$210,043,573. (Notional) Freddie Mac. Stripped Interest Certificates, Series 260

Transcription

1 Offering Circular Supplement (To Offering Circular Dated December 31, 2007) Offered Securities: Underlying Assets: $210,043,573 (Notional) Freddie Mac Stripped Interest Certificates, Series 260 Classes of Stripped Interest Certificates ( SCs ) listed below and the MACSC Classes shown on Annex I (collectively, the Certificates ) Mortgage interest payments consisting of the excess yield attributable to certain first lien, single-family, fixed rate, conventional Mortgages included in various pools that back previously issued Freddie Mac Gold PCs Mortgage Servicer: CitiMortgage, Inc. Payment Dates: Monthly, beginning in February 2010 Guarantee: Freddie Mac guarantees interest on the Classes Form of Classes: Book-entry (Federal Reserve Banks) Closing Date: January 29, 2010 Class of SCs Original Notional Principal Amount(1) Class Coupon Interest Type(2) CUSIP Number Final Payment Date 1... $ 7,191, % FIX/IO 31325TFL8 May 15, ,286, FIX/IO 31325TFM6 May 15, ,521, FIX/IO 31325TFN4 April 15, ,472, FIX/IO 31325TFP9 April 15, , (3) W/IO 31325TFQ7 May 15, ,947, FIX/IO 31325TFR5 May 15, ,016, FIX/IO 31325TFS3 May 15, ,719, FIX/IO 31325TFT1 May 15, ,811, FIX/IO 31325TFU8 May 15, ,513, FIX/IO 31325TFV6 May 15, ,851, FIX/IO 31325TFW4 May 15, ,316, (3) W/IO 31325TFX2 May 15, ,377, FIX/IO 31325TFY0 May 15, ,635, FIX/IO 31325TFZ7 May 15, ,946, FIX/IO 31325T F 2 0 May 15, ,012, (3) W/IO 31325T F 3 8 May 15, 2039 Class of SCs Original Notional Principal Amount(1) Class Coupon Interest Type(2) CUSIP Number Final Payment Date $ 4,975, % FIX/IO 31325T F 4 6 April 15, ,511, FIX/IO 31325T F 5 3 May 15, ,972, FIX/IO 31325T F 6 1 May 15, ,150, FIX/IO 31325T F 7 9 May 15, ,858, FIX/IO 31325T F 8 7 April 15, , (3) W/IO 31325T F 9 5 May 15, ,108, FIX/IO 31325TGA1 March 15, ,077, FIX/IO 31325TGB9 March 15, ,975, FIX/IO 31325TGC7 December 15, ,718, FIX/IO 31325TGD5 March 15, ,724, (3) W/IO 31325TGE3 March 15, ,913, FIX/IO 31325TGF0 January 15, ,858, FIX/IO 31325TGG8 January 15, ,498, FIX/IO 31325TGH6 February 15, ,923, FIX/IO 31325TGJ2 February 15, , (3) W/IO 31325TGK9 February 15, 2039 (1) Notional principal amount based on Mortgage balances as of January 1, (2) See Description of Pass-Through Certificates Categories of Classes in the Offering Circular. (3) Initial Class Coupon. Class Coupon is recalculated monthly as described under Description of the Certificates Interest on Certificates. The yields on the Certificates will be extremely sensitive to the prepayment experience of the Mortgages in the related Mortgage Groups. You should carefully consider the associated risks, including the risk that you may not fully recover your initial investment. The Certificates may not be suitable investments for you. You should not purchase Certificates unless you have carefully considered and are able to bear the associated prepayment, interest rate, yield and market risks of investing in them. Certain Risk Considerations on page S-2 highlights some of these risks. You should purchase Certificates only if you have read and understood this Supplement, the Offering Circular and the other documents listed under Available Information. Interest payments on the Certificates are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. The Certificates are not tax-exempt. Because of applicable securities law exemptions, we have not registered the Certificates with any federal or state securities commission. No securities commission has reviewed this Supplement. CitiMortgage, Inc. will sell the excess yield to Freddie Mac in exchange for the Certificates. CitiMortgage, Inc. has agreed to sell Freddie Mac all of the Certificates. Citi Offering Circular Supplement Dated December 22, 2009

