interest rates 3.74% 3.50% 3.13% 2.90% 2.67% 1.89% 0.72% 0.64% 0.71% 0.93% 30-year mortgage rate, based on Primary Mortgage Market Survey (PMMS) 10-year LIBOR 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 168 218 United States (Not Seasonally Adjusted) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Freddie Mac House Price Index (December 2000 = 100) (2006 Peak) National home prices have surpassed the 2006 peak Unemployment rate and job creation
7© Freddie Mac 0.26% 0.26% 1.95% 2.44% 2.04% 1.84% 1.79% 4.44% 5.47% 5.30% 0.63% 0.60% 2.48% 3.04% 2.64% Core single-family portfolio (loans originated post-2008) Legacy and relief refinance single-family portfolio Total 4Q19 1Q20 2Q20 3Q20 4Q20 $147 $138 $232 $337 $384 $63 $55 $60 $101 $109 $84 $83 $172 $236 $275 48 49 48 46 47 Home purchase UPB Refinance UPB 4Q19 1Q20 2Q20 3Q20 4Q20 Single-Family Guarantee Financial Highlights and Key Metrics Note: Totals may not add due to rounding. (73%) (74%) (75%) (77%) (78%) Single-Family Guarantee Segment Earnings $ Millions $1,420 $588 $753 $1,311 $1,884 4Q19 1Q20 2Q20 3Q20 4Q20 Guarantee fees charged on new acquisitions (bps)10 $1,994 $2,020 $2,061 $2,179 $2,326 $1,701 $1,739 $1,794 $1,928 $2,093 $293 $281 $267 $251 $233 Core single-family portfolio (loans originated post-2008) Legacy and relief refinance single-family portfolio 4Q19 1Q20 2Q20 3Q20 4Q20 17% YoY increase Credit guarantee portfolio $ Billions Serious delinquency rates7 (85 ) 86 87 88 (90 ) New business activity $ Billions
8© Freddie Mac 752 752 758 761 761 4Q19 1Q20 2Q20 3Q20 4Q20 13% 14% 10% 10% 10% 4Q19 1Q20 2Q20 3Q20 4Q20 New business activity with debt-to-income ratio > 45% Weighted average original loan-to-value ratio (OLTV) Weighted average original credit score 75% 74% 72% 71% 70% 4Q19 1Q20 2Q20 3Q20 4Q20 Single-Family Guarantee Loan Purchase Credit Characteristics4 43% 40% 26% 30% 28% 20% 21% 18% 16% 18% 37% 39% 56% 54% 54% 4% 5% 3% 3% 4% Home purchase Cash-out refinance Other refinance Investment properties as a percentage of loan purchases 4Q19 1Q20 2Q20 3Q20 4Q20 Loan purpose and investment properties as a percentage of loan purchases
9© Freddie Mac Total Single-Family credit guarantee portfolio with transferred credit risk $ Billions $598 $858 $1,144 $1,376 $1,859 $457 $648 $838 $906 $959 26% 35% 44% 45% 41% Reference pool UPB at issuance Reference pool UPB outstanding 2016 2017 2018 2019 2020 Outstanding reference pool UPB as a percentage of total single-family portfolio Cumulative Single-Family transferred credit risk based on outstanding balance at period end $ Billions $34.9 $37.5 $34.1 $37.7 $40.8 Transferred to third parties 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 Single-Family Guarantee Credit Risk Transfer – STACR / ACIS This slide reflects STACR and ACIS CRT transactions only. It excludes senior subordinate securitization structures and lender risk-sharing transactions.
10© Freddie Mac Multifamily acquisitions of units by area median income (AMI) (% of eligible units acquired) 94% 91% 93% 94% 96% 6% 9% 7% 6% 4% ≤120% AMI >120% AMI 2016 2017 2018 2019 2020 69% 69% 69% 66% 70% 4Q19 1Q20 2Q20 3Q20 4Q20 1.32 1.42 1.36 1.42 1.38 4Q19 1Q20 2Q20 3Q20 4Q20 Weighted average original loan-to-value ratio (OLTV) for new business activity Multifamily Financial Highlights and Key Metrics Weighted average original debt service coverage ratio (ODSCR) for new business activity Multifamily comprehensive income (loss) $ Millions $502 $(174) $1,063 $1,177 $1,149 4Q19 1Q20 2Q20 3Q20 4Q20 (89 %)
11© Freddie Mac Multifamily securitization activity11,12 $ Billions $52.1 $67.5 $72.8 $75.4 $75.0 $49.9 $60.7 $66.3 $67.9 $65.7 $2.2 $6.8 $6.5 $7.5 $9.3 Primary securitization products Other securitization products 2016 2017 2018 2019 2020 $56.8 $73.2 $78.0 $78.4 $83.0 $56.8 $73.2 $77.5 $77.9 $82.5 $0.5 $0.5 $0.5 New loan purchase activity LIHTC new business activity 2016 2017 2018 2019 2020 Multifamily Key Metrics, continued New business activity4 $ Billions Note: Totals may not add due to rounding.
