Freddie Mac
The Federal Home Loan Mortgage Corporation, a government-sponsored enterprise. Like Fannie Mae, it buys loans from lenders to keep money flowing, adding liquidity and size to the secondary mortgage market.
Key Takeaways
- Freddie Mac is the nickname for the Federal Home Loan Mortgage Corporation, chartered by Congress in 1970 to support the housing finance system.
- Freddie Mac's own guidance states that it does not originate mortgage loans or lend money directly to mortgage borrowers.
- Freddie Mac buys closed loans from lenders and, in most instances, packages them into securities sold in the global capital markets.
- The Federal Housing Finance Agency placed Freddie Mac into conservatorship on September 6, 2008, and FHFA reported it was still operating under conservatorship in 2026.
What It Means
Freddie Mac is the nickname for the Federal Home Loan Mortgage Corporation, a government-sponsored enterprise Congress chartered in 1970 to support the housing finance system and help keep a reliable, affordable supply of mortgage money available across the country. Its role is the same as the role Fannie Mae plays. Freddie Mac states plainly that it does not originate mortgage loans or lend money directly to mortgage borrowers.
What it does instead is buy loans that lenders have already closed. In most instances Freddie Mac packages the loans it buys into securities that are sold in the global capital markets, and it guarantees the payments investors receive on them. That guarantee pulls investors into housing who would never write a home loan themselves.
The result is liquidity, meaning a lender can turn a thirty-year promise back into cash quickly. Since 1970 there have been two of these enterprises buying loans in the Secondary Mortgage Market instead of one, so a lender has more than one place to sell when it needs its money back. For a Washington broker, the practical effect shows up as loan programs that look much the same from one lender to the next.
How It Works in Washington
Freddie Mac operates under a federal charter, so a student will not find it in the Revised Code of Washington. Washington law governs the two ends of the transaction instead: who originates the loan here, and what secures it.
Many of the lenders that sell to Freddie Mac are chartered in this state. A Washington state-chartered Credit Union operates under chapter 31.12 RCW, the Washington State Credit Union Act, and a state-chartered commercial bank under Title 30A RCW, the Washington Commercial Bank Act. Both are supervised by the Department of Financial Institutions. Loan originators and mortgage brokers who bring the borrower to those lenders must hold a license under chapter 19.146 RCW, the Mortgage Broker Practices Act.
Whatever happens to the loan afterward, the security stays Washington paper. The loan is secured by a Deed Of Trust under chapter 61.24 RCW, and RCW 61.24.020 provides that the deed of trust is subject to all laws relating to mortgages on real property and may be foreclosed by trustee's sale. Selling the loan to Freddie Mac transfers ownership of the debt. It does not move the property or the remedy out of Washington.
Example
The Okafors buy a house in Bellingham for $480,000 and borrow $384,000 after a 20 percent down payment of $96,000. Their lender is a Washington state-chartered credit union that underwrites the file to Freddie Mac's standards, because it already knows it plans to sell the loan rather than hold it.
The loan closes in March and is sold to Freddie Mac in May for its $384,000 balance. Freddie Mac pools it with thousands of similar loans and sells securities backed by the pool to investors. The credit union keeps servicing the loan, so the Okafors send their payment to the same place they always did, and the $384,000 that came back from the sale funds new loans for other members that summer. If the Okafors later default, the trustee named in their deed of trust conducts the sale under chapter 61.24 RCW, exactly as it would have if the credit union had kept the loan.
Common Mistakes and Exam Traps
- FHLMC stands for the Federal Home Loan Mortgage Corporation and belongs to Freddie Mac. FNMA is Fannie Mae. Exam questions swap the two sets of initials on purpose.
- Freddie Mac buys loans; it does not make them. Any answer that has a borrower applying to Freddie Mac or receiving funds from Freddie Mac is wrong.
- Selling a loan to Freddie Mac does not change the borrower's interest rate, payment, or recorded security instrument. It changes only who owns the debt.
- Freddie Mac operates in the secondary market. Placing it in the primary market beside the originating lender is the classic distractor.
Where you'll learn this
Frequently Asked Questions
Why does the country need both Fannie Mae and Freddie Mac?
Congress chartered Freddie Mac in 1970, decades after Fannie Mae was chartered in 1938. With two enterprises buying closed loans, a lender has an alternative place to sell, and money keeps flowing to borrowers when one buyer pulls back.
A client's loan was sold to Freddie Mac. Who does the client pay now?
The servicer, which is frequently the same lender that made the loan. Freddie Mac owns the debt while a servicer collects the payments, so the borrower pays whoever is named in the transfer notice.
Is a Freddie Mac loan different from a Fannie Mae loan for the buyer?
Rarely in any way the buyer notices. Both enterprises publish purchase standards that lenders write to, so the credit, income, and appraisal requirements a Washington borrower faces look very similar either way.