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Single-Family Credit Risk Transfer HandbookSTACR and ACIS

Freddie Mac | 2019

Executive Message

Single-Family Credit Risk Transfer Handbook

Freddie Mac is dedicated to improving the U.S. housing finance system; in response to

the 2007 housing crisis, Freddie Mac, established the agency Credit Risk Transfer

(CRT) sector in 2013. The goal of this handbook is to help familiarize investors with the

two flagship CRT programs, STACR & ACIS. The complementary capital markets and

reinsurance executions reduce housing risk exposure to U.S. taxpayers while providing

unique investment opportunities to institutional investors.

--Mike Reynolds, Vice President, Credit Risk Transfer

2

ContentsHow Freddie Mac Makes Home Possible 4

Single-Family Credit Risk Transfer (CRT) 7

1. CRT Overview 8

2. Transaction Overview 13

3. Loss Overview 23

4. Investors & Liquidity 26

Credit Risk Management Framework 33

1. Overview 34

2. Loss Mitigation 40

3. Home Possible 47

Collateral Performance 50

U.S. Housing Market Overview 62

Resources 68

Appendix 74

1. Transaction Considerations 76

How Freddie Mac Makes Home Possible


Freddie Mac | 2019

Freddie Mac’s Role in U.S. Housing Finance


Freddie Mac was chartered by the federal government in 1970 to provide liquidity, stability, and affordability to

the housing market.

5

1Lenders originate loans. Lenders include banks, credit unions,

mortgage brokers and others. They

originate loans per the Single-Family

Seller/Servicer Guide and sell loans

to Freddie Mac.

2Freddie Mac overlays its

credit risk management

framework on purchased

loans, ensuring loan quality. Underwriting and Quality Control

processes take advantage of

proprietary data models and

intelligent automation to ensure all

loans meet Freddie Mac underwriting

standards.

3Interest rate risk is passed

through to investors by

guaranteed Uniform

Mortgage Backed Securities

(UMBS).Investors include Federal Reserve,

money managers, hedge funds,

banks, credit unions and more.

4Credit investors gain

exposure to the U.S.

mortgage market through

innovative risk-sharing

offerings.Investors include money managers,

hedge funds, (re)insurers, REITS,

insurance companies and other

investors.

Lender

Interest Rate

Risk Transfer Credit Risk Transfer

UMBS CRT Offerings

Loans

Freddie Mac | 2019

Sustainable Business Model


6

Credit Risk TransferStructured Agency Credit Risk (STACR®) Trust: Freddie

Mac’s flagship securitization credit risk sharing vehicle.

STACR transactions transfer risk to the private capital markets

through the issuance of unsecured and non-guaranteed notes.

The bankruptcy-remote trust makes periodic payments of

principal and interest on the notes to investors.

Agency Credit Insurance Structure (ACIS®): Freddie Mac’s

flagship insurance-based credit risk sharing vehicle. ACIS

transactions are insurance policies issued by or ceded to

global (re)insurance companies to cover a portion of credit risk

on the STACR or standalone reference pools. Freddie Mac

pays monthly premiums to (re)insurers, based on their tranche

participation, in exchange for claim coverage on their portion of

the reference pool.

Interest Rate Risk TransferUniform Mortgage Backed Securities (UMBS): pass-

through securities representing an undivided interest in a

pool of residential mortgages which transfer interest rate risk

to investors. Freddie Mac guarantees the timely payment of

interest and scheduled principal on all UMBS’ issued by

Freddie Mac. Old

Mo

de

lN

ew

Mo

de

l

Buy and Hold Credit Risk

Mortgage

Lenders

Interest Rate Risk

InvestorsFreddie Mac

Credit Risk

Interest Rate Risk

Credit Risk

Credit Risk

Interest Rate Risk

Freddie Mac

Buy and Transfer Credit Risk

Mortgage

Lenders

Credit Risk

Interest Rate Risk

InvestorsFreddie Mac

Credit Risk

Interest Rate Risk

Freddie Mac

Mortgage

Single-Family Credit Risk Transfer (CRT)


1. CRT OverviewSingle-Family Credit Risk Transfer (CRT)

Freddie Mac | 2019

Highlights

CRT Overview

9

110+CRT transactions to date

240+CRT Unique Investors

$51 Billion Issued in securitization and

insurance coverage

$1.4 TrillionMortgages Credit Protected

As the founder of the GSE CRT market, Freddie Mac is constantly innovating to improve the housing finance

system. Since inception, Freddie Mac’s award-winning CRT program has accomplished the following:

2015

RMBS Deal of the Year RMBS Deal of the YearRMBS Deal of the Year

2016 2019

As of 9/30/2019

Freddie Mac | 2019

Offerings

CRT Overview

10

Securities (Re)Insurance Contracts Insured-Placed MI

STACR®

Structured Agency Credit Risk

ACIS®

Agency Credit Insurance Structure

AFRMSM

ACIS Forward Risk Mitigation

IMAGINSM

Integrated Mortgage InsuranceSM

Issuance/Insurance Type REMIC Notes Trust Notes Debt Notes Aggregate Excess of Loss Credit (Re)insurance Mortgage Insurance

Primary ParticipantsMoney Managers, Hedge Funds, REITs,

Sovereign Funds, Insurance Companies(Re)insurance Companies

(Re)insurance/Mortgage

Insurance Companies

Bond/Policy StructureMulti-Class: Investment Grade, Non-

Investment Grade, Not RatedMulti-Class

(Re)insurance Policy

Multi-Class Forward

(Re)insurance Policy

Insured-Placed

Mortgage Insurance

Flagship Series Collateral Offering

DNA On-the-run loans with original loan-to-value ratios of 61-80% STACR/ACIS

HQA On-the-run loans with original loan-to-value ratios of 81-97% STACR/ACIS

Additional Series Collateral Offering

FTR Off-the-run STACR/ACIS

SAP 15-year loans ACIS

Freddie Mac | 2019

Evolution of an Asset Class

CRT Overview

2014

Building Tools:

- Introduce HQ series (>80%

LTV)

- Sell more mezzanine risk

2011 & 2012

Inception:

- Freddie Mac establishes team

to generate CRT concepts

- FHFA publishes strategic plan

for CRT and guidelines

governing GSE risk sharing

2015

Achieve Scale & Depth:

- New CRT offerings: Seller Facing

CRT (front-end CRT) and Freddie

Mac Whole Loan SecuritiesSM (WLS)

- All CRT programs begin transferring

actual loss in lieu of fixed severity

(removes mark to market volatility)

2013

Establish the Market:

- Pioneer the first STACR (debt) and ACIS

(reinsurance) transactions

- Historical loan level data released

- First STACR transaction (debt)

- Focused on 60-80% LTV fixed-rate collateral

2016 & 2017

Further Development:

- Home Affordable Refinance Program® (HARP)

Historical Data release

- Expand ACIS to include 15-year fixed rate loans

- Introduce front end CRT (ACIS/Deep MI) to

transfer risk simultaneously upon acquisition

- Inaugural STACR SPI transaction

- Inaugural STACR HARP transaction

2018

Continued Expansion:

- Inaugural STACR Trust transaction

- STACR extends term to 30 years and sells

Class B-2 notes with 10 bps Credit

Enhancement

- Integrated Mortgage InsuranceSM

(IMAGINSM) launches, bringing new capital

sources for HLTV lending

2019

Progress:

- STACR REMIC

- Introduction of Off-the-Run (FTR)

series including sales of seasoned

B2 notes

- Clarity investor tool released

11

Freddie Mac | 2019

STACR/ACIS CRT Growth

CRT Overview

Cumulative single-family transferred credit risk based on outstanding balance at period end ($ Billions)

Total single-family credit guarantee portfolio with

transferred credit risk ($ Billions)

Data includes STACR, ACIS, and Deep MI Freddie Mac CRT products as of June 30, 2019

$385

$598

$858

$1,144 $1,270

$329 $457 $648 $838 $911

19%

26%

35%

44%47%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2015 2015 2017 2018 2019 YTD*

Reference pool UPB at issuance

Reference pool UPB outstanding

Outstanding reference pool UPB as a percentage of total single-familyportfolio

$24.5 $24.8 $26.4

$28.1 $28.1

$1.9 $1.6 $2.4 $1.7 $1.3

$3.9 $4.4 $5.3 $6.1 $6.7 $5.6 $5.5 $5.9 $5.8 $5.9

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Mezzanine loss positions: Transferred to third parties

