Freddie Mac 2009 Annual Report Download - page 62

cases the objectives of reducing the need to draw funds from Treasury and returning to long-term profitability will be
subordinated as we provide this assistance. There is significant uncertainty as to the ultimate impact that our efforts to aid
the housing and mortgage markets will have on our future capital or liquidity needs and we cannot estimate whether, and the
extent to which, costs we incur in the near term as a result of these efforts, which for the most part we are not reimbursed
for, will be offset by the prevention or reduction of potential future costs.
In a letter to the Chairmen and Ranking Members of the Congressional Banking and Financial Services Committees
dated February 2, 2010, the Acting Director of FHFA stated that minimizing our credit losses is our central goal and that we
will be limited to continuing our existing core business activities and taking actions necessary to advance the goals of the
conservatorship. The Acting Director stated that FHFA does not expect we will be a substantial buyer or seller of mortgages
for our mortgage-related investments portfolio, except for purchases of delinquent mortgages out of PC pools. The Acting
Director also stated that permitting us to engage in new products is inconsistent with the goals of the conservatorship. These
restrictions could limit our ability to return to profitability in future periods. See “BUSINESS — Conservatorship and Related
Developments” for information on the purpose and goals of the conservatorship.
In addition to supporting the MHA Program as discussed below, we continue to pursue other initiatives to assist the
mortgage market and homeowners. For example, in 2009 we entered into standby commitments to purchase single-family
and multifamily mortgages from a financial institution that provides short-term loans, known as warehouse lines of credit, to
mortgage originators. See “Our Other Efforts to Assist the U.S. Housing Market” for additional information regarding these
and other initiatives. Some of these actions could have a negative impact on our business, operating results or financial
condition.
Given the important role the Obama Administration and our Conservator have placed on Freddie Mac in addressing
housing and mortgage market conditions, we may be required to take additional actions that could have a negative impact on
our business, operating results or financial condition. The Conservator and Treasury also did not authorize us to engage in
certain business activities and transactions, including the sale of certain assets, some of which we believe may have had a
beneficial impact on our results of operations or financial condition, if executed. Our inability to execute such transactions
may adversely affect our profitability, and thus contribute to our need to draw additional funds from Treasury. However, we
believe that the increased support provided by Treasury pursuant to the December 2009 amendment to the Purchase
Agreement is sufficient to ensure that we maintain our access to the debt markets and maintain positive net worth and
liquidity to continue to conduct our normal business activities over the next three years.
On February 18, 2010, we received a letter from the Acting Director of FHFA stating that FHFA has determined that
any sale of the LIHTC investments by Freddie Mac would require Treasury’s consent under the terms of the Purchase
Agreement. The letter further stated that FHFA had presented other options for Treasury to consider, including allowing
Freddie Mac to pay senior preferred stock dividends by waiving the right to claim future tax benefits of the LIHTC
investments. However, after further consultation with Treasury and consistent with the terms of the Purchase Agreement, the
Acting Director informed us we may not sell or transfer the assets and that he sees no other disposition options. As a result,
we wrote down the carrying value of our LIHTC investments to zero as of December 31, 2009, resulting in a loss of
$3.4 billion. This write-down reduces our net worth at December 31, 2009 and, as such, increases the likelihood that we will
require additional draws from Treasury under the Purchase Agreement and, as a consequence, increases the likelihood that
our dividend obligation on the senior preferred stock will increase. See “NOTE 5: VARIABLE INTEREST ENTITIES” to
our consolidated financial statements for additional information.
Management is continuing its efforts to identify and evaluate actions that could be taken to reduce the significant
uncertainties surrounding our business, as well as the level of future draws under the Purchase Agreement; however, our
ability to pursue such actions may be limited by market conditions and other factors. Any actions we take related to the
uncertainties surrounding our business and future draws will likely require approval by FHFA and Treasury before they are
implemented. In addition, FHFA, Treasury or Congress may have a different perspective from management and may direct us
to focus our efforts on supporting the mortgage markets in ways that make it more difficult for us to implement any such
actions.
MHA Program
Participation in the MHA Program is an integral part of our mission of providing stability to the housing market,
including helping families maintain ownership whenever possible and helping maintain the stability of communities. In
addition to our long-standing initiatives for foreclosure avoidance, we have also implemented a number of other initiatives to
assist the U.S. residential mortgage market and help families keep their homes, some of which were undertaken at the
direction of FHFA. If our efforts under the MHA Program and other initiatives to support the U.S. residential mortgage
market do not achieve their desired results, or are otherwise perceived to have failed to achieve their objectives, we may
experience damage to our reputation, which may impact the extent of future government support to our business and the
59 Freddie Mac