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New England 265 Franklin St., 10th Floor Boston, MA 02110 (860) 523-4691

New England 265 Franklin St., 10th Floor Boston, MA 02110 (860) 523-4691. Fannie Mae Today. Entered conservatorship in Sept. 2008 >$802 billion mortgage portfolio ($850 B Authority) > $2.6 Trillion in MBS $110 billion multifamily portfolio – now 85% flows thru MBS

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New England 265 Franklin St., 10th Floor Boston, MA 02110 (860) 523-4691

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  1. New England 265 Franklin St., 10th Floor Boston, MA 02110 (860) 523-4691 Confidential - Internal Distribution

  2. Fannie Mae Today • Entered conservatorship in Sept. 2008 • >$802 billion mortgage portfolio ($850 B Authority) • > $2.6 Trillion in MBS • $110 billion multifamily portfolio – now 85% flows thru MBS • Finances 1 of every 3 mortgages • 7,500 employees Confidential - Internal Distribution

  3. Capitalmarket Homebuyer Fannie Mae Lender Wall Street investors Primary market Secondary market U.S. Housing Finance Markets Confidential - Internal Distribution

  4. Affordable Housing Goals2010 Moved to goals in relation to market test *Low-to-Moderate Income 40% *Under-served Areas 30% *Special Affordable 22% *Special Affordable Multifamily $2.85B Confidential - Internal Distribution

  5. National Mortgage Crisis • 2000-2006 boom in subprime lending came home to roost – serious delinquency rate jumps to 20.1% • Crisis spreads to prime loans due to high unemployment plummeting home values • 15 million loans underwater – 7 million > 125% 1.2 million > 150% • Projections of 4 million foreclosures • Strategic defaults represent 20% of defaults • Sales & home prices - steep declines • Housing starts way down, inventory way up • 33% of those in default are investors – Las Vegas, Florida, Arizona Confidential - Internal Distribution

  6. Contributing Factors • Structural change in industry – bankers to broker • Historic low interest rates • Shift from financial to real estate investments 2001-2005 • Steady if not rapid residential price appreciation • Over building • Capital markets chasing yield – domestic and foreign capital flooded US mortgage and RE market • Subprime grew from less than 5% to over 30% of overall market – lots of steering and abuse * loc- no doc loans, investors, easier yes Confidential - Internal Distribution

  7. Housing production outstripped household formation New Units Authorized Increase in occupied housing units Source: Bureau of the Census Confidential - Internal Distribution

  8. Household formation has declined Average annual increase 2000-2005 = 1,122,000 Average Annual Increase 2005-2009 = 631,000 Source: American Community Survey Confidential - Internal Distribution

  9. Meanwhile, the “shadow inventory” is growing 3.4 million mortgages 1.8 million mortgages 570,000 mortgages 240,000 mortgages Source: OCC Mortgage Metrics Confidential - Internal Distribution

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  12. So What’s Happening in the market? • Commercial MBS market has vanished • Conduits for Commercial and Asset backed securities have closed shop • People in trouble now have no way to refinance • Capital sources gone • LTV’s upside down • Further consolidation • GSE/FHA/HFAs trying to step in with rescue loans and modifications Confidential - Internal Distribution

  13. Connecticut & Subprime • Subprime represents 12% of all CT loans – 63,000 out of 528,000 • Hybrids and ARMs represent 65% • Delinquency #s • Prime – 5%% • Subprime 18%% • FHA 8%% • 2,000 loans per month to reset thru early 2010 • Many loans – 20% defaulting prior to reset • Concentration of defaults and subprime in CT cities Confidential - Internal Distribution

  14. Serious Delinquencies in CT vs US(Percent of active loans 90+ or in FC, April 1992-August 2010) US CT NE Confidential - Internal Distribution Source: LPS Applied Analytics Note: New England (NE) excludes Fairfield County, CT

  15. Delinquencies by NE State(Percent of active loans, August 2010) Confidential - Internal Distribution Source: LPS Applied Analytics 15

  16. Concentration of Real Estate Owned (REO) Properties in CT and RI (March 2009) Confidential - Internal Distribution Source: Federal Reserve Bank of Boston analysis of LPS Applied Analytics

  17. Foreclosure Crisis Reponse • HAMP • HARP • HAFA Confidential - Internal Distribution

  18. Targeted Initiatives • NSP REO Sales • Detroit – Short Sale w/ Retention • Massachusetts Refi Lease to Own • Chicago Note Sales • Hardest Hit Funds • Foreclosure Prevention Initiatives • Mortgage Help Centers • Non profit vendor fee for service Confidential - Internal Distribution

  19. Take-aways • Delinquencies - CT better than U.S., but slightly worse than NE • Hotspots in several cities and in Wyndham County • MHA Loan mods slowing in CT and the nation • REOs concentrating in ~8 CT cities, might include a few others in future • Emerging two-tier loan market in US • Importance of FHA in CT for nonprime borrowers Confidential - Internal Distribution

  20. Other Activity • Pullback in Community lending – doing permanent MF and SF loans and some targeted construction lending through participations • Have launched Affordable Advantage with HFAs – nothing formal with CHFA as of yet • Out of the LIHTC investment role – no tax liabilities for foreseeable future • Have affordable projects been hurt harder than commercial? • Effectiveness of programs on FP side? Confidential - Internal Distribution

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