Freddie Mac 2011 Annual Report Download - page 287

Under the GSE Act, FHFA must place us into receivership if FHFA determines in writing that our assets are and
have been less than our obligations for a period of 60 days. FHFA has notified us that the measurement period for any
mandatory receivership determination with respect to our assets and obligations would commence no earlier than the SEC
public filing deadline for our quarterly or annual financial statements and would continue for 60 calendar days after that
date. FHFA has advised us that, if, during that 60-day period, we receive funds from Treasury in an amount at least equal
to the deficiency amount under the Purchase Agreement, the Director of FHFA will not make a mandatory receivership
determination. If funding has been requested under the Purchase Agreement to address a deficit in our net worth, and
Treasury is unable to provide us with such funding within the 60-day period specified by FHFA, FHFA would be required
to place us into receivership if our assets remain less than our obligations during that 60-day period.
To address our net worth deficit of $146 million at December 31, 2011, FHFA will submit a draw request on our
behalf to Treasury under the Purchase Agreement in the amount of $146 million, and will request that we receive these
funds by March 31, 2012. Our draw request represents our net worth deficit at quarter-end rounded up to the nearest
$1 million. Upon funding of this draw request, our aggregate funding received from Treasury under the Purchase
Agreement will increase to $71.3 billion. This aggregate funding amount does not include the initial $1.0 billion
liquidation preference of senior preferred stock that we issued to Treasury in September 2008 as an initial commitment
fee and for which no cash was received. As a result of the additional $146 million draw request, the aggregate liquidation
preference on the senior preferred stock owned by Treasury will increase from $72.2 billion at December 31, 2011 to
$72.3 billion. We paid a quarterly dividend of $1.6 billion, $1.6 billion, $1.6 billion, and $1.7 billion on the senior
preferred stock in cash on March 31, 2011, June 30, 2011, September 30, 2011, and December 30, 2011, respectively, at
the direction of the Conservator. Following funding of the draw request related to our net worth deficit at December 31,
2011, our annual cash dividend obligation to Treasury on the senior preferred stock will increase from $7.22 billion to
$7.23 billion, which exceeds our annual historical earnings in all but one period.
Subordinated Debt Commitment
In October 2000, we announced our adoption of a series of commitments designed to enhance market discipline,
liquidity and capital. In September 2005, we entered into a written agreement with FHFA that updated those commitments
and set forth a process for implementing them. FHFA, as Conservator of Freddie Mac, has suspended the requirements in
the September 2005 agreement with respect to issuance, maintenance and reporting and disclosure of Freddie Mac
subordinated debt during the term of conservatorship and thereafter until directed otherwise.
NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS
Single-family Credit Guarantee Portfolio
Our business activity is to participate in and support the residential mortgage market in the United States, which we
pursue by both issuing guaranteed mortgage securities and investing in mortgage loans and mortgage-related securities.
The table below summarizes the concentration by year of origination and geographical area of the approximately
$1.7 trillion and $1.8 trillion UPB of our single-family credit guarantee portfolio at December 31, 2011 and 2010,
respectively. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” and “NOTE 4: MORTGAGE
LOANS AND LOAN LOSS RESERVES” and “NOTE 7: INVESTMENTS IN SECURITIES” for more information about
credit risk associated with loans and mortgage-related securities that we hold.
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