© 2019 Fannie Mae

Fannie Mae Key Affordable StrategiesNCSHA Annual Conference & Showplace

October 21, 2019

While every effort has been made to ensure the reliability of the session content, Fannie Mae’s Selling and Servicing Guides and their updates, including Guide Announcements and Release Notes, are the official statements of Fannie Mae’s policies and procedures and control in the event of discrepancies between the information in this seminar and the Guides.

An important note about the seminar content

2

© 2019 Fannie Mae

Market overview

Supply is about affordability.

Policy goals expanded access to credit

More borrowers qualify for loans – increasing competition for homes

The problem…

Supply collapsed post-crisis….And new supply focused on luxury markets

Existing housing stock oldest in history – 40% are over 50 years old

Keeping with Fannie Mae’s mission, increased cost to acquire and maintain housing needs to be addressed.

4

5

Number of Homes Available for Sale per 1000 Households (NSA)

Total home inventory per household is at record lows.

Previous low, Q4 1994

Note: Shaded area denotes recessionSource: Fannie Mae ESR analysis – Data through Q1 2018

6

Entry-level supply has declined the most.

Note: Homes are tiered into high, mid and low thirds of home values within a given region; inventory is the subset of homes in that tier that are for sale Source: Zillow, https://www.zillow.com/research/data

7

Conventional Owner-Occupied Purchase-Money Mortgage (PMM) Acquisitions of Eligible Loans

642757 716

791

523 471 421 476379

267 270 288377

465 414 440522 528 515

287

223

254231

230

242221

211260

246

198 204 194

257

348329

363

445505 528

311

74%

75%76%

77%

68%68%

67%

65%

61%

57% 57% 60%

59%

57%56%

55%

54%51% 49%

48%

0

200

400

600

800

1000

1200

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 YTD

Thousands, Labels Show % Repeat Buyers*

First-Time Homebuyers Repeat

*NOTE: Eligible loans exclude loans with features that make them no longer eligible for delivery to Fannie Mae (e.g. FICO<620,LTV>97). For more details see “Credit Risk of Low Income Mortgages” by Fout, Li, Palim and Pan (2018).

Source: ESR Analysis of Fannie Mae Acquisition data

8

Urban* Population as a Percent of the Total U.S. Population (1790-2010)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1790 1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

1916: 50% of the US population now lives in an urban area

*Urban is currently defined as any area with 50,000+ people as well as 1,000 person per square mile density and includes urban clusters which are places with 2,500 to 49,999 people.

Source: Census Bureau

9

Core City Share* of Population Growth Within the 50 Largest MSAs

0%

5%

10%

15%

20%

25%

30%

35%

40%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

*Share of MSA population growth that can be attributed to the principal city

Source: Census Bureau, Fannie Mae ESR Analysis

10

Share of Adult Children Still Living at Home

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

2%

4%

6%

8%

10%

12%

14%

16%

'67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19

Employment and Residence of Young Adults, 1967-2019

Share of 25-34 Year Olds Living At Home With Parents Share of 25-34 Year Olds Employed (Right Axis)

Source: Census Bureau, Bureau of Labor Statistics

Affordable Housing: State and Local Programs

State and Local programs primarily serve low income renters but can also provide affordable housing to moderate income renters as well.

11 Confidential © 2019 Fannie Mae

0

20

40

60

80

100

120

Multiple Tiers 50-60% 61-80% 81-100% 101-150% 151-240%

Nu

mb

er o

f Pro

gra

ms

Maximum Percentage of Area Median Income

Maximum Income Level by Rental Program

Source: Grounded Solutions Network

As of May 31, 2019

© 2019 Fannie Mae

Partnering with Fannie Mae

Advancing Housing Affordability

• Small Financial Institutions

• Shared Equity/Community Land Trusts

• Duty to Serve Energy

• Rural and High Needs Rural

“Big 6” Focus Areas

• Revitalize Manufactured Housing

• Support local regulatory change

• Support single-family builders

• Stimulate condo development & acquisitions

• Take modular mainstream

• Unlock nontraditional land sources

14

Affordable Housing: State and Local Programs

About 10% of new market rate developments under construction have a percentage of new rent-restricted units.

15 Confidential © 2019 Fannie Mae

Market-Rate Properties Under Construction With Some Percentage of Affordable Units

Source: CoStar as of May 31, 2019

Excludes student, senior, and military housing properties. Excludes properties under construction in Alaska and Hawaii

© 2019 Fannie Mae

Affordable MortgagesRecent Product Changes

HomeReady®: Limiting the maximum AMI to 80% across all MSAs and counties. This is part of a broader effort to focus Fannie Mae’s spending on affordable products. More details are available in the Lender Letter.

HFA Preferred: Limiting the pricing benefit of HFA Preferred – both the LLPA waiver and the charter minimum MI requirement – to loans less than or equal to 80% AMI.

[HFA Preferred Risk Sharing: Limiting HFA Preferred Risk Sharing loans to borrowers at or below 80% AMI.]

© 2019 Fannie Mae

Reach More LMI Borrowers

• HFAs will continue to be allowed to deliver loans greater than 80% AMI through the HFA Preferred variance, including the underwriting flexibilities of the variance (this does not apply to HFA Preferred Risk Sharing).

HFA Preferred - New LIP and VLIP Incentives:• LIP loans (less than or equal to 80% AMI) will receive an LLPA rebate of 0.5%• VLIP loans (those <=50% AMI) will receive an LLPA rebate of 1%