Freddie Mac 2015 Annual Report Download - page 171

Management's Discussion and Analysis Regulation and Supervision
Freddie Mac 2015 Form 10-K 169
rating Freddie Mac’s and Fannie Mae’s performance each year, on which FHFA would report annually to
Congress.
We cannot predict the content of any final rule that FHFA may adopt, or the impact that such final rule will
have on our business or operations. If the December 2015 rule proposal is adopted, it is possible that it
could have an adverse effect on our profitability.
Final Rule on Margin and Capital Requirements for Covered Swap Entities
In October 2015, FHFA and several other agencies jointly issued a final rule governing margin and capital
requirements for covered swap entities pursuant to authority under the Dodd-Frank Act. The final rule
imposes initial and variation margin requirements for swaps that are not cleared through central
clearinghouses, including: obligations to post and collect initial and variation margin; eligibility, valuation
and segregation of collateral; margin model methodologies; documentation; and other requirements.
While an increasing number of our interest rate swap transactions are cleared, we continue to execute
uncleared swap transactions, which will be affected by these rules.
Final Rule on Risk Retention
In October 2014, six agencies, including FHFA, issued a rule that generally requires a securitizer of asset-
backed securities to retain no less than five percent of the credit risk of the assets underlying such
securities. The risk retention requirements became applicable to new single-family loan securitizations
issued beginning in December 2015 and will apply to new multifamily securitizations issued beginning in
December 2016. A provision in the rule indicates that our fully guaranteed securitizations generally satisfy
the risk retention requirements for so long as we are in conservatorship or receivership and receiving
federal financial support. However, this provision does not apply to our securitization structures that are
not fully guaranteed. In December 2015, FHFA indicated that it will exercise its authority under the rule to
direct Freddie Mac to sell or otherwise hedge credit risk in certain securitizations that are not fully
guaranteed that we would otherwise be required to retain under the rule.
Industry Letter on Integrated Mortgage Disclosure Rule
On October 6, 2015, at the direction of FHFA, we issued an industry letter concerning the CFPB’s Know
Before You Owe Truth-in-Lending Act - Real Estate Settlement Procedures Act Integrated Mortgage
Disclosure Rule (the “TRID rule”), which went into effect on October 3, 2015. In the letter, we noted,
among other items, that:
• We expect seller/servicers to make good faith efforts to comply with the TRID rule, and failure to
use a TRID Rule-required form will be deemed a violation of the good faith efforts standard and
will render the mortgage subject to all contractual remedies, including repurchase;
• We will not conduct routine post-purchase loan file reviews for technical compliance with the
TRID rule, until further notice; and
• After a transitional period, we will consider whether to begin such reviews for technical
compliance.