ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Federally chartered corporation | 8200 Jones Branch Drive McLean, Virginia 22102-3110 | 52-0904874 | (703) 903-2000 | |||
(State or other jurisdiction of incorporation or organization) | (Address of principal executive offices, including zip code) | (I.R.S. Employer Identification No.) | (Registrant’s telephone number, including area code) |
Large accelerated filer ý | Accelerated filer ¨ | ||||
Non-accelerated filer (Do not check if a smaller reporting company) ¨ | Smaller reporting company ¨ |
Table of Contents |
Page | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
EXECUTIVE SUMMARY | |
KEY ECONOMIC INDICATORS | |
CONSOLIDATED RESULTS OF OPERATIONS | |
CONSOLIDATED BALANCE SHEETS ANALYSIS | |
OUR BUSINESS SEGMENTS | |
RISK MANAGEMENT | |
LIQUIDITY AND CAPITAL RESOURCES | |
CONSERVATORSHIP AND RELATED MATTERS | |
REGULATION AND SUPERVISION | |
OFF-BALANCE SHEET ARRANGEMENTS | |
FORWARD-LOOKING STATEMENTS | |
FINANCIAL STATEMENTS | |
OTHER INFORMATION | |
CONTROLS AND PROCEDURES | |
SIGNATURES | |
FORM 10-Q INDEX | |
EXHIBIT INDEX |
Freddie Mac Form 10-Q | i |
Management's Discussion and Analysis | Executive Summary |
• | $(0.9) billion resulting from a larger decline in interest rates; and |
• | $(0.6) billion resulting from widening spreads. |
Freddie Mac Form 10-Q | 1 |
Management's Discussion and Analysis | Executive Summary |
• | Interest-Rate Volatility — We hold assets and liabilities that expose us to interest-rate risk. Through our use of derivatives, we manage our exposure to interest-rate risk on an economic basis to a low level as measured by our models. However, the way we account for our financial assets and liabilities (i.e., some are measured at amortized cost, while others are measured at fair value), including derivatives, creates volatility in our GAAP earnings when interest rates fluctuate. Based upon the composition of our financial assets and liabilities, including derivatives, at March 31, 2016, we generally recognize fair value losses in earnings when interest rates decline. This volatility generally is not indicative of the underlying economics of our business. For information about the sensitivity of our financial results to interest-rate volatility, see "Risk Management - Interest-Rate Risk and Other Market Risks." |
• | Spread Volatility — Spread volatility (i.e., credit spreads, liquidity spreads, risk premiums, etc.), or OAS, is the risk associated with changes in the excess of interest rates over benchmark rates. We hold assets and liabilities that expose us to spread volatility, which may contribute to significant earnings volatility. For financial assets and liabilities measured at fair value, we generally recognize fair value losses when spreads widen. |
Freddie Mac Form 10-Q | 2 |
Management's Discussion and Analysis | Executive Summary |
Freddie Mac Form 10-Q | 3 |
Management's Discussion and Analysis | Key Economic Indicators | Single-family Home Prices |
• | Home prices continued to appreciate during the three months ended March 31, 2016, increasing 1.5%, compared to an increase of 1.6% during the three months ended March 31, 2015, based on our own non-seasonally adjusted price index of single-family homes funded by loans owned or guaranteed by us or Fannie Mae. |
• | National home prices at March 31, 2016 were approximately 5% below their peak level of 167 reached in June 2006, based on our index. |
Freddie Mac Form 10-Q | 4 |
Management's Discussion and Analysis | Key Economic Indicators | Interest Rates |
• | Mortgage interest rates, as indicated by the 30-year PMMS rate, decreased during the three months ended March 31, 2016. We expect mortgage interest rates to remain low in 2016, but to begin slowly trending up in the second half of the year. |
• | The average 30-year PMMS rate was 3.74% during the first quarter of 2016, compared to 3.72% during the first quarter of 2015. |
• | Longer-term interest rates, as indicated by the 10-year LIBOR and the 10-year Treasury rate, declined sharply during the three months ended March 31, 2016. The decline in longer-term interest rates coincided with worldwide economic growth forecast downgrades from the International Monetary Fund, increased financial market volatility, investors' flight-to-safety of longer-term U.S. Treasuries, and market expectations that the Federal Reserve would raise its short-term interest rate less rapidly than previously anticipated. |
Freddie Mac Form 10-Q | 5 |
Management's Discussion and Analysis | Key Economic Indicators | Unemployment Rate |
• | An average of approximately 209,000 monthly net new jobs were added to the economy during the first quarter of 2016. The steady flow of jobs has helped to stabilize the unemployment rate at 5%. |
Freddie Mac Form 10-Q | 6 |
Management's Discussion and Analysis | Consolidated Results of Operations | Comparison |
Three Months Ended March 31, | Change | ||||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | |||||||||||
Net interest income | $ | 3,405 | $ | 3,647 | $ | (242 | ) | (7 | )% | ||||||
Benefit (provision) for credit losses | 467 | 499 | (32 | ) | (6 | )% | |||||||||
Net interest income after benefit (provision) for credit losses | 3,872 | 4,146 | (274 | ) | (7 | )% | |||||||||
Non-interest income (loss): | |||||||||||||||
Gains (losses) on extinguishment of debt | (55 | ) | (79 | ) | 24 | (30 | )% | ||||||||
Derivative gains (losses) | (4,561 | ) | (2,403 | ) | (2,158 | ) | 90 | % | |||||||
Net impairment of available-for-sale securities recognized in earnings | (57 | ) | (93 | ) | 36 | (39 | )% | ||||||||
Other gains (losses) on investment securities recognized in earnings | 303 | 417 | (114 | ) | (27 | )% | |||||||||
Other income (loss) | 947 | 11 | 936 | 8,509 | % | ||||||||||
Total non-interest income (loss) | (3,423 | ) | (2,147 | ) | (1,276 | ) | 59 | % | |||||||
Non-interest expense: | |||||||||||||||
Administrative expense | (448 | ) | (451 | ) | 3 | (1 | )% | ||||||||
REO operations (expense) income | (84 | ) | (75 | ) | (9 | ) | 12 | % | |||||||
Temporary Payroll Tax Cut Continuation Act of 2011 expense | (272 | ) | (222 | ) | (50 | ) | 23 | % | |||||||
Other (expense) income | (153 | ) | (463 | ) | 310 | (67 | )% | ||||||||
Total non-interest expense | (957 | ) | (1,211 | ) | 254 | (21 | )% | ||||||||
(Loss) income before income tax benefit (expense) | (508 | ) | 788 | (1,296 | ) | (164 | )% | ||||||||
Income tax benefit (expense) | 154 | (264 | ) | 418 | (158 | )% | |||||||||
Net (loss) income | (354 | ) | 524 | (878 | ) | (168 | )% | ||||||||
Total other comprehensive income (loss), net of taxes and reclassification adjustments | 154 | 222 | (68 | ) | (31 | )% | |||||||||
Comprehensive (loss) income | $ | (200 | ) | $ | 746 | $ | (946 | ) | (127 | )% |
• | Other gains (losses) on investment securities recognized in earnings decreased due to a decline in sales of available-for-sale non-agency mortgage-related securities in an unrealized gain position. This decrease in sales was attributable to increased market volatility and weaker investor demand for this product type. |
• | Other income (loss) increased due to the following: |
◦ | Reduced lower-of-cost-or-fair-value adjustments as we transferred fewer seriously delinquent |
Freddie Mac Form 10-Q | 7 |
Management's Discussion and Analysis | Consolidated Results of Operations | Comparison |
◦ | Minimal gains on STACR debt notes carried at fair value as a result of relatively unchanged spreads between STACR yields and LIBOR during the three months ended March 31, 2016 compared to losses as a result of tightened spreads during the three months ended March 31, 2015; and |
◦ | Increased gains on multifamily mortgage loans for which we have elected the fair value option driven by a larger decline in interest rates in the current period versus during the first quarter of 2015. |
• | Other expense decreased primarily driven by fewer reclassifications of seriously delinquent single-family loans from held-for-investment to held-for-sale. See "Loan Reclassifications" below for the effect of these loan reclassifications on pre-tax net income. |
• | Income tax benefit reflects a pre-tax net loss and income tax expense reflects pre-tax net income in the respective periods. |
Three Months Ended March 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Benefit for credit losses | $ | 64 | $ | 692 | ||||
Other income (loss) - lower-of-cost-or-fair-value adjustment | (67 | ) | (581 | ) | ||||
Other (expense) income - property taxes and insurance associated with these loans | (31 | ) | (349 | ) | ||||
Effect on income before income tax (expense) benefit | $ | (34 | ) | $ | (238 | ) |
Freddie Mac Form 10-Q | 8 |
Management's Discussion and Analysis | Consolidated Results of Operations | Comparison |
Three Months Ended March 31, | |||||||
(in billions) | 2016 | 2015 | |||||
Components of derivative gains (losses) | |||||||
Derivative gains (losses) | $ | (4.6 | ) | $ | (2.4 | ) | |
Less: Accrual of periodic cash settlements | (0.5 | ) | (0.6 | ) | |||
Derivative fair value changes | $ | (4.1 | ) | $ | (1.8 | ) | |
Estimated Net Interest Rate Effect | |||||||
Interest rate effect on derivative fair values | $ | (4.0 | ) | $ | (1.7 | ) | |
Estimate of offsetting interest rate effect related to financial instruments measured at fair value | 1.9 | 0.9 | |||||
Income tax benefit (expense) | 0.7 | 0.3 | |||||
Estimated Net Interest Rate Effect on Comprehensive income | $ | (1.4 | ) | $ | (0.5 | ) |
Freddie Mac Form 10-Q | 9 |
Management's Discussion and Analysis | Consolidated Results of Operations | Net Interest Income |
Three Months Ended March 31, | |||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||
(dollars in millions) | Average Balance(1) | Interest Income (Expense) | Average Rate | Average Balance(1) | Interest Income (Expense) | Average Rate | |||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 11,726 | $ | 7 | 0.25 | % | $ | 15,353 | $ | 3 | 0.07 | % | |||||||||
Securities purchased under agreements to resell | 57,921 | 50 | 0.34 | 47,430 | 8 | 0.07 | |||||||||||||||
Mortgage-related securities: | |||||||||||||||||||||
Mortgage-related securities | 201,604 | 1,916 | 3.80 | 244,662 | 2,366 | 3.87 | |||||||||||||||
Extinguishment of PCs held by Freddie Mac | (105,097 | ) | (960 | ) | (3.65 | ) | (111,988 | ) | (1,034 | ) | (3.69 | ) | |||||||||
Total mortgage-related securities, net | 96,507 | 956 | 3.96 | 132,674 | 1,332 | 4.02 | |||||||||||||||
Non-mortgage-related securities | 14,261 | 13 | 0.36 | 9,419 | 3 | 0.12 | |||||||||||||||
Loans held by consolidated trusts(1) | 1,630,646 | 14,261 | 3.50 | 1,563,272 | 13,879 | 3.55 | |||||||||||||||
Loans held by Freddie Mac(1) | 145,531 | 1,557 | 4.28 | 165,168 | 1,575 | 3.81 | |||||||||||||||
Total interest-earning assets | $ | 1,956,592 | $ | 16,844 | 3.45 | $ | 1,933,316 | $ | 16,800 | 3.47 | |||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Debt securities of consolidated trusts including PCs held by Freddie Mac | $ | 1,653,105 | $ | (12,751 | ) | (3.09 | ) | $ | 1,583,630 | $ | (12,521 | ) | (3.16 | ) | |||||||
Extinguishment of PCs held by Freddie Mac | (105,097 | ) | 960 | 3.65 | (111,988 | ) | 1,034 | 3.69 | |||||||||||||
Total debt securities of consolidated trusts held by third parties | 1,548,008 | (11,791 | ) | (3.05 | ) | 1,471,642 | (11,487 | ) | (3.12 | ) | |||||||||||
Other debt: | |||||||||||||||||||||
Short-term debt | 100,871 | (93 | ) | (0.37 | ) | 121,728 | (38 | ) | (0.12 | ) | |||||||||||
Long-term debt | 300,221 | (1,504 | ) | (2.00 | ) | 324,655 | (1,563 | ) | (1.93 | ) | |||||||||||
Total other debt | 401,092 | (1,597 | ) | (1.59 | ) | 446,383 | (1,601 | ) | (1.43 | ) | |||||||||||
Total interest-bearing liabilities | 1,949,100 | (13,388 | ) | (2.75 | ) | 1,918,025 | (13,088 | ) | (2.73 | ) | |||||||||||
Expense related to derivatives | — | (51 | ) | (0.01 | ) | — | (65 | ) | (0.01 | ) | |||||||||||
Impact of net non-interest-bearing funding | 7,492 | — | 0.01 | 15,291 | — | 0.02 | |||||||||||||||
Total funding of interest-earning assets | $ | 1,956,592 | $ | (13,439 | ) | (2.75 | ) | $ | 1,933,316 | $ | (13,153 | ) | (2.72 | ) | |||||||
Net interest income/yield | $ | 3,405 | 0.70 | $ | 3,647 | 0.75 |
(1) | Loan fees, primarily consisting of amortization of delivery fees, included in interest income were $485 million and $506 million for loans held by consolidated trusts and were $81 million and $66 million for loans held by Freddie Mac during the three months ended March 31, 2016 and March 31, 2015, respectively. |
Freddie Mac Form 10-Q | 10 |
Management's Discussion and Analysis | Consolidated Results of Operations | Net Interest Income |
Three Months Ended March 31, | Change | |||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | ||||||||||
Contractual net interest income: | ||||||||||||||
Management and guarantee fee income | $ | 710 | $ | 608 | $ | 102 | 17 | % | ||||||
Management and guarantee fee income related to the Temporary Payroll Tax Cut Continuation Act of 2011 | 267 | 217 | 50 | 23 | % | |||||||||
Other contractual net interest income | 1,840 | 2,222 | (382 | ) | (17 | )% | ||||||||
Total contractual net interest income | 2,817 | 3,047 | (230 | ) | (8 | )% | ||||||||
Net amortization - loans and debt securities of consolidated trusts | 533 | 533 | — | — | % | |||||||||
Net amortization - other assets and debt | 106 | 132 | (26 | ) | (20 | )% | ||||||||
Expense related to derivatives | (51 | ) | (65 | ) | 14 | (22 | )% | |||||||
Net interest income | $ | 3,405 | $ | 3,647 | $ | (242 | ) | (7 | )% |
• | Management and guarantee fee income (contractual) increased, as the rates and volume of our single-family credit guarantee business continued to increase. |
• | Other contractual net interest income decreased, as we continued to reduce the balance of our mortgage-related investments portfolio pursuant to the portfolio limits established by the Purchase Agreement and FHFA. |
Freddie Mac Form 10-Q | 11 |
Management's Discussion and Analysis | Consolidated Results of Operations | Provision for Credit Losses |
Three Months Ended March 31, | Change | ||||||||||||||
(dollars in billions) | 2016 | 2015 | $ | % | |||||||||||
Provision for newly impaired loans | $ | (0.2 | ) | $ | (0.2 | ) | $ | — | — | % | |||||
Amortization of interest rate concessions | 0.3 | 0.3 | — | — | % | ||||||||||
Reclassifications of held-for-investment loans to held-for-sale loans | 0.1 | 0.7 | (0.6 | ) | (86 | )% | |||||||||
Other, including changes in estimated default probability and loss severity | 0.3 | (0.3 | ) | 0.6 | (200 | )% | |||||||||
Benefit (provision) for credit losses | $ | 0.5 | $ | 0.5 | $ | — | — | % |
• | Reclassification of fewer seriously delinquent single-family loans from held-for-investment to held-for-sale. During the three months ended March 31, 2016, $0.4 billion in UPB of seriously delinquent single-family loans were reclassified to held-for-sale, compared to $3.6 billion during the three months ended March 31, 2015. See "Loan Reclassifications" for the effect of these loan reclassifications on pre-tax net income; and |
• | Improvement in estimated probability of default and loss severity for single-family loans. |
Freddie Mac Form 10-Q | 12 |
Management's Discussion and Analysis | Consolidated Results of Operations | Derivative Gains (Losses) |
Three Months Ended March 31, | Change | |||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | ||||||||||
Fair value changes: | ||||||||||||||
Change in interest-rate swaps | $ | (5,690 | ) | $ | (2,661 | ) | $ | (3,029 | ) | 114 | % | |||
Change in option-based derivatives | 1,935 | 1,016 | 919 | 90 | % | |||||||||
Accrual of periodic cash settlements | (490 | ) | (571 | ) | 81 | (14 | )% | |||||||
Other | (316 | ) | (187 | ) | (129 | ) | 69 | % | ||||||
Derivative gains (losses) | $ | (4,561 | ) | $ | (2,403 | ) | $ | (2,158 | ) | 90 | % |
• | We recognized derivative fair value losses during the three months ended March 31, 2016 and March 31, 2015, primarily due to declines in the 10-year par swap rate of 54 basis points and 26 basis points, respectively, in each period. See "Our Business Segments - Investments - Market Conditions" for more information about par swap rates. |
Freddie Mac Form 10-Q | 13 |
Management's Discussion and Analysis | Consolidated Results of Operations | Other Comprehensive Income |
Three Months Ended March 31, | Change | |||||||||||||
(in millions) | 2016 | 2015 | $ | % | ||||||||||
Other comprehensive income, excluding accretion and reclassifications | $ | 221 | $ | 463 | $ | (242 | ) | (52 | )% | |||||
Accretion due to significant increases in expected cash flows on previously-impaired available-for-sale securities | (90 | ) | (126 | ) | 36 | (29 | )% | |||||||
Reclassifications from AOCI | 23 | (115 | ) | 138 | (120 | )% | ||||||||
Total other comprehensive income (loss) | $ | 154 | $ | 222 | $ | (68 | ) | (31 | )% |
• | Losses resulting from spread widening for our non-agency mortgage-related securities, partially offset by gains resulting from a larger decline in longer-term interest rates; and |
• | Reclassification of net unrealized losses from AOCI to earnings during 2016 due to fewer sales and lower pricing of our non-agency mortgage-related securities. The declines in both sales and pricing were attributable to increased market volatility and weaker demand for this product type. We reclassified net unrealized gains during 2015 due to greater sales and higher pricing, as a result of declining longer-term interest rates and stabilized collateral performance. |
Freddie Mac Form 10-Q | 14 |
Management's Discussion and Analysis | Consolidated Balance Sheets Analysis |
Change | |||||||||||||||
(dollars in millions) | March 31, 2016 | December 31, 2015 | $ | % | |||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | 6,158 | $ | 5,595 | $ | 563 | 10 | % | |||||||
Restricted cash and cash equivalents | 16,671 | 14,533 | 2,138 | 15 | % | ||||||||||
Securities purchased under agreements to resell | 40,098 | 63,644 | (23,546 | ) | (37 | )% | |||||||||
Subtotal | 62,927 | 83,772 | (20,845 | ) | (25 | )% | |||||||||
Investments in securities | 107,595 | 114,215 | (6,620 | ) | (6 | )% | |||||||||
Mortgage loans, net | 1,762,633 | 1,754,193 | 8,440 | — | % | ||||||||||
Accrued interest receivable | 6,091 | 6,074 | 17 | — | % | ||||||||||
Derivative assets, net | 814 | 395 | 419 | 106 | % | ||||||||||
Real estate owned, net | 1,571 | 1,725 | (154 | ) | (9 | )% | |||||||||
Deferred tax assets, net | 18,123 | 18,205 | (82 | ) | — | % | |||||||||
Other assets | 9,346 | 7,313 | 2,033 | 28 | % | ||||||||||
Total assets | $ | 1,969,100 | $ | 1,985,892 | $ | (16,792 | ) | (1 | )% | ||||||
Liabilities and Equity: | |||||||||||||||
Liabilities: | |||||||||||||||
Accrued interest payable | $ | 6,047 | $ | 6,183 | $ | (136 | ) | (2 | )% | ||||||
Debt, net | 1,955,618 | 1,970,269 | (14,651 | ) | (1 | )% | |||||||||
Derivative liabilities, net | 1,632 | 1,254 | 378 | 30 | % | ||||||||||
Other liabilities | 4,803 | 5,246 | (443 | ) | (8 | )% | |||||||||
Total liabilities | 1,968,100 | 1,982,952 | (14,852 | ) | (1 | )% | |||||||||
Total equity | 1,000 | 2,940 | (1,940 | ) | (66 | )% | |||||||||
Total liabilities and equity | $ | 1,969,100 | $ | 1,985,892 | $ | (16,792 | ) | (1 | )% |
• | Cash and cash equivalents, restricted cash and cash equivalents, and securities purchased under agreements to resell affect one another, so the changes in the balances should be viewed together. The combined balance declined due to reduced near-term cash needs. |
• | Investments in securities declined as we continue to reduce our less liquid mortgage-related securities pursuant to the limits on the size of our portfolio, and we reduced our non-mortgage-related investments portfolio due to a decrease in our near-term cash needs. |
• | Real estate owned, net continued to decline as we continued to sell our existing inventory and the pace of new REO acquisitions slowed as our population of seriously delinquent loans declined. |
• | Other assets increased as receivables from servicers increased driven by borrower prepayment activity. Additionally, our current income tax receivable also contributed to the increase, as our net loss during the three months ended March 31, 2016 reduced our estimated tax liability. |
• | Debt, net decreased as we continued to reduce other debt along with the decline in our mortgage-related investments portfolio. This decrease was partially offset by an increase in debt securities of consolidated trusts held by third parties. |
Freddie Mac Form 10-Q | 15 |
Management's Discussion and Analysis | Consolidated Balance Sheets Analysis |
• | Total equity decreased primarily as a result of a comprehensive loss during the three months ended March 31, 2016 compared to comprehensive income during the three months ended December 31, 2015. |
Freddie Mac Form 10-Q | 16 |
Management's Discussion and Analysis | Our Business Segments | Segment Earnings |
• | Single-family Guarantee - reflects results from our purchase, securitization, and guarantee of single-family loans and the management of single-family mortgage credit risk. |
• | Multifamily - reflects results from our purchase, investment, securitization, and guarantee activities in multifamily loans and securities, and the management of multifamily mortgage credit risk. |
• | Investments - reflects results from managing the company’s mortgage-related investments portfolio (excluding Multifamily investments and single-family seriously delinquent loans), treasury function, and interest-rate risk. |
• | All Other - consists of material corporate-level activities that are infrequent in nature and based on decisions outside the control of the management of our reportable segments. |
Freddie Mac Form 10-Q | 17 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | Single-family loan origination volumes in the U.S. decreased during the first quarter of 2016 compared to the first quarter of 2015, driven by a decrease in refinancing activity. |
