Management's Discussion and Analysis Introduction

Management's Discussion and Analysis of Financial Condition and Results of
Operations
This Quarterly Report on Form 10-Q includes forward-looking statements that are
based on current expectations, including the effects the COVID-19 pandemic and
the actions taken in response may have on our liquidity, business activities,
financial condition, and results of operations, and that are subject to
significant risks and uncertainties. These forward-looking statements are made
as of the date of this Form 10-Q. We undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this Form 10-Q. Actual results might differ significantly from those described
in or implied by such statements due to various factors and uncertainties,
including those described in the MD&A - Forward-Looking Statements section of
this Form 10-Q and the Introduction and Risk Factors sections of our Annual
Report on Form 10-K for the year ended December 31, 2020, or 2020 Annual Report.
Throughout this Form 10-Q, we use certain acronyms and terms that are defined in
the Glossary of our 2020 Annual Report.
You should read the following MD&A in conjunction with our 2020 Annual Report
and our condensed consolidated financial statements and accompanying notes for
the three and nine months ended September 30, 2021 included in Financial
Statements.
INTRODUCTION
Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to
provide liquidity, stability, and affordability to the U.S. housing market. We
do this primarily by purchasing residential mortgage loans originated by
lenders. In most instances, we package these loans into guaranteed
mortgage-related securities, which are sold in the global capital markets, and
transfer interest-rate and liquidity risks to third-party investors. In
addition, we transfer mortgage credit risk exposure to third-party investors
through our credit risk transfer programs, which include securities- and
insurance-based offerings. We also invest in mortgage loans and mortgage-related
securities. We do not originate loans or lend money directly to mortgage
borrowers.
We support the U.S. housing market and the overall economy by enabling America's
families to access mortgage loan funding with better terms and by providing
consistent liquidity to the single-family and multifamily mortgage markets. We
have helped many distressed borrowers keep their homes or avoid foreclosure and
have helped many distressed renters avoid eviction. We are working with FHFA,
our customers, and the industry to build a better housing finance system for the
nation.
COVID-19 Pandemic Response Efforts
Throughout the COVID-19 pandemic, we have remained focused on serving our
mission and the crucial role we play in the U.S. housing finance system while
supporting the health and safety of our communities, customers, and staff. We
continue to actively monitor the effects of the pandemic and to make decisions
based on guidance from national, state, and local governments and public health
authorities, including the U.S. CDC. More than 95% of our staff continued to
work remotely as of September 30, 2021. We have started planning for our staff
to return to the office. The decision as to timing will be informed by local
infection rates, CDC guidance, and other factors.
We have taken actions to help homeowners with Freddie Mac-owned mortgages who
are directly or indirectly affected by the COVID-19 pandemic stay in their homes
during this challenging time. We have also provided support to the multifamily
mortgage market. For additional information on our support of the mortgage
markets during the pandemic, see MD&A - Our Business Segments - Single-Family,
MD&A - Our Business Segments - Multifamily, MD&A - Risk Management - Credit Risk
- Single-Family Mortgage Credit Risk, and MD&A - Risk Management - Credit Risk -
Multifamily Mortgage Credit Risk.

Freddie Mac 3Q 2021 Form 10-Q 1

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Management's Discussion and Analysis Introduction

Business Results
Consolidated Financial Results


               Net Revenues, Net Income, and Comprehensive Income
                                 (In billions)
                    [[Image Removed: fmcc-20210930_g2.jpg]]

n Net income and comprehensive income were $2.9 billion for 3Q 2021, an
increase of 19% each year-over-year. The increases in both net income and
comprehensive income were driven by higher net revenues and a credit reserve
release in Single-family.
n Net revenues increased 4% year-over-year to $5.2 billion, primarily driven by
higher net interest income, partially offset by a decline in net investment
gains. The increase in net interest income was primarily driven by continued
mortgage portfolio growth and higher average portfolio guarantee fee rates in
Single-family. The decline in net investment gains was primarily due to lower
gains from mortgage loan purchase and securitization activities in Multifamily
as a result of lower favorable impacts from changes in market spreads.

