UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 15, 2018 Federal Home Loan Mortgage Corporation (Exactnameofregistrantasspecifiedinitscharter) Freddie Mac Federally chartered corporation (Stateorotherjurisdictionof incorporation) 001-34139 52-0904874 (Commission FileNumber) (IRSEmployer IdentificationNo.) 8200 Jones Branch Drive McLean, Virginia 22102-3110 (Addressofprincipalexecutiveoffices) (ZipCode) Registrant s telephone number, including area code: (703) 903-2000 Not applicable (Formernameorformeraddress,ifchangedsincelastreport) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( seegeneral Instruction A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( 240.12b-2 of this chapter). Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02. Results of Operations and Financial Condition. On February 15, 2018, Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) announced its results of operations for the year ended December 31, 2017. A copy of the related press release for the year ended December 31, 2017 is being filed as Exhibit 99.1 to this report and is incorporated herein by reference. In addition, a copy of the Fourth Quarter 2017 Financial Results Supplement is being furnished as Exhibit 99.2 to this report and is incorporated herein by reference. Exhibit 99.1 submitted herewith shall be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934. Exhibit 99.2 submitted herewith shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed to be incorporated by reference into any disclosure document relating to Freddie Mac, except to the extent, if any, expressly set forth by specific reference in such document. Item 9.01. Financial Statements and Exhibits. (d) Exhibits. The following exhibits listed in the Exhibit Index below are being filed or furnished as part of this Report on Form 8-K: Exhibit Number Description of Exhibit 99.1 Press release, dated February 15, 2018, issued by Freddie Mac 99.2 Fourth Quarter 2017 Financial Results Supplement Freddie Mac Form 8-K
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FEDERAL HOME LOAN MORTGAGE CORPORATION By: /s/ James G. Mackey James G. Mackey Executive Vice President Chief Financial Officer Date: February 15, 2018 Freddie Mac Form 8-K
Exhibit99.1 FreddieMacReportsFull-Year2017ComprehensiveIncomeof$5.6Billionand FourthQuarter2017ComprehensiveLossof$3.3Billion Full-YearandFourthQuarterComprehensiveIncome,ExcludingSignificantItems¹, Were$8.1Billionand$2.1Billion,Respectively Write-down of Net Deferred Tax Asset Led to Fourth Quarter Net Loss and $0.3 Billion Draw Request to the U.S. Treasury 2017Full-YearFinancialResults Comprehensive income of $5.6 billion was affected by two significant items: $4.5 billion, or $2.9 billion after-tax, benefit from a litigation settlement; and $5.4 billion write-down of the net deferred tax asset due to the impact of the recent tax reform legislation. Comprehensive income, excluding the significant items¹, was $8.1 billion, reflecting strong business fundamentals. Market-related gains of $1.2 billion after-tax primarily driven by gains from spread tightening and single-family legacy asset dispositions. 2017FourthQuarterFinancialResults Comprehensive loss of $3.3 billion, driven primarily by the $5.4 billion write-down of the net deferred tax asset. Excluding this write-down, comprehensive income¹ was $2.1 billion, reflecting continued strong business fundamentals. Market-related gains of $0.4 billion after-tax primarily driven by gains from spread tightening and single-family legacy asset dispositions. 2017BusinessHighlights Fundamentals Remained Strong; Continued Growth in Guarantee Businesses Total guarantee portfolio grew 6 percent highest growth rate in the past ten years; exceeding $2 trillion for the first time. Total mortgage-related investments portfolio declined 15 percent to $253 billion while the total investments portfolio declined 13 percent to $342 billion. Delivering on the Company's Mission Provided approximately $429 billion in liquidity to the mortgage market funded nearly 1.5 million single-family homes and 820 thousand multifamily rental units; guaranteed nearly 11 million single-family homes and nearly 4 million multifamily rental units at year-end. Returned $10.9 Billion to Taxpayers in 2017 Returned $112.4 billion to taxpayers to-date while drawing $71.3 billion through year-end. $0.3 billion will be drawn to cover fourth quarter net worth deficit; remaining amount available under the Senior Preferred Stock Purchase Agreement will decline to $140.2 billion. Single-family: Providing Liquidity to the Market while Transforming Housing Finance Guarantee portfolio grew 4 percent during the year, reflecting increased competitiveness and efforts to improve the mortgage experience for lenders the company serves. Serious delinquency rate of 1.08 percent, up 8 basis points from prior year and 22 basis points from prior quarter, due to the impact of recent hurricane activity. Transferred a majority of credit risk 2 on $280 billion in UPB of loans during 2017; have now transferred a portion of credit risk on 35 percent of the total outstanding guarantee portfolio, up from 26 percent a year ago. Multifamily: Leading the Industry Guarantee portfolio grew 28 percent from prior year to $203 billion. Record purchase volume of $73 billion increased 29 percent from a year ago due to continued strong market demand, expansion of new product offerings and increased competitiveness. Delinquency rate continued to be near zero at 0.02 percent at year-end. Transferred a large majority of the credit risk 2 on a record $65 billion in UPB of loans in 2017 and on $249 billion in UPB of loans since 2009. ¹ See Non-GAAP Financial Measures Highlights on page 4 and pages 15-16 for additional details and reconciliations to the comparable amounts under GAAP. 2 As measured by modeled capital. 2017 was a landmark year in Freddie Mac s transformation, reaching several very significant milestones. The guarantee book topped $2 trillion for the first time after growing 6 percent last year, the highest rate in a decade. Our work to innovate and reimagine the mortgage experience - and almost all business activities - has helped increase our competitiveness and made home possible for 2.3 million homebuying and renting families in 2017. Notably, the number of first-time homebuyers we funded hit a 10-year high and we were once again the nation s top multifamily financier. At the same time, we significantly lowered taxpayer exposure to our risks, having reduced impaired assets in the investment portfolio by nearly 30 percent through cost-effective transactions, while integrating credit risk transfer extensively across both guarantee businesses. We now have a fully competitive company that is executing on its mission, protecting taxpayers and helping to build a better housing finance system for the nation. We are all proud to be part of this better Freddie Mac. Donald H. Layton Chief Executive Officer
