FREDDIE MAC ANNOUNCES ENHANCEMENTS TO TWO EXISTING PRODUCTS

Both Product Updates Are In Response To Customer Needs

McLean, VA – Freddie Mac (NYSE:FRE) announced that it has made adjustments to its baseline business terms on its Freddie Mac Interest-Only (IO) Fixed-Rate Mortgage product in order to make more interest-only financing available to its customers. At the same time, it is allowing more yield maintenance flexibility through the new Freddie Mac Treasury Plus Yield Maintenance option.

"Freddie Mac has expanded the credit terms of its Interest-Only product in response to feedback from its customers and the unique challenges presented by the marketplace," said Mitchell W. Kiffe, Freddie Mac vice president of Multifamily Production and Sales. "The changes are two-fold: Freddie Mac is providing the potential of a longer interest-only term for all loans, and it is also offering lower debt coverage ratios (DCR) for certain acquisition loans with above average fundamentals."

Changes to Standard Product

The following terms will be available for standard full and partial IO loans. Both acquisition and refinance transactions will be permitted. All loans must meet the minimum DCR and maximum loan-to-value (LTV) specifications outlined below. Here are highlights of some of the changes:

For full-term interest-only loans (10 years or less)

• The loan term and interest-only period is 10 years or less.
• The minimum amortizing DCR is 1.15x.
• The maximum LTV is 70 percent.

For partial interest-only loans (15 years or less)

• The IO period is 3 to 5 years on a loan with a term of 7 to 15 years. The minimum amortizing DCR is 1.20x. The maximum LTV is 80 percent.
• The IO period is three to four years on a loan with a term of less than seven years. The minimum amortizing DCR is 1.20x. The maximum LTV is 75 percent.

New Enhanced Product

The following terms may be offered for certain acquisition transactions with above average sponsorship, market, property and rent growth prospects:

For full-term interest-only loans

• For loan terms of seven to 10 years, the minimum amortizing DCR is 1.10x (or 1.05x if one of several conditions specified by Freddie Mac are met). The maximum LTV is 70 percent.
• For loan terms of less than 7 years, the minimum amortizing DCR is 1.15x. The maximum LTV is 75 percent.

For partial interest-only loans

• The IO period is five years on a loan with a term of seven years or greater. The minimum amortizing DCR is 1.10x. The maximum LTV is 80 percent.
• Up to four years of IO for terms less than seven years. The DCR is 1.10x. The maximum LTV is 75 percent LTV.

The above parameters relate to conventional loans only; however, it should be noted that changes were also made to the Interest-Only product for seniors housing. Freddie Mac customers should contact their regional representative for more information. Also, for further details and information about terms not included in this release, please see the updated Freddie Mac Interest-Only Mortgage term sheet.

Freddie Mac Treasury Plus Yield Maintenance Option

Freddie Mac is now offering to modify the assumed reinvestment rate in the yield maintenance formula up to the treasury security (T) yield rate plus 100 basis points (bps), or the net spread, whichever is lower. Upon premature loan payoff, this will provide the borrower with additional flexibility and will result in a lower yield maintenance premium being paid than would have otherwise been the case.

The borrower will have the option to choose one of the following alternative assumed reinvestment rates: T +25bps, T+50 bps, T+75 bps, or T+100 bps, or net spread, whichever is lower. The yield maintenance formula will still contain the minimum 1 percent prepayment premium.

For all deals with the T+ option, the loans will be subject to the standard yield maintenance formula with an assumed reinvestment rate equal to the yield rate on the applicable treasury security for a period of approximately two or three years as set forth in the table below.

Thereafter, the assumed reinvestment rates will be equal to the T+ option selected.

"We have had the ability to offer T+ flexibility in the yield maintenance formula in the past," said Kiffe. "This announcement formalizes and expands the offering and aims to respond to our Seller/Servicer and borrower requests to allow for more yield maintenance flexibility, particularly on acquisition deals where the investment time horizon is three to five years."

Since the introduction of the Freddie Mac Program Plus® network of multifamily loan originators and servicers in 1993, Freddie Mac has provided financing for over 48,000 multifamily properties totaling more than $147 billion.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.

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