Freddie Mac 2012 Annual Report Download - page 77

We are devoting significant internal resources to the implementation of the servicing alignment initiative and the MHA
Program. The costs we incur related to these initiatives have been, and will likely continue to be, significant. The size and
scope of these efforts may also limit our ability to pursue other business opportunities or corporate initiatives.
We may experience further write-downs and losses relating to our assets, including our investment securities, net deferred
tax assets, REO properties or mortgage loans, that could materially adversely affect our business, results of operations,
financial condition, liquidity and net worth.
We experienced significant losses and write-downs relating to certain of our assets during the past several years,
including significant declines in market value, impairments of our investment securities, write-downs of REO properties,
losses on non-performing loans removed from PC pools, and impairments on other assets. The fair value of our assets may be
further adversely affected by continued weakness in the economy, any further deterioration in the housing and financial
markets, additional ratings downgrades, or other events.
Since we entered into conservatorship in September 2008, we have established a significant valuation allowance on our
deferred tax assets. If future events significantly alter our current outlook, additional valuation allowances may need to be
established for the remaining deferred tax asset. The future status and role of Freddie Mac could be affected by actions of the
Conservator, and legislative and regulatory action that alters the ownership, structure, and mission of the company. The
uncertainty of these developments could materially affect our operations, which could in turn affect our ability or intent to
hold investments until the recovery of any temporary unrealized losses.
We may experience additional write-downs and losses relating to our assets, including those that are currently AAA-
rated, and the fair values of our assets may decline in the future. This could adversely affect our results of operations,
financial condition, liquidity, and net worth.
There may not be an active, liquid trading market for our equity securities.
Our common stock and classes of preferred stock that previously were listed and traded on the NYSE were delisted
from the NYSE effective July 8, 2010, and now trade on the OTCQB Marketplace. The market price of our common stock
declined significantly between June 16, 2010, the date we announced our intention to delist these securities, and July 8, 2010,
the first day the common stock traded exclusively on the OTC market, and may decline further. Trading volumes on the
OTCQB Marketplace have generally been, and will likely continue to be, less than those on the NYSE, which would make it
more difficult for investors to execute transactions in our securities and could make the prices of our securities decline or be
more volatile.
Operational Risks
We face significant levels of operational risk. Our risk management efforts may not effectively mitigate the risks we seek
to manage.
We face significant levels of operational risk, due to a variety of factors, including: (a) the level and pace of
organizational change within our company; (b) the complexity of our business operations; (c) limitation in our core systems;
(d) the fact that we face a variety of different, and potentially competing, business objectives and new FHFA-mandated
activities (e.g., the initiatives we are pursuing under the Conservatorship Scorecard); and (e) employee turnover.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify,
manage, monitor and mitigate operational risks related to our business. Our risk management policies, procedures and
techniques may not be sufficient to mitigate the risks we have identified or to appropriately identify additional risks to which
we are subject. See “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK” and “MD&A —
RISK MANAGEMENT” for a discussion of our approach to managing certain of the risks we face.
We have incurred, and will continue to incur, expenses and we may otherwise be adversely affected by delays and
deficiencies in the foreclosure process.
We have been, and will likely continue to be, adversely affected by delays and deficiencies in the foreclosure process,
which could increase our expenses.
The average length of time for foreclosure of a Freddie Mac loan significantly increased in recent years, particularly in
states that require a judicial foreclosure process, and may further increase. A number of factors have contributed to this
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