freddie mac investor presentation · © freddie mac 8 on august 17, 2012, the conservator, acting...
TRANSCRIPT
Freddie Mac Investor Presentation
November 2018
© Freddie Mac 2
A Better Freddie Mac …and a better housing finance system
For families
...innovating to improve the liquidity, stability and
affordability of mortgage markets
For customers
...competing to earn their business
For taxpayers
...reducing their exposure to mortgage risks, innovating to
access private capital
© Freddie Mac 3
For more information about Freddie Mac and its business, please see the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K for the year ended December 31, 2017, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors and the Securities and Exchange Commission’s website at www.sec.gov.
Section Page
I
II
III
IV
V
VI
Freddie Mac Overview
U.S. Housing Market
Credit Guarantee Business
Multifamily Business
Capital Markets Business
Debt Funding Program
4
14
18
23
29
31
VII Single-family Securitization 38
Table of Contents
© Freddie Mac 4
Freddie Mac Overview
© Freddie Mac 5
“A primary purpose is to provide stability in the secondary market for home mortgages including mortgages securing housing for low and moderate income families. This can be accomplished through both portfolio purchasing and selling activities, as well asthrough the securitization of home mortgages.”1
U.S. Residential
Mortgage Market
Mortgage
Investments
Mortgage
Securitization Freddie Mac
Global Capital
Markets
Mortgage-backed
Securities
Debt
Securities
Freddie Mac’s Mission
© Freddie Mac 6
▪ We continue to operate under the conservatorship that commenced on September 6, 2008, under the direction of the Federal Housing Finance Agency (FHFA) as our Conservator.
▪ FHFA as our Conservator:
» Assumed all powers of the Board, management and shareholders
» Has directed and will continue to direct certain of our business activities and strategies
» Delegated certain authority to our Board of Directors to oversee, and to management to conduct, day-to-day operations
▪ Our ability to access funds from the Treasury under the Purchase Agreement is critical to keeping us solvent.
▪ There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified termination date.
▪ Our future structure and role will be determined by the Administration and Congress, and it is possible, and perhaps likely, that there will be significant changes beyond the near term.
Conservatorship
© Freddie Mac 7
FHFA Strategic Plan – Fiscal Years 2018 - 2022
▪ On January 29, 2018, FHFA released the FHFA Strategic Plan: Fiscal Years 2018-2022,
which reflects the Agency’s priorities as regulator and conservator of Freddie Mac and
Fannie Mae (the Enterprises).
▪ FHFA’s Strategic Plan sets forth three goals for the Agency:
» Ensure safe and sound regulated entities
» Ensure liquidity, stability and access in housing finance
» Manage the Enterprises’ ongoing conservatorships
▪ FHFA, acting as conservator and regulator, must follow the mandates assigned to it by
statute and oversee the missions assigned to the Enterprises by their charters until such
time as Congress revises those mandates and missions.
© Freddie Mac 8
▪ On August 17, 2012, the Conservator, acting on our behalf, and Treasury entered into a third
amendment to the Purchase Agreement.
▪ The principal changes included:
» Replacement of the fixed dividend rate with a net worth sweep dividend beginning in the
first quarter of 2013
» Accelerated wind-down of the retained portfolio
» Submission of an annual risk management plan to Treasury
» Suspension of the periodic commitment fee
Amended Purchase Agreement
© Freddie Mac 9
▪ On December 21, 2017, the Conservator, acting on our behalf, entered into a Letter
Agreement with Treasury.
▪ The principal changes pursuant to the Letter Agreement are as follows:
» The senior preferred stock dividend for the dividend period from October 1, 2017
through and including December 31, 2017 was reduced to $2.25 billion.
» The applicable Capital Reserve Amount from January 1, 2018 and thereafter will be
$3.0 billion, rather than zero as previously provided. If for any reason we were not to
pay our dividend requirement on the senior preferred stock in full in any future period,
the applicable Capital Reserve Amount would thereafter be zero.
» The liquidation preference of the senior preferred stock increased by $3.0 billion, to
$75.3 billion, on December 31, 2017.
