exv10w66







 




    Exhibit 10.66



 




    United
    States of America

    Office of Federal Housing Enterprise Oversight



 




    In the
    Matter of

    THE FEDERAL HOME LOAN MORTGAGE CORPORATION (“FREDDIE
    MAC”)

    December 9, 2003
    



 




    STIPULATION
    AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER



 



    The Director of the Office of Federal Housing Enterprise
    Oversight (“OFHEO”) has determined to initiate cease
    and desist proceedings and has determined to impose a civil
    money penalty against the Federal Home Loan Mortgage Corporation
    (“Freddie Mac” or “Enterprise”) pursuant to
    12 U.S.C. § 4631 and 12 U.S.C.
    § 4636.



 



    The Enterprise, in the interest of compliance and cooperation,
    consents to the issuance of a Consent Order, dated
    December 9, 2003 (“Order”), before the filing of
    any notice and before the finding of any issues of fact or law.



 



    In consideration of the above premises, the Director and the
    Enterprise, through its duly authorized representative, hereby
    stipulate and agree to the following:



 




    ARTICLE I



 




    Jurisdiction



 



    (1) The Enterprise is a corporation chartered pursuant to
    the Federal Home Loan Mortgage Corporation Act of 1970,
    12 U.S.C. §§ 1451 to 1459, and subject to
    supervision and regulation by OFHEO pursuant to the Federal
    Housing Enterprises Financial Safety and Soundness Act of 1992,
    12 U.S.C. §§ 4501 et seq.



 




    ARTICLE II



 




    Agreement



 



    (2) The Enterprise hereby consents and agrees to the
    issuance of the Order by the Director. In so doing, the
    Enterprise neither admits nor denies any wrongdoing or any
    asserted or implied finding or other basis for the Order. The













 






    Enterprise further consents and agrees that said Order shall
    become effective upon its issuance and shall be fully
    enforceable by OFHEO under the provisions of 12 U.S.C.
    §§ 4635 and 4636.



 




    ARTICLE III



 




    Waivers



 



    (3) The Enterprise, by signing this Stipulation and
    Consent, hereby waives:



 



    (a) the issuance of a Notice of Charges pursuant to
    12 U.S.C. § 4631(c)(1);



 



    (b) written notice of the Director’s determination to
    impose a penalty on the record pursuant to
    12 U.S.C. § 4636(c)(1)(A);



 



    (c) any and all procedural rights available in connection
    with the issuance of the Order;



 



    (d) all rights to seek any type of administrative or
    judicial review of the Order; and



 



    (e) any and all rights to challenge or contest the validity
    of the Order.



 




    ARTICLE IV



 




    Other
    Action



 



    (4) The Enterprise agrees that the provisions of this
    Stipulation and Consent shall not inhibit, estop, bar, or
    otherwise prevent the Director from taking any other action
    affecting the Enterprise in connection with OFHEO’s ongoing
    regulatory oversight of the Enterprise with respect to matters
    occurring subsequent to the date of the Order or with respect to
    matters relating to third parties not affiliated with the
    Enterprise (including separated senior officers of the
    Enterprise) if, at any time, the













 






    Director deems it appropriate to do so to fulfill the
    responsibilities placed upon him by the several laws of the
    United States of America.



 



    (5) The Enterprise agrees that the provisions of this
    Stipulation and Consent shall not be construed to limit or
    otherwise affect regulatory actions by other federal regulatory
    agencies.



 



    IN TESTIMONY WHEREOF, the undersigned, the Director of OFHEO,
    has hereunto set his hand on behalf of himself and OFHEO.



 


		
	    /s/  Armando
    Falcon,
    Jr.

    	     DATED:
    December 9, 2003
    







    Armando Falcon, Jr.




    Director, Officer of Federal Housing Enterprise Oversight



 


 



    IN TESTIMONY WHEREOF, the undersigned, as the duly authorized
    representative of the Enterprise, has hereunto set his hand on
    behalf of the Enterprise.



