Freddie Mac SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Decrease in mortgage rates: Recent trend shows a downward trend in mortgage rates. This will create a positive impact and will propel U.S. home sales and refinance market. This also has an impact on the sales of the expensive homes. In June 2019, this has led to a 5% increase in the home purchase applications as compared to previous month. Dayton area has some of the expensive homes in United States. Favourable rates have been helping Dayton-Area homes sales. Last year the 30-year fixed mortgage rate was around 4.55%. It has dropped to 3.73% in June 2019. Local home sales have also increased to 7% in May 2019.

2. Business opportunities in renovation: Different business opportunities like Plaza Home Mortgage have tied hands with Freddie Mac. Plaza Home Mortgage has become the first TPO lender to offer Freddie Mac’s CHOICERenovationSM loan program. Through this program, the company will provide homebuyers with the flexibility to use one loan to purchase a home and finance the cost of renovations. Homeowners can also use this for refinancing the repairment needs of their homes. This program covers a variety of property types including: 1-4-unit primary residences, manufactured homes, 1-unit second homes and 1-unit investment properties. Additionally, homebuyers can buy and repair distressed properties after a natural disaster or finance renovations that will prevent future disaster-related damage, such as storm surge barriers.

Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Green Advantage Program: Freddie Mac has initiated a green advantage program in 2016. The objective of this program is to finance energy and water improvements on multifamily properties. Under this program, loans are issued over a period of two year and the company targets affordable, below-market rental units for community-based workers like teachers, nurses, and firefighters. Through this initiative, the company wants to ensure that the borrowers will remain committed to the mission of sustainability. The company also sets a mandate target that borrowers will reduce their energy and water consumption by 30%. In case the borrower fails to implement these efficiencies within a period of 2 years, they are considered as functionally default on loan. Green Advantage also focuses on the affordability crisis in the U.S. It has been found that there are around 86% of the financed units that are affordable to tenants with incomes equal to or less than area median income (AMI). Through this, tenants are expected to save $138 per year through reduced energy or water bills.

2. Sustainable investments programs and solutions: There are many sustainable investments programs that the company has got engaged in. One such program is the launching of the Green Bonds. This series is backed by loans that are issued to sustainable properties. The company is also offering similar green investments like GreenCHOICE mortgages which will help finance home improvements for greater energy efficiency. This will further help lower income group families to decrease their home utility costs through energy saving home repairs and improvements. In order to expand this initiative, the company established partnership with Rocky Mountain Institute, RESNET, the institute for market transformation and the department of Energy. This initiative comes under Freddie Mac’s Duty to Serve plan, that works towards providing financing to rural and manufactured housing in order to support those underserved markets. The aim is to provide homebuyers and renters across the country greater access to affordable housing.