Freddie Mac 2015 Annual Report Download - page 196

Risk Factors Legal and Regulatory Risks
Freddie Mac 2015 Form 10-K 194
LEGAL AND REGULATORY RISKS
Legislative or regulatory actions could adversely affect our business activities and financial
results.
We operate in a highly regulated industry and are subject to heightened supervision from FHFA, as our
Conservator. Our compliance systems and programs may not be adequate to ensure that we are in
compliance with all legal and other requirements. We could incur fines or other negative consequences
for inadvertent violations.
Our business may be directly adversely affected by future legislative and regulatory actions at the federal,
state, and local levels, including actions by FHFA as Conservator. Judicial actions at the federal, state, or
local level could also adversely affect us. Legislative, regulatory or judicial actions could affect us in a
number of ways, including by imposing significant additional legal, compliance and other costs on us,
limiting our business activities and diverting management attention or other resources.
For example, our ability to recruit and retain executives and other employees with the necessary skills to
conduct our business may be adversely affected by legislative or regulatory actions (e.g., significant
restrictions on compensation). We could also be negatively affected by legislative, regulatory or judicial
action that:
• Changes the foreclosure process of any individual state;
• Limits or otherwise adversely affects the rights of a holder of a first lien on a mortgage (such as
through granting priority rights in foreclosure proceedings for homeowner associations);
• Expands the responsibilities of (and costs to) servicers for maintaining vacant properties prior to
foreclosure;
• Permits or requires principal reductions, such as allowing local governments to use eminent domain
to seize mortgage loans and forgive principal on the loans; or
• Prevents us from using the MERS System or disrupts foreclosures of loans registered in the MERS
System.
Our business could also be adversely affected by any modification, reduction, or repeal of the federal
income tax deductibility of loan interest payments.
The Dodd-Frank Act significantly changed the regulation of loans and the financial services industry and
could continue to affect us in substantial ways. For example, the Dodd-Frank Act and related regulatory
changes could cause or require us to make further changes to our business practices, such as practices
related to mortgage underwriting and servicing.
Legislation or regulatory actions could indirectly adversely affect us to the extent they affect the activities
of banks, savings institutions, insurance companies, derivative counterparties, clearinghouses, securities
dealers, and other regulated entities that constitute a significant portion of our customers or
counterparties, or to the extent that they modify industry practices. Legislative or regulatory provisions
that remove incentives for these entities to purchase our securities or enter into derivatives or other
transactions with us could have a material adverse effect on our business and financial results. For
example, changes in business practices resulting from the Dodd-Frank Act and related regulatory
changes could have a negative effect on the volume of loan originations or could modify or remove
incentives for financial institutions to sell loans to us, either of which could adversely affect the number of