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Fannie Mae & Freddie Mac: A Brief History of Government-Sponsored Enterprises Freddie Mac established in Fannie Mae and Freddie Mac ; ; ; 1970 after the Emergency placed into conservatorship Fannie Mae established in Home Finance Act to at a time when they 1938 to provide liquidity to provide further liquidity to guaranteed 57% of the $12 the primary and secondary the mortgage markets trillion USA mortgage market mortgage markets Fannie Mae became a publicly traded company in Freddie Mac became a 9/68, in part to reduce rising government debt publicly traded company in levels from the Vietnam War by taking Fannie Mae 12/88 with an initial market debt off USA Inc.’s balance sheet cap of $3 billion Fannie Mae & Freddie Mac — What do they do? They are insurance and investment companies. Both buy residential and multifamily mortgages which conform to their underwriting standards from banks and other originators. They either hold them in their portfolios or package them into residential mortgage-backed securities (RMBS). These securities, which carry Fannie and Freddie’s guarantee on them, are then sold to investors (banks, insurance companies, bond funds, etc.). K P Source: Fannie Mae, Freddie Mac, Los Angeles Times. (@ 4 www.kpcb.com USA Inc. | Income Statement Drilldown 195 Fannie Mae & Freddie Mac: What Went Wrong? Fannie Mae and Freddie Mac Public Market Capitalizations, 1990 — 2010 7/05 — Fannie Mae and Freddie ik aa Mac agreedtorestrictionson growth of their retained portfolios 9/08 — Fannie cr Si Cis Ss Mae and Freddie 9/99 — Fannie Mae expanded mortgage | Mac placed into availability to low-income borrowers conservatorship under pressure from White House 1/93 - HUD began promoting broader $40 — home ownership =——————sSsSS Market Cap ($B) $20 ---------- ff 8 $0 T T T T T T T T T T T 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 —Freddie Mac —Fannie Mae Note: HUD is Department of Housing and Urban Development. Source: FactSet. a USA Inc. | Income Statement Drilldown 196 HOUSE_OVERSIGHT_020939