Freddie Mac 2014 Annual Report Download - page 219

214 Freddie Mac
Non-Agency Mortgage-Related Security Issuers
We are engaged in various loss mitigation efforts concerning certain investments in non-agency mortgage-related
securities, including the activities discussed below. The effectiveness of these various loss mitigation efforts is uncertain, in part
because our rights as an investor are limited, and any potential recoveries may take significant time to realize. Lawsuits against
a number of parties are currently pending. These parties include some of our significant seller/servicers and counterparties,
including counterparties to debt funding and derivatives transactions.
In 2011, FHFA, as Conservator for Freddie Mac and Fannie Mae, filed lawsuits against 18 corporate families of financial
institutions and related defendants alleging securities laws violations and, in some cases, fraud. These lawsuits sought to
recover losses and damages sustained by Freddie Mac and Fannie Mae as a result of their investments in certain non-agency
mortgage-related securities issued or sold by, or backed by mortgages originated by, these financial institutions or control
persons thereof. As of December 31, 2014, most of these lawsuits have been resolved through settlements. We and FHFA
reached settlements with the following parties in these FHFA-filed lawsuits in 2014:
• Morgan Stanley (February 2014)
• Societe Generale (February 2014)
• Credit Suisse Holdings (USA), Inc. (March 2014)
• Bank of America Corporation (March 2014)
• Barclays Bank PLC (April 2014)
• First Horizon National Corporation (April 2014)
• RBS Securities, Inc. (June 2014; resolved claims against RBS in FHFA's lawsuit against Ally Financial Inc.)
• Goldman Sachs and Co. (August 2014)
• HSBC North America Holdings, Inc. (September 2014)
At the direction of our Conservator, we are also working to enforce contractual rights of certain trusts with respect to the
non-agency mortgage-related securities we hold, and have directed certain trustees to initiate litigation on behalf of certificate
holders against several financial institutions for breach of contract claims. We reached a settlement with WMC Mortgage LLC
in March 2014.
During 2014, we recognized $6.1 billion within non-interest income on our consolidated statements of comprehensive
income from the settlements discussed above.
We have also been participating with other investors in non-agency mortgage-related securities in certain investor
consortiums that seek to enforce certain claims relating to such securities. As discussed below, three settlements have been
announced. Each of these settlements resolves certain claims with respect to a number of mortgage securitization trusts,
including trusts in which we have investments. If an individual settlement is approved, we would expect to receive a benefit
from the settlement for those covered securitizations that we hold at the time settlement proceeds are distributed to the trusts.
Each settlement is subject to various conditions, and it is not possible to predict the timing or ultimate outcome of the approval
process for any individual settlement, which could take substantial time. The settlements are as follows:
• In April 2014, Citigroup Inc. announced a settlement to resolve certain claims with respect to a number of mortgage
securitization trusts. In December 2014, the trustees of the securitizations filed suit in New York state court seeking
approval of the settlement.
• In November 2013, J.P. Morgan Chase & Co. announced a settlement to resolve certain claims with respect to a
number of mortgage securitization trusts. In October 2014, the trustees of the securitizations filed suit in New York
state court seeking approval of the settlement.
• In June 2011, Bank of America Corporation, BAC Home Loans Servicing, LP, Countrywide Financial Corporation and
Countrywide Home Loans, Inc. entered into a settlement agreement with The Bank of New York Mellon, as trustee, to
resolve certain claims with respect to a number of Countrywide mortgage securitization trusts. In January 2014, a New
York state court approved a significant portion of the settlement. An appeal of this decision is pending. There can be
no assurance that final court approval of the entire settlement will be obtained.
See "Seller/Servicers" for information about specialty servicers that service mortgage loans underlying our non-agency
mortgage-related securities.
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