Remarks Delivered by
Dwight Robinson
SVP, Freddie Mac

National Association of Home Builders
Cutting Edge Financing Panel
Las Vegas, NV
January 21, 2003

Thank you, Jerry [Howard]. Good afternoon. It's a pleasure to have this opportunity to speak to you this afternoon and to be at this conference.

As Jerry said, we go back a number of years. I want to congratulate Jerry, and the National Association of Home Builders, on another outstanding year.

I am pleased to be here as a substitute for Freddie Mac's chairman, Leland Brendsel. I would be remiss if I didn't say that Leland always looks forward to this opportunity to address America's home builders. Unfortunately, however, some last-minute pressing business prevented him from joining us here today. He certainly wanted me to pass along his regrets for missing this convention, and his regards.

I also am pleased to have this opportunity to share the dais with Arne and John.

Freddie Mac has enjoyed a great partnership with the National Association of Home Builders for many years. With your dedication and the commitment of all the National Association of Home Builders staff, I am certain that this organization will continue to grow and prosper in the years ahead.

I believe Freddie Mac and America's home builders have a shared mission. Together, we are a major component of the best housing industry in the world.

Today, I want to talk about the remarkable performance of the U.S. housing market; I want to look forward another great year; and I want to highlight what Freddie Mac is doing to with you — the home builders — to serve more families.

As you know, 2002 was a remarkable year for housing in America. I like to think of it as being the year of the homeowner.

On my flight out here I sat with some home builders from Loudoun County, Virginia. They were pleased with the performance of the housing market in 2002, but expressed concerns about the prospects for 2003.

Certainly, housing construction and home sales outperformed all expectations in 2002. New home building hit its highest level in 16 years, with 1.7 million starts. Home sales set a new record — 6.5 million sales. Mortgage originations hit a new record — exceeding $2 trillion for the second year in a row. Mortgages rates were at their lowest levels in 37 years, and home prices continue to rise.

There has been some debate recently in the press regarding whether there is a housing bubble. We certainly don't think so.

In fact, house prices rose an average of 6.5 percent in 2002, with all regions experiencing increases — though, as you might expect, there were some points of weakness. Over the past two years, the rise in home prices has increased homeowners' equity by $1.5 trillion, offsetting some of the $5 trillion that households lost in the stock market.

Housing has been a source of financial stability and wealth for the average family in America. It has strengthened and supported the nation's economy. This is significant given the weakness in other parts of the economy.

A recent study sponsored by the Homeownership Alliance, representing a broad cross-section of the American housing industry — including the Home Builders, Freddie Mac, and Fannie Mae — confirms there is no risk of a nationwide decline in home prices.

We expect America's housing market to remain strong in 2003 — exactly what I told my friends from Loudoun County:

• Interest rates will stay low — averaging between six and six and a quarter percent for the year.
• Housing starts will continue to be strong and close to last year's level.
• And 2003 will be a solid year for home sales — close to 6.5 million.

As overall demand for housing increases, Freddie Mac will continue to ensure that plenty of financing is available for your homebuyers.

If you look out over the rest of this decade, the nation's families are going to need an additional $6 trