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LIQUIDATION ANALYSIS OF FANNIE MAE AND FREDDIE MAC PREPARED FOR GSO CAPITAL PARTNERS March 19, 2014 VALUATION SERVICES, LLC This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

FNMA FHLMC Liquidation Valuation Analysis

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Page 1: FNMA FHLMC Liquidation Valuation Analysis

LIQUIDATION ANALYSIS OF FANNIE MAE AND FREDDIE MAC

PREPARED FOR GSO CAPITAL PARTNERS

March 19, 2014

VALUATION SERVICES, LLC

This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 2: FNMA FHLMC Liquidation Valuation Analysis

LIMITATIONS OF REPORT / NO THIRD PARTY RELIANCE This report (the “Report”) has been prepared at the request of GSO Capital Partners, LP (“GSO”) based on instructions given by GSO to Alvarez & Marsal Valuation Services, LLC (“A&M”).

This Report and the information contained herein (the “Information”) may not be reproduced, distributed or referenced without the prior written consent of A&M. A&M assumes no duties or obligations to any recipient of this Report by virtue of their access hereto.

The limiting conditions, assumptions and disclaimers set forth on this page and through the Report are an integral part of this Report, must be reviewed in conjunction herewith, and may not be modified or distributed separately.

Limitations of Report This Report has been prepared at the request of GSO for discussion purposes only to assist GSO in considering issues related to Fannie Mae and Freddie Mac. This Report does not contain the entirety of the advice and/or analysis A&M has provided to GSO as it relates to Fannie Mae and/or Freddie Mac and does not purport to contain all necessary information that may be required to evaluate any entity or transaction, regardless of how pertinent or material such information may be. In preparation of this Report, A&M relied solely on publically available information that came into its possession and has not independently verified any of the underlying source data which provided a basis for the Information (or is included herein). Accordingly, A&M makes no representation or warranty as to the accuracy, reliability or completeness of the Information or assumptions on which it is based. In addition, it is possible that the conclusions and analyses set forth in the Report would change should A&M have access to nonpublic information.

While the work related to this Report (the “Engagement”) may include an analysis of financial accounting data, it does not include an audit, compilation or review of any kind of any financial statements nor does it constitute an examination, compilation or agreed-upon procedures in accordance with standards established by the American Institute of Certified Public Accountants. Further, any references to estimated ranges of collateral values or cash flow recoveries included in this Report are not valuations of any kind. Rather, estimates included herein are based upon the limited public financial information that came into A&M’s possession (as well as various assumptions) and are provided for informational purposes only. There will be differences between estimated and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Accordingly, no representation or warranty is made as to, and A&M takes no responsibility for, the achievability of the expected results described in this Report and A&M does not express any opinion or other form of assurance on the financial statements or financial components referenced or relied upon herein.

This Report may be subject to further work, revision and other factors which may mean that such prior versions are substantially different from any final report or advice issued. A&M does not undertake any obligation to update or provide to any party any revisions to the Information to reflect events, circumstances or changes in expectations after the date such Information was derived, developed, reviewed or created by A&M. The Information does not constitute a recommendation as to what action, if any, any person should take with respect to any securities, nor does the Information constitute a recommendation regarding the accounting, tax, financial, legal or regulatory aspects of any proposed or possible structure of any transaction.

No Third Party Reliance A&M is not responsible to any party, in any way, for the future financial or operational performance of Fannie Mae and Freddie Mac or any affiliated company.

This Report and any related advice or Information is provided solely for the use and benefit of GSO and only in connection with the purpose in respect of which the services are provided. In no event, regardless of whether consent has been provided, shall A&M assume any responsibility, liability or duty of care to any person or entity other than GSO (“Third Party”) to which any Information is disclosed or otherwise made available. This Report does not necessarily take account of those matters or issues which might be of relevance to any Third Party, A&M has not considered any such matters or issues, and any Third Party is responsible for conducting its own investigation with respect to the Information and any related transactions or activities. A&M makes no representations or warranties, express or implied, to any Third Party on which any such party may rely with respect to the Information, including without limitation, as to accuracy or completeness, the inclusion or omission of any facts or information, or as to its suitability, sufficiency or appropriateness for the purposes of any such party.

A&M Firm Alvarez & Marsal Valuations Services, LLC (“A&M”) and certain of its affiliates make up a part of a global consulting firm, however, this Report is solely a product of A&M and not of any affiliate of A&M (notwithstanding any such affiliates’ involvement in the matters relating hereto).

1 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 3: FNMA FHLMC Liquidation Valuation Analysis

METHODOLOGY & ASSUMPTIONS

VALUATION SERVICES, LLC

Page 4: FNMA FHLMC Liquidation Valuation Analysis

OVERVIEW - METHODOLOGY & ASSUMPTIONS Objective • The objective of this analysis is to estimate the possible cash flows of FNMA and FHLMC (the “GSE’s”) assuming an orderly liquidation

over ten years, and relying only on publicly available information based on the assumptions and methodology discussed herein.1

Summary of Methodology • Deconsolidated the trusts to estimate stand-alone balance sheets for FNMA as of June 30, 2013 and FHLMC September 30, 2013. • Projected future cash flows of the trusts in the ordinary course to estimate future guarantee fees to the GSEs and future purchases by the

GSEs of loans in the trusts that become seriously delinquent (120 days past due). • Projected cash flows from the retained investment and loan portfolios. • Projected cash flows for short and long term debt. • Estimated the liquidation value of remaining assets and the pay down of remaining debt at the end of year ten. Key Assumptions • No future securitizations or guarantees. • Existing securitizations have the guarantee of the US government and run off in the ordinary course until the final payment of the last loan. • The debt of FNMA and FHLMC have the guarantee of the US government, including future short term borrowings for liquidity purposes. • A generally stable economic environment characterized by moderate growth, a gradually improving housing market and increasing interest

rates. • No material change in the policies of each GSE. • No cash income tax until later years as a result of the utilization of tax attribute carry forwards; alternatively calculated cash income taxes,

using a Federal statutory rate of 35%. • As a result of very limited visibility into each GSE’s interest rate management, we were unable to model the use of derivatives in the cash

flow projections. • Reduction in current run rate operating expenses to reflect no new securitizations from day one, a reduction in workout costs to normalized

levels over next three years and further cost reductions as each GSE’s balance sheet shrinks. • Any excess or deficit of cash flows from operating and investing activities versus contractual maturities of long term debt are assumed to

pay down short term debt or invested in fed funds sold or, alternatively, funded by short term debt. • Year ten haircuts applied to remaining portfolios of performing loans, TDR loans and loans purchased from the trusts. • Transfer of administration of remaining trusts at the end of year ten to a third party. • No large settlements of litigation announced since balance sheet dates reflected in future cash flows. 1We note that this Report presents a summary of our analysis, methodology and assumptions. Though we have made an attempt to describe those assumptions that we deem significant and relevant to the discussion in connection with which this Report is presented, it is possible that assumptions that are not disclosed herein would be considered material and therefore important to a recipient hereof in assessing the utility and reliability of the analyses.

Future validation of stand-alone balance sheet and assumptions will be necessary once access to Fannie Mae and Freddie Mac non-public information becomes available.

