Freddie Mac
Definition and meaning of Freddie Mac in real estate.
Freddie Mac, officially the Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise created by Congress to keep money flowing to mortgage lenders.
In more detail
By purchasing mortgages from banks and lenders, this corporation provides these institutions with the cash needed to make new loans to home buyers. Freddie Mac packages these purchased loans into mortgage-backed securities and sells them to investors on the secondary market. Along with its sister organization, Fannie Mae, it helps stabilize the housing market and ensure that affordable conforming loans are widely available.
Although chartered by Congress, it operates as a private company under conservatorship, following regulations set by the federal government.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Official Name | Federal Home Loan Mortgage Corporation |
| Established by | US Congress in 1970 |
| Primary Role | Purchasing mortgages on secondary market |
A local bank sells a bundle of newly closed home loans to Freddie Mac, which provides the bank with fresh capital to issue new mortgages.
Frequently asked questions
What is the difference between Fannie Mae and Freddie Mac?
While both buy and securitize mortgages, Fannie Mae primarily purchases loans from larger commercial banks, whereas Freddie Mac historically focuses on buying loans from smaller, thrifts and savings institutions.
Does Freddie Mac lend money directly to home buyers?
No, Freddie Mac does not make direct loans to consumers; it operates strictly in the secondary mortgage market by purchasing loans made by other lenders.