Concentration of Credit and Other Risks

12 Months Ended

Dec. 31, 2025

Risks and Uncertainties [Abstract]

CONCENTRATION OF CREDIT AND OTHER RISKS

Concentration of Credit and Other Risks

Concentrations of credit risk may arise when we do business with a number of customers or counterparties that engage in similar activities or have similar economic characteristics that make them vulnerable in similar ways to changes in industry conditions, which could affect their ability to meet their contractual obligations. Concentrations of credit risk may also arise when there are a limited number of counterparties in a certain industry. Based on our assessment of business conditions that could affect our financial results, we have determined that concentrations of credit risk exist among certain borrowers (including geographic concentrations), loan sellers and servicers, credit enhancement providers, and other investment counterparties. In the sections below, we discuss our concentration of credit risk for each of the groups to which we are exposed. For a discussion of our derivative counterparties, as well as related master netting and collateral agreements, see Note 9. For a discussion of securities purchased under agreements to resell and other collateralized arrangements, see Note 10.

Single-Family Mortgage Portfolio

Single-family borrowers are primarily affected by house prices and interest rates, which are influenced by economic factors. Geographic concentrations may increase the exposure of our portfolio to credit risk, as regional economic conditions may affect a borrower's ability to repay and the underlying property value.

The table below summarizes the concentration by geographic area of our Single-Family mortgage portfolio. See Note 3, Note 4, Note 5, and Note 6 for additional information about credit risk associated with single-family loans that we hold or guarantee.

Table 15.1 - Concentration of Credit Risk of Our Single-Family Mortgage Portfolio

	December 31, 2025
(Dollars in millions)	Portfolio UPB(1)	% of Portfolio		SDQ Rate
Region(2):
West	$921,697	29	%	0.46	%
Northeast	728,432	23		0.61
Southeast	564,250	18		0.67
Southwest	478,227	15		0.63
North Central	463,375	15		0.59
Total	$3,155,981	100	%	0.59
State:
California	$509,813	16	%	0.45
Texas	229,450	7		0.71
Florida	213,784	7		0.80
New York	138,196	4		0.81
Illinois	118,119	4		0.69
All other	1,946,619	62		0.55
Total	$3,155,981	100	%	0.59

(1)Excludes UPB of loans underlying certain securitization products for which data was not available.

(2)Region designation: West (AK, AS, AZ, CA, GU, HI, ID, MP, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, U.S. VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI)

Multifamily Mortgage Portfolio

Numerous factors affect the credit risk related to multifamily borrowers, including effective rents paid and capitalization rates for the mortgaged property. Effective rents paid vary among geographic regions of the United States. Geographic concentrations may increase the exposure of our portfolio to credit risk, as regional economic conditions may affect a multifamily borrower's ability to repay and the underlying property value. The average UPB for multifamily loans is significantly larger than for single-family loans and, therefore, individual defaults for multifamily borrowers can result in more significant losses.

The table below summarizes the concentration by geographic area of our Multifamily mortgage portfolio.

Table 15.2 - Concentration of Credit Risk of Our Multifamily Mortgage Portfolio

	December 31, 2025
(Dollars in millions)	Portfolio UPB	% of Portfolio		Delinquency Rate(1)
Region(2)(3):
Northeast	$126,400	25	%	0.81	%
West	116,239	23		0.19
Southeast	104,266	21		0.16
Southwest	96,952	20		0.59
North Central	51,978	11		0.40
Total	$495,835	100	%	0.44
State(3):
California	$62,128	13	%	0.30
Texas	60,963	12		0.53
Florida	45,235	9		0.10
New York	39,404	8		2.05
Georgia	21,266	4		0.06
All other	266,839	54		0.30
Total	$495,835	100	%	0.44

(1)Based on loans two monthly payments or more delinquent or in foreclosure.

(2)Region designation: Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); West (AK, AS, AZ, CA, GU, HI, ID, MP, MT, NV, OR, UT, WA); Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, U.S. VI); Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY); North Central (IL, IN, IA, MI, MN, ND, OH, SD, WI).

