Freddie Mac Investor Presentation
Transcription
Freddie Mac Investor Presentation
Freddie Mac Update December 2014 Table of contents Section Page I Freddie Mac Overview 3 II U.S. Housing Market 16 III Credit Guarantee Business 28 IV Investment Management Business 37 V Multifamily Business 42 VI Debt Funding Program 53 VII Mortgage Funding 60 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 Annual Report on Form 10-K for the year ended December 31, 2013, 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. © Freddie Mac 2 Freddie Mac Overview © Freddie Mac © Freddie Mac 3 Freddie Mac’s mission U.S. Residential Mortgage Market Mortgage Securitization Mortgage-backed Securities Freddie Mac Global Capital Markets Mortgage Investments Debt Securities “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 1 House of Representatives report on FIRREA, No. 54, 101st Congress, 1st Session, Part 3 at 2 (1989). © Freddie Mac 4 Conservatorship We continue to operate under the conservatorship that commenced on September 6, 2008, under the direction of Federal Housing Finance Agency (FHFA) our Conservator. FHFA as our Conservator: » FHFA assumed all powers of the Boards, management and shareholders » FHFA has directed and will continue to direct certain of our business activities and strategies » FHFA delegated certain authority to our Board of Directors to oversee, and to management to conduct, day-to-day operations Our ability to access funds from the Treasury under the Purchase Agreement is critical to keeping us solvent. There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified termination date. Our future structure and role will be determined by the Administration and Congress, and there will likely be significant changes beyond the near term. © Freddie Mac 5 FHFA Strategic Plan On May 13, 2014, FHFA released its 2014 Strategic Plan, which provides an updated vision of FHFA’s implementation of its obligations as Conservator of Freddie Mac and Fannie Mae (the Enterprises). The plan sets forth three reformulated strategic goals: » Maintain, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets. » Reduce taxpayer risk through increasing the role of private capital in the mortgage market. » Build a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary mortgage market in the future. FHFA’s 2014 Strategic Plan adheres to its existing statutory mandate of overseeing the conservatorships of the Enterprises in their current state and ensuring that the Enterprises’ infrastructure meets the needs of their current credit guarantee businesses and other operations. © Freddie Mac 6 2014 Conservatorship Scorecard Strategic Goal Weight Scorecard Objective Increase access to mortgage credit for creditworthy borrowers Continue loss mitigation and foreclosure prevention activities MAINTAIN 40% Continue to develop approaches to reduce costs for Lender Placed Insurance (LPI) Maintain new multifamily business volume at or below 2013 cap (excluding certain mission-related activity) Single-family: Complete credit risk transfers involving at least $90 billion of UPB and utilize at least one transaction type in addition to the STACR structure REDUCE 30% Multifamily: Assess economics and feasibility of additional types of risk transfer structures and increasing the amount of risk transferred in current structures Retained Portfolio: Submit to FHFA plans to meet, even under adverse conditions, the annual PSPA requirements and $250 billion PSPA cap by December 31, 2018 Finalize mortgage insurance Master Policies and enhanced eligibility requirements Continue to build and test the Common Securitization Platform (CSP), and continue implementation of required changes to systems and operations for integration into CSP BUILD 30% Identify key components, features and standards needed for a single (common) security in the CSP; assess and begin to address key issues Provide support for mortgage data standardization initiatives: • Servicing Data and Technology Initiative (SDTI) • Uniform Closing Disclosure Dataset (UCD) initiative • Uniform Loan Application Dataset (ULAD) © Freddie Mac 7 Amended Purchase Agreement On August 17, 2012, Freddie Mac, acting through FHFA, as Conservator, and Treasury entered into a third amendment to the Purchase Agreement. The principal changes, which are consistent with FHFA’s strategic plan for Freddie Mac and Fannie Mae conservatorships, include: » Replacement of the fixed dividend rate with a net worth sweep dividend beginning for the first quarter of 2013 » Accelerated wind-down of the retained portfolio » Submission of annual risk management plan to Treasury » Suspension of periodic commitment fee © Freddie Mac 8 U.S. housing finance market reform On February 11, 2011, the Obama Administration delivered a report to Congress that lays out the Administration’s plan to reform the U.S. housing finance market The report recommends winding down Freddie Mac and Fannie Mae » The report identifies a number of policy levers that could be used to wind down Freddie Mac and Fannie Mae, shrink the government’s footprint in housing finance, and help bring private capital back to the mortgage market, including: – Increasing GSE g-fees – Phasing in a 10 percent down payment requirement on mortgages insured by Freddie Mac and Fannie Mae – Reducing conforming loan limits – Winding down Freddie Mac and Fannie Mae’s investment portfolios, consistent with Freddie Mac and Fannie Mae’s Purchase Agreements with Treasury The report states that the government is committed to ensuring that the GSEs have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations » The report states that the Administration will not pursue policies or reforms in a way that would impair the GSEs’ ability to honor their obligations » The report states the Administration’s belief that under the Purchase Agreements there is sufficient funding to ensure the orderly and deliberate wind down of Freddie Mac and Fannie Mae Source: The Department of the Treasury and U.S. Department of Housing and Urban Development’s “Reforming America’s