Freddie Mac is a shareholder-owned corporation that was chartered in 1970 to increase the supply of mortgage money that lenders are able to make available to homebuyers.
To do its job, Freddie Mac buys mortgages from banks and other lenders, packages them as securities, and sells the securities to investors. The money it raises by selling these bonds pays for purchasing the mortgages.
Lenders use the money they realize from selling mortgages to Freddie to make additional loans. Lenders must be approved in order to participate in the program. Loans must meet Freddie Mac qualifications to be eligible for purchase.
To facilitate the lending process, Freddie Mac provides lenders with an automated underwriting tool to help them evaluate mortgage applications.
Freddie Mac guarantees the securities it issues, but the bonds aren't federal debts and aren't federally guaranteed.
Like its sister corporation Fannie Mae, Freddie Mac shares are traded on the New York Stock Exchange (NYSE).
- Browse Related Terms: Agency bond, Fannie Mae, Freddie Mac, Government bond, Government National Mortgage Association (Ginnie Mae), Quasi-public corporation, Sallie Mae, Scripophily
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