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page2 McLean, VA Freddie Mac (OTCQB: FMCC) today reported net income of $5.6 billion for the full-year 2017, compared to net income of $7.8 billion for the full-year 2016. The company also reported comprehensive income of $5.6 billion for the full-year 2017, compared to comprehensive income of $7.1 billion for the full-year 2016. Summary Consolidated Statements of Comprehensive Income ThreeMonthsEnded Full-Year (Dollarsinmillions) 12/31/2017 9/30/2017 Change 2017 2016 Change Net interest income $3,501 $3,489 $12 $14,164 $14,379 $(215) Benefit (provision) for credit losses 262 (716) 978 84 803 (719) Derivative gains (losses) 88 (678) 766 (1,988) (274) (1,714) Other non-interest income (loss) 1 1,227 6,152 (4,925) 8,857 774 8,083 Non-interest income (loss) 1,315 5,474 (4,159) 6,869 500 6,369 Administrative expense (558) (524) (34) (2,106) (2,005) (101) Other non-interest expense (698) (533) (165) (2,177) (2,038) (139) Non-interest expense (1,256) (1,057) (199) (4,283) (4,043) (240) Incomebeforeincometaxexpense 3,822 7,190 (3,368) 16,834 11,639 5,195 Income tax expense (6,743) (2,519) (4,224) (11,209) (3,824) (7,385) Netincome(loss) $(2,921) $4,671 $(7,592) $5,625 $7,815 $(2,190) Total other comprehensive income (loss) (391) (21) (370) (67) (697) 630 Comprehensiveincome(loss) $(3,312) $4,650 $(7,962) $5,558 $7,118 $(1,560) Memo Item Guarantee fee income (1) $186 $169 $17 $662 $513 $149 (1) Guarantee fee income on a GAAP basis is primarily from the company s multifamily business and is included in Other income (loss) on Freddie Mac s consolidated statements of comprehensive income. FinancialResultsDiscussion Full-Year2017FinancialResults Freddie Mac s full-year 2017 net income of $5.6 billion and comprehensive income of $5.6 billion decreased $2.2 billion and $1.6 billion, respectively, from the full-year 2016. The decrease in the company s full-year 2017 results was primarily driven by two significant items: a $5.4 billion write-down of the company's net deferred tax asset during the fourth quarter, partially offset by the $4.5 billion, or $2.9 billion after-tax, litigation settlement received in the third quarter. Freddie Mac's full-year 2017 comprehensive income, excluding significant items¹, was $8.1 billion, an increase of approximately $1.0 billion from the full-year 2016, reflecting strong business fundamentals. Market-related gains of $1.2 billion were primarily driven by a $0.9 billion gain from credit spread tightening and a $0.6 billion gain from single-family legacy asset dispositions, partially offset by a $0.3 billion loss from interest rate impacts, all after-tax. FourthQuarter2017FinancialResults The company s fourth quarter 2017 net loss of $2.9 billion and comprehensive loss of $3.3 billion decreased $7.6 billion and $8.0 billion, respectively, from the third quarter of 2017 primarily driven by the write-down of the company's net deferred tax asset in the fourth quarter and the litigation settlement received in the third quarter. Freddie Mac's fourth quarter 2017 comprehensive income, excluding the write-down of the net deferred tax asset¹, was $2.1 billion, an increase of approximately $0.3 billion from the $1.8 billion comprehensive income, excluding the litigation settlement 1, in the third quarter of 2017, reflecting continued strong business fundamentals. Market-related gains of $0.4 billion were primarily driven by a $0.3 billion gain from credit spread tightening and a $0.3 billion gain from single-family legacy asset dispositions, partially offset by a $0.1 billion loss from interest rate impacts, all after-tax. ¹ See Non-GAAP Financial Measures Highlights on page 4 and pages 15-16 for additional details and reconciliations to the comparable amounts under GAAP.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page3 SelectedFinancialMeasures NetInterestIncome $Billions Full-Year and Fourth Quarter 2017 Net interest income decreased $0.2 billion from 2016 and was relatively unchanged from the third quarter. The decrease in full-year net interest income primarily reflected a mandated decline in the size of the company s investments portfolio partially offset by higher net interest yield on both mortgage-related investments and other investments and increased guarantee fees. GuaranteeFeeIncome(1)andMultifamilyGuaranteePortfolio (1) Guarantee fee income on a GAAP basis is primarily from the company s multifamily business and is included in Other income (loss) on Freddie Mac s consolidated statements of comprehensive income. Full-Year and Fourth Quarter 2017 Guarantee fee income, primarily from the company s multifamily business, increased $149 million and $17 million from the full-year 2016 and the third quarter of 2017, respectively, driven by larger average multifamily guarantee portfolio balances due to increased issuances of K Certificates and SB Certificates during 2017.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page4 Benefit(Provision)forCreditLosses $Millions Full-Year 2017 Benefit for credit losses decreased $719 million from the full-year 2016 primarily reflecting the company's estimate of losses related to hurricane activity in the third quarter of 2017. Fourth Quarter 2017 Benefit for credit losses was $262 million, a shift from a provision for credit losses of $716 million in the third quarter of 2017, driven by the company's estimate of losses from hurricane activity in the third quarter that increased the provision for credit losses in that period. Non-GAAPFinancialMeasureHighlights In addition to analyzing the company s results on a GAAP basis, management reviews net interest income and guarantee fee income on an adjusted, or non-gaap, basis. These adjusted financial measures are calculated by reclassifying certain credit guarantee-related activities and investment-related activities between various line items on the company s GAAP consolidated statements of comprehensive income. Management believes these non-gaap financial measures are useful because they more clearly reflect the company s sources of revenue. The company s GAAP net interest income includes the spread earned on its investments activities plus the guarantee fees earned by its single-family business. GAAP guarantee fees are primarily those generated by its multifamily business. Adjusted net interest income is the net spread earned on the company s investments activities, including the cost of funds associated with using derivatives. Adjusted guarantee fee income consists of the revenues from guarantee fees from both the single-family and multifamily businesses, net of the 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011. In 2017, the company added a new non-gaap financial measure adjusting comprehensive income for certain significant items. This adjusted financial measure is calculated by excluding significant items from the company s GAAP comprehensive income that are not indicative of its on-going operations. Management believes that this new non-gaap financial measure is useful because it allows users to better understand the drivers of the company's on-going financial results. The company excluded the write-down of the net deferred tax asset in the fourth quarter of 2017 from GAAP comprehensive income as the impact of the tax reform legislation is considered a one-time event. The company excluded a litigation settlement in the third quarter of 2017 from GAAP comprehensive income as it related to the recovery of losses on legacy securities in which the company no longer invests. The graphs that follow show the non-gaap financial measures for adjusted net interest income and adjusted guarantee fee income.