OFFERING CIRCULAR

8,000,000 Shares

Freddie Mac V

5% Non-Cumulative Preferred Stock

Dividend Rate: 5%

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

December 31 of each year, beginning

June 30, 1998

Dividend Adjustment: Dividend amount subject to adjustment

upon certain adverse changes to dividendsreceived deduction prior to September 23,

1999

Liquidation Preference: $50 per share plus current dividends

Optional Redemption: On or after March 31, 2003

Issue Date: March 23, 1998

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(2) Freddie Mac(1)(3)

Per Share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $50.00 $0.50 $49.50

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $400,000,000 $4,000,000 $396,000,000

(1) Plus accrued dividends, if any, from March 23, 1998.

(2) Freddie Mac has agreed to indemnify the several Underwriters against certain liabilities. See ""Underwriting.''

(3) Before deducting estimated expenses of $200,000 payable by Freddie Mac.

Merrill Lynch & Co.

Bear, Stearns & Co. Inc.

Blaylock & Partners, L.P.

Goldman, Sachs & Co.

Lehman Brothers

J.P. Morgan & Co.

Morgan Stanley Dean Witter

Salomon Smith Barney

The date of this OÅering Circular is March 18, 1998.
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

5% 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 issued by Freddie Mac on January 15, 1998 attached as Appendix B to this

OÅering Circular; and

‚ Freddie Mac's Information Statement dated March 31, 1997 and its Information Statement

Supplements dated May 15, 1997, August 14, 1997, November 14, 1997 and January 30, 1998

(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 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Federal Home Loan Mortgage Corporation (""Freddie Mac'' or

the ""Corporation'').

Security OÅeredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,000,000 shares of 5% Non-Cumulative Preferred Stock (the

""Preferred Stock''), with a redemption price and liquidation

preference of $50 per share.

Dividends:

RateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5%

Dividends will accrue from March 23, 1998.

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

Payment DatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ March 31, June 30, September 30 and December 31 of each

year, beginning June 30, 1998.

DRD Protection ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ If, prior to September 23, 1999, 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%.

PreferencesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 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 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Beginning March 31, 2003, Freddie Mac will have the option to

redeem the Preferred Stock at any time, 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 then-current quarterly dividend period accrued through the redemption date.

Liquidation RightsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 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 RightsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ None, except with respect to certain changes in the terms of the

Preferred Stock.

Preemptive and Conversion Rights ÏÏÏÏÏÏ None.

Rating ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock has been rated ""aa3'' by Moody's Investors

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

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

Use of ProceedsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 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 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ First Chicago Trust Company, New York, New York.

NYSE Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 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 Year Ended December 31,

1997 1996 1995 1994 1993

(unaudited)

(dollars in millions, except per share amounts)

BALANCE SHEET

Retained portfolio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 164,421 $ 137,755 $107,424 $ 72,828 $ 55,698

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 194,597 $ 173,866 $137,181 $ 106,199 $ 83,880

Primary capital base(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,215 $ 7,411 $ 6,546 $ 5,895 $ 5,197

Adjusted total capital base(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,736 $ 7,901 $ 7,179 $ 7,121 $ 6,680

MORTGAGE PURCHASE AND FINANCING ACTIVITIES

Mortgage purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 121,490 $ 128,565 $ 98,386 $ 124,246 $ 229,706

Number of mortgages purchasedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,085,046 1,232,540 934,890 1,256,566 2,315,162

PC issuances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 114,258 $ 119,702 $ 85,877 $ 117,110 $ 208,724

Mortgage Participation CertiÑcates (""PCs'')(3)ÏÏÏÏÏÏÏÏÏÏÏÏ $ 579,385 $ 554,260 $515,051 $ 491,325 $ 454,906

INCOME STATEMENT

Net interest income on earning assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,882 $ 1,542 $ 1,298 $ 1,047 $ 808

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,298 $ 1,249 $ 1,185 $ 1,173 $ 1,077

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,395 $ 1,243 $ 1,091 $ 983 $ 786

Earnings per common share:(4)(5)

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.90 $ 1.65 $ 1.42 $ 1.27 $ 1.02

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.88 $ 1.63 $ 1.41 $ 1.26 $ 1.01

Dividends per common share(5)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.40 $ 0.35 $ 0.30 $ 0.26 $ 0.22

Return on common equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.1% 22.6% 22.1% 23.3% 22.3%

(1) ""Stockholders' equity,'' ""Reserves for losses on retained mortgages'' and ""Reserves for losses on Mortgage Participation

CertiÑcates.''