• | Single-family serious delinquency (SDQ) rates in the U.S. continued to decline due to macroeconomic factors, such as a stable labor market and continued home price appreciation. |
Freddie Mac Form 10-Q | 18 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | Our loan purchase activity decreased during the three months ended March 31, 2016 compared to the three months ended March 31, 2015 primarily due to a decrease in refinance loan purchase volume. During the latter part of 2015, mortgage interest rates declined at a slower pace compared to the latter part of 2014. When mortgage interest rates decline, there can be a lag of up to three months between the time the borrower refinances and when we purchase the loan. |
Freddie Mac Form 10-Q | 19 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | The Core single-family book grew to 68% of the single-family credit guarantee portfolio at March 31, 2016 compared to 66% at December 31, 2015. The Core single-family book consists of loans that were originated since 2008, excluding HARP and other relief refinance loans. |
• | The HARP and other relief refinance book represented an additional 17% of the single-family credit guarantee portfolio at March 31, 2016 compared to 18% at December 31, 2015. |
• | The Legacy single-family book declined to 15% of the single-family credit guarantee portfolio at March 31, 2016 compared to 16% at December 31, 2015. |
• | We had 10.7 million loans in our single-family credit guarantee portfolio at both March 31, 2016 and December 31, 2015. |
Freddie Mac Form 10-Q | 20 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | Average portfolio Segment Earnings management and guarantee fees remained relatively unchanged during the three months ended March 31, 2016 compared to the three months ended March 31, 2015, as higher contractual management and guarantee fee rates during the three months ended March 31, 2016 were offset by lower amortization of upfront fees driven by lower loan liquidations resulting from lower refinance volume. |
• | The average management and guarantee fee rate charged on new acquisitions recognizes upfront delivery fee income over the estimated life of the related loans using our expectations of prepayments and other liquidations, whereas the average portfolio Segment Earnings management and guarantee fee rate recognizes these amounts for the entire portfolio over the contractual life of the related loans (usually 30 years) adjusted for actual prepayments. |
Freddie Mac Form 10-Q | 21 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
(In billions) | ||||||||||
Senior | Freddie Mac $50.9 | Reference Pool $53.7 | ||||||||
Mezzanine | Freddie Mac $0.1 | ACIS $0.7 | STACR Debt Notes $1.4 | |||||||
First Loss | Freddie Mac $0.4 | ACIS $0.1 | STACR Debt Notes $0.1 |
(1) | The amounts represent the UPB upon issuance of STACR debt notes and execution of ACIS transactions. |
• | We continued to transfer a portion of credit risk to third-party investors, insurers, and selected sellers through credit risk transfer transactions. During the three months ended March 31, 2016, we transferred a portion of the credit risk associated with $53.8 billion in UPB of loans in our Core single-family book through STACR debt note, ACIS, and seller indemnification transactions. |
• | The interest and premiums we pay on our issued STACR debt note and ACIS transactions effectively reduce the management and guarantee fee income we earn on the PCs within the respective reference pools. Our expected management and guarantee fee income on the PCs within the STACR and ACIS reference pools has been effectively reduced by approximately 32%, on average, for all transactions executed through March 31, 2016. The effective reduction to our overall management and guarantee fee income could change over time as we continue our credit risk transfer activities or if there are changes in the economic or regulatory environment that affect the cost of executing these transactions. |
• | As of March 31, 2016, there has not been a significant number of loans in our STACR debt note reference pools that have experienced a credit event. As a result, we have only recognized minimal write-downs on our STACR debt notes and have begun to make minimal claims for reimbursement of losses under our ACIS transactions. |
Freddie Mac Form 10-Q | 22 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
As of March 31, 2016 | |||||||||||||||||||
(dollars in millions) | Total Current UPB | Total Protected UPB(1) | Coverage Remaining(2) | Collateralized Coverage Remaining(3) | Percentage of Coverage Remaining Provided By Credit Risk Transfer Transactions(4) | ||||||||||||||
Core single-family book | $ | 1,153,452 | $ | 478,541 | $ | 73,005 | $ | 14,484 | 25 | % | |||||||||
HARP and other relief refinance book | 296,000 | 32,921 | 9,009 | — | — | % | |||||||||||||
Legacy single-family book | 256,667 | 34,353 | 10,554 | — | — | % | |||||||||||||
Total | $ | 1,706,119 | $ | 545,815 | $ | 92,568 | $ | 14,484 | 19 | % |
(1) | Represents the UPB covered by the credit enhancement. |
(2) | Represents the amounts that are still available for us to recover under the credit enhancement. |
(3) | Collateralized coverage includes cash received by Freddie Mac upon issuance of STACR debt notes and unguaranteed whole loan securities, as well as cash and securities pledged for our benefit. All collateralized coverage relates to credit risk transfer transactions in the Core single-family book. |
(4) | Credit risk transfer transactions include STACR debt notes, ACIS insurance policies, seller indemnification agreements, and whole loan securities. The substantial majority of single-family loans covered by these transactions were acquired after 2012. |
• | The Core single-family book had credit protection on 41% of total current UPB as of March 31, 2016 compared to 39% as of December 31, 2015. |
Freddie Mac Form 10-Q | 23 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
March 31, 2016 | |||||||||||||||||||||||||||
CLTV ≤ 80 | CLTV > 80 to 100 | CLTV > 100 | All Loans | ||||||||||||||||||||||||
(credit score) | % Portfolio | SDQ Rate | % Portfolio | SDQ Rate | % Portfolio | SDQ Rate | % Portfolio | SDQ Rate | % Modified | ||||||||||||||||||
Core single-family book: | |||||||||||||||||||||||||||
< 620 | 0.2 | % | 2.12 | % | — | % | 4.13 | % | — | % | 11.61 | % | 0.2 | % | 2.46 | % | 2.9 | % | |||||||||
620 to 659 | 1.3 | 0.95 | % | 0.2 | 1.34 | % | — | 6.42 | % | 1.5 | 1.02 | % | 1.2 | % | |||||||||||||
≥ 660 | 57.1 | 0.14 | % | 8.6 | 0.25 | % | 0.1 | 1.99 | % | 65.8 | 0.16 | % | 0.2 | % | |||||||||||||
Not available | 0.1 | 1.47 | % | — | 3.54 | % | — | 7.53 | % | 0.1 | 3.00 | % | 3.2 | % | |||||||||||||
Total | 58.7 | % | 0.17 | % | 8.8 | % | 0.31 | % | 0.1 | % | 3.36 | % | 67.6 | % | 0.19 | % | 0.2 | % | |||||||||
Relief refinance book: | |||||||||||||||||||||||||||
< 620 | 0.6 | % | 1.59 | % | 0.2 | % | 3.00 | % | 0.1 | % | 4.43 | % | 0.9 | % | 2.25 | % | 3.6 | % | |||||||||
620 to 659 | 0.8 | 1.00 | % | 0.3 | 2.04 | % | 0.2 | 3.33 | % | 1.3 | 1.53 | % | 2.1 | % | |||||||||||||
≥ 660 | 10.7 | 0.29 | % | 3.2 | 0.99 | % | 1.3 | 1.80 | % | 15.2 | 0.53 | % | 0.6 | % | |||||||||||||
Not available | — | 1.35 | % | — | — | % | — | 1.85 | % | — | 1.12 | % | 1.1 | % | |||||||||||||
Total | 12.1 | % | 0.39 | % | 3.7 | % | 1.22 | % | 1.6 | % | 2.15 | % | 17.4 | % | 0.69 | % | 0.9 | % | |||||||||
Legacy single-family book | |||||||||||||||||||||||||||
< 620 | 0.8 | % | 6.23 | % | 0.3 | % | 12.78 | % | 0.2 | % | 20.28 | % | 1.3 | % | 8.49 | % | 31.5 | % | |||||||||
620 to 659 | 1.4 | 4.47 | % | 0.5 | 10.29 | % | 0.3 | 16.84 | % | 2.2 | 6.35 | % | 25.8 | % | |||||||||||||
≥ 660 | 8.2 | 1.92 | % | 2.0 | 7.02 | % | 1.1 | 12.00 | % | 11.3 | 2.89 | % | 12.1 | % | |||||||||||||
Not available | 0.2 | 5.01 | % | — | 17.04 | % | — | 19.12 | % | 0.2 | 5.76 | % | 14.0 | % | |||||||||||||
Total | 10.6 | % | 2.63 | % | 2.8 | % | 8.31 | % | 1.6 | % | 14.18 | % | 15.0 | % | 3.86 | % | 15.5 | % |
Freddie Mac Form 10-Q | 24 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||||
(dollars in billions) | UPB | CLTV | % Modified | SDQ Rate | UPB | CLTV | % Modified | SDQ Rate | ||||||||||||||||||
Alt-A | $ | 38.5 | 76 | % | 23.9 | % | 6.01 | % | $ | 40.2 | 77 | % | 23.1 | % | 6.32 | % |
Freddie Mac Form 10-Q | 25 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | Serious delinquency rates continued to decline across our single-family credit guarantee portfolio during the three months ended March 31, 2016 due to the continued strong performance of loans in the Core single-family book, continued loss mitigation and foreclosure activities for loans in the Legacy single-family book, as well as sales of certain non-performing loans. |
• | As part of our strategy to mitigate losses and reduce our holdings of less liquid assets, we sold seriously delinquent loans totaling $0.8 billion in UPB during the three months ended March 31, 2016. |
• | Delinquency rates declined to 1.17% and 0.36% for loans one month and two months past due, respectively, as of March 31, 2016 compared to 1.37% and 0.42%, respectively, as of December 31, 2015. |
Freddie Mac Form 10-Q | 26 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
Three Months Ended March 31, | |||||||
(dollars in millions) | 2016 | 2015 | |||||
Charge-offs, gross | $ | 569 | $ | 2,951 | |||
Recoveries | (128 | ) | (174 | ) | |||
Charge-offs, net | 441 | 2,777 | |||||
REO operations expense (income) | 84 | 75 | |||||
Total credit losses | $ | 525 | $ | 2,852 | |||
Total credit losses (in bps) | 12.2 | 67.7 | |||||
Ratio of total loan loss reserves (excluding reserves for TDR concessions) to net charge-offs for single-family loans(1) | 2.7 | 2.2 | |||||
Ratio of total loan loss reserves to net charge-offs for single-family loans | 8.2 | 1.7 |
(1) | The ratio for the three months ended March 31, 2015 excludes charge-offs of $1.9 billion associated with our initial adoption of regulatory guidance on January 1, 2015. |
March 31, 2016 | March 31, 2015 | |||||||||||||
(dollars in millions) | Loan Count | Amount | Loan Count | Amount | ||||||||||
TDRs, at January 1 | 512,253 | $ | 85,960 | 539,590 | $ | 94,401 | ||||||||
New additions | 12,470 | 1,701 | 16,650 | 2,356 | ||||||||||
Repayments and reclassifications to held-for-sale | (10,426 | ) | (1,945 | ) | (9,574 | ) | (2,779 | ) | ||||||
Foreclosure transfers and foreclosure alternatives | (2,962 | ) | (426 | ) | (6,055 | ) | (1,025 | ) | ||||||
TDRs, at March 31, | 511,335 | 85,290 | 540,611 | 92,953 | ||||||||||
Loans impaired upon purchase | 8,137 | 604 | 11,882 | 906 | ||||||||||
Total impaired loans with specific reserve | 519,472 | 85,894 | 552,493 | 93,859 | ||||||||||
Allowance for loan losses | (13,315 | ) | (16,357 | ) | ||||||||||
Net investment, at March 31, | $ | 72,579 | $ | 77,502 |
Freddie Mac Form 10-Q | 27 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
TDRs on accrual status | $ | 82,121 | $ | 82,026 | ||||
Non-accrual loans | 20,299 | 22,460 | ||||||
Total TDRs and non-accrual loans | $ | 102,420 | $ | 104,486 | ||||
Loan loss reserves associated with: | ||||||||
TDRs on accrual status | $ | 11,432 | $ | 12,105 | ||||
Non-accrual loans | 2,596 | 2,677 | ||||||
Total | $ | 14,028 | $ | 14,782 | ||||
Three Months Ended March 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Foregone interest income on TDRs and non-accrual loans(1) | $ | 697 | $ | 871 |
(1) | Represents the amount of interest income that we would have recognized for loans outstanding at the end of each period, had the loans performed according to their original contractual terms. |
• | As of March 31, 2016, 68% of the loan loss reserves for single-family mortgage loans related to interest rate concessions provided to borrowers as part of loan modifications. |
• | Most of our modified single-family loans, including TDRs, were current and performing at March 31, 2016. |
• | We expect our loan loss reserves associated with existing single-family TDRs to continue to decline over time as borrowers continue to make monthly payments under the modified terms and interest-rate concessions are amortized into earnings. |
• | Charge-offs were lower during the three months ended March 31, 2016 compared to the three months ended March 31, 2015 due to: |
◦ | Decreased REO acquisition and foreclosure alternative volumes; and |
◦ | Our initial adoption of an FHFA advisory bulletin on January 1, 2015 that changed when we deem a loan to be uncollectible, which increased charge-offs by $1.9 billion during the three months ended March 31, 2015. |
• | See Note 4 for information on our single-family loan loss reserves. |
Freddie Mac Form 10-Q | 28 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
• | Our loan workout activity has declined along with the decline in the number of delinquent loans in the single-family credit guarantee portfolio. |
Freddie Mac Form 10-Q | 29 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
Three Months Ended March 31, | ||||||||||||||
2016 | 2015 | |||||||||||||
(dollars in millions) | Number of Properties | Amount | Number of Properties | Amount | ||||||||||
Beginning balance — REO | 17,004 | $ | 1,774 | 25,768 | $ | 2,684 | ||||||||
Additions | 4,631 | 440 | 7,201 | 683 | ||||||||||
Dispositions | (6,226 | ) | (603 | ) | (10,231 | ) | (983 | ) | ||||||
Ending balance — REO | 15,409 | 1,611 | 22,738 | 2,384 | ||||||||||
Beginning balance, valuation allowance | (52 | ) | (126 | ) | ||||||||||
Change in valuation allowance | 8 | 36 | ||||||||||||
Ending balance, valuation allowance | (44 | ) | (90 | ) | ||||||||||
Ending balance — REO, net | $ | 1,567 | $ | 2,294 |
• | Our REO inventory declined during the three months ended March 31, 2016, primarily due to REO dispositions exceeding our acquisitions. REO acquisitions continue to decline due to fewer seriously delinquent loans and a large proportion of property sales to third parties at foreclosure. |
Freddie Mac Form 10-Q | 30 |
Management's Discussion and Analysis | Our Business Segments | Single-Family Guarantee |
Three Months Ended March 31, | Change | ||||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | |||||||||||
Net interest income (loss) | $ | (118 | ) | $ | (137 | ) | $ | 19 | (14 | )% | |||||
Management and guarantee fee income | 1,285 | 1,257 | 28 | 2 | % | ||||||||||
Benefit (provision) for credit losses | 289 | (380 | ) | 669 | (176 | )% | |||||||||
Net interest income and management and guarantee income after benefit (provision) for credit losses | 1,456 | 740 | 716 | 97 | % | ||||||||||
Other non-interest income (loss) | 187 | (183 | ) | 370 | (202 | )% | |||||||||
Non-interest expense: | |||||||||||||||
Administrative expense | (295 | ) | (300 | ) | 5 | (2 | )% | ||||||||
REO operations expense | (84 | ) | (75 | ) | (9 | ) | 12 | % | |||||||
Other non-interest expense | (100 | ) | (92 | ) | (8 | ) | 9 | % | |||||||
Total non-interest expense | (479 | ) | (467 | ) | (12 | ) | 3 | % | |||||||
Segment Earnings before income tax (expense) benefit | 1,164 | 90 | 1,074 | 1,193 | % | ||||||||||
Income tax (expense) benefit | (354 | ) | (30 | ) | (324 | ) | 1,080 | % | |||||||
Segment Earnings, net of taxes | 810 | 60 | 750 | 1,250 | % | ||||||||||
Total other comprehensive income (loss), net of tax | 1 | (1 | ) | 2 | (200 | )% | |||||||||
Total comprehensive income | $ | 811 | $ | 59 | $ | 752 | 1,275 | % |
• | Benefit for credit losses increased due to improvements in estimated loss severity and probability of default. |
• | Other non-interest income increased primarily due to: |
◦ | Fewer seriously delinquent single-family loans reclassified from held-for-investment to held-for-sale; and |
◦ | Minimal gains on STACR debt notes carried at fair value as a result of relatively unchanged spreads between STACR yields and LIBOR during the three months ended March 31, 2016 compared to losses as a result of tightened spreads during the three months ended March 31, 2015. |
Freddie Mac Form 10-Q | 31 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
• | The profitability of our K Certificate transactions (as measured by gains and losses on sales of mortgage loans) is affected by the change in K Certificate spreads during the period between our commitment to purchase a loan and execution of the K Certificate transaction. |
• | Macroeconomic market conditions continued to create volatility in the K Certificate benchmark spread during the three months ended March 31, 2016. During January and February of 2016, spread widening had an adverse effect on K Certificate profitability. However, the K Certificate benchmark spread tightened sharply in March 2016 amid a broader rally in the corporate bond market, ending the first quarter at 80 basis points. |
• | During the three months ended March 31, 2016, the rate of increase in effective rents continued to slow marginally and vacancy rates continued to increase slightly. Despite these changes, both market conditions remain strong relative to historic levels. We expect this moderation trend to continue for the remainder of the year, but do not expect it to significantly affect our financial results. |
Freddie Mac Form 10-Q | 32 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
• | We have a goal under the 2016 Conservatorship Scorecard to maintain the dollar volume of multifamily new business activity at or below a production cap of $31 billion. For purposes of determining our performance under the goal, business activity associated with certain targeted loan types is excluded from this production cap. Reclassifications between new business activity subject to |
Freddie Mac Form 10-Q | 33 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
• | Approximately two-thirds of our multifamily new business activity during the three months ended March 31, 2016 counted towards the 2016 Scorecard production cap, and the remaining one-third was not subject to the production cap. |
• | Our multifamily portfolio grew during the three months ended March 31, 2016 due to an increase in the guarantee portfolio, which was primarily attributable to our securitization of loans in K Certificate transactions. |
• | Our balance of multifamily held-for-sale loans was $23.6 billion at March 31, 2016. This balance is high relative to historic levels and exposes us to spread risk. However, we expect the balance to decline during the year as we continue to securitize loans into K Certificates and other securitization products. |
• | Our multifamily delinquency rate at March 31, 2016 was 0.04%. |
Freddie Mac Form 10-Q | 34 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
• | During the three months ended March 31, 2016, we executed nine K Certificate transactions that transferred credit risk associated with $9.8 billion in UPB of loans. Our K Certificate issuance volume increased during the three months ended March 31, 2016 compared to the three months ended March 31, 2015 because of the record origination volume in the multifamily market during 2015. As the overall market grew, we increased our purchases, ending 2015 with a large portfolio of held-for-sale loans which are being securitized in 2016. |
• | We also transferred credit risk associated with $1.0 billion of additional loans through other securitization products, such as small balance loan securitizations. |
• | The average management and guarantee fee rate on newly issued K Certificates remained relatively unchanged during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. |
Freddie Mac Form 10-Q | 35 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
Three Months Ended March 31, | Change | ||||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | |||||||||||
Net interest income | $ | 252 | $ | 242 | $ | 10 | 4 | % | |||||||
Management and guarantee fee income | 108 | 73 | 35 | 48 | % | ||||||||||
Benefit for credit losses | 5 | 3 | 2 | 67 | % | ||||||||||
Net interest income and management and guarantee income after benefit (provision) for credit losses | 365 | 318 | 47 | 15 | % | ||||||||||
Gains (losses) on loans | 497 | 353 | 144 | 41 | % | ||||||||||
Derivative losses | (787 | ) | (199 | ) | (588 | ) | 295 | % | |||||||
Other non-interest income | 240 | 37 | 203 | 549 | % | ||||||||||
Administrative expense | (80 | ) | (70 | ) | (10 | ) | 14 | % | |||||||
Other non-interest expense | (24 | ) | (11 | ) | (13 | ) | 118 | % | |||||||
Segment Earnings before income tax expense | 211 | 428 | (217 | ) | (51 | )% | |||||||||
Income tax expense | (64 | ) | (144 | ) | 80 | (56 | )% | ||||||||
Segment Earnings, net of taxes | 147 | 284 | (137 | ) | (48 | )% | |||||||||
Total other comprehensive income (loss), net of tax | 3 | (20 | ) | 23 | (115 | )% | |||||||||
Total comprehensive income | $ | 150 | $ | 264 | $ | (114 | ) | (43 | )% |
• | Net interest income increased primarily due to higher average balances of unsecuritized held-for-sale mortgage loans. |
• | Management and guarantee fee income increased primarily due to higher average multifamily guarantee portfolio balances as a result of ongoing issuances of K Certificates. |
• | Gains (losses) on loans increased due to increased interest rate-related fair value gains, partially offset by increased spread-related fair value losses. Interest rate-related fair value gains (which are offset in derivative losses) increased due to larger declines in longer-term interest rates during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. Spread-related fair value losses increased due to increased volatility in K Certificate spreads during the three months ended March 31, 2016 compared to spread-related fair value gains during the three months ended March 31, 2015 when K Certificate spreads were relatively unchanged. |
