Ahleeya Vang Brooke Maxwell

Agenda  Creating the Mortgage Market 1900: Who and Loan Characteristics 1930: Great Depression  Federal National Mortgage Association Fannie Mae  Government National Mortgage Association Ginnie Mae  Federal Home Loan Mortgage Corporation Freddie Mac  Sub-Prime Lending

Creating the Mortgage Markets  Early 1900 Who? ○ Only the rich could afford to buy homes Loan Characteristics High down-payments Short maturity (6-11 years) Balloon payment at end Regional rates

Creating the Mortgage Markets  1930s: The Great Depression National Mortgage Market created ○ Offered national rates instead of regional rates FHA & VA insured mortgages ○ Reduced risk to lenders ○ Changed overall characteristics of contract structure Lower down-payments Longer maturities (30 year loans) Fixed rates Lower interest rates

Fannie Mae  Created in 1938 To make loans accessible at a 30 year fixed rate, making loans more accessible to families.  Operates in the secondary market Works mainly with mortgage bankers, brokers, and primary mortgage partners. Fund by issuing debt: national & International  3 main businesses Single family, housing & community development and capital markets.

Ginnie Mae  Created in 1968  Does not buy, sell loans or issue mortgage-backed securities  Guarantee MBS backed by guaranteed loans Federal Housing Administration (FHA) Department of Veteran Affairs (VA) Rural Housing Service (RHS) Office of Public and Indian Housing (PIH)  No matter what they are fully backed

Success of Ginnie Mae  Not Involved in the “Meltdown of 2008”  Stay true to their mission statement  Guaranteed over $2.8 trillion ($2.7 trillion, just single family) in mortgage backed securities

Fannie & Ginnie Mae Loan Limits  Housing & Economic Recovery Act of 2008 Changed the way we limit conforming loans. General Conforming Loans High Cost Conforming Loans  Chart of Historical Loan Limits ricalloanlimits.pdf ricalloanlimits.pdf

Freddie Mac  Created in 1970 Emerged from the Emergency Home Finance Act of 1970  Mission: to provide liquidity, stability and affordability to the housing market.  Helps with competition for the newly private Fannie Mae.  Essentially the same helps with single family, multi family, investment business

Sub-Prime Lending  Financial institutions lending to people who do not meet loan standards.  Lack of people who fit standards Had to go to people who didn’t conform  Advertise at a low interest rates Rates hiked up  Housing Market fails... Prices of home come down & people have no equity  Excess of homes, buyers market Banks have all the homes & they aren’t worth anything

Fannie Mae Stock Prices  This chart shows a 52 week rise and fall of Fannie Mae’s stock price.  High of $28.78 and a low of $.30  The biggest low was in near December 2008

Ginnie Mae Stock Prices  52 Week Stock prices  High of $11.36 and a low of $10.69  Not as much difference, due to the fact they are government backed.

Freddie Mac Stock Prices  52 week stock prices.  High of $26.80 and a low of $.25.  The lowest point was in between September & October of 2008.

Summary  1900’s loans accessible with balloon payments  Great Depression  Fannie Mae  Ginnie Mae  Freddie Mac  Sub-prime lending