Freddie Mac buys loans from its 2,500 originators, then sells those loans to investors, such as other banks and large pension funds. The originating banks use this revenue to plow more money into the mortgage market, keeping rates down and liquidity up. Freddie Mac's job, along with the other secondary mortgage players, is to keep the funds moving so more people can buy homes at the most attractive rates. It is joined by Fannie Mae (Federal National Mortgage Association), which began its life selling mortgages insured by the U.S. government and is now Freddie Mac's main competitor.
Greenbacks, Yes; Green Screens, No
Until the late 1990s, Freddie Mac processed, serviced and packaged loans using several hundred green-screen mainframe applications that ran in a CICS/Cobol batch environment. Then it started to get the Web services religion.
The company's first foray into distributed online processing came in 1999, when it created LoanProspector. com--an automated loan-underwriting app. Lenders key in information on potential mortgages to ensure they meet Freddie Mac's guidelines for risk and the borrower's ability to pay. Before LoanProspector went online, "you had to go to our legacy system to close the mortgage and deliver the loan to us," says Kim Petty, vice president of Freddie Mac's sourcing and servicing business information services. Now more than 99 percent of Freddie Mac's single-family loans are serviced over Web applications.
LoanProspector isn't the only Web application Freddie Mac uses; more than half of its legacy apps have been converted to XML-based Web services apps that run interactively, in real time. Where it used to take days to approve a particular loan, now it takes seconds, and loans can be processed typically within 24 hours rather than a week.