Conservatorship, Senior Preferred Stock Purchase Agreement and Related Matters (Tables)

12 Months Ended

Dec. 31, 2023

Conservatorship, Preferred Stock Agreements, And Related Parties [Abstract]

The senior preferred stock purchase agreement and accompanying stock certificate include key provisions that impact

us, including those described in the table below. For a discussion of the terms of the senior preferred stock related to

dividends, liquidation preference, and limits on redemptions and paydowns, see “Note 12, Equity.”


Treasury Funding Commitment	•On a quarterly basis, we may draw funds from Treasury to cover the amount that our total liabilities exceed our total assets for the applicable fiscal quarter (referred to as the “deficiency amount”), up to the amount of remaining funding commitment under the agreement. •As of the date of this filing: ◦$119.8 billion has been paid to us by Treasury under this funding commitment; and ◦$113.9 billion of funding commitment from Treasury remains; this amount would be reduced by any future payments by Treasury under the commitment.
Termination Provisions for Funding Commitment	•Treasury’s funding commitment has no specified end date, but will terminate upon: ◦our liquidation and the fulfillment of Treasury’s obligations under its funding commitment; ◦the payment in full of, or reasonable provision for, our liabilities (whether or not contingent, including guaranty obligations); or ◦Treasury funding the maximum amount under the agreement. •Treasury also may terminate its funding commitment and void the agreement if a court vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of the conservator or curtails the conservator’s powers.


Rights of Debt and MBS Holders	•Holders of our debt securities or our guaranteed MBS may file a claim in the United States Court of Federal Claims for relief if we default on our payment obligations on those securities and: ◦we and the conservator fail to exercise all rights under the agreement to draw on Treasury’s funding commitment, or ◦Treasury fails to perform its obligations under its funding commitment and we and/or the conservator are not diligently pursuing remedies for Treasury’s failure. •Holders may seek to require Treasury to fund us up to: ◦the amount necessary to cure the relevant payment defaults; ◦the deficiency amount; or ◦the amount of remaining funding under the agreement, whichever is the least. Any Treasury funding provided under these circumstances would increase the liquidation preference of the senior preferred stock. •The terms of the agreement generally may be amended or waived; however, no such amendment or waiver may decrease Treasury’s aggregate funding commitment or add conditions to Treasury’s funding commitment that would adversely affect in any material respect the holders of our debt or guaranteed MBS.
Commitment Fee	•The agreement provides for the payment of an unspecified quarterly commitment fee to Treasury to compensate it for its ongoing support under the agreement. •Until the capital reserve end date, the periodic commitment fee will not be set, accrue, or be payable. The capital reserve end date is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to or exceeding the capital requirements and buffers set forth in the enterprise regulatory capital framework. •No later than the capital reserve end date, we and Treasury, in consultation with the Chair of the Federal Reserve, will agree on the amount of the periodic commitment fee.

The senior preferred stock purchase agreement contains covenants that prohibit us (and, in one instance, FHFA) from

taking several actions without the prior written consent of Treasury or require us to take specified actions, including the

following described in the table below:


Dividends and Share Repurchases	•We may not pay dividends or make other distributions on or repurchase our equity securities (other than the senior preferred stock).
Issuances of Equity Securities	•We may not issue equity securities, except for common stock issued: ◦upon exercise of the warrant; ◦as required by any pre-conservatorship agreements; and ◦following the satisfaction of two conditions: (a) the exercise of the warrant in full, and (b) the resolution of all currently pending significant litigation relating to the conservatorship and the August 2012 amendment to the senior preferred stock purchase agreement.


Termination of Conservatorship	•Neither we nor FHFA may terminate or seek to terminate the conservatorship, other than through a receivership, without the prior consent of Treasury, with one exception that allows FHFA to terminate our conservatorship without the prior consent of Treasury if the following conditions are met: ◦all currently pending significant litigation relating to the conservatorship and the August 2012 amendment to the senior preferred stock purchase agreement has been resolved; and ◦for two or more consecutive quarters, our common equity tier 1 capital (as defined in the enterprise regulatory capital framework), together with any stockholder equity that would result from a firm commitment public underwritten offering of common stock which is fully consummated concurrent with the termination of conservatorship, equals or exceeds at least 3% of our adjusted total assets (as defined in the enterprise regulatory capital framework). As of December 31, 2023, 3% of our adjusted total assets was $136.6 billion and we had a common equity tier 1 capital deficit of $74 billion.
Asset Dispositions	•We may not sell, transfer, lease or otherwise dispose of any assets, except for dispositions for fair market value in limited circumstances, including if: ◦the transaction is in the ordinary course of business and consistent with past practice; or ◦the assets have a fair market value individually or in the aggregate of less than $250 million.
Subordinated Debt	•We may not issue any subordinated debt securities.
Mortgage Assets Limit	•We may not hold mortgage assets in excess of $225 billion; however, we are currently managing our business to a $202.5 billion mortgage asset cap according to FHFA instructions.
Indebtedness	•We may not have indebtedness in excess of $270 billion.
Executive Compensation	•We may not enter into any new compensation arrangements or increase amounts or benefits payable under existing compensation arrangements with any of our executive officers (as defined by Securities and Exchange Commission (“SEC”) rules) without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury.
Equitable Access and Offers for Single-Family Mortgage Loans	•We may not vary our pricing or acquisition terms for single-family loans based on the business characteristics of the seller, including the seller’s size, charter type, or volume of business with us. •We must offer to purchase at all times, for equivalent cash consideration and on substantially the same terms, any single-family mortgage loan that: ◦is of a class of loans that we then offer to acquire for inclusion in our MBS or for other non- cash consideration; ◦is offered by a seller that has been approved to do business with us; and ◦has been originated and sold in compliance with our underwriting standards.


Single-Family Loan Eligibility Program	•We must maintain a program reasonably designed to ensure that the single-family loans we acquire are limited to: ◦qualified mortgages; ◦government-backed loans; ◦loans exempt from the Consumer Financial Protection Bureau’s (the “CFPB’s”) ability-to- repay and qualified mortgage rule (other than loans secured by timeshares and home equity lines of credit, which, we are not allowed to buy); ◦loans secured by an investment property; ◦refinancing loans with streamlined underwriting originated in accordance with our eligibility criteria for high LTV ratio refinancings; ◦loans originated with temporary underwriting flexibilities during times of exigent circumstances, as determined in consultation with FHFA; ◦loans secured by manufactured housing; and ◦such other loans that FHFA may designate that were eligible for purchase by us as of January 2021.
Enterprise Regulatory Capital Framework	•We are required to comply with the enterprise regulatory capital framework rule published by FHFA in the Federal Register on December 17, 2020, disregarding any subsequent amendments or modifications to the rule. •FHFA has subsequently amended the enterprise regulatory capital framework and instructed us to comply with the framework as amended. Accordingly, we are not in compliance with this covenant. See “Note 13, Regulatory Capital Requirements” for additional information. •While our compliance with the covenants in the senior preferred stock purchase agreement is not a condition of Treasury’s funding commitment under that agreement, FHFA, as our conservator and regulator, has the authority to direct compliance or impose consequences for any non-compliance with that agreement.
Risk Management Plan	•While in conservatorship, we must provide an annual risk management plan to Treasury.