                                   Net Worth
                                 (In billions)
                    [[Image Removed: fmcc-20210930_g3.jpg]]

n Net worth was $25.3 billion as of September 30, 2021, up from $16.4 billion
as of December 31, 2020. The increases in net worth reflected above through June
30, 2021 have been added to the aggregate liquidation preference of the senior
preferred stock, and the increase in net worth during 3Q 2021 will be added on
December 31, 2021. For more information, see MD&A - Introduction - Business
Results - Conservatorship and Government Support for Our Business.

Freddie Mac 3Q 2021 Form 10-Q 2

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Management's Discussion and Analysis Introduction

Market Liquidity

              Market Liquidity
                                 (In thousands)

[[Image Removed: fmcc-20210930_g4.jpg]]
We support the U.S. housing market by executing our Charter Mission to provide
liquidity and help maintain credit availability for new and refinanced
single-family mortgages as well as for rental housing. We provided $318 billion
in liquidity to the mortgage market in 3Q 2021, which enabled the financing of
nearly 1.2 million home purchases, refinancings, and rental units.

Freddie Mac 3Q 2021 Form 10-Q 3

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Management's Discussion and Analysis Introduction

Portfolio Balances



                               Mortgage Portfolio
            (UPB in billions)[[Image Removed: fmcc-20210930_g5.jpg]]

                             Investments Portfolio
                               (UPB in billions)

[[Image Removed: fmcc-20210930_g6.jpg]]

n  Our mortgage portfolio increased 21% year-over-year to $3,086 billion, driven
by a 23% increase in our single-family mortgage portfolio and a 10% increase in
our multifamily mortgage portfolio.
l  The growth in our single-family mortgage portfolio was primarily driven by
higher new business activity. Additionally, continued house price appreciation
contributed to new business acquisitions having a higher average loan size
compared to older vintages that continued to run off.
l  The growth in our multifamily mortgage portfolio was primarily driven by
ongoing loan purchase and securitization activity attributable to continued high
demand for multifamily financing.
n  Our investments portfolio decreased 26% year-over-year to $255 billion,
primarily due to a decrease in our mortgage- related investments portfolio.
l  The decrease in our mortgage-related investments portfolio was driven by
asset sales to comply with FHFA instructions to reduce our agency MBS and CMO
portfolios. For more information on limits on our mortgage-related investments
portfolio, see MD&A - Our Portfolios - Investments Portfolio - Mortgage-Related
Investments Portfolio.
l  The decrease in our other investments portfolio was driven primarily by a
decline in our custodial trust account due to lower loan prepayments.
Freddie Mac 3Q 2021 Form 10-Q         4

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Management's Discussion and Analysis Introduction

Credit Risk Transfer

            Single-Family Mortgage Portfolio with Credit Enhancement
                               (UPB in billions)
                    [[Image Removed: fmcc-20210930_g7.jpg]]
             Multifamily Mortgage Portfolio with Credit Enhancement
                               (UPB in billions)
                    [[Image Removed: fmcc-20210930_g8.jpg]]

In addition to transferring interest-rate and liquidity risk to third-party
investors through our securitization activities, we engage in various credit
enhancement arrangements to reduce our credit risk exposure. We transfer a
portion of the credit risk, primarily on recently acquired loans, through our
CRT programs. We also reduce our credit risk exposure through other credit
enhancement arrangements, primarily primary mortgage insurance. See MD&A - Risk
Management - Credit Risk for additional information on our credit enhancements
and CRT programs.
Conservatorship and Government Support for Our Business

Since September 2008, we have been operating in conservatorship, with FHFA as
our Conservator. The conservatorship and related matters significantly affect
our management, business activities, financial condition, and results of
operations. Our future is uncertain, and the conservatorship has no specified
termination date. We do not know what changes may occur to our business model
during or following conservatorship, including whether we will continue to
exist.
In connection with our entry into conservatorship, we entered into the Purchase
Agreement with Treasury, under which we issued Treasury both senior preferred
stock and a warrant to purchase common stock. The senior preferred stock and
warrant were issued as an initial commitment fee in consideration for Treasury's
commitment to provide funding to us under the Purchase Agreement. Our Purchase
Agreement with Treasury is critical to keeping us solvent and avoiding the
appointment of a receiver by FHFA under statutory mandatory receivership
provisions. We believe that the support provided by Treasury pursuant to the
Purchase Agreement currently enables us to have adequate liquidity to conduct
normal business activities.
The Purchase Agreement includes significant restrictions on our business
activities, including limits on our secondary market activities; our
single-family and multifamily loan acquisitions; the amount of indebtedness we
can incur; the size of our mortgage-related investments portfolio; and our
ability to pay dividends, transfer certain assets, raise capital, pay down the
liquidation preference of the senior preferred stock, and exit conservatorship.
In September 2021, certain requirements in the Purchase Agreement related to our
secondary market activities and single-family and multifamily loan acquisitions
were suspended. For additional information on this suspension of requirements,
see MD&A - Regulation and Supervision - Legislative and Regulatory Developments
- September 2021 Letter Agreement with Treasury.
Treasury, as the holder of the senior preferred stock, is entitled to receive
cumulative quarterly cash dividends, when, as, and if declared by the Board of
Directors. The dividends we have paid to Treasury on the senior preferred stock
have been declared by, and paid at the direction of, the Conservator, acting as
successor to the rights, titles, powers, and privileges of the Board.
Freddie Mac 3Q 2021 Form 10-Q         5

