"Division") of the United States Securities and Exchange Commission (the "Commission") into

UNITED STATES OF AMERICA 

SECURITIES AND EXCHANGE COMMISSION 

NON-PROSECUTION AGREEMENT 

1. This agreement arises out of an investigation by the Division of Enforcement (the 
"Division") 
of the United States Securities and Exchange Commission (the "Commission") into 
possible violations 
ofthe federal securities laws by the Federal Home Loan Mortgage 
Corporation (the "Respondent" or "Freddie Mac") and others that occurred in or about December 
2006 through September 
6, 2008, arising from, among other things, public statements concerning 
Freddie Mac's exposure to Subprime and Alt-A mortgages (collectively, the "Investigation"). 
Prior to a public enforcement action being brought by the Commission against Freddie Mac, 
without admitting or denying liability, Respondent has offered to accept responsibility for its 
conduct and to not dispute, contest, or contradict the factual statements set forth in Exhibit 
A, as 
specifically provided herein. Accordingly, the Commission and the Respondent enter into this 
Non-Prosecution Agreement (the "Agreement"). 
2. The Respondent is  a corporation organized and operated under the laws of the United 
States 
of America, subject to the ongoing supervision of the Federal Housing Finance Agency 
("FHF A"). On September 
6, 2008, FHF A placed the Respondent into conservatorship, and as 
conservator, succeeded to all rights, titles, powers and privileges 
of the Respondent and its 
shareholders, officers, and directors with respect to the Respondent and its assets. As 
conservator, FHF A maintains a continuous on-site presence at the Respondent and provides 
substantial oversight over the Respondent, including, among other things, with respect to its 
corporate governance, regulatory compliance and operations. In addition, the United 
States 
Treasury has made substantial capital investments in the Respondent and holds senior preferred 
stock, as well as warrants representing an ownership stake 
of up to 79.9 percent of the 
Respondent's common stock. 
3. In entering into this Agreement, the Commission recognizes the unique circumstances 
presented 
by the Respondent's current status, including the financial support provided to the 
Respondent by the U.S. Treasury, the role 
of another government agency (FHFA) as conservator, 
and the costs that may be imposed on U.S. taxpayers. Based on these circumstances and in 
consideration 
of the public interest, subject to the full, truthful, and continuing cooperation of the 
Respondent as described below and its satisfactory performance 
of all obligations and 
undertakings herein, the Commission and Respondent enter into this Agreement with the terms 
and conditions contained herein. 
COOPERATION 
4. The Respondent agrees to cooperate fully and truthfully in the Investigation and any 
other related enforcement litigation or proceeding to which the Commission is  a party (the 
"Proceedings"), without regard to the time period in which the cooperation is required 
("Cooperation Period"). In addition, the Respondent agrees to cooperate fully and truthfully, 
when directed by the Division's staff, in any other related official investigation or proceeding by 
any 
U.S. federal agency (the "Other Proceedings"). The Respondent acknowledges and 
1 


understands that its ongoing cooperation with the Commission is  an important and material 
factor underlying the Commission's decision to enter into this Agreement. The full, truthful, and 
continuing cooperation 
ofthe Respondent shall include, but not be limited to: 
a. identifying, assembling, organizing and producing, in a responsive and prompt 
manner, all non-privileged, non-attorney work-product documents, information, and other 
materials (including but not limited 
to providing reports or analyses of data concerning 
Respondent's models, credit risk reporting or data systems) to the Commission as requested by 
the Division's staff, wherever located, in the possession, custody, or control 
ofthe Respondent; 
b. providing declarations authenticating all documents, information, and other 
materials produced to the Commission by Respondent upon request by the Division's staff; 
c. providing declarations, upon request by the Division's staff, certifying that 
documents, information, and other materials produced to the Commission by Respondent 
comply with Federal Rule 
of Evidence 902(11)(A-C); 
d. providing Federal Rule of Civil Procedure 30(b)(6) witnesses, and authenticating 
documents, for the purpose 
of establishing the facts set forth in Exhibit A; 
e. using its best efforts to secure the full, truthful, and continuing cooperation, as 
defined in Paragraph 4, 
of Freddie Mac's current and former board members, officers, employees 
and agents, including making these persons available, when requested to do so by the Division's 
staff, for interviews and the provision 
of testimony in the investigation, deposition, trial and 
other judicial proceedings in connection with the Proceedings or Other Proceedings; 
f. authenticating all documents, information, and other materials identified by the 
Division's staff, to the extent able to do so; 
g. responding to all inquiries, when requested to do so by the Division's staff, in 
connection with the Proceedings or Other Proceedings; 
h. producing to the Commission, in a responsive and prompt manner, any 
documents, information and materials not previously produced to the Commission that are 
provided formally or informally to any party for use in the Proceedings or Other Proceedings at 
the request 
of such party or otherwise; 
i. notifying the Division's staff, in a prompt manner, of the receipt and substance of 
any request for documents, information or materials by a party to the Proceedings or Other 
Proceedings or the scheduling or facilitation 
of interviews or meetings between parties to the 
Proceedings or Other Proceedings (or their counsel) and any 
of Freddie Mac's current and 
former board members, officers, employees and agents in connection with the Proceedings or 
Other Proceedings; 
j. maintaining the confidentiality 
of communications with the Division's staff 
relating to the cooperation required under paragraphs a-i above, and refusing to enter into, not 
entering into, modifying or withdrawing from existing formal or informal joint-defense 
agreements or arrangements with any person relating to the Proceedings or Other Proceedings to 
2 


the extent such agreements limit Respondent's ability to provide or share information with the 
Commission; 
and, 
k. providing appropriate assistance to the Commission to obtain documents or other 
information necessary for the Commission to assess and respond to defenses raised in the 
Proceedings or Other Proceedings. 
5. The full, truthful, and continuing cooperation of each person described in Paragraph 4( e) 
above will be subject to the procedures and protections 
of this Paragraph, and shall include, but 
not be limited to: 
a. producing all non-privileged documents, information, and other materials as 
requested by the Division's staff;' 
b. appearing for interviews, at such times and places as requested by the Division's 
staff; 
c. authenticating all documents, information, and other materials identified by the 
Division's staff, to the extent able to do so; 
d. responding to all inquiries, when requested to do so by the Division's staff, in 
connection with the Proceedings or Other Proceedings; and, 
e. testifying at deposition, at trial and in other judicial proceedings, when requested 
to do so by the Division's staff, in connection with the Proceedings or Other Proceedings. 
STATUTE OF LIMITATIONS 
6. The Respondent agrees that the running of any statute of limitations applicable to any 
action or proceeding against it authorized, instituted, or brought by or on behalf 
of the 
Commission arising out of the Investigation (the "Enforcement Proceeding"), including any 
sanctions or relief that may be imposed therein, is  tolled and suspended during the Cooperation 
Period. 
a. The Respondent and any of its attorneys or agents shall not include the 
Cooperation Period in the calculation 
of the running of any statute of limitations or for any other 
time-related defense applicable to the Enforcement Proceeding, including any sanctions or relief 
that may be imposed therein, in asserting or relying upon any such time-related defense. 
b. This agreement shall not affect any applicable statute of limitations defense or any 
other time-related defense that may be available to Respondent before the commencement 
of the 
Cooperation Period or be construed to revive an Enforcement Proceeding that may be barred by 
any applicable statute 
of limitations or any other time-related defense before the commencement 
of the Cooperation Period. 
c. The running of any statute of limitations applicable to the Enforcement 
Proceeding shall commence again after the end 
of the Cooperation Period, unless there is  an 
extension 
of the tolling period executed in writing by or on behalf of the parties hereto. 
3 


d. This agreement shall not be construed as an admission by the Commission 
relating to the applicability 
of any statute of limitations to the Enforcement Proceeding, including 
any sanctions or relief that may be imposed therein, or to the length 
of any limitations period that 
may apply, or to the applicability 
of any other time-related defense. 
UNDERTAKINGS 
7. During the Cooperation Period, the Respondent understands and agrees to perform the 
following undertakings: 
a. to provide written notification to the Division, within five days, if it has been 
questioned in the context 
of an investigation, charged, or convicted of an offense related to the 
securities laws by any federal, state, or local law enforcement organization or regulatory agency; 
and 
b. to submit a report to the Division detailing its efforts to identify and implement 
improved disclosure procedures since being placed into conservatorship 
on September 6, 2008, 
and, ifrequested, to meet with the Division's staff to discuss the report and its progress with 
respect to its obligations pursuant to this Agreement. 
PUBLIC STATEMENTS 
8. The Respondent agrees not to take any action or to make or permit any public statement 
through present or future attorneys, employees, agents, 
or other persons authorized to speak for it 
("Related Person"), except in legal proceedings in which the Commission is not a party, denying, 
directly or indirectly, any aspect 
of this Agreement or creating the impression that the statements 
in Exhibit A to this Agreement are without factual basis. This paragraph is  not intended to apply 
to any statement made by an individual in the course 
of any criminal, civil, or regulatory 
proceeding initiated by the government or self-regulatory organization against such individual, 
unless such individual is speaking on behalf 
of the Respondent. 1 If it is  determined by the 
Commission that a public statement by the Respondent or any Related Person contradicts in 
whole 
or in part this Agreement, at its sole discretion, the Commission may bring an 
enforcement action in accordance with Paragraphs 
15 through 18, but only provided that 
Respondent does not cure the statement by promptly making appropriate public statements or 
court filings satisfactory to the Commission after a reasonable opportunity to do so by the 
Commission. 
9. 
Prior to issuing any press release concerning this Agreement, the Respondent agrees to 
have the text 
of the release approved by the staff of the Division. 
SERVICE 
10. The Respondent agrees to serve by hand delivery 
or by next-day mail all written notices 
and correspondence required 
by or related to this Agreement to Charles Cain, Assistant Director, 
Nothing in this Agreement affects Respondent's and Related Person's (i) testimonial obligations or (ii) right to 
take legal or factual positions 
in litigation or other legal proceedings in which the Commission is not a party. 
4 


100 F  Street, N.E., Washington, D.C. 20549 ((202) 551-4911), unless otherwise directed in 
writing by the staff 
of the Division. 
VIOLATION OF AGREEMENT 
11. The Respondent understands and agrees that it shall be a violation 
of this Agreement if it 
knowingly provides false or misleading information or materials in connection with the 
Proceedings or Other Proceedings. In the event 
of such misconduct, the Division will advise the 
Commission 
of the Respondent's misconduct and may make a criminal referral for providing 
false information (18 U.S.C. § 1001), contempt (18 U.S.C. 
§§ 401-402) and/or obstructing 
justice (18 U.S.c. § 1503 
et seq.). 
12. The Respondent understands and agrees that should the Division determine that the 
Respondent has failed materially to comply with any term or condition 
ofthis Agreement, the 
Division will notify the Respondent or its counsel 
ofthe fact and provide an opportunity for the 
Respondent to make a Wells submission pursuant to the Securities Act 
of 1933 Release No. 
5310. Under these circumstances, the Division may, in its sole discretion and not subject to 
judicial review, recommend to the Commission an enforcement action against the Respondent 
for any securities law violations, including, but not limited to, the substantive offenses relating to 
the Investigation. 
13. The Respondent understands and agrees that in any future enforcement action resulting 
from its violation 
of the Agreement, any documents, statements, information, testimony, or 
evidence provided by it during the Investigation, Proceedings or Other Proceedings, and any 
leads derived there from, may be used against it  in future legal proceedings. 
14. In the event it breaches this Agreement, the Respondent agrees not to dispute, contest, or 
contradict the factual statements contained in Exhibit A, or their admissibility, in any future 
Commission enforcement action against it. 
COMPLIANCE WITH AGREEMENT 
15. SUbject to the full, truthful, and continuing cooperation of the Respondent, as described 
in Paragraphs 4 and 5, and compliance by Respondent with all obligations, prohibitions and 
undertakings in this Agreement, the Commission agrees not to bring any enforcement action or 
proceeding against the Respondent arising from the Investigation. This Agreement should not, 
however, be deemed to exonerate the Respondent or be construed as a finding by the 
Commission that violations 
of the federal securities laws have not occurred. 
16. The Respondent understands and agrees that this Agreement does not bind other U.S. 
federal, state or self-regulatory organizations, but the Commission may, at its discretion, issue a 
letter to these organizations detailing the fact, manner, and extent of its cooperation during the 
Proceedings or Other Proceedings, upon the written request 
ofthe Respondent. 
17. The Respondent understands and agrees that if it sells, merges, or transfers all or 
substantially all 
of its business operations as they exist as of the date of this Agreement, whether 
such a sale is structured as a stock or asset sale, merger, or transfer during the Cooperation 
5 


Period, it shall include in any contract for sale, merger, or transfer a provision binding the 
purchaser or successor in interest to the obligations set forth in this Agreement. 
18. The Respondent understands and agrees that the Agreement only provides protection 
against enforcement actions arising from the Investigation and does not relate to any other 
violations, or to any individual or entity other than the Respondent. 
VOLUNTARY AGREEMENT 
19. The Respondent's decision to enter into this Agreement is  freely and voluntarily made 
and is  not the result 
of force, threats, assurances, promises, or representations other than those 
contained in this Agreement. 
20. The Respondent has read and understands this Agreement. Furthermore, the Respondent 
has reviewed all legal and factual aspects 
of this matter with its attorney and is fully satisfied 
with its attorney's legal representation. The Respondent has thoroughly reviewed this 
Agreement with its attorney and has received satisfactory explanations concerning each 
paragraph 
of the Agreement. After conferring with its attorney and considering all available 
alternatives, the Respondent has made a knowing decision to enter into the Agreement. 
21. The Respondent represents that its Board 
of Directors has duly authorized, in the 
resolution attached as Exhibit B to this Agreement, the execution and delivery 
of this Agreement, 
and that the person signing this Agreement has authority to bind the Respondent. 
ENTIRETY OF AGREEMENT 
22. This Agreement constitutes the entire agreement between the Commission and the 
Respondent, and supersedes all prior understandings, 
if any, whether oral or written, relating to 
the subject matter herein. 
23. This Agreement cannot be modified except in writing, signed by the Respondent and an 
authorized representative 
ofthe Commission. 
24. This agreement may be executed in counterparts. 
25. In the event an ambiguity or a question 
of intent or interpretation arises, this Agreement 
shall be construed as 
if drafted jointly by the parties hereto, and no presumption or burden of 
proof shall arise favoring or disfavoring the Commission or the Respondent by virtue of the 
authorship 
of any of the provisions of the Agreement. 
6 


The signatories below acknowledge acceptance of the foregoing terms and conditions. 
RESPONDENT: 
an, Jr. 
CEO, Freddie Mac 
8200 Jones Branch Drive 
McLean, VA 
22102-3110 
Attached hereto is the Certificate 
of the Secretary to the Board of Directors of Freddie Mac, 
certifying that Charles 
E. Haldeman, Jr. is, and at the time of the signing and delivery of the 
Agreement was, the duly appointed, qualified and acting Chief Executive Officer 
of Freddie Mac 
and duly authorized to execute the Agreement on behalf of Freddie Mac, and that the signature 
of Charles E. Haldeman, Jr. appearing on the Agreement is his genuine signature. 
RESPONDENT'S COUNSEL: 
Approved as to form: 
Date Neal 
E. Sullivan, Esq. 
Bingham McCutchen LLP 
2020 K Street 
NW 
Washington, DC 20006-1806 
SECURITIES AND EXCHANGE COMMISSION 
DIVISION 
OF ENFORCEMENT: 
Date 
Robert Khuzami 
Director, Enforcement Division 
United States Securities and Exchange 
Commission 
100 F Street, N.E. 
Washington, D.C. 20549 
7 


