 Chaniece Applewhite, Flossie Brockington, Cameron Coker, Dionnia McGill, and Justin Smith

A GSE is a privately held corporation with public purposes created by Congress to reduce the cost of capital for certain borrowing sectors of the economy. GSEs are not backed by the “full faith and credit” of the U.S. Government.

Mission Statement: To ensure that working families have access to mortgage credit to buy homes they can afford over the long term or secure quality rental housing.

 Federal National Mortgage Association, known as Fannie Mae  Government sponsored enterprise  Founded in 1938 during the Great Depression as part of the Franklin D. Roosevelt’s “New Deal”  Acquired by the Housing and Home Finance Agency from the Federal Loan agency in 1950  Publicly traded since 1968 after conversion to a privately owned corporation  Split into current Fannie Mae and Ginnie Mae in 1968  Initially purchased Federal Housing Administration Loans (FHA) but was authorized in 1970 to purchase private loans  Chartered by Congress to increase the money flow to mortgage lenders  Securitizes and/or buys mortgage loans made by banks, thrifts, and credit unions  Issued first mortgage-backed security in 1981 History

Corporate Hierarchy Michael Williams, CEO Susan McFarland, CFO Michael Shaw, Chief Credit Officer Terry Edwards, Executive Vice President John Nichols, Chief Risk Officer Linda Knight, Program Executive

Mission Statement: To stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing.

 Federal Home Loan Mortgage Corporation, known as Freddie Mac  Government sponsored enterprise, established by Congress as a private corporation under the Emergency Home Finance Act of 1970  Created to expand the secondary market for mortgages and to create competition for Fannie Mae  Owned by Federal Home Loan Bank System and governed by Federal Home Loan Bank Board until the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA)  Reorganized under FIRREA, severing its ties to the Federal Home Loan Bank Board and creating an 18 member board of directors  Placed under supervision of the U.S. Department of Housing and Urban Development in 1989  Began receiving housing credit to purchase subprime securities in 1994  Placed under conservatorship of the U.S. Federal Government on Sunday, September 7, 2008 History

Corporate Hierarchy Charles Haldeman, Jr. CEO Ross Kari, CFO Hollis McLoughlin, Vice President of External Relations David Brickman, Vice President of Multifamily Ralph Boyd, Jr. Vice President of Community Relations Timothy Kenny, General Auditor

 Securitization o Mortgage notes are purchased from banks and other lenders o Loans are assembled into “pools” o Pools are securitized by the issuance of mortgage-backed securities  Mortgage-backed securities o Residential: backed by mortgages on residential real estate o Commercial: backed by mortgages on commercial property (office buildings, schools, apartment buildings) o Issued in “tranches”: a piece, portion, or slice of the structured financing o Pay periodic payments that are similar to coupon payments o CMO: Collateralized mortgage obligation that creates separate pools of pass-through rates for different classes of bondholders with varying maturities (tranches) Products / Services

Financials

Key Statistics

 U.S. Department of Housing and Development (HUD) began loosening restrictions for purchasing homes in the mid-1990s, and banks began to make subprime loans  Fannie May and Freddie Mac began buying these subprime mortgages when HUD required that they provide at least 42% of mortgage financing to borrowers with below median incomes  This target percentage was increased to 50% in 2000 and 52% in 2005  By the end of 2007, Fannie May and Freddie Mac had purchased $4.9 trillion of outstanding mortgages, 70% of which had been packaged and sold to investors  Many of these subprime mortgages purchased became bad when housing prices began to drop  As a result of the decrease in the value of homes and the increase in foreclosures, many of the mortgage-backed securities were deemed to be “junk” status instead of investment grade  Fannie Mae and Freddie Mac combined to lose $14.9 billion  Placed into conservatorship in 2008 Role in Credit Crisis

 Federal Housing Finance Agency assumed control of both Fannie Mae and Freddie Mac on September 6, 2008  All key executives were fired  Compensation of all management was restructured  All major decision referred to new management put in place by the FHFA  All political activities were halted  Federal Reserve and Treasury department purchased almost $100 billion in debt to increase liquidity for Fannie May and Freddie Mac Conservatorship

 Fannie Mae and Freddie Mac were GSEs established by Congress  Exist to purchase mortgages and provide liquidity for banks  Securitize mortgages in the form of mortgage- backed securities  Played key roles in the financial crisis of 2008  Suffered huge monetary losses during the financial crisis  Underwent government intervention in 2008 Conclusion

 Chaniece Applewhite, Flossie Brockington, Cameron Coker, Dionnia McGill, and Justin Smith