freddie mac Investor Presentation – Freddie Mac Update

68
Freddie Mac Update January 2009

Transcript of freddie mac Investor Presentation – Freddie Mac Update

Page 1: freddie mac Investor Presentation – Freddie Mac Update

Freddie Mac Update

January 2009

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Table of Contents

48Mortgage FundingVI

2

10

24

33

42

Freddie Mac Overview

U.S. Housing Market

Credit Guarantee Business

Investment Management Business

Global Debt Funding Program

I

II

III

IV

V

PageSection

For more information about Freddie Mac and its business, please see the company’s filings with the Securities and Exchange Commission, including the company’s Registration Statement on Form 10, dated July 18, 2008, which are available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the Securities and Exchange Commission’s Web site at www.sec.gov.

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Freddie Mac Overview

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Congress created Freddie Mac to provide stability, liquidity, and affordability to the U.S. residential mortgage market

“A primary purpose is to provide stability in the secondary market for home mortgages including mortgages securing housing for low and moderate income families. This can be accomplished through both portfolio purchasing and selling activities, as well as through the securitization of home mortgages.”1

U.S. ResidentialMortgage Market

MortgageInvestments

MortgageSecuritization

1House of Representatives report on FIRREA, No. 54, 101st Congress, 1st Session, Part 3 at 2 (1989).

Freddie Mac

Global Capital Markets

Mortgage-backedSecurities

Debt Securities

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Freddie Mac is a central part of the U.S. housing market

$ Trillions U.S. Residential Mortgage Debt Outstanding

2007 $ TrillionsFRE/FNM Total Portfolio 5.0FRE/FNM Eligible 10.4Total US Residential Mortgages 12.0

Sources: Freddie Mac Total Portfolio: Monthly Volume Summary, January 2008; Fannie Mae Total Portfolio: Monthly Summary, January 2008, “Book of Business”; Total US Residential MDO: Federal Reserve Board’s Flow of Funds Accounts, December 11, 2008. The MDO forecast for 2008 through 2011 is based on the December 2008 forecast of Freddie Mac’s Chief Economist. Forecasted figures for 2012 through 2015 are from the Homeownership Alliance, based on an 8.25% annual growth rate, and assume a constant FHA & VA share of MDO; FRE/FNM Eligible MDO: Nets out an assumed 15% jumbo share of single-family conventional MDO.

$19.7

$13.3$12.4$12.2$12.0$11.2

$10.1

$5.5

$3.7$2.9

0

5

10

15

20

25

1990 1995 2000 2005 2006 2007 2008Est.

2009Est.

2010Est.

2015Est.

FRE/FNM Total Portfolio Total U.S. Residential Mortgages FRE/FNM Eligible

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5

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2002 2003 2004 2005 2006 2007 2008 YTD

Outstanding Guaranteed PCs and Structured SecuritiesRetained Portfolio (PCs & Structured Securities)Retained Portfolio (Non-Freddie Mac Mortgage-Related Securities & Mortgage Loans)

$1,317$1,415

$1,506$1,685

$1,827

$2,103 $2,200

1 Includes PCs and Structured Securities Freddie Mac held in connection with PC market-making and support activities accomplished through the Securities Sales & Trading Group business unit and the Money Manager program. These programs ceased in the fourth quarter of 2004.

Source: Data as of period end. Data for 2002-2004 is based on Freddie Mac’s Information Statements dated September 24, 2004 and June 14, 2005. Data for 2005-2007 is based on Freddie Mac’s Registration Statement on Form 10 dated July 18, 2008. Data for 2008 is based on Freddie Mac’s November 2008 Monthly Volume Summary. Figures for 2008 are subject to change.

UPB$ Billions

Total mortgage portfolio

Our credit guarantee business has accounted for most of our growth

$1,827

$805

1 1

$1,395

$432

$373

1

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Housing and Economic Recovery Act of 2008

The Housing and Economic Recovery Act of 2008 was signed into law by President Bush on July 30, 2008

» The Act is a comprehensive housing stimulus package containing GSE reform, FHA modernization, and foreclosure prevention measures, among other provisions

» The Act consolidates the regulation of Freddie Mac, Fannie Mae, and the Federal Home Loan Banks into a single new regulator called the Federal Housing Finance Agency (FHFA)

Implementation of many provisions of the new law will occur over time through the public rulemaking process

The Act requires FHFA to consult with the Federal Reserve with respect to the risk posed to the financial system before issuing any regulations, guidelines, and orders regarding safe and sound operations, prudential management and operations standards, capital requirements, and portfolio standards

» This consultative requirement expires on December 31, 2009

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Key provisions of the Act

Under the Act, FHFA has authority to: » Assess our safety and soundness» Regulate our portfolio investments » Change our minimum and risk-based capital levels » Approve new products before they are initially offered