3 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 5: FNMA FHLMC Liquidation Valuation Analysis

PROJECTION OF CASH FLOWS OF TRUSTS

Mortgage Loans

Single-family

Fixed Legacy

New

ARM Legacy

New

Multifamily

Fixed Legacy

New

ARM Legacy

New

Information from the June 2013 10Q for FNMA and the September 2013 10Q for FHLMC was relied on to model the cash flows of mortgage loans as follows:

• Legacy Book (originations pre-2009) vs. New Book (originations 2009 and after). • In order to project cash flows of the trusts, we started with the opening balances of the above buckets, calculated

the contractual amortization, estimated prepayments and those loans which will become seriously delinquent (120 days past due) which are then purchased at par by each GSE, using assumptions as discussed in the following sections.

• We then projected guarantee fees by applying the guarantee fee (“G Fee”) assumptions, as discussed in the following sections, to the quarterly balances of the mortgage loans in the trusts.

4 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 6: FNMA FHLMC Liquidation Valuation Analysis

Delinquent Loans

Troubled Debt Restructuring

Performing TDR

TDR Defaults after 1 Year

Default Net of Loss

Proceeds Realized in 2 Years

1/2

1/2

2/3 FNMA 4/5 FHLMC

1/3 FNMA 1/5 FHLMC

• Loans are purchased from the trusts when they become seriously delinquent (120 days past due). In estimating loans which will become seriously delinquent in the trusts, we applied a delinquency factor of two times defaults. This factor was estimated by analyzing the relationship of foreclosures, short sales and deeds in lieu of foreclosure to total loans going through workouts, as disclosed in the SEC filings of both GSEs.

• Of the delinquent loans purchased from the trusts, we assume that one-half will default,* no interest will be collected for two years, and

then a recovery (net of severity) will be realized.

• We assume that the other half of the delinquent loans purchased from the trusts that do not default will go through a workout for one year, during which no interest is collected, and then go through troubled debt restructuring (“TDR”) and earn interest at a lower rate per the restructured terms. Cash flows are projected on restructured loans utilizing the prepayment, default and severity assumptions discussed in the following sections.

• We assume that a certain percentage of the TDR loans (see chart below) will default the year after being restructured. The recovery (net of severity) on these loans is reflected in the cash flows at the end of the second year.

• For defaulted loans, the loss is determined by applying the severity assumptions discussed in the following sections. The losses are

aggregated in accumulated severity, which reduces the amount of loans on the balance sheet.

*Defaults are defined as loan liquidations other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deed in lieu of foreclosure.

PROJECTION OF CASH FLOWS FROM SERIOUSLY DELINQUENT LOANS PURCHASED BY GSES AT PAR FROM THE TRUSTS

5 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 7: FNMA FHLMC Liquidation Valuation Analysis

SINGLE-FAMILY PREPAYMENT ASSUMPTIONS

• We believe the Legacy Book will prepay faster than the New Book due to its higher origination interest rate.

• We calculated historical prepayments from June 2013 to December 2013 for New Book and Legacy Book using vintage years data.

• Given the assumption of gradually increasing interest rates, we project a slight downward trend from the historical prepayments for both the

Legacy Book and New Book.

For multifamily we assume little to no prepayments due to yield-maintenance provisions, other prepayment fees and lock-out periods in multifamily loans.

Year

New Legacy New Legacy

Q2 2013* 18.30% 27.75% 18.97% 27.20%Q3 2013* 14.16% 25.07% 15.04% 24.29%

Q4 2013* 10.91% 20.91% 11.19% 19.52%

Remainder 2013 12.54% 22.99% 11.19% 19.52%2014 10% 19% 10% 18%

2015 10% 17% 10% 16%2016 10% 15% 10% 15%2017 10% 15% 10% 15%2018 10% 15% 10% 15%2019 10% 15% 10% 15%2020 10% 15% 10% 15%2021 10% 15% 10% 15%2022 10% 15% 10% 15%2023 10% 15% 10% 15%

* Source: Historical CPR is from Mortgage-Backed Securities Online based on FNMA/FHLMC factors.

FNMA BASE FHLMC BASE

PRO

JECT

EDHI

STO

RICA

L

6 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 8: FNMA FHLMC Liquidation Valuation Analysis

SINGLE-FAMILY DEFAULT ASSUMPTIONS

Note: Defaults are defined as loan liquidation other than through voluntary pay-off or repurchase by lenders and include loan foreclosures, short sales, sales to third parties and deed in lieu of foreclosure.

• We relied on cumulative defaults by vintage year, where available, to calculate annual historical defaults.

• For projected years, we continued to trend lower for the Legacy Book, as is normally the case given its stage of the default curve. For the New Book, we increased annual defaults to a peak in 2018 and then trended defaults lower, as is typical of a default curve.

• Historically, Fannie Mae has experienced higher defaults compared to Freddie Mac, which is the case for both the Legacy Book and New Book default assumptions.

Year Legacy Book New Book Legacy Book New Book2008 0.60% 0.00% N/A N/A2009 1.00% 0.00% N/A N/A2010 1.70% 0.00% N/A N/A2011 1.50% 0.02% 1.16% 0.03%2012 1.00% 0.07% 1.05% 0.07%

Q1 2013 0.20% 0.00% 0.24% 0.02%Q2 2013 0.20% 0.02% 0.21% 0.02%Q3 2013 0.30% 0.01% 0.21% 0.03%Q4 2013 0.22% 0.03% N/A N/AFY2013 0.92% 0.06% N/A N/A

Cumulative Defaults as of Q3/Q4 2013 7.82% 0.15% 5.55% N/A

Remainder 2013 0.90% 0.07% 0.86% 0.11%2014 0.72% 0.11% 0.68% 0.14%2015 0.57% 0.15% 0.54% 0.15%2016 0.45% 0.20% 0.42% 0.17%2017 0.36% 0.27% 0.33% 0.19%

2018 0.28% 0.35% 0.26% 0.20%2019 0.23% 0.31% 0.21% 0.18%2020 0.18% 0.28% 0.16% 0.17%2021 0.14% 0.25% 0.13% 0.15%2022 0.11% 0.23% 0.10% 0.13%

2023 0.09% 0.20% 0.08% 0.12%

Total Projected Defaults 4.03% 2.42% 3.78% 1.71%

FHLMC SINGLE-FAMILYBASE SCENARIO BASE SCENARIO

PRO

JECT

EDHI

STO

RICA

L

FNMA SINGLE-FAMILY

7 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 9: FNMA FHLMC Liquidation Valuation Analysis

MULTIFAMILY DEFAULT ASSUMPTIONS

• Fannie Mae multifamily historical annual default rates were calculated in a manner similar to single family defaults.

• Projected defaults for the Legacy Book are assumed to continue to trend down, while New Book defaults trend up to a peak in 2015 before trending down.

• We have very little visibility into the multifamily book of Freddie Mac. Consequently, we relied on Fannie Mae assumptions for Freddie Mac. (Note that multifamily is 5.2 percent and 4.2 percent of the total guarantee books of Fannie Mae and Freddie Mac, respectively).