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page5 AdjustedNetInterestIncome(1)(2)andInvestmentsPortfolio $Billions (1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see page 15 of this press release. (2) During the first quarter of 2017, the company discontinued adjustments which reflected the reclassification of amortization of upfront cash paid and received upon acquisitions and issuances of swaptions and options from GAAP derivative gains (losses) to adjusted net interest income. Prior period results have been revised to conform to the current period presentation. Full-Year and Fourth Quarter 2017 Adjusted net interest income decreased $0.2 billion from the full-year 2016 and was relatively unchanged from the third quarter of 2017. The decrease in full-year adjusted net interest income primarily reflected a decline in the company s investments portfolio, partially offset by higher net interest yield on both mortgage-related investments and other investments. The mortgage-related investments portfolio declined $45 billion, or 15 percent, from the prior year, ending the year at $253 billion below the 2017 year-end mandated portfolio cap of $288 billion and just slightly over the 2018 year-end mandated portfolio cap of $250 billion. The company remained focused on reducing the balance of less liquid assets in this portfolio. The balance of less liquid assets was $88 billion at year-end 2017, a decline of $36 billion, or 29 percent, from year-end 2016. Less liquid assets include single-family reperforming loans, single-family seriously delinquent loans, multifamily unsecuritized mortgage loans not in the securitization pipeline, and mortgage-related securities not guaranteed by a GSE or the U.S. government. The balance of non-agency mortgage-related securities was $5 billion at year-end 2017, a decline of $11 billion, or 69 percent, from year-end 2016.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page6 AdjustedGuaranteeFeeIncome(1)andTotalGuaranteePortfolio $Billions (1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see page 15 of this press release. Note: Amounts may not add due to rounding. Full-Year and Fourth Quarter 2017 Adjusted guarantee fee income increased $0.2 billion from the full-year 2016 and was relatively unchanged from the third quarter of 2017. The increase in adjusted guarantee fee income primarily reflected higher multifamily income due to larger average multifamily guarantee portfolio balances as a result of increased issuances of K Certificates and SB Certificates during 2017. Adjusted single-family guarantee fee income was relatively unchanged from the prior year as higher average contractual guarantee fees on the growing guarantee portfolio were partially offset by lower amortization of single-family upfront fees driven by a decrease in loan prepayments. Adjusted single-family guarantee fee income from contractual guarantee fees is expected to increase over the long-term as guarantee fees on new single-family business are generally higher than the fees received on older vintages that continue to run off. The total guarantee portfolio grew $119 billion, or 6 percent, from the prior year.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page7 SegmentFinancialResultsandBusinessHighlights Freddie Mac s operations consist of three reportable segments which are based on the types of business activities they perform Single-family Guarantee, Multifamily and Capital Markets. The company presents Segment Earnings for each reportable segment by reclassifying certain credit guarantee-related and investment-related activities between various line items on its GAAP condensed consolidated statements of comprehensive income and allocating certain revenue and expenses, including funding costs and administrative expenses, to its three reportable segments. For more information about Segment Earnings, see Note 13 to the financial statements included in the company s Annual Report on Form 10-K for the year ended December 31, 2017 and page 16 of this Press Release. Single-familyGuaranteeSegment Providing liquidity while transforming U.S. housing finance. Financial Results (1) ThreeMonthsEnded Full-Year (Dollarsinmillions) 12/31/2017 9/30/2017 Change 2017 2016 Change Guarantee fee income $1,589 $1,581 $8 $6,094 $6,091 $3 Provision for credit losses (41) (826) 785 (816) (517) (299) Other non-interest income 424 403 21 1,505 447 1,058 Administrative expense (363) (353) (10) (1,381) (1,323) (58) REO operations expense (65) (38) (27) (203) (298) 95 Other non-interest expense (381) (348) (33) (1,382) (1,169) (213) SegmentEarningsbeforeincometaxexpense 1,163 419 744 3,817 3,231 586 Income tax expense (405) (164) (241) (1,316) (1,061) (255) SegmentEarnings,netoftaxes $758 $255 $503 $2,501 $2,170 $331 Total other comprehensive income (loss), net of tax 42 42 40 (9) 49 Totalcomprehensiveincome $800 $255 $545 $2,541 $2,161 $380 (1) The financial performance of the company s Single-family Guarantee segment is measured based on its contribution to GAAP net income (loss). Single-family Guarantee segment earnings increased $331 million from the full-year 2016. The increase in segment earnings primarily resulted from a higher benefit from single-family legacy asset reclassifications and dispositions, partially offset by an increase in provision for credit losses attributable to estimated losses from recent hurricane activity and higher credit risk transfer expense due to increased volume of outstanding transactions. Business Highlights Core loan portfolio (after 2008), which excludes HARP and other relief refinance loans, continued to grow and was 78 percent of the single-family credit guarantee portfolio at December 31, 2017. Single-family credit guarantee portfolio increased 4 percent from year-end 2016 to $1.8 trillion at year-end 2017 driven in part by an increase in U.S. single-family mortgage debt outstanding as a result of continued home price appreciation, combined with the continuing stability of the company's share of U.S single-family origination volume. Average guarantee fees charged on new acquisitions were 41 basis points (net of the legislated 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011) for the full-year 2017, down from 45 basis points for the full-year 2016 due in part to competitive pricing pressures. Average guarantee fees on the single-family credit guarantee portfolio were 34 basis points, down from 35 basis points for the full-year 2016, due to lower amortization of upfront fees driven by a decrease in loan prepayments in 2017 partially offset by higher contractual guarantee fees. Sold $0.5 billion in UPB of seriously delinquent single-family mortgage loans and $8.2 billion of single-family reperforming loans during 2017, and $3.1 billion in UPB of seriously delinquent single-family mortgage loans and $1.1 billion of single-family reperforming loans during 2016.