Freddie Mac

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Freddie Mac works by

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linking homeowners and renters to the world’s capital markets.

It is a unique mortgage credit system.

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Freddie Mac's mission

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is to provide

liquidity,
stability and
affordability

to the housing market.

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Freddie Mac stands for

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Federal Home Loan Mortgage Corporation (FHLMC)

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Freddie Mac is a

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congressionally chartered institution

that buys mortgages from lenders and

resells them as securities on the secondary mortgage market.

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Freddie Mac was created to

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help stabilize the U.S. mortgage markets.

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FHLMC symbol

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NYSE: FRE

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FHLMC chartered in

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1970 by Congress

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FHLMC strives to create

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Stability
Affordability
Opportunity
Prosperity

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stability by

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Freddie Mac's retained portfolio plays an important role in making sure there’s a stable supply of money for lenders to make the home loans new homebuyers need and an available supply of workforce housing in our communities

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Affordability

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Financing housing for low- and moderate-income families has been a key part of Freddie Mac’s business since we opened our doors 35 years ago. Freddie Mac’s vision is that families must be able both to afford to purchase a home and to keep that home.

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Opportunity

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Freddie Mac makes sure there's a stable supply of money for lenders to make the loans new homebuyers need. This gives everyone better access to homefinancing, raising the roof on homeownership opportunity in America.

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Prosperity

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Freddie Mac plays an important role in America’s economy, of which nearly 20% is made up of housing and related industries.

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Values

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* Leadership: We take the initiative to achieve our common purposes.
* Integrity: We do the right thing – without compromise!
* People: We are fair, respect others, embrace diversity and are accountable.
* Excellence: We strive to exceed stakeholder expectations individually and collectively.

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Chairman and CEO

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Richard F. Syron

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is a GSE

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Government-Sponsored Enterprise

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And in recent years, housing has been the backbone of our nation's economy, accounting for

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more than a third of the growth in nominal GDP. T

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Gross Domestic Product

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monetary value of all the goods and services

produced by an economy over a specified period.

It includes consumption, government purchases, investments, and exports minus imports.

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consumption

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direct utilization of goods and services by consumers,

not including the use of means of production,

such as machinery and factories

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GSEs are a group of

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financial services corporations

created by the United States Congress.

Their function is to reduce interest rates

for specific borrowing sectors of the

economy,
farmers, and
homeowners.

The mortgage borrowing segment is by far the largest of the borrowing segments that the GSEs operate in.

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securitization is a

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financial technique that pools assets together and, in effect,

turns them into a tradeable security

held by a bankruptcy remote special purpose vehicle (SPV).

used to immediately realize the value of a cash-producing asset.

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capital market aka

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securities markets

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capital market

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is the market for securities,

where companies and the government can raise long-term funds.

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capital market includes

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the stock market and the bond market.

The SEC oversees the market, to ensure that investors are protected against misselling.

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The capital markets consist of

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the primary market, where new issues are distributed to investors, and

the secondary market, where existing securities are traded.

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primary market is that part of the capital markets that

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deals with the issuance of new securities.

Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue.

IPOs, Underwriting

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secondary market is the financial market for

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trading of securities that have already been issued in an initial private or public offering.

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Demand for debt securities drives up their

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trading price, which

lowers their interest rates.

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Proponents say that this secondary market in consumer loans gives household borrowers

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cheap fixed rate loans (low fixed rates on long term loans),

removes credit risk from banks' balance sheets and

provides standardized instruments (securitized securities) for investors.

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GSEs are a hybrid form of a corporation designed to

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utilize privately provided capital

in pursuit of publicly developed missions.

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The "big three" housing GSEs

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Fannie Mae (FNMA),
Ginnie Mae (GNMA) and
Freddie Mac

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The "big three" housing GSEs own or securitize

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upwards of 70% of the residential mortages in the United States.

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Companies competing with these GSEs generally

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only securitize mortgages which the GSEs will not securitize.

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GNMA

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Government National Mortgage Association (Ginnie Mae)

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Before the Depression, a prospective homeowner usually had to

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make a downpayment of as much as 40 percent and

pay interest on the
mortgage for five years.

The last payment involved a lump sum, paying off the full principal of the loan.

Owning a home was a privilege
reserved mainly for the wealthy.

Often, regional shortages of mortgage money meant potential homebuyers — even wealthy ones — couldn’t get a mortgage at all.

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About _________ renter households would be
disqualified

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to buy starter homes were it not for Fannie Mae and
Freddie Mac.

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How do they do it? Fannie Mae and Freddie Mac are

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a bridge between
mortgage lenders and Wall Street.

Fannie Mae and Freddie Mac buy
mortgages from lenders,

giving them cash, and

then package hundreds
of mortgages together into securities,

selling them to investors such as
central banks and pension funds.

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conforming” loan rates are

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(mortgages that qualify for Fannie Mae and Freddie Mac purchase)

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“jumbo” loan
rates

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(mortgages whose value exceed the limit).

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Homebuyers obtain loans from primary mortgage lenders, such as
banks, thrifts, mortgage companies or credit unions. The mortgage
lender, in turn, may either hold the loans in its portfolio or

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package the
loans and sell them in the secondary mortgage market.

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When the
lender sells the loans, the mortgage lender can then use the proceeds of
the sale to

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make new loans to other homebuyers in their communities.

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The secondary market companies turn the mortgage loans they have
purchased into securities and

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sell them to investors on Wall Street. The
secondary market then uses the funds from the mortgage-backed
security sales to purchase more loans from primary mortgage lenders.

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By securing mortgages, the secondary market

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expands opportunities
for investors, drawing more funding (liquidity) into the mortgage
market.

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By pooling individual home mortgages, it is possible for lenders to

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diversify credit risk - the risk of someone not repaying their loan -over a
large numbers of borrowers and properties.

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key players in
the secondary mortgage market.

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FHLMC, GNMC, FNMC
Banks,
state housing agencies,
mortgage brokers,
investment bankers,
pension funds, and
insurance companies

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Fannie Mae and Freddie Mac are the
two largest participants, investing in

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one in five and one in six homes in
America, respectively.

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Without the secondary market, the homeownership landscape would
be a much different place. The only financial institutions originating
mortgage loans would be

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so-called portfolio lenders, those with the capacity to hold them permanently.

Mortgage interest rates would be
higher, as would down-payment requirements.

And, low downpayment,
thirty-year, fixed-rate mortgages—a fixture in today’s U.S.
housing market—would likely be considered a relic of the past.

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% of growth in economy that was housing related in 2005

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19

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Only __ countries offer long-term fixed rate,
prepayable mortgages to help make homeownership a reality for more families—the __________

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two

US & Denmark

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slogan

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Freddie Mac. Our mission is to make home possible. And it’s working.

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Mortgage-Backed Securities - MBS

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An investment instrument that represents ownership of an undivided interest in a group of mortgages. Principal and interest from the individual mortgages are used to pay investors' principal and interest on the MBS. Also known as "mortgage pass-through".

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When you invest in a mortgage-backed security you are

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lending money to a homebuyer or business.

An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to worry if the customers have the assets to cover the loan.

Instead, the bank acts as a middleman between the homebuyer and the investment markets.