Secondary Mortgage Market ResourcesDo 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 © 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 © 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 © 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 © 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 MarketsPension Funds,

Investors

6 © 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 stability, liquidity and affordability to America’s housing market, in good times and bad.

7 © 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 © 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 © 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 © 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 © 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