Freddie Mac 2015 Annual Report Download - page 201

Risk Factors Other Risks
Freddie Mac 2015 Form 10-K 199
There may not be a liquid market for our PCs, which could adversely affect the price performance of PCs
and our single-family market share. A significant reduction in our market share, and thus in the volume of
loans that we securitize, or a reduction in the trading volume of our PCs, could further reduce the liquidity
of our PCs. While we may employ various strategies to support the liquidity and price performance of our
PCs, and may consider additional strategies, those strategies may fail or adversely affect our business.
We may cease such activities at any time, or FHFA could require us to do so, which could adversely affect
the liquidity and price performance of our PCs.
The liquidity-related price differences between our PCs and comparable Fannie Mae securities could be
influenced by factors that are largely outside of our control. For example, the level of the Federal
Reserve’s purchases of agency mortgage-related securities could affect the demand for and values of our
PCs. Therefore, any strategies we employ to reduce the liquidity-related price differences may not reduce
or eliminate these price differences over the long-term.
In certain circumstances, we compensate sellers for the difference in price between our PCs and
comparable Fannie Mae securities by reducing our guarantee fees, which adversely affects the
profitability of our single-family guarantee business. We also incur costs in connection with our efforts to
support the liquidity and price performance of our PCs, including by engaging in transactions that yield
less than our target rate of return. For more information, see “MD&A - Our Business Segments - Single-
Family Guarantee - Business Overview - Products and Activities” and “- Investments Segment - Business
Overview - Products and Activities.”
In accordance with FHFA’s 2014 Strategic Plan and the Conservatorship Scorecards, we are developing
a single (common) security, which is designed to reduce the price performance disparities between the
mortgage-related securities of Freddie Mac and Fannie Mae. This initiative is complex and costly, and
may require us to align our business processes more closely with those of Fannie Mae. There can be no
assurance that a single (common) security will reduce the trading value disparities.
Our current Multifamily business model is highly dependent on our ability to finance purchased multifamily
loans through securitization into K Certificates. A significant decrease in demand for K Certificates could
have an adverse impact on the profitability of the Multifamily business to the extent that our holding period
for the loans increases and we are exposed to credit, spread and other market risks for a longer period of
time. We employ various strategies to support the liquidity of our K Certificates, and may consider
additional strategies. From time to time, we purchase and sell guaranteed K Certificates and related
unguaranteed securities associated with K Certificates as well as our other securitization products
through our mortgage-related investments portfolio.
There may not be an active, liquid trading market for our equity securities.
Our common stock and the publicly traded classes of our preferred stock trade exclusively on the OTCQB
Marketplace. Trading volumes on the OTCQB Marketplace can fluctuate significantly, which could make it
difficult for investors to execute transactions in our securities and could cause declines or volatility in the
prices of our equity securities.