You’re part of something big!

1. Workforce Housing Specialist You’re part of something big!

2. Introductions Gary Johnson, Bank of Kansas City 913-317-8300 Ron Yaffe, KCRAR 816-536-1123

3. Today’s Agenda • Funding Background • Marketing Opportunities • Barriers to Homeownership • Fannie Mae & Freddie Mac Solutions • Predatory Lending & Mortgage Fraud

4. Suppliers of funds to conventional mortgage lenders Private companies with public missions Fannie Mae & and Freddie Mac?

5. Secondary Market W here lenders & investorsbuy & sell existing mortgages • Consumer gets a mortgage from a bank or lender, Fannie Mae purchases mortgages and sells to investors • Banks and lenders receive cash from Fannie Mae to repeat the process • Results in lowest rates available!

6. Source: Neighborhood Reinvestment Corp. Benefits of Homeownership • Benefits to the neighborhood • Owners stay in your community longer – 12 years versus less than 3 years for renters • Owners more likely to attend church, be members of PTO, block club, are more likely to vote and participate in the political process • Less likely to have alcohol and substance abuse problems • Effects on children • More likely to be in school after age 17 • Less likely to become teenage parents • Less likely to be involved in the juvenile justice system

7. Survey Says:Home as an Investment P eople see buying a home as being a safe and potentially lucrative investment Stocks Mutual funds Savings or money market account IRA or 401(k) plan Buying a home Source: 2002 Fannie Mae National Housing Survey

8. Source: Fannie Mae Foundation, 1996 Sizing the Opportunity-New Americans Immigrants will account for nearly 1/5 of total household growth N ew Americans

9. Non-Traditional Nationally, non-traditional lending has grown at a compound rate of 26% from 1994 to 2002. $ Billions Source: Inside Mortgage Finance, 2002

10. Non-Traditional Reaching underserved markets Data from the full year 2001 shows that non-traditional lending is …

11. Of the credit-impaired with rates greater than 10.5% in 2001 49% Answered an advertisement Over 50% had balloon or pre-payment penalty Finding Lenders • How credit-impaired borrowers find their lenders • 29% Answered a solicitation or ad • (versus 6% of all) • 22% Family and friends • 16% Realtor • (versus 20% for general population) This is what you are competing with!

12. Knowledge Consumer’s knowledge of the home buying process is still a barrier. Source: 2002 Fannie Mae National Housing Survey

13. Comfort with Real Estate Terms N ot Comfortable 77% 70 60 58% 50 51% 40 Percent (%) 30 20 10 0 Whites Blacks Hispanics Source: 2002 Fannie Mae National Housing Survey

14. Obstacles to Home Buying Proportion of home buyers saying each is a major obstacle July 2002 May 1999 July 2000 May 2001 Source: 2002 Fannie Mae National Housing Survey

15. Overcoming Barriers Lack of Funds for Down Payment & Closing Past Credit Problems Low & Moderate Income

16. Fast recommendations and closings Eliminates uncertainties for buyers and sellers Gain satisfied customers and more referrals Automated Underwriting

17. DU as an Underwriting Tool • Desktop Underwriter® considers various relevant risk elements rather than limiting the assessment of the case to a few characteristics. This includes: • Credit Profile • LTV (MI level) • Liquid Reserves • Purpose of Loan • Loan Term • Debt to Income Ratio • Property Type • Number of Borrowers • Employment Other Benefits of DU include reduced documentation requirements, detailed Findings and Reporting, underwriting consistency and flexibility, and the limited waiver of representations and warranties.

18. Benefits of Automated Tools • Fair and objective • Fast recommendations — • saves time and hassle • Less paperwork – • streamlined appraisals • Flexible products – • low down payments • expanded ratios & credit scores Loans close faster and you get your commission sooner!

19. Benefits to REALTORS • Productivity • Easier and smoother transactions • Profitability • Sell more homes with more flexible financing and less hassles • Competitive Edge • Easy, practical way to help your clients be successful

20. Flexible Sources of Funds • Personal Savings • Gifts, grants or unsecured loans from relatives, employers, public agencies, or nonprofits • Loans from 401(k) accounts

21. Fixed rate 5/1, 7/1 and 10/1 ARMs Zero or 3% down payment Expanded ratios means lower qualifying income Loan limit of $333,700 Owner occupied, single-family homes, condos, and PUDs Flexible Profile

22. No down payment for Flexible 100 Borrower must contribute a minimum of $500 toward closing costs. 3% down payment for Flexible 97 Flexible sources of funds may be used for the 3% contribution to down payment Seller contribution up to 3% allowed for closing costs and prepays. Flexible 97 & 100 • No income limitation • No geographic limitation • No home buyer counseling

23. Product Concept Before Now with EA DU Approves DU Approves RWC Delivered Level I - Eligible RWC Ineligible for Delivery To Fannie Mae Level II - Eligible Level III - Eligible Level IV - Ineligible for Delivery to Fannie Mae

24. Ideal financing for credit challenged T Expanded Approval is a product in Desktop Underwriter ® that reaches further into the credit spectrum thus enabling approved lenders to approve more loans. he right mortgage at the right price • Say “yes” to more borrowers • Offer better pricing compared to a sub-prime execution • Reach a broader audience of buyers/borrowers • Provide loan products tailored to the borrower • “Yes” Rate • is 95% vs. 85%

25. Expanded Approval with TPR • Helps consumers with past impaired credit save money – about $220/month on a $100,000 mortgage -- and avoid predatory lenders with a conventional mortgage. • Enables consumers to finance a home at a rate as much as 2 percentage points lower than would otherwise be available. • Leverages technology, Desktop Underwriter®, to expand approvals for borrowers with blemished credit histories. • Rewards 24 consecutive on-time payments with an automatic interest rate reduction of up to 1 percentage point.