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page8 Transferred a portion of credit risk associated with $280 billion in UPB of loans in the single-family credit guarantee loan portfolio during the full-year 2017; the company has now transferred a portion of the credit risk on nearly 35 percent of the total outstanding single-family credit guarantee portfolio. Provided funding for nearly 1.5 million single-family homes, approximately 663 thousand of which were refinance loans. MultifamilySegment Leading the Multifamily finance industry. Financial Results (1) ThreeMonthsEnded Full-Year (Dollarsinmillions) 12/31/2017 9/30/2017 Change 2017 2016 Change Net interest income $301 $342 $(41) $1,206 $1,022 $184 Guarantee fee income 193 170 23 676 511 165 Benefit (provision) for credit losses (3) (22) 19 (13) 22 (35) Gains (losses) on loans and other non-interest income 654 183 471 1,485 1,166 319 Derivative gains (losses) 212 22 190 181 407 (226) Administrative expense (107) (98) (9) (395) (362) (33) Other non-interest expense (22) (11) (11) (66) (58) (8) SegmentEarningsbeforeincometaxexpense 1,228 586 642 3,074 2,708 366 Income tax expense (426) (212) (214) (1,060) (890) (170) SegmentEarnings,netoftaxes $802 $374 $428 $2,014 $1,818 $196 Total other comprehensive income (loss), net of tax (142) (4) (138) (77) (236) 159 Totalcomprehensiveincome $660 $370 $290 $1,937 $1,582 $355 (1) The financial performance of the company s Multifamily segment is measured based on its contribution to GAAP comprehensive income (loss). Multifamily segment comprehensive income increased $355 million from the full-year 2016. The increase in comprehensive income was primarily due to increased net interest income driven by higher net interest yields and increased guarantee fee income due to continued growth in the multifamily guarantee portfolio. Higher fair value gains were driven by larger average balances due to increased new business volume, partially offset by less tightening of K Certificate benchmark spreads and the effects of strategic pricing. Disposition of certain non-agency CMBS, coupled with spread tightening, resulted in larger gains on non-agency CMBS. Derivative gains (losses) for the Multifamily segment are largely offset by interest rate-related fair value changes on the loans and investment securities being economically hedged. As a result, there is minimal net impact on total comprehensive income for the Multifamily segment from interest rate-related derivatives. Business Highlights Record new purchase volume of $73 billion for 2017, an increase of 29 percent from 2016, while outstanding loan purchase commitments increased 17 percent to $14 billion, reflecting continued strong market demand and strategic pricing efforts. Multifamily guarantee portfolio increased 28 percent from year-end 2016 to $203 billion at year-end 2017 due to increased share of Multifamily new business volume, expansion of new product offerings and purchase activity related to certain targeted loans in underserved markets. Capped Multifamily new business activity was $34 billion for 2017, while uncapped new business activity was $40 billion.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page9 The 2017 FHFA Scorecard goal was to maintain the dollar volume of annual capped multifamily new business activity at or below a production cap of $36.5 billion. This production cap will decrease to $35.0 billion in 2018. Transferred a large majority of the expected and stress credit losses on a record $65 billion in UPB of loans in 2017 and on $249 billion in UPB of loans since 2009. Credit risk transfers primarily consisted of 53 K Certificate and 19 SB Certificate transactions that transferred a large majority of expected and stress credit losses associated with $61 billion in UPB of loans during 2017 and $239 billion in UPB of loans since 2009. Provided financing for approximately 820 thousand rental units in 2017 compared to 739 thousand in 2016. 83 percent of the eligible units financed were affordable to families earning at or below area median incomes. CapitalMarketsSegment Enhancing the liquidity of the company s securities in the secondary mortgage market while reducing less liquid assets using economically sensible transactions and responding to market opportunities in funding the company's business activities. Financial Results (1) ThreeMonthsEnded Full-Year (Dollarsinmillions) 12/31/2017 9/30/2017 Change 2017 2016 Change Net interest income $773 $804 $(31) $3,381 $3,812 $(431) Net impairment of available-for-sale securities recognized in earnings 42 50 (8) 236 269 (33) Derivative gains (losses) 170 (324) 494 (587) 1,151 (1,738) Gains (losses) on trading securities (363) (26) (337) (570) (1,077) 507 Other non-interest income 897 5,754 (4,857) 7,813 1,865 5,948 Administrative expense (88) (73) (15) (330) (320) (10) SegmentEarningsbeforeincometaxexpense 1,431 6,185 (4,754) 9,943 5,700 4,243 Income tax expense (507) (2,143) 1,636 (3,428) (1,873) (1,555) SegmentEarnings,netoftaxes $924 $4,042 $(3,118) $6,515 $3,827 $2,688 Total other comprehensive income (loss), net of tax (291) (17) (274) (30) (452) 422 Totalcomprehensiveincome $633 $4,025 $(3,392) $6,485 $3,375 $3,110 (1) The financial performance of the company s Capital Markets segment is measured based on its contribution to GAAP comprehensive income (loss). Capital Markets segment comprehensive income increased $3.1 billion from the full-year 2016. Business Highlights The increase in comprehensive income was primarily driven by the $4.5 billion (pre-tax) litigation settlement received in the third quarter of 2017, partially offset by decreased net interest income driven by the continued reduction in the balance of the mortgage-related investments portfolio. Continued to responsibly reduce the balance of the mortgage investments portfolio with a focus on reducing less liquid assets. The less liquid assets were $56 billion at year-end 2017, down $24 billion, or 30 percent, from year-end 2016, due primarily to securitizations of $8.2 billion of reperforming loans and sales of $9.2 billion of nonagency mortgage-related securities and ongoing portfolio liquidations. Continued to maintain a presence in the agency mortgage-related securities market to strategically support the guarantee business. Liquid assets held by the Capital Markets segment were 66 percent of the portfolio, or $130 billion, at year-end 2017, an increase from 60 percent of the portfolio, or $138 billion, at year-end 2016.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page10 HousingMarketSupport Freddie Mac supports the U.S. housing market by executing its charter mission to ensure credit availability for new and refinanced mortgages as well as rental housing and helping struggling homeowners avoid foreclosure. AffordableHousingGoals In December 2017, FHFA determined that Freddie Mac achieved all five single-family and all three multifamily affordable housing goals for 2016. At this time, based on preliminary information, the company believes it met all five single-family goals and all three multifamily goals for 2017. FHFA will not be able to make a final determination on the company's 2017 performance until market data is released in October 2018. PreventingForeclosures Freddie Mac continued to help struggling borrowers retain their homes or otherwise avoid foreclosure, completing approximately 75 thousand singlefamily loan workouts in 2017. MortgageFunding Freddie Mac provided approximately $429 billion in liquidity to the market in 2017, funding: Nearly 1.5 million single-family homes, approximately 663 thousand of which were refinance loans; and Approximately 820 thousand multifamily rental units.