Freddie Mac 2009 Annual Report Download - page 30

our quarterly or annual financial statements and would continue for 60 calendar days after that date. FHFA has also advised
us that, if, during that 60-day period, we receive funds from Treasury in an amount at least equal to the deficiency amount
under the Purchase Agreement, the Director of FHFA will not make a mandatory receivership determination.
In addition, we could be put into receivership at the discretion of the Director of FHFA at any time for other reasons,
including conditions that FHFA has already asserted existed at the time the then Director of FHFA placed us into
conservatorship. These include: a substantial dissipation of assets or earnings due to unsafe or unsound practices; the
existence of an unsafe or unsound condition to transact business; an inability to meet our obligations in the ordinary course
of business; a weakening of our condition due to unsafe or unsound practices or conditions; critical undercapitalization; the
likelihood of losses that will deplete substantially all of our capital; or by consent.
Capital Standards
FHFA has suspended capital classification of us during conservatorship in light of the Purchase Agreement. The existing
statutory and FHFA-directed regulatory capital requirements will not be binding during the conservatorship. We continue to
provide our regular submissions to FHFA on both minimum and risk-based capital. FHFA continues to publish relevant
capital figures (minimum capital requirement, core capital, and GAAP net worth) but does not publish our critical capital,
risk-based capital or subordinated debt levels during conservatorship.
On October 9, 2008, FHFA also announced that it will engage in rule-making to revise our minimum capital and risk-
based capital requirements. The Reform Act provides that FHFA may increase minimum capital levels from the existing
statutory percentages either by regulation or on a temporary basis by order. On February 8, 2010, FHFA issued a notice of
proposed rulemaking setting forth procedures and standards for such a temporary increase in minimum capital levels. FHFA
may also, by regulation or order, establish capital or reserve requirements with respect to any product or activity of an
enterprise, as FHFA considers appropriate. In addition, under the Reform Act, FHFA must, by regulation, establish risk-based
capital requirements to ensure the enterprises operate in a safe and sound manner, maintaining sufficient capital and reserves
to support the risks that arise in their operations and management. In developing the new risk-based capital requirements,
FHFA is not bound by the risk-based capital standards in effect prior to the enactment of the Reform Act.
Our regulatory minimum capital is a leverage-based measure that is generally calculated based on GAAP and reflects a
2.50% capital requirement for on-balance sheet assets and 0.45% capital requirement for off-balance sheet obligations. Based
upon our adoption of amendments to the accounting standards for transfers of financial assets and consolidation of VIEs, we
determined that, under the new consolidation guidance, we are the primary beneficiary of our single-family PC trusts and
certain Structured Transactions and, therefore, effective January 1, 2010, we consolidated on our balance sheet the assets and
liabilities of these trusts. Pursuant to regulatory guidance from FHFA, our minimum capital requirement will not
automatically be affected by adoption of these amendments on January 1, 2010. Specifically, upon adoption of these
amendments, FHFA directed us, for purposes of minimum capital, to continue reporting single-family PCs and certain
Structured Transactions held by third parties using a 0.45% capital requirement. Notwithstanding this guidance, FHFA
reserves the authority under the Reform Act to raise the minimum capital requirement for any of our assets or activities.
For additional information, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Capital Resources” and
“NOTE 11: REGULATORY CAPITAL” to our consolidated financial statements. Also, see “RISK FACTORS — Legal and
Regulatory Risks” for more information.
Affordable Housing Goals
Prior to the enactment of the Reform Act, HUD had authority over Freddie Mac’s charter compliance and housing
mission, including authority over our affordable housing goals, whereas the Office of Federal Housing Enterprise Oversight
was the safety and soundness regulator over Freddie Mac. Those roles are now combined in FHFA.
Until 2009, our annual affordable housing goals, which are set as a percentage of the total number of dwelling units
underlying our total mortgage purchases, had risen steadily since they became permanent in 1995. The goals are intended to
expand housing opportunities for low- and moderate-income families, low-income families living in low-income areas, very
low-income families and families living in defined underserved areas. The goal relating to low-income families living in low-
income areas and very low-income families is referred to as the “special affordable” housing goal. This special affordable
housing goal also includes a multifamily annual minimum dollar volume target of qualifying multifamily mortgage
purchases. In addition, three subgoals were established that are expressed as percentages of the total number of mortgages we
purchased that finance the purchase of single-family, owner-occupied properties located in metropolitan areas.
On July 28, 2009, FHFA issued a final rule that adjusted our goals for 2009 to the levels set forth in the table below.
Except for the multifamily special affordable volume target, FHFA decreased all of the goals, as compared to those in effect
for 2008.
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