Freddie Mac Participation Certificates comprise qualifying FHLMC conventional residential mortgages on single-family homes.

• A. Corporate bonds
• B. Qualifying FHLMC conventional residential mortgages on single-family homes
• C. Government-guaranteed securities
• D. Municipal mortgage notes

Answer: (B)

Participation Certificates from Freddie Mac are pass-through securities backed by a pool of qualifying conventional residential mortgages on single-family homes. This means the certificates represent an undivided interest in a pool of conforming loans that meet Freddie Mac’s underwriting standards, and investors receive a pro rata share of the monthly principal and interest payments from that pool. They are not corporate bonds, nor are they government-guaranteed securities or municipal mortgage notes. The key is that the value and cash flows come from the mortgage pool itself, not from a corporation or a government guarantee.