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Assignment analyzes publicly available information about a Fortune 500 Company called Freddie Mac

Home, - Comprehensive Analysis of a Fortune 500 Company

Introduction

Freddie Mac is a government based enterprise which deals in the business of homeownership and rental housing in the mortgage market. It helps in maintaining the flow of mortgage capital by buying the mortgage loans from the lenders which is further given to the qualified borrowers. The company aims at providing stability, affordability and liquidity to the housing market of United States through all aspects of the economic conditions. The company has turned out to be more innovative and efficient in serving the renters, homebuyers, and the taxpayers. It’s headquarter is located at McLean, Virginia, US. It is reported that since the year 1970, it has made more than 78 million times home possible. The delinquency rate for single family (90+ days) and multifamily (60+ days) are 0.73 percent and 0.01 percent respectively. The previous policy of 30 year of fixed rate for mortgage has no fixed rules for the customers. Thus, the lenders are also not satisfied with this mortgage policy, as it is long term with fixed rate of interest and also has the option of prepaying the loan without any form of penalty (Babcock, 2018). This led the government to introduce Freddie Mac which helped the lenders to handle these investment risk of 30 year mortgage through their expertise. Freddie Mac along with its sister institutions allows a reliable, steady, flow of the funds to the individual buyers from the capital markets, even in disturbed economic period. It charges both the loan level price adjustments (LLPAs) and the guarantee fees. It also operates certain special programs which eliminate some of the hurdles for the low income homeownerships like, credit history issues, high down payments, and able to get reasonable fixed rate. It also facilitates the customers in rural areas by purchasing loans secured by the houses and other properties of those locations. The company also provides training to the lender customers with the help of online learning center. It invented the online multilingual credit smart program for facilitating the borrowers to aware of their pre purchase counselling alternatives (Carr, Anacker, & Mac, 2014).  

Freddie Mac’s SEC fillings

The Freddie Mac's report is based on theUS Security and exchange commission (SEC) Form-10k Annual Report and Form DEF-14A Proxy Statement. According to the SEC form, it protects the investor and encourages fairness within the securities market. Apart from them it shares information related to the investment and companies professionals to gain confidence from the investors. The Freddie Mac mortgage related securities includes the various mortgage products. The percentage of repaying fixed rate for single family loans under the trust debt securities is approximately 93 percent and 92 percent in the year 2012 and 2011 respectively. In the year 2012, the debts securities of UPB of its consolidated trusts have reduced by a proportion of around 4.5 percent. The reason behind this was that the volume of newly introduced insurances was low as compared to the volume of liquidation of the mentioned securities (Ermilova, & Nikeriasova, 2018). However, before the company's voluntary registration with SEC's common stock in July 2008 it had not filled any financial report in corporation with SEC. Instead, it had prepared Annual Information statements along with the Information statements in place of the forms 10-Q, 10-K, and 8-K.   

Analysis of external stakeholders

Competitors- Some of the major competitors of Freddie Mac includes Fannie Mae, Archstone, Vornado Realty Trust, Boston Properties Inc, Equity Office Management, Fidelity National Financial, MGIC, Ocwen, Apartment Investment & Management Co, and Equity Residential. Among all of these, Fannie Mae is the closest competitor of Freddie Mac which is also another secondary mortgage market. Its revenue in FY 2017 is $112.4 B and market capitalization is $7.7 B. As compared to Fannie Mae, Freddie Mac is listed 2nd in CEO rank, eNPS rank, overall culture rank, gender rank, and diversity rank (Frame, Fuster, Tracy, & Vickery, 2015). 

