Fill and Sign the Policy and Procedure for Appeal of Site Visit Report Hcphes Form

SM Freddie Mac 8200 Jones Branch Drive McLean, Virginia 22102 TO THE STOCKHOLDERS OF FREDDIE MAC July 12, 2006 Dear Freddie Mac Stockholder: We are pleased to invite you to attend Freddie Mac's annual stockholders' meeting to be held on Friday, September 8, 2006, at 9:00 a.m. at the Freddie Mac campus, 8000 Jones Branch Drive, McLean, Virginia 22102. The Proxy Statement and Notice of Annual Meeting of Stockholders accompanying this letter describes the business to be transacted at the meeting. This Proxy Statement and the accompanying proxy card are Ñrst being mailed to stockholders on July 12, 2006. We hope you will be able to attend the annual meeting and urge you to read the enclosed Proxy Statement and Notice, as well as the accompanying Information Statement and Annual Report to Stockholders and the audited Ñnancial statements included in the Annual Report, for information about Freddie Mac and the annual meeting. Please complete, sign and return the enclosed proxy card, or vote by Internet or by telephone, at your earliest convenience. Sending your proxy card, or voting by Internet or by telephone, will not aÅect your right to vote your shares personally if you do attend the meeting. Please indicate whether you plan to attend the meeting on the proxy card. Sincerely, Richard F. Syron Chairman of the Board and Chief Executive OÇcer FEDERAL HOME LOAN MORTGAGE CORPORATION PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS Our annual meeting of stockholders will be held on Friday, September 8, 2006, at 9:00 a.m. at the Freddie Mac oÇce located at 8000 Jones Branch Drive, McLean, Virginia 22102, for the purposes of: (1) electing 13 members to our Board of Directors, each for a term ending on the date of our next annual meeting; (2) ratifying the appointment by the Audit Committee of our Board of Directors of PricewaterhouseCoopers LLP as our independent auditors for the Ñscal year ending December 31, 2006; (3) voting on a proposal submitted by a stockholder; and (4) transacting any other business that may properly come before the meeting or any adjournment thereof. RECORD DATE June 30, 2006 is the record date for the annual meeting. This means that owners of Freddie Mac common stock at the close of business on that date are entitled to receive notice of the meeting, and vote at the meeting or any meeting adjournment. Stockholders of record on the record date will be admitted to the meeting with photo identiÑcation and veriÑcation of stock ownership (as described in ""Annual Meeting Admission'' below). WHO MAY ATTEND THE MEETING Attendance is limited to stockholders, including persons holding proxies from stockholders, and one guest each. Invited representatives of the media may attend the meeting. ANNUAL MEETING ADMISSION Registration begins at 8:00 a.m. A valid photo identiÑcation and proof of stock ownership must be presented in order to attend the meeting. If your shares are registered in your name, you should bring the bottom half of the proxy card, which is your admission ticket. If you hold Freddie Mac stock in the name of a broker, trust, bank or other nominee (""street name''), you must bring a copy of an account statement reÖecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder, you must present valid proof of proxy. Cameras, recording devices and other electronic devices are not permitted at the meeting. WEBCAST OF THE MEETING If you are not able to attend the meeting in person, you may listen to a live webcast of the meeting on the Internet by visiting http://www.freddiemac.com/investors at 9:00 a.m. on Friday, September 8, 2006. You will not be able to ask questions unless you attend the meeting in person. SECURITY AND PARKING AT THE MEETING The annual meeting will be held at the Freddie Mac campus. The campus consists of several buildings, so please take note that 8000 Jones Branch Drive is the building where the meeting will be held. Reserved parking will be available for annual meeting attendees. Security measures will require that photo identiÑcation and your admission ticket or proof of stock ownership (as described in ""Annual Meeting Admission'' above) be presented to the security guard in order to access the reserved parking area. Our Board of Directors recommends that you vote ""FOR'' the election of directors and the ratiÑcation of the appointment of our independent auditors and ""AGAINST'' the stockholder proposal. Your vote is important. Please vote your proxy promptly so your shares can be represented at the annual meeting, even if you plan to attend the annual meeting. You can vote by Internet, by telephone, or by using the enclosed proxy card. Please see your proxy card for speciÑc instructions on how to vote. Our proxy tabulator, Computershare Trust Company N.A., must receive any proxy that will not be delivered in person to the annual meeting by 11:59 p.m., eastern time, on Thursday, September 7, 2006. You have the power to revoke a proxy at any time before its exercise by giving the Corporate Secretary of Freddie Mac written notice of your revocation, by submitting a later dated proxy or by voting the shares in person at the annual meeting. The accompanying Proxy Statement contains information describing each matter we expect to be presented for action at the annual meeting. By Order of the Board of Directors, Robert E. Bostrom Executive Vice President, General Counsel and Corporate Secretary Dated: July 12, 2006 McLean, Virginia TABLE OF CONTENTS About the Meeting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Corporate Governance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Corporate Governance Guidelines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Director IndependenceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Director QualiÑcations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Audit Committee Financial Expert ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Codes of ConductÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Chairman of the Board ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lead Director ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Contacting the Board ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Stock Ownership by Directors, Executive OÇcers and Greater than 5% Holders ÏÏÏÏ Proposal 1: Election of Directors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Director Nomination Process ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Nominees for Election ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Meetings of the Board and Committees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Board Compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Compensation Committee Interlocks and Insider Participation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Transactions with Institutions Related to Directors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Legal ProceedingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IndemniÑcation and Other Reimbursements of Directors, OÇcers and Employees ÏÏÏ Audit Committee ReportÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Executive OÇcersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Report of the CHRC on Executive Compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Executive Compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Compensation Tables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Stock Performance Graph ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Executive Deferred Compensation PlanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Pension Plan and Supplemental Executive Retirement PlanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Employment and Separation Agreements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Proposal 