(3)Loans collateralized by properties located in multiple regions or states are reported entirely in the region or state with the largest UPB as of origination.

In the Multifamily mortgage portfolio, concentration of credit risk depends on the legal structure of the investments we hold. Our exposure to credit risk in our senior subordinate securitization products is reduced by the subordinate tranches, which are typically sold to third-party investors. As a result, our Multifamily mortgage credit risk is primarily related to loans that have not been securitized or loans underlying our fully guaranteed securitizations. See Note 3, Note 4, Note 5, and Note 6 for additional information about credit risk associated with multifamily loans that we hold or guarantee.

Single-Family Sellers and Servicers

We acquire a significant portion of our Single-Family loan purchase volume from several large sellers. Our top 10 sellers provided approximately 59% of our Single-Family purchase volume, including three sellers that each provided 10% or more of our Single-Family purchase volume during 2025.

We purchase single-family loans from both depository and non-depository sellers. Non-depository institutions may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight, as large depository institutions. Our top five non-depository sellers provided approximately 46% of our Single-Family purchase volume during 2025.

If we discover that the representations or warranties related to a loan were breached (i.e., that contractual standards were not followed), we can exercise certain contractual remedies to mitigate our actual or potential credit losses. These contractual remedies may include, but are not limited to, the ability to require the seller or servicer to repurchase the loan at its current UPB, reimburse us for losses realized with respect to the loan after consideration of any other recoveries, and/or indemnify us. Our current remedies framework provides for the categorization of loan origination defects for loans with settlement dates on or after January 1, 2016. Among other items, the framework provides that "significant defects" may result in a repurchase request or a repurchase alternative, such as recourse or indemnification. We implemented a pilot program in 2024 that provides participating sellers with a fee-based alternative to performing loan repurchases. Beginning in 1Q 2025 the pilot program was expanded to all eligible sellers and now comprises a significant share of our new business activity. The pilot program continues to maintain the protections related to delinquent loans and charter violations outlined in the selling and servicing representation and warranty framework for mortgage loans. Sellers that choose not to participate in the pilot program still have access to other repurchase alternatives, including the new fee-only alternative we implemented in 1Q 2025 for eligible loans. If the fee-only alternative is offered on a performing loan, sellers will be able to pay a fee in exchange for immediate representation and warranty relief on that loan.

Under our current selling and servicing representation and warranty framework for our mortgage loans, we relieve sellers of repurchase obligations for breaches of certain selling representations and warranties for certain types of loans, including:

n    Loans that have established an acceptable payment history for 36 months of consecutive, on-time payments after purchase, subject to certain exclusions and

n    Loans that have satisfactorily completed a quality control review.

Solely for the purpose of determining whether the acceptable payment history requirements are met, payments due during the COVID-19-related forbearance period are considered to have been made on time, provided that the mortgage was reported by the servicer as having entered into a COVID-19-related forbearance plan between March 13, 2020 and October 31, 2023 and met certain other criteria as described in our Guide.

An independent dispute resolution process for alleged breaches of selling or servicing representations and warranties on our loans allows for a neutral third party to render a decision on demands that remain unresolved after the existing appeal and escalation processes have been exhausted.

As of December 31, 2025, the UPB of loans subject to our repurchase requests issued to our Single-Family sellers and servicers was approximately $0.4 billion (this figure includes repurchase requests for which appeals were pending). During 2025, we recovered amounts with respect to $1.1 billion in UPB of loans subject to our repurchase requests.

The ultimate amounts of recovery payments we receive from seller/servicers related to their repurchase obligations may be significantly less than the amount of our estimates of potential exposure to losses. Our expected credit losses for exposure to seller/servicers for their repurchase obligations are considered in our allowance for credit losses. See Note 6 for further information.

