Freddie Mac 2009 Annual Report Download - page 32

Table 3 — Affordable Housing Goals and Reported Results for 2007 and 2008
(1)
Housing Goals and Actual Results
Goal Result Goal Result
2008 2007
Year Ended December 31,
Low- and moderate-income goal
(2)
........................................... 56% 51.5% 55% 56.1%
Underserved areas goal
(3)
................................................. 39 37.7 38 43.1
Special affordable goal
(2)
.................................................. 27 23.1 25 25.8
Multifamily special affordable volume target (in billions) . ......................... $3.92 $7.49 $3.92 $15.12
Subgoal Result Subgoal Result
2008 2007
Year Ended December 31,
Home Purchase Subgoals and Actual Results
Low- and moderate-income subgoal
(2)(4)
....................................... 47% 39.3% 47% 43.5%
Underserved areas subgoal
(2)
............................................... 34 30.3 33 33.8
Special affordable subgoal
(2)(4)
.............................................. 18 15.1 18 15.9
(1) An individual mortgage may qualify for more than one of the goals or subgoals. Each of the goal and subgoal percentages and each of our percentage
results is determined independently and cannot be aggregated to determine a percentage of total purchases that qualifies for these goals or subgoals.
(2) These 2008 goals and subgoals were determined to be infeasible.
(3) FHFA concluded that achievement by us of the 2008 underserved areas goal was feasible, but challenging. Accordingly, FHFA decided not to require us
to submit a housing plan.
(4) These 2007 subgoals were determined to be infeasible.
We make adjustments to our mortgage loan sourcing and purchase strategies due to the goals. These strategies include
entering into some purchase and securitization transactions with lower expected economic returns than our typical
transactions. At times, we also relax some of our underwriting criteria to obtain goals-qualifying mortgage loans and may
make additional investments in higher risk mortgage loan products that are more likely to serve the borrowers targeted by the
goals. Efforts to meet the goals could further increase our credit losses. We continue to evaluate the cost of these activities.
We anticipate that the difficult market conditions and our financial condition will continue to affect our affordable
housing activities in 2010. See also “RISK FACTORS — Legal and Regulatory Risks.” However, we view the purchase of
mortgage loans that are eligible to count toward our affordable housing goals to be a principal part of our mission and
business and we are committed to facilitating the financing of affordable housing for low- and moderate-income families.
If the Director of FHFA finds that we failed to meet a housing goal established under section 1332, 1333, or 1334 of
the GSE Act and that achievement of the housing goal was feasible, the GSE Act states that the Director may require the
submission of a housing plan with respect to the housing goal for approval by the Director. The housing plan must describe
the actions we would take to achieve the unmet goal in the future. FHFA has the authority to take actions against us,
including issuing a cease and desist order or assessing civil money penalties, if we: (a) fail to submit a required housing plan
or fail to make a good faith effort to comply with a plan approved by FHFA; or (b) fail to submit certain data relating to our
mortgage purchases, information or reports as required by law. See “RISK FACTORS — Legal and Regulatory Risks.”
New Products
The Reform Act requires the enterprises to obtain the approval of FHFA before initially offering any product, subject to
certain exceptions. The Reform Act provides for a public comment process on requests for approval of new products. FHFA
may temporarily approve a product without soliciting public comment if delay would be contrary to the public interest.
FHFA may condition approval of a product on specific terms, conditions and limitations. The Reform Act also requires the
enterprises to provide FHFA with written notice of any new activity that we or Fannie Mae consider not to be a product.
On July 2, 2009, FHFA published an interim final rule on prior approval of new products, implementing the new
product provisions for us and Fannie Mae in the Reform Act. The rule establishes a process for Freddie Mac and Fannie Mae
to provide prior notice to the Director of FHFA of a new activity and, if applicable, to obtain prior approval from the
Director if the new activity is determined to be a new product. On August 31, 2009, Freddie Mac and Fannie Mae filed joint
public comments on the interim final rule with FHFA. FHFA has stated that permitting us to engage in new products is
inconsistent with the goals of conservatorship and has instructed us not to submit such requests under the interim final rule.
This could have an adverse effect on our business and profitability in future periods. We cannot currently predict when or if
FHFA will permit us to engage in new products under the interim final rule.
Affordable Housing Allocations
The Reform Act requires us to set aside in each fiscal year an amount equal to 4.2 basis points for each dollar of the
unpaid principal balance of total new business purchases, and allocate or transfer such amount (i) to HUD to fund a Housing
Trust Fund established and managed by HUD and (ii) to a Capital Magnet Fund established and managed by Treasury. FHFA
has the authority to suspend our allocation upon finding that the payment would contribute to our financial instability, cause
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