1. 11© 2011 Fannie Mae. Trademarks of Fannie Mae. The Economy Drags Housing Upward Doug Duncan Chief Economist, Fannie Mae August 9, 2015

2. 2 Disclaimer Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

3. 3 Job Growth For Younger Workers Outpaces Older Cohorts Source: Bureau of Labor Statistics

4. 4 Income Growth Expectations Continue to Improve Source: The Conference Board, NBER 1991-1996 Avg.=9.9 1982-1987 Avg.=18.7 2001-2006 Avg.=9.7 2009-2014 Avg.= -1.64

5. 5 Household Formation Shows Signs of Improvement Source: Fannie Mae Economic & Strategic Research Forecast Source: Census Bureau

6. 6 Multifamily Housing Starts Reach 27-Year High Source: Census Bureau SAAR, Thousands of Units

7. 7 Existing Home Sales Reach 8-Year High, While New Home Sales Fall Short Source: National Association of REALTORS®, Census Bureau

8. 8 Source: S&P/Case-Shiller, CoreLogic, Federal Housing Finance Agency Home Price Appreciation Accelerates Year-over-Year % Change

9. 9 Continuous Tight Supply May Further Support Home Price Growth Source: CoreLogic, National Association of REALTORS®

10. 10 Source: Fannie Mae National Housing Survey™ Consumers Exhibit a More Balanced View of the Housing Market

11. 11 Source: Fannie Mae Economic & Strategic Research Forecast Source: Census Bureau Vacancy Rates Trend Lower

12. 12 Homeownership Rate Continues to Decline as the Market Remains Dominated by Renter Households Change in Units from Prior Year, Thousands of Units Homeownership Rate, % Source: Census Bureau

13. 13 Lenders Plan to Increase Their Marketing Investments Into First-Time Homebuyers and Move-Up Homebuyers [If YES, firm develops or implements Direct-to-Consumer marketing programs] Listed below are some possible mortgage consumer segments. For each consumer segment, please indicate whether your firm plans to make marketing investments in 2015 to increase your firm’s penetration into the consumer segment as part of your firm’s 2015 mortgage origination strategy. (Q4 2014) In addition, larger institutions are more likely to invest in affluent consumers and mid-sized and smaller lenders are more likely to invest in lower-then-median income consumers. L/M/S - Denote a % is significantly higher than the annual loan origination volume group that the letter represents at the 95% confidence level Please note that percentages are based on the number of financial institutions that gave responses other than “Not Applicable.” Percentages may add to under or over 100% due to rounding. Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q4 2014

14. 14 The Share of Lenders Reporting Increased Demand for GSE Eligible Loans Over the Prior Three Months Has Been in a Steady Climb Since Q4 2014 Up The same Down Q: Over the past three months, apart from normal seasonal variation, did your firm’s consumer demand for single-family purchase mortgages go up, go down, or stay the same? “Up” = Went up significantly + Went up somewhat, “Down” = Went down significantly + Went down somewhat Q: Over the next three months, apart from normal seasonal variation, do you expect your firm’s consumer demand for single-family purchase mortgages to go up, go down, or stay the same? “Up” = Go up significantly + Go up somewhat, “Down” = Go down significantly + Go down somewhat Past 3 Months Next 3 Months Mid-sized Institutions Larger Institutions Smaller Institutions Total * Denotes a statistically significant change since Q1 2015 Purchase Mortgage Demand: GSE Eligible Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015

15. 15 Reported Credit Tightening for GSE-Eligible Loans Continues to Trend Down Gradually Each Quarter Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015 Credit Standards: GSE Eligible Past 3 Months Next 3 Months Mid-sized Institutions Larger Institutions Smaller Institutions Total Ease Remain Unchanged Tighten Q: Over the past three months, how did your firm’s credit standards for approving consumer applications for mortgage loans change (across both purchase mortgages and refinance mortgages)? “Ease” = Eased considerably + Eased somewhat, “Tighten” = Tightened somewhat + Tightened considerably Q: Over the next three months, how do you expect your firm’s credit standards for approving applications from individuals for mortgage loans to change (across purchase mortgages and refinance mortgages)? “Ease” = Ease considerably + Ease somewhat, “Tighten” = Tighten somewhat + Tighten considerably

