1. Secondary Mortgage Market Resources Do You Need to Sell Some Loans??? North Carolina Affordable Housing Conference Durham, NC October 16 & 17, 2008 Presented by: Miles O. Vaughn Fannie Mae

2. 1© 2008 Fannie Mae The Housing Finance Market Where all activities related to the origination, sale, securitization, and servicing of residential mortgages takes place Two components: 1. Primary Mortgage Market 2. Secondary Mortgage Market

3. 2© 2008 Fannie Mae Primary Mortgage Market Mortgages are originated and funds loaned directly to borrowers Some key players: ­ Commercial Banks ­ Credit Unions ­ Mortgage Companies ­ Housing Finance Agencies (i.e. North Carolina Housing Finance Agency)

4. 3© 2008 Fannie Mae Secondary Mortgage Market Market where residential mortgages and mortgage-backed securities (MBS) are bought and sold Mortgage-backed securities are pools of mortgages with similar features bundled into an investment instrument (securitization) Some key players: ­ Fannie Mae ­ Freddie Mac ­ Ginnie Mae ­ Pension Funds ­ Commercial Banks

5. 4© 2008 Fannie Mae Housing Finance Market Dynamics Borrowers (Pay Mortgages) Lenders/Originators (Banks, HFA, S&L’s, Credit Unions, etc.) Fannie Mae, Freddie Mac, FHLB Capital Markets Pension Funds, Investors

6. 5© 2008 Fannie Mae Fannie Mae’s History Created in 1938 to help combat the adverse effects of the Great Depression ­ High unemployment ­ Massive bank closures ­ Tightening of availability of mortgage financing Mission is to provide s tability, liquidity and affordability to America’s housing market, in good times and bad.

7. 6© 2008 Fannie Mae How Fannie Mae Provides Liquidity Fannie Mae provides liquidity in two ways: 1. Purchase mortgages from lenders Hold these mortgages in portfolio Provide cash to lenders so they can fund additional mortgages In order to finance the mortgages we purchase, we issue debt securities to capital market investors (continued)

8. 7© 2008 Fannie Mae 2. We issue mortgage-backed securities (MBS) Pool the loans from lenders and bundle into MBS MBS are owned by lenders and are backed by the underlying mortgages MBS are very liquid and lenders can sell them or hold them Fannie Mae guarantees timely payments of interest and principal of MBS Fannie Mae earns guarantee fee How Fannie Mae Provides Liquidity (con’t)

9. 8© 2008 Fannie Mae Fannie Mae’s Key Business Groups Capital Markets - Purchases and sells our portfolio mortgage loans, MBS, and other mortgage-related securities Single-Family Mortgage Business - Offers our lender partners mortgage products and services that helps borrowers buy and keep their homes Housing and Community Development - Works with housing partners to help stabilize and expand supply of affordable and market-rate rental housing

10. 9© 2008 Fannie Mae Benefits to Borrower Insures steady stream of funding is available Allows for competitiveness in mortgage rates New technologies that make buying a home quicker, easier, and less expensive

11. 10© 2008 Fannie Mae Contact Information Miles O. Vaughn Senior Business Developer Fannie Mae 112 South Tryon Street, Suite 1100 Charlotte, N.C. 28284 Miles_o_vaughn@fanniemae.com (704) 344-6964