OFFERING CIRCULAR

5,000,000 Shares

Variable Rate, Non-Cumulative

Freddie Mac V

Preferred Stock

Initial Dividend Rate: 5.97% (from November 5, 1999 through

December 31, 2004)

Variable Dividend Rate: 5-year CMT Rate

Dividend Rate Cap: 11%

Payment Dates: March 31, June 30, September 30 and

December 31 of each year, beginning

December 31, 1999

Dividend Rate Reset: As of January 1, 2005 and as of January 1

every Ñve years thereafter (based on

5-year CMT Rate determined two Business

Days prior)

Dividend Adjustment: Dividend amount subject to adjustment

upon certain adverse changes to

dividends-received deduction prior to

May 5, 2001

Liquidation Preference: $50 per share plus current dividends

Optional Redemption: On December 31, 2004 and on

December 31 every Ñve years thereafter

Issue Date: November 5, 1999

Listing: New York Stock Exchange (pending)

FREDDIE MAC'S OBLIGATIONS UNDER THE TERMS OF THE PREFERRED STOCK ARE OBLIGATIONS

OF FREDDIE MAC ONLY AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY,

THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY OF

THE UNITED STATES OTHER THAN FREDDIE MAC.

Initial Public Underwriting Proceeds to

OÅering Price(1) Discount Freddie Mac(1)(2)

Per Share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $50.00 $0.50 $49.50

Total(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $250,000,000 $2,500,000 $247,500,000

(1) Plus accrued dividends, if any, from November 5, 1999.

(2) Before deducting estimated expenses of $250,000 payable by Freddie Mac.

(3) Freddie Mac has granted the Underwriters an option to purchase up to an additional 750,000 shares to cover

overallotments. If all such shares are purchased, the total Initial Public OÅering Price, Underwriting Discount and

Proceeds to Freddie Mac will be $287,500,000, $2,875,000 and $284,625,000, respectively. See ""Underwriting.''

Goldman, Sachs & Co. Lehman Brothers

First Tennessee Bank NA

Blaylock & Partners, L.P.

The date of this OÅering Circular is November 2, 1999.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE

PREFERRED STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN

CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE

""UNDERWRITING.''

ADDITIONAL INFORMATION

This OÅering Circular should be read in conjunction with, and is qualiÑed in its entirety by:

‚ the CertiÑcate of Creation, Designation, Powers, Preferences, Rights, Privileges, QualiÑcations,

Limitations, Restrictions, Terms and Conditions (the ""CertiÑcate of Designation'') relating to the

Variable Rate, Non-Cumulative Preferred Stock (the ""Preferred Stock''), which will be in

substantially the form attached as Appendix A to this OÅering Circular;

‚ the press release and certain unaudited Ñnancial statements issued by Freddie Mac on October 19,

1999 attached as Appendix B to this OÅering Circular; and

‚ Freddie Mac's Information Statement dated March 31, 1999 and its Information Statement

Supplements dated May 14, 1999 and August 13, 1999 (together, the ""Information Statement''),

which are hereby incorporated by reference.

Freddie Mac furnishes its stockholders with annual reports containing Ñnancial information audited by

independent public accountants and quarterly reports containing unaudited Ñnancial information.

The shares of Preferred Stock are exempt from the registration requirements of the Securities Act of

1933 and are ""exempted securities'' within the meaning of the Securities Exchange Act of 1934. Accordingly,

no registration statement has been Ñled with the Securities and Exchange Commission, and Freddie Mac

does not Ñle periodic reports with the Securities and Exchange Commission.

Copies of Freddie Mac's most recent annual and quarterly reports and its most recent proxy statement are

available, and copies of the CertiÑcate of Designation as executed will be available, without charge, from

Shareholder Relations, Freddie Mac, 8200 Jones Branch Drive, McLean, VA 22102, telephone (800)

FREDDIE (800-373-3343).

Dividends paid on the Preferred Stock have no exemption under federal law from federal, state or local

taxation.

The distribution of this OÅering Circular and the oÅer, sale and delivery of the Preferred Stock in

certain jurisdictions may be restricted by law. Persons who receive this OÅering Circular should inform

themselves about and observe any such restrictions.

2
OFFERING SUMMARY

Issuer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Federal Home Loan Mortgage Corporation (""Freddie Mac'' or

the ""Corporation'').

Security OÅered ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000,000 shares (assuming the Underwriters' overallotment option is not exercised) of Variable Rate, Non-Cumulative Preferred

Stock (the ""Preferred Stock''), with a redemption price and

liquidation preference of $50 per share.

Dividends:

Initial Dividend Rate ÏÏÏÏÏÏÏÏÏÏÏÏ 5.97% per annum. Dividends will accrue at the Initial Dividend

Rate from November 5, 1999 through December 31, 2004. The

dividend rate will reset as of January 1, 2005 and as of January 1

every Ñve years thereafter (based on 5-year CMT Rate determined two Business Days prior).

Variable Dividend Rate ÏÏÏÏÏÏÏÏÏÏ 5-year CMT Rate. For information about how and when the

5-year CMT Rate will be determined, see ""Description of Preferred Stock Ì Dividends.''

Rate Cap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11%

Calculation Agent ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Freddie Mac

FrequencyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Quarterly, when, as and if declared by the Board of Directors.

Payment Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ March 31, June 30, September 30 and December 31 of each year,

beginning December 31, 1999.

DRD Protection ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ If, prior to May 5, 2001, certain amendments to the Internal

Revenue Code of 1986, as amended (the ""Code''), are enacted

that reduce the percentage of the dividends-received deduction

below 70%, the amount of dividends payable in respect of the

Preferred Stock will be adjusted to oÅset the eÅect of such

reduction. However, no adjustment will be made to the extent that

the percentage of the dividends-received deduction is reduced

below 50%. Such adjustment may result in a dividend rate in

excess of 11% per annum.

PreferencesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock will be entitled to a preference, both as to

dividends and upon liquidation, over the common stock (and any

other junior stock) of Freddie Mac. The Preferred Stock will rank

on a parity, both as to dividends and upon liquidation, with other

currently outstanding series of Freddie Mac preferred stock.

Optional Redemption ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ On December 31, 2004 and on December 31 every Ñve years

thereafter, Freddie Mac will have the option to redeem the

Preferred Stock, in whole or in part, at the redemption price of $50

per share plus the amount that would otherwise be payable as the

dividend for the quarterly dividend period ending on the redemption date.

Liquidation Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ In the event of any dissolution or liquidation of Freddie Mac,

holders of the Preferred Stock will be entitled to receive, out of

any assets available for distribution to stockholders, up to $50 per

share plus the dividend for the then-current quarterly dividend

period accrued through the liquidation payment date.

Voting Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ None, except with respect to certain changes in the terms of the

Preferred Stock.

Preemptive and Conversion Rights ÏÏÏÏÏ None.

RatingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock is expected to be rated ""aa3'' by Moody's

Investors Service, Inc. (""Moody's'') and ""AA-'' by Standard &

Poor's Ratings Services (""S&P''). See ""Rating.''

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ To be added to the working capital of Freddie Mac and used for

general corporate purposes, including the purchase of residential

mortgages, the redemption of previously issued shares of preferred

stock, the repayment of outstanding debt and the repurchase of

outstanding shares of the Corporation's stock.

Transfer Agent, Dividend Disbursing

Agent and Registrar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ First Chicago Trust Company, New York, New York.

NYSE Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Application has been made to list the Preferred Stock on the New

York Stock Exchange (the ""NYSE'').

3
SUMMARY SELECTED FINANCIAL DATA

At or For the Nine

Months Ended

September 30, At or For the Year Ended December 31,

1999 1998 1998 1997 1996 1995 1994

(dollars in millions, except per share amounts)

BALANCE SHEET

Retained portfolio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 315,968 $ 216,522 $ 255,009 $ 164,421 $ 137,755 $ 107,424 $ 72,828

Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 364,885 $ 263,256 $ 321,421 $ 194,597 $ 173,866 $ 137,181 $ 106,199

Primary capital base(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 11,907 $ 10,034 $ 11,603 $ 8,215 $ 7,411 $ 6,546 $ 5,895

Adjusted total capital base(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 12,039 $ 10,194 $ 11,765 $ 8,736 $ 7,901 $ 7,179 $ 7,121

MORTGAGE PURCHASE AND FINANCING

ACTIVITIES

Mortgage purchasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 230,797 $ 198,879 $ 288,338 $ 121,490 $ 128,565 $ 98,386 $ 124,246

Number of mortgages purchased ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,758,190 1,696,297 2,396,651 1,085,046 1,232,540 934,890 1,256,566

PC issuances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 200,642 $ 180,408 $ 250,564 $ 114,258 $ 119,702 $ 85,877 $ 117,110

Mortgage Participation Certificates (""PCs'')(4) ÏÏ $ 738,581 $ 635,726 $ 646,459 $ 579,385 $ 554,260 $ 515,051 $ 491,325

INCOME STATEMENT

Net interest income on earning assets(5)ÏÏÏÏÏÏ $ 1,876 $ 1,390 $ 1,927 $ 1,631 $ 1,542 $ 1,298 $ 1,047

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏ $ 1,043 $ 978 $ 1,307 $ 1,298 $ 1,249 $ 1,185 $ 1,173

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,629 $ 1,232 $ 1,700 $ 1,395 $ 1,243 $ 1,091 $ 983

Earnings per common share:(6)

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.18 $ 1.70 $ 2.32 $ 1.90 $ 1.65 $ 1.42 $ 1.27

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.17 $ 1.68 $ 2.31 $ 1.88 $ 1.63 $ 1.41 $ 1.26

Dividends per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.45 $ 0.36 $ 0.48 $ 0.40 $ 0.35 $ 0.30 $ 0.26

Return on common equity(7)(8) ÏÏÏÏÏÏÏÏÏÏÏÏ 25.0% 24.3% 24.1% 23.3% 22.2% 21.9% 23.2%

(1) Excludes related purchase and sale premiums, discounts and deferred fees, reserve for losses on retained mortgages, and net

unrealized gain (loss) on available-for-sale guaranteed mortgage securities.

(2) ""Stockholders' equity'' plus the sum of ""Reserve for losses on retained mortgages'' and ""Reserve for losses on Mortgage Participation

CertiÑcates.''

(3) ""Primary capital base'' and ""Subordinated borrowings.''

(4) Includes Freddie Mac PCs held in the retained portfolio.

(5) In fourth quarter 1998, Freddie Mac changed its reporting for the preferred stock ownership interests and dividends associated with

its real estate investment trust (""REIT'') subsidiaries, which were formed in 1997. Under the revised reporting, the preferred stock

ownership interests in the REIT subsidiaries, previously reported as minority interest on Freddie Mac's Consolidated Balance Sheets,

are now included in debt securities. The related dividends paid by the REIT subsidiaries, previously reported as minority interest on

Freddie Mac's Consolidated Statements of Income, are now reported as interest expense on long-term debt. Amounts for 1997 have

been restated to reÖect this revised reporting.

(6) ""Earnings per common share-basic'' are computed based on weighted average common shares outstanding. ""Earnings per common

share-diluted'' are computed based on the total of weighted average common shares outstanding and the eÅect of dilutive common

equivalent shares outstanding.

(7) Calculated quarterly as ""Net income'' less preferred stock dividends, divided by the simple average of the beginning and ending

balances of ""Stockholders' equity,'' net of preferred stock (at redemption value).

(8) Year-to-date and annual computations reÖect the average of quarterly returns.

4
FREDDIE MAC

Freddie Mac is a shareholder-owned government-sponsored enterprise (""GSE'') chartered on July 24,

1970 pursuant to the Federal Home Loan Mortgage Corporation Act, Title III of the Emergency Home

Finance Act of 1970, as amended (the ""Freddie Mac Act''). Freddie Mac's statutory purposes are:

‚ to provide stability in the secondary market for residential mortgages

‚ to respond appropriately to the private capital market

‚ to provide ongoing assistance to the secondary market for residential mortgages (including

activities relating to mortgages on housing for low- and moderate-income families involving a

reasonable economic return that may be less than the return earned on other activities)

‚ to promote access to mortgage credit throughout the United States (including central cities, rural

areas and other underserved areas) by increasing the liquidity of mortgage investments and

improving the distribution of investment capital available for residential mortgage Ñnancing. 

Neither the United States nor any agency or instrumentality of the United States (other than Freddie

Mac) is obligated, either directly or indirectly, to fund the mortgage purchase or Ñnancing activities of Freddie

Mac.

The principal activity of Freddie Mac consists of the purchase of Ñrst lien, conventional, residential

mortgages. Its mortgage purchases are primarily Ñnanced by sales of single-class guaranteed mortgage-related

securities, primarily various types of mortgage participation certiÑcates (""PCs''). Freddie Mac guarantees the

payment of interest due on PCs and the principal of the underlying mortgages. Freddie Mac also Ñnances

mortgage purchases with debt securities, other liabilities and equity capital. In addition, Freddie Mac invests

in mortgages and mortgage-related securities, and engages in other activities that support its mortgage

purchase, investment and Ñnancing activities.

Freddie Mac is subject to two primary types of risk in the conduct of its business: credit risk associated

with the mortgages it purchases and the institutions with which it does business; and interest-rate risk that

principally results from mismatches between the maturities of the assets and liabilities associated with its

mortgage portfolio. Freddie Mac also is subject to operational risk associated with losses that may occur due to

human error, system failure (including failures related to the Year 2000 date change), fraud or circumvention

of internal controls. For a discussion of the impact and management of these risks, see ""Management's

Discussion and Analysis of Financial Condition and Results of Operations'' in the Information Statement.