In addition, the Act:» Allows increases in GSE loan limits based on changes in a new housing price index

established by FHFA, beginning January 1, 2009 • In high-cost areas, increases the limits to the lesser of 115% of the median home

price or 150% of the limit, currently $625,500 for a 1-unit single-family home» Establishes a new affordable housing regime» Requires the GSEs to set aside and transfer, in each fiscal year, an amount equal to 4.2

basis points of the unpaid principal balance of total new business purchases to two new housing funds

Provides Treasury authority to purchase GSE obligations and securities, under certain conditions, until December 31, 2009

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Conservatorship

The Director of the Federal Housing Finance Agency (FHFA) has placed Freddie Mac and Fannie Mae in conservatorship in order to restore the balance between the GSEs’ safety and soundness and mission

» Treasury Secretary Paulson stated that the primary mission of the GSEs is to proactively work to increase the availability of mortgage finance, including consideration of mortgage affordability

FHFA is the Conservator for both GSEs» The Conservator assumes all power of the Boards, management and shareholders» FHFA has appointed a new CEO to lead each GSE» FHFA has stated that the GSEs will continue business as usual during the

conservatorship

FHFA has indicated that the conservatorship goals include:» Restoring confidence in the GSEs» Enhancing the GSEs’ capacity to fulfill their missions» Mitigating systemic risk that contributes to market instability

FHFA has indicated that a GSE’s conservatorship will end when the Director determines that it has been restored to a safe and solvent condition

On October 9, 2008, FHFA announced that has suspended the capital classification of both GSEs during the conservatorship, in light of the United States Treasury Senior Preferred Stock Purchase Agreement

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Treasury Actions

Treasury has announced additional actions:

» Entering into a Senior Preferred Stock Purchase Agreement with each GSE• Each Agreement provides a commitment for a maximum amount funded of $100

billion for the GSE• As consideration, each GSE has issued to Treasury senior preferred stock and a

warrant to acquire 79.9% of the GSE’s common stock

» Creating a GSE Credit Facility• Short-term facility is available to Freddie Mac, Fannie Mae and the Federal Home

Loan Banks• Funding under the facility would be provided directly by Treasury to Freddie Mac in

exchange for eligible collateral consisting of guaranteed agency MBS• Facility available until December 31, 2009

» Announcing an MBS Purchase Program• Treasury will purchase GSE MBS in the open market• Program will begin in September 2008 and expire on December 31, 2009• Scale of program will be based on developments in the capital markets and housing

markets

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U.S. Housing Market

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0

5

10

15

20

25

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

$ Trillions

Single-family mortgage debt is protected in relation to total value of housing stock

1 Value of Housing Stock: Federal Reserve Board’s Flow of Funds Accounts, December 11, 2008, Table B.100 (line #50). Note this figure includes homes with and without underlying mortgages. Home equity is the difference between the value of the housing stock and the amount of single-family debt.

2 Single-family Mortgage Debt Outstanding: Federal Reserve Board’s Flow of Funds Accounts, December 11, 2008, Table B.100 (line #33).

Source: Federal Reserve Board’s Flow of Funds Accounts. 2008 data as of September 30, 2008.

$8.5 Trillion

$10.6 Trillion

Value of Housing Stock1

Home Equity

Single Family Mortgage Debt 2

$7.1 Trillion(2001)

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-6

-4

-2

0

2

4

6

8

10

12

14

16

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008

- Recession Year

Note: Growth rates for 1952 to 2007 are calculated using the annual average of certain third party and Freddie Mac indices. The forecasted growth rate for 2008 is calculated using a Freddie Mac index.

Sources: E. H. Boeckh and Associates, Bureau of Labor Statistics, U.S. Census Bureau and Freddie Mac.

U.S. nominal house prices declined sharply

Annual national house price growthPercent

Forecast

4.7%: 1952-2008Average Growth Rate

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Inventories of homes for sale remain above recent levels

Sources: Census Bureau and National Association of Realtors. 2008 data as of November 30, 2008.

New Homes

Existing Homes

- Recession

Months Supply of Homes for Sale

0123456789

101112131415

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

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Fewer refinances imply a 27 percent drop in mortgage originations in 2008

Source: U.S. Department of Housing and Urban Development, Federal Financial Institutions Examination Council, Federal Housing Finance Board. 2008 data based on the December 2008 forecast of Freddie Mac’s Office of the Chief Economist.

Total single-family mortgage originations

0

1,000

2,000

3,000

4,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Est.

2009Est.

$ Billions

Refinance Originations

Home Purchase Originations

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0.70.4

1.71.2

1.7

3.43.8

2.5

(1.8)(1.4)

(3.9)(3.9)

(0.9)(0.3)

(1.1)

(5)

(4)

(3)

(2)

(1)

0

1

2

3

4

5

1Q 2005 3Q 2005 1Q 2006 3Q 2006 1Q 2007 3Q 2007 1Q 2008 3Q 2008

Percent

National home prices have continued to decline1

Quarterly home price change

1 National home prices use the internal Freddie Mac index, which is value-weighted based on Freddie Mac’s single-family portfolio.