Housing Finance Market: A Report to Congress”, February 2011. © Freddie Mac 9 Market presence MBS Issuance Volume $ Trillions 2.4 $2.2T $2.0T 2.0 $1.9T $1.8T 1.6 $1.7T $1.6T $1.5T $1.2T 1.2 $1.2T $0.9T 0.8 0.4 0.0 2005 2006 2007 Freddie Mac 2008 2009 Fannie Mae 2010 2011 2012 YTD 20141 Private Label Ginnie Mae 2013 YTD 2005 2006 2007 2008 2009 2010 2011 2012 20141 2013 Enterprises & Ginnie Mae 45% 44% 62% 95% 97% 96% 98% 99% 98% 98% Private Label 55% 56% 38% 5% 3% 4% 2% 1% 2% 2% 1 2014 data as of November 30, 2014. Source: Inside Mortgage Finance. © Freddie Mac 10 Housing market support Number of Families Freddie Mac Helped to Own or Rent a Home1 Single-Family Loan Workouts2 Number of Loans (000) In Thousands Cumulative Since 2009: 2,472 2,480 12,427 Cumulative Since 2009: 1,047 275 2,458 2,089 208 1,830 169 1,098 168 133 94 2009 2010 2011 2012 2013 YTD 2014 2009 2010 2011 2012 2013 YTD 2014 Loan modifications3modifications3 Home Retention Actions Repayment plans3plans3 Forbearance agreements3agreements3 Short sales and deed-in-lieu of foreclosure transactions33 Foreclosure Alternatives 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 These categories are not mutually exclusive and a borrower in one category may also be included within 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 short sale or deed-in-lieu transaction in a later period. © Freddie Mac 11 Comprehensive income $ Billions $30.4 $9.8 $5.6 $7.0 $5.7 $4.4 $4.5 $1.9 3Q12 4Q12 1Q13 2Q13 3Q13 1 4Q13 1Q14 2Q14 A Net income B Total other comprehensive income (loss), net of taxes C=A+B $2.8 3Q14 2 Comprehensive income 1 Net income and Comprehensive income include $23.9 billion non-cash benefit from releasing the valuation allowance on deferred tax assets. © Freddie Mac 2 Consists of the after-tax changes in: (a) the unrealized gains and losses on available-for-sale securities; (b) the effective portion of derivatives previously designated as cash flow hedges; and (c) defined benefit plans. © Freddie Mac 12 Treasury draw requests and dividend payments $ Billions Draws From Treasury Dividend Payments to Treasury Cumulative Total Total Senior Preferred Stock Outstanding Less: Initial Liquidation Preference 1 Treasury Draws Cumulative Total $72.3 Dividend Payments as of 09/30/14 $88.2 $1.0 4Q14 Dividend Obligation $2.8 Total Dividend Payments2 $71.3 $91.0 $47.6 $44.6 $16.8 $13.0 $7.6 $6.1 2008 2009 2010 2011 $0.02 $0.0 $0.0 $0.2 2012 2013 YTD 2014 2008 $4.1 $5.7 $6.5 $7.2 2009 2010 2011 2012 Draw Requests from Treasury 4 2013 Dividend Payments to Treasury YTD 2014 3 5 1 The initial $1 billion liquidation preference of senior preferred stock was issued to Treasury in September 2008 as consideration for Treasury’s funding commitment. The company received no cash proceeds as a result of issuing this initial $1 billion liquidation preference of senior preferred stock. 2 Amounts may not add due to rounding. 3 Amount does not include the December 2014 dividend obligation of $2.8 billion. 4 Annual amounts represent the total draws requested based on Freddie Mac’s quarterly net deficits for the periods presented. Draw requests are funded in the subsequent quarter (e.g., $19 million draw request for 1Q12 was funded in 2Q12). 5 Represents quarterly cash dividends paid by Freddie Mac to Treasury during the periods presented. Through December 31, 2012, Treasury was entitled to receive cumulative quarterly cash dividends at the annual rate of 10% per year on the liquidation preference of the senior preferred stock. However, the fixed dividend rate was replaced with a net worth sweep dividend payment beginning in the first quarter of 2013. See the company’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information. © Freddie Mac 13 Investments – Purchase Agreement portfolio limits Mortgage Assets 1, 2 Indebtedness 1, 3 $ Billions $ Billions $780 $663 $553 $553 $553 12/31/13 $663 $663 $553 $564 $470 $461 $663 $434 $420 $414 03/31/14 06/30/14 09/30/14 12/31/14 $511 12/31/13 $458 $449 $440 03/31/14 06/30/14 09/30/14 Mortgage-related investments portfolio ending balance Total debt outstanding Mortgage-related investments portfolio limit Indebtedness limit 12/31/14 01/01/15 1 The company’s Purchase Agreement with Treasury limits the amount of mortgage assets the company can own and indebtedness it can incur. Under the Purchase Agreement, mortgage assets and indebtedness are calculated without giving effect to the January 1, 2010 change in the accounting guidance related to the transfer of financial assets and consolidation of variable interest entities (VIEs). See the company’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information. 2 Represents the unpaid principal balance (UPB) of the company’s mortgage-related investments portfolio. The company discloses its mortgage assets on this basis monthly in its Monthly Volume Summary reports, which are available on its Web site and in Current Reports on Form 8-K filed with the Securities and Exchange Commission (SEC). 3 Represents the par value of the company’s unsecured short-term and long-term debt securities issued to third parties to fund its business activities. The company discloses its indebtedness on this basis monthly in its Monthly Volume Summary reports, which are available on its Web site and in Current Reports on Form 8-K filed with the SEC. © Freddie Mac 14 Single-family real estate owned Property Inventory 3Q14 Activity Historical Trend Ending Property Inventory (Number of Properties) (Number of Properties) 51k 49k 48k 45k 47k 47k 44k 36k 8,648 29k (15,438) 36,134 06/30/14 Inventory 29,344 Acquisitions Dispositions 09/30/14 Inventory 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 © Freddie Mac 3Q14 15 U.S. Housing Market © Freddie Mac © Freddie Mac 16 U.S. single-family mortgage debt in relation to total value of housing stock $ Trillions 25 Value of U.S. Housing Stock 1 20 15 U.S. Home Equity 2 Record: $13.3 Trillion (2006) $11.0 Trillion 10 5 $9.4 Trillion U.S. Single-family Mortgage Debt Outstanding 3 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1 Value of U.S. housing stock: Federal Reserve Board’s Flow of Funds Accounts, December 11, 2014, Table B.100 (line #49). This figure includes homes with and without underlying mortgages. 