12© Freddie Mac Freddie Mac (60+ day) FDIC insured institutions (90+ day) MF CMBS market (60+ day) ACLI investment bulletin (60+ day) 4Q16 4Q17 4Q18 4Q19 4Q20 $213 $249 $280 $353 $158 $203 $237 $271 $312 $13 $7 $7 $6 $4 $42 $39 $36 $33 $36 Guarantee portfolio Mortgage-related securities Unsecuritized loans and other 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 Multifamily market and Freddie Mac delinquency rates8 Total portfolio unit count In Thousands Total portfolio loan count In Thousands Total portfolio $ Billions 17 21 24 27 29 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 Multifamily Portfolio Metrics 66% increase since 2016 (82%) Note: Totals may not add due to rounding. (74%) (85%) (88%) (88%) $309 3,404 3,946 4,289 4,305 4,598 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 0.22% 0.10% 1.95% 0.16%
13© Freddie Mac $168 $170 $146 $156 $135 $119 $116 $84 $85 $64 $19 $26 $35 $49 $51 $30 $28 $27 $22 $20 Liquid Securitization pipeline Less liquid 4Q19 1Q20 2Q20 3Q20 4Q20 Capital Markets Financial Highlights and Key Metrics Note: Totals may not add due to rounding. $268 $291 $299 $300 $295 $168 $171 $147 $156 $135 $100 $120 $152 $144 $160 Mortgage investments portfolio Other investments portfolio 4Q19 1Q20 2Q20 3Q20 4Q20 $539 $210 $124 $(36) $(502) 4Q19 1Q20 2Q20 3Q20 4Q20 Capital Markets investments portfolio $ Billions 10% YoY increase Capital Markets cash window securitization4 $ Billions $73 $59 $130 $195 $243 4Q19 1Q20 2Q20 3Q20 4Q20 Capital Markets mortgage investments portfolio $ Billions 20% YoY decrease Capital Markets comprehensive income (loss) $ Millions (71%) (68%) (57%) (54%) (47%) 9
14© Freddie Mac Number of families Freddie Mac helped to own or rent a home13 In Thousands 75 90 47 426 15 16 7 228 10 11 9 12 9 4 169 33 51 25 19 5 3 2 1 Forbearance agreements Repayment plans Payment deferrals Loan modifications Short sales and deed-in-lieu of foreclosure transactions 2017 2018 2019 2020 Housing Market Support Home Retention Actions 2,311 2,192 2,578 4,601 663 442 782 2,667 828 884 987 1,131 820 866 809 803 Single-Family refinance borrowers Single-Family purchase borrowers Multifamily rental units 2017 2018 2019 2020 Note: Totals may not add due to rounding. Foreclosure Alternatives 15 15 15 15 15 9 Number of Single-Family loan workouts14 In Thousands
15© Freddie Mac Endnotes 1 For additional information regarding Freddie Mac’s non-GAAP financial measures and reconciliations to the comparable amounts under GAAP, see the company’s Press Release for the quarter ended December 31, 2020. 2 Based on unpaid principal balances (UPB) of loans and securities. Excludes mortgage-related securities traded, but not yet settled. The amount of mortgage assets that the company may own in its mortgage-related investments portfolio is currently capped under the Senior Preferred Stock Purchase Agreement (Purchase Agreement) with the U.S. Department of Treasury at $250 billion, and in February 2019, FHFA directed us to maintain this portfolio at or below $225 billion. The company is required to include 10% of the notional value of interest-only securities it holds when calculating the size of its mortgage-related investments portfolio for purposes of the Purchase Agreement and FHFA limits. The balance of the mortgage-related investments portfolio as determined for these purposes was $188.8 billion as of December 31, 2020, including $6.6 billion representing 10% of the notional amount of the interest-only securities the company held at that date. With respect to the composition of Freddie Mac's mortgage-related investments portfolio, in August 2020, FHFA instructed the company to: (1) reduce the amount of agency MBS to no more than $50 billion by June 30, 2021 and no more than $20 billion by June 30, 2022, with all dollar caps to be based on UPB; and (2) reduce the UPB of its existing portfolio of collateralized mortgage obligations (CMOs), which are also sometimes referred to as REMICs, to zero by June 30, 2021. The company will have a holding period limit to sell any new CMO tranches created but not sold at issuance. CMOs do not include tranches initially retained from reperforming loans senior subordinate securitization structures. 3 Primarily Freddie Mac’s K Certificate and SB (Small Balance) Certificate transactions. 4 The company’s Purchase Agreement with Treasury limits the amount of mortgage assets the company can own and indebtedness it can incur. It also further restricts certain aspects of the company's Single-Family and Multifamily new business activities. See the company’s Annual Report on Form 10-K for the year ended December 31, 2020 for more information. 5 The other investments portfolio is primarily used for short-term liquidity management, cash and other investments held by consolidated trusts, and other investments, which include investments in debt securities used to pledge as collateral, LIHTC partnerships, and secured lending activities. 6 Represents the company’s aggregate indebtedness for purposes of the Purchase Agreement debt cap and primarily includes the par value of other short-term and long-term debt used to fund its business activities. Beginning in 2020, the company offset amounts recognized as payables under repurchase agreements accounted for as collateralized borrowings and amounts recognized as receivables under reverse repurchase agreements accounted for as collateralized borrowings when such amounts meet the conditions for offsetting repurchase and reverse repurchase agreements in FASB ASC Subtopic 210-20 (Balance Sheet - Offsetting). Previously, such amounts were presented on a gross basis, with amounts recognized as payables under repurchase agreements accounted for as collateralized borrowings included in Other Debt and amounts recognized as receivables under reverse repurchase agreements accounted for as collateralized borrowings included in Other Investments. Prior periods have been revised to conform to the current period presentation. 