The principal oÇce of Freddie Mac is in McLean, Virginia. Freddie Mac has regional oÇces that are

primarily responsible for the performance of various marketing activities and quality control procedures. These

oÇces are located in Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; McLean, Virginia; New York, New

York and Woodland Hills, California.

A more detailed discussion of the business of the Corporation appears under ""Business'' in the

Information Statement. The preceding description of the business of Freddie Mac is qualiÑed in its entirety by

that discussion.

USE OF PROCEEDS

The Corporation will apply the net proceeds from the sale of Preferred Stock to its general funds to be

used for general corporate purposes, including the purchase of residential mortgages, the redemption of shares

of preferred stock previously issued by the Corporation, the repayment of outstanding debt and the repurchase

of outstanding shares of the Corporation's stock. The precise amounts and timing of the application of the

proceeds will depend upon the funding requirements of the Corporation.

The Corporation engages in Ñnancing transactions continuously. The amount and nature of such

transactions are dependent upon a number of factors, including the volume of mortgage prepayments and

mortgages purchased by the Corporation, as well as general market conditions.

5
CAPITALIZATION

The following table sets forth the capitalization of the Corporation at September 30, 1999 and as adjusted

to reÖect the sale of the Preferred Stock oÅered hereby. This table should be read in conjunction with the

Ñnancial statements of the Corporation and other information contained in the Information Statement.

September 30, 1999

As

Actual Adjusted(1)

(dollars in millions)

Debt Securities:

Notes and bonds payable due within one year:

Discount notes, medium-term notes and securities sold under

agreements to repurchase ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $165,029 $165,029

Current portion of long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,527 8,527

173,556 173,556

Notes and bonds payable due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167,458 167,458

Total debt securities, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 341,014 341,014

Subordinated Borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132 132

Stockholders' Equity(2):

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 250

6.125% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(4) 287 287

6.14% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(5) 600 600

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(6) 150 150

5% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(7) ÏÏÏÏ 400 400

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220 220

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(8) ÏÏ 400 400

5.3% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(9) ÏÏ 200 200

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(10) 150 150

5.79% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(11) 250 250

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(12) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 250

Common stock, $0.21 par value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 152

Additional paid-in capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484 481

Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,287 9,287

Net unrealized gain on certain investments reported at fair value, net of taxes ÏÏÏÏÏÏÏÏÏÏÏ (908) (908)

Less: treasury stock, at cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (782) (782)

Total stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,140 11,387

Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $352,286 $352,533

(1) ""As adjusted'' reÖects anticipated proceeds of $250 million from the issuance of 5 million shares of Preferred Stock and the

deduction of $3 million in estimated transaction costs. The actual costs may diÅer.

(2) Preferred stock amounts reÖect redemption values as shown. Costs associated with the issuance of preferred stock are included in

additional paid-in capital.

(3) Optional redemption on or after June 30, 2001.

(4) Optional redemption on or after December 31, 2001.

(5) Optional redemption on or after June 30, 2002.

(6) Optional redemption on or after October 27, 1998.

(7) Optional redemption on or after March 31, 2003.

(8) Optional redemption on or after September 30, 2003.

(9) Optional redemption on or after October 30, 2000.

(10) Optional redemption on or after March 31, 2004.

(11) Optional redemption on or after June 30, 2009.

(12) Optional redemption on December 31, 2004 and on December 31 every Ñve years thereafter.

See Notes 7 and 8 to the Consolidated Financial Statements included in the Information Statement for

further information about Freddie Mac's debt securities, subordinated borrowings and stockholders' equity.

Amounts of debt securities and subordinated borrowings are net of unamortized discounts, premiums and

hedging gains or losses.

The Corporation engages in transactions aÅecting stockholders' equity (including repurchases of its

common stock and redemptions of its preferred stock) from time to time and issues or retires debentures,

notes and other debt obligations on an ongoing basis. Accordingly, on any date subsequent to September 30,

1999, stockholders' equity may diÅer, and the amount of debt obligations outstanding will diÅer, and may

diÅer substantially, from the Ñgures contained in the capitalization table above.

6
SELECTED FINANCIAL DATA

The following selected Ñnancial data for the years 1994 through 1998 have been summarized or derived from

the audited consolidated Ñnancial statements or the internal accounting records of the Corporation. These data are

qualiÑed in their entirety by, and should be read in conjunction with, the detailed information, audited consolidated

Ñnancial statements and notes to consolidated Ñnancial statements that are presented in the Information Statement.

The following selected Ñnancial data for the nine months ended September 30, 1999 and September 30, 1998 have

been summarized or derived from unaudited consolidated Ñnancial statements (which are included in Appendix B

to this OÅering Circular) or from internal accounting records, but in the opinion of management of the Corporation,

all adjustments necessary for a fair presentation have been included. Adjustments included herein are of a normal,

recurring nature.

At or For the Nine

Months

Ended September 30, At or For the Year Ended December 31,

1999 1998 1998 1997 1996 1995 1994

(dollars in millions, except per share amounts)

Balance Sheet

Retained portfolio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 315,968 $ 216,522 $ 255,009 $ 164,421 $ 137,755 $ 107,424 $ 72,828

Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 364,885 $ 263,256 $ 321,421 $ 194,597 $ 173,866 $ 137,181 $ 106,199

Debt securities, net(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 341,014 $ 236,387 $ 287,234 $ 172,321 $ 156,491 $ 119,328 $ 92,053

Total liabilities(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 353,191 $ 253,361 $ 309,978 $ 186,154 $ 166,271 $ 130,297 $ 99,368

Capital base: Stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 11,140 $ 9,288 $ 10,835 $ 7,521 $ 6,731 $ 5,863 $ 5,162

Reserve for mortgage losses(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 767 746 768 694 680 683 733

Primary capital baseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 11,907 $ 10,034 $ 11,603 $ 8,215 $ 7,411 $ 6,546 $ 5,895

Subordinated borrowingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132 160 162 521 490 633 1,226

Adjusted total capital base ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 12,039 $ 10,194 $ 11,765 $ 8,736 $ 7,901 $ 7,179 $ 7,121

Mortgage Participation CertiÑcates (""PCs'')(4)ÏÏÏÏÏÏÏ $ 738,581 $ 635,726 $ 646,459 $ 579,385 $ 554,260 $ 515,051 $ 491,325

Freddie Mac PCs held in the retained portfolio ÏÏÏÏÏÏÏ $ 209,368 $ 145,039 $ 168,108 $ 103,400 $ 81,195 $ 56,006 $ 30,670

Primary capital ratio(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.33% 1.33% 1.45% 1.23% 1.15% 1.10% 1.04%

Adjusted total capital ratio(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.35% 1.35% 1.47% 1.30% 1.22% 1.20% 1.26%

Return on common equity(7)(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.0% 24.3% 24.1% 23.3% 22.2% 21.9% 23.2%

Return on average assets and contingencies(8)(9) ÏÏÏÏÏ 0.26% 0.23% 0.24% 0.21% 0.20% 0.20% 0.18%

Mortgage Purchase and Financing Activities

Mortgage purchasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 230,797 $ 198,879 $ 288,338 $ 121,490 $ 128,565 $ 98,386 $ 124,246

Number of mortgages purchased ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,758,190 1,696,297 2,396,651 1,085,046 1,232,540 934,890 1,256,566

PC issuances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 200,642 $ 180,408 $ 250,564 $ 114,258 $ 119,702 $ 85,877 $ 117,110

Structured Securitizations(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 103,817 $ 108,044 $ 135,162 $ 84,366 $ 34,145 $ 15,372 $ 73,131

Long-term debt:(2) Issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 93,484 $ 41,587 $ 63,789 $ 35,091 $ 33,852 $ 29,643 $ 22,744

Retired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (21,741) (43,304) (54,708) (22,091) (20,819) (11,082) (6,462)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 71,743 $ (1,717) $ 9,081 $ 13,000 $ 13,033 $ 18,561 $ 16,282

Income Statement

Net interest income on earning assets(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,876 $ 1,390 $ 1,927 $ 1,631 $ 1,542 $ 1,298 $ 1,047

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,043 978 $ 1,307 $ 1,298 $ 1,249 $ 1,185 $ 1,173

Income before income taxes and extraordinary itemÏÏÏÏ $ 2,337 $ 1,707 $ 2,356 $ 1,964 $ 1,797 $ 1,586 $ 1,482

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,629 $ 1,232 $ 1,700 $ 1,395 $ 1,243 $ 1,091 $ 983

Earnings per common share:(11) Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.18 $ 1.70 $ 2.32 $ 1.90 $ 1.65 $ 1.42 $ 1.27

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.17 $ 1.68 $ 2.31 $ 1.88 $ 1.63 $ 1.41 $ 1.26

Weighted average common shares outstanding

(in thousands):(11)

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 695,867 677,839 679,790 684,937 709,453 721,288 722,663

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 700,421 682,717 684,658 691,701 714,878 725,114 726,108

Dividends per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.45 $ 0.36 $ 0.48 $ 0.40 $ 0.35 $ 0.30 $ 0.26

Dividend payout ratio on common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.63% 21.15% 20.65% 21.08% 21.26% 21.09% 20.47%

Ratio of earnings to Ñxed charges(2)(12) ÏÏÏÏÏÏÏÏÏÏÏÏ 1.16:1 1.17:1 1.16:1 1.17:1 1.19:1 1.23:1 1.31:1

Ratio of earnings to combined Ñxed charges and

preferred stock dividends(2)(12) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.15:1 1.15:1 1.15:1 1.16:1 1.18:1 1.22:1 1.30:1

(1) Excludes related purchase and sale premiums, discounts and deferred fees, reserve for losses on retained mortgages, and net unrealized gain (loss) on

available-for-sale guaranteed mortgage securities.

(2) In fourth quarter 1998, Freddie Mac changed its reporting for the preferred stock ownership interests and dividends associated with its REIT

subsidiaries, which were formed in 1997. Under the revised reporting, the preferred stock ownership interests in the REIT subsidiaries previously

reported as minority interest on Freddie Mac's Consolidated Balance Sheets, are now included in debt securities. The related dividends paid by the

REIT subsidiaries, previously reported as minority interest on Freddie Mac's Consolidated Statements of Income, are now reported as interest expense

on long-term debt. Amounts for 1997 have been restated to reÖect this revised reporting.

(3) ""Reserves for losses on retained mortgages'' and ""Reserves for losses on Mortgage Participation CertiÑcates.''

(4) Includes Freddie Mac PCs held in the retained portfolio.

(5) ""Primary capital base'' divided by the sum of ""Total assets'' and ""PCs'' less ""Freddie Mac PCs held in the retained portfolio.''

(6) ""Adjusted total capital base'' divided by the sum of ""Total assets'' and ""PCs'' less ""Freddie Mac PCs held in the retained portfolio.''

(7) Calculated quarterly as ""Net income'' less preferred stock dividends, divided by the simple average of the beginning and ending balances of

""Stockholders' equity,'' net of preferred stock (at redemption value).

(8) Year-to-date and annual computations reÖect the average of quarterly returns.

(9) Calculated quarterly as ""Net income'' divided by the simple average of the beginning and ending balances of ""Total assets'' and ""PCs'' less ""Freddie

Mac PCs held in the retained portfolio.''

(10) Includes issuances of mortgage-related securities in which the cash Öows are structured into various classes having a variety of features, the majority of

which qualify for treatment as Real Estate Mortgage Investment Conduits (REMICs) under the Internal Revenue Code.

(11) ""Earnings per common share-basic'' are computed based on weighted average common shares outstanding. ""Earnings per common share-diluted'' are

computed based on the total of weighted average common shares outstanding and the eÅect of dilutive common equivalent shares outstanding.

(12) Earnings represent consolidated pre-tax income plus consolidated Ñxed charges, less interest capitalized. Fixed charges include interest (including

amounts capitalized) and the portion of net rental expense deemed representative of interest.

7
REGULATION AND GOVERNMENTAL RELATIONSHIPS

From time to time, Freddie Mac's statutory, structural and regulatory relationships with the federal

government may be subject to review or modiÑcation. While Freddie Mac's GSE status is often advantageous

for the Corporation, proposals have been advanced that could adversely aÅect Freddie Mac's fulÑllment of its

statutory purposes, as well as the Corporation's results of operations. A more detailed discussion of Freddie

Mac's regulatory and governmental relationships appears under ""Regulation and Governmental Relationships'' in the Information Statement.

DESCRIPTION OF PREFERRED STOCK

The description of the Preferred Stock set forth below does not purport to be complete and is qualiÑed in

its entirety by the CertiÑcate of Designation, which will be in substantially the form attached as Appendix A.

General

Under Û306(f) of the Freddie Mac Act, Freddie Mac is authorized to issue an unlimited number of

shares of preferred stock. The shares of Preferred Stock being oÅered hereby will have a par value of $1.00 per

share. The Preferred Stock will be created pursuant to the CertiÑcate of Designation.

First Chicago Trust Company, New York, New York, will be the transfer agent, dividend disbursing

agent and registrar for the Preferred Stock.

