Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2023

Risks and Uncertainties [Abstract]

Concentrations of Credit Risk

Concentrations of Credit Risk

Concentrations of credit risk arise when a number of lenders 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:

•single-family and multifamily borrowers (including geographic concentrations and loans with certain higher-risk

characteristics);

•mortgage insurers;

•mortgage lenders that sell loans to us and mortgage lenders and other counterparties that service our loans;

•multifamily lenders with risk sharing; and

•derivative counterparties.

Concentrations for each of these groups are discussed below.

Single-Family Loan Borrowers

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. Our single-family allowance is 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.

Multifamily Loan Borrowers

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.

Geographic Concentration

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,
	2023			2022			2023			2022
Midwest		14	%		14	%		12	%		12	%
Northeast		16			16			15			15
Southeast		23			23			27			27
Southwest		19			19			22			22
West		28			28			24			24
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.

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our credit risk is the delinquency status of the mortgage loans in our guaranty

book of business.

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.

We report the delinquency status of our single-family and multifamily guaranty book of business below.

Single-Family Credit Risk Characteristics

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,
	2023			2022
	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	0.98%	0.24%	0.56%	0.84%	0.20%	0.60%
Percentage of single-family conventional loans based on loan count	1.06	0.26	0.55	0.96	0.23	0.65

	As of December 31,
	2023		2022
	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%	0.81%	5%	0.68%
90.01% to 100%	3	0.59	3	0.40
Greater than 100%	*	2.05	*	4.04
Geographical distribution:
California	19	0.42	19	0.46
Florida	6	0.73	6	0.90
Illinois	3	0.70	3	0.86
New York	5	0.92	5	1.12
Texas	7	0.64	7	0.71
All other states	60	0.52	60	0.62
Vintages:
2008 and prior	2	2.07	2	2.78
2009-2023	98	0.47	98	0.53

*Represents less than 0.5% of single-family conventional book of business.

(1)Based on loan count, consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of

December 31, 2023 and 2022.

Multifamily Credit Risk Characteristics

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 the 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,
	2023(1)		2022(1)
	30 Days Delinquent	Seriously Delinquent(2)	30 Days Delinquent	Seriously Delinquent(2)
Percentage of multifamily guaranty book of business	0.10%	0.46%	0.04%	0.24%

	As of December 31,
	2023		2022
	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%	0.13%	1%	0.85%
Less than or equal to 80%	99	0.46	99	0.24
Current DSCR below 1.0(4)	4	7.04	3	3.88

(1)Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid

principal balance of loans in our multifamily guaranty book of business.

(2)Consists of multifamily loans that were 60 days or more past due as of the dates indicated.

(3)Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the aggregate unpaid

principal balance of multifamily loans for each category included in our multifamily guaranty book of business.

(4)Our estimates of current DSCRs are based on the latest available income information covering a 12 month period, from quarterly and

annual statements for these properties including the related debt service.

Other Concentrations

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,
	2023		2022
	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	$200,023		$193,549
Pool mortgage insurance	98		237
Total mortgage insurance risk in force	$200,121	6%	$193,786	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, coastal barrier resources system, or

otherwise protected 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,
	2023	2022
Counterparty:(1)
Mortgage Guaranty Insurance Corp.	19%	19%
Radian Guaranty, Inc.	18	17
Arch Capital Group Ltd.	18	18
Enact Mortgage Insurance Corp.	16	17
Essent Guaranty, Inc.	16	16
National Mortgage Insurance Corp.	13	12
Others	—	1
Total	100%	100%

(1)Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the

counterparty.

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, 2023 and 2022,

our estimated benefit from mortgage insurance, which is based on estimated credit losses as of period end, reduced our

loss reserves by $1.2 billion and $2.2 billion, 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 $471 million recorded in “Other assets” in our consolidated balance sheets as of December 31, 2023 and

$515 million as of December 31, 2022 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

$417 million as of December 31, 2023 and $462 million as of December 31, 2022, 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) based on

unpaid principal balance. There were no servicers that serviced 10% or more of our single-family guaranty book of

business as of December 31, 2023 or 2022.

	Percentage of Single-Family Conventional Guaranty Book of Business
	As of December 31,
	2023	2022
Top five depository servicers	22%	22%
Top five non-depository servicers	27	23
Total	49%	45%

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five

depository multifamily mortgage servicers and top five non-depository multifamily mortgage servicers. As of December

31, 2023, two servicers serviced 10% or more of our multifamily guaranty book of business, Walker & Dunlop, Inc. and

Wells Fargo Bank, N.A. (together with its affiliates). As of December 31, 2023, Walker & Dunlop, Inc. and Wells Fargo

Bank, N.A. (together with its affiliates) serviced 13% and 10%, respectively, of our multifamily guaranty book of business

based on unpaid principal balance, compared with 13% and 11% as of December 31, 2022.

	Percentage of Multifamily Guaranty Book of Business
	As of December 31,
	2023	2022
Top five depository servicers	27%	28%
Top five non-depository servicers	44	43
Total	71%	71%

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 $111.9 billion as of

December 31, 2023, compared with $103.9 billion as of December 31, 2022. As of December 31, 2023, 52% of our

maximum potential loss recovery on multifamily loans was from five DUS lenders, as compared with 53% as of

December 31, 2022.

Derivatives Counterparties. For information on credit risk associated with our derivative transactions and repurchase

agreements see “Note 9, Derivative Instruments” and “Note 15, Netting Arrangements.”