2017 Letter Agreement
© Freddie Mac 10
2018 Conservatorship Scorecard
Source: FHFA
▪ Continue efforts to increase access to single-family mortgage credit for creditworthy borrowers, including underserved segments of the market.
▪ Finalize post-crisis loss mitigation activities.
▪ Continue to responsibly support the Neighborhood Stabilization Initiative.
▪ Assess the current mortgage servicing business model and develop plans to support ongoing liquidity in the mortgage servicing market.
▪ Continue to gather and report to FHFA information needed to inform policy decisions regarding single-family rentals, and assist FHFA in assessing single-
family rental strategies.
▪ Develop plans to further support liquidity in the multifamily workforce housing market and consider market cost differences.
▪ Manage the dollar volume of new multifamily business to remain at or below $35 billion (excluding loans in affordable and underserved market segments).
Maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to
foster liquid, efficient, competitive, and resilient national housing finance markets. (40%)
Reduce taxpayer risk through increasing the role of private capital in the mortgage market. (30%)
▪ Single-family Credit Risk Transfers:
» Transfer a meaningful portion of credit risk on at least 90 percent of the unpaid principal balance (UPB) of newly acquired single-family mortgages in
loan categories targeted for credit risk transfer, subject to FHFA target adjustments as may be necessary to reflect market conditions and economic
considerations.
» For 2018, targeted single-family loan categories include: non-HARP, fixed-rate mortgages with terms greater than 20 years and loan-to-value (LTV)
ratios above 60 percent.
» Report to FHFA the actual amount of underlying mortgage credit risk transferred.
▪ Multifamily Credit Risk Transfers: Transfer a meaningful portion of the credit risk on newly acquired mortgages, subject to FHFA target adjustments as
may be necessary to reflect market conditions and economic considerations. Report to FHFA the actual amount of underlying mortgage credit risk
transferred.
▪ Retained Portfolio: Execute FHFA-approved retained portfolio plans that meet, even under adverse conditions, the annual Preferred Stock Purchase
Agreement (PSPA) requirements and the $250 billion PSPA cap by December 31, 2018. Any sales should be commercially reasonable transactions that
consider impacts to the market, borrowers, and neighborhood stability.
▪ Private Mortgage Insurer Eligibility Requirements (PMIERs 2.0): Evaluate existing PMIERs and whether changes or updates are appropriate.
Build a new single-family infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary
market in the future. (30%)
▪ Common Securitization Platform (CSP) and Single Security Initiative:
» Continue working with FHFA, Fannie Mae, and Common Securitization Solutions, LLC (CSS) to implement the Single Security Initiative on the CSP.
» Incorporate certain design principles in developing the CSP such as allowing for the integration of additional market participants in the future.
» Continue to work with Fannie Mae and CSS to obtain and use input from the Single Security Initiative/CSP Industry Advisory Group.
» Work proactively with the industry to help market participants prepare for the implementation of the Single Security Initiative.
▪ Provide active support for Mortgage Data Standardization Initiatives.
© Freddie Mac 11
Market Presence
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018
Enterprises &
Ginnie Mae62% 95% 97% 96% 98% 99% 98% 95% 95% 97% 96% 95%
Private Label 38% 5% 3% 4% 2% 1% 2% 5% 5% 3% 4% 5%
$1.9
$1.2
$1.7
$1.4$1.2
$1.7 $1.6
$1.0
$1.3$1.5
$1.4
$0.9
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018
Freddie Mac Fannie Mae Ginnie Mae Private Label
MBS Issuance Volume$ Trillions
Data as of October 13, 2018.
Source: Inside MBS & ABS.
*
*
© Freddie Mac 12
$71.3
$0.3
$71.6
$96.5
$5.0$10.9
$1.6
$114.0
2008 - 2015 2016 2017 YTD 2018 Cumulative Total
Draw Requests from Treasury Dividend Payments to Treasury
Treasury Draw Requests and Dividend Payments
Treasury draw requests and dividend payments$ Billions
Data as of September 30, 2018.
Note: Totals may not add due to rounding.
2
*
*
© Freddie Mac 1313© Freddie Mac
Number of single-family loan workouts4
In Thousands
Housing Market Support
Number of families Freddie Mac helped
to own or rent a home3
In Thousands
Note: Totals may not add due to rounding.