BLENDYear Legacy New2009 0.28%2010 0.61%2011 0.53%2012 0.35%

YTD Q3 2013 0.26%

Remainder 2013 0.30% 0.40% 0.20%2014 0.29% 0.36% 0.22%2015 0.28% 0.32% 0.24%2016 0.25% 0.29% 0.22%2017 0.23% 0.26% 0.20%2018 0.21% 0.24% 0.18%2019 0.18% 0.21% 0.16%2020 0.17% 0.19% 0.14%2021 0.15% 0.17% 0.13%2022 0.13% 0.15% 0.12%2023 0.12% 0.14% 0.10%

BASE CASE

PRO

JECT

EDHI

STO

RICA

L

8 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 10: FNMA FHLMC Liquidation Valuation Analysis

SINGLE-FAMILY SEVERITY

• We expect the Legacy Book to experience a higher severity than the New Book due to differences in underwriting criteria and housing

prices at the time of origination using the blended severity rate and the worst severity rate during the period from 2008 through 2011, we estimated severity rates for the Legacy Book and the New Book.

• Historically, Freddie Mac has experienced a higher severity rate than Fannie Mae.

• Severity rates trend down for both the Legacy Book and the New Book as a result of the assumption of a gradually improving housing market.

Year ALLLegacy Book

New Book ALL

Legacy Book New Book

Q2 2012 30.59% 37.90%Q3 2012 29.83% 39.95%FY 2012 30.71% 39.05%Q1 2013 27.18% 38.55%Q2 2013 24.93% 36.15%Q3 2013 22.16% 34.70%Q4 2013 N/A 34.15%FY 2013 24.22% N/A

Remainder 2013 24.93% 37.70% 19.88% 34.70% 41.30% 32.26%2014 34% 18% 37% 29%2015 31% 16% 33% 26%2016 27% 15% 30% 24%2017 25% 15% 27% 21%2018 22% 15% 24% 19%2019 20% 15% 22% 17%2020 20% 15% 20% 15%2021 20% 15% 20% 15%2022 20% 15% 20% 15%2023 20% 15% 20% 15%

FNMA SINGLE-FAMILY

HIST

ORI

CAL

PRO

JECT

ED

FHLMC SINGLE-FAMILYBASE SCENARIOBASE SCENARIO

9 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 11: FNMA FHLMC Liquidation Valuation Analysis

MULTIFAMILY SEVERITY

• The Fannie Mae Credit Supplement provides multifamily credit losses for the Legacy Book, which are three times that of the New Book,

and the Legacy Book and New Books each approximate 50 percent of the multifamily portfolio.

• The Freddie Mac Loss Summary report of states that foreclosures prior to 2008 experienced a severity rate of 11 percent, which was applied to the New Book. Foreclosures after 2008 experienced a severity rate of 32 percent, which was applied to the Legacy Book.

• The severity rate is assumed to continue to trend down as a result of gradually rising multifamily housing prices.

Year ALL Legacy BookNew Book Legacy Book New Book

FY 2012 37.43%Q1 2013 34.49%Q2 2013 30.07%Q3 2013 21.00%FY 2013 23.56%

Remainder 2013 22.00% 33% 11% 32% 11%2014 31% 10% 30% 11%2015 30% 10% 29% 10%

2016 28% 9% 27% 10%2017 27% 9% 26% 9%2018 26% 9% 25% 9%2019 25% 9% 25% 9%2020 25% 9% 25% 9%2021 25% 9% 25% 9%2022 25% 9% 25% 9%2023 25% 9% 25% 9%

HIST

ORI

CAL

FHLMC MULTI FAMILYBASE SCENARIOBASE SCENARIO

PRO

JECT

ED

FNMA MULTI FAMILY

10 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 12: FNMA FHLMC Liquidation Valuation Analysis

GUARANTEE FEE ASSUMPTIONS

(in basis points) Fannie Mae Freddie Mac

Total Single Family 32.4 30.6

Legacy Book 30.9 22.7

New Book 33.2 34.0

Total Multifamily 56.3 30.3

Legacy Book 39.1

New Book 72.2

• In order to calculate the G Fee on the total single family Fannie Mae guarantee book, we relied on the effective G Fee of 35.8 basis points for the single family guarantee book, as disclosed in the Fannie Mae June 2013 10Q, and applied an adjustment for the portion of the G Fee to be paid to the U.S. Treasury. We relied on the single family effective G Fee from the 2008 10K for the Legacy Book and calculated the G Fee for New Book based on the percentage of New Book to total guarantee book.

• We calculated the G Fee for the Legacy Book and New Book of Freddie Mac using the G Fee by vintage years, as disclosed in the September 2013 10Q.

• We calculated the Fannie Mae multifamily G Fee assumptions in a manner similar to that applied to the single family G Fee for Fannie Mae, but relied on the effective G Fee rate for the total multifamily book of 58.4 basis points, as disclosed in the June 2013 10 Q.

• We relied on the effective G Fee of 30.8 basis points from the Freddie Mac September 2013 10Q, adjusted for our estimate to be paid to the U.S. Treasury, for the Freddie Mac New Book G Fee applicable to the multifamily book. A substantial portion of New Book are K Certificates (with loss sharing to third parties), which have a lower G Fee. We estimate the Legacy portion of the multifamily guarantee book is de-minimis.

11 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 13: FNMA FHLMC Liquidation Valuation Analysis

PROJECTION OF CASH FLOWS FROM RETAINED LOAN AND INVESTMENT PORTFOLIOS

• Cash flows from performing and TDR loans on the opening balance sheet are projected by calculating the contractual amortization and applying the prepayment, delinquency, default and severity assumptions previously discussed to the same buckets, where available.

• Interest income is projected relying on average yield information disclosed in SEC filings. • For variable interest loans, the LIBOR forward curve was applied. • For those TDR loans which we estimated had been restructured over the past year, additional severity was calculated for the portion of

restructured loans that default within one year of restructuring. • Cash flows from investments in agency MBS on the opening balance sheet are projected by calculating the contractual amortization and

applying the prepayment assumptions previously discussed using the same buckets, where available. • Interest income is projected relying on average yield information disclosed in SEC filings.

• We have very little visibility into non-agency investments in Alt-A, Subprime, and Option Arm securities, as well as CMBS. • There is reference in the SEC filings to these investments being senior tranches. • As a result, we have reflected these investments at the lower of cost or market value in the opening balance sheet (thereby

reflecting any loss reserves recorded as of the balance sheet date) and applied conservative assumptions (see chart below), to opening balance sheet amounts in order to project cash flows.

• For variable interest securities, the LIBOR forward curve was applied. • The losses resulting from applying severity assumptions on loan and non-agency investments are aggregated in accumulated severity,

which reduces the amount of loans and investments on the balance sheet of each GSE.

Freddie Mac - Non-Agency Investment Assumptions

Sept. 30 Balances WAC Maturity in Years Prepay Default Severity

(000's)(Alt-A, Subprime, Option ARMS) 43,265 5.74% 8.0 5.0% 8.0% 55.0%

CMBS* 34,676 3.20% 4.0 0.0% 3.0% 30.0%

Fannie Mae - Non-Agency Investment Assumptions

June 30 Balances WAC Maturity in Years Prepay Default Severity

(000's)(Alt-A, Subprime, Option ARMS) 24,138 5.40% 8.0 5.0% 8.0% 50.0%

CMBS* 17,435 3.20% 4.0 0.0% 3.0% 30.0%* CMBS are variable interest rate securities.

