Dr. Fratantoni's presentation at the 13th Annual Economic Summit hosted by NVAR at George Mason University.

1. Presentation at NVAR Economic SummitSeptember 23, 2009Mike FratantoniVP, Research & EconomicsMortgage Bankers Association

2. Macroeconomic and Interest Rate Outlook

3. Unemployment Rate Source: Bureau of Labor Statistics

4. Inflation Source: BLS

5. Measures of Household Wealth Source: Federal Reserve Board

6. Home Sales Sources: Census and NAR

7. Inventories and Vacancies

8. National Home Price Trend Source: FHFA

9. Federal Reserve’s Balance Sheet, $ mil Source: Federal Reserve *All Liquidity Facilities includes: Term Auction credit; primary credit; secondary credit; seasonal credit; Primary Dealer Credit Facility; Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; Term Asset-Backed Securities Loan Facility; Commercial Paper Funding Facility; outstanding principal amount of loans to American International Group, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC; and central bank liquidity swaps.

10. Agency MBS Issuance Data and Government Purchase Programs Sources: Federal Reserve, FHFA, IMF, Treasury

12. Economic Forecast Source: Mortgage Bankers Association

13. Housing Market Forecast Source: Mortgage Bankers Association

14. Lending and Underwriting Trends

15. Fed Senior Loan Officer Survey: July 2009 Source: Board of Governors of the Federal Reserve

16. Purchase Apps

17. Refinance Activity

18. Product Mix: Quarterly Mortgage Bankers Performance Report Production Mix, Average by Dollar Volume Source: Mortgage Bankers Association, Quarterly Mortgage Bankers Performance Report

19. Mortgage Originations $ Billion Estimate Forecast Source: Mortgage Bankers Association

20. Delinquencies, Foreclosures, and Loss Mitigation Efforts

21. Foreclosure Starts Rate

22. 90+ Day Delinquencies by Loan Type (NSA) Source: Mortgage Bankers Association NDS

23. 90+ Delinquencies by State Source: Mortgage Bankers Association

24. DC, MD, VA Delinquencies and Foreclosures Source: Mortgage Bankers Association, National Delinquency Survey

25. High Level of Modification Activity Source: JPM Chase

27. Burnout

29. Loan limits The Economic Stimulus Act of 2008 increased temporarily the CLL from $417,000 to $625,500. The act set the CLL in high-cost areas based on the areas’ home prices compared to the national median, up to a maximum of $729,750. The American Response and Recovery Act of 2009 raised, for one year, the high cost loan limits to the higher of $729,750 or the highest 2008 level. The standard level of $417,000 did not change. The current FHA loan limit ranges up to $729,750 in high-cost areas. With respect to 2010, the Senate stripped an extension of the higher GSE and FHA loan limits from the Transportation-HUD appropriations bill that it approved last Thursday. The higher limits were in the version of the bill that the House had earlier passed. SIFMA voted to maintain limits on the ability of the GSEs to include “jumbo conforming” loans in TBA pools.

30. HR 1728 – Overview HR 1728 - Mortgage Reform and Anti-Predatory Lending Act Passed House May 7, 2009; Not Senate Priority Safe harbor for “qualified loan” (rate does not exceed 1.5% over average prime offer rate; 2.5% for jumbo, 3.5% for junior liens; fully amortizing, total fees not to exceed 2 points; full underwriting...) Economic Interest Requirements- Creditor of not qualified mortgages to retain economic interest (at least 5%) of credit risk for loan it transfers/sells. Other Provisions - Other provisions regarding appraisals, pre-loan counseling and servicing.

31. Obama Administration Reform Proposal Establishes National Bank Supervisor merging OCC and OTS Elimination of thrift charter Federal Reserve as systemic risk regulator Consumer Financial Protection Agency CFPA Broad jurisdiction - financial products and services, Broad powers – “plain vanilla”, compensation, risk retention, disclosure, RESPA,TILA, CRA,HMDA Floor not a ceiling – encourages patchwork Rating agency reform GSE proposal forthcoming with February 2010 budget document

32. Secondary Mortgage Market: Current State

33. Secondary Mortgage Market: MBA Proposal

34. Conclusions Difficult macro environment Ongoing weakness in the job market Upward trend in rates Continuing weakness in the housing market Continuing increases in delinquency and foreclosure rates until job market improves Difficult regulatory environment More and more restrictive regulation coupled with industry tightening of underwriting will likely continue to restrict the flow of credit Uncertainty regarding the future role and capabilities of the GSEs or their successors