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

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

(4) In fourth quarter 1997, Freddie Mac adopted Statement of Financial Accounting Standards No. 128, ""Earnings per Share.'' All

previously reported earnings per share amounts are now reported as ""Earnings per common share-basic,'' 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.

(5) Per share amounts reÖect a four-for-one stock split eÅective December 31, 1996.

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 mission is (i) to provide

stability in the secondary market for residential mortgages, (ii) to respond appropriately to the private capital

market, (iii) 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) and (iv) 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, including both whole loans and participation interests in such 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 mortgagerelated securities, and engages in other activities that support its mortgage purchases, 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 in the Corporation's assets and liabilities associated with its mortgage

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

Discussion and Analysis of Financial Condition and Results of Operations Ì Risk Management'' 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 indebtedness 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 December 31, 1997 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.

December 31, 1997

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 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 78,064 $ 78,064

Current portion of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,064 7,064

85,128 85,128

Notes and bonds payable due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 83,446 83,446

Total debt securities, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 168,574 168,574

Subordinated Borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 521 521

Minority Interest in Real Estate Investment Trusts(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,747 3,747

Stockholders' Equity(3):

6.72% Non-Cumulative Preferred Stock, $1.00 par value and $25.00 redemption

value(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 300

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

redemption value(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 250

6.125% Non-Cumulative Preferred Stock, $1.00 par value and $50.00

redemption value(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 287 287

6.14% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 600 600

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150 150

5% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption

value(9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 400

Common stock, $0.21 par value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 152

Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51 47

Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,830 6,830

Net unrealized gain on certain investments reported at fair value, net of taxes ÏÏ 146 146

Less: treasury stock, at cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,245) (1,245)

Total stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,521 7,917

Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $180,363 $180,759

(1) ""As adjusted'' reÖects anticipated proceeds of $400 million from the issuance of 8 million shares of Preferred Stock and the

deduction of $4 million in estimated transaction costs. The actual costs may diÅer.

(2) Represents preferred stock ownership interest in Freddie Mac's real estate investment trust subsidiaries.

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

additional paid-in capital.

(4) Optional redemption on or after September 30, 1998.

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

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

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

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

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

See Notes 7 and 8 to the 1996 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 December 31,

1997, 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 1993 through 1996 have been summarized or derived

from the audited 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

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

following selected Ñnancial data for the year ended December 31, 1997 have been summarized or derived from

unaudited Ñnancial statements which are included in the Information Statement Supplement dated January 30, 1998 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 Year Ended December 31,

1997 1996 1995 1994 1993

(unaudited)

(dollars in millions, except per share amounts)

Balance Sheet

Retained portfolio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 164,421 $ 137,755 $ 107,424 $ 72,828 $ 55,698

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 194,597 $ 173,866 $ 137,181 $ 106,199 $ 83,880

Debt securities, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 168,574 $ 156,491 $ 119,328 $ 92,053 $ 48,510

Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 182,407 $ 166,271 $ 130,297 $ 99,368 $ 77,406

Capital base:

Stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,521 $ 6,731 $ 5,863 $ 5,162 $ 4,437

Reserve for mortgage losses(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 694 680 683 733 760

Primary capital baseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,215 $ 7,411 $ 6,546 $ 5,895 $ 5,197

Subordinated borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 521 490 633 1,226 1,483

Adjusted total capital base ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,736 $ 7,901 $ 7,179 $ 7,121 $ 6,680