The signatories below acknowledge acceptance of the foregoing tenus and conditions. 
RESPONDENT: 
Date Charles 
E. Haldeman, Jr. 
CEO, Freddie Mac 
8200 Jones Branch Drive 
McLean, VA 
22102-3110 
Attached hereto is  the Certificate 
of the Secretary to the Board ofDirectors of Freddie Mac, 
certifying that Charles 
E. Haldeman, Jr. is, and at the time ofthe signing and delivery of the 
Agreement was, the duly appointed, qualified and acting Chief Executive Officer 
ofFreddie Mac 
and duly authorized to execute the Agreement on behalf 
of Freddie Mac, and that the signature 
of Charles E. Haldeman, Jr. appearing on the Agreement is  his genuine signature. 
RESPONDENT'S COUNSEL: 
Approved as to form: 
Neal 
E. Su ivan, Esq. 
Bingham McCutchen LLP 
2020 K Street NW 
Washington, DC 20006-1806 
Date 
SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT: 
Date 
Director, Enforcement Division 
United 
States Securities and Exchange 
Commission 
100 F  Street, N.E. 
Washin ton, D.C. 20549 
7 


EXHIBIT A 

STATEMENT OF FACTS 
Freddie Mac 
1. Federal Home Loan Mortgage Corporation ("Freddie Mac") is a government-
sponsored enterprise that was chartered by Congress 
in 1970 to support liquidity, stability and 
affordability in the secondary mortgage market, where existing mortgage-related assets are 
purchased and sold. Freddie Mac manages its business through three reportable segments: 
(1) single-family guarantee, (2) multifamily, and (3) investments. Freddie Mac's primary 
business segment is  its single-family guarantee portfolio, through which it guarantees the 
payment 
of principal and interest on single-family mortgage related securities, in exchange for 
guarantee fees. The single family business purchases residential mortgages and mortgage-related 
securities in the secondary mortgage market and securitizes them as Freddie Mac mortgage­
backed securities, known as Participation Certificates ("PCs"). Freddie Mac guarantees the 
payment 
of principal and interest on the mortgage loans that underlie these PCs. The 
multifamily segment activities include purchases 
of multifamily mortgages for investment and 
guarantees of payments of principal and interest on multifamily mortgage-related securities and 
mortgages underlying multifamily housing revenue bonds. Through the investment segment, 
which includes the retained portfolio, the company invests principally in mortgage-related 
securities and single-family mortgages, including its own PCs. 
2. In or about November 2007, Freddie Mac began reporting significant credit losses 
in its portfolio 
of mortgage-related assets and guaranty contracts. On November 20,2007, 
Freddie Mac reported a net loss 
of $2 billion, which reflected "a higher provision for credit 
losses and losses on mark-to-market items." For the period January 1, 2007 through March 31, 
2011, Freddie Mac reported cumulative net losses of$88.1 billion. 
3. From 1992 until July 30,2008, Freddie Mac's primary regulator was the Office of 
Federal Housing Enterprise Oversight. 
4. On July 30, 2008, when the President signed into law the Housing and Economic 
Recovery Act 
of2008, the Federal Housing Finance Agency ("FHFA") became Freddie Mac's 
primary regulator. On September 
6, 2008, FHF A placed Freddie Mac into conservatorship, and 
as conservator succeeded to all rights, titles, powers and privileges of Freddie Mac, its 
shareholders, and the officers or directors 
of Freddie Mac with respect to the company and its 
assets. 
5. On July 8, 2010, Freddie Mac's common stock was delisted from the New York 
Stock Exchange. Freddie 
Mac's common stock presently is  traded in the over-the-counter 
market and quoted on the OTC Bulletin Board under the ticker symbol "FMCC." Freddie Mac's 
debt securities are actively traded 
in the over-the-counter market. 
6. From March 23, 2007 through August 6,2008 (the "Relevant Period"), Freddie 
Mac published mortgage credit risk disclosures in annual information statements and periodic 
information statement supplements posted on its website and, as 
of August 6, 2008, in periodic 

filings with the Securities and Exchange Commission. These disclosures included information 
on Freddie Mac's single-family credit guarantee portfolio which consisted 
of mortgage loans and 
PCs backed by mortgage loans (whether held in its portfolio or by third parties). 
7. During the Relevant Period, Freddie Mac provided disclosures regarding its 
exposure to Alt-A and subprime mortgage loans in its single-family mortgage credit guarantee 
portfolio. 
Subprime Disclosures 
8. During the Relevant Period, Loan Prospector ("LP") was Freddie Mac's 
proprietary automated underwriting system ("AUS"). Loan originators used LP to obtain an 
AUS score, which could be used to determine the terms on which a loan could be sold to Freddie 
Mac. For example, whether a loan could be sold to Freddie Mac without certain representations 
and warranties or without additional cost. 
9. LP was based on performance models calibrated to loans in Freddie Mac's 
guarantee portfolio and to other data acquired by Freddie Mac. Using these models, LP 
generated a score reflecting an estimate 
of the risk of default associated with loans. Freddie Mac 
grouped these numerical scores into six bands or "grades," roughly corresponding to the level 
of 
anticipated risk:   A+, AI, A2, A3, Cl or C2. The first four categories were called "Accept" 
loans; the C 1 and C2 categories were designated "Caution" loans. In general, loans categorized 
as C 1 or C2 were those with multiple higher risk characteristics, such as high LTV s,  low FICOs, 
unusual property types or high debt-to-income ratios. 
10. In 1998, Freddie Mac developed its "A-minus" offering under which a loan that 
scored C 1 under LP could be sold to Freddie Mac on the same terms as an Accept loan with the 
payment 
of an additional fee by the seller. Contemporaneous Freddie Mac internal documents 
described A-minus loans as comprising "approximately 50 percent 
of subprime loans," and as 
"[m ]ortgages that generally comprise the first and second tier 
of subprime lender risk grades." 
11. As of November 1998, an internal Freddie Mac document titled Credit Policy 
Book described mortgage loans that received an 
LP C2 rating as having a credit quality of 
"subprime. " 
12. In 1999, 
in order to manage the company's risk exposure to "traditional subprime 
residential mortgages," Freddie Mac developed a model to estimate the likelihood that a loan 
was being made to someone who traditionally would have borrowed through the subprime 
channel. The model scored mortgage loans on a variety 
of credit risk characteristics, such as 
debt ratio, FICOs, and time since most recent foreclosure, and generated a "subprime score" 
which, 
if the score was below certain thresholds, resulted in an automatic LP rating of C 1 or C2. 
In addition, the model contained certain overrides that required a mortgage loan to receive an LP 
C 1 or C2 rating 
if certain characteristics were present, such as a debt-to-income ratio greater than 
50 percent, assuming that the loan did not possess certain specific mitigating factors. 
2 


13. During the Relevant Period, Freddie Mac also purchased loans that qualified 
under the Federal National Mortgage Association ("Fannie Mae") Expanded Approval ("EA") 
program. On August 17,2005, a direct report to Freddie Mac's Senior Vice President, Credit 
Policy 
& Portfolio Management, signed an internal policy document authorizing increased 
purchases of EA loans. Comments by the direct report to Freddie Mac's SVP for Credit Policy 
and others annexed to the document stated: 
• 	"[B]ased on an analysis 
of available data, there is  also high risk associated with 
the purchase 
of EA Mortgages, since performance compares to sub prime 
products. " 
• 	"[EA loans] appear to be subprime in nature." 
14. On August 20,2007, Freddie Mac's SVP, Credit Policy & Portfolio Management 
("SVP for Credit Policy"), described EA loans as "clearly sUbprime." 
15. The approximate aggregate amount (in billions of U.S. dollars), measured by 
unpaid principal balance, 
of C1, C2 and EA loans on Freddie Mac's single-family credit 
guarantee book at the end of the following periods was as follows: 
$39 $35 
$74 
$75 
$1,220 6% 
$42 
$37 $79 
$80 
$1,244 6% 
$47 $39 $86 
$87 
$1,274 7% 
$53 $42 $95 $97 
$1,318 7% 
$60 $47 $107 $109 $1,360 8% 
$64 $50 $114 $116 $1,387 
8% 
3 


$71 $54 $125 $127 $1,428 9% 
$78 $60 $138 $141 $1,467 10% 
$89 
$67 $156 
$160 $1,528 10% 
$100 $77 $177 $183 $1,586 12% 
$110 
$88 $198 
$206 $1,642 13% 
$118 
$98 $216 $227 $1,692 13% 
$123 $104 $227 $238 $1,739 14% 
$127 $106 $233 
$244 
$1,784 14% 
16. During the Relevant 
Period, Freddie 
Mac's single-family guarantee segment 
entered into contracts with certain larger customers that required the companies to sell to or 
securitize with Freddie Mac a specified minimum share 
oftheir eligible loan originations, subject 
to certain conditions and exclusions. The purchase and securitization 
of mortgage loans from 
customers under these longer-term contracts had fixed pricing schedules for Freddie 
Mac's 
guarantee fees that were negotiated at the outset of the contract. Freddie Mac referred to these 
transactions as "flow" activity (the "flow channel"), which represented the majority 
of Freddie 
Mac's purchase volumes during the Relevant Period. The remainder ofFreddie Mac's purchases 
and securitizations 
of mortgage loans during the Relevant Period occurred in "bulk" transactions 
for which purchase prices and guarantee fees were negotiated on an individual transaction basis. 
4 


17. During the Relevant Period, in addition to purchasing and guaranteeing the 
payment 
of principal and interest on loans that had been underwritten using Loan Prospector, 
Freddie Mac also purchased and guaranteed the payment 
of principal and interest on loans 
underwritten using automated underwriting systems created by others. 
18. During the Relevant Period, Freddie Mac tracked, in senior-level presentations 
and other documents, the relative risk 
of mortgages purchased through automated underwriting 
systems other than Loan Prospector. Freddie Mac used an internal modeling system called LP 
Emulator to conduct a post-purchase evaluation 
of all loans. Freddie Mac used the term "defect 
rate" to track the percentage 
of all loans purchased on terms equivalent to LP "Accept" loans that 
were scored by the LP Emulator as "Caution." The designation as part 
of a "defect rate" 
signified that, among other things, Freddie Mac was taking on greater credit risk than projected 
by the original assessment. 
19. In the second quarter 
of 2003, Freddie Mac's aggregate defect rate of purchases 
from the flow channel was at 
1.1 percent. As Freddie Mac's share of residential mortgages 
purchased through automated underwriting systems other than LP increased, however, so did the 
defect rate. In August 2007, the aggregate defect rate 
of all purchases from the flow channel was 
21.1 %. 
20. During a June 7, 2007 Board committee meeting attended by Freddie 
Mac's 
Executive Vice President, Investments and Capital Markets (and later Chief Business Officer) 
(the "CBO"), and the SVP for Credit Policy, among others, the following information was 
presented: 
• 	As 
of January 2007, approximately 40 percent of Freddie Mac's flow channel 
purchases came through Fannie 
Mae's own proprietary automated underwriting 
system, called Desktop Underwriter ("DU"), and through an automated 
underwriting system used by Countrywide Financial Corporation 
("Countrywide"), called "CLUES." 
• 	"Fannie Mae-approve loans have a much higher defect rate than Freddie Mac­
accept loans[.]" 
• 	"Fannie Mae-approves have higher share 
of low FICO loans and subprime-like 
loans[.]" 
• 	"Countrywide is  particularly volatile and a high proportion 
of defects are 
subprime in nature[.]" 
• 	The defect rate for Freddie 
Mac's purchases through both DU and CLUES at that 
time was at least 20 percent. 
21. 	During the Relevant Period, one 
of Freddie Mac's largest customers was 
Countrywide. Countrywide organized its business into two channels -  the "Retail" channel and 
the 
"TPO" (third-party originator) channel. Countrywide'S Retail channel included Full 
Spectrum Lending. Full Spectrum Lending was a subprime lending division. 
5 

22. Countrywide delivered loans from both of its origination channels to Freddie 
Mac. Countrywide Retail deliveries to Freddie Mac included approximately 
$3 billion worth of 
loans from Full Spectrum Lending in 2006; $6 billion in 2007; and $2 billion in 2008. 
23. Beginning in or about early 2007, executive-level reports prepared for monthly 
meetings 
of Freddie Mac's Enterprise Risk Management Committee (the "ERMC") attended by 
senior executives at Freddie Mac observed that "[l]oan level risk grades are blurred as capital 
retreats in [the] subprime market, increasing the risk that we are already purchasing subprime 
loans under existing acquisition programs." This language continued to appear in essentially the 
same form 
in these reports throughout 2007. Freddie Mac's Chief Executive Officer and 
Chairman 
of the Board of Directors (the "CEO"), Freddie Mac's Chief Financial Officer 
(the "CFO"), and the CBO generally attended these ERMC meetings. 
24. In February 2007, Freddie Mac's senior executives, including the CEO, CFO, 
CBO and the SVP for Credit Policy, attended a two-day offsite meeting. A presentation used at 
the meeting stated the following: 
• 	Freddie Mac was "taking on more risky product 
...and combining higher-risk 
loans with higher-risk borrowers[.]" 
• 	Freddie Mac was purchasing and guaranteeing increasing amounts 
of "risk 
layering" loans, "leading to more 'Cautions[.]'" 
• 	"'Caution' loans have greater default costs 
... resulting in higher expected 
losses[. ]" 
• 	Freddie Mac "already purchase[d] subprime-like loans 
...but with considerably 
lower fees[.]" 
• 	The "worst 10% 
of [Freddie Mac's] Flow Business" were "subprime-like 
loans[.]" 
25. In March 
2007, Freddie 
Mac's senior executives, including the CEO, CFO, CBO 
and SVP for Credit Policy, attended a Board 
of Directors meeting. The CBO and the former 
President and Chief Operating Officer (the "COO") led a discussion at the meeting concerning a 
slide in which the "worst 10% 
of [Freddie Mac's] Flow Business" was listed as an example of 
"subprime-like loans" the company already purchased, and in which they conveyed: 
• 	"We already purchase subprime-like loans to help achieve our HUD goals 
... [bJut we receive considerably lower fees than subprime loans would fetch in 
the market." 
• 	"Some 
of our current purchases have subprime-like risk[.]" 
• 	"[F]ixed-rate subprime doesn't look all that different than the bottom 
of our 
purchases, with returns five to six times as great, not universal for all sUbprime." 
6 

26. On March 23,2007, Freddie Mac published its Information Statement and Annual 
Report 
to Stockholders for the Fiscal Year Ended December 31, 2006 (the "2006 IS"). Freddie 
Mac stated in the 2006 
IS that: 
Participants in the mortgage market often characterize loans based 
upon their overall credit quality at the time 
of origination, 
generally considering them to 
be prime or sUbprime. There is no 
universally accepted definition of subprime. The subprime 
segment 
of the mortgage market primarily serves borrowers with 
poorer credit payment histories and such loans typically have a mix 
of credit characteristics that indicate a higher likelihood of default 
and higher loss severities than prime loans. Such characteristics 
might include a combination 
of high loan-to-value ratios, low 
FICO scores or originations using lower underwriting standards 
such as limited or no documentation 
of a borrower's income. The 
subprime market helps certain borrowers by increasing the 
availability 
of mortgage credit. 
While we 
do not characterize the single-family loans underlying 
the PCs and Structured Securities in our credit guarantee portfolio 
as either prime or subprime, we believe that, based on lender-type, 
underwriting practice and product structure, the number 
of loans 
underlying these securities that are subprime is not significant. 
Also included in our credit guarantee portfolio are Structured 
Securities backed by non-agency mortgage-related securities where 
the underlying collateral was identified as being subprime by the 
original issuer. At December 31, 2006 and 2005, the Structured 
Securities backed by subprime mortgages constituted 
approximately 
0.1 percent and 0.2 percent, respectively of our 
credit guarantee portfolio. 
With respect to our Retained portfolio, we 
do not believe that any 
meaningful amount 
of the agency securities we hold is backed by 
subprime mortgages. However, at December 31, 2006 and 2005, 
we held approximately $124 billion and $139 billion, respectively, 
of non-agency mortgage-related securities backed by subprime 
loans. These securities include significant credit enhancement 
based on their structure and more than 99.9 percent 
of these 
securities were rated AAA at December 31, 2006. 
27. The same day that Freddie Mac released the 2006 IS, it held an earnings 
conference call with research analysts. On the earnings conference call, Freddie Mac's CFO 
discussed the company's "very low levels" 
of credit-related expenses, and attributed that "to the 
fact that our portfolio 
is predominantly based on long-term fixed-rate mortgages, our overall 
average LTV ratio is about 57 percent, and we have little to 
no exposure to the subprime risk 
layered mortgage products that have drawn so much activity lately." 
7 