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page11 AboutFreddieMac sconservatorship Since September 2008, Freddie Mac has been operating under conservatorship with FHFA as Conservator. The support provided by Treasury pursuant to the Purchase Agreement enables the company to maintain access to the debt markets and have adequate liquidity to conduct its normal business operations. (1) Excludes the initial $1 billion liquidation preference of senior preferred stock issued to Treasury in September 2008 as consideration for Treasury s funding commitment and the $3.0 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 21, 2017 Letter Agreement. The company received no cash proceeds as a result of issuing the initial $1 billion liquidation preference of senior preferred stock or the $3.0 billion increase on December 31, 2017. Note: Amounts may not add due to rounding. Based on Freddie Mac's net worth deficit of $312 million at December 31, 2017, FHFA, as Conservator, will submit a draw request, on the company's behalf, to Treasury under the Purchase Agreement in the amount of $312 million. The amount of funding available to Freddie Mac under the Purchase Agreement is $140.5 billion as of December 31, 2017, and will be reduced to $140.2 billion upon the funding of the draw request related to the company's negative net worth at December 31, 2017. The applicable Capital Reserve Amount was $600 million in 2017 and will be $3.0 billion from January 1, 2018 and thereafter, pursuant to the December 21, 2017 Letter Agreement. Under the Letter Agreement, the dividend for the dividend period from October 1, 2017 through and including December 31, 2017 was reduced to $2.25 billion. Through December 31, 2017, aggregate cash dividends paid to Treasury were $41.1 billion more than cumulative cash draws received from Treasury. The payment of dividends does not reduce the outstanding liquidation preference under the Purchase Agreement. The aggregate liquidation preference of the senior preferred stock increased by $3.0 billion to $75.3 billion on December 31, 2017 pursuant to the Letter Agreement and will increase to $75.6 billion upon the funding of the draw request.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page12 AdditionalInformation For more information, including that related to Freddie Mac s financial results, conservatorship and related matters, see the company s Annual Report on Form 10-K for the year ended December 31, 2017 and the company s Financial Results Supplement. These documents are available on the Investor Relations page of the company s Web site at www.freddiemac.com/investors. Additional information about Freddie Mac and its business is also set forth in the company s filings with the SEC, which are available on the Investor Relations page of the company s Web site at www.freddiemac.com/investors and the SEC s Web site at www.sec.gov. Freddie Mac encourages all investors and interested members of the public to review these materials for a more complete understanding of the company s financial results and related disclosures. WebcastAnnouncement Management will host a conference call at 9 a.m. Eastern Time on February 15, 2018 to discuss the company s results with the media. The conference call will be concurrently webcast. To access the live audio webcast, use the following link: https://edge.media-server.com/m6/p/kqr995hm. The replay will be available on the company s Web site at www.freddiemac.com/investors for approximately 30 days. All materials related to the call will be available on the Investor Relations page of the company s Web site at www.freddiemac.com/investors. MediaContact:LisaGagnon(703)903-3385 InvestorContact:LaurieGarthune(571)382-4732 * * * * This press release contains forward-looking statements, which may include statements pertaining to the conservatorship, the company s current expectations and objectives for its Single-Family Guarantee, Multifamily and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends, market share, the effect of legislative and regulatory developments and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of the company s credit risk transfer transactions, and results of operations and financial condition on a GAAP, Segment Earnings, non-gaap and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company s control. Management s expectations for the company s future necessarily involve a number of assumptions, judgments and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation or regulations and new or amended accounting guidance, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company s Annual Report on Form 10-K for the year ended December 31, 2017, which is available on the Investor Relations page of the company s Web site at www.freddiemac.com/investors and the SEC s Web site at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this press release. Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since its creation by Congress in 1970, the company has made housing more accessible and affordable for homebuyers and renters in communities nationwide. The company is building a better housing finance system for homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac s blog FreddieMac.com/blog.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page13 FREDDIEMAC CONDENSEDCONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME (inmillions,exceptshare-relatedamounts) Interest income December31, 2017 ThreeMonthsEnded TwelveMonthsEnded September30, 2017 December31, 2017 December31, 2016 Mortgage loans $16,055 $15,867 $63,735 $61,040 Investments in securities 778 821 3,415 3,855 Other 221 185 657 270 Total interest income 17,054 16,873 67,807 65,165 Interest expense (13,553) (13,384) (53,643) (50,786) Net interest income 3,501 3,489 14,164 14,379 Benefit (provision) for credit losses 262 (716) 84 803 Net interest income after benefit (provision) for credit losses 3,763 2,773 14,248 15,182 Non-interest income (loss) Gains (losses) on extinguishment of debt 46 27 341 (211) Derivative gains (losses) 88 (678) (1,988) (274) Net Impairment of available-for-sale securities recognized in earnings (1) (1) (18) (191) Other gains (losses) on investment securities recognized in earnings 214 723 1,054 (78) Other income 968 5,403 7,480 1,254 Non-interest income (loss) 1,315 5,474 6,869 500 Non-interest expense Salaries and employee benefits (285) (272) (1,098) (989) Professional services (112) (110) (452) (489) Other administrative expense (161) (142) (556) (527) Totaladministrativeexpense (558) (524) (2,106) (2,005) Real estate owned operations expense (61) (35) (189) (287) Temporary Payroll Tax Cut Continuation Act of 2011 expense (350) (339) (1,340) (1,152) Other expense (287) (159) (648) (599) Non-interest expense (1,256) (1,057) (4,283) (4,043) Income before income tax expense 3,822 7,190 16,834 11,639 Income tax expense (6,743) (2,519) (11,209) (3,824) Net income (loss) (2,921) 4,671 5,625 7,815 Other comprehensive income (loss), net of taxes and reclassification adjustments: Changes in unrealized gains (losses) related to available-for-sale securities (499) (47) (253) (825) Changes in unrealized gains (losses) related to cash flow hedge relationships 43 26 124 141 Changes in defined benefit plans 65 62 (13) Totalothercomprehensiveincome(loss),netoftaxesandreclassification adjustments (391) (21) (67) (697) Comprehensiveincome(loss) $(3,312) $4,650 $5,558 $7,118 Net income (loss) $(2,921) $4,671 $5,625 $7,815 Undistributed net worth sweep and senior preferred stock dividends (4,650) (8,869) (7,718) Net income (loss) attributable to common stockholders $(2,921) $21 $(3,244) $97 Net income (loss) per common share basic and diluted $(0.90) $0.01 $(1.00) $0.03 Weighted average common shares outstanding (in millions) basic and diluted 3,234 3,234 3,234 3,234