First loss positions: Retained by Freddie Mac

First loss positions: Transferred to third parties

Mezzanine loss positions: Retained by Freddie Mac

12

2. Transaction Overview

Single-Family Credit Risk Transfer (CRT) Business

Freddie Mac | 2019

CRT Business Process

Transaction Overview

Borrower

Institutions make loans to

homeowners; Freddie

Mac purchases or

guarantees those loans

UMBS

Loans purchased are

grouped and sold to

UMBS investors, reducing

interest rate risk held by

Freddie Mac

CRT Eligibility

Loans sold in UMBS

securities that meet CRT

eligibility criteria are

included in a CRT

reference pool

Transaction

Once the reference pool

is finalized, credit risk is

transferred to investors

through STACR & ACIS

transactions

14

Freddie Mac | 2019

Reference Pool Creation Illustration


15

Total Loans

Securitized in

UMBS Q1

$81 billion

Reference

Pool

Eligibility

Criteria

Initial

Cohort

$28 billion

Loan

Performance

Removals

➢ Incomplete data reconciliation

➢ Corrected data

➢ Repurchased

➢ Removed by QC

process

➢ Paid in full

➢ Failed delinquency

criteria

➢ Bankruptcy

➢ 100% fully amortizing

➢ Fixed-rate

➢ 1-to-4 unit

➢ First lien mortgage loans

➢ Original terms of 241-360

months

➢ No loans originated under

Relief Refinance programs

➢ Meets transaction specific

LTV criteria (61-80 LTV for

DNA; 81-97 LTV for HQA)

Reference

Pool

$26 billion

STACR &

ACIS

Transaction

Freddie Mac | 2019

STACR & ACIS Capital Structure


16

Hypothetical Allocation of Principal Payments

Specified Credit and Modification Events

Class M-1H

Class M-2H

Class B-1H

Class B-2H

Class B-3H (Reference Tranche Only)

STACR NotesRetained

Credit Risk

Class A-H

(Reference Tranche Only)

STACR M-1

STACR M-2

STACR B-1

STACR B-2

ACIS M-1

ACIS M-2

ACIS B-1

ACIS B-2

ACIS Contracts

Reference Pool

STACR & ACIS are complementary programs issued from the same reference pool for On-the-Run transactions

Freddie Mac | 2019

STACR Trust Structure


17

Payments of principal and

interest on notes

Freddie Mac STACR Trust

Eligible Investments

Credit protection

payments

Credit premium and credit protection

reimbursement payments

Earnings/ liquidation proceeds

of eligible investments

Proceeds of sale of notes

Proceeds of

sale of notes

STACR Transaction

Freddie Mac | 2019

Aligns with key principles of STACR program

Most features of STACR securities will remain largely unchanged:

STACR REMIC


18

Freddie Mac continues efforts to make a positive impact on the CRT market with the introduction of STACR REMIC

STACR Trust STACR REMIC

▪ Reduces counterparty risk exposure

to Freddie Mac

▪ Avoids any disruption of the TBA

market

▪ No tax withholding

▪ REIT friendly

▪ No Commodity Pool Operator (CPO)

requirements

▪ Benefits to international investors:

▪ Regulation S Offering

▪ No tax withholding

Incremental Enhancements

▪ Uncapped 1M LIBOR floater

▪ Reference pool selection criteria

▪ Freddie Mac retained credit risk

▪ Capital structure

▪ Cash flows

▪ Loss Calculations

Freddie Mac | 2019

STACR REMIC Structure


19

Hypothetical Allocation of Principal Payments

Specified Credit and Modification Events

Class M-1H

Class M-2H

Class B-1H

Class B-2H

Class B-3H


STACR Notes

Offered at ClosingRetained

Credit Risk

Class A-H


Class M-1

Class M-2

Class B-1

Class B-2

Reference Pool

Trust issues Notes

Receives cash Proceeds

Capital Contribution Amount

Transfer Amount

Return Reimbursement Amount

Freddie Mac STACR REMIC Trust

Liquidation Proceeds

cover Return Amounts

Earnings and

Liquidation Proceeds

Trust pays interest

(uncapped LIBOR floater)

Trust repays principal

less credit and applicable

modification lossesCash

Proceeds

IO Q-REMIC Interests

Eligible Investments

Freddie Mac | 2019

ACIS Structure


20

(Re)insurers have option to contract directly or indirectly (via cell company) with Freddie Mac

Cell issues quota share reinsurance contract to the reinsurers

Net amount of claims and

premiums flow through cell

Direct

Cut

Through

Indirect Policy

Freddie Mac executes a primary

insurance policy with a cell company

Cell Company

(Re)insurer #1

Collateral

Trust

(Re)insurer #2

Collateral

Trust

(Re)insurer #3

Collateral

Trust

(Re)insurer #4

Collateral

Trust

Direct Policy

(Re)insurer #1

Collateral

Trust

Freddie Mac executes a primary

insurance policy directly with (re)insurers

(Re)insurer #2

Collateral

Trust

(Re)insurer #3

Collateral

Trust

(Re)insurer #4

Collateral

Trust

Freddie Mac | 2019

Transaction Example & Program Comparisons


21

For Illustrative Purposes Only

STACR ACIS

Maturity 30-year loan term 12.5 year

Early

Termination

Earlier of: (a) 10% or less pool

factor or (b) on or after 120th

payment date (10 years)

5 year; If not called at year 5

reverts to STACR language

Qualified

Buyer

Qualified Institutional Buyer

“QIB”

Approved Counterparty

Coupon 1 Month Libor plus spread Fixed rate

Liquidity 8-10 broker/dealers make

active markets daily

Investor posts collateral for a

portion of risk insured; buy and

hold position with the ability to

seek further reinsurance from a

third party; interest paid based on

notional amount

Triggers • Minimum Credit

Enhancement Test

• Delinquency Test

• Cumulative Net Loss Test

Same as STACR

Other • 144A Compliant

• Minimum Denomination

$10,000

• Minimum Increment $1

N/A

Early

Redemption*Maturity*

Tranche Loss CoverageExpected

RatingsBalance WAL

Principal

WindowWAL

Principal

Window

Attach Detach STACR ACIS 10% 10% 10% 10%

M-1 3.50% 4.25% Investment Grade $110m $36m 1.2 6−25 1.2 6–25

M-2 1.10% 3.50% Rated $352m $115m 5.7 25–120 5.8 25–132

B-1 0.60% 1.10% Rated/Not Rated $73m $24m 10.0 120–120 12.9 132–182

B-2 0.10% 0.60% Not Rated $73m $24m 10.0 120– 20 18.8 182–292

Total $608m $199m*Assume stated CPR & 0 CDR; WAL in years,

principal window in months

Freddie Mac | 2019

Introduces operational efficiencies to the mortgage market

Eliminates duplicative processes and shortens underwriting time

Single underwriting guide and credit box for the lender

Lenders and servicers work solely and directly with Freddie Mac

Lowers costs for lenders & borrowers

Reduces the traditional sales/operational costs of traditional MI

Diversifies private capital sources

Level playing field for lenders of all sizes – same pricing for all lenders

Enables better management of taxpayer exposure

Freddie Mac works with highly rated and diversified global reinsurers who place aside

secured collateral to pay claim liabilities

No ability for the insurer/reinsurer to unilaterally rescind coverage

IMAGIN Overview


22

IMAGIN is an enhanced form of front-end mortgage insurance negotiated by Freddie Mac on behalf of borrowers

Freddie Mac | 2019

IMAGIN Structure


23

Seller chooses IMAGIN in

lieu of standard MI and sells

loan to Freddie Mac

Freddie Mac bills Seller

IMAGIN credit fee

Cell company initially

provides charter

compliant MI coverage

upon loan delivery

Risk transferred to

panel of reinsurers /

MI companies

Performs servicing

activities in accordance

with the Seller/Servicer

Guide

Loans reinsured by a

panel of Freddie Mac

chosen/approved

reinsurers

Reinsurers post

collateral into trust

account

Back end operations

(premium payments

and claims) handled

between Freddie Mac

and investors

BorrowerSeller/

Servicer

Freddie

Mac

Cell

Company

Panel of

Reinsurers

/ MIs

Collateral

Account

Freddie Mac | 2019

IMAGIN Comparison


Feature BPMI LPMI IMAGIN

Buyer of MI Lender Lender Freddie Mac

MI Premium Paid By Borrower Lender Freddie Mac

Payment of Coverage One-time or monthly insurance paymentOne-time, monthly, or annual payment which

is built into the note rate

Similar to LPMI, the cost of IMAGIN is

embedded in the borrower note rate

Lower Mortgage Payment Through

Cancellation of the MIYes No No

MI CancellationAutomatic cancellation once LTV drops below

78%None – MI coverage exists for life of loan None – MI coverage exists for 10-year term

MI Rescissions & Denials Yes Yes No

Length/Term of Coverage Terminates upon cancellation Life of loan 10-year term

PolicyApproved MI companies – Selected by

borrower/lender

Approved MI companies – Selected by

borrower/lenderNegotiated by Freddie Mac

Origination Guidelines GSE and MI Guidelines GSE and MI Guidelines Freddie Mac Guidelines

Loan Quality Reviews GSE and MI Guidelines GSE and MI Guidelines Freddie Mac Quality Control

Loan Performance Reporting Servicer works with both GSE and MI Servicer works with both GSE and MI Servicer works directly with Freddie Mac

Loss Mitigation and Property Disposition

Approvals

GSE and MI Loss Mitigation and Approval

requirements

GSE and MI Loss Mitigation and Approval

requirements

Freddie Mac Loss Mitigation and Approval

requirements

Claim Filing Servicer files claims Servicer files claims Freddie Mac files claims

24

3. Loss OverviewSingle-Family Credit Risk Transfer (CRT) Business

Freddie Mac | 2019

Disposition Loss

Loss Overview

26

Allocation of Disposition Loss*

Disposition

Loss =

1 (+) UPB at time of removal from the Reference Pool (including prior principal forgiveness)

2 (-) Net Sales Proceeds

3 (+)Delinquent Accrued Interest (Non-Capitalized)

Interest Bearing UPB * min(Note Rate – 35bps, Accounting Net Yield) * (# of Months Delinquent/12)

4 (+) Taxes and Insurance

5 (+) Legal Costs

6 (+)Maintenance and Preservation Costs (e.g. Property Inspection, HOA, Utilities, Rental Receipts,

REO Management, etc.)

