Mortgage Dictionary -> Freddie Mac
In the United States, the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is a stock-holder owned company that was created to provide stability, liquidity and affordability to the housing market. On the New York Stock Exchange (NYSE) its symbol is FRE.
Freddie Mac provides stability for the housing market in that it makes sure there's a stable supply of money for lenders (i.e. banks, other financial institutions) to lend to homebuyers. It also makes sure there's a good supply of affordable company housing in communities.
Freddie Mac provides liquidity for the housing market in that it ensures everyone has access to home financing giving everyone the opportunity to own a home in the United States.
Freddie Mac provides affordability for the housing market in that it makes it possible for low to moderate income families to own a home of their own.
The Federal Home Loan Mortgage Corporation was chartered in 1970 by the Congress of the United States government according to the Emergency Home Finance Act of 1970. With the advent of Freddie Mac entering the market, Fannie Mae, a secondary mortgage buyer, was given some competition, thereby squelching its monopoly. Freddie Mac's purpose is to keep money flowing to lenders in regards to home ownership and rental housing. It is now one of the United States' largest investors in mortgages.
The roles of Freddie Mac are as follows:
- It purchases primary mortgages from financial institutions such as banks
- It bundles the loans it purchases into securities
- It sells the securities to stock market investors
Despite what most people think, Freddie Mac gets no direct funding from the United States government, nor are Freddie Mac securities insured by them.
On September 7, 2008, the Federal Housing Finance Agency (FHFA), placed Freddie Mac under its conservatorship, after a report that the federal government planned to place it under its control to stabilize it.
Time will tell how Freddie Mac will fare in the light of its trouble and the depressed housing economy in the United States. Consumer confidence and the consistency of borrowers will go a long way to strengthening the US economy and the Federal Home Loan Mortgage Corporation.