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page14 FREDDIEMAC CONDENSEDCONSOLIDATEDBALANCESHEETS (inmillions,exceptshare-relatedamounts) Assets December31,2017 December31,2016 Cash and cash equivalents $6,848 $12,369 Restricted cash and cash equivalents 2,963 9,851 Securities purchased under agreements to resell 55,903 51,548 Investments in securities, at fair value 84,318 111,547 Mortgage loans held-for-sale (includes $20,054 and $16,255 at fair value) 34,763 18,088 Mortgage loans held-for-investment (net of allowance for loan losses of $8,966 and $13,431) 1,836,454 1,784,915 Accrued interest receivable 6,355 6,135 Derivative assets, net 375 747 Deferred tax assets, net 8,107 15,818 Other assets (includes $3,353 and $2,408 at fair value) 13,690 12,358 Total assets $2,049,776 $2,023,376 Liabilitiesandequity Liabilities Accrued interest payable $6,221 $6,015 Debt, net (includes $5,799 and $6,010 at fair value) 2,034,630 2,002,004 Derivative liabilities, net 269 795 Other liabilities 8,968 9,487 Total liabilities 2,050,088 2,018,301 Commitments and contingencies Equity Senior preferred stock (redemption value of $75,336 and $72,336) 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 650,054,731 shares and 650,046,828 shares outstanding Additional paid-in capital Retained earnings (accumulated deficit) (83,261) (77,941) AOCI, net of taxes, related to: Available-for-sale securities (includes $593 and $782, related to net unrealized gains on securities for which otherthan-temporary impairment has been recognized in earnings) 662 915 Cash flow hedge relationships (356) (480) Defined benefit plans 83 21 Total AOCI, net of taxes 389 456 Treasury stock, at cost, 75,809,155 shares and 75,817,058 shares (3,885) (3,885) Total equity (312) 5,075 Total liabilities and equity $2,049,776 $2,023,376
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page15 FREDDIEMAC NON-GAAP RECONCILIATIONS ReconciliationofGAAPNetInterestIncometoAdjustedNetInterestIncome(pre-tax) (Dollars in millions) 1Q2017 2Q2017 3Q2017 4Q2017 2016 2017 GAAPNetInterestIncome $3,795 $3,379 $3,489 $3,501 $14,379 $14,164 Reclassifications: Guarantee fee income reclassified to adjusted guarantee fee income (1) (2) (1,741) (1,840) (1,921) (1,946) (7,241) (7,448) Accrual of periodic cash settlements reclassified from derivative gain (loss) (3) (467) (429) (398) (296) (1,760) (1,590) Other reclassifications (4) (387) 57 (24) (185) (544) (539) Total reclassifications (2,595) (2,212) (2,343) (2,427) (9,545) (9,577) AdjustedNetInterestIncome $1,200 $1,167 $1,146 $1,074 $4,834 $4,587 ReconciliationofGAAPGuaranteeFeeIncome*toAdjustedGuaranteeFeeIncome(pre-tax) (Dollars in millions) 1Q2017 2Q2017 3Q2017 4Q2017 2016 2017 GAAPGuaranteeFeeIncome* $149 $158 $169 $186 $513 $662 Reclassifications: Guarantee fee income reclassified from net interest income (1) (2) 1,741 1,840 1,921 1,946 7,241 7,448 Temporary Payroll Tax Cut Continuation Act of 2011 expense reclassified from other non-interest expense (5) (321) (330) (339) (350) (1,152) (1,340) Total reclassifications 1,420 1,510 1,582 1,596 6,089 6,108 AdjustedGuaranteeFeeIncome $1,569 $1,668 $1,751 $1,782 $6,602 $6,770 ReconciliationofGAAPComprehensiveIncometoComprehensiveIncome,excludingSignificantItems (Dollars in billions) 1Q2017 2Q2017 3Q2017 4Q2017 2016 2017 GAAPComprehensiveIncome $2.2 $2.0 $4.7 $(3.3) $7.1 $5.6 Exclusions: Non-agency mortgage-related securities litigation settlement (4.5) (4.5) Tax effect related to litigation settlement 1.6 1.6 Write-down of net deferred tax asset 5.4 5.4 Total exclusions (2.9) 5.4 2.5 ComprehensiveIncome,excludingSignificantitems(6) $2.2 $2.0 $1.8 $2.1 $7.1 $8.1 * Guarantee fee income on a GAAP basis is included in Other income (loss) on Freddie Mac s condensed consolidated statements of comprehensive income. Note: Columns may not add due to rounding. For notes on reclassifications, see page 16 of this press release.
FreddieMacFourthQuarter2017FinancialResults February15,2018 Page16 During the first quarter of 2017, the company changed how it calculates certain components of its Segment Earnings for its Capital Markets segment. The purpose of this change was to more closely align Segment Earnings results relative to GAAP results in order to better reflect how management evaluates the Capital Markets segment. Prior period results have been revised to conform to the current period presentation. The change to the calculation of net interest income for the Capital Markets segment is also reflected in the company's calculation of adjusted net interest income. The change includes: The discontinuation of adjustments which reflected the reclassification of amortization of upfront cash paid and received upon acquisitions and issuances of swaptions and options from derivative gains (losses) to net interest income for the Capital Markets segment. The discontinuation of the adjustments resulted in an increase to adjusted net interest income of $1.3 billion for 2016 to align with the current presentation. The change did not affect the calculation of adjusted guarantee fee income. During the fourth quarter of 2017, the company changed its GAAP accounting for qualifying hedges due to the adoption of amended hedge accounting guidance. As a result, the company modified its investment activity-related reclassifications beginning in the fourth quarter of 2017 in order to continue to reflect Segment Earnings for its Capital Markets segment consistently with prior periods. No prior period results required updates. Notes on Significant Reclassifications (1) Net guarantee fees are reclassified from GAAP net interest income to adjusted guarantee fee income. (2) Implied guarantee fee income related to unsecuritized loans held in the mortgage investments portfolio is reclassified from GAAP net interest income to adjusted guarantee fee income. (3) The accrual of periodic cash settlements of all derivatives is reclassified from GAAP derivative gains (losses) into adjusted net interest income to fully reflect the periodic cost associated with the protection provided by these contracts. (4) Other reclassifications primarily relate to items reclassified out of GAAP net interest income, including the amortization of premiums and discounts associated with the company s PCs and the loans underlying those PCs, amortization of non-cash premiums on single-family loans in trusts and on consolidated PCs, amortization of discounts on loans purchased with deteriorated credit quality that are on accrual status, the accretion of other-than-temporary impairments on available-for-sale securities, STACR debt note expense and net float income or expense. (5) The expense related to the Temporary Payroll Tax Cut Continuation Act of 2011 is reclassified from GAAP other non-interest expense to adjusted guarantee fee income. As a result of the reclassification, the revenue and expense related to the legislated 10 basis point increase are netted within adjusted guarantee fee income. (6) On December 22, 2017, tax reform legislation was signed into law. The fourth quarter of 2017 and full-year 2017 GAAP results reflect the estimated impact of the enactment of the legislation, which resulted in a $5.4 billion decrease in both net income and comprehensive income. The third quarter of 2017 and full-year 2017 GAAP results also included a benefit of $4.5 billion (pre-tax) from a settlement with the Royal Bank of Scotland plc related to non-agency mortgage-related securities. The tax effect related to this settlement was $(1.6) billion. Comprehensive income excluding the impact of these significant items is a non-gaap financial measure. Management believes this measure is useful because it allows users to better understand the drivers of the company's on-going financial results.