7 (-) MI Proceeds (Total Claim Amount * Coverage %)

8 (+) Miscellaneous Expenses (e.g. BPO, other sales expenses not included in item 2 above)

9 (-)Miscellaneous Credits (e.g. Positive Escrow, Insurance Refunds, Hazard Claim Proceeds, Make

Whole Events, etc.)

*For Illustrative Purposes Only

1. Class B-3 Principal



4. Class M-2 Principal


6. Class A Principal

Freddie Mac | 2019

Modification Loss

Loss Overview

27

Allocation of Modification Loss*

Modification

Loss =

1 (+)Modification Costs

e.g. Interest Short Fall (Passed to investors on a monthly basis included in modification loss amount)

2 (+) Bankruptcy Cramdown Costs (Passed to investors on a monthly basis included in write down loss amount)

*For Illustrative Purposes Only

1. Class B-3 Interest






7. Class M-2 Interest


9. Class M-1 Interest


Modification Hierarchy Investor Impact Borrower Impact

Term Extension No ImpactLoan term is extended to reduce borrower

monthly payments

Interest Rate Reduction Loss of interest from rate change Reduces monthly payment

Principal ForbearanceLoss of interest as principal with forbearance is

non-interest bearing

Suspension of mortgage payments for a specific

period of time which is paid as a balloon payment

upon termination of the loan

4. Investors & Liquidity

Single-Family Credit Risk Transfer (CRT) Business

Freddie Mac | 2019

Investor Participation at Issuance

Investors & Liquidity

29

Money ManagerHedge Fund Insurance REIT Sovereign Fund

In addition to the participation shown above, ACIS is generally responsible for 25% of each tranche issued for (Re)insurer participation

6% 6%

92%85% 92% 78%

2%7% 8%

5%

4% 10%

2018 DNA 2019 DNA 2018 HQA 2019 HQA

M-1

45%

70%83% 79%

40%

19%

17%7%

14%11%

15%

2018 DNA 2019 DNA 2018 HQA 2019 HQA

B-1

46%33% 42% 33%

48%58% 47%

54%

1%6% 7%12% 13%

2018 DNA 2019 DNA 2018 HQA 2019 HQA

M-2

72% 74%63%

73%

25% 23% 37% 25%

4% 4%

2018 DNA 2019 DNA 2018 HQA 2019 HQA

B-2

Data as End of Q2

Freddie Mac | 2019

Investor Count per Tranche


30

101316192225283134

19-HQA1 19-DNA2 19-HQA2 19-DNA3

B1

101316192225283134

19-HQA1 19-DNA2 19-HQA2 19-DNA3

M1

101316192225283134

19-HQA1 19-DNA2 19-HQA2 19-DNA3

M2

101316192225283134

19-HQA1 19-DNA2 19-HQA2 19-DNA3

B2

Freddie Mac | 2019

STACR Liquidity


31(1) Trading volumes reflect the sum of all buy and sell trades

Current Outstanding ($ Billions)

Rated 18.5

Unrated 6.3

Total 24.8

2013 2014 2015 2016 2017 2018 2019

Nominal ($Billions) 0.3 0.6 1.1 1.5 1.9 1.7 2.1

% of Outstanding 48% 20% 13% 11% 12% 8% 9%

Average Trading Volume per Month

Monthly Trading Volume Over Trailing 12 Months(1)

0.0

0.5

1.0

1.5

2.0

2.5

2013 2014 2015 2016 2017 2018 2019

($ B

illi

on

s)

Trades of 5mm+ are estimated to be 10mm

All data as of August 2019

Approximately 8 – 10 dealers make markets daily

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug

2018 2019

Nominal ($billions) % of Outstanding

0

10

20

30

40

2019201820172016201520142013

($ B

illi

on

s)

Cumulative Issuance

Freddie Mac | 2019

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%

Bloomberg BarclaysUS Corp HY Index

S&P Index

CRTx RNI Subordinate

CRTx RNI Lower Mezzanine

CRTx RNI Upper Mezzanine

Total Return Annualized

CRT Return Summary as of 09/03/2019

1 Y 3 Y

STACR Returns Summary


32

All data as of September 2019

Freddie Mac | 2019

ACIS Returns Summary


33

ACIS premiums, losses, and returns on ongoing transactions are based on actual cashflow emergence to date. ACIS returns on collateral are tax adjusted and will vary by counterparty. Assumes US tax rates.

Aon’s Reinsurance Aggregate (ARA) Return on Equity measures net income attributable to common shareholders as a ratio to average common shareholders’ equity based on the following constituent reinsurers:

Alleghany, Arch, Argo, Aspen, AXIS, Beazley, Everest Re, Fairfax, Hannover Re, Hiscox, Lancashire, MAPFRE, Markel, Munich Re, Partner Re, QBE, RenRe, SCOR, Swiss Re, Validus, and XL Catlin

ACIS Returns to date as of

8/26/2019

10.7%11.3%

10.1%

8.4%

2.7%

4.2%

16.2%

2013 2014 2015 2016 2017 2018 ACIS CollateralReturns To Date

Aon's Reinsurance Aggregate (ARA) Return on Common Equity

ACIS Returns on Collateral vs. Reinsurer Returns on Common Equity

Freddie Mac | 2019

100% 100% 100% 100% 100%

40%

100% 100% 100% 100% 100%

60%

100% 100% 100%

2013 2014 2015 2016 2017 2018

M1 M2 M3

0

5

10

15

20

25

30

35

0-1 Years 1-3 Years 3-6 Years 6-10 Years

Nu

mb

er

of B

ond

s

WAL

NAIC Designation

NAIC 1 NAIC 2 NAIC 3Source: https://crt.freddiemac.com/_assets/docs/offerings/stacr/2018-stacr-debt-note-naic-designations.xlsx

Note: The National Association of Insurance Commissioners 2018 Mortgage Reference Securities Report is not a substitute for or functional equivalent of the credit ratings of rating agencies and is not produced to permit investors to compare the likelihood of default or of full and

timely payment between one or more securities.

*Security weighted average life calculated as of January 07, 2019 assuming 10 CPR and 0 CDR.

MACR Bonds are not included

STACR NAIC Designation & Rating Agency Upgrades


34

✓ 64 STACR bonds have an NAIC designation

DNA/HQA M1, M2, M3 Upgrades by Issuance Year

✓ 0 bonds have been downgraded

✓ Over 125 upgrades from Original to Current rating for the

entire STACR program

https://crt.freddiemac.com/_assets/docs/offerings/stacr/2018-stacr-debt-note-naic-designations.xlsx

Credit Risk Management Framework


1. Credit Risk Management Overview

Credit Risk Management Framework

Freddie Mac | 2019

Credit Risk Management Overview


37

Freddie Mac – Risk Management

CRT is supported by an advanced risk management framework

▪ Documentation Standards and Credit

Eligibility Requirements

▪ Delegated Underwriting Guidelines

▪ Seller Representations and Warranties

▪ Loan AdvisorSM

▪ Post-Close Credit Review

▪ Quality Assurance

▪ Compliance Review

▪ Performing Loan and Non-Performing

Loan Quality Control Review

▪ Due Diligence Review

▪ Underwriting Defects Repurchase Process

▪ Seller In-House Quality Control

▪ Seller Servicer Approval Standards

▪ Loan Servicer Performance Monitoring

and Scorecard

▪ CORE Reviews

Underwriting Standards Quality Control Seller/Servicer Management

Freddie Mac | 2019

By the end of 2019, Freddie

Mac’s goal is to have 100% of

loans processed through Loan

Product Advisor or Loan

Quality Advisor*

Loan Advisor Exclusionary List

ensures only approved seller-

servicers have access to the

tools

Loans sold to Freddie Mac

must have documented

evidence of the mortgagor’s

ability to repay and of the value

of the property

Appraisal independence rules

insulate the appraiser from

influence by other parties

involved in processing or

originating the loan

Representations & Warranties

require the seller-servicer to

repurchase the loan if there is a

material underwriting defect

discovered, subject to certain

limits

Underwriting Standards


38

Loan AdvisorFreddie Mac Loan Advisor℠ is a smart, end-to-end technology solution built to provide greater certainty about the quality of loans and

offer insight into loans' purchase eligibility early in the loan production process. Loan Advisor’s advanced analytics and modeling

capabilities automate processes, catch errors and identify opportunities to reduce risk.