 


		
	    /s/  Shaun
    F.
    O’Malley

    	     DATED:
    December 9, 2003
    







    Shaun F. O’Malley




    Chairman of the Board of Directors




    Federal Home Loan Mortgage Corporation (“Freddie Mac”)













 





 




    United
    States of America

    Office of Federal Housing Enterprise Oversight



 




    Order
    No. 2003-02



 




    In the
    Matter of

    The Federal Home Loan Mortgage Corporation



 




    Consent
    Order



 



    Whereas, the Director of the Office of Federal Housing
    Enterprise Oversight (“OFHEO”) has determined to
    initiate cease and desist proceedings against the Federal Home
    Loan Mortgage Corporation (“Freddie Mac” or
    “Enterprise”) pursuant to 12 USC § 4631.



 



    Whereas, the Director has determined to initiate such
    proceedings based on his view that Freddie Mac engaged in
    conduct that does not conform with the Federal Housing
    Enterprises Financial Safety and Soundness Act of 1992
    (“Safety and Soundness Act”), OFHEO rules, guidances
    and standards, and the Federal Home Loan Mortgage Corporation
    Act and that such conduct has resulted in harm to the Enterprise;



 



    Whereas, the Director believes that the conduct involved
    provides sufficient grounds to initiate administrative or
    enforcement proceedings against the Enterprise, including a
    claim for the award of civil money penalties and other relief;



 



    Whereas, the Enterprise has executed a “Stipulation and
    Consent to the Issuance of a Consent Order,” dated
    December 9, 2003, that is accepted by the Director, and by
    such Stipulation and Consent the Enterprise has consented to the
    issuance of this Consent Order (“the Order”) by the
    Director.



 



    Whereas the Director believes that it would be in the public
    interest to enter into this Consent Order with the Enterprise,













 





 



    Therefore, the Director, pursuant to the authority vested in him
    by the Safety and Soundness Act, 12 U.S.C.
    §§ 4631 and 4636, hereby orders that:



 




    Article I     Cooperation
    



 



    1. The Enterprise shall use good faith reasonable efforts
    to cooperate with OFHEO in OFHEO’s pursuit of
    administrative or enforcement proceedings with respect to other
    persons, including, upon reasonable prior notice and at
    reasonable times and places, in making Enterprise’s
    documents and records relating to such proceeding available to
    OFHEO without subpoena (subject to any privilege or other
    protection available under applicable law), and, upon reasonable
    prior notice and at reasonable times and places, in making the
    Enterprise’s personnel (including officers, directors and
    employees) available for interview and/or testimony without
    subpoena (subject to any privilege or other protection available
    under applicable law), provided that the duty to
    cooperate under this paragraph shall not require cooperation
    between the Enterprise and OFHEO in respect of claims or
    proceedings making any allegation that would, if proven,
    adversely affect the Enterprise, as determined by the Enterprise.



 



    2. The Enterprise shall use good faith reasonable efforts
    to cooperate with OFHEO in OFHEO’s pursuit of litigation
    with respect to other persons or in litigation involving other
    persons, including, upon reasonable prior notice and at
    reasonable times and places, in making the Enterprise’s
    documents and records relating to such litigation available to
    OFHEO without subpoena (subject to any privilege or other
    protection available under applicable law), and, upon reasonable
    prior notice and at reasonable times and places, in making the
    Enterprise’s personnel (including officers, directors and
    employees) available for interview and/or testimony without
    subpoena (subject to any privilege or other protection available
    under applicable law), provided that the duty to
    cooperate under this paragraph shall not require cooperation
    between the Enterprise and OFHEO in respect of claims or
    proceedings making any allegation that would, if proven,
    adversely affect the Enterprise, as determined by the Enterprise.




    

    2








 







    Article II     Board
    of Directors and Senior Management
    



 



    3. Within 120 days from the date of this Order, the
    Board shall cause to be conducted a review of the
    Enterprise’s bylaws in light of the factors contributing to
    the restatement and revision of the Enterprise’s financial
    statements for 2000, 2001 and 2002. Based on this review, the
    Board shall cause such revisions to be made in the
    Enterprise’s bylaws as the Board determines to be
    appropriate.