2 CERTAIN RISK CONSIDERATIONS Although we guarantee interest payments on the Certificates, and so bear the associated credit risk, as an investor you will bear the other risks of owning mortgage securities. This section highlights some of these risks. You should also read Risk Factors and Prepayment, Yield and Suitability Considerations in the Offering Circular for further discussions of these risks. The Certificates May Not be Suitable Investments for You. The Certificates are complex securities. You should not purchase a Class of Certificates unless you are able, either alone or together with an investment advisor, to understand the associated prepayment, yield, liquidity and market risks and to analyze the information in this Supplement. Mortgage Prepayments and Repurchases Will Reduce Your Yield. The yields on the Certificates will be extremely sensitive to the prepayment experience of the Mortgages represented in the related groups of Mortgages described in this Supplement (each a Mortgage Group ). The Mortgages represented in the Mortgage Groups have been included in various pools that back previously issued Freddie Mac Gold PCs. For a discussion of certain prepayment considerations, investors should review Risk Factors in the Offering Circular and the PC Offering Circular. You should carefully consider the associated risks, including the risk that you may not fully recover your initial investment. The Yield of a Class of Certificates Will Depend upon Several Factors. The yield of each Class of Certificates will depend upon its purchase price and the rate of principal payments on the related Mortgages. The Mortgages are subject to prepayment at any time without penalty. Mortgage prepayment rates fluctuate continuously and (in some market conditions) substantially. The yield on a Class of Certificates could be lower than you expect if principal prepayments are faster than you expect. If prepayments are very fast, you may not even recover your investment. In the case of the WAC/IO Classes, disproportionately fast prepayments on the related Mortgages with relatively higher rates of excess yield would increase the likelihood of a reduced or negative yield. The Certificates are Subject to Market Risks. You will bear all of the market risks of your investment. The market value of your Certificates will vary over time, primarily in response to changes in prevailing interest rates. If you sell your Certificates when their market value is low, you may experience significant losses. Our Giant and Other Pass-Through Certificates Offering Circular dated December 31, 2007 defines many of the terms we use in this Supplement. S-2

3 AVAILABLE INFORMATION We registered our common stock with the U.S. Securities and Exchange Commission (the SEC ) under the Securities Exchange Act of 1934 (the Exchange Act ), effective July 18, As a result, we now file annual, quarterly and current reports, proxy statements and other information with the SEC. Prior to July 18, 2008, we prepared an annual Information Statement (containing annual financial disclosures and audited consolidated financial statements) and Information Statement Supplements (containing periodic updates to the annual Information Statement). As described below, we incorporate certain documents by reference in this Supplement, which means that we are disclosing information to you by referring you to those documents rather than by providing you with separate copies. We incorporate the following documents by reference in this Supplement: Our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 11, All other reports we have filed with the SEC pursuant to Section 13(a) of the Exchange Act since December 31, 2008, excluding any information furnished to the SEC on Form 8-K. All documents that we file with the SEC pursuant to Section 13(a), 13(c) or 14 of the Exchange Act after the date of this Supplement and prior to the termination of the offering of the Certificates, excluding any information that we furnish to the SEC on Form 8-K. Our Mortgage Participation Certificates Offering Circular dated September 25, 2009, which describes Gold PCs generally. Our Giant and Other Pass-Through Certificates Offering Circular dated December 31, 2007 (the Offering Circular ) and the related Offering Circular Supplements dated July 18, 2008 and March 11, 2009, which together describe Gold Giant PCs and SCs generally. Thesedocuments are collectively referred toasthe Incorporated Documents and are considered part of this Supplement. You should purchase Certificates only if you have read and understood this Supplement, the Offering Circular and the other Incorporated Documents. Information that we incorporate by reference will automatically update information in this Supplement. You should rely only on the most current information provided or incorporated by reference in this Supplement. You may read and copy any document we file with the SEC at the SEC s public reference room at 100 F Street, N.E., Washington, D.C Please call the SEC at SEC-0330 for further information on the public reference room. The SEC also maintains a website at that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC. You can obtain, without charge, copies of the Incorporated Documents, any documents we subsequently file with the SEC, the Trust Agreement and current information concerning the underlying assets and Certificates, as well as the disclosure documents and current information for any other securities we issue, from our Investor Inquiry Department or our internet website as described on page 4 of the Offering Circular. S-3