28. At December 31, 2006, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $141 billion of C1, C2 and EA loans, which equated to 
approximately 
10 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, Freddie Mac disclosed in its 2006 
IS that the number of subprime loans 
underlying the PCs and Structured Securities in its single-family credit guarantee portfolio was 
"not significant." 
29. During 2007, Freddie Mac internally explored the possibility 
of offering a new 
product, referred 
to as the "model subprime offering." 
30. One project undertaken by the team charged with developing the model subprime 
offering involved an analysis 
of Freddie Mac's existing products. Those existing products were 
compared to the proposed parameters for purchasing and guaranteeing mortgages under the 
model subprime offering. Under the direction 
of Freddie Mac's SVP for Credit Policy, the team 
concluded in June 2007 that: 
• 	"Subprime mortgages are not considered unique in the industry. An analysis 
of 
Freddie Mac's existing products indicates our current A-minus offering has credit 
risk and product parameters (business terms) that match, and in some cases, are 
broader than those outlined in the proposed model Subprime offering." 
• 	The model subprime offering "will compete with affordable offerings like Home 
Possible and [Fannie Mae's] MyCommunityMortgage, as well as our LP A-minus 
offering and [Fannie Mae's] newly revamped EA program." 
31. Senior executives and officials within Freddie Mac, including Freddie Mac's 
CBO, were aware 
of the conclusions of this analysis. 
32. On May 11,2007, the then-head 
of External Reporting, in an e-mail including 
Freddie Mac's SVP for Credit Policy, among others, remarked on a draft version 
ofa speech to 
be given by Freddie Mac's CEO at the UBS Global Financial Services Conference (the "UBS 
Conference"): "We need to be careful how we word this. Certainly our portfolio includes loans 
that under some definitions would be considered subprime. Look back at the subprime language 
in the annual report and use that as a guide as what to say. Basically, we said we 
don't have a 
definition 
of subprime and we don't acquire loans from subprime lenders. We should reconsider 
making as sweeping a statement as we have 'basically 
no subprime exposure. '" 
33. On May 14,2007, Freddie Mac's CEO spoke at the UBS Conference (the "May 
14 speech") and stated: "As we discussed in the past, at the end of 2006, Freddie had basically 
no subprime exposure in our guarantee business, and about $124 billion 
of AAA rated subprime 
exposure in our retained portfolio." 
34. On May 17,2007, Freddie 
Mac's CBO gave a speech at the Lehman Brothers 
10th Annual Financial Services Conference (the "May 
17 speech") and stated: "As we discussed 
in the past, at the end 
of 2006, Freddie had basically no subprime exposure in our guarantee 
business, and about $124 billion 
of AAA rated subprime exposure in our retained portfolio." 
8 


35. Freddie Mac's single-family credit guarantee portfolio is the Company's largest 
business segment (by portfolio unpaid principal balance), which purchases and guarantees the 
payment 
ofprincipal and interest on mortgage loans originated by lenders and packages such 
loans into mortgage-backed securities. Freddie 
Mac's retained portfolio is under the Company's 
Investments segment, and holds mortgage-related securities and single-family mortgages for 
investment purposes. 
36. On June 14, 2007, Freddie Mac published its Financial Report for the Three 
Months Ended March 31, 2007 (the 
"IQ07 ISS"). In the lQ07 ISS, Freddie Mac did not include 
any statement regarding its exposure to subprime loans in its single-family credit guarantee 
portfolio. 
37. 
On the same day that Freddie 
Mac released its lQ07 ISS, Freddie Mac held a 
conference call to discuss its earnings for the quarter ended March 31, 2007. On that call, 
Freddie 
Mac's CFO stated that "[a]t the end ofthe first quarter, our total reserves for credit loss 
stood at $545 million or roughly 3 basis points 
ofthe total mortgage portfolio .... Just a 
reminder -
we do not hold subprime loans directly so there is no contribution in the numbers I 
just mentioned from suhprime. Also, we continue to expect no losses from our subprime-backed 
AAA-rated ABS security exposure." 
38. In a memorandum dated June 
15,2007, the Chair ofFreddie Mac's Disclosure 
Committee informed the Chair 
ofFreddie Mac's Audit Committee that there was no clear 
defmition 
ofsubprime loans in the market. 
39. 
At March 31, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
ofapproximately $160 billion of C1, C2 and EA loans, which equated to 
approximately 
10 percent ofFreddie Mac's single-family credit guarantee portfolio. As 
described above, in the 1 Q07 ISS, Freddie Mac did not include any statement regarding its 
subprime exposure in its single-family guarantee portfolio. 
40. On August 
30,2007, Freddie Mac published its Financial Report for the Three 
and Six Months Ended June 30, 2007 (the "2Q07 ISS"). Freddie Mac stated in the 2Q07 ISS 
that: 
Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality 
at the time of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition 
of subprime. The 
subprime segment 
of the mortgage market primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a  mix 
of credit characteristics that indicate a  higher 
likelihood 
of default and higher loss severities than prime loans. 
Such characteristics might include a  combination 
of high loan-to­
value ratios, low credit scores 
or originations using lower 
underwriting standards such as limited 
or no documentation of a 
borrower's income. The subprime market helps certain borrowers 
by broadening the availability 
ofmortgage credit. 
9 

We estimate that approximately $2 billion, or 0.1 percent, and $3 
billion, or 0.2 percent, of loans underlying our single-family 
mortgage portfolio, at June 30, 2007 and December 31, 2006, 
respectively, were classified as subprime mortgage loans. 
With respect to our Retained portfolio, at June 30, 2007 and 
December 31, 2006, we held investments 
of approximately $119 
billion and $124 billion, respectively, 
of non-agency mortgage­
related securities backed 
by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and approximately 99.9 percent 
of these securities 
held at June 30, 2007, were rated AAA at August 27,2007. 
41. At June 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $182 billion of C1, C2 and EA loans, which equated to 
approximately 
12 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 
2Q07 ISS that, 
at June 30, 2007, it  had approximately $2 billion, or 0.1 percent, 
of loans underlying its single-family credit guarantee portfolio that were classified as subprime 
mortgage loans. Freddie Mac made 
no other disclosure in its 2Q07 ISS quantifying its subprime 
exposure in its single-family credit guarantee book 
of business as of June 30, 2007. 
42. On November 20,2007, Freddie Mac published its Financial Report for the Three 
and Nine Months Ended September 30, 2007 (the "3Q07 ISS"). Freddie Mac stated 
in the 3Q07 
ISS that: 
Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time 
of 
origination, generally considering them to be prime or subprime. 
There 
is no universally accepted definition of subprime. The 
sub prime segment 
of the mortgage market   primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a mix 
of credit characteristics that indicate a higher 
likelihood 
of default and higher loss severities than prime loans. 
Such characteristics might include a  combination 
of high loan-to­
value ratios, low credit scores or originations using lower 
underwriting standards such as limited or no documentation 
of a 
borrower's income. The subprime market helps certain borrowers 
by broadening the availability of mortgage credit. 
We estimate that approximately $5 billion and $3 billion of loans 
underlying our Structured Transactions at September 
30,2007 and 
December 31, 2006, respectively, were classified 
as subprime 
mortgage loans. With respect 
to our retained portfolio, at 
September 30, 2007 and December 31, 2006, we held investments 
of approximately $105 billion and $124 billion, respectively, of 
non-agency mortgage-related securities backed by subprime loans. 
10 


These secuntIes include significant credit enhancement, 
particularly through subordination, and approximately 97.6% 
of 
these securities were rated AAA at November 15,2007. 
Between September 30 and November 15,2007, credit ratings for 
several mortgage-related securities backed by subprime loans with 
an aggregate unpaid principal balance 
of $2.5 billion were 
downgraded from AAA to a  lesser investment-grade rating by at 
least one nationally recognized statistical rating organization. To 
date, we have not recorded any impairment charges on these 
securities because we have the ability and intent 
to hold these 
securities for a  period 
of time sufficient to recover all unrealized 
losses; however, since these are designated as available-for-sale 
securities, there are $55 million 
of unrealized losses, net as of 
September 30, 2007 that are reflected in AOCI. We expect that 
these and   any further credit downgrades 
of our non-agency 
mortgage-related securities backed by subprime loans will result in 
declines in their fair value. 
43. At September 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $206 billion of C1, C2 and EA loans, which equated to 
approximately 
13 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 3Q07 ISS that at  September 
30, 2007, it had approximately 
$5 billion of loans 
underlying its Structured Transactions that were classified 
as subprime mortgage loans. Freddie 
Mac made no other disclosure in its 3Q07 ISS quantifying its subprime exposure in its single­
family credit guarantee book 
of business as of September 30, 2007. 
44. On December 11,2007, Freddie Mac's CEO gave a speech at the Goldman Sachs 
Financial Services Conference (the "December 
11 speech"), during which he stated: "Finally, 
we feel that our credit position in the current guarantee book, actually, is  very near the best 
of the 
entire industry. A very major reason for this is  that we have very low exposures 
to alt A in risk­
layered mortgage products in the guarantee business. We didn't do any subprime business." 
Later, in response to a question from the audience, the CEO added "[i]n terms 
of our insight in 
the subprime stuff, we didn't buy any subprime loans. I mean, we bought some securities, which 
we can 
go through, and we think we're fine in. We bought them for goal purposes. But we 
didn't buy in [sic] guarantee, essentially any subprime loans. 
So we weren't in that business." 
45. On February 28, 2008, Freddie Mac published its Information Statement and 
Annual Report to Stockholders for the fiscal year ended December 31, 2007 (the "2007 IS"). 
Freddie Mac stated in the 2007 IS that: 
Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time 
of 
origination, generally considering them to be prime or sUbprime. 
There is no universally accepted definition 
of subprime. The 
subprime segment 
of the mortgage market primarily serves 
11 

borrowers with poorer credit payment histories and such loans 
typically have a mix 
of credit characteristics that indicate a  higher 
likelihood 
of default and higher loss severities than prime loans. 
Such characteristics might include a  combination 
of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such as limited or no documentation 
of a  borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability 
of mortgage credit. 
While we have not historically characterized the single-family 
loans underlying our PCs and Structured Securities 
as either prime 
or subprime, we 
do monitor the amount of loans we have 
guaranteed with characteristics that indicate a  higher degree 
of 
credit risk. See "Mortgage Portfolio Characteristics -Higher 
Risk Combinations" for further information. 
We estimate that 
approximately $6 billion and 
$3 billion of loans underlying our 
Structured Transactions 
at December 31, 2007 and 2006, 
respectively, were classified as subprime mortgage loans. 
To 
support our mission, we announced in April 2007 that we will 
purchase up to $20 billion in fixed-rate and hybrid ARM products 
that will provide lenders with more choices to offer subprime 
borrowers. The products are intended to be consumer-friendly 
mortgages for borrowers that will limit payment shock by offering 
reduced adjustable-rate margins, longer fixed-rate terms and longer 
reset periods than existing similar products. Subsequent 
to our 
announcement, we have entered into purchase commitments 
of 
$207 million of mortgages on primary residence, single-family 
properties specifically pursuant to this commitment. 
We also 
fulfill this commitment through purchases 
of refinance mortgages 
made to credit challenged borrowers, who may have previously 
been served by the subprime mortgage market. As 
of December 
31, 2007, we have purchased approximately $43 billion 
of 
conventional mortgages made to borrowers who otherwise might 
have been limited to subprime products, including approximately 
$23 billion 
of refinance mortgages meeting our criteria. 
With respect 
to our retained portfolio, at December 31, 2007 and 
2006, we held investments 
of approximately $101 billion and $122 
billion, respectively, 
of non-agency mortgage-related securities 
backed by subprime loans. These securities include significant 
credit enhancement, particularly through subordination, and 
81 % 
of these securities were AAA-rated at February 25, 2008. During 
2007, we recognized $10 million 
of credit losses as impairment 
expense on these securities related to four positions that were 
below AAA-rated at acquisition. The net unrealized losses, net 
of 
tax, on the remaining securities that are below AAA-rated are 
included in AOCl and totaled $504 million as 
of December 31, 
12 


2007. Between December 31, 2007 and February 25, 2008, credit 
ratings for mortgage-related securities backed by subprime loans 
with an aggregate unpaid principal balance 
of $16 billion were 
downgraded by at least one nationally recognized statistical rating 
organization. In addition, there were 
$5 billion of unrealized 
losses, net 
of tax, associated with AAA-rated, non-agency 
mortgage-related securities backed by subprime collateral that are 
principally a  result 
of decreased liquidity in the subprime market. 
The extent and duration 
of the decline in fair value of these 
securities relative to our cost have met our criteria that indicate the 
impairment 
of these securities is temporary. However, if market 
conditions continue 
to deteriorate, further credit downgrades to our 
non-agency mortgage-related securities backed by subprime loans 
could occur and may result in additional declines in their fair 
value. 
46. Freddie Mac's 
"Higher Risk Combinations" disclosure stated that, 
as of 
December 31, 2007, approximately one percent of single-family mortgage loans it guaranteed 
were made 
to borrowers with credit scores below 620 and had original LTV ratios above 90 
percent at the time 
of mortgage origination. 
47. At December 31,2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $226 billion of C1, C2 and EA loans, which equated to 
approximately 
13 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 2007 IS that at December 31, 2007, it had approximately $6 billion ofloans 
underlying its Structured Transactions that were classified 
as subprime mortgage loans. Freddie 
Mac made no other disclosure in its 2007 
IS quantifying its subprime exposure in its single­
family credit guarantee book 
of business as of December 31, 2007. 
48. On May 14,2008, Freddie Mac published its Financial Report for the Three 
Months Ended March 31, 2008 (the 
"1 Q08 ISS"). Freddie Mac stated in the 1 Q08 ISS that: 
Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time 
of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition 
of subprime. The 
subprime segment 
of the mortgage market primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a  mix 
of credit characteristics that indicate a higher 
likelihood 
of default and higher loss severities than prime loans. 
Such characteristics might include a  combination 
of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such 
as limited or no documentation of a  borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability 
of mortgage credit. While we have not 
historically characterized the single-family loans underlying our 
13 