2: RatiÑcation of Appointment of Independent Auditors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Description of FeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Approval of Independent Auditor Services and Fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Proposal 3: Stockholder Proposal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Other Proposed ActionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Availability of Annual Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Section 16(a) BeneÑcial Ownership ReportingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Stockholder Proposals and Nominations for Next Annual Meeting of Stockholders ÏÏÏÏÏÏ Solicitation by Board; Expenses of SolicitationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 5 5 5 5 6 6 6 7 7 7 11 11 11 19 22 25 25 25 26 27 29 32 37 37 41 42 42 44 51 51 52 53 56 56 56 56 57 Appendix A Ì Freddie Mac's Corporate Governance Guidelines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1 Appendix B Ì Audit Committee Charter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ B-1 ABOUT THE MEETING Who is soliciting my vote? The Board of Directors of Freddie Mac is soliciting your vote on proposals being submitted to our annual meeting of stockholders to be held on September 8, 2006. What am I voting on? You will be voting on the following three items: ‚ election of 13 members to the Board (see page 11); ‚ ratification of the appointment of PricewaterhouseCoopers LLP, or PricewaterhouseCoopers, by the Audit Committee of our Board of Directors as our independent auditors for the fiscal year ending December 31, 2006 (see page 51); and ‚ a proposal submitted by a stockholder (see page 53). The Board is not aware of any other matters to be presented for a vote at the annual meeting. Who is entitled to vote? Holders of record of our common stock, par value $0.21 per share, as of the close of business on June 30, 2006, the record date, are entitled to vote at the annual meeting. As of June 12, 2006, there were 691,326,563 votes that could be cast at the annual meeting by all stockholders, consisting of one vote for each share of Freddie Mac common stock outstanding as of such date. We have no other outstanding classes of stock that are entitled to vote at the annual meeting. How many votes do I have? Stockholders entitled to vote have one vote on all matters for each share of Freddie Mac common stock they owned on the record date. There is no cumulative voting. For purposes of determining the number of votes cast with respect to any voting matter, only those votes cast ""for'' or ""against'' are counted; ""votes withheld'' and ""abstentions'' are not counted. How do I vote by proxy? Stockholders can vote by proxy in three ways: by Internet; by telephone; or by mail (using the enclosed proxy card). Please see your proxy card or the information provided to you by your bank, trust, broker or other holder of record for more information on how to vote by proxy. If you vote by proxy, your shares will be voted at the annual meeting in the manner you indicate. What if I hold shares indirectly? If you hold shares in a stock brokerage account or through a bank, trust or other nominee, you are considered to be the beneÑcial owner of shares held in ""street name'' and these proxy materials are being forwarded to you by your broker or nominee. You may not vote directly any shares held in ""street name''; however, as the beneÑcial owner you have the right to direct your broker or nominee on how to vote your shares. If you hold shares in ""street name'' and you want to attend or vote in person at the annual meeting, you must bring to the meeting proof of stock ownership, such as an account statement or a proxy or letter from your broker or nominee which conÑrms that you are the beneÑcial owner of those shares. About the Meeting 1 Can I change my vote after I return my proxy card? Yes. You can change or revoke your proxy by Internet, by telephone or by mail at any time before the annual meeting, regardless of the method by which you previously cast your vote. Can I vote in person at the annual meeting? Yes. However, we encourage you to vote by Internet, by telephone, or by completing and returning the enclosed proxy card to ensure that your shares are represented and voted. How many votes must be present to hold the annual meeting? Your shares are counted as present at the annual meeting if you attend the meeting or if you properly return a proxy by mail, by telephone or by Internet. To conduct the meeting, a majority of our outstanding shares of common stock as of June 30, 2006 must be present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and broker or nominee non-votes will be counted for purposes of establishing a quorum at the annual meeting. See ""Will my shares be voted if I do not return my proxy or attend the annual meeting?'' below for more information on voting by brokers and nominees. If a quorum is not present, the meeting will be adjourned until a quorum is present. We urge you to vote by proxy even if you plan to attend the annual meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting. How many votes are needed to approve Freddie Mac's proposals? The 13 nominees for director who receive the greatest number of ""for'' votes will be elected as directors. This number is called a plurality. Shares not voted will have no impact on the election of directors. If you properly return a proxy, your proxy will be voted ""for'' each of the nominees for director unless your proxy is marked ""vote withheld'' as to a particular nominee or nominees for director. The ratiÑcation of the appointment of PricewaterhouseCoopers as our independent auditors for the Ñscal year ending December 31, 2006 and the adoption of the stockholder proposal each requires a majority of the votes cast at the meeting to be voted ""for'' such proposal. A properly executed proxy marked ""abstain'' with respect to either proposal will not be counted as a vote cast for such proposal. Does any stockholder control as much as 5% of any class of Freddie Mac's voting stock? Yes. Based on a review of beneÑcial ownership reports as of December 31, 2005 that are Ñled with us and that are the equivalent of Schedule 13G and 13D reports Ñled with the Securities and Exchange Commission, or the SEC, and in reliance on updates to those reports based on a review of Form 13F Ñlings with the SEC, as of March 31, 2006, Capital Research and Management Company, 333 South Hope Street, 55th Floor, Los Angeles, CA 90071-1447, beneÑcially owned 62,220,000 shares, or 9.0%, of our outstanding common stock. We are unaware of any other stockholders beneÑcially owning more than 5% of our outstanding common stock. How will voting on any other business be conducted? We currently do not know of any business to be considered at the annual meeting other than the proposals described in this Proxy Statement. If any other business is properly presented at the annual meeting, your signed proxy gives authority to the named proxies to vote your shares on such matters at their discretion. About the Meeting 2 Is my vote conÑdential? Yes. Proxy cards, ballots, telephone votes, Internet votes and voting tabulations that identify individual stockholders are conÑdential. Only certain employees who collect the proxy cards and ballots at the annual meeting, or who receive and review telephone and Internet votes, and the inspectors of election who process proxy cards, ballots, telephone votes and Internet votes and count the votes will have access to your proxy card, ballot, telephone vote or Internet vote. Who will count the vote? Representatives of Computershare Trust Company, N.A., our transfer agent, will tabulate the votes and act as inspectors of election. Will my shares be voted if I do not return my proxy or attend the annual