• | Derivative losses increased due to a larger decline in longer-term interest rates. These losses are offset by fair value changes of the loans and investment securities being economically hedged, and as a result, there is no net impact on total comprehensive income for the Multifamily segment from fair value changes related to interest rate-related derivatives. The fair value changes of the economically hedged assets are included in gains (losses) on loans, other non-interest income and total other comprehensive income (loss). |
• | Other non-interest income increased primarily due to gains recognized on certain held-for-sale loan purchase commitments for which we elected the fair value option beginning in 2016. In addition, we recognized higher guarantee obligation amortization income due to a larger portfolio of guaranteed K Certificates. |
Freddie Mac Form 10-Q | 36 |
Management's Discussion and Analysis | Our Business Segments | Multifamily |
• | Total other comprehensive income (loss) remained relatively unchanged. While we recognized increased interest rate-related fair value gains due to a larger decline in longer-term interest rates (which are offset in derivatives losses), we also recognized increased spread-related fair value losses as a result of CMBS spread widening on our available-for-sale securities during the three months ended March 31, 2016 compared to spread tightening during the three months ended March 31, 2015. |
Freddie Mac Form 10-Q | 37 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | Longer-term interest rates (e.g., 2-year and 10-year rates) declined as of March 31, 2016 compared to December 31, 2015, and also declined as of March 31, 2015 compared to December 31, 2014. In each case, the decline reduced the fair value of our pay-fixed interest rate swaps and improved the fair values of our receive-fixed interest rate swaps, certain of our option contracts, and the vast majority of our investments in securities. |
• | The decline in longer-term interest rates as of March 31, 2016 was larger than the decline in longer-term interest rates as of March 31, 2015, resulting in greater impacts to our financial results during the three months ended March 31, 2016 compared to the three months ended March 31, 2015. |
Freddie Mac Form 10-Q | 38 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | We continue to reduce the size of our mortgage investments portfolio in order to comply with the mortgage-related investments portfolio limits. The balance of our mortgage investments portfolio declined 1.8% from December 31, 2015 to March 31, 2016. |
• | The balance of our non-mortgage-related assets portfolio declined 22.6% from December 31, 2015 to March 31, 2016, due to reduced near-term cash needs. |
• | The percentage of less liquid assets relative to our total mortgage investments portfolio declined from 38.8% at December 31, 2015 to 37.2% at March 31, 2016, primarily due to repayments and securitizations of our less liquid assets. We actively managed the size of our less liquid assets by selling $0.8 billion of non-agency mortgage-related securities and enhancing the liquidity of $3.5 billion of single-family reperforming loans and performing modified loans through securitization. We |
Freddie Mac Form 10-Q | 39 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | The overall liquidity of our mortgage investments portfolio continues to improve as our new asset acquisitions have almost entirely consisted of purchases of more liquid assets, including agency mortgage-related securities and loans awaiting securitization into PCs. |
Freddie Mac Form 10-Q | 40 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | The average balance of the mortgage-related securities that we manage declined 16.0% during the three months ended March 31, 2016 compared to the same period in 2015, primarily due to repayments and the sale of certain non-agency mortgage-related securities. |
• | The average balance of the single-family unsecuritized mortgage loans that we manage declined 10.0% during the three months ended March 31, 2016 compared to the same period in 2015, primarily due to the repayment and securitization of certain reperforming loans and performing modified loans, partially offset by an increase in our purchase of loans for our securitization pipeline. |
• | The average balance of the non-mortgage-related assets that we manage will fluctuate period to period based on our liquidity needs, investment strategy, and investment returns. This portfolio reflects our investments for operating purposes as well as the restricted assets that we hold and invest on behalf of consolidated trusts and cash that has been pledged to us under various agreements. |
• | Net interest yield declined 35 basis points during the three months ended March 31, 2016 compared to the same period in 2015, primarily due to an increase in our funding costs, coupled with a continued reduction in the balance of higher yielding mortgage-related assets in our mortgage investments portfolio due to repayments. |
Freddie Mac Form 10-Q | 41 |
Management's Discussion and Analysis | Our Business Segments | Investments |
Three Months Ended March 31, | |||||||
(Par value in millions) | 2016 | 2015 | |||||
Discount notes and Reference Bills: | |||||||
Beginning balance | $ | 104,088 | $ | 134,670 | |||
Issuances | 105,653 | 61,610 | |||||
Maturities | (134,082 | ) | (79,891 | ) | |||
Ending balance | 75,659 | 116,389 | |||||
Callable debt: | |||||||
Beginning balance | 107,675 | 107,070 | |||||
Issuances | 28,930 | 25,085 | |||||
Repurchases | — | — | |||||
Calls | (27,691 | ) | (10,905 | ) | |||
Maturities | (250 | ) | (1,557 | ) | |||
Ending balance | 108,664 | 119,693 | |||||
Non-callable debt: | |||||||
Beginning balance | 194,372 | 206,393 | |||||
Issuances | 8,438 | 14,088 | |||||
Repurchases | — | — | |||||
Maturities | (8,891 | ) | (13,369 | ) | |||
Ending balance | 193,919 | 207,112 | |||||
Total other debt | $ | 378,242 | $ | 443,194 |
• | The outstanding balance of our other debt declined during the three months ended March 31, 2016, compared to the same period in 2015, as we required less debt to fund our business operations, as the balance of our mortgage-related investments portfolio continues to decline. |
• | During the three months ended March 31, 2016, we continued to utilize overnight discount notes as a more cost effective tool to manage our intra-day liquidity needs. This resulted in an increase in both issuances and pay-offs of our short-term other debt compared to the same period during 2015. |
• | Issuances and calls of our longer-term callable debt increased during the three months ended March 31, 2016 compared to the same period in 2015, as we refinanced more of our outstanding callable debt due to the low interest rate environment and favorable spreads relative to our non-callable debt. |
Freddie Mac Form 10-Q | 42 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | As our long-term debt spreads remained high during the three months ended March 31, 2016, we continue to rely on short-term and medium-term debt issuances for our overall funding needs. Our effective short-term debt percentage, which represents the percentage of our total other debt that is expected to mature within one year, has remained relatively flat at 41.7% as of March 31, 2016 as compared to 41.3% as of December 31, 2015. |
• | Our short-term debt issuances provide us with overall lower funding costs relative to longer-term debt and greater flexibility as we reduce our mortgage-related investments portfolio. We saw improvement in our short-term debt spreads compared to the fourth quarter of 2015, primarily due to declining external competition for new short-term debt issuances. |
Freddie Mac Form 10-Q | 43 |
Management's Discussion and Analysis | Our Business Segments | Investments |
• | As of March 31, 2016, $91 billion of the outstanding $109 billion of callable debt may be called within one year. |
Freddie Mac Form 10-Q | 44 |
Management's Discussion and Analysis | Our Business Segments | Investments |
Three Months Ended March 31, | Change | |||||||||||||
(dollars in millions) | 2016 | 2015 | $ | % | ||||||||||
Net interest income | $ | 748 | $ | 1,155 | $ | (407 | ) | (35 | )% | |||||
Non-interest income: | ||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | 81 | 118 | (37 | ) | (31 | )% | ||||||||
Derivative losses | (2,995 | ) | (1,428 | ) | (1,567 | ) | 110 | % | ||||||
Gains on trading securities | 169 | 45 | 124 | 276 | % | |||||||||
Other non-interest income | 189 | 461 | (272 | ) | (59 | )% | ||||||||
Total non-interest income | (2,556 | ) | (804 | ) | (1,752 | ) | 218 | % | ||||||
Non-interest expense: | ||||||||||||||
Administrative expense | (73 | ) | (81 | ) | 8 | (10 | )% | |||||||
Other non-interest (expense) income | (2 | ) | — | (2 | ) | — | % | |||||||
Total non-interest expense | (75 | ) | (81 | ) | 6 | (7 | )% | |||||||
Segment Earnings before income tax expense | (1,883 | ) | 270 | (2,153 | ) | (797 | )% | |||||||
Income tax expense | 572 | (90 | ) | 662 | (736 | )% | ||||||||
Segment Earnings, net of taxes | (1,311 | ) | 180 | (1,491 | ) | (828 | )% | |||||||
Total other comprehensive income (loss), net of tax | 150 | 236 | (86 | ) | (36 | )% | ||||||||
Total comprehensive income | $ | (1,161 | ) | $ | 416 | $ | (1,577 | ) | (379 | )% |
• | Net interest income decreased due to the continued reduction in the balance of our mortgage investments portfolio. |
• | Derivative losses increased due to a larger decline in longer-term interest rates. See "Consolidated Results of Operations - Derivative Gains (Losses)" for additional information. |
• | Gains on trading securities increased due to a larger decline in longer-term interest rates, partially offset by spread widening for our agency mortgage-related securities classified as trading. |
• | Other non-interest income decreased due to a decline in sales of available-for-sale non-agency mortgage-related securities in an unrealized gain position. This decrease in sales was attributable to increased market volatility and weaker investor demand for this product type. |
• | Other comprehensive income decreased due to spread widening for our non-agency mortgage-related securities and less spread tightening for our agency mortgage-related securities classified as available-for-sale, partially offset by gains resulting from a larger decline in longer-term interest rates. Other comprehensive income in both periods reflects the reversals of unrealized losses due to the accretion of other-than-temporary impairments in earnings and the reclassification of unrealized gains and losses related to available-for-sale securities that were sold during the respective periods. |
Freddie Mac Form 10-Q | 45 |
Management's Discussion and Analysis | Risk Management | Credit Risk |
Freddie Mac Form 10-Q | 46 |
Management's Discussion and Analysis | Risk Management | Interest-Rate Risk and Other Market Risks |
PMVS-YC | PMVS-L | |||||||||||
(in millions) | 25 bps | 50 bps | 100 bps | |||||||||
Assuming shifts of the LIBOR yield curve: | ||||||||||||
March 31, 2016 | $ | 10 | $ | — | $ | — | ||||||
December 31, 2015 | $ | 12 | $ | 50 | $ | 186 |
Three Months Ended March 31, | ||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||
(duration gap in months, dollars in millions) | Duration Gap | PMVS-YC 25 bps | PMVS-L 50 bps | Duration Gap | PMVS-YC 25 bps | PMVS-L 50 bps | ||||||||||||||||
Average | 0.2 | $ | 8 | $ | 29 | 0.1 | $ | 28 | $ | 123 | ||||||||||||
Minimum | (0.2 | ) | $ | — | $ | — | (0.3 | ) | $ | 4 | $ | 61 | ||||||||||
Maximum | 0.7 | $ | 31 | $ | 92 | 0.8 | $ | 47 | $ | 250 | ||||||||||||
Standard deviation | 0.2 | $ | 6 | $ | 26 | 0.2 | $ | 11 | $ | 38 |
Freddie Mac Form 10-Q | 47 |
Management's Discussion and Analysis | Risk Management | Interest-Rate Risk and Other Market Risks |
PMVS-L (50 bps) | |||||||||||
(in millions) | Before Derivatives | After Derivatives | Effect of Derivatives | ||||||||
March 31, 2016 | $ | 3,040 | $ | — | $ | (3,040 | ) | ||||
December 31, 2015 | $ | 3,373 | $ | 50 | $ | (3,323 | ) |
GAAP FV-YC | GAAP FV-L | ||||||||||
(in millions) | 25 bps | 50 bps | 100 bps | ||||||||
March 31, 2016 | $ | 459 | $ | 1,484 | $ | 3,114 | |||||
December 31, 2015 | $ | 635 | $ | 1,630 | $ | 3,573 |
Freddie Mac Form 10-Q | 48 |
Management's Discussion and Analysis | Liquidity and Capital Resources |
Three Months Ended March 31, | ||||||||
(dollars in millions) | 2016 | 2015 | ||||||
Beginning balance | $ | 418,021 | $ | 454,029 | ||||
Issued during the period | ||||||||
Short-term: | ||||||||
Amount | $ | 105,653 | $ | 61,610 | ||||
Weighted-average effective interest rate | 0.32 | % | 0.10 | % | ||||
Long-term: | ||||||||
Amount | $ | 38,840 | $ | 40,913 | ||||
Weighted-average effective interest rate | 1.42 | % | 1.20 | % | ||||
Total issued: | ||||||||
Amount | $ | 144,493 | $ | 102,523 | ||||
Weighted-average effective interest rate | 0.62 | % | 0.54 | % | ||||
Paid off during the period: | ||||||||
Short-term: | ||||||||
Amount | $ | (134,082 | ) | $ | (79,891 | ) | ||
Weighted-average effective interest rate | 0.23 | % | 0.09 | % | ||||
Long-term: | ||||||||
Amount | $ | (37,110 | ) | $ | (25,924 | ) | ||
Weighted-average effective interest rate | 1.88 | % | 2.09 | % | ||||
Total paid off: | ||||||||
Amount | $ | (171,192 | ) | $ | (105,815 | ) | ||
Weighted-average effective interest rate | 0.59 | % | 0.58 | % | ||||
Ending balance | $ | 391,322 | $ | 450,737 |
Freddie Mac Form 10-Q | 49 |
Management's Discussion and Analysis | Liquidity and Capital Resources |
Three Months Ended March 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Beginning balance | $ | 1,513,089 | $ | 1,440,325 | ||||
New issuances | 70,956 | 78,847 | ||||||
Newly-issued debt securities retained at issuance | (19,349 | ) | (20,614 | ) | ||||
Net new issuances to third parties | 51,607 | 58,233 | ||||||
Additional issuances of securities | 28,264 | 23,449 | ||||||
Total issuances | 79,871 | 81,682 | ||||||
Extinguishments, net | (68,736 | ) | (73,696 | ) | ||||
Ending balance | $ | 1,524,224 | $ | 1,448,311 |
Freddie Mac Form 10-Q | 50 |
Management's Discussion and Analysis | Liquidity and Capital Resources |
• | Increase in net purchases of mortgage loans acquired as held-for-sale, primarily due to an increase in the purchase of multifamily loans; and |
• | Decrease in net interest income. |
• | Increase in net proceeds received from purchases and sales of trading securities, as we purchased fewer non-mortgage-related securities; and |
• | Decrease in securities purchased under agreements to resell. |
• | Increase in net funds used to repay other debt, as the amount of other debt required to fund our mortgage-related investments portfolio has declined. This increase was partially offset by an increase in proceeds received from issuance of debt securities of consolidated trusts held by third parties as we issued more PCs for cash. |
Freddie Mac Form 10-Q | 51 |
Management's Discussion and Analysis | Liquidity and Capital Resources |
Three Months Ended | ||||||||||||||||||||
(in millions) | 3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | |||||||||||||||
Beginning balance | $ | 2,940 | $ | 1,299 | $ | 5,713 | $ | 2,546 | $ | 2,651 | ||||||||||
Comprehensive (loss) income | (200 | ) | 1,641 | (501 | ) | 3,913 | 746 | |||||||||||||
Capital draw from Treasury | — | — | — | — | — | |||||||||||||||
Senior preferred stock dividends declared | (1,740 | ) | — | (3,913 | ) | (746 | ) | (851 | ) | |||||||||||
Total equity / net worth | $ | 1,000 | $ | 2,940 | $ | 1,299 | $ | 5,713 | $ | 2,546 | ||||||||||
Aggregate draws under Purchase Agreement | $ | 71,336 | $ | 71,336 | $ | 71,336 | $ | 71,336 | $ | 71,336 | ||||||||||
Aggregate cash dividends paid to Treasury | $ | 98,205 | $ | 96,465 | $ | 96,465 | $ | 92,552 | $ | 91,806 |
Freddie Mac Form 10-Q | 52 |
Management's Discussion and Analysis | Conservatorship and Related Matters |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||||||||
(dollars in millions) | Liquid | Securitiz-ation Pipeline | Less Liquid | Total | Liquid | Securitiz-ation Pipeline | Less Liquid | Total | |||||||||||||||||||||||
Investments segment - Mortgage investments portfolio: | |||||||||||||||||||||||||||||||
Single-family unsecuritized loans | |||||||||||||||||||||||||||||||
Performing loans | $ | — | $ | 10,573 | $ | — | $ | 10,573 | $ | — | $ | 10,041 | $ | — | $ | 10,041 | |||||||||||||||
Reperforming loans and performing modified loans | — | — | 63,540 | 63,540 | — | — | 67,036 | 67,036 | |||||||||||||||||||||||
Total single-family unsecuritized loans | — | 10,573 | 63,540 | 74,113 | — | 10,041 | 67,036 | 77,077 | |||||||||||||||||||||||
Freddie Mac mortgage-related securities | 137,316 | — | 5,342 | 142,658 | 135,869 | — | 6,076 | 141,945 | |||||||||||||||||||||||
Non-agency mortgage-related securities | — | — | 25,959 | 25,959 | — | — | 27,754 | 27,754 | |||||||||||||||||||||||
Non-Freddie Mac agency mortgage-related securities | 12,434 | — | — | 12,434 | 12,958 | — | — | 12,958 | |||||||||||||||||||||||
Total Investment segment - Mortgage investments portfolio | 149,750 | 10,573 | 94,841 | 255,164 | 148,827 | 10,041 | 100,866 | 259,734 | |||||||||||||||||||||||
Single-family Guarantee segment - Single-family unsecuritized seriously delinquent loans | — | — | 17,757 | 17,757 | — | — | 19,501 | 19,501 | |||||||||||||||||||||||
Multifamily segment - unsecuritized loans and mortgage-related securities | 6,667 | 23,545 | 36,726 | 66,938 | 7,304 | 19,563 | 40,809 | 67,676 | |||||||||||||||||||||||
Total mortgage-related investments portfolio | $ | 156,417 | $ | 34,118 | $ | 149,324 | $ | 339,859 | $ | 156,131 | $ | 29,604 | $ | 161,176 | $ | 346,911 | |||||||||||||||
Percentage of total mortgage-related investments portfolio | 46 | % | 10 | % | 44 | % | 100 | % | 45 | % | 9 | % | 46 | % | 100 | % | |||||||||||||||
Mortgage-related investments portfolio cap at December 31, 2016 and December 31, 2015 | $ | 339,304 | $ | 399,181 | |||||||||||||||||||||||||||
90% of mortgage-related investments portfolio cap at December 31, 2016 and December 31, 2015(1) | $ | 305,374 | $ | 359,263 |
(1) | Represents the amount that we manage to under our Retained Portfolio Plan, subject to certain exceptions. |
• | Sales of $1.6 billion of less liquid assets, including $0.8 billion in UPB of non-agency mortgage-related securities and $0.8 billion in UPB of seriously delinquent unsecuritized single-family loans; and |
• | Securitizations of $3.5 billion of single-family reperforming loans and performing modified loans, thereby enhancing their liquidity. We retained the resulting Freddie Mac mortgage-related securities created through such securitizations in our mortgage-related investments portfolio. |
Freddie Mac Form 10-Q | 53 |
Management's Discussion and Analysis | Regulation and Supervision |
Freddie Mac Form 10-Q | 54 |
Management's Discussion and Analysis | Regulation and Supervision |
• | the FHFA benchmark for that goal; or |
• | the actual share of the market that meets the criteria for that goal. |
• | Are owner-occupants; |
• | Are at least 90 days delinquent as of March 1, 2016; |
• | Have a mortgage with an outstanding UPB of $250,000 or less; and |
• | Have a mark-to-market loan-to-value ratio of more than 115% after capitalization. |
Freddie Mac Form 10-Q | 55 |
Management's Discussion and Analysis | Off-Balance Sheet Arrangements |
Freddie Mac Form 10-Q | 56 |
Management's Discussion and Analysis | Forward-Looking Statements |
• | The actions the U.S. government (including FHFA, Treasury, and Congress) may take, or require us to take, including to support the housing markets or to implement FHFA’s Conservatorship Scorecards and other objectives for us; |
• | The effect of the restrictions on our business due to the conservatorship and the Purchase Agreement, including our dividend obligation on the senior preferred stock; |
• | Our ability to maintain adequate liquidity to fund our operations; |
• | Changes in our Charter or in applicable legislative or regulatory requirements (including any legislation affecting the future status of our company); |
• | Changes in the fiscal and monetary policies of the Federal Reserve, including any changes to its policy of maintaining sizable holdings of mortgage-related securities and any future sales of such securities; |
• | The success of our efforts to mitigate our losses on our Legacy single-family book and our investments in non-agency mortgage-related securities; |
• | The success of our strategy to transfer mortgage credit risk through STACR debt note, ACIS, K Certificate and other credit risk transfer transactions; |
• | Our ability to maintain the security of our operating systems and infrastructure (e.g., against cyberattacks); |
• | Changes in economic and market conditions, including changes in employment rates, interest rates, spreads, and home prices; |
• | Changes in the U.S. residential mortgage market, including changes in the supply and type of loan products (e.g., refinance versus purchase, and fixed-rate versus ARM); |
• | Our ability to effectively execute our business strategies, implement new initiatives, and improve efficiency; |
• | The adequacy of our risk management framework; |
• | Our ability to manage mortgage credit risks, including the effect of changes in underwriting and servicing practices; |
Freddie Mac Form 10-Q | 57 |
Management's Discussion and Analysis | Forward-Looking Statements |
• | Our ability to limit or manage our exposure to interest-rate volatility and spread volatility, including the availability of derivative financial instruments needed for interest-rate risk management purposes; |
• | Changes or errors in the methodologies, models, assumptions, and estimates we use to prepare our financial statements, make business decisions, and manage risks; |
• | Changes in investor demand for our debt or mortgage-related securities (e.g., single-family PCs and multifamily K Certificates); |
• | Changes in the practices of loan originators, investors and other participants in the secondary mortgage market; and |
