Final answer:
Congress established the Federal Home Loan Mortgage Corporation, or Freddie Mac, in 1970 to securitize mortgages and promote home ownership by expanding the secondary mortgage market. This corporation played a key role in increasing the availability of home loans.
Step-by-step explanation:
In 1970, Congress created the Federal Home Loan Mortgage Corporation (Freddie Mac) to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market. Freddie Mac was established to buy mortgages on the secondary market, pool them, and sell them as a mortgage-backed security to investors on the open market. This increased the supply of money available for mortgage lending and increased the money available for new home purchases.
The creation of Freddie Mac was part of a larger effort to stabilize the housing market, which had previously been dominated by local banks that faced significant risks. These efforts included government programs like the FHA and VA loans, which encouraged homeownership and aimed to ensure stability in housing standards and financing.
However, changes in bank regulations later allowed for the rise of subprime lending and securitization of riskier mortgages, contributing to the financial crisis when the housing market collapsed and many borrowers were unable to repay their loans.