Industry- Freddie Mac securitizes the total mortgages prior to selling the securities to investors and shift a substantial part of credit risk away from the tax payers. The various types of mortgage products which the company deals include: fixed rate mortgage, adjustable rate mortgage, and other government sponsored offerings. The fixed rate mortgage includes condominium unit mortgage, 30 year fixed mortgage rate, energy efficient rate, manufactured homes, cash out refinance mortgage, mortgage on investment property, rural housing service, renovation mortgage and many more. The adjustable mortgage run by the company includes loans possible mortgages, CMT indexed ARMs, manufactured homes, LIBOR indexed ARMS, home possible mortgages, financed permanent buy down mortgages, and secondary financing loans. Similarly the government sponsored offerings includes the mortgages like RHS leveraged seconds, guaranteed rural housing mortgages, mortgages in veterans affairs, and mortgages for Native Americans. The industry analysis of the company includes the political, legal, economical, and cultural issues which might affect the company performances. The increased level of taxation in US has the possibility to demotivate Freddie Mac from increasing their profit level. There is also risk of military attack by the hostile nations which eventually may cause divestment from the ventures (Kaul, Goodman, McCargo, & Hill, 2018). The IP (intellectual property) of the company should be protected through specified policies which can reduce the risk for entrepreneurs to invest in Freddie Mac.

Vendors- the vendors are responsible to provide eMortgage to the Freddie Mac. The secondary mortgage market of the company changes and demands continuously and thus needs the supplier who can provide cost effective and high quality products and services. The various vender lists of Freddie Mac includes Digital Delivery, DocuSign Inc., DocMagic, Docutech, Fisery, eOriginal, eSign Systems, Pavaso, NotaryCam Inc., SigniaDocs Inc. and Notarize Inc.. In its website, the company encourages disabled, women and minority owned businesses for registering as the diverse suppliers(Acolin, Bricker, Calem, & Wachter, 2016).

Customers- it is focused in providing the customers with the comprehensive support for strengthening the business and improving the working relationship. The customer service level standards are based on the customer feedback and improve it through assigned targets. The customer service center of the company answers calls of the customers within 3 seconds and tries to resolves their issues in the first call only (Frame, Fuster, Tracy, & Vickery, 2015). It believes in designing a better company for its customers and become flexible to provide the experience according to customer's need. 

GovernmentEntity- under the government entity of Freddie Mac, it is entitled to provide public financial services though it is held privately. The GSE are entitled to purchase the mortgage from the lenders within the secondary mortgage markets. Government established it in the housing sector for encouraging the homeownership within the working class and the middle class people. According to the entity, the government has the right to receive the copy of default notice which is received by borrower from lender under the loans documents. The regulatory agreement is not even allowedto be modified, altered, or amended without any prior written permission of the lender as long as the property is secured by the Property (Mae, & Mac, 2015). 

Community- the community crew includes the employees who have a tradition of making difference in the work structure. It extended the family up to nearly 75 million within the past 46 years. It works with the trusted intermediaries and professionals for successful homeownership for the borrowers. It united with non-profit partners for helping and facilitating communities from New York to Los Angeles. Moreover, it also works for building the eco-friendly and sustainable practices in every aspects of its business to decrease the harmful impact on environment(Carr, Anacker, & Mac, 2014).

Analysis of internal stakeholders

Shareholders- the company has approximately 430 institutional shareholders and investors which have filed 13F forms with the SEC (Securities Exchange Commission). According to reports, these shareholders hold a share of 141,532 in the company. The major shareholders of the company have the right to include mutual funds, individual investors, and hedge funds. Among, these shareholders, the largest shareholders include Carret Asset Management, Rhumbline Advisers, VNBTrust, Llc, Marietta Wealth Management, Vigilant Capital Management, InterOcean Capital, National Association, Winch Advisory Services, Winch Advisory Services, Vectors Research Management, and Captrust Financial Advisors. The present ownership structure of the company is reflected in its current positions by funds and institutions. 

Board of Directors- the board of directors is a set of members elected as the representative of the shareholders. The board of directors of Freddie Mac role is to create the policies for the management of corporate and making important decisions on the company issues. Some of the board of directors of the company includes Donald H. Layton, Lance F. Drummond, Carolyn H. Byrd, Thomas M. Goldstein, Steven W. Kohlhagen, S. Sara Mathew, Eugene B. Shanks, Anthony A. Williams, and Christopher S. Lynch. As per the decisions set by the non-employee directors of the company, the board of directors is considered independent under the standards mentioned in the guidelines of Freddie Mac. 