4 GENERAL INFORMATION The Trust Agreement We will form a trust fund to hold the underlying assets and to issue the Certificates, each pursuant to the Pass-Through Certificates Master Trust Agreement dated as of December 31, 2007 and a Terms Supplement consisting of this Supplement (together, the Trust Agreement ). We will act as Trustee and Administrator under the Trust Agreement. You should refer to the Trust Agreement for a complete description of your rights and obligations and the rights and obligations of Freddie Mac. You will acquire your Certificates subject to the terms and conditions of the Trust Agreement. MACSC Classes The Classes of Certificates will include MACSC Classes as described in Annex I. Form of Classes The Classes will be issued, held and transferable on the Fed System. Only a Fed Participant can be a Holder of SCs or MACSC Classes. As a beneficial owner, you are not necessarily the Holder. See Description of Pass-Through Certificates Form of Pass-Through Certificates, Holders and Payment Procedures in the Offering Circular. The Mortgages The Mortgages underlying the Assets (the Mortgages ) are first lien, single-family, fixed-rate, conventional mortgages and mortgage participations. Authorized Denominations The Classes will be issued, held and transferred in minimum original notional principal amounts of $100,000 and additional increments of $1. Payment Dates; Record Dates We will make payments on each outstanding Class on the 15th of each month or, if the 15th is not a Business Day, on the next Business Day (a Payment Date ), beginning in the month following the Closing Date. On each Payment Date, any payment on a Certificate will be made to the Holder of record as of the end of the preceding calendar month. Accrual Period The Accrual Period for each Payment Date is the preceding calendar month. Method of Payment A Federal Reserve Bank will credit payments on each Class to the accounts of Holders of that Class monthly on each Payment Date. Each Holder, and each other financial intermediary, will be responsible for remitting payments to their customers. S-4

5 Guarantees Freddie Mac guarantees to the Holders of each Class the timely payment of interest at its Class Coupon as described in this Supplement. Final Payment Dates The Final Payment Date for each Class is the latest date by which it will be paid in full and will retire. The Final Payment Date for each Class is based on the latest Final Payment Date for the Gold PCs backed by the related Mortgages. The actual retirement of each Class may occur earlier than its Final Payment Date. Excess Yield DESCRIPTION OF THE CERTIFICATES The assets underlying the Certificates consist of certain interest amounts (collectively, the Excess Yield ) payable on the Mortgages represented in the related Mortgage Groups. The Mortgages, which currently are serviced by CitiMortgage, Inc. ( Citi ), have been included in various pools that back previously issued Freddie Mac Gold PCs (the Gold PCs ). The Excess Yield is payable at rates (each, an Excess Yield Rate ) that, with respect to any particular Mortgage, will represent in the aggregate the following: the interest rate borne by that Mortgage less the applicable pass-through rate on the Gold PCs backed by that Mortgage less the guarantee fee rate applied to that Mortgage in connection with the Gold PCs less the minimum servicing fee rate.* * Freddie Mac requires that a Mortgage servicer retain a minimum amount of the interest rate borne by a Mortgage. In the case of the Mortgages related to this Series, the minimum servicing fee rate is 0.250% per annum. The portion of the Excess Yield attributable to any particular Mortgage may be directed to a single Class of SCs at the applicable Excess Yield Rate or may be divided into multiple components and directed to several Classes of SCs at the applicable Excess Yield Rates. As a result, a particular Mortgage may be represented in a single Mortgage Group or in multiple Mortgage Groups. Structure Freddie Mac will form a separate Pass-Through Pool with respect to the Excess Yield related to each Class of SCs. Each Class of SCs will represent a 100% beneficial ownership interest in the Excess Yields in the related Pass-Through Pool. As long as each Mortgage is included in a Gold PC pool, Citi will be obligated to advance the portion of the Excess Yield attributable to that Mortgage, if the related borrower does not make the regularly scheduled monthly payment. However, Citi will not be obligated to advance Excess Yield in excess of a S-5

