Freddie Mac 2010 Annual Report Download - page 199

Our business objectives and strategies have in some cases been altered since we were placed into conservatorship, and
may continue to change. These changes to our business objectives and strategies may not contribute to our profitability.
Based on our charter, public statements from Treasury and FHFA officials and guidance from our Conservator, we have a
variety of different, and potentially competing, objectives, including:
• providing liquidity, stability and affordability in the mortgage market;
• continuing to provide additional assistance to the struggling housing and mortgage markets;
• reducing the need to draw funds from Treasury pursuant to the Purchase Agreement;
• returning to long-term profitability; and
• protecting the interests of taxpayers.
In a letter to the Chairmen and Ranking Members of the Senate Banking and House Financial Services Committees
dated February 2, 2010, the Acting Director of FHFA stated that the focus of the conservatorship is on conserving assets,
minimizing corporate losses, ensuring Freddie Mac continues to serve its mission, overseeing remediation of identified
weaknesses in corporate operations and risk management, and ensuring that sound corporate governance principles are
followed. The Acting Director of FHFA stated that minimizing our credit losses is our central goal and that we will be
limited to continuing our existing core business activities and taking actions necessary to advance the goals of the
conservatorship. The Acting Director stated that permitting us to offer new products is inconsistent with the goals of the
conservatorship.
These objectives create conflicts in strategic and day-to-day decision making that will likely lead to suboptimal
outcomes for one or more, or possibly all, of these objectives. We regularly receive direction from our Conservator on how
to pursue our objectives under conservatorship, including direction to focus our efforts on assisting homeowners in the
housing and mortgage markets. The Conservator and Treasury have also not authorized us to engage in certain business
activities and transactions, including the purchase or sale of certain assets, which we believe may have had a beneficial
impact on our results of operations or financial condition, if executed. Our inability to execute such transactions may
adversely affect our profitability, and thus contribute to our need to draw additional funds from Treasury. However, we
believe that the support provided by Treasury pursuant to the Purchase Agreement currently enables us to maintain our
access to the debt markets and to have adequate liquidity to conduct our normal business activities, although the costs of our
debt funding could vary.
Given the important role the Obama Administration and our Conservator have placed on Freddie Mac in addressing
housing and mortgage market conditions and our public mission, we may be required to take additional actions that could
have a negative impact on our business, operating results, or financial condition. The Acting Director of FHFA stated that
FHFA does not expect we will be a substantial buyer or seller of mortgages for our mortgage-related investments portfolio,
except for purchases of seriously delinquent mortgages out of PC pools. We are also subject to limits on the amount of assets
we can sell from our mortgage-related investments portfolio in any calendar month without review and approval by FHFA
and, if FHFA determines, Treasury.
Certain changes to our business objectives and strategies are designed to provide support for the mortgage market in a
manner that serves our public mission and other non-financial objectives, but may not contribute to our profitability. Some of
these changes increase our expenses, while others require us to forego revenue or other opportunities. In addition, the
objectives set forth for us under our charter and by our Conservator, as well as the restrictions on our business under the
Purchase Agreement, have adversely impacted and may continue to adversely impact our financial results, including our
segment results. For example, our efforts to help struggling homeowners and the mortgage market, in line with our public
mission, may help to mitigate our credit losses, but in some cases may increase our expenses or require us to forgo revenue
opportunities in the near term. There is significant uncertainty as to the ultimate impact that our efforts to aid the housing
and mortgage markets, including our efforts in connection with the MHA Program, will have on our future capital or
liquidity needs. We are allocating significant internal resources to the implementation of the various initiatives under the
MHA Program, which has increased, and will continue to increase, our expenses. We cannot currently estimate whether, or
the extent to which, costs incurred in the near term from HAMP or other MHA Program efforts may be offset, if at all, by
the prevention or reduction of potential future costs of loan defaults and foreclosures due to these initiatives.
There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified
termination date, and as to what changes may occur to our business structure during or following our conservatorship,
including whether we will continue to exist. Our future structure and role will be determined by the Obama Administration
and Congress. We have no ability to predict the outcome of these deliberations.
On February 11, 2011, the Obama Administration delivered a report to Congress that lays out the Administration’s plan
to reform the U.S. housing finance market, including options for structuring the government’s long-term role in a housing
finance system in which the private sector is the dominant provider of mortgage credit. The report recommends winding
196 Freddie Mac