OFFERING CIRCULAR

20,000,000 Shares

5.9% Non-Cumulative

Perpetual Preferred Stock

Freddie Mac

Dividend Rate: 5.9%

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

December 31, beginning December 31, 2006

Optional Redemption: On or after September 30, 2011

Liquidation Preference: $25 per share plus current dividends

Issue Date: October 16, 2006

Listing: New York Stock Exchange (pending)

An investment in the Preferred Stock involves risks. See Risk Factors beginning on page 5 of

this OÅering Circular and beginning on page 9 of our Information Statement dated June 28, 2006,

which we are incorporating by reference in this OÅering Circular.

We alone are responsible for our obligations under and for making payments on the Preferred

Stock. The Preferred Stock is not guaranteed by, and is not a debt or obligation of, the

United States or any federal agency or instrumentality other than Freddie Mac.

Initial Public Underwriting Proceeds to

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

Per ShareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.00 $0.25 $24.75

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $500,000,000 $5,000,000 $495,000,000

(1) Plus any accrued dividends from October 16, 2006.

(2) Before deducting estimated expenses of $150,000.

Joint Book-Running Managers

Lehman Brothers Merrill Lynch & Co.

Co Managers

Goldman, Sachs & Co.

Banc of America Securities LLC

Bear, Stearns & Co. Inc.

JPMorgan

Morgan Stanley

The date of this OÅering Circular is October 11, 2006.
In this OÅering Circular, we refer to the 5.9% Non-Cumulative Perpetual Preferred Stock as

the ""Preferred Stock.''

The Underwriters may engage in transactions that aÅect the price of the Preferred Stock,

including stabilizing and short-covering transactions and the imposition of a penalty bid, in

connection with the oÅering. For a description of these activities, see Underwriting.

ADDITIONAL INFORMATION

You should read this OÅering Circular together with:

‚ the CertiÑcate of Creation, Designation, Powers, Preferences, Rights, Privileges, QualiÑcations, Limitations, Restrictions, Terms and Conditions for the Preferred Stock (the

""CertiÑcate of Designation''), which will be in substantially the form attached as

Appendix A;

‚ our Proxy Statement dated July 12, 2006; and

‚ our Information Statement dated June 28, 2006 (the ""Information Statement'') and

our Information Statement Supplements dated August 1, August 21, September 8 and

October 3, 2006 (the ""Information Statement Supplements'').

This OÅering Circular incorporates the Proxy Statement, the Information Statement and the

Information Statement Supplements by reference, which means that we are disclosing information

to you by referring to them rather than by providing you with separate copies. They are considered

part of this OÅering Circular. We also furnish our common stockholders with periodic reports

containing Ñnancial information and supplements to our Information Statement. You can obtain

copies of any of these documents by contacting us at:

Freddie Mac

Investor Relations Department

Mailstop D40

1551 Park Run Drive

McLean, Virginia 22102-3110

Telephone: 571-382-4732 or 1-800-FREDDIE (800-373-3343)

e-mail: shareholder@freddiemac.com

Our Proxy Statement, Information Statement and Information Statement Supplements are also

available on the ""Investor Relations'' page of our Internet Website (http://www.freddiemac.com).

Although this information is available on our website, none of the other information on or

hyperlinked from our website is incorporated by reference into this OÅering Circular. You should

rely only on the information included or speciÑcally incorporated by reference in this OÅering

Circular in deciding whether to make an investment in the Preferred Stock. We have not authorized

anyone to provide you with any diÅerent or additional information.

Because of applicable securities law exemptions, we have not registered the Preferred Stock

with any federal or state securities commission. No securities commission has reviewed this

OÅering Circular.

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

state or local taxation. For a discussion of relevant U.S. tax considerations associated with an

investment in the Preferred Stock, see Certain Federal Income Tax Consequences.

Some jurisdictions may by law restrict the distribution of this OÅering Circular and the oÅer,

sale and delivery of the Preferred Stock. Persons who receive this OÅering Circular should know

about and observe any such restrictions.

2
SUMMARY

This summary contains selected information about the Preferred Stock. You should refer to the

remainder of this OÅering Circular for further information.

Issuer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Federal Home Loan Mortgage Corporation or ""Freddie

Mac,'' a stockholder-owned government-sponsored

enterprise.

Securities OÅered ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,000,000 shares of Preferred Stock, each with a $25 per

share redemption price and liquidation preference.

Dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.9% per annum. Dividends will accrue from but not

including the issue date.

FrequencyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will pay non-cumulative dividends quarterly, when, as

and if declared by our Board of Directors.

Payment Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will pay dividends, if declared, on March 31, June 30,

September 30 and December 31 of each year, or the next

business day, beginning December 31, 2006.

Preferences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock will receive a preference over our

common stock and any other junior stock as to dividends

and distributions upon liquidation. The Preferred Stock will

rank equally with our other currently outstanding series of

preferred stock as to dividends and distributions upon

liquidation.

MaturityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Perpetual.

Optional Redemption ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Beginning on September 30, 2011 and at any time thereafter, we will have the option to redeem the Preferred Stock,

in whole or in part, at the price of $25 per share plus the

amount that would otherwise be payable as the dividend for

the quarterly dividend period in which the redemption date

falls, accrued through and including the redemption date,

whether or not declared. We will give notice of optional

redemption by mail to holders of the Preferred Stock to be

redeemed from 30 days to 60 days before the redemption

date.

Liquidation Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ If Freddie Mac is dissolved or liquidated, you will be

entitled to receive, out of any assets available for distribution to our stockholders, up to $25 per share of Preferred

Stock plus the dividend for the then-current quarterly

dividend period accrued through and including the liquidation payment date, whether or not declared.

Voting Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ None, except in the case of speciÑed changes in the terms

of the Preferred Stock.

Preemptive and Conversion RightsÏÏÏ None.

RatingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Preferred Stock has been rated Aa3 (stable) by

Moody's Investors Service, Inc. (""Moody's''), AA¿ (sta3
ble) by Standard & Poor's Ratings Services, a division of

The McGraw-Hill Companies, Inc. (""S&P'') and AA¿

(stable) by Fitch Ratings (""Fitch''). See Ratings.

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will use the net proceeds from the sale of the Preferred

Stock primarily for the repurchase of outstanding shares of

our common stock. Any remaining net proceeds may be

used for general corporate purposes, including the repayment of outstanding debt, the purchase of residential mortgages or mortgage securities and the redemption of

previously issued shares of preferred stock.

Transfer Agent, Dividend Disbursing

Agent and Registrar ÏÏÏÏÏÏÏÏÏÏÏÏÏ Computershare Trust Company, N.A.

Exchange Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We have applied to list the Preferred Stock on the New

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

CUSIP Number ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 313400681

4
RISK FACTORS

Prospective purchasers of the Preferred Stock should consider carefully the risk factors set forth

below, and in the Information Statement beginning on page 9, as well as all other information

contained or incorporated by reference in this OÅering Circular, in evaluating an investment in the

Preferred Stock.

We Continue to Experience Delays in Our Financial Reporting

Since the restatement and revision of our Ñnancial results for 2000, 2001 and 2002, we have had

to face many challenging and complex accounting and Ñnancial reporting issues, including ongoing

controls remediation and systems re-engineering and development. We fell behind in our periodic

reporting for the years ended December 31, 2002, 2003, 2004 and 2005, and we have not yet

returned to quarterly reporting. In order to devote the resources needed to complete a review of our

internal control environment and return to timely reporting as soon as possible, we have decided to

delay our interim Ñnancial reporting for 2006. If we fail to meet our reporting obligations, this could

aÅect our ability to maintain the listing of our securities on the NYSE. Further, the OÇce of

Federal Housing Enterprise Oversight (""OFHEO'') could seek to require us to implement a

remediation plan, hold additional capital or take other actions. In August 2006, in response to a

request from OFHEO, we announced that we will voluntarily limit, on a temporary basis, the annual

growth of our retained mortgage portfolio to no more than two percent above the level of June 30,

2006, eÅective July 1, 2006. In addition, a failure to eÅectively and timely implement the

remediation plan undertaken as a result of the prior restatement of our consolidated Ñnancial

statements and the consent order entered into with OFHEO, including particular initiatives relating

to technical infrastructure and internal control over Ñnancial reporting, could similarly adversely

aÅect our business. Additionally, because we do not have current Ñnancial information available, our

current Ñnancial results could diÅer (perhaps substantially) from our most recent audited Ñnancial

statements as of December 31, 2005 as set forth in our Information Statement or management's

estimates of our Ñnancial results for the Ñrst half of 2006 as set forth in our Information Statement

Supplement dated October 3, 2006. Any of these events could have an adverse eÅect on the trading

value of the Preferred Stock. For further information, see Management's Discussion and Analysis of

Financial Condition and Results of Operations Ì Risk Management Ì Operational Risks Ì Internal Control Over Financial Reporting in the Information Statement.