Authorized Issuance

Freddie Mac has been authorized by its Board of Directors to issue the shares of Preferred Stock oÅered

hereby (including any shares issued pursuant to the Underwriters' overallotment option). The Board of

Directors may increase the authorized number of shares at any time, without the consent of the holders of

Preferred Stock.

Dividends

Dividends on shares of the Preferred Stock will not be mandatory. Holders of Preferred Stock will be

entitled to receive non-cumulative, quarterly cash dividends which will accrue from but not including

November 5, 1999 and will be payable on March 31, June 30, September 30 and December 31 of each year

(each, a ""Dividend Payment Date''), commencing December 31, 1999, when, as and if declared by the Board

of Directors in its sole discretion, out of funds legally available for dividend payments. If a Dividend Payment

Date is not a ""Business Day,'' the related dividend will be paid on the next Business Day with the same force

and eÅect as though paid on the Dividend Payment Date, without any increase to account for the period from

such Dividend Payment Date through the date of actual payment. For these purposes, ""Business Day'' means

a day other than (i) a Saturday or a Sunday, (ii) a day on which New York City banks are closed or (iii) a

day on which the oÇces of Freddie Mac are closed. Dividends will be paid to holders of record on the record

date Ñxed by the Board of Directors, not to be earlier than 45 days or later than 10 days preceding the

applicable Dividend Payment Date.

The dividend rate for the period from November 5, 1999 through and including December 31, 2004 will

be 5.97%. Thereafter, dividends will accrue at a variable per annum rate (not greater than 11%) equal to the

""CMT Rate'' (as deÑned below). On January 1, 2005, and on January 1 every Ñve years thereafter, the

previous dividend rate will be replaced by the then-current CMT Rate. The CMT Rate for each such Ñve-year

period will be determined by Freddie Mac on the second Business Day immediately preceding the Ñrst day of

such period (each, a ""CMT Determination Date''). If declared, the initial dividend, which will be for the

""Dividend Period'' from but not including November 5, 1999 through and including December 31, 1999, will

be $0.456 per share and will be payable on December 31, 1999. Thereafter, the ""Dividend Period'' relating to a

Dividend Payment Date will be the period from but not including the preceding Dividend Payment Date

through and including the related Dividend Payment Date. The amount of dividends payable for any period

shorter than a full Dividend Period shall be computed on the basis of twelve 30-day months and a 360-day

year. If Freddie Mac redeems the Preferred Stock, the dividend that would otherwise be payable for the

Dividend Period ending on the date of redemption will be included in the redemption price of the shares

redeemed and will not be separately payable.

8
The ""CMT Rate'' for any CMT Determination Date will be the rate (not greater than 11%) equal

to:

(i) the weekly average interest rate of U.S. Treasury securities having an index maturity of Ñve

years for the week that ends immediately before the week in which the relevant CMT Determination

Date falls, as such rate appears on page ""7052'' on Telerate (or such other page as may replace the 7052

page on that service or any successor service) under the heading "". . . Treasury Constant Maturities . . .

Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 p.m.''

(ii) If the applicable rate described in clause (i) above is not displayed on Telerate page 7052 at

3:00 p.m., New York City time, on the relevant CMT Determination Date, then the CMT Rate will be

the Treasury constant maturity rate applicable to a Ñve-year index maturity for the weekly average as

published in H.15(519) (as deÑned below).

(iii) If the applicable rate described in clause (ii) above does not appear in H.15(519) at 3:00 p.m.,

New York City time, on the relevant CMT Determination Date, then the CMT Rate will be the Treasury

constant maturity rate, or other U.S. Treasury rate, applicable to a Ñve-year index maturity with reference

to the relevant CMT Determination Date, that:

(a) is published by the Board of Governors of the Federal Reserve System, or the U.S.

Department of the Treasury; and

(b) is determined by Freddie Mac to be comparable to the applicable rate formerly displayed

on Telerate page 7052 and published in H.15(519).

(iv) If the rate described in clause (iii) above does not appear at 3:00 p.m., New York City time, on

the relevant CMT Determination Date, then the CMT Rate will be the yield to maturity of the

arithmetic mean of the secondary market oÅered rates for Treasury notes having an original maturity of

approximately Ñve years and a remaining term to maturity of not less than four years, and in a

representative amount, as of approximately 3:30 p.m., New York City time, on the relevant CMT

Determination Date, as quoted by three primary U.S. government securities dealers in New York City

selected by Freddie Mac. In selecting these oÅered rates, Freddie Mac will request quotations from Ñve

primary dealers and will disregard the highest quotation Ì or, if there is equality, one of the highest Ì

and the lowest quotation Ì or, if there is equality, one of the lowest. Treasury notes are direct, noncallable, Ñxed rate obligations of the U.S. government.

(v) If Freddie Mac is unable to obtain three quotations of the kind described in clause (iv) above,

the CMT Rate will be the yield to maturity of the arithmetic mean of the secondary market oÅered rates

for Treasury notes with an original maturity longer than Ñve years and a remaining term to maturity

closest to Ñve years, and in a representative amount, as of approximately 3:30 p.m., New York City time,

on the relevant CMT Determination Date, as quoted by three primary U.S. government securities dealers

in New York City selected by Freddie Mac. In selecting these oÅered rates, Freddie Mac will request

quotations from Ñve primary dealers and will disregard the highest quotation Ì or, if there is equality,

one of the highest Ì and the lowest quotation Ì or, if there is equality, one of the lowest.

(vi) If fewer than Ñve but more than two primary dealers are quoting oÅered rates as described

above in clause (v), then the CMT Rate for the relevant CMT Determination Date will be based on the

arithmetic mean of the oÅered rates so obtained, and neither the highest nor the lowest of those

quotations will be disregarded.

(vii) If two or fewer primary dealers are quoting oÅered rates as described above in clause (v), the

CMT Rate in eÅect for the new Dividend Period will be the CMT Rate in eÅect for the prior Dividend

Period.

""H.15(519)'' means the weekly statistical release entitled ""Statistical Release H.15(519),'' or any

successor publication, published by the Board of Governors of the Federal Reserve System.

Absent manifest error, Freddie Mac's determination of the CMT Rate will be Ñnal and binding. Investors

may obtain the dividend rates for the current and preceding Dividend Periods by writing, calling or e-mailing

the Investor Inquiry Department at Freddie Mac at 8200 Jones Branch Drive, McLean, Virginia 22102

9
(outside Washington, D.C. metropolitan area, phone 800/336-FMPC; within Washington, D.C. metropolitan

area, phone 703/450-3777; e-mail: Investor Inquiry@freddiemac.com)

The Preferred Stock will rank prior to the Voting Common Stock, par value $0.21 per share, of Freddie

Mac (the ""Common Stock'') with respect to dividends, to the extent provided in the CertiÑcate of

Designation. No dividend may be declared or paid or set apart for payment on the Common Stock (or any

other junior stock) unless dividends have been declared and paid or set apart (or ordered to be set apart) on

the Preferred Stock in respect to the then-current Dividend Period. The Preferred Stock will rank on a parity

with respect to dividends with the following outstanding securities: the 5.79% Non-Cumulative Preferred

Stock issued on July 21, 1999, the 5.1% Non-Cumulative Preferred Stock issued on March 19, 1999, the 5.3%

Non-Cumulative Preferred Stock issued on October 28, 1998, the Variable Rate, Non-Cumulative Preferred

Stock issued on September 23, 1998 and September 29, 1998, the 5.1% Non-Cumulative Preferred Stock

issued on September 23, 1998, the 5% Non-Cumulative Preferred Stock issued on March 23, 1998, the 5.81%

Non-Cumulative Preferred Stock issued on October 27, 1997, the 6.14% Non-Cumulative Preferred Stock

issued on June 3, 1997, the 6.125% Non-Cumulative Preferred Stock issued on November 1, 1996 and the

Variable Rate, Non-Cumulative Preferred Stock issued on April 26, 1996 (collectively, the ""Existing

Preferred Stock'').

Dividends on the Preferred Stock will not be cumulative. If a dividend is not paid on the Preferred Stock,

the holders of the Preferred Stock will have no claim in respect of such non-payment so long as no dividend is

paid on the Common Stock (or any other junior stock) or the Existing Preferred Stock for the then-current

period.

The Board of Directors may, in its discretion, choose to pay dividends on the Preferred Stock without the

payment of any dividends on the Common Stock.

No dividends will be declared or paid or set apart for payment on any shares of the Preferred Stock if at

the same time any arrears or default exists in the payment of dividends on any outstanding class or series of

stock of Freddie Mac ranking prior to the Preferred Stock with respect to the payment of dividends. At the

time of issuance of the Preferred Stock, no class or series of stock of Freddie Mac ranking prior to the

Preferred Stock will exist.

Holders of shares of the Preferred Stock will not be entitled to any dividends, whether payable in cash or

property, other than as described above and will not be entitled to interest, or any sum in lieu of interest, in

respect of any dividend payment. See ""Regulatory Matters'' for a description of possible regulatory restrictions

on Freddie Mac's payment of dividends.

Changes in the Dividends-Received Percentage

If, prior to May 5, 2001, one or more amendments to the Code are enacted that reduce or eliminate the

percentage of the dividends-received deduction (currently 70 percent) as speciÑed in section 243(a)(1) of the

Code or any successor provision (the ""Dividends-Received Percentage''), including any change applicable

only to certain categories of stock, which change is applicable to the Preferred Stock, certain adjustments may

be made in respect of the dividends payable by the Corporation, and Post Declaration Date Dividends and

Retroactive Dividends (as such terms are deÑned below) may become payable, as described below.

The amount of each dividend payable (if declared) per share of Preferred Stock for dividend payments

made on or after the eÅective date of such change in the Code will be adjusted by multiplying the amount of

the dividend payable described above under ""Dividends'' (before adjustment) by a factor, which will be the

number determined in accordance with the following formula (the ""DRD Formula''), and rounding the result

to the nearest cent (with one-half cent rounded up):

1-.35(1-.70)

1-.35(1-DRP)

For the purposes of the DRD Formula, ""DRP'' means the Dividends-Received Percentage (expressed as a

decimal) applicable to the dividend in question; provided, however, that if the Dividends-Received Percentage

applicable to the dividend in question is less than 50%, then the DRP will equal .50. If the amount of any

dividend payable on the Preferred Stock is adjusted through such application of the DRD Formula, the

resulting dividend rate may exceed 11% per annum. No amendment to the Code, other than a change in the

10
percentage of the dividends-received deduction set forth in section 243(a)(1) of the Code or any successor

provision, or a change in the percentage of the dividends-received deduction for certain categories of stock,

which change is applicable to the Preferred Stock, will give rise to an adjustment. Notwithstanding the

foregoing provisions, if, with respect to any such amendment, the Corporation receives either an unqualiÑed

opinion of nationally recognized independent tax counsel selected by the Corporation or a private letter ruling

or similar form of assurance from the Internal Revenue Service (the ""IRS'') to the eÅect that such an

amendment does not apply to a dividend payable on the Preferred Stock, then such amendment will not result

in the adjustment provided for pursuant to the DRD Formula with respect to such dividend. The opinion

referenced in the previous sentence must be based upon the legislation amending or establishing the DRP or

upon a published pronouncement of the IRS addressing such legislation. Unless the context otherwise

requires, references to dividends in this OÅering Circular will mean dividends as adjusted by the DRD

Formula. The Corporation's calculation of the dividends payable as so adjusted shall be Ñnal and not subject to

review, absent manifest error.

Notwithstanding the foregoing, if any such amendment to the Code is enacted after the dividend payable

on a Dividend Payment Date has been declared but before such dividend is paid, the amount of the dividend

payable on such Dividend Payment Date will not be increased; instead, additional dividends (the ""Post

Declaration Date Dividends''), equal to the excess, if any, of (x) the product of the dividend paid by the

Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD

Formula would be equal to the greater of the Dividends-Received Percentage applicable to the dividend in

question and .50) over (y) the dividend paid by the Corporation on such Dividend Payment Date, will be

payable (if declared) to holders of Preferred Stock on the record date applicable to the next succeeding

Dividend Payment Date, in addition to any other amounts payable on such date.

If any such amendment to the Code is enacted and the reduction in the Dividends-Received Percentage

retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the

Preferred Stock (each, an ""AÅected Dividend Payment Date''), the Corporation will pay (if declared)

additional dividends (the ""Retroactive Dividends'') to holders of Preferred Stock on the record date

applicable to the next succeeding Dividend Payment Date (or, if such amendment is enacted after the

dividend payable on such Dividend Payment Date has been declared, to Holders of Preferred Stock on the

record date applicable to the second succeeding Dividend Payment Date following the date of enactment) in

an amount equal to the excess of (x) the product of the dividend paid by the Corporation on each AÅected

Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to

the greater of the Dividends-Received Percentage and .50 applied to each AÅected Dividend Payment Date)

over (y) the sum of the dividend paid by the Corporation on each AÅected Dividend Payment Date. The

Corporation will make only one payment of Retroactive Dividends for any such amendment. Notwithstanding

the foregoing provisions, if, with respect to any such amendment, the Corporation receives either an

unqualiÑed opinion of nationally recognized independent tax counsel selected by the Corporation or a private

letter ruling or similar form of assurance from the IRS to the eÅect that such amendment does not apply to a

dividend payable on an AÅected Dividend Payment Date for the Preferred Stock, then such amendment will

not result in the payment of Retroactive Dividends with respect to such AÅected Dividend Payment Date. The

opinion referenced in the previous sentence must be based upon the legislation amending or establishing the

DRP or upon a published pronouncement of the IRS addressing such legislation.