2 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. 3 U.S. single-family mortgage debt outstanding: Federal Reserve Board’s Flow of Funds Accounts, December 11, 2014, Table L.100 (line #27). Source: Federal Reserve Board’s Flow of Funds Accounts. Data as of September 30, 2014. © Freddie Mac 17 U.S. nominal house prices Annual Changes in National House Prices 16 14 12 10 8 4.1%: 1952-2013 Average Growth Rate 6 4 2 0 -2 -4 -6 -8 -10 - Recession Year 2012 2009 2006 2003 2000 1997 1994 1991 1988 1985 1982 1979 1976 1973 1970 1967 1964 1961 1958 1955 1952 -12 Note: Growth rates for 1952 to 2013 are calculated using the annual average of certain third party and Freddie Mac indices. Sources: E. H. Boeckh and Associates, Bureau of Labor Statistics, U.S. Census Bureau and Freddie Mac. © Freddie Mac 18 National home prices1 Cumulative decline of 11% since June 2006 170 United States (NSA) 160 Q32014 NSA Index Growth: 0.7% Q32014 SA Index Growth: 1.2% 150 140 130 United States (SA) 120 110 100 Freddie Mac House Price Index (December 2000=100) 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 National home prices use the Freddie Mac House Price Index for the U.S., which is a value-weighted average of the state indexes where the value weights are based on Freddie Mac’s single-family credit guarantee portfolio. Other indices of home prices may have different results, as they are determined using home prices relating to different pools of mortgage loans and calculated under different conventions than Freddie Mac’s. Quarterly growth rates are calculated as a 3-month change based on the final month of each quarter. ‘SA’ denotes ‘Seasonally Adjusted’ and ‘NSA’ denotes ‘Not Seasonally Adjusted’; seasonal factors typically result in stronger house-price appreciation during the second and third quarters. Historical growth rates change as new data becomes available. Values for the most recent periods typically see the largest changes. Cumulative decline calculated as the percent change from June 2006 to September 2014. Source: Freddie Mac. © Freddie Mac 19 Home price performance by state September 2013 to September 20141 United States 5% NH 7% WA 7% OR 13% NV 8% CA 5% MT 3% ID 8% ND 3% WY 3% UT 4% AZ 7% CO 3% SD 4% KS 3% OK 3% NM 7% HI 3% WI 4% MO 1% NY 8% MI 3% IA 5% NE 8% TX 5% AK 1% MN 4% IL 4% IN 4% OH KY 3% TN 6% 5% AR 3% LA 5% MS 4% AL 0% VT 4% 4% ME MA 4% RI 6% CT -1% 2% PA NJ 1% 0% 4% 4% WV VA DE 6% MD DC 7% NC 3% 6% SC 7% GA 8% FL ≥ 8% 5 to 7% 2 to 4% -1 to 1% 1 The Freddie Mac House Price Index for the U.S. is a value-weighted average of the state indexes where the value weights are based on Freddie Mac’s single-family credit guarantee portfolio. Percent changes were rounded to nearest whole percentage point. Source: Freddie Mac © Freddie Mac 20 Vacant housing oversupply Excess Vacant Homes (Numbers in Millions) 2.0 Excess for-Rent Inventory 1.6 Excess for-Sale Inventory 1.2 0.8 0.4 0.0 -0.2 -0.4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Freddie Mac calculations using U.S. Census Bureau data. Negative values reflect undersupply. The under/oversupply of vacant housing was estimated based on the average vacancy rate from 1994Q1 to 2003Q4. 2014 data as of September 30, 2014. © Freddie Mac 21 Inventories of homes for sale Months Supply of Homes for Sale 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1976 Existing Homes 5.6 5.1 New Homes 1979 1982 1985 1988 1991 1995 1998 2001 2004 2007 2010 2014 Sources: U.S. Census Bureau and National Association of Realtors. 2014 data as of October 31, 2014. © Freddie Mac 22 Single-family mortgage originations $ Billions 4,000 Refinance Originations Home Purchase Originations 3,000 2,000 $1.2T $1.1T $1.2T 1,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est. Fcst. Fcst. Note: Estimates and forecasts by the Office of the Chief Economist do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. Source: U.S. Department of Housing and Urban Development and Federal Financial Institutions Examination Council. 2014, 2015 and 2016 data based on the December 2014 estimate of Freddie Mac’s Office of the Chief Economist. © Freddie Mac 23 GSE purchases under the Home Affordable Refinance Program 30-Year Fixed Mortgage Rate1 (Percent) # of Loans (Thousands) 140 5.5 120 5.0 100 4.5 80 60 4.0 40 3.5 20 0 Apr-09 3.0 Dec-09 Aug-10 Freddie Mac 2 Apr-11 Dec-11 Fannie Mae3 Aug-12 Apr-13 Dec-13 Aug-14 30-Year Fixed Mortgage Rate 1 Based on Freddie Mac’s Primary Mortgage Market Survey rate for the last week in the period, which represents the national average mortgage commitment rate to a qualified borrower exclusive of any fees and points required by the lender on conforming mortgages with LTV ratios of 80%. 2 The Relief Refinance MortgageSM initiative is Freddie Mac’s implementation of the Home Affordable Refinance Program® (HARP). 3 Fannie Mae’s Refi PlusTM initiative includes loans refinanced under HARP. Source: Federal Housing Finance Agency, Freddie Mac. 2014 data as of September 30, 2014. © Freddie Mac 24 Housing affordability Index 210 200 190 180 170 160 150 140 130 120 110 100 90 80 1991 167 Average = 138 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2014 Note: An index of 100 indicates a median income family has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a median income family has more than enough income to qualify for a mortgage on a median-priced home. Data seasonally adjusted. Source: National Association of Realtors. 