12 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 14: FNMA FHLMC Liquidation Valuation Analysis

PROJECTION OF CASH FLOWS USED FOR DEBT SERVICE

Long Term Debt

• We were able to obtain the details of the long term debt for FNMA and FHLMC at the security level from each GSE’s website. This information included terms such as maturity date and interest rate.

• We modeled out the repayment of long term debt based on the contractual maturity date of each debt security.

• Long term debt includes fixed rate, variable rate, step interest and zero coupon securities.

• Interest expense was projected for each debt security in accordance with its contractual terms.

• For variable interest debt the LIBOR forward curve was used.

Short Term Debt

• Interest on short term debt has been 13 basis points, which approximates the fed funds rate.

• Interest expense on short term debt was projected using the fed funds forward curve.

13 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 15: FNMA FHLMC Liquidation Valuation Analysis

OTHER ASSUMPTIONS

• Cash is reduced pro-rata as the balance sheet of each GSE shrinks.

• Non-performing loans, net of severity, calculated using Q2, 2013 total severity of 24.9 percent and Q3, 2013 total severity of 34.7 percent for FNMA and FHLMC, respectively, in the opening balance sheet is realized over the next three years.

• Other Real Estate Owned (“OREO”) property on the opening balance sheet is realized over the next three quarters.

• We have very little visibility into Other Assets net of Other Liabilities of $8.6 billion and $2.6 billion for FNMA and FHLMC, respectively. Consequently, we assumed they are realized equally over the next ten years.

• The historical run-rate of operating expenses for each GSE was reduced by one third of Salaries & Benefits, one-half of professional services over the next three years, and then further reduced pro-rata as the balance sheet of each GSE shrinks.

14 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 16: FNMA FHLMC Liquidation Valuation Analysis

SUMMARY RESULTS

VALUATION SERVICES, LLC VALUATION SERVICES, LLC

Page 17: FNMA FHLMC Liquidation Valuation Analysis

PROJECTED CASH FLOWS • Based on our analysis, the ten year cash flows generated for each GSE are estimated as follows:

10 Year Total Cash Flows (USD in millions)

Fannie Mae Freddie Mac

2014 - 2023 2014 – 2023

Interest Income $108,971 $93,763

Guaranty Fees 48,515 26,364

Interest Expense (49,534) (38,460)

Administrative Expenses (11,952) (8,828)

Cash Income Taxes - (1,564)

Net Cash Flows from Operating Activities $95,999 $71,276

Principal Payments, Prepayments and Recoveries on Retained Loan Portfolio $207,586 $132,917

Recovery from NPLs and OREO 82,677 35,011

Principal Payments, Prepayments and Recoveries (1) on Retained Investment Portfolio 203,317 297,228

Purchases of Loans from MBS Trusts (77,331) (37,253)

Principal Payments, Prepayments and Recoveries Related to MBS Trusts 50,254 23,488

Realization of Other Assets / Liabilities 8,588 2,630

Net Cash Flows From Investing Activities $475,091 $454,021

Net Cash Flows From Financing Activities (2) ($563,637) ($525,698)

Net Increase (Decrease) in Cash (3) $7,454 ($401)

(1) Includes recoveries from non-agency investment securities. (2) Represents paydown of Long Term Debt, Short Term Debt and Dividends Payable. (3) Represents release of cash from cash and cash equivalents, restricted cash, loans held for sale and from fed funds sold / purchased.

16 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 18: FNMA FHLMC Liquidation Valuation Analysis

(1) The opening balance sheet eliminates assets and liabilities identified as those of the consolidated trusts in the SEC filings of the GSEs and reflects adjustments made to (i) include accrued dividend paid to U.S. Treasury the next quarter (ii) reflect retained investment and loan portfolios per segment disclosures in SEC filings (iii) eliminate interest receivable and payable and restricted cash of unconsolidated trusts (iv) reflect nonperforming loans, net of severity of $23.03 billion and $16.2 billion calculated using Q2 2013 and Q3 2013 total severity of 24.93% and 34.7% for Fannie Mae and Freddie Mac, respectively and (v) reflect investment in non-agency securities at lower of cost or market.

(2) Retained Investment Portfolio balance, net of severity of $3,461 million for Fannie Mae and $6,818 million for Freddie Mac in 2023.

BALANCE SHEET • The following shows the change in the balance sheet of each GSE at the end of the ten year period:

Balance Sheet (USD in millions)

Fannie Mae Freddie Mac

Jun 30, 2013 (1) Jun 30, 2023 Sep 30, 2013 (1) Sep 30, 2023

Cash, Cash Equivalents & Fed Funds Sold $65,674 $73,572 $39,359 $49,433

Retained Investment Portfolio 230,424 23,646 (2) 333,915 29,869 (2)

Retained Loan Portfolio 110,000 22,459 69,800 830

Retained TDR Loan Portfolio 137,340 17,295 74,153 10,206

Non-Performing Loans (NPLs) 72,340 - 30,572 -

Other Real Estate Loans (OREO) 10,266 - 4,368 -

MBS Trusts - 27,076 - 13,765

Loans Held For Sale 444 - 10,475 -

Accumulated Severity - (12,064) - (6,263)

Mortgage Loans 330,419 54,766 189,368 18,538

Deferred Tax Assets 48,679 15,079 23,930 -

Other Assets – Net 8,588 - 2,630 -

Total Assets $683,784 $167,064 $589,202 97,839

Dividend Payable 10,243 - 30,436 -

Short Term Debt 102,799 - 136,030 -

Long Term Debt 500,441 49,846 379,638 20,406

Total Liabilities $613,483 $49,846 $546,104 $20,406

Total Equity 70,301 117,217 43,098 77,433

Total Debt + Equity $683,784 $167,064 $589,202 $97,839

17 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 19: FNMA FHLMC Liquidation Valuation Analysis

LIQUIDATION PROCEEDS

• As previously discussed, our analysis assumed all cash flows generated through operating and investing activities were used to repay maturities of long term debt, repay short term debt and invest in fed funds sold.

• At the end of year ten, net assets are liquidated and the proceeds are used to repay remaining debt. • The net liquidation proceeds for each GSE are as follows:

Year 2023 Liquidation Proceeds (USD in millions)

Fannie Mae Freddie Mac

Book Value Liquidation Value Book Value Liquidation Value

Cash, Cash Equivalents & Fed Funds Sold $73,572 $73,572 $49,433 $49,433

Investment in Securities 23,646 23,646 29,869 29,869

Performing Loans – Retained Portfolio: Conforming Loans (1)

20,711 19,676 - -

Performing Loans – Retained Portfolio: TDR (2) 17,295 15,565 10,077 9,069

MBS Trusts (2) 16,760 15,084 8,460 7,614

Mortgage Loans 54,766 50,325 18,538 16,684

Total Assets 147,543 95,986

Short Term Debt - -

Long Term Debt (3) (49,954) (22,200)

Total Debt (49,954) (22,200)

Net Liquidation Proceeds (4) $97,589 $73,786

(1) Liquidation Value represents a 5% discount to book value. (2) Liquidation Value represents a 10% discount to book value. (3) Includes additional zero coupon interest through 2023 of $107.9 million for Fannie Mae and $1,793 million for Freddie Mac (4) Net Liquidation Proceeds would be $61,429 million for Fannie Mae and $47,583 million for Freddie Mac if cash income taxes are applied, calculated at the 35% Federal statutory rate.