meeting? Your shares may be voted on certain types of proposals if they are held in the name of a brokerage Ñrm or nominee, even if you do not provide the brokerage Ñrm or nominee with voting instructions. Brokerage Ñrms and nominees have the authority under New York Stock Exchange, or NYSE, rules to vote shares for which their customers do not provide voting instructions on certain ""routine'' matters. The election of directors and the ratiÑcation of PricewaterhouseCoopers as our independent auditors for Ñscal year 2006 are considered routine matters for which brokerage Ñrms and nominees may vote shares for which they have not received voting instructions. This is called a ""broker vote.'' The stockholder proposal is not considered a routine matter under NYSE rules. If your broker or nominee does not have discretion to vote your shares held in the name of the brokerage Ñrm or other nominee on a particular proposal because it is not considered to be a routine matter, and you do not give your broker or nominee instructions on how to vote your shares, the votes will be ""broker non-votes.'' We count broker non-votes for quorum purposes, but we do not count broker non-votes (or abstentions) as votes ""for'' or ""against'' the proposals to be acted on at the annual meeting. If you do not vote shares registered in your name, your shares will not be voted. What if I return my proxy card but do not provide voting instructions? Proxy cards that are signed and returned but do not contain instructions on how you want your shares voted will be voted: ‚ ""for'' the election of each of the 13 nominees for director; ‚ ""for'' the ratiÑcation of PricewaterhouseCoopers as our independent auditors for the Ñscal year ending December 31, 2006; ‚ ""against'' the stockholder proposal included in these proxy materials; ‚ in accordance with the recommendation of the Board on any other stockholder proposal; and ‚ in accordance with the best judgment of the named proxies on any other matters properly brought before the meeting. Can I get Freddie Mac's proxy materials delivered to me electronically next year? Yes. If you vote electronically via the Internet, and hold your shares in street name, you may consent to electronic delivery of future Freddie Mac proxy statements, proxy cards and annual reports by responding aÇrmatively to the request for your consent when prompted. See ""How do I sign up to receive proxy materials electronically?'' below for additional information. About the Meeting 3 We encourage you to consent to electronic delivery because it will save Freddie Mac a portion of the costs associated with printing and mailing our proxy materials and annual reports. If you consent and Freddie Mac delivers some or all of its future annual meeting materials to you by electronic mail or by posting materials to the Internet, you will not receive paper copies of these materials through the mail unless you request them from Freddie Mac. How do I sign up to receive proxy materials electronically? If you hold shares in street name, you may submit your consent to electronic delivery at www.freddiemac.com/investors/ar/edelivery.html. Your consent will be effective until you revoke it. By consenting to electronic delivery, you are stating to Freddie Mac that you currently have access to the Internet and expect to have access in the future. If you do not have access to the Internet, or do not expect to have access in the future, please do not consent to electronic delivery, because Freddie Mac may rely on your consent and not deliver paper copies of future annual meeting materials. In addition, if you consent to electronic delivery, you will be responsible for any Internet charges (e.g., online fees) in connection with the electronic delivery of the proxy materials and annual report. What if I vote ""abstain''? Abstentions will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Abstentions do not constitute a vote ""for'' or ""against'' any matters and thus will have no eÅect on the outcome of a vote on a proposal. What happens if the meeting is postponed or adjourned? Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted. Does Freddie Mac provide for ""householding'' of proxy materials? Yes. We have adopted a procedure for stockholders whose shares are held in street name called ""householding,'' pursuant to which stockholders of record who have the same address and the same last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Proxy Statement and Annual Report unless one or more of these stockholders notiÑes us that they wish to continue receiving multiple copies. This procedure provides extra convenience for stockholders and a cost savings for us. Currently, we are not providing householding to stockholders whose shares are registered in their name. If at any time you no longer wish to participate in householding and would prefer to receive a separate Proxy Statement and Annual Report, or if your shares are held in street name and you are receiving multiple copies of our Proxy Statement and Annual Report and wish to receive only one, please notify your bank, broker, trust or other holder of record. For more information, call or write to Freddie Mac at the contact information provided under ""Availability of Annual Report'' below. Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not in any way aÅect the mailing of dividend checks. About the Meeting 4 CORPORATE GOVERNANCE We are committed to excellence in corporate governance and have taken measures to achieve this goal, as well as to meet the requirements of the Sarbanes-Oxley Act of 2002, or the SarbanesOxley Act, the corporate governance regulations of the OÇce of Federal Housing Enterprise Oversight, or OFHEO, and the listing standards of the exchanges on which our securities are registered, including the NYSE and the PaciÑc Stock Exchange. Corporate Governance Guidelines In June 2006, the Board adopted revised Corporate Governance Guidelines, or the Guidelines, which are attached as Appendix A and are available on our Website at www.freddiemac.com/governance/pdf/gov guidelines.pdf. Printed copies of the Guidelines also are available to any stockholder upon request to the Corporate Secretary, at the address speciÑed below under ""Contacting the Board.'' Director Independence The non-employee members of the Board have determined that: ‚ With the exception of Richard F. Syron and Eugene M. McQuade, neither any member of the Board standing for election nor any nominee has a material relationship with Freddie Mac and all such members of the Board and nominees are independent within the meaning of both Section 303A.02 of the NYSE listing standards and the independence criteria set forth in Section 5 of our Guidelines. ‚ All current members of the Audit Committee, the Compensation and Human Resources Committee, or the CHRC, and the Governance, Nominating and Risk Oversight Committee, or the GNROC, are, and members of the Board to be appointed to those committees eÅective September 8, 2006 will be, independent within the meaning of Section 303A.02 of the NYSE listing standards and Sections 4 and 5 of our Guidelines. All current members of the Audit Committee also are, and members of the Board to be appointed to the Audit Committee eÅective September 8, 2006 also will be, independent within the meaning of Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Section 303A.06 of the NYSE listing standards. Mr. Syron is Chief Executive OÇcer of Freddie Mac as well as Chairman of the Board, and Mr. McQuade is President and Chief Operating OÇcer of Freddie Mac. Because Messrs. Syron and McQuade are each employees of Freddie Mac, neither of them is independent under the Guidelines or the NYSE listing standards. Director QualiÑcations OFHEO's corporate governance regulations and the Guidelines impose a term limit of ten years and a retirement