2014 data as of June 30, 2014. © Freddie Mac 25 Jumbo-conforming spreads Effective Jumbo-conforming Interest Rate Spread Basis points 200 180 Record: 184 bps 12/19/08 160 Most recent: 8 bps 12/5/14 140 120 100 80 60 40 20 0 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 (20) Note: Effective spread adds fees and points to the interest rate. Source: HSH Associates. Data as of December 5, 2014. © Freddie Mac 26 30-year fixed mortgage rates Percent 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.13% 4.10% 4.05% 4.0 3.5 Jan08 Jun- Dec- May- Nov- Apr08 08 09 09 10 30-Year Conforming Oct- Mar- Sep- Feb- Aug- Jan10 11 11 12 12 13 30-Year Conforming Jumbo Jul13 Dec- Jun- Nov13 14 14 30-Year Non-Conforming Jumbo Note: Points and fees are added to interest rates. Source: HSH Associates. Data as of December 5, 2014. © Freddie Mac 27 Credit Guarantee Business © Freddie Mac © Freddie Mac 28 Total mortgage portfolio $ Billions 2,400 $2,207 2,200 $2,251 $2,165 $2,103 $2,075 $1,956 2,000 $1,827 1,800 $1,915 $1,902 $1,684 1,600 1,400 1,200 $1,653 $1,496 1,000 800 600 400 $158 200 $407 $249 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2014 Outstanding Freddie Mac Mortgage-Related Securities and Other Guarantee Commitments Mortgage-related Investments Portfolio (PCs, REMICs and Other Structured Securities) Mortgage-related Investments Portfolio (Non-Freddie Mac Mortgage-Related Securities & Mortgage Loans) Note: Totals may not add due to rounding. Source: Freddie Mac. 2014 data as of October 31, 2014. Figures for 2014 are subject to change. © Freddie Mac 29 Freddie Mac’s GSE market share Freddie Mac share of PC/MBS issuances 50 45 43% 41% 40% 40 37% 38% 38% 35 35% 35% 2011 2012 30 2007 2008 2009 2010 2013 YTD 2014 Source: Freddie Mac and Fannie Mae Monthly Volume Summaries. 2014 data as of October 31, 2014. Freddie Mac Monthly Volume Summary figures for 2014 are subject to change. © Freddie Mac 30 Freddie Mac’s single-family credit guarantee portfolio by region1 North Central 17% Northeast West 26% 29% Southwest 12% Southeast 16% 1 Based on the unpaid principal balance of the single-family credit guarantee portfolio, which includes unsecuritized single-family mortgage loans held by the company on its consolidated balance sheets and those underlying Freddie Mac mortgage-related securities, or covered by the company's other guarantee commitments. Source: Freddie Mac. Data as of September 30, 2014. © Freddie Mac 31 Single-family mortgage market and Freddie Mac delinquency rates Single-family Serious Delinquency Rates 32 Seriously Delinquent (%) 28 24 20 18.29% 16 12 8 4.65% 2.68% 1.96% 4 0 Sep-10 Mar-11 Sep-11 Mar-12 Total Mortgage Market 1 Sep-12 1 Prime Mar-13 Sep-13 1 Subprime Mar-14 Freddie Mac Sep-14 2 1 Source: National Delinquency Survey from the Mortgage Bankers Association. Categories represent first lien single-family loans. 2 See “MD&A – RISK MANAGEMENT – Credit Risk – Mortgage Credit Risk – Single-Family Mortgage Credit Risk – Credit Performance – Delinquencies” in Freddie Mac’s Form 10-K for the year ended December 31, 2013, for information about the company’s reported delinquency rates. © Freddie Mac 32 Estimated current LTV ratio of our single-family credit guarantee portfolio Weighted Average Estimated Loan-to-Value1 Ratio of Our Single-family Credit Guarantee Portfolio Adjusted to Reflect Current Market Values Weighted Average Estimated Current LTV Ratio (Percent) 80% 80 77% 78% 75% 75 72% 70 69% 67% 65 63% 60 56% 57% 2005 2006 55 2007 2008 2009 2010 2011 2012 2013 YTD 2014 1 Based on the unpaid principal balance of the single-family credit guarantee portfolio, excluding Other Guarantee Transactions for which the loan characteristics data are not available. Current LTV ratios are management estimates, which are updated on a monthly basis. Current market values are estimated by adjusting the value of the property at origination based on changes in the market value of homes in the same geographical area since that time. Source: Freddie Mac. 2014 data as of September 30, 2014. © Freddie Mac 33 Risk characteristics of our single-family credit guarantee portfolio Estimated Current Loan-to-Value Ratio1,2 (Percent) Above 100 to 120 5% Credit Score1,3 Above 120 2% 620 to 659 6% Above 90 to 100 7% Less than 620 3% 660 to 699 13% Above 80 to 90 11% 60 and below 38% 700 to 739 20% 740 and above 58% Above 70 to 80 19% Above 60 to 70 18% 1 Based on the unpaid principal balance of the single-family credit guarantee portfolio, excluding Other Guarantee Transactions for which the loan characteristics data are not available. 2 Current LTV ratios are management estimates, which are updated on a monthly basis. Current market values are estimated by adjusting the value of the property at origination based on changes in the market value of homes in the same geographical area since that time. 3 Credit score data is at the time of mortgage loan origination or Freddie Mac’s purchase and is based on FICO scores. Source: Freddie Mac. Data as of September 30, 2014. © Freddie Mac 34 Single-family credit quality - purchases Weighted Average Original LTV Ratio1 Weighted Average Credit Score2 Percent (%) 97 756 76 91 756 755 755 77 70 70 67 83 71 80 77 77 66 67 749 762 75 757 744 759 758 756 76 68 747 67 748 744 740 738 727 712 2009 2010 2011 Relief refinance (includes HARP) 2012 All other 2013 YTD 2014 Total purchases 2009 2010 2011 Relief refinance (includes HARP) 2012 2013 All other YTD 2014 Total purchases 1 Original LTV ratios are calculated as the unpaid principal balance (UPB) of the mortgage Freddie Mac guarantees including the credit-enhanced portion, divided by the lesser of the appraised value of the property at the time of mortgage origination or the mortgage borrower’s purchase price. Second liens not owned or guaranteed by Freddie Mac are excluded from the LTV ratio calculation. The existence of a second lien mortgage reduces the borrower’s equity in the home and, therefore, can increase the risk of default. 