Freddie Mac 2014 Annual Report Download - page 32

27 Freddie Mac
Department of the Treasury
Treasury has significant rights and powers with respect to our company as a result of the Purchase Agreement. In
addition, under our charter, the Secretary of the Treasury has approval authority over our issuances of notes, debentures and
substantially identical types of unsecured debt obligations (including the interest rates and maturities of these securities), as
well as new types of mortgage-related securities issued subsequent to the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989. The Secretary of the Treasury has performed this debt securities approval function by
coordinating GSE debt offerings with Treasury funding activities. In addition, our charter authorizes Treasury to purchase
Freddie Mac debt obligations not exceeding $2.25 billion in aggregate principal amount at any time.
Consumer Financial Protection Bureau
The CFPB regulates consumer financial products and services. The CFPB adopted a number of final rules in early 2013
relating to mortgage origination, finance, and servicing practices. The rules generally went into effect in January 2014. The
rules include an ability-to-repay rule, which requires mortgage originators to make a reasonable and good faith determination
that a borrower has a reasonable ability to repay the loan according to its terms. This rule provides certain protection from
liability for originators making loans that satisfy the definition of a qualified mortgage. The ability-to-repay rule applies to most
loans acquired by Freddie Mac, and for such loans covered by the rule, FHFA has directed us and Fannie Mae to limit our
single-family acquisitions to loans that generally would constitute qualified mortgages under applicable CFPB regulations. The
directive generally restricts us and Fannie Mae from acquiring loans that are: (a) not fully amortizing; (b) have a term greater
than 30 years; or (c) have points and fees in excess of 3% of the total loan amount.
Securities and Exchange Commission
We are subject to the reporting requirements applicable to registrants under the Exchange Act, including the requirement
to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Although
our common stock is required to be registered under the Exchange Act, we continue to be exempt from certain federal securities
law requirements, including the following:
• Securities we issue or guarantee are “exempted securities” and may be sold without registration under the Securities
Act;
• We are excluded from the definitions of “government securities broker” and “government securities dealer” under the
Exchange Act;
• The Trust Indenture Act of 1939 does not apply to securities issued by us; and
• We are exempt from the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as we are an
“agency, authority or instrumentality” of the U.S. for purposes of such Acts.
Legislative and Regulatory Developments
We discuss certain significant legislative and regulatory developments below. For more information regarding these and
other legislative and regulatory developments that could affect our business, see “RISK FACTORS — Conservatorship and
Related Matters” and “— Legal and Regulatory Risks.”
Legislation Related to Freddie Mac and its Future Status
Our future structure and role will be determined by the Administration and Congress, and there are likely to be significant
changes beyond the near-term.
Congress held hearings and considered legislation on the future state of Freddie Mac, Fannie Mae and the housing finance
system during 2014. A number of bills were introduced in Congress in 2014 relating to the future status of Freddie Mac, Fannie
Mae, and the secondary mortgage market. None of the bills was considered by the full Senate or the full House of
Representatives, although one of them (the “Housing Finance Reform and Taxpayer Protection Act of 2014,” also known as the
Johnson-Crapo bill) was approved by the Senate Banking Committee in May 2014. Several of the bills considered by Congress
(including the Johnson-Crapo bill) would have placed us into receivership and materially affected our business prior to our
eventual liquidation.
Since these bills were not enacted prior to the adjournment of the 113th Congress, they would need to be reintroduced in
the 114th Congress that began in January 2015 in order to be considered further. We do not know whether that will occur.
However, it is likely that similar or new bills related to Freddie Mac, Fannie Mae and the future of the mortgage finance system
will be introduced and considered in the 114th Congress. We cannot predict whether any of such bills will be enacted.
On January 27, 2015, the “Pay Back the Taxpayers Act of 2015” was introduced in the House Financial Services
Committee. This bill would prohibit contributions by us and Fannie Mae to the Housing Trust Fund and the Capital Market
Fund while we are in conservatorship or receivership. For more information, see “Federal Housing Finance Agency —
Affordable Housing Allocations.”
For more information, see “RISK FACTORS — Conservatorship and Related Matters — The future status and role of
Freddie Mac are uncertain.”
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