Notwithstanding the foregoing, no adjustment in the dividends payable by the Corporation will be made,

and no Post Declaration Date Dividends or Retroactive Dividends will be payable by the Corporation, in

respect of the enactment of any amendment to the Code on or after May 5, 2001.

In the event that the amount of dividends payable per share of the Preferred Stock is adjusted pursuant to

the DRD Formula and/or Post Declaration Date Dividends or Retroactive Dividends are to be paid, the

Corporation will give notice of each such adjustment and, if applicable, any Post Declaration Date Dividends

and Retroactive Dividends to the holders of Preferred Stock.

Optional Redemption

The Preferred Stock will not be redeemable prior to December 31, 2004. On that date and on

December 31 every Ñve years thereafter, subject to the notice provisions set forth below and subject to any

11
further limitations which may be imposed by law, Freddie Mac may redeem the Preferred Stock, in whole or

in part, out of funds legally available therefor, at the redemption price of $50.00 per share plus an amount

equal to the amount of the dividend that would otherwise be payable for the Dividend Period ending on the

date of redemption. If less than all of the outstanding shares of the Preferred Stock are to be redeemed,

Freddie Mac will select shares to be redeemed from the outstanding shares not previously called for

redemption by lot or pro rata (as nearly as possible) or by any other method which Freddie Mac in its sole

discretion deems equitable.

Freddie Mac will give notice of any such redemption by mail to holders of the Preferred Stock not less

than 30 days and not more than 60 days prior to the date Ñxed by Freddie Mac for such redemption. Each

such notice will state the number of shares of Preferred Stock being redeemed, the redemption price, the

redemption date and the place at which a holder's certiÑcate(s) representing shares of the Preferred Stock

must be presented upon such redemption.

See ""Regulatory Matters'' for a description of possible regulatory restrictions on Freddie Mac's

redemption of the Preferred Stock.

From and after the redemption date, the shares of Preferred Stock called for redemption will no longer be

deemed outstanding, and all rights of the holders thereof as holders of the Preferred Stock will cease.

Regulatory Matters

Neither Freddie Mac's right to declare dividends on nor its right to redeem the Preferred Stock is

currently subject to prior regulatory approval. Under the Federal Housing Enterprises Financial Safety and

Soundness Act of 1992 (the ""GSE Act''), the exercise of these rights may be subject to regulatory approval

only if the Corporation fails to meet applicable capital standards.

The GSE Act established minimum capital, critical capital and risk-based capital standards for the

Corporation.

The GSE Act has required the Corporation to maintain ""core capital'' in an amount that equals or

exceeds the levels established under the minimum and critical capital standards since the GSE Act was

enacted. In June 1996, the Director (the ""Director'') of the OÇce of Federal Housing Enterprise Oversight

(""OFHEO'') issued a Ñnal minimum capital regulation that interprets the minimum capital standard and

implements a calculation methodology similar to the methodology OFHEO applied on an interim basis since

the GSE Act was enacted.

The GSE Act does not require the Corporation to maintain ""total capital'' at a level that equals or

exceeds the risk-based capital standard until the Director issues a Ñnal risk-based capital regulation

establishing the risk-based capital stress test (and the risk-based capital level cannot be determined from the

GSE Act alone). OFHEO issued the proposed risk-based capital regulation in two portions Ì the Ñrst in

June 1996 and the second in April 1999. Following the submission and consideration of public comments on

the proposals, OFHEO will determine whether to issue a Ñnal regulation or a revised proposal. Under the GSE

Act, the Ñnal regulation will become eÅective immediately upon issuance. However, as described below,

various aspects of OFHEO's capital-related authority do not become eÅective until one year after OFHEO

issues a Ñnal risk-based capital regulation.

Subject to the applicability of the risk-based capital standard described above, the Corporation may pay a

dividend without prior OFHEO approval if the payment would not decrease the total capital of the

Corporation to an amount less than the risk-based capital level for the Corporation and would not decrease the

core capital level to an amount less than the minimum capital level for the Corporation. Beginning one year

after the Ñnal risk-based capital regulation is issued, if the Corporation's total capital is less than the risk-based

capital level, but its core capital equals or exceeds the minimum capital level, the Corporation is prohibited

from making a dividend payment that would decrease its core capital to an amount less than the minimum

capital level. At any time, if the Corporation's core capital is less than the minimum capital level, the

Corporation may make a dividend payment only if the Director determines that the dividend payment satisÑes

certain statutory standards and if the Director approves the payment, and under these circumstances the

Corporation is prohibited from making any dividend payment that would decrease the Corporation's core

capital to less than the critical capital level.

12
In addition to the preceding requirements that relate directly to the payment of dividends, the Director

has authority, under certain conditions, to require the Corporation to submit for the Director's approval a

capital restoration plan or to restrict the Corporation's activities, either of which also could aÅect the payment

of dividends. SpeciÑcally, if the Director determines, after the risk-based capital regulation has been in eÅect

for one year, that the Corporation fails to meet the risk-based capital standard, or if the Director determines,

at any time, that the Corporation fails to meet the minimum capital standard, the Corporation will be required

to submit for the Director's approval a capital restoration plan setting forth a feasible plan for restoring the

Corporation's capital level. In addition, if the Corporation at any time fails to meet the minimum capital

standard, the Director is authorized to impose various limitations on the Corporation's activities. If, at any

time, the Director determines that the Corporation fails to meet the critical capital standard, the Director may

appoint a conservator for the Corporation. The GSE Act provides that any such conservator will have all the

powers of the shareholders, directors and oÇcers of the Corporation, unless the Director provides otherwise.

If the Director does not approve a required capital restoration plan or determines that the Corporation has

failed to make reasonable eÅorts to comply with such a plan, then the Director may treat the Corporation as

not meeting capital standards that it otherwise meets and take the actions authorized when the Corporation

does not meet such standards. Similarly, beginning one year after OFHEO issues a Ñnal risk-based capital

rule, if the Director determines that the Corporation is engaging in conduct not approved by the Director that

could result in a rapid depletion of core capital or that the value of the property subject to mortgages held or

securitized by the Corporation has decreased signiÑcantly, the Director is authorized to treat the Corporation

as not meeting capital standards that it otherwise meets.

If the Corporation fails to meet or is treated by the Director as not meeting applicable capital standards

and the Director has reasonable cause to believe that the Corporation or any executive oÇcer or director of the

Corporation is engaging in or about to engage in any conduct (which could include the payment of dividends)

that threatens to result in a material depletion of the Corporation's core capital, then the Director is authorized

to commence proceedings pursuant to which, after a hearing, the Director could issue a cease and desist order

prohibiting such conduct. If the Director determines that the conduct in question is likely to cause a signiÑcant

depletion of core capital, the Director can issue such an order without a hearing, which would be eÅective until

completion of the cease-and-desist proceedings, and can do so without regard to whether the Corporation

meets all applicable capital standards.

The Director has the authority to require the Corporation to submit a report to the Director regarding any

capital distribution (including any dividend) declared by the Corporation before the Corporation makes the

distribution.

The foregoing discussion with respect to the payment of dividends is equally applicable to Freddie Mac's

redemption of the Preferred Stock and is based on Freddie Mac's understanding and interpretations of the

relevant provisions of the GSE Act. OFHEO has not yet issued any deÑnitive guidance as to its interpretations

of these provisions of the GSE Act. Until OFHEO has provided such guidance, there can be no assurance that

the foregoing discussion will be consistent with OFHEO's interpretation in every respect. A more detailed

discussion of the regulatory oversight of Freddie Mac's capitalization and the terms used above appears under

""Regulation and Governmental Relationships Ì Regulation of Freddie Mac Ì OFHEO Oversight'' in the

Information Statement.

No Preemptive Rights and No Conversion

No holder of the Preferred Stock will have any preemptive right to purchase or subscribe for any other

shares, rights, options or other securities of any class of Freddie Mac which at any time may be sold or oÅered

for sale by Freddie Mac. The holders of shares of Preferred Stock will not have any right to convert such

shares into or exchange such shares for any other class or series of stock or obligations of Freddie Mac.

No Voting Rights

Section 306(f) of the Freddie Mac Act prohibits the holders of Preferred Stock from voting with respect

to the election of any member of the Board of Directors. Except as set forth under ""Amendments'' below, the

holders of the Preferred Stock will not be entitled to vote.

13
Liquidation Rights

Upon any voluntary or involuntary dissolution, liquidation or winding up of Freddie Mac, after payment

or provision for the liabilities of Freddie Mac and the expenses of such dissolution, liquidation or winding up,

the holders of the outstanding shares of the Preferred Stock will be entitled to receive out of the assets of

Freddie Mac available for distribution to stockholders, before any payment or distribution is made on the

Common Stock (or any other junior stock), the amount of $50.00 per share plus an amount equal to the

dividend (calculated as provided in the CertiÑcate of Designation) for the then-current quarterly Dividend

Period accrued through and including the date of such liquidation payment. In the event of the dissolution,

liquidation or winding up of Freddie Mac, the rights of the Preferred Stock are on a parity with those of the

Existing Preferred Stock. If the assets of Freddie Mac available for distribution in such event are insuÇcient

to pay in full the aggregate amount payable to holders of the Preferred Stock, the Existing Preferred Stock and

any other class or series of stock ranking on a parity upon liquidation with the Preferred Stock and the Existing

Preferred Stock, the assets will be distributed to the holders of Preferred Stock, the Existing Preferred Stock

and such parity stock pro rata, based on the amounts to which they are entitled.

Notwithstanding the foregoing, holders of the Preferred Stock will not be entitled to be paid any amount

in respect of a dissolution, liquidation or winding up of Freddie Mac until holders of any classes or series of

stock of Freddie Mac ranking prior to the Preferred Stock upon liquidation have been paid all amounts to

which such classes or series are entitled.

A consolidation, merger or combination of Freddie Mac with or into any other corporation or entity, or

the sale of all or substantially all of the property or business of Freddie Mac, will not be deemed to be a

liquidation, dissolution or winding up of Freddie Mac for purposes of these provisions on liquidation rights.

Additional Classes or Series of Stock

Freddie Mac will have the right to create and issue additional classes or series of stock ranking prior to, on

a parity with or junior to the Preferred Stock, as to dividends, liquidation or otherwise, without the consent of

holders of the Preferred Stock.

Amendments

Without the consent of the holders of the Preferred Stock, Freddie Mac will have the right to amend,

alter, supplement or repeal any terms of the Preferred Stock to cure any ambiguity, to correct or supplement

any term which may be defective or inconsistent with any other term or to make any other provisions so long

as such action does not materially and adversely aÅect the interests of the holders of the Preferred Stock.

Otherwise, the terms of the Preferred Stock may be amended, altered, supplemented or repealed only with the

consent of the holders of at least two-thirds of the outstanding shares of Preferred Stock. On matters requiring

their consent, holders of the Preferred Stock will be entitled to one vote per share.

NYSE Listing

Application has been made to list the Preferred Stock on the NYSE. Approval of such application will be

subject, among other things, to satisfactory distribution of the Preferred Stock.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Preferred Stock and payments thereon are generally subject to taxation by the United States and

other taxing jurisdictions to the same extent and in the same manner as stock of and payments thereon by any

other corporation. The following discussion addresses some of the U.S. federal income tax consequences that

may result from ownership of the Preferred Stock by a U.S. person who holds the Preferred Stock as a capital

asset. For this purpose, a U.S. person is an individual who is a citizen or resident of the United States for

federal income tax purposes, a corporation, partnership or other type of entity organized under the laws of the

United States or any State (other than a partnership that is not treated as a U.S. person under any applicable

Treasury regulations), an estate whose income is subject to U.S. federal income tax regardless of its source, or

a trust if a court within the United States is able to exercise primary supervision of the administration of the

trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.

Notwithstanding the preceding sentence, to the extent provided in Treasury regulations, certain trusts in

14
existence on August 20, 1996, and treated as U.S. persons prior to such date, that elect to continue to be

treated as U.S. persons, also will be U.S. persons. This discussion does not purport to address all rules which

may apply to particular investors. Investors are encouraged to consult their own tax advisors regarding the

federal, state, local and foreign tax considerations applicable to an investment in the Preferred Stock.

This discussion reÖects current federal income tax laws and regulations and administrative and judicial

interpretations thereof. Changes to any of these subsequent to the date of this OÅering Circular may aÅect the

tax consequences described herein, possibly retroactively.

Dividends

Distributions on the Preferred Stock which are paid out of current earnings and proÑts, or earnings and

proÑts accumulated after 1984, generally constitute dividends taxable as ordinary income. To the extent that

the amount of any distribution paid on a share of Preferred Stock exceeds the current or accumulated earnings

and proÑts for federal income tax purposes attributable to that share, such excess will be treated Ñrst as a

return of capital (rather than as ordinary income) and will be applied against and reduce the holder's adjusted

tax basis in that share of Preferred Stock. Any such amount in excess of the holder's adjusted tax basis will

then be taxed as capital gain. For purposes of the remainder of this discussion, it is assumed that dividends

paid with respect to the Preferred Stock will constitute dividends for U.S. federal income tax purposes.