2 Credit score data is based on FICO scores at the time of loan origination or Freddie Mac’s purchase and may not be indicative of the borrowers’ current creditworthiness. FICO scores can range between approximately 300 to 850 points. © Freddie Mac 35 Single-family credit quality – credit guarantee portfolio Concentration of Credit Risk Serious Delinquency Rates Percent (%) as of September 30, 2014 Percent (%) 9.15 8.77 8.25 8 14 7.93 7.66 3.11 3.12 2.07 0.66 1.96 0.70 8 20 83 58 7 2 % of Portfolio % of Credit Losses 3.29 3.24 2.58 2.39 0.62 0.64 0.25 0.24 3Q 2013 4Q 2013 3.16 2.20 0.65 0.24 1Q 2014 0.23 0.23 2Q 2014 3Q 2014 New single-family book 1 HARP and other relief refinance loans New single-family book 1 HARP and other relief refinance loans 2005 - 2008 legacy single-family book Pre-2005 legacy single-family book 2005 - 2008 legacy single-family book Pre-2005 legacy single-family book Total 1 Loans acquired after 2008. Excludes HARP and other relief refinance loans. © Freddie Mac 36 Investment Management Business © Freddie Mac © Freddie Mac 37 Mortgage-related investments portfolio UPB $ Billions $900 $900 $867 $830 $810 $784 $800 $755 $729 $697 $700 $653 $600 $650 $558 $553 2 $500 $461 $470 Portfolio Balance at 10/31/2014: $400 $407 Billion $300 3/31/09 6/30/09 9/30/09 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 Mortgage-related investments portfolio ending balance1 Mortgage-related investments portfolio limit (changes on Dec. 31 annually) 2,3 1 Represents the unpaid principal balance (UPB) of the company’s mortgage-related investments portfolio. The mortgage-related investments portfolio is determined without giving effect to the January 1, 2010 change in accounting standards related to the transfer of financial assets and consolidation of variable interest entities (VIEs). 2 The mortgage-related investments portfolio limit as of December 31, 2014 under the Purchase Agreement, as amended on August 17, 2012. 3 Under FHFA regulation and the Purchase Agreement with Treasury, as amended on August 17, 2012, the company’s mortgage-related investments portfolio is subject to a cap beginning in 2013 that decreases by 15% each year until the cap reaches $250 billion. Prior to the August 17, 2012 amendment, the portfolio was subject to a cap that decreased by 10% each year. Source: Freddie Mac. Figures for 2014 are subject to change. © Freddie Mac 38 Mortgage-related investments portfolio composition Mortgage-related Investments Portfolio: $414 Billion Mortgage Loans 40% ($164.4 B) Agency 4% ($15.7 B) PCs, REMICs and Other Structured Securities 39% ($161.7 B) Non-Agency Backed by Subprime Loans 7% ($30.7 B) Other Non-Agency 6% ($26.1 B) Non-Agency Backed by Alt-A and Other Loans 2% ($6.5 B) Non-Agency Backed by Option ARM Loans 2% ($8.5 B) Note: Dollars and percentages may not add due to rounding. The mortgage-related investments portfolio is determined without giving effect to the January 1, 2010 change in accounting standards related to the transfer of financial assets and consolidation of variable interest entities (VIEs). Source: Freddie Mac. Data based on UPBs as of September 30, 2014. © Freddie Mac 39 Freddie Mac’s mortgage-related investments portfolio product types Mortgage-Related Investments Portfolio1 Non-Freddie Mac MBS1 Subprime 35% Mortgage Loans 40% Fannie Mae 18% Non-Freddie Mac MBS 21% Freddie Mac Multi-class REMICs and Other Structured Securities 15% Freddie Mac Single-class PCs 24% CMBS 26% Ginnie Mae <1% Alt-A & Other 7% Option ARM 10% Obligations of State and Political Subdivisions 3% Manufactured Housing 1% 1 Based on unpaid principal balances. The mortgage-related investments portfolio is determined without giving effect to the January 1, 2010 change in accounting standards related to the transfer of financial assets and consolidation of variable interest entities (VIEs). Note: Percentages may not add due to rounding. Source: Freddie Mac. Data as of September 30, 2014 © Freddie Mac 40 Interest-rate risk measures Average Monthly PMVS-Level1 Average Monthly Duration Gap2 $ Millions Months 6 300 5 4 3 $207 2 200 1 $146 0 (1) $95 100 $60 $93 $56 $55 $28 $25 $38 $26 $23 $9 (2) (3) (4) (5) (6) 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 13 13 13 14 14 14 14 14 14 14 14 14 14 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 13 13 13 14 14 14 14 14 14 14 14 14 14 1 PMVS is an estimate of the change in the market value of Freddie Mac’s net assets from an instantaneous 50 basis point shock to interest rates, assuming no rebalancing actions are undertaken and assuming the mortgage-to-LIBOR basis does not change. PMVS-Level or PMVS-L measures the estimated sensitivity of the company’s portfolio market value to parallel movements in interest rates. 2 Duration gap measures the difference in price sensitivity to interest rate changes between Freddie Mac’s assets and liabilities, and is expressed in months relative to the market value of assets. Source: Freddie Mac. 2014 data as of October 31, 2014. Figures for 2014 are subject to change. © Freddie Mac 41 Multifamily Business © Freddie Mac © Freddie Mac 42 Multifamily market rental vacancy rates Percent 9 8 7 6 5 4.2% 4 3 2 1 0 1990 1993 1997 2000 2004 2007 2011 2014 Source: Reis U.S. Metro data. 2014 data as of September 30, 2014. © Freddie Mac 43 Apartment price index vs. Freddie Mac house price index U.S. Property Value Index (2000 = 100) 170 Freddie Mac House Price Index1 160 11% Down 3% Down 150 140 130 120 110 NCREIF Apartment Index 100 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 The Freddie Mac House Price Index for the U.S. is a value-weighted average of the state indexes where the value weights are based on Freddie Mac’s single-family credit guarantee portfolio. Other indices of home prices may have different results, as they are determined using different pools of mortgage loans and calculated under different conventions. Source: Freddie Mac House Price Index, National Council of Real Estate Investment Fiduciaries. 