Federal Home Loan Mortgage Corporation
Freddie Mac is a government-sponsored enterprise chartered to keep money flowing to mortgage lenders, which in turn supports homeownership and rental housing for middle-income Americans. The company's role is to buy a large number of loans from mortgage lenders, then combine them and sell them as mortgage-backed securities. It purchases, guarantees, and securitizes home loans, and is a mainstay of the secondary mortgage market.
WHAT DOES FREDDIE MAC DO
- Freddie Mac was created to enhance the flow of credit to different parts of the economy.
- Freddie Mac buys home loans from banks and other commercial mortgage lenders, giving these institutions funds that they can then use to finance more loans and mortgages).
- After purchasing a large number of these mortgages, Freddie Mac either holds them in its own portfolio or combines and sells them as mortgage-backed securities to investors who are seeking a steady income stream.
- Securities issued by Freddie Mac tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.