Freddie Mac 2014 Annual Report Download - page 29

24 Freddie Mac
and financial conditions (baseline, adverse, and severely adverse); and (b) publicly disclose the results of the stress test under
the “severely adverse” scenario. In April 2014, we disclosed the results of the first annual stress test.
For additional information, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Capital Resources, the
Purchase Agreement, and the Dividend Obligation on the Senior Preferred Stock.”
New Products
The GSE Act requires the enterprises to obtain the approval of FHFA before initially offering any product (including new
mortgage products), subject to certain exceptions. The GSE Act also requires us to provide FHFA with written notice of any
new activity that we consider not to be a product. While FHFA has published an interim final rule on prior approval of new
products, it has stated that permitting us to engage in new products is inconsistent with the goals of conservatorship and
instructed us not to submit such requests under the interim final rule. This could have an adverse effect on our business and
profitability in future periods.
Affordable Housing Goals
We are subject to annual affordable housing goals. We view the purchase of mortgage loans that are eligible to count
toward our affordable housing goals to be a principal part of our mission and business, and we are committed to facilitating the
financing of affordable housing for low- and moderate-income families. In light of these goals, we may make adjustments to
our mortgage loan sourcing and purchase strategies, which could potentially increase our credit losses. These strategies could
include entering into purchase and securitization transactions with lower expected economic returns than our typical
transactions. In February 2010, FHFA stated that it does not intend for us to undertake uneconomic or high risk activities in
support of the housing goals nor does it intend for the state of conservatorship to be a justification for withdrawing our support
from these market segments.
If the Director of FHFA finds that we failed to meet a housing goal and that achievement of the housing goal was
feasible, the Director may require the submission of a housing plan with respect to the housing goal. The housing plan must
describe the actions we would take to achieve the unmet goal in the future. FHFA has the authority to take actions against us,
including issuing a cease and desist order or assessing civil money penalties, if we: (a) fail to submit a required housing plan or
fail to make a good faith effort to comply with a plan approved by FHFA; or (b) fail to submit certain mortgage purchase data,
information or reports as required by law. See “RISK FACTORS — Legal and Regulatory Risks — We may make certain
changes to our business in an attempt to meet our housing goals and subgoals.”
FHFA has established four goals and one subgoal for single-family owner-occupied housing, one multifamily affordable
housing goal, and one multifamily affordable housing subgoal. Three of the single-family housing goals and the subgoal target
purchase money mortgages for: (a) low-income families; (b) very low-income families; and/or (c) families that reside in low-
income areas. The single-family housing goals also include one that targets refinancing mortgages for low-income families.
The multifamily affordable housing goal targets multifamily rental housing affordable to low-income families. The multifamily
affordable housing subgoal targets multifamily rental housing affordable to very low-income families.
The single-family goals are expressed as a percentage of the total number of eligible mortgages underlying our total
single-family mortgage purchases. The multifamily goals are expressed in terms of minimum numbers of units financed.
The single-family goals are measured by comparing our performance with: (a) the actual share of the market that meets
the criteria for each goal; and (b) a benchmark level established by FHFA. If our performance on a single-family goal falls short
of the benchmark, we still could achieve the goal if our performance meets or exceeds the actual share of the market that meets
the criteria for the goal for that year.
Affordable Housing Goals for 2014
FHFA’s affordable housing goals for Freddie Mac for 2014 are set forth below.
Table 3 — Affordable Housing Goals for 2014
Goals for 2014
Single -family purchase money goals (benchmark levels):
Low-income 23%
Very low-income 7%
Low-income areas(1) 18%
Low-income areas subgoal 11%
Single -family refinance low-income goal (benchmark level) 20%
Multifamily low-income goal (in units) 200,000
Multifamily low-income subgoal (in units) 40,000
(1) FHFA annually sets the benchmark level for the low-income areas goal based on the benchmark level for the low-income areas subgoal, plus an
adjustment factor reflecting the additional incremental share of mortgages for low- and moderate-income families in designated disaster areas in the
three most recent years for which such data are available. For 2014, FHFA set the benchmark level at 18%.
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