Glossary: FACT – Freddie Mac

Fair and Accurate Credit Transactions Act (FACT) – a piece of legislation passed by Congress on December 4, 2003, as an amendment to the Fair Credit Reporting Act allowing consumers to request one free credit report every twelve months from each of the three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion).

The act also contains provisions to help reduce identity theft, by allowing individuals to place alerts on their credit histories if identity theft is suspected, or if deploying overseas in the military, thereby making fraudulent applications for credit more difficult.

Another key item is the requirement that mortgage lenders provide consumers with a Credit Disclosure Notice that included their credit scores, range of scores, credit bureaus, scoring models, and factors affecting their scores. This form is typically available from credit reporting agencies, and many will send this directly to the consumer on the lenders’ behalf.

Fair Credit Reporting Act (FCRA) – legislation regarding the collection and distribution of consumer credit information by Credit Reporting Agencies. Any company dealing with credit report information is under the authority of the FCRA and is liable for civil prosecution if the regulations are violated.

Fair Debt Collection Practices Act – the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m. and after 9 p.m. or at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, make false statements, or use unfair practices when they try to collect a debt. Debt collectors must honor a written request from you to stop further contact.

Fannie Mae – Federal National Mortgage Association (FNMA), is a private, shareholder-owned company created in 1938 as part of FDR’s New Deal. The Company works to assure that mortgage money is readily available for existing and potential homeowners. Fannie Mae does not directly lend money to homebuyers, but works with lenders to make sure that there is no shortage of funds available for mortgage loans. The method by which Fannie Mae accomplishes this is by purchasing mortgages from a variety of institutions that make up the primary mortgage market. The maximum conforming amount of a Fannie Mae loan in 2008 is $417,000.

Federal Reserve Economic Symposium – a meeting of the heads of the Federal Reserve Bank and prominent academics held every year in Jackson Hole, Wyoming. The topic in 2007 was “Housing, Housing Finance and Monetary Policy.” The Federal Reserve Bank of Kansas City sponsors the symposium each year.

Federal Housing Authority (FHA) – a government agency created as part of the National Housing Act of 1934. The FHA aims to improve housing standards and conditions, insure mortgages and stabilize the mortgage market. It has benefited from the mortgage market collapse because now that many lenders are out of capital or out of business, the FHA is one of the few remaining options for borrowers.

Federal Reserve – America’s central bank and a government agency that controls the amount of money in the economy. The Fed (as its commonly known as) also regulates the cost of borrowing money and oversees the banking industry.

FICO (Fair Isaac Corporation) – developed in 1956 by Bill Fair and Earl Isaac, FICO’s purpose is to measure credit risk. FICO has offices around the globe and is the most used credit rating company in the world. Scores range between 300 and 850.

Fixed Rate Mortgage – In a fixed rate mortgage, borrowing costs and monthly payments remain the same for the term of the loan, no matter what happens to market interest rates. This can be advantageous if the mortgage is taken out at a time of low interest.

Forbearance – a postponement of payment on a loan, typically if the borrower doesn’t qualify for a deferment and is unable to make payments for a reason such as poor health. Interest continues to accrue during forbearance.

Freddie Mac – Federal Home Loan Mortgage Corporation (FHLMC), is a shareholder-owned corporation that was established by Congress in 1970 to support home ownership and rental housing in the markets that its larger sibling Fannie Mae was not covering. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities. It finances these purchases primarily by issuing mortgage pass through securities and debt instruments in the capital markets.

The proceeds of these sales fund new mortgages, which in turn increases the money supply to homebuyers. Like Fannie Mae, Freddie Mac does not make loans directly to homebuyers, but puts private investor capital to work for homebuyers in general. In 2008, the maximum value of a conforming Freddie Mac loan is $417,000.

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