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Financing term

Freddie Mac

A government-sponsored enterprise that purchases mortgages from lenders, supporting the secondary mortgage market.

Why Freddie Mac matters on the exam

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Exam questions using Freddie Mac

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A conventional loan that meets Fannie Mae and Freddie Mac underwriting guidelines and loan limits is called a:

  1. Jumbo loan
  2. Subprime loan
  3. Conforming loan
  4. Blanket loan
Show answer & explanation

Conforming loan — Conforming loans meet the size limits and underwriting standards set by Fannie Mae and Freddie Mac so they can be purchased on the secondary market; loans above the limit are jumbo loans.

Source: PSI National Real Estate Exam Content Outline §4 Financing

Freddie Mac was originally created to:

  1. Directly originate mortgage loans to individual consumers through an entire nationwide network of federal retail branch offices
  2. Guarantee mortgage loans made to eligible veterans and active service members, replacing the Department of Veterans Affairs program
  3. Regulate state real estate licensing and administer the national portion of the license examination
  4. Compete with and provide an additional secondary market outlet alongside Fannie Mae, especially for savings and loan lenders
Show answer & explanation

Compete with and provide an additional secondary market outlet alongside Fannie Mae, especially for savings and loan lenders — Freddie Mac was chartered to expand the secondary mortgage market, initially serving savings and loan associations, providing competition and additional liquidity alongside Fannie Mae.

Source: PSI National Real Estate Exam Content Outline §4 Financing

Unlike Fannie Mae and Freddie Mac, Ginnie Mae:

  1. Is a government-owned corporation that guarantees securities backed by FHA, VA, and USDA loans
  2. Is a privately owned, for-profit corporation that is publicly traded on a national stock exchange
  3. Purchases only conventional conforming loans that meet Fannie Mae's guidelines
  4. Sets the maximum interest rate lenders may lawfully charge on every federally backed mortgage loan
Show answer & explanation

Is a government-owned corporation that guarantees securities backed by FHA, VA, and USDA loans — Ginnie Mae is a wholly government-owned corporation that guarantees mortgage-backed securities backed by pools of FHA, VA, and USDA loans, rather than buying loans itself like Fannie Mae or Freddie Mac.

Source: PSI National Real Estate Exam Content Outline §4 Financing

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