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Fitch Affirms Freddie Mac’s ‘AAA’ IDR; Places ‘A+’ Preferred Stock on Watch Negative

2008-07-17 09:21:00

NEW YORK–(EMWNews)–Fitch Ratings has affirmed Freddie Mac’s (NYSE:FRE) long-term Issuer

Default Rating (IDR) at ‘AAA’. Fitch has also has placed Freddie Mac’s

‘A+’ preferred stock on Rating Watch Negative. A complete list of

ratings is provided at the end of this release.

Today’s affirmation of Freddie Mac’s long-term IDR and senior debt

rating reflect the high probability of external support and the

company’s importance to the U.S. housing market. This likelihood has

increased recently due to the U.S. Treasury’s plan to maintain the

confidence and stability of the financial markets and, in particular,

maintaining the liquidity of Government Sponsored Enterprise (GSE) debt.

Also, the Federal Reserve Board has authorized lending to Freddie Mac,

if necessary, on a secured basis.

Fitch’s placement of Freddie Mac’s preferred stock on Rating Watch

Negative reflects the uncertainties surrounding the U.S. Treasury’s

plans, in general, and potential impact on preferred shareholders

specifically, from any needed equity investment from the Treasury. While

Fitch believes the Treasury has restored investor confidence, Freddie

Mac faces some execution risk surrounding its upcoming equity raise due

to the current market environment.

While dramatic change in the competitive landscape offers improved

pricing and opportunities longer term, Fitch believes Freddie Mac’s

ability to manage credit risk will be significantly challenged

throughout 2009 and into 2010. In resolving the Negative Rating Watch,

Fitch will consider Freddie Mac’s ability to raise capital as planned.

Fitch will continue to monitor Freddie Mac’s capital levels relative to

current and expected portfolio performance. Fitch will also seek

clarification on Treasury’s plans for GSEs.

Fitch has affirmed the following ratings with a Stable Outlook:

Freddie Mac

— Long-term IDR ‘AAA’;

— Senior unsecured ‘AAA’;

— Subordinated debt ‘AA-‘;

— Short-term IDR ‘F1+’;

— Short-term debt ‘F1+’;

— Support ‘1’;

— Support floor ‘AAA’.

Fitch has also placed the following rating on Rating Watch Negative:

Freddie Mac

— Preferred stock ‘A+’.

Fitch’s rating definitions and the terms of use of such ratings are

available on the agency’s public site,

Published ratings, criteria and methodologies are available from this

site, at all times. Fitch’s code of conduct, confidentiality, conflicts

of interest, affiliate firewall, compliance and other relevant policies

and procedures are also available from the ‘Code of Conduct’ section of

this site.

Fitch Ratings
Vincent Arscott, CFA, +1-212-908-0872 (New York)

Fahey, +1-312-368-5468 (Chicago)
Kenneth Reed, +1-212-908-0540

(Media Relations, New York)

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Jordan Taylor

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