• | Other factors and assumptions described in this Form 10-Q and our 2015 Annual Report, including in the “MD&A” section. |
Freddie Mac Form 10-Q | 58 |
Financial Statements |
Freddie Mac Form 10-Q | 59 |
Financial Statements | Condensed Consolidated Statements of Comprehensive Income (Loss) |
Three Months Ended March 31, | |||||||
(in millions, except share-related amounts) | 2016 | 2015 | |||||
Interest income | |||||||
Mortgage loans | $ | 15,818 | $ | 15,454 | |||
Investments in securities | 969 | 1,335 | |||||
Other | 57 | 11 | |||||
Total interest income | 16,844 | 16,800 | |||||
Interest expense | (13,388 | ) | (13,088 | ) | |||
Expense related to derivatives | (51 | ) | (65 | ) | |||
Net interest income | 3,405 | 3,647 | |||||
Benefit (provision) for credit losses | 467 | 499 | |||||
Net interest income after benefit (provision) for credit losses | 3,872 | 4,146 | |||||
Non-interest income (loss) | |||||||
Gains (losses) on extinguishment of debt | (55 | ) | (79 | ) | |||
Derivative gains (losses) | (4,561 | ) | (2,403 | ) | |||
Impairment of available-for-sale securities: | |||||||
Total other-than-temporary impairment of available-for-sale securities | (52 | ) | (89 | ) | |||
Portion of other-than-temporary impairment recognized in AOCI | (5 | ) | (4 | ) | |||
Net impairment of available-for-sale securities recognized in earnings | (57 | ) | (93 | ) | |||
Other gains (losses) on investment securities recognized in earnings | 303 | 417 | |||||
Other income (loss) | 947 | 11 | |||||
Non-interest income (loss) | (3,423 | ) | (2,147 | ) | |||
Non-interest expense | |||||||
Salaries and employee benefits | (239 | ) | (232 | ) | |||
Professional services | (101 | ) | (113 | ) | |||
Occupancy expense | (13 | ) | (12 | ) | |||
Other administrative expense | (95 | ) | (94 | ) | |||
Total administrative expense | (448 | ) | (451 | ) | |||
Real estate owned operations (expense) income | (84 | ) | (75 | ) | |||
Temporary Payroll Tax Cut Continuation Act of 2011 expense | (272 | ) | (222 | ) | |||
Other (expense) income | (153 | ) | (463 | ) | |||
Non-interest expense | (957 | ) | (1,211 | ) | |||
(Loss) income before income tax benefit (expense) | (508 | ) | 788 | ||||
Income tax benefit (expense) | 154 | (264 | ) | ||||
Net (loss) income | (354 | ) | 524 | ||||
Other comprehensive income (loss), net of taxes and reclassification adjustments: | |||||||
Changes in unrealized gains (losses) related to available-for-sale securities | 119 | 157 | |||||
Changes in unrealized gains (losses) related to cash flow hedge relationships | 34 | 59 | |||||
Changes in defined benefit plans | 1 | 6 | |||||
Total other comprehensive income (loss), net of taxes and reclassification adjustments | 154 | 222 | |||||
Comprehensive (loss) income | $ | (200 | ) | $ | 746 | ||
Net (loss) income | $ | (354 | ) | $ | 524 | ||
Undistributed net worth sweep and senior preferred stock dividends | — | (746 | ) | ||||
Net loss attributable to common stockholders | $ | (354 | ) | $ | (222 | ) | |
Net loss per common share — basic and diluted | $ | (0.11 | ) | $ | (0.07 | ) | |
Weighted average common shares outstanding (in millions) — basic and diluted | 3,234 | 3,236 |
Freddie Mac Form 10-Q | 60 |
Financial Statements | Condensed Consolidated Balance Sheets |
March 31, | December 31, | |||||||
(in millions, except share-related amounts) | 2016 | 2015 | ||||||
Assets | ||||||||
Cash and cash equivalents (Note 12) | $ | 6,158 | $ | 5,595 | ||||
Restricted cash and cash equivalents (Notes 3, 12) | 16,671 | 14,533 | ||||||
Securities purchased under agreements to resell (Notes 3, 8) | 40,098 | 63,644 | ||||||
Investments in securities, at fair value (Note 5) | 107,595 | 114,215 | ||||||
Mortgage loans held-for-sale (Notes 3, 4) (includes $22,415 and $17,660 at fair value) | 27,085 | 24,992 | ||||||
Mortgage loans held-for-investment (Notes 3, 4) (net of allowance for loan losses of $14,521 and $15,331) | 1,735,548 | 1,729,201 | ||||||
Accrued interest receivable (Note 3) | 6,091 | 6,074 | ||||||
Derivative assets, net (Notes 7, 8) | 814 | 395 | ||||||
Real estate owned, net (Note 3) | 1,571 | 1,725 | ||||||
Deferred tax assets, net (Note 10) | 18,123 | 18,205 | ||||||
Other assets (Notes 3, 16) | 9,346 | 7,313 | ||||||
Total assets | $ | 1,969,100 | $ | 1,985,892 | ||||
Liabilities and equity | ||||||||
Liabilities | ||||||||
Accrued interest payable (Note 3) | $ | 6,047 | $ | 6,183 | ||||
Debt, net (Notes 3, 6) (includes $6,915 and $7,184 at fair value) | 1,955,618 | 1,970,269 | ||||||
Derivative liabilities, net (Notes 7, 8) | 1,632 | 1,254 | ||||||
Other liabilities (Notes 3, 16) | 4,803 | 5,246 | ||||||
Total liabilities | 1,968,100 | 1,982,952 | ||||||
Commitments and contingencies (Notes 3, 7, and 14) | ||||||||
Equity (Note 9) | ||||||||
Senior preferred stock, at redemption value | 72,336 | 72,336 | ||||||
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 650,046,828 shares and 650,045,962 shares outstanding | — | — | ||||||
Additional paid-in capital | — | — | ||||||
Retained earnings (accumulated deficit) | (82,867 | ) | (80,773 | ) | ||||
AOCI, net of taxes, related to: | ||||||||
Available-for-sale securities (includes $578 and $778, related to net unrealized gains on securities for which other-than-temporary impairment has been recognized in earnings) | 1,859 | 1,740 | ||||||
Cash flow hedge relationships | (587 | ) | (621 | ) | ||||
Defined benefit plans | 35 | 34 | ||||||
Total AOCI, net of taxes | 1,307 | 1,153 | ||||||
Treasury stock, at cost, 75,817,058 shares and 75,817,924 shares | (3,885 | ) | (3,885 | ) | ||||
Total equity (See Note 9 for information on our dividend obligation to Treasury) | 1,000 | 2,940 | ||||||
Total liabilities and equity | $ | 1,969,100 | $ | 1,985,892 |
March 31, | December 31, | |||||||
(in millions) | 2016 | 2015 | ||||||
Consolidated Balance Sheet Line Item | ||||||||
Assets: (Note 3) | ||||||||
Mortgage loans held-for-sale | $ | 277 | $ | 1,403 | ||||
Mortgage loans held-for-investment | 1,635,242 | 1,625,184 | ||||||
All other assets | 42,819 | 37,305 | ||||||
Total assets of consolidated VIEs | $ | 1,678,338 | $ | 1,663,892 | ||||
Liabilities: (Note 3) | ||||||||
Debt, net | $ | 1,568,183 | $ | 1,556,121 | ||||
All other liabilities | 4,761 | 4,769 | ||||||
Total liabilities of consolidated VIEs | $ | 1,572,944 | $ | 1,560,890 |
Freddie Mac Form 10-Q | 61 |
Financial Statements | Condensed Consolidated Statements of Cash Flows |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Net cash used in operating activities | $ | (4,086 | ) | $ | (3,507 | ) | |
Cash flows from investing activities | |||||||
Purchases of trading securities | (8,104 | ) | (13,898 | ) | |||
Proceeds from sales of trading securities | 3,234 | 2,863 | |||||
Proceeds from maturities of trading securities | 7,692 | 4,414 | |||||
Purchases of available-for-sale securities | (3,009 | ) | (2,161 | ) | |||
Proceeds from sales of available-for-sale securities | 2,404 | 4,134 | |||||
Proceeds from maturities of available-for-sale securities | 4,808 | 4,893 | |||||
Purchases of held-for-investment mortgage loans | (28,577 | ) | (27,353 | ) | |||
Proceeds from sales of mortgage loans held-for-investment | 832 | 406 | |||||
Repayments of mortgage loans held-for-investment | 64,343 | 74,167 | |||||
(Increase) decrease in restricted cash | (2,138 | ) | (154 | ) | |||
Net proceeds from dispositions of real estate owned and other recoveries | 665 | 1,121 | |||||
Net (increase) decrease in securities purchased under agreements to resell | 23,546 | 4,737 | |||||
Derivative premiums and terminations and swap collateral, net | (4,094 | ) | (1,481 | ) | |||
Changes in other assets | (3,652 | ) | (1,076 | ) | |||
Net cash provided by investing activities | 57,950 | 50,612 | |||||
Cash flows from financing activities | |||||||
Proceeds from issuance of debt securities of consolidated trusts held by third parties | 40,722 | 30,122 | |||||
Repayments and redemptions of debt securities of consolidated trusts held by third parties | (65,494 | ) | (73,600 | ) | |||
Proceeds from issuance of other debt | 145,003 | 103,119 | |||||
Repayments of other debt | (171,791 | ) | (106,416 | ) | |||
Payment of cash dividends on senior preferred stock | (1,740 | ) | (851 | ) | |||
Changes in other liabilities | (1 | ) | — | ||||
Net cash used in financing activities | (53,301 | ) | (47,626 | ) | |||
Net (decrease) increase in cash and cash equivalents | 563 | (521 | ) | ||||
Cash and cash equivalents at beginning of year | 5,595 | 10,928 | |||||
Cash and cash equivalents at end of period | $ | 6,158 | $ | 10,407 | |||
Supplemental cash flow information | |||||||
Cash paid for: | |||||||
Debt interest | $ | 15,438 | $ | 15,304 | |||
Income taxes | 573 | 458 | |||||
Non-cash investing and financing activities (Note 4) |
Freddie Mac Form 10-Q | 62 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 1 |
Freddie Mac Form 10-Q | 63 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 1 |
Standard | Description | Date of Adoption | Effect on Consolidated Financial Statements |
ASU 2015-02, Amendments to the Consolidation Analysis (Topic 810) | The amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. | January 1, 2016 | The adoption of this amendment did not have a material effect on our consolidated financial statements. |
ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30) | The amendment requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. | January 1, 2016 | Previously reported amounts have been conformed to the current presentation (see Notes 6 and 16). The effect of adoption as of January 1, 2016 and December 31, 2015 was a reduction to Other Assets and Debt, net of $158 million. There were no effects on earnings resulting from this change. |
Standard | Description | Date of Adoption | Effect on Consolidated Financial Statements |
ASU 2016-06, Derivatives and Hedging (Topic 815) | The amendment clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendment is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. | January 1, 2017 | We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements. |
ASU 2016-02, Leases (Topic 842) | The amendment addresses the accounting for lease arrangements. | January 1, 2019 | We do not expect that the adoption of this amendment will have a material effect on our consolidated financial statements. |
Freddie Mac Form 10-Q | 64 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 2 |
• | Keeping us solvent; |
• | Allowing us to focus on our primary business objectives under conservatorship; and |
• | Avoiding the appointment of a receiver by FHFA under statutory mandatory receivership provisions. |
Freddie Mac Form 10-Q | 65 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 2 |
Freddie Mac Form 10-Q | 66 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 3 |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
Consolidated Balance Sheet Line Item | ||||||||
Assets: | ||||||||
Restricted cash and cash equivalents | $ | 16,316 | $ | 14,529 | ||||
Securities purchased under agreements to resell | 17,350 | 14,840 | ||||||
Mortgage loans held-for-sale | 277 | 1,403 | ||||||
Mortgage loans held-for-investment | 1,635,242 | 1,625,184 | ||||||
Accrued interest receivable | 5,373 | 5,305 | ||||||
Real estate owned, net | 37 | 40 | ||||||
Other assets | 3,743 | 2,591 | ||||||
Total assets of consolidated VIEs | $ | 1,678,338 | $ | 1,663,892 | ||||
Liabilities: | ||||||||
Accrued interest payable | $ | 4,760 | $ | 4,763 | ||||
Debt, net | 1,568,183 | 1,556,121 | ||||||
Other liabilities | 1 | 6 | ||||||
Total liabilities of consolidated VIEs | $ | 1,572,944 | $ | 1,560,890 |
Freddie Mac Form 10-Q | 67 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 3 |
March 31, 2016 | December 31, 2015 | |||||||
(in millions) | Freddie Mac Securities | |||||||
Assets and Liabilities Recorded on our Consolidated Balance Sheets | ||||||||
Assets: | ||||||||
Investments in securities | $ | 49,046 | $ | 49,040 | ||||
Accrued interest receivable | 211 | 200 | ||||||
Other assets | 1,371 | 1,232 | ||||||
Liabilities: | ||||||||
Other liabilities | (1,283 | ) | (1,230 | ) | ||||
Maximum Exposure to Loss | $ | 122,474 | $ | 114,193 | ||||
Total Assets of Non-Consolidated VIEs | $ | 144,497 | $ | 134,900 |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||
(dollars in millions, terms in years) | Maximum Exposure | Recognized Liability(1) | Maximum Remaining Term | Maximum Exposure | Recognized Liability(1) | Maximum Remaining Term | |||||||||||||
K Certificates and other securitization products | $ | 122,474 | $ | 1,195 | 39 | $ | 114,193 | $ | 1,136 | 40 | |||||||||
Other mortgage-related guarantees | 13,784 | 616 | 35 | 13,067 | 596 | 38 | |||||||||||||
Derivative instruments | 17,729 | 178 | 29 | 17,894 | 151 | 30 |
(1) | This amount excludes our reserve for guarantee losses, which totaled $74 million and $76 million as of March 31, 2016 and December 31, 2015, respectively, and is included within other liabilities on our consolidated balance sheets. |
Freddie Mac Form 10-Q | 68 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 3 |
UPB at | Maximum Coverage at | |||||||||||||||
(in millions) | March 31, 2016 | December 31, 2015 | March 31, 2016 | December 31, 2015 | ||||||||||||
K Certificates | $ | 109,109 | $ | 101,473 | $ | 19,696 | $ | 18,453 | ||||||||
Other securitization products | 7,835 | 7,026 | 1,632 | 1,477 | ||||||||||||
Total | $ | 116,944 | $ | 108,499 | $ | 21,328 | $ | 19,930 |
Freddie Mac Form 10-Q | 69 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
(in millions) | Held by Freddie Mac | Held by consolidated trusts | Total | Held by Freddie Mac | Held by consolidated trusts | Total | ||||||||||||||||||
Held-for sale: | ||||||||||||||||||||||||
Single-family | $ | 4,343 | $ | 381 | $ | 4,724 | $ | 6,045 | $ | 1,702 | $ | 7,747 | ||||||||||||
Multifamily | 23,564 | — | 23,564 | 19,582 | — | 19,582 | ||||||||||||||||||
Total UPB | 27,907 | 381 | 28,288 | 25,627 | 1,702 | 27,329 | ||||||||||||||||||
Cost basis and fair value adjustments, net | (1,099 | ) | (104 | ) | (1,203 | ) | (2,038 | ) | (299 | ) | (2,337 | ) | ||||||||||||
Total held-for-sale loans | 26,808 | 277 | 27,085 | 23,589 | 1,403 | 24,992 | ||||||||||||||||||
Held-for-investment: | ||||||||||||||||||||||||
Single-family | 87,527 | 1,607,282 | 1,694,809 | 90,532 | 1,597,590 | 1,688,122 | ||||||||||||||||||
Multifamily | 27,818 | 1,690 | 29,508 | 29,505 | 1,711 | 31,216 | ||||||||||||||||||
Total UPB | 115,345 | 1,608,972 | 1,724,317 | 120,037 | 1,599,301 | 1,719,338 | ||||||||||||||||||
Cost basis adjustments | (3,338 | ) | 29,090 | 25,752 | (3,465 | ) | 28,659 | 25,194 | ||||||||||||||||
Allowance for loan losses | (11,701 | ) | (2,820 | ) | (14,521 | ) | (12,555 | ) | (2,776 | ) | (15,331 | ) | ||||||||||||
Total held-for-investment loans | 100,306 | 1,635,242 | 1,735,548 | 104,017 | 1,625,184 | 1,729,201 | ||||||||||||||||||
Total loans, net | $ | 127,114 | $ | 1,635,519 | $ | 1,762,633 | $ | 127,606 | $ | 1,626,587 | $ | 1,754,193 |
Freddie Mac Form 10-Q | 70 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
• | Loans within the Alt-A category continue to be presented in that category following modification, even though the borrower may have provided full documentation of assets and income to complete the modification; and |
• | Loans within the option ARM category continue to be presented in that category following modification, even though the modified loan no longer provides for optional payment provisions. |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||||||||
Current LTV Ratio | Current LTV Ratio | ||||||||||||||||||||||||||||||
(in millions) | ≤ 80 | > 80 to 100 | > 100(1) | Total | ≤ 80 | > 80 to 100 | > 100(1) | Total | |||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate(2) | $ | 1,045,142 | $ | 234,710 | $ | 45,701 | $ | 1,325,553 | $ | 1,020,227 | $ | 242,948 | $ | 50,893 | $ | 1,314,068 | |||||||||||||||
15-year amortizing fixed-rate(2) | 271,010 | 11,380 | 1,499 | 283,889 | 271,456 | 12,400 | 1,754 | 285,610 | |||||||||||||||||||||||
Adjustable-rate | 58,696 | 4,498 | 190 | 63,384 | 59,724 | 5,055 | 249 | 65,028 | |||||||||||||||||||||||
Alt-A, interest-only, and option ARM | 27,742 | 12,469 | 7,539 | 47,750 | 27,014 | 13,124 | 8,485 | 48,623 | |||||||||||||||||||||||
Total single-family loans | $ | 1,402,590 | $ | 263,057 | $ | 54,929 | $ | 1,720,576 | $ | 1,378,421 | $ | 273,527 | $ | 61,381 | $ | 1,713,329 |
(1) | The serious delinquency rate for the total of single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 6.01% and 6.03% as of March 31, 2016 and December 31, 2015, respectively. |
(2) | The majority of our loan modifications result in new terms that include fixed interest rates after modification. As of March 31, 2016 and December 31, 2015, we have categorized UPB of approximately $37.2 billion and $38.3 billion, respectively, of modified loans as fixed-rate loans (instead of as adjustable rate loans), even though the modified loans have rate adjustment provisions. In these cases, while the terms of the modified loans provide for the interest rate to adjust, such rates and the timing of adjustment are determined at the time of modification rather than at a subsequent date. |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
Credit risk profile by internally assigned grade:(1) | ||||||||
Pass | $ | 28,233 | $ | 29,660 | ||||
Special mention | 879 | 1,135 | ||||||
Substandard | 381 | 408 | ||||||
Doubtful | — | — | ||||||
Total | $ | 29,493 | $ | 31,203 |
(1) | A loan categorized as: "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower; "Special mention" has signs of potential financial weakness; "Substandard" has a weakness that jeopardizes the timely full repayment; and "Doubtful" has a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions. |
Freddie Mac Form 10-Q | 71 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
March 31, 2016 | |||||||||||||||||||||||
(in millions) | Current | One Month Past Due | Two Months Past Due | Three Months or More Past Due, or in Foreclosure(1) | Total | Non-accrual | |||||||||||||||||
Single-family: | |||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | $ | 1,295,280 | $ | 13,937 | $ | 4,269 | $ | 12,067 | $ | 1,325,553 | $ | 12,065 | |||||||||||
15-year amortizing fixed-rate | 282,599 | 788 | 160 | 342 | 283,889 | 342 | |||||||||||||||||
Adjustable-rate | 62,757 | 312 | 83 | 232 | 63,384 | 232 | |||||||||||||||||
Alt-A, interest-only, and option ARM | 42,932 | 1,796 | 631 | 2,391 | 47,750 | 2,390 | |||||||||||||||||
Total single-family | 1,683,568 | 16,833 | 5,143 | 15,032 | 1,720,576 | 15,029 | |||||||||||||||||
Total multifamily | 29,493 | — | — | — | 29,493 | 120 | |||||||||||||||||
Total single-family and multifamily | $ | 1,713,061 | $ | 16,833 | $ | 5,143 | $ | 15,032 | $ | 1,750,069 | $ | 15,149 | |||||||||||
December 31, 2015 | |||||||||||||||||||||||
(in millions) | Current | One Month Past Due | Two Months Past Due | Three Months or More Past Due, or in Foreclosure(1) | Total | Non-accrual | |||||||||||||||||
Single-family: | |||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | $ | 1,280,247 | $ | 16,178 | $ | 5,037 | $ | 12,606 | $ | 1,314,068 | $ | 12,603 | |||||||||||
15-year amortizing fixed-rate | 284,137 | 935 | 183 | 355 | 285,610 | 355 | |||||||||||||||||
Adjustable-rate | 64,326 | 359 | 88 | 255 | 65,028 | 255 | |||||||||||||||||
Alt-A, interest-only, and option ARM | 43,543 | 1,962 | 714 | 2,404 | 48,623 | 2,403 | |||||||||||||||||
Total single-family | 1,672,253 | 19,434 | 6,022 | 15,620 | 1,713,329 | 15,616 | |||||||||||||||||
Total multifamily | 31,203 | — | — | — | 31,203 | 170 | |||||||||||||||||
Total single-family and multifamily | $ | 1,703,456 | $ | 19,434 | $ | 6,022 | $ | 15,620 | $ | 1,744,532 | $ | 15,786 |
(1) | Includes $7.0 billion of loans that were in the process of foreclosure as of both March 31, 2016 and December 31, 2015. |
Freddie Mac Form 10-Q | 72 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
(dollars in millions) | March 31, 2016 | December 31, 2015 | ||||||
Single-family:(1) | ||||||||
Non-credit-enhanced portfolio | ||||||||
Serious delinquency rate | 1.20 | % | 1.30 | % | ||||
Total number of seriously delinquent loans | 95,941 | 105,071 | ||||||
Credit-enhanced portfolio:(2) | ||||||||
Primary mortgage insurance: | ||||||||
Serious delinquency rate | 1.78 | % | 2.06 | % | ||||
Total number of seriously delinquent loans | 24,290 | 27,813 | ||||||
Other credit protection:(3) | ||||||||
Serious delinquency rate | 0.49 | % | 0.58 | % | ||||
Total number of seriously delinquent loans | 8,888 | 9,422 | ||||||
Total single-family: | ||||||||
Serious delinquency rate | 1.20 | % | 1.32 | % | ||||
Total number of seriously delinquent loans | 128,044 | 141,255 | ||||||
Multifamily:(4) | ||||||||
Non-credit-enhanced portfolio: | ||||||||
Delinquency rate | 0.03 | % | 0.03 | % | ||||
UPB of delinquent loans | $ | 19 | $ | 19 | ||||
Credit-enhanced portfolio: | ||||||||
Delinquency rate | 0.04 | % | 0.02 | % | ||||
UPB of delinquent loans | $ | 48 | $ | 20 | ||||
Total Multifamily: | ||||||||
Delinquency rate | 0.04 | % | 0.02 | % | ||||
UPB of delinquent loans | $ | 67 | $ | 39 |
(1) | Serious delinquencies on single-family loans underlying certain REMICs, other securitization products, and other mortgage-related guarantees may be reported on a different schedule due to variances in industry practice. |
(2) | The credit enhanced categories are not mutually exclusive as a single loan may be covered by both primary mortgage insurance and other credit protection. |
(3) | Consists of single-family loans covered by financial arrangements (other than primary mortgage insurance) that are designed to reduce our credit risk exposure. See "Credit Protection and Other Forms of Credit Enhancement" for more information. |
(4) | Multifamily delinquency performance is based on UPB of loans that are two monthly payments or more past due or those in the process of foreclosure. |