Management- the management of the company is responsible oversee and manage the day to day activities going within the company. It is directly responsible to fulfill the changing demands of the different operational aspects going within the business (Passmore, & Sherlund, 2016). Some of the major executive in the management team includes Donald H. Layton (Chief Executive Officer), David M. Brickman (President), Stacey Goodman (Chief information officer and executive vice president), Anil Hinduja (Chief Enterprise Risk Officer and Executive Vice President), Michael Hutchins (Executive Vice President), Deborah Jenkins (Head of Multifamily Business), James G. Mackey (Chief Financial Officer), David Lowman (Head of the Single family business), William McDavid (General Counsel and Corporate Secretary)(Acolin, Bricker, Calem, & Wachter, 2016). 

Employees- Freddie Mac aims at fostering a work environment which can help their employees to be their best. The total number of employees working in the company is approximately 6185 (as per 2017data). The company offers several benefits to its employees such as health insurance, accidental death insurance, maternity and paternity leave, family medical leave, vacation and paid time off, gym membership, job training, and tuition assistance (Ni, & Van Wart, 2015). Some of the important employees of the company include Michelle (Enterprise Operational Risk Management), Corey (Community Mission Manager of the Multifamily), Chris (production associate of Multifamily), Bellore (business process director of the single family), Kamara (Production manager of multifamily), and Cynthia (Human resources and information systems senior). 

SWOT analysis

In the following section, the strengths, weaknesses, opportunities, and threats (SWOT) analysis for Freddie Mac Company is detailed. The objective of this analysis is to identify the market related challenges and opportunities such that, the company could improve the implemented work practices and strategies for achieving competitive advantage(Ni, & Van Wart, 2015). 

Strengths

• Freddie Mac is recognized as a market leader who is engaged in financing of mortgage loans related to residential properties. 

• The company is benefited with huge advantage and perception of security among the customers, because this enterprise is sponsored by government. 

• The company focuses on dedicated customer relationship management. This brings a high level of customer satisfaction as well as good brand equity to retain loyal customers. 

• The company is recognized by Forbes Global public companies ranking and hence have a strong market brand name (Roisman, 2015). 

• Have a huge Workforce of more than 5,000 employees, offering these services. 

• The company have developed a strong distribution network over the years. This makes a reliable networking distribution, which can reach the potential market easily.

• The company uses Automation as part of work practices and related activities. As a result of which, the organization enables scaling up and scaling down based on the demand conditions of current market situation(Acolin, Bricker, Calem, & Wachter, 2016). 

Weaknesses

• A recent decline in the net income and assets, is the responsible factor for hampering the company's confidence, among the stakeholders and investors. 

• The profitability ratio and net contribution percentage of the company is below the industry average, as revealed according to the annual report. 

• There exists a stiff competition in market with reference to other big investment agencies. 

• Freddie Mac is facing low divorce because of recent sovereign debt crisis. 

• The company is also facing high attrition rate in the workforce. This suggests that the organization have to spend more on training and development of their employees, in comparison to its competitors in market. 

• The product demanding forecast of the company is not good, because of which the company mist many of the opportunities compared to the competitors. The reason is associated with poor forecasting strategy which results in two high inventory at in-house and channels(Ni, & Van Wart, 2015). 

Opportunities

• Overcoming the low default with reference to debt crisis is possible because of government support. 

• Attractive rate of home loan interest, supports the business of company in the market. 

• The decreasing rate of transportation cost also brings opportunity to control the price of products, favorable for the customers. Hence, it enables the company to gain profitability and to gain more market shares. 

• The adoption of new technology standards (mainly the IT prospective and disruptive technologies integration into product line) and utilization of the government free trade agreement fetches great opportunities for the company to enter into potential emerging markets (Shapiro, & Kamarck, 2015). 

• The lower inflation rate brings more stability in the market. This also enables credit system within the scope of lowering interest rate to the existing customers of the company.

• Over the past years, the company have extensively invested in the technological utilization for example the online platform. This enables the company to attract new customers from the online channel, and can serve their needs in a better way using the big data analytics. 

Threats

• Recent house bubbling factor in United States could be considered as a risk factor for the company. 

• Rising raw material, position images trade for the Freddie Mac Company’s profitability.

• Recent measures related to the mortgage rules, brings possibility to introduce tougher situation for buying and selling of houses(Abel, & Fuster, 2018). 