6 prescribed limitation. The Freddie Mac guarantee will cover the amount of any interest shortfalls caused by this limitation. The Mortgages are being serviced pursuant to the Master Agreement between Freddie Mac and Citi and the Freddie Mac Single-Family Seller/Servicer Guide. The Freddie Mac Single-Family Seller/ Servicer Guide restricts Citi s ability to target borrowers for refinance. Citi has agreed, among other things, not to specifically target borrowers whose Mortgages are owned or securitized by Freddie Mac to the exclusion of other Mortgages with similar characteristics. Mortgage Groups Each Class of SCs listed on the front cover of this Supplement relates to a single Mortgage Group having the same numerical designation as that Class. As stated above, a particular Mortgage may be represented in a single Mortgage Group or in multiple Mortgage Groups. The following table sets forth certain information with respect to the Mortgages represented in each Mortgage Group as of January 1, Mortgage Group Pseudopool Number(1) Mortgage Principal Balance Excess Yield Rate(2) Weighted Average Interest Rate(3) Range of Interest Rates Weighted Average Remaining Term to Maturity (in months)(3) Weighted Average Loan Age (in months)(3) 1 X00647 $ 653,798, % 4.713% % X ,438, X ,417, X ,804, X ,392, X ,036, X ,004, X ,243, X ,051,182, X ,070,305, X ,207,084, X ,117,241, X ,549, X ,411, X ,050, X ,837, X ,369, X ,514, X ,910, X ,592, X ,368, X ,934, X ,614, X ,128, X ,025, X ,500, X ,697, X ,167, X ,569, X ,905, X ,344, X ,154, (1) For disclosure purposes, Freddie Mac has assigned a Pseudopool Number to each Mortgage Group. Investors may search Freddie Mac s internet website for information on each Pseudopool as of the Closing Date and for monthly updates by filling in the PC Security Lookup window with the Pseudopool Number for the related Mortgage Group. (2) These figures are a weighted average of the Excess Yield Rates for Mortgages represented in the related Mortgage Group, as of January 1, 2010, weighted by the unpaid principal balances of those Mortgages. (3) These figures are weighted by (i) the unpaid principal balances of the Mortgages represented in the related Mortgage Group and (ii) the applicable Excess Yield Rate for each of those Mortgages. Each Mortgage represented in a Mortgage Group other than Mortgage Groups from which WAC/IO SCs are issued (the WAC/IO Groups ) has the identical Excess Yield Rate with respect to that S-6

7 Mortgage Group. By contrast, the Mortgages represented in the WAC/IO Groups have different Excess Yield Rates. Those Excess Yield Rates will be within the following ranges: WAC/IO Group Excess Yield Rates % Each Class has a notional principal amount, which is used to calculate interest payments. The Classes are not entitled to any principal payment. For any Payment Date, the notional principal amount for each Class of SCs is derived by multiplying the applicable Mortgage principal balance as of the first day of that month by a Conversion Constant. The Conversion Constant for each Class of SCs is equal to (a) the applicable Excess Yield Rate (in the case of a WAC/IO SC Class, the weighted average Excess Yield Rate as of January 1, 2010) shown in the table above, divided by (b) the Class Coupon for that Class (in the case of a WAC/IO SC Class, the initial Class Coupon) shown on the front cover of this Supplement. The Mortgages represented in the related Mortgage Groups have been included in various pools that back previously issued Gold PCs. Principal payments attributable to the Mortgages represented in a Mortgage Group, including payments resulting from prepayments of the Mortgages or repurchases of the Mortgages from a Gold PC pool, will reduce the aggregate principal balance of the related Mortgage Group by the amount of the principal payments and, in turn, will reduce the notional principal amount of the corresponding Class of SCs proportionately. In general, the notional principal amount of a Class of SCs will be reduced as a result of principal payments at the same time and in the same manner as principal payments reduce the principal balance of the related Gold PCs. As a result, Mortgages that are prepaid in full or repurchased from the related Gold PC pool will be treated as having a principal balance of zero for purposes of calculating the notional principal amount of the related Class or Classes of SCs. Interest on Certificates We will pay 30 days interest on each Payment Date. The FIX/IO Classes will bear interest at the Class Coupons shown on the front cover and Annex I. The Class Coupon for each WAC/IO SC Class will be based on a weighted average of the Excess Yield Rates of the Mortgages represented in the applicable Mortgage Group using the unpaid principal balance of each Mortgage as a weight and will be recalculated monthly based on principal payments applied to such Mortgages. For any month, the Class Coupon for each WAC/IO SC Class will be equal to the applicable weighted average Excess Yield Rate for that month divided by the Conversion Constant for that Class, carried out to nine decimal places. Investors can obtain the Class Coupons for the current Accrual Period for the WAC/IO SC Classes on our internet website by entering the applicable Class CUSIP number or the Series number and the Class designation in the Strip Security Lookup window or by contacting Investor Inquiry at Freddie Mac. S-7