We Have Material Weaknesses and Other DeÑciencies in Our Internal Controls

We have discovered, and may in the future discover, material weaknesses and signiÑcant

deÑciencies in our internal controls that require remediation. Due to these weaknesses and

deÑciencies, our management has determined that, as of December 31, 2005, our internal control

over Ñnancial reporting was not eÅective. A failure to establish and maintain an adequate control

environment could result in a material error in our reported Ñnancial results, loss of market

conÑdence in our reported results and additional delays in our Ñnancial reporting timeline. Any of

these results could have a material adverse eÅect on our business and on the trading price of our

securities, and could result in additional regulatory measures. OFHEO is considering whether

additional remedial actions may be appropriately applied to us. For further information, see

Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Risk

Management Ì Operational Risks Ì Internal Control Over Financial Reporting in the Information

Statement.

5
We May Be Unable To Manage EÅectively All of the Risks to Which We Are Subject

Our business is exposed to operational risks, interest-rate and other market risks and credit

risks. We are also exposed to other risks, such as those described in the Risk Factors section of the

Information Statement, including reputation risk, legislation and regulatory risk and risks related to

implementing our business strategies. As described therein and above, we face a number of

signiÑcant operational risks, including material weaknesses and other signiÑcant deÑciencies in our

internal control over Ñnancial reporting. These operational risks may expose us to Ñnancial loss, may

delay or interfere with our ability to return to and sustain timely Ñnancial reporting, or may result in

other adverse consequences to our business and the trading value of our securities. Our retained

portfolio activities expose us to interest-rate risk and other market risks arising primarily from the

uncertainty as to when borrowers will pay the outstanding principal balance of mortgage loans and

mortgage-related securities, known as prepayment risk, and the resulting potential mismatch in the

timing of our receipt of cash Öows on our assets versus the timing of our obligation to make

payments on our liabilities. Our credit guarantee activities also expose us to interest-rate risk

because changes in interest rates can cause Öuctuations in the fair value of our existing credit

guarantee portfolio. Our credit guarantee portfolio also is subject primarily to two types of credit

risk Ì mortgage credit risk and institutional credit risk. Mortgage credit risk is the risk that a

borrower will fail to make timely payments on a mortgage or security we own or guarantee.

Institutional credit risk is the risk that a counterparty that has entered into a business contract or

arrangement with us will fail to meet its obligations. For further information, see Risk Factors and

Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Risk

Management in the Information Statement.

The Preferred Stock Is Subordinated to Our Senior Obligations

The Preferred Stock is subordinated to our senior obligations, including our subordinated debt

consisting primarily of Freddie SUBS» securities. The terms of the Freddie SUBS that we have

outstanding provide for the deferral of interest payments under certain speciÑed circumstances of

Ñnancial distress and, during those deferral periods, prohibit the payment of dividends on our stock,

including the Preferred Stock. Additionally, we may not declare or pay dividends on 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 our stock ranking prior to the Preferred Stock with respect to the

payment of dividends. As of the date of this OÅering Circular, we have no outstanding class or series

of stock that ranks senior to the Preferred Stock.

There Is No Existing Trading Market for the Preferred Stock

The Preferred Stock is a new issue of securities with no established trading market. We have

applied to list the Preferred Stock on the NYSE. There is no assurance that the Preferred Stock will

be approved for listing on the NYSE. However, even if the listing of the Preferred Stock is

approved, an active market for the Preferred Stock may or may not develop or be sustained in the

future. We cannot assure you regarding the liquidity of, or trading markets for, the Preferred Stock.

6
FREDDIE MAC

Freddie Mac is a stockholder-owned company chartered by Congress in 1970 under the Federal

Home Loan Mortgage Corporation Act (the ""Freddie Mac Act'') to stabilize the nation's

residential mortgage markets and expand opportunities for homeownership and aÅordable rental

housing. We are one of the largest purchasers of mortgage loans in the U.S. We bring innovation

and eÇciency to the mortgage lending process.

Our mission is to provide liquidity, stability and aÅordability to the U.S. housing market. We

fulÑll our mission by purchasing residential mortgages and mortgage-related securities in the

secondary mortgage market. We purchase mortgages that meet our underwriting and product

standards, then bundle them into mortgage-related securities that can be sold to investors. We can

use the proceeds to purchase additional mortgages from primary market mortgage lenders, thus

providing them with a continuous Öow of funds. We also purchase mortgage loans and mortgagerelated securities for our investment portfolio, which we Ñnance primarily by issuing a variety of debt

instruments in the capital markets.

Though we are chartered by Congress, our business is funded completely with private capital.

We are responsible for making payments on our securities. Neither the U.S. government nor any

other agency or instrumentality of the U.S. government is obligated to fund our mortgage purchase

or Ñnancing activities or to guarantee our securities and other obligations.

Our statutory purposes, as stated in our charter, are:

‚ To provide stability in the secondary market for residential mortgages;

‚ To respond appropriately to the private capital market;

‚ To provide ongoing assistance to the secondary market for residential mortgages

(including activities related to mortgages on housing for low- and moderate-income

families involving a reasonable economic return that may be less than the return

received on other activities) by increasing the liquidity of mortgage investments and

improving the distribution of investment capital available for residential mortgage

Ñnancing; and

‚ To promote access to mortgage credit throughout the U.S. (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.

7
USE OF PROCEEDS

We will use the net proceeds from the sale of Preferred Stock primarily for the repurchase of

outstanding shares of our common stock. Any remaining net proceeds may be used for general

corporate purposes, including the repayment of outstanding indebtedness, the purchase of residential

mortgages or mortgage securities and the redemption of shares of preferred stock we have previously

issued. The precise amounts and timing of the application of the proceeds will depend on our capital

and funding requirements.

We engage in Ñnancing transactions continuously. The amount and nature of these transactions

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

mortgages we purchase, as well as general market conditions.

8
CAPITALIZATION

The following table shows our capitalization at December 31, 2005 and pro forma as adjusted to

reÖect the sale of the Preferred Stock oÅered by this OÅering Circular and the sale of our preferred

stock in July 2006. This information should be read together with our consolidated Ñnancial

statements and other Ñnancial information set forth in the Information Statement. We engage in

transactions and issue or repurchase debt obligations on an ongoing basis, all of which cause our

total capitalization to change. Therefore, on any date after December 31, 2005, our total capitalization will diÅer (perhaps substantially) from the Ñgures contained in this capitalization table. See

Risk Factors Ì We Continue to Experience Delays in Our Financial Reporting.

December 31, 2005

Pro Forma As

Actual Pro Forma(1) Adjusted(2)

(dollars in millions)

Debt securities, net:

Due within one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $288,532 $288,532 $288,532

Due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 454,627 454,627 454,627

Total debt securities, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 743,159 743,159 743,159

Subordinated Borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,633 5,633 5,633

Stockholders' Equity(3)(4)(5): Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(6) ÏÏ 250 250 250

6.14% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(7)ÏÏÏÏÏÏÏÏÏÏ 600 600 600

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(8)ÏÏÏÏÏÏÏÏÏÏ 150 150 150

5% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(9) ÏÏÏÏÏÏÏÏÏÏÏÏ 400 400 400

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(10) ÏÏ 220 220 220

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(10) ÏÏÏÏÏÏÏÏÏÏ 400 400 400

5.3% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(11) ÏÏÏÏÏÏÏÏÏÏ 200 200 200

5.1% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(12) ÏÏÏÏÏÏÏÏÏÏ 150 150 150

5.79% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(13) ÏÏÏÏÏÏÏÏÏ 250 250 250

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(14) ÏÏ 287 287 287

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(15) ÏÏ 325 325 325

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(16) ÏÏ 230 230 230

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(17) ÏÏÏÏÏÏÏÏÏ 173 173 173

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(18) ÏÏ 201 201 201

6% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(19)ÏÏÏÏÏÏÏÏÏÏÏÏ 173 173 173

5.7% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(20) ÏÏÏÏÏÏÏÏÏÏ 300 300 300

5.81% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(21) ÏÏÏÏÏÏÏÏÏ 300 300 300

Variable Rate, Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(22) ÏÏÏÏÏÏ Ì 750 750

6.42% Non-Cumulative Preferred Stock, $1.00 par value and $50.00 redemption value(22) ÏÏÏÏÏÏÏÏÏ Ì 250 250

5.9% Non-Cumulative Preferred Stock, $1.00 par value and $25.00 redemption value(23) ÏÏÏÏÏÏÏÏÏÏ Ì Ì 500

Common stock, $0.21 par value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 152 152

Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 924 914 909

Retained earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,559 31,559 31,559

Accumulated other comprehensive income (loss), net of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,773) (8,773) (8,773)

Treasury stock, at costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,280) (1,280) (1,280)

Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,191 28,181 28,676

Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $775,983 $776,973 $777,468

(1) ""Pro Forma'' reÖects proceeds of $990 million from the July 2006 issuance of 20 million shares of preferred stock, and the deduction of

$300,000 in transaction costs.

