Debt Level: Why Will It Continue to Rise?
Answer Part 3: Potential Loss on Guarantees on Fannie Mae / Freddie Mac Originations Could Rise
Government-Sponsored Enterprises Gross Debt Composition, 1971 — 2008
= Freddie Mac RMBS*
= Fannie Mae RMBS*
a Freddie Mac Corporate Debt
= Fannie Mae Corporate Debt
Total GSE Debt Outstanding ($B)
a Other Debt
1971 1976 1981 1986 1991 1996 2001 2006
Note: *RMBS is residential mortgage-backed securities. Other debt includes those issued by other federal agencies such as KP Federal Home Loan Banks and Student Loan Marketing Association (Sallie Mae). Source: FHFA Report to the Congress 2009. (@)E) www.kpcb.com USA Inc. | Income Statement Drilldown 157
Debt Level: GSEs’ Expansion Into ‘Non-Conventional’ Mortgage Lending Business Has Proved to Be Costly So Far
Fannie Mae Credit Losses by Type of Mortgage Product, 1008 — 2Q10
CO ee = Other Non-Conventional Non- $6,000 -_- SSubprime Conventional , BAItA Mortgages = = Interest Only 30% of Fannie
= Conventional Mae’s Total
4 Loan Guarantee Balance, But Causing 70-80%
Quarterly Credit Losses ($MM)
of Losses Owing to Lower Loan Quality 1908 2008 3008 49008 1Q09 2009 3Q09 4009 1Q10 2Q10 KP Source: Fannie Mae, Betsy Graseck, Morgan Stanley Research. a USA Inc. | Income Statement Drilldown 158
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