Our Focus on Affordability
Freddie Mac has a broad and important public mission to provide liquidity, stability and affordability to the nation's residential mortgage markets. We primarily fulfill our mission by purchasing mortgages in the secondary market, securitizing them, and selling them to investors. In doing so, we help to create a liquid and stable mortgage market that provides America's families with an array of responsible financing and refinancing options.
But in the wake of the housing and economic crisis, our mission to facilitate the financing of housing for low- and moderate-income families has grown even more important. While other sources of liquidity have pulled back from the market, Freddie Mac and Fannie Mae have not; in fact, we funded more than 70 percent of single-family home mortgages and approximately 80 percent of the multifamily market in 2009.
We have a history of not pulling back. We did not pull back from the "oil patch" in the mid-80s or New England and California in the 1990s. We did not pull back during the financial market crisis of 1998. Time and again, we've actively supported and helped to stabilize the market.
Freddie Mac alone provided $548 billion in funding last year to help keep the single-family and multifamily markets operating. This allowed more than 2.5 million families, including low- and moderate-income families and families in underserved areas, to own or rent a home, and helped more than 272,000 borrowers avoid foreclosure. We also refinanced loans for 1.8 million borrowers, providing an estimated $4.5 billion in aggregate annual interest rate savings – or about $2,500 per family.
Providing liquidity and stability to the mortgage markets has helped Freddie Mac achieve the third prong of our mission: to provide affordability to the market. In fact, Freddie Mac and Fannie Mae do more to finance affordable housing than any other financial institution in the country.
Freddie Mac's contributions to housing affordability include keeping mortgage rates low, reducing mortgage origination costs and creating sustainable mortgage products for low- and moderate-income families. More recently, we're helping struggling borrowers lower their mortgage payments to more affordable levels through the Obama Administration's Making Home Affordable program.
We also have a long history of increasing the availability of affordable rental housing in the U.S. More than 90 percent of the rental units we've financed were affordable to people whose incomes are at or below the area median income.
To further facilitate the financing of affordable housing, Freddie Mac and Fannie Mae have been directed since 1995 – via the establishment of housing goals targets – to focus our mortgage purchases on low- and moderate-income borrowers and borrowers living in low-income or underserved areas. Our regulator, the Federal Housing Finance Agency (FHFA), sets these goals and evaluates our performance. In addition, we've established a Mission Division within the company to ensure a continued focus on our affordable housing mission.
We take our affordable housing mission seriously at Freddie Mac and support the affordable housing market in a manner consistent with our safety and soundness. Among the highlights for 2009, Freddie Mac:
- Provided affordable single-family financing for more than 2 million families – including 1 million low- and moderate-income families, 685,000 families living in underserved areas, and 454,000 very low-income families.
- Helped 164,000 homebuyers buy their first home during the most difficult mortgage market in decades.
- Provided financing for approximately 30,000 families through federal public subsidy programs, including:
- U.S. Department of Veterans Affairs programs.
- The U.S. Department of Agriculture's Guaranteed Rural Housing Program.
- The U.S. Department of Housing and Urban Development's rental housing assistance programs designed to promote affordable single-family and multifamily housing, including Section 8 and Section 236 rental programs.
- Financed approximately 250,000 apartment homes, the vast majority of which were affordable to families earning low or moderate incomes.
- Refinanced the largest apartment development in the U.S. that relies on government assistance. This spared 6,000 families from rent increases in a recession.
- Financed $1.2 billion in rental housing for senior citizens and $580 million in rental housing for college students.
- Together with the U.S. Department of the Treasury and Fannie Mae, helped the nation's state and local housing finance agencies continue to provide low-rate mortgages to first-time homebuyers and financing for the construction of affordable multifamily rental properties. We did this by securitizing $15.3 billion in bonds and providing $8.2 billion in credit and liquidity support.
Of course, more is urgently needed, especially with so many struggling families needing affordable housing alternatives during this tough time. That's why we're working closely with our regulator on ways we can do more, in a manner consistent with the company's safety and soundness.
Under a new "duty to serve" mandate, Freddie Mac and Fannie Mae have been asked to provide assistance to three underserved markets: manufactured housing, housing in rural areas and affordable housing preservation. This is another example of how we're helping to meet the nation's critical housing challenges. In fact, Freddie Mac's ability to step in and make a difference in markets like these that might otherwise be neglected is one key benefit of our public mission – and something that clearly distinguishes us from the private sector.
Freddie Mac's focus on affordability is critically needed – in this and every market environment. And we'll continue to do all that we can to lower the cost of buying and renting a home. That's both our mission and our promise.
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