age of 72 for directors. The Board previously determined that the interests of Freddie Mac and its stockholders strongly support a transition period of service for directors who had served on the Board for more than ten years at the time the Guidelines were adopted, and would otherwise be required to leave the Board following the expiration of their current term. In particular, the Board has determined that Ronald F. Poe may be renominated for no more than one additional term beginning in September 2006. OFHEO has granted a waiver of the term limit provisions of its corporate governance regulations to permit Mr. Poe to be renominated for such additional term. Corporate Governance 5 William J. Turner, the only other director who has served on the Board for more than ten years, has not been nominated for reelection. Audit Committee Financial Expert We have a standing Audit Committee that satisÑes the ""audit committee'' deÑnition under Section 3(a)(58)(A) of the Exchange Act, the requirements of Rule 10A-3 promulgated under the Exchange Act and Section 303A.06 of the NYSE listed company manual. The current members of the Audit Committee are Richard Karl Goeltz, Thomas S. Johnson, Shaun F. O'Malley, Stephen A. Ross and William J. Turner. Mr. Goeltz has been a member of the Audit Committee since March 31, 2004, and is currently its chairman. The Board has determined that Mr. Goeltz is independent within the meaning of Rule 10A-3 promulgated under the Exchange Act, and that he is an ""audit committee Ñnancial expert'' under SEC regulations. However, Mr. Goeltz is not an auditor or accountant for Freddie Mac, does not perform Ñeld work and is not an employee of Freddie Mac. In accordance with the SEC's safe harbor relating to audit committee Ñnancial experts, a person designated or identiÑed as an audit committee Ñnancial expert will not be deemed an ""expert'' for purposes of the federal securities laws. In addition, such designation or identiÑcation does not impose on such person any duties, obligations or liabilities that are greater than those imposed on such person as a member of the Audit Committee and Board of Directors in the absence of such designation or identiÑcation and does not aÅect the duties, obligations or liabilities of any other member of the Audit Committee or Board of Directors. Codes of Conduct We have separate codes of conduct applicable to employees and to Board members that outline the principles, policies and laws governing their activities. The employee and Board codes were last revised in June 2005. Upon joining Freddie Mac or its Board, all employees and directors, respectively, are required to sign acknowledgements that they have read the applicable code and agree to abide by it. In addition, all employees and directors must respond to an annual questionnaire concerning code compliance. The employee code also serves as the code of ethics for senior Ñnancial oÇcers required by the Sarbanes-Oxley Act. Copies of our employee and director codes of conduct are available, and any amendments or waivers that would be required to be disclosed are posted, on our Website at www.freddiemac.com. Printed copies of the codes of conduct also are available to any stockholder upon request to the Corporate Secretary, at the address speciÑed below under ""Contacting the Board.'' Chairman of the Board Mr. Syron has served as Chairman of the Board since December 31, 2003. Under our bylaws, the Chairman of the Board is elected annually by the Board at its meeting following the annual meeting. Under the terms of Mr. Syron's employment agreement, so long as Mr. Syron remains Chief Executive OÇcer, the Board will nominate him as a director and, provided he is elected as a director, will elect him to serve as Chairman of the Board. In addition to the customary duties of Chief Executive OÇcer and Chairman, Mr. Syron has agreed to actively assist us in developing a succession plan for his replacement as Chief Executive OÇcer prior to December 31, 2008. Upon the appointment of a successor, Mr. Syron will cease to be Chief Executive OÇcer but will remain Chairman of the Board through December 31, 2008. For more information about Mr. Syron's Corporate Governance 6 employment agreement, see ""Executive Agreements Ì Richard F. Syron'' below. Compensation Ì Employment and Separation Consistent with a consent order we entered into with OFHEO, we have committed to OFHEO to separate the positions of Chairman and Chief Executive OÇcer within a reasonable period of time. EÅective September 1, 2004, Mr. McQuade was appointed President and Chief Operating OÇcer of Freddie Mac. Pursuant to the terms of his employment agreement, if someone other than Mr. McQuade is appointed to succeed Mr. Syron as our Chief Executive OÇcer, or Mr. McQuade is not appointed Chief Executive OÇcer by September 1, 2007, then under certain conditions, Mr. McQuade may terminate his employment with us for good reason and he will receive certain payments and beneÑts as a result. For more information about Mr. McQuade's employment agreement and Chief Executive OÇcer succession terms, see ""Executive Compensation Ì Employment and Separation Agreements Ì Eugene M. McQuade'' below. Lead Director The non-employee directors have established the position of Lead Director, whose responsibilities include assisting the Chairman of the Board in developing the agenda for Board meetings; reviewing the Board's governance procedures and policies, including working with the Chairman to develop and monitor committee charters and assignments; and chairing meetings of the Board held among the non-employee directors. The Lead Director is elected annually by a majority of the non-employee directors at the Board meeting following the annual meeting. Mr. O'Malley is currently the Lead Director, and his term as Lead Director expires at the Board meeting following this annual meeting. We will announce the results of the election of the Lead Director following his or her election. Contacting the Board To contact our Board, please send your comments in writing to Corporate Secretary, Freddie Mac, 8200 Jones Branch Drive, McLean, Virginia 22102. All comments or complaints relating to our accounting, internal accounting controls or auditing matters will be forwarded to the Chair of the Audit Committee, for treatment in a manner consistent with the Audit Committee's complaint policy for such matters, and to the Lead Director. All other comments will be forwarded to the Lead Director. Comments indicating that they are to be submitted to the Lead Director or to the Audit Committee Chair anonymously or conÑdentially will be treated accordingly. You will receive a written acknowledgement from the Corporate Secretary upon receipt of your comment, unless it is anonymous. Please refer to our Website at www.freddiemac.com for more information on our Board and how to contact our Board members. Stock Ownership by Directors, Executive OÇcers and Greater than 5% Holders We expect our directors and oÇcers to own our common stock. A signiÑcant portion of director and executive compensation is paid in common stock, as described in greater detail in ""Proposal 1: Election of Directors Ì Board Compensation'' and ""Report of the CHRC on Executive Compensation'' below. EÅective as of January 31, 2006, we expect our Chief Executive OÇcer and our President and Chief Operating OÇcer to own, within four years of such oÇcer's date of hire or promotion, as Corporate Governance 7 appropriate, Freddie Mac stock with a fair market value equal to Ñve times such oÇcer's annual base salary. We also expect, within four years of the date of hire or promotion to executive oÇcer, each other executive oÇcer to own Freddie Mac stock with a fair market value equal to three times such oÇcer's annual base salary. Each of our executive oÇcers, including our Chief