Source: Freddie Mac.

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43 states and Washington DC had home price declines from 3Q 2007 to 3Q 20081

-0.5

0.7

-1.5-19.2

-27.7-4.4

RI –11.7

CT –6.1

DC –6.5

-5.1

-20.8

-5.2

-3.2

-1.0

-3.9

-6.7 -2.9

-1.4 -0.1

-2.5

-6.5

-9.3

-2.6

-12.7

-7.2

-3.5

-1.3

-0.9

-0.8

2.4

-1.5

-8.1

-6.7

-3.4

-26.8

-1.9

-5.7

1.4

-5.8

-2.7

0.0

4.1

-2.6

0.7

-6.1-10.3

-4.8

-4.3

-4.6

1.5

-0.1

>= 0%-5 to 0%

< -20%

-10 to -5%-20 to -10%

United States -10.5%

1 National home prices use the internal Freddie Mac index, which is value-weighted based on Freddie Mac’s single-family portfolio.

Source: Freddie Mac.

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16%20%

13%

3% 14%

33%

20%

7%

3%8%

5%

57%

Subprime and Alt-A shares of the market quintupled between 2001 and 2006, then declined sharply

Source: Inside Mortgage Finance (by dollar amount) and Freddie Mac. 2008 data is as of September 30, 2008.

Home Equity Loans

Conventional, Conforming Prime

Jumbo Prime Subprime Alt-A FHA & VA

2001

$2.2 trillion $3.0 trillion $1.8 trillion

2006 2008 YTD

64%

8%

17%

3%

1% 7%

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0

5

10

15

20

25

30

0 4 8 12 16 20 24 28 32 36 40 44 48

Age in Months

Percent (%)

0

1

2

3

4

5

6

7

8

9

10

11

0 4 8 12 16 20 24 28 32 36 40 44 48

Age in Months

Percent (%)

Recent Alt-A and subprime originations are performing far worse than earlier originations

Source: Loan Performance, a subsidiary of First American Real Estate Solutions.

Alt-A Subprime

Cumulative 60-days or more delinquency rate as a share of the number of loans originated

2002 2003 2004 2005 2006 2007

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Hybrid ARM mortgages are experiencing faster delinquency rates than fixed-rate mortgages

Source: Citigroup.

Fixed-rate MortgagesHybrid ARM Mortgages

0

5

10

15

20

25

30

35

40

1998 2000 2002 2004 2006 2008

Percent

Subprime

Alt-A

Jumbo

0

5

10

15

20

25

30

35

40

1998 2000 2002 2004 2006 2008

Percent

Subprime

Alt-A

Jumbo

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0

5

10

15

20

25

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Percent

Subprime ARM defaults are 21 times those on prime fixed-rate mortgages

Source: Mortgage Bankers Association. Quarterly data not seasonally adjusted (Q1 1998 – Q2 2008).

Prime Conventional FRM

FHA & VA

SubprimeARM

Loans 90 days or more delinquent or in foreclosure

SubprimeFRM

- Recession

Prime Conventional ARM

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21Source: Inside MBS & ABS – October 10, 2008 edition, Freddie Mac and Fannie Mae. Data as of September 30, 2008.

Annual MBS issuance by product type

Alt-ASubprime

050

100150200250300350400450500

2000 2001 2002 2003 2004 2005 2006 2007 2008YTD

$ Billions

0

5

10

15

20

25Percent

Subprime MBS IssuancePercent of Total MBS Issuance

0

50100

150

200250

300

350

400450

500

2000 2001 2002 2003 2004 2005 2006 2007 2008YTD

$ Billions

0

5

10

15

20

25Percent

Alt-A MBS IssuancePercent of Total MBS Issuance

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0

20

40

60

80

100

120

140

160

180

200

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Basis pointsEffective jumbo-conforming interest rate spread

Jumbo-conforming spreads spiked to record levels in December 2008

Note: Effective spread adds fees and points to the interest rate.

Source: HSH Associates. Data as of December 26, 2008.

Record: 184 bps12/09/08

Most recent: 169 bps12/26/08

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Mortgage rates on conforming jumbo loans

30-year fixed mortgage rates

Source: HSH Associates. Points and fees are added to interest rates.

5

6

7

8

Jan4

Jan18

Feb1

Feb15

Feb29

Mar14

Mar28

Apr11

Apr25

May9

May23

Jun6

Jun20

Jul3

Jul18

Aug1

Aug15

Aug29

Sep12

Sep26

Oct-10

Oct-24

Percent

30-Year Conforming 30-Year Conforming Jumbo 30-Year Non-Conforming Jumbo

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Credit Guarantee Business

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1 For 2006, 2007 and 2008, Freddie Mac’s share of PC/MBS issuances is calculated as Freddie Mac’s issuance activities for Total Guaranteed PCs and Structured Securities Issued divided by the sum of such issuances and Fannie Mae’s Total MBS Issuances.

