Freddie Mac 2015 Annual Report Download - page 161

Management's Discussion and Analysis Conservatorship and Related Matters
Freddie Mac 2015 Form 10-K 159
• Issue any subordinated debt.
LIMITS ON OUR MORTGAGE-RELATED INVESTMENTS PORTFOLIO AND
INDEBTEDNESS
Our ability to acquire and sell mortgage assets is significantly constrained by limitations under the
Purchase Agreement and other limitations imposed by FHFA:
• Under the Purchase Agreement and FHFA regulation, the UPB of our mortgage-related investments
portfolio is subject to a cap that decreases by 15% each year until the cap reaches $250 billion.
• Under the Purchase Agreement, we also may not incur indebtedness that would result in the par
value of our aggregate indebtedness exceeding 120% of the amount of mortgage assets we are
permitted to own on December 31 of the immediately preceding calendar year.
• Our Retained Portfolio Plan, which we adopted in 2014, provides for us to manage the mortgage-
related investments portfolio so that it does not exceed 90% of the annual cap established by the
Purchase Agreement, subject to certain exceptions. Under the plan, we may seek permission from
FHFA to increase the plan's limit on the mortgage-related investments portfolio to 95% of the
Purchase Agreement annual cap.
• FHFA indicated that any portfolio sales should be commercially reasonable transactions that consider
impacts to the market, borrowers and neighborhood stability.
Our decisions with respect to managing the decline of the mortgage-related investments portfolio affect all
three business segments. In order to achieve all of our portfolio reduction goals, it is possible that we may
forgo economic opportunities in one business segment in order to pursue opportunities in another
business segment. The reduction in the mortgage-related investments portfolio will result in a decline in
income from this portfolio over time.
Our results against the limits imposed on our mortgage-related investments portfolio and aggregate
indebtedness are shown below.