Freddie Mac 2009 Annual Report Download - page 50

Our seller/servicers have a key role in the success of our loss mitigation activities. The continued increases in
delinquent loan volume and the ongoing weak conditions of the mortgage market during 2009 placed a strain on the loss
mitigation resources of many of our seller/servicers. A decline in the performance of seller/servicers in mitigation efforts
could result in missed opportunities for successful loan modifications, an increase in our credit losses and damage to our
reputation.
Depending on the type of loss mitigation activities we pursue, those activities could result in accelerating or slowing
prepayments on our PCs or Structured Securities, either of which could negatively affect the pricing of such PCs or
Structured Securities.
We are devoting significant internal resources to the implementation of the various initiatives under the MHA Program,
which will increase our expenses. The size and scope of our effort under the MHA Program may also limit our ability to
pursue other important corporate opportunities or initiatives.
Our relationships with our customers could be harmed by our actions as the compliance agent under HAMP, which could
negatively affect our ability to purchase loans from them in the future.
We are the compliance agent for certain foreclosure avoidance activities under HAMP. In this role, we conduct
examinations and review servicer compliance with the published requirements for the program. It is unclear how servicers
will perceive our actions as compliance agent. It is possible that this could impair our relationships with our lender
customers, which could negatively affect our ability to purchase loans from them in the future.
We may experience further write-downs and losses relating to our assets, including our investment securities, net deferred
tax assets, REO properties or mortgage loans, that could materially adversely affect our business, results of operations,
financial condition, liquidity and net worth.
We experienced a significant increase in losses and write-downs relating to our assets during 2008 and 2009, including
significant declines in market value, impairments of our investment securities, market-based write-downs of REO properties,
losses on non-performing loans purchased out of PC pools, and impairments on other assets.
A substantial portion of our impairment losses and write-downs relate to our investments in non-agency mortgage-
related securities backed by subprime, Alt-A and option ARM mortgage loans. We also incurred significant losses during
2008 and 2009 relating to our investments in non-mortgage-related securities, primarily as a result of a substantial decline in
the market value of these assets due to the deteriorating economy and ongoing weakness in the financial markets. The fair
value of our investments in securities, including CMBS, may be further adversely affected by continued weakness in the
economy, further deterioration in the housing and financial markets, additional ratings downgrades or other events.
We increased our valuation allowance for our deferred tax assets, net by $2.7 billion during 2009. The future status and
role of Freddie Mac could be affected by actions of the Conservator, and legislative and regulatory action that alters the
ownership, structure and mission of the company. The uncertainty of these developments could materially affect our
operations, which could in turn affect our ability or intent to hold investments until the recovery of any temporary unrealized
losses. If future events significantly alter our current outlook, a valuation allowance may need to be established for the
remaining deferred tax asset.
Due to the ongoing weaknesses in the economy and in the housing and financial markets, we may experience additional
write-downs and losses relating to our assets, including those that are currently AAA-rated, and the fair values of our assets
may continue to decline. This could adversely affect our results of operations, financial condition, liquidity and net worth. In
addition, many of these assets do not trade in a liquid secondary market and the size of our holdings relative to normal
market activity is such that, if we were to attempt to sell a significant quantity of assets, the pricing in such markets could be
significantly disrupted and the price we ultimately realize may be materially lower than the value at which we carry these
assets on our consolidated balance sheets.
The price and trading liquidity of our common stock and our NYSE-listed issues of preferred stock may be adversely
affected if those securities are delisted from the NYSE.
If we do not satisfy the minimum share price, corporate governance and other requirements of the continued listing
standards of the NYSE, our common stock and NYSE-listed issues of preferred stock could be delisted from the NYSE. In
November 2008, the NYSE notified us that we had failed to satisfy one of the NYSE’s standards for continued listing of our
common stock. Specifically, the NYSE advised us that we were “below criteria” for the NYSE’s price criteria for common
stock because the average closing price of our common stock over a consecutive 30 trading-day period was less than $1 per
share. In September 2009, the NYSE notified us that we had returned to compliance with the NYSE’s minimum share price
listing requirement.
If our common stock price again fails to meet the NYSE’s minimum price criteria, our common stock could be delisted
from the NYSE, and this would also likely result in the delisting of our NYSE-listed preferred stock. The delisting of our
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