Executive OÇcer and our President and Chief Operating OÇcer, will be treated as complying with this stock ownership requirement, even if the oÇcer does not otherwise meet the requirement, if the oÇcer: ‚ retains all Freddie Mac stock the oÇcer owned as of January 31, 2006; ‚ retains all restricted stock units (net of shares withheld for taxes) for which the restrictions have lapsed; and ‚ retains all restricted stock units (net of shares withheld for taxes) for which the restrictions lapse in the future. For information on our stock ownership requirements for non-employee directors, see ""Proposal 1: Election of Directors Ì Board Compensation Ì Stock Ownership Guidelines'' below. We believe that stock ownership by our directors and executive oÇcers aligns their interests with the long-term interests of our stockholders. BeneÑcial Ownership. We have only one class of voting stock, which is common stock. The following table shows the beneÑcial ownership of our common stock as of June 1, 2006 by our current directors, director nominees, all named executive oÇcers (as that term is deÑned in ""Executive Compensation Ì Compensation Tables Ì Summary Compensation Table'' below), all of our directors and executive oÇcers as a group, and holders of more than 5% of our common stock. BeneÑcial ownership is determined in accordance with SEC rules for computing the number of shares of common stock beneÑcially owned by a person and the percentage ownership of that person. As of June 1, 2006, each director, director nominee and named executive oÇcer, and all of our directors and executive oÇcers as a group, owned less than 1% of our outstanding common stock. The information presented below is based on information provided to us by the individuals or entities speciÑed in the table. Corporate Governance 8 As of June 1, 2006 Name Barbara T. Alexander Martin F. Baumann GeoÅrey T. Boisi Patricia L. Cook Michelle Engler Robert R. Glauber Richard Karl Goeltz Thomas S. Johnson William M. Lewis, Jr. Eugene M. McQuade Shaun F. O'Malley JeÅrey M. Peek Ronald F. Poe Stephen A. Ross Joseph A. Smialowski Richard F. Syron William J. Turner** All directors and executive officers as a group (28 persons)(10) Common Stock BeneÑcially Owned Excluding Stock Options* Position Director Former EVP Ì Finance and Chief Financial OÇcer Director EVP Ì Investments & Capital Markets Director Director nominee Director Director Director President and Chief Operating OÇcer; Director Lead Director Director Director Director EVP Ì Operations and Technology Chairman of the Board and Chief Executive OÇcer Director Stock Options Exercisable Within 60 Days of June 1, 2006 Total Common Stock BeneÑcially Owned* 400 7,479(1) 907 38,807 1,307 46,286 613 7,369 907 14,042 1,520 21,411 6,580(2) 0 4,632(3) 6,191(4) 2,318(5) 25,677 4,494 0 3,712 2,036 907 28,192 11,074 0 8,344 8,227 3,225 53,869 4,046(6) 388 70,162(7) 17,157(8) 4,960 4,754 0 21,143 10,638 7,050 8,800 388 91,305 27,795 12,010 96,995 124,637 221,632 3,727 306,971(9) 8,561 336,384 12,288 643,355 Common Stock BeneÑcially Owned Capital Research & Management Company 333 South Hope Street, 55th Floor Los Angeles, CA 90071-1447 Percent of Class 62,220,000(11) 5% Holder*** 9.0% * Includes shares of stock beneÑcially owned as of June 1, 2006. Also includes restricted stock units vesting within 60 days of June 1, 2006. A restricted stock unit represents a conditional contractual right to receive one share of Freddie Mac common stock at a speciÑed future date. Restricted stock units are not considered legally issued or outstanding shares and, therefore, do not have voting rights. Restricted stock units have dividend equivalent rights that entitle the grantee to dividend equivalents on each share of common stock subject to the grant in the amount of dividends per share payable on our outstanding shares of common stock. For non-employee directors, (i) these dividend equivalents are accrued as additional restricted stock units to be settled at the same time as the underlying restricted stock units, are not subject to a vesting schedule, and are settled irrespective of whether the underlying restricted stock units vest, and (ii) all dividend equivalents in the above table are scheduled to settle in common stock as of the date of this annual meeting. ** Not nominated for reelection. Corporate Governance 9 *** We require that beneÑcial owners of more than 5% of our common stock report the amount of their ownership interest and certain other information to us. All persons who have Ñled such a report to date are identiÑed in this table. To enforce compliance with the reporting requirement, we may deny beneÑcial owners who have failed to Ñle the required report the right to vote any shares in excess of the 5% threshold. Any shares as to which voting rights are denied will not be counted as outstanding shares for determining whether a quorum exists or whether a majority of shares has been voted for or against any proposal. (1) Figures are based on our records as of June 1, 2006. (2) Includes 2,014 restricted stock units and 115 dividend equivalents on restricted stock units. (3) Includes 1,608 restricted stock units and 43 dividend equivalents on restricted stock units. (4) Includes 882 restricted stock units and 17 dividend equivalents on restricted stock units. (5) Includes 393 restricted stock units and 7 dividend equivalents on restricted stock units. (6) Includes 2,345 restricted stock units and 121 dividend equivalents on restricted stock units. (7) Includes 1,230 restricted stock units and 45 dividend equivalents on restricted stock units. Also includes 9,071 shares held by Mr. Poe's spouse, as to which Mr. Poe disclaims beneÑcial ownership. (8) Includes 3,857 restricted stock units and 337 dividend equivalents on restricted stock units. (9) Includes 20,034 restricted stock units and 685 dividend equivalents on restricted stock units. (10) In addition to the persons shown in the table, this group includes our Executive Vice President Ì General Counsel and Corporate Secretary; our Executive Vice President Ì Community Relations; our Executive Vice President Ì Human Resources; our Senior Vice President Ì General Auditor; our Senior Vice President Ì Corporate Controller and Principal Accounting OÇcer; and all of our Senior Vice Presidents who reported directly to the Chairman and Chief Executive OÇcer or the President and Chief Operating OÇcer as of June 1, 2006. (11) Based on a review of beneÑcial ownership reports as of December 31, 2005 that are Ñled with us and that are the equivalent of Schedule 13G and 13D reports Ñled with the SEC, and in reliance on updates to those reports based on a review of Form 13F Ñlings with the SEC, as of March 31, 2006, Capital Research & Management Company, 333 South Hope Street, 55th Floor, Los Angeles, CA 90071-1447, beneÑcially owned 62,220,000 shares, with sole voting power as to zero shares and sole dispositive power as to 62,220,000 shares. Corporate Governance 10 PROPOSAL 1: ELECTION OF DIRECTORS Director Nomination Process Under its charter, the GNROC is responsible for recommending to the Board the slate of nominees to be proposed for election by the stockholders at our annual meeting and for reviewing proposals for nominations from stockholders that are submitted in accordance with the procedures summarized below. The GNROC comprises the following Ñve directors, each of whom is independent under the Guidelines and the NYSE listing standards: Messrs. Boisi, Goeltz, O'Malley (Chair), Poe and Ross. The GNROC has the authority to employ a variety of methods for identifying and evaluating potential Board nominees. Candidates for vacancies on the Board may come to the attention of the GNROC through several diÅerent means, including recommendations from Board members, senior management or professional search Ñrms, stockholder