Freddie Mac 2009 Annual Report Download - page 238

(c) there are likely to be significant changes to our capital structure and business model beyond the near-term that we expect
to be decided by Congress and the Executive Branch.
There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified
termination date, and as to what changes may occur to our business structure during or following our conservatorship,
including whether we will continue to exist. Our future structure and role are currently being considered by the President and
Congress. We have no ability to predict the outcome of these deliberations. However, we are not aware of any immediate
plans of our Conservator to significantly change our business structure in the near-term.
See “NOTE 9: DEBT SECURITIES AND SUBORDINATED BORROWINGS” and “NOTE 10: FREDDIE MAC
STOCKHOLDERS’ EQUITY (DEFICIT)” for more information on the terms of the conservatorship and the agreements
described above.
Housing Finance Agency Initiative
On October 19, 2009, we entered into a Memorandum of Understanding with Treasury, FHFA and Fannie Mae, which
sets forth the terms under which Treasury and, as directed by FHFA, we and Fannie Mae, would provide assistance, through
three separate initiatives, to state and local HFAs so that the HFAs can continue to meet their mission of providing
affordable financing for both single-family and multifamily housing. FHFA directed us and Fannie Mae to participate in the
HFA initiative on a basis that is consistent with the goals of being commercially reasonable and safe and sound. Treasury’s
participation in these assistance initiatives does not affect the amount of funding that Treasury can provide to Freddie Mac
under the terms of our senior preferred stock purchase agreement with Treasury.
From October 19, 2009 to December 31, 2009, we, Treasury, Fannie Mae and participating HFAs entered into definitive
agreements setting forth the respective parties’ obligations under this initiative. The initiatives are as follows:
•Temporary Credit and Liquidity Facilities Initiative. In December 2009, on a 50-50 pro rata basis, Freddie Mac and
Fannie Mae agreed to provide $8.2 billion of credit and liquidity support, including outstanding interest at the date of
the guarantee, for variable rate demand obligations, or VRDOs, previously issued by HFAs. This support was
provided through the issuance of guarantees, which provide credit enhancement to the holders of such VRDOs and
also create an obligation to provide funds to purchase any VRDOs that are put by their holders and are not
remarketed. Treasury provided a credit and liquidity backstop on the TCLFI. These guarantees, each of which expires
on or before December 31, 2012, replaced existing liquidity facilities from other providers.
•New Issue Bond Initiative. In December 2009, on a 50-50 pro rata basis, Freddie Mac and Fannie Mae agreed to
issue in total $15.3 billion of partially guaranteed pass-through securities backed by new single-family and certain
new multifamily housing bonds issued by HFAs. Treasury purchased all of the pass-through securities issued by
Freddie Mac and Fannie Mae. This initiative provided financing for HFAs to issue new housing bonds.
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 also will be paid
on-going fees.
The third initiative under the HFA initiative is described below:
•Multifamily Credit Enhancement Initiative. Using existing housing bond credit enhancement products, Freddie Mac
is providing a guarantee of new housing bonds issued by HFAs, which Treasury purchased from the HFAs. Treasury
will not be responsible for a share of any losses incurred by us in this initiative.
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. Except for the transactions with Treasury discussed above in “Government Support for our Business” and
“Housing Finance Agency Initiative — Temporary Credit and Liquidity Facilities Initiative” and “— New Issue Bond
Initiative” as well as in “NOTE 9: DEBT SECURITIES AND SUBORDINATED BORROWINGS,” and “NOTE 10:
FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT),” no transactions outside of normal business activities have
occurred between us and the U.S. government during the year ended December 31, 2009. 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.
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