18 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 20: FNMA FHLMC Liquidation Valuation Analysis

Fannie Mae Supplemental Schedules

VALUATION SERVICES, LLC VALUATION SERVICES, LLC

Page 21: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LPLiquidation Analysis of Federal National Mortgage Association (Fannie Mae)Estimate of Fannie Mae Balance Sheet as of June 30, 2013 Valuation Date: June 30, 2013US$ in millions Page 1 of 1

Fannie Mae (Consolidated) Remove Consolidated Trusts Other Adjustments (1) Fannie Mae (Stand alone)

AssetsCash And Cash Equivalents 24,718$ -$ -$ 24,718$ Restricted Cash 53,930 (48,774) (2,000) 3,156 Federal Funds Sold And Securities Purchased Under Agreements To Resell Or Similar Arrangements 37,800 - - 37,800 Investments In Securities 95,725 (665) 135,364 230,424 Mortgage Loans

Of Fannie Mae 279,475 - 40,678 320,153 Of Consolidated Trust 2,696,579 (2,696,579) - -

Acquired Property, Net 10,266 - - 10,266 Accrued Interest Receivable 8,997 (7,725) (1,272) - Deferred Tax Assets, Net 48,679 - - 48,679 Other Net Assets 8,222 366 - 8,588

Total Assets 3,264,391$ (2,753,377)$ 172,770$ 683,784$

LiabilitiesAccrued Dividends -$ -$ 10,243$ 10,243$ Accrued Interest Payable 10,613 (8,275) (2,338) - Debt - - - -

Of Fannie Mae 603,240 - - 603,240 Of Consolidated Trust 2,637,295 (2,637,295) - -

Total Liabilities 3,251,148 (2,645,570) 7,905 613,483

Total Equity 13,243 (107,807) 164,865 70,301

Total Liabilities & Equity 3,264,391$ (2,753,377)$ 172,770$ 683,784$

Footnotes:(1) Other adjustments made (i) to include accrued dividend paid to U.S. Treasury in Q3 2013 (ii) to reflect retained investment and loan portfolios per segment disclousures in SEC filings (iii) eliminate interest receivable and payable and restricted

cash of unconsolidated trusts (iv) to reflect nonperforming loans, net of severity of $23.03 billion calculated using Q2 2013 severity of 24.93% (v) to reflect investment in non-agency securities at lower of cost or market.

20 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 22: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LP Schedule 1Liquidation Analysis of Federal National Mortgage Association (Fannie Mae)Entity Cash Inflows & Outflows Yearly Summary Valuation Date: June 30, 2013US$ in millions Page 1 of 2

LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM TotalJun 30, '14 Jun 30, '15 Jun 30, '16 Jun 30, '17 Jun 30, '18 Jun 30, '19 Jun 30, '20 Jun 30, '21 Jun 30, '22 Jun 30, '23

Cash From Operations

Interest Income

Mortgage Loans - Performing 12,011$ 10,158$ 8,779$ 7,630$ 6,541$ 5,508$ 4,583$ 3,757$ 3,007$ 2,387$ 64,360$ Investment Securities 8,941 7,198 5,888 4,769 3,816 3,113 2,534 2,033 1,637 1,347 41,276

Interest Income - TDR - Performing - 117 307 369 406 430 447 441 422 395 3,334 Total Interest Income 20,952 17,473 14,974 12,768 10,763 9,052 7,564 6,230 5,066 4,129 108,971

Guaranty Fees 8,725 7,522 6,536 5,661 4,901 4,217 3,584 2,971 2,423 1,976 48,515

Other fees - - - - - - - - - - -

Interest ExpenseInterest on Short Term Debt (129) (57) - (14) (634) (970) (231) - - - (2,035) Interest on Long Term Debt (9,188) (7,281) (6,819) (5,804) (3,992) (3,234) (2,915) (2,823) (2,751) (2,692) (47,500)

Total Interest Expense (9,317) (7,338) (6,819) (5,818) (4,626) (4,204) (3,146) (2,823) (2,751) (2,692) (49,534)

Administrative ExpensesSalaries and Benefits (1) (1,132) (996) (861) (734) (640) (557) (476) (398) (326) (280) (6,400) Professional Services Fees (2) (785) (639) (493) (390) (340) (295) (252) (210) (172) (141) (3,717) Occupancy Expenses (165) (137) (110) (92) (80) (70) (60) (50) (41) (33) (837) Other Administrative Expenses (197) (163) (131) (110) (96) (83) (71) (59) (48) (40) (998)

Total Administrative Expenses (2,278) (1,936) (1,596) (1,326) (1,156) (1,005) (859) (716) (586) (494) (11,952)

Expenses Related to Derivatives Hedging - - - - - - - - - - -

Net Cash Flows from Operations 18,082 15,722 13,095 11,284 9,882 8,060 7,144 5,662 4,151 2,919 95,999

Cash Taxes - - - - - - - - - - -

Net After-Tax Cash Flows from Operations (3) 18,082$ 15,722$ 13,095$ 11,284$ 9,882$ 8,060$ 7,144$ 5,662$ 4,151$ 2,919$ 95,999$

Footnotes:(1) Salaries and Benefits are reduced by 33.33% over the first three years.

Starting in the fourth year, they are calculated as a percentage of the outstanding mortgage portfolio balance.(2) Professional Services Fees are reduced by 50.00% over the first three years.

Starting in the fourth year, they are calculated as a percentage of the outstanding mortgage portfolio balance.(3) Net After-Tax Cash Flows from Operations estimated to be $59,839 million for the 10-year period if cash taxes were calculated using 35% Federal Statutory rate.

21 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 23: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LP Schedule 1Liquidation Analysis of Federal National Mortgage Association (Fannie Mae)Entity Cash Inflows & Outflows Yearly Summary Valuation Date: June 30, 2013US$ in millions Page 2 of 2

LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM TotalJun 30, '14 Jun 30, '15 Jun 30, '16 Jun 30, '17 Jun 30, '18 Jun 30, '19 Jun 30, '20 Jun 30, '21 Jun 30, '22 Jun 30, '23

Cash From Investing

Pricipal Payments - Conforming LoansContractual 1,768$ 1,663$ 1,561$ 1,467$ 1,383$ 2,529$ 4,518$ 5,497$ 4,965$ 2,641$ 27,992$ Prepayments 9,634 8,122 7,184 6,305 5,535 4,839 4,213 3,621 3,103 2,658 55,213

Total Pricipal Payments - Conforming Loans 11,402 9,785 8,745 7,772 6,918 7,369 8,730 9,118 8,068 5,298 83,204 Pricipal Payments - TDR

Contractual 5,275 5,354 5,167 5,452 6,064 4,782 2,413 1,414 1,280 1,158 38,360 Prepayments 21,534 15,120 10,970 8,372 6,780 5,515 4,494 3,633 2,927 2,341 81,685

Total Pricipal Payments - TDR 26,809 20,474 16,137 13,824 12,844 10,297 6,907 5,047 4,207 3,499 120,045

