Concentrations of credit risk arise when a number of customers and counterparties engage in similar activities or have similar economic characteristics that make them susceptible to similar changes in industry conditions, which could affect their ability to meet their contractual obligations. Based on our assessment of business conditions that could impact our financial results, we have determined that concentrations of credit risk exist among:

Regional economic conditions may affect a borrower’s ability to repay a mortgage loan and the property value underlying the loan. Geographic concentrations increase the exposure of our guaranty book of business to changes in credit risk. Single-family borrowers are primarily affected by home prices and interest rates.

To manage credit risk and comply with our charter requirements, we typically require primary mortgage insurance or other credit enhancements if the current LTV ratio (i.e., the ratio of the unpaid principal balance of a loan to the current value of the property that serves as collateral) of a single-family conventional mortgage loan is greater than 80% when the loan is delivered to us.

Numerous factors affect a multifamily borrower’s ability to repay the loan and the value of the property underlying the loan. Multifamily loans are generally non-recourse to the borrower. The most significant factors affecting credit risk are rental income, property valuations, and general economic conditions. The average unpaid principal balance for multifamily loans is significantly larger than for single-family borrowers and, therefore, individual defaults for multifamily borrowers can result in more significant losses. We continually monitor the performance and risk characteristics of our multifamily loans, underlying properties and borrowers on an ongoing basis.

As part of our multifamily risk management activities, we perform detailed loan reviews that evaluate property performance, borrower and geographic concentrations, lender qualifications, counterparty risk and contract compliance. We generally require mortgage servicers to obtain and submit periodic property operating information and condition reviews, allowing us to monitor the performance of individual loans. We use this information to evaluate the credit quality of our portfolio, identify potential problem loans and initiate appropriate loss mitigation activities.

The following table displays the regional geographic concentration of single-family and multifamily loans in our guaranty book of business, measured by the unpaid principal balance of the loans.


	Geographic Concentration(1)
	Percentage of Single-Family Conventional Guaranty Book of Business						Percentage of Multifamily Guaranty Book of Business
	As of December 31,						As of December 31,
	2022			2021			2022			2021
Midwest		14	%		14	%		12	%		11	%
Northeast		16			16			15			15
Southeast		23			23			27			27
Southwest		19			18			22			22
West		28			29			24			25
Total		100	%		100	%		100	%		100	%

(1)Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

For single-family and multifamily loans, we use this information, in conjunction with housing market and other economic data, to structure our pricing and our eligibility and underwriting criteria to reflect the current risk of loans with higher-risk characteristics, and in some cases we decide to significantly reduce our participation in riskier loan product categories. Management also uses this data together with other credit risk measures to identify key trends that guide the development of our loss mitigation strategies.

For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family loans (based on number of loans) that are 90 days or more past due or in the foreclosure process, and loans that have higher risk characteristics, such as high mark-to-market LTV ratios.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our single-family conventional guaranty book of business.


	As of December 31,
	2022						2021
	30 Days Delinquent		60 Days Delinquent		Seriously Delinquent(1)		30 Days Delinquent		60 Days Delinquent		Seriously Delinquent(1)
Percentage of single-family conventional guaranty book of business based on UPB	0.84	%	0.20	%	0.60	%	0.73	%	0.16	%	1.20	%
Percentage of single-family conventional loans based on loan count	0.96		0.23		0.65		0.86		0.20		1.25


	As of December 31,
	2022				2021
	Percentage of Single-Family Conventional Guaranty Book of Business Based on UPB		Seriously Delinquent Rate(1)		Percentage of Single-Family Conventional Guaranty Book of Business Based on UPB		Seriously Delinquent Rate(1)
Estimated mark-to-market LTV ratio:
80.01% to 90%	5	%	0.68	%	5	%	0.88	%
90.01% to 100%	3		0.40		2		0.51
Greater than 100%	*		4.04		*		12.41
Geographical distribution:
California	19		0.46		19		1.01
Florida	6		0.90		6		1.59
Illinois	3		0.86		3		1.55
New Jersey	3		0.85		3		1.90
New York	5		1.12		5		2.24
All other states	64		0.62		64		1.16
Vintages:
2008 and prior	2		2.78		3		4.90
2009-2022	98		0.53		97		1.01

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, based on unpaid principal balance, that are 60 days or more past due, and loans with other higher risk characteristics to determine our overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not limited to, current DSCR below 1.0 and original LTV ratios greater than 80%. We stratify multifamily loans into different internal risk categories based on the credit risk inherent in each individual loan.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our multifamily guaranty book of business.


	As of December 31,
	2022(1)				2021(1)
	30 Days Delinquent		Seriously Delinquent(2)		30 Days Delinquent		Seriously Delinquent(2)
Percentage of multifamily guaranty book of business	0.04	%	0.24	%	0.03	%	0.42	%


	As of December 31,
	2022				2021
	Percentage of Multifamily Guaranty Book of Business(1)		Serious Delinquency Rate(2)(3)		Percentage of Multifamily Guaranty Book of Business(1)		Serious Delinquency Rate(2)(3)
Original LTV ratio:
Greater than 80%	1	%	0.85	%	1	%	0.13	%
Less than or equal to 80%	99		0.24		99		0.42
Current DSCR below 1.0(4)	3		3.88		2		13.90

(4)For 2022, our estimates of current DSCRs are based on the latest available income information from quarterly and annual statements for these properties including the related debt service. For 2021, our estimates of current DSCRs are based on the latest available annual statements.

Mortgage Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the applicable mortgage insurance policies in force and is generally based on the loan-level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified in the policy.

The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as the total risk-in-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.


