Freddie Mac 2011 Annual Report Download - page 73

for loans with LTV ratios above 80%. In addition, relief refinance mortgages may not be covered by mortgage insurance
for the full excess of their UPB over 80%.
We are devoting significant internal resources to the implementation of the servicing alignment initiative and the
MHA Program, which has, and will continue to, increase our expenses. The size and scope of these efforts may also limit
our ability to pursue other business opportunities or corporate initiatives.
We may experience further write-downs and losses relating to our assets, including our investment securities, net
deferred tax assets, REO properties or mortgage loans, that could materially adversely affect our business, results of
operations, financial condition, liquidity and net worth.
We experienced significant losses and write-downs relating to certain of our assets during the past several years,
including significant declines in market value, impairments of our investment securities, market-based write-downs of
REO properties, losses on non-performing loans removed from PC pools, and impairments on other assets. The fair value
of our assets may be further adversely affected by continued weakness in the economy, further deterioration in the
housing and financial markets, additional ratings downgrades, or other events.
We increased our valuation allowance for our net deferred tax assets by $2.3 billion during 2011. The future status
and role of Freddie Mac could be affected by actions of the Conservator, and legislative and regulatory action that alters
the ownership, structure, and mission of the company. The uncertainty of these developments could materially affect our
operations, which could in turn affect our ability or intent to hold investments until the recovery of any temporary
unrealized losses. If future events significantly alter our current outlook, a valuation allowance may need to be established
for the remaining deferred tax asset.
Due to the ongoing weaknesses in the economy and in the housing and financial markets, we may experience
additional write-downs and losses relating to our assets, including those that are currently AAA-rated, and the fair values
of our assets may continue to decline. This could adversely affect our results of operations, financial condition, liquidity,
and net worth.
There may not be an active, liquid trading market for our equity securities. Our equity securities are not likely to have
any value beyond the short-term.
Our common stock and classes of preferred stock that previously were listed and traded on the NYSE were delisted
from the NYSE effective July 8, 2010, and now trade on the OTC market. The market price of our common stock
declined significantly between June 16, 2010, the date we announced our intention to delist these securities, and July 8,
2010, the first day the common stock traded exclusively on the OTC market, and may decline further. Trading volumes on
the OTC market have been, and will likely continue to be, less than those on the NYSE, which would make it more
difficult for investors to execute transactions in our securities and could make the prices of our securities decline or be
more volatile. The Acting Director of FHFA has stated that “[Freddie Mac and Fannie Mae’s] equity holders retain an
economic claim on the companies but that claim is subordinate to taxpayer claims. As a practical matter, taxpayers are not
likely to be repaid in full, so [Freddie Mac and Fannie Mae] stock lower in priority is not likely to have any value.”
Operational Risks
We have incurred, and will continue to incur, expenses and we may otherwise be adversely affected by delays and
deficiencies in the foreclosure process.
We have been, and will likely continue to be, adversely affected by delays in the foreclosure process, which could
increase our expenses.
The average length of time for foreclosure of a Freddie Mac loan significantly increased in recent years, and may
continue to increase. A number of factors have contributed to this increase, including: (a) the increasingly lengthy
foreclosure process in many states; and (b) concerns about deficiencies in seller/servicers’ conduct of the foreclosure
process. More recently, regulatory developments impacting mortgage servicing and foreclosure practices have also
contributed to these delays. For more information on these developments, see “BUSINESS — Regulation and
Supervision — Legislative and Regulatory Developments —Developments Concerning Single-Family Servicing Practices.”
Delays in the foreclosure process could cause our credit losses to increase for a number of reasons. For example,
properties awaiting foreclosure could deteriorate until we acquire ownership of them through foreclosure. This would
increase our expenses to repair and maintain the properties when we do acquire them. Such delays may also adversely
affect the values of, and our losses on, the non-agency mortgage-related securities we hold. Delays in the foreclosure
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