Source: Freddie Mac and Fannie Mae Monthly Summaries. 2008 data as of November 30, 2008. Figures for 2008 are subject to change.

Freddie Mac share of PC/MBS issuances1

(Percent)Freddie Mac’s GSE market share

Our GSE market share remains near historical levels

43%

37%

41%

45%

43% 43%

40%

30

35

40

45

50

2002 2003 2004 2005 2006 2007 2008 YTD

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30-year Fixed Rate

72%

20-year Fixed Rate

2%15-year

Fixed Rate8%

ARM3%

Multifamily Conventional

6%

Other3%

IO6%

Total mortgage portfolio purchasesEleven months ended November 30, 2008

We fulfill our mission through a diversity of mortgage products

Total mortgage portfolioAs of November 30, 2008

$369.1 Billion $1.9 Trillion

Note: Excludes non-Freddie Mac mortgage-related securities.

Source: Freddie Mac.

Multifamily Conventional

4%Other1%

30-year Fixed Rate64%

20-year Fixed Rate4% 15-year Fixed

Rate13%

ARM4%

Option ARM1%

Balloon1%

IO8%

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68%

63%

57%56%

58%

61%61%61%60%

63%

65%

50

55

60

65

70

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sept 30,2008

Average Estimated Current LTV (Percent)

Significant homeowner equity supports the credit quality of our single-family portfolio

Average estimated loan-to-value1 ratio of our single-family portfolio adjusted to reflect current market prices

1 Based on the unpaid principal balance of the single-family mortgage portfolio, excluding Structured Transactions backed by Ginnie Mae Certificates and certain Structured Transactions that are backed by non-Freddie Mac mortgage-related securities. Current market values are estimated by adjusting the value of the property at origination based on changes in the market value of homes since origination. Estimated current LTV ratio range is not applicable to purchases we made during 2008, includes the credit-enhanced portion of the loan and excludes any secondary financing by third parties.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008. Data as of period end.

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Freddie Mac’s portfolio is well diversified1

West

26%Southwest

13%

North Central

19%

Southeast

18%

Northeast

24%

1 Based on unpaid principal balances.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008. Data as of September 30, 2008.

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0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,000

Before credit enhancements After credit enhancements

Estimated sensitivity of credit losses to an immediate 5% decline in house prices1

1 Based on the single-family mortgage portfolio, excluding Structured Securities backed by Ginnie Mae Certificates. 2 Assumes that none of the credit enhancements currently covering our mortgage loans has any mitigating impact on our credit losses. 3 Assumes we collect amounts due from credit enhancement providers after giving effect to certain assumptions about counterparty default rates.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008.

Net Present Value($ Millions)

6/30/2007 9/30/2007 12/31/2007 6/30/20083/31/2008 9/30/2008

2 3

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Credit delinquencies and losses continue to increase

Total credit losses290-day single-family delinquencies1

1 Based on mortgage loans in our retained portfolio and total guaranteed PCs and Structured Securities issued, excluding Structured Transactions, Structured Securities backed by Ginnie Mae Certificates and mortgage loans whose contractual terms have been modified under an agreement with the borrower and the borrower is less than 90 days delinquent under the modified terms.2Calculated as annualized credit losses divided by the average total mortgage portfolio, excluding non-Freddie Mac mortgage-related securities and that portion of Structured Securities that is backed by Ginnie Mae Certificates. 2008 YTD is for nine months ended September 30, 2008.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008.

30405060708090

100110120130

2004 2005 2006 2007 Sept 30,2008

Basis Points

02468

101214161820

2004 2005 2006 2007 2008 YTD

Basis Points

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Delinquencies are low relative to the industry

Basis Points90-day or more delinquencies

1 Based on mortgage loans in our retained portfolio and total guaranteed PCs and Structured Securities issued, excluding Structured Transactions, Structured Securities backed by Ginnie Mae Certificates and mortgage loans whose contractual terms have been modified under an agreement with the borrower and the borrower is less than 90 days delinquent under the modified terms.

Source: Mortgage Bankers Association and Freddie Mac. Data as of period end.