We are also exposed to the risk that servicers might fail to service loans in accordance with the contractual requirements, resulting in increased credit losses. For example, our servicers have an active role in our loss mitigation efforts, and we, therefore, have exposure to them to the extent a decline in their performance results in a failure to realize the anticipated benefits of the loss mitigation plans. Since we do not have our own servicing operation, if our servicers lack appropriate controls, experience a failure in their controls, or experience an operating disruption in their ability to service loans, our business and financial results could be adversely affected.

Servicers who hold the right to service our loans may either operationally perform the servicing activities themselves or engage other servicers to operationally perform servicing activities on their behalf. Servicers who hold the right to service the loans remain responsible for servicing activities even if other servicers operationally perform servicing activities on their behalf. Significant portions of our single-family loans are serviced by several large servicers. As of December 31, 2025, approximately 67% of our Single-Family mortgage portfolio was serviced by our top 10 servicers, based on the servicing volume they operationally performed. Two servicers each operationally performed servicing for 10% or more of our Single-Family mortgage portfolio as of December 31, 2025.

We utilize both depository and non-depository servicers for single-family loans. Some of these non-depository servicers service a large share of our loans. As of December 31, 2025, approximately 41% of our Single-Family mortgage portfolio, excluding loans for which we do not exercise control over the associated servicing, was serviced by our five largest non-depository servicers, based on the servicing volume they operationally performed. We routinely monitor the performance of our largest non-depository servicers.

For our mortgage-related securities, we guarantee the payment of principal and interest, and when the underlying borrowers do not make their mortgage payments, our Guide generally requires Single-Family servicers to advance the missed mortgage interest payments for up to 120 days. After this time, Freddie Mac will make the missed mortgage principal and interest payments until the mortgages are no longer held by the securitization trust.

In addition to principal and interest payments, borrowers are also responsible for other expenses such as property taxes and homeowner's insurance premiums. When borrowers do not pay these expenses, our Guide generally requires Single-Family servicers to advance the funds for these expenses in order to protect or preserve our interest in or legal right to the properties. These advances are ultimately collectible from the borrowers. If the borrowers reperform through loan workout activities, the missed payments and incurred expenses will be collected from them. We will reimburse the servicers for the advanced amounts when uncollected from the borrowers at completion of foreclosures or foreclosure alternatives.

In 2022, FHFA and Ginnie Mae issued a joint announcement of their updated minimum financial eligibility requirements for Enterprise seller/servicers and Ginnie Mae issuers. Subsequently, Freddie Mac announced the updated changes. The new requirements contain changes related to incorporating enhanced definitions of capital and liquidity, reducing the procyclicality of the current liquidity requirements, and incorporating lessons learned from the pandemic. They also require certain Ginnie Mae issuers that may also be Freddie Mac servicers to maintain a minimum risk-based capital ratio of 6%. They also include higher supplemental requirements applicable only to large non-depositories, defined as non-depositories having $50 billion or more of total single-family servicing UPB, as well as a new origination liquidity requirement for sellers that originate greater than $1 billion in single-family first lien mortgages in the most recent calendar year. The majority of the requirements became effective on September 30, 2023, while the risk-based capital ratio requirement became effective on December 31, 2024.

Multifamily Sellers and Servicers

We acquire a significant portion of our Multifamily loan purchase and guarantee volume from several large sellers. Our top 10 sellers provided approximately 73% of our Multifamily purchase and guarantee volume, including three sellers that each provided 10% or more of our Multifamily purchase and guarantee volume during 2025.

Significant portions of our multifamily loans are serviced by several large servicers. Our top 10 servicers serviced approximately 75% of our Multifamily mortgage portfolio, including three servicers that each serviced 10% or more of our Multifamily mortgage portfolio as of December 31, 2025.