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Management's Discussion and Analysis Introduction

Under the August 2012 amendment to the Purchase Agreement, our cash dividend
requirement each quarter is the amount, if any, by which our Net Worth Amount at
the end of the immediately preceding fiscal quarter, less the applicable Capital
Reserve Amount, exceeds zero. Pursuant to the January 2021 Letter Agreement, the
applicable Capital Reserve Amount is the amount of adjusted total capital
necessary to meet the capital requirements and buffers set forth in the ERCF.
This Capital Reserve Amount will remain in effect until the last day of the
second fiscal quarter during which we have reached and maintained such level of
capital (the Capital Reserve End Date). As a result of increases in the
applicable Capital Reserve Amount since December 2017, we have been able to
retain earnings and build capital, but the increases in our Net Worth Amount
have been, or will be, added to the aggregate liquidation preference of the
senior preferred stock. If for any reason we were not to pay our dividend
requirement on the senior preferred stock in full in any future period until the
Capital Reserve End Date, the unpaid amount would be added to the liquidation
preference and the applicable Capital Reserve Amount would thereafter be zero.
This would not affect our ability to draw funds from Treasury at the request of
FHFA, our Conservator, under the Purchase Agreement. After the Capital Reserve
End Date, we will be subject to a new periodic cash dividend requirement, as
well as a periodic commitment fee to be agreed upon with Treasury in
consultation with the Chairman of the Federal Reserve.
The graphs below show our net worth, the liquidation preference of the senior
preferred stock, the remaining amount of Treasury's funding commitment to us,
the cumulative senior preferred stock dividends we have paid to Treasury, and
the cumulative funds we have drawn from Treasury pursuant to its funding
commitment.

                     Net Worth, Liquidation Preference, and
                          Treasury Funding Commitment
                                 (In billions)
                    [[Image Removed: fmcc-20210930_g9.jpg]]
                          Draws and Dividend Payments

                                 (In billions)
                    [[Image Removed: fmcc-20210930_g10.jpg]]
Pursuant to the Purchase Agreement and terms of the senior preferred stock:
n  Our Net Worth Amount was $25.3 billion as of September 30, 2021, up from
$22.4 billion as of June 30, 2021. As our Net Worth Amount as of June 30, 2021
was below the amount necessary to meet the capital requirements and buffers set
forth in the ERCF, we did not have a dividend requirement to Treasury on the
senior preferred stock for 3Q 2021, and we will not have a dividend requirement
on the senior preferred stock until we reach such capital levels.
n  The liquidation preference of the senior preferred stock increased from $91.4
billion on June 30, 2021 to $95.0 billion on September 30, 2021 based on the
$3.6 billion increase in our Net Worth Amount during 2Q 2021, and will increase
to $98.0 billion on December 31, 2021 based on the $2.9 billion increase in our
Net Worth Amount during 3Q 2021.
n  At September 30, 2021, our assets exceeded our liabilities under GAAP;
therefore, no draw is being requested from Treasury under the Purchase
Agreement.
Freddie Mac 3Q 2021 Form 10-Q         6

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Management's Discussion and Analysis Market Conditions and Economic Indicators

MARKET CONDITIONS AND ECONOMIC INDICATORS
The following graphs and related discussions present certain market and
macroeconomic indicators that can significantly affect our business and
financial results.
Interest Rates(1)