Dividends received by corporations generally will be eligible for the dividends-received deduction. The

dividends-received deduction is available only with respect to a dividend received on stock held for more than

45 days (or more than 90 days in the case of a dividend on preferred stock attributable to periods aggregating

in excess of 366 days), including the day of disposition but not the day of acquisition. This holding period must

be satisÑed during the 90-day period (180-day period in the case of a preferred stock dividend attributable to

periods aggregating in excess of 366 days) beginning on the date which is 45 (90) days before the date on

which the stock becomes ex-dividend with respect to the dividend. The length of time that a corporate

shareholder is deemed to have held stock for these purposes is reduced for periods during which the

shareholder's risk of loss with respect to the stock is diminished by reason of the existence of certain options,

contracts to sell, short sales or other similar transactions. The amount of such deduction generally will equal

70 percent of the amount of the dividends received, subject to reduction in certain events, including where a

holder has indebtedness outstanding that is directly attributable to an investment in the Preferred Stock. For

this purpose, indebtedness of a depository institution attributable to deposits received in the ordinary course of

its business is not treated as indebtedness directly attributable to an investment in the Preferred Stock.

For purposes of the corporate alternative minimum tax, alternative minimum taxable income is increased

by 75 percent of the amount by which a corporation's adjusted current earnings exceeds its alternative

minimum taxable income prior to the addition of the applicable tax preference item. The amount of any

dividend that is included in a corporate shareholder's adjusted current earnings will not be reduced by any

dividends-received deduction otherwise allowable with respect to that dividend.

Dispositions, Including Redemptions

Any sale, exchange, redemption (except as discussed below) or other disposition of the Preferred Stock

generally will result in taxable gain or loss equal to the diÅerence between the amount received and the

shareholder's adjusted tax basis in the Preferred Stock. Such gain or loss generally will be capital gain or loss

and will be long-term capital gain or loss if the holding period for the Preferred Stock exceeds one year.

A redemption of Preferred Stock may be treated as a dividend, rather than as payment in exchange for

the Preferred Stock, unless the redemption is ""not essentially equivalent to a dividend'' with respect to the

holder within the meaning of section 302(b)(1) of the Code. In applying this standard, the holder must take

into account not only the Preferred Stock and other stock of Freddie Mac that it owns directly, but also the

Preferred Stock and other stock of Freddie Mac that it constructively owns within the meaning of section 318

of the Code. A redemption payment made to a holder will be ""not essentially equivalent to a dividend'' if it

results in a ""meaningful reduction'' in the holder's aggregate stock interest in Freddie Mac. Because of the

ambiguities in applying this rule, each holder should consult its own tax advisor to determine whether a

redemption of Preferred Stock will be treated as a dividend or as payment in exchange for the Preferred Stock.

If the redemption payment is treated as a dividend, the rules discussed above under ""Dividends'' apply.

15
Information Reporting and Backup Withholding

Payments of dividends on shares of Preferred Stock held of record by U.S. persons other than

corporations and other exempt holders are required to be reported to the IRS.

Backup withholding of U.S. federal income tax at a rate of 31 percent may apply to payments made with

respect to shares of Preferred Stock, as well as payments of proceeds from the sale of shares of Preferred

Stock, to holders that are not ""exempt recipients'' and that fail to provide certain identifying information

(such as the taxpayer identiÑcation number of the holder) in the manner required. Individuals generally are

not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.

LEGAL INVESTMENT CONSIDERATIONS

Section 106 of the Secondary Mortgage Market Enhancement Act of 1984 (""SMMEA'') provides that

any person, trust, corporation, partnership, association, business trust or business entity created pursuant to or

existing under the laws of the United States or any state (including the District of Columbia and Puerto Rico)

is authorized to purchase, hold and invest in securities issued or guaranteed by Freddie Mac (including the

shares of Preferred Stock) to the same extent that the investor is authorized to purchase, hold or invest in

obligations issued or guaranteed as to principal and interest by the United States or any agency or

instrumentality thereof. Prior to October 4, 1991, states were authorized by SMMEA to enact legislation

which speciÑcally referred to Û106 and either prohibited or limited an investor's authority to purchase, hold or

invest in securities issued or guaranteed by Freddie Mac. 15 U.S.C. Û77r-1. Certain states enacted such

legislation limiting to varying extents the ability of certain entities (in most cases, insurance companies) to

invest in securities issued or guaranteed by Freddie Mac, including the shares of Preferred Stock.

Notwithstanding the preceding paragraph, investors should consult their own legal advisors in determining whether and to what extent the shares of Preferred Stock constitute legal investments for such investors

and whether and to what extent the shares of Preferred Stock can be used as collateral for various types of

borrowings. The foregoing does not take into consideration the application of statutes, regulations, orders,

guidelines or agreements generally governing investments made by a particular investor, including but not

limited to ""prudent investor'' provisions, safety and soundness conditions and percentage-of-assets limits. In

addition, Ñnancial institutions should consult their legal advisors or regulators in determining the appropriate

treatment of the shares of Preferred Stock under any applicable risk-based capital or similar rules. Institutions

whose investment activities are subject to legal investment laws and regulations or to review by regulatory

authorities may be subject to restrictions on investments in the shares of Preferred Stock. An institution under

the jurisdiction of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System,

the Federal Deposit Insurance Corporation, the OÇce of Thrift Supervision, the National Credit Union

Administration, the Department of the Treasury or any other federal or state agency with similar authority

should review any applicable regulations, policy statements and guidelines before purchasing or pledging the

shares of Preferred Stock.

16
UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement (the ""Underwriting

Agreement''), the Corporation has agreed to sell to each of the Underwriters named below, and each of the

Underwriters, for whom Goldman, Sachs & Co. are acting as representatives, has severally agreed to purchase

from the Corporation the respective number of shares of Preferred Stock set forth opposite its name below.

Number of Shares

Underwriter of Preferred Stock

Goldman, Sachs & Co. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,625,000

Lehman Brothers Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,375,000

First Tennessee Bank National AssociationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 750,000

Blaylock & Partners, L.P. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250,000

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000,000

Under the terms of the Underwriting Agreement, the several Underwriters are committed to take and pay

for all of the shares of Preferred Stock oÅered hereby, if any are taken.

The Underwriters propose to oÅer the Preferred Stock in part directly to the public at the initial oÅering

price set forth on the cover page of this OÅering Circular and in part to certain dealers at such price less a

concession not in excess of $0.325 per share. The Underwriters may allow, and such dealers may reallow, a

concession not in excess of $0.125 per share on sales to certain brokers and dealers. After the shares of

Preferred Stock are released for sale to the public, the oÅering price and other selling terms may from time to

time be varied by the Underwriters.

The Corporation has granted the Underwriters an option exercisable for seven days after the date of this

OÅering Circular to purchase up to an aggregate of 750,000 additional shares of Preferred Stock solely to

cover overallotments, if any. If the Underwriters exercise their overallotment option, the Underwriters have

severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the

number of shares to be purchased by each of them, as shown in the foregoing table, bears to the 5,000,000

shares of Preferred Stock oÅered.

Prior to this oÅering, there has been no public market for the Preferred Stock. Application has been made

to list the Preferred Stock on the NYSE. Trading of the Preferred Stock on the NYSE is expected to

commence within a fourteen-day period after the initial delivery of the Preferred Stock. The Underwriters

have advised the Corporation that they intend to make a market in the Preferred Stock prior to the

commencement of trading on the NYSE, but are not obliged to do so and may discontinue any such market

making at any time without notice.

In connection with the oÅering, the Underwriters may purchase and sell the Preferred Stock in the open

market. These transactions may include over-allotment and stabilizing transactions and purchases to cover

syndicate short positions created in connection with the oÅering. Stabilizing transactions consist of certain bids

or purchases for the purpose of preventing or retarding a decline in the market price of the Preferred Stock;

and syndicate short positions involve the sale by the Underwriters of a greater number of shares of Preferred

Stock than they are required to purchase from Freddie Mac in the oÅering. The Underwriters also may impose

a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of

the securities sold in the oÅering for their account may be reclaimed by the syndicate if such shares of

Preferred Stock are repurchased by the Underwriters in stabilizing or covering transactions. These activities

may stabilize, maintain or otherwise aÅect the market price of the Preferred Stock, which may be higher than

the price that might otherwise prevail in the open market; and these activities, if commenced, may be

discontinued at any time. These transactions may be eÅected on the NYSE, in the over-the-counter market or

otherwise.

The Corporation has agreed to indemnify the Underwriters against certain liabilities in connection with

the oÅering and sale of the Preferred Stock.

Certain of the Underwriters, dealers or agents may engage in transactions with, and perform services for,

the Corporation in the ordinary course of business.

17
RATING

Moody's is expected to assign the Preferred Stock a rating of ""aa3.'' A rating of ""aa'' is the second

highest rating that Moody's assigns to preferred stock. An issue which is rated ""aa'' is considered by Moody's

to be a ""high-grade preferred stock.'' According to Moody's, this rating indicates that ""there is a reasonable

assurance the earnings and asset protection will remain relatively well maintained in the foreseeable future.''

The numerical modiÑer ""3'' indicates that the issue ranks in the lower end of the generic rating category of

""aa.'' S&P is expected to assign the Preferred Stock a rating of ""AA¿.'' A rating of ""AA'' is the second

highest rating that S&P assigns to preferred stock. An issue which is rated ""AA'' is considered by S&P to be a

""high-quality, Ñxed-income security.'' According to S&P, this rating indicates that ""the capacity to pay

preferred stock dividends is very strong, although not as overwhelming as for issues rated AAA.'' The addition

of the minus (¿) sign indicates that the issue ranks in the lower end of the generic rating category ""AA.'' A

security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or

withdrawal at any time by the assigning rating organization.

INDEPENDENT PUBLIC ACCOUNTANTS

The Consolidated Financial Statements of the Corporation included in the Information Statement have

been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with

respect thereto.

LEGAL MATTERS

The validity of the Preferred Stock will be passed upon for the Corporation by Maud Mater, Esq.,

Executive Vice President-General Counsel and Secretary of the Corporation. As of September 30, 1999,

Ms. Mater was the beneÑcial owner of 78,497 shares of Common Stock and options covering an additional

127,417 shares of Common Stock. Certain legal matters relating to the Preferred Stock will be passed upon

for the Underwriters by Cleary, Gottlieb, Steen & Hamilton.

18
Appendix A

FREDDIE MAC

CERTIFICATE OF CREATION, DESIGNATION, POWERS,

PREFERENCES, RIGHTS, PRIVILEGES, QUALIFICATIONS,

LIMITATIONS, RESTRICTIONS, TERMS AND CONDITIONS

of

VARIABLE RATE, NON-CUMULATIVE PREFERRED STOCK

(Par Value $1.00 Per Share)

I, MAUD MATER, Secretary of the Federal Home Loan Mortgage Corporation, a governmentsponsored enterprise of the United States of America (""Freddie Mac'' or the ""Corporation''), do hereby

certify that, pursuant to authority vested in the Board of Directors of Freddie Mac by Section 306(f) of the

Federal Home Loan Mortgage Corporation Act, as amended (12 U.S.C. Û1455(f)), the Board of Directors

adopted FHLMC Resolution 99-07 on March 5, 1999 and adopted FHLMC Resolution 99-22 on September 10, 1999, which resolutions are now, and at all times since such date have been, in full force and eÅect, and

that the Chairman and Chief Executive OÇcer, pursuant to the authority delegated to him by such

resolutions, approved the Ñnal terms of the public issuance and sale of the preferred stock of Freddie Mac

designated above.

The Variable Rate, Non-Cumulative Preferred Stock shall have the following designation, powers,

preferences, rights, privileges, qualiÑcations, limitations, restrictions, terms and conditions:

1. Designation, Par Value, Number of Shares and Seniority

The class of preferred stock of Freddie Mac created hereby (the ""Non-Cumulative Preferred Stock'')

shall be designated ""Variable Rate, Non-Cumulative Preferred Stock,'' shall have a par value of $1.00 per

share and shall consist of 5 million shares.* The Board of Directors shall be permitted to increase the

authorized number of such shares at any time. The Non-Cumulative Preferred Stock shall rank prior to the

Voting Common Stock of Freddie Mac (the ""Common Stock'') to the extent provided in this CertiÑcate and

shall rank, both as to dividends and upon liquidation, on a parity with the 5.79% Non-Cumulative Preferred

Stock issued on July 21, 1999, the 5.1% Non-Cumulative Preferred Stock issued on March 9, 1999, the 5.3%

Non-Cumulative Preferred Stock issued on October 28, 1998, the Variable Rate, Non-Cumulative Preferred

Stock issued on September 23, 1998 and September 29, 1998, the 5.1% Non-Cumulative Preferred Stock

issued on September 23, 1998, the 5% Non-Cumulative Preferred Stock issued on March 23, 1998, the 5.81%

Non-Cumulative Preferred Stock issued on October 27, 1997, the 6.14% Non-Cumulative Preferred Stock

issued on June 3, 1997 and the 6.125% Non-Cumulative Preferred Stock issued on November 1, 1996 and the

Variable Rate, Non-Cumulative Preferred Stock issued, on April 26, 1996 (collectively, the ""Existing

Preferred Stock'').

