Fannie Mae previously announced that it will support the Obama Administration's initiative to help borrowers who have mortgages with current loan-to-value ratios up to 105 percent to refinance their mortgages without obtaining new mortgage insurance in excess of what was already in place, if Fannie Mae already owned or guaranteed the mortgage. On July 1, 2009, the Obama Administration announced an expansion of this initiative by allowing borrowers who have a current loan-to-value ratio up to 125 percent to apply for refinancing.
An increase in refinancing activity due to this expansion could result in an increase in prepayments to investors in certain Mortgaged-Backed Securities (MBS) depending on borrower response to the initiative and other factors. Investors in existing MBS pools with a high concentration of loans secured by properties that are located in geographic regions where home prices have declined or may continue to decline could receive greater prepayments than they otherwise may have expected had the initiative not been further expanded, since many borrowers typically would not otherwise have been able to refinance their existing mortgages. See our MBS Prospectus, dated June 1, 2009 for additional information regarding the impact of refinancing on MBS investors.
Last revised: 07/08/09