*As of September 30.
Home
Retention
Actions
Foreclosure
Alternatives
5
5
5
5
© Freddie Mac 14
U.S. Housing Market
15© Freddie Mac
Source: Freddie Mac September 2018 Economic and Housing Research Outlook.
Refi
Purchase
Total value of U.S. real estate held by households7
$ Trillions
Source: Federal Reserve Board’s Flow of Funds Accounts, Table B. 101. Data as of June 30, 2018.
Annual Single-family mortgage originations6
$ Trillions
Total cash-out dollars as a percentage of aggregate
refinanced originations UPB
Source: Freddie Mac Economic & Housing Research Quarterly Refinance Statistics 2Q18.
Total home equity cashed out $ Billions
Source: Freddie Mac Economic & Housing Research Quarterly Refinance Statistics 2Q18.
Housing Market Trends
Value of Housing Stock
$10.2
$15.2
$25.4
Home Equity
Single-family Mortgage Debt Outstanding
0
5
10
15
20
25
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Home Equity
Single-family Mortgage Debt Outstanding
6.0%
31.2%
8.1%
2.6%
8.0%
21.8%
2Q03 2Q06 2Q09 2Q12 2Q15 2Q18
$38.8
$84.0
$24.7
$5.9 $11.7
$15.8
2Q03 2Q06 2Q09 2Q12 2Q15 2Q18
0.60.8 0.8 0.9
1.0 1.1 1.2 1.3
1.5 1.1
0.5
0.8
1.0 0.7 0.5 0.4
2.1T
1.9T
1.3T
1.8T
2.1T
1.8T1.6T 1.7T
2012 2013 2014 2015 2016 2017 2018F 2019F
16© Freddie Mac
Vacant Housing Over/Undersupply8
Housing Market Trends, continued
Source: Freddie Mac calculations using US Census Bureau data. 2018 data as of August 31, 2018.
Source: US Census Bureau, Freddie Mac September 2018 Economic and Housing Research
Outlook.
Note: Dashed line indicates forecasted data
Source: US Census Bureau, Freddie Mac September 2018 Economic and Housing Research
Outlook
Note: Dashed line indicates forecasted data
Source: US Census Bureau
Note: Data as of June 30, 2018.
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
1999 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 2015 20172018F
Mill
ion U
nits
Home Sales (Existing + New)
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Housing Starts (millions)
62
63
64
65
66
67
68
69
70
Homeownership Rate (percent)
Homeownership rates are low despite
low unemployment levels:
• Many more millennial renters
• High student debt loan burden
• Limited access to credit
• Affordability
• Prices increasing quicker than wages
64.3%
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015 2016 2018
For-Rent Inventory(Millions)
For-Sale Inventory(Millions)
-0.8
© Freddie Mac 1717© Freddie Mac
National home prices have surpassed the 2006 peak
Key Economic Indicators
National home prices increased by an average of 5.9% over the past year
Quarterly ending interest rates
Unemployment rate and job creation
Freddie Mac House Price Index (December 2000 = 100)
(2006 Peak)
Data as of September 30, 2018.
Data as of September 30, 2018.
© Freddie Mac 18
Credit Guarantee Business
© Freddie Mac 19
$106
$122
$1924
$1,827
$2,103
$2,207$2,251
$2,165$2,075
$1,956$1,915 $1,910 $1,942
$2,011$2,098
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018
$ Billions
Outstanding Freddie Mac Mortgage-Related Securities and Other Mortgage-Related Guarantees
Mortgage-Related Investments Portfolio (PCs, REMICs and Other Securitization Products)
Mortgage-Related Investments Portfolio (Non-Freddie Mac Mortgage-Related Securities & Mortgage Loans)
$2,045
Total Mortgage Portfolio
$228
* Data as of September 30, 2018.
Note: Totals may not add due to rounding.
$2,151
*
© Freddie Mac 20
Freddie Mac Share of PC/MBS IssuancesPercent (%)
Freddie Mac’s GSE Market Share
37%
38%
35% 35%
38%
41%
43%
41%
42%
41%
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018
Data as of September 30, 2018.
