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Frequently Asked Questions
1. Why did the U.S. Congress create Freddie Mac? Freddie Mac was created by Congress in 1970 with a mission to provide liquidity, stability and affordability to the nation’s mortgage markets using private, not public capital. Congress’ creation of Freddie Mac was a sophisticated and creative approach to the longstanding national goal of promoting homeownership and a recognition that historically the strictly private markets had failed to provide a stable and affordable supply of credit for residential housing. Read more. 2. Freddie Mac has certain ties to the government. What benefits does Freddie Mac provide in return? Freddie Mac’s mission of providing liquidity, stability and affordability to the nation’s residential mortgage markets is a unique and important national assignment – and Congress provided benefits and requirements in our Charter to ensure we achieve it. The system works because these tools are commensurate with the nature of the task. Read more. 3. How does Freddie Mac provide liquidity to the mortgage market? In simplest terms, one of Freddie Mac’s jobs is to provide liquidity – that is, to ensure that mortgage money is available whenever and wherever funds are needed. Every day, we purchase loans from mortgage originators, which replenishes the supply of mortgage money in communities across the nation. We then sell mortgage-related securities or issue corporate debt to finance mortgages and mortgage-related securities that we hold in our retained portfolio. Our portfolio purchases are particularly important during times when other investors seek to sell their mortgage and mortgage-backed securities holdings. Read more. 4. How does Freddie Mac provide stability to the mortgage market? Our Congressional charter contains several restrictions that ensure we maintain a singular focus on the U.S. residential mortgage market. This contrasts with other corporations that may enter or exit any lawful line of business. Freddie Mac may not enter into lines of business outside of its charter. Today, mortgage credit is available whenever borrowers need it because Freddie Mac participates in this market during all economic circumstances – from the smooth and well functioning to the most disruptive. This constant presence brings stability to the mortgage market. Read more. 5. How does Freddie Mac provide affordability to the mortgage market? Freddie Mac and Fannie Mae each do more to finance affordable housing than any other financial institutions. Thanks to the GSEs, mortgage rates are lower, mortgage credit is readily available across the country at about the same interest rate, America’s homebuyers can choose among a wide range of mortgage products and with technological advancements we have pioneered, getting a mortgage is quicker easier and cheaper. Read more. 6. Does Freddie Mac present a financial risk to taxpayers? While no financial institution can perform its task without undertaking some amount of risk, Freddie Mac’s strong asset base, our expertise in managing the risks associated with purchasing and investing in mortgages and stringent minimum and risk-based capital requirements ensure that we can continue to fulfill our mission in a safe and responsible manner. Read more. 7. In light of its unique role, does Freddie Mac have any competition in the market? Some have suggested that because of our GSE status, Freddie Mac faces little or no competition in the portion of the residential mortgage market we serve. In reality, mortgage market competition is fierce. When times are good – like they are right now -- there is no shortage of investors eager to purchase mortgages. No lender is compelled to sell its mortgages to Freddie Mac. Like any other company, Freddie Mac must earn its business by offering a competitive deal. Read more. 8. Why do we still need Freddie Mac? Can't banks and other financial institutions fill its role? While acknowledging Freddie Mac’s role in creating today’s vibrant and robust mortgage market, some argue that Freddie Mac is no longer needed to help maintain it. Underlying this argument is the belief that without Freddie Mac, there would be less government involvement in the mortgage market, and it would function just as well or even better as a result. In fact, without the GSEs, there could be as much – if not more – direct government involvement in the mortgage market, and the mortgage finance system could become less consumer-friendly and financially robust. Read more. 9. How is Freddie Mac accountable to Congress and the American people? Freddie Mac is held to high standards of accountability. From direct Congressional oversight, to our comprehensive regulatory regime, to our numerous public disclosures, we strive to earn and maintain public trust. Read more.
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