• | Our allowance for loan losses, which pertains to all single-family and multifamily loans classified as held-for-investment on our consolidated balance sheets; and |
• | Our reserve for guarantee losses, which pertains to single-family and multifamily loans underlying our K Certificates, other securitization products, and other mortgage-related guarantees. |
Freddie Mac Form 10-Q | 73 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||||||||||
Allowance for Loan Losses | Reserve for Guarantee Losses | Allowance for Loan Losses | Reserve for Guarantee Losses | ||||||||||||||||||||||||||||
(in millions) | Held by Freddie Mac | Held By Consolidated Trusts | Total | Held by Freddie Mac | Held By Consolidated Trusts | Total | |||||||||||||||||||||||||
Single-family: | |||||||||||||||||||||||||||||||
Beginning balance | $ | 12,516 | $ | 2,775 | $ | 57 | $ | 15,348 | $ | 18,800 | $ | 2,884 | $ | 109 | $ | 21,793 | |||||||||||||||
Provision (benefit) for credit losses | (435 | ) | (29 | ) | 2 | (462 | ) | (469 | ) | (25 | ) | (2 | ) | (496 | ) | ||||||||||||||||
Charge-offs | (499 | ) | (68 | ) | (2 | ) | (569 | ) | (2,781 | ) | (168 | ) | (2 | ) | (2,951 | ) | |||||||||||||||
Recoveries | 126 | 2 | — | 128 | 169 | 5 | — | 174 | |||||||||||||||||||||||
Transfers, net(1) | (41 | ) | 139 | — | 98 | 301 | (142 | ) | — | 159 | |||||||||||||||||||||
Ending balance | $ | 11,667 | $ | 2,819 | $ | 57 | $ | 14,543 | $ | 16,020 | $ | 2,554 | $ | 105 | $ | 18,679 | |||||||||||||||
Multifamily ending balance | $ | 34 | $ | 1 | $ | 17 | $ | 52 | $ | 74 | $ | — | $ | 17 | $ | 91 | |||||||||||||||
Total ending balance | $ | 11,701 | $ | 2,820 | $ | 74 | $ | 14,595 | $ | 16,094 | $ | 2,554 | $ | 122 | $ | 18,770 |
(1) | Consists of approximately $0.1 billion during both the three months ended March 31, 2016 and March 31, 2015 attributable to capitalization of past due interest on modified loans. Also includes amounts associated with reclassified single-family reserves related to our removal of loans previously held by consolidated trusts, net of reclassifications for single-family loans subsequently resecuritized after such removal. |
Three Months Ended March 31, | ||||||||||||||
2016 | 2015 | |||||||||||||
(dollars in millions) | Number of Loans | Post-TDR Recorded Investment | Number of Loans | Post-TDR Recorded Investment | ||||||||||
Single-family:(1) | ||||||||||||||
20 and 30-year or more, amortizing fixed-rate | 10,332 | $ | 1,456 | 13,293 | $ | 1,919 | ||||||||
15-year amortizing fixed-rate | 1,318 | 94 | 1,652 | 123 | ||||||||||
Adjustable-rate | 274 | 40 | 405 | 57 | ||||||||||
Alt-A, interest-only, and option ARM | 919 | 169 | 1,388 | 269 | ||||||||||
Total single-family | 12,843 | 1,759 | 16,738 | 2,368 | ||||||||||
Multifamily | 2 | 8 | — | — | ||||||||||
Total | 12,845 | $ | 1,767 | 16,738 | $ | 2,368 |
(1) | The pre-TDR recorded investment for single-family loans initially classified as TDR during the three months ended March 31, 2016 and March 31, 2015 was $1.8 billion and $2.4 billion, respectively. |
Freddie Mac Form 10-Q | 74 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
Three Months Ended March 31, | |||||||||||||
2016 | 2015 | ||||||||||||
(dollars in millions) | Number of Loans | Post-TDR Recorded Investment | Number of Loans | Post-TDR Recorded Investment | |||||||||
Single-family: | |||||||||||||
20 and 30-year or more, amortizing fixed-rate | 3,992 | $ | 634 | 4,307 | $ | 754 | |||||||
15-year amortizing fixed-rate | 233 | 18 | 206 | 18 | |||||||||
Adjustable-rate | 73 | 11 | 68 | 12 | |||||||||
Alt-A, interest-only, and option ARM | 459 | 98 | 514 | 122 | |||||||||
Total single-family | 4,757 | $ | 761 | 5,095 | $ | 906 | |||||||
Multifamily | — | $ | — | — | $ | — |
Freddie Mac Form 10-Q | 75 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
(in millions) | UPB | Recorded Investment | Associated Allowance | UPB | Recorded Investment | Associated Allowance | ||||||||||||||||||
Single-family — | ||||||||||||||||||||||||
With no specific allowance recorded:(1) | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | $ | 5,324 | $ | 4,000 | N/A | $ | 4,957 | $ | 3,724 | N/A | ||||||||||||||
15-year amortizing fixed-rate | 42 | 35 | N/A | 45 | 38 | N/A | ||||||||||||||||||
Adjustable-rate | 223 | 220 | N/A | 194 | 191 | N/A | ||||||||||||||||||
Alt-A, interest-only, and option ARM | 1,574 | 1,213 | N/A | 1,370 | 1,033 | N/A | ||||||||||||||||||
Total with no specific allowance recorded | 7,163 | 5,468 | N/A | 6,566 | 4,986 | N/A | ||||||||||||||||||
With specific allowance recorded:(2) | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | 72,302 | 70,708 | $ | (10,667 | ) | 72,886 | 71,215 | $ | (11,245 | ) | ||||||||||||||
15-year amortizing fixed-rate | 957 | 961 | (23 | ) | 975 | 978 | (21 | ) | ||||||||||||||||
Adjustable-rate | 478 | 470 | (27 | ) | 518 | 510 | (28 | ) | ||||||||||||||||
Alt-A, interest-only, and option ARM | 14,390 | 13,755 | (2,598 | ) | 14,409 | 13,839 | (2,725 | ) | ||||||||||||||||
Total with specific allowance recorded | 88,127 | 85,894 | (13,315 | ) | 88,788 | 86,542 | (14,019 | ) | ||||||||||||||||
Combined single-family: | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | 77,626 | 74,708 | (10,667 | ) | 77,843 | 74,939 | (11,245 | ) | ||||||||||||||||
15-year amortizing fixed-rate | 999 | 996 | (23 | ) | 1,020 | 1,016 | (21 | ) | ||||||||||||||||
Adjustable-rate | 701 | 690 | (27 | ) | 712 | 701 | (28 | ) | ||||||||||||||||
Alt-A, interest-only, and option ARM | 15,964 | 14,968 | (2,598 | ) | 15,779 | 14,872 | (2,725 | ) | ||||||||||||||||
Total single-family | $ | 95,290 | $ | 91,362 | $ | (13,315 | ) | $ | 95,354 | $ | 91,528 | $ | (14,019 | ) | ||||||||||
Multifamily — | ||||||||||||||||||||||||
With no specific allowance recorded(1) | $ | 277 | $ | 270 | N/A | $ | 341 | $ | 333 | N/A | ||||||||||||||
With specific allowance recorded | 157 | 148 | $ | (19 | ) | 149 | 142 | $ | (21 | ) | ||||||||||||||
Total multifamily | $ | 434 | $ | 418 | $ | (19 | ) | $ | 490 | $ | 475 | $ | (21 | ) | ||||||||||
Total single-family and multifamily | $ | 95,724 | $ | 91,780 | $ | (13,334 | ) | $ | 95,844 | $ | 92,003 | $ | (14,040 | ) |
Freddie Mac Form 10-Q | 76 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
For the Three Months Ended March 31, 2016 | For the Three Months Ended March 31, 2015 | |||||||||||||||||||||||
(in millions) | Average Recorded Investment | Interest Income Recognized | Interest Income Recognized On Cash Basis(3) | Average Recorded Investment | Interest Income Recognized | Interest Income Recognized On Cash Basis(3) | ||||||||||||||||||
Single-family — | ||||||||||||||||||||||||
With no specific allowance recorded:(1) | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | $ | 4,015 | $ | 102 | $ | 2 | $ | 3,012 | $ | 88 | $ | 2 | ||||||||||||
15-year amortizing fixed-rate | 37 | 1 | — | 44 | 2 | — | ||||||||||||||||||
Adjustable rate | 222 | 2 | — | 33 | 1 | — | ||||||||||||||||||
Alt-A, interest-only, and option ARM | 1,195 | 25 | 1 | 683 | 18 | — | ||||||||||||||||||
Total with no specific allowance recorded | 5,469 | 130 | 3 | 3,772 | 109 | 2 | ||||||||||||||||||
With specific allowance recorded:(2) | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | 70,731 | 685 | 74 | 76,264 | 632 | 81 | ||||||||||||||||||
15-year amortizing fixed-rate | 942 | 12 | 2 | 1,147 | 13 | 3 | ||||||||||||||||||
Adjustable rate | 461 | 5 | 1 | 788 | 4 | 1 | ||||||||||||||||||
Alt-A, interest-only, and option ARM | 13,673 | 124 | 10 | 16,128 | 101 | 13 | ||||||||||||||||||
Total with specific allowance recorded | 85,807 | 826 | 87 | 94,327 | 750 | 98 | ||||||||||||||||||
Combined single-family: | ||||||||||||||||||||||||
20 and 30-year or more, amortizing fixed-rate | 74,746 | 787 | 76 | 79,276 | 720 | 83 | ||||||||||||||||||
15-year amortizing fixed-rate | 979 | 13 | 2 | 1,191 | 15 | 3 | ||||||||||||||||||
Adjustable rate | 683 | 7 | 1 | 821 | 5 | 1 | ||||||||||||||||||
Alt-A, interest-only, and option ARM | 14,868 | 149 | 11 | 16,811 | 119 | 13 | ||||||||||||||||||
Total single-family | $ | 91,276 | $ | 956 | $ | 90 | $ | 98,099 | $ | 859 | $ | 100 | ||||||||||||
Multifamily — | ||||||||||||||||||||||||
With no specific allowance recorded(1) | $ | 271 | $ | 3 | $ | 1 | $ | 518 | $ | 6 | $ | 2 | ||||||||||||
With specific allowance recorded | 148 | 2 | 1 | 374 | 4 | 2 | ||||||||||||||||||
Total multifamily | $ | 419 | $ | 5 | $ | 2 | $ | 892 | $ | 10 | $ | 4 | ||||||||||||
Total single-family and multifamily | $ | 91,695 | $ | 961 | $ | 92 | $ | 98,991 | $ | 869 | $ | 104 |
(1) | Individually impaired loans with no specific related valuation allowance primarily represent those loans for which the collateral value is sufficiently in excess of the loan balance to result in recovery of the entire recorded investment if the property were foreclosed upon or otherwise subject to disposition. |
(2) | Consists primarily of loans classified as TDRs. |
(3) | Consists of income recognized during the period related to loans on non-accrual status. |
Freddie Mac Form 10-Q | 77 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
(in millions) | Single-family | Multifamily | Total | Single-family | Multifamily | Total | ||||||||||||||||||
Recorded investment: | ||||||||||||||||||||||||
Collectively evaluated | $ | 1,629,214 | $ | 29,075 | $ | 1,658,289 | $ | 1,621,801 | $ | 30,728 | $ | 1,652,529 | ||||||||||||
Individually evaluated | 91,362 | 418 | 91,780 | 91,528 | 475 | 92,003 | ||||||||||||||||||
Total recorded investment | 1,720,576 | 29,493 | 1,750,069 | 1,713,329 | 31,203 | 1,744,532 | ||||||||||||||||||
Ending balance of the allowance for loan losses: | ||||||||||||||||||||||||
Collectively evaluated | (1,171 | ) | (16 | ) | (1,187 | ) | (1,273 | ) | (18 | ) | (1,291 | ) | ||||||||||||
Individually evaluated | (13,315 | ) | (19 | ) | (13,334 | ) | (14,019 | ) | (21 | ) | (14,040 | ) | ||||||||||||
Total ending balance of the allowance | (14,486 | ) | (35 | ) | (14,521 | ) | (15,292 | ) | (39 | ) | (15,331 | ) | ||||||||||||
Net investment in loans | $ | 1,706,090 | $ | 29,458 | $ | 1,735,548 | $ | 1,698,037 | $ | 31,164 | $ | 1,729,201 |
UPB(1) at | Maximum Coverage(1)(2) at | |||||||||||||||
(in millions) | March 31, 2016 | December 31, 2015 | March 31, 2016 | December 31, 2015 | ||||||||||||
Primary mortgage insurance | $ | 261,242 | $ | 257,063 | $ | 66,899 | $ | 65,760 | ||||||||
STACR debt note and ACIS transactions(3) | 271,291 | 241,450 | 16,842 | 14,916 | ||||||||||||
Lender recourse and indemnifications | 6,178 | 6,339 | 5,243 | 5,396 | ||||||||||||
Pool insurance(4) | 1,633 | 1,706 | 720 | 753 | ||||||||||||
HFA indemnification | 2,536 | 2,599 | 2,536 | 2,599 | ||||||||||||
Subordination | 2,920 | 3,021 | 319 | 336 | ||||||||||||
Other credit enhancements | 15 | 15 | 9 | 10 | ||||||||||||
Total | $ | 545,815 | $ | 512,193 | $ | 92,568 | $ | 89,770 |
(1) | Except for the majority of our single-family credit risk transfer transactions, our credit enhancements generally provide protection for the first, or initial, credit losses associated with the related loans. Excludes: (a) FHA/VA and other governmental loans; (b) credit protection associated with $8.0 billion and $8.3 billion in UPB of single-family loans underlying other securitization products as of March 31, 2016 and December 31, 2015, respectively, as the information was not available; and (c) repurchase rights (subject to certain conditions and limitations) we have under representations and warranties provided by our agreements with seller/servicers to underwrite loans and service them in accordance with our standards. The UPB of single-family loans covered by insurance or partial guarantees issued by federal agencies (such as FHA, VA and USDA) was $3.1 billion and $3.2 billion as of March 31, 2016 and December 31, 2015, respectively. |
(2) | Except for subordination, this represents the remaining amount of loss recovery that is available subject to terms of counterparty agreements. For subordination, this represents the UPB of the securities that are subordinate to our guarantee, which could provide protection by absorbing first losses. |
(3) | Excludes $100.8 billion and $87.4 billion in UPB at March 31, 2016 and December 31, 2015, respectively, where the related loans are also covered by primary mortgage insurance. Maximum coverage amounts presented represent the outstanding balance of STACR debt notes held by third parties as well as the remaining aggregate limit of insurance purchased from third parties in ACIS transactions. |
(4) | Excludes approximately $0.5 billion and $0.6 billion in UPB at March 31, 2016 and December 31, 2015, respectively, where the related loans are also covered by primary mortgage insurance. |
Freddie Mac Form 10-Q | 78 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 4 |
Freddie Mac Form 10-Q | 79 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 5 |
(in millions) | March 31, 2016 | December 31, 2015 | |||||
Trading securities | $ | 36,471 | $ | 39,278 | |||
Available-for-sale securities | 71,124 | 74,937 | |||||
Total | $ | 107,595 | $ | 114,215 |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
Mortgage-related securities: | ||||||||
Freddie Mac | $ | 14,771 | $ | 15,513 | ||||
Fannie Mae | 6,182 | 6,438 | ||||||
Ginnie Mae | 144 | 30 | ||||||
Other | 136 | 146 | ||||||
Total mortgage-related securities | 21,233 | 22,127 | ||||||
Non-mortgage-related securities | 15,238 | 17,151 | ||||||
Total fair value of trading securities | $ | 36,471 | $ | 39,278 |
Freddie Mac Form 10-Q | 80 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 5 |
March 31, 2016 | ||||||||||||||||||||
Gross Unrealized Losses | ||||||||||||||||||||
(in millions) | Amortized Cost | Gross Unrealized Gains | Other-Than-Temporary Impairment(1) | Temporary Impairment(2) | Fair Value | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Freddie Mac | $ | 32,955 | $ | 1,363 | $ | — | $ | (43 | ) | $ | 34,275 | |||||||||
Fannie Mae | 6,616 | 276 | — | (45 | ) | 6,847 | ||||||||||||||
Ginnie Mae | 143 | 12 | — | — | 155 | |||||||||||||||
CMBS | 9,618 | 485 | (13 | ) | (23 | ) | 10,067 | |||||||||||||
Subprime | 11,814 | 519 | (327 | ) | (59 | ) | 11,947 | |||||||||||||
Option ARM | 3,159 | 238 | (67 | ) | (5 | ) | 3,325 | |||||||||||||
Alt-A and other | 2,489 | 465 | (8 | ) | (6 | ) | 2,940 | |||||||||||||
Obligations of states and political subdivisions | 996 | 17 | — | (1 | ) | 1,012 | ||||||||||||||
Manufactured housing | 474 | 83 | (1 | ) | — | 556 | ||||||||||||||
Total available-for-sale securities | $ | 68,264 | $ | 3,458 | $ | (416 | ) | $ | (182 | ) | $ | 71,124 | ||||||||
December 31, 2015 | ||||||||||||||||||||
Gross Unrealized Losses | ||||||||||||||||||||
(in millions) | Amortized Cost | Gross Unrealized Gains | Other-Than-Temporary Impairment(1) | Temporary Impairment(2) | Fair Value | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Freddie Mac | $ | 32,684 | $ | 942 | $ | — | $ | (99 | ) | $ | 33,527 | |||||||||
Fannie Mae | 7,033 | 265 | — | (36 | ) | 7,262 | ||||||||||||||
Ginnie Mae | 150 | 12 | — | — | 162 | |||||||||||||||
CMBS | 12,009 | 450 | (2 | ) | (9 | ) | 12,448 | |||||||||||||
Subprime | 12,499 | 653 | (295 | ) | (55 | ) | 12,802 | |||||||||||||
Option ARM | 3,423 | 317 | (56 | ) | (6 | ) | 3,678 | |||||||||||||
Alt-A and other | 2,788 | 506 | (11 | ) | (5 | ) | 3,278 | |||||||||||||
Obligations of states and political subdivisions | 1,187 | 19 | — | (1 | ) | 1,205 | ||||||||||||||
Manufactured housing | 488 | 87 | — | — | 575 | |||||||||||||||
Total available-for-sale securities | $ | 72,261 | $ | 3,251 | $ | (364 | ) | $ | (211 | ) | $ | 74,937 |
(1) | Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairments in earnings. |
(2) | Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairments in earnings. |
Freddie Mac Form 10-Q | 81 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 5 |
March 31, 2016 | ||||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||||
(in millions) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
Freddie Mac | $ | 3,300 | $ | (26 | ) | $ | 1,430 | $ | (17 | ) | ||||||
Fannie Mae | 2,286 | (27 | ) | 1,220 | (18 | ) | ||||||||||
Ginnie Mae | — | — | 53 | — | ||||||||||||
CMBS | 175 | (23 | ) | 144 | (13 | ) | ||||||||||
Subprime | 1,766 | (30 | ) | 3,669 | (356 | ) | ||||||||||
Option ARM | 419 | (22 | ) | 555 | (50 | ) | ||||||||||
Alt-A and other | 152 | (3 | ) | 219 | (11 | ) | ||||||||||
Obligations of states and political subdivisions | 4 | — | 8 | (1 | ) | |||||||||||
Manufactured housing | — | — | 14 | (1 | ) | |||||||||||
Total available-for-sale securities in a gross unrealized loss position | $ | 8,102 | $ | (131 | ) | $ | 7,312 | $ | (467 | ) | ||||||
December 31, 2015 | ||||||||||||||||
Less than 12 Months | 12 Months or Greater | |||||||||||||||
(in millions) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
Freddie Mac | $ | 8,171 | $ | (64 | ) | $ | 1,224 | $ | (35 | ) | ||||||
Fannie Mae | 2,402 | (24 | ) | 1,337 | (12 | ) | ||||||||||
Ginnie Mae | — | — | 55 | — | ||||||||||||
CMBS | 396 | (9 | ) | 160 | (2 | ) | ||||||||||
Subprime | 719 | (21 | ) | 3,923 | (329 | ) | ||||||||||
Option ARM | 349 | (8 | ) | 579 | (54 | ) | ||||||||||
Alt-A and other | 108 | (1 | ) | 265 | (15 | ) | ||||||||||
Obligations of states and political subdivisions | 18 | — | 8 | (1 | ) | |||||||||||
Manufactured housing | — | — | 14 | — | ||||||||||||
Total available-for-sale securities in a gross unrealized loss position | $ | 12,163 | $ | (127 | ) | $ | 7,565 | $ | (448 | ) |
Freddie Mac Form 10-Q | 82 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 5 |
March 31, 2016 | |||||||||||
(dollars in millions) | Subprime | Option ARM | Alt-A | ||||||||
UPB | $ | 16,462 | $ | 4,922 | $ | 2,376 | |||||
Weighted average collateral defaults | 42 | % | 26 | % | 22 | % | |||||
Weighted average collateral severities | 63 | % | 56 | % | 45 | % | |||||
Weighted average voluntary prepayment rates | 3 | % | 11 | % | 11 | % | |||||
Average security credit enhancements | 5 | % | (2 | )% | — | % |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Net impairment of available-for-sale securities recognized in earnings | |||||||
Intent to sell | $ | 52 | $ | 89 | |||
Other | 5 | 4 | |||||
Total net impairment of available-for-sale securities recognized in earnings | $ | 57 | $ | 93 |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Credit-related other-than-temporary impairments on available-for-sale securities recognized in earnings: | |||||||
Beginning balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings | $ | 5,306 | $ | 6,798 | |||
Additions: | |||||||
Amounts related to credit losses on securities for which an other-than-temporary impairment was not previously recognized | — | — | |||||
Amounts related to credit losses on securities for which an other-than-temporary impairment was previously recognized | 5 | 4 | |||||
Reductions: | |||||||
Amounts related to securities which were sold, written off, or matured | (55 | ) | (52 | ) | |||
Amounts related to securities which we intend to sell or it is more likely than not that we will be required to sell before recovery of amortized cost basis | (636 | ) | (380 | ) | |||
Amounts related to amortization resulting from significant increases in cash flows expected to be collected and/or due to the passage of time that are recognized over the remaining life of the security | (69 | ) | (89 | ) | |||
Ending balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings | $ | 4,551 | $ | 6,281 |
Freddie Mac Form 10-Q | 83 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 5 |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Gross realized gains | $ | 80 | $ | 367 | |||
Gross realized losses | (8 | ) | (5 | ) | |||
Net realized gains (losses) | $ | 72 | $ | 362 |
As of March 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
After One Year Through Five Years | After Five Years Through Ten Years | |||||||||||||||||||||||||||||||||||||||
Total Amortized Cost | Total Fair Value | One Year or Less | After Ten Years | |||||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 32,955 | $ | 34,275 | $ | 19 | $ | 19 | $ | 1 | $ | 1 | $ | 1,692 | $ | 1,684 | $ | 31,243 | $ | 32,571 | ||||||||||||||||||||
Fannie Mae | 6,616 | 6,847 | 3 | 3 | 11 | 12 | 72 | 81 | 6,530 | 6,751 | ||||||||||||||||||||||||||||||
Ginnie Mae | 143 | 155 | — | — | 1 | 1 | 21 | 24 | 121 | 130 | ||||||||||||||||||||||||||||||
CMBS | 9,618 | 10,067 | 140 | 142 | — | — | 17 | 17 | 9,461 | 9,908 | ||||||||||||||||||||||||||||||
Subprime | 11,814 | 11,947 | — | — | — | — | — | — | 11,814 | 11,947 | ||||||||||||||||||||||||||||||
Option ARM | 3,159 | 3,325 | — | — | — | — | — | — | 3,159 | 3,325 | ||||||||||||||||||||||||||||||
Alt-A and other | 2,489 | 2,940 | — | — | 13 | 13 | 6 | 7 | 2,470 | 2,920 | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 996 | 1,012 | 10 | 11 | 23 | 24 | 75 | 78 | 888 | 899 | ||||||||||||||||||||||||||||||
Manufactured housing | 474 | 556 | — | — | — | — | 7 | 9 | 467 | 547 | ||||||||||||||||||||||||||||||
Total available-for-sale securities | $ | 68,264 | $ | 71,124 | $ | 172 | $ | 175 | $ | 49 | $ | 51 | $ | 1,890 | $ | 1,900 | $ | 66,153 | $ | 68,998 |
Freddie Mac Form 10-Q | 84 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 6 |
Interest Expense for the | |||||||||||||||
Balance, Net | Three Months Ended March 31, | ||||||||||||||
(in millions) | March 31, 2016 | December 31, 2015 | 2016 | 2015 | |||||||||||
Debt securities of consolidated trusts held by third parties | $ | 1,568,183 | $ | 1,556,121 | $ | 11,791 | $ | 11,487 | |||||||
Other debt: | |||||||||||||||
Short-term debt | 85,128 | 113,569 | 93 | 38 | |||||||||||
Long-term debt | 302,307 | 300,579 | 1,504 | 1,563 | |||||||||||
Total other debt | 387,435 | 414,148 | 1,597 | 1,601 | |||||||||||
Total debt, net | $ | 1,955,618 | $ | 1,970,269 | $ | 13,388 | $ | 13,088 |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||
