Fannie Mae's smaller sibling. The Federal Home Loan Mortgage Corporation — another government-sponsored enterprise that buys mortgages from lenders to keep money flowing in the housing market.
Freddie Mac — the Federal Home Loan Mortgage Corporation — is the other major GSE alongside Fannie Mae. Founded in 1970 to break up Fannie's monopoly, Freddie does essentially the same thing: buys mortgages from lenders, packages them into mortgage-backed securities, and sells them to investors.
Fannie historically focused more on loans from large commercial banks, while Freddie focused on loans from smaller thrifts and savings institutions — though today the lines have blurred. Each has its own underwriting guidelines and automated underwriting system (Fannie's is Desktop Underwriter, Freddie's is Loan Product Advisor), but they're broadly similar.
For borrowers, the practical difference is small. Some loans qualify only with one or the other due to specific guideline differences. Lenders run your file through both automated systems and choose whichever gives the better outcome.
Example
Your self-employed friend was denied through Fannie Mae's Desktop Underwriter but approved through Freddie Mac's Loan Product Advisor on the same scenario. Your loan officer runs your file through both — and submits whichever approves.
Also known as
Federal Home Loan Mortgage Corporation, FHLMC, Freddie
Source:
Freddie Mac