Freddie
Mac
We Open Doors®
10th Annual LARIBA Symposium
“Building For The Future”
Saber Salam
Vice President, Freddie Mac
March 22, 2003
We Open Doors
®
Every Step of the Way
Discussion Outline
ƒ Islamic Mortgage Program Results
ƒ Outlook for Mortgage Originations
ƒ Opportunities for 2003 and Beyond
2
1
Islamic Mortgage Program
Results
1.
2.
3.
4.
5.
Over $100 million in funding.
Product available in 20 states and growing.
Multiple products and lenders.
High percentage of 1st Time Home Buyers.
High percentage of minority & immigrant home
buyers.
3
Activity Increased in Latter Part
of 2002
Volume of Activity by Origination Year/Month
UPB in Millions
12
10
8
6
4
Islamic Mortgages (Left)
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
Oct-01
Sep-01
Aug-01
Jul-01
0
Nov-01
2
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Universe (Right)
4
2
30-Year Most Common Product
Millions
UPB by Product Type and Origination Year
50
45
40
35
30
25
20
15
10
5
0
SFFR 30
SFFR 20
2000
2001
SFFR 15
2002
5
WAC’s Are Generally Higher than
Universe
WAC by Origination Year/Month
(Fixed-30)
8.0%
7.8%
7.6%
7.4%
7.2%
7.0%
6.8%
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
Apr-02
Islamic Mortgages
May-02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
Sep-01
Aug-01
6.2%
6.0%
Jul-01
6.6%
6.4%
Universe
6
3
Geographic Concentrations in
California, Michigan, Texas, Illinois,
Minnesota, Virginia, and Maryland
Geographic Distribution of UPB
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
CA MI TX IL
MN VA MD FL NJ MA WA IN OH GA CO NV NC CT IA KY
Islamic Mortgages
Universe
7
Outlook For Mortgage
Originations
ƒ Home Equity continues to be key to wealth
accumulation for American Families.
ƒ 2002 was another record origination year
ƒ $2.5 trillion in originations
ƒ $90 billion of home equity converted to cash
ƒ House price appreciation is keeping pace with
income growth
ƒ Delinquency is on the rise for consumer loans
and sub-prime mortgages.
8
4
Home Equity Grew $2 Trillion
Over Three Years
12500
Value of Housing Stock
$7.6 trillion
Billions of Dollars
10000
7500
$5.6 trillion
Home Equity
5000
2500
Single Family Mortgage Debt
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
9
Source: Board of the Governors of the Federal Reserve System
Mortgage Rates Are Near
a 40-Year Low
Mortgage Rate (Percent)
18
16
Single -Family
14
July 1965
12
5.80%
10
0.5 points
February 28, 2003
5.79%
Multifamily
0.6 points
8
6
Forecast
10 -Year Treasury
4
2
January 1963
September 2002
3.83%
3.87%
0
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
Source: American Council of Life Insurers (ACLI), Freddie Mac (PMMS), Federal Reserve
10
5
Mortgage Originations Will Be
Quite Strong
Total Single-Family Mortgage Originations (Billions of Dollars)
Sources: HUD, Freddie Mac
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1991
1992
Forecast
1990
2400
2300
2200
2100
2000
1900
1800
1700
1600
1500
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
Office of the Chief Economist
11
Mortgage Cash Out Refis Support
the Economy
Home Equity Converted to Cash
(Billions of Dollars)
100
90
80
70
Forecast
60
50
40
30
20
10
0
'93
Sources: Freddie Mac
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
Office of the Chief Economist
12
6
7%
Home Price Index
Mean Household Income
6%
5%
4%
3%
2%
Source: Freddie Mac and Census Bureau
Pacific
Mountain
Central
East North
Central
West North
Central
West South
Central
East South
South Atlantic
Middle Atlantic
0%
New England
1%
U.S.
Office of the Chief Economist
13
Subprime Has Performed Poorly
Percent of Loans 90 Days or More Delinquent or in Foreclosure
9
8
7
6
Subprime
5
4
FHA
3
VA
2
Prime Conventional
1
2002
2001
2000
1999
0
1998
Annualized Growth Rate over 1991 - 2001
Home Value Growth Has Been in
Line with Income Growth
- Recession
Source: Mortgage Bankers Association and Loanperformance.com
Office of the Chief Economist
14
7
Consumer Loan Delinquencies
Are Up
Percent Delinquent 60 days or More
4
1
3.8
3.6
0.8
3.4
Credit Card Debt (left axis)
3.2
0.6
3
2.8
0.4
2.6
Automobile Loans (right axis)
2.4
0.2
2.2
2
0
1998
1999
2000
2001
2002
- Recession
Source: Credit Card and Auto Securities Rated by Fitch
Office of the Chief Economist
15
Opportunities in 2003 &
Beyond
ƒ Expect 2003 to be another strong origination year.
ƒ Mortgage rates will remain stable in 2003.
ƒ Home values are expected to grow 3-5%, but some
markets may see declines.
ƒ Mortgage Debt Outstanding to continue to grow in the
coming decade.
ƒ Home Equity continues to be central to wealth
accumulation for American families.
ƒ 60% of the 1st time home buyer market expected to
be represented by minority and immigrant families.
16
8
Homeownership Rates
(Census Bureau 2Q 2001)
80%
70%
60%
50%
40%
30%
Hispanic
African
American
Other
Minority
White (nonHispanic)
Overall
17
Islamic Mortgage
Opportunities
ƒ Strong growth area as evidenced by the success
of the program.
ƒ Freddie Mac’s is helping lower costs for Muslim
families and bringing much needed capital.
ƒ We need more companies to focus on this
opportunity and become Freddie Mac
Seller/Servicers.
ƒ Standardization of products, strong community
outreach, investments in origination and
servicing infrastructure will be keys to success.
18
9