8 Class Factors General We make Class Factors available on or about the fifth business day of each month after the Closing Date. See Description of Pass-Through Certificates Payments Class Factors in the Offering Circular. Use of Factors You can calculate reductions in notional principal amounts and interest payments by using the Class Factors. For example, the reduction in the balance of a Class in February will equal its original balance times the difference between its January and February Class Factors. The amount of interest to be paid on a Class in February will equal 30 days interest at its Class Coupon, accrued during the related Accrual Period, on the balance of that Class determined by its January Class Factor. We calculate the Class Factors for MACSC Classes and for SC Classes that are exchangeable for MACSC Classes assuming that the maximum possible amount of each Class is outstanding at all times, without regard to any exchanges that may occur. Class Factors will be available each month on our internet website or by contacting our Investor Inquiry Department. To access the information on our internet website, investors should fill in the Strip Security Lookup window with the applicable Class CUSIP number or the Series number and the Class designation. Calculations All calculations made with respect to the Certificates will be final and binding, absent manifest error. No Optional Termination We have no option to effect an early termination of this Series. General Yield PREPAYMENT AND YIELD ANALYSIS As an investor in the Certificates, your yield will depend upon your purchase price and the rate of principal payments on the Mortgages represented in the related Mortgage Group. See Prepayment, Yield and Suitability Considerations Yields in the Offering Circular for a discussion of yield considerations and risks. Suitability The Certificates may not be suitable investments for you. See Prepayment, Yield and Suitability Considerations Suitability in the Offering Circular for a discussion of suitability considerations and risks. S-8

9 Modeling Assumptions To prepare the yield table below, we have employed the following assumptions (the Modeling Assumptions ), among others: As of January 1, 2010, each Mortgage represented in the related Mortgage Group has an Excess Yield Rate, interest rate, remaining term to maturity and loan age equal to the weighted average Excess Yield Rate, interest rate, remaining term to maturity and loan age for that Mortgage Group shown in the table on page S-6. The Class Coupons for the WAC/IO SC Classes remain constant at their initial Class Coupons. Payments on the Classes are always received on the 15th of the month, whether or not a Business Day. Each Class is outstanding from the Closing Date to retirement and no exchanges occur. The Classes are purchased at the prices listed in the table, plus accrued interest from the first day of the month of the Closing Date. When reading the table and the related text, you should bear in mind that the Modeling Assumptions, like any other stated assumptions, are unlikely to be entirely consistent with actual experience. For example, most of the Mortgages will not have the characteristics assumed, the Class Coupons for the WAC/IO SC Classes will vary over time and many Payment Dates will occur on a Business Day after the 15th of the month. Yield Table The following table shows, at various percentages of CPR, pre-tax yields to maturity (corporate bond equivalent) of each Class. We have prepared this table using the Modeling Assumptions and the assumed prices shown in the table, plus accrued interest from January 1, Actual sales may not occur at the assumed prices. The Mortgages will have characteristics that are more diverse than those assumed, and Mortgage prepayment rates will differ from the constant rates shown. These differences will affect the actual payment behavior and yields of the Classes. In the case of the WAC/IO Classes, disproportionately fast prepayments on the related Mortgages with relatively higher Excess Yield Rates would increase the likelihood of a reduced or negative yield. See Prepayment, Yield and Suitability Considerations Tabular Information in Supplements in the Offering Circular for a description of yield calculations and the CPR prepayment model. S-9