2014 data as of September 30, 2014. © Freddie Mac 44 Multifamily total market originations $Billions $220 Multifamily Mortgage Originations (Billions of Dollars) Forecast $210 $200 $185 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: FFIEC (HMDA), OTS Thrift Financial Report, ACLI Investment Bulletin, MBA Commercial Mortgage Banker Origination Survey, Freddie Mac’s Office of the Chief Economist. Note: Estimates and forecasts by the Office of the Chief Economist do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. © Freddie Mac 45 Multifamily business volume and portfolio composition Multifamily New Business Volume Total Multifamily Portfolio $ Billions UPB $ Billions $7 $7 $154 $164 $169 $180 $177 $167 $162 $135 $5 $4 $3 3Q13 4Q13 1Q14 2Q14 3Q14 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 9/30/14 MF unsecuritized loan portfolio MF investment securities portfolio MF guarantee portfolio 1 1 Primarily K-Deals. © Freddie Mac 46 Multifamily mortgage portfolio attributes1 $ Billions Deliquency Rate Credit Enhanced $79.5 0.03% Non-Credit Enhanced $55.7 0.02% $135.2 0.03% UPB At September 30, 2014 Total Year of Acquisition or Guarantee Current Loan Size $ Billions as of September 30, 2014 $ Billions as of September 30, 2014 $74.6 $29.3 $23.0 $51.5 $22.5 $15.2 $11.6 $13.0 $10.3 $10.3 $6.1 2007 and Prior 2008 2009 2010 2011 2012 2013 2014 > $25M > $5M & <=$25M > $3M & <= $5M $2.8 > $750K & <= $3M $0.2 <= $750K 1 Based on the unpaid principal balance (UPB) of the multifamily mortgage portfolio. © Freddie Mac 47 Multifamily market and Freddie Mac delinquency rates Percent 14 12 10 8 6 4 2 0 2Q10 4Q10 2Q11 Freddie Mac (60+ day) 4Q11 1 MF CMBS Market (60+ day) 2Q12 4Q12 2Q13 4Q13 2Q14 1.59% 0.61% 0.07% 0.02% FDIC Insured Institutions (90+ day) ACLI Investment Bulletin (60+ day) 1 See “MD&A – RISK MANAGEMENT – Credit Risk – Mortgage Credit Risk – Multifamily Mortgage Credit Risk ” in Freddie Mac’s Form 10-K for the year ended December 31, 2013, for information about the company’s reported multifamily delinquency rate. The multifamily delinquency rate at September 30, 2014 was 0.03%. Source: Freddie Mac, FDIC Quarterly Banking Profile, TREPP (CMBS multifamily 60+ delinquency rate, excluding REOs), American Council of Life Insurers (ACLI). Non-Freddie Mac data is not yet available for the third quarter of 2014. © Freddie Mac 48 Multifamily portfolio net charge-offs1 Basis Points 12 10 8 6 4 2 0 3Q 2006 3Q 2007 3Q 2008 3Q 2009 3Q 2010 3Q 2011 3Q 2012 3Q 2013 3Q 2014 1 Data point for each quarter equals sum of previous four quarters of net charge-offs, divided by the average multifamily loan portfolio and guarantee portfolio balance. Source: Freddie Mac. Data as of September 30, 2014. © Freddie Mac 49 Multifamily K-deal securities Multifamily K Certificates are regularly-issued structured pass-through securities backed by multifamily mortgage loans. Approximately $89 billion1 of securities have been issued since the start of the K-deal program in 2008. As of October 31, 2014, two CME2 loans were delinquent 60 days or more. 1 Total UPB represents the total collateral UPB associated with each transaction, including the portion Freddie Mac does not guarantee. 2 Reflects performance of K-deals backed by Capital Markets Execution issued since 2008. Note: Additional information is provided on http://www.freddiemac.com/multifamily/investors/kcerts.html. Source: Freddie Mac. © Freddie Mac 50 Multifamily securitization volume K-Deal Securitization Volume1 UPB $ Billions $28.0 $21.2 $17.3 $13.7 $6.4 $2.1 2009 2010 2011 2012 2013 YTD 20142 YTD 2009 2010 2011 2012 2013 20142 Total Total UPB1 $2.1 $6.4 $13.7 $21.2 $28.0 $17.3 $88.7 K-Deal Transactions 2 6 12 17 19 14 70 1 Total UPB represents the total collateral UPB of multifamily loans sold via Freddie Mac’s K Certificate transactions, including the portion Freddie Mac does not guarantee. 2 Data as of November 30, 2014. Note: Totals may not add due to rounding. © Freddie Mac 51 Multifamily K-deal structure K-deals include guaranteed K-Certificates and interest-only classes. The related underlying private label trust includes unguaranteed mezzanine, subordinate and interest-only bonds. In a typical K-deal, the private-label securities that back the K-Certificates are generally rated AAA. Freddie Mac sells loans to a third-party depositor Loans deposited into the third-party trust by the depositor Freddie Mac acquires Guaranteed Bonds and deposits them into a Freddie Mac trust Freddie Mac sells guaranteed K-Certificates backed by the Guaranteed Bonds Senior Investors Unguaranteed Mezzanine Bonds Mezzanine Investors Unguaranteed Subordinate Bonds Subordinate Investors © Freddie Mac 52 Debt Funding Program © Freddie Mac © Freddie Mac 53 Freddie Mac’s total debt outstanding ($ Billions) Short Term Reference Bills® & Discount Notes Medium Term Notes (MTNs) MTN Callable Callables with Expired Options MTN Other Freddie Notes ® USD Reference Notes® €Reference Notes ® Total Reference Notes® Other $118.5 $137.8 $117.8 122.1 99.0 100.0 94.2 11.7 7.7 7.0 9.0 10.3 137.5 142.0 102.2 71.7 55.8 12.4 4.2 1.2 0.8 0.1 $276.0 $209.5 $181.4 $160.4 $239.5 $238.1 $225.9 $190.4 $157.7 1.6 1.4 1.0 0.5 - $241.1 $239.5 - - Structured Agency Credit Risk Debt Notes - - Total Debt Outstanding YTD 2014 130.3 Mortgage-Linked Amortizing Notes® Subordinated Debt 2013 2012 $161.3 $194.9 $291.9 Total MTNs Reference Notes 2011 2010 Instrument Type $226.8 $190.9 $157.7 $1.9 $1.0 $0.6 $1.1 $5.9 - $0.9 $0.6 $0.6 $0.6 $0.6 $728.8 $677.5 $557.3 $512.7 $443.0 Note: Totals may not recalculate due to rounding. Excludes debt securities of consolidated trusts held by third parties. All figures represent par 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. For non-dollar denominated instruments, the U.S. dollar amounts reflected are based on the exchange rate at issuance. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-term notes that have original maturities of one year or less which are categorized as long-term debt. Source: Freddie Mac. 2014 data as of November 30, 2014. © Freddie Mac 54 Freddie Mac’s outstanding debt by type $ Billions 600 500 400 300 200 100 0 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Discount Notes Term Callable Debt Term Bullet Debt Note: Excludes debt securities of consolidated trusts held by third parties. All figures represent par amounts in USD billions based on settlement date. These figures could differ significantly from proceeds, amortized principal amount and book value figures, particularly for zero-coupon securities. Source: Freddie Mac. © Freddie Mac 55 Debt maturity profile $ Billions 180 160 140 120 $107 100 80 60 40 $59 20 0 $10 $11 2014 2015 2016 2017 2018 2019 Long-term 2020 2021 2022 2023 2024 2025+ Short-term Note: Totals may not recalculate due to rounding. Outstanding balance using par amounts based on settle date. