Freddie Mac
What Is Freddie Mac?
Freddie Mac is a government-sponsored enterprise (GSE) that purchases mortgages from lenders and supports liquidity in the housing market.
Its official name is the Federal Home Loan Mortgage Corporation.
Like Fannie Mae, Freddie Mac does not issue mortgages directly to homebuyers. Instead, it buys eligible conforming loans from lenders and packages them into mortgage-backed securities.
This process allows lenders to free up capital and continue making new loans.
Why It Matters in a Mortgage
Freddie Mac influences:
- Conforming loan guidelines
- Underwriting standards
- Interest rate competitiveness
- Secondary market liquidity
By purchasing loans that meet its standards, Freddie Mac helps create consistency in mortgage qualification across the country.
Its guidelines shape how lenders evaluate:
- Credit scores
- Debt-to-income ratios
- Loan-to-value ratios
How It Works
- Lender originates a conforming mortgage.
- Loan meets Freddie Mac guidelines.
- Freddie Mac purchases the loan.
- Loan may be bundled into mortgage-backed securities.
Borrowers continue paying their loan servicer, even if ownership changes.
Freddie Mac vs. Fannie Mae
Freddie Mac → GSE purchasing conforming loans
Fannie Mae → Similar GSE with comparable function
Both support the secondary mortgage market.
FAQs About Freddie Mac
Does Freddie Mac set mortgage rates?
No, but it influences pricing structures.
Are all conforming loans sold to Freddie Mac?
Some are sold to Freddie Mac, others to Fannie Mae.
Is Freddie Mac government-run?
It is a government-sponsored enterprise, not a direct agency.
Related Terms