(dollars in million) | Contractual Maturity | UPB | Carrying Amount | Weighted Average Coupon(1) | Contractual Maturity | UPB | Carrying Amount | Weighted Average Coupon(1) | |||||||||||||||||
Single-family: | |||||||||||||||||||||||||
30-year or more, fixed-rate(2) | 2016 - 2053 | $ | 1,107,363 | $ | 1,141,139 | 3.85 | % | 2016 - 2053 | $ | 1,090,584 | $ | 1,123,290 | 3.88 | % | |||||||||||
20-year fixed-rate | 2016 - 2036 | 74,054 | 76,302 | 3.58 | 2016 - 2036 | 73,018 | 75,221 | 3.61 | |||||||||||||||||
15-year fixed-rate | 2016 - 2031 | 266,078 | 272,450 | 2.99 | 2016 - 2031 | 270,036 | 276,531 | 3.01 | |||||||||||||||||
Adjustable-rate | 2016 - 2047 | 60,613 | 61,973 | 2.62 | 2016 - 2047 | 62,496 | 63,899 | 2.61 | |||||||||||||||||
Interest-only | 2026 - 2041 | 13,482 | 13,542 | 3.20 | 2026 - 2041 | 14,252 | 14,317 | 3.16 | |||||||||||||||||
FHA/VA | 2016 - 2044 | 944 | 962 | 5.35 | 2016 - 2044 | 986 | 1,005 | 5.37 | |||||||||||||||||
Total single-family | 1,522,534 | 1,566,368 | 1,511,372 | 1,554,263 | |||||||||||||||||||||
Multifamily(2) | 2017 - 2028 | 1,690 | 1,815 | 4.91 | 2017 - 2028 | 1,717 | 1,858 | 4.90 | |||||||||||||||||
Total debt securities of consolidated trusts held by third parties | $ | 1,524,224 | $ | 1,568,183 | $ | 1,513,089 | $ | 1,556,121 |
(1) | The effective rate for debt securities of consolidated trusts held by third parties was 3.05% and 3.06% as of March 31, 2016 and December 31, 2015, respectively. |
Freddie Mac Form 10-Q | 85 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 6 |
(2) | Carrying amount includes securities recorded at fair value. |
March 31, 2016 | December 31, 2015 | |||||||||||||||||||||
(dollars in millions) | Par Value | Carrying Amount(1) | Weighted Average Effective Rate | Par Value | Carrying Amount(1) | Weighted Average Effective Rate | ||||||||||||||||
Other short-term debt: | ||||||||||||||||||||||
Discount notes and Reference Bills® | $ | 75,659 | $ | 75,583 | 0.42 | % | $ | 104,088 | $ | 104,024 | 0.28 | % | ||||||||||
Medium-term notes | 9,545 | 9,545 | 0.20 | 9,545 | 9,545 | 0.20 | ||||||||||||||||
Total other short-term debt | $ | 85,204 | $ | 85,128 | 0.40 | $ | 113,633 | $ | 113,569 | 0.28 | ||||||||||||
Other long-term debt: | ||||||||||||||||||||||
Original maturities on or before December 31, | ||||||||||||||||||||||
2016 | $ | 49,654 | $ | 49,675 | 2.17 | % | $ | 58,765 | $ | 58,821 | 2.13 | % | ||||||||||
2017 | 95,586 | 95,660 | 1.44 | 91,544 | 91,636 | 1.48 | ||||||||||||||||
2018 | 54,118 | 54,149 | 1.42 | 48,189 | 48,187 | 1.52 | ||||||||||||||||
2019 | 39,455 | 39,361 | 1.73 | 31,352 | 31,259 | 1.84 | ||||||||||||||||
2020 | 16,732 | 16,705 | 1.88 | 26,697 | 26,664 | 1.96 | ||||||||||||||||
Thereafter | 50,573 | 46,757 | 3.70 | 47,841 | 44,012 | 3.72 | ||||||||||||||||
Total other long-term debt(2) | 306,118 | 302,307 | 1.97 | 304,388 | 300,579 | 2.02 | ||||||||||||||||
Total other debt | $ | 391,322 | $ | 387,435 | $ | 418,021 | $ | 414,148 |
(1) | Represents par value, net of associated discounts or premiums, and hedge-related basis adjustments. Includes $6.8 billion and $7.0 billion at March 31, 2016 and December 31, 2015, respectively, of other long-term debt that represents the fair value of debt securities with the fair value option elected. |
(2) | Balance, net for other long-term debt includes callable debt of $107.9 billion and $106.9 billion at March 31, 2016 and December 31, 2015, respectively, which gives us the option to call or not call debt for a variety of reasons that include managing the composition of liabilities or economic reasons. |
Freddie Mac Form 10-Q | 86 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 7 |
• | Exchange-traded derivatives; |
• | Cleared derivatives; and |
• | OTC derivatives. |
• | LIBOR-based interest-rate swaps; |
• | LIBOR- and Treasury-based options (including swaptions); and |
• | LIBOR- and Treasury-based exchange-traded futures. |
Freddie Mac Form 10-Q | 87 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 7 |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||
Notional or Contractual Amount | Derivatives at Fair Value | Notional or Contractual Amount | Derivatives at Fair Value | ||||||||||||||||||||
(in millions) | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
Total derivative portfolio | |||||||||||||||||||||||
Interest-rate swaps: | |||||||||||||||||||||||
Receive-fixed | $ | 263,757 | $ | 7,282 | $ | (58 | ) | $ | 209,988 | $ | 4,591 | $ | (486 | ) | |||||||||
Pay-fixed | 219,907 | 12 | (19,991 | ) | 218,599 | 319 | (11,736 | ) | |||||||||||||||
Basis (floating to floating) | 1,125 | 1 | — | 1,125 | 1 | — | |||||||||||||||||
Total interest-rate swaps | 484,789 | 7,295 | (20,049 | ) | 429,712 | 4,911 | (12,222 | ) | |||||||||||||||
Option-based: | |||||||||||||||||||||||
Call swaptions | |||||||||||||||||||||||
Purchased | 59,230 | 5,288 | — | 57,925 | 3,450 | — | |||||||||||||||||
Written | 4,375 | — | (151 | ) | 4,375 | — | (100 | ) | |||||||||||||||
Put Swaptions | |||||||||||||||||||||||
Purchased | 29,080 | 424 | — | 24,050 | 580 | — | |||||||||||||||||
Written | 11,025 | — | (5 | ) | 11,025 | — | (28 | ) | |||||||||||||||
Other option-based derivatives(1) | 14,096 | 949 | — | 12,088 | 791 | — | |||||||||||||||||
Total option-based | 117,806 | 6,661 | (156 | ) | 109,463 | 4,821 | (128 | ) | |||||||||||||||
Futures | 69,739 | — | — | 56,332 | — | — | |||||||||||||||||
Commitments | 58,008 | 126 | (174 | ) | 29,114 | 34 | (28 | ) | |||||||||||||||
Credit derivatives | 3,743 | 22 | (7 | ) | 3,899 | 25 | (10 | ) | |||||||||||||||
Other | 3,013 | — | (23 | ) | 3,033 | — | (23 | ) | |||||||||||||||
Total derivatives not designated as hedging instruments | 737,098 | 14,104 | (20,409 | ) | 631,553 | 9,791 | (12,411 | ) | |||||||||||||||
Derivative interest receivable (payable) | 1,164 | (1,617 | ) | 814 | (1,393 | ) | |||||||||||||||||
Netting adjustments(2) | (14,454 | ) | 20,394 | (10,210 | ) | 12,550 | |||||||||||||||||
Total derivative portfolio, net | $ | 737,098 | $ | 814 | $ | (1,632 | ) | $ | 631,553 | $ | 395 | $ | (1,254 | ) |
(1) | Primarily consists of purchased interest-rate caps and floors. |
(2) | Represents counterparty netting and cash collateral netting. Cash collateral amounts were a net $5.9 billion and $2.3 billion at March 31, 2016 and December 31, 2015, respectively. |
Freddie Mac Form 10-Q | 88 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 7 |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Interest-rate swaps: | |||||||
Receive-fixed | $ | 2,944 | $ | 1,317 | |||
Pay-fixed | (8,635 | ) | (3,978 | ) | |||
Basis (floating to floating) | 1 | — | |||||
Total interest-rate swaps | (5,690 | ) | (2,661 | ) | |||
Option based: | |||||||
Call swaptions | |||||||
Purchased | 2,099 | 1,015 | |||||
Written | (71 | ) | (29 | ) | |||
Put swaptions | |||||||
Purchased | (278 | ) | (66 | ) | |||
Written | 38 | 15 | |||||
Other option-based derivatives(1) | 147 | 81 | |||||
Total option-based | 1,935 | 1,016 | |||||
Other: | |||||||
Futures | (181 | ) | (40 | ) | |||
Commitments | (126 | ) | (111 | ) | |||
Credit derivatives | (8 | ) | (37 | ) | |||
Other | (1 | ) | 1 | ||||
Total other | (316 | ) | (187 | ) | |||
Accrual of periodic cash settlements: | |||||||
Receive-fixed interest-rate swaps | 617 | 680 | |||||
Pay-fixed interest-rate swaps | (1,107 | ) | (1,251 | ) | |||
Total accrual of periodic cash settlements | (490 | ) | (571 | ) | |||
Total | $ | (4,561 | ) | $ | (2,403 | ) |
(1) | Primarily consists of purchased interest-rate caps and floors. |
Freddie Mac Form 10-Q | 89 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 8 |
Freddie Mac Form 10-Q | 90 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 8 |
March 31, 2016 | |||||||||||||||||||
(in millions) | Gross Amount Recognized | Amount Offset in the Consolidated Balance Sheets | Net Amount Presented in the Consolidated Balance Sheets(1) | Gross Amount Not Offset in the Consolidated Balance Sheets(2) | Net Amount | ||||||||||||||
Assets: | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
OTC interest-rate swaps and option-based derivatives | $ | 11,672 | $ | (11,031 | ) | $ | 641 | $ | (436 | ) | $ | 205 | |||||||
Cleared and exchange-traded derivatives | 3,448 | (3,423 | ) | 25 | — | 25 | |||||||||||||
Other | 148 | — | 148 | — | 148 | ||||||||||||||
Total derivatives | 15,268 | (14,454 | ) | 814 | (436 | ) | 378 | ||||||||||||
Securities purchased under agreements to resell | 40,098 | — | 40,098 | (40,098 | ) | — | |||||||||||||
Total | $ | 55,366 | $ | (14,454 | ) | $ | 40,912 | $ | (40,534 | ) | $ | 378 | |||||||
Liabilities: | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
OTC interest-rate swaps and option-based derivatives | $ | (11,819 | ) | $ | 10,594 | $ | (1,225 | ) | $ | 1,084 | $ | (141 | ) | ||||||
Cleared and exchange-traded derivatives | (10,003 | ) | 9,800 | (203 | ) | — | (203 | ) | |||||||||||
Other | (204 | ) | — | (204 | ) | — | (204 | ) | |||||||||||
Total | $ | (22,026 | ) | $ | 20,394 | $ | (1,632 | ) | $ | 1,084 | $ | (548 | ) | ||||||
December 31, 2015 | |||||||||||||||||||
(in millions) | Gross Amount Recognized | Amount Offset in the Consolidated Balance Sheets | Net Amount Presented in the Consolidated Balance Sheets(1) | Gross Amount Not Offset in the Consolidated Balance Sheets(2) | Net Amount | ||||||||||||||
Assets: | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
OTC interest-rate swaps and option-based derivatives | $ | 8,763 | $ | (8,433 | ) | $ | 330 | $ | (269 | ) | $ | 61 | |||||||
Cleared and exchange-traded derivatives | 1,783 | (1,777 | ) | 6 | — | 6 | |||||||||||||
Other | 59 | — | 59 | — | 59 | ||||||||||||||
Total derivatives | 10,605 | (10,210 | ) | 395 | (269 | ) | 126 | ||||||||||||
Securities purchased under agreements to resell | 63,644 | — | 63,644 | (63,644 | ) | — | |||||||||||||
Total | $ | 74,249 | $ | (10,210 | ) | $ | 64,039 | $ | (63,913 | ) | $ | 126 | |||||||
Liabilities: | |||||||||||||||||||
Derivatives: | |||||||||||||||||||
OTC interest-rate swaps and option-based derivatives | $ | (8,886 | ) | $ | 7,801 | $ | (1,085 | ) | $ | 948 | $ | (137 | ) | ||||||
Cleared and exchange-traded derivatives | (4,857 | ) | 4,749 | (108 | ) | — | (108 | ) | |||||||||||
Other | (61 | ) | — | (61 | ) | — | (61 | ) | |||||||||||
Total | $ | (13,804 | ) | $ | 12,550 | $ | (1,254 | ) | $ | 948 | $ | (306 | ) |
Freddie Mac Form 10-Q | 91 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 8 |
(1) | For derivatives, includes cash collateral posted or held in excess of exposure. |
(2) | Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability presented on the consolidated balance sheets. For cleared and exchange-traded derivatives, does not include non-cash collateral posted by us with an aggregate fair value of $2.6 billion and $2.8 billion as of March 31, 2016 and December 31, 2015, respectively. |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
Restricted cash and cash equivalents | $ | 349 | $ | 175 | ||||
Securities purchased under agreements to resell | 582 | 905 | ||||||
Investments in securities - Trading securities | 1,075 | 447 | ||||||
Total | $ | 2,006 | $ | 1,527 |
Freddie Mac Form 10-Q | 92 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 8 |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
Securities pledged with the ability for the secured party to repledge: | ||||||||
Debt securities of consolidated trusts held by third parties(1) | $ | 1,711 | $ | 1,293 | ||||
Available-for-sale securities | 175 | — | ||||||
Trading securities | 1,995 | 2,487 | ||||||
Total securities pledged | $ | 3,881 | $ | 3,780 |
(1) | Represents PCs held by us in our Investments segment mortgage investments portfolio and pledged as collateral which are recorded as a reduction to debt securities of consolidated trusts held by third parties on our consolidated balance sheets. |
Freddie Mac Form 10-Q | 93 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 9 |
Three Months Ended March 31, 2016 | ||||||||||||||||
(in millions) | AOCI Related to Available- For-Sale Securities | AOCI Related to Cash Flow Hedge Relationships | AOCI Related to Defined Benefit Plans | Total | ||||||||||||
Beginning balance | $ | 1,740 | $ | (621 | ) | $ | 34 | $ | 1,153 | |||||||
Other comprehensive income before reclassifications(1) | 129 | — | 2 | 131 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income | (10 | ) | 34 | (1 | ) | 23 | ||||||||||
Changes in AOCI by component | 119 | 34 | 1 | 154 | ||||||||||||
Ending balance | $ | 1,859 | $ | (587 | ) | $ | 35 | $ | 1,307 | |||||||
Three Months Ended March 31, 2015 | ||||||||||||||||
(in millions) | AOCI Related to Available- For-Sale Securities | AOCI Related to Cash Flow Hedge Relationships | AOCI Related to Defined Benefit Plans | Total | ||||||||||||
Beginning balance | $ | 2,546 | $ | (803 | ) | $ | (13 | ) | $ | 1,730 | ||||||
Other comprehensive income before reclassifications(1) | 331 | — | 6 | 337 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income | (174 | ) | 59 | — | (115 | ) | ||||||||||
Changes in AOCI by component | 157 | 59 | 6 | 222 | ||||||||||||
Ending balance | $ | 2,703 | $ | (744 | ) | $ | (7 | ) | $ | 1,952 |
(1) | For the three months ended March 31, 2016 and March 31, 2015, net of tax expense of $0.1 billion and $0.2 billion, respectively, for AOCI related to available-for-sale securities. |
Freddie Mac Form 10-Q | 94 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 9 |
Details about Accumulated Other Comprehensive Income Components | Three Months Ended March 31, | Affected Line Item in the Consolidated Statements of Comprehensive Income | ||||||||
(in millions) | 2016 | 2015 | ||||||||
AOCI related to available-for-sale securities | ||||||||||
$ | 72 | $ | 362 | Other gains (losses) on investment securities recognized in earnings | ||||||
(57 | ) | (93 | ) | Net impairment of available-for-sale securities recognized in earnings | ||||||
15 | 269 | Total before tax | ||||||||
(5 | ) | (95 | ) | Tax (expense) or benefit | ||||||
10 | 174 | Net of tax | ||||||||
AOCI related to cash flow hedge relationships | ||||||||||
— | — | Interest expense — Other debt | ||||||||
(51 | ) | (65 | ) | Expense related to derivatives | ||||||
(51 | ) | (65 | ) | Total before tax | ||||||
17 | 6 | Tax (expense) or benefit | ||||||||
(34 | ) | (59 | ) | Net of tax | ||||||
AOCI related to defined benefit plans | ||||||||||
1 | — | Salaries and employee benefits | ||||||||
— | — | Tax (expense) or benefit | ||||||||
1 | — | Net of tax | ||||||||
Total reclassifications in the period | $ | (23 | ) | $ | 115 | Net of tax |
Freddie Mac Form 10-Q | 95 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 9 |
• | Vested options to purchase common stock; and |
• | Vested restricted stock units that earn dividend equivalents at the same rate when and as declared on common stock. |
• | Weighted average shares related to stock options if the average market price during the period exceeds the exercise price; and |
• | The weighted-average of restricted stock units. |
Freddie Mac Form 10-Q | 96 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 9 |
Freddie Mac Form 10-Q | 97 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 10 |
Freddie Mac Form 10-Q | 98 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 11 |
Segment | Description | Financial Performance Measurement Basis |
Single-family Guarantee | The Single-family Guarantee segment reflects results from our purchase, securitization, and guarantee of single-family loans and the management of single-family mortgage credit risk. | Contribution to GAAP net income (loss) |
Multifamily | The Multifamily segment reflects results from our purchase, investment, securitization, and guarantee activities in multifamily loans and securities, and the management of multifamily mortgage credit risk. | Contribution to GAAP comprehensive income (loss) |
Investments | The Investments segment reflects results from managing the company's mortgage-related investments portfolio (excluding Multifamily segment investments and single-family seriously delinquent loans), treasury function, and interest-rate risk. | Contribution to GAAP comprehensive income (loss) |
All Other | The All Other category consists of material corporate-level activities that are infrequent in nature and based on decisions outside the control of the management of our reportable segments. | N/A |
• | The discontinuation of adjustments to net interest income and management and guarantee fee income which reflected the amortization of cash premiums and discounts on the consolidated Freddie Mac mortgage-related securities we purchased as investments, as well as the amortization of certain guarantee buy-up and buy-down fees and credit delivery fees on mortgage loans we purchased. The discontinuation of the adjustments resulted in an increase to net interest income for the Investments segment of $181 million and a decrease to management and guarantee fee income for the Single- |
Freddie Mac Form 10-Q | 99 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 11 |
• | When we securitize loans into PCs, the premiums and discounts on the loans were previously amortized in net interest income. This amortization will now be reflected in other non-interest income, consistent with the amortization of the premiums and discounts on the securitized PCs themselves. We reclassified $348 million of expense from net interest income into other non-interest income for the Investments segment for the three months ended March 31, 2015 to align with the current presentation. |
• | Impacts from the reclassification of mortgage loans from held-for-investment to held-for-sale will be reflected in aggregate as other non-interest income. We reclassified $692 million of benefit from (provision) benefit for credit losses and $360 million of expense from other non-interest expense into other non-interest income for the Single-family Guarantee segment for the three months ended March 31, 2015 to align with the current presentation. |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Segment Earnings (loss), net of taxes: | |||||||
Single-family Guarantee | $ | 810 | $ | 60 | |||
Multifamily | 147 | 284 | |||||
Investments | (1,311 | ) | 180 | ||||
All Other | — | — | |||||
Total Segment Earnings, net of taxes | (354 | ) | 524 | ||||
Net income | $ | (354 | ) | $ | 524 | ||
Comprehensive income (loss) of segments: | |||||||
Single-family Guarantee | $ | 811 | $ | 59 | |||
Multifamily | 150 | 264 | |||||
Investments | (1,161 | ) | 416 | ||||
All Other | — | 7 | |||||
Comprehensive income of segments | (200 | ) | 746 | ||||
Comprehensive income | $ | (200 | ) | $ | 746 |
Freddie Mac Form 10-Q | 100 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 11 |
Three Months Ended March 31, 2016 | |||||||||||||||||||||||||||
Total Segment Earnings (Loss) | Total per Consolidated Statements of Comprehensive Income | ||||||||||||||||||||||||||
Single-family Guarantee | Multifamily | Investments | All Other | Reclassifications | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Net interest income (loss) | $ | (118 | ) | $ | 252 | $ | 748 | $ | — | $ | 882 | $ | 2,523 | $ | 3,405 | ||||||||||||
Management and guarantee fee income(1) | 1,285 | 108 | — | — | 1,393 | (1,283 | ) | 110 | |||||||||||||||||||
Benefit for credit losses | 289 | 5 | — | — | 294 | 173 | 467 | ||||||||||||||||||||
Net interest income and management and guarantee income after benefit (provision) for credit losses | 1,456 | 365 | 748 | — | 2,569 | 1,413 | 3,982 | ||||||||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | — | — | 81 | — | 81 | (138 | ) | (57 | ) | ||||||||||||||||||
Derivative gains (losses) | (8 | ) | (787 | ) | (2,995 | ) | — | (3,790 | ) | (771 | ) | (4,561 | ) | ||||||||||||||
Gains (losses) on trading securities | — | 62 | 169 | — | 231 | — | 231 | ||||||||||||||||||||
Gains (losses) on mortgage loans | — | 497 | — | — | 497 | (19 | ) | 478 | |||||||||||||||||||
Other non-interest income (loss) | 195 | 178 | 189 | — | 562 | (186 | ) | 376 | |||||||||||||||||||
Administrative expenses | (295 | ) | (80 | ) | (73 | ) | — | (448 | ) | — | (448 | ) | |||||||||||||||
REO operations income (expense) | (84 | ) | — | — | — | (84 | ) | — | (84 | ) | |||||||||||||||||
Other non-interest expense | (100 | ) | (24 | ) | (2 | ) | — | (126 | ) | (299 | ) | (425 | ) | ||||||||||||||
Income tax (expense) benefit | (354 | ) | (64 | ) | 572 | — | 154 | — | 154 | ||||||||||||||||||
Net income (loss) | 810 | 147 | (1,311 | ) | — | (354 | ) | — | (354 | ) | |||||||||||||||||
Changes in unrealized gains (losses) related to available-for-sale securities | — | 3 | 116 | — | 119 | — | 119 | ||||||||||||||||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships | — | — | 34 | — | 34 | — | 34 | ||||||||||||||||||||
Changes in defined benefit plans | 1 | — | — | — | 1 | — | 1 | ||||||||||||||||||||
Total other comprehensive income (loss), net of taxes | 1 | 3 | 150 | — | 154 | — | 154 | ||||||||||||||||||||
Comprehensive income (loss) | $ | 811 | $ | 150 | $ | (1,161 | ) | $ | — | $ | (200 | ) | $ | — | $ | (200 | ) |
Freddie Mac Form 10-Q | 101 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 11 |
Three Months Ended March 31, 2015 | |||||||||||||||||||||||||||
Total Segment Earnings (Loss) | Total per Consolidated Statements of Comprehensive Income | ||||||||||||||||||||||||||
Single-family Guarantee | Multifamily | Investments | All Other | Reclassifications | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Net interest income (loss) | $ | (137 | ) | $ | 242 | $ | 1,155 | $ | — | $ | 1,260 | $ | 2,387 | $ | 3,647 | ||||||||||||
Management and guarantee fee income(1) | 1,257 | 73 | — | — | 1,330 | (1,242 | ) | 88 | |||||||||||||||||||
(Provision) benefit for credit losses | (380 | ) | 3 | — | — | (377 | ) | 876 | 499 | ||||||||||||||||||
Net interest income and management and guarantee income after benefit (provision) for credit losses | 740 | 318 | 1,155 | — | 2,213 | 2,021 | 4,234 | ||||||||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | — | (17 | ) | 118 | — | 101 | (194 | ) | (93 | ) | |||||||||||||||||
