Freddie Mac is a GSE chartered by Congress in 1970. Our public mission is to
provide liquidity, stability, and affordability to the U.S. housing market.
We do this primarily by purchasing residential mortgage loans originated by
lenders. In most instances, we package these loans into mortgage-related securities,
which are guaranteed by us and sold in the global capital markets. We also invest
in mortgage loans and mortgage-related securities. We do not originate loans
or lend money directly to consumers.
We support the U.S. housing market and the overall economy by enabling America’s
families to access mortgage loan funding at lower rates and by providing consistent
liquidity to the multifamily mortgage market, which we do primarily by providing
financing for workforce housing. We have helped many distressed borrowers keep
their homes or avoid foreclosure. We are working with FHFA, our customers and
the industry to build a stronger housing finance system for the nation.
Since September 2008, we have been operating in conservatorship, with FHFA
acting as our Conservator. The conservatorship and related matters significantly
affect our management, business activities, financial condition, and results
of operations. Our future is uncertain, and the conservatorship has no specified
termination date. We do not know what changes may occur to our business model
during or following conservatorship, including whether we will continue to exist.
Our Purchase Agreement with Treasury and the terms of the senior preferred stock
we issued to Treasury constrain our business activities. However, we believe
that the support provided by Treasury pursuant to the Purchase Agreement currently
enables us to have adequate liquidity to conduct our normal business activities.
The Purchase Agreement also requires our future profits to effectively be distributed
to Treasury, and we cannot retain capital from the earnings generated by our
business operations (other than a limited amount that will decrease to zero
in 2018) or return capital to stockholders other than Treasury. Consequently,
our ability to access funds from Treasury under the Purchase Agreement is critical
to keeping us solvent and avoiding the appointment of a receiver by FHFA under
statutory mandatory receivership provisions.
Our primary business strategies describe how we plan to pursue our Charter
Mission over a timeframe of three to five years, or approximately through 2018
to 2020. Our core assumption is that the conservatorship will continue with
no material changes during that period. These strategies complement FHFAs annual
Conservatorship Scorecards.
Charter Mission
We are a government-sponsored enterprise with a specific and limited corporate
purpose (i.e., “Charter Mission”) to support the liquidity, stability
and affordability of U.S. housing mortgage markets as a participant in the secondary
mortgage market, while operating as a commercial enterprise earning an appropriate
return. Everything we do must be done within the specific constraints of our
Charter Mission.
Our Twin Goals
We established overarching twin goals to enable us to reach our Charter Mission:
A Better Freddie Mac; and
A Better Housing Finance System
Our Key Strategies
A Better Freddie Mac
We are focused on operating as a very well-run large financial institution,
by:
Being a very effective operating organization;
Being a market leader through customer focus and innovation; and
Managing risk and economic capital for quality risk-adjusted returns.
A Better Housing Finance System
We are focused on providing leadership, through innovation and constructive
forward-looking engagement with FHFA to improve the liquidity, stability, and
affordability of the U.S. housing markets, by:
Modernizing and improving the functioning of the mortgage markets;
Developing greater responsible access to housing finance; and
Reducing taxpayer exposure to mortgage risks.
Our Charter forms the framework for our business activities. Our statutory
mission as defined in our Charter is to:
Provide stability in the secondary market for residential loans;
Respond appropriately to the private capital market;
Provide ongoing assistance to the secondary market for residential loans (including
activities relating to loans for low- and moderate-income families, involving
a reasonable economic return that may be less than the return earned on other
activities) by increasing the liquidity of mortgage investments and improving
the distribution of investment capital available for residential mortgage financing;
and
Promote access to mortgage loan credit throughout the U.S. (including central
cities, rural areas, and other underserved areas) by increasing the liquidity
of mortgage investments and improving the distribution of investment capital
available for residential mortgage financing.
Our Charter permits us to purchase first-lien single-family loans with LTV ratios
at the time of our purchase of less than or equal to 80%. Our Charter also permits
us to purchase first-lien single-family loans that do not meet this criterion
if we have certain specified credit protections, which include mortgage insurance
on the portion of the UPB of the loan that exceeds an 80% LTV ratio, a sellers
agreement to repurchase or replace a defaulted loan, or the retention by the
seller of at least a 10% participation interest in the loan.
This Charter requirement does not apply to multifamily loans or to loans that
have the benefit of any guarantee, insurance or other obligation by the U.S.
or any of its agencies or instrumentalities (e.g., the FHA, the VA, or the USDA
Rural Development). Additionally, as part of HARP, we purchase single-family
loans that refinance loans we currently own or guarantee without obtaining additional
credit enhancement in excess of that already in place for any such loan, even
when the LTV ratio of the new loan is above 80%.
Our Charter does not permit us to originate loans or lend money directly to
consumers in the primary mortgage market. Our Charter limits our purchase of
single-family loans to the conforming loan market, which consists of loans originated
with UPBs at or below limits determined annually based on changes in FHFA’s
housing price index. Since 2006, the base conforming loan limit for a one-family
residence has been set at $417,000, and higher limits have been established
in certain “high-cost” areas (currently, up to $625,500 for a one-family
residence). Higher limits also apply to two- to four-family residences and to
loans secured by properties in Alaska, Guam, Hawaii, and the U.S. Virgin Islands.
