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Federal Home Loan Mortgage Corporation (Freddie Mac):
The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is a Government Sponsored Enterprise (GSE) created to act as a clearinghouse for mortgages. It helps ensure there's enough money available for banks and other lenders to provide loans to homebuyers.
A clearinghouse for mortgages refers to an organization or a company that buys, sells, and manages mortgages from various lending institutions. Freddie Mac, as a mortgage clearinghouse, creates liquidity in the mortgage market by purchasing mortgages from banks and other lenders, providing them with cash to issue new loans. This process ensures a steady supply of mortgage credit is available for homebuyers, making it easier for people to buy homes.
Freddie Mac also helps lenders manage their risk by transferring the mortgages they originate to the clearinghouse, which then assumes the responsibility for those loans. Freddie Mac may then package and sell these mortgages as mortgage-backed securities to investors, further spreading the risk and attracting more capital to the mortgage market.
For example, let's say a bank has given out a lot of home loans and doesn't have much money left to lend. Freddie Mac can step in, buy some of those loans from the bank, giving the bank more money to help other people buy homes.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In a land where homes are dreams come true,
Freddie Mac is there to help me and you.
They buy up loans from banks far and wide,
So more people can own homes with great pride.
When banks run out of money to lend,
Freddie Mac steps in, a helpful friend.
With more cash in hand, banks can say,
"Come get a home loan, we'll help you today!"