Loan Product

Advisor®

Condo Project

Advisor®

Loan Collateral

Advisor®

Loan Quality

Advisor®

Loan Closing

Advisor®

Loan Selling

Advisor®

Quality Control

Advisor®

Loan Coverage

Advisor®

Business

Intelligence

Correspondent

Assignment

Center

*does not include bulk deals

Freddie Mac | 2019

Underwriting Standards


39

Loan Product Advisor®

Loan Product Advisor (LPA) is the cornerstone of Loan Advisor. LPA takes advantage of proprietary data models and

intelligent automation to ensure all loans meet Freddie Mac underwriting standards.

Generates an assessment of a loan’s

credit risk and overall quality

✓ Minimum credit score requirements

✓ Maximum debt-to-income ratio limits

✓ Maximum loan-to-value ratio limits

✓ Elimination of risky products (IOs, pay option

ARMs, no documentation and balloons)

Features innovative tools and

offerings leveraging algorithms to

enhance the origination process

Home Value Explorer ® (HVE)

An automated Freddie Mac tool used to determine values of

properties inside and outside of Freddie Mac.

Automated Collateral Evaluation (ACE)

An offering that eliminates the need for a traditional appraisal for

properties that have valuations validated by HVE.

Asset and Income Modeler (AIM)

An Automated Underwriting System (AUS) solution used to

wirelessly validate borrower assets and income. AIM is the first

and only AUS solution in the industry to also assess self-

employed income.

Freddie Mac | 2019

Performing Loan QC

▪ Regularly perform QC on a random and targeted basis to test the quality of recently purchased loans, including added

focus on key elements of particular interest or concern (e.g., loan attributes or sellers).

▪ Freddie Mac benchmarks every loan we purchase against our valuation model and appraisals are assessed within our

automated system, Loan Collateral Advisor® for instantaneous feedback to the originator.

▪ CRT transactions perform a separate Due Diligence review

Non-Performing Loan QC ▪ Freddie Mac also reviews mortgage loans that default within the first few years after purchase or guarantee.

Seller In-House QC

▪ Each loan seller must have an in-house QC program that has written procedures and operates independently of the

sellers’ origination and underwriting functions.

▪ Freddie Mac reviews, monitors, and provides feedback on sellers’ QC and origination practices, including performing on-

site reviews of its largest sellers.

Quality Control (QC)


40

Freddie Mac performs QC on all purchased loans, including those that are credit enhanced by any of the CRT programs. Losses are

mitigated through a comprehensive QC program across performing and non-performing loans, including third-party QC processes by lenders.

Freddie Mac | 2019

Account Plans▪ Focused on covered National, Regional and Community Servicers, Independent Mortgage Bankers, Specialty Servicers,

Master Servicers and Subservicers.

▪ Sets goals and objectives, establishes agreed-upon action plans and milestones.

File Reviews, Rewards and Remedies

▪ Identifies servicing performance gaps and trends, encourages and rewards quality servicing.

▪ Helps identify and resolve issues and provides consequences for poor data quality and servicing processes.

Servicer Success Scorecard

▪ Covers Master, Interim, Sub and Consolidated servicing modes

▪ Performance evaluation specific to servicer segments (ranked groups), uses synthetics and ranks.

▪ Provides loan level data and analyses.

▪ SHARPSM – Servicer Honors and Rewards Program enables eligible servicing clients to receive annual rewards based on

completion of the Servicer Success Scorecard.

Counterparty Operational Risk Evaluation (CORE)

▪ Identifies SF counterparty operational risk issues and monitors remediation.

▪ Provides assessment of Counterparty’s compliance with Guide Requirements.

▪ Conducts on-site due diligence of Servicers’ preparedness for large MSR transfers.

▪ Works closely with account managers and Single-Family Operations to ensure review scope addresses new/ emerging risks.

Seller/Servicer Management


41

Freddie Mac believes that a well-rounded view of servicing performance supports a broad and in-depth analysis of

both performing and non-performing loans.

2. Loss MitigationCredit Risk Management Framework

Freddie Mac | 2019

Liquidation

Options

Loan

Modification

Options

Payment

Relief

Options

Loss Mitigation Waterfall

Loss Mitigation

1. Forbearance

2. Repayment Plan

3. Deferred

Payment Alternative

4. Flex Modification

5. Standard Short Sale

6. Deed-in-Lieu

1. Forbearance

Relief option that provides a temporary reduction or

suspension of payments to give Borrowers a period of

time to improve their financial situation.

2. Repayment

Plan

Borrowers that have had a short term hardship, and now

have the ability to begin making payments again, but

either do not want or do not require a loan modification

3. Deferred

Payment

Alternative

A relief option for Borrowers with a resolved hardship,

who are 30 or 60 days delinquent, but have recently

made at least 2 consecutive monthly payments (rolling

delinquency). Past due payments are deferred (non-

interest bearing) and will be due at maturity.

4. Flex

Modification

An affordable modification that provides significant

payment relief to eligible borrowers, leverages

requirements of the Freddie Mac Standard and

Streamlined Modifications

5. Standard

Short Sale

Borrowers that wish to gracefully exit the home by selling

the property for less than the total amount necessary to

satisfy the mortgage. Cash or note contribution may be

required in some instances.

6. Standard

Deed-in-Lieu

Borrowers that wish to gracefully exit the home by

voluntarily conveying clear and marketable title of the

property to Freddie Mac in exchange for a discharge of

debt.

Current 30 Days 60 Days 90 Days 180 Days Foreclosure

43

Freddie Mac | 2019

REO Overview

Loss Mitigation

Mission: effectively manage Freddie Mac’s credit losses in a way that maximizes financial recoveries and

supports community stabilization.

44

Credit Loss ManagementImprove Collateral Values

Manage Expenses

Maximize Remedies

Community StabilizationPreserve, Maintain, & Repair

Price Homes At Fair Market Value

Non-Profit / Owner Occupant Priority

Freddie Mac | 2019

REO Business Model & Process

Loss Mitigation

45

REO Support &

Financial Functions

Managed By

Freddie Mac Staff

Freddie Mac staff perform

oversight monitoring, support,

and financial functions.

REO Core Process

Outsourced With

Freddie Mac

Oversight

The outsourcer and their vendors

are required to use Freddie Mac

systems, follow detailed policies &

procedures, and utilize proprietary

methodologies for valuation,

pricing, and repair decisioning.

Freddie Mac utilizes an asset management firm to perform the core REO disposition activities using their vendor network.

Asset Management Firm

(Outsourced)

Listing

Brokers

Freddie Mac: Oversight | Support | Financial Functions

P&M

VendorsGeneral

Contractors

Eviction

Attorneys

Title & Closing

Agents

Freddie Mac | 2019

REO Core Competencies

Loss Mitigation

46

Efficient & Controlled ProcessesMature, efficient, and controlled disposition processes that helped us effectively

manage our REO portfolio during the last financial crisis. Processes are continually

refined as business and market conditions change.

Valuation & Pricing MethodologiesExtensive disposition data and analytics used to develop pricing models and disposition

strategies to maximize collateral recoveries.

Risk ManagementProven financial, liability and reputation risk management practices.

“Good Neighbor Policy”REO homes are properly maintained and priced to protect communities. Nonprofit /

Owner Occupant exclusive purchase opportunities.

Experienced StaffExperienced and tenured staff & management team.

Core Competencies

Efficient &

Controlled

Processes

Valuation &

Pricing

Methodologies

Risk Management

“Good

Neighbor

Policy”

Experienced

Staff

Freddie Mac | 2019

Servicing Guidelines for Disaster Relief

Loss Mitigation

A property located in a county, parish or municipality has been declared by the President of the United States to be

a Major Disaster Area where federal aid in the form of Individual Assistance is being made available (Eligible

Disaster Area).

47

Freddie Mac Disaster Policy goes into effect when:

Servicers must assist borrowers with Freddie Mac-owned mortgages who work or reside in the designated eligible disaster area

Suspend Payments for up to 12 months

Suspend Reportingdelinquencies to credit bureaus

Waive Fees for being late and assessment of new penalties during

forbearance, trial, or repayment plan periods

Disburse Insuranceproceeds

Freddie Mac | 2019

Servicing Disaster Relief Timeline

Loss Mitigation

Disaster Modifications General Modifications

Extend Modification Disaster Relief Modification Flex Modification

Borrower resumes close to contractual payment Borrower resumes contractual payment Targeting a payment reduction of 20% or greater

Advanced escrow and escrow shortage is spread over up to

60 months in a repayment planDelinquencies (including advanced escrow) are capitalized Delinquencies (including advanced escrow) are capitalized

Term is only extended by number of payments missedTerm is extended only enough to achieve equal to, or just less

than, contractual paymentTerm is extended up to 480 months

May provide interest rate relief

Only available for borrowers affected by disaster May result in principal forbearance

48

Disaster strikes90 day forbearance

begins

Servicer establishes

Qualified Right party

Contact (QRPC) to

determine effect of

disaster on homeowner

Servicer works with

borrower to transition

from forbearance into

the appropriate

modification option to

cure the delinquency;

(forbearance can

continue for a maximum

of 12 months)

If borrower was current

or less than 31 days

delinquent at time of the

disaster and the servicer

has established QRPC

three main modifications

are available:

3. Home PossibleCredit Risk Management Framework

Freddie Mac | 2019

Home Possible® Overview

Home Possible

50

Home Possible® offers flexibility to meet a variety of borrowers’ needs.