PCs and Structured Securities as either prime or subprime, we do 
monitor the amount of loans we have guaranteed with 
characteristics that indicate a  higher degree 
of credit risk (see 
"Higher Risk Combinations" for further information). In addition, 
we estimate that approximately $4 billion 
of security collateral 
underlying our Structured Transactions at both March 31, 2008 and 
December 31, 2007 were classified as subprime. 
With respect 
to our retained portfolio, at March 31, 2008 and 
December 31, 2007, we held investments 
of approximately $93 
billion and 
$101 billion, respectively, of non-agency mortgage­
related securities backed by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and 70% and 96% 
of these securities were AAA­
rated at March 31, 2008 and December 31, 2007, respectively. 
The unrealized losses, net 
of tax, on these securities that are below 
AAA-rated are included in AOCI and totaled 
$5 billion and $504 
million 
as of March 31, 2008 and December 31, 2007, 
respectively. In addition, there were $6 billion 
of unrealized 
losses, net 
of tax, included in AOCI on these securities that are 
AAA-rated, principally 
as a result of decreased liquidity and larger 
risk premiums in the subprime market. 
We receive substantial 
monthly remittances 
of principal repayments on these securities, 
which totaled more than 
$8 billion during the first quarter of2008. 
49. At March 31, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $239 billion of C1, C2 and EA loans, which equated to 
approximately 14 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 1 
Q08 ISS that at March 31, 2008, it had approximately $4 billion of security 
collateral underlying its Structured Transactions that were classified as sUbprime. Freddie Mac 
made 
no other disclosure in its 1 Q08 ISS quantifying its subprime exposure in its single-family 
credit guarantee book 
of business as of March 31, 2008. 
50. On July 18, 2008, Freddie Mac filed a Form 10 Registration Statement with the 
Commission ("Form 10"). In its Form 10, Freddie Mac repeated verbatim the subprime 
disclosure from Freddie Mac's 2007 IS, described above at paragraph 45. 
51. Freddie Mac's first periodic report following its registration with the Commission 
occurred on August 
6, 2008, when it filed a Form 10-Q for the quarterly period ended June 30, 
2008 (the "2Q08 10-Q"). Freddie Mac stated in the 2Q08 10-Q that: 
Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time 
of 
origination, generally considering them to be prime or subprime. 
There 
is no universally accepted definition of sUbprime. The 
subprime segment 
of the mortgage market primarily serves 
14 

borrowers with poorer credit payment histories and such loans 
typically have a mix 
of credit characteristics that indicate a  higher 
likelihood 
of default and higher loss severities than prime loans. 
Such characteristics might include a  combination 
of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such as limited or no documentation 
of a  borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability 
of mortgage credit. While we have not 
historically characterized the single-family loans underlying our 
PCs and Structured Securities 
as either prime or subprime, we do 
monitor the amount of loans we have guaranteed with 
characteristics that indicate a  higher degree 
of credit risk (see 
"Higher Risk Combinations" for further information). In addition, 
we estimate that approximately $6 billion 
of security collateral 
underlying our Structured Transactions at both June 30, 2008 and 
December 31, 2007 were classified as subprime. 
With respect 
to our retained portfolio, at June 30, 2008 and 
December 31, 2007, we held investments 
of approximately $86 
billion and $101 billion, respectively, 
of non-agency mortgage­
related securities backed by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and 
91 % and 100% of these   securities were 
investment grade at June 30, 2008 and December 31, 2007, 
respectively. During 2008, the credit characteristics 
of these 
securities have experienced significant and rapid declines. See 
"CONSOLIDATED BALANCE SHEET ANALYSIS -Retained 
Portfolio" for further discussion and our evaluation 
of these 
securities for impairment. 
52. At June 30, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $244 billion of C1, C2 and EA loans, which equated to 
approximately 14 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 2Q08 10-Q that at June 30, 2008, it  had approximately $6 billion 
of security 
collateral underlying its Structured Transactions that were classified as subprime. Freddie Mac 
made 
no other disclosure in its 2Q08 10-Q quantifying its subprime exposure in its single-family 
credit guarantee book 
of business as of June 30, 2008. 
53. Freddie Mac's CEO and CFO both certified the 2006 IS, the 2Q07 ISS, the 3Q07 
ISS, the 2007 IS, the 1 Q08 ISS, and the 2Q08 10-Q. The certifications stated, among other 
things: 
• 	"Based on my knowledge, this [Report] does not contain any untrue statement 
of 
a material fact or omit to state a material fact necessary to make the statements 
made, in light 
of the circumstances under which such statements were made, not 
misleading with respect to the period covered by this [Report.]" 
15 

• 	"Based on my knowledge, the consolidated financial statements, and other 
financial information included in this [Report], fairly present in all material 
respects the financial condition, results 
of operations and cash flows of Freddie 
Mac as of, and for, the periods presented in this [Report]." 
54. Freddie Mac's CBO sub-certified the 2006 IS, the 2Q07 ISS, the 3Q07 ISS, the 
2007 IS, the 1Q08 ISS, and the 2Q08 10-Q. Freddie 
Mac's SVP for Credit Policy sub-certified 
the 2006 IS, the 2Q07 ISS and the 2Q08 10-Q. Those sub-certifications stated, among other 
things: 
• 	"Based upon my role and responsibilities, I have reviewed the appropriate 
sections 
of the [Report]." 
• 	"I have consulted with such members 
of my staff and others whom I thought 
should be consulted in connection with my execution 
of this attestation." 
• 	"Based upon my role and responsibilities, but limited in all respects to the matters 
that come to my attention in fulfilling my responsibilities as [CBO or SVP for 
Credit Policy], I hereby certify to the best 
of my knowledge and belief that:" 
• 	"The [Report] does not contain any untrue statement 
of a material fact or omit to 
state a material fact necessary to make the statements made, in light 
of the 
circumstances under which such statements were made, to not be misleading." 
• 	"The financial statements and other financial information included in the [report] 
fairly present, in all material respects, the financial condition and results 
of 
operations, and cash flows of the Company as ofand for the periods presented in 
the [Report]." 
55. In addition to sub-certifying the disclosures as described above in paragraph 54, 
the SVP for Credit Policy served on the disclosure committee that considered the 1 Q08 ISS and 
2Q08 lO-Q. 
Freddie Mac's Alt-A Disclosures 
56. Prior to June 14,2007, Freddie Mac did not publicly disclose its quantitative 
exposure to Alt-A loans. 
57. On June 14,2007, Freddie Mac held its first quarter 
of2007 financial results 
conference call with research analysts. In response to an analyst's question, Freddie Mac's CBO 
stated "[t]he mix of our portfolio that is  defined as Alt-A by our customers, because that is really 
the only way you get at that designation, we would estimate that maybe 5 percent or less 
of our 
portfolio that comes through flow is  Alt-A, and on the bulk business it is about 
2. So I am 
comfortable saying it is less than 10." 
58. 	On August 30,2007, in its 2Q07 ISS, Freddie Mac disclosed the following: 
16 


Many mortgage market participants classify single-family loans 
that range between their prime and subprime categories as Alt-A 
because these loans have a  combination 
of characteristics of each 
category or may be underwritten with lower or alternative 
documentation than a full documentation mortgage loan. Although 
there 
is no universally accepted definition of Alt-A, industry 
participants have used this classification principally 
to describe 
loans for which the underwriting process has been streamlined in 
order to reduce the documentation requirements 
of the borrower or 
allow alternative documentation. 
We principally acquire mortgage 
loans originated 
as Alt-A from our traditional lenders that largely 
specialize in originating prime mortgage loans. These lenders 
typically originate Alt-A loans 
as a complementary product 
offering and generally follow an origination path similar 
to that 
used for their prime origination process. 
In determining our Alt-A exposure in loans underlying our single­
family mortgage portfolio, we have classified mortgage loans 
as 
Alt-A if the lender that delivers them to us has classified the loans 
as Alt-A, or 
if the loans had reduced documentation requirements 
which indicate that the loan should be classified as Alt-A. 
We 
estimate that approximately $120 billion, or eight percent, of loans 
underlying our single-family mortgage portfolio at June 30, 2007 
were classified 
as Alt-A mortgage loans. For these loans, our 
average credit score was 
715 and our estimated current LTV ratios 
were 
71 percent. 
59. The same day that Freddie Mac released the 2Q07 ISS, it  held a financial results 
conference call with research analysts. On the conference call, Freddie Mac's CFO said: "On 
mortgage product concentrations, 
we have low exposure to all day [sic] and risk-layered loans, 
and when taken together, these represent about 8 percent 
of the total single-family guarantee 
portfolio. On the Alt-A side, 
as of the end of June, we guaranteed $120 billion ofloans that were 
either identified by the originator as Alt-A or had reduced levels 
of documentation." 
60. At June 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $462 billion of reduced documentation loans, which equated to 
approximately 29 percent 
of Freddie Mac's single-family credit guarantee portfolio. Only a 
portion 
of these loans were included in Freddie Mac's disclosed amount of$120 billion. 
61. Freddie Mac's quantification 
of its Alt-A exposure was derived from seller-
identified loans and an internal model known as DEFCAP that was used 
to calculate its 
guarantee obligation. Certain reduced documentation loan programs were not flagged as "low­
or no-doc" loans within the DEFCAP model based upon determinations made at the time. Those 
determinations were not reviewed in connection with providing public disclosure 
of the 
company's exposure to Alt-A loans. As such, those loans were not included in Freddie Mac's 
quantification 
of its Alt-A exposure in its 2Q07 ISS. 
17 

62. On October 15,2007, Freddie Mac's Vice President, Customer Facing Models 
and Analytics, wrote an e-mail in which 
he stated: "It is  said that Countrywide 'Fast and Easy' 
loans, for example, have 
... morphed into some aggressive true 'Low Doc' dimensions more 
recently." However, Freddie Mac determined not to flag Countrywide's Fast and Easy loans as 
"low-or no-doc" in the DEFCAP model; thus, they were not included in the quantification 
of 
Alt-A loan exposure that Freddie Mac provided in its public disclosures. 
63. On November 20, 2007, in the 3Q07 ISS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as 
of September 30, 2007: 
Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination 
of characteristics of each category or may be 
underwritten with lower or alternative documentation than a  full 
documentation mortgage loan. Although there 
is no universally 
accepted definition 
of Alt-A, industry participants have used this 
classification principally to describe loans for which the 
underwriting process has been streamlined in order 
to reduce the 
documentation requirements 
of the borrower or allow alternative 
documentation. 
We principally acquire mortgage loans originated as Alt-A from 
our traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans 
as a 
complementary product offering and generally follow an 
origination path similar 
to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans as Alt-A 
if the lender that delivers them to us has classified 
the loans 
as Alt-A, or if the loans had reduced documentation 
requirements which indicate that the loan should be classified as 
Alt-A. 
We estimate that approximately $131 billion, or 8%, of 
loans underlying our single-family mortgage portfolio at 
September 30, 2007 were classified as Alt-A mortgage loans. For 
these loans, our average credit score was 
715 and our  estimated 
current average LTV ratio was 72%. 
64. At September 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $484 billion of reduced documentation loans, which equated to 
approximately 30 percent 
of Freddie Mac's single-family credit guarantee portfolio. 
18 


65. On February 28, 2008, in the 2007 IS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as 
of December 31, 2007: 
Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination 
of characteristics of each category or may be 
underwritten with lower or alternative documentation than a  full 
documentation mortgage loan. Although there 
is no universally 
accepted definition 
of Alt-A, industry participants have used this 
classification principally 
to describe loans for which the 
underwriting process has been streamlined in order 
to reduce the 
documentation requirements 
of the borrower or allow alternative 
documentation. 
We principally acquire Alt-A mortgage loans from our traditional 
lenders that largely specialize in originating prime mortgage loans. 
These lenders typically originate Alt-A loans as a  complementary 
product offering and generally follow an origination path similar to 
that used for their prime origination process. In determining our 
exposure to Alt-A loans in our PC and Structured Securities 
portfolio, 
we have classified mortgage loans as Alt-A if the lender 
that delivers them to us has classified the loans as Alt-A, or 
if the 
loans had reduced documentation requirements which indicate that 
the loans should 
be classified as Alt-A. We estimate that 
approximately $154 billion, or 9%, 
of our single-family PCs and 
Structured  Securities at December 31, 2007 were backed by Alt-A 
mortgage loans. For these loans, our average credit score was 719, 
our estimated current average L TV ratio was 72% and our 
delinquency rate, excluding certain Structured Transactions, was 
1. 86% at December 31, 2007. 
66. At December 31,2007, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $505 billion of reduced documentation loans, which equated to 
approximately 30 percent 
of Freddie Mac's single-family credit guarantee portfolio. 
67. On May 
14, 2008, in the 1 Q08 ISS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as 
of March 31, 2008: 
Many mortgage market participants classify  single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination 
of characteristics of each category or may be 
underwritten with lower or alternative documentation than a  full 
documentation mortgage loan. Although there 
is no universally 
accepted definition 
of Alt-A, industry participants have used this 
classification principally to describe loans for which the 
19 

underwriting process has been streamlined in order to reduce the 
documentation requirements 
of the borrower or allow alternative 
documentation. 
We principally acquire mortgage loans originated as Alt-A from 
our traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans as a 
complementary product offering and generally follow an 
origination path similar 
to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans 
as Alt-A if the lender that delivers them to us has classified 
the loans as Alt-A, or 
if the loans had reduced documentation 
requirements, which indicate that the loan should be classified 
as 
Alt-A. We estimate that approximately $188 billion, or 11%, of 
loans underlying our guaranteed PCs and Structured Securities at 
March 31, 2008 were classified 
as Alt-A mortgage loans. We 
estimate that approximately $2 billion, or 7%, of our investments 
in single-family mortgage loans in our retained portfolio were 
classified as Alt-A loans as 
of March 31, 2008. For all of these 
Alt-A loans combined, the average credit score was 723, the 
estimated current average LTV ratio was 76% and the delinquency 
rate, excluding certain Structured Transactions, was 2.32% at 
March 31, 2008. 
68. At March 31,2008, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $527 billion of reduced documentation loans, which equated to 
approximately 30 percent 
of Freddie Mac's single-family credit guarantee portfolio. 
69. 
On July 18,2008, Freddie Mac filed a Form 10 with the Commission. In its 
Form 
10, Freddie Mac repeated verbatim the Alt-A disclosure from Freddie Mac's 2007 IS, 
described above at paragraph 65. 
70. On August 6, 2008, in the 2Q08 10-Q, Freddie Mac disclosed the following 
regarding its Alt-A exposure as 
of June 30, 2008: 
Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination 
of characteristics of each category or may be 
underwritten with lower or alternative documentation than a  full 
documentation mortgage loan. Although there 
is no universally 
accepted definition 
of Alt-A, industry participants have used this 
classification principally 
to describe loans for which the 
underwriting process has been streamlined in order to reduce the 
documentation requirements 
of the borrower or allow alternative 
documentation. 
20 


We principally acquire mortgage loans originated as Alt-A from 
our  traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans 
as a 
complementary product offering and generally follow an 
origination path similar to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans as Alt-A 
if the lender that delivers them to us has classified 
the loans 
as Alt-A, or if the loans had reduced documentation 
requirements, which indicate that the loan should be classified as 
Alt-A. 
We estimate that approximately $188 billion, or 10%, of 
loans underlying our guaranteed PCs and Structured Securities at 
June 30, 2008 were classified as Alt-A mortgage loans. In 
addition, we estimate that approximately 
$2 billion, or 
approximately 7%, 
of our investments in single-family mortgage 
loans in our retained portfolio were classified 
as Alt-A loans as of 
June 30, 2008. For all of these Alt-A loans combined, the average 
credit score was 724, the estimated current average LTV ratio, 
based on our guaranteed exposure, was 78%. The delinquency rate 
for these Alt-A loans was 3.72% and 1.86% at June 30, 2008 and 
December 31, 2007, respectively. 
We implemented several 
changes 
in our underwriting and eligibility criteria in 2008 to 
reduce our acquisition 
of certain higher-risk loan products, 
including Alt-A loans. 
As a  result there are approximately $14 
billion 
of single-family Alt-A mortgage loans in our retained 
portfolio and underlying our PCs and Structured Securities as 
of 
June 30, 2008 that were originated in 2008 as compared to $60 
billion remaining as 
of June 30,  2008 that were originated in 2007. 
71. At June 30, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted 
of approximately $541 billion of reduced documentation loans, which equated to 
approximately 30 percent of Freddie Mac's single-family credit guarantee portfolio. 
72. On November 6, 2009, Freddie Mac disclosed in its third quarter Form 10-Q the 
following: 
In determining our Alt-A exposure on loans underlying our single­
family mortgage portfolio, we have classified mortgage loans as 
Alt-A 
if the lender that delivers them to us has classified the loans 
as Alt-A, or 
if the loans had reduced documentation requirements, 
as well 
as a  combination of certain credit attributes and expected 
performance characteristics at acquisition which, when compared 
to full documentation loans in our  portfolio, indicate that the loan 
should be classified as Alt-A. There are circumstances where 
loans with reduced documentation are not classified as Alt-A 
because we already own the credit risk on the loans or the loans 
fall within various programs which we believe support not 
21 


classifying the loans as Alt-A. For our non-agency mortgage­
related securities that are backed by Alt-A loans, 
we classified 
securities 
as Alt-A if the securities were labeled as Alt-A when 
sold 
to us. 
22 

UNITED STATES OF AMERICA 

SECURITIES AND EXCHANGE COMMISSION 


NON-PROSECUTION AGREEMENT 


1. This agreement arises out of an investigation by the Division of Enforcement (the 
"Division") of the United States Securities and Exchange Commission (the "Commission") into 
possible violations ofthe federal securities laws by the Federal Home Loan Mortgage 
Corporation (the "Respondent" or "Freddie Mac") and others that occurred in or about December 
2006 through September 6, 2008, arising from, among other things, public statements concerning 
Freddie Mac's exposure to Subprime and Alt-A mortgages (collectively, the "Investigation"). 
Prior to a public enforcement action being brought by the Commission against Freddie Mac, 
without admitting or denying liability, Respondent has offered to accept responsibility for its 
conduct and to not dispute, contest, or contradict the factual statements set forth in Exhibit A, as 
specifically provided herein. Accordingly, the Commission and the Respondent enter into this 
Non-Prosecution Agreement (the "Agreement"). 