Source: Freddie Mac and Fannie Mae Monthly Volume Summaries.
.
*
*
© Freddie Mac 21
Data as of September 30 2018.
West
30%
Southwest
14%
North Central
16%
Southeast
16%
Northeast
24%
Freddie Mac’s Single-family Credit Guarantee Portfolio
by Region9
© Freddie Mac 2222© Freddie Mac
Single-family Financial Highlights and
Key Metrics
Single-family segment earnings$ Millions
Credit guarantee portfolio$ Billions
New funding volume$ Billions
Guarantee fees charged on new acquisitions (bps)10
Serious delinquency rates +4% YoY
increase
Note: Totals may not add due to rounding.
(77%) (78%) (79%) (80%) (81%)
© Freddie Mac 23
Multifamily Business
© Freddie Mac 24
0
1
2
3
4
5
6
7
8
9
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 YTD2018
Multifamily Market Rental Vacancy Rates
Percent
4.8%
Data as of September 30, 2018.
Source: Reis U.S. Metro data.
*
*
© Freddie Mac 25
Multifamily Mortgage Originations
Sources: Freddie Mac Form 10-Ks, 10-Qs, FHFA Report to Congress, and Freddie Mac's internal reports, Fannie Mae 10-Ks, 10-Qs, FHFA Report to Congress, and Fannie Mae's Multifamily Monthly New
Business Volumes, American Council of Life Insurers (ACLI), Wells Fargo Securities LLC, Intex Solutions Inc., Mortgage Bankers Association and Freddie Mac internal research.
$250
$269
$295 $305
$-
$50
$100
$150
$200
$250
$300
$350
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017(E)
2018(F)
Multifamily Mortgage Originations $ Billions
Other CMBS Fannie Mae Freddie Mac Life Insurers
© Freddie Mac 2626© Freddie Mac
Multifamily acquisitions of units by area median
income (% of eligible units acquired)
Multifamily Financial Highlights and
Key Metrics
Total portfolio$ Billions
Multifamily market and Freddie Mac delinquency
rates (%)
Multifamily comprehensive income$ Millions
+57% increase
since 2014
(54%) (64%) (74%) (82%) (85%)
Note: Totals may not add due to rounding.
*As of September 30, 2018.
2Q18
© Freddie Mac 2727© Freddie Mac
Multifamily securitization volume11
$ Billions
Multifamily Key Metrics, continued
New funding volume$ Billions
Note: Totals may not add due to rounding.
*As of September 30, 2018.
Cap = $30.0
Cap = $36.5
Cap = $25.9
12
Cap = $35.0
© Freddie Mac 28
Basic K-Deal Transaction Structure
Loans deposited into the
third-party trust by the depositor
Freddie Mac acquires
Guaranteed Bonds13 and
deposits them into a Freddie
Mac trust
Freddie Mac sells
Guaranteed K Certificates
backed by the Guaranteed
Bonds
Senior Bond
Investors
Subordinate Bond
Investors
Mezzanine Bond
Investors
Unguaranteed Mezzanine
Bonds
Unguaranteed Subordinate
Bonds
Freddie Mac sells loans to a
third-party depositor
Freddie Mac securitizes loans via the K-Deal program through the following steps:
▪ The loans are sold to a third-party depositor who places the
loans into a third-party trust.
▪ Private label securities backed by the loans are issued by
the third-party trust.
▪ Freddie Mac purchases and guarantees certain bonds
(“Guaranteed Bonds”13) issued by the third-party trust and
securitizes these bonds via a Freddie Mac trust.
▪ The resulting Freddie Mac guaranteed structured pass-
through certificates (“K Certificates”) are publicly offered via
placement agents.
▪ The unguaranteed mezzanine and subordinate bonds are
issued by the third-party trust and are privately offered to
investors via placement agents.
© Freddie Mac 29
Capital Markets Business
© Freddie Mac 3030© Freddie Mac
$262
Capital Markets cash window securitization$ Billions
Capital Markets comprehensive income$ Billions
Capital Markets Financial Highlights
and Key Metrics
Capital Markets mortgage investments portfolio$ Billions
Capital Markets investments portfolio $ Billions
-13% YoY decrease
(62%) (66%) (66%) (66%)
Note: Totals may not add due to rounding.