Borrower Profile

First-time homebuyers, move-up

borrowers, and retirees

Effective July 28, 2019 all HP loans will

have the same income limits of 80%

AMI, regardless of where the mortgage

premise is located

Key Features

Purchase and no cash out refinancing.

Maximum 97 percent LTV/ TLTV/HTLTV. 105

percent TLTV with Affordable Second.®

Sweat equity allowed for the entire amount of

down payment and closing costs.

Mortgage insurance options

Loan Product Advisor or manual underwriting

No reserves required for 1-unit properties for

manually underwritten mortgages.

Maximum credit fee in price of 1.5 percent, with

no credit fee in price on many loans.

Borrower Benefits

Stable monthly payments with fixed-rate

mortgages

Flexible sources of funds for down payment

Reduced mortgage insurance coverage for

LTV ratios greater than 90%

Minimum down payment of 3% allowed.

Freddie Mac | 2019

Home Possible® Overview

Home Possible

51

Feature Home Possible Standard Conventional

Eligible Mortgages15, 20, and 30-year fixed

5/1, 5/5, 7/1 and 10/1 CMT- and LIBOR-indexed

ARMS

15, 20, and 30-year fixed

5/1, 5/5, 7/1 and 10/1 CMT- and LIBOR-indexed

ARMS

Maximum LTV1 Unit: 97%

2-4 Unit: 95%95%

Maximum TLTV105% affordable second

97% secondary financing95%

Occupancy 1 to 4 unit primary residencePrimary residence, second home, or investment

property

Property Type1 to 4 unit: Single-Family, Condos, PUDs,

Manufactured Housing (1-unit primary residences only)

1 to 4 unit: Single-Family, Condos, PUDs,

Manufactured Housing

Other Income Boarder income (1-unit properties only) All income considered

Mortgage InsuranceLender Paid Single Premium MI and Financed Single

Premium MI allowedLender Paid or Borrower Paid

Underwriting MethodLoan Product Advisor® (LPA) or Manual – LPA flags

Home Possible eligible loansLPA or LQA

No Credit Score BorrowersBorrowers with no credit score can be evaluated

through LPA

At least one borrower on the transaction must have a

usable credit score

Income LimitDetermined by LPA;

Non-LPA HP eligibility is determined by the HP Income

and Eligibility Tool

No Income Limits

Geographic Limit No Geographic Limits No Geographic Limits

Mortgage Insurance Coverage Levels

Home Possible

Fixed Rate >20yrs

Non-Home Possible

Fixed Rate >20yrs

Standard Custom* Standard Custom*

>80% & ≤85%

LTV12% 6% 12% 6%

>85% & ≤90%

LTV25% 12% 25% 12%

>90% & ≤95%

LTV25% 16% 30% 16%

>95% & ≤97%

LTV25% 18% 35% 18%

*If custom mortgage insurance is chosen, in addition to all other applicable

delivery fees, the custom mortgage insurance delivery fee applies, including on

Home Possible Mortgages

Collateral Performance


Freddie Mac | 2019

Credit Quality of Single Family Portfolio


53

Serious Delinquencies

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Pre-Crisis Cumulative D90 by Vintage

1999 2000 2001 2002 2003

2004 2005 2006 2007 2008

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Post-Crisis Cumulative D90 by Vintage

2002 2009 2010 2011 2012

2013 2014 2015 2016 2017

Despite falling house prices in their early years, the performance of the 2009 and 2010 vintages are dramatically better than pre-crisis

vintages.

Source: Data included in tables were derived from Freddie Mac’s Single Family Loan Level Dataset (SF LLD) as of February 2019 refresh: Originations: 1999-December 31, 2017. Performance data: 1999 - June 30, 2018, Losses reported for loans

liquidated as of Q12018.

(1) Loans with an LTV between 60% and 97%, Fixed Rate with term between 241-360.

Freddie Mac | 2019

0.10% 0.14%0.26%

0.44%

0.89%

2.57%

3.85%3.89%

2.02%

0.37%0.15%

0.07% 0.02% 0.01% 0.01% 0.00% 0.00% 0.00%0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cu

mu

lati

ve

Ne

t L

os

s

Reference Pool Proxy

DNA Proxy Cohort Performance Example


54

Class M-1 takes 100% loss(1)


Class B-1 takes 100% loss(1)



(1) Assuming no principal payments

Freddie Mac | 2019

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Cumulative Net Loss (bps)15DNA115DNA215DNA316DNA116DNA216DNA316DNA417DNA117DNA217DNA318DNA118DNA218DNA319DNA119DNA2

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

90+ Days Delinquent (% by Current Balance)

90-119 120-179 180+ BK/FC/REO

DNA Performance


55

0

5

10

15

20

25

30

35

Voluntary Prepayment Rate (% by Balance) 13-DN113-DN214-DN114-DN214-DN314-DN415-DN115-DNA115-DNA215-DNA316-DNA116-DNA216-DNA316-DNA417-DNA117-DNA217-DNA318-DNA118-DNA218-DNA319-DNA119-DNA2

Source: Freddie Mac monthly remittance data. All data as of August 2019

Freddie Mac | 2019

DNA Third-Party Base Expected Default and Loss


56

28 19 20 23 23 18 18 25 16 1223 17

91

75

153

80 82

123

67

82

108

41

78 81

0

25

50

75

100

125

150

175

200

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

18-DNA3 19-DNA1 19-DNA2 19-DNA3

Collateral Expected Default and Loss at Issuance to Maturity

Cumulative Loss Cumulative Default B2 Attachment B1 Attachment

**Disclaimer: The estimates shown above are for informational purposes only and delivered solely as reference material with respect to Freddie Mac. There is no assurance that the actual losses of the Reference Obligations will mirror the estimates shown above. The information

contained in these materials may be based on assumptions regarding market conditions and other matters that may be of a proprietary nature to the model owners and unknown to Freddie Mac. The model owners have consented to Freddie Mac’s use and presentation of the

estimates shown here, but do not make any representations that the information is accurate or complete. Neither Freddie Mac, nor the model owners, take responsibility for or make representations regarding the reasonableness of the underlying assumptions that form the basis of

the estimates shown here or the likelihood that the estimates shown will coincide with actual market conditions or events and the estimates should not be relied upon for such purposes.

Freddie Mac | 2019

DNA Outstanding Balances & Loss Estimates


57

The chart illustrates the

aggregate portfolio for all

low LTV (>60-80%)

STACR transactions

placed up to 2019-DNA2

since their inception, along

with projected losses

modeled from Bloomberg

as of June 2019

The outstanding class

balances on the

transactions have

decreased over time as

borrower payments have

reduced the mezzanine

tranches

(1) Balances include not issued retained reference tranches.

(2) Source of Base Loss: Bloomberg

(3) As of June 2019

$0

$300,000,000

$600,000,000

$900,000,000

$1,200,000,000

$1,500,000,000

$1,800,000,000

$2,100,000,000

STACR Portfolio - Outstanding Balances & Bloomberg Projected Base Loss

Initial Aggregate Balance

M-1 &M-1H Outstanding Balance

M-2 & M-2H Outstanding Balance


B & BH Outstanding Balance

B-1 & B-1H Outstanding Balance


B-3H Outstanding Balance

Bloomberg Projected Base Loss

Freddie Mac | 2019

0.3%0.5%

0.9%

1.5%

3.2%

4.2% 4.2%

2.3%

0.9%

0.6%

0.3%0.1% 0.1% 0.1% 0.0% 0.0% 0.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cu

mu

lati

ve

Ne

t L

os

s

Reference Pool Proxy

HQA Proxy Cohort Performance Example


58






(1) Assuming no principal payments

Freddie Mac | 2019

0.0%0.1%0.2%0.3%0.4%0.5%0.6%0.7%0.8%0.9%1.0%1.1%

90+ Days Delinquent (% by Current Balance)

90-119 days 120-179 days 180+ days BK/ REO/ FCL

HQA Performance


59

Source: Freddie Mac monthly remittance data. All data as of August 2019

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47

Cumulative Net Loss (bps) 15-HQA1

15-HQA2

16-HQA1

16-HQA2

16-HQA3

16-HQA4

17-HQA1

17-HQA2

17-HQA3

18-HQA1

18-HQA2

19-HQA1

19-HQA2

0

5

10

15

20

25

30

35

Voluntary Prepayment Rate (% by Balance)

