Freddie Mac 2015 Annual Report Download - page 159

Management's Discussion and Analysis Conservatorship and Related Matters
Freddie Mac 2015 Form 10-K 157
CONSERVATORSHIP AND RELATED MATTERS
SUPERVISION OF OUR COMPANY DURING CONSERVATORSHIP
FHFA has broad powers when acting as our Conservator. Upon its appointment, the Conservator
immediately succeeded to all rights, titles, powers and privileges of Freddie Mac, and of any stockholder,
officer or director of Freddie Mac with respect to Freddie Mac and its assets. The Conservator also
succeeded to the title to all books, records and assets of Freddie Mac held by any other legal custodian
or third party.
Under the GSE Act, the Conservator may take any actions it determines are necessary to put us in a safe
and solvent condition and appropriate to carry on our business and preserve and conserve our assets
and property. The Conservator’s powers include the ability to transfer or sell any of our assets or
liabilities, subject to certain limitations and post-transfer notice provisions, without any approval,
assignment of rights or consent of any party. However, the GSE Act provides that loans and mortgage-
related assets that have been transferred to a Freddie Mac securitization trust must be held by the
Conservator for the beneficial owners of the trust and cannot be used to satisfy our general creditors.
We conduct our business subject to the direction of FHFA as our Conservator. The Conservator has
delegated certain authority to the Board of Directors to oversee, and to management to conduct, business
operations so we can operate in the ordinary course. The directors serve on behalf of, and exercise
authority as directed by, the Conservator. The Conservator retains the authority to withdraw or revise its
delegations of authority at any time. The Conservator also retains certain significant authorities for itself,
and has not delegated them to the Board. The Conservator continues to provide strategic direction for the
company and directs the efforts of the Board and management to implement its strategy. Despite the
delegations of authority to management, many management decisions are subject to review and/or
approval by FHFA and management frequently receives direction from FHFA on various matters involving
day-to-day operations.
Our current business objectives reflect direction we received from the Conservator including the
Conservatorship Scorecards. At the direction of the Conservator, we have made changes to certain
business practices that are designed to provide support for the mortgage market in a manner that serves
our public mission and other non-financial objectives. Given our public mission and the important role the
Administration and our Conservator have placed on Freddie Mac in addressing housing and mortgage
market conditions, we sometimes take actions that could have a negative impact on our business,
operating results or financial condition, and thus contribute to a need for additional draws under the
Purchase Agreement. Certain of these actions are intended to help homeowners and the mortgage
market.
TREASURY AGREEMENTS AND SENIOR PREFERRED STOCK
In connection with our entry into conservatorship, we entered into the Purchase Agreement with Treasury.
Under the Purchase Agreement, we issued to Treasury both senior preferred stock and a warrant to
purchase common stock. We refer to the Purchase Agreement and the warrant as the "Treasury
Agreements." The Treasury Agreements and the senior preferred stock do not contain any provisions
causing them to terminate or cease to exist upon the termination of conservatorship. The conservatorship,
the Treasury Agreements and the senior preferred stock materially limit the rights of our common and