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Definition: Freddie Mac- Federal Home Loan Mortgage Corp
FHLMC is a public government sponsored enterprise which was primarily set up in 1970 to increase the mortgage secondary market in United States. The FHLMC bought mortgage securities from secondary market, stoked them and then later sold these mortgages securities by bundling them in to the open market, hence increasing the money supply in the secondary market and this fuelled increase in demand of homes and also increase in purchase.
The Freddie mac preferred stock was highly rated by Moody’s until 2008. But during the crisis it was degraded and subsequently it has plummeted. Freddie Mac had come up with a mortgaged-backed security bond in case of housing loans where, they charged a guarantee fee on loans it purchased and then securitized those into the above said bonds. Due to such a guarantee by Freddie Mac on loans to repay the principle and interest on underlying loan, the mortgage backed security bonds became very popular to investors.
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