26. Expanded Approval with TPR Timely Payment Rewards What are the Requirements? • 24 consecutive monthly payments • without delinquency • Re-test opportunity • on third (3rd) and fourth (4th) anniversary • Borrower has never been three months or more delinquent What is it? An optional rate reduction feature that rewards consumers making timely payments with a one time rate reduction without the cost of a refinance. Thus encouraging borrowers with past credit problems to improve their payment performance: • 1.00% rate reduction for EA-III/Eligible • .50% rate reduction for EA-II/Eligible

27. Even with Higher MI Premiums How competitive is EA? Note: Comparison based on EA/TPR including new A- MI premiums; Execution normalized to account for MI premium, prepayment parameters, and loan size (as of 7/17/03)

28. Freddie Mac • Scope • Programs • Similarities, Differences

29. Close More Deals with EA • Key Features • No income or geographic restrictions • Flexible debt-to-income ratios • No pre-payment penalties • Fixed rate and 5/1, 7/1 and 10/1 ARMs • LTV’s up to 100% (with $500 minimum borrower contribution • Flexible sources of down payment for 3% minimum contribution on 97% LTV • Automatic rate reduction option • Say “Yes” to more borrowers with competitive interest rates

30. My Community Mortgage • Suite of financing solutions for low-and moderate-income buyers • Community 97 • Community 100 Plus • Community Solutions • For teachers, police, firefighters, & health care workers

31. Community 100 & Community 100 Plus *gifts, grants, Community Seconds, or borrower funds

32. Community Solutions Expanded Ratios for Firefighters, Policemen, Teachers, and Healthcare Professionals* Ratios as high as 45% with 1 month reserves or 50% with 2 months reserves Reserves may be gifted * Incentives to Healthcare Professionals require their employers provide an EAH Program

33. Borrower Eligibility Financing for Legal Aliens • Fannie Mae will purchase mortgages made to lawful permanent or nonpermanent residents under the same terms that are available to US citizens • Underwriting flexibilities allow eligible immigrant borrowers to apply for a home loan even if they are only in the process of obtaining permanent residency, or do not have a complete U.S. income and credit history • Community lending products allow for alternative sources of qualifying income such as boarder income and part-time employment • Fannie Mae does not require a borrower to have a social security number

34. www.fanniemae.com

36. The Dark Side of Financing • Predatory Lending • Mortgage Fraud

37. Mortgage Fraud Missouri: 339.100 (4) Representing to any lender, guaranteeing agency, or any other interested party, either verbally or through the preparation of false documents, an amount in excess of the true and actual sales price of the real estate or terms differing from those actually agreed upon. Kansas 58-3062. Prohibited acts. Represent to any lender, guaranteeing agency or any other interested party, either verbally or through the preparation of false documents, an amount in excess of the true and actual sale price of the real estate or terms differing from those actually agreed upon.

38. Red Flags • Inflated appraisals • “Silent” Second Mortgages • Higher than necessary rates and fees • Last minute, sudden repair invoices • New immigrants being advised to falsify information on SS#, citizenship, etc.

39. Red Flags • Items omitted from the HUD-1 • No Good Faith Estimate (or buyer being told not to let REALTOR®see it) ● Request for resubmitting listing to MLS with higher list price ● Mortg. Broker refusal to “put it in writing on their letterhead”

40. Red Flags • Unusual number of addenda to the contract • Mortgage broker unwilling to speak with agent • Promises to improve borrower’s credit score • Misrepresenting source of Buyer’s Down Payment

41. Red Flags • False claims about owner-occupancy • Undisclosed rebates or funds to any third party • Falsifying gift letters

42. Red Flags • Falsifying income • Falsifying rental verifications

43. What to do Put everything in the contract! • Be wary of unusual promises. • Verify the value. • Check the title history. • Know what’s fair and proper with loans, rates and terms

44. When asked to participate in a questionable scheme: Refuse & Report

45. Reporting Fraud Regulatory Bodies in Missouri • Lenders/banks, mortgage brokers http://www.missouri-finance.org/ • Real Estate Appraisers http://pr.mo.gov/appraisers.asp ● Real Estate Brokers/Agents http://pr.mo.gov/realestate.asp ●FBI

46. Join us forWHS Certification – Part II“Taking it to the streets” • Promote yourself • Increase Sales - Build Referrals • Learn about a powerful new website • Make a difference in your community

47. FHA • Stable • Credit scores don’t dominate • Appraisals less burdensome • Prohibitive fees, paid by seller, less than $100 • Gift funds allowed • Loan Limits increased to $271K=KC, STL=? • No pay off penalty • Not-for-profit DP Assistance still available

48. 100% Loan-To-Value Programs • If not becoming extinct, will be expensive • Freddie and Fannie not in sync • Mortgage Insurance Companies are either unwilling ot insure or are using aggressive pricing

49. CREDIT SCORES • There are credit scores and credit scores! • For the same person will vary re: home, vehicle, retail. Public doesn’t understand that! Credit repair services may be of little or no long term benefit and may return to previous levels. • Buyers with credit issues = opportunity to develop future business and referrals. Differentiate yourself by helping them restore their credit standing.

50. Added Value • All national studies show large segments of emerging markets lack RE knowledge, are unfamiliar w/terms and are easily duped. • Two choke points: loan appl. and closing. Be present to build trust, eliminate surprises, make a clear message that you are an authorized participant.