Freddie Mac 2012 Annual Report Download - page 14

Strengthening Our Infrastructure and Improving Overall Efficiency While Also Focusing On Retention of Key Employees
We continue to work to both enhance the quality of our infrastructure and to improve our efficiency to preserve the
taxpayers’ investment. We are focusing our resources primarily on key projects, many of which are related to FHFA-
mandated strategic initiatives that will likely take several years to fully implement. We are also focused on making
significant improvements to our systems infrastructure in order to: (a) replace legacy hardware or software systems at the end
of their useful lives and to strengthen our disaster recovery capabilities; and (b) improve our data collection and
administration capabilities as well as our ability to assist in the servicing of loans.
We continue to actively manage our general and administrative expenses, while also continuing to focus on retaining
key talent. In the first half of 2012, we introduced a new compensation program for employees to help mitigate the
uncertainty surrounding compensation. Under the program, the majority of employees have a more predictable income, as the
program either reduces or eliminates the amount of compensation that is subject to variability. The variable elements of
compensation for our senior executives are subject only to reduction based on the company’s and their individual
performance, with no upside potential. While employee turnover moderated in 2012 compared to 2011, we are continuing to
explore various strategic arrangements with outside firms to provide operational capability and staffing for key functions, as
needed.
Our general and administrative expenses increased in 2012 compared to 2011, largely due to an increase in spending for
FHFA-mandated strategic initiatives. We believe the various FHFA-mandated strategic initiatives will likely continue to
require significant resources and thus continue to affect our level of administrative expenses going forward.
Single-Family Credit Guarantee Portfolio
The UPB of our single-family credit guarantee portfolio declined approximately 6.2% and 3.5% during 2012 and 2011,
respectively, as the amount of single-family loan liquidations exceeded new loan purchase and guarantee activity. We believe
this is due, in part, to declines in the amount of single-family mortgage debt outstanding in the market and a decline in our
single-family competitive position compared to other market participants (primarily Fannie Mae and Ginnie Mae). See
“RISK FACTORS — Competitive and Market Risks — A significant decline in the price performance of or demand for our
PCs could have an adverse effect on the volume and/or profitability of our new single-family guarantee business” for further
information on our competitive position in the single-family mortgage market.
The table below provides certain credit statistics for our single-family credit guarantee portfolio.
9Freddie Mac