	As of December 31,
	2022				2021
	Risk in Force		Percentage of Single-Family Conventional Guaranty Book of Business		Risk in Force		Percentage of Single-Family Conventional Guaranty Book of Business
	(Dollars in millions)
Mortgage insurance risk in force:
Primary mortgage insurance	$	193,549			$	176,587
Pool mortgage insurance	237				261
Total mortgage insurance risk in force	$	193,786	5	%	$	176,848	5	%

Mortgage insurance only covers losses that are realized after the borrower defaults and title to the property is subsequently transferred, such as after a foreclosure, short-sale, or a deed-in-lieu of foreclosure. Also, mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not cover

property damage that is not covered by the hazard insurance we require, and such damage may result in a reduction to, or a denial of, mortgage insurance benefits. Specifically, a property damaged by a flood that was outside a Federal Emergency Management Agency (“FEMA”)-identified Special Flood Hazard Area, where we require coverage, or a property damaged by an earthquake are the most likely scenarios where property damage may result in a default not covered by hazard insurance.

The table below displays our mortgage insurer counterparties that provided 10% or more of the risk in force mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business.


	Percentage of Risk-in-Force Coverage by Mortgage Insurer
	As of December 31,
	2022		2021
Counterparty:(1)
Mortgage Guaranty Insurance Corp.	19	%	19	%
Arch Capital Group Ltd.	18		19
Radian Guaranty, Inc.	17		17
Enact Mortgage Insurance Corp.(2)	17		17
Essent Guaranty, Inc.	16		16
National Mortgage Insurance Corp.	12		11
Others	1		1
Total	100	%	100	%

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, monoline mortgage insurers that insure single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill their obligations to pay our claims under insurance policies. On at least a quarterly basis, we assess our mortgage insurer counterparties’ respective abilities to fulfill their obligations to us. Our assessment includes financial reviews and analyses of the insurers’ portfolios and capital adequacy. If we determine that it is probable that we will not collect all of our claims from one or more of our mortgage insurer counterparties, it could increase our loss reserves, which could adversely affect our results of operations, liquidity, financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations, we also consider the recoveries that we expect to receive from primary mortgage insurance, as mortgage insurance recoveries reduce the severity of the loss associated with defaulted loans if the borrower defaults and title to the property is subsequently transferred. Mortgage insurance does not cover credit losses that result from a reduction in mortgage interest paid by the borrower in connection with a loan modification, forbearance of principal, or forbearance of scheduled loan payments. We evaluate the financial condition of our mortgage insurer counterparties and adjust the contractually due recovery amounts to ensure that expected credit losses as of the balance sheet date are included in our loss reserve estimate. As a result, if our assessment of one or more of our mortgage insurer counterparties’ ability to fulfill their respective obligations to us worsens, it could increase our loss reserves. As of December 31, 2022 and 2021, our estimated benefit from mortgage insurance, which is based on estimated credit losses as of period end, reduced our loss reserves by $2.2 billion and $559 million, respectively.

When an insured loan held in our retained mortgage portfolio subsequently goes into foreclosure, we charge off the loan, eliminating any previously-recorded loss reserves, and record REO and a mortgage insurance receivable for the claim proceeds deemed probable of recovery, as appropriate. However, if a mortgage insurer rescinds, cancels or denies insurance coverage, the initial receivable becomes due from the mortgage seller or servicer. We had outstanding receivables of $515 million recorded in “Other assets” in our consolidated balance sheets as of December 31, 2022 and $533 million as of December 31, 2021 related to amounts claimed on insured, defaulted loans excluding government-insured loans. We assessed these outstanding receivables for collectability, and established a valuation allowance of $462 million as of December 31, 2022 and $479 million as of December 31, 2021, which reduced our claim receivable to the amount considered probable of collection.

Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities, including loss mitigation, on our behalf. Our mortgage servicers and sellers may also be obligated to repurchase loans or foreclosed properties, reimburse us for losses or provide other remedies under certain circumstances, such as if it is determined that the mortgage loan did not meet our underwriting or eligibility requirements, if certain loan

representations and warranties are violated or if mortgage insurers rescind coverage. Our representation and warranty framework does not require repurchase for loans that have breaches of certain selling representations and warranties if they have met specified criteria for relief.

Our business with mortgage servicers is concentrated. The table below displays the percentage of our single-family conventional guaranty book of business serviced by our top five depository single-family mortgage servicers and top five non-depository single-family mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies one servicer that serviced 10% or more of our single-family guaranty book of business as of December 31, 2021, based on unpaid principal balance.


	Percentage of Single-Family Conventional Guaranty Book of Business
	As of December 31,
	2022		2021
Wells Fargo Bank, N.A. (together with its affiliates)	9	%	10	%
Remaining top five depository servicers	13		11
Top five non-depository servicers	23		23
Total	45	%	44	%

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five multifamily mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book of business based on unpaid principal balance.


	Percentage of Multifamily Guaranty Book of Business
	As of December 31,
	2022		2021
Walker & Dunlop, Inc.	13	%	12	%
Wells Fargo Bank, N.A. (together with its affiliates)	11		11
Remaining top five servicers	24		24
Total	48	%	47	%

Multifamily Lenders with Risk Sharing. We enter into risk sharing agreements with lenders pursuant to which the lenders agree to bear all or some portion of the credit losses on the covered loans. Our maximum potential loss recovery from lenders under these risk sharing agreements on both DUS and non-DUS multifamily loans was $103.9 billion as of December 31, 2022, compared with $97.6 billion as of December 31, 2021. As of December 31, 2022, 53% of our maximum potential loss recovery on multifamily loans was from five DUS lenders, as compared with 52% as of December 31, 2021.