Freddie Mac 2011 Annual Report Download - page 47

requirements placed on servicers as a result of these developments could expose Freddie Mac to financial risk as a result
of further extensions of foreclosure timelines if home prices remain weak or decline. We may need to make additional
significant changes to our practices, which could increase our operational risk. It is difficult to predict other impacts on
our business of these changes, though such changes could adversely affect our credit losses and costs of servicing, and
make it more difficult for us to transfer mortgage servicing rights to a successor servicer should we need to do so. The
regulatory developments and changes include the following:
• On April 13, 2011, the OCC, the Federal Reserve, the FDIC, and the Office of Thrift Supervision entered into
consent orders with 14 large servicers regarding their foreclosure and loss mitigation practices. These institutions
service the majority of the single-family mortgages we own or guarantee. The consent orders required the servicers
to submit comprehensive action plans relating to, among other items, use of foreclosure documentation, staffing of
foreclosure and loss mitigation activities, oversight of third parties, use of the Mortgage Electronic Registration
System, or the MERS System, and communications with borrowers. We will not be able to assess the impact of
these actions on our business until the servicers’ comprehensive action plans are publicly available.
• On April 28, 2011, FHFA announced a new set of aligned standards for servicing delinquent mortgages owned or
guaranteed by Freddie Mac and Fannie Mae. We implemented most aspects of this initiative effective October 1,
2011. We have also implemented a new standard modification initiative that replaced our previous non-HAMP
modification program beginning January 1, 2012. See “MD&A — RISK MANAGEMENT — Credit Risk —
Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA
Program.” FHFA has also directed us and Fannie Mae to work on a joint initiative to consider alternatives for
future mortgage servicing structures and servicing compensation. The development of further alternatives could
impact our ability to conduct current initiatives. For more information, see “RISK FACTORS — Legal and
Regulatory Risks — Legislative or regulatory actions could adversely affect our business activities and financial
results.”
• On June 30, 2011, the OCC issued Supervisory Guidance regarding the OCC’s expectations for the oversight and
management of mortgage foreclosure activities by national banks. The Supervisory Guidance contains several
elements from the consent orders with the 14 major servicers that will now be applied to all national banks. In the
Supervisory Guidance, the OCC directed all national banks to conduct a self-assessment of foreclosure
management practices by September 30, 2011. Additionally, the Guidance sets forth foreclosure management
standards that mirror the broad categories of the servicing guidelines contained in the consent orders.
• On October 19, 2011, FHFA announced that it has directed Freddie Mac and Fannie Mae to transition away from
current foreclosure attorney network programs and move to a system where mortgage servicers select qualified law
firms that meet certain minimum, uniform criteria. The changes will be implemented after a transition period in
which input will be taken from servicers, regulators, lawyers, and other market participants. We cannot predict the
scope or timing of these changes, or the extent to which our business will be impacted by them.
• Several localities have adopted ordinances that would expand the responsibilities and liability for registering and
maintaining vacant properties to servicers and assignees. These laws could significantly expand mortgage costs and
liabilities in those areas. On December 8, 2011, FHFA directed Freddie Mac and Fannie Mae to take certain
actions with respect to a municipal ordinance of the City of Chicago, and, on December 12, 2011, FHFA, on its
own behalf and as conservator for Freddie Mac and Fannie Mae, filed a lawsuit against the City of Chicago to
prevent enforcement of the ordinance.
• On February 9, 2012, a coalition of state attorneys general and federal agencies announced that it had entered into
a settlement with five large seller/servicers concerning certain issues related to mortgage servicing practices. While
the settlement includes changes to mortgage servicing practices, it is too early to determine if these changes will
have a significant effect on us. The settlement does not involve loans owned or guaranteed by us.
For more information on operational risks related to these developments in mortgage servicing, see “MD&A — RISK
MANAGEMENT — Operational Risks.”
Administration Plan to Help Responsible Homeowners and Heal the Housing Market
In his January 24, 2012 State of the Union Address, President Obama called for action to help responsible borrowers
and support a housing market recovery. The Administration subsequently put forth a “Plan to Help Responsible
Homeowners and Heal the Housing Market.” We have implemented, or are in the process of implementing, several aspects
of the Administration’s plan, such as the changes to HAMP discussed in “MD&A — RISK MANAGEMENT — Credit
42 Freddie Mac