 



    The Enterprise shall report to OFHEO on the results of the
    review and on any revisions to be made to the Enterprise’s
    bylaws.



 



    4. Within 120 days From the date of this Order, the
    Board shall cause to be conducted a review of the
    Enterprise’s codes of conduct for the Board and for
    employees in light of the factors contributing to the
    restatement and revision of the Enterprise’s financial
    statements for 2000, 2001 and 2002, and shall cause such
    revisions to be made in those codes of conduct as the Board
    determines to be appropriate and such employee training programs
    to be developed and implemented as the Board determines to be
    appropriate.



 



    Enterprise shall report to OFHEO on the results of the review of
    the Enterprise’s codes of conduct for the Board and
    employees, on any revisions to be made in such codes of conduct
    and on any employee training programs to be developed and
    implemented.



 



    In addition, for the first 24 months following the
    implementation of any employee training programs pursuant to
    this paragraph, the Enterprise shall submit to OFHEO at the end
    of each six-month period a report on the implementation of such
    training programs by the Enterprise.



 



    5. Within 180 days from the date of this Order, the
    Board shall cause to be prepared a succession plan for the
    Enterprise’s senior management. The Board shall consult
    with OFHEO in preparing this succession plan, and shall submit a
    copy of this succession




    

    3








 






    plan to OFHEO. (For purposes of this paragraph, senior
    management means the Enterprise’s chief executive officer,
    chief operating officer, chief financial officer and general
    counsel, and the heads of the Investment & Capital
    Markets Division and the Mortgage Sourcing,
    Operations & Funding Division.)



 



    6. Within 120 days from the date of this Order, the
    Board shall cause to be conducted a review of its committee
    structure and shall determine what changes, if any, are
    appropriate to make in such committee structure. This review
    shall take into account the need for effective Board oversight
    of essential Enterprise functions, including management
    implementation of internal controls and operational risk
    planning. The Board shall report to OFHEO any changes it
    determines to make in its committee structure as a result of
    this review.



 



    7. Within 150 days from the date of this Order, the
    Board shall cause to be reviewed the frequency of regular Board
    meetings, the Board’s process (including the amount of time
    allotted) for full Board consideration of Board committee
    reports, and the Board’s processes for obtaining
    information from management with respect to both the
    Enterprise’s ongoing operations and issues of special
    importance to the Enterprise.



 



    Based on this review, the Board shall determine what revisions,
    if any, are appropriate to make in the frequency of regular
    Board meetings, in the Board’s process (including the
    amount of time allotted) for full Board consideration of Board
    committee reports, and in the Board’s processes for
    obtaining information from management with respect to both the
    Enterprise’s ongoing operations and issues of special
    importance to the Enterprise.



 



    The Board shall report to OFHEO any changes it determines to
    make as a result of this review with respect to the frequency of
    regular Board meetings, the Board’s process (including the
    amount of time allotted) for full Board consideration of Board
    committee reports, and the Board’s processes for obtaining
    information from management with




    

    4








 






    respect to both the Enterprise’s ongoing operations and
    issues of special importance to the Enterprise.



 



    8. Within 120 days from the date of this Order, the
    Board shall determine what limits, if any, to establish on the
    terms of members of the Board. The Board shall report to OFHEO
    any such term limits that are to be established and how such
    limits are to be implemented.



 



    9. Within 120 days from the date of this Order, the
    Board shall develop required qualifications for service as a
    director of Enterprise. Such qualifications may include limits
    on service of Enterprise directors on boards of directors of
    other companies; standards for determining independence for
    outside directors that meet or exceed existing requirements of
    the New York Stock Exchange; and standards for the continuation
    of service as a director for executive officer directors who
    cease to be employees of Enterprise. The Board shall report to
    OFHEO any such qualifications that are to be established and how
    such qualifications are to be implemented.