2. Dividends

(a) Holders of outstanding shares of Non-Cumulative Preferred Stock will be entitled to receive, ratably,

non-cumulative quarterly cash dividends which will accrue from but not including November 5, 1999 and will

be payable on March 31, June 30, September 30 and December 31 of each year (each, a ""Dividend Payment

Date''), commencing December 31, 1999, when as and if declared by the Board of Directors in its sole

discretion, out of funds legally available for dividend payments. If a Dividend Payment Date is not a ""Business

Day,'' the related dividend will be paid on the next Business Day with the same force and eÅect as though paid

on the Dividend Payment Date, without any increase to account for the period from such Dividend Payment

Date through the date of actual payment. For these purposes, ""Business Day'' means a day other than (i) a

Saturday or a Sunday, (ii) a day on which New York City banks are closed or (iii) a day on which the oÇces

of Freddie Mac are closed. Dividends will be paid to holders of record on the record date Ñxed by the Board of

Directors, not to be earlier than 45 days or later than 10 days preceding the applicable Dividend Payment

Date.

* Plus up to 750,000 additional shares pursuant to Underwriters' overallotment option.

A-1
The dividend rate for the period from November 5, 1999 through and including December 31, 2004 will

be 5.97%. Thereafter, dividends will accrue at a variable per annum rate (not greater than 11%) equal to the

""CMT Rate'' (as deÑned below). On January 1, 2005, and on January 1 every Ñve years thereafter, the

previous dividend rate will be replaced by the then-current CMT Rate. The CMT Rate for each Ñve-year

period will be determined by Freddie Mac on the second Business Day immediately preceding the Ñrst day of

such period (each, a ""CMT Determination Date''). If declared, the initial dividend, which will be for the

""Dividend Period'' from but not including November 5, 1999 through and including December 31, 1999, will

be $0.456 per share and will be payable on December 31, 1999. Thereafter, the ""Dividend Period'' relating to a

Dividend Payment Date will be the period from but not including the preceding Dividend Payment Date

through and including the related Dividend Payment Date. The amount of dividends payable for any period

shorter than a full Dividend Period shall be computed on the basis of twelve 30-day months and a 360-day

year. If Freddie Mac redeems the Non-Cumulative Preferred Stock, the dividend that would otherwise be

payable for the Dividend Period ending on the date of redemption will be included in the redemption price of

the shares redeemed and will not be separately payable.

(b) The ""CMT Rate'' for any CMT Determination Date will be the rate (not greater than 11%) equal

to:

(i) the weekly average interest rate of U.S. Treasury securities having an index maturity of Ñve

years for the week that ends immediately before the week in which the relevant CMT Determination

Date falls, as such rate appears on page ""7052'' on Telerate (or such other page as may replace the 7052

page on that service or any successor service) under the heading "". . . Treasury Constant Maturities . . .

Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 p.m.''

(ii) If the applicable rate described in clause (i) above is not displayed on Telerate page 7052 at

3:00 p.m., New York City time, on the relevant CMT Determination Date, then the CMT Rate will be

the Treasury constant maturity rate applicable to a Ñve-year index maturity for the weekly average as

published in H.15(519) (as deÑned below).

(iii) If the applicable rate described in clause (ii) above does not appear in H.15(519) at 3:00 p.m.,

New York City time, on the relevant CMT Determination Date, then the CMT Rate will be the Treasury

constant maturity rate, or other U.S. Treasury rate, applicable to a Ñve-year index maturity with reference

to the relevant CMT Determination Date, that:

(A) is published by the Board of Governors of the Federal Reserve System, or the U.S.

Department of the Treasury; and

(B) is determined by Freddie Mac to be comparable to the applicable rate formerly displayed

on Telerate page 7052 and published in H.15(519).

(iv) If the rate described in clause (iii) above does not appear at 3:00 p.m., New York City time, on

the relevant CMT Determination Date, then the CMT Rate will be the yield to maturity of the

arithmetic mean of the secondary market oÅered rates for Treasury notes having an original maturity of

approximately Ñve years and a remaining term to maturity of not less than four years, and in a

representative amount, as of approximately 3:30 p.m., New York City time, on the relevant CMT

Determination Date, as quoted by three primary U.S. government securities dealers in New York City

selected by Freddie Mac. In selecting these oÅered rates, Freddie Mac will request quotations from Ñve

primary dealers and will disregard the highest quotation Ì or, if there is equality, one of the highest Ì

and the lowest quotation Ì or, if there is equality, one of the lowest. Treasury notes are direct, noncallable, Ñxed rate obligations of the U.S. government.

(v) If Freddie Mac is unable to obtain three quotations of the kind described in clause (iv) above,

the CMT Rate will be the yield to maturity of the arithmetic mean of the secondary market oÅered rates

for Treasury notes with an original maturity longer than Ñve years and a remaining term to maturity

closest to Ñve years, and in a representative amount, as of approximately 3:30 p.m., New York City time,

on the relevant CMT Determination Date, as quoted by three primary U.S. government securities dealers

in New York City selected by Freddie Mac. In selecting these oÅered rates, Freddie Mac will request

quotations from Ñve primary dealers and will disregard the highest quotation Ì or, if there is equality,

one of the highest Ì and the lowest quotation Ì or, if there is equality, one of the lowest. If two Treasury

A-2
notes with an original maturity longer than Ñve years have remaining terms to maturity that are equally

close to Ñve years, Freddie Mac will obtain quotations for the Treasury note with the shorter remaining

term to maturity.

(vi) If fewer than Ñve but more than two primary dealers are quoting oÅered rates as described

above in clause (v), then the CMT Rate for the relevant CMT Determination Date will be based on the

arithmetic mean of the oÅered rates so obtained, and neither the highest nor the lowest of those

quotations will be disregarded.

(vii) If two or fewer primary dealers are quoting oÅered rates as described above in clause (v), the

CMT Rate in eÅect for the new Dividend Period will be the CMT Rate in eÅect for the prior Dividend

Period.

""H.15(519)'' means the weekly statistical release entitled ""Statistical Release H.15(519),'' or any

successor publication, published by the Board of Governors of the Federal Reserve System.

Absent manifest error, Freddie Mac's determination of the CMT Rate will be Ñnal and binding.

No dividends shall be declared or paid or set apart for payment on the Common Stock or any other class

or series of stock ranking junior to or (except as hereinafter provided) on a parity with the Non-Cumulative

Preferred Stock with respect to the payment of dividends unless dividends have been declared and paid or set

apart (or ordered by the Board of Directors to be set apart) for payment on the outstanding Non-Cumulative

Preferred Stock in respect of the then-current Dividend Period; provided, however, that the foregoing dividend

preference shall not be cumulative and shall not in any way create any claim or right in favor of the holders of

Non-Cumulative Preferred Stock in the event that Freddie Mac shall not have declared or paid or set apart

(or the Board of Directors shall not have ordered to be set apart) dividends on the Non-Cumulative Preferred

Stock in respect of any prior Dividend Period. In the event that Freddie Mac shall not pay any one or more

dividends or any part thereof on the Non-Cumulative Preferred Stock, the holders of the Non-Cumulative

Preferred Stock shall not have any claim in respect of such non-payment so long as no dividend is paid on any

junior or parity stock in violation of the next preceding sentence.

(c) If, prior to May 5, 2001, one or more amendments to the Internal Revenue Code of 1986, as

amended (the ""Code''), are enacted that reduce or eliminate the percentage of the dividends-received

deduction as speciÑed in section 243(a)(1) of the Code or any successor provision (the ""Dividends-Received

Percentage''), including any change applicable only to certain categories of stock, which change is applicable

to the Preferred Stock, certain adjustments may be made in respect of the dividends payable by the

Corporation, and Post Declaration Date Dividends and Retroactive Dividends (as such terms are deÑned

below) may become payable, as described below.

The amount of each dividend payable (if declared) per share of Non-Cumulative Preferred Stock for

dividend payments made on or after the eÅective date of such change in the Code will be adjusted by

multiplying the amount of the dividend payable pursuant to Section 2(a) (before adjustment) by a factor,

which shall be the number determined in accordance with the following formula (the ""DRD Formula''), and

rounding the result to the nearest cent (with one-half cent rounded up):

1-.35(1-.70)

1-.35(1-DRP)

For the purposes of the DRD Formula, ""DRP'' means the Dividends-Received Percentage (expressed as a

decimal) applicable to the dividend in question; provided, however, that if the Dividends-Received Percentage

applicable to the dividend in question is less than 50%, then the DRP will equal .50. In the event an

adjustment to any dividend payable on the Non-Cumulative Preferred Stock is made pursuant to this

Section 2(c), the resulting dividend rate may exceed 11% per annum. No amendment to the Code, other than

a change in the percentage of the dividends-received deduction set forth in section 243(a)(1) of the Code or

any successor provision, or a change in the percentage of the dividends-received deduction for certain

categories of stock, which change is applicable to the Preferred Stock, will give rise to an adjustment.

Notwithstanding the foregoing provisions, if, with respect to any such amendment, the Corporation

receives either an unqualiÑed opinion of nationally recognized independent tax counsel selected by the

Corporation or a private letter ruling or similar form of assurance from the Internal Revenue Service (the

A-3
""IRS'') to the eÅect that such an amendment does not apply to a dividend payable on the Non-Cumulative

Preferred Stock, then such amendment shall not result in the adjustment provided for pursuant to the DRD

Formula with respect to such dividend. The opinion referenced in the previous sentence shall be based upon

the legislation amending or establishing the DRP or upon a published pronouncement of the IRS addressing

such legislation. Unless the context otherwise requires, references to dividends herein shall mean dividends as

adjusted by the DRD Formula. The Corporation's calculation of the dividends payable as so adjusted shall be

Ñnal and not subject to review, absent manifest error.

Notwithstanding the foregoing, if any such amendment to the Code is enacted after the dividend payable

on a Dividend Payment Date has been declared but before such dividend is paid, the amount of the dividend

payable on such Dividend Payment Date shall not be increased. Instead, additional dividends (the ""Post

Declaration Date Dividends''), equal to the excess, if any, of (x) the product of the dividend paid by the

Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD

Formula would be equal to the greater of the Dividends-Received Percentage applicable to the dividend in

question and .50) over (y) the dividend paid by the Corporation on such Dividend Payment Date, shall be

payable (if declared) to holders of Non-Cumulative Preferred Stock on the record date applicable to the next

succeeding Dividend Payment Date, in addition to any other amounts payable on such date.

If any such amendment to the Code is enacted and the reduction in the Dividends-Received Percentage

retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the

Non-Cumulative Preferred Stock (each, an ""AÅected Dividend Payment Date''), the Corporation shall pay

(if declared) additional dividends (the ""Retroactive Dividends'') to holders on the record date applicable to

the next succeeding Dividend Payment Date (or, if such amendment is enacted after the dividend payable on

such Dividend Payment Date has been declared, to holders on the record date applicable to the second

succeeding Dividend Payment Date following the date of enactment) in an amount equal to the excess of

(x) the product of the dividend paid by the Corporation on each AÅected Dividend Payment Date and the

DRD Formula (where the DRP used in the DRD Formula would be equal to the greater of the DividendsReceived Percentage and .50 applied to each AÅected Dividend Payment Date) over (y) the sum of the

dividend paid by the Corporation on each AÅected Dividend Payment Date. The Corporation will make only

one payment of Retroactive Dividends for any such amendment. Notwithstanding the foregoing provisions, if,

with respect to any such amendment, the Corporation receives either an unqualiÑed opinion of nationally

recognized independent tax counsel selected by the Corporation or a private letter ruling or similar form of

assurance from the IRS to the eÅect that such amendment does not apply to a dividend payable on an

AÅected Dividend Payment Date for the Non-Cumulative Preferred Stock, then such amendment will not

result in the payment of Retroactive Dividends with respect to such AÅected Dividend Payment Date. The

opinion referenced in the previous sentence must be based upon the legislation amending or establishing the

DRP or upon a published pronouncement of the IRS addressing such legislation.

In the event that the amount of dividends payable per share of the Non-Cumulative Preferred Stock is

adjusted pursuant to the DRD Formula and/or Post Declaration Date Dividends or Retroactive Dividends are

to be paid, the Corporation will give notice of each such adjustment and, if applicable, any Post Declaration

Date Dividends and Retroactive Dividends to be given as soon as practicable to the holders of NonCumulative Preferred Stock.

(d) Notwithstanding any other provision of this CertiÑcate, the Board of Directors, in its discretion, may

choose to pay dividends on the Non-Cumulative Preferred Stock without the payment of any dividends on the

Common Stock or any other class or series of stock from time to time outstanding ranking junior to the

Non-Cumulative Preferred Stock with respect to the payment of dividends.

(e) No dividend shall be declared or paid or set apart for payment on any shares of the Non-Cumulative

Preferred Stock if at the same time any arrears or default exists in the payment of dividends on any

outstanding class or series of stock of Freddie Mac ranking prior to or (except as provided herein) on a parity

with the Non-Cumulative Preferred Stock with respect to the payment of dividends. If and whenever

dividends, having been declared, shall not have been paid in full, as aforesaid, on shares of the

Non-Cumulative Preferred Stock and on the shares of any other class or series of stock of Freddie Mac

ranking on a parity with the Non-Cumulative Preferred Stock with respect to the payment of dividends, all

such dividends that have been declared on shares of the Non-Cumulative Preferred Stock and on the shares of

A-4
any such other class or series shall be paid pro rata, so that the respective amounts of dividends paid per share

on the Non-Cumulative Preferred Stock and on such other class or series shall in all cases bear to each other

the same ratio that the respective amounts of dividends declared but unpaid per share on the shares of the

Non-Cumulative Preferred Stock (including any adjustments due to changes in the Dividends-Received

Percentage) and on the shares of such other class or series bear to each other.

