Freddie Mac 2012 Annual Report Download - page 47

bringing the entity into compliance with the standards). In addition, a failure to meet any standard also may constitute an
unsafe or unsound practice, which may form the basis for FHFA initiating an administrative enforcement action.
Portfolio Activities
The GSE Act requires FHFA to establish, by regulation, criteria governing portfolio holdings to ensure the holdings are
backed by sufficient capital and consistent with the enterprises’ mission and safe and sound operations. In establishing these
criteria, FHFA must consider the ability of the enterprises to provide a liquid secondary market through securitization
activities, the portfolio holdings in relation to the mortgage market and the enterprises’ compliance with the prudential
management and operations standards prescribed by FHFA.
On December 28, 2010, FHFA issued a final rule adopting the portfolio holdings criteria established in the Purchase
Agreement, as it may be amended from time to time, for so long as we remain subject to the Purchase Agreement.
See “Conservatorship and Related Matters — Limits on Investment Activity and Our Mortgage-Related Investments
Portfolio” for additional information on restrictions on our portfolio activities.
Anti-Predatory Lending
Predatory lending practices are in direct opposition to our mission, our goals and our practices. We instituted anti-
predatory lending policies intended to prevent the purchase or assignment of mortgage loans with unacceptable terms or
conditions or resulting from unacceptable practices. These policies include processes related to the origination, delivery and
validation of loans sold to us. In addition to the purchase policies we instituted, we promote consumer education and
financial literacy efforts to help borrowers avoid abusive lending practices and we provide competitive mortgage products to
reputable mortgage originators so that borrowers have a greater choice of financing options.
Subordinated Debt
FHFA directed us to continue to make interest and principal payments on our subordinated debt, even if we fail to
maintain required capital levels. As a result, the terms of any of our subordinated debt that provide for us to defer payments
of interest under certain circumstances, including our failure to maintain specified capital levels, are no longer applicable. In
addition, the requirements in the agreement we entered into with FHFA in September 2005 with respect to issuance,
maintenance, and reporting and disclosure of Freddie Mac subordinated debt have been suspended during the term of
conservatorship and thereafter until directed otherwise. See “NOTE 14: REGULATORY CAPITAL — Subordinated Debt
Commitment” for more information regarding subordinated debt.
Department of Housing and Urban Development
HUD has regulatory authority over Freddie Mac with respect to fair lending. Our mortgage purchase activities are
subject to federal anti-discrimination laws. In addition, the GSE Act prohibits discriminatory practices in our mortgage
purchase activities, requires us to submit data to HUD to assist in its fair lending investigations of primary market lenders
with which we do business and requires us to undertake remedial actions against such lenders found to have engaged in
discriminatory lending practices. In addition, HUD periodically reviews and comments on our underwriting and appraisal
guidelines for consistency with the Fair Housing Act and the anti-discrimination provisions of the GSE Act.
Department of the Treasury
Treasury has significant rights and powers with respect to our company as a result of the Purchase Agreement. In
addition, under our charter, the Secretary of the Treasury has approval authority over our issuances of notes, debentures and
substantially identical types of unsecured debt obligations (including the interest rates and maturities of these securities), as
well as new types of mortgage-related securities issued subsequent to the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989. The Secretary of the Treasury has performed this debt securities approval function
by coordinating GSE debt offerings with Treasury funding activities. In addition, our charter authorizes Treasury to purchase
Freddie Mac debt obligations not exceeding $2.25 billion in aggregate principal amount at any time.
Securities and Exchange Commission
We are subject to the reporting requirements applicable to registrants under the Exchange Act, including the
requirement to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
42 Freddie Mac