15-HQ1

15-HQ2

15-HQA1

15-HQA2

16-HQA1

16-HQA2

16-HQA3

16-HQA4

17-HQA1

17-HQA2

17-HQA3

18-HQA1

18-HQA2

19-HQA1

19-HQA2

Freddie Mac | 2019

HQA Third-Party Base Expected Default and Loss


60

20 19 15 19 16 19 18 22 21 15 27 227

22 17

166

150

211

164

139

239

147156

231

127

170

208

68

149 154

0

25

50

75

100

125

150

175

200

225

250

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

BAML CreditSuisse

JPMorgan

18-HQA1 18-HQA2 19-HQA1 19-HQA2 19-HQA3

Collateral Expected Default and Loss (bps) at Issuance to Maturity

Cumulative Loss Cumulative Default B2 Attachment B1 Attachment

**Disclaimer: The estimates shown above are for informational purposes only and delivered solely as reference material with respect to Freddie Mac. There is no assurance that the actual losses of the Reference Obligations will mirror the estimates shown above. The information

contained in these materials may be based on assumptions regarding market conditions and other matters that may be of a proprietary nature to the model owners and unknown to Freddie Mac. The model owners have consented to Freddie Mac’s use and presentation of the

estimates shown here, but do not make any representations that the information is accurate or complete. Neither Freddie Mac, nor the model owners, take responsibility for or make representations regarding the reasonableness of the underlying assumptions that form the basis of

the estimates shown here or the likelihood that the estimates shown will coincide with actual market conditions or events and the estimates should not be relied upon for such purposes.

Freddie Mac | 2019

HQA Outstanding Balances & Loss Estimates


61

The chart illustrates the

aggregate portfolio for all high

LTV (>80-97%) STACR

transactions placed up to

2018-HQA3 since their

inception, along with projected

losses modeled from

Bloomberg as of September

2019

The outstanding class

balances on high LTV (>80-

97%) STACR transactions

have decreased over time as

borrower payments have

reduced the mezzanine

tranches

(1) Balances include not issued retained reference tranches.

(2) Source of Base Loss: Bloomberg

(3) As of September 2019

$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

STACR Portfolio - Outstanding Balances & Bloomberg Projected Base Loss

Initial Aggregate Balance




B & BH Outstanding Balance



B-3H Outstanding Balance

Bloomberg Projected Base Loss

Freddie Mac | 2019

47 47 49 51 53 53 54

47

55 55 56 58 59 59 60 62 6366 67 68 71 73

75 74 75 75 76 76 76 74 76 75 75 76 75 75 75 75 75 76 76 76 76 76

Original LTV vs. Estimated LTV

(DN Series)

Estimated LTV Original LTV

65 61

65 67 61

68 68 69 71 71 71 74 75 76 80 82

85 89

92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 93 93 93

Original LTV vs. Estimated LTV

(HQ Series)

Estimated LTV Original LTV

Estimated LTV Numbers


62

*Same reference pool. **Weighted average life was 28 months at issuance, typical transaction is between 9-12 months.

On-going positive house price

appreciation allows borrowers

to build equity; thereby,

reducing loan-to-value ratio and

credit risk.

▪ Home Value Explorer® (HVE®) is a

Freddie Mac AVM tool that

generates an estimate of property

value

▪ HVE provides extensive coverage

of all 50 states and more than

3,100 counties with its database of

~100 million property records.

▪ For more information on HVE visit:

www.freddiemac.com/hve/hve* *

All data as of August 2019

Freddie Mac | 2019

Delinquency & Transition Matrix as shown in Freddie Mac’s Clarity investor portal


63

Access Clarity now at: https://clarity.freddiemac.com/

For Illustrative Purposes Only Data as of 9/9/2019

https://clarity.freddiemac.com/

U.S. Housing Market Overview


Freddie Mac | 2019

(1) Based on the company’s purchases of loans and issuances of mortgage-related securities. For the periods presented, a borrower may be counted more than once if the company purchased more than one loan (purchase or refinance mortgage) relating to the same borrower.

(2) Consists of both home retention actions and foreclosure alternatives.

(3) * Categories are not mutually exclusive, and a borrower in one category may also be included in another category in the same or another period. For example, a borrower helped through a home retention action in one period may subsequently lose his or her home through a

foreclosure alternative in a later period.

Freddie Mac Housing Market Support


65

Single-family loan workouts2

Th

ou

san

ds

Th

ou

san

ds

Families helped to own or rent a home1

739 820 866

343

745828

884

445

937 663 442

257

24212311

2192

1045

2016 2017 2018 2019 YTD*

Multifamily rental units Single-Family Purchase borrowers

Single-Family Refinance borrowers

43 45

60

17

12 10

11

4

515

16

4

9

5

3

1

69

75

90

26

2016 2017 2018 2019 YTD*

Short sales and deed-in-lieu of foreclosure transactions* Forbearance agreements*

Repayment plans* Loan modifications*

YTD* As of June 30, 2019

Freddie Mac | 2019

0.6 0.8 0.8 0.8 1.0 1.1 1.1 1.2 1.2

1.5 1.1

0.50.9

1.0 0.70.5

0.90.6

2.11.9

1.3

1.8

2.11.8

1.6

2.0

1.8

2012 2013 2014 2015 2016 2017 2018F 2019F 2020F

0

5

10

15

20

25

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

$10.4

$15.8

$26.1

Home Equity

Single-family Mortgage Debt Outstanding

Source: Freddie Mac August 2019 Economic and Housing Research Outlook. Includes only 1st lien loans

Refi

Purchase

(1) Value of U.S. housing stock includes homes with and without underlying mortgages. U.S. home equity is the difference between the value of the U.S.

housing stock and the amount of U.S. single-family mortgage debt outstanding.

Source: US Census Bureau, Freddie Mac July 2019 Economic and Housing Research Outlook.

Note: Dashed line indicates forecasted data

Size of the US Residential Mortgage Market ($ Trillions)

Source: Federal Reserve Flow of Funds, Inside Mortgage Finance, Fannie Mae, Freddie Mac, eMBS and Urban Institute. Last updated

June 2019. Note: Unsecuritized first liens includes loans held by commercial banks, GSEs, savings intuitions, and credit unions.

U.S. Housing Market Size and Sales


66

Source: Federal Reserve Board’s Flow of Funds Accounts, Table B. 101. Data as of March 31, 2019.

Annual Single-family mortgage originations ($ Trillions)

Home Sales (Existing + New)

Total value of U.S. real estate held by households1 ($ Trillions)

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

Mill

ion

Units

Freddie Mac | 2019

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015 2016 2018

For-Rent Inventory (Millions)

For-Sale Inventory (Millions)

62

63

64

65

66

67

68

69

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

110

120

130

140

150

160

170

180

190

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Negative values reflect undersupply. The under/oversupply of vacant housing was estimated based on the average vacancy rate from 1Q

1994 to 4Q 2003. Source: Freddie Mac calculations using US Census Bureau data. Data as of June 30, 2018.

Source: US Census Bureau Note: Data as of July 25, 2018.

Homeownership rates are low despite

low unemployment levels:

• Many more millennial renters

• High student debt loan burden

• Limited access to credit

• Affordability

• Prices increasing quicker than wages

64.1%

Cumulative increase of 17.8% since June 2006 (NSA Series)

2019 Q2 Not Seasonally Adjusted

(NSA) Index Growth: (2.68%)

2019 Q2 Seasonally Adjusted (SA)

Index Growth: (0.81%)

Freddie Mac House

Price Index

(December

2000=100)

Based on Freddie Mac’s single-family credit guarantee portfolio. Quarterly growth rates are calculated as a 3-month change based on the final

month of each quarter. Historical growth rates change as new data becomes available. Values for the most recent periods typically see the

largest changes. Cumulative increase, based on the NSA series, calculated as the percent change from June 2006 to June 2019.

Source: Freddie Mac.

National Home Prices

Note: Serious delinquency is defined as 90 days or more past due or in the foreclosure process. Not seasonally adjusted.

Source: “Housing Finance At a Glance: A Monthly Chartbook”, Housing Finance Policy Center, February 2019; Fannie

Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.

