Concentrations of Credit Risk |
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| 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 loan 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. More information about these groups is provided 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 UPB 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 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. 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 multifamily guaranty book of business, 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 UPB of the loans.
(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 BusinessOne of the measures by which management gauges our credit risk is the delinquency status of the mortgage loans in our guaranty book of business. For single-family and multifamily loans, management uses this information, in conjunction with housing market data, other economic data, our capital requirements and our mission objectives, to help inform changes to our eligibility and underwriting criteria. 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.
*Represents less than 0.5% of single-family conventional guaranty book of business (1)Multifamily Credit Risk CharacteristicsFor multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, based on UPB, 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 ratio 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.
(1)Calculated based on the aggregate UPB of multifamily loans for each category divided by the aggregate UPB 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 UPB of multifamily loans that were seriously delinquent divided by the aggregate UPB 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.
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 is not intended to cover property damage from hazards, including natural disasters; and the mortgage insurance policy permits the exclusion of any material loss directly related to property damage. 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.
(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, 2025 and 2024, 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 $1.0 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 $501 million recorded in “Other assets” in our consolidated balance sheets as of December 31, 2025 and $472 million as of December 31, 2024 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 $380 million as of December 31, 2025 and $403 million as of December 31, 2024, 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. In the fourth quarter of 2025, we updated our disclosure of servicer concentrations to be based on the counterparty performing the servicing, including loans serviced by that counterparty on behalf of other servicers. Previously servicer concentrations were disclosed based on loans for which the servicer was directly contractually responsible to us and excluded loans serviced on behalf of another servicer. Prior period information in this report has been recast to reflect this updated approach. Our business with mortgage servicers is concentrated. Following Rocket Companies, Inc.’s acquisition of Mr. Cooper Group in October 2025, Nationstar Mortgage LLC, doing business as Mr. Cooper (“Mr. Cooper”) and Rocket Mortgage, LLC are affiliates. These companies serviced approximately 23% of our single-family guaranty book of business based on UPB as of December 31, 2025. As of December 31, 2024, these companies on a combined basis serviced approximately 23% of our single-family guaranty book of business, based on UPB. No other single-family mortgage servicer serviced 10% or more of our single-family conventional guaranty book of business as of December 31, 2025 or 2024. Rocket Mortgage, LLC and Mr. Cooper are non-depository servicers. 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 UPB.
As of December 31, 2025, 40% of our single-family conventional guaranty book of business was serviced by depository servicers, and 60% of our single-family conventional guaranty book of business was serviced by non-depository servicers. As of December 31, 2024, 42% of our single-family conventional guaranty book of business was serviced by depository servicers, and 58% of our single-family conventional guaranty book of business was serviced by non- depository servicers. 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, 2025, Walker & Dunlop, Inc. serviced 13% of our multifamily guaranty book of business based on UPB, compared with 14% as of December 31, 2024. No other multifamily mortgage servicer serviced 10% or more of our multifamily guaranty book of business as of December 31, 2025 or 2024. Walker & Dunlop, Inc. is a non-depository servicer.
As of December 31, 2025, 29% of our multifamily guaranty book of business was serviced by depository servicers and 71% of our multifamily guaranty book of business was serviced by non-depository servicers. As of December 31, 2024, 31% of our multifamily guaranty book of business was serviced by depository servicers and 69% of our multifamily guaranty book of business was serviced by non-depository servicers. Compared with depository financial institutions, our non-depository servicers pose additional risks because they may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight as depository financial institutions. 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 $129.6 billion as of December 31, 2025, compared with $119.8 billion as of December 31, 2024. As of December 31, 2025, 53% of our maximum potential loss recovery on multifamily loans was from five DUS lenders, as compared with 52% as of December 31, 2024. 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.”
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