Mortgage Participation CertiÑcates (""PCs'')(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 579,385 $ 554,260 $ 515,051 $ 491,325 $ 454,906

Freddie Mac PCs held in the retained portfolio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 103,400 $ 81,195 $ 56,006 $ 30,670 $ 15,877

Primary capital ratio(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.23% 1.15% 1.10% 1.04% 0.99%

Adjusted total capital ratio(4)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.30% 1.22% 1.20% 1.26% 1.28%

Return on common equity(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.1% 22.6% 22.1% 23.3% 22.3%

Return on average assets and contingencies(6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.21% 0.20% 0.19% 0.18% 0.16%

Mortgage Purchase and Financing Activities

Mortgage purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 121,490 $ 128,565 $ 98,386 $ 124,246 $ 229,706

Number of mortgages purchasedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,085,046 1,232,540 934,890 1,256,566 2,315,162

Mortgage PC settlements: Single-class ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 114,258 $ 119,702 $ 85,877 $ 117,110 $ 208,724

Multiclass (REMICs) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 84,366 $ 34,145 $ 15,372 $ 73,131 $ 143,336

Long-term debt: Issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 31,132 $ 33,852 $ 29,643 $ 22,744 $ 24,784

Retired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (21,879) (20,819) (11,082) (6,462) (9,924)

Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9,253 $ 13,033 $ 18,561 $ 16,282 $ 14,860

Income Statement

Net interest income on earning assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,882 $ 1,542 $ 1,298 $ 1,047 $ 808

Management and guarantee income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,298 $ 1,249 $ 1,185 $ 1,173 $ 1,077

Income before income taxes and extraordinary item ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,964 $ 1,797 $ 1,586 $ 1,482 $ 1,128

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,395 $ 1,243 $ 1,091 $ 983 $ 786

Earnings per common share:(7)(8) Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.90 $ 1.65 $ 1.42 $ 1.27 $ 1.02

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.88 $ 1.63 $ 1.41 $ 1.26 $ 1.01

Weighted average common shares outstanding (in thousands):(7)(8)

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 684,937 709,453 721,288 722,663 721,685

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 691,701 714,878 725,114 726,108 725,167

Dividends per common share(8)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.40 $ 0.35 $ 0.30 $ 0.26 $ 0.22

Dividend payout ratio on common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.08% 21.26% 21.09% 20.47% 21.63%

Ratio of earnings to Ñxed charges(9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.18:1 1.19:1 1.23:1 1.31:1 1.32:1

Ratio of earnings to combined Ñxed charges and preferred stock

dividends(9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.16:1 1.18:1 1.22:1 1.30:1 1.30:1

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

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

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

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

(5) ""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).

(6) ""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.''

(7) In fourth quarter 1997, Freddie Mac adopted Statement of Financial Accounting Standards No. 128, ""Earnings per Share.'' All previously reported

earnings per share amounts are now reported as ""Earnings per common share-basic,'' 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.

(8) Per share amounts and weighted average common shares outstanding reÖect a four-for-one stock split eÅective December 31, 1996.

(9) 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 is 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. 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

March 23, 1998 and will be payable on March 31, June 30, September 30 and December 31 of each year

(each, a ""Dividend Payment Date''), commencing June 30, 1998, at the annual rate of $2.50 per share, 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. If declared, the initial dividend, which

will be for the period from but not including March 23, 1998 through and including June 30, 1998, will be

$0.67361 per share and will be payable on June 30, 1998. 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 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 the 5.81% Non-Cumulative Preferred Stock issued on October 27, 1997 and currently outstanding, the

6.14% Preferred Stock issued on June 3, 1997 and currently outstanding, the 6.125% Non-Cumulative

Preferred Stock issued on November 1, 1996 and currently outstanding, the Variable Rate, Non-Cumulative

Preferred Stock issued on April 26, 1996 and currently outstanding and the 6.72% Non-Cumulative Preferred

8
Stock issued on August 2, 1993 and currently outstanding (collectively, the ""Existing Preferred Stock'') with

respect to dividends.

