Freddie Mac | USAGov (2024)

FAQs

What exactly does Freddie Mac do? ›

The Federal Home Loan Mortgage Corp. (FHLMC), or Freddie Mac, is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders, which in turn supports homeownership and rental housing for middle-income Americans.

The two corporations each purchase their loans from different sources — Fannie Mae buys them from large banks and credit unions while Freddie Mac buys them from smaller banks and credit unions. Both entities purchase and sell conventional loans.

In December 2003 Freddie Mac, the federally chartered mortgage financing giant, agreed to pay a civil penalty of $125 million and implement measures to correct its accounting and governance problems as part of a consent order with a federal regulator.

All loans backed by Fannie Mae and Freddie Mac are typically conventional loans, which are not insured by the government.

Freddie Mac does not make loans directly to homebuyers. The primary business of Freddie Mac is to purchase loans from lenders to replenish their supply of funds so they can make more mortgage loans to other bor- rowers.

It's common for lenders to sell home loans to another company, including Freddie Mac. This practice allows lenders to make more home loans. If you received a letter titled "Borrower Notification: Freddie Mac Has Purchased Your Mortgage Loan," don't be alarmed.

Conventional Conforming Loans: Lenders that make conventional conforming loans typically sell them to the Government Sponsored Enterprises (GSEs) Freddie Mac or Fannie Mae, as the loans conform to the GSEs' standards and meet loan amount limits set by the federal government.

Credit score: Both Fannie Mae and Freddie Mac require a minimum credit score of 620 for fixed-rate mortgages. However, you may need a higher credit score for certain loan programs or to obtain better interest rates.

Freddie Mac was chartered by Congress in 1970 as a private company to likewise help ensure a reliable and affordable supply of mortgage funds throughout the country. Today it is a shareholder-owned company that operates under a congressional charter.

Why did Fannie and Freddie Mac fail? ›

While Fannie Mae and Freddie Mac are often blamed for the mortgage crisis, the causes of their failure have been widely misunderstood. Many observers who focus on the types and terms of mortgages as sources of the GSEs' collapse have suggested that affordable-housing requirements contributed to the problem.

The takeover of Fannie and Freddie was addressed in the U.S. Financial Crisis Inquiry Report and a study by the Federal Reserve Bank of New York. The terms of the bailout agreement between the U.S. Treasury Department and Fannie Mae and Freddie Mac.

The Mortgage must have a minimum Indicator Score of 620. If no Borrower has a usable Credit Score, then the Mortgage does not have an Indicator Score and is not eligible for delivery to Freddie Mac.

As a result, both Fannie and Freddie are pivotal to the country's housing system. Both Fannie Mae and Freddie Mac have nicknames derived from their full names: Fannie Mae from the Federal National Mortgage Association (FNMA) and Freddie Mac from the Federal Home Loan Mortgage Corporation (FMCC).

When purchasing a house, there are three main types of mortgages to choose from: fixed-rate, conventional, and standard adjustable rate. All have different benefits and shortcomings that assist various homebuyer profiles.

The primary function of Fannie Mae and Freddie Mac is to provide liquidity to the nation's mortgage finance system.

Freddie Mac's primary method of making money is by charging a guarantee fee on loans that it has purchased and securitized into mortgage-backed security (MBS) bonds.

AIM is a capability within Loan Product Advisor^® (LPA^SM) that automates the assessment of borrower assets, income and employment for lenders.