What does Freddie Mac stand for? The moniker is a nickname for The Federal Home Loan Mortgage Corporation.
About Freddie Mac
Freddie Mac is an organization that is chartered by the United States Congress in an effort to allow homeowners better access to affordable mortgages. This is not a charity organization - it is owned by stockholders - and it does not make loans directly to consumers for mortgages. Instead, Freddie Mac is tasked to keep the housing market thriving by purchasing bundles of mortgages from financial institutions.
Here is a basic, simplified version of the process behind Freddie Mac involvement with mortgage loans:
- A financial institution lends money for a mortgage loan to a consumer.
- After the loan's closing, the financial institution groups the loan with many other mortgage loans and sells the entire bundle to Freddie Mac. The financial institution may retain servicing of the mortgage or might choose to have another servicer take control of the loan.
- Freddie Mac combines the purchased bundle of mortgages with other bundles from other financial institutions and sells the investments to other sources.
This allows the original financial institution to have more available capital with which to grant more mortgage loans to applicants. If mortgage lenders did not sell closed loans to organizations like Freddie Mac and Fannie Mae they would be very limited in the number of loans they could approve unless they had a huge amount of capital to work with.
What Does Freddie Mac Stand For Today
Although The Federal Home Loan Mortgage Corporation was formed in 1970 it wasn't until 1994 that the decision was made to operate officially under the name Freddie Mac. The nickname caught on so quickly at the advent of the organization in the seventies that it was only a matter of time until it was widely accepted.
Freddie Mac versus Fannie Mae
Freddie Mac and Fannie Mae are in competition of one another, ensuring that there is more than one single organization purchasing mortgages in bundles from lenders. If there was only one chartered organization then this could potentially lead to price gouging and other financial problems.
There are many similarities between Freddie Mac and Fannie Mae, but they are indeed two separate organizations.
- Both are chartered by the United States Congress.
- Both have the same congressional mandates.
- Both must follow the same regulations.
- Both companies are publicly traded.
Freddie Mac versus Ginnie Mae
The United States Congress also chartered the forming of Ginnie Mae, which is another similar company but is not in direct competition with Freddie Mac or Fannie Mae. Ginnie Mae is an organization nestled within the U.S. government and functions within the U.S. Department of Housing and Urban Development (HUD). Ginnie Mae purchases bundles of mortgage loans guaranteed by both the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA).
Freddie Mac benefits from homeowners becoming as educated as possible about mortgages so there are less defaults on payments. As a result, this organization offers a substantial library of informative articles and other mortgage information for consumers. Information available on the Freddie Mac website includes:
- Mortgage calculators and other tools
- Tips to avoid foreclosure
- Information about buying a home
- Mortgage terminology
Freddie Mac also offers a website entitled ''HomeSteps" which offers a long list of available properties as well as listings for approved real estate agents and home financing information. Freddie Mac also lists average interest rates for single family dwellings on their website.
The website has a wide variety of valuable information for homeowners, but also has important information available for organizations interested in debt securities and mortgage securities. Lenders can also access information regarding the Freddie Mac underwriting system called Loan Prospector.
What does Freddie Mac stand for? It's an organization that enables lenders to continually refresh their capital to lend money for mortgages, and it's an organization that attempts to make a profit for shareholders.