(2) ""Pro Forma As Adjusted'' reÖects anticipated proceeds of $495 million from the issuance of 20 million shares of Preferred Stock, and the

deduction of $150,000 in estimated transaction costs. The actual transaction costs may diÅer. ""Pro Forma As Adjusted'' also reÖects the

July 2006 issuance of preferred stock described in (1), but does not reÖect the June 2006 issuance of $1.25 billion in Freddie SUBS, any

other debt transactions since December 31, 2005 or any repurchases of common stock since December 31, 2005.

(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) As long as the capital monitoring framework established by OFHEO in January 2004 remains in eÅect, any preferred stock redemption will

require prior approval by OFHEO. See Note 10: Regulatory Capital to our consolidated Ñnancial statements included in our Information

Statement for more information.

(5) All classes of preferred stock are perpetual and non-cumulative, and carry no signiÑcant voting rights or rights to purchase additional

Freddie Mac stock or securities.

(6) Optional redemption on or after June 30, 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.

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

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

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

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

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

(15) Optional redemption on March 31, 2003 and on March 31 every two years thereafter.

(16) Optional redemption on March 31, 2003 and on March 31 every year thereafter.

(17) Optional redemption on or after March 31, 2011.

(18) Optional redemption on June 30, 2003 and on June 30 every two years thereafter.

(19) Optional redemption on or after June 30, 2006.

(20) Optional redemption on or after December 31, 2006.

(21) Optional redemption on or after March 31, 2007.

(22) Optional redemption on or after June 30, 2011.

(23) Optional redemption on or after September 30, 2011.

9
See Notes 8 and 9 to the consolidated Ñnancial statements included in the Information

Statement for further information about our debt securities, subordinated borrowings and stockholders' equity.

FINANCIAL REPORTING MATTERS AND RELATED INFORMATION

Since the restatement and revision of our Ñnancial results for 2000, 2001 and 2002, we have had

to face many challenging and complex accounting and Ñnancial reporting issues, including ongoing

controls remediation and systems re-engineering and development. We fell behind in our periodic

reporting for the years ended December 31, 2002, 2003, 2004 and 2005, and we have not yet

returned to quarterly reporting. Improving internal control over Ñnancial reporting and mitigating

the risks presented by material weaknesses and other control deÑciencies in our Ñnancial reporting

processes continue to be top corporate priorities. Many of the material weaknesses and other control

deÑciencies identiÑed in prior years persisted throughout 2005 and continue to present challenges for

us in 2006. In addition, we determined that some previously identiÑed deÑciencies were more

serious than originally assessed. We also identiÑed additional control deÑciencies in 2005. While we

believe we have made progress in the remediation of certain material weaknesses and other control

deÑciencies that have been identiÑed, these will continue to pose signiÑcant risks to our Ñnancial

reporting processes until fully remediated. For example, in the course of completing our Ñnancial

reporting process for 2005, we discovered a number of internal control issues that resulted in

adjustments to our interim 2005 Ñnancial results. See Risk Factors Ì Business and Operational

Risks and Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Risk Management Ì Operational Risks in our Information Statement for more information. The material weaknesses and signiÑcant deÑciencies in our internal control over Ñnancial

reporting adversely aÅect our ability to record, process, summarize and report Ñnancial data in a

timely manner. Based on the continued existence of material weaknesses at December 31, 2005, our

Chief Executive OÇcer and President and Chief Operating OÇcer have concluded that our internal

control over Ñnancial reporting was not eÅective at December 31, 2005.

We have not completed our evaluation of our internal control over Ñnancial reporting.

Accordingly, we are unable to determine whether additional weaknesses or deÑciencies that require

remediation exist. Our ability to identify, manage, mitigate and/or remedy internal control

weaknesses and deÑciencies and other risks may continue to delay our return to regular, timely

reporting. Any controls and procedures, no matter how well designed and operated, can provide only

reasonable assurance of achieving the desired control objectives. Furthermore, we cannot be certain

that our eÅorts to improve our control environment will be successful or that we will be able to

maintain adequate controls over our Ñnancial processes and reporting in the future. A failure to

establish and maintain an adequate control environment could result in a material error in our

reported Ñnancial results and additional delay in our Ñnancial reporting timeline, and could have a

material adverse eÅect on our business depending on the nature of the failure and any required

remediation. An ineÅective control environment, including our disclosure controls and procedures,

could also cause investors to lose conÑdence in our reported Ñnancial information, which would

likely have an adverse eÅect on the trading price of our securities. If we fail to meet our reporting

obligations, this could aÅect our ability to maintain the listing of our securities on the NYSE.

Further, in May 2006, OFHEO announced that it would consider applying additional remedial

measures to us and to Fannie Mae, including, but not limited to, limiting the growth of our retained

mortgage portfolio and requiring us to hold additional capital (see Regulatory Capital for more

10
information). In August 2006, in response to a request from OFHEO, we announced that we will

voluntarily limit, on a temporary basis, the annual growth of our retained mortgage portfolio to no

more than two percent above the level of June 30, 2006, eÅective July 1, 2006. In addition, a failure

to eÅectively and timely implement the remediation plan undertaken as a result of the prior

restatement of our consolidated Ñnancial statements and the consent order entered into with

OFHEO, including particular initiatives relating to technical infrastructure and internal control over

Ñnancial reporting, could similarly adversely aÅect our business. See also Risk Factors Ì Business

and Operational Risks and Ì Legal and Regulatory Risks in our Information Statement.

We are also exposed to the risk that our business processes could be adversely aÅected by

inadequate staÇng, which strains existing resources and increases the risk that an error or fraud will

not be detected. This risk is of particular concern because of high turnover rates, critical vacancies

and recent changes in our senior management. We have Ñlled some important vacancies such as

General Counsel, General Auditor, Principal Accounting OÇcer and Senior Vice President,

Enterprise Operational Risk. Our President and Chief Operating OÇcer has assumed the responsibilities of the Chief Financial OÇcer while we conduct a search to Ñll that position. Recently, high

employee turnover rates have contributed to increased operational risk. While we have made

progress in our eÅorts to build a strong management team by Ñlling several senior positions, we need

to continue to recruit additional qualiÑed people into leadership positions across the organization in

order to achieve our objectives in regard to remediation of our internal control deÑciencies.

Executive management committees and other internal advisory groups monitor performance

against our risk management strategies and established risk limits, identify and assess potential

issues and provide oversight regarding changes in business processes and activities. Within the

business units, risk management personnel identify, monitor and report risks. Independent oversight

of risk management is provided by our Enterprise Risk Oversight, Corporate Compliance and

Internal Audit divisions, in addition to the oversight provided by the board of directors and its

committees. Together these groups assess the adequacy and eÅectiveness of the risk management

functions across the company.

While we believe that both our day-to-day and long-term management of interest-rate and

other market risks and credit risks is satisfactory, weaknesses exist in our overall risk governance

framework. We are focused on strengthening our capacity in four important areas: risk governance,

risk identiÑcation, risk measurement and assessment and related education and communication. Our

risk management framework is being reviewed under a new leadership team in our Enterprise Risk

Oversight division to address these issues and to establish clear lines of authority, clarify roles and

responsibilities and to improve the overall eÅectiveness of the risk oversight function. We recently

created an executive management enterprise risk committee to provide an enterprise-wide view of

risk. Our board of directors also assigned primary responsibility for oversight of enterprise risk

management to the newly re-chartered Governance, Nominating and Risk Oversight Committee of

the board of directors.

For further discussion of corporate initiatives we have undertaken to improve our ability to

manage our operational risks and the potential eÅects of those risks on our business, see

Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Risk

Management Ì Operational Risks in the Information Statement.

11
SELECTED FINANCIAL DATA

The following table sets forth, for the periods and dates indicated, our selected consolidated

Ñnancial data which has been derived from and should be read in conjunction with our annual

consolidated Ñnancial statements, including those incorporated in this OÅering Circular by reference

to our Information Statement for the year ended December 31, 2005.

We do not have current Ñnancial information available and have material weaknesses and other

deÑciencies in our internal control environment. On any date after December 31, 2005, our Ñnancial

information may diÅer (perhaps substantially) from the data contained in this table. See Risk

Factors Ì We Continue to Experience Delays in Our Financial Reporting and Ì We Have Material

Weaknesses and Other DeÑciencies in Our Internal Controls. You should also read, in conjunction

with this Ñnancial information, the discussion of certain operational risks relating to our Ñnancial

reporting set forth under Risk Factors and Financial Reporting Matters and Related Information

above.