(66%)
-9% YoY
decrease
© Freddie Mac 31
Debt Funding Program
© Freddie Mac 32
Freddie Mac’s Total Debt Outstanding14
$ Billions
Instrument Type 2014 2015 2016 2017 YTD 2018*
Short-term Overnight Discount Notes $ - $ 1.0 $ 1.0 $ 1.0 $ 1.0
Reference Bills® & Discount Notes 134.7 103.1 60.1 44.7 32.4
Total Short-term $ 134.7 $ 104.1 $ 61.1 $ 45.7 $ 33.4
Medium-Term Notes (MTN) MTN Callable $ 98.2 $ 96.0 $ 82.8 $ 93.5 $ 92.9
Callables with Expired Options 11.1 12.3 16.0 20.6 17.4
MTN Other 53.8 56.2 59.7 48.3 31.2
Freddie Notes 0.1 - - - -
Total MTN $ 163.2 $ 164.5 $ 158.5 $ 162.3 $ 141.5
Reference Notes® USD Reference Notes® $ 151.7 $ 137.2 $ 118.7 $ 80.0 $ 65.4
€Reference Notes® - - - - -
Total Reference Notes® $ 151.7 $ 137.2 $ 118.7 $ 80.0 $ 65.4
Other Mortgage-Linked Amortizing Notes® $ 0.6 $ 0.5 $ 0.3 $ 0.3 $ 0.2
Structured Agency Credit Risk Debt Notes $ 5.9 $ 11.6 $ 14.5 $ 17.8 $ 17.9
Multifamily Structured Credit Risk Note $ - $ - $ 0.1 $ 0.1 $ 0.1
Subordinated Debt $ 0.6 $ 0.6 $ 0.5 $ 0.5 $ 0.5
Total Debt Outstanding15,16 $ 456.7 $ 418.4 $ 353.7 $ 306.7 $ 259.1
* Data as of October 31, 2018.
Note: Totals may not add due to rounding.
© Freddie Mac 33
Freddie Mac’s Outstanding Debt by Type17
$321 $315 $326 $317
$304 $297 $282 272 279 279 283 283 281
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
Discount Notes Term Callable Debt Term Bullet Debt Other
$ Billions
$407
Debt Limit
$34616
34© Freddie Mac
Debt Maturity Profile18
$ Billions
42
53
1
74 5
11
7
23 23
13 14
2 1 2
811
13
15
6
19
6
73
3 2
1
5
20
4Q18 1Q19 2Q19 3Q19 4Q19 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+
Short-term Long-term Callable Long-term Non-callable
© Freddie Mac 35
Short-term Debt Balances19
Total Short-term Debt OutstandingTotal Short-term Debt Outstanding
as a % of Total Debt Outstanding
$104
$78
$57
$50
0
20
40
60
80
100
120
3Q15 3Q16 3Q17 3Q18
$ Billions
18%
10%
15%
20%
25%
30%
3Q15 3Q16 3Q17 3Q18
Average= 24%
© Freddie Mac 36
Freddie Mac Callable Debt Issued and Called20
Callable Debt
$6
$4$2
$9
$6 $5
$9
$5 $5
$2 $2$4 $4 $5
$1$3 $2
$1$3
$4$2
$3 $4 $4$2
($13)
($2)($0) ($0) ($0) ($1)
($5)
($2) ($3) ($3)
($7)
($3)($2)
($1) ($0) ($0) ($1) ($0) ($1) ($1) ($0) ($0) ($0) ($0) ($0)
(30)
(20)
(10)
0
10
20
30
Oct-16 Apr-17 Oct-17 Apr-18 Oct-18
Called
$ Billions
Issued
© Freddie Mac 37
S&P Moody’s Fitch
Senior Long-term
Debt
AA+ Aaa AAA
Short-term Debt A-1+ P-1 F1+
Subordinated Debt AA- Aa2 AA-
Preferred Stock21 D Ca C/RR6
Outlook Stable Stable Stable
Note: Data as of February 1, 2018.