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 September 23, 1999, one or more amendments to the Code are enacted that reduce 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''), 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. 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

""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.

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

9
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 September 23, 1999.

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 March 31, 2003. On or after that date and subject to

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

or in part, at any time or from time to time, 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, if any (calculated as provided in the

CertiÑcate of Designation), that would otherwise be payable for the then-current Dividend Period accrued

through and including the date of such 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.

10
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 a portion of the proposed regulation in June 1996, and OFHEO has stated

that it expects to issue the remainder of the proposed regulation in a second proposal, and to issue the Ñnal

regulation after it has considered comments on both portions of the proposed regulation. Freddie Mac's riskbased capital requirement cannot be estimated from the Ñrst proposal alone. The Ñnal risk-based capital

regulation becomes eÅective when issued but, until the risk-based capital regulation has been in eÅect for one

year, the Director must base any determination of the Corporation's capital adequacy solely on whether the

core capital of the Corporation is equal to or exceeds the minimum and critical capital levels.

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.

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.

11
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, 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.

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

12
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

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.

13
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 excluding the day of acquisition or any day which

is more than 45 days (or 90 days) after the date on which the Preferred Stock becomes ex-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.

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

14
(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. Depository institutions should review and consider the applicability of the Federal

Financial Institutions Examination Council's Supervisory Policy Statement on Securities Activities, as

revised.

15
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 Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representative, 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

Merrill Lynch, Pierce, Fenner & Smith

IncorporatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,400,000

Bear, Stearns & Co. Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

Blaylock & Partners, L.P. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

Goldman, Sachs & Co. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

Lehman Brothers Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

J.P. Morgan Securities Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

Morgan Stanley & Co. Incorporated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

Smith Barney Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 800,000

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,000,000

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 $.30 per share. The Underwriters may allow, and such dealers may reallow, a

concession not in excess of $.27 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.

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.

16
RATING

Moody's has assigned 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 ""highgrade 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 has

assigned 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, Ñxedincome 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., Senior

Vice President-General Counsel and Secretary of the Corporation. As of December 31, 1997, Ms. Mater was

the beneÑcial owner of 66,692 shares of Common Stock and options covering an additional 148,880 shares of

Common Stock. Ms. Mater was elected to Ñll a vacancy on Freddie Mac's Board of Directors until an external

candidate is identiÑed for recommendation for election at the next Annual Stockholders' Meeting or

substitution by the Board of Directors prior to the next Annual Stockholders' Meeting. Certain legal matters

relating to the Preferred Stock will be passed upon for the Underwriters by Cleary, Gottlieb, Steen &

Hamilton.

17
Appendix A

FREDDIE MAC

CERTIFICATE OF CREATION, DESIGNATION, POWERS,

PREFERENCES, RIGHTS, PRIVILEGES, QUALIFICATIONS,

LIMITATIONS, RESTRICTIONS, TERMS AND CONDITIONS

of

5% 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 98-05 on March 6, 1998, which resolution is now, and at all times since such

date has been, in full force and eÅect, and that the Chairman and Chief Executive OÇcer, pursuant to the

authority delegated to him by such resolution, approved the Ñnal terms of the public issuance and sale of the

preferred stock of Freddie Mac designated above.

The 5% 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 ""5% Non-Cumulative Preferred Stock,'' shall have a par value of $1.00 per share and shall

consist of 8 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 5.81% Non-Cumulative Preferred Stock issued on

October 27, 1997, the 6.14% Non-Cumulative Preferred Stock issued on June 3, 1997, the 6.125% NonCumulative Preferred Stock issued on November 1, 1996, the Variable Rate, Non-Cumulative Preferred

Stock issued on April 26, 1996 and the 6.72% Non-Cumulative Preferred Stock issued on August 2, 1993

(collectively, the ""Existing Preferred Stock'').

