Definition
Freddie Mac is a public corporation that ensures liquidity in U.S. mortgage markets.
History
Freddie Mac is a nickname for the Federal Home Loan Mortgage Corporation (FHLMC). Freddie Mac was chartered as a public corporation at the direction of Congress in 1970.
Freddie Mac was created just 2 years after Fannie Mae was converted from a federally chartered entity to a public corporation. Both corporations continue to serve with similar missions.
Analysis
The purpose of creating Freddie Mac was to enhance the secondary mortgage market so that primary mortgage lenders could lend more capital to prospective homebuyers. Fannie Mae had been able to enhance liquidity in mortgage markets for a number of years. By adding Freddie Mac to the mix, the ability to support primary mortgage markets was expanded, thereby allowing for more access to mortgage funds.
Freddie Mac purchases mortgage loans from banks and mortgage companies. This allows for those lenders to free up capital that they may lend to another prospective homebuyer.
Freddie Mac is stockholder controlled. It also must follow the direction of the Department of Housing and Urban Development (HUD) to ensure that public interests are met.
In addition to purchasing mortgage portfolios, Freddie Mac reaches out to lower income families through educational programs aimed at increasing homeownership among the working poor.
