Freddie Mac 2015 Annual Report Download - page 194

Risk Factors Liquidity Risks
Freddie Mac 2015 Form 10-K 192
We pay net worth sweep dividends to Treasury on the senior preferred stock on a quarterly basis. The
amount of the net worth sweep dividend could vary substantially from quarter to quarter for a number of
reasons, including as a result of non-cash changes in net worth. It is possible that, due to non-cash
increases in net worth, such as increases in the fair value of our securities or a reduction in our loan loss
reserves, the amount of our dividend for a quarter could exceed the amount of available cash, which
could have an adverse effect on our financial results.
Changes in U.S. Government Support
Treasury supports us through the Purchase Agreement and Treasury’s ability to purchase up to
$2.25 billion of our obligations under its permanent statutory authority. Unlike certain of our competitors,
we do not have access to the Federal Reserve's discount window or emergency credit facilities. Changes
or perceived changes in the U.S. government’s support for us could have a severe negative effect on our
access to the unsecured debt markets and our debt funding costs. Our access to the unsecured debt
markets and the costs of our debt funding could be adversely affected by a number of factors relating to
U.S. government support, including:
• Uncertainty about the future of the GSEs;
• If debt investors become concerned that the risk of us being placed in receivership is increasing; and
• Future draws that significantly reduce the amount of available funding remaining under the Purchase
Agreement.
For more information, see “MD&A - Liquidity and Capital Resources - Capital Resources.”
Demand for Debt Funding
If investor demand for our debt securities were to decrease, our liquidity, business, and results of
operations could be materially adversely affected. The willingness of domestic and foreign investors to
purchase and hold our debt securities can be influenced by many factors, including changes in the world
economy, changes in foreign-currency exchange rates, regulatory and political factors, as well as the
availability of and investor preferences for other investments. If investors were to divest their holdings or
reduce their purchases of our debt securities, our funding costs could increase and our business activities
could be curtailed.
The market for our debt securities may become less liquid as the size of our mortgage-related
investments portfolio declines, as we will be issuing fewer debt securities. This could lead to a decrease
in demand for our debt securities and an increase in our funding costs.
Competition for Debt Funding
We compete for debt funding with Fannie Mae, the FHLBs, and other institutions. Competition for debt
funding from these entities can vary with changes in economic, financial market, and regulatory
environments. Increased competition for debt funding may result in a higher cost to finance our business,
which could negatively affect our financial results. See “MD&A - Our Business Segments - Investments”
for a description of our debt issuance programs. Our funding costs and liquidity contingency plans may
also be affected by changes in the amount of, and demand for, debt issued by Treasury.