Recovery from Retained PortfolioRecovery from Default - 179 1,820 514 400 325 278 225 164 117 4,021 Recovery from TDR - - 27 34 41 46 52 48 38 29 315

Total Recovery from Retained Portfolio - 179 1,847 548 440 372 330 273 202 146 4,336

Recovery from Non-Perfoming Loans (NPLs) 27,973 24,305 20,091 - - - - - - - 72,369 Recovery from Other Real Estate Owned (OREO) 10,308 - - - - - - - - - 10,308

Principal Payments and Prepayments of Investment Portfolio 45,776 36,242 31,081 26,287 19,122 12,926 10,853 9,315 6,406 5,308 203,317

Fannie Mae MBS TrustsPurchase of loans from MBS Trusts (15,113) (11,656) (9,856) (8,949) (8,644) (7,510) (5,685) (4,279) (3,218) (2,421) (77,331) Proceeds from recovery - Default - 315 6,997 5,770 5,136 4,830 4,762 4,177 3,169 2,384 37,540 Proceeds from recovery - TDR - - 0 7 18 22 26 28 27 25 153 Principal Payments - TDR - Performing - 54 149 190 221 244 262 265 259 246 1,890 Principal Prepayments - TDR - Performing - 301 817 1,076 1,255 1,380 1,477 1,497 1,467 1,401 10,671

Net Outflow Related to MBS Trusts (15,113) (10,986) (1,893) (1,905) (2,014) (1,034) 842 1,689 1,703 1,635 (27,076)

Proceeds from Sale of Other Net Assets 859 859 859 859 859 859 859 859 859 859 8,588

Net Cash Flows from Investing 108,013$ 80,858$ 76,867$ 47,385$ 38,169$ 30,788$ 28,521$ 26,300$ 21,445$ 16,745$ 475,091$

Cash From Financing

Long Term Debt Paydown (76,827) (71,541) (88,997) (78,373) (77,933) (22,601) (16,838) (4,484) (2,119) (10,880) (450,595)

Net Short Term Debt (4) (82,172) (20,627) - 4,362 27,841 (17,954) (14,250) - - - (102,799)

Dividends Payable (10,243)

Net Cash Flows from Financing (169,243)$ (92,168)$ (88,997)$ (74,011)$ (50,092)$ (40,555)$ (31,088)$ (4,484)$ (2,119)$ (10,880)$ (563,637)$

Release of Cash From Balance Sheet

Cash and Cash Equivalents 4,589$ 3,460$ 3,419$ 2,140$ 1,726$ 1,391$ 1,282$ 1,165$ 941$ 729$ 20,841$ Restricted Cash 316 316 316 316 316 316 316 316 316 316 3,156 Cash from Loans held for Sale 444 444 Cash From Fed Funds Sold (Purchased) 37,800 (8,188) (4,699) 12,887 - - (6,173) (28,960) (24,734) (9,828) (31,895)

Release of Cash from Balance Sheet 43,148$ (4,412)$ (965)$ 15,342$ 2,041$ 1,707$ (4,576)$ (27,479)$ (23,478)$ (8,783)$ (7,454)$

Cash Distributions -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Footnotes:(4) Includes $16.8 billion principal paydown of Short Term Debt in Q3'2013. 22 of 28

This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 24: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LP Schedule 2Liquidation Analysis of Federal National Mortgage Association (Fannie Mae)Annual Balance Sheet Valuation Date: June 30, 2013US$ in millions Page 1 of 1

Jun 30, '13 Jun 30, '14 Jun 30, '15 Jun 30, '16 Jun 30, '17 Jun 30, '18 Jun 30, '19 Jun 30, '20 Jun 30, '21 Jun 30, '22 Jun 30, '23

AssetsTotal Cash and Cash Equivalents (1) 27,874$ 22,970$ 19,194$ 15,460$ 13,004$ 10,963$ 9,256$ 7,659$ 6,179$ 4,922$ 3,877$ Federal Funds Sold and Securities Purchased 37,800 - 8,188 12,887 - - - 6,173 35,133 59,867 69,695

Investments in Securities (2) 230,424 184,648 148,407 117,325 91,038 71,916 58,989 48,137 38,822 32,415 27,107 Accumulated Severity - - - (1,038) (1,840) (2,439) (2,858) (3,138) (3,321) (3,424) (3,461)

Total Investments in Securities 230,424 184,648 148,407 116,287 89,197 69,477 56,132 44,999 35,501 28,991 23,646

Mortgage LoansPerforming Loans - Retained Portfolio: Conforming Loans 110,000 98,598 88,634 78,043 69,723 62,365 54,624 45,564 36,173 27,904 22,459 Performing Loans - Retained Portfolio: TDR 137,340 110,531 90,057 73,919 60,095 47,251 36,955 30,048 25,001 20,794 17,295

Non-Performing Loans (NPLs) (3) 72,369 44,396 20,091 - - - - - - - - Fannie Mae MBS Trusts - 15,113 26,099 27,992 29,897 31,911 32,945 32,103 30,414 28,711 27,076 Loans Held For Sale 444 - - - - - - - - - - Total Accumulated Severity - - (174) (4,209) (6,380) (7,902) (9,084) (10,113) (10,962) (11,593) (12,064)

Total Mortgage Loans 320,153 268,639 224,707 175,745 153,336 133,625 115,439 97,602 80,626 65,816 54,766

Other Real Estate Loans (OREO) 10,266 - - - - - - - - - -

Deferred Tax Assets 48,679 42,350 36,848 32,265 28,315 24,857 22,036 19,535 17,554 16,101 15,079

Other Assets - Net 8,588 7,729 6,870 6,012 5,153 4,294 3,435 2,576 1,718 859 -

Total Assets 683,784$ 526,336$ 444,214$ 358,655$ 289,005$ 243,216$ 206,298$ 178,545$ 176,710$ 176,555$ 167,064$

Liabilities

Dividend Payable (4) 10,243$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Short Term Debt 102,799 20,627 - - 4,362 32,203 14,250 - - - - Long-Term Debt 500,441 423,614 352,073 263,075 184,702 106,769 84,167 67,329 62,845 60,727 49,846

Total Debt 603,240 444,240 352,073 263,075 189,064 138,972 98,417 67,329 62,845 60,727 49,846

Total Liabilities 613,483 444,240 352,073 263,075 189,064 138,972 98,417 67,329 62,845 60,727 49,846

Equity 70,301 82,096 92,141 95,579 99,941 104,243 107,881 111,216 113,864 115,829 117,217

Total Debt + Equity 683,784$ 526,336$ 444,214$ 358,655$ 289,005$ 243,216$ 206,298$ 178,545$ 176,710$ 176,555$ 167,064$

Yearly Change in Total Assets -23.0% -15.6% -19.3% -19.4% -15.8% -15.2% -13.5% -1.0% -0.1% -5.4%

Footnotes:(1) Includes Cash and Cash Equivalents and Restricted Cash.(2) Subprime, Alt-A and Option ARM securities balances are based on the lower of the cost or fair value of the securities.(3) Non-performing loans balance is net of allowance for loan losses estimated to be $24.03 billion based on a Q2 2013 severity rate of 24.93%.(4) Represents dividend payable to the U.S. Treasury in Q3 2013.

