How Our Business Benefits Homebuyers

In the last 35 years, Freddie Mac has opened doors for more than 41 million homebuyers and more than 2 million renters. It's even likely that you have directly experienced some of the improvements we've brought to the mortgage market.

1. We help to lower interest rates.

Without Freddie Mac, mortgage rates would be higher and homeownership rates would fall, especially for central-city residents and lower-income families. When mortgage rates increase by only one half of one percent, nearly one million families find themselves priced out of the market and unable to own homes. Freddie Mac helps keep interest rates on mortgages as low as they can be given economic circumstances.

In fact, because we lower mortgage rates by an average of 1/2%, we save a family about $12,000 over the life of a $100,000 loan. That savings adds up to $15 billion each year for homeowners in the conventional mortgage markets we serve, and allows more families to become homeowners. And lower mortgage rates mean lower mortgage payments, allowing still more families to achieve homeownership. A study released in 2001 details how we use our charter to save billions of dollars for homebuyers and renters each year.

2. We keep rates consistent across the United States.

Across the nation's cities, mortgage rates varied by as much as 1.7% in 1970. Today, that difference is only 0.1%.

Average Annual Effective Interest Rate of Fixed-Rate, Conventional Loans Secured by 1-Unit Homes

3. We make more loan products available.

Every day, Freddie Mac makes affordable mortgage products available to lenders around the country. These include:

• Low-down payment loans;

• Lease-purchase; and

• Mortgages with reduced insurance.

Over the past 34 years, Freddie Mac has developed a variety of loan products with low down payment requirements, which are particularly helpful to minority and low- and moderate-income borrowers.

4. We help make the mortgage process faster and less expensive.

In 1995, Freddie Mac introduced Loan Prospector®, our state-of-the-art automated underwriting service. Loan Prospector provides an objective standardized risk assessment tool. This tool helps lenders reduce the time and cost associated with originating a mortgage. When we later offered Loan Prospector on the Internet, it helped reduce these costs even more.

Learn more about Loan Prospector and the benefits of automated underwriting.

Automated underwriting tools such as Loan Prospector can help reduce origination costs by $300 to $650 per loan. When combined with efficiencies from other Internet-based automated underwriting services, the savings increases to between $800 and $2100 per loan.

5. We make the mortgage process fairer.

Freddie Mac works continually with our lending customers to make the complex mortgage application process fair and clearly understandable to consumers. We have released details on the underwriting factors used by Loan Prospector in assessing mortgage risk, and have encouraged other automated underwriters and credit scoring agencies to make their processes more understandable to mortgage borrowers and lenders. In addition, we've taken the lead in combating predatory lending practices, refusing to do business with lenders intent on stripping equity from homeowners or otherwise engaged in predatory lending practices.

6. We connect U.S. mortgage lenders with a global supply of funding.

Growth in U.S. bank deposits alone cannot begin to meet the credit needs of tomorrow's homebuyers. To ensure that those needs are met, Freddie Mac attracts capital from investors around the world.

Our business is purchasing high-quality home mortgage loans. Borrowers have $500 billion in equity behind our mortgages—nearly 60% of our mortgages have current loan-to-value (LTV) ratios of 70% or less. This makes investment in our securities and debt products very attractive for investors around the world.

7. We Make Rental Housing Affordable

Making rental housing more affordable is another part of Freddie Mac's business. We help finance rental properties for families with low incomes, and for those in underserved areas. Our multifamily division generates new ideas along with our Program Plus® customers—everything from investing in low-income housing tax credit partnerships to developing mortgage products that speed the construction and rental of very low-income housing.

8. We Are Focused on Expanding Homeownership Opportunities for Minority Families

On June 17, 2002, President George W. Bush called on the nation's housing industry to expand homeownership opportunities to help 5.5 million minority families becomes homeowners this decade. Freddie Mac immediately responded to the President's call with a comprehensive set of initiatives that target the entire homebuying process. We call our initiatives Catch the Dream. The goal is simple: to turn the dream of homeownership into a reality for millions more of America's families.