Freddie Mac
Freddie Mac (Federal Home Loan Mortgage Corporation) is a U.S. government-sponsored enterprise chartered by Congress in 1970 that purchases conforming residential mortgage loans from savings institutions and other lenders, pools them into mortgage-backed securities with a payment guarantee, and sells those securities to investors to replenish lender capital and sustain mortgage credit availability.
Freddie Mac was created in 1970 primarily to serve savings and loan institutions — the thrifts that dominated residential mortgage lending at the time — by providing them with a secondary market outlet for their mortgage portfolios. Prior to Freddie Mac's establishment, savings institutions often had to hold originated mortgages on their own balance sheets, constraining their ability to make new loans. By allowing thrifts to sell loans to Freddie Mac, Congress enabled continuous recycling of mortgage capital.
Freddie Mac's structural operations closely parallel Fannie Mae's. Both entities purchase conforming loans from primary market lenders, issue agency MBS with payment guarantees, and operate under FHFA regulation and conservatorship. Freddie Mac uses its own distinct MBS programs — including Freddie Mac Gold PC (Participation Certificate) and subsequent unified securities programs — but the economic function is equivalent to Fannie Mae's.
Congress established Freddie Mac partly to introduce competition into what would otherwise be a Fannie Mae monopoly in the secondary mortgage market. In practice, the two GSEs developed complementary rather than purely competitive market roles, with both growing to dominate conventional conforming mortgage securitization. Their combined guaranteed MBS outstanding measured in the tens of trillions of dollars by the early 2020s.
Like Fannie Mae, Freddie Mac entered FHFA conservatorship in September 2008 after losses on mortgage guarantees during the housing crisis exhausted its capital. The U.S. Treasury provided capital backstops through preferred stock purchase agreements, and both GSEs resumed profitability under conservatorship, collectively remitting hundreds of billions of dollars in dividend payments to Treasury by the early 2020s.
The conforming loan limits applied to Freddie Mac purchases are identical to Fannie Mae's, set annually by the FHFA and adjusted for high-cost markets. Loans meeting these standards can be originated under either GSE's guidelines, creating a broadly standardized market for the vast majority of U.S. conventional residential mortgages. This standardization underpins the U.S. mortgage market's ability to offer long-term fixed-rate mortgages at scale — a product that is unusual internationally and is made possible largely by the existence of the GSE secondary market infrastructure.