Freddie Mac 2012 Annual Report Download - page 230

We are also subject to certain constraints on our business activities by Treasury due to the terms of, and Treasury’s
rights under, the Purchase Agreement. Our ability to access funds from Treasury under the Purchase Agreement is critical to
keeping us solvent.
The Conservator continues to determine, and direct the efforts of the Board of Directors and management to address, the
strategic direction for the company. While the Conservator has delegated certain authority to management to conduct day-to-
day operations, many management decisions are subject to review and approval by FHFA and Treasury. In addition,
management frequently receives directions from FHFA on various matters involving day-to-day operations.
Our current business objectives reflect direction we have received from the Conservator (including the Conservatorship
Scorecard), and have changed considerably since we entered into conservatorship. At the direction of the Conservator, we
have made changes to certain business practices that are designed to provide support for the mortgage market in a manner
that serves our public mission and other non-financial objectives but may not contribute to our profitability.
Certain of these objectives are intended to help homeowners and the mortgage market and may help to mitigate future
credit losses. However, some of our initiatives are expected to have an adverse impact on our near- and long-term financial
results. Given the important role the Administration and our Conservator have placed on Freddie Mac in addressing housing
and mortgage market conditions and our public mission, we may be required to take additional actions that could have a
negative impact on our business, operating results or financial condition.
The Conservator stated that it is taking actions in support of the objectives of gradual transition to greater private capital
participation in housing finance and greater distribution of risk to participants other than the government. The Conservator
also stated that it is focusing on retaining value in the business operations of Freddie Mac and Fannie Mae, overseeing
remediation of identified weaknesses in corporate operations and risk management, and ensuring that sound corporate
governance principles are followed.
On February 21, 2012, FHFA sent to Congress a strategic plan for the next phase of the conservatorships of Freddie
Mac and Fannie Mae. The plan sets forth objectives and steps FHFA is taking or will take to meet FHFA’s obligations as
Conservator. FHFA stated that the steps envisioned in the plan are consistent with each of the housing finance reform
frameworks set forth in the report delivered by the Administration to Congress in February 2011, which is described below,
as well as with the leading congressional proposals previously introduced. FHFA indicated that the plan leaves open all
options for Congress and the Administration regarding the resolution of the conservatorships and the degree of government
involvement in supporting the secondary mortgage market in the future.
FHFA’s plan provides lawmakers and the public with an outline of how FHFA, as Conservator, intends to guide Freddie
Mac and Fannie Mae over the next few years, and identifies three strategic goals:
•Build. Build a new infrastructure for the secondary mortgage market;
•Contract. Gradually contract Freddie Mac and Fannie Mae’s dominant presence in the marketplace while simplifying
and shrinking their operations; and
•Maintain. Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
The Conservatorship Scorecard, instituted by FHFA, established objectives, performance targets and measures, and
provided the implementation roadmap for FHFA’s strategic plan. We continue to align our resources and internal business
plans to meet the goals and objectives in FHFA’s directives.
We regularly receive direction from our Conservator on how to pursue our objectives under conservatorship, including
direction to focus our efforts on assisting homeowners in the housing and mortgage markets. The Conservator and Treasury
have also not authorized us to engage in certain business activities and transactions, including the purchase or sale of certain
assets, which we believe might have had a beneficial impact on our results of operations or financial condition, if executed.
Our inability to execute such transactions may adversely affect our profitability, and thus contribute to our need to draw
additional funds in the future under the Purchase Agreement. However, we believe that the support provided by Treasury
pursuant to the Purchase Agreement currently enables us to maintain our access to the debt markets and to have adequate
liquidity to conduct our normal business activities, although the costs of our debt funding could vary.
The Acting Director of FHFA stated that FHFA does not expect we will be a substantial buyer or seller of mortgages for
our mortgage-related investments portfolio. We are also subject to limits on the amount of assets we can sell from our
225 Freddie Mac