Freddie Mac 2010 Annual Report Download - page 65

underserved populations. For example, we may purchase loans 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. FHFA has not yet published a final rule with respect to our duty to
serve underserved markets. However, it is possible that we could also make changes to our business in the future in response
to this duty. If we do not meet our housing goals or duty to serve requirements, and FHFA finds that the goals or
requirements were feasible, we may become subject to a housing plan that could require us to take additional steps that
could have an adverse effect on our results of operations and financial condition.
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, including litigation in the U.S. Tax Court as result of a dispute of certain tax
matters with the IRS related to our 1998 through 2005 federal income tax returns. We are also 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 or settlements of any such claims, investigations, proceedings or
examinations. Any legal proceeding, governmental investigation or examination issue, even if resolved in our favor, could
result in negative publicity or cause us to incur significant legal and other expenses. Furthermore, developments in, outcomes
of, impacts of, and costs, expenses, settlements and judgments related to these legal proceedings and governmental
investigations and examinations may differ from our expectations and exceed any amounts for which we have reserved or
require adjustments to such reserves. We are also cooperating with other investigations, such as the review being conducted
by state attorneys general and state bank and mortgage regulators into foreclosure practices. These proceedings could divert
management’s attention or other resources. See “LEGAL PROCEEDINGS” for information about our pending legal
proceedings and “NOTE 14: INCOME TAXES” for information about our litigation with the IRS relating to potential
additional income taxes and penalties for the 1998 to 2005 tax years and other tax-related matters.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal offices consist of five office buildings in McLean, Virginia. We own four of the office buildings,
comprising approximately 1.3 million square feet. We occupy the fifth building, comprising approximately 200,000 square
feet, under a lease from a third party.
ITEM 3. LEGAL PROCEEDINGS
We are involved as a party to a variety of legal proceedings arising from time to time in the ordinary course of business.
See “NOTE 21: LEGAL CONTINGENCIES” for more information regarding our involvement as a party to various legal
proceedings.
ITEM 4. RESERVED
62 Freddie Mac