2. The Respondent is a corporation organized and operated under the laws of the United 
States of America, subject to the ongoing supervision of the Federal Housing Finance Agency 
("FHF A"). On September 6, 2008, FHF A placed the Respondent into conservatorship, and as 
conservator, succeeded to all rights, titles, powers and privileges of the Respondent and its 
shareholders, officers, and directors with respect to the Respondent and its assets. As 
conservator, FHF A maintains a continuous on-site presence at the Respondent and provides 
substantial oversight over the Respondent, including, among other things, with respect to its 
corporate governance, regulatory compliance and operations. In addition, the United States 
Treasury has made substantial capital investments in the Respondent and holds senior preferred 
stock, as well as warrants representing an ownership stake of up to 79.9 percent of the 
Respondent's common stock. 

3. In entering into this Agreement, the Commission recognizes the unique circumstances 
presented by the Respondent's current status, including the financial support provided to the 
Respondent by the U.S. Treasury, the role of another government agency (FHFA) as conservator, 
and the costs that may be imposed on U.S. taxpayers. Based on these circumstances and in 
consideration of the public interest, subject to the full, truthful, and continuing cooperation of the 
Respondent as described below and its satisfactory performance of all obligations and 
undertakings herein, the Commission and Respondent enter into this Agreement with the terms 
and conditions contained herein. 

COOPERATION 

4. The Respondent agrees to cooperate fully and truthfully in the Investigation and any 
other related enforcement litigation or proceeding to which the Commission is a party (the 
"Proceedings"), without regard to the time period in which the cooperation is required 
("Cooperation Period"). In addition, the Respondent agrees to cooperate fully and truthfully, 
when directed by the Division's staff, in any other related official investigation or proceeding by 
any U.S. federal agency (the "Other Proceedings"). The Respondent acknowledges and 

1 




understands that its ongoing cooperation with the Commission is an important and material 
factor underlying the Commission's decision to enter into this Agreement. The full, truthful, and 
continuing cooperation of the Respondent shall include, but not be limited to: 

a. identifying, assembling, organizing and producing, in a responsive and prompt 
manner, all non-privileged, non-attorney work-product documents, information, and other 
materials (including but not limited to providing reports or analyses of data concerning 
Respondent's models, credit risk reporting or data systems) to the Commission as requested by 
the Division's staff, wherever located, in the possession, custody, or control ofthe Respondent; 

b. providing declarations authenticating all documents, information, and other 
materials produced to the Commission by Respondent upon request by the Division's staff; 

c. providing declarations, upon request by the Division's staff, certifying that 
documents, information, and other materials produced to the Commission by Respondent 
comply with Federal Rule of Evidence 902(11)(A-C); 

d. providing Federal Rule of Civil Procedure 30(b)(6) witnesses, and authenticating 
documents, for the purpose of establishing the facts set forth in Exhibit A; 

e. using its best efforts to secure the full, truthful, and continuing cooperation, as 
defined in Paragraph 4, of Freddie Mac's current and former board members, officers, employees 
and agents, including making these persons available, when requested to do so by the Division's 
staff, for interviews and the provision of testimony in the investigation, deposition, trial and 
other judicial proceedings in connection with the Proceedings or Other Proceedings; 

f. authenticating all documents, information, and other materials identified by the 
Division's staff, to the extent able to do so; 

g. responding to all inquiries, when requested to do so by the Division's staff, in 
connection with the Proceedings or Other Proceedings; 

h. producing to the Commission, in a responsive and prompt manner, any 
documents, information and materials not previously produced to the Commission that are 
provided formally or informally to any party for use in the Proceedings or Other Proceedings at 
the request of such party or otherwise; 

i. notifying the Division's staff, in a prompt manner, of the receipt and substance of 
any request for documents, information or materials by a party to the Proceedings or Other 
Proceedings or the scheduling or facilitation of interviews or meetings between parties to the 
Proceedings or Other Proceedings (or their counsel) and any of Freddie Mac's current and 
former board members, officers, employees and agents in connection with the Proceedings or 
Other Proceedings; 

j. maintaining the confidentiality of communications with the Division's staff 
relating to the cooperation required under paragraphs a-i above, and refusing to enter into, not 
entering into, modifying or withdrawing from existing formal or informal joint-defense 
agreements or arrangements with any person relating to the Proceedings or Other Proceedings to 

2 




the extent such agreements limit Respondent's ability to provide or share information with the 
Commission; and, 

k. providing appropriate assistance to the Commission to obtain documents or other 
information necessary for the Commission to assess and respond to defenses raised in the 
Proceedings or Other Proceedings. 

5. The full, truthful, and continuing cooperation of each person described in Paragraph 4( e) 
above will be subject to the procedures and protections of this Paragraph, and shall include, but 
not be limited to: 

a. producing all non-privileged documents, information, and other materials as 
requested by the Division's staff;' 

b. appearing for interviews, at such times and places as requested by the Division's 
staff; 

c. authenticating all documents, information, and other materials identified by the 
Division's staff, to the extent able to do so; 

d. responding to all inquiries, when requested to do so by the Division's staff, in 
connection with the Proceedings or Other Proceedings; and, 

e. testifying at deposition, at trial and in other judicial proceedings, when requested 
to do so by the Division's staff, in connection with the Proceedings or Other Proceedings. 

STATUTE OF LIMITATIONS 

6. The Respondent agrees that the running of any statute of limitations applicable to any 
action or proceeding against it authorized, instituted, or brought by or on behalf of the 
Commission arising out of the Investigation (the "Enforcement Proceeding"), including any 
sanctions or relief that may be imposed therein, is tolled and suspended during the Cooperation 
Period. 

a. The Respondent and any of its attorneys or agents shall not include the 
Cooperation Period in the calculation of the running of any statute of limitations or for any other 
time-related defense applicable to the Enforcement Proceeding, including any sanctions or relief 
that may be imposed therein, in asserting or relying upon any such time-related defense. 

b. This agreement shall not affect any applicable statute of limitations defense or any 
other time-related defense that may be available to Respondent before the commencement of the 
Cooperation Period or be construed to revive an Enforcement Proceeding that may be barred by 
any applicable statute of limitations or any other time-related defense before the commencement 
of the Cooperation Period. 

c. The running of any statute of limitations applicable to the Enforcement 
Proceeding shall commence again after the end of the Cooperation Period, unless there is an 
extension of the tolling period executed in writing by or on behalf of the parties hereto. 

3 




d. This agreement shall not be construed as an admission by the Commission 
relating to the applicability of any statute of limitations to the Enforcement Proceeding, including 
any sanctions or relief that may be imposed therein, or to the length of any limitations period that 
may apply, or to the applicability of any other time-related defense. 

UNDERTAKINGS 

7. During the Cooperation Period, the Respondent understands and agrees to perform the 
following undertakings: 

a. to provide written notification to the Division, within five days, if it has been 
questioned in the context of an investigation, charged, or convicted of an offense related to the 
securities laws by any federal, state, or local law enforcement organization or regulatory agency; 
and 

b. to submit a report to the Division detailing its efforts to identify and implement 
improved disclosure procedures since being placed into conservatorship on September 6, 2008, 
and, ifrequested, to meet with the Division's staff to discuss the report and its progress with 
respect to its obligations pursuant to this Agreement. 

PUBLIC STATEMENTS 

8. The Respondent agrees not to take any action or to make or permit any public statement 
through present or future attorneys, employees, agents, or other persons authorized to speak for it 
("Related Person"), except in legal proceedings in which the Commission is not a party, denying, 
directly or indirectly, any aspect of this Agreement or creating the impression that the statements 
in Exhibit A to this Agreement are without factual basis. This paragraph is not intended to apply 
to any statement made by an individual in the course of any criminal, civil, or regulatory 
proceeding initiated by the government or self-regulatory organization against such individual, 
unless such individual is speaking on behalf of the Respondent. 1 If it is determined by the 
Commission that a public statement by the Respondent or any Related Person contradicts in 
whole or in part this Agreement, at its sole discretion, the Commission may bring an 
enforcement action in accordance with Paragraphs 15 through 18, but only provided that 
Respondent does not cure the statement by promptly making appropriate public statements or 
court filings satisfactory to the Commission after a reasonable opportunity to do so by the 
Commission. 

9. Prior to issuing any press release concerning this Agreement, the Respondent agrees to 
have the text of the release approved by the staff of the Division. 

SERVICE 

10. The Respondent agrees to serve by hand delivery or by next-day mail all written notices 
and correspondence required by or related to this Agreement to Charles Cain, Assistant Director, 

Nothing in this Agreement affects Respondent's and Related Person's (i) testimonial obligations or (ii) right to 
take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party. 

4 




100 F Street, N.E., Washington, D.C. 20549 ((202) 551-4911), unless otherwise directed in 
writing by the staff of the Division. 

VIOLATION OF AGREEMENT 

11. The Respondent understands and agrees that it shall be a violation of this Agreement if it 
knowingly provides false or misleading information or materials in connection with the 
Proceedings or Other Proceedings. In the event of such misconduct, the Division will advise the 
Commission of the Respondent's misconduct and may make a criminal referral for providing 
false information (18 U.S.C. § 1001), contempt (18 U.S.C. §§ 401-402) and/or obstructing 
justice (18 U.S.c. § 1503 et seq.). 

12. The Respondent understands and agrees that should the Division determine that the 
Respondent has failed materially to comply with any term or condition ofthis Agreement, the 
Division will notify the Respondent or its counsel of the fact and provide an opportunity for the 
Respondent to make a Wells submission pursuant to the Securities Act of 1933 Release No. 
5310. Under these circumstances, the Division may, in its sole discretion and not subject to 
judicial review, recommend to the Commission an enforcement action against the Respondent 
for any securities law violations, including, but not limited to, the substantive offenses relating to 
the Investigation. 

13. The Respondent understands and agrees that in any future enforcement action resulting 
from its violation of the Agreement, any documents, statements, information, testimony, or 
evidence provided by it during the Investigation, Proceedings or Other Proceedings, and any 
leads derived there from, may be used against it in future legal proceedings. 

14. In the event it breaches this Agreement, the Respondent agrees not to dispute, contest, or 
contradict the factual statements contained in Exhibit A, or their admissibility, in any future 
Commission enforcement action against it. 

COMPLIANCE WITH AGREEMENT 

15. SUbject to the full, truthful, and continuing cooperation of the Respondent, as described 
in Paragraphs 4 and 5, and compliance by Respondent with all obligations, prohibitions and 
undertakings in this Agreement, the Commission agrees not to bring any enforcement action or 
proceeding against the Respondent arising from the Investigation. This Agreement should not, 
however, be deemed to exonerate the Respondent or be construed as a finding by the 
Commission that violations of the federal securities laws have not occurred. 

16. The Respondent understands and agrees that this Agreement does not bind other U.S. 
federal, state or self-regulatory organizations, but the Commission may, at its discretion, issue a 
letter to these organizations detailing the fact, manner, and extent of its cooperation during the 
Proceedings or Other Proceedings, upon the written request of the Respondent. 

17. The Respondent understands and agrees that if it sells, merges, or transfers all or 
substantially all of its business operations as they exist as of the date of this Agreement, whether 
such a sale is structured as a stock or asset sale, merger, or transfer during the Cooperation 

5 




Period, it shall include in any contract for sale, merger, or transfer a provision binding the 
purchaser or successor in interest to the obligations set forth in this Agreement. 

18. The Respondent understands and agrees that the Agreement only provides protection 
against enforcement actions arising from the Investigation and does not relate to any other 
violations, or to any individual or entity other than the Respondent. 

VOLUNTARY AGREEMENT 

19. The Respondent's decision to enter into this Agreement is freely and voluntarily made 
and is not the result of force, threats, assurances, promises, or representations other than those 
contained in this Agreement. 

20. The Respondent has read and understands this Agreement. Furthermore, the Respondent 
has reviewed all legal and factual aspects of this matter with its attorney and is fully satisfied 
with its attorney's legal representation. The Respondent has thoroughly reviewed this 
Agreement with its attorney and has received satisfactory explanations concerning each 
paragraph of the Agreement. After conferring with its attorney and considering all available 
alternatives, the Respondent has made a knowing decision to enter into the Agreement. 

21. The Respondent represents that its Board of Directors has duly authorized, in the 
resolution attached as Exhibit B to this Agreement, the execution and delivery of this Agreement, 
and that the person signing this Agreement has authority to bind the Respondent. 

ENTIRETY OF AGREEMENT 

22. This Agreement constitutes the entire agreement between the Commission and the 
Respondent, and supersedes all prior understandings, if any, whether oral or written, relating to 
the subject matter herein. 

23. This Agreement cannot be modified except in writing, signed by the Respondent and an 
authorized representative of the Commission. 

24. This agreement may be executed in counterparts. 

25. In the event an ambiguity or a question of intent or interpretation arises, this Agreement 
shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of 
proof shall arise favoring or disfavoring the Commission or the Respondent by virtue of the 
authorship of any of the provisions of the Agreement. 

6 




The signatories below acknowledge acceptance of the foregoing terms and conditions. 

RESPONDENT: 

an, Jr. 
CEO, Freddie Mac 
8200 Jones Branch Drive 
McLean, VA 
22102-3110 

Attached hereto is the Certificate of the Secretary to the Board of Directors of Freddie Mac, 
certifying that Charles E. Haldeman, Jr. is, and at the time of the signing and delivery of the 
Agreement was, the duly appointed, qualified and acting Chief Executive Officer of Freddie Mac 
and duly authorized to execute the Agreement on behalf of Freddie Mac, and that the signature 
of Charles E. Haldeman, Jr. appearing on the Agreement is his genuine signature. 

RESPONDENT'S COUNSEL: 

Approved as to form: 

Date Neal E. Sullivan, Esq. 
Bingham McCutchen LLP 
2020 K Street NW 
Washington, DC 20006-1806 

SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT: 

Date Robert Khuzami 
Director, Enforcement Division 
United States Securities and Exchange 
Commission 
100 F Street, N.E. 
Washington, D.C. 20549 

7 




The signatories below acknowledge acceptance of the foregoing tenus and conditions. 

