The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise, headquartered in Tysons Corner, Virginia. The FHLMC was created in 1970 to expand the secondary market for mortgages in the United States.

Fannie Mae and Freddie Mac were created by Congress. They perform an important role in the nation’s housing finance system – to provide liquidity, stability and affordability to the mortgage market. They provide liquidity (ready access to funds on reasonable terms) to the thousands of banks, savings and loans, and mortgage companies that make loans to finance housing.

Fannie Mae and Freddie Mac buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities (MBS) that may be sold. Lenders use the cash raised by selling mortgages to the Enterprises to engage in further lending. The Enterprises’ purchases help ensure that individuals and families that buy homes and investors that purchase apartment buildings and other multifamily dwellings have a continuous, stable supply of mortgage money.

By packaging mortgages into MBS and guaranteeing the timely payment of principal and interest on the underlying mortgages, Fannie Mae and Freddie Mac attract to the secondary mortgage market investors who might not otherwise invest in mortgages, thereby expanding the pool of funds available for housing. That makes the secondary mortgage market more liquid and helps lower the interest rates paid by homeowners and other mortgage borrowers.

Fannie Mae and Freddie Mac also can help stabilize mortgage markets and protect housing during extraordinary periods when stress or turmoil in the broader financial system threaten the economy. The Enterprises’ support for mortgage lending that finances affordable housing reduces the cost of such borrowing.

Fannie Mae was first chartered by the U.S. government in 1938 to help ensure a reliable and affordable supply of mortgage funds throughout the country. Today it is a shareholder-owned company that operates under a congressional charter.

Freddie Mac was chartered by Congress in 1970 as a private company to likewise help ensure a reliable and affordable supply of mortgage funds throughout the country. Today it is a shareholder-owned company that operates under a congressional charter. ¹⁾

Fannie Mae and Freddie Mac fall under the US Agency Housing and Urban Development HUD where Fitts served as Assistant Secretary. Links to Solari site and that material is in the Fannie Mae section under corruption. This is the pdf version of “Dillon Read & Co. Inc. & The Aristocracy of Stock Profits” the most powerful condensed history of corporate capture of American government. Two dozen single page chapters are priceless foundation & context for the web of conflicted interests, NGOs and shell companies. At least the old days names had stability and durability.²⁾

The Atlantic By James Kwak - Oct 3 2011 It's becoming clear that Freddie Mac offered Bank of America a sweetheart deal in a case that suggests not only incompetence, but also something between cronyism and regulatory capture.

Three years since the collapse of Lehman Brothers, we're not any closer to purging the rot at the heart of our financial-regulatory complex. Last December, Bank of America agreed to pay $1.35 billion to Freddie Mac for nearly 800,000 faulty mortgage loans that Freddie had bought from Countrywide, which has since been acquired by BofA. The full story, as told by the inspector general of the Federal Housing Finance Agency (i.e.: FHFA, Freddie's regulator), is a classic tale of institutional corruption.

The background is that Countrywide, then the country's largest originator of exotic mortgages, sold 787,000 loans to Freddie Mac. Under the terms of the sale, if it later turned out that some of those loans were defective, Freddie could sell them back to Countrywide for their full face value. Many of those loans were indeed defective due to inflated appraisals, fictional stated incomes, or other reasons.

By 2010, many of these mortgages had gone into foreclosure. This gave Freddie the option to sell the defective loans back to Bank of America, which then owned Countrywide. But proving that hundreds of thousands of loans were defective was a lot of work. Freddie only reviewed some of them, relying on a poor methodology that dramatically underestimated the number of defective mortgages. This increased losses to Freddie Mac – losses that will eventually fall to Treasury and taxpayers.

In its review, Freddie Mac focused on loans that defaulted within two years. But in the Countrywide portfolio, foreclosures tended to peak in the fourth year.*

And so you get this picture, from a 2011 report by Freddie's internal auditor. What you're seeing is that Freddie's review process (the black line) looked hardest at the bucket of loans containing 16% of total foreclosures. It mostly ignored the bucket containing 70% of the foreclosures. By comparison, this is a bit like searching for a lost salt shaker and spending more time looking on the roof than in the kitchen.

IF NOT INCOMPETENCE, THEN CORRUPTION

This appears to be worse than incompetence. It appears to be something between cronyism and regulatory capture. The evidence suggests that Freddie Mac management wanted to give Bank of America a sweetheart deal. They swept concerns about their faulty loan review process under the rug. And they misled regulators about their process. Were good relations with Bank of America were worth more to Freddie than the money it could have gotten in a settlement? We don't know.

What we do know is that good relations with Bank of America are worth quite a bit to Freddie's executives. The money recovered in the settlement benefits all taxpayers. Since the Treasury Department is currently making good on Freddie's losses, any further losses from defective mortgages come out of our pockets. Sweetheart deals with the nation's largest banks don't help Americans, but they are good for the execs at Bank of America–and for execs at Freddie Mac who decide to look for work for big banks in the future… And the band played on.³⁾