Serving the Housing Market in Good Times and Bad
One of Freddie Mac's key priorities – as defined by our regulator and conservator, the Federal Housing Finance Agency – is providing constant, stable support to the housing market.
Throughout the housing crisis, we've continued to supply an ongoing stream of funding for mortgages, every day, in all geographic markets. In fact, Freddie Mac and Fannie Mae together funded almost three quarters of all mortgage loans originated last year.
And we've done this at a time when most other sources of liquidity have dried up. Even when private label investors abandoned the market, Freddie Mac continued to serve our mission on behalf of homeowners and renters across the nation.
Our constancy and stability is especially valuable in this kind of environment. As HUD Secretary Shaun Donovan testified before Congress in October, "We cannot lose sight of the important role that the GSEs are playing today in the recovery of the market. Without [them] … there would not be mortgage capital available broadly, and it would certainly not be available at the rates that have been available."
Last year, Freddie Mac provided liquidity for nearly $550 billion in home loans. By purchasing or guaranteeing well over half a trillion dollars in mortgages and mortgage securities, we helped some 2.2 million borrowers and another 350,000 renters.
Compare all this to 2006, at the height of the boom, when private institutions provided 60 percent of liquidity. It may not seem important who provides liquidity to the markets, but it is. Freddie Mac's charter is to be in housing and only housing – our charter mandates us to stay in this market in good times and bad. Unfortunately, the history shows that private lenders abandon housing when the going gets tough.
We also have an incentive to underwrite mortgages in a manner that is safe and affordable. Freddie Mac owns almost a quarter of the mortgages in the United States – yet we account for less than 10 percent of the seriously delinquent mortgages. By contrast, private label securities represent only 12 percent of first mortgages outstanding, but they account for one third of seriously delinquent loans.
When you ask people what proportion of Freddie Mac's loans they think are seriously delinquent, the estimates usually start at 1 in 5 and go up from there. The truth is, less than 1 in 25 of our loans are seriously delinquent. This record puts us among the very best in the industry. And it underscores how we're a source of both liquidity and stability for the housing finance market.
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