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-term notes that have original maturities of one year or less are categorized as long-term debt. Excludes debt securities of consolidated trusts held by third parties. Source: Freddie Mac. Data as of November 30, 2014. © Freddie Mac 56 Debt maturity profile by quarter $ Billions 80 70 60 50 $54 40 30 $11 $36 20 $6 $10 10 $11 $15 4Q14 1Q15 $21 $14 $9 0 2Q15 Long-term 3Q15 4Q15 Short-term Note: Totals may not recalculate due to rounding. Outstanding balance using par amounts based on settle date. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-term notes that have original maturities of one year or less are categorized as long-term debt. Excludes debt securities of consolidated trusts held by third parties. Source: Freddie Mac. Data as of November 30, 2014. © Freddie Mac 57 Short-term debt balances Total Short-term Debt Outstanding as a % of Total Debt Outstanding Total Short-term Debt Outstanding $ Billions 350 40% 300 35% 250 30% 200 150 25% Average = 25% 100 20% 50 0 3Q05 1Q07 3Q08 1Q10 3Q11 1Q13 3Q14 15% 3Q05 1Q07 3Q08 1Q10 3Q11 1Q13 3Q14 Note: Outstanding balance using par amounts based on settle date. Short-term debt is debt with an original maturity of less than or equal to one year, except certain medium-term notes that have original maturities of one year or less are categorized as long-term debt. Excludes debt securities of consolidated trusts held by third parties. Source: Freddie Mac. 2014 data as of September 30, 2014. © Freddie Mac 58 Freddie Mac callable debt issued and called Callable Debt $ Billions 30 2-Year UST Yield 0.60 2-Year UST Yield Issued 20 0.50 $11 $10 10 $5 $7 $8 $8 $7 $9 $8 $6 $4 $1 $3 $6 $4 $4 $4 $5 $5 $4 $5 $5 $3 $4 $5 0.40 0 (10) ($7) ($6) ($7) ($7) ($1) ($0) ($1) ($2) ($3) ($5) ($4) ($5) ($5) ($8) ($9) ($9) ($11) ($4) ($2) ($4) ($2) ($1) 0.30 ($9) ($11) ($7) 0.20 (20) Called (30) 0.10 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Note: All figures represent par amounts in USD billions based on the trade date. Source: Freddie Mac. Data as of November 30, 2014. © Freddie Mac 59 Single-family Securitization © Freddie Mac © Freddie Mac 60 Composition of bond market debt outstanding Outstanding Public and Private Bond Market Debt – $38.2 Trillion Municipal ($3.7) 10% Corporate Debt 6 ($7.7) 20% Treasury 1 ($12.1) 32% Agency Debt 2 ($2.0) 5% 3 Money Market 5 ($2.7) Asset-Backed 4 7% ($1.4) 4% MBS ($8.7) 23% 1 Interest-bearing marketable coupon public debt. 2 Includes Freddie Mac, Fannie Mae, Federal Home Loan Banks, Farmer Mac, the Farm Credit System, and federal budget agencies (e.g. TVA). 3 Includes Ginnie Mae, Fannie Mae and Freddie Mac mortgage-backed securities and CMOs, CMBS and private-label MBS/CMOs. 4 Includes auto, credit card, home equity, manufacturing, student loans and other USD-denominated CDOs are also included. 5 Includes commercial paper, bankers acceptances and large time deposits. 6 Includes all non-convertible debt, MTNs and Yankee bonds, but excludes CDs and federal agency debt. Note: Percentages may not add up to 100% due to rounding. Source: Securities Industry and Financial Markets Association as of June 30, 2014. © Freddie Mac 61 Freddie Mac’s mortgage-related securities products Mortgage-related Securities Products Outstanding $Billions 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 2000 2001 2002 REMICs 2003 2004 2005 2006 Reference REMIC 2007 2008 2009 T-deals/WLR 2010 Strips 2011 2012 2013 2014 YTD PCs Source: Freddie Mac. 2014 data as of September 30, 2014. © Freddie Mac 62 Composition of Freddie Mac’s single-family pass-through securities1 15-year fixed-rate 18% 30-year fixed-rate 2 75% Interest-only 2% Adjustable-rate3 4% FHA/VA <1% 1 Based on unpaid principal balances (UPB) of the securities. 2 Includes 20-year fixed-rate mortgage loans. 3 Portfolio balance includes $0.8 billion in UPB of option ARM mortgage loans as of September 30, 2014. Note: Percentages may not add up to 100% due to rounding. Source: Freddie Mac. Data as of September 30, 2014. © Freddie Mac 63 Single-family risk transfer transactions Structured Agency Credit Risk (STACR®) Debt Note Issuances Agency Credit Insurance StructureSM (ACISSM) Transactions $ Billions $ Millions $1.9 $1.0 $0.5 $553.9 $1.0 $0.6 No Transaction 3Q13 4Q13 1Q14 2Q14 3Q14 3Q13 $77.4 No Transaction 4Q13 1Q14 No Transaction 2Q14 3Q14 YTD 20141 Cumulative STACR Issuances $3.9 $5.0 ACIS Transactions $0.6 $0.6 $123.7 $181.7 $ Billions Reference Pool UPB2 1 2014 data as of September 30, 2014. 2 Includes the first loss risk held by Freddie Mac. © Freddie Mac 64 Estimated institutional holdings of Agency MBS $Billions 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Note: Agency MBS includes Freddie Mac, Fannie Mae and Ginnie Mae securities. Other investors include hedge funds, structured investment vehicles, pension funds, saving institutions, nonprofits and individuals. Source: Freddie Mac, Fannie Mae, Federal Reserve, Inside MBS & ABS, National Credit Union Administration, and the U.S. Treasury Department. Data as June 30, 2014. © Freddie Mac 65 Estimated demand for Agency mortgage-related securities $ Billions 250 200 150 100 50 0 (50) (100) 1/08 10/08 7/09 Comm Bank PT/CMO 4/10 1/11 Agency 10/11 Foreign 7/12 4/13 Treasury 1/14 10/14 Fed Note: Presents net purchases/sales of Agency mortgage-related securities by the listed institutions, excluding securitization activity. Comm Bank PT and Comm Bank CMO represent net purchases/sales of Agency mortgage-related securities by commercial banks through passthroughs and CMOs, respectively. Agency mortgage-related securities include securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. Source: Federal Reserve Board, Freddie Mac and Fannie Mae Monthly Volume Summaries, Treasury International Capital data, Federal Home Loan Banks, US Treasury Department, Federal Reserve Bank of New York. Data as of October 31, 2014. © Freddie Mac 66 Estimated Asia net flows into Agencies $ Billions 30 20 10 0 (10) (20) (30) 1/08 10/08 7/09 Japan China 4/10 Korea 1/11 10/11 Hong Kong 7/12 Taiwan 4/13 1/14 10/14 Singapore Note: Consists of agency mortgage-related and debt securities which include securities issued by Freddie Mac, Fannie Mae, Ginnie Mae, Federal Home Loan Banks, Farmer Mac, the Farm Credit System, and federal budget agencies (e.g. TVA). Source: Treasury International Capital data. Data as of October 31, 2014. © Freddie Mac 67 Agency CMO issuance Agency CMO Outstanding Agency CMO Issuance $ Billions $ Billions 1,400 500 1,200 400 1,000 300 800 600 200 400 100 200 0 0 2008 2009 2010 Freddie Mac 2011 2012 Fannie Mae 2013 Ginnie Mae YTD 2014 2008 2009 2010 Freddie Mac 2011 2012 Fannie Mae 2013 YTD 2014 Ginnie Mae Source: Bloomberg. 