12
Selected Financial Data(1)

At or for the Year Ended December 31,

2005 2004 2003 2002 2001

(dollars in millions, except share-related amounts)

Income Statement Data

Net interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,370 $ 9,137 $ 9,498 $ 9,525 $ 7,448

Non-interest income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199 (3,039) (244) 7,154 (1,591)

Net income before cumulative eÅect of changes in accounting principles ÏÏÏÏÏ 2,189 2,937 4,816 10,090 3,115

Cumulative eÅect of changes in accounting principles, net of taxes ÏÏÏÏÏÏÏÏÏÏ (59) Ì Ì Ì 43

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,130 2,937 4,816 10,090 3,158

Preferred stock dividends and issuance costs on redeemed preferred stock (223) (210) (216) (239) (217)

Net income available to common stockholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,907 $ 2,727 $ 4,600 $ 9,851 $ 2,941

Earnings per common share before cumulative eÅect of changes in accounting

principles: Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.84 $ 3.96 $ 6.69 $ 14.22 $ 4.19

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.83 3.94 6.68 14.17 4.17

Earnings per common share after cumulative eÅect of changes in accounting

principles: Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.76 $ 3.96 $ 6.69 $ 14.22 $ 4.25

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.75 3.94 6.68 14.17 4.23

Dividends per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.52 $ 1.20 $ 1.04 $ 0.88 $ 0.80

Weighted average common shares outstanding (in thousands):

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 691,582 689,282 687,094 692,727 692,603

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 693,511 691,521 688,675 695,116 695,973

Balance Sheet Data

Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 806,222 $ 795,284 $ 803,449 $ 752,249 $ 641,100

Senior debt, net due within one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 288,532 282,303 295,262 244,429 264,227

Senior debt, net due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 454,627 443,772 438,738 415,662 311,013

Subordinated debt, net due after one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,633 5,622 5,613 5,605 3,128

Miscellaneous liabilities(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29,290 30,662 30,420 52,914 40,489

Minority interests in consolidated subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 949 1,509 1,929 2,309 2,619

Stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,191 31,416 31,487 31,330 19,624

Portfolio Balances(3)

Retained portfolio (unpaid principal balances)(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 710,017 $ 652,936 $ 645,466 $ 567,272 $ 497,639

Total Guaranteed PCs and Structured Securities issued (unpaid principal

balances)(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,335,524 1,208,968 1,162,068 1,090,624 961,511

Total mortgage portfolio (unpaid principal balances) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,684,217 1,505,206 1,414,399 1,316,609 1,150,723

Ratios

Return on average assets(6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.3% 0.4% 0.6% 1.4% 0.6%

Return on common equity(7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.7 10.2 17.2 47.2 20.2

Return on total equity(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.3 9.3 15.3 39.6 17.1

Dividend payout ratio on common stock(9)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56.4 30.7 15.6 6.2 18.9

Equity to assets ratio(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.7 3.9 4.0 3.7 3.4

(1) Beginning October 1, 2005, we changed our method for determining gains and losses upon the re-sale of PCs and Structured Securities related to

deferred items recognized in connection with our guarantee of those securities. EÅective January 1, 2005, we changed our method of accounting

for interest expense related to callable debt instruments to recognize interest expense using an eÅective interest method over the contractual life of

the debt. For periods prior to 2005, we amortized premiums, discounts, deferred issuance costs and other basis adjustments in interest expense

using an eÅective interest method over the estimated life of the debt. See ""Note 1: Summary of SigniÑcant Accounting Policies'' to our

consolidated Ñnancial statements included in the Information Statement. EÅective January 1, 2003, we adopted the provisions of Financial

Accounting Standards Board, or FASB, Interpretation No. 45, ""Guarantor's Accounting and Disclosure Requirements for Guarantees, Including

Indirect Guarantees of Indebtedness of Others,'' or FIN 45, and FASB StaÅ Position FIN 45-2, ""Whether FASB Interpretation No. 45,

Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, Provides Support

for Subsequently Accounting for a Guarantor's Liability at Fair Value.'' We also adopted the provisions of Statement of Financial Accounting

Standards No. 133, ""Accounting for Derivative Instruments and Hedging Activities,'' or SFAS 133, and the provisions of Emerging Issues Task

Force No. 99-20, ""Recognition of Interest Income and Impairment on Purchased and Retained BeneÑcial Interests in Securitized Financial

Assets,'' or EITF 99-20, as of January 1, 2001 and April 1, 2001, respectively.

(2) Includes (a) Due to Participation CertiÑcate investors, (b) Accrued interest payable, (c) Guarantee obligation, (d) Derivative liabilities, at fair

value, (e) Reserve for guarantee losses on Participation CertiÑcates and (f) Other liabilities, as presented on our consolidated balance sheets.

(3) Excludes mortgage loans and mortgage-related securities traded, but not yet settled.

(4) The Retained portfolio presented in our consolidated balance sheets diÅers from the Retained portfolio on this table because the consolidated

balance sheet caption includes valuation adjustments and deferred balances. See ""Management's Discussion and Analysis of Financial Condition

and Results of Operations Ì Consolidated Results of Operations Ì Table 17 Ì Characteristics of Mortgage Loans and Mortgage-Related

Securities in the Retained Portfolio'' in the Information Statement.

(5) Excludes Structured Securities where we have resecuritized PCs and other previously issued Structured Securities. These excluded Structured

Securities do not increase our credit-related exposure and consist of single-class Structured Securities backed by PCs, REMICs and principal-only

strips. The notional balances of interest-only strips are excluded because this line item is based on unpaid principal balance. Also excluded from

this line item are modiÑable and combinable REMIC tranches and interest and principal classes where the holder has the option to exchange the

security tranches for other pre-deÑned security tranches.

(6) Ratio computed as Net income divided by the simple average of beginning and ending Total assets.

(7) Ratio computed as Net income available to common stockholders divided by the simple average of beginning and ending Stockholders' equity, net

of Preferred Stock, at redemption value.

(8) Ratio computed as Net income divided by the simple average of beginning and ending Stockholders' equity.

(9) Ratio computed as Common stock dividends declared divided by Net income available to common stockholders.

(10) Ratio computed as the simple average of beginning and ending Stockholders' equity divided by the simple average of beginning and ending Total

assets.

13
REGULATION AND GOVERNMENTAL RELATIONSHIPS

We face an uncertain regulatory environment in light of legislative reforms currently being

considered in Congress. On October 26, 2005, the House of Representatives passed a bill concerning

GSE regulatory oversight. The Senate Committee on Banking, Housing, and Urban AÅairs passed a

bill concerning GSE regulatory oversight on July 28, 2005. The bills that have been passed by the

full House of Representatives and by the Senate Committee on Banking, Housing, and Urban

AÅairs diÅer in various respects, although each in its current form would result in signiÑcant

changes in the existing GSE regulatory oversight structure.

We currently generate a signiÑcant portion of our net income through our portfolio investment

activities. Current legislative proposals would give our regulator substantial authority to regulate the

amount and composition of our portfolio investments and to require substantial reductions in those

investments. Additional provisions under consideration would increase the regulator's authority to

require us to maintain higher capital levels and to approve new programs and business activities, and

would modify our aÅordable housing goals and require that a speciÑed percentage of our proÑts be

placed in a fund to support aÅordable housing.

We believe the enactment into law of these provisions, depending on their Ñnal terms and on

how they would be applied by our regulator, could have a material adverse eÅect on our ability to

fulÑll our mission, our future earnings, stock price and stockholder returns, the rate of growth in our

fair value, and our ability to recruit qualiÑed oÇcers and directors. See Risk Factors Ì Legal and

Regulatory Risks Ì Developments aÅecting our legislative and regulatory environment could

materially harm our business prospects or competitive position in our Information Statement.

We believe appropriate GSE regulatory oversight legislation would strengthen market conÑdence and promote our mission. While we continue to work toward enactment of appropriate

regulatory oversight legislation, we cannot predict the prospects for the enactment, timing or content

of any Ñnal legislation or its impact on our Ñnancial prospects. A more detailed discussion of our

regulatory and governmental relationships appears under Regulation and Supervision in our

Information Statement.

DESCRIPTION OF PREFERRED STOCK

The Preferred Stock will have the terms shown in the CertiÑcate of Designation attached as

Appendix A. The following is a summary of those terms.

General

Section 306(f) of the Freddie Mac Act authorizes us to issue an unlimited number of shares of

preferred stock. The shares of Preferred Stock we are oÅering will have a par value of $1.00 per

share and will be created by the CertiÑcate of Designation.

Computershare Trust Company, N.A., will be the transfer agent, dividend disbursing agent and

registrar for the Preferred Stock.

Authorized Issuance

Our Board of Directors has authorized us to issue the shares of Preferred Stock. The Board

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

14
Preferred Stock. We may ""reopen'' this oÅering at any time by oÅering additional shares of the

Preferred Stock at prices to be determined at that time.

Dividends

General

Dividends on shares of the Preferred Stock are not mandatory. If you own shares of the

Preferred Stock, you will be entitled to receive non-cumulative, quarterly cash dividends which will

accrue from but not including the original date of issuance and will be payable on March 31,

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

beginning on December 31, 2006. Dividends on shares of the Preferred Stock will accrue at an

annual rate of 5.9% or $1.475 per share. However, dividends are payable only if declared by our

Board of Directors in its sole discretion, out of funds legally available for dividend payments.

