How Freddie Mac Supports Markets
Every day, Freddie Mac provides a continuous flow of funds to mortgage lenders. We do so not by making individual mortgage loans to consumers; instead, we support the U.S. home mortgage market by providing money directly to lenders, ensuring that the system is liquid, stable and affordable.
To fulfill this vital mission, Freddie Mac buys residential mortgages and mortgage-related securities and guarantees mortgages made by lenders. We issue debt securities to the global capital markets to fund the purchase of mortgages and mortgage-related securities we hold as an investor. We also create and sell mortgage-related securities to the capital markets, providing a guarantee to investors on those securities.
Freddie Mac Mortgage-Related Securities
Freddie Mac pools the mortgages it purchases from lenders across the country and packages them into securities that can be sold to investors. These investors include the lenders themselves, pension funds, insurance companies, securities dealers, commercial and central banks, and others. Freddie Mac also is one of the largest investors in mortgage-related securities, purchasing and holding in portfolio a portion of our own securities and those issued by others.
For investors, we offer a variety of high quality and liquid mortgage-related security products, including pass-throughs, or participation certificates (PCs); multi-class securities, including REMICs; and stripped mortgage-related securities of principal-only or interest-only payments. We also offer multifamily PCs, which are PCs backed by loans covering residences with five or more units.
The cornerstone of Freddie Mac’s mortgage-related securities program is the Gold PC. Each Gold PC represents undivided ownership interests in a pool of residential mortgages. Freddie Mac guarantees the timely payment of interest and principal on each Gold PC it issues.
Freddie Mac Debt Securities
As an investor supporting the U.S. mortgage market, Freddie Mac purchases and holds in an investment portfolio both mortgages and mortgage-related securities. We fund the purchases of these mortgage investments by selling debt securities to investors across the United States and around the world. Investors in our debt securities include investment managers, insurance companies, commercial and central banks, and pension funds. The market for Freddie Mac debt securities is one of the largest and most liquid in the world.
Freddie Mac’s debt-funding program is well established, and offers investors a wide range of short-, medium- and long-term investment vehicles. Our dealer-syndicated Reference Notes® securities program is the anchor of our debt-funding program, offering investors large-size, liquid investment vehicles through a calendar-based issuance program. Our annual Funding Calendars designate optional issuance dates for these programs. We also offer shorter-dated debt securities, as well as callable debt securities.
At least once a month, as outlined on our Funding Calendar, we may announce a new Reference Notes security in maturities ranging from two to 10 years. This program offers investors several benefits, including certainty of supply and liquid benchmarks for both dealers and investors.
Freddie Mac’s other debt-funding needs are met through the issuance of short-term discount notes, medium-term securities and callable bonds, allowing us to respond quickly to changing market conditions to meet our funding needs and the needs of our investors.