Exhibit 99.2 Fourth Quarter 2017 Financial Results Supplement February 15, 2018
2 Freddie Mac Adjusted net interest income Adjusted guarantee fee income 1Q17 2Q17 3Q17 4Q17 2016 2017 $1.2 $1.2 $1.1 $1.1 $4.8 $4.6 $1.6 $1.7 $1.8 $1.8 $6.6 $6.8 Corporate Highlights Key highlightsfinancial highlights $ Billions Note: Totals may not add due to rounding. 4Q17 comprehensive loss of $3.3 billion, driven primarily by a $5.4 billion write-down of the net deferred tax asset (DTA). Comprehensive income, excluding this write-down1, was $2.1 billion. 2017 comprehensive income of $5.6 billion, driven by the $5.4 billion net DTA write- down in 4Q17, partially offset by a $4.5 billion (pre-tax), or $2.9 billion (after-tax) litigation settlement in 3Q17. Comprehensive income, excluding the write-down and the settlement1, was $8.1 billion. Total guarantee portfolio grew 6% from prior year while total investments portfolio decreased 13%. Total comprehensive income (loss) 1Q17 2Q17 3Q17 4Q17 2016 2017 $2.2 $2.0 $4.7 -$3.3 $7.1 $5.6 Total guarantee portfolio Total investments portfolio 4Q16 1Q17 2Q17 3Q17 4Q17 $1,913 $1,943 $1,958 $1,984 $2,032 $394 $383 $366 $349 $342 11 ($3.3)
3 Freddie Mac Draw Requests from Treasury Dividend Payments to Treasury 2008-2014 2015 2016 2017 Cumulative Total $71.3 $71.3 $91.0 $5.5 $5.0 $10.9 $112.4 Corporate Highlights, continued Treasury draw requests and dividend payments $ Billions DFAST3 - Additional draws needed under severely adverse scenario $ Billions Note: Totals may not add due to rounding. 2 with DTA valuation allowance without DTA valuation allowance 2015 2016 2017 Remaining PSPA Funding $62 $53 $43 $34 $26 $21 $140.5
4 Freddie Mac United States (Not Seasonally Adjusted) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 168 179 Average monthly net new jobs (non-farm) National unemployment rate (as of the last month in each quarter) 4Q16 1Q17 2Q17 3Q17 4Q17 164,000 177,000 190,000 142,000 216,000 4.7% 4.5% 4.3% 4.2% 4.1% Key Economic Indicators National home prices increased by an average of 7.1% over the past year Quarterly ending interest rates Unemployment rate and job creation National home prices have surpassed the 2006 peak Freddie Mac House Price Index (December 2000 = 100) (2006 Peak) 30-year PMMS 10-year LIBOR 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 4.32% 4.14% 3.88% 3.83% 3.99% 2.32% 2.39% 2.27% 2.28% 2.39%
5 Freddie Mac Mortgage-related investments portfolio Other investments and cash portfolio 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 $298 $291 $284 $267 $253 $96 $394 $92 $383 $82 $366 $82 $349 $89 $342 Single-family credit guarantee portfolio Multifamily guarantee portfolio 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 $1,755 $1,779 $1,784 $1,800 $1,829 $158 $1,913 $164 $1,943 $174 $1,958 $184 $1,984 $203 $2,032 Total Portfolio Balances Total debt outstanding6,7 $ Billions Portfolio balance highlightstotal guarantee portfolio4 $ Billions Total guarantee portfolio: Single-family - grew $74 billion, or 4% year-over- year. Multifamily - grew $45 billion, or 28% year-over- year. Total investments portfolio: Mortgage-related investments portfolio - decreased $45 billion, or 15% year-over-year. Note: Totals may not add due to rounding. +6% -13% Total investments portfolio $ Billions PSPA 2017 Limit $288B Unsecured debt Secured debt Indebtedness limit 12/31/2016 3/31/2017 6/30/2017 9/30/2017 12/31/2017 $353 $351 $334 $312 $306 $3 $8 $6 $9 $10 $479 $407 $357 $359 $340 $321 $317 5 4,6
6 Freddie Mac Purchase UPB Refinance UPB 4Q16 1Q17 2Q17 3Q17 4Q17 $46 $39 $45 $57 $57 $71 $117 $47 $86 $28 $73 $30 $87 $41 $98 43 44 44 42 36 Core single-family portfolio (loans originated post-2008) Legacy and relief refinance single-family portfolio 4Q16 1Q17 2Q17 3Q17 4Q17 $1,275 $1,317 $1,343 $1,377 $1,424 $480 $1,755 $462 $1,779 $441 $1,784 $423 $1,800 $405 $1,829 Single-family Financial Highlights and Key Metrics Single-family segment earnings $ Millions Credit guarantee portfolio $ Billions New funding volume $ Billions Guarantee fees charged on new acquisitions (bps)8 Serious delinquency rates +4% Note: Totals may not add due to rounding. Core single-family portfolio (loans originated post-2008) Legacy and relief refinance single-family portfolio Total 4Q16 1Q17 2Q17 3Q17 4Q17 0.20% 0.19% 0.18% 0.19% 0.35% 2.28% 2.17% 2.07% 2.14% 2.59% 1.00% 0.92% 0.85% 0.86% 1.08% (73%) (74%) (75%) (77%) (78%) 4Q16 1Q17 2Q17 3Q17 4Q17 $280 $710 $778 $255 $758
7 Freddie Mac Reference pool UPB at issuance Reference pool UPB outstanding 2013 2014 2015 2016 2017 $58 $205 $385 $595 $854 $57 $193 $329 $454 $636 3% 12% 19% 26% 35% Single-family Credit Risk Transfer STACR / ACIS Total Single-family credit guarantee portfolio with transferred credit risk $ Billions Cumulative Single-family transferred credit risk based on outstanding balance at period end $ Billions Outstanding reference pool UPB as a percentage of total Single-family portfolio First loss positions: Retained by Freddie Mac Mezzanine loss positions: Retained by Freddie Mac First loss positions: Transferred to third parties Mezzanine loss positions: Transferred to third parties 12/31/16 3/31/17 6/30/17 9/30/17 12/31/2017 $3.3 $3.6 $4.2 $4.1 $4.6$1.0 $1.1 $1.4 $1.1 $1.5 $1.5 $1.8 $2.2 $2.3 $2.7 $18.3 $19.4 $20.9 $20.3 $21.6
8 Freddie Mac 100% AMI >100% AMI 2013 2014 2015 2016 2017 89% 90% 88% 86% 83% 11% 10% 12% 14% 17% Guarantee Portfolio Mortgage-related Securities Unsecuritized Loans 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 $75 $91 $120 $158 $203$33 $25 $19 $13 $7 $59 $167 $53 $169 $49 $188 $42 $213 $39 $249 Multifamily Financial Highlights and Key Metrics Total portfolio $ Billions Multifamily market and Freddie Mac delinquency rates (%) Multifamily comprehensive income $ Millions Multifamily acquisitions of units by area median income (% of eligible units acquired) +49% (45%) (54%) (64%) (74%) (82%) Note: Totals may not add due to rounding. Freddie Mac (60+ day) FDIC Insured Institutions (90+ day) MF CMBS Market (60+ day) 4Q13 4Q14 4Q15 4Q16 4Q17 0.02 0.15 1.37 4Q16 1Q17 2Q17 3Q17 4Q17 $370 $445 $462 $370 $660 as of 3Q17
9 Freddie Mac K Certificate UPB SB Certificate UPB 2009-2013 2014 2015 2016 2017 $71.5 $21.3 $35.6 $47.3 $56.7 $1.8 $37.4 $3.9 $51.2 $5.5 $62.2 Purchase Volume Subject to Cap Purchase Volume not Subject to Cap 2013 2014 2015 2016 2017 $25.9 $25.9 $30.0 $36.5 $33.7 $2.4 $28.3 $17.3 $47.3 $20.3 $56.8 $39.5 $73.2 Multifamily Key Metrics, continued Multifamily securitization volume $ Billions New funding volume $ Billions Note: Totals may not add due to rounding. Cap = $30.0 Cap = $36.5 Cap = $25.9 9
