Freddie Mac

The Federal Home Loan Mortgage Corporation (FHLMC), or "Freddie Mac" is a government-sponsored enterprise (GSE) whose purpose is to facilitate capital allocation in the residential real estate market. Freddie Mac operates in the secondary mortgage market, expanding the real estate financing market by securitizing residential mortgages into mortgage-backed securities. The firm raises capital by issuing bonds.

Freddie Mac was created and chartered by Congress in 1970 as a private shareholder-owned company. On September 6, 2008, the company was placed in conservatorship by the Federal Housing Finance Agency (FHFA). Under conservatorship, stockholders in the company were ruined (the stock dividend suspended, the stock delisted, and falling to less than a dollar), while the value of Freddie Mac bonds and mortgage-backed securities were backed by the government.

For investors, Freddie Mac securities come in three forms:


 * Stock: Since 1970, Freddie Ma has been a public stock, listed on the NYSE until effective bankruptcy in 2008 forced the government to place the company into conservatorship. The company is delisted, and currently trades in the over the counter market as a penny stock.
 *  Bond: Freddie Mac bonds are considered government agency (GSE) debentures. Freddie Mac issues reference bills® securities, discount notes, medium term and syndicated callable notes, FreddieNotes® securities, Reference Notes® securities, €Reference Notes® securities, and subordinated debt (Freddie SUBS). In 2010, Freddie Mac bond securities comprised 27.1% of the Barclays Capital US Agency Index.
 * Mortgage-backed securities (MBS): Freddie Mac issues pools of mortgages, packaged into Freddie Mac MBS, which Freddie Mac guarantees as to timely payment of principal and interest. Freddie Mac MBS have comprised 32% to 39% of the Barclay's Capital MBS Index over the 2005 - 2010 period.