Freddie Mac 2015 Annual Report Download - page 179

Risk Factors Conservatorship and Related Matters
Freddie Mac 2015 Form 10-K 177
• Deterioration of economic conditions, including increased levels of unemployment and declines in
home prices or family incomes;
• Adverse changes in interest rates, yield curves, implied volatility or spreads, which could affect our
financial assets and liabilities, including derivatives, and increase realized and unrealized losses
recorded in earnings or AOCI;
• The required reductions in the size of our mortgage-related investments portfolio, reductions of higher
yielding assets, or other limitations on our investment activities that reduce our earnings capacity;
• The success of any transactions or other steps we may take in an effort to mitigate the risk of needing
additional draws from Treasury;
• Restrictions on our single-family guarantee activities that could reduce our income from these
activities;
• Restrictions on the volume of multifamily business we may conduct or other limits on multifamily
business activities that could reduce our income from these activities;
• Adverse changes in our liquidity or funding costs, or limitations on our access to public debt markets;
• A failure of one or more of our major counterparties to meet their obligations to us;
• Changes in accounting policies, practices, or guidance;
• The effects of our foreclosure prevention and loss mitigation efforts;
• Changes in housing or economic conditions, legislation, including reductions in corporate tax rates, or
other factors that affect our assessment of our ability to realize our net deferred tax asset, and cause
us to establish a valuation allowance against our net deferred tax asset; or
• Changes in business practices resulting from legislative and regulatory developments or direction
from our Conservator.
Additional draws, which will increase the already substantial liquidation preference of our senior preferred
stock and decrease the amount of Treasury's remaining commitment under the Purchase Agreement,
may add to the uncertainty regarding our long-term financial sustainability.
FHFA controls our business activities. The terms of the Purchase Agreement and the senior
preferred stock significantly limit our business activities. We may be required to take actions that
reduce our profitability, are difficult to implement, or expose us to additional risk.
We are under the control of FHFA, as our Conservator, and are not managed to maximize stockholder
returns. FHFA determines our strategic direction. We face a variety of different, and sometimes
competing, business objectives and FHFA-mandated activities (e.g., the initiatives we are pursuing under
the Conservatorship Scorecards). It may be difficult for us to devote sufficient resources and management
attention to these multiple priorities. Some of the activities FHFA has required us to undertake are costly
and difficult to implement, such as building the common securitization platform.
FHFA has required us to make changes to our business that have adversely affected our financial results.
FHFA could require us to make additional changes at any time. For example, FHFA may require us to
undertake activities that:
• Reduce our profitability;
• Expose us to additional credit, market, funding, operational, and other risks; or
• Provide additional support for the mortgage market to serve our public mission, but adversely affect
our financial results.