10 Freddie Mac Mortgage Investments Portfolio Other Investments and Cash Portfolio 4Q16 1Q17 2Q17 3Q17 4Q17 $230 $225 $222 $207 $196 $96 $326 $92 $317 $82 $304 $82 $289 $89 $285 Liquid Securitization Pipeline Less Liquid 4Q16 1Q17 2Q17 3Q17 4Q17 $138 $141 $137 $129 $130 $13 $8 $12 $13 $10 $79 $230 $76 $225 $73 $222 $64 $206 $56 $196 Capital Markets Financial Highlights and Key Metrics Capital Markets mortgage investments portfolio $ Billions Capital Markets comprehensive income $ Billions Capital Markets investments portfolio $ Billions Capital Markets cash window securitization $ Billions -15% (60%) (63%) (62%) (62%) Note: Totals may not add due to rounding. (66%) -13% 4Q16 1Q17 2Q17 3Q17 4Q17 $48 $31 $25 $32 $35 4Q16 1Q17 2Q17 3Q17 4Q17 $3.2 $1.1 $0.7 $4.0 $0.6
11 Freddie Mac Loan modifications¹² Repayment plans¹² Forbearance agreements¹² Short sales and deed-in-lieu of foreclosure transactions¹² 2013 2014 2015 2016 2017 83 67 54 43 45 29 25 21 12 10 12 9 6 5 15 44 168 19 120 13 94 9 69 5 75 Multifamily rental units Purchase borrowers Refinance borrowers 2013 2014 2015 2016 2017 388 413 650 739 820 515 606 677 745 828 1,555 2,458 608 1,627 910 2,237 937 2,421 663 2,311 Housing Market Support Number of families Freddie Mac helped to own or rent a home10 In Thousands Number of single-family loan workouts11 In Thousands Note: Totals may not add due to rounding. Home Retention Actions Foreclosure Alternatives
12 Freddie Mac Endnotes 1 For additional information regarding Freddie Mac s non-gaap financial measures and reconciliations to the comparable amounts under GAAP, see the company s Press Release for the quarter ended December 31, 2017. 2 Excludes the initial $1 billion liquidation preference of senior preferred stock issued to Treasury in September 2008 as consideration for Treasury s funding commitment and the $3.0 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 21, 2017 Letter Agreement. The company received no cash proceeds as a result of issuing the initial $1 billion liquidation preference of senior preferred stock or the $3.0 billion increase on December 31, 2017. 3 For additional information, see Regulation and Supervision / Federal Housing Finance Agency / Capital Standards in the company s Annual Report on Form 10-K for the year ended December 31, 2017. (DFAST: Dodd-Frank Act Stress Test) 4 Based on unpaid principal balances (UPB) of loans and securities. Excludes mortgage-related securities traded, but not yet settled. 5 Primarily Freddie Mac s K Certificate and SB (Small Balance) Certificate transactions. 6 The company s Purchase Agreement with Treasury limits the amount of mortgage assets the company can own and indebtedness it can incur. See the company s Annual Report on Form 10-K for the year ended December 31, 2017 for more information. 7 Represents the company s aggregate indebtedness for purposes of the Purchase Agreement debt cap and primarily includes the par value of other short-term and long-term debt used to fund its business activities. 8 Represents the estimated average rate of guarantee fees for new acquisitions during the period assuming amortization of upfront fees using the estimated life of the related loans rather than the original contractual maturity date of the related loans. Includes the effect of fee adjustments that are based on the price performance of Freddie Mac s PCs relative to comparable Fannie Mae securities. Net of legislated 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011. 9 Includes K Certificates without subordination, which are fully guaranteed and issued without subordinate or mezzanine securities. 10 Based on the company s purchases of loans and issuances of mortgage-related securities. For the periods presented, a borrower may be counted more than once if the company purchased more than one loan (purchase or refinance mortgage) relating to the same borrower. 11 Consists of both home retention actions and foreclosure alternatives. 12 Categories are not mutually exclusive, and a borrower in one category may also be included in another category in the same or another period. For example, a borrower helped through a home retention action in one period may subsequently lose his or her home through a foreclosure alternative in a later period.
13 Freddie Mac Safe Harbor Statements Freddie Mac obligations Freddie Mac s securities are obligations of Freddie Mac only. The securities, including any interest or return of discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation for, certain Freddie Mac securities, including offering circulars and related supplements and agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions or to certain persons. This information is provided for your general information only, is current only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information does not constitute a sufficient basis for making a decision with respect to the purchase or sale of any security. All information regarding or relating to Freddie Mac securities is qualified in its entirety by the relevant offering circular and any related supplements. Investors should review the relevant offering circular and any related supplements before making a decision with respect to the purchase or sale of any security. In addition, before purchasing any security, please consult your legal and financial advisors for information about and analysis of the security, its risks and its suitability as an investment in your particular circumstances. Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include statements pertaining to the conservatorship, the company s current expectations and objectives for its Single-family Guarantee, Multifamily and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends, market share, the effect of legislative and regulatory developments and new accounting guidance, credit quality of loans the company guarantees, the costs and benefits of the company s credit risk transfer transactions, and results of operations and financial condition on a GAAP, Segment Earnings, non-gaap and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company s control. Management s expectations for the company s future necessarily involve a number of assumptions, judgments and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation or regulations and new or amended accounting guidance, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company s Annual Report on Form 10-K for the year ended December 31, 2017, which is available on the Investor Relations page of the company s Web site at www.freddiemac.com/investors and the SEC s Web site at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this presentation.