Freddie Mac 2012 Annual Report Download - page 6

PART I
This Annual Report on Form 10-K includes forward-looking statements that are based on current expectations and are
subject to significant risks and uncertainties. These forward-looking statements are made as of the date of this Form 10-K
and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of
this Form 10-K. Actual results might differ significantly from those described in or implied by such statements due to various
factors and uncertainties, including those described in: the “BUSINESS — Forward-Looking Statements” and “RISK
FACTORS” sections of this Form 10-K.
Throughout this Form 10-K, we use certain acronyms and terms that are defined in the “GLOSSARY.”
ITEM 1. BUSINESS
Conservatorship and Government Support for Our Business
We continue to operate under the direction of FHFA, as our Conservator. We are also subject to certain constraints on
our business activities imposed by Treasury due to the terms of, and Treasury’s rights under, the Purchase Agreement. We
are dependent upon the continued support of Treasury and FHFA in order to continue operating our business. Our ability to
access funds from Treasury under the Purchase Agreement is critical to keeping us solvent and avoiding the appointment of a
receiver by FHFA under statutory mandatory receivership provisions. The conservatorship and related matters have had a
wide-ranging impact on us, including our regulatory supervision, management, business, financial condition, and results of
operations.
There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified
termination date, and as to what changes may occur to our business structure during or following conservatorship, including
whether we will continue to exist. We are not aware of any current plans of our Conservator to significantly change our
business model or capital structure in the near-term. Our future structure and role will be determined by the Administration
and Congress, and there are likely to be significant changes beyond the near-term. We have no ability to predict the outcome
of these deliberations.
As our Conservator, FHFA succeeded to all rights, titles, powers and privileges of Freddie Mac, and of any stockholder,
officer or director thereof, with respect to the company and its assets. FHFA, as Conservator, has directed and will continue
to direct certain of our business activities and strategies. FHFA has delegated certain authority to our Board of Directors to
oversee, and to management to conduct, day-to-day operations. The directors serve on behalf of, and exercise authority as
directed by, the Conservator.
In March 2012, FHFA instituted the 2012 conservatorship scorecard, or the Conservatorship Scorecard, for use by both
us and Fannie Mae that established business objectives and performance targets and measures, and provided the
implementation roadmap for FHFA’s strategic plan for Freddie Mac and Fannie Mae. We continue to align our resources and
internal business plans to meet the goals and objectives in FHFA’s directives. See “Regulation and Supervision —
Legislative and Regulatory Developments — FHFA’s Strategic Plan for Freddie Mac and Fannie Mae Conservatorships”
and “EXECUTIVE COMPENSATION — Compensation Discussion and Analysis” for further information.
Our current business objectives reflect direction we have received from the Conservator (including the Conservatorship
Scorecard), our charter, other legislation, and public statements from FHFA and Treasury officials. Our business objectives
have changed considerably since we entered into conservatorship and may continue to change. Certain changes to our
business objectives and strategies are designed to provide support for the mortgage market in a manner that serves our public
mission and other non-financial objectives. However, these changes to our business objectives and strategies may not
contribute to our profitability. Some of these changes increase our expenses, while others require us to forego revenue
opportunities.
On February 21, 2012, FHFA sent to Congress a strategic plan for the next phase of the conservatorships of Freddie
Mac and Fannie Mae. 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’s plan provides lawmakers and the
1Freddie Mac