1

287

134152

235

199

167

122

9377

65

0

50

100

150

200

250

300

2003 2004 2005 2006 2007 1Q2008

2Q2008

3Q2008

Oct2008

Nov2008

MBA Prime Conventional Mortgage DelinquenciesFreddie Mac Total Single-Family 90-day or More Delinquencies

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(In Basis Points) 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008

Non-credit enhanced delinquency rates 1

1 North Central 39 48 52 59 72

2 Northeast 31 39 45 53 69

3 Southeast 43 59 76 98 131

4 Southwest 27 32 33 38 46

5 West 26 42 59 80 108

Total single-family delinquency rate 2

6 Total portfolio 51 65 77 93 122

Single-family delinquency rates by region

1 Presentation of non-credit-enhanced delinquency rates with the following regional designation: West (AK, AZ, CA, GU, HI, ID, MT, NV, OR, UT, WA); Northeast (CT, DE, DC, MA, ME, MD, NH, NJ, NY, PA, RI, VT, VA, WV); North Central (Il, IN, IA, MI, MN, ND, OH, SD, WI);Southeast (AL, FL, GA, KY, MS, NC, PR, SC, TN, VI); and Southwest (AR, CO, KS, LA, MO, NE, NM, OK, TX, WY). 2 Based on mortgage loans in our retained portfolio and total guaranteed PCs and Structured Securities issued, excluding Structured Transactions, Structured Securities backed by Ginnie Mae Certificates and mortgage loans whose contractual terms have been modified under an agreement with the borrower and the borrower is less than 90 days delinquent under the modified terms.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008. Data as of period end.

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Investment Management Business

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Return on Equity Threshold Interest Rate Risk ManagementReturn on Equity Threshold

Maximize Fair Value

Freddie Mac’s asset-liability management framework is disciplined

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Retained portfolio growth depends on market conditions

UPB$ Billions

Note: Data represents net growth of the Retained portfolio based on unpaid principal balances.

Source: Data for 2002-2004 is based on Freddie Mac’s Information Statements dated September 24, 2004 and June 14, 2005. Data for 2005-2007 is based on Freddie Mac’s SEC Registration Statement on Form 10 dated July 18, 2008. Data for 2008 is based on Freddie Mac’s November 2008 Monthly Volume Summary. Figures for 2008 are subject to change.

Retained portfolio growth

$7

$17

$57

$78

$70

-$6

$85

-10

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008 YTD

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CMBS25%

Fannie Mae22%

Subprime30%

Manufactured Housing

<1%Mortgage

Revenue Bonds5%

Alt-A & Other

18%Ginnie Mae<1%

Freddie Mac Multi-class Structured Securities

18%

Mortgage Loans14%

Non-Freddie Mac MBS

35%

Freddie Mac Single Class

PCs 33%

1 Based on unpaid principal balances. Exclude mortgage-related securities traded, but not yet settled.

Source: Freddie Mac. Data as of September 30, 2008.

Freddie Mac’s Retained portfolio is diversified among a number of product types

Retained portfolio1 Non-FRE MBS1

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Mortgage Loans14%

($100 B) Agency8%

($57 B)

Non-Agency Backed by

Subprime Loans11%

($80 B)

Non-Agency Backed by Alt-A

and Other Loans

6% ($46 B)

Other Non-Agency

11%($79 B)

PCs and Structured Securities

51%($375 B)

Retained portfolio composition

Retained portfolio

$737 billion

Note: Credit ratings for most non-agency mortgage-related securities are designated by no fewer than two nationally recognized statistical rating organizations. Approximately 66% and 96% of total non-agency mortgage-related securities held at September 30, 2008 and December 31, 2007, respectively, were AAA-rated as of those dates, based on the lowest rating available.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008. Data based on unpaid principal balances as of September 30, 2008 and exclude mortgage-related securities traded, but not yet settled.

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The majority of our convexity is hedged upfront

Example of how we limit the negative convexity embedded in our Retained portfolio assuming the

convexity risk of the mortgage universe

Note: Figure above is an example only. It is not intended to represent percentages of Freddie Mac’s Retained portfolio hedged by each instrument.

Hedging activities executed upon purchase of mortgage

Swaptions

Callable Debt

Dynamically Rebalanced

Asset Selection

MortgageStructuring

Page 40: freddie mac Investor Presentation – Freddie Mac Update

39Source: Freddie Mac.

PMVS-LevelParallel LIBOR Curve Shifts

PMVS-Yield CurveNon-Parallel LIBOR Curve Shifts

PMVS is Freddie Mac’s primary interest-rate risk measure

Yield

- 50 bps

+ 50 bps

Term

<<

<<

Yield - 12.5 bps(2-year)

+ 12.5 bps(10-year)

Term<

<

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Average monthly PMVS-Level

Interest-rate risk is well controlled

Note: 2007 and 2008 figures based on Freddie Mac’s November 2008 Monthly Volume Summary. Figures for 2008 are subject to change.

Source: Freddie Mac.

Average monthly duration gap

Months$ Millions

-6-5-4-3-2-10123456

Nov07

Dec07

Jan08

Feb08

Mar08

Apr08

May08

June08

July08

Aug08

Sep08

Oct08

Nov08

$378 $385

$438

$331

$437

$571 $576

$390$348

$271

$395$354

$394

0

100

200

300

400

500

600

Nov07

Dec07

Jan08

Feb08

Mar08

Apr08

May08

June08

July08

Aug08

Sep08

Oct08

Nov08

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43

44

45

46

47

48

49

50

2004 2005 2006 2007 1Q 2008 2Q 2008 3Q 2008

Percent

Callable debt is an integral part of our interest-rate risk management framework

1Excludes callable debt with expired options.

