About Freddie Mac

Today, house buyers could find plenty of sources for home funding, which makes purchasing a home more affordable than ever. However, as hard as the times are, the housing market in the US is not that prosperous like decades ago and the real estate market bubble has burst unexpectedly. As a result, the federal government needs something to help stabilize nation’s mortgage markets and ensure fair housing opportunities.

Here comes Freddie Mac!

Company Mission

Freddie Mac, officially known as the Federal Home Loan Mortgage Corporation, is a public government-sponsored enterprise (GSE). It was created in 1970 by the Congress, bearing a mission to guarantee the stability of mortgage markets in the US, especially the secondary mortgage market.

Simply speaking, Freddie Mac buys mortgage loans and mortgage related securities from loan lenders, pools the mortgage loans and then sells them to the investors. By doing so, the money for mortgage lending increases, which results in more liquidity for home buyers to borrow.

While providing more liquid money in housing market, Freddie Mac enhances the opportunities for less fortunate families obtaining homeownership or affordable rental housing. It has greatly eased the tension soaring over the US real estate and mortgage markets and strengthened the liquidity, stability, and affordability in the US housing markets.

Mortgage Services

Though Freddie Mac voluntarily participates in the secondary mortgage market, it does not make loans directly to homebuyers or individual customers. Instead, it purchases loans from lenders after the loans are closed, and then makes guarantees on the loans and charges a guarantee fee.

What to be guaranteed? If a loan borrower defaults and the home is foreclosed, Freddie Mac will make sure the lender’s principal and interest will be paid back, and thereafter, Freddie Mac will become the owner of the house. Here you see, the risk that mortgage lenders carry has been largely reduced.

However, not all home mortgages are eligible to be purchased or guaranteed by Freddie Mac. A loan must meet Freddie Mac’s requirements on credit and size in order to be purchased and packed into a MBS (Mortgage Backed Securities). Loans meeting the underwriting guidelines of Freddie Mac are called “conforming mortgages.”

Thus, although your home mortgage is not bought from Freddie Mac, there is still a chance that Freddie Mac is the current real lender of your loan. You can figure out whether Freddie Mac owns your mortgage with Freddie Mac’s self-service loan look-up tool.

Why Conservatorship?

On September 6, 2008, the federal government placed Freddie Mac, as well as Fannie Mae, into the conservatorship under the regulation of the Federal Housing Finance Agency (FHFA). The purpose of conservatorship is to recover the confidence in these two companies, boost their capacity to perform the mission and abate the current financial and real estate crises.

Today’s Freddie Mac

After the federal takeover, Freddie Mac focuses more on meeting the urgent liquidity needs in the US residential mortgage market, lowering the costs for borrowers, and facilitating the recovery of the nation’s housing market and economy. Freddie Mac provides mortgage funding for homes via three core business lines:

• Single-family credit guarantee business for home loans

• Multifamily business for apartment funding

• Investment business for mortgage-related securities

Today, Freddie Mac’s role in the nation’s housing system gets increasingly important. It is reported that in the first nine months of 2011, the company has purchased or guaranteed over $259 billion in mortgage loans and mortgage related securities, which is almost two-thirds of home loans during these nine months. Benefits or features of Freddie Mac’s mortgage funding include:

• Lower mortgage rates

• The 30-year fixed rate mortgage

• A “backstop bid” for mortgage lenders

• Continuous market services in good times or bad

Freddie Mac Official Website: http://www.freddiemac.com


Read Also:

In-Depth Guide to Freddie Mac and Its Major Mortgage Programs

How to make my home possible given the current climate in housing market? This might be a major concern for many Americans today. High housing prices and real estate bubble have somewhat kept us from getting our own “castles.” Then is there any way for us to receive homeownership affordably? Maybe Freddie Mac can help you on this count.

This web site is not affiliated with Freddie Mac. We recommend Freddie Mac official site for more accurate information of its financial services.