Freddie Mac 2009 Annual Report Download - page 54

On June 17, 2009, the Obama Administration announced a legislative proposal to overhaul the regulatory structure of
the financial services industry. The proposal does not address the regulatory oversight or structure of Freddie Mac. However,
the proposal states that Treasury and HUD are expected to consult with other government agencies and develop
recommendations for the future of Freddie Mac, Fannie Mae and the Federal Home Loan Bank System. Separately, Treasury
Secretary Geithner and House Financial Services Committee Chairman Frank have both expressed support for substantially
reforming the structure of the GSE model. Representatives of the Obama Administration have indicated that the
Administration will release a statement regarding the future of the GSEs in the near future.
In addition to legislative actions, FHFA has expansive regulatory authority over us, and the manner in which FHFA will
use its authority in the future is unclear. FHFA could take a number of regulatory actions that could materially adversely
affect our company, such as changing our current capital requirements, which are not binding during conservatorship.
Legislation or regulation affecting the financial services, mortgage and investment banking industries may adversely
affect our business activities and financial results.
We expect that the financial services, mortgage and investment banking industries will face increased regulation,
whether by legislation or regulatory actions at the federal or state level.
Congress and state legislatures are considering several legislative and regulatory actions that would impact our business
activities. These actions include among other things, regulatory oversight of systemically important financial institutions and
reforms related to asset-backed securitization, consumer financial protection, over-the-counter derivatives and mortgage
lending. We could be subject to new and additional regulatory oversight and standards related to our activities, products and
capital adequacy and exposed to increased liability or credit losses. We could also be adversely affected by any legislative or
regulatory changes to existing bankruptcy laws or proceedings or the foreclosure process, including any changes that would
allow bankruptcy judges to unilaterally change the terms of mortgage loans.
In addition, legislation or regulatory actions could indirectly affect us to the extent such legislation or actions affect the
activities of banks, savings institutions, insurance companies, securities dealers and other regulated entities that constitute a
significant part of our customer base or counterparties. Legislative or regulatory provisions that create or remove incentives
for these entities to sell mortgage loans to us, purchase our securities or enter into derivatives or other transactions with us
could have a material adverse effect on our business results and financial condition.
Our financial condition and results of operations and our ability to return to long-term profitability may be affected by
the nature, extent and success of the actions taken by the U.S. government to stabilize the economy and the housing and
financial markets.
Conditions in the overall economy, and the mortgage markets in particular, may be affected in both the short and long-
term by the implementation of the Emergency Economic Stabilization Act of 2008, the Recovery Act, the Financial Stability
Plan announced by Treasury Secretary Geithner on February 10, 2009 and the MHA Program. The long-term impact that the
implementation of these, or any future, laws and programs may have on our business and on the financial markets is
uncertain. While the financial markets appear to have stabilized, there can be no assurance that this will continue. Any
worsening of current financial market conditions could materially and adversely affect our business, financial condition,
results of operations, or access to the debt markets.
The government could implement new laws or programs to support the economy and the housing and financial markets
that could have an adverse effect on our business, including by increasing our credit losses.
We may make certain changes to our business in an attempt to meet the housing goals and subgoals set for us by FHFA
that may increase our losses.
We may make adjustments to our mortgage sourcing and purchase strategies in an effort to meet our housing goals and
subgoals, including changes to our underwriting guidelines and the expanded use of targeted initiatives to reach underserved
populations. For example, we may purchase loans and mortgage-related securities that offer lower expected returns on our
investment and increase our exposure to credit losses. Doing so could cause us to forgo other purchase opportunities that we
would expect to be more profitable. If our current efforts to meet the goals and subgoals prove to be insufficient, we may
need to take additional steps that could further increase our losses.
We are involved in legal proceedings, governmental investigations and IRS examinations that could result in the payment
of substantial damages or otherwise harm our business.
We are a party to various legal actions, and are subject to investigations by the SEC and the U.S. Attorney’s Office for
the Eastern District of Virginia. In addition, certain of our current and former directors, officers and employees are involved
in legal proceedings for which they may be entitled to reimbursement by us for costs and expenses of the proceedings. The
defense of these or any future claims or proceedings could divert management’s attention and resources from the needs of
the business. We may be required to establish reserves and to make substantial payments in the event of adverse judgments
51 Freddie Mac