nominations and other sources. The GNROC considers all nominations submitted by stockholders that meet the eligibility requirements outlined in our bylaws. As required by our bylaws, stockholder nominations of candidates for election as directors must be submitted in writing to the Corporate Secretary, Freddie Mac, 8200 Jones Branch Drive, McLean, Virginia 22102 not less than 50 days or more than 75 days prior to the date of the annual meeting. Due to the timing of this annual meeting, and as announced in our press release dated June 1, 2006, the deadline for stockholder nominations of candidates for election as directors is July 20, 2006. As of the date of this proxy statement, we have not received any stockholder nominations of candidates for election as directors for this annual meeting. For information on what must be included in the written notice to nominate a candidate for election at the next annual meeting of stockholders, see ""Stockholder Proposals and Nominations for Next Annual Meeting of Stockholders'' below. As stated in the Guidelines, our Board seeks candidates for election to the Board who have achieved a high level of stature, success and respect in their principal occupations. Directors must exemplify high standards of integrity and be committed both to our public mission and to the interests of our stockholders. We seek to have a diversity of talent on the Board. Candidates are selected for their character, judgment, experience and expertise. In addition, candidates must have the ability and time to commit to Board service. In selecting candidates for election to the Board, the Board also considers a director's independence under the independence standards that are a part of the Guidelines. These independence standards incorporate the independence standards set forth in the NYSE listed company manual. See ""Corporate Governance Guidelines'' above and Appendix A attached to this Proxy Statement. Stockholder nominees to the Board will be evaluated by the GNROC based on the criteria speciÑed above in the same way as a nominee recommended by the Board or management. Nominees for Election Our enabling legislation establishes the membership of our Board at 18 directors: 13 directors elected by the stockholders and 5 directors appointed by the President of the United States. All directors have the same duties and responsibilities and serve for a term ending on the date of the next annual meeting of stockholders. Thirteen directors are to be elected by stockholders at this meeting. Prior to our March 31, 2004 annual meeting, the OÇce of Counsel to the President informed us that the President did not intend to reappoint any of his then-current Presidential Proposal 1: Election of Directors 11 appointees. Consequently, each of their terms as Presidential appointees ended on the date of that annual meeting. No new appointees have been named by the President as of the date of this Proxy Statement. The Board has nominated the persons named below for election at this annual meeting to serve until the next annual meeting. With the exception of Mr. Peek, who was appointed to the Board eÅective January 1, 2006 to Ñll a vacancy, and Mr. Glauber, who is being nominated for election to the Board for the Ñrst time at this meeting, each of the persons named below is nominated for reelection at this meeting. Messrs. Peek and Glauber were identiÑed as potential candidates by a third-party search Ñrm retained to assist the GNROC in its search for possible director candidates. The evaluation of the suitability of Messrs. Peek and Glauber as directors of Freddie Mac was performed by the GNROC. The Board expects each of its current members and each nominee, and any future Presidential appointee, to attend any Freddie Mac annual stockholders' meeting at which such person is standing for election or reelection or will begin a term as a Presidential appointee to the Board. Each of the eleven nominees for reelection to the Board attended the July 15, 2005 annual meeting. If any of the 13 nominees is unable or unwilling to serve on the date of the annual meeting or any adjournment of the meeting, the proxies received on behalf of that nominee will be voted for a substitute nominee. The Board has no reason to believe that any of the nominees will be unable or unwilling to serve if elected. Unless stockholders specify otherwise in their proxies, proxies solicited by the Board will be voted ""for'' each of the 13 nominees for election named in this Proxy Statement. The 13 nominees who receive the greatest number of votes will be elected. No stockholder is entitled to cumulate his or her votes in the election of directors. Your proxy may not be voted for a greater number of persons than the 13 nominees named. We recommend that you vote for each of the 13 nominees. The nominees have provided the following information about their principal occupation, business experience and other matters. Proposal 1: Election of Directors 12 BARBARA T. ALEXANDER Director since 2004 Age 57 Ms. Alexander has been an independent consultant since January 2004. Prior to that, she was a Senior Advisor to UBS Warburg LLC and predecessor Ñrms (UBS) from October 1999 to January 2004 and Managing Director of the North American Construction and Furnishings Group in the Corporate Finance Department of UBS from 1992 to October 1999. From 1987 to 1992, Ms. Alexander was a Managing Director in the Corporate Finance Department of Salomon Brothers Inc. From 1972 to 1987, she held various positions at Salomon Brothers, Smith Barney, Investors DiversiÑed Services, and Wachovia Bank and Trust Company. Ms. Alexander is a member of the board of directors of Centex Corporation and Harrah's Entertainment, Inc., where she is chair of the Audit Committee. She also is an Executive Fellow at the Joint Center for Housing Studies at Harvard University and a member of the board of directors of HomeAid America. GEOFFREY T. BOISI Director since 2004 Age 59 Mr. Boisi has been Chairman and Senior Partner of Roundtable Investment Partners LLC, a private investment management Ñrm, since March 2005. From 2000 to May 2002, Mr. Boisi was Vice Chairman of JP Morgan Chase, where he served as Co-Chief Executive OÇcer of JP Morgan, the Ñrm's investment bank, and was a member of JP Morgan Chase's executive and management committees. From 1993 to 2000, he was the founding Chairman and Senior Partner of The Beacon Group, a merger and acquisition advisory and private investment Ñrm. From 1971 to 1993, Mr. Boisi held various positions at Goldman Sachs & Company, including senior general partner, member of the Ñrm's management committee and head of the investment banking business. Proposal 1: Election of Directors 13 MICHELLE ENGLER Director since 2001 Age 48 Ms. Engler is an attorney and is Trustee of the JNL Series Trust and the JNL Investor Series Trust, each an investment company, and has been a member of the board of managers of each of the JNL/NY Variable Funds since 2000. From 1992 to 2000, she was of counsel to the law Ñrm of Varnum, Riddering, Schmidt & Howlett, a Grand Rapids, Michiganbased law Ñrm. Prior to that, she was a partner in the Houston law Ñrm of Nathan, Wood & Sommers. Ms. Engler served on our Board as a Presidential appointee from 2001 through March 31, 2004, when she was elected to our Board by the stockholders. ROBERT R. GLAUBER Nominee Age 67 Mr. Glauber has been Chairman and Chief Executive OÇcer of the NASD since September 2001, after becoming its CEO and President in November 2000, and has announced his retirement from the NASD, eÅective later this year. He has been a member of the NASD Board since 1996. Prior to joining the NASD, he was a lecturer at the John F. Kennedy School of Government at Harvard University from 1992 until 2000, Under Secretary of the Treasury for Finance from 1989 to 1992 and, prior