Freddie Mac 2011 Annual Report Download - page 54

power to take actions without our knowledge that could be material to investors and could significantly affect our
financial performance.
These changes and other factors could have material adverse effects on, among other things, our portfolio growth, net
worth, credit losses, net interest income, guarantee fee income, net deferred tax assets, and loan loss reserves, and could
have a material adverse effect on our future results of operations and financial condition. In light of the significant
uncertainty surrounding these changes, there can be no assurances regarding when, or if, we will return to profitability.
We have a variety of different, and potentially competing, objectives that may adversely affect our financial results and
our ability to maintain positive net worth.
Based on our charter, other legislation, public statements from Treasury and FHFA officials and guidance and
directives from our Conservator, we have a variety of different, and potentially competing, objectives. These objectives
include: (a) minimizing our credit losses; (b) conserving assets; (c) providing liquidity, stability, and affordability in the
mortgage market; (d) continuing to provide additional assistance to the struggling housing and mortgage markets;
(e) managing to a positive stockholders’ equity and reducing the need to draw funds from Treasury pursuant to the
Purchase Agreement; and (f) protecting the interests of the taxpayers. These objectives create conflicts in strategic and
day-to-day decision making that will likely lead to suboptimal outcomes for one or more, or possibly all, of these
objectives. This could lead to negative publicity and damage our reputation. We may face increased operational risk from
these competing objectives. Current portfolio investment and mortgage guarantee activities, liquidity support, loan
modification and refinancing initiatives, and foreclosure forbearance initiatives, including our efforts under the MHA
Program, are intended to provide support for the mortgage market in a manner that serves our public mission and other
non-financial objectives under conservatorship, but may negatively impact our financial results and net worth.
FHFA directives that we and Fannie Mae adopt uniform approaches in some areas could have an adverse impact on
our business or on our competitive position with respect to Fannie Mae.
FHFA is also Conservator of Fannie Mae, our primary competitor. On multiple occasions, FHFA has directed us and
Fannie Mae to confer and suggest to FHFA possible uniform approaches to particular business and accounting issues and
problems. It is likely that we will receive additional directives in the future. In most such cases, FHFA subsequently
directed us and Fannie Mae to adopt a specific uniform approach. For example:
• In March 2009, FHFA directed Freddie Mac and Fannie Mae to adopt the HAMP program for modification of
mortgages that they hold or guarantee, leading to a largely uniform approach to modifications for HAMP-eligible
borrowers;
• In February 2010, FHFA directed Freddie Mac and Fannie Mae to work together to standardize definitions for
mortgage delivery data;
• In January 2011, FHFA announced that it had directed Freddie Mac and Fannie Mae to work on a joint initiative,
in coordination with HUD, to consider alternatives for future mortgage servicing structures and servicing
compensation;
• In April 2011, FHFA announced a new set of aligned standards for servicing of non-performing loans owned or
guaranteed by Freddie Mac and Fannie Mae, including a standard modification initiative for borrowers not eligible
for HAMP modifications;
• In October 2011, through the revisions to the HARP initiative, FHFA directed us and Fannie Mae to align certain
aspects of our and Fannie Mae’s respective refinance initiatives; and
• In December 2011, FHFA announced that the guarantee fee on all single-family residential mortgages sold to
Freddie Mac and Fannie Mae will increase by 10 basis points to fund the payroll tax cut, effective April 1, 2012.
This increase is in connection with the implementation of the Temporary Payroll Tax Cut Continuation Act of
2011.
We cannot predict the impact on our business of these actions or any similar actions FHFA may require us and
Fannie Mae to take in the future. It is possible that in some areas FHFA could require us and Fannie Mae to take a
uniform approach that, because of differences in our respective businesses, could place Freddie Mac at a competitive
disadvantage to Fannie Mae. We may be required to adopt approaches that are operationally difficult for us to implement.
It also is possible that in some cases identifying, adopting and maintaining a uniform approach could entail higher costs
than would a unilateral approach, and that when market conditions merit a change in a uniform approach, coordinating the
change might entail additional cost and delay. If and when conservatorship ends, market acceptance of a uniform
approach could make it difficult to depart from that approach even if doing so would be economically desirable.
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