How It Works: The Secondary Mortgage Market

January 25, 2016

How it works

Welcome to our "How It Works" blog series, where we'll discuss it all, from Freddie Mac to the loan approval process.

Today's focus is on the secondary mortgage market, and more specifically, Freddie Mac. Here, we'll answer important questions such as:

  • Where does mortgage money come from?
  • What does your mortgage payment or rent check have to do with the global economy and what is Freddie Mac's role in making the connections?
  • Where does Freddie Mac get the money to buy mortgage loans?

Some Background

The U.S. Congress created the secondary mortgage market in the 1930s to give lenders a much bigger, steadier and more evenly distributed stream of mortgage money to stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing.

The secondary mortgage market, including Freddie Mac, connects lenders, homebuyers and investors in a single, efficient system that benefits homebuyers in many ways, including:

  • Keeping mortgage rates lower.
  • Enabling interest rates for mortgage loans to be similar across the country, in good times and bad.
  • Making mortgage loans with longer terms, such as 15 and 30 years, available to borrowers.
  • Putting homeownership within reach of more of America's qualified homebuyers.
  • Allowing borrowers to refinance at any time without penalty, in most cases.

How It Works

Watch our video to find out how the secondary mortgage market works and how Freddie Mac connects borrowers, lenders and investors from around the world to make home possible for millions of America's families and renters.

Follow this series to learn more about how things work in the mortgage industry and visit My Home by Freddie MacSM where we discuss it all.