RESPONDENT: 

Date Charles E. Haldeman, Jr. 
CEO, Freddie Mac 
8200 Jones Branch Drive 
McLean, VA 
22102-3110 

Attached hereto is the Certificate of the Secretary to the Board of Directors of Freddie Mac, 
certifying that Charles E. Haldeman, Jr. is, and at the time ofthe signing and delivery of the 
Agreement was, the duly appointed, qualified and acting Chief Executive Officer of Freddie Mac 
and duly authorized to execute the Agreement on behalf of Freddie Mac, and that the signature 
of Charles E. Haldeman, Jr. appearing on the Agreement is his genuine signature. 

RESPONDENT'S COUNSEL: 

Approved as to form: 

Neal E. Su ivan, Esq. 
Bingham McCutchen LLP 
2020 K Street NW 
Washington, DC 20006-1806 

Date 

SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT: 

Date 
Director, Enforcement Division 
United States Securities and Exchange 
Commission 
100 F Street, N.E. 
Washin ton, D.C. 20549 

7 




EXHIBIT A 


STATEMENT OF FACTS 

Freddie Mac 

1. Federal Home Loan Mortgage Corporation ("Freddie Mac") is a government-
sponsored enterprise that was chartered by Congress in 1970 to support liquidity, stability and 
affordability in the secondary mortgage market, where existing mortgage-related assets are 
purchased and sold. Freddie Mac manages its business through three reportable segments: 
(1) single-family guarantee, (2) multifamily, and (3) investments. Freddie Mac's primary 
business segment is its single-family guarantee portfolio, through which it guarantees the 
payment of principal and interest on single-family mortgage related securities, in exchange for 
guarantee fees. The single family business purchases residential mortgages and mortgage-related 
securities in the secondary mortgage market and securitizes them as Freddie Mac mortgage­
backed securities, known as Participation Certificates ("PCs"). Freddie Mac guarantees the 
payment of principal and interest on the mortgage loans that underlie these PCs. The 
multifamily segment activities include purchases of multifamily mortgages for investment and 
guarantees of payments of principal and interest on multifamily mortgage-related securities and 
mortgages underlying multifamily housing revenue bonds. Through the investment segment, 
which includes the retained portfolio, the company invests principally in mortgage-related 
securities and single-family mortgages, including its own PCs. 

2. In or about November 2007, Freddie Mac began reporting significant credit losses 
in its portfolio of mortgage-related assets and guaranty contracts. On November 20,2007, 
Freddie Mac reported a net loss of $2 billion, which reflected "a higher provision for credit 
losses and losses on mark-to-market items." For the period January 1, 2007 through March 31, 
2011, Freddie Mac reported cumulative net losses of$88.1 billion. 

3. From 1992 until July 30,2008, Freddie Mac's primary regulator was the Office of 
Federal Housing Enterprise Oversight. 

4. On July 30, 2008, when the President signed into law the Housing and Economic 
Recovery Act of2008, the Federal Housing Finance Agency ("FHFA") became Freddie Mac's 
primary regulator. On September 6, 2008, FHF A placed Freddie Mac into conservatorship, and 
as conservator succeeded to all rights, titles, powers and privileges of Freddie Mac, its 
shareholders, and the officers or directors of Freddie Mac with respect to the company and its 
assets. 

5. On July 8, 2010, Freddie Mac's common stock was delisted from the New York 
Stock Exchange. Freddie Mac's common stock presently is traded in the over-the-counter 
market and quoted on the OTC Bulletin Board under the ticker symbol "FMCC." Freddie Mac's 
debt securities are actively traded in the over-the-counter market. 

6. From March 23, 2007 through August 6,2008 (the "Relevant Period"), Freddie 
Mac published mortgage credit risk disclosures in annual information statements and periodic 
information statement supplements posted on its website and, as of August 6, 2008, in periodic 



filings with the Securities and Exchange Commission. These disclosures included information 
on Freddie Mac's single-family credit guarantee portfolio which consisted of mortgage loans and 
PCs backed by mortgage loans (whether held in its portfolio or by third parties). 

7. During the Relevant Period, Freddie Mac provided disclosures regarding its 
exposure to Alt-A and subprime mortgage loans in its single-family mortgage credit guarantee 
portfolio. 

Subprime Disclosures 

8. During the Relevant Period, Loan Prospector ("LP") was Freddie Mac's 
proprietary automated underwriting system ("AUS"). Loan originators used LP to obtain an 
AUS score, which could be used to determine the terms on which a loan could be sold to Freddie 
Mac. For example, whether a loan could be sold to Freddie Mac without certain representations 
and warranties or without additional cost. 

9. LP was based on performance models calibrated to loans in Freddie Mac's 
guarantee portfolio and to other data acquired by Freddie Mac. Using these models, LP 
generated a score reflecting an estimate of the risk of default associated with loans. Freddie Mac 
grouped these numerical scores into six bands or "grades," roughly corresponding to the level of 
anticipated risk: A+, AI, A2, A3, Cl or C2. The first four categories were called "Accept" 
loans; the C 1 and C2 categories were designated "Caution" loans. In general, loans categorized 
as C 1 or C2 were those with multiple higher risk characteristics, such as high LTV s, low FICOs, 
unusual property types or high debt-to-income ratios. 

10. In 1998, Freddie Mac developed its "A-minus" offering under which a loan that 
scored C 1 under LP could be sold to Freddie Mac on the same terms as an Accept loan with the 
payment of an additional fee by the seller. Contemporaneous Freddie Mac internal documents 
described A-minus loans as comprising "approximately 50 percent of subprime loans," and as 
"[m ]ortgages that generally comprise the first and second tier of subprime lender risk grades." 

11. As of November 1998, an internal Freddie Mac document titled Credit Policy 
Book described mortgage loans that received an LP C2 rating as having a credit quality of 
"subprime. " 

12. In 1999, in order to manage the company's risk exposure to "traditional subprime 
residential mortgages," Freddie Mac developed a model to estimate the likelihood that a loan 
was being made to someone who traditionally would have borrowed through the subprime 
channel. The model scored mortgage loans on a variety of credit risk characteristics, such as 
debt ratio, FICOs, and time since most recent foreclosure, and generated a "subprime score" 
which, if the score was below certain thresholds, resulted in an automatic LP rating of C 1 or C2. 
In addition, the model contained certain overrides that required a mortgage loan to receive an LP 
C 1 or C2 rating if certain characteristics were present, such as a debt-to-income ratio greater than 
50 percent, assuming that the loan did not possess certain specific mitigating factors. 

2 




13. During the Relevant Period, Freddie Mac also purchased loans that qualified 
under the Federal National Mortgage Association ("Fannie Mae") Expanded Approval ("EA") 
program. On August 17,2005, a direct report to Freddie Mac's Senior Vice President, Credit 
Policy & Portfolio Management, signed an internal policy document authorizing increased 
purchases of EA loans. Comments by the direct report to Freddie Mac's SVP for Credit Policy 
and others annexed to the document stated: 

• 	 "[B]ased on an analysis of available data, there is also high risk associated with 
the purchase of EA Mortgages, since performance compares to sub prime 
products. " 

• 	 "[EA loans] appear to be subprime in nature." 

14. On August 20,2007, Freddie Mac's SVP, Credit Policy & Portfolio Management 
("SVP for Credit Policy"), described EA loans as "clearly sUbprime." 

15. The approximate aggregate amount (in billions of U.S. dollars), measured by 
unpaid principal balance, of C1, C2 and EA loans on Freddie Mac's single-family credit 
guarantee book at the end of the following periods was as follows: 

$39 $35 $74 $75 $1,220 6% 

$42 $37 $79 $80 $1,244 6% 

$47 $39 $86 $87 $1,274 7% 

$53 $42 $95 $97 $1,318 7% 

$60 $47 $107 $109 $1,360 8% 

$64 $50 $114 $116 $1,387 8% 

3 




$71 $54 $125 $127 $1,428 9% 

$78 $60 $138 $141 $1,467 10% 

$89 $67 $156 $160 $1,528 10% 

$100 $77 $177 $183 $1,586 12% 

$110 $88 $198 $206 $1,642 13% 

$118 $98 $216 $227 $1,692 13% 

$123 $104 $227 $238 $1,739 14% 

$127 $106 $233 $244 $1,784 14% 

16. During the Relevant Period, Freddie Mac's single-family guarantee segment 
entered into contracts with certain larger customers that required the companies to sell to or 
securitize with Freddie Mac a specified minimum share of their eligible loan originations, subject 
to certain conditions and exclusions. The purchase and securitization of mortgage loans from 
customers under these longer-term contracts had fixed pricing schedules for Freddie Mac's 
guarantee fees that were negotiated at the outset of the contract. Freddie Mac referred to these 
transactions as "flow" activity (the "flow channel"), which represented the majority of Freddie 
Mac's purchase volumes during the Relevant Period. The remainder of Freddie Mac's purchases 
and securitizations of mortgage loans during the Relevant Period occurred in "bulk" transactions 
for which purchase prices and guarantee fees were negotiated on an individual transaction basis. 

4 




17. During the Relevant Period, in addition to purchasing and guaranteeing the 
payment of principal and interest on loans that had been underwritten using Loan Prospector, 
Freddie Mac also purchased and guaranteed the payment of principal and interest on loans 
underwritten using automated underwriting systems created by others. 

18. During the Relevant Period, Freddie Mac tracked, in senior-level presentations 
and other documents, the relative risk of mortgages purchased through automated underwriting 
systems other than Loan Prospector. Freddie Mac used an internal modeling system called LP 
Emulator to conduct a post-purchase evaluation of all loans. Freddie Mac used the term "defect 
rate" to track the percentage of all loans purchased on terms equivalent to LP "Accept" loans that 
were scored by the LP Emulator as "Caution." The designation as part of a "defect rate" 
signified that, among other things, Freddie Mac was taking on greater credit risk than projected 
by the original assessment. 

19. In the second quarter of 2003, Freddie Mac's aggregate defect rate of purchases 
from the flow channel was at 1.1 percent. As Freddie Mac's share of residential mortgages 
purchased through automated underwriting systems other than LP increased, however, so did the 
defect rate. In August 2007, the aggregate defect rate of all purchases from the flow channel was 
21.1 %. 

20. During a June 7, 2007 Board committee meeting attended by Freddie Mac's 
Executive Vice President, Investments and Capital Markets (and later Chief Business Officer) 
(the "CBO"), and the SVP for Credit Policy, among others, the following information was 
presented: 

• 	 As of January 2007, approximately 40 percent of Freddie Mac's flow channel 
purchases came through Fannie Mae's own proprietary automated underwriting 
system, called Desktop Underwriter ("DU"), and through an automated 
underwriting system used by Countrywide Financial Corporation 
("Countrywide"), called "CLUES." 

• 	 "Fannie Mae-approve loans have a much higher defect rate than Freddie Mac­
accept loans[.]" 

• 	 "Fannie Mae-approves have higher share of low FICO loans and subprime-like 
loans[.]" 

• 	 "Countrywide is particularly volatile and a high proportion of defects are 
subprime in nature[.]" 

• 	 The defect rate for Freddie Mac's purchases through both DU and CLUES at that 
time was at least 20 percent. 

21. 	 During the Relevant Period, one of Freddie Mac's largest customers was 
Countrywide. Countrywide organized its business into two channels - the "Retail" channel and 
the "TPO" (third-party originator) channel. Countrywide'S Retail channel included Full 
Spectrum Lending. Full Spectrum Lending was a subprime lending division. 

5 



22. Countrywide delivered loans from both of its origination channels to Freddie 
Mac. Countrywide Retail deliveries to Freddie Mac included approximately $3 billion worth of 
loans from Full Spectrum Lending in 2006; $6 billion in 2007; and $2 billion in 2008. 

23. Beginning in or about early 2007, executive-level reports prepared for monthly 
meetings of Freddie Mac's Enterprise Risk Management Committee (the "ERMC") attended by 
senior executives at Freddie Mac observed that "[l]oan level risk grades are blurred as capital 
retreats in [the] subprime market, increasing the risk that we are already purchasing subprime 
loans under existing acquisition programs." This language continued to appear in essentially the 
same form in these reports throughout 2007. Freddie Mac's Chief Executive Officer and 
Chairman of the Board of Directors (the "CEO"), Freddie Mac's Chief Financial Officer 
(the "CFO"), and the CBO generally attended these ERMC meetings. 

24. In February 2007, Freddie Mac's senior executives, including the CEO, CFO, 
CBO and the SVP for Credit Policy, attended a two-day offsite meeting. A presentation used at 
the meeting stated the following: 

• 	 Freddie Mac was "taking on more risky product ...and combining higher-risk 
loans with higher-risk borrowers[.]" 

• 	 Freddie Mac was purchasing and guaranteeing increasing amounts of "risk 
layering" loans, "leading to more 'Cautions[.]'" 

• 	 "'Caution' loans have greater default costs ... resulting in higher expected 
losses[. ]" 

• 	 Freddie Mac "already purchase[d] subprime-like loans ...but with considerably 
lower fees[.]" 

• 	 The "worst 10% of [Freddie Mac's] Flow Business" were "subprime-like 
loans[.]" 

25. In March 2007, Freddie Mac's senior executives, including the CEO, CFO, CBO 
and SVP for Credit Policy, attended a Board of Directors meeting. The CBO and the former 
President and Chief Operating Officer (the "COO") led a discussion at the meeting concerning a 
slide in which the "worst 10% of [Freddie Mac's] Flow Business" was listed as an example of 
"subprime-like loans" the company already purchased, and in which they conveyed: 

• 	 "We already purchase subprime-like loans to help achieve our HUD goals 
... [bJut we receive considerably lower fees than subprime loans would fetch in 
the market." 

• 	 "Some of our current purchases have subprime-like risk[.]" 

• 	 "[F]ixed-rate subprime doesn't look all that different than the bottom of our 
purchases, with returns five to six times as great, not universal for all sUbprime." 

6 



26. On March 23,2007, Freddie Mac published its Information Statement and Annual 
Report to Stockholders for the Fiscal Year Ended December 31, 2006 (the "2006 IS"). Freddie 
Mac stated in the 2006 IS that: 

Participants in the mortgage market often characterize loans based 
upon their overall credit quality at the time of origination, 
generally considering them to be prime or sUbprime. There is no 
universally accepted definition of subprime. The subprime 
segment of the mortgage market primarily serves borrowers with 
poorer credit payment histories and such loans typically have a mix 
of credit characteristics that indicate a higher likelihood of default 
and higher loss severities than prime loans. Such characteristics 
might include a combination of high loan-to-value ratios, low 
FICO scores or originations using lower underwriting standards 
such as limited or no documentation of a borrower's income. The 
subprime market helps certain borrowers by increasing the 
availability of mortgage credit. 

While we do not characterize the single-family loans underlying 
the PCs and Structured Securities in our credit guarantee portfolio 
as either prime or subprime, we believe that, based on lender-type, 
underwriting practice and product structure, the number of loans 
underlying these securities that are subprime is not significant. 
Also included in our credit guarantee portfolio are Structured 
Securities backed by non-agency mortgage-related securities where 
the underlying collateral was identified as being subprime by the 
original issuer. At December 31, 2006 and 2005, the Structured 
Securities backed by subprime mortgages constituted 
approximately 0.1 percent and 0.2 percent, respectively of our 
credit guarantee portfolio. 

With respect to our Retained portfolio, we do not believe that any 
meaningful amount of the agency securities we hold is backed by 
subprime mortgages. However, at December 31, 2006 and 2005, 
we held approximately $124 billion and $139 billion, respectively, 
of non-agency mortgage-related securities backed by subprime 
loans. These securities include significant credit enhancement 
based on their structure and more than 99.9 percent of these 
securities were rated AAA at December 31, 2006. 