         Quarterly Ending Rates[[Image Removed: fmcc-20210930_g11.jpg]]
(1) 30-year PMMS interest rates are as of the last week in each quarter. SOFR
interest rates are 30-day average rates.
n  The 30-year Primary Mortgage Market Survey (PMMS) interest rate is indicative
of what a consumer could expect to be offered on a first-lien prime conventional
conforming home purchase mortgage with an LTV of 80%. Increases (decreases) in
the PMMS rate typically result in decreases (increases) in refinancing activity
and total originations.
n  Changes in the 10-year LIBOR interest rate and other benchmark rates can
significantly affect the fair value of our financial instruments. We have
elected hedge accounting for certain assets and liabilities in an effort to
reduce GAAP earnings variability attributable to changes in benchmark interest
rates.
n  SOFR is a benchmark rate for secured overnight dollar-denominated financing,
identified by certain banking regulators and market participants as a potential
replacement for LIBOR. SOFR affects the interest earned on our short-term
investments.
n  Changes in the 3-month LIBOR rate and SOFR rate affect the interest expense
on our short-term funding.

Unemployment Rate and Monthly Net New Jobs

[[Image Removed: fmcc-20210930_g12.jpg]]Source: U.S. Bureau of Labor Statistics.

n Changes in the national unemployment rate can affect several market factors,
including the demand for single-family and multifamily housing and loan
delinquency rates.
n The unemployment rate has declined three percentage points from 3Q 2020 to 3Q
2021, but the labor market has not yet fully recovered from the COVID-19
pandemic. The pace of job growth also declined quarter-over-quarter.

Freddie Mac 3Q 2021 Form 10-Q 7

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Management's Discussion and Analysis Market Conditions and Economic Indicators

Single-Family Housing and Mortgage Market Conditions

                 U.S. Single-Family Home Sales and House Prices

[[Image Removed: fmcc-20210930_g13.jpg]]Sources: National Association of
Realtors, U.S. Census Bureau, and Freddie Mac House Price Index.

                    U.S. Single-Family Mortgage Originations
                               (UPB in billions)
                    [[Image Removed: fmcc-20210930_g14.jpg]]
Source: Inside Mortgage Finance. 3Q 2021 U.S. single-family mortgage
originations data is not yet available.
n  Despite low mortgage rates, home sales decreased year-over-year driven by an
increase in house prices and ongoing uncertainty with respect to the COVID-19
pandemic. We expect home sales for full-year 2022 to remain relatively flat
compared to full-year 2021.
n  Single-family house prices increased 3.8% during 3Q 2021, compared to an
increase of 4.3% during 3Q 2020. Although supply constraints could continue to
exert pressure on house prices for the remainder of 2021 and into 2022, we
expect house price growth to slow in 2022.

n U.S. single-family loan origination volumes increased to $1,280 billion in 2Q
2021 from $990 billion in 2Q 2020 as a result of low average mortgage interest
rates, higher home sales, and increasing house prices. We expect total
originations to decrease in 2022 primarily due to a decrease in refinance
originations driven by higher mortgage rates.

Freddie Mac 3Q 2021 Form 10-Q 8

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Management's Discussion and Analysis Market Conditions and Economic Indicators

Multifamily Housing and Mortgage Market Conditions

             Apartment Vacancy Rates and Change in Effective Rents

[[Image Removed: fmcc-20210930_g15.jpg]]Source: Reis.

                    Apartment Completions and Net Absorption
                              (Units in thousands)
                    [[Image Removed: fmcc-20210930_g16.jpg]]
Source: For 3Q20 - 2Q21, "Reis National Performance Trends Report." For
3Q21,"Reis 3Q 2021 Construction First Glance." 3Q21 net absorption data is not
yet available.
n  Vacancy rates decreased during 3Q 2021 and are returning to pre-pandemic
levels, which are well below the average of 5.3% from 2000 to 3Q 2021. The
decrease in vacancy rates was driven by higher demand for multifamily housing as
a result of improving economic conditions. However, these rates may be impacted
in the future by the expiration of COVID-19 relief programs and eviction
moratoriums as well as ongoing uncertainty driven by the COVID-19 variants.
n  Effective rent growth (i.e., the average rent paid by the renter over the
term of the lease, adjusted for concessions by the landlord and costs borne by
the renter) was positive at a national level and in all of the major geographic
markets in 3Q 2021, representing the highest quarterly national growth rate on
record.
n  Multifamily property prices grew 5.3% in 3Q 2021, as investors continued to
believe there was a need for additional rental housing in the U.S. and the
overall investment environment remained attractive due to low interest rates.

n While final rates are not yet available, we expect net absorption rates to
have increased markedly during 3Q 2021 driven by improving economic conditions,
pent-up demand, and rising income levels. We further expect net absorptions to
match or exceed completions for full-year 2021.