▪ Freddie Mac’s credit ratings and outlooks are primarily based on the support the company
receives from Treasury, and therefore, are affected by changes in the credit ratings and
outlooks of the U.S. government.
Credit Ratings
© Freddie Mac 38
Single-family Securitization
© Freddie Mac 39
Composition of Bond Market Debt Outstanding
Note: Percentages may not add to 100% due to rounding.
Source: Securities Industry and Financial Markets Association. Data as of November 7, 2018.
Outstanding Public and Private Bond Market Debt ($T) – $41.9 Trillion
Municipal($3.9)
9%
Treasury($15.0)
36%
Agency Debt($1.9)
5%
MBS($9.5)23%Asset-Backed
($1.6)4%
Money Market($1.1)
3%
Corporate Debt($9.1)22%
22
23
27
26
25
24
© Freddie Mac 40
Freddie Mac’s Mortgage-related Securities Products
Mortgage-related Securities Products Outstanding
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018*
$ Billions
REMICs Reference REMIC T-Deals/WLR Strips PCs
* Data as of September 30, 2018.
© Freddie Mac 4141© Freddie Mac
Single-family Credit Risk Transfer –
STACR / ACIS / Deep MI
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
*As of September 30, 2018.
42© Freddie Mac
Source: Freddie Mac, Fannie Mae, Federal Reserve, Inside MBS & ABS, National Credit Union Administration and the U.S. Treasury Department.
Data as of June 30, 2018.
Estimated Institutional Holdings of Agency MBS28
17991721
972 938
780
250190 170
10023
US Banks NY Fed Other Foreign MutualFunds
REITs GSEs Life Insurers CreditUnions
State/LocalGovts
$ Billions
43© Freddie Mac
Estimated Demand for Agency Mortgage-related
Securities29
Sources: Federal Reserve Board, Freddie Mac and Fannie Mae Monthly Volume Summaries, Treasury International Capital data, Federal Home Loan Banks, U.S. Treasury Department, Federal Reserve
Bank of New York.
$ Billions
(100)
(50)
0
50
100
150
200
Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
Comm Bank PT/CMO Foreign Agency Treasury Fed
© Freddie Mac 44
(30)
(20)
(10)
0
10
20
30
Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
Japan China S. Korea Hong Kong Taiwan Singapore
Source: Treasury International Capital data.
$ Billions
Estimated Asia Net Flows into Agencies30
© Freddie Mac 45
Note: Percentages may not add to 100% due to rounding. Data as October 31, 2018.
Composition of Collateral Underlying
Freddie Mac REMICs
30-year83%
15-year5% 20-year
6% Other4% ARM
2%
Balloon<1%
© Freddie Mac 46
Sources: Freddie Mac and eMBS.
Freddie Mac and Fannie Mae Aggregate Fixed-rate
Prepayment Speeds31
0
5
10
15
20
25
30
35
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18
1-Month CPR (%)
Freddie Mac CPR Fannie Mae CPR
11%13%
19%
12%
11% 11%
8%
10%
19%
12%
11%
12%
© Freddie Mac 47
Multi-lender Giant Issuance
as Percentage of Total Fixed-rate Issuance
0
10
20
30
40
50
60
70
80
90
100
0
10,000
20,000
30,000
40,000
50,000
60,000
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18
Percent$ Millions
Total Freddie Mac Fixed-rate Issuance Excluding Multi-lender Giant Issuance
Total Freddie Mac Multi-lender Giant Issuance
Total Multi-lender Giant Issuance Volume as % of Total Fixed-rate Issuance
Total Multi-lender Giant Issuance as % of Total Fixed-rate Non-specified Issuance
© Freddie Mac 48
Freddie Mac Fixed-rate Issuance –
Percentage From Top 5 Sellers32
0
10
20
30
40
50
60
70
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18
Percent
49© Freddie Mac
Freddie Mac Collateral DescriptionBloomberg
Ticker
Outstanding
Balance*
REMICs
Gold and 75-Day PCs
FHR
$311.8B
ReREMICs of Existing
Multiclass Securities$47.3B
Reference REMICs with Guaranteed Final Gold PCs FHRR $1.1B
T-Deals
Freddie Mac Owned
New or Seasoned
Private Label ABS
FSPC $4.7B
Strips Gold and 75-Day PCs
FHS$15.9B
Excess Servicing Assets $9.7B
Freddie Mac Single-family Structured Finance
Securities33
* Reflects issuance through September 30, 2018.
