Government-sponsored enterprises (GSEs) such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have been the subject of calls for greater supervision. Nevertheless, their securities still offer appeal to investors. For example:
“FreddieNotes.” These Freddie Mac securities have a survivor’s option. If the investor dies, the survivor can redeem them at par. These securities are unsecured senior callable medium-term debt obligations of Freddie Mac.
Step-up securities. Also from Freddie Mac, these are callable notes that increase in yield if they’re not called (redeemed before their ultimate maturity). Even if they are called, they always provide a higher yield than a non-callable security for the same time frame.
Both varieties are mortgage-related securities, which is the case of anything issued by Fannie Mae or Freddie Mac. Thus, they have low credit risk and relatively high yields.