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Ahleeya Vang
Brooke Maxwell
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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
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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
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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
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Fannie Mae
Created in 1938To make loans accessible at a 30 year fixed rate,
making loans more accessible to families.
Operates in the secondary marketWorks mainly with mortgage bankers, brokers, and
primary mortgage partners.Fund by issuing debt: national & International
3 main businessesSingle family, housing & community development
and capital markets.
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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
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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
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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
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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
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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
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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
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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.
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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.
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Summary
1900’s loans accessible with balloon payments
Great Depression Fannie Mae Ginnie Mae Freddie Mac Sub-prime lending