Dividends not declared for any Dividend Payment Date will not accrue thereafter.

If a Dividend Payment Date is not a Business Day, the related dividend will be paid on the next

Business Day with the same eÅect as though paid on the Dividend Payment Date, without any

increase to account for the period from the Dividend Payment Date through the date of actual

payment. ""Business Day'' means a day other than (a) Saturday or Sunday, (b) a day on which

New York City banks are closed or (c) a day on which our oÇces are closed. We will make

dividend payments to holders of record on the record date established by our Board of Directors,

which will be from 10 to 45 days before the applicable Dividend Payment Date.

If declared, the initial dividend, which will be for the period from but not including the original

date of issuance through and including December 31, 2006, will be $0.303 per share. 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.

We will compute the amount of dividends payable on the Preferred Stock for any period shorter

than a full Dividend Period on the basis of twelve 30-day months and a 360-day year. We will

compute any dividends payable on the Preferred Stock for each full Dividend Period by dividing the

annual dividend by four. If we redeem the Preferred Stock, we will include the dividend that would

otherwise be payable for the Dividend Period in which the redemption date falls, accrued through

and including the redemption date, whether or not declared, in the redemption price of the shares

redeemed. We will not pay this dividend to you separately.

The CertiÑcate of Designation does not require us to make any dividend adjustment as a result

of changes in the dividends-received deduction under the Internal Revenue Code of 1986.

Preferences and Limitations

The Preferred Stock will rank prior to our Common Stock with respect to dividends, as

provided in the CertiÑcate of Designation. We will not declare or pay any dividend on our Common

Stock or any of our other junior stock unless dividends have been declared and paid or set apart, or

ordered to be set apart, on the Preferred Stock for the then-current Dividend Period. The Preferred

Stock will rank equally with respect to dividends with the Existing Preferred Stock, which are listed

in Section 1 of the CertiÑcate of Designation and in the capitalization table on page 9.

Dividends on the Preferred Stock are not cumulative. If we do not pay a dividend on the

Preferred Stock, the holders of the Preferred Stock will have no claim to a payment as long as we do

15
not pay a dividend for the then-current period on our Common Stock, any of our other junior stock

or the Existing Preferred Stock.

Our Board of Directors may, in its discretion, choose to pay dividends on the Preferred Stock

without paying dividends on our Common Stock.

We have oÅered and sold subordinated debt which we refer to as Freddie SUBS securities. As

of the date of this OÅering Circular, we have a total of approximately $5.75 billion in Freddie SUBS

outstanding. The most recent issuance of Freddie SUBS took place in June 2006. The terms of the

Freddie SUBS that we have issued provide for the deferral of interest payments under certain

speciÑed circumstances of Ñnancial distress. The terms of the Freddie SUBS also prohibit the

payment of dividends on our stock, including the Preferred Stock, during any period when we have

deferred paying interest on our subordinated debt.

We will not declare or pay any dividends on 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 our stock 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 our stock 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 other 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 Capital below for a description of possible regulatory restrictions on our ability

to pay dividends.

Optional Redemption

The Preferred Stock will not be redeemable before September 30, 2011. At any time on or after

that date, we may redeem the Preferred Stock, in whole or in part, out of legally available funds. The

redemption price will be $25.00 per share plus an amount equal to the amount of the dividend that

would otherwise be payable for the Dividend Period in which the redemption date falls, accrued

through and including the redemption date, whether or not declared. If we redeem less than all of

the outstanding shares of the Preferred Stock, we will select shares to be redeemed by lot or pro rata

(as nearly as possible) or by any other method which we deem equitable.

We will give notice of optional redemption by mail to holders of the Preferred Stock from

30 days to 60 days before the redemption date. Each 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 Preferred Stock certiÑcates must be presented for redemption.

On 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 of those shares will cease, other than the

right to receive the redemption price.

The terms of our currently oÅered subordinated debt prohibit us from redeeming our stock,

including the Preferred Stock, during any period when we have deferred paying interest on the

subordinated debt.

See Regulatory Capital below for a description of possible regulatory restrictions on our ability

to redeem the Preferred Stock.

16
No Preemptive Rights and No Conversion

As a holder of Preferred Stock, you will not have any preemptive rights to purchase or

subscribe for any other shares, rights, options or other securities. You will not have any right to

convert your shares into or exchange your shares for any other class or series of our stock or

obligations.

No Voting Rights

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

the election of any member of our Board of Directors. Except as described under Amendments

below, as a holder you will not be entitled to vote.

Liquidation Rights

If we voluntarily or involuntarily dissolve, liquidate or wind up our business, then, after payment

of or provision for our liabilities to creditors and the expenses of dissolution, liquidation or winding

up, the holders of the outstanding shares of Preferred Stock will be entitled to receive out of our

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

Common Stock or any other junior stock, $25.00 per share plus an amount equal to the dividend for

the then-current quarterly Dividend Period accrued through and including the liquidation payment

date, whether or not declared.

In the event of our dissolution, liquidation or winding up, the rights of the Preferred Stock rank

equally with those of the Existing Preferred Stock. If our assets available for distribution to

shareholders 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 of equal priority upon

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

Stock and such other 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 our dissolution, liquidation or winding up until holders of any classes or

series of our stock ranking prior to the Preferred Stock upon liquidation have been paid all amounts

to which they are entitled.

Our consolidation, merger or combination with or into any other corporation or entity, or the

sale of all or substantially all of our property or business, will not constitute a liquidation, dissolution

or winding up for purposes of these provisions on liquidation rights.

Additional Classes or Series of Stock

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

equally with or junior to the Preferred Stock, as to dividends, liquidation or otherwise, without the

consent of holders of the Preferred Stock. As of the date of this OÅering Circular, we have no

outstanding class or series of stock or other equity security that ranks senior to the Preferred Stock

as to dividends or distributions upon liquidation.

Amendments

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

CertiÑcate of Designation to cure any ambiguity, to correct or supplement any term which may be

17
defective or inconsistent with any other term or to make any other provisions so long as the

amendment does not materially and adversely aÅect the interests of the holders of the Preferred

Stock. Otherwise, we may amend the CertiÑcate of Designation only with the consent of the holders

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

each holder will be entitled to one vote per share.

NYSE Listing

We intend to apply to list the Preferred Stock on the NYSE. There is no assurance that the

Preferred Stock will be approved for listing on the NYSE. Approval of our application will be

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

REGULATORY CAPITAL

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (""GSE Act'')

establishes our minimum, critical and risk-based capital standards.

Total capital includes Core capital and general reserves for mortgage and foreclosure losses and

any other amounts available to absorb losses that OFHEO includes by regulation. Core capital

consists of the par value of outstanding Common stock (Common stock issued less Common stock

held in treasury), the par value of outstanding perpetual, noncumulative preferred stock, additional

paid-in capital and retained earnings, as determined in accordance with U.S. generally accepted

accounting principles (""GAAP'').

The minimum capital standard requires us to hold an amount of Core capital that is generally

equal to the sum of 2.50 percent of aggregate on-balance sheet assets, as determined in accordance

with GAAP, and approximately 0.45 percent of the sum of outstanding mortgage-related securities

we guaranteed and other aggregate oÅ-balance sheet obligations. As discussed below, in 2004

OFHEO implemented a framework for monitoring our capital adequacy, which includes a

mandatory target capital surplus of 30 percent over the minimum capital requirement.

The critical capital standard requires us to hold an amount of Core capital that is generally

equal to the sum of 1.25 percent of aggregate on-balance sheet assets, as determined in accordance

with GAAP, and approximately 0.25 percent of the sum of outstanding mortgage-related securities

we guaranteed and other aggregate oÅ-balance sheet obligations.

The risk-based capital standard requires the application of a stress test to determine the amount

of Total capital that we must hold to absorb projected losses resulting from adverse interest-rate and

credit-risk conditions speciÑed by the GSE Act and adds 30 percent additional capital to provide for

management and operations risk. The adverse interest-rate conditions prescribed by the GSE Act

include one scenario in which 10-year Treasury yields rise by as much as 75 percent (up-rate

scenario) and one in which they fall by as much as 50 percent (down-rate scenario). The credit risk

component of the stress tests simulates the performance of our mortgage portfolio based on loss

rates for a benchmark region. The criteria for the benchmark region are established by the GSE Act

and are intended to capture the credit-loss experience of the region that experienced the highest

historical rates of default and severity of mortgage losses for two consecutive origination years.

OFHEO is required to classify our capital adequacy not less than quarterly.