Source: Freddie Mac.

Callable debt outstanding as a share of fixed-rate assets1

Page 43: freddie mac Investor Presentation – Freddie Mac Update

Global Debt Funding Program

Page 44: freddie mac Investor Presentation – Freddie Mac Update

43Note: All figures represent face amounts in USD billions based on trade date. These figures could differ significantly from proceeds, amortized principal amount and book value figures, particularly for zero-coupon securities.

Source: Freddie Mac. 2008 data as of December 31, 2008.

Freddie Mac’s suite of debt products

Debt securities outstanding$ Billions

0

100

200

300

400

500

600

700

800

900

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Short-term Debt Callable DebtMTN Bullet Debt Subordinated DebtUS$ Reference Notes® €Reference Notes®

10

251

312

206

578

Page 45: freddie mac Investor Presentation – Freddie Mac Update

44

Refinancing our maturing debt requires substantial issuance of debt

1Freddie Mac long-term debt maturity figures excluding subordinated debt.

Note: All figures represent face amounts in USD billions based on the settlement date.

Source: Freddie Mac. Data as of December 31, 2008.

Freddie Mac long-term debt maturities1

5135 24 26

9 11 17

49

52 46

27

1433

149

534

5 130

50

100

150

200

250

2009 2010 2011 2012 2013 2014 2015 2016 >2017

$ Billions

Other Debt Securities

Reference Notes

Page 46: freddie mac Investor Presentation – Freddie Mac Update

45

Short-term debt balances have grown but remain within historical levels

Total short-term debt outstanding Total short-term as a % of total debt outstanding

Rapid Portfolio Growth Periods

Source: Freddie Mac. Data as of December 31, 2008.

0

50

100

150

200

250

300

350

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

$ Billions

20%

25%

30%

35%

40%

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Page 47: freddie mac Investor Presentation – Freddie Mac Update

46

Our debt funding program accesses diverse pools of global capital

Note: Data reflects orders placed in our US$ Reference Notes® securities syndicated bond deals.

Source: Freddie Mac. Data for the 12 months ended December 31, 2008.

Geographical area Investor type

Asia33%

Other2% Europe

14%

N. America51%

Other12%

Bank10%

Central Bank42%

Investment Manager

30%

Insurance & Pension

6%

Page 48: freddie mac Investor Presentation – Freddie Mac Update

47

Agencies vs FDIC guaranteed bank paper

FDIC borrowing reverts to $30 billion on December 31, 2009Valid on debt issued from now until June 30, 2009, with coverage ending in June 2012

Short-term borrowing facility reverts to $2.25 billion on December 31, 2009$100 billion of preferred capital agreement is indefinite in duration

Expiration

Less flexible maturity structureOffer tailored, flexible investment and maturity dates and sizeFlexibility

Repo market needs to be establishedEasy to repoRepo

To be determinedIssues with > $1 billion are liquidLiquidity

Maximum of $1.4 trillion of debt could be guaranteed by the FDIC

Over $1 trillion of short-term debt maturing for Freddie Mac, Fannie Mae & Home Loan Bank combined

New Supply through Dec ‘09

Attractive for investors looking to diversify from Agencies

Traditional investors already hold a large pool of AgenciesDiversification

New instrument with no precedenceMandate for some local entities and banks allows them to invest in Agencies in addition to Treasuries

Structural Considerations

Yet to be decided20% (possibly lowered to 10%)Risk Weight

FDIC has unlimited borrowing authority at TreasuryFDIC guarantee on members’ debt

Unlimited secured short-term borrowing facility through Treasury$100 billion of preferred capital from U.S. Treasury

Funding

FDIC Guaranteed Bank PaperFreddie Mac

Sources: Freddie Mac, Barclays Capital and Morgan Stanley

Page 49: freddie mac Investor Presentation – Freddie Mac Update

Mortgage Funding

Page 50: freddie mac Investor Presentation – Freddie Mac Update

49

Treasury ($5.5)17%

Agency Debt ($3.2)10%

MBS ($8.9)27%

CorporateDebt ($6.1)18%

Money Market ($4.0)12%

Asset-Backed ($2.8)

8%

Municipal ($2.7)

8%

U.S. mortgage securities are the largest fixed-income sector

1 Interest-bearing marketable public debt.2 Includes Freddie Mac, Fannie Mae, Federal Home Loan Banks, Tennessee Valley Authority and Farm Credit System.3 MBS include Ginnie Mae, Fannie Mae and Freddie Mac mortgage-backed securities, CMOs and private-label MBS/CMOs. 4 Securities Industry and Financial Markets Association estimates.5 Includes commercial paper, bankers acceptances and large time deposits. Beginning in 2006, bankers’ acceptance are excluded.

