Freddie Mac is a stockholder-owned financial services company chartered by Congress in 1970 under the Federal Home Loan Mortgage Corporation Act. Its principal offices are located in McLean, Virginia. Freddie Mac purchases residential mortgage loans and mortgage-related securities from mortgage lenders and securities dealers, and provides credit guarantee of payment of principal and interest for residential mortgages originated by mortgage lenders. Through its credit guarantee activities, Freddie Mac securitizes mortgage loans by issuing interests in pools of purchased mortgages to third-party investors. Freddie Mac also resecuritizes mortgage-related securities that are issued by it or the Government National Mortgage Association (Ginnie Mae), as well as non-agency entities. Freddie Mac purchases mortgage loans that finance homes in the United States, including its territories Puerto Rico, Guam, United States Virgin Islands. In the primary market, residential mortgage lenders originate or provide mortgages to homebuyers. These lenders include mortgage banking companies, commercial banks, savings banks, savings and loan associations, credit unions, and state and local housing finance agencies. Lenders may choose to replenish their supply of lending capital by selling the mortgage loans they originate into the secondary mortgage market. Freddie Mac's total United States residential mortgage debt was $8.7 trillion during the year ended December 31, 2004. Its total mortgage portfolio was $1.5 trillion in 2004. Freddie Mac purchases single-family mortgage loans, which are secured by one- to four-family properties, mainly from mortgage bankers, dealers, insurance companies and federally insured financial institutions. The types of single-family mortgage loans typically include 30-year, 20-year, 15-year and 10-year, fixed-rate mortgages, initial interest-only mortgages, adjustable-rate mortgages (ARMs) and balloon or reset mortgages. The substantial majority of the mortgage loans that Freddie Mac purchases are conventional mortgages. It purchases some mortgages that are fully insured by the Federal Housing Administration or the Rural Housing Service and some mortgages that are partially guaranteed by the Department of Veterans Affairs. In 2004, Wells Fargo Home Mortgage, Inc., Chase Home Finance LLC, ABN Amro Mortgage Group, Inc. and National City Mortgage Co. accounted for approximately 63% of Freddie Mac's mortgage purchase volume. Wells Fargo was the largest source and accounted for approximately 33% of its mortgage purchase volume in 2004, while Chase Home Finance LLC accounted for approximately 14%. Freddie Mac purchases multi-family mortgages, which are secured by structures with five or more units designed principally for residential use, from approved mortgage lenders. These lenders include federally insured financial institutions, mortgage bankers, investment bankers and insurance companies. These mortgages have terms generally ranging from 5 to 30 years. Freddie Mac purchases mortgage loans and mortgage-related securities, and hold them for investment purposes. It finances these purchases by issuing short, medium and long-term debt and subordinated debt, and equity securities. The Company invests in agency securities, non-agency, mortgage-related securities and whole mortgage loans. The Company competes with the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks.

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