1. The Housing Outlook Presented by: Mark M. Zandi, Chief Economist Presented by: Mark M. Zandi, Chief Economist April 26, 2007

2. 2 Median existing house price, % change year ago, 05Q4-06Q4 Decline > 3% < 3% The Housing Correction is in Full Swing…

3. 3 …and Has Another Year to Run Sources: Realtors, Moody's Economy.com Median existing house price, $ ths, SA

4. 4 # of Excess Housing Units, Ths. Sources: Census, Moody's Economy.com Bulging Inventories Must Be Worked Off

5. 5 Stunning Erosion in Mortgage Credit Quality… Sources: Equifax, Moody's Economy.com Default rate (R) Delinquency rate (L) % of residential mortgage debt, $

6. 6...In an Increasing Number of Areas... Change in mortgage delinquency rate, 07Q1-05Q4 Sources: Equifax, Moody's Economy.com Over 120 bp 48 bp to 120 bp Less than 48 bp U.S. = 83 bp

7. 7...Particularly In Recent Subprime Vintages # of months of seasoning Subprime ARM cumulative losses, by vintage year % of original balance Source: Moody’s Investors Service 1999 2000 2001 2002 2003 2004 2005 2006

8. 8 Source: Credit Suisse Share of securitized purchase mortgage originations More Credit Problems are Coming...

9. 9...as Resetting Mounts... Mortgage debt outstanding facing first payment reset, $ bil Source: Credit Suisse

10. 10...and Mortgage Lenders Tighten Source: Federal Reserve Senior Loan Officer Survey Net % of banks tightening mortgage loan standards