10 Pre-Tax Yields of All Classes Class Assumed Price 5% CPR 12% CPR 20% CPR 24% CPR % 8.3% 0.6% (8.7)% (13.5)% (8.8) (13.6) (9.0) (13.8) (0.1) (9.3) (14.1) (9.2) (14.0) (6.5) (11.4) (6.8) (11.6) (7.1) (11.9) (6.6) (11.4) (6.6) (11.4) (6.6) (11.4) (6.4) (11.3) (4.4) (9.3) (2.7) (7.6) (4.6) (9.5) (3.8) (8.8) (4.1) (4.6) (4.6) (4.4) (4.4) (4.4) (8.9) (13.7) (6.7) (11.6) (4.0) (8.9) (4.4) (6.3) (11.2) CERTAIN FEDERAL INCOME TAX CONSEQUENCES You should read Certain Federal Income Tax Consequences General, Giant Certificates Application of the Stripped Bond Rules and Strips in the Offering Circular for a general discussion of the anticipated material federal income tax consequences of owning an interest in a Class of SCs. S-10

11 Annex I MACSC CLASSES This Series includes Classes ( MACSC Classes ) of Modifiable and Combinable Stripped Interest Certificates ( MACSCs ). A Holder of Classes of SCs shown in the following table can exchange all or part of those SCs, in the exchange proportions shown, for a proportionate interest in the related MACSC Class, and vice versa. Each MACSC Class receives interest payments from the related SCs. SC Class Original Notional Principal Amount Exchange Proportions(1) MACSC Class Maximum Original Notional Principal Amount Exchange Proportions(1) Class Coupon Interest Type(2) CUSIP Number Final Payment Date Combination 1 1 $ 7,191, % 33 $21,471, % 4.0% FIX/IO 31325TGL7 May 15, ,286, ,521, ,472, Combination 2 6 $ 9,947, % 34 $62,859, % 4.5% FIX/IO 31325TGM5 May 15, ,016, ,719, ,811, ,513, ,851, Combination 3 13 $11,377, % 35 $31,958, % 5.0% FIX/IO 31325TGN3 May 15, ,635, ,946, Combination 4 17 $ 4,975, % 36 $27,469, % 5.5% FIX/IO 31325TGP8 May 15, ,511, ,972, ,150, ,858, Combination 5 23 $14,108, % 37 $42,880, % 6.0% FIX/IO 31325TGQ6 March 15, ,077, ,975, ,718, Combination 6 28 $ 3,913, % 38 $16,193, % 6.5% FIX/IO 31325TGR4 February 15, ,858, ,498, ,923, Combination 7 5 $ 770, % 39 $ 4,099, % %(3) W/IO 31325TGS2 May 15, ,316, ,012, Combination 8 22 $ 631, % 40 $ 3,111, % %(3) W/IO 31325TGT0 May 15, ,724, , (1) Exchange proportions are constant proportions of the original balances of the Classes of SCs or MACSC Classes, as applicable. In accordance with the exchange proportions, you may exchange SC Certificates for MACSCs, and vice versa. (2) See Description of Pass-Through Certificates Categories of Classes in the Offering Circular. (3) Initial Class Coupon. The Class Coupons for MACSC Classes 39 and 40 will vary from month to month, as their related SC Classes reduce at different rates and the Class Coupons of their related SC Classes change. Their Class Coupons will be derived by aggregating the accrued interest on their related SC Classes. We will issue the SCs shown on the front cover of this Offering Circular on the Closing Date. The SCs listed in the table above may be exchanged, in whole or in part, for the related MACSC Class at any time on or after the Closing Date. The specific Classes of SCs and MACSCs that are outstanding at any given time, and the outstanding notional principal amounts of those Classes, will depend on reductions on those Classes and any exchanges that have occurred. Exchanges of SCs for MACSCs, and vice versa, may occur repeatedly. MACSCs receive interest payments from the related SCs at the Class Coupon of the applicable MACSC Class. On each Payment Date when MACSCs are outstanding, we allocate interest payments from the applicable SCs to the related MACSCs. I-1