(f) Holders of shares of the Non-Cumulative Preferred Stock shall not be entitled to any dividends, in

cash or in property, other than as herein provided and shall not be entitled to interest, or any sum in lieu of

interest, on or in respect of any dividend payment.

3. Optional Redemption

(a) The Non-Cumulative Preferred Stock shall not be redeemable prior to December 31, 2004. On that

date and on December 31 every Ñve years thereafter, subject to the notice provisions set forth in Section 3(b)

below and subject to any further limitations which may be imposed by law, Freddie Mac may redeem the

Non-Cumulative Preferred Stock, in whole or in part, out of funds legally available therefor, at the redemption

price of $50.00 per share plus an amount, determined in accordance with Section 2 above, equal to the amount

of the dividend that would otherwise be payable for the Dividend Period ending on the date of such

redemption. If less than all of the outstanding shares of the Non-Cumulative Preferred Stock are to be

redeemed, Freddie Mac shall select shares to be redeemed from the outstanding shares not previously called

for redemption by lot or pro rata (as nearly as possible) or by any other method which Freddie Mac in its sole

discretion deems equitable.

(b) In the event Freddie Mac shall redeem any or all of the Non-Cumulative Preferred Stock as

aforesaid, notice of such redemption shall be given by Freddie Mac by Ñrst class mail, postage prepaid, mailed

neither less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares

of the Non-Cumulative Preferred Stock being redeemed, at such holder's address as the same appears in the

books and records of Freddie Mac. Each such notice shall state the number of shares being redeemed, the

redemption price, the redemption date and the place at which such holder's certiÑcate(s) representing shares

of the Non-Cumulative Preferred Stock must be presented for cancellation or exchanges, as the case may be,

upon such redemption. Failure to give notice, or any defect in the notice, to any holder of the Non-Cumulative

Preferred Stock shall not aÅect the validity of the proceedings for the redemption of shares of any other holder

of Non-Cumulative Preferred Stock being redeemed.

(c) Notice having been mailed as aforesaid, from and after the redemption date speciÑed therein and

upon payment of the consideration set forth in Section 3(a) above, said shares of the Non-Cumulative

Preferred Stock shall no longer be deemed to be outstanding, and all rights of the holders thereof as holders of

the Non-Cumulative Preferred Stock shall cease, with respect to shares so redeemed.

(d) Any shares of the Non-Cumulative Preferred Stock which shall have been redeemed shall, after

such redemption, no longer have the status of authorized, issued or outstanding shares.

4. No Voting Rights

Except as set forth in Section 9(h) below, the shares of the Non-Cumulative Preferred Stock shall not

have any voting powers, either general or special.

5. No Conversion or Exchange Rights

The holders of shares of the Non-Cumulative Preferred Stock shall not have any right to convert such

shares into or exchange such shares for any other class or series of stock or obligations of Freddie Mac.

6. No Preemptive Rights

No holder of the Non-Cumulative Preferred Stock shall as such holder have any preemptive right to

purchase or subscribe for any other shares, rights, options or other securities of any class of Freddie Mac which

at any time may be sold or oÅered for sale by Freddie Mac.

A-5
7. Liquidation Rights and Preference

(a) Except as otherwise set forth herein, upon the voluntary or involuntary dissolution, liquidation or

winding up of Freddie Mac, after payment of or provision for the liabilities of Freddie Mac and the expenses of

such dissolution, liquidation or winding up, the holders of the outstanding shares of the Non-Cumulative

Preferred Stock shall be entitled to receive out of the assets of Freddie Mac available for distribution to

stockholders, before any payment or distribution shall be made on the Common Stock or any other class or

series of stock of Freddie Mac ranking junior to the Non-Cumulative Preferred Stock upon liquidation, the

amount of $50.00 per share plus an amount, determined in accordance with Section 2 above, equal to the

dividend, if any, otherwise payable for the then-current Dividend Period accrued through and including the

date of payment in respect of such dissolution, liquidation or winding up, and the holders of the outstanding

shares of any class or series of stock of Freddie Mac ranking on a parity with the Non-Cumulative Preferred

Stock upon liquidation shall be entitled to receive out of the assets of Freddie Mac available for distribution to

stockholders, before any such payment or distribution shall be made on the Common Stock or any other class

or series of stock of Freddie Mac ranking junior to the Non-Cumulative Preferred Stock and to such parity

stock upon liquidation, any corresponding preferential amount to which the holders of such parity stock may,

by the terms thereof, be entitled; provided, however, that if the assets of Freddie Mac available for distribution

to stockholders shall be insuÇcient for the payment of the full amounts to which the holders of the

outstanding shares of the Non-Cumulative Preferred Stock and the holders of the outstanding shares of such

parity stock shall be entitled to receive upon such dissolution, liquidation or winding up of Freddie Mac as

aforesaid, then, subject to paragraph (b) of this Section 7, all of the assets of Freddie Mac available for

distribution to stockholders shall be distributed to the holders of outstanding shares of the Non-Cumulative

Preferred Stock and to the holders of outstanding shares of such parity stock pro rata, so that the amounts so

distributed to holders of the Non-Cumulative Preferred Stock and to holders of such classes or series of such

parity stock, respectively, shall bear to each other the same ratio that the respective distributive amounts to

which they are so entitled (including any adjustment due to changes in the Dividends-Received Percentage)

bear to each other. After the payment of the aforesaid amounts to which they are entitled, the holders of

outstanding shares of the Non-Cumulative Preferred Stock and the holders of outstanding shares of any such

parity stock shall not be entitled to any further participation in any distribution of assets of Freddie Mac.

(b) Notwithstanding the foregoing, upon the dissolution, liquidation or winding up of Freddie Mac, the

holders of shares of the Non-Cumulative Preferred Stock then outstanding shall not be entitled to be paid any

amounts to which such holders are entitled pursuant to paragraph (a) of this Section 7 unless and until the

holders of any classes or series of stock of Freddie Mac ranking prior upon liquidation to the Non-Cumulative

Preferred Stock shall have been paid all amounts to which such classes or series are entitled pursuant to their

respective terms.

(c) Neither the sale of all or substantially all of the property or business of Freddie Mac, nor the merger,

consolidation or combination of Freddie Mac into or with any other corporation or entity, shall be deemed to

be a dissolution, liquidation or winding up for the purpose of this Section 7.

8. Additional Classes or Series of Stock

The Board of Directors shall have the right at any time in the future to authorize, create and issue, by

resolution or resolutions, one or more additional classes or series of stock of Freddie Mac, and to determine

and Ñx the distinguishing characteristics and the relative rights, preferences, privileges and other terms of the

shares thereof. Any such class or series of stock may rank prior to or on a parity with or junior to the NonCumulative Preferred Stock as to dividends or upon liquidation or otherwise.

9. Miscellaneous

(a) Any stock of any class or series of Freddie Mac shall be deemed to rank:

(i) prior to the shares of the Non-Cumulative Preferred Stock, either as to dividends or upon

liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts

distributable upon dissolution, liquidation or winding up of Freddie Mac, as the case may be, in

preference or priority to the holders of shares of the Non-Cumulative Preferred Stock;

A-6
(ii) on a parity with shares of the Non-Cumulative Preferred Stock, either as to dividends or upon

liquidation, whether or not the dividend rates or amounts, dividend payment dates or redemption of

liquidation prices per share, if any, be diÅerent from those of the Non-Cumulative Preferred Stock, if the

holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon

dissolution, liquidation or winding up of Freddie Mac, as the case may be, in proportion to their respective

dividend rates or amounts or liquidation prices, without preference or priority, one over the other, as

between the holders of such class or series and the holders of shares of the Non-Cumulative Preferred

Stock; and

(iii) junior to shares of the Non-Cumulative Preferred Stock, either as to dividends or upon

liquidation, if such class or series shall be Common Stock, or if the holders of shares of the

Non-Cumulative Preferred Stock shall be entitled to receipt of dividends or of amounts distributable

upon dissolution, liquidation or winding up of Freddie Mac, as the case may be, in preference or priority

to the holders of shares of such class or series.

(b) Freddie Mac and any agent of Freddie Mac may deem and treat the holder of a share or shares of

Non-Cumulative Preferred Stock, as shown in Freddie Mac's books and records, as the absolute owner of such

share or shares of Non-Cumulative Preferred Stock for the purpose of receiving payment of dividends in

respect of such share or shares of Non-Cumulative Preferred Stock and for all other purposes whatsoever, and

neither Freddie Mac nor any agent of Freddie Mac shall be aÅected by any notice to the contrary. All

payments made to or upon the order of any such person shall be valid and, to the extent of the sum or sums so

paid, eÅectual to satisfy and discharge liabilities for moneys payable by Freddie Mac on or with respect to any

such share or shares of Non-Cumulative Preferred Stock.

(c) The shares of the Non-Cumulative Preferred Stock, when duly issued, shall be fully paid and nonassessable.

(d) The Non-Cumulative Preferred Stock shall be issued, and shall be transferable on the books of

Freddie Mac, only in whole shares, it being intended that no fractional interests in shares of Non-Cumulative

Preferred Stock shall be created or recognized by Freddie Mac.

(e) For purposes of this CertiÑcate, the term ""Freddie Mac'' means the Federal Home Loan Mortgage

Corporation and any successor thereto by operation of law or by reason of a merger, consolidation or

combination.

(f) This CertiÑcate and the respective rights and obligations of Freddie Mac and the holders of the

Non-Cumulative Preferred Stock with respect to such Non-Cumulative Preferred Stock shall be construed in

accordance with and governed by the laws of the United States, provided that the law of the Commonwealth

of Virginia shall serve as the federal rule of decision in all instances except where such law is inconsistent with

Freddie Mac's enabling legislation, its public purposes or any provision of this CertiÑcate.

(g) Any notice, demand or other communication which by any provision of this CertiÑcate is required or

permitted to be given or served to or upon Freddie Mac shall be given or served in writing addressed (unless

and until another address shall be published by Freddie Mac) to Freddie Mac, 8200 Jones Branch Drive,

McLean, Virginia 22102, Attn: Executive Vice President-General Counsel and Secretary. Such notice,

demand or other communication to or upon Freddie Mac shall be deemed to have been suÇciently given or

made only upon actual receipt of a writing by Freddie Mac. Any notice, demand or other communication

which by any provision of this CertiÑcate is required or permitted to be given or served by Freddie Mac

hereunder may be given or served by being deposited Ñrst class, postage prepaid, in the United States mail

addressed (i) to the holder as such holder's name and address may appear at such time in the books and

records of Freddie Mac or (ii) if to a person or entity other than a holder of record of the Non-Cumulative

Preferred Stock, to such person or entity at such address as appears to Freddie Mac to be appropriate at such

time. Such notice, demand or other communication shall be deemed to have been suÇciently given or made,

for all purposes, upon mailing.

A-7
(h) Freddie Mac, by or under the authority of the Board of Directors, may amend, alter, supplement or

repeal any provision of this CertiÑcate pursuant to the following terms and conditions:

(i) Without the consent of the holders of the Non-Cumulative Preferred Stock, Freddie Mac may

amend, alter, supplement or repeal any provision of this CertiÑcate to cure any ambiguity, to correct or

supplement any provision herein which may be defective or inconsistent with any other provision herein,

or to make any other provisions with respect to matters or questions arising under this CertiÑcate,

provided that such action shall not materially and adversely aÅect the interests of the holders of the NonCumulative Preferred Stock.

(ii) The consent of the holders of at least 66 2/3% of all of the shares of the Non-Cumulative

Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a

meeting called for the purpose at which the holders of shares of the Non-Cumulative Preferred Stock

shall vote together as a class, shall be necessary for authorizing, eÅecting or validating the amendment,

alteration, supplementation or repeal of the provisions of this CertiÑcate if such amendment, alteration,

supplementation or repeal would materially and adversely aÅect the powers, preferences, rights,

privileges, qualiÑcations, limitations, restrictions, terms or conditions of the Non-Cumulative Preferred

Stock. The creation and issuance of any other class or series of stock, or the issuance of additional shares

of any existing class or series of stock of Freddie Mac (including the Non-Cumulative Preferred Stock),

whether ranking prior to, on a parity with or junior to the Non-Cumulative Preferred Stock, shall not be

deemed to constitute such an amendment, alteration, supplementation or repeal.

(iii) Holders of the Non-Cumulative Preferred Stock shall be entitled to one vote per share on

matters on which their consent is required pursuant to subparagraph (ii) of this paragraph (h). In

connection with any meeting of such holders, the Board of Directors shall Ñx a record date, neither earlier

than 60 days nor later than 10 days prior to the date of such meeting, and holders of record of shares of

the Non-Cumulative Preferred Stock on such record date shall be entitled to notice of and to vote at any

such meeting and any adjournment. The Board of Directors, or such person or persons as it may

designate, may establish reasonable rules and procedures as to the solicitation of the consent of holders of

the Non-Cumulative Preferred Stock at any such meeting or otherwise, which rules and procedures shall

conform to the requirements of any national securities exchange on which the Non-Cumulative Preferred

Stock may be listed at such time.