Derivative gains (losses) | (37 | ) | (199 | ) | (1,428 | ) | — | (1,664 | ) | (739 | ) | (2,403 | ) | ||||||||||||||
Gains (losses) on trading securities | — | 10 | 45 | — | 55 | — | 55 | ||||||||||||||||||||
Gains (losses) on mortgage loans | — | 353 | — | — | 353 | (553 | ) | (200 | ) | ||||||||||||||||||
Other non-interest income (loss) | (146 | ) | 44 | 461 | — | 359 | 47 | 406 | |||||||||||||||||||
Administrative expenses | (300 | ) | (70 | ) | (81 | ) | — | (451 | ) | — | (451 | ) | |||||||||||||||
REO operations income (expense) | (75 | ) | — | — | — | (75 | ) | — | (75 | ) | |||||||||||||||||
Other non-interest expense | (92 | ) | (11 | ) | — | — | (103 | ) | (582 | ) | (685 | ) | |||||||||||||||
Income tax (expense) benefit | (30 | ) | (144 | ) | (90 | ) | — | (264 | ) | — | (264 | ) | |||||||||||||||
Net income | 60 | 284 | 180 | — | 524 | — | 524 | ||||||||||||||||||||
Changes in unrealized gains (losses) related to available-for-sale securities | — | (20 | ) | 177 | — | 157 | — | 157 | |||||||||||||||||||
Changes in unrealized gains (losses) related to cash flow hedge relationships | — | — | 59 | — | 59 | — | 59 | ||||||||||||||||||||
Changes in defined benefit plans | (1 | ) | — | — | 7 | 6 | — | 6 | |||||||||||||||||||
Total other comprehensive income (loss), net of taxes | (1 | ) | (20 | ) | 236 | 7 | 222 | — | 222 | ||||||||||||||||||
Comprehensive income | $ | 59 | $ | 264 | $ | 416 | $ | 7 | $ | 746 | $ | — | $ | 746 |
(1) | Management and guarantee fee income is included in other income (loss) on our GAAP consolidated statements of comprehensive income. |
Freddie Mac Form 10-Q | 102 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
March 31, 2016 | December 31, 2015 | Percent of Credit Losses Three Months Ended | |||||||||||||||
Percentage of Portfolio | Serious Delinquency Rate | Percentage of Portfolio | Serious Delinquency Rate | March 31, 2016 | March 31, 2015 | ||||||||||||
Book of Business | |||||||||||||||||
Core single-family book | 68 | % | 0.19 | % | 66 | % | 0.21 | % | 6 | % | 2 | % | |||||
HARP and other relief refinance book | 17 | 0.69 | % | 18 | 0.72 | % | 15 | 5 | |||||||||
Legacy single-family book | 15 | 3.86 | % | 16 | 4.12 | % | 79 | 93 | |||||||||
Total | 100 | % | 1.20 | % | 100 | % | 1.32 | % | 100 | % | 100 | % | |||||
Region(1) | |||||||||||||||||
West | 30 | % | 0.73 | % | 29 | % | 0.79 | % | 12 | % | 12 | % | |||||
Northeast | 25 | 1.84 | % | 26 | 2.04 | % | 37 | 47 | |||||||||
North Central | 17 | 1.03 | % | 17 | 1.13 | % | 25 | 13 | |||||||||
Southeast | 16 | 1.41 | % | 16 | 1.57 | % | 21 | 25 | |||||||||
Southwest | 12 | 0.81 | % | 12 | 0.88 | % | 5 | 3 | |||||||||
Total | 100 | % | 1.20 | % | 100 | % | 1.32 | % | 100 | % | 100 | % | |||||
State(2) | |||||||||||||||||
Illinois | 5 | % | 1.48 | % | 5 | % | 1.62 | % | 10 | % | 7 | % | |||||
Florida | 5 | 1.90 | % | 5 | 2.16 | % | 10 | 20 | |||||||||
New York | 5 | 2.64 | % | 5 | 2.94 | % | 10 | 15 | |||||||||
New Jersey | 4 | 3.42 | % | 4 | 3.90 | % | 9 | 18 | |||||||||
California | 18 | 0.56 | % | 18 | 0.60 | % | 6 | 4 | |||||||||
All other | 63 | 1.03 | % | 63 | 1.12 | % | 55 | 36 | |||||||||
Total | 100 | % | 1.20 | % | 100 | % | 1.32 | % | 100 | % | 100 | % |
(1) | Region designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY). |
(2) | States presented based on those with the highest percentage of credit losses during the three months ended March 31, 2016. |
• | Purchased pursuant to a previously issued other mortgage-related guarantee; |
Freddie Mac Form 10-Q | 103 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
• | Part of our relief refinance initiative; or |
• | In another refinance loan initiative and the pre-existing loan (including Alt-A loans) was originated under less than full documentation standards. |
Percentage of Portfolio(1) | Serious Delinquency Rate(1) | |||||||||||
(Percentage of portfolio based on UPB) | March 31, 2016 | December 31, 2015 | March 31, 2016 | December 31, 2015 | ||||||||
Interest-only | 1 | % | 1 | % | 5.55 | % | 6.02 | % | ||||
Alt-A | 2 | % | 2 | % | 6.01 | % | 6.32 | % | ||||
Original LTV ratio greater than 90%(2) | 16 | % | 16 | % | 1.81 | % | 2.01 | % | ||||
Lower credit scores at origination (less than 620) | 2 | % | 2 | % | 6.17 | % | 6.67 | % |
(1) | Excludes loans underlying certain other securitization products for which data was not available. |
(2) | Includes HARP loans, which we purchase as part of our participation in the MHA Program. |
Freddie Mac Form 10-Q | 104 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
Three Months Ended | ||||||
March 31, 2016 | March 31, 2015 | |||||
Single-family Seller | ||||||
Wells Fargo Bank, N.A. | 13 | % | 10 | % | ||
Other top 10 sellers | 35 | 41 | ||||
Top 10 single-family sellers | 48 | % | 51 | % | ||
Multifamily Seller | ||||||
Berkadia Commercial Mortgage LLC | 26 | % | 6 | % | ||
CBRE Capital Markets, Inc. | 19 | 18 | ||||
Walker & Dunlop, LLC | 14 | 17 | ||||
Other top 10 sellers | 29 | 43 | ||||
Top 10 multifamily sellers | 88 | % | 84 | % |
March 31, 2016 | December 31, 2015 | |||||
Single-family Servicer | ||||||
Wells Fargo Bank, N.A. | 20 | % | 20 | % | ||
JP Morgan Chase Bank, N.A. | 10 | 10 | ||||
Other top 10 servicers | 34 | 35 | ||||
Top 10 single-family servicers | 64 | % | 65 | % | ||
Multifamily Servicer | ||||||
Berkadia Commercial Mortgage LLC | 14 | % | 14 | % | ||
Wells Fargo Bank, N.A. | 13 | 14 | ||||
CBRE Capital Markets, Inc. | 13 | 12 | ||||
Other top 10 servicers | 38 | 36 | ||||
Top 10 multifamily servicers | 78 | % | 76 | % |
Freddie Mac Form 10-Q | 105 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
Mortgage Insurance Coverage | ||||||||
Credit Rating(1) | March 31, 2016 | December 31, 2015 | ||||||
Radian Guaranty Inc. | BBB- | 22 | % | 22 | % | |||
United Guaranty Residential Insurance Company | BBB+ | 22 | 23 | |||||
Mortgage Guaranty Insurance Corporation | BBB- | 21 | 21 | |||||
Genworth Mortgage Insurance Corporation | BB+ | 14 | 14 | |||||
Total | 79 | % | 80 | % |
(1) | Ratings are for the corporate entity to which we have the greatest exposure. Coverage amounts may include coverage provided by consolidated affiliates and subsidiaries of the counterparty. Latest rating available as of March 31, 2016. Represents the lower of S&P and Moody’s credit ratings and outlooks stated in terms of the S&P equivalent. |
Freddie Mac Form 10-Q | 106 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
Freddie Mac Form 10-Q | 107 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 12 |
Freddie Mac Form 10-Q | 108 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
• | Level 1 - inputs to the valuation techniques are based on quoted prices in active markets for identical assets or liabilities. |
• | Level 2 - inputs to the valuation techniques are based on observable inputs other than quoted prices in active markets for identical assets or liabilities. |
• | Level 3 - one or more inputs to the valuation technique are unobservable and significant to the fair value measurement |
Freddie Mac Form 10-Q | 109 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
Freddie Mac Form 10-Q | 110 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
March 31, 2016 | |||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Netting Adjustment(1) | Total | ||||||||||||||
Assets: | |||||||||||||||||||
Investments in securities: | |||||||||||||||||||
Available-for-sale, at fair value: | |||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||
Freddie Mac | $ | — | $ | 29,906 | $ | 4,369 | $ | — | $ | 34,275 | |||||||||
Fannie Mae | — | 6,763 | 84 | — | 6,847 | ||||||||||||||
Ginnie Mae | — | 154 | 1 | — | 155 | ||||||||||||||
CMBS | — | 6,440 | 3,627 | — | 10,067 | ||||||||||||||
Subprime | — | — | 11,947 | — | 11,947 | ||||||||||||||
Option ARM | — | — | 3,325 | — | 3,325 | ||||||||||||||
Alt-A and other | — | — | 2,940 | — | 2,940 | ||||||||||||||
Obligations of states and political subdivisions | — | — | 1,012 | — | 1,012 | ||||||||||||||
Manufactured housing | — | — | 556 | — | 556 | ||||||||||||||
Total available-for-sale securities, at fair value | — | 43,263 | 27,861 | — | 71,124 | ||||||||||||||
Trading, at fair value: | |||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||
Freddie Mac | — | 14,648 | 123 | — | 14,771 | ||||||||||||||
Fannie Mae | — | 6,153 | 29 | — | 6,182 | ||||||||||||||
Ginnie Mae | — | 144 | — | — | 144 | ||||||||||||||
Other | — | 135 | 1 | — | 136 | ||||||||||||||
Total mortgage-related securities | — | 21,080 | 153 | — | 21,233 | ||||||||||||||
Non-mortgage-related securities | 15,238 | — | — | — | 15,238 | ||||||||||||||
Total trading securities, at fair value | 15,238 | 21,080 | 153 | — | 36,471 | ||||||||||||||
Total investments in securities | 15,238 | 64,343 | 28,014 | — | 107,595 | ||||||||||||||
Mortgage loans: | |||||||||||||||||||
Held-for-sale, at fair value | — | 22,415 | — | — | 22,415 | ||||||||||||||
Derivative assets, net: | |||||||||||||||||||
Interest-rate swaps | — | 7,295 | — | — | 7,295 | ||||||||||||||
Option-based derivatives | — | 6,661 | — | — | 6,661 | ||||||||||||||
Other | — | 125 | 23 | — | 148 | ||||||||||||||
Subtotal, before netting adjustments | — | 14,081 | 23 | — | 14,104 | ||||||||||||||
Netting adjustments(1) | — | — | — | (13,290 | ) | (13,290 | ) | ||||||||||||
Total derivative assets, net | — | 14,081 | 23 | (13,290 | ) | 814 | |||||||||||||
Other assets: | |||||||||||||||||||
Guarantee asset, at fair value | — | — | 1,894 | — | 1,894 | ||||||||||||||
Non-derivative held-for-sale purchase commitments, at fair value | — | 74 | — | — | 74 | ||||||||||||||
Total other assets | — | 74 | 1,894 | — | 1,968 | ||||||||||||||
Total assets carried at fair value on a recurring basis | $ | 15,238 | $ | 100,913 | $ | 29,931 | $ | (13,290 | ) | $ | 132,792 | ||||||||
Liabilities: | |||||||||||||||||||
Debt securities of consolidated trusts held by third parties, at fair value | $ | — | $ | 122 | $ | — | $ | — | $ | 122 | |||||||||
Other debt, at fair value | — | 6,793 | — | — | 6,793 | ||||||||||||||
Derivative liabilities, net: | |||||||||||||||||||
Interest-rate swaps | — | 20,049 | — | — | 20,049 | ||||||||||||||
Option-based derivatives | — | 156 | — | — | 156 | ||||||||||||||
Other | — | 170 | 34 | — | 204 | ||||||||||||||
Subtotal, before netting adjustments | — | 20,375 | 34 | — | 20,409 | ||||||||||||||
Netting adjustments(1) | — | — | — | (18,777 | ) | (18,777 | ) | ||||||||||||
Total derivative liabilities, net | — | 20,375 | 34 | (18,777 | ) | 1,632 | |||||||||||||
Other liabilities: | |||||||||||||||||||
Non-derivative held-for-sale purchase commitments, at fair value | — | 24 | — | — | 24 | ||||||||||||||
All other, at fair value | — | — | 8 | — | 8 | ||||||||||||||
Total other liabilities | — | 24 | 8 | — | 32 | ||||||||||||||
Total liabilities carried at fair value on a recurring basis | $ | — | $ | 27,314 | $ | 42 | $ | (18,777 | ) | $ | 8,579 |
Freddie Mac Form 10-Q | 111 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
December 31, 2015 | |||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Netting Adjustment(1) | Total | ||||||||||||||
Assets: | |||||||||||||||||||
Investments in securities: | |||||||||||||||||||
Available-for-sale, at fair value: | |||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||
Freddie Mac | $ | — | $ | 30,919 | $ | 2,608 | $ | — | $ | 33,527 | |||||||||
Fannie Mae | — | 7,172 | 90 | — | 7,262 | ||||||||||||||
Ginnie Mae | — | 161 | 1 | — | 162 | ||||||||||||||
CMBS | — | 8,918 | 3,530 | — | 12,448 | ||||||||||||||
Subprime | — | — | 12,802 | — | 12,802 | ||||||||||||||
Option ARM | — | — | 3,678 | — | 3,678 | ||||||||||||||
Alt-A and other | — | — | 3,278 | — | 3,278 | ||||||||||||||
Obligations of states and political subdivisions | — | — | 1,205 | — | 1,205 | ||||||||||||||
Manufactured housing | — | — | 575 | — | 575 | ||||||||||||||
Total available-for-sale securities, at fair value | — | 47,170 | 27,767 | — | 74,937 | ||||||||||||||
Trading, at fair value: | |||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||
Freddie Mac | — | 15,182 | 331 | — | 15,513 | ||||||||||||||
Fannie Mae | — | 6,397 | 41 | — | 6,438 | ||||||||||||||
Ginnie Mae | — | 30 | — | — | 30 | ||||||||||||||
Other | — | 144 | 2 | — | 146 | ||||||||||||||
Total mortgage-related securities | — | 21,753 | 374 | — | 22,127 | ||||||||||||||
Non-mortgage-related securities | 17,151 | — | — | — | 17,151 | ||||||||||||||
Total trading securities, at fair value | 17,151 | 21,753 | 374 | — | 39,278 | ||||||||||||||
Total investments in securities | 17,151 | 68,923 | 28,141 | — | 114,215 | ||||||||||||||
Mortgage loans: | |||||||||||||||||||
Held-for-sale, at fair value | — | 17,660 | — | — | 17,660 | ||||||||||||||
Derivative assets, net: | |||||||||||||||||||
Interest-rate swaps | — | 4,911 | — | — | 4,911 | ||||||||||||||
Option-based derivatives | — | 4,821 | — | — | 4,821 | ||||||||||||||
Other | — | 34 | 25 | — | 59 | ||||||||||||||
Subtotal, before netting adjustments | — | 9,766 | 25 | — | 9,791 | ||||||||||||||
Netting adjustments(1) | — | — | — | (9,396 | ) | (9,396 | ) | ||||||||||||
Total derivative assets, net | — | 9,766 | 25 | (9,396 | ) | 395 | |||||||||||||
Other assets: | |||||||||||||||||||
Guarantee asset, at fair value | — | — | 1,753 | — | 1,753 | ||||||||||||||
Total assets carried at fair value on a recurring basis | $ | 17,151 | $ | 96,349 | $ | 29,919 | $ | (9,396 | ) | $ | 134,023 | ||||||||
Liabilities: | |||||||||||||||||||
Debt securities of consolidated trusts held by third parties, at fair value | $ | — | $ | 139 | $ | — | $ | — | $ | 139 | |||||||||
Other debt, at fair value | — | 7,045 | — | — | 7,045 | ||||||||||||||
Derivative liabilities, net: | |||||||||||||||||||
Interest-rate swaps | — | 12,222 | — | — | 12,222 | ||||||||||||||
Option-based derivatives | — | 128 | — | — | 128 | ||||||||||||||
Other | — | 28 | 33 | — | 61 | ||||||||||||||
Subtotal, before netting adjustments | — | 12,378 | 33 | — | 12,411 | ||||||||||||||
Netting adjustments(1) | — | — | — | (11,157 | ) | (11,157 | ) | ||||||||||||
Total derivative liabilities, net | — | 12,378 | 33 | (11,157 | ) | 1,254 | |||||||||||||
Other liabilities: | |||||||||||||||||||
All other, at fair value | — | — | 10 | — | 10 | ||||||||||||||
Total liabilities carried at fair value on a recurring basis | $ | — | $ | 19,562 | $ | 43 | $ | (11,157 | ) | $ | 8,448 |
(1) | Represents counterparty netting, cash collateral netting and net derivative interest receivable or payable. The net cash collateral posted was $5.9 billion and $2.3 billion, respectively, at March 31, 2016 and December 31, 2015. The net interest receivable (payable) of derivative assets and derivative liabilities was $(0.5) billion and $(0.6) billion at March 31, 2016 and December 31, 2015, respectively, which was mainly related to interest rate swaps. |
Freddie Mac Form 10-Q | 112 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
March 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Assets measured at fair value on a non-recurring basis: | |||||||||||||||||||||||||||||||
Mortgage loans(1) | $ | — | $ | 770 | $ | 3,729 | $ | 4,499 | $ | — | $ | 1,130 | $ | 5,851 | $ | 6,981 | |||||||||||||||
REO, net(2) | — | — | 839 | 839 | — | — | 1,046 | 1,046 | |||||||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | — | $ | 770 | $ | 4,568 | $ | 5,338 | $ | — | $ | 1,130 | $ | 6,897 | $ | 8,027 |
(1) | Includes loans that are classified as held-for-investment and have been measured for impairment based on the fair value of the underlying collateral and held-for-sale loans where the fair value is below cost. Includes the correction of an error in previously reported amounts that is not material to the consolidated financial statements. |
(2) | Represents the fair value of foreclosed properties that were measured at fair value subsequent to their initial classification as REO, net. The carrying amount of REO, net was adjusted to fair value of $0.8 billion, less estimated costs to sell of $55 million (or approximately $0.8 billion) at March 31, 2016. The carrying amount of REO, net was adjusted to fair value of $1.0 billion, less estimated costs to sell of $68 million (or approximately $0.9 billion) at December 31, 2015. |
Freddie Mac Form 10-Q | 113 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
Three Months Ended March 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
Realized and unrealized gains (losses) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2016 | Included in earnings | Included in other comprehensive income | Total | Purchases | Issues | Sales | Settlements, net | Transfers into Level 3(1) | Transfers out of Level 3(1) | Balance, March 31, 2016 | Unrealized gains (losses) still held | ||||||||||||||||||||||||||||||||||||
in millions | |||||||||||||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale, at fair value: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 2,608 | $ | 14 | $ | 1 | $ | 15 | $ | 1,755 | $ | — | $ | (362 | ) | $ | (89 | ) | $ | 714 | $ | (272 | ) | $ | 4,369 | $ | — | ||||||||||||||||||||
Fannie Mae | 90 | — | — | — | — | — | — | (6 | ) | — | — | 84 | — | ||||||||||||||||||||||||||||||||||
Ginnie Mae | 1 | — | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||||
CMBS | 3,530 | — | 88 | 88 | 17 | — | — | (8 | ) | — | — | 3,627 | — | ||||||||||||||||||||||||||||||||||
Subprime | 12,802 | 26 | (171 | ) | (145 | ) | — | — | (208 | ) | (502 | ) | — | — | 11,947 | 18 | |||||||||||||||||||||||||||||||
Option ARM | 3,678 | 58 | (88 | ) | (30 | ) | — | — | (182 | ) | (141 | ) | — | — | 3,325 | 28 | |||||||||||||||||||||||||||||||
Alt-A and other | 3,278 | 34 | (39 | ) | (5 | ) | — | — | (185 | ) | (148 | ) | — | — | 2,940 | 28 | |||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 1,205 | — | (2 | ) | (2 | ) | — | — | — | (191 | ) | — | — | 1,012 | — | ||||||||||||||||||||||||||||||||
Manufactured housing | 575 | — | (4 | ) | (4 | ) | — | — | — | (15 | ) | — | — | 556 | — | ||||||||||||||||||||||||||||||||
Total available-for-sale mortgage-related securities | 27,767 | 132 | (215 | ) | (83 | ) | 1,772 | — | (937 | ) | (1,100 | ) | 714 | (272 | ) | 27,861 | 74 | ||||||||||||||||||||||||||||||
Trading, at fair value: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | 331 | (5 | ) | — | (5 | ) | 50 | 11 | (139 | ) | (2 | ) | 8 | (131 | ) | 123 | (2 | ) | |||||||||||||||||||||||||||||
Fannie Mae | 41 | 1 | — | 1 | — | — | (13 | ) | — | — | — | 29 | (1 | ) | |||||||||||||||||||||||||||||||||
Other | 2 | — | — | — | — | — | — | (1 | ) | — | — | 1 | — | ||||||||||||||||||||||||||||||||||
Total trading mortgage-related securities | 374 | (4 | ) | — | (4 | ) | 50 | 11 | (152 | ) | (3 | ) | 8 | (131 | ) | 153 | (3 | ) | |||||||||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Guarantee asset | 1,753 | 58 | — | 58 | 142 | 16 | — | (75 | ) | — | — | 1,894 | 58 | ||||||||||||||||||||||||||||||||||
Realized and unrealized (gains) losses | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2016 | Included in earnings(1) | Included in other comprehensive income(1) | Total | Purchases | Issues | Sales | Settlements, net | Transfers into Level 3(2) | Transfers out of Level 3(2) | Balance, March 31, 2016 | Unrealized (gains) losses still held | ||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Net derivatives(2) | $ | 8 | $ | 18 | $ | — | $ | 18 | $ | — | $ | — | $ | — | $ | (15 | ) | $ | — | $ | — | $ | 11 | $ | 3 | ||||||||||||||||||||||
Other liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
All other, at fair value | 10 | (2 | ) | — | (2 | ) | — | — | — | — | — | — | 8 | 8 |
Freddie Mac Form 10-Q | 114 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
Three Months Ended March 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
Realized and unrealized gains (losses) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2015 | Included in earnings | Included in other comprehensive income | Total | Purchases | Issues | Sales | Settlements, net | Transfers into Level 3 | Transfers out of Level 3 | Balance, March 31, 2015 | Unrealized gains (losses) still held | ||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale, at fair value: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 4,231 | $ | — | $ | (2 | ) | $ | (2 | ) | $ | 1,010 | $ | — | $ | (654 | ) | $ | 22 | $ | — | $ | (1,924 | ) | $ | 2,683 | $ | — | |||||||||||||||||||
Fannie Mae | 85 | — | 1 | 1 | — | — | — | (7 | ) | 43 | (9 | ) | 113 | — | |||||||||||||||||||||||||||||||||
Ginnie Mae | 4 | — | — | — | — | — | — | (1 | ) | — | — | 3 | — | ||||||||||||||||||||||||||||||||||
CMBS | 3,474 | (17 | ) | 101 | 84 | — | — | — | (6 | ) | — | — | 3,552 | (17 | ) | ||||||||||||||||||||||||||||||||
Subprime | 20,589 | 192 | 12 | 204 | — | — | (2,892 | ) | (102 | ) | — | — | 17,799 | (65 | ) | ||||||||||||||||||||||||||||||||
Option ARM | 5,649 | 11 | (29 | ) | (18 | ) | — | — | (168 | ) | (187 | ) | — | — | 5,276 | (11 | ) | ||||||||||||||||||||||||||||||
Alt-A and other | 5,027 | 6 | (11 | ) | (5 | ) | — | — | (106 | ) | (143 | ) | 15 | — | 4,788 | (1 | ) | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 2,198 | — | (5 | ) | (5 | ) | — | — | — | (366 | ) | — | — | 1,827 | — | ||||||||||||||||||||||||||||||||
Manufactured housing | 638 | — | (1 | ) | (1 | ) | — | — | (4 | ) | (14 | ) | — | — | 619 | — | |||||||||||||||||||||||||||||||
Total available-for-sale mortgage-related securities | 41,895 | 192 | 66 | 258 | 1,010 | — | (3,824 | ) | (804 | ) | 58 | (1,933 | ) | 36,660 | (94 | ) | |||||||||||||||||||||||||||||||
Trading, at fair value: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-related securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | 927 | 2 | — | 2 | 44 | 128 | (5 | ) | (10 | ) | 34 | (609 | ) | 511 | 2 | ||||||||||||||||||||||||||||||||
Fannie Mae | 232 | 2 | — | 2 | — | — | (2 | ) | (2 | ) | 6 | (97 | ) | 139 | 2 | ||||||||||||||||||||||||||||||||
