Freddie Mac 2015 Annual Report Download - page 165

Management's Discussion and Analysis Regulation and Supervision
Freddie Mac 2015 Form 10-K 163
REGULATION AND SUPERVISION
In addition to our oversight by FHFA as our Conservator, we are subject to regulation and oversight by
FHFA under our charter and the GSE Act and to certain regulation by other government agencies.
Furthermore, regulatory activities by other government agencies can affect us indirectly, even if we are
not directly subject to such agencies’ regulation or oversight. For example, regulations that modify
requirements applicable to the purchase or servicing of mortgages can affect us.
FEDERAL HOUSING FINANCE AGENCY
FHFA is an independent agency of the federal government responsible for oversight of the operations of
Freddie Mac, Fannie Mae, and the FHLBs.
Under the GSE Act, FHFA has safety and soundness authority that is comparable to, and in some
respects, broader than that of the federal banking agencies. FHFA is responsible for implementing the
various provisions of the GSE Act that were added by the Reform Act.
Receivership
Under the GSE Act, FHFA must place us into receivership if FHFA determines in writing that our assets
are less than our obligations for a period of 60 days. FHFA notified us that the measurement period for
any mandatory receivership determination with respect to our assets and obligations would commence no
earlier than the SEC public filing deadline for our quarterly or annual financial statements and would
continue for 60 calendar days after that date. FHFA also advised us that, if, during that 60-day period, we
receive funds from Treasury in an amount at least equal to the deficiency amount under the Purchase
Agreement, the Director of FHFA will not make a mandatory receivership determination. In addition, we
could be put into receivership at the discretion of the Director of FHFA at any time for other reasons set
forth in the GSE Act.
Certain aspects of conservatorship and receivership operations of Freddie Mac, Fannie Mae and the
FHLBs are addressed in an FHFA rule. Among other provisions, the rule indicates that FHFA generally will
not permit payment of securities litigation claims during conservatorship and that claims by current or
former shareholders arising as a result of their status as shareholders would receive the lowest priority of
claim in receivership. In addition, the rule indicates that administrative expenses of the conservatorship
will also be deemed to be administrative expenses of receivership and that capital distributions may not
be made during conservatorship, except as specified in the rule.
Capital Standards
FHFA suspended capital classification of us during conservatorship in light of the Purchase Agreement.
The existing statutory and FHFA-directed regulatory capital requirements are not binding during the
conservatorship. These capital standards are described in Note 16. Under the GSE Act, FHFA has the
authority to increase our minimum capital levels temporarily or to establish additional capital and reserve
requirements for particular purposes.
Pursuant to an FHFA rule, FHFA-regulated entities are required to conduct annual stress tests to
determine whether such companies have sufficient capital to absorb losses as a result of adverse