Multifamily loans utilize both primary and master servicers. Primary servicers service unsecuritized mortgage loans and are also typically engaged by master servicers to service on their behalf the mortgage loans underlying securitizations. For a majority of our K Certificate securitizations, we utilize one of three large financial depository institutions as master servicer. Meanwhile, we typically retain the role of master servicer in our fully guaranteed K Certificate securitizations and certain other securitization transactions. Multifamily primary servicers discussed above present potential operational risk and impact to the borrowers if the servicing needs to be transferred to another servicer. We also rely on master servicers of our multifamily securitization transactions to advance funds in the event of payment shortfalls, including principal and interest payments related to loans in forbearance. In instances where payment shortfalls occur, the master servicer is required to make advances as long as such advances have not been deemed unrecoverable. For multifamily loans purchased and held in our mortgage-related investments portfolio, the primary servicers are not required to advance funds in the event of payment shortfalls and, therefore, do not present significant counterparty credit risk from this source.

Credit Enhancement Providers

We have counterparty credit risk relating to the potential insolvency of, or nonperformance by, mortgage insurers that insure single-family loans we purchase or guarantee. We also have similar exposure to insurers and reinsurers through our ACIS and other insurance transactions where we purchase insurance policies as part of our CRT activities.

We evaluate the recovery and collectability from mortgage insurers as part of the estimate of our allowance for credit losses. See Note 6 for additional information. As of December 31, 2025, mortgage insurers provided primary mortgage insurance coverage with maximum loss limits of $181.5 billion for $681.0 billion of UPB in connection with our Single-Family mortgage portfolio. These amounts are based on gross coverage without regard to netting of coverage that may exist to the extent an affected loan is covered under other types of insurance. Changes in our expectations related to recovery and collectability from our credit enhancement providers may affect our estimates of expected credit losses, perhaps significantly.

The table below summarizes the concentration of mortgage insurer counterparties who provided 10% or more of our overall primary mortgage insurance coverage.

Table 15.3 - Primary Mortgage Insurer Concentration

	Mortgage Insurance Coverage(1)
Mortgage Insurer	December 31, 2025
Mortgage Guaranty Insurance Corporation	18	%
Radian Guaranty Inc.	18
Essent Guaranty, Inc.	17
Enact	16
Arch Mortgage Insurance Company	16
National Mortgage Insurance	15
Total	100	%

(1)Coverage amounts exclude coverage primarily related to certain loans for which we do not control servicing, and may include coverage provided by affiliates and subsidiaries of the counterparty.

As part of our ACIS transactions, we regularly obtain insurance coverage from global insurers and reinsurers. These transactions incorporate several features designed to increase the likelihood that we will recover on the claims we file with the insurers and reinsurers. In each transaction, we require the individual insurers and reinsurers to post collateral to cover portions of their exposure, which helps to promote certainty and timeliness of claim payment.

While private mortgage insurance companies are required to be monoline (i.e., to participate solely in the mortgage insurance business, although the holding company may be a diversified insurer), many of our insurers and reinsurers in these transactions participate in multiple types of insurance businesses, which helps diversify their risk exposure.

Other Investment Counterparties

We are exposed to the non-performance of counterparties relating to other investments (including non-mortgage-related securities and cash equivalents) transactions, including those entered into on behalf of our securitization trusts. Our policies require that the counterparty be evaluated using our internal counterparty rating model prior to our entering such transactions. We monitor the financial strength of our counterparties to these transactions and may use collateral maintenance requirements to manage our exposure to individual counterparties. The permitted term and dollar limits for each of these transactions are also based on the counterparty's financial strength.

Our other investments (including non-mortgage-related securities and cash equivalents) counterparties are primarily major institutions, including other GSEs, Treasury, the Federal Reserve Bank of New York, GSD/FICC, highly-rated supranational institutions, depository and non-depository institutions, brokers and dealers, and government money market funds. As of December 31, 2025, including amounts related to our consolidated VIEs, the balance in our other investments portfolio was $162.6 billion. The balance consists primarily of cash, securities purchased under agreements to resell, U.S. Treasury securities, cash deposited with the Federal Reserve Bank of New York, and secured lending activities.