Note: Percentages may not add up to 100% due to rounding.

Source: Securities Industry and Financial Markets Association as of September 30, 2008.

Outstanding public and private bond market debt – $33.2 Trillion

1 2

34

54

Page 51: freddie mac Investor Presentation – Freddie Mac Update

50

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2Q 2008

GSE, Ginnie Mae & Private-Label MBS Treasury Securities Non-GSE Corporate Bonds

MBS – a major investment vehicle

Amount Outstanding$ Billions

Sources: Federal Reserve Board and Securities Industry and Financial Markets Association. 2008 data as of June 30, 2008.

Page 52: freddie mac Investor Presentation – Freddie Mac Update

51

To-be-announced (TBA) market

Buyer and seller decide on general trade parameters» Term» Agency » Coupon» Settlement date» Par amount» Price

Buyer does not know which pools will actually be delivered until two days before settlement

Seller is obligated to provide pool information by 3 p.m. two days prior to settlement (“48-Hour Rule”)

Pools must satisfy Securities Industry and Financial Markets Association (SIFMA) good delivery guidelines

Page 53: freddie mac Investor Presentation – Freddie Mac Update

52

Secondary market securities

Pass-throughs or participation certificates (PCs)» Securitization structure where a GSE or other entity ‘passes’ the amount

collected from the borrowers every month to the investor, after deducting fees and expenses

CMOs or REMICs» Collateralized Mortgage Obligations or Real Estate Mortgage Investment

Conduits» Multiclass securities backed by mortgage loans, pools of mortgages, or even

existing CMOs or REMICs

Strips» Separation of coupons from a bond, where the coupons become a security and

the remaining face-value bond becomes another security• Interest-only (IO)• Principal-only (PO)

Page 54: freddie mac Investor Presentation – Freddie Mac Update

53

Loan A

Loan B

Loan C

Loan X

.

.

.

P

i

Pi

Pi

Pass-through

Freddie PC

Loan A

Loan B

Loan C

Loan X

.

.

.

PiPiPi

Pi

Pass-through

Freddie PC

Pass-through

Freddie GiantPC

Pi

TBA MarketP

i

Pass-through formation

Pi

Page 55: freddie mac Investor Presentation – Freddie Mac Update

54

P

i

Pass-Through

Freddie PC

Pass-Through

Freddie GiantPC

REMIC Trust

Freddie REMICPi

Tranche A

.

.

.

Tranche B

Tranche C

Tranche D

Tranche ETranche F

Tranche G

.

.

.

REMIC formation

Tranche E

Tranche D

Page 56: freddie mac Investor Presentation – Freddie Mac Update

55

Sequential REMIC tranches

Note: Chart shows how principal (darker shading) and interest (lighter shading) would be allocated to each of three hypotheticalsequential tranches if no repayments were made on the underlying mortgages.

Page 57: freddie mac Investor Presentation – Freddie Mac Update

56

P

i

Pass-through

Freddie PC

Pass-through

Freddie PC

Strip Trust

Freddie GiantPC

Pi

P

i

Principal-only

PO

Interest-only

IO

.

.

.

Strip formation

Page 58: freddie mac Investor Presentation – Freddie Mac Update

57

Reference REMIC securities offer liquidity, transparency and predictability

Liquidity» Broad dealer sponsorship and secondary market support

Transparency» Primary issuance through syndicated offerings» Secondary market support through Freddie Mac REMIC Dealer Group» PCs underlying the offered GMC are disclosed prior to pricing

Predictability» Calendar-based monthly optional issuance windows » Maximum of three Reference REMICs issued per quarter» Average life extension limited by shortened stated final maturity date

Page 59: freddie mac Investor Presentation – Freddie Mac Update

58

Freddie Mac’s mortgage products

Mortgage products outstanding

Source: Freddie Mac. Data as of November 30, 2008.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2001 2002 2003 2004 2005 2006 2007 2008-YTD

$ Billions

REMICs Reference REMIC T-deals/Whole Loan REMIC Strips PCs

Page 60: freddie mac Investor Presentation – Freddie Mac Update

59

Freddie Mac mortgage securities products

Gold PCs» Pass-through securities representing an undivided interest in a pool of

residential mortgages

Giant PCs» Pass-through securities that are created by consolidating smaller PCs into

larger Giant PCs

ARM PCs» Mortgage-backed securities representing an undivided interest in a pool of

residential adjustable-rate mortgages

Multifamily PCs » PCs backed by loans covering residences with five or more units designed

principally for residential use

Page 61: freddie mac Investor Presentation – Freddie Mac Update

60

Freddie Mac mortgage securities products

REMICs» Customized mortgage structures created from mortgage pass-through

securities by redistributing cash flows to cater to a variety of market demands

Reference REMICs®

» A structured alternative to a traditional 30- or 15-year mortgage-backed security and built on the success of Freddie Mac’s guaranteed maturity class (GMC) product