18
To be classiÑed as ""adequately capitalized,'' we must meet both the risk-based and minimum

capital standards. If we fail to meet the risk-based capital standard, we cannot be classiÑed higher

than ""undercapitalized.'' If we fail to meet the minimum capital requirement but exceed the critical

capital requirement, we cannot be classiÑed higher than ""signiÑcantly undercapitalized.'' If we fail

to meet the critical capital standard, we must be classiÑed as ""critically undercapitalized.'' In

addition, OFHEO has discretion to reduce our capital classiÑcation by one level if OFHEO

determines that we are engaging in conduct OFHEO did not approve that could result in a rapid

depletion of Core capital or determines that the value of property subject to mortgage loans we hold

or guarantee has decreased signiÑcantly.

OFHEO has never classiÑed us as other than ""adequately capitalized,'' the highest possible

classiÑcation. When we are classiÑed as adequately capitalized, we can generally pay a dividend on

our common or preferred stock without prior OFHEO approval so long as the payment would not

decrease Total capital to an amount less than our risk-based capital requirement and would not

decrease our Core capital to an amount less than the minimum capital requirement.

If we were classiÑed as undercapitalized, we would be prohibited from making a capital

distribution (which includes common and preferred dividend payments, common stock repurchases

and preferred stock redemptions) that would decrease our Core capital to an amount less than the

minimum capital requirement. We also would be required to submit a capital restoration plan for

OFHEO approval, which could adversely aÅect our ability to make capital distributions.

If we were classiÑed as signiÑcantly undercapitalized, we would be able to make a capital

distribution only if OFHEO determined that the distribution satisÑed certain statutory standards.

Under these circumstances, we would be prohibited from making any capital distribution that would

decrease our Core capital to less than the critical capital level, and OFHEO also could take action to

limit our growth, require us to acquire new capital or restrict us from activities that create excessive

risk. We also would be required to submit a capital restoration plan for OFHEO approval, which

could adversely aÅect our ability to make capital distributions.

If we were classiÑed as critically undercapitalized, OFHEO would be required to appoint a

conservator for the company unless OFHEO made a written Ñnding that it should not do so and the

Secretary of the Treasury concurred in that determination.

19
The following table summarizes our regulatory capital requirements and surpluses(1):

December 31,

2005 2004

(in millions)

Minimum capital requirement(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25,010 $24,131

Core capital(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,964 35,009

Minimum capital surplus(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,954 10,878

Critical capital requirement(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $12,782 $12,308

Core capital(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,964 35,009

Critical capital surplus(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,182 22,701

Risk-based capital requirement(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,282 $11,108

Total capital(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,781 34,691

Risk-based capital surplus(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,499 23,583

(1) OFHEO is the authoritative source of the capital calculations that underlie our capital classiÑcations.

(2) Amounts for 2005 are based on amended reports we submitted to OFHEO on May 30, 2006.

(3) Amounts for 2005 and 2004 are those calculated by OFHEO prior to the issuance of our 2005 and 2004 Ñnancial results.

Factors that could adversely aÅect the adequacy of our regulatory capital for future periods

include declines in GAAP income, increases in our risk proÑle, changes in the economic

environment, such as large interest-rate or implied volatility moves or house price declines, changes

in option-adjusted spreads, legislative or regulatory action that could increase capital requirements

or changes in or adoption of new accounting standards such as SFAS 155. See Note 1: Summary of

SigniÑcant Accounting Policies Ì Recently Issued Accounting Standards, Not Yet Adopted in our

Information Statement for more information regarding SFAS 155. In particular, interest-rate levels

or implied volatility can aÅect the amount of our Core capital, even if we are economically well

hedged against interest-rate changes, because certain gains or losses are recognized through GAAP

earnings while other oÅsetting gains or losses may not be. Changes in option-adjusted spreads can

also aÅect the amount of our Core capital, because option-adjusted spreads are a factor in the

valuation of our guaranteed mortgage portfolio.

In a letter dated January 28, 2004, OFHEO created a framework for monitoring our capital due

to our higher operational risk, including our inability to produce timely Ñnancial statements in

accordance with GAAP. The letter directed that we maintain a mandatory target capital surplus of

30 percent over our minimum capital requirement, subject to certain conditions and variations; that

we submit weekly reports concerning our capital levels; and that we obtain prior approval of certain

capital transactions. At December 31, 2004 and 2005, our estimated surplus in excess of the

30 percent mandatory target surplus was approximately $3.6 billion and $3.5 billion, respectively.

Our failure to meet the mandatory target capital surplus would result in an OFHEO inquiry

regarding the reason for such failure. If OFHEO were to determine that we had acted unreasonably

regarding our compliance with the framework, as set forth in OFHEO's letter, OFHEO could seek

to require us to submit a remedial plan or take other remedial steps.

In addition, under this framework, we are required to obtain prior written approval from the

Director of OFHEO before engaging in certain capital transactions, including the repurchase of any

shares of Common Stock, redemption of any Preferred Stock or payment of Preferred Stock

dividends above stated contractual rates. We also must submit a written report to the Director of

OFHEO after the declaration, but before the payment, of any dividend on our Common Stock. The

20
report must contain certain information on the amount of the dividend, the rationale for the payment

and the impact on our capital surplus.

This framework will remain in eÅect until the Director of OFHEO determines that it should be

modiÑed or expire. OFHEO's letter indicated that this determination would consider our resumption

of timely Ñnancial and regulatory reporting that complies with GAAP, among other factors.

A more detailed discussion of the regulatory oversight of our capitalization and the terms used

above appears under Note 10: Regulatory Capital to the consolidated Ñnancial statements in the

Information Statement.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

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

and other taxing jurisdictions to the same extent as stock of any other corporation. The following

discussion addresses certain U.S. federal income tax consequences that may result from ownership

of the Preferred Stock by a U.S. person (as deÑned below) who holds the Preferred Stock as a

capital asset.

This discussion does not discuss all of the U.S. federal income tax consequences that may be

relevant to a U.S. person in light of its particular circumstances or to U.S. persons subject to special

rules, such as certain Ñnancial institutions, insurance companies, certain former citizens or residents

of the United States, traders in securities that elect to use a mark-to-market method of accounting

for their securities holdings, dealers in securities, U.S. persons holding the Preferred Stock as part of

a hedging transaction, straddle conversion transaction or synthetic security transaction, U.S. persons

whose functional currency is not the U.S. dollar, tax-exempt persons, or regulated investment

companies.

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 U.S. federal, state, local and

foreign tax considerations applicable to an investment in the Preferred Stock.

This discussion reÖects current U.S. federal income tax laws and Treasury regulations and

administrative and judicial interpretations. Changes to any of these that occur after the date of this

OÅering Circular may aÅect the tax consequences that we describe herein.

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

for U.S. federal income tax purposes, a corporation, partnership or other type of entity organized

under the laws of the United States or any State or the District of Columbia (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.

21
Dividends

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

earnings and proÑts accumulated after 1984 (as determined for U.S. federal income tax purposes),

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 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 preferred stock dividend

attributable to periods aggregating in excess of 366 days), including the day of disposition but not

the day of acquisition. This holding period must be satisÑed during the 91-day period (or the

181-day period in the case of a preferred stock dividend attributable to periods aggregating in excess

of 366 days) beginning on the date which is 45 (90) days before the date on which the stock

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

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

risk of loss with respect to the stock is diminished by reason of the shareholder's position in 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.

Dividends received by individuals generally are subject to a reduced maximum tax rate of

15 percent through December 31, 2010, after which date the rate applicable to dividends is

scheduled to return to the rate generally applicable to ordinary income. The rate reduction does not

apply to dividends received to the extent that the individual shareholder elects to treat the dividends

as ""investment income,'' which may be oÅset against investment expenses. Furthermore, the rate

reduction does not apply to dividends that are paid to individual shareholders with respect to

Preferred Stock that is held for 60 days or less during the 121-day period beginning on the date

which is 60 days before the date on which the Preferred Stock becomes ex-dividend. Individual

shareholders should consult their own tax advisors regarding the implications of these rules in light

of their particular circumstances.

22
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. Tax rates on capital gain for individuals vary depending on

each individual's income and holding period for the Preferred Stock. Long-term capital gain realized

by individuals is subject to a reduced maximum tax rate of 15 percent through December 31, 2010,

after which date the maximum rate is scheduled to return to the rate generally applicable to capital

gains. Individual shareholders should contact their own tax advisors for more information or for the

capital gains tax rate applicable to speciÑc shares of Preferred Stock.

A payment made in 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 Internal

Revenue Code of 1986. 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

Internal Revenue Code of 1986. 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 the company. Because of the ambiguities in applying this rule, each holder should consult

its own tax advisor to determine whether a payment made in 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 Internal Revenue Service.

Backup withholding of U.S. federal income tax may apply to payments made with respect to

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

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

information (such as the taxpayer identiÑcation number of the holder) in the manner required.

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

generally are exempt recipients.

