Question:

What is a Freddie Mac mortgage loan?

Answer:

Freddie Mac is one of the major players on the secondary mortgage market in America along with Fannie Mae and Ginnie Mae.

A Freddie Mac mortgage loan would be a home loan underwritten to the standards of Freddie Mac, and sold to them. Freddie Mac does not lend money directly to consumers. Rather, they buy already originated mortgages from lenders if the mortgage loans cover certain criteria.

Relation between Freddie Mac, Mortgages And Lenders

Primary lenders lend money to consumers. These are banks, unions, private lenders, online lenders, etc. Home buyers applying for mortgages are evaluated - income, credit, loan purpose, etc.; the loan is underwritten under specific criteria and if those are met, the homeowner-to-be is approved for the loan.

Certain home mortgage loans satisfying Freddie Mac's or Fannie Mae criteria will be then offered to them. Freddie Mac and Fannie Mae will buy some of those and will convert them into Mortgage-Backed Securities (MBSs) and sell them to investors on Wall Street.

The money Freddie Mac generates from selling MBSs on Wall Street is used for purchasing new conforming mortgage loans. This is how primary lenders are reassured they will be able to sell their loans and originate new mortgages. The participation of secondary market mortgage players as Freddie Mac keeps homeownership costs down and smoothes the process.

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