50© Freddie Mac
Deal Structure Options – Agency REMICs
REMIC Program Feature Benefit
Callable PCs (CPC)Pass-through securities that are backed by a Giant PC and subject to a call option. In the event of a
call, the callable class is paid off at par and the call class receives the underlying Giant PC.
Callable REMIC Classes (CRC)
Pass-through securities that are backed by a REMIC class and subject to a call option. In the event of
a call, the callable class is paid off at par and the call class receives the underlying REMIC class.
Callable REMIC Classes may also be backed by a callable class of CPCs and will be retired upon
redemption of the collateral.
Guaranteed Maturity Class (GMC)
GMC is a feature added to a REMIC class to provide a stated legal maturity date, at par, guaranteed by
Freddie Mac. GMCs have a final payment date earlier than the latest date by which these Classes might
be retired solely from payments on their underlying assets.
IO/PO Strips
• Floater/Inverse Floater
Combinations
Combinations of Floating Rate, Inverse Floating Rate, Floating Rate IO, Inverse Floating Rate IO
certificates that permit holders to exchange classes for combinations of floating rate and inverse floater
rate classes with various margins and caps.
• Gold MACSStrip securities that are exchangeable for other classes of the same series having different class
coupons or coupon formulas.
Excess IO Strips (XSIO)Interest-only securities backed by Excess Servicing Spread held by mortgage servicers. Loan
characteristics for the loans backing each issued XSIO security are pooled to mirror PC pooling
practices.
Modifiable And Combinable REMICs
(MACR)
Holders of a MACR Class can exchange all or part of the class for a predetermined proportionate
interest in other specified REMIC or MACR classes, and vice versa.
34
51© Freddie Mac
Deal Structure Options, continued
REMIC Program Feature Benefit
REMIC UnwindsPermits the holder of both the REMIC Residual class and 100% of all outstanding REMIC classes
covered by the Residual class to exchange their REMIC interests for all collateral backing the REMIC.
ReREMICPermits the holder of any portion of an issued REMIC class to use that class as collateral to back a
subsequent REMIC.
Retail ClassesRetail classes are designed primarily for individual investors and are typically issued and receive
principal in $1,000 increments.
Reverse REMICPermits the holder of a pro-rata portion of all outstanding REMIC classes within a REMIC group to
recombine their interests for a pro-rata portion of the underlying REMIC collateral.
Single Group Residual
Simplifies the REMIC Unwind feature for the holder of the Residual class and 100% of all outstanding
REMIC classes issued a single REMIC Group. Holder exchanges its interests for all collateral backing
the specific REMIC Group.
Syndicated IO/PO StripsCollateral is stripped into separate Interest-only and Principal-only securities with transactions
underwritten and distributed by a syndicate of dealers.
© Freddie Mac 52
Endnotes
1 House of Representatives report on FIRREA, No. 54, 101st Congress, 1st Session, Part 3 at 2 (1989).
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 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.
4 Consists of both home retention actions and foreclosure alternatives.
5 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.
6 Estimates and forecasts by the Economic and Housing Research Department do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating
Freddie Mac's business prospects or expected results, and are subject to change without notice.
7 Value of U.S. housing stock includes homes with and without underlying mortgages. U.S. home equity is the difference between the value of the U.S. housing stock and the amount of U.S.
single-family mortgage debt outstanding.
8 Negative values reflect undersupply. The under/oversupply of vacant housing was estimated based on the average vacancy rate from 1Q 1994 to 4Q 2003.
9 Based on the unpaid principal balance (UPB) of the single-family credit guarantee portfolio, which includes unsecuritized single-family mortgage loans held by the company on its consolidated
balance sheets and those underlying Freddie Mac mortgage-related securities or covered by the company's other mortgage-related guarantees.
