 |
 |
 |
|
| Our portfolio purchases are particularly important during times when other investors seek to sell their mortgage and mortgage-backed securities holdings. By stepping in while others are bowing out, Freddie Mac acts as a buyer of last resort. |
In simplest terms, one of Freddie Mac's jobs is to provide liquidity – that is, to ensure that mortgage money is available whenever and wherever funds are needed. Every day, we purchase loans from mortgage originators, which replenishes the supply of mortgage money in communities across the nation. How do we do this? Unlike banks, which raise most of their funds through deposits, Freddie Mac relies exclusively on global capital markets to raise funds to ensure that we can meet lender needs. We sell mortgage-related securities or issue corporate debt to finance mortgages and mortgage-related securities that we hold in our retained portfolio.
Through Freddie Mac's securitization business, mortgage lenders sell their mortgages to Freddie Mac and receive either cash or securities backed by mortgages in return. The original lenders may either hold the securities as an investment or sell them in the capital markets. Freddie Mac guarantees to the holders of the securities the payment of interest and principal on the underlying mortgages. This guarantee increases the value and liquidity of the underlying mortgages, thus enabling Freddie Mac to attract more private funds to meet America's housing needs.
Freddie Mac's purchases of mortgages and mortgage-related securities for its retained portfolio provide additional liquidity to the mortgage market. Many investors prefer the predictability of investing in our debt – rather than attempting to manage the interest-rate risk associated with mortgage-backed securities. Our portfolio purchases are particularly important during times when other investors seek to sell their mortgage and mortgage-backed securities holdings. By stepping in while others are bowing out, Freddie Mac acts as a buyer of last resort. We ensure that mortgage funds are available at all times and throughout all types of economic and market conditions. This is what makes home possible for millions of American families.
| Freddie Mac Provides Liquidity During
Periods Of Economic Stress |
 |
| Sources: Freddie Mac, Federal Reserve Board |
| © 2008 Freddie Mac |
|