Strips» Formed from Giant PCs of either Freddie Mac Gold PCs or GNMA certificates

and generally represent the Interest-only (IO) and Principal-only (PO) cash flow components of a pool

Page 62: freddie mac Investor Presentation – Freddie Mac Update

61

Conforming-jumbo<1%

15-year fixed-rate14%

RHS and other federally

guaranteed loans<1%

FHA/VA<1%

Balloons/Resets1%

ARMs/Adjustable-Rate

5%

Option ARMs <1%

Interest-Only9%

30-year fixed-rate71%

Composition of Freddie Mac’s single-family pass-through securities1

1 Based on unpaid principal balances of the securities and excludes mortgage-related securities traded, but not yet settled. Also includes long-term standby commitments for mortgage assets held by third parties that require that we purchase loans from lenders when these loans meet certain delinquency criteria. 2 Portfolio balances include $1.9 billion and $1.8 billion of 40-year fixed-rate mortgages as well as $68.7 billion and $72.2 billion of 20-year fixed-rate mortgages at September 30, 2008 and December 31, 2007, respectively.

Source: Freddie Mac’s Form 10-Q dated November 14, 2008. Data as of September 30, 2008.

2

Page 63: freddie mac Investor Presentation – Freddie Mac Update

62

Agency CMO issuance

Source: Bloomberg. Data as of December 31, 2008.

Agency CMO OutstandingAgency CMO Issuance

0

100

200

300

400

2004 2005 2006 2007 2008

$ Billions

Freddie Mac Fannie Mae Ginnie Mae

0200400600800

1,0001,2001,400

2004 2005 2006 2007 2008

$ Billions

Freddie Mac Fannie Mae Ginnie Mae

Page 64: freddie mac Investor Presentation – Freddie Mac Update

63

30-year82%

Balloon<1%

15-year12%

20-year5%

Other<1%

ARM1%

Composition of collateral underlying Freddie Mac’s REMICs issued

Source: Freddie Mac. Data as of September 30, 2008.

Page 65: freddie mac Investor Presentation – Freddie Mac Update

64

Calendar-based issuance of REMIC securities with a guaranteed maturity class (GMC) offered through a syndicate underwriting group

Stated final maturity date guaranteed by Freddie Mac. » Average issue size of $1.5 billion

Integrated into Freddie Mac’s Reference suite of products, Reference Bills® and Reference Notes®, featuring:

» Liquidity» Transparency» Calendar-based predictability

Designed to further Freddie Mac’s housing mission by broadening the investor base for mortgage-backed securities

Reference REMIC® securities – a structured mortgage-backed securities investment option

Page 66: freddie mac Investor Presentation – Freddie Mac Update

65

Reference REMIC securities offer an unmatched array of attractive features

Freddie Mac Reference

REMIC

Prepayment Linked Notes

Syndicated Callables ABS

TradeWeb Eligibility √ Some √

Daily Closing Prices √ Some √

Guaranteed Shortened Final Maturity √ √

Syndicate Led √ Some √ √

Issuance Calendar √

Fully Collateralized by Mortgages/MBS √ √

Collateral Disclosed Pre-Pricing √

Re-REMIC/MACR Eligible √ √

No Upsize (or "Tapping") Post-Pricing √ √

Reference REMIC securities are an outstanding compliment to traditional REMICs and TBA pass-through securities currently offered by Freddie Mac.

Page 67: freddie mac Investor Presentation – Freddie Mac Update

66

Bank27%

Insurance & Pension

14%

Other4%

Investment Manager

37%

Central Bank18%

Asia36%

N. America63%

Europe1%

Other<1%

Reference REMIC® securities access diverse pools of global capital

Note: Data reflects orders placed in Freddie Mac’s Reference REMIC® securities.

Source: Freddie Mac. Data as of December 31, 2008.

Geographical area Investor type

Page 68: freddie mac Investor Presentation – Freddie Mac Update

Freddie Mac obligations

Freddie 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 sometimes contain forward-looking statements pertaining to management's current expectations as to the conservatorship and its effect on the business and company’s future business plans,capital management, credit losses and credit-related expenses, returns on investments, results of operations and/or financial condition. 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-to-debt OAS, credit outlook, actions by FHFA and Treasury, and the impacts of newly enacted legislation or regulations, could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company’s Registration Statement on Form 10, dated July 18, 2008, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available on the the company’s Web site at www.FreddieMac.com/investors and the Securities and Exchange Commission’s Web site at www.sec.gov.

© 2008 by Freddie Mac. No part of this document may be duplicated, reproduced, distributed or displayed in public in any manner or by any means without the written permission of Freddie Mac.

Safe Harbor Statements