• The different regulations and continuous fluctuation in the laws regarding the products and their standards, could make the company face lawsuits in various market. 

• In recent years, the company has not introduced any innovative product into the market. Over the years, the newly-introduced product by the company is basically the response to the development made by competitors. 

• The supply of new product is not regular sized by the company. This leads to high and low fluctuation in the sales number over the time. 

• Threats related to price of new entrants and intensifying competition in the market. The stable profitability opportunity in the market attracts new entrance into the business (Gates, 2017). 

In order to retain the competitive advantage in market, the company should focus on maintaining their strengths. For example, the company has track record of maintaining a strong free cash flow, maintaining high standards of customer satisfaction, and successful track record of integrating the technological compliments into the product line through mergers and acquisition. In addition to this, the company also has strong dealer community and strong distribution network. These characteristic market roles must be retained by the organization in their future endeavors, which in turn will be responsible for retaining the loyal customers as well as attracting new customers. Importantly, as mentioned in the above section, the company faces higher attrition rate in their workforce(Acolin, Bricker, Calem, & Wachter, 2016). 

In order to overcome this limitation, they have to focus extensively on measures to improve the competency level of their employees. This requires investment on conducting training programs, workshops, motivational sessions, and improving the channel of communication at workplace. Also, the company has to focus on developing unique selling proposition (USP) for the products. This is because, many of the products which have high sales figure but are not clearly defined in terms of USP are vulnerable to be attacked by the competitors(Ni, & Van Wart, 2015). 

On the opportunity side, Freddie Mac needs to gain advantage of newer policies. This includes economic upticks, new environmental policies, free trade agreements, lower inflation rate and decreased cost of transportation, which should be favorable modified for attainment of high profitability. It is also of high interest to the company that they should invest in analysis of consumer behavior, such that the information gained can be effectively included within the scope of strategy framework building. For example, the new trends in the consumer behavior could be effective in building new revenue streams as well as diversifying the product line into varying categories, suitable according to the consumer’s requirement. This strategy will further be effective because of the fact that company nowadays is using online channels and big data analytics for retaining as well as attracting new customers. 

The present section details how the strengths and limitation of the company could be modulated into favorable market conditions. In particular, the company has to make strong strategy decisions to maintain the cash flow, using the IT platform for business communication, and maintaining a strong network in market. However, it should be noted that certain capabilities of the organization can prove to be strength and/or weakness at the same time. For instance, the changing regulations with respect to the social, economic, and political environment could prove to be a threat or opportunity. In this fluctuating environment, the company can become a field player or can gain competitive advantage if it can develop the product in a technology efficient manner compared to the competitors (Acolin, Bricker, Calem, & Wachter, 2016). Of note, the SWOT analysis is also considered as a static assessment. Here, the status quo of many perspectives could change with respect to the environmental variation. This means that as the capabilities, circumstances, strategies, market threats, changes the overall dynamics of the competitive environment cannot be explained with a single matrix analysis.

Conclusion

Freddie Mac focus on achieving desirable solutions for the mortgage products for meeting the lenders needs of getting extra borrowers. It does not directly lend to the borrowers but acts as a medium between the lenders and the borrowers by buying and making the loans (Abel, & Fuster, 2018). It is therefore considered as to operate in the secondary mortgage market in United States. Since 1970, the company has been chartered by Congress and it tries to achieve the mission of steady money flowing, promoting house affordability, and maintaining stability of house market. According to data, around 90 percent of the apartments financed by the company are reasonable for low to medium income customers. The mortgage funding for September 2018 is $31billion and $286 billion for the YTD 2018. The GSE Freddie Mac has provided three strategies as mortgage consultant which can help in compete in the housing environment. First, there is need to understand the players or the borrowers type. This would help in providing the customers with program that best suits their requirement and help them to buy the home. Second, the company should remain on the top of the game by following the latest trends, industry insights, and the best practices for the overall professional development. Third, the mortgage company should deal with the referral partners in personal touch, so that they would definitely refer it to some other borrowers also (Aalbers,2016). The referral partners could be tax accountants, real estate professionals, and the house improvement contractors.         

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