 



    10. At least once annually, the Board shall review, with
    appropriate professional assistance, the legal and regulatory
    requirements that are applicable to its activities and duties.



 



    11. At least once annually, the Enterprise’s senior
    management shall review, with appropriate professional
    assistance, the legal and regulatory requirements applicable to
    their activities and duties.



 



    12. At least once annually, the Board shall meet with
    senior representatives of OFHEO to ensure that the Board is
    appropriately apprised regarding any significant regulatory
    issues relating to the Enterprise’s operations and
    activities.



 



    13. The Enterprise shall separate the position of Chairman
    and the position of Chief Executive Officer within a reasonable
    period of time.




    

    5








 






    14. Within 180 days from the date of this Order,
    Enterprise shall submit to OFHEO an acceptable plan setting
    forth specific actions that Enterprise will take to foster a
    management culture in which appropriate consideration is given
    to operational stability and legal and regulatory compliance
    throughout the Enterprise, as essential elements of a management
    approach that seeks properly to address all relevant risks and
    to maximize the Enterprise’s long-term value. Such actions
    shall include appropriate training of the Enterprise’s
    officers and employees, and steps to make the Enterprise’s
    compensation system for executive officers consistent with
    fostering the management culture contemplated under this
    paragraph.



 




    Article III     Internal
    Controls
    



 



    15. Within 60 days from the date of this Order, the
    Enterprise shall submit to OFHEO a report on the nature and
    status of PricewaterhouseCoopers’ and any other
    consultant’s review of the Enterprise’s design,
    assessment and evaluation of controls with respect to financial
    reporting. Upon completion of such reviews, the Enterprise shall
    submit to OFHEO a report analyzing the results of such reviews
    and setting forth a plan for remedial steps to be taken by
    management.



 



    16. (a) Within 60 days from the date of this
    Order, the Enterprise shall engage an independent consultant to
    conduct a review of the Enterprise’s internal controls with
    respect to the following:



 



    (i)  Reporting to the Enterprise’s Board of
    Directors.



 



    (ii)  Reporting to the Enterprise’s senior
    management.



 



         (b) Within 180 days from
    the date of its engagement, the consultant shall prepare a
    written report setting forth any recommended changes in the
    Enterprise’s internal controls with respect to the
    following:



 



    (i)  Reporting to the Enterprise’s Board of
    Directors.



 



    (ii) Reporting to the Enterprise’s senior management.




    

    6








 






    The consultant shall provide a copy of its report to OFHEO at
    the same time that the report is provided to the Enterprise.



 



         (c) Within 60 days after
    receipt of the consultant’s report, the Enterprise shall
    submit to OFHEO an acceptable written plan to address the
    recommendations of the consultant’s report.



 



    17. At least once annually, the Enterprise’s senior
    management shall review the effectiveness of the internal
    controls that are the subject of
    paragraphs 15-16,
    and shall report to the Board, or an appropriate Board
    committee, on the results of its review. A copy of senior
    management’s report shall be submitted to OFHEO.



 



    18. The Enterprise shall have established the position of
    chief risk officer with responsibility for the Enterprise’s
    risk oversight function. Within 60 days of the date of this
    Order, the Enterprise shall report to OFHEO on the functions of
    the chief risk officer and to whom such officer shall report.



 



    19. The Enterprise shall have established the position of
    chief compliance officer. Within 60 days of the date of
    this Order, the Enterprise shall report to OFHEO on the
    functions of the chief compliance officer and to whom such
    officer shall report.



 




    Article IV     Internal
    Audit
    



 



    20. Within 120 days from the date of this Order, the
    Enterprise shall submit to OFHEO an acceptable plan setting
    forth specific actions that the Enterprise will take in order to
    address the effectiveness of its internal audit function,
    including but not limited to:



 



    (a) The independence of the internal audit function;



 



    (b) The adequacy of information provided to the audit
    committee;



 



    (c) The adequacy of internal audit staffing;



 



    (d) The adequacy of internal audit planning;




    

    7








 






    (e) The adequacy of internal audit work programs; and



 



    (f) The adequacy of formal management responses to audit
    findings.