Ginnie Mae | 1 | — | — | — | — | — | (1 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other | 4 | 4 | — | 4 | — | — | (4 | ) | — | — | — | 4 | — | ||||||||||||||||||||||||||||||||||
Total trading mortgage-related securities | 1,164 | 8 | — | 8 | 44 | 128 | (12 | ) | (12 | ) | 40 | (706 | ) | 654 | 4 | ||||||||||||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Guarantee asset | 1,626 | (15 | ) | — | (15 | ) | — | 93 | — | (135 | ) | — | — | 1,569 | (15 | ) | |||||||||||||||||||||||||||||||
All other, at fair value | 5 | 1 | — | 1 | — | — | — | — | — | — | 6 | 1 | |||||||||||||||||||||||||||||||||||
Total other assets | 1,631 | (14 | ) | — | (14 | ) | — | 93 | — | (135 | ) | — | — | 1,575 | (14 | ) | |||||||||||||||||||||||||||||||
Realized and unrealized (gains) losses | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2015 | Included in earnings(1) | Included in other comprehensive income(1) | Total | Purchases | Issues | Sales | Settlements, net | Transfers into Level 3 | Transfers out of Level 3 | Balance, March 31, 2015 | Unrealized (gains) losses still held | ||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Net derivatives(2) | $ | 10 | $ | 25 | $ | — | $ | 25 | $ | — | $ | — | $ | — | $ | (10 | ) | $ | — | $ | — | $ | 25 | $ | 15 |
(1) | Transfers out of Level 3 during the three months ended March 31, 2016 consisted primarily of certain mortgage-related securities due to an increased volume and level of activity in the market and availability of price quotes from dealers and third-party pricing services. Freddie Mac securities are generally classified as Level 3 at issuance and generally are classified as Level 2 when they begin trading. Transfers into Level 3 during the three months ended March 31, 2016 consisted primarily of certain mortgage-related securities due to a lack of market activity and relevant price quotes from dealers and third-party pricing services. |
(2) | Amounts are prior to counterparty netting, cash collateral netting, net trade/settle receivable or payable and net derivative interest receivable or payable. |
Freddie Mac Form 10-Q | 115 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
March 31, 2016 | |||||||||||||
Level 3 Fair Value | Predominant Valuation Technique(s) | Unobservable Inputs | |||||||||||
(dollars in millions) | Type | Range | Weighted Average | ||||||||||
Recurring fair value measurements | |||||||||||||
Assets | |||||||||||||
Investments in securities | |||||||||||||
Available-for-sale, at fair value | |||||||||||||
Mortgage-related securities | |||||||||||||
Freddie Mac | $ | 3,699 | Discounted cash flows | OAS | (38) - 491 bps | 97 bps | |||||||
670 | Other | ||||||||||||
Total Freddie Mac | 4,369 | ||||||||||||
Fannie Mae | 36 | Median of external sources | |||||||||||
33 | Single external source | ||||||||||||
15 | Other | ||||||||||||
Total Fannie Mae | 84 | ||||||||||||
Ginnie Mae | 1 | Discounted cash flows | |||||||||||
Total Ginnie Mae | 1 | ||||||||||||
CMBS | 3,610 | Risk Metrics | Effective duration | 2.90 - 10.77 years | 9.32 years | ||||||||
17 | Other | ||||||||||||
Total CMBS | 3,627 | ||||||||||||
Subprime, option ARM, and Alt-A: | |||||||||||||
Subprime | 11,406 | Median of external sources | External pricing sources | $70.2 - $74.2 | $ | 72.1 | |||||||
541 | Other | ||||||||||||
Total subprime | 11,947 | ||||||||||||
Option ARM | 3,093 | Median of external sources | External pricing sources | $64.6 - $69.5 | $ | 67.3 | |||||||
232 | Other | ||||||||||||
Total option ARM | 3,325 | ||||||||||||
Alt-A and other | 2,153 | Median of external sources | External pricing sources | $84.9 - $88.2 | $ | 86.7 | |||||||
477 | Single external source | External pricing source | $83.8 - $83.8 | $ | 83.8 | ||||||||
310 | Other | ||||||||||||
Total Alt-A and other | 2,940 | ||||||||||||
Obligations of states and political subdivisions | 917 | Median of external sources | External pricing sources | $101.5 - $101.9 | $ | 101.7 | |||||||
95 | Other | ||||||||||||
Total obligations of states and political subdivisions | 1,012 | ||||||||||||
Manufactured housing | 485 | Median of external sources | External pricing sources | $90.0 - $93.3 | $ | 91.5 | |||||||
71 | Other | ||||||||||||
Total manufactured housing | 556 | ||||||||||||
Total available-for-sale mortgage-related securities | 27,861 | ||||||||||||
Trading, at fair value | |||||||||||||
Mortgage-related securities | |||||||||||||
Freddie Mac | 95 | Discounted cash flows | |||||||||||
11 | Risk Metrics | ||||||||||||
17 | Other | ||||||||||||
Total Freddie Mac | 123 | ||||||||||||
Fannie Mae | 29 | Discounted cash flows | |||||||||||
Total Fannie Mae | 29 | ||||||||||||
Ginnie Mae | — | ||||||||||||
Other | 1 | Discounted cash flows | |||||||||||
Total other | 1 | ||||||||||||
Total trading mortgage-related securities | 153 | ||||||||||||
Total investments in securities | $ | 28,014 | |||||||||||
Other assets: | |||||||||||||
Guarantee asset, at fair value | $ | 1,763 | Discounted cash flows | OAS | 17 - 198 bps | 58 bps | |||||||
131 | Other | ||||||||||||
Total guarantee asset, at fair value | 1,894 | ||||||||||||
Liabilities | |||||||||||||
Net derivatives | 11 | Other | |||||||||||
Total net derivatives | 11 | ||||||||||||
Other liabilities | |||||||||||||
All other, at fair value | 8 | Other | |||||||||||
Total all other, at fair value | 8 |
Freddie Mac Form 10-Q | 116 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
December 31, 2015 | |||||||||||||
Level 3 Fair Value | Predominant Valuation Technique(s) | Unobservable Inputs | |||||||||||
(dollars in millions) | Type | Range | Weighted Average | ||||||||||
Recurring fair value measurements | |||||||||||||
Assets | |||||||||||||
Investments in securities | |||||||||||||
Available-for-sale, at fair value | |||||||||||||
Mortgage-related securities | |||||||||||||
Freddie Mac | $ | 2,145 | Discounted cash flows | OAS | (46) - 503 bps | 86 bps | |||||||
463 | Other | ||||||||||||
Total Freddie Mac | 2,608 | ||||||||||||
Fannie Mae | 37 | Median of external sources | |||||||||||
36 | Single external source | ||||||||||||
17 | Other | ||||||||||||
Total Fannie Mae | 90 | ||||||||||||
Ginnie Mae | 1 | Discounted cash flows | |||||||||||
Total Ginnie Mae | 1 | ||||||||||||
CMBS | 3,530 | Risk Metrics | Effective duration | 3.15 - 11.02 years | 9.57 years | ||||||||
Total CMBS | 3,530 | ||||||||||||
Subprime, option ARM, and Alt-A: | |||||||||||||
Subprime | 11,652 | Median of external sources | External pricing sources | $73.2 - $77.3 | $ | 75.0 | |||||||
1,150 | Other | ||||||||||||
Total subprime | 12,802 | ||||||||||||
Option ARM | 3,190 | Median of external sources | External pricing sources | $67.8 - $72.4 | $ | 69.9 | |||||||
488 | Other | ||||||||||||
Total option ARM | 3,678 | ||||||||||||
Alt-A and other | 2,601 | Median of external sources | External pricing sources | $85.8 - $89.3 | $ | 87.6 | |||||||
506 | Single external source | External pricing source | $84.7 - $84.7 | $ | 84.7 | ||||||||
171 | Other | ||||||||||||
Total Alt-A and other | 3,278 | ||||||||||||
Obligations of states and political subdivisions | 1,099 | Median of external sources | External pricing sources | $101.4 - $101.8 | $ | 101.6 | |||||||
106 | Other | ||||||||||||
Total obligations of states and political subdivisions | 1,205 | ||||||||||||
Manufactured housing | 505 | Median of external sources | External pricing sources | $90.4 - $93.7 | $ | 92.1 | |||||||
70 | Other | ||||||||||||
Total manufactured housing | 575 | ||||||||||||
Total available-for-sale mortgage-related securities | 27,767 | ||||||||||||
Trading, at fair value | |||||||||||||
Mortgage-related securities | |||||||||||||
Freddie Mac | 249 | Discounted cash flows | OAS | (1,315) - 1,959 bps | 129 bps | ||||||||
19 | Risk Metrics | ||||||||||||
63 | Other | ||||||||||||
Total Freddie Mac | 331 | ||||||||||||
Fannie Mae | 41 | Discounted cash flows | |||||||||||
Total Fannie Mae | 41 | ||||||||||||
Ginnie Mae | — | ||||||||||||
Other | 1 | Median of external sources | |||||||||||
1 | Discounted cash flows | ||||||||||||
Total other | 2 | ||||||||||||
Total trading mortgage-related securities | 374 | ||||||||||||
Total investments in securities | $ | 28,141 | |||||||||||
Other assets: | |||||||||||||
Guarantee asset, at fair value | $ | 1,623 | Discounted cash flows | OAS | 17 - 198 bps | 57 bps | |||||||
130 | Other | ||||||||||||
Total guarantee asset, at fair value | 1,753 | ||||||||||||
Liabilities | |||||||||||||
Net derivatives | 8 | Other | |||||||||||
Total net derivatives | 8 | ||||||||||||
Other liabilities | |||||||||||||
All other, at fair value | 10 | Other | |||||||||||
Total all other, at fair value | 10 |
Freddie Mac Form 10-Q | 117 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
March 31, 2016 | |||||||||||
Level 3 Fair Value | Predominant Valuation Technique(s) | Unobservable Inputs | |||||||||
(dollars in millions) | Type | Range | Weighted Average | ||||||||
Non-recurring fair value measurements | |||||||||||
Mortgage loans | $ | 3,729 | |||||||||
Internal model | Historical sales proceeds | $3,000 - $788,699 | $191,075 | ||||||||
Internal model | Housing sales index | 41 - 470 bps | 91 bps | ||||||||
Third-party appraisal | Property value | $1 million - $30 million | $28 million | ||||||||
Income capitalization(1) | Capitalization rates | 6% - 9% | 6% | ||||||||
Median of external sources | External pricing sources | $38.1 - $94.1 | $69.4 | ||||||||
REO, net | $ | 839 | |||||||||
Internal model | Historical sales proceeds | $3,000 - $677,440 | $154,037 | ||||||||
Internal model | Housing sales index | 43 - 470 bps | 88 bps | ||||||||
Other | |||||||||||
December 31, 2015 | |||||||||||
Level 3 Fair Value | Predominant Valuation Technique(s) | Unobservable Inputs | |||||||||
(dollars in millions) | Type | Range | Weighted Average | ||||||||
Non-recurring fair value measurements | |||||||||||
Mortgage loans | $ | 5,851 | |||||||||
Internal model | Historical sales proceeds | $3,000 - $788,699 | $191,957 | ||||||||
Internal model | Housing sales index | 44 - 428 bps | 90 bps | ||||||||
Third-party appraisal | Property value | $1 million - $30 million | $28 million | ||||||||
Income capitalization(1) | Capitalization rates | 6%- 9% | 7% | ||||||||
Median of external sources | External pricing sources | $39.0 - $94.6 | $70.0 | ||||||||
REO, net | $ | 1,046 | |||||||||
Internal model | Historical sales proceeds | $3,000 - $581,751 | $155,885 | ||||||||
Internal model | Housing sales index | 44 - 428 bps | 87 bps | ||||||||
Other |
(1) | The predominant valuation technique used for multifamily loans. Certain loans in this population are valued using other techniques, and the capitalization rate for those is not represented in the “Range” or “Weighted Average” above. |
Freddie Mac Form 10-Q | 118 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
March 31, 2016 | |||||||||||||||||||||||
Fair Value | |||||||||||||||||||||||
(in millions) | GAAP Carrying Amount | Level 1 | Level 2 | Level 3 | Netting Adjustments | Total | |||||||||||||||||
Financial Assets | |||||||||||||||||||||||
Cash and cash equivalents | $ | 6,158 | $ | 6,158 | $ | — | $ | — | $ | — | $ | 6,158 | |||||||||||
Restricted cash and cash equivalents | 16,671 | 16,671 | — | — | — | 16,671 | |||||||||||||||||
Securities purchased under agreements to resell | 40,098 | — | 40,098 | — | — | 40,098 | |||||||||||||||||
Investments in securities: | |||||||||||||||||||||||
Available-for-sale, at fair value | 71,124 | — | 43,263 | 27,861 | — | 71,124 | |||||||||||||||||
Trading, at fair value | 36,471 | 15,238 | 21,080 | 153 | — | 36,471 | |||||||||||||||||
Total investments in securities | 107,595 | 15,238 | 64,343 | 28,014 | — | 107,595 | |||||||||||||||||
Mortgage loans: | |||||||||||||||||||||||
Loans held by consolidated trusts | 1,635,242 | — | 1,517,455 | 155,576 | — | 1,673,031 | |||||||||||||||||
Loans held by Freddie Mac | 127,391 | — | 37,180 | 91,380 | — | 128,560 | |||||||||||||||||
Total mortgage loans | 1,762,633 | — | 1,554,635 | 246,956 | — | 1,801,591 | |||||||||||||||||
Derivative assets, net | 814 | — | 14,081 | 23 | (13,290 | ) | 814 | ||||||||||||||||
Guarantee asset | 1,894 | — | — | 2,104 | — | 2,104 | |||||||||||||||||
Non-derivative purchase commitments, at fair value | 74 | — | 106 | 8 | — | 114 | |||||||||||||||||
Advances to lenders | 680 | — | — | 680 | — | 680 | |||||||||||||||||
Total financial assets | $ | 1,936,617 | $ | 38,067 | $ | 1,673,263 | $ | 277,785 | $ | (13,290 | ) | $ | 1,975,825 | ||||||||||
Financial Liabilities | |||||||||||||||||||||||
Debt, net: | |||||||||||||||||||||||
Debt securities of consolidated trusts held by third parties | $ | 1,568,183 | $ | — | $ | 1,656,668 | $ | 3,516 | $ | — | $ | 1,660,184 | |||||||||||
Other debt | 387,435 | — | 388,906 | 5,950 | — | 394,856 | |||||||||||||||||
Total debt, net | 1,955,618 | — | 2,045,574 | 9,466 | — | 2,055,040 | |||||||||||||||||
Derivative liabilities, net | 1,632 | — | 20,375 | 34 | (18,777 | ) | 1,632 | ||||||||||||||||
Guarantee obligation | 1,808 | — | — | 3,303 | — | 3,303 | |||||||||||||||||
Non-derivative purchase commitments, at fair value | 24 | — | 29 | 28 | — | 57 | |||||||||||||||||
Total financial liabilities | $ | 1,959,082 | $ | — | $ | 2,065,978 | $ | 12,831 | $ | (18,777 | ) | $ | 2,060,032 |
Freddie Mac Form 10-Q | 119 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
December 31, 2015 | |||||||||||||||||||||||
Fair Value | |||||||||||||||||||||||
(in millions) | GAAP Carrying Amount | Level 1 | Level 2 | Level 3 | Netting Adjustments | Total | |||||||||||||||||
Financial Assets | |||||||||||||||||||||||
Cash and cash equivalents | $ | 5,595 | $ | 5,595 | $ | — | $ | — | $ | — | $ | 5,595 | |||||||||||
Restricted cash and cash equivalents | 14,533 | 14,533 | — | — | — | 14,533 | |||||||||||||||||
Securities purchased under agreements to resell | 63,644 | — | 63,644 | — | — | 63,644 | |||||||||||||||||
Investments in securities: | |||||||||||||||||||||||
Available-for-sale, at fair value | 74,937 | — | 47,170 | 27,767 | — | 74,937 | |||||||||||||||||
Trading, at fair value | 39,278 | 17,151 | 21,753 | 374 | — | 39,278 | |||||||||||||||||
Total investments in securities | 114,215 | 17,151 | 68,923 | 28,141 | — | 114,215 | |||||||||||||||||
Mortgage loans: | |||||||||||||||||||||||
Loans held by consolidated trusts | 1,625,184 | — | 1,477,251 | 162,947 | — | 1,640,198 | |||||||||||||||||
Loans held by Freddie Mac | 129,009 | — | 31,831 | 97,133 | — | 128,964 | |||||||||||||||||
Total mortgage loans | 1,754,193 | — | 1,509,082 | 260,080 | — | 1,769,162 | |||||||||||||||||
Derivative assets, net | 395 | — | 9,766 | 25 | (9,396 | ) | 395 | ||||||||||||||||
Guarantee asset | 1,753 | — | — | 1,958 | — | 1,958 | |||||||||||||||||
Advances to lenders | 910 | — | 910 | — | — | 910 | |||||||||||||||||
Total financial assets | $ | 1,955,238 | $ | 37,279 | $ | 1,652,325 | $ | 290,204 | $ | (9,396 | ) | $ | 1,970,412 | ||||||||||
Financial Liabilities | |||||||||||||||||||||||
Debt, net: | |||||||||||||||||||||||
Debt securities of consolidated trusts held by third parties | $ | 1,556,121 | $ | — | $ | 1,624,019 | $ | 805 | $ | — | $ | 1,624,824 | |||||||||||
Other debt | 414,306 | — | 412,752 | 6,586 | — | 419,338 | |||||||||||||||||
Total debt, net | 1,970,427 | — | 2,036,771 | 7,391 | — | 2,044,162 | |||||||||||||||||
Derivative liabilities, net | 1,254 | — | 12,378 | 33 | (11,157 | ) | 1,254 | ||||||||||||||||
Guarantee obligation | 1,729 | — | — | 3,129 | — | 3,129 | |||||||||||||||||
Total financial liabilities | $ | 1,973,410 | $ | — | $ | 2,049,149 | $ | 10,553 | $ | (11,157 | ) | $ | 2,048,545 |
March 31, 2016 | December 31, 2015 | |||||||||||||||
(in millions) | Multifamily Held-For-Sale Loans | Other Debt - Long Term | Multifamily Held-For-Sale Loans | Other Debt - Long Term | ||||||||||||
Fair value | $ | 22,415 | $ | 6,793 | $ | 17,660 | $ | 7,045 | ||||||||
Unpaid principal balance | 21,995 | 6,842 | 17,673 | 7,093 | ||||||||||||
Difference | $ | 420 | $ | (49 | ) | $ | (13 | ) | $ | (48 | ) |
Freddie Mac Form 10-Q | 120 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 13 |
Freddie Mac Form 10-Q | 121 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 14 |
Freddie Mac Form 10-Q | 122 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 14 |
Freddie Mac Form 10-Q | 123 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 14 |
Freddie Mac Form 10-Q | 124 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 14 |
Freddie Mac Form 10-Q | 125 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 14 |
Freddie Mac Form 10-Q | 126 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 15 |
(in millions) | March 31, 2016 | December 31, 2015 | ||||||
GAAP net worth | $ | 1,000 | $ | 2,940 | ||||
Core capital (deficit)(1)(2) | $ | (72,643 | ) | $ | (70,549 | ) | ||
Less: Minimum capital requirement(1) | 19,057 | 19,687 | ||||||
Minimum capital surplus (deficit)(1) | $ | (91,700 | ) | $ | (90,236 | ) |
(1) | Core capital and minimum capital figures are estimates and represent amounts submitted to FHFA. FHFA is the authoritative source for our regulatory capital. |
(2) | Core capital excludes certain components of GAAP total equity (i.e., AOCI and the liquidation preference of the senior preferred stock) as these items do not meet the statutory definition of core capital. |
Freddie Mac Form 10-Q | 127 |
Financial Statements | Notes to the Condensed Consolidated Financial Statements | Note 16 |
Three Months Ended March 31, | |||||||
(in millions) | 2016 | 2015 | |||||
Other income (loss): | |||||||
Gains (losses) on loans | $ | 478 | $ | (200 | ) | ||
Gains (losses) on debt recorded at fair value | 13 | (189 | ) | ||||
Other | 456 | 400 | |||||
Total other income (loss) | $ | 947 | $ | 11 | |||
Other expense: | |||||||
Property tax and insurance expense on held-for-sale loans | $ | (27 | ) | $ | (360 | ) | |
Other expense | (126 | ) | (103 | ) | |||
Total other expense | $ | (153 | ) | $ | (463 | ) |
(in millions) | March 31, 2016 | December 31, 2015 | |||||
Other assets: | |||||||
Accounts and other receivables(1) | $ | 4,960 | $ | 3,625 | |||
Current income tax receivable | 753 | 26 | |||||
Guarantee asset | 1,894 | 1,753 | |||||
Advances to lenders | 680 | 910 | |||||
Fixed assets | 526 | 502 | |||||
All other | 533 | 497 | |||||
Total other assets | $ | 9,346 | $ | 7,313 | |||
Other liabilities: | |||||||
Servicer liabilities | $ | 1,071 | $ | 1,191 | |||
Guarantee obligation | 1,808 | 1,729 | |||||
Accounts payable and accrued expenses | 1,159 | 1,286 | |||||
All other | 765 | 1,040 | |||||
Total other liabilities | $ | 4,803 | $ | 5,246 |
(1) | Primarily consists of servicer receivables and other non-interest receivables. |
Freddie Mac Form 10-Q | 128 |
Other Information |
Freddie Mac Form 10-Q | 129 |
Other Information |
Freddie Mac Form 10-Q | 130 |
Other Information |
Freddie Mac Form 10-Q | 131 |
Controls and Procedures |
Freddie Mac Form 10-Q | 132 |
Controls and Procedures |
• | FHFA has established the Division of Conservatorship, which is intended to facilitate operation of the company with the oversight of the Conservator. |
• | We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also provide drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release. |
• | FHFA personnel, including senior officials, review our SEC filings prior to filing, including this Form 10-Q, and engage in discussions with us regarding issues associated with the information contained in those filings. Prior to filing this Form 10-Q, FHFA provided us with a written acknowledgment that it had reviewed the Form 10-Q, was not aware of any material misstatements or omissions in the Form 10-Q, and had no objection to our filing the Form 10-Q. |
• | The Director of FHFA is in frequent communication with our Chief Executive Officer, typically meeting (in person or by phone) on at least a bi-weekly basis. |
• | FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and capital markets management, external communications, and legal matters. |
• | Senior officials within FHFA’s accounting group meet frequently with our senior financial executives regarding our accounting policies, practices, and procedures. |
Freddie Mac Form 10-Q | 133 |
Signatures |
Federal Home Loan Mortgage Corporation | ||
By: | /s/ Donald H. Layton | |
Donald H. Layton | ||
Chief Executive Officer |
By: | /s/ James G. Mackey | |
James G. Mackey | ||
Executive Vice President — Chief Financial Officer | ||
(Principal Financial Officer) |
Freddie Mac Form 10-Q | 134 |
Index |
Item Number | Page(s) | |
PART I | FINANCIAL INFORMATION | |
Item 1. | Financial Statements | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II | OTHER INFORMATION | |
Item 1. | Legal Proceedings | |
Item 1A | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 6. | Exhibits | |
SIGNATURES | ||
EXHIBIT INDEX |
Freddie Mac Form 10-Q | 135 |
Exhibit Index |
Exhibit No. | Description* | |
4.1 | Federal Home Loan Mortgage Corporation Global Debt Facility Agreement, dated February 18, 2016 | |
12.1 | Statement re: computation of ratio of earnings to fixed charges and computation of ratio of earnings to combined fixed charges and preferred stock dividends | |
31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a) | |
31.2 | Certification of Executive Vice President —Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a) | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
32.2 | Certification of Executive Vice President —Chief Financial Officer pursuant to 18 U.S.C. Section 1350 |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation | |
101.LAB | XBRL Taxonomy Extension Labels | |
101.PRE | XBRL Taxonomy Extension Presentation | |
101.DEF | XBRL Taxonomy Extension Definition |
* | The SEC file numbers for the Registrant’s Registration Statement on Form 10, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K are 000-53330 and 001-34139. |
Freddie Mac Form 10-Q | E-1 |