FREDDIE MAC REVAMPS UNDERWRITING REQUIREMENTS TO HELP GULF COAST STORM VICTIMS OBTAIN MORTGAGES

Company Eases Income, Credit, Other Requirements Until Oct. 3, 2006

McLean, VA – Freddie Mac (NYSE: FRE) today announced it was temporarily easing several underwriting requirements to make it easier for storm victims who lost jobs, income, or important financial documents in Hurricanes Katrina or Rita to qualify for a mortgage Freddie Mac can purchase. Freddie Mac is one of the nation's largest investors in residential mortgages.

"These changes are designed to help borrowers overcome some of the daunting obstacles the storms left behind – from temporarily lost incomes to permanently lost or damaged financial documents," said Richard F. Syron, Chairman and CEO of Freddie Mac. "By giving lenders a prudent, objective and responsible way to help ensure more storm victims succeed as long-term homeowners, today's announcement underscores Freddie Mac's mission to keep America's mortgage market liquid, stable, and affordable."

Announced in a September 30 Guide Bulletin, the temporary requirements are for most of Freddie Mac's mortgage products whether they are sold under Freddie Mac's Cash or Guarantor programs.

The special underwriting requirements apply only to mortgages closed on or after August 30 for Hurricane Katrina victims and on or after September 25 for victims of Hurricane Rita. The Freddie Mac rule changes, which lenders can use for qualified storm victims to finance a home in or out of the disaster areas, will expire after October 3, 2006.

To qualify under the temporary requirements, borrowers must have been victims of either storm and must live in, had employers in, or are relocating from the federally designated major disaster areas where Federal Emergency Management Agency's Individual Assistance program is available.

Specifically, the changes show lenders how to accommodate storm-victims who must now rely on:

Temporary income, such as employer-paid severance, temporary employer assistance, unemployment compensation, disaster assistance grants or other forms of public or private assistance. Temporary income may be used to qualify the borrower. In addition, unemployed borrowers receiving temporary income moving out of the disaster areas will have to provide a written statement of intent to work. Lenders must document the likelihood of the borrower re-establishing his or her regular income to the point where they can meet their long-term mortgage obligation.
Alternative third-party documentation in place of lost or destroyed income and employment records.
Storm-damaged credit reputations. Lenders can discount adverse or derogatory credit reports caused by the hurricanes provided there is no evidence that the borrower had unacceptable credit before the storms. However, bankruptcies, foreclosures or deed-in-lieu of foreclosures within the last two years will still make a borrower's credit history unacceptable even if they were caused by the storms.

Other changes provide guidance for calculating borrower housing expense-to-income and debt-to-income ratios for financing 1-4 family properties. For example, lenders can exclude mortgage payments on a destroyed or damaged residence in the disaster area from the borrower's housing expense-to-income ratio, but must include it in the borrower's debt payment-to-income ratio.

For more information, lenders can contact their Freddie Mac Account Representative or
review the new Guide Bulletin at www.freddiemac.com/sell/guide/bulletins.

Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing 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 for one in six homebuyers and nearly four million renters in America.

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