Freddie Mac 2012 Annual Report Download - page 48

Form 8-K. Although our common stock is required to be registered under the Exchange Act, we continue to be exempt from
certain federal securities law requirements, including the following:
• Securities we issue or guarantee are “exempted securities” under the Securities Act and may be sold without
registration under the Securities Act;
• We are excluded from the definitions of “government securities broker” and “government securities dealer” under the
Exchange Act;
• The Trust Indenture Act of 1939 does not apply to securities issued by us; and
• We are exempt from the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as we are an
“agency, authority or instrumentality” of the U.S. for purposes of such Acts.
Legislative and Regulatory Developments
We discuss certain significant legislative and regulatory developments below. For more information regarding these and
other legislative and regulatory developments that could impact our business, see “RISK FACTORS — Conservatorship and
Related Matters” and “— Legal and Regulatory Risks.”
Administration Report on Reforming the U.S. Housing Finance Market
On February 11, 2011, the Administration delivered a report to Congress that lays out the Administration’s plan to
reform the U.S. housing finance market, including options for structuring the government’s long-term role in a housing
finance system in which the private sector is the dominant provider of mortgage credit. The report recommends winding
down Freddie Mac and Fannie Mae, stating that the Administration will work with FHFA to determine the best way to
responsibly reduce the role of Freddie Mac and Fannie Mae in the market and ultimately wind down both institutions. The
report states that these efforts must be undertaken at a deliberate pace, which takes into account the impact that these changes
will have on borrowers and the housing market.
The report states that the government is committed to ensuring that Freddie Mac and Fannie Mae have sufficient capital
to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations, and further
states that the Administration will not pursue policies or reforms in a way that would impair the ability of Freddie Mac and
Fannie Mae to honor their obligations. The report states the Administration’s belief that under the companies’ senior
preferred stock purchase agreements with Treasury, there is sufficient funding to ensure the orderly and deliberate wind
down of Freddie Mac and Fannie Mae, as described in the Administration’s plan.
The report identifies a number of policy levers that could be used to wind down Freddie Mac and Fannie Mae, shrink
the government’s footprint in housing finance, and help bring private capital back to the mortgage market, including
increasing guarantee fees, phasing in a 10% down payment requirement, reducing conforming loan limits, and winding down
Freddie Mac and Fannie Mae’s investment portfolios, consistent with the senior preferred stock purchase agreements. These
recommendations, if implemented, would have a material impact on our business volumes, market share, results of
operations and financial condition.
As discussed in “Our Business Segments — Single-Family Guarantee Segment,” we were directed by FHFA to
implement two across-the-board increases in guarantee fees in 2012. Temporary high-cost area loan limits that had been in
place since 2008 expired on September 30, 2011 (effectively reducing the conforming loan limits in certain high-cost areas).
In addition, the annual rate at which the mortgage-related investments portfolio limit declines increased from 10% to 15%, as
a result of the August 2012 amendment to the Purchase Agreement.
We cannot predict the extent to which the other recommendations in the report will be implemented or when any actions
to implement them may be taken. However, we are not aware of any current plans of our Conservator to significantly change
our business model or capital structure in the near-term.
FHFA’s Strategic Plan for Freddie Mac and Fannie Mae Conservatorships
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, as well as with the leading
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