A-8
(i) RECEIPT AND ACCEPTANCE OF A SHARE OR SHARES OF THE NON-CUMULATIVE

PREFERRED STOCK BY OR ON BEHALF OF A HOLDER SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER (AND ALL OTHERS HAVING BENEFICIAL OWNERSHIP OF SUCH SHARE OR SHARES) OF ALL OF THE TERMS AND PROVISIONS OF THIS

CERTIFICATE. NO SIGNATURE OR OTHER FURTHER MANIFESTATION OF ASSENT TO THE

TERMS AND PROVISIONS OF THIS CERTIFICATE SHALL BE NECESSARY FOR ITS OPERATION OR EFFECT AS BETWEEN FREDDIE MAC AND THE HOLDER (AND ALL SUCH

OTHERS).

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Freddie Mac this 5th day of

November, 1999.

®Seal©

Maud Mater, Secretary

A-9
FOR IMMEDIATE RELEASE

October 19, 1999

MEDIA CONTACT: DOUGLAS ROBINSON

703.903.2423

INVESTOR CONTACT: BILL STEPHENS

703.903.2798

FREDDIE MAC ANNOUNCES RECORD EARNINGS FOR

THIRD QUARTER 1999

Third Quarter 1999 Earnings Per Share Up 29 Percent

McLean, VA—Freddie Mac (NYSE:FRE) today announced record diluted

earnings per common share of $0.75 for third quarter 1999, a 29 percent increase over

third quarter 1998 diluted earnings per common share of $0.58. Net income for the third

quarter was $564 million, compared to $425 million for the same period a year ago and

$552 million for second quarter 1999.

“Freddie Mac once again delivered strong results in the third quarter,” said Leland

C. Brendsel, Chairman and Chief Executive Officer. “This year alone we have financed

homes for nearly 2 million families. Freddie Mac has tremendous opportunities to

continue to shape the way mortgages are made and will remain the best way to finance

housing in America.” Brendsel added, “We also have tremendous financial strength. The

company benefited from past management actions, putting interest-rate and credit risk at

very low levels. We remain committed to protecting and enhancing value through

superior risk management.”

“Strong total portfolio growth and continued credit strength produced solid

earnings this quarter,” added David W. Glenn, President and Chief Operating Officer. “We

demonstrated our commitment to disciplined portfolio management by restructuring shortterm financing to protect long-term value. We also completed a $6 billion Reference

Note® issue, our largest ever, tapping worldwide capital markets to finance America’s

housing.”

Revenues

Freddie Mac’s total revenues were $1.000 billion in third quarter 1999, compared

to $821 million in third quarter 1998 and $1.009 billion in second quarter 1999.

Net interest income on earning assets totaled $610 million in third quarter 1999,

compared to $480 million in third quarter 1998 and $640 million in second quarter 1999.

(more)
Freddie Mac—Quarterly Earnings

October 19, 1999

Page 2

On a fully taxable equivalent (FTE) basis, the net interest yield on earning assets

was 0.76 percent in third quarter 1999, compared to 0.90 percent in third quarter 1998

and 0.83 percent in second quarter 1999. The decline in net interest yield from second

quarter 1999 was driven primarily by increased funding costs, reflecting the effect of both

rising interest rates and actions taken by management to extend the maturities of the

corporation’s debt financing.

Management and guarantee fee income totaled $356 million in third quarter 1999,

compared to $328 million in third quarter 1998 and $349 million in second quarter 1999.

During third quarter 1999, the average balance of Total PCs increased $24 billion, or 3

percent, while the average guarantee fee rate decreased 0.3 basis points. The decrease in

the average guarantee fee rate reflects continued portfolio turnover, with fees on new PC

issuances below the portfolio average, and liquidations of existing PCs at comparatively

higher rates.

In third quarter 1999, Other income, net totaled $34 million, compared to $13

million in third quarter 1998 and $20 million in second quarter 1999. Other income, net,

which generally includes resecuritization fees and gains and losses related to certain

derivative transactions and investment activities, may fluctuate from period to period.

Credit

Third quarter 1999 credit-related expenses (the provision for mortgage losses plus

REO operations expense) totaled $36 million, a decrease of $43 million from third quarter

1998 and an increase of $3 million from second quarter 1999. The quarterly provision for

mortgage losses was $15 million for third quarter 1999, compared to $40 million for third

quarter 1998 and $15 million for second quarter 1999.

Total third quarter 1999 mortgage charge-offs were $16 million, compared to $14

million in third quarter 1998 and $17 million in second quarter 1999. Single-family

charge-offs were $17 million in third quarter 1999, compared to $15 million in third

quarter 1998 and $19 million in second quarter 1999. Multifamily recoveries totaled $1

million in third quarter 1999, compared to recoveries of $1 million in third quarter 1998

and $2 million in second quarter 1999.

(more)
Freddie Mac—Quarterly Earnings

October 19, 1999

Page 3

Annualized third quarter 1999 credit losses (charge-offs plus REO operations

expense) represented 1.8 basis points of the average total mortgage portfolio, compared to

3.1 basis points in third quarter 1998 and 1.7 basis points in second quarter 1999.

At September 30, 1999, total REO balances were $473 million, down from $561

million at September 30, 1998 and $509 million at June 30, 1999. Single-family REO

balances were $469 million at September 30, 1999, down from $553 million at September

30, 1998 and $505 million at June 30, 1999. Multifamily REO balances were $4 million at

September 30, 1999, compared to $8 million at September 30, 1998 and $4 million at June

30, 1999.

The August 1999 delinquency rate for single-family, at-risk mortgages was 0.40

percent, down 9 basis points from September 1998 and 1 basis point from June 1999.

August 1999 delinquent multifamily balances were $21 million, down from $50

million at September 30, 1998 and $23 million at June 30, 1999. As a percentage of the

unpaid principal balance of multifamily mortgages serviced, the multifamily delinquency

rate was 0.14 percent at the end of August, down from 0.53 percent at September 30,

1998 and 0.16 percent at June 30, 1999.

Administrative Expenses

Third quarter 1999 administrative expenses were $164 million, compared to $142

million in third quarter 1998 and $161 million in second quarter 1999. Annualized

administrative expenses represented 7.9 basis points of the average total mortgage

portfolio in third quarter 1999 compared to 8.2 basis points in third quarter 1998 and 8.0

basis points in second quarter 1999.

Capital

The corporation’s primary capital base (stockholders’ equity plus the reserve for

mortgage losses) totaled $11.907 billion at September 30, 1999, compared to $10.034

billion at September 30, 1998 and $11.323 billion at June 30, 1999. In third quarter 1999,

Freddie Mac issued $250 million of 5.79% preferred stock.

Extraordinary Item

Freddie Mac recorded a $9 million after-tax gain (or $0.01 per basic and diluted

common share) during third quarter 1999 as a result of the repurchase of debt.
Freddie Mac—Quarterly Earnings

October 19, 1999

Page 4

* * * *

Freddie Mac’s quarterly announcements of earnings results sometimes contain

forward-looking statements pertaining to management’s current expectations as to Freddie

Mac’s future business plans, results of operations and/or financial condition.

Management’s expectations for the corporation’s future necessarily involve a number of

assumptions and estimates, and various factors could cause actual results to differ

materially from these expectations. These assumptions and factors are discussed in the

corporation’s Annual Report to Shareholders and its Information Statement and quarterly

Information Statement Supplements.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to

create a continuous flow of funds to mortgage lenders. By supplying lenders with the

money to make mortgages and packaging the mortgages into marketable securities,

Freddie Mac sustains a stable mortgage credit system and reduces the mortgage rates paid

by homebuyers. Over the years, Freddie Mac has opened the doors for one in six

homebuyers in America and two million renters.

Freddie Mac’s earnings releases and other financial disclosures are available on the

Shareholders’ page of our World Wide Web site at http://www.freddiemac.com.
FREDDIE MAC

CONSOLIDATED STATEMENTS OF INCOME 

(unaudited)

(dollars in millions, except per share amounts)

Quarter Ended Nine Months Ended

Sept 30, June 30, Sept 30, Sept 30, Sept 30,

1999 1999 1998 1999 1998

Interest income

 Mortgages $ 995 $ 972 $ 934 $ 2,952 $ 2,772

 Guaranteed mortgage securities 4,120 3,819 2,685 11,393 7,389

 Investments and securities purchased

 under agreements to resell 764 658 542 2,239 1,599

5,879 5,449 4,161 16,584 11,760

Interest expense on debt securities

 Short-term debt (338) (473) (952) (1,735) (2,814)

 Long-term debt (4,793) (4,146) (2,516) (12,402) (6,903)

(5,131) (4,619) (3,468) (14,137) (9,717)

Interest expense due to security program cycles (138) (190) (213) (571) (653)

(5,269) (4,809) (3,681) (14,708) (10,370)

Net interest income on earning assets 610 640 480 1,876 1,390

Management and guarantee income 356 349 328 1,043 978

Other income, net 34 20 13 87 67

 Total revenues 1,000 1,009 821 3,006 2,435

Provision for mortgage losses (15) (15) (40) (45) (150)

REO operations expense (21) (18) (39) (74) (123)

Administrative expenses (164) (161) (142) (488) (409)

Housing tax credit partnerships (22) (20) (16) (62) (46)

 Total non-interest expense (222) (214) (237) (669) (728)

Income before income taxes and extraordinary item 778 795 584 2,337 1,707

Income taxes (223) (238) (159) (705) (475)

Income before extraordinary item, net of taxes 555 557 425 1,632 1,232

Extraordinary gain (loss) on retirement of debt, net of taxes 9 (5) - (3) -

 Net income $ 564 $ 552 $ 425 $ 1,629 $ 1,232

 Preferred stock dividends (39) (36) (29) (111) (83)

 Net income available to common stockholders $ 525 $ 516 $ 396 $ 1,518 $ 1,149

Earnings per common share before extraordinary item

 Basic $ 0.74 $ 0.75 $ 0.58 $ 2.19 $ 1.70

 Diluted $ 0.74 $ 0.74 $ 0.58 $ 2.17 $ 1.68

Earnings per common share 

 Basic $ 0.75 $ 0.74 $ 0.58 $ 2.18 $ 1.70

 Diluted $ 0.75 $ 0.74 $ 0.58 $ 2.17 $ 1.68

Weighted average common shares outstanding (thousands)

 Basic 696,410 695,839 677,251 695,867 677,839

 Diluted 700,255 700,835 681,880 700,421 682,717
FREDDIE MAC

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in millions)

Sept 30, June 30, Sept 30,

1999 1999 1998

Assets

Retained portfolio

 Mortgages $ 55,695 $ 54,282 $ 51,212

 Reserve for losses on retained mortgages (345) (346) (299)

55,350 53,936 50,913

 Guaranteed mortgage securities (GMS) 260,273 244,902 165,310

 Net unrealized gain (loss) on available-for-sale GMS (1,052) (1,013) 238

 Purchase and sale premiums, discounts and deferred fees (57) 52 186

 Retained portfolio, net 314,514 297,877 216,647

Cash and cash equivalents 1,992 1,214 1,286

Investments 23,447 22,411 27,293

Securities purchased under agreements to resell 3,068 2,143 3,532

Accounts and trading receivables 18,643 14,846 12,271

Real estate owned (REO), net 473 509 561

Other assets 2,748 2,540 1,666

 Total Assets $ 364,885 $ 341,540 $ 263,256

Liabilities and Stockholders' Equity

Debt securities, net

 Due within one year $ 173,556 $ 165,941 $ 151,966

 Due after one year 167,458 148,341 84,421

 Total debt securities, net 341,014 314,282 236,387

Principal and interest due to Mortgage Participation

 Certificate (PC) investors 7,502 10,758 14,550

Other liabilities 4,675 5,393 2,424

353,191 330,433 253,361

Reserve for losses on Mortgage Participation Certificates 422 422 447

Guarantees

 Total Mortgage Participation Certificates (Total PCs) 738,581 718,085 635,726

 Less--Underlying mortgages (738,581) (718,085) (635,726)

- - -

Subordinated borrowings 132 130 160

Stockholders' equity 11,140 10,555 9,288

 Total Liabilities and Stockholders' Equity $ 364,885 $ 341,540 $ 263,256
No person has been authorized to give any

information or make any representations other 5,000,000 Shares than those contained in this OÅering Circular,

and, if given or made, such information or representations must not be relied upon as having

been authorized. This OÅering Circular does not

constitute an oÅer to sell or a solicitation of an

oÅer to buy any securities other than the Preferred Stock or an oÅer to sell or the solicitation Freddie Mac

of an oÅer to buy Preferred Stock in any circumstance in which such oÅer or solicitation is unlawful. Neither the delivery of this OÅering

Circular nor any sale made hereunder shall, Variable Rate, under any circumstances, create an implication

that there has been no change in the aÅairs of Non-Cumulative

the Corporation since the date hereof or, in the Preferred Stock case of facts set forth in the Information Statement incorporated by reference herein, since (Liquidation Preference the respective dates thereof or that the information contained herein or therein is correct as of $50.00 Per Share)

any time subsequent thereto.

Description Page

Additional Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2

OÅering Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3

Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

TABLE OF CONTENTS Y

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 Goldman, Sachs & Co. Capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6

Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 Lehman Brothers

Regulation and Governmental Relationships ÏÏÏ 8

Description of Preferred Stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 First Tennessee Bank NA

Certain Federal Income Tax Consequences ÏÏÏ 14 Blaylock & Partners, L.P. Legal Investment Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏ 16

Underwriting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 November 2, 1999 RatingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18

Independent Public AccountantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18

Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18

Appendix A Ì CertiÑcate of Designation ÏÏÏÏÏÏ A-1

Appendix B Ì Press Release and Unaudited

Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B-1