Freddie Mac 2015 Annual Report Download - page 225

Financial Statements Notes to the Consolidated Financial Statements | Note 2
Freddie Mac 2015 Form 10-K 223
Treasury will bear the initial losses of principal up to 35% of total principal for these two initiatives
combined, and thereafter Freddie Mac and Fannie Mae each will be responsible only for losses of
principal on the securities that it issues to the extent that such losses are in excess of 35% of all losses
under both initiatives. Treasury will bear all losses of unpaid interest. Under both initiatives, we and
Fannie Mae were paid fees at the time bonds were securitized and are also paid ongoing fees for as long
as the bonds remain outstanding.
RELATED PARTIES AS A RESULT OF CONSERVATORSHIP
As a result of our issuance to Treasury of the warrant to purchase shares of our common stock equal to
79.9% of the total number of shares of our common stock outstanding, on a fully diluted basis, we are
deemed a related party to the U.S. government. During the years ended December 31, 2015, 2014, and
2013, no transactions outside of normal business activities have occurred between us and the U.S.
government (or any of its related parties), except for the following:
• The transactions discussed with Treasury above in “Purchase Agreement and Warrant,” “Government
Support for our Business” and “Housing Finance Agency Initiative”;
• The transactions discussed in Note 4, Note 7, and Note 10; and
• The allocation or transfer of 4.2 basis points of each dollar of new business purchases to certain
housing funds as required under the GSE Act.
In addition, we are deemed related parties with Fannie Mae as both we and Fannie Mae have the same
relationships with FHFA and Treasury. All transactions between us and Fannie Mae have occurred in the
normal course of business in conservatorship. In October 2013, FHFA announced the formation of CSS.
CSS is equally-owned by Freddie Mac and Fannie Mae. In connection with the formation of CSS, we
entered into a limited liability company agreement with Fannie Mae. In November 2014, we and Fannie
Mae announced that a chief executive officer has been named for CSS. Additionally, we and Fannie Mae
each appointed two executives to the CSS Board of Managers and signed governance and operating
agreements for CSS. During the year ended December 31, 2015, we contributed $66 million of capital to
CSS.