What is Freddie Mac?

Freddie Mac (Federal Home Loan Mortgage Corporation) is a government-sponsored enterprise created in 1970 to expand the secondary mortgage market alongside Fannie Mae. It buys conventional mortgages from lenders — historically focusing on smaller banks and thrifts — packages them into mortgage-backed securities, and guarantees investor payments. Freddie Mac and Fannie Mae together back roughly half of all outstanding U.S. mortgages.

Photo of Ross Kilburn

Updated

Key facts

  • Freddie Mac was created by Congress in 1970 through the Emergency Home Finance Act specifically to provide competition for Fannie Mae and expand mortgage availability through smaller lenders.
  • Freddie Mac and Fannie Mae together guarantee approximately $7.7 trillion in mortgage-backed securities — roughly half of the $12 trillion U.S. residential mortgage market.
  • Freddie Mac has been in government conservatorship under the FHFA alongside Fannie Mae since September 2008 — the Treasury invested $71.3 billion to stabilize it.
  • Freddie Mac's Primary Mortgage Market Survey (PMMS) has published weekly average mortgage rates since 1971 and is the most widely cited mortgage rate benchmark in the United States.
  • Freddie Mac's Flex Modification can change the interest rate, extend the term and set aside part of the balance as principal forbearance, and the new principal and interest payment must be lower than the old one.

Related data

How Does Freddie Mac Work?

Freddie Mac's role is functionally identical to Fannie Mae's — it provides liquidity to the mortgage market by buying loans from originators and selling mortgage-backed securities to investors. The key operational flow:

  • Purchase: Freddie Mac buys conventional mortgages that meet its underwriting standards from approved lenders
  • Securitize: It pools loans into Participation Certificates (PCs) — Freddie Mac's name for its mortgage-backed securities
  • Guarantee: Freddie Mac guarantees timely payment of principal and interest to PC holders
  • Manage risk: It charges guarantee fees (g-fees) to compensate for default risk and uses credit enhancements (mortgage insurance, subordination) to protect against losses

Freddie Mac vs. Fannie Mae

While both GSEs serve the same fundamental purpose, there are historical and operational differences:

  • Origin: Fannie Mae (1938) was a New Deal creation; Freddie Mac (1970) was created to prevent Fannie Mae from becoming a monopoly
  • Lender base: Freddie Mac historically purchased more loans from smaller banks, thrifts, and credit unions, while Fannie Mae dealt more with large commercial banks. This distinction has blurred significantly.
  • Underwriting: Both use automated underwriting systems — Freddie Mac's is called Loan Product Advisor (LPA); Fannie Mae's is Desktop Underwriter (DU). Standards are nearly identical.
  • Affordable lending: Freddie Mac's equivalent to Fannie Mae's HomeReady is Home Possible — both allow 3% down payment for low-to-moderate income borrowers

For borrowers, the distinction is largely irrelevant. Your lender decides whether to sell your loan to Fannie Mae or Freddie Mac, and the terms of your mortgage don't change either way.

The Primary Mortgage Market Survey

Freddie Mac's PMMS is arguably its most publicly visible contribution. The survey began publishing weekly average 30-year fixed mortgage rates in April 1971, added 15-year fixed rates in 1991, and now uses loan-application data submitted through Loan Product Advisor (LPA). When news outlets report "mortgage rates this week," they're almost always citing the PMMS.

Freddie Mac and the 2008 Crisis

Like Fannie Mae, Freddie Mac suffered massive losses as housing prices declined and mortgage defaults surged. The federal government placed both GSEs into conservatorship on September 6, 2008. The Treasury injected $71.3 billion into Freddie Mac (compared to $119.8 billion for Fannie Mae). Both have since returned more than the investment amount in dividend payments, but remain in conservatorship as Congress has not acted on GSE reform.

Why Freddie Mac Matters for Financial Distress

Freddie Mac's underwriting standards, along with Fannie Mae's, define eligibility for conforming mortgages rather than the whole conventional mortgage market. Borrowers who don't qualify for conventional loans backed by the GSEs may have other options, including FHA loans, non-qualified mortgages and, for eligible borrowers, USDA or VA loans. Costs and rates depend on the loan and borrower. This stratification shows up across two separately sourced series. One is the Board of Governors single-family mortgage delinquency rate, which sits in the American Distress Index's Delinquency domain. The other is HUD's FHA delinquency rate, which we show as context. Loans backed by the GSEs run lower than FHA loans, reflecting the different risk profiles of the borrower pools.

Questions about Freddie Mac

What is the difference between Freddie Mac and Fannie Mae?

Both buy and securitize conventional mortgages, but Freddie Mac was created in 1970 as competition for Fannie Mae (1938). Freddie Mac historically served smaller lenders while Fannie Mae worked with large banks. Today, their underwriting standards and loan limits are virtually identical. Borrowers don't choose between them.

How do I know if Freddie Mac owns my mortgage?

Use Freddie Mac's loan lookup tool at freddiemac.com/loanlookup. If Freddie Mac owns your loan, you may qualify for specific loss mitigation programs including Flex Modification, which can reduce your payment by up to 20% through rate reduction and term extension.

Is Freddie Mac still in conservatorship?

Yes, as of 2026. Freddie Mac has been in government conservatorship under the FHFA since September 2008. While both GSEs have returned more than the Treasury's investment in dividends, Congress has not passed legislation to end the conservatorship or restructure the GSEs.

What is Freddie Mac's Home Possible program?

Home Possible is Freddie Mac's affordable lending program allowing 3% down payment for borrowers at or below 80% of area median income. It accepts non-traditional credit history, allows gift funds for the entire down payment, and offers reduced mortgage insurance coverage requirements.

Why does Freddie Mac matter for mortgage rates?

Freddie Mac publishes the Primary Mortgage Market Survey — the most widely cited weekly mortgage rate benchmark. More importantly, by guaranteeing MBS, Freddie Mac reduces investor risk, which keeps mortgage rates lower than they would be in a purely private market.

Related terms

  • Fannie MaeGovernment-sponsored enterprise that buys and guarantees conventional mortgages, providing liquidity so lenders can make more home loans.
  • Ginnie MaeFederal government corporation that guarantees mortgage-backed securities backed by FHA, VA, and USDA loans. Carries the full faith and credit of the U.S. government.
  • Conforming LoanA mortgage that meets Fannie Mae/Freddie Mac guidelines and loan limits, qualifying for GSE purchase. Typically offers the lowest conventional mortgage rates.
  • Mortgage-Backed Securities (MBS)Investment bonds created by pooling thousands of home loans. Investors receive homeowners' monthly payments as returns. Central to how mortgages are funded in the U.S.
  • Conventional LoanA mortgage not backed by a government agency. Typically requires higher credit scores and larger down payments than FHA loans.
  • Loan ModificationA permanent change to your mortgage's terms, such as the interest rate or the length of the loan, agreed with your mortgage company.
  • Jumbo LoanA mortgage exceeding the conforming loan limit ($832,750 in most areas). Cannot be sold to Fannie Mae or Freddie Mac, so it carries higher rates and stricter requirements.
  • Private Mortgage Insurance (PMI)Insurance that protects a lender if a borrower defaults on a conventional mortgage.

Sources and method

We write with assistance from AI tools. Figures come from the data and sources named on this page.