 




    Article V     Internal
    Accounting
    



 



    21. (a) Within 60 days of the date of this Order,
    the Enterprise shall engage an independent consultant to conduct
    a review of:



 



    (i)   The current staffing of the
    Enterprise’s internal accounting function in relation to
    Enterprise’s accounting requirements.



 



    (ii)  Any plans to augment the staffing of the
    Enterprise’s internal accounting function in relation to
    the Enterprise’s accounting requirements.



 



    (iii) The structure for ongoing management oversight of the
    internal accounting function, including with respect to ensuring
    timely implementation of new accounting standards and
    requirements.



 



         (b) Within 90 days from
    the date of its engagement, the consultant shall prepare a
    written report setting forth any recommendations with respect to:



 



    (i)  The staffing of the Enterprise’s internal
    accounting function in relation to the Enterprise’s
    accounting requirements.



 



    (ii) The structure for ongoing management oversight of the
    internal accounting function, including with respect to ensuring
    timely implementation of new accounting standards and
    requirements.



 



         (c) Within 60 days of
    receipt of the consultant’s report, the Enterprise shall
    submit to OFHEO an acceptable written plan to address the
    recommendations of the consultant’s report.



 




    Article VI     Risk
    Management Transactions
    



 



    22. (a) Within 90 days after the date of this
    Order, the Enterprise shall develop procedures with respect to:




    

    8








 






    (i)  Appropriate management oversight that a business
    purpose exists for unique transactions relating to risk
    management or where a business purpose is required under
    generally accepted accounting principles for a transaction
    relating to risk management.



 



    (ii) Maintaining appropriate records of the business
    purpose of unique transactions relating to risk management or
    where a business purpose is required under generally accepted
    accounting principles for a transaction relating to risk
    management.



 



         (b) The Enterprise shall
    submit to OFHEO a copy of the procedures developed pursuant to
    paragraph 22(a).



 




    Article VII     Public
    Disclosures and Regulatory Reporting
    



 



    23. Within 90 days from the date of this Order, the
    Enterprise shall submit to OFHEO an acceptable plan setting
    forth specific actions that the Enterprise will take to address
    the adequacy of its public disclosures practices and to have in
    place effective ongoing management oversight of its public
    disclosure practices.



 



    24. Within 90 days from the date of this Order, the
    Enterprise shall review its procedures for ensuring that
    reports, including data, submitted to OFHEO meet all applicable
    legal and regulatory requirements, and shall submit to OFHEO a
    report setting forth those procedures, including any steps the
    Enterprise has made or has determined it should make to enhance
    those procedures.



 




    Article VIII     Oversight
    and Reporting
    



 



    25. The Board shall designate a committee of the Board that
    shall be responsible for overseeing the Enterprise’s
    compliance with the provisions of this Order.




    

    9








 






    26. Management shall prepare quarterly a report on the
    Enterprise’s progress in complying with the provisions of
    this Order, and shall submit such quarterly progress report to
    the designated Board committee for its review and approval.



 



    27. Following approval by the Board committee, a copy of
    such quarterly progress report shall be submitted to OFHEO.



 



    28. The first quarterly progress report pursuant to
    paragraph 27 shall be submitted to the designated Board
    committee by no later than March 15, 2004.



 




    Article IX.     Civil
    Money Penalty
    



 



    29. Within ten days from the date of this Order, the
    Enterprise shall transfer $125 million, in the manner
    specified by the General Counsel of OFHEO, in the name of the
    United States Treasury. This amount shall constitute a civil
    money penalty imposed on the Enterprise pursuant to
    12 U.S.C. § 4636.



 


 



    It is so ordered, this 9th day of December, 2003.



 



    /s/  Armando
    Falcon, Jr.








    Armando Falcon, Jr.




    Director, Office of Federal Housing Enterprise Oversight




    

    10