to that, was a Professor of Finance at the Harvard Business School. Mr. Glauber previously served on the boards of the Federal Reserve Bank of Boston, a number of Dreyfus mutual funds and the Investment Company Institute. Mr. Glauber also is a director of Moody's Corporation. Proposal 1: Election of Directors 14 RICHARD KARL GOELTZ Director since 2003 Age 63 Mr. Goeltz was Vice Chairman, Chief Financial OÇcer and Member of the OÇce of the Chief Executive of American Express Company from 1996 to 2000. Prior to that, he was Group Chief Financial OÇcer and a member of the Board of NatWest Group from 1992 to 1996. Mr. Goeltz also held various Ñnance positions at The Seagram Company Ltd., including Executive Vice President-Finance and Chief Financial OÇcer, and at Exxon Corporation. He is a director of Warnaco Group, Inc., where he is Chair of the Audit Committee and a member of the Nominating and Corporate Governance Committee; a director of the New Germany Fund; and a director of Aviva plc, where he is a member of the Audit Committee and Chair of the Remuneration Committee. He also is a member of the Court of Governors and the Council of the London School of Economics and Political Science. THOMAS S. JOHNSON Director since 2004 Age 65 Mr. Johnson retired in September 2004 as Chairman and Chief Executive OÇcer of GreenPoint Financial Corporation, a national specialty mortgage lender and New York consumer banking company, following the acquisition of GreenPoint Financial by North Fork Bancorporation, Inc., with whom Mr. Johnson remained employed in a non-management capacity until December 31, 2004. Mr. Johnson had held the oÇces of Chairman and Chief Executive OÇcer of GreenPoint since 1993. He also was President of GreenPoint through 1997. Prior to that, he served as President and a director of Chemical Bank and Chemical Banking Corporation and then of Manufacturers Hanover Trust Company and Manufacturers Hanover Corporation. Mr. Johnson also is a director of Alleghany Corporation, where he is a member of the Audit Committee; RR Donnelley & Sons, Inc.; the Phoenix Companies, where he is Chairman of the Audit Committee; and North Fork Bancorporation. Proposal 1: Election of Directors 15 WILLIAM M. LEWIS, JR. Director since 2004 Age 50 Mr. Lewis is a Managing Director and Co-Chairman of Investment Banking at Lazard Ltd, a position he has held since April 2004. From 1978 to 1980 and from 1982 to April 2004, he held various positions at Morgan Stanley, most recently serving as Managing Director and CoHead of the Global Banking Department from 1999 to 2004. Mr. Lewis also is a director of Darden Restaurants, Inc. EUGENE M. McQUADE Director since 2004 Age 57 Mr. McQuade was appointed President and Chief Operating OÇcer of Freddie Mac eÅective September 1, 2004. Prior to joining Freddie Mac, Mr. McQuade was President of Bank of America Corporation. He also served as President and Chief Operating OÇcer of FleetBoston Financial Corp., which merged with Bank of America on April 1, 2004. Mr. McQuade joined Fleet in 1992 and became Chief Financial OÇcer in 1993, Vice Chairman in 1997, and President and Chief Operating OÇcer in 2002. Prior to joining Fleet, Mr. McQuade was Executive Vice President and Controller of Manufacturers Hanover Corp. Mr. McQuade also is a director of XL Capital Ltd. Proposal 1: Election of Directors 16 SHAUN F. O'MALLEY Director since 2001 Lead Director since 2003 Age 71 Mr. O'Malley served as Non-executive Chairman of Freddie Mac from June to December 2003. Upon the appointment of Mr. Syron as Chairman and Chief Executive OÇcer of Freddie Mac in December 2003, Mr. O'Malley resigned his position as Non-executive Chairman and became the Lead Director. Mr. O'Malley retired from Price Waterhouse LLP in 1995, where he was Chairman and Senior Partner from 1988 to 1995. He also was president of the Financial Accounting Foundation from 1990 to 1992. Mr. O'Malley also serves on the Board of Directors of Horace Mann Educators Corporation, where he is chair of its Audit Committee, and on the Board of Directors of Philadelphia Consolidated Holding Corp., which does business as Philadelphia Insurance Companies, where he is a member of the Governance and Nominating Committee and the Compensation Committee. JEFFREY M. PEEK Director since 2006 Age 59 Mr. Peek is Chairman and Chief Executive OÇcer of CIT Group Inc., a provider of commercial and consumer Ñnance solutions. Mr. Peek has served as Chief Executive OÇcer of CIT since July 2004 and as Chairman since January 2005. He has served as a director of CIT since September 2003, and previously served as President of CIT from September 2003 until January 2005 and Chief Operating OÇcer of CIT from September 2003 until July 2004. Prior to that, he served as Vice Chairman of Credit Suisse First Boston LLC from 2002 to 2003. Mr. Peek spent a large part of his career at Merrill Lynch & Co., Inc. from 1983 until 2001. He served in a variety of leadership positions at Merrill Lynch, including Executive Vice President of Merrill Lynch, cohead of Investment Banking, and President of Merrill Lynch Investment Managers. Proposal 1: Election of Directors 17 RONALD F. POE Director since 1990 Age 67 Mr. Poe has been President of Ronald F. Poe & Associates, a private real estate investment Ñrm, since 1998. In September 1998, he retired as Chairman of the Board and Chief Executive OÇcer of Legg Mason Dorman & Wilson, Inc., a real estate investment banking Ñrm, where he had worked for 34 years. Mr. Poe also is a director of CPC Resources, Inc., the for-proÑt wholly owned subsidiary of Community Preservation Corporation, a not-for-proÑt corporation. STEPHEN A. ROSS Director since 1998 Age 62 Mr. Ross has been the Franco Modigliani Professor of Finance and Economics at the Massachusetts Institute of Technology since 1998 and has been, and continues to be, a consultant to a number of investment banks and major corporations. He also has been Chairman and Chief Executive OÇcer of Compensation Valuation, Inc., a company specializing in the valuation of complex option contracts and option valuation services, since April 2003; a member of the Advisory Council of Taconic Capital Partners LLC, an event-driven hedge fund, since January 2004; a director of IV Capital Ltd., a London-based investment company, since May 1998; and Chairman of the Investment Advisory Board of IV Capital since July 2004. Mr. Ross also was Co-Chairman of Roll and Ross Asset Management Corporation, an investment management company, from 1986 to July 2004. He previously was the Sterling Professor of Economics and Finance at Yale University from 1976 to 1998, and a Professor of Economics and Finance at the Wharton School of the University of Pennsylvania. Mr. Ross is a member of the Board of Trustees of the California Institute of Technology. Proposal 1: Election of Directors 18 RICHARD F. SYRON Director since 2003 Age 62 Mr. Syron was appointed Chairman of the Board and Chief Executive OÇcer of Freddie Mac in December 2003. Prior to joining Freddie Mac, Mr. Syron was the Executive Chairman of Thermo Electron Corporation from November 2002 to December 2003. Mr. Syron was named to the Board of Thermo Electron in 1997. He became Chairman in January 2000 and was Chief Executive OÇcer from June 1999 to November 2002. He also served as President of Thermo Electron from June 1999 to July 2000. Prior to joining Thermo Electron, he served as Chairman and Chief Executive OÇcer of the American Stock Exchange from 1994 to May 1999, President of the Federal Reserve Bank of Boston from 1989 to 1994, and President of the Federal Home Loan Bank of Boston from 1986 to 1989. Mr. Syron also is a director of Genzyme Corporation. Meetings of the Board and Committees The Board met 10 times in 2005 and four times during the period from January 1, 2006 through June 1, 2006. During 2005, each