2. Dividends

(a) The holders of outstanding shares of Non-Cumulative Preferred Stock shall be entitled to receive,

ratably, when, as and if declared by the Board of Directors, in its sole discretion, out of funds legally available

therefor, non-cumulative, cash dividends at the annual rate of 5%, or $2.50, per share of Non-Cumulative

Preferred Stock. Dividends on the Non-Cumulative Preferred Stock shall accrue from but not including

March 23, 1998 and are payable when, as and if declared by the Board of Directors quarterly on March 31,

June 30, September 30 and December 31 of each year (each, a ""Dividend Payment Date'') commencing on

June 30, 1998. If a Dividend Payment Date is not a ""Business Day,'' the related dividend shall 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 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. The ""Dividend

Period'' relating to a Dividend Payment Date shall be the period from but not including the preceding

Dividend Payment Date (or from but not including March 23, 1998, in the case of the Ñrst Dividend Payment

Date) through and including the related Dividend Payment Date. The dividend payable in respect of the Ñrst

Dividend Period will be $0.67361 per share. The amount of dividends payable in respect of any quarterly

Dividend Period other than the Ñrst Dividend Period shall be computed at a rate equal to 5% divided by 4; the

amount of dividends payable in respect of any shorter period shall be computed on the basis of twelve 30-day

A-1
months and a 360-day year. Each such dividend shall be paid to the holders of record of outstanding shares of

the Non-Cumulative Preferred Stock as they appear in the books and records of Freddie Mac on such record

date as shall be Ñxed in advance by the Board of Directors, not to be earlier than 45 days nor later than 10 days

preceding the applicable Dividend Payment Date. 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.

(b) If, prior to September 23, 1999, one or more amendments to the Internal Revenue Code of 1986, as

amended (the ""Code''), are enacted that reduce 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''), 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 clause (a) of this Section 2 (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. 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

""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.

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

A-2
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.

(c) 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.

(d) 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

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.

(e) 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.

A-3
3. Optional Redemption

(a) The Non-Cumulative Preferred Stock shall not be redeemable prior to March 31, 2003. Subject to

this limitation and to any further limitations which may be imposed by law, Freddie Mac may redeem the

Non-Cumulative Preferred Stock, in whole or in part, at any time or from time to time, 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, if any, otherwise payable for the then-current Dividend

Period accrued through and including 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.

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

A-4
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;

(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

A-5
(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: Senior 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.

(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

A-6
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.

(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 23rd day of

March, 1998.

®Seal©

Maud Mater, Secretary

A-7
Appendix B

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B-1
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B-2
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B-3
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B-4
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B-5
No person has been authorized to give any information or

make any representations other than those contained in 8,000,000 Shares 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 of an oÅer to buy Preferred Stock in any Freddie Mac

circumstance in which such oÅer or solicitation is unlawful.

Neither the delivery of this OÅering Circular nor any sale

made hereunder shall, under any circumstances, create an 5% Non-Cumulative

implication that there has been no change in the aÅairs of Preferred Stock

the Corporation since the date hereof or, in the case of facts (Liquidation Preference set forth in the Information Statement incorporated by

reference herein, since the respective dates thereof or that $50.00 Per Share)

the information contained herein or therein is correct as of

any time subsequent thereto.

Description Page

Additional Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2

TABLE OF CONTENTS

Merrill Lynch & Co.

Y

OÅering Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 Bear, Stearns & Co. Inc. Freddie MacÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 Blaylock & Partners, L.P. Capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6

Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 Goldman, Sachs & Co. Regulation and Governmental Relationships ÏÏÏÏÏÏÏÏÏÏÏ 8

Description of Preferred Stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 Lehman Brothers

Certain Federal Income Tax Consequences ÏÏÏÏÏÏÏÏÏÏÏÏ 13

Legal Investment Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15 J.P. Morgan & Co.

UnderwritingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 Morgan Stanley Dean Witter Rating ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17

Independent Public Accountants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 Salomon Smith Barney Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17

Appendix A Ì CertiÑcate of Designation ÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1 March 18, 1998 Appendix B Ì Press Release ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B-1