2014 data as of November 30, 2014. © Freddie Mac 68 Composition of collateral underlying Freddie Mac REMICs Balloon <1% Other 2% ARM 2% 15-year 13% 20-year 10% 30-year 74% Note: Percentages may not add up to 100% due to rounding. Source: Freddie Mac. Data as of November 30, 2014. © Freddie Mac 69 Freddie Mac structured finance securities1 Freddie Mac Collateral Description Bloomberg Ticker Outstanding Balance2 Series $354.3B Gold and 75 Day PCs REMICs Reference REMICs with Guaranteed Final T-Deals ReREMICs of Existing Multiclass Securities FHR 0001 – 4415 $50.8B Gold PCs FHRR R001 – R016 $2.9B Freddie Mac Owned New or Seasoned Private Label ABS FSPC T001 – T082 $9.9B FHS 001 – 341 $24.2B Gold and 75 Day PCs Strips K-Deals Excess Servicing Assets Freddie Mac Owned Multifamily Loans Held as Private Label ABS FHMS $15.1B K001 – K040 $73.8B M001 – M032 $5.0B FHM Municipal Bonds Secured by Multifamily M Certificates (Tax-Exempt) Tax-Exempt or Taxable (formerly referred to as Multifamily Variable Multifamily Affordable FHMT Rate Certificates ) Housing Loans (Taxable) 1 Guaranteed as described in the applicable offering documents. 2 Outstanding balance reflects issuance through November 30, 2014. © Freddie Mac 70 Deal structure options REMIC Program Feature Benefit Callable PCs (CPC) Pass-through securities that are backed by a Giant PC and subject to a call option. In the event of a call, the callable class is paid off at par and the call class receives the underlying Giant PC. Callable REMIC Classes (CRC) Pass-through securities that are backed by a REMIC classes and subject to a call option. In the event of a call, the callable class is paid off at par and the call class receives the underlying REMIC class. Callable REMIC Classes may also be backed by a callable class of CPCs and will be retired upon redemption of the collateral. Guaranteed Maturity Class (GMC) GMC is a feature added to a REMIC class to provide a stated legal maturity date, at par, guaranteed by Freddie Mac. GMCs have a final payment date earlier than the latest date by which these Classes might be retired solely from payments on their underlying assets. IO/PO Strips • Floater/Inverse Floater Combinations Combinations of Floating Rate, Inverse Floating Rate, Floating Rate IO, Inverse Floating Rate IO certificates that permit holders to exchange classes for combinations of floating rate and inverse floater rate classes with various margins and caps. • Gold MACS Strip securities that are exchangeable for other classes of the same series having different class coupons or coupon formulas. Excess IO Strips (XSIO) Interest Only securities backed by Excess Servicing Spread held by mortgage servicers. Loan characteristics for the loans backing each issued XSIO security are pooled to mirror PC pooling practices. Modifiable And Combinable REMICs (MACR) Holders of a MACR Class can exchange all or part of the class for a predetermined proportionate interest in other specified REMIC or MACR classes, and vice versa. 1 1 Excess Servicing Spread is the excess of the Servicer retained mortgage servicing fee rate over the Freddie Mac minimum core servicing fee rate of 25 basis points. © Freddie Mac 71 Deal structure options (continued) REMIC Program Feature Benefit REMIC Unwinds Permits the holder of both the REMIC Residual class and 100% of all outstanding REMIC classes covered by the Residual class to exchange their REMIC interests for all collateral backing the REMIC. ReREMIC Permits the holder of any portion of an issued REMIC class to use that class as collateral to back a subsequent REMIC. Retail Classes Retail classes are designed primarily for individual investors and are typically issued and receive principal in $1,000 increments. Reverse REMIC Permits the holder of a pro-rata portion of all outstanding REMIC classes within a REMIC group to recombine their interests for a pro-rata portion of the underlying REMIC collateral. Single Group Residual Simplifies the REMIC Unwind feature for the holder of the Residual class and 100% of all outstanding REMIC classes issued a single REMIC Group. Holder exchanges its interests for all collateral backing the specific REMIC Group. Syndicated IO/PO Strips Collateral is stripped into separate Interest Only and Principal Only securities with transactions underwritten and distributed by a syndicate of dealers. © Freddie Mac 72 Safe Harbor Statements 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 may contain forward-looking statements, which may include statements pertaining to the conservatorship, the company’s current expectations and objectives for its single-family, multifamily and investment businesses, its loan workout initiatives and other efforts to assist the U.S. residential mortgage market, liquidity, 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 we guarantee, and results of operations and financial condition on a GAAP, Segment Earnings and fair value basis. Forwardlooking 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, 2013, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014 and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site 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. © Freddie Mac 23