What is the role of Freddie Mac in the housing market?
Asked 6 months ago
Freddie Mac plays a crucial role in the housing market as a government-sponsored enterprise. It operates in the secondary mortgage market, purchasing mortgage loans from lenders, predominantly banks, and then packaging them into mortgage-backed securities (MBS). By doing so, Freddie Mac provides liquidity to lenders, enabling them to continually issue new loans to homebuyers. This process stimulates the housing market by ensuring a constant flow of funds. Additionally, Freddie Mac provides stability by guaranteeing timely payment of principal and interest on the MBS it issues. This guarantee reassures investors who purchase these securities, making them more attractive. Ultimately, Freddie Mac's involvement lowers borrowing costs for homebuyers, making homeownership more accessible and promoting housing market stability.
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