23 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 25: FNMA FHLMC Liquidation Valuation Analysis

Freddie Mac Supplemental Schedules

VALUATION SERVICES, LLC VALUATION SERVICES, LLC

Page 26: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LPLiquidation Analysis of Federal Home Loan Mortgage Corp (Freddie Mac)Estimate of Freddie Mac Balance Sheet as of September 30, 2013 Valuation Date: September 30, 2013US$ in millions Page 1 of 1

Freddie Mac (Consolidated) Remove Consolidated Trusts Other Adjustments (1) Freddie Mac (Stand alone)

AssetsCash And Cash Equivalents 9,532$ -$ 9,532$ Restricted Cash 5,755 (5,651) 104 Federal Funds Sold And Securities Purchased Under Agreements To Resell Or Similar Arrangements 41,023 (11,300) 29,723 Investments In Securities 192,445 - 141,470 333,915 Mortgage Loans

Of Freddie Mac 160,691 24,309 185,000 Of Consolidated Trust 1,528,803 (1,528,803) -

1,689,494 (1,528,803) 24,309 185,000 Acquired Property, Net 4,368 4,368 Accrued Interest Receivable 6,340 (5,127) (1,213) - Deferred Tax Assets, Net 23,930 23,930 Other Net Assets 2,630 2,630

Total Assets 1,975,517$ (1,550,881)$ 164,566$ 589,202$

LiabilitiesDividend Payable -$ -$ 30,436$ 30,436$ Accrued Interest Payable 6,504 (4,695) (1,809) - Debt -

Of Freddie Mac 515,668 515,668 Of Consolidated Trust 1,419,909 (1,561,379) 141,470 -

Total Liabilities 1,942,081 (1,566,074) 170,097 546,104

Total Equity 33,436 15,193 (5,531) 43,098

Total Liabilities & Equity 1,975,517$ (1,550,881)$ 164,566$ 589,202$

Footnotes:(1) Other adjustments made (i) to include accrued dividend paid to U.S. Treasury in Q4 2013 (ii) to reflect retained investment and loan portfolios per segment disclousures in SEC filings (iii) eliminate interest receivable and payable and restricted

cash of unconsolidated trusts (iv) to reflect non performing loans, net of severity of $16.2 billion calculated using Q3 2013 severity of 34.7% (v) to reflect investment in non-agency securities at lower of cost or market.

25 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 27: FNMA FHLMC Liquidation Valuation Analysis

26 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

GSO Capital Partners LP Schedule 1Liquidation Analysis of Federal Home Loan Mortgage Corp (Freddie Mac)Entity Cash Inflows & Outflows Yearly Summary Valuation Date: September 30, 2013US$ in millions Page 1 of 2

LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM TotalSep 30, '14 Sep 30, '15 Sep 30, '16 Sep 30, '17 Sep 30, '18 Sep 30, '19 Sep 30, '20 Sep 30, '21 Sep 30, '22 Sep 30, '23

Cash Flow From Operations

Interest Income

Mortgage Loans - Performing 6,914$ 6,202$ 5,732$ 5,363$ 4,986$ 4,355$ 3,381$ 2,332$ 1,301$ 620$ 41,186$ Investment Securities 11,442 9,274 7,553 5,950 4,587 3,664 2,917 2,233 1,708 1,390 50,717 Interest Income - TDR - Performing - 58 165 214 239 250 251 243 229 211 1,860

Total Interest Income 18,355 15,534 13,450 11,526 9,812 8,269 6,549 4,808 3,237 2,221 93,763

Guaranty Fees 4,648 4,035 3,524 3,063 2,665 2,298 1,961 1,647 1,374 1,150 26,364

Other fees - - - - - - - - - - -

Interest ExpenseInterest on Short Term Debt (284) (453) (958) (1,645) (2,251) (1,987) (1,268) (155) - - (9,001) Interest on Long Term Debt (6,375) (5,791) (4,828) (3,439) (2,409) (1,785) (1,485) (1,263) (1,129) (955) (29,459)

Total Interest Expense (6,659) (6,244) (5,786) (5,084) (4,660) (3,772) (2,753) (1,417) (1,129) (955) (38,460)

Administrative ExpensesSalaries and Benefits (1) (771) (679) (587) (520) (476) (412) (325) (233) (148) (102) (4,251) Professional Services Fees (2) (516) (420) (324) (271) (248) (215) (169) (122) (77) (53) (2,416) Occupancy Expenses (52) (46) (40) (36) (33) (28) (22) (16) (10) (6) (291) Other Administrative Expenses (335) (297) (260) (231) (211) (183) (144) (104) (65) (41) (1,870)

Total Administrative Expenses (1,673) (1,441) (1,211) (1,057) (968) (838) (661) (475) (300) (204) (8,828)

Net Cash Flows from Operations 14,671 11,883 9,978 8,447 6,849 5,957 5,097 4,563 3,182 2,212 72,840

Cash Taxes - - - - - - - - (790) (774) (1,564)

Net After-Tax Cash Flows from Operations (3) 14,671$ 11,883$ 9,978$ 8,447$ 6,849$ 5,957$ 5,097$ 4,563$ 2,392$ 1,438$ 71,276$

Footnotes:(1) Salaries and Benefits are reduced by 33.33% over the first three years.

Starting in the fourth year, they are calculated as a percentage of the average outstanding mortgage portfolio balance.(2) Professional Services Fees are reduced by 50.00% over the first three years.

Starting in the fourth year, they are calculated as a percentage of the average outstanding mortgage portfolio balance.(3) Net After-Tax Cash Flows from Operations estimated to be $45,073 million for the 10-year period if cash taxes were calculated using 35% Federal Statutory rate.

Page 28: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LP Schedule 1Liquidation Analysis of Federal Home Loan Mortgage Corp (Freddie Mac)Entity Cash Inflows & Outflows Yearly Summary Valuation Date: September 30, 2013US$ in millions Page 2 of 2

LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM TotalSep 30, '14 Sep 30, '15 Sep 30, '16 Sep 30, '17 Sep 30, '18 Sep 30, '19 Sep 30, '20 Sep 30, '21 Sep 30, '22 Sep 30, '23

Cash Flow From Investing

Principal Payments - Conforming LoansContractual 118$ 111$ 105$ 99$ 3,627$ 10,811$ 13,887$ 15,305$ 12,165$ 2,791$ 59,019$ Prepayments 1,213 1,119 1,053 989 915 788 612 424 253 159 7,526

Total Principal Payments - Conforming Loans 1,331 1,230 1,158 1,088 4,542 11,598 14,499 15,730 12,418 2,950 66,545 Principal Payments - TDR

Contractual 2,368 2,076 1,872 1,740 1,555 1,314 1,161 1,049 946 852 14,933 Prepayments 12,143 8,666 6,625 5,326 4,340 3,522 2,853 2,283 1,820 1,437 49,014

Total Principal Payments - TDR 14,511 10,742 8,497 7,066 5,895 4,837 4,014 3,332 2,765 2,288 63,947

Recovery from Retained PortfolioRecovery from Default - 129 1,056 336 256 197 146 99 61 31 2,311 Recovery from TDR - - 18 20 19 17 15 12 9 5 114

Total Recovery from Retained Portfolio - 129 1,073 356 275 214 161 111 69 36 2,426