Circular 230

Any U.S. federal tax advice included in this OÅering Circular (1) is not intended or written to

be used, and cannot be used, to avoid any U.S. federal tax penalties, and (2) was written to support

the promotion or marketing of the transaction or matter addressed by this OÅering Circular. Any

taxpayer receiving this OÅering Circular should seek advice from an independent tax advisor based

on the taxpayer's particular circumstances.

23
LEGAL INVESTMENT CONSIDERATIONS

You should consult your own legal advisors to determine whether the shares of Preferred Stock

constitute legal investments for you and whether the shares of Preferred Stock can be used as

collateral for borrowings. In addition, Ñnancial institutions should consult their legal advisors or

regulators in determining the appropriate treatment of the shares of Preferred Stock under riskbased capital or similar rules.

If you are subject to legal investment laws and regulations or to review by regulatory

authorities, you may be subject to restrictions on investing in the shares of Preferred Stock.

Institutions regulated by 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.

UNDERWRITING

Under the terms of an underwriting agreement (the ""Underwriting Agreement''), we have

agreed to sell to the Underwriters named below, and the Underwriters, for whom Lehman Brothers

Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives, have

severally agreed to purchase from us, the shares of Preferred Stock opposite their names.

Number of Shares

Underwriter of Preferred Stock

Lehman Brothers Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,500,000

Merrill Lynch, Pierce, Fenner & Smith

Incorporated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,500,000

Goldman, Sachs & Co. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,000,000

Banc of America Securities LLC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,000

Bear, Stearns & Co. Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,000

J.P. Morgan Securities Inc. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,000

Morgan Stanley & Co. Incorporated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,000,000

The Underwriting Agreement requires the Underwriters to take and pay for all of the shares of

Preferred Stock, if any are taken.

The Underwriters propose to oÅer a portion of the Preferred Stock directly to the public at the

initial oÅering price shown on the cover page of this OÅering Circular, plus accrued dividends, if

any, from but not including October 16, 2006, and a portion to certain dealers at that price less a

concession of not more than $0.20 per share. The Underwriters may allow, and the dealers may

reallow, a concession of not more than $0.10 per share on sales to certain brokers and dealers. After

the initial oÅering of the shares, the Underwriters may vary the oÅering price and other selling

terms.

Until this oÅering, there has been no public market for the Preferred Stock. We have applied 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 us 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

24
market making at any time without notice. There is no assurance that the Preferred Stock will be

approved for listing on the NYSE.

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

the open market. These transactions may include 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. 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 us in the oÅering. The

Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate

members or other broker-dealers for 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 in the over-the-counter market or otherwise.

We and the Underwriters have agreed to indemnify each other against certain liabilities in

connection with the oÅering and sale of the Preferred Stock.

Some of the Underwriters, dealers or agents may engage in transactions with us and perform

services for us in the ordinary course of business.

RATINGS

Moody's has assigned the Preferred Stock a rating of Aa3 and a rating outlook of stable. An

issue which is rated ""Aa'' is considered by Moody's to be ""of high quality'' and ""subject to very low

credit risk.'' The numerical modiÑer ""3'' indicates that the issue ranks in the lower end of the

generic rating category of ""Aa.'' According to Moody's a ""rating outlook is an opinion regarding the

likely direction of a rating over the medium term.''

S&P has assigned the Preferred Stock a rating of AA¿ and a rating outlook of stable. An issue

which is rated ""AA'' is considered by S&P to diÅer ""from the highest-rated obligations only to a

small degree.'' According to S&P, ""the obligor's capacity to meet its Ñnancial commitment on the

obligation is very strong.'' The modiÑer ""¿'' indicates that the issue ranks in the lower end of the

generic rating category ""AA.'' According to S&P, a ""rating outlook assesses the potential direction

of a long-term credit rating over the intermediate term (typically six months to two years)''; a rating

outlook of ""stable means that a rating is not likely to change'' over this period.

Fitch has assigned the Preferred Stock a rating of AA¿ and a rating outlook of stable. An issue

which is rated ""AA'' is considered by Fitch to be of ""very high credit quality.'' According to Fitch,

this rating indicates a ""very strong capacity for payment of Ñnancial commitments.'' The modiÑer

""¿'' indicates that the issue ranks in the lower end of the generic rating category ""AA.'' According

to Fitch, a rating outlook ""indicates the direction a rating is likely to move over a one to two-year

period.''

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.

25
INDEPENDENT ACCOUNTANTS

The consolidated Ñnancial statements as of December 31, 2005 and December 31, 2004 and for

each of the three years in the period ended December 31, 2005, incorporated by reference into this

OÅering Circular, have been audited by PricewaterhouseCoopers LLP, independent accountants, as

stated in their report with respect thereto.

LEGAL MATTERS

Kevin I. MacKenzie, Esq., Vice President and Deputy General Counsel Ì Securities, will

render an opinion on the legality of the Preferred Stock. Mr. MacKenzie is the beneÑcial owner of

23,295 shares of Common Stock, 10,907 of which are unvested, and options covering an additional

17,580 shares of Common Stock, 4,356 of which are unvested. Sidley Austin LLP is representing the

Underwriters on legal matters concerning the Preferred Stock.

26
FORWARD-LOOKING STATEMENTS

We regularly communicate information concerning our business activities to investors, securities analysts, the news media and others as part of our normal operations. Some of these

communications include ""forward-looking statements'' pertaining to our current expectations and

objectives for Ñnancial reporting, future business plans, results of operations, Ñnancial condition and

trends. Forward-looking statements are typically accompanied by, and identiÑed with, terms such as

""estimates,'' ""continue,'' ""promote,'' ""consider,'' ""enables,'' ""currently,'' ""priorities,'' ""remain,''

""anticipate,'' ""initiative,'' ""preliminary,'' ""ongoing,'' ""believes,'' ""expects,'' ""intend,'' ""plan,'' ""future,'' ""seek,'' ""potential,'' ""objectives,'' ""long-term,'' ""ultimately,'' ""goal,'' ""will,'' ""may,'' ""might,''

""should,'' ""could,'' ""would,'' ""likely'' and similar phrases. This OÅering Circular includes forwardlooking statements. These statements are not historical facts, but rather represent our expectations

based on current information, plans, estimates and projections. Forward-looking statements involve

known and unknown risks, uncertainties and other factors, some of which are beyond our control.

You should be careful about relying on any forward-looking statements and should also consider all

risks, uncertainties and other factors described in this OÅering Circular and the Information

Statement in considering any forward-looking statements. Actual results may diÅer materially from

those discussed as a result of various factors, including those factors described in the Risk Factors

section of this OÅering Circular and the Information Statement incorporated by reference herein.

Factors that could cause actual results to diÅer materially from the expectations expressed in these

and other forward-looking statements by management include, among others:

‚ our ability to eÅectively and timely implement the remediation plan undertaken as a

result of the restatement of our consolidated Ñnancial statements and the consent order

entered into with OFHEO, including particular initiatives relating to technical infrastructure and controls over Ñnancial reporting;

‚ our ability to eÅectively implement our business strategies and manage the risks in our

business;

‚ changes in our assumptions regarding rates of growth in our business, spreads we expect

to earn, required capital levels and the timing and impact of capital transactions;

‚ our ability to eÅectively manage and implement changes, developments or impacts of

accounting standards and interpretations;

‚ the availability of debt Ñnancing and equity capital in suÇcient quantity and at

attractive rates to support continued growth in our retained portfolio, to reÑnance

maturing debt and to meet regulatory capital requirements;

‚ changes in pricing or valuation methodologies, models, assumptions and/or estimates;

‚ volatility of reported results due to changes in fair value of certain instruments or assets;

‚ the rate of growth in total outstanding U.S. residential mortgage debt and the size of the

U.S. residential mortgage market;

‚ preferences of originators in selling into the secondary market;

‚ borrower preferences for Ñxed-rate mortgages or adjustable-rate mortgages;

27
‚ investor preferences for mortgage loans and mortgage-related and debt securities versus

other investments;

‚ the occurrence of a major natural or other disaster in geographic areas in which portions

of our total mortgage portfolio are concentrated;

‚ other factors and assumptions described in our Information Statement, including in the

sections titled Business, Risk Factors and Management's Discussion and Analysis of

Financial Condition and Results of Operations;

‚ our assumptions and estimates regarding the foregoing; and

‚ market reactions to the foregoing.

We undertake no obligation to update forward-looking statements we make to reÖect events or

circumstances after the date of this OÅering Circular, or to reÖect the occurrence of unanticipated

events.

28
Appendix A

FREDDIE MAC

CERTIFICATE OF CREATION, DESIGNATION, POWERS,

PREFERENCES, RIGHTS, PRIVILEGES, QUALIFICATIONS,

LIMITATIONS, RESTRICTIONS, TERMS AND CONDITIONS

of

5.9% NON-CUMULATIVE PERPETUAL PREFERRED STOCK

(Par Value $1.00 Per Share)

I, KEVIN I. MACKENZIE, Assistant Secretary of the Federal Home Loan Mortgage

Corporation, a government-sponsored 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 2005-29 on

October 5, 2005, 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 resolutions, approved the Ñnal terms of the public issuance and sale of the preferred

stock of Freddie Mac designated above.

