Federal Home Loan Mortgage Corporation (Freddie Mac) is a government-sponsored enterprise (GSE) chartered by the US Congress in 1970 to support the nation's housing finance system. The company operates primarily in the secondary mortgage market, where it purchases single-family and multifamily residential mortgages from lenders such as banks, credit unions, and mortgage companies. Freddie Mac does not originate loans directly to consumers. Instead, it pools the purchased loans into mortgage-backed securities (MBS) and sells them to investors globally, while guaranteeing the payment of principal and interest on the underlying mortgages. This process provides lenders with a continuous flow of funds to issue new mortgages, thereby increasing liquidity and expanding access to homeownership and affordable rental housing.
Freddie Mac's business is divided into two main segments: Single-Family and Multifamily. The Single-Family segment focuses on purchasing and securitizing mortgages for one- to four-unit residential properties, representing the vast majority of the company's business activity and revenue. The Multifamily segment provides financing for apartment buildings with five or more units, with a strong emphasis on affordable housing. The company generates revenue primarily through guarantee fees charged for assuming the credit risk on the mortgages underlying its MBS, as well as net interest income from its retained mortgage portfolio and other investments.
Since September 2008, Freddie Mac has operated under the conservatorship of the Federal Housing Finance Agency (FHFA) following the subprime mortgage crisis. Despite this status, it remains a publicly traded entity on the OTC market. The company holds a dominant competitive position in the US housing finance system alongside its sister organization, Fannie Mae, collectively capturing a significant majority of the secondary mortgage market.