Serious Delinquency Rates Single-Family-Loans

Housing Market Trends


67

Vacant Housing Over/Undersupply

-0.9

0%

2%

4%

6%

8%

10%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fannie Freddie FHA VA

3.76%

1.96%

0.76%0.69%

Homeownership Rate %

Freddie Mac | 2019

Home Price Increase Outpaces Income


68

Source: http://www.freddiemac.com/singlefamily/comparing.html

House prices in the U.S.

have increased at a rapid

pace over the last few years,

growing about twice as fast

as the long-run average;

household income has not

kept pace creating an

affordability challenge

There are differences across MSAs in terms of house prices and incomes; using

an internal Freddie Mac model we compared the 50 largest MSAs. We

estimated a long-term fundamental value and compared it to the Freddie Mac

House Price Index (FMHPI), below are the MSAs where the FMHPI is 20%

higher than its long-term fundamental value for at least two consecutive quarters:

01. Austin, TX 04. Houston, TX 07. Nashville, TN

02. Dallas, TX 05. Las Vegas, NV 08. San Antonio, TX

03. Denver, CO 06. Miami, FL 09. Tampa, FL

Freddie Mac | 2019

Economic and Housing Market Outlook


69

Major Economic Indicators2018 2019 2020

Indicator Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 2020

Real GDP Growth (%) 2.60 3.50 2.90 1.10 3.10 2.10 1.80 1.90 1.90 1.80 1.70 1.70 2.80 2.50 2.22 1.77

Consumer Prices (%)a 3.20 2.10 2.00 1.50 0.90 2.90 2.40 2.30 2.20 2.10 2.00 1.90 2.10 2.20 2.12 2.05

Unemployment Rate (%)b 4.10 3.90 3.80 3.80 3.90 3.60 3.70 3.70 3.70 3.80 3.80 3.90 4.38 3.90 3.73 3.80

30-Year Fixed Mtg. Rate (%)b 4.30 4.54 4.57 4.80 4.40 4.01 3.60 3.60 3.60 3.60 3.70 3.80 4.00 4.55 3.90 3.68

5/1 Hybrid Treas. Indexed ARM Rate (%)b 3.60 3.76 3.88 4.10 3.90 3.63 3.40 3.40 3.40 3.40 3.50 3.60 3.20 3.84 3.58 3.48

10-Year Const. Mat. Treas. Rate (%)b 2.80 2.90 2.90 3.00 2.70 2.30 1.80 1.80 1.80 1.80 1.80 1.80 2.33 2.90 2.15 1.80

1-Year Const. Mat. Treas. Rate (%)b 1.90 2.30 2.50 2.70 2.50 2.30 1.80 1.80 1.70 1.70 1.70 1.70 1.23 2.35 2.10 1.70

Federal Funds Effective Rate (%) b. 1.45 1.74 1.92 2.20 2.40 2.40 2.13 2.13 2.00 2.00 1.90 1.90 1.00 1.83 2.27 1.95

Housing and Mortgage Markets

Housing Startsc 1.32 1.26 1.23 1.19 1.21 1.26 1.26 1.27 1.27 1.28 1.28 1.29 1.20 1.25 1.25 1.28

Total Home Sales (Incl. Condos)d 6.15 6.04 5.91 5.72 5.88 5.92 5.96 6.00 6.03 6.04 6.03 6.05 6.12 5.96 5.94 6.04

FMHPI House Price Appreciation (%)e 1.95 0.98 1.04 0.81 0.99 0.80 0.77 0.77 0.77 0.77 0.59 0.50 7.20 4.87 3.37 2.64

1-4 Family Mortgage Originationsf

Conventional $289 $350 $341 $302 $280 $445 $487 $417 $361 $382 $378 $319 $1,400 $1,282 $1,630 $1,440

FHA & VA $88 $90 $94 $82 $75 $100 $130 $111 $96 $101 $101 $85 $410 $354 $415 $383

Total $377 $440 $435 $384 $355 $545 $617 $528 $457 $483 $479 $404 $1,810 $1,636 $2,045 $1,823

Refinancing Share - Originations (%)g 40 29 25 26 36 38 49 45 42 36 29 25 37 30 43 33

Residential Mortgage Debt (%)h 2.9 3.1 3.0 2.1 2.3 3.0 2.9 2.9 2.9 2.9 2.8 2.8 3.0 2.8 2.9 2.9

Note: Quarterly and annual forecasts (or estimates) are shown in shaded areas; totals may not add due to rounding; annual forecast data are averages of quarterly values, except GDP and CPI which are reported as Q4 over Q4.

a. Calculations based on quarterly averages of monthly index levels; index levels based on the seasonally-adjusted, all-urban consumer price index; reported as an annual rate.

b. Quarterly average of monthly unemployment rates (seasonally-adjusted); Quarterly average of monthly interest rates (not seasonally-adjusted); reported as an annual rate.

c. Millions of housing units; quarterly averages of monthly, seasonally-adjusted levels (reported at an annual rate).

d. Millions of housing units; total sales are the sum of new and existing detached single-family homes; quarterly averages of monthly, seasonally-adjusted levels (reported at an annual rate).

e. Quarterly growth rate of Freddie Mac's House Price Index; seasonally-adjusted; annual rates for yearly data.

f. Billions of dollars (not seasonally-adjusted). Includes only 1st lien mortgage originations.

g. Home Mortgage Disclosure Act for 1st lien single-family mortgages (not seasonally-adjusted); Annual share is dollar-weighted average of quarterly shares.

h. Federal Reserve Board; growth rate of single-family residential mortgage debt (households and nonprofit organizations; home mortgages; liability, seasonally-adjusted), reported as annual rate.

Prepared by the Economic & Housing Research group; Send comments and questions to [email protected].

http://www.freddiemac.com/research/forecast/20190828_low_mortgage_rates_strong_labor_markets.page?

ResourcesSingle-Family Credit Risk Transfer Handbook

Freddie Mac | 2019

Data Transparency

Resources

71

Freddie Mac has made available the Single-Family Loan-Level Dataset as part of a larger effort to increase transparency; The dataset

includes loan-level origination and monthly loan performance data on over 26.6 million loans.

http://www.freddiemac.com/research/datasets/sf_loanlevel_dataset.page

Additionally, Freddie Mac releases a STACR Loan-Level Dataset for all deals on a monthly basis.

Access the data files, disclosure file layout, and glossary here:

https://crt.freddiemac.com/offerings/stacr.aspx#overview-details

In 2019, CLARITY launched brining further insight into Freddie Mac’s CRT program. Origination and Performance metrics are available

with new enhancements scheduled.


Additional information about Freddie Mac’s Single-Family CRT offerings including: issuance calendars, historical performance

presentations, NAIC designations and more can be found at:

https://crt.freddiemac.com/

http://www.freddiemac.com/research/datasets/sf_loanlevel_dataset.page

https://crt.freddiemac.com/offerings/stacr.aspx#overview-details


https://crt.freddiemac.com/

Freddie Mac | 2019

Market Support Tools

Resources

72

Freddie Mac’s credit risk offerings have deep market support. Analyze and Model transactions using these tools:

Freddie Mac

CLARITY

Credit Suisse

Locus Tool

Milliman

M-Pire

J.P. Morgan

Morgan Markets

RiskSpan

Edge

LSEG

Yield Book

Bloomberg

Terminal/BTM Model

CoreLogic

Property Data Leader

Freddie Mac | 2019

Clarity

Resources

73

Freddie Mac’s data intelligence portal for investors

Clarity’s preset configurations offer quick, clear

views into Freddie Mac CRT data and make it

easy for any user to get valuable insights

quickly. Easily export and download charts to

your desktop – it’s that simple

Clarity’s data visualizations enhance

understanding with crisp, clear information

design that makes it easy to spot trends and

zero in on key figures.

The Clarity you see today is just the beginning.

We’re already working on initiatives to bring

you more features, more functionality and more

flexibility to get exactly the analysis and insights

you need to stay on top of a dynamic market.

Advanced Filters For Quick Performance Analysis

Data Visualizations Bring Raw Numbers To Life

Up Next: Even More Clarity

Clear. Concise. Immediate. Illuminating.

Access Clarity Now


https://crt.freddiemac.com/clarity.aspx

Freddie Mac | 2019

Disaster Relief Servicing Resources

Resources

74

Freddie Mac Disaster Relief Reference Guide

http://www.freddiemac.com/learn/pdfs/service/disaster_mod.pdf

Natural Disaster Relief web page:

http://www.freddiemac.com/singlefamily/service/natural_disasters.html

Managing Hazard Insurance Losses reference:

http://www.freddiemac.com/learn/pdfs/service/mhil.pdf

Guide Chapter 8404

https://guide.freddiemac.com/app/guide/chapter/8404

Seller/Servicer Guide

https://guide.freddiemac.com/app/guide/

http://www.freddiemac.com/learn/pdfs/service/disaster_mod.pdf

http://www.freddiemac.com/singlefamily/service/natural_disasters.html

http://www.freddiemac.com/learn/pdfs/service/mhil.pdf

https://guide.freddiemac.com/app/guide/chapter/8404

https://guide.freddiemac.com/app/guide/

AppendixSingle-Family Credit Risk Transfer Handbook

Freddie Mac | 2019

Qualified Mortgage

Appendix

76

In 2014, new CFPB rules went into effect to provide homeowners and consumers shopping for a home mortgage with new rights and

greater protection from harmful practices. Now, nearly every mortgage a lender makes must now be evaluated based on the borrower’s

ability to repay. These new rules defined a new class of mortgages called “Qualified Mortgages” or “QM.”

QM Common Rules:

▪ A loan a borrower should be able to repay – lenders must assess a borrower’s ability to repay, in general the borrower must have a DTI of 43% or less including mortgage payments.