Freddie Mac 3Q 2021 Form 10-Q         9

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Management's Discussion and Analysis Market Conditions and Economic Indicators

Mortgage Debt Outstanding

                    Single-Family Mortgage Debt Outstanding
                               (UPB in billions)

[[Image Removed: fmcc-20210930_g17.jpg]]Source: Federal Reserve Financial
Accounts of the United States of America. 3Q 2021 U.S. single-family mortgage
debt outstanding data is not yet available.

                     Multifamily Mortgage Debt Outstanding
(UPB in billions)
[[Image Removed: fmcc-20210930_g18.jpg]]Source: Federal Reserve Financial
Accounts of the United States of America. 3Q 2021 U.S. multifamily mortgage debt
outstanding data is not yet available.
n  U.S. single-family mortgage debt outstanding is expected to increase
year-over-year, primarily driven by house price appreciation. An increase in
U.S. single-family mortgage debt outstanding typically results in the growth of
our single-family mortgage portfolio.

n While the multifamily mortgage market grew, our share of multifamily mortgage
debt outstanding decreased slightly in 2Q 2021 due to ongoing competition and a
reduced FHFA multifamily loan purchase cap for 2021.

Freddie Mac 3Q 2021 Form 10-Q 10

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Management's Discussion and Analysis Market Conditions and Economic Indicators

Delinquency Rates


                    Single-Family Serious Delinquency Rates

[[Image Removed: fmcc-20210930_g19.jpg]]
Source: National Delinquency Survey from the Mortgage Bankers Association. 3Q
2021 total mortgage market rate is not yet available.

                         Multifamily Delinquency Rates
[[Image Removed: fmcc-20210930_g20.jpg]]Source: Freddie Mac, FDIC Quarterly
Banking Profile, Intex Solutions, Inc., and Wells Fargo Securities (Multifamily
CMBS market, excluding REOs), American Council of Life Insurers (ACLI). The 3Q
2021 delinquency rates for FDIC insured institutions and ACLI investment
bulletin are not yet available.
n  Our single-family serious delinquency rate is based on the number of loans in
our single-family mortgage portfolio that are three monthly payments or more
past due or in the process of foreclosure. We report single-family loans in
forbearance as delinquent during the forbearance period to the extent that
payments are past due based on the loans' original contractual terms,
irrespective of the forbearance plan.
n  Our single-family serious delinquency rate declined quarter-over-quarter and
year-over-year, due primarily to an increase in the number of borrowers exiting
forbearance and completing loan workout solutions that return their mortgages to
current status. 54% of the seriously delinquent loans at September 30, 2021 were
covered by credit enhancements that are designed to partially reduce our credit
risk exposure to these loans.
n  While our single-family serious delinquency rate has declined since 3Q 2020,
we expect the rate to remain elevated compared to pre-pandemic levels as a
result of the COVID-19 pandemic and the forbearance programs we are offering in
response. Our single-family serious delinquency rate as of February 29, 2020 was
0.60%.




n  Our multifamily delinquency rate is based on the UPB of loans in our
multifamily mortgage portfolio that are two monthly payments or more past due or
in the process of foreclosure. We report multifamily loans in forbearance as
current as long as the borrowers are in compliance with their forbearance
agreement, including the agreed-upon repayment plan.
n  While our multifamily delinquency rate remained above pre-pandemic levels,
this rate was slightly down quarter-over-quarter and year-over-year, and remains
low compared to many other market participants.
n  Multifamily delinquency rates could increase in the near term due to the
continuing effects of the COVID-19 pandemic. However, our credit enhancement
coverage will partially reduce our credit risk exposure from these loans. For
additional information on our delinquency and forbearance rates and credit
enhancement coverage, see MD&A - Risk Management - Credit Risk - Multifamily
Mortgage Credit Risk.
Freddie Mac 3Q 2021 Form 10-Q         11

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