of the current directors attended at least 75% of the meetings of the Board and committees on which he or she served, and the non-employee directors met regularly in executive session without management. The Ñve current standing Board committees are the Audit Committee, the CHRC, the Finance and Capital Deployment Committee, the GNROC and the Mission and Sourcing Committee. The committee charters of each of the Ñve current standing committees were revised in June 2006 and are available on our Website at www.freddiemac.com. Printed copies also are available to any stockholder on request to the Corporate Secretary, at the address speciÑed above under ""Contacting the Board.'' The Audit Committee charter also is attached to this Proxy Statement as Appendix B. In addition to these standing committees, a Special Derivative Litigation Committee (the ""SDLC'') was created by the Board in December 2003 to investigate allegations and claims made in stockholder derivative litigation on behalf of stockholders against certain current and former executive oÇcers and directors. For more information about this litigation, see NOTE 13: LEGAL CONTINGENCIES to the consolidated Ñnancial statements in the accompanying Annual Report. The membership of current Board members on each committee, along with the number of times each committee met in 2005 and during the period January 1, 2006 through June 1, 2006, is shown in the table below. Proposal 1: Election of Directors 19 COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS THEREOF IN 2005 AND DURING THE PERIOD JANUARY 1, 2006 THROUGH JUNE 1, 2006 Director Audit CHRC Finance and Capital Deployment É B. Alexander G. Boisi M. Engler R. Goeltz T. Johnson Chair É É SDLC Chair É É É É Chair É É R. Poe S. Ross É É É É É Mission and Sourcing É É Chair É W. Lewis E. McQuade(1) S. O'Malley J. Peek GNROC É Chair É É É É Chair 9 4 6 4 É É (1) R. Syron W. Turner 2005 Meetings 2006 Meetings(3) 16(2) 6 7(2) 4 9 4 7 2 (1) Messrs. Syron and McQuade are not members of any committee. (2) Includes one joint meeting of the Audit Committee and the Finance and Capital Deployment Committee. (3) January 1, 2006 through June 1, 2006. The following is a description of the Board committees and their responsibilities as of the date of this Proxy Statement: The Audit Committee's primary responsibility is to assist the Board in discharging its oversight responsibilities with respect to Ñnancial matters and compliance with laws and regulations. The committee's speciÑc responsibilities with respect to its oversight of Ñnancial matters are: to appoint, evaluate, monitor the independence of, determine the compensation of, and, as the committee may deem it appropriate, terminate and replace our independent auditors; to review the independent auditors' report on the independent auditors' internal quality control procedures; to pre-approve any audit services, and any non-audit services permitted under applicable law, to be performed by our independent auditors; to review management's policies and guidelines governing the processes for assessing and managing Freddie Mac's risks; to meet in joint session with the Finance and Capital Deployment Committee to review Freddie Mac's major Ñnancial risk exposures and the steps management has taken to monitor and control such exposures; to oversee the integrity of our Ñnancial reporting processes and disclosure, including systems of control regarding Ñnance, accounting, compliance with legal and regulatory requirements and programs for the detection and prevention of fraud; to hire, determine the compensation of, evaluate the performance of and decide whether to retain our Senior Vice President Ì General Auditor; and to assess the eÅectiveness of the internal auditors. The committee also conducts an annual evaluation of the committee's performance, including its oversight responsibilities described above. Proposal 1: Election of Directors 20 The Audit Committee's purposes, duties and responsibilities under its charter include those speciÑed in the NYSE listing standards for audit committees. The CHRC's primary functions are: in consultation with senior management, to approve Freddie Mac's executive compensation philosophy; to approve the compensation of Freddie Mac's executive oÇcers, including approving the goals and objectives relevant to determining the compensation of the CEO, evaluating the CEO's performance in light of those goals and objectives and such other factors as the CHRC deems relevant, and using that evaluation for purposes of determining the CEO's compensation; to approve cash incentive plans for non-executive oÇcers; to review, approve, amend and/or terminate any stock-based compensation or beneÑt plan and any retirement plan, including Freddie Mac's pension plan and thrift plan; to review the management of our human resources; to recommend outside director compensation; to review plans, policies and procedures for management succession; and to conduct an annual evaluation of the CHRC's performance. The CHRC's purposes, duties and responsibilities under its charter include those speciÑed in the NYSE listing standards for compensation committees. The Finance and Capital Deployment Committee's primary functions are: to review our capital requirements, management and allocation; to recommend dividends on our common and preferred stock for approval by the Board; to monitor our debt and mortgage-related securities activities; to monitor our investment, funding, liquidity and hedging strategies and activities; to monitor our asset/liability management techniques; to monitor enterprise risk metrics and limits; to meet in joint session with the Audit Committee to review Freddie Mac's major Ñnancial risk exposures and the steps management has taken to monitor and control such exposures; and to conduct an annual evaluation of the committee's performance. The GNROC's members are the chairs of each of the other standing committees and, if the Lead Director is not one of the committee chairs, the Lead Director, and any other directors designated by the Board. Its primary functions are: to oversee corporate governance matters generally, including reviewing and recommending changes in our bylaws, our Guidelines, and the independence standards and qualiÑcations for Board membership set forth in the Guidelines; to conduct an annual evaluation of the committee's performance and to oversee the annual evaluation of the performance of the Board and each of its other committees; to identify individuals qualiÑed to be members of the Board and to recommend Board nominees; to review and make recommendations concerning the independence of Board members and to review the application to Board members of membership qualiÑcations under the Guidelines; to review and make recommendations concerning membership on Board committees and on committee structure and responsibilities; to oversee enterprise-wide risk management strategies and governance, to review major enterprise risk exposures and to review the capabilities for and adequacy of resources allocated to enterprise risk management; to review management's proposed response to stockholder proposals submitted for inclusion in our Proxy Statement and make recommendations to the Board regarding responses to any such proposals; to oversee management of legislative and related matters; to review the activities of our political action committee; and to oversee our compliance with the consent order we have entered into with OFHEO. The GNROC's purposes, duties and responsibilities under its charter include those speciÑed in the NYSE listing standards for governance and nominating committees. Proposal 1: Election of Directors 21 The Mission and Sourcing Committee's primary functions are: to monitor our mission-related activities; to monitor our mortgage purchase activities, including