Freddie Mac 2010 Annual Report Download - page 26

The conservatorship has also impacted our investment activity. FHFA has stated that we will not be a substantial buyer
or seller of mortgages for our mortgage-related investments portfolio, except for purchases of delinquent mortgages out of
PC pools. FHFA also stated that, given the size of our current mortgage-related investments portfolio and the potential
volume of delinquent mortgages to be purchased out of PC pools, it expects that any net additions to our mortgage-related
investments portfolio would be related to that activity.
The Conservator and Treasury also did not authorize us to engage in certain business activities and transactions,
including the sale of certain assets, some of 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. 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.
Management is continuing its efforts to identify and evaluate actions that could be taken to reduce the significant
uncertainties surrounding our business, as well as the level of future draws under the Purchase Agreement; however, our
ability to pursue such actions may be limited by market conditions and other factors. Any actions we take will likely require
approval by FHFA and Treasury before they are implemented. In addition, FHFA, Treasury or Congress may have a different
perspective than management and may direct us to focus our efforts on supporting the mortgage markets in ways that make
it more difficult for us to implement any such actions.
These actions and objectives also create risks and uncertainties that we discuss in “RISK FACTORS.” For more
information on the impact of conservatorship and our current business objectives, see “NOTE 3: CONSERVATORSHIP AND
RELATED MATTERS” and “Executive Summary — Our Primary Business Objectives.”
Limits on Mortgage-Related Investments Portfolio Under the Purchase Agreement and by FHFA
Under the terms of the Purchase Agreement and FHFA regulation, our mortgage-related investments portfolio is subject
to a cap that decreases by 10% each year until the portfolio reaches $250 billion. As a result, the UPB of our mortgage-
related investments portfolio could not exceed $810 billion as of December 31, 2010 and may not exceed $729 billion as of
December 31, 2011.
Table 4 presents the UPB of our mortgage-related investments portfolio, for purposes of the limit imposed by the
Purchase Agreement and FHFA regulation. We disclose our mortgage assets on this basis monthly under the caption
“Mortgage-Related Investments Portfolio — Ending Balance” in our Monthly Volume Summary reports, which are available
on our website and in current reports on Form 8-K we file with the SEC.
The UPB of our mortgage-related investments portfolio declined from December 31, 2009 to December 31, 2010,
primarily due to liquidations, partially offset by the purchase of $127.5 billion of seriously delinquent loans from PC trusts.
Table 4 — Mortgage-Related Investments Portfolio
(1)
December 31, 2010 December 31, 2009
(in millions)
Investments segment — Mortgage investments portfolio . . . . ................................ $481,677 $597,827
Single-family Guarantee segment — Single-family unsecuritized mortgage loans
(2)
................. 69,766 10,743
Multifamily segment — Mortgage investments portfolio. . . . ................................ 145,431 146,702
Total mortgage-related investments portfolio . . ......................................... $696,874 $755,272
(1) Based on UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(2) Represents unsecuritized non-performing single-family loans for which the Single-family Guarantee segment is actively pursuing a problem loan
workout.
Supervision of our Business During Conservatorship
We experienced a change in control when we were placed into conservatorship on September 6, 2008. Under
conservatorship, we have additional heightened supervision and direction from our regulator, FHFA, which is also acting as
our Conservator. As Conservator, FHFA has succeeded to the powers of our Board of Directors and management, as well as
the powers of our stockholders. During the conservatorship, the Conservator delegated certain authority to the Board of
Directors to oversee, and management to conduct, day-to-day operations so that the company can continue to operate in the
ordinary course of business. The Conservator retains the authority to withdraw or revise its delegations of authority at any
time. The directors serve on behalf of, and exercise authority as directed by, the Conservator.
Because the Conservator succeeded to the powers, including voting rights, of our stockholders, who therefore do not
currently have voting rights of their own, we do not expect to hold stockholders’ meetings during the conservatorship, nor
will we prepare or provide proxy statements for the solicitation of proxies.
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