Housing Subsidies

Since Freddie Mac was chartered [PDF 54K ] by an Act of Congress, many people are unclear about:

• How closely we're tied to the federal government, and

• What benefits or special treatment we get from the federal government.

We hope the following facts will clarify this:

• Freddie Mac is a shareholder-owned, publicly traded corporation and is one of the nation's largest taxpayers. We paid more than $1 billion in taxes from 1999 to 2001.

• Freddie Mac is not a government agency. We receive no federal funds. We receive our funding from shareholders and investors who purchase the mortgage-backed securities and debt securities we issue.

• Freddie Mac's obligations and securities do not constitute debt of the United States and are not guaranteed by the federal government. The offering documents for each security we issue clearly states this.

• Federal law allows the Secretary of the Treasury to purchase up to $2.25 billion of GSE obligations. In Freddie Mac's 33 year history, the Treasury has never exercised its discretionary borrowing authority.

• Because of our federal charter and line of credit, many investors feel that Freddie Mac is more creditworthy than other private firms. As a result, we are able to borrow money at rates more favorable than the rates offered to other firms.

It's also worth noting that the supply of funds that Freddie Mac makes available to mortgage lenders through its secondary mortgage market activities drives down mortgage rates by as much as one-half percent - saving the homeowner with a $100,000 mortgage around $12,000 in interest over the life of a 30-year loan. A study by former OMB director Dr. James Miller and economist Dr. James Pearce estimated total savings range from $8 billion to $23 billion annually. That savings helps make homeownership affordable for more families and individuals than would be possible without the secondary mortgage market.

As a result, homeownership is a reality for many American families, and not just a dream.