12 Your Ability to Exchange SCs and MACSCs May be Limited You must own the right SCs in the right proportions to enter into an exchange involving MACSCs. If you do not own the right SCs, you may not be able to obtain them because: The owner of SCs that you need for an exchange may refuse or be unable to sell those SCs to you at a reasonable price or at any price. Some SCs may be unavailable because they have been placed into other financial structures. Notional principal reductions over time will decrease the amounts available for exchange. MACSC Exchanges We permit exchanges subject to the following constraints: The Classes must be exchanged in the applicable exchange proportions shown above. As described below, these are based on the original notional principal amounts of the SCs or MACSC Class, as applicable. The aggregate notional principal amount (rounded to whole dollars) of the Certificates received in the exchange, immediately after the exchange, must equal that of the Certificates surrendered for exchange immediately before the exchange. The interest entitlement of the Certificates received in the exchange must at all times equal that of the Certificates surrendered for exchange. We base the exchange proportions on the original, rather than on the outstanding, balances of the Classes. At any time after the first Payment Date, the outstanding balances of the Classes of SCs are likely to have different proportions than their original balances. Any exchanges will be subject to the rules, regulations and procedures applicable to our book-entry securities. The first payment on an SC or a MACSC received in an exchange transaction will be made on the Payment Date in the month after the exchange. We will make this payment to the Holder of record as of the applicable Record Date. Procedures and Fees Notice If you want to exchange Classes, you must notify our Mortgage Funding Department through a dealer that belongs to our REMIC dealer group. The dealer must notify us by telephone ( or ) or by fax ( ). We must receive the notice not later than two Business Days before the proposed exchange date, which, subject to our approval, can be any Business Day other than the first or last Business Day of the month. The notice must include: The outstanding balances of both the Classes to be exchanged and the Classes to be received. The proposed exchange date. I-2

13 After we receive a notice, we will telephone the dealer to give instructions for delivering the exchanged Classes and the exchange fee to us by wire transfer. Your notice becomes irrevocable on the second Business Day before the proposed exchange date. Exchange Fee We charge a fee for each exchange. The fee for an exchange is 1 32 of 1% of the notional principal amount of the Certificates received or surrendered in the exchange, but not less than $1,000. Taxation of MACSC Classes You should read Certain Federal Income Tax Consequences General, Giant Certificates Application of the Stripped Bond Rules and Strips in the Offering Circular for a general discussion of the anticipated material federal income tax consequences of owning an interest in a MACSC Class. I-3

14 If you intend to purchase Certificates, you should rely on the information in this Supplement, including the information in the Offering Circular and the other Incorporated Documents. We have not authorized anyone to provide you with different information. This Supplement, the Offering Circular and the other Incorporated Documents may not be correct after their dates. We are not offering the Certificates in any jurisdiction that prohibits their offer. $210,043,573 (Notional) Freddie Mac Stripped Interest Certificates, Series 260 Description TABLE OF CONTENTS Page Certain Risk Considerations.... S-2 Available Information... S-3 General Information..... S-4 The Trust Agreement... S-4 MACSC Classes S-4 Form of Classes S-4 The Mortgages... S-4 Authorized Denominations... S-4 Payment Dates; Record Dates... S-4 Accrual Period... S-4 Method of Payment... S-4 Guarantees.... S-5 Final Payment Dates... S-5 Description of the Certificates... S-5 Excess Yield.... S-5 Structure S-5 Mortgage Groups..... S-6 Interest on Certificates.... S-7 Class Factors... S-8 Calculations... S-8 No Optional Termination..... S-8 Prepayment and Yield Analysis... S-8 General... S-8 Yield Table.... S-9 Certain Federal Income Tax Consequences... S-10 Annex I MACSC Classes.... I-1 Citi Offering Circular Supplement Dated December 22, 2009