Ahleeya VangBrooke Maxwell

Agenda Creating the Mortgage Market

1900: Who and Loan Characteristics1930: Great Depression

Federal National Mortgage AssociationFannie Mae

Government National Mortgage AssociationGinnie Mae

Federal Home Loan Mortgage CorporationFreddie Mac

Sub-Prime Lending

Creating the Mortgage Markets Early 1900

Who?○ Only the rich could afford to buy homes

Loan CharacteristicsHigh down-paymentsShort 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

structureLower down-paymentsLonger maturities (30 year loans)Fixed ratesLower interest rates

Fannie Mae

Created in 1938To 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

2008Changed the way we limit conforming loans.General Conforming LoansHigh Cost Conforming Loans

Chart of Historical Loan Limitshttp://www.fanniemae.com/aboutfm/pdf/histo

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