Freddie Mac 2014 Annual Report Download - page 280

275 Freddie Mac
against the Risk Management prong of the Corporate Scorecard goals. See "CD&A — At-Risk Deferred Salary Based on
Corporate Scorecard Goals and Individual Performance."
For a discussion of the Compensation Committee’s conclusion that our compensation policies and practices do not create
risks that are reasonably likely to have a material adverse effect on us, see “Executive Compensation — Compensation and
Risk.”
Transactions with 5% Shareholders
In connection with our entry into conservatorship, we issued a warrant to Treasury to purchase shares of our common
stock equal to 79.9% of the total number of shares of our common stock outstanding, on a fully diluted basis. There were a
number of transactions between us and Treasury since the beginning of 2014, as discussed in “BUSINESS — Conservatorship
and Related Matters,” “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS,” as well as in "NOTE 8: DEBT
SECURITIES AND SUBORDINATED BORROWINGS," and "NOTE 11: STOCKHOLDERS' EQUITY."
FHFA, as conservator, approved the Purchase Agreement and our administrative role in the MHA Program and the
Memorandum of Understanding with Treasury, FHFA, and Fannie Mae. FHFA also instructed us to implement the recently
announced $5,000 principal reduction incentive under HAMP in which Treasury will pay the incentive for borrowers with
certain of our HAMP modified loans. The remaining transactions described in the sections referenced above did not require
review and approval under any of our policies and procedures relating to transactions with related persons.
Transactions with Institutions Related to Directors
In the ordinary course of business, we were a party during 2014, and expect to continue to be a party during 2015, to
certain business transactions with institutions affiliated with members of our Board. Management believes that the terms and
conditions of the transactions were no more and no less favorable to us than the terms of similar transactions with unaffiliated
institutions to which we are, or expect to be, a party. None of these transactions were required to be disclosed under SEC rules.
Transactions with Institutions Related to Executive Officers
Mr. Layton joined us in May 2012 as CEO and as a member of the Board of Directors. Mr. Layton previously served as a
senior executive officer of JPMorgan Chase, ending his service in 2004.
Freddie Mac has an extensive business relationship with JPMorgan Chase (through its subsidiaries). As of December 31,
2014, JPMorgan Chase was one of Freddie Mac’s largest servicers, and serviced approximately 1.19 million loans for Freddie
Mac. JPMorgan Chase had an aggregate unpaid principal balance of loans of approximately $194.2 billion as of December 31,
2014 and approximately $193.3 billion as of January 31, 2015. JPMorgan Chase sold approximately $13.9 billion in single-
family loans to Freddie Mac in 2014.
JPMorgan Chase also is a significant capital markets, derivatives and multifamily counterparty and is an underwriter of
our debt and mortgage securities. As of January 31, 2015, JPMorgan Chase and its subsidiaries had an aggregate notional
balance of $22.3 billion of derivatives and $1 billion of reverse purchase agreements with Freddie Mac. From January 1, 2014
through January 31, 2015, JPMorgan Chase served as underwriter for $26.9 billion of Freddie Mac’s debt securities and $32.4
billion of Freddie Mac’s mortgage-related securities.
Mr. Layton receives a pension from JPMorgan Chase in connection with his retirement in 2004. In addition, Mr. Layton
has a deferred compensation balance under JPMorgan Chase’s Deferred Compensation Plan, of which more than 90% is
payable in fifteen annual installments beginning in January 2016 and earns a return based upon a defined list of mutual funds
that Mr. Layton designates. The remaining portion, less than 10%, is in the form of a “private equity balance” that is payable as
proceeds are realized from the underlying private equity transactions into which the funds were invested. Mr. Layton’s deferred
compensation balance is less than ten percent of his total net worth on an after-tax basis. Mr. Layton also has brokerage and
deposit accounts with JPMorgan Chase.
The amounts of Mr. Layton’s pension and deferred compensation do not depend in any way on JPMorgan Chase’s results
as long as JPMorgan Chase is able to meet its obligations. In addition, in order to eliminate any potential conflicts of interest,
Mr. Layton agreed to recuse himself from acting upon matters directly relating to JPMorgan Chase that may be considered by
the Board of Directors, or presented to him in his capacity as CEO and a member of the Board, if such matter has the potential
to affect JPMorgan Chase’s ability to satisfy its obligations to him. Mr. Layton does not have a material interest in our
relationship with JPMorgan Chase and the relationships described above were not required to be reviewed, approved or ratified
under our Related Person Transactions Policy.
Conservatorship Agreements
Treasury, FHFA, and the Federal Reserve have taken a number of actions to support us during conservatorship, including
entering into the Purchase Agreement, described in this Form 10-K. See “BUSINESS — Conservatorship and Related Matters"
and “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS — Related Parties as a Result of Conservatorship.”
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Description of Fees
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