27. The same day that Freddie Mac released the 2006 IS, it held an earnings 
conference call with research analysts. On the earnings conference call, Freddie Mac's CFO 
discussed the company's "very low levels" of credit-related expenses, and attributed that "to the 
fact that our portfolio is predominantly based on long-term fixed-rate mortgages, our overall 
average LTV ratio is about 57 percent, and we have little to no exposure to the subprime risk 
layered mortgage products that have drawn so much activity lately." 

7 



28. At December 31, 2006, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $141 billion of C1, C2 and EA loans, which equated to 
approximately 10 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, Freddie Mac disclosed in its 2006 IS that the number of subprime loans 
underlying the PCs and Structured Securities in its single-family credit guarantee portfolio was 
"not significant." 

29. During 2007, Freddie Mac internally explored the possibility of offering a new 
product, referred to as the "model subprime offering." 

30. One project undertaken by the team charged with developing the model subprime 
offering involved an analysis of Freddie Mac's existing products. Those existing products were 
compared to the proposed parameters for purchasing and guaranteeing mortgages under the 
model subprime offering. Under the direction of Freddie Mac's SVP for Credit Policy, the team 
concluded in June 2007 that: 

• 	 "Subprime mortgages are not considered unique in the industry. An analysis of 
Freddie Mac's existing products indicates our current A-minus offering has credit 
risk and product parameters (business terms) that match, and in some cases, are 
broader than those outlined in the proposed model Subprime offering." 

• 	 The model subprime offering "will compete with affordable offerings like Home 
Possible and [Fannie Mae's] MyCommunityMortgage, as well as our LP A-minus 
offering and [Fannie Mae's] newly revamped EA program." 

31. Senior executives and officials within Freddie Mac, including Freddie Mac's 
CBO, were aware of the conclusions of this analysis. 

32. On May 11,2007, the then-head of External Reporting, in an e-mail including 
Freddie Mac's SVP for Credit Policy, among others, remarked on a draft version ofa speech to 
be given by Freddie Mac's CEO at the UBS Global Financial Services Conference (the "UBS 
Conference"): "We need to be careful how we word this. Certainly our portfolio includes loans 
that under some definitions would be considered subprime. Look back at the subprime language 
in the annual report and use that as a guide as what to say. Basically, we said we don't have a 
definition of subprime and we don't acquire loans from subprime lenders. We should reconsider 
making as sweeping a statement as we have 'basically no subprime exposure. '" 

33. On May 14,2007, Freddie Mac's CEO spoke at the UBS Conference (the "May 
14 speech") and stated: "As we discussed in the past, at the end of 2006, Freddie had basically 
no subprime exposure in our guarantee business, and about $124 billion of AAA rated subprime 
exposure in our retained portfolio." 

34. On May 17,2007, Freddie Mac's CBO gave a speech at the Lehman Brothers 
10th Annual Financial Services Conference (the "May 17 speech") and stated: "As we discussed 
in the past, at the end of 2006, Freddie had basically no subprime exposure in our guarantee 
business, and about $124 billion of AAA rated subprime exposure in our retained portfolio." 

8 




35. Freddie Mac's single-family credit guarantee portfolio is the Company's largest 
business segment (by portfolio unpaid principal balance), which purchases and guarantees the 
payment of principal and interest on mortgage loans originated by lenders and packages such 
loans into mortgage-backed securities. Freddie Mac's retained portfolio is under the Company's 
Investments segment, and holds mortgage-related securities and single-family mortgages for 
investment purposes. 

36. On June 14, 2007, Freddie Mac published its Financial Report for the Three 
Months Ended March 31, 2007 (the "IQ07 ISS"). In the lQ07 ISS, Freddie Mac did not include 
any statement regarding its exposure to subprime loans in its single-family credit guarantee 
portfolio. 

37. On the same day that Freddie Mac released its lQ07 ISS, Freddie Mac held a 
conference call to discuss its earnings for the quarter ended March 31, 2007. On that call, 
Freddie Mac's CFO stated that "[a]t the end ofthe first quarter, our total reserves for credit loss 
stood at $545 million or roughly 3 basis points ofthe total mortgage portfolio .... Just a 
reminder - we do not hold subprime loans directly so there is no contribution in the numbers I 
just mentioned from suhprime. Also, we continue to expect no losses from our subprime-backed 
AAA-rated ABS security exposure." 

38. In a memorandum dated June 15,2007, the Chair of Freddie Mac's Disclosure 
Committee informed the Chair ofFreddie Mac's Audit Committee that there was no clear 
defmition ofsubprime loans in the market. 

39. At March 31, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $160 billion of C1, C2 and EA loans, which equated to 
approximately 10 percent ofFreddie Mac's single-family credit guarantee portfolio. As 
described above, in the 1 Q07 ISS, Freddie Mac did not include any statement regarding its 
subprime exposure in its single-family guarantee portfolio. 

40. On August 30,2007, Freddie Mac published its Financial Report for the Three 
and Six Months Ended June 30, 2007 (the "2Q07 ISS"). Freddie Mac stated in the 2Q07 ISS 
that: 

Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition of subprime. The 
subprime segment of the mortgage market primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a mix of credit characteristics that indicate a higher 
likelihood of default and higher loss severities than prime loans. 
Such characteristics might include a combination of high loan-to­
value ratios, low credit scores or originations using lower 
underwriting standards such as limited or no documentation of a 
borrower's income. The subprime market helps certain borrowers 
by broadening the availability ofmortgage credit. 

9 



We estimate that approximately $2 billion, or 0.1 percent, and $3 
billion, or 0.2 percent, of loans underlying our single-family 
mortgage portfolio, at June 30, 2007 and December 31, 2006, 
respectively, were classified as subprime mortgage loans. 

With respect to our Retained portfolio, at June 30, 2007 and 
December 31, 2006, we held investments of approximately $119 
billion and $124 billion, respectively, of non-agency mortgage­
related securities backed by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and approximately 99.9 percent of these securities 
held at June 30, 2007, were rated AAA at August 27,2007. 

41. At June 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $182 billion of C1, C2 and EA loans, which equated to 
approximately 12 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 2Q07 ISS that, at June 30, 2007, it had approximately $2 billion, or 0.1 percent, 
of loans underlying its single-family credit guarantee portfolio that were classified as subprime 
mortgage loans. Freddie Mac made no other disclosure in its 2Q07 ISS quantifying its subprime 
exposure in its single-family credit guarantee book of business as of June 30, 2007. 

42. On November 20,2007, Freddie Mac published its Financial Report for the Three 
and Nine Months Ended September 30, 2007 (the "3Q07 ISS"). Freddie Mac stated in the 3Q07 
ISS that: 

Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition of subprime. The 
sub prime segment of the mortgage market primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a mix of credit characteristics that indicate a higher 
likelihood of default and higher loss severities than prime loans. 
Such characteristics might include a combination of high loan-to­
value ratios, low credit scores or originations using lower 
underwriting standards such as limited or no documentation of a 
borrower's income. The subprime market helps certain borrowers 
by broadening the availability of mortgage credit. 

We estimate that approximately $5 billion and $3 billion of loans 
underlying our Structured Transactions at September 30,2007 and 
December 31, 2006, respectively, were classified as subprime 
mortgage loans. With respect to our retained portfolio, at 
September 30, 2007 and December 31, 2006, we held investments 
of approximately $105 billion and $124 billion, respectively, of 
non-agency mortgage-related securities backed by subprime loans. 

10 




These secuntIes include significant credit enhancement, 
particularly through subordination, and approximately 97.6% of 
these securities were rated AAA at November 15,2007. 

Between September 30 and November 15,2007, credit ratings for 
several mortgage-related securities backed by subprime loans with 
an aggregate unpaid principal balance of $2.5 billion were 
downgraded from AAA to a lesser investment-grade rating by at 
least one nationally recognized statistical rating organization. To 
date, we have not recorded any impairment charges on these 
securities because we have the ability and intent to hold these 
securities for a period of time sufficient to recover all unrealized 
losses; however, since these are designated as available-for-sale 
securities, there are $55 million of unrealized losses, net as of 
September 30, 2007 that are reflected in AOCI. We expect that 
these and any further credit downgrades of our non-agency 
mortgage-related securities backed by subprime loans will result in 
declines in their fair value. 

43. At September 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $206 billion of C1, C2 and EA loans, which equated to 
approximately 13 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 3Q07 ISS that at September 30, 2007, it had approximately $5 billion of loans 
underlying its Structured Transactions that were classified as subprime mortgage loans. Freddie 
Mac made no other disclosure in its 3Q07 ISS quantifying its subprime exposure in its single­
family credit guarantee book of business as of September 30, 2007. 

44. On December 11,2007, Freddie Mac's CEO gave a speech at the Goldman Sachs 
Financial Services Conference (the "December 11 speech"), during which he stated: "Finally, 
we feel that our credit position in the current guarantee book, actually, is very near the best of the 
entire industry. A very major reason for this is that we have very low exposures to alt A in risk­
layered mortgage products in the guarantee business. We didn't do any subprime business." 
Later, in response to a question from the audience, the CEO added "[i]n terms of our insight in 
the subprime stuff, we didn't buy any subprime loans. I mean, we bought some securities, which 
we can go through, and we think we're fine in. We bought them for goal purposes. But we 
didn't buy in [sic] guarantee, essentially any subprime loans. So we weren't in that business." 

45. On February 28, 2008, Freddie Mac published its Information Statement and 
Annual Report to Stockholders for the fiscal year ended December 31, 2007 (the "2007 IS"). 
Freddie Mac stated in the 2007 IS that: 

Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time of 
origination, generally considering them to be prime or sUbprime. 
There is no universally accepted definition of subprime. The 
subprime segment of the mortgage market primarily serves 

11 



borrowers with poorer credit payment histories and such loans 
typically have a mix of credit characteristics that indicate a higher 
likelihood of default and higher loss severities than prime loans. 
Such characteristics might include a combination of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such as limited or no documentation of a borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability of mortgage credit. 

While we have not historically characterized the single-family 
loans underlying our PCs and Structured Securities as either prime 
or subprime, we do monitor the amount of loans we have 
guaranteed with characteristics that indicate a higher degree of 
credit risk. See "Mortgage Portfolio Characteristics - Higher 
Risk Combinations" for further information. We estimate that 
approximately $6 billion and $3 billion of loans underlying our 
Structured Transactions at December 31, 2007 and 2006, 
respectively, were classified as subprime mortgage loans. To 
support our mission, we announced in April 2007 that we will 
purchase up to $20 billion in fixed-rate and hybrid ARM products 
that will provide lenders with more choices to offer subprime 
borrowers. The products are intended to be consumer-friendly 
mortgages for borrowers that will limit payment shock by offering 
reduced adjustable-rate margins, longer fixed-rate terms and longer 
reset periods than existing similar products. Subsequent to our 
announcement, we have entered into purchase commitments of 
$207 million of mortgages on primary residence, single-family 
properties specifically pursuant to this commitment. We also 
fulfill this commitment through purchases of refinance mortgages 
made to credit challenged borrowers, who may have previously 
been served by the subprime mortgage market. As of December 
31, 2007, we have purchased approximately $43 billion of 
conventional mortgages made to borrowers who otherwise might 
have been limited to subprime products, including approximately 
$23 billion of refinance mortgages meeting our criteria. 

With respect to our retained portfolio, at December 31, 2007 and 
2006, we held investments of approximately $101 billion and $122 
billion, respectively, of non-agency mortgage-related securities 
backed by subprime loans. These securities include significant 
credit enhancement, particularly through subordination, and 81 % 
of these securities were AAA-rated at February 25, 2008. During 
2007, we recognized $10 million of credit losses as impairment 
expense on these securities related to four positions that were 
below AAA-rated at acquisition. The net unrealized losses, net of 
tax, on the remaining securities that are below AAA-rated are 
included in AOCl and totaled $504 million as of December 31, 

122007. Between December 31, 2007 and February 25, 2008, credit 
ratings for mortgage-related securities backed by subprime loans 
with an aggregate unpaid principal balance of $16 billion were 
downgraded by at least one nationally recognized statistical rating 
organization. In addition, there were $5 billion of unrealized 
losses, net of tax, associated with AAA-rated, non-agency 
mortgage-related securities backed by subprime collateral that are 
principally a result of decreased liquidity in the subprime market. 
The extent and duration of the decline in fair value of these 
securities relative to our cost have met our criteria that indicate the 
impairment of these securities is temporary. However, if market 
conditions continue to deteriorate, further credit downgrades to our 
non-agency mortgage-related securities backed by subprime loans 
could occur and may result in additional declines in their fair 
value. 

46. Freddie Mac's "Higher Risk Combinations" disclosure stated that, as of 
December 31, 2007, approximately one percent of single-family mortgage loans it guaranteed 
were made to borrowers with credit scores below 620 and had original LTV ratios above 90 
percent at the time of mortgage origination. 

47. At December 31,2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $226 billion of C1, C2 and EA loans, which equated to 
approximately 13 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 2007 IS that at December 31, 2007, it had approximately $6 billion ofloans 
underlying its Structured Transactions that were classified as subprime mortgage loans. Freddie 
Mac made no other disclosure in its 2007 IS quantifying its subprime exposure in its single­
family credit guarantee book of business as of December 31, 2007. 

48. On May 14,2008, Freddie Mac published its Financial Report for the Three 
Months Ended March 31, 2008 (the "1 Q08 ISS"). Freddie Mac stated in the 1 Q08 ISS that: 

Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition of subprime. The 
subprime segment of the mortgage market primarily serves 
borrowers with poorer credit payment histories and such loans 
typically have a mix of credit characteristics that indicate a higher 
likelihood of default and higher loss severities than prime loans. 
Such characteristics might include a combination of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such as limited or no documentation of a borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability of mortgage credit. While we have not 
historically characterized the single-family loans underlying our 

13 




PCs and Structured Securities as either prime or subprime, we do 
monitor the amount of loans we have guaranteed with 
characteristics that indicate a higher degree of credit risk (see 
"Higher Risk Combinations" for further information). In addition, 
we estimate that approximately $4 billion of security collateral 
underlying our Structured Transactions at both March 31, 2008 and 
December 31, 2007 were classified as subprime. 

With respect to our retained portfolio, at March 31, 2008 and 
December 31, 2007, we held investments of approximately $93 
billion and $101 billion, respectively, of non-agency mortgage­
related securities backed by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and 70% and 96% of these securities were AAA­
rated at March 31, 2008 and December 31, 2007, respectively. 
The unrealized losses, net of tax, on these securities that are below 
AAA-rated are included in AOCI and totaled $5 billion and $504 
million as of March 31, 2008 and December 31, 2007, 
respectively. In addition, there were $6 billion of unrealized 
losses, net of tax, included in AOCI on these securities that are 
AAA-rated, principally as a result of decreased liquidity and larger 
risk premiums in the subprime market. We receive substantial 
monthly remittances of principal repayments on these securities, 
which totaled more than $8 billion during the first quarter of2008. 

49. At March 31, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $239 billion of C1, C2 and EA loans, which equated to 
approximately 14 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 1 Q08 ISS that at March 31, 2008, it had approximately $4 billion of security 
collateral underlying its Structured Transactions that were classified as sUbprime. Freddie Mac 
made no other disclosure in its 1 Q08 ISS quantifying its subprime exposure in its single-family 
credit guarantee book of business as of March 31, 2008. 

50. On July 18, 2008, Freddie Mac filed a Form 10 Registration Statement with the 
Commission ("Form 10"). In its Form 10, Freddie Mac repeated verbatim the subprime 
disclosure from Freddie Mac's 2007 IS, described above at paragraph 45. 