Recovery from Non-Performing Loans (NPLs) 11,851 10,141 8,580 - - - - - - - 30,572 Recovery from Other Real Estate Owned (OREO) 4,439 - - - - - - - - - 4,439

Principal Payments and Prepayments of Investment Portfolio 67,379 51,030 45,873 40,306 27,835 18,749 15,667 14,674 8,624 7,091 297,228

Freddie Mac MBS TrustsPurchase of loans from MBS Trusts (8,684) (6,661) (5,288) (4,336) (3,680) (2,861) (2,138) (1,580) (1,164) (861) (37,253) Proceeds from recovery - Default - 130 3,366 2,737 2,279 1,946 1,700 1,345 1,020 758 15,280 Proceeds from recovery - TDR - - 0 4 11 13 13 13 12 10 75 Principal Payments - TDR - Performing - 32 96 133 156 171 178 177 171 160 1,274 Principal Prepayments - TDR - Performing - 186 557 761 874 927 944 919 874 816 6,859

Net Outflow Related to MBS Trusts (8,684) (6,313) (1,269) (702) (361) 195 699 874 912 883 (13,765)

Proceeds from Sale of Other Net Assets 263 263 263 263 263 263 263 263 263 263 2,630

Net Cash Flows from Investing 91,090$ 67,222$ 64,176$ 48,377$ 38,449$ 35,856$ 35,304$ 34,984$ 25,052$ 13,511$ 454,021$

Cash From Financing

Long Term Debt Paydown (4) (70,847) (79,251) (61,227) (58,176) (36,137) (19,538) (15,120) (1,930) (9,207) (7,801) (359,232)

Net Short Term Debt (46,536) (1,103) (14,151) 429 (9,895) (22,954) (25,942) (15,878) - - (136,030)

Dividends Paid (30,436) - - - - - - - - - (30,436)

Net Cash Flows from Financing (147,818)$ (80,354)$ (75,377)$ (57,747)$ (46,032)$ (42,492)$ (41,062)$ (17,808)$ (9,207)$ (7,801)$ (525,698)$

Release of Cash From Balance Sheet

Cash and Cash Equivalents 1,849$ 1,238$ 1,213$ 912$ 723$ 669$ 651$ 640$ 444$ 237$ 8,575$ Restricted Cash 10 10 10 10 10 10 10 10 10 10 104 Cash from Loans held for Sale 10,475 - - - - - - - - - 10,475 Cash From Fed Funds Sold (Purchased) 29,723 - - - - - - (22,389) (18,691) (7,395) (18,753)

Release of Cash from Balance Sheet 42,057$ 1,248$ 1,224$ 922$ 734$ 679$ 661$ (21,739)$ (18,237)$ (7,148)$ 401$

Cash Distributions -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Footnotes:(4) Includes $1.3 billion long term debt paid in Q3'2013. 27 of 28

This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 29: FNMA FHLMC Liquidation Valuation Analysis

GSO Capital Partners LP Schedule 2Liquidation Analysis of Federal Home Loan Mortgage Corp (Freddie Mac)Annual Balance Sheet Valuation Date: September 30, 2013US$ in millions Page 1 of 1

Sep 30, '13 Sep 30, '14 Sep 30, '15 Sep 30, '16 Sep 30, '17 Sep 30, '18 Sep 30, '19 Sep 30, '20 Sep 30, '21 Sep 30, '22 Sep 30, '23

AssetsTotal Cash and Cash Equivalents (1) 9,636$ 7,777$ 6,529$ 5,305$ 4,383$ 3,649$ 2,970$ 2,309$ 1,659$ 1,205$ 957$ Federal Funds Sold and Securities Purchased 29,723 - - - - - - - 22,389 41,081 48,476

Investments in Securities (2) 333,915 266,536 215,506 169,633 129,327 101,492 82,743 67,076 52,402 43,778 36,687 Accumulated Severity - - - (2,054) (3,639) (4,819) (5,643) (6,192) (6,549) (6,749) (6,818)

Total Investments in Securities 333,915 266,536 215,506 167,578 125,688 96,672 77,100 60,884 45,853 37,029 29,869

Mortgage LoansPerforming Loans - Retained Portfolio: Conforming Loans 69,800 68,469 67,109 64,878 63,434 58,617 46,805 32,144 16,303 3,816 830 Performing Loans - Retained Portfolio: TDR 74,153 59,642 48,900 40,403 33,337 27,442 22,605 18,591 15,259 12,494 10,206

Non-Performing Loans (NPLs) (3) 30,572 18,721 8,580 - - - - - - - - Freddie Mac MBS Trusts - 8,684 14,997 16,266 16,968 17,329 17,133 16,434 15,560 14,648 13,765 Loans Held For Sale 10,475 - - - - - - - - - - Total Accumulated Severity - - (33) (2,342) (3,614) (4,489) (5,113) (5,576) (5,896) (6,112) (6,263)

Total Mortgage Loans 185,000 155,516 139,554 119,204 110,125 98,898 81,430 61,594 41,226 24,845 18,538

Other Real Estate Loans (OREO) 4,368 - - - - - - - - - -

Deferred Tax Assets 23,930 18,795 14,636 11,144 8,187 5,790 3,705 1,921 324 - -

Other Assets - Net 2,630 2,367 2,104 1,841 1,578 1,315 1,052 789 526 263 -

Total Assets 589,202$ 450,991$ 378,328$ 305,073$ 249,961$ 206,325$ 166,257$ 127,497$ 111,977$ 104,423$ 97,839$

Liabilities

Dividend Payable (4) 30,436$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Short Term Debt 136,030 89,494 88,391 74,240 74,669 64,774 41,820 15,878 - - - Long-Term Debt 379,638 308,791 229,541 168,314 110,138 74,002 54,464 39,343 37,414 28,207 20,406

Total Debt 515,668$ 398,286$ 317,932$ 242,554$ 184,807$ 138,776$ 96,284$ 55,222$ 37,414$ 28,207$ 20,406$

Total Liabilities 546,104$ 398,286$ 317,932$ 242,554$ 184,807$ 138,776$ 96,284$ 55,222$ 37,414$ 28,207$ 20,406$

Equity 43,098$ 52,706$ 60,397$ 62,518$ 65,153$ 67,549$ 69,973$ 72,275$ 74,563$ 76,216$ 77,433$

Total Debt + Equity 589,202$ 450,991$ 378,328$ 305,073$ 249,961$ 206,325$ 166,257$ 127,497$ 111,977$ 104,423$ 97,839$

Yearly Change in Total Assets -23.5% -16.1% -19.4% -18.1% -17.5% -19.4% -23.3% -12.2% -6.7% -6.3%

Footnotes:(1) Includes Cash and Cash Equivalents and Restricted Cash.(2) Subprime, Alt-A and Option ARM securities balances are based on the lower of the cost or fair value of the securities.(3) Non-performing loans balance net of allowance for loan losses estimated to be $16.2 billion based on a Q3 2013 severity rate of 34.7%.(4) Represents dividend payable to the U.S.Treasury in Q4 2013.

28 of 28 This Report should be reviewed in its entirety. The information set forth on page 1 of this Report entitled “Limitations of Report/No Third Party Reliance” is an integral part of this Report.

Page 30: FNMA FHLMC Liquidation Valuation Analysis