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Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to increase the supply of money that mortgage lenders (commercial banks, mortgage bankers, savings institutions, credit unions) can make available to homebuyers and multi-family investors. They do this by buying investmentquality mortgages from lenders, packaging the mortgages as securities, and selling the securities to investors, such as insurance companies and pension funds. These securities are guaranteed by Freddie Mac. For the most part, this process is invisible to borrowers. But because Freddie Mac exists, millions of homeowners and renters benefited from lower housing costs, including lower monthly mortgage payments and better access to home financing. Freddie Mac helps ensure that the U.S. housing finance system is among the most liquid, efficient and reliable in the world. Over the years, Freddie Mac has helped one in six homebuyers realize their dream of owning a home. Freddie Mac, also known as the Federal Home Loan Mortgage Corporation, is one of Congress' great success stories.
DOES FREDDIE MAC MAKE LOANS?
Freddie Mac's charter prohibits it from originating mortgage loans. As a result, it does not make loans directly to homebuyers. After a borrower receives a lender's approval for a mortgage, Freddie Mac buys that mortgage from the lender. This process enables the lender to make more home mortgage loans to other borrowers.
IS FREDDIE MAC A GOVERNMENT AGENCY?
No. Congress chartered Freddie Mac with a special mission, but the government has no ownership interest in the company. Freddie Mac is owned by its shareholders and, like other corporations, is accountable to a board of directors and to its shareholders. Freddie Mac's board of directors consists of 18 members (13 are elected each year by stockholders and the other five are appointed by the President of the United States). Anyone can own Freddie Mac Stock, which is traded on the New York and Pacific Stock Exchanges. ("FRE" or "FredMac")
HOW DOES FREDDIE MAC INCREASE ACCESS TO HOUSING?
To help alleviate the nation's growing shortage of affordable housing, Freddie Mac's efforts encompass the single-family homebuying sector and the multi-family, or the apartment rental sector. Freddie Mac's standard single-family program is designed to help all borrowers who want to buy a home achieve their dream. For example, Freddie Mac:
· Requires no minimum loan size.
· Purchases loans nationwide, including central cities and rural areas.
· Requires lenders to qualify borrowers on a case-by-case basis.
· Accepts municipal and community grants and rent credits as eligible forms of down payment.
· Accepts part-time earnings, unemployment compensation and public assistance as eligible sources of income.
Freddie Mac also uses innovative products, programs and services that are outside the traditional housing finance system. Many of these specialized programs are designed for low-income families who do not have sufficient funds for down payments and closing costs. Freddie Mac will play a very significant role in the future of affordable housing. In fact, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 sets purchase targets for Freddie Mac at 30 percent of the total units financed for low- and very-low- income families, as well as for families in central cities and under-served areas.
HOW DOES FREDDIE MAC DIFFER FROM FANNIE AND GINNIE MAE? Freddie Mac and Fannie Mae have the same charters, Congressional mandates and regulatory structure. However, Freddie Mac has different strategies for achieving its mission. Competition between Freddie Mac and Fannie Mae ensures the benefits of the secondary market are passed on to homebuyers and renters in the form of lower housing costs. Ginnie Mae is a government agency created by Congress to ensure adequate funds exclusively for government loans insured by Federal Housing Administration (FHA) and Veterans Administration