51. Freddie Mac's first periodic report following its registration with the Commission 
occurred on August 6, 2008, when it filed a Form 10-Q for the quarterly period ended June 30, 
2008 (the "2Q08 10-Q"). Freddie Mac stated in the 2Q08 10-Q that: 

Participants in the mortgage market often characterize single­
family loans based upon their overall credit quality at the time of 
origination, generally considering them to be prime or subprime. 
There is no universally accepted definition of sUbprime. The 
subprime segment of the mortgage market primarily serves 

14 



borrowers with poorer credit payment histories and such loans 
typically have a mix of credit characteristics that indicate a higher 
likelihood of default and higher loss severities than prime loans. 
Such characteristics might include a combination of high LTV 
ratios, low credit scores or originations using lower underwriting 
standards such as limited or no documentation of a borrower's 
income. The subprime market helps certain borrowers by 
broadening the availability of mortgage credit. While we have not 
historically characterized the single-family loans underlying our 
PCs and Structured Securities as either prime or subprime, we do 
monitor the amount of loans we have guaranteed with 
characteristics that indicate a higher degree of credit risk (see 
"Higher Risk Combinations" for further information). In addition, 
we estimate that approximately $6 billion of security collateral 
underlying our Structured Transactions at both June 30, 2008 and 
December 31, 2007 were classified as subprime. 

With respect to our retained portfolio, at June 30, 2008 and 
December 31, 2007, we held investments of approximately $86 
billion and $101 billion, respectively, of non-agency mortgage­
related securities backed by subprime loans. These securities 
include significant credit enhancement, particularly through 
subordination, and 91 % and 100% of these securities were 
investment grade at June 30, 2008 and December 31, 2007, 
respectively. During 2008, the credit characteristics of these 
securities have experienced significant and rapid declines. See 
"CONSOLIDATED BALANCE SHEET ANALYSIS - Retained 
Portfolio" for further discussion and our evaluation of these 
securities for impairment. 

52. At June 30, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $244 billion of C1, C2 and EA loans, which equated to 
approximately 14 percent of Freddie Mac's single-family credit guarantee portfolio. As 
described above, when describing its single-family credit guarantee portfolio, Freddie Mac 
disclosed in its 2Q08 10-Q that at June 30, 2008, it had approximately $6 billion of security 
collateral underlying its Structured Transactions that were classified as subprime. Freddie Mac 
made no other disclosure in its 2Q08 10-Q quantifying its subprime exposure in its single-family 
credit guarantee book of business as of June 30, 2008. 

53. Freddie Mac's CEO and CFO both certified the 2006 IS, the 2Q07 ISS, the 3Q07 
ISS, the 2007 IS, the 1 Q08 ISS, and the 2Q08 10-Q. The certifications stated, among other 
things: 

• 	 "Based on my knowledge, this [Report] does not contain any untrue statement of 
a material fact or omit to state a material fact necessary to make the statements 
made, in light of the circumstances under which such statements were made, not 
misleading with respect to the period covered by this [Report.]" 

15 



• 	 "Based on my knowledge, the consolidated financial statements, and other 
financial information included in this [Report], fairly present in all material 
respects the financial condition, results of operations and cash flows of Freddie 
Mac as of, and for, the periods presented in this [Report]." 

54. Freddie Mac's CBO sub-certified the 2006 IS, the 2Q07 ISS, the 3Q07 ISS, the 
2007 IS, the 1Q08 ISS, and the 2Q08 10-Q. Freddie Mac's SVP for Credit Policy sub-certified 
the 2006 IS, the 2Q07 ISS and the 2Q08 10-Q. Those sub-certifications stated, among other 
things: 

• 	 "Based upon my role and responsibilities, I have reviewed the appropriate 
sections of the [Report]." 

• 	 "I have consulted with such members of my staff and others whom I thought 
should be consulted in connection with my execution of this attestation." 

• 	 "Based upon my role and responsibilities, but limited in all respects to the matters 
that come to my attention in fulfilling my responsibilities as [CBO or SVP for 
Credit Policy], I hereby certify to the best of my knowledge and belief that:" 

• 	 "The [Report] does not contain any untrue statement of a material fact or omit to 
state a material fact necessary to make the statements made, in light of the 
circumstances under which such statements were made, to not be misleading." 

• 	 "The financial statements and other financial information included in the [report] 
fairly present, in all material respects, the financial condition and results of 
operations, and cash flows of the Company as of and for the periods presented in 
the [Report]." 

55. In addition to sub-certifying the disclosures as described above in paragraph 54, 
the SVP for Credit Policy served on the disclosure committee that considered the 1 Q08 ISS and 
2Q08 lO-Q. 

Freddie Mac's Alt-A Disclosures 

56. Prior to June 14,2007, Freddie Mac did not publicly disclose its quantitative 
exposure to Alt-A loans. 

57. On June 14,2007, Freddie Mac held its first quarter of2007 financial results 
conference call with research analysts. In response to an analyst's question, Freddie Mac's CBO 
stated "[t]he mix of our portfolio that is defined as Alt-A by our customers, because that is really 
the only way you get at that designation, we would estimate that maybe 5 percent or less of our 
portfolio that comes through flow is Alt-A, and on the bulk business it is about 2. So I am 
comfortable saying it is less than 10." 

58. 	 On August 30,2007, in its 2Q07 ISS, Freddie Mac disclosed the following: 

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Many mortgage market participants classify single-family loans 
that range between their prime and subprime categories as Alt-A 
because these loans have a combination of characteristics of each 
category or may be underwritten with lower or alternative 
documentation than a full documentation mortgage loan. Although 
there is no universally accepted definition of Alt-A, industry 
participants have used this classification principally to describe 
loans for which the underwriting process has been streamlined in 
order to reduce the documentation requirements of the borrower or 
allow alternative documentation. We principally acquire mortgage 
loans originated as Alt-A from our traditional lenders that largely 
specialize in originating prime mortgage loans. These lenders 
typically originate Alt-A loans as a complementary product 
offering and generally follow an origination path similar to that 
used for their prime origination process. 

In determining our Alt-A exposure in loans underlying our single­
family mortgage portfolio, we have classified mortgage loans as 
Alt-A if the lender that delivers them to us has classified the loans 
as Alt-A, or if the loans had reduced documentation requirements 
which indicate that the loan should be classified as Alt-A. We 
estimate that approximately $120 billion, or eight percent, of loans 
underlying our single-family mortgage portfolio at June 30, 2007 
were classified as Alt-A mortgage loans. For these loans, our 
average credit score was 715 and our estimated current LTV ratios 
were 71 percent. 

59. The same day that Freddie Mac released the 2Q07 ISS, it held a financial results 
conference call with research analysts. On the conference call, Freddie Mac's CFO said: "On 
mortgage product concentrations, we have low exposure to all day [sic] and risk-layered loans, 
and when taken together, these represent about 8 percent of the total single-family guarantee 
portfolio. On the Alt-A side, as of the end of June, we guaranteed $120 billion ofloans that were 
either identified by the originator as Alt-A or had reduced levels of documentation." 

60. At June 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $462 billion of reduced documentation loans, which equated to 
approximately 29 percent of Freddie Mac's single-family credit guarantee portfolio. Only a 
portion of these loans were included in Freddie Mac's disclosed amount of$120 billion. 

61. Freddie Mac's quantification of its Alt-A exposure was derived from seller-
identified loans and an internal model known as DEFCAP that was used to calculate its 
guarantee obligation. Certain reduced documentation loan programs were not flagged as "low­
or no-doc" loans within the DEFCAP model based upon determinations made at the time. Those 
determinations were not reviewed in connection with providing public disclosure of the 
company's exposure to Alt-A loans. As such, those loans were not included in Freddie Mac's 
quantification of its Alt-A exposure in its 2Q07 ISS. 

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62. On October 15,2007, Freddie Mac's Vice President, Customer Facing Models 
and Analytics, wrote an e-mail in which he stated: "It is said that Countrywide 'Fast and Easy' 
loans, for example, have ... morphed into some aggressive true 'Low Doc' dimensions more 
recently." However, Freddie Mac determined not to flag Countrywide's Fast and Easy loans as 
"low- or no-doc" in the DEFCAP model; thus, they were not included in the quantification of 
Alt-A loan exposure that Freddie Mac provided in its public disclosures. 

63. On November 20, 2007, in the 3Q07 ISS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as of September 30, 2007: 

Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination of characteristics of each category or may be 
underwritten with lower or alternative documentation than a full 
documentation mortgage loan. Although there is no universally 
accepted definition of Alt-A, industry participants have used this 
classification principally to describe loans for which the 
underwriting process has been streamlined in order to reduce the 
documentation requirements of the borrower or allow alternative 
documentation. 

We principally acquire mortgage loans originated as Alt-A from 
our traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans as a 
complementary product offering and generally follow an 
origination path similar to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans as Alt-A if the lender that delivers them to us has classified 
the loans as Alt-A, or if the loans had reduced documentation 
requirements which indicate that the loan should be classified as 
Alt-A. We estimate that approximately $131 billion, or 8%, of 
loans underlying our single-family mortgage portfolio at 
September 30, 2007 were classified as Alt-A mortgage loans. For 
these loans, our average credit score was 715 and our estimated 
current average LTV ratio was 72%. 

64. At September 30, 2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $484 billion of reduced documentation loans, which equated to 
approximately 30 percent of Freddie Mac's single-family credit guarantee portfolio. 

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65. On February 28, 2008, in the 2007 IS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as of December 31, 2007: 

Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination of characteristics of each category or may be 
underwritten with lower or alternative documentation than a full 
documentation mortgage loan. Although there is no universally 
accepted definition of Alt-A, industry participants have used this 
classification principally to describe loans for which the 
underwriting process has been streamlined in order to reduce the 
documentation requirements of the borrower or allow alternative 
documentation. 

We principally acquire Alt-A mortgage loans from our traditional 
lenders that largely specialize in originating prime mortgage loans. 
These lenders typically originate Alt-A loans as a complementary 
product offering and generally follow an origination path similar to 
that used for their prime origination process. In determining our 
exposure to Alt-A loans in our PC and Structured Securities 
portfolio, we have classified mortgage loans as Alt-A if the lender 
that delivers them to us has classified the loans as Alt-A, or if the 
loans had reduced documentation requirements which indicate that 
the loans should be classified as Alt-A. We estimate that 
approximately $154 billion, or 9%, of our single-family PCs and 
Structured Securities at December 31, 2007 were backed by Alt-A 
mortgage loans. For these loans, our average credit score was 719, 
our estimated current average L TV ratio was 72% and our 
delinquency rate, excluding certain Structured Transactions, was 
1. 86% at December 31, 2007. 

66. At December 31,2007, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $505 billion of reduced documentation loans, which equated to 
approximately 30 percent of Freddie Mac's single-family credit guarantee portfolio. 

67. On May 14, 2008, in the 1 Q08 ISS, Freddie Mac disclosed the following 
regarding its Alt-A exposure as of March 31, 2008: 

Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination of characteristics of each category or may be 
underwritten with lower or alternative documentation than a full 
documentation mortgage loan. Although there is no universally 
accepted definition of Alt-A, industry participants have used this 
classification principally to describe loans for which the 

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underwriting process has been streamlined in order to reduce the 
documentation requirements of the borrower or allow alternative 
documentation. 

We principally acquire mortgage loans originated as Alt-A from 
our traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans as a 
complementary product offering and generally follow an 
origination path similar to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans as Alt-A if the lender that delivers them to us has classified 
the loans as Alt-A, or if the loans had reduced documentation 
requirements, which indicate that the loan should be classified as 
Alt-A. We estimate that approximately $188 billion, or 11%, of 
loans underlying our guaranteed PCs and Structured Securities at 
March 31, 2008 were classified as Alt-A mortgage loans. We 
estimate that approximately $2 billion, or 7%, of our investments 
in single-family mortgage loans in our retained portfolio were 
classified as Alt-A loans as of March 31, 2008. For all of these 
Alt-A loans combined, the average credit score was 723, the 
estimated current average LTV ratio was 76% and the delinquency 
rate, excluding certain Structured Transactions, was 2.32% at 
March 31, 2008. 

68. At March 31,2008, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $527 billion of reduced documentation loans, which equated to 
approximately 30 percent of Freddie Mac's single-family credit guarantee portfolio. 

69. On July 18,2008, Freddie Mac filed a Form 10 with the Commission. In its 
Form 10, Freddie Mac repeated verbatim the Alt-A disclosure from Freddie Mac's 2007 IS, 
described above at paragraph 65. 

70. On August 6, 2008, in the 2Q08 10-Q, Freddie Mac disclosed the following 
regarding its Alt-A exposure as of June 30, 2008: 

Many mortgage market participants classify single-family loans 
with credit characteristics that range between their prime and 
subprime categories as Alt-A because these loans have a 
combination of characteristics of each category or may be 
underwritten with lower or alternative documentation than a full 
documentation mortgage loan. Although there is no universally 
accepted definition of Alt-A, industry participants have used this 
classification principally to describe loans for which the 
underwriting process has been streamlined in order to reduce the 
documentation requirements of the borrower or allow alternative 
documentation. 

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We principally acquire mortgage loans originated as Alt-A from 
our traditional lenders that largely specialize in originating prime 
mortgage loans. These lenders typically originate Alt-A loans as a 
complementary product offering and generally follow an 
origination path similar to that used for their prime origination 
process. In determining our Alt-A exposure in loans underlying 
our single-family mortgage portfolio, we have classified mortgage 
loans as Alt-A if the lender that delivers them to us has classified 
the loans as Alt-A, or if the loans had reduced documentation 
requirements, which indicate that the loan should be classified as 
Alt-A. We estimate that approximately $188 billion, or 10%, of 
loans underlying our guaranteed PCs and Structured Securities at 
June 30, 2008 were classified as Alt-A mortgage loans. In 
addition, we estimate that approximately $2 billion, or 
approximately 7%, of our investments in single-family mortgage 
loans in our retained portfolio were classified as Alt-A loans as of 
June 30, 2008. For all of these Alt-A loans combined, the average 
credit score was 724, the estimated current average LTV ratio, 
based on our guaranteed exposure, was 78%. The delinquency rate 
for these Alt-A loans was 3.72% and 1.86% at June 30, 2008 and 
December 31, 2007, respectively. We implemented several 
changes in our underwriting and eligibility criteria in 2008 to 
reduce our acquisition of certain higher-risk loan products, 
including Alt-A loans. As a result there are approximately $14 
billion of single-family Alt-A mortgage loans in our retained 
portfolio and underlying our PCs and Structured Securities as of 
June 30, 2008 that were originated in 2008 as compared to $60 
billion remaining as of June 30, 2008 that were originated in 2007. 

71. At June 30, 2008, Freddie Mac's single-family credit guarantee portfolio 
consisted of approximately $541 billion of reduced documentation loans, which equated to 
approximately 30 percent of Freddie Mac's single-family credit guarantee portfolio. 

72. On November 6, 2009, Freddie Mac disclosed in its third quarter Form 10-Q the 
following: 

In determining our Alt-A exposure on loans underlying our single­
family mortgage portfolio, we have classified mortgage loans as 
Alt-A if the lender that delivers them to us has classified the loans 
as Alt-A, or if the loans had reduced documentation requirements, 
as well as a combination of certain credit attributes and expected 
performance characteristics at acquisition which, when compared 
to full documentation loans in our portfolio, indicate that the loan 
should be classified as Alt-A. There are circumstances where 
loans with reduced documentation are not classified as Alt-A 
because we already own the credit risk on the loans or the loans 
fall within various programs which we believe support not 

21 




classifying the loans as Alt-A. For our non-agency mortgage­
related securities that are backed by Alt-A loans, we classified 
securities as Alt-A if the securities were labeled as Alt-A when 
sold to us. 

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