7 Information related to single-family loans in forbearance is based on information reported by servicers. Beginning in 4Q 2020, Freddie Mac required single-family servicers to report all alternatives to foreclosure to the company, which include forbearance plans on all mortgages, including those where the borrower has continued to make payments in accordance with the loan's original contractual terms and remains in current status. The forbearance data the company reported in prior periods was generally limited to loans in forbearance that were past due based on the loan's original contractual terms. For the purpose of reporting delinquency rates, the company reports single-family loans in forbearance as delinquent during the forbearance period to the extent that payments are past due based on the loan's original contractual terms, irrespective of the forbearance agreement. 8 Multifamily loans in forbearance are reported as current as long as the borrower is in compliance with the forbearance agreement, including the agreed upon repayment plan. Loans in forbearance are therefore not included in the multifamily delinquency rates if the borrower is in compliance with the forbearance agreement. 9 Excludes the initial $1 billion liquidation preference of the senior preferred stock issued to Treasury in September 2008 and the $13.9 billion increase to-date in the aggregate liquidation preference of the senior preferred stock pursuant to the Letter Agreements. 10 Represents the estimated average rate of guarantee fees for new acquisitions during the period assuming amortization of upfront fees using the estimated life of the related loans rather than the original contractual maturity date of the related loans. Net of legislated 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011. 11 Multifamily's primary securitization products are K Certificates and SB Certificates. In these transactions, the company guarantees the senior securities, but does not issue or guarantee the mezzanine or subordinated securities. The interest-rate risk and a substantial amount of the expected and stress credit risk is sold to third-party investors through the mezzanine and subordinated securities, thereby reducing the company's risk exposure. 12 Excludes re-securitization UPB of primary and other securitization products. 13 Based on the company’s purchases of loans and issuances of mortgage-related securities. For the periods presented, a borrower may be counted more than once if the company purchased more than one loan (purchase or refinance mortgage) relating to the same borrower. 14 Consists of both home retention actions and foreclosure alternatives. 15 Categories are not mutually exclusive, and a borrower in one category may also be included in another category in the same or another period. For example, a borrower helped through a home retention action in one period may subsequently lose his or her home through a foreclosure alternative in a later period.
16© Freddie Mac Safe Harbor Statements Freddie Mac obligations Freddie Mac’s securities are obligations of Freddie Mac only. The securities, including any interest or return of discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation for, certain Freddie Mac securities, including offering circulars and related supplements and agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions or to certain persons. This information is provided for your general information only, is current only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information does not constitute a sufficient basis for making a decision with respect to the purchase or sale of any security. All information regarding or relating to Freddie Mac securities is qualified in its entirety by the relevant offering circular and any related supplements. Investors should review the relevant offering circular and any related supplements before making a decision with respect to the purchase or sale of any security. In addition, before purchasing any security, please consult your legal and financial advisors for information about and analysis of the security, its risks and its suitability as an investment in your particular circumstances. Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include statements pertaining to the conservatorship, the company’s current expectations and objectives for its Single-family Guarantee, Multifamily, and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends, the effects of the COVID-19 pandemic and actions taken in response thereto on its business, financial condition, and liquidity, its market share, the effect of legislative and regulatory developments and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of the company’s credit risk transfer transactions, and results of operations and financial condition on a GAAP, Segment Earnings, non-GAAP and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments, and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury, Congress, and state and local governments), and the impacts of legislation or regulations and new or amended accounting guidance, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2020, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s website at www.freddiemac.com/investors and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this presentation.