▪ Safer and easier to understand – no risky features like negative amortization or interest-only payments and terms of 30 years or less

▪ Fairer deal – limit the points and fees lenders can charge when they want to make a qualified mortgage to 3 percent

“GSE Patch”:

▪ If a loan made to a borrower is eligible for purchase by one of the GSEs or insured by FHA, VA, or USDA the loan may have a DTI higher than 43% with no maximum.

▪ This option exists until it expires on January 10, 2021 or when the GSEs exit conservatorship whichever occurs first; the FHA, VA, and USDA rules are permanent.

▪ Currently, there is no option for higher DTI loans past 2021 for the GSEs, but the CFPB is currently considering options

Transaction Considerations

Appendix

Freddie Mac | 2019

Enhanced Relief Refinance


78

Enhanced Relief Refinance (ERR) is Freddie Mac’s high LTV ratio refinance program which was developed at the direction of the FHFA

ERR provides refinance opportunities to borrowers with existing Freddie Mac guaranteed mortgage loans who are making their mortgage

payments on time but whose LTV ratio for a new mortgage exceeds the maximum allowed for standard refinance products under our Guide

ERR substitution in CRT pools is subject to CFTC approval; after approval, loans in the reference pool that refinance through ERR will

replace the original loans in the reference pool.

If Freddie Mac does not get CFTC approval then the loans in this pool that refinance through ERR will be treated as a prepayment

Replacement loans refinanced through ERR will not constitute a Modification Event

Eligibility limited to:

▪ Loans owned or securitized by Freddie Mac that were funded on or after October 1, 2017

▪ Have been originated at least 15 months prior to refinance date

▪ No 30-day delinquency in the past 6 months and no more than one 30-day delinquency in the preceding 12 months

Freddie Mac | 2019

Who can Invest


79

STACR: Qualified Institutional Buyer

ACIS: Reinsurers must be an approved counterparty with streamlined or full approval

▪ Enables greater levels of participation and potential for

lower collateral.

▪ Meet with reinsurer senior management.

▪ Assess reinsurer risk management framework and

management of mortgage credit risk.

▪ Analyze public and non-public information to evaluate credit

quality, financial strength, capital adequacy; benchmark

against peers.

▪ Enables reinsurer to participate at limited levels, establish

familiarity with ACIS transactions and mortgage credit.

▪ Approval based on review of publicly available information.

▪ Does not guarantee full approval.

▪ Includes market-based partial collateralization; collateral

levels driven by ratings and tranche participation.

Streamlined Full Approval

Freddie Mac | 2019

Michael S. ReynoldsVice President, CRT

[email protected]

(571) 382-4852

Christian ValenciaDirector, STACR

[email protected]

(571) 382-3727

Jeffrey ShueDirector, ACIS

[email protected]

(571) 382-3023

Charlotte Gladwin Director, STACR

[email protected]

(571) 382-3732

Michael MuraiManager, STACR

[email protected]

(571) 382-5702

Sonya ShethManager, Fixed Income Marketing

[email protected]

(571) 382-4376

Freddie Mac Key Contacts


80

Freddie Mac | 2019

Safe Harbor Statements


Freddie Mac obligationsFreddie Mac’s securities are obligations of Freddie Mac only. The securities, including any

interest or return of discount on the securities, are not guaranteed by and are not debts or

obligations of the United States or any federal agency or instrumentality other than Freddie

Mac.

No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation

for, certain Freddie Mac securities, including offering circulars and related supplements and

agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions

or to certain persons. This information is provided for your general information only, is current

only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to

buy securities. The information does not constitute a sufficient basis for making a decision with

respect to the purchase or sale of any security. All information regarding or relating to Freddie

Mac securities is qualified in its entirety by the relevant offering circular and any related

supplements. Investors should review the relevant offering circular and any related

supplements before making a decision with respect to the purchase or sale of any security. In

addition, before purchasing any security, please consult your legal and financial advisors for

information about and analysis of the security, its risks and its suitability as an investment in

your particular circumstances.

Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include

statements pertaining to the conservatorship, the company’s current expectations and

objectives for its Single-family Guarantee, Multifamily and Capital Markets segments, its efforts

to assist the housing market, liquidity and capital management, economic and market

conditions and trends, market share, the effect of legislative and regulatory developments and

new accounting guidance, credit quality of loans the company owns or guarantees, the costs

and benefits of the company’s credit risk transfer transactions, and results of operations and

financial condition on a GAAP, Segment Earnings, non-GAAP and fair value basis. Forward-

looking statements involve known and unknown risks and uncertainties, some of which are

beyond the company’s control. Management’s expectations for the company’s future

necessarily involve a number of assumptions, judgments and estimates, and various factors,

including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by

the U.S. government (including FHFA, Treasury and Congress), and the impacts of legislation

or regulations and new or amended accounting guidance, could cause actual results to differ

materially from these expectations. These assumptions, judgments, estimates and factors are

discussed in the company’s Annual Report on Form 10-K for the year ended December 31,

2018, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, which are available

on the Investor Relations page of the company’s website at www.freddiemac.com/investors

and the SEC’s website at www.sec.gov. The company undertakes no obligation to update

forward-looking statements it makes to reflect events or circumstances occurring after the date

of this presentation.

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Freddie Mac | 2019

Disclaimer


Notice to all Investors:

This presentation (“Presentation”) is not an offer to sell any Freddie Mac securities. Offers for any given security are

made only through applicable offering circulars and any related supplements, which incorporate Freddie Mac's

Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 14, 2019, and

all documents that Freddie Mac files with the SEC pursuant to Section 13(a), 13(c) or 14 of the Exchange Act,

excluding any information "furnished" to the SEC on Form 8-K. Content in this Presentation is not reflective of

current markets/spreads and is not indicative of any future Freddie Mac offerings. Please use this Presentation for

informational purposes only.

Notice to United Kingdom Investors:

This Presentation is only being distributed to and is directed at: (a) investment professionals falling within Article 19

of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "FPO"); (b) high net worth

entities falling within Article 49 of the FPO; and (c) other persons in respect of whom exemptions under the FPO are

available. The investments to which this Presentation relates are available only to, and any agreement to acquire

such investments, will be made only with, such persons. Any other person should not act or rely on this

Presentation or any of its contents.

This Presentation is not intended to be an offer of transferable securities to the public in the United Kingdom or any

European Union jurisdiction, in accordance with the Prospectus Directive (2003/71/EC, as amended). In any event,

this Presentation is made available only in circumstances in which a prospectus requirement under such Directive

does not apply, including but not limited to the distribution of this Presentation to qualified investors only.

Notice to Canadian Investors:

This Presentation is confidential and may not be reproduced or transferred, in whole or in part, to any other party

that is not an employee, officer, director, or authorized agent of the recipient without the express written consent of

Freddie Mac. Each person accepting these materials agrees to return them promptly upon request.

The material provided herein is for informational purposes only and delivered solely as reference material with

respect to Freddie Mac. The Presentation does not constitute an offer to sell or a solicitation of an offer to buy any

securities of Freddie Mac. Any offering of securities of Freddie Mac will occur only in accordance with the terms

and conditions set forth in an offering circular (“Offering Circular”). Investors are strongly urged to carefully review

the Offering Circular (including the risk factors described therein) and to discuss any prospective investment in

Freddie Mac with their legal and tax advisers in order to make an independent determination of the suitability and

consequences of an investment.

No person has been authorized to give any information or to make any representation, warranty, statement or

assurance not contained in the Offering Circular and, if given or made, such other information or representation,

warranty, statement or assurance must not be relied upon.

Prospective investors should inform themselves and take appropriate advice as to any applicable legal

requirements and any applicable taxation and exchange control regulations in the countries of their citizenship,

residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or

disposal of any securities of Freddie Mac.

Targets shown in this Presentation are objectives and should not be construed as providing any assurance or

guarantee as to the results that may be realized in the future from investment in any asset or asset class described

in the Presentation. Please be advised that any targets shown in the Presentation are subject to change at any

time and are current as of the date of this Presentation only. In addition, the information contained herein includes

observations and/or assumptions and involves significant elements of subjective judgment and analysis. No

representations are made as to the accuracy of such observations and assumptions and there can be no

assurances that actual events will not differ materially from those assumed. In the event any of the assumptions

used in the Presentation do not prove to be true, results are likely to vary substantially from those discussed therein.

Notice to Spain Investors:

No action has been or will be taken by Freddie Mac that would permit a public offering of the STACR securities in

Spain. Neither the STACR securities nor the offering have been or will be registered or approved by the Spanish

Securities Market Commission (Comisión Nacional del Mercado de Valores) and, therefore, no prospectus has

been or will be registered or approved by the CNMV for the purposes of this offering.

A prospective investor in securities of Freddie Mac must conduct its own independent review and due diligence to

make its own assessment of the merits and risks of making an investment in, perform its own legal, accounting and

tax analysis and conclude that the investment in the securities of Freddie Mac (i) is fully consistent with the

investor’s financial requirements and financial condition, investment objectives and risk tolerance; (ii) complies and

is fully consistent with all investment policies, guidelines and restrictions applicable to the investor; and (iii) is a fit,

proper and suitable investment for the investor.

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