Freddie Mac
Freddie Mac (Federal Home Loan Mortgage Corporation) is a government-sponsored enterprise that purchases mortgages from lenders and packages them into securities sold to investors. This process provides liquidity to the mortgage market, enabling lenders to make more home loans to consumers.
Example
“The mortgage lender sold the loan to Freddie Mac within 30 days of closing to free up capital for new lending.”
Memory Tip
Remember "Freddie Mac" sounds like a friendly guy's name, making mortgages more accessible to regular folks.
Why It Matters
Freddie Mac's participation in the mortgage market helps keep interest rates competitive and ensures a steady supply of mortgage funding for homebuyers. Many borrowers benefit from Freddie Mac's loan programs and standards, even if they're not directly aware of the organization's involvement.
Common Misconception
People often confuse Freddie Mac with a direct lender, but it actually purchases loans from banks and other lenders rather than lending directly to consumers.
In Practice
A homebuyer might obtain a mortgage from their local bank, which then sells the loan to Freddie Mac within weeks of closing. The borrower continues making payments to their original lender or a loan servicer, while Freddie Mac holds the actual loan as an investment.
Etymology
Freddie Mac is a nickname for the Federal Home Loan Mortgage Corporation, created in 1970 as a friendlier-sounding alternative to the bureaucratic acronym FHLMC.
Common Misspellings
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