The 5.9% 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 ""5.9% Non-Cumulative Perpetual Preferred Stock,'' shall have a par

value of $1.00 per share and shall consist of 20,000,000 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

distributions upon liquidation, on a parity with (a) the 6.42% Non-Cumulative Preferred Stock

issued on July 17, 2006, (b) the Variable Rate, Non-Cumulative Preferred Stock issued on July 17,

2006, (c) the 5.81% Non-Cumulative Preferred Stock issued on January 29, 2002, (d) the

5.7% Non-Cumulative Preferred Stock issued on October 30, 2001, (e) the 6% Non-Cumulative

Preferred Stock issued on May 30, 2001, (f) the Variable Rate, Non-Cumulative Preferred Stock

issued on May 30, 2001 and June 1, 2001, (g) the 5.81% Non-Cumulative Preferred Stock issued on

March 23, 2001, (h) the Variable Rate, Non-Cumulative Preferred Stock issued on March 23,

2001, (i) the Variable Rate, Non-Cumulative Preferred Stock issued on January 26, 2001, (j) the

Variable Rate, Non-Cumulative Preferred Stock issued on November 5, 1999, (k) the 5.79% NonCumulative Preferred Stock issued on July 21, 1999, (l) the 5.1% Non-Cumulative Preferred Stock

issued on March 19, 1999, (m) the 5.3% Non-Cumulative Preferred Stock issued on October 28,

1998, (n) the 5.1% Non-Cumulative Preferred Stock issued on September 23, 1998, (o) the

Variable Rate, Non-Cumulative Preferred Stock issued on September 23, 1998 and September 29,

1998, (p) the 5% Non-Cumulative Preferred Stock issued on March 23, 1998, (q) the 5.81% NonCumulative Preferred Stock issued on October 27, 1997, (r) the 6.14% Non-Cumulative Preferred

A-1
Stock issued on June 3, 1997 and (s) the Variable Rate, Non-Cumulative Preferred Stock issued on

April 26, 1996 (collectively, the ""Existing Preferred Stock'').

2. Dividends

(a) Holders of outstanding shares of Non-Cumulative Preferred Stock 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 5.9%, or $1.475,

per share of Non-Cumulative Preferred Stock. Dividends on the Non-Cumulative Preferred Stock

shall accrue from but not including October 16, 2006 and will be 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 December 31, 2006. 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.

""Business Day'' means a day other than (i) a Saturday or Sunday, (ii) a day on which New York

City banks are closed, or (c) a day on which the oÇces of Freddie Mac are closed.

If declared, the initial dividend, which will be for the period from but not including October 16,

2006 through and including December 31, 2006, will be $0.303 per share. Thereafter, dividends will

accrue from Dividend Period to Dividend Period at a rate equal to 5.9% divided by four; the amount

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

months and a 360-day year. Except for the initial Dividend Payment Date, 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.

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 preceding sentence.

(b) 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

A-2
time outstanding ranking junior to the Non-Cumulative Preferred Stock with respect to the

payment of dividends.

(c) 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 and on the shares of such other class or series bear to each other.

(d) Holders of shares of the Non-Cumulative Preferred Stock shall not be entitled to any

dividends, in cash or in property, other than as herein provided and shall not be entitled to interest,

or any sum in lieu of interest, on or in respect of any dividend payment.

3. Optional Redemption

(a) The Non-Cumulative Preferred Stock shall not be redeemable prior to September 30,

2011. Subject to this limitation and the notice provisions set forth in Section 3(b) below 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 $25.00 per share plus an amount, determined in accordance with

Section 2(a) above, equal to the amount of the dividend, if any, otherwise payable for the thencurrent Dividend Period accrued through and including the date of such redemption, whether or not

declared. 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. If Freddie Mac redeems the NonCumulative Preferred Stock, the dividend that would otherwise be payable for the Dividend Period

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

and will not be separately payable.

(b) 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 exchange, 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

A-3
Stock shall not aÅect the validity of the proceedings for the redemption of shares of any other holder

of the 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, other than the right to receive the redemption price for such redeemed shares.

(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 $25.00 per share plus an

amount, determined in accordance with Section 2(a) above, equal to the dividend, if any, otherwise

payable for the then-current Dividend Period accrued through and including the date of payment in

respect of such dissolution, liquidation or winding up, and the holders of the outstanding shares of

any class or series of stock of Freddie Mac ranking on a parity with the Non-Cumulative Preferred

Stock upon liquidation shall be entitled to receive out of the assets of Freddie Mac available for

distribution to stockholders, before any such payment or distribution shall be made on the Common

Stock or any other class or series of stock of Freddie Mac ranking junior to the Non-Cumulative

Preferred Stock and to such parity stock upon liquidation, any corresponding preferential amount to

which the holders of such parity stock may, by the terms thereof, be entitled; provided, however,

that if the assets of Freddie Mac available for distribution to stockholders shall be insuÇcient for the

payment of the amount 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

A-4
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 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 Non-Cumulative 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

distributions 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 distributions upon liquidation, whether or not the dividend rates or amounts, dividend

payment dates or redemption or 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

A-5
or liquidation prices, without preference or priority, one over the other, as between the holders

of such class or series and the holders of shares of the Non-Cumulative Preferred Stock; and

(iii) junior to shares of the Non-Cumulative Preferred Stock, either as to dividends or

distributions 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 non-assessable.

(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: Vice President and Deputy General

Counsel Ì Securities. 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.

A-6
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 Non-Cumulative Preferred Stock.

(ii) The consent of the holders of at least 66 2/3% of all of the shares of the NonCumulative Preferred Stock at the time outstanding, given in person or by proxy, either in

writing or by a vote at a meeting called for the purpose at which the holders of shares of the

Non-Cumulative Preferred Stock shall vote together as a class, shall be necessary for

authorizing, eÅecting or validating the amendment, alteration, supplementation or repeal of the

provisions of this CertiÑcate if such amendment, alteration, supplementation or repeal would

materially and adversely aÅect the powers, preferences, rights, privileges, qualiÑcations,

limitations, restrictions, terms or conditions of the Non-Cumulative Preferred Stock. The

creation and issuance of any other class or series of stock, or the issuance of additional shares of

any existing class or series of stock of Freddie Mac (including the Non-Cumulative Preferred

Stock), whether ranking prior to, on a parity with or junior to the Non-Cumulative Preferred

Stock, shall not be deemed to constitute such an amendment, alteration, supplementation or

repeal.

(iii) Holders of the Non-Cumulative Preferred Stock shall be entitled to one vote per

share on matters on which their consent is required pursuant to subparagraph (ii) of this

paragraph (h). In connection with any meeting of such holders, the Board of Directors shall Ñx

a record date, neither earlier than 60 days nor later than 10 days prior to the date of such

meeting, and holders of record of shares of the Non-Cumulative Preferred Stock on such

record date shall be entitled to notice of and to vote at any such meeting and any adjournment.

The Board of Directors, or such person or persons as it may designate, may establish reasonable

rules and procedures as to the solicitation of the consent of holders of the Non-Cumulative

Preferred Stock at any such meeting or otherwise, which rules and procedures shall conform to

the requirements of any national securities exchange on which the Non-Cumulative Preferred

Stock may be listed at such time.

A-7
(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

16th day of October, 2006.

®Seal©

Kevin I. MacKenzie, Assistant Secretary

A-8
If you intend to purchase Preferred Stock, you

should rely only on the information in this OÅer- 20,000,000 Shares

ing Circular, including the information in the

documents that we have incorporated by reference

herein. We have not authorized anyone to provide

you with diÅerent information. Freddie Mac

This OÅering Circular and the incorporated documents may not be correct after their dates. 20,000,000 Shares

We are not oÅering the Preferred Stock in any 5.9% Non-Cumulative

jurisdiction that prohibits its oÅer. Perpetual Preferred Stock

(Liquidation Preference

$25.00 Per Share)

Lehman Brothers

TABLE OF CONTENTS

Description Page Merrill Lynch & Co.

Additional Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2

Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3

Risk FactorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 Goldman, Sachs & Co.

Use of ProceedsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 Banc of America Securities LLC

CapitalizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Bear, Stearns & Co. Inc.

Financial Reporting Matters and Related Information ÏÏ 10 JPMorgan

Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 Morgan Stanley

Regulation and Governmental Relationships ÏÏÏÏÏÏÏÏ 14

Description of Preferred Stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14

Regulatory Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18

Certain Federal Income Tax ConsequencesÏÏÏÏÏÏÏÏÏ 21

Legal Investment Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24

Underwriting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24

Ratings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25

Independent AccountantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 October 11, 2006

Legal Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26

Forward-Looking StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27

Appendix A Ì CertiÑcate of Designation ÏÏÏÏÏÏÏÏÏÏ A-1