10 Represents the estimated average rate of guarantee fees for new acquisitions during the period assuming amortization of upfront delivery 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.
11 Excludes other types of Multifamily securitization products.
12 Includes K Certificates without subordination, which are fully guaranteed and issued without subordinate or mezzanine securities.
13 Guaranteed Bonds include senior amortizing bonds as well as interest-only bonds derived from senior and subordinate P&I bonds.
14 All figures represent face amounts in USD billions based on trade date. These figures could differ significantly from proceeds, amortized principal amount and book value figures, particularly for
zero-coupon securities. For non-dollar denominated instruments, the USD amounts reflected in the table are based on the exchange rate at issuance.
15 Data excludes securities sold under agreements to repurchase and other secured borrowings.
16 Under the Purchase Agreement with Treasury, the company’s aggregate indebtedness (which primarily includes the par value of other short- and long-term debt, including securities sold under
agreements to repurchase and other secured borrowings) is subject to a limit of $346 billion in 2018 and decreases to a limit of $300 billion on January 1, 2019.
17 Includes securities sold under agreements to repurchase and other secured borrowings. All figures represent par amounts in USD billions based on settlement date. These figures could differ
significantly from proceeds, amortized principal amount and book value figures, particularly for zero-coupon securities.
18 Outstanding balance using par amounts based on settlement date and maturity date. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-
term notes that have original maturities of one year or less that are categorized as long-term debt. Excludes debt securities of consolidated trusts held by third parties.
19 Outstanding balance using par amounts based on settlement date. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-term notes that have
original maturities of one year or less that are categorized as long-term debt. Excludes debt securities of consolidated trusts held by third parties.
20 All figures represent par amounts in USD billions based on the trade date and redemption date.
21 Does not include senior preferred stock issued to Treasury.
22 Interest-bearing marketable coupon public debt.
23 Includes Freddie Mac, Fannie Mae, Federal Home Loan Banks, Farmer Mac, the Farm Credit System, and federal budget agencies (e.g., TVA).
24 Includes Ginnie Mae, Fannie Mae and Freddie Mac MBS and CMOs, and private-label MBS/CMOs.
© Freddie Mac 53
Endnotes, continued
25 Includes auto, credit card, home equity, manufacturing, student loans and other; USD-denominated CDOs are also included.
26 Includes commercial paper, bankers acceptances, and large time deposits.
27 Includes debt obligations of U.S. financial and nonfinancial corporations including bonds, notes, debentures, mandatory convertible securities, long-term debt, private mortgage-backed
securities, and unsecured debt. Includes bonds issued both in the United States and in foreign countries, but not bonds issued in foreign countries by foreign subsidiaries of U.S. corporations.
Recorded at book value.
28 Other investors include hedge funds, structured investment vehicles, pension funds, savings institutions, nonprofits and individuals. Agency MBS includes Freddie Mac, Fannie Mae and Ginnie
Mae securities.
29 Presents net purchases/sales of Agency mortgage-related securities by the listed institutions, excluding securitization activity. Comm Bank PT and Comm Bank CMO represent net
purchases/sales of Agency mortgage-related securities by commercial banks through passthroughs and CMOs, respectively. Agency mortgage-related securities include securities issued by
Freddie Mac, Fannie Mae and Ginnie Mae.
30 Consists of Agency mortgage-related and debt securities which include securities issued by Freddie Mac, Fannie Mae, Ginnie Mae, Federal Home Loan Banks, Farmer Mac, the Farm Credit
System, and federal budget agencies (e.g., TVA).
31 Prepayment speeds expressed in terms of 1-month constant conditional prepayment rates (CPR) as provided by eMBS. Includes all outstanding GSE fixed-rate products, excluding Freddie Mac
Giants and Fannie Mae Megas.
32 Issuance figures based on monthly Freddie Mac fixed-rate issuance volume and includes both Multi-Lender and Single Lender pools.
33 Guaranteed as described in the applicable offering documents.
34 Excess Servicing Spread is the excess of the Servicer-retained mortgage servicing fee rate over the Freddie Mac minimum core servicing fee rate of 25 basis points.
© Freddie Mac 54
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 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, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s website at www.freddiemac.com/investors and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this presentation.