16. 16 [IF deliver loans to the GSEs or Ginnie Mae] You mentioned that your firm securitizes or sells mortgage loans with/to Fannie Mae, Freddie Mac, or Ginnie Mae. Does your firm apply credit overlays* that are more stringent than what Fannie Mae, Freddie Mac, or Ginnie Mae require? Showing Total (N=185) Applying Credit Overlays Among Lenders Delivering to the GSEs or Ginnie Mae A Limited Number of Lenders Reported That They Apply Overlays When Delivering Loans to the GSEs or Ginnie Mae Yes No Respondents saw the following definition when they hovered over “overlays” in the question text: Lenders’ own underwriting guidelines that exceed requirements in the guides published by the investor to which the loan is being sold. Lender overlays can address various borrower and property attributes, including, but not limited to, credit score, debt-to-income ratio, amount of assets and the type of assets, minimum down payment, property type, and other attributes. IF YES N=66 [IF apply credit overlays] What type of overlay does your firm apply most often? Showing Total (N=66) Higher credit scores Additional documentation Lower LTV ratioRestrictions on property type Lower DTI ratioLimitations on sources of funds permitted for down payment and closing costs Other Results across subgroups can be found on pp. 28-29 Due to small sample sizes, results should be interpreted with caution Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015

17. 17 While There is Minimal Diversion From the Median for All Lender Sizes, Smaller Institutions Demonstrate Larger Spread of FICO Scores Number of Lenders 696164121 Number of Lenders 830201112 Lower Quartile (Q1) Upper Quartile (Q3) Median Outlier Source: Marketrac, HMDA, Freddie Mac, Fannie Mae Max Value Min Value *2014 Data through 2014 Q3 “Other” Institution Type includes private equity firms and insurance companies (i.e. Fortress Investment, Walter Investment, Ocwen Financial, Metlife, Inc.) Note: FICO weighted by loan UPB **Q1 – (Q3-Q1)*1.5 < Outlier < Q3 + (Q3-Q1)*1.5

18. 18 Real Interest Rates Have Trended Lower for Over Three Decades Source: Federal Reserve Board, Freddie Mac, Bloomberg Inflation Adjusted 1-Year U.S. Treasury Yield

19. 19 The Fed’s Balance Sheet Remains at Historic High, Though Its Duration is Shortening Source: Federal Reserve Board

20. 20 Mortgage Securitization is Dominated by GSEs and Ginnie Mae. However, the Share of Credit Risk Held by the Private Sector is Increasing Source: Federal Reserve, Fannie Mae, Freddie Mac, FDIC, Treasury & FHLBs *Preliminary

21. 21 Douglas G. Duncan is Fannie Mae’s Senior Vice President and Chief Economist. He is responsible for managing Fannie Mae’s Economic & Strategic Research Group and oversees corporate strategy. In this leadership role, Duncan provides all economic, housing, and mortgage market forecasts and analyses, and serves as the company’s thought leader and spokesperson on economic and mortgage market issues. Prior to joining Fannie Mae, Duncan was Senior Vice President and Chief Economist at the Mortgage Bankers Association. His experience also includes service as a LEGIS Fellow and staff member with the Committee on Banking, Finance, and Urban Affairs for Congressman Bill McCollum in the U.S. House of Representatives, and work on the Financial Institutions Project at the U.S. Department of Agriculture. He has been elected to the Board of Directors for the National Association of Business Economists, is a member of the American Economics Association and the American Real Estate and Urban Economics Association, and is past president of the Housing Statistics Users Group. Named one of Bloomberg / BusinessWeek’s 50 Most Powerful People in Real Estate and one of Inman News’ 100 Most Influential Real Estate Leaders for 2013, Duncan is a frequent speaker on national and state economic, housing, and mortgage market conditions. Duncan received his Ph. D. in Agricultural Economics from Texas A&M University and his B.S. and M.S. in Agricultural Economics from North Dakota State University. Speaker Biography

22. 22 Contact Information fanniemae.com/portal/research-and-analysis/ Doug Duncan, Senior Vice President & Chief Economist Fannie Mae 3900 Wisconsin Avenue, NW Mail Stop 1H-2N/01 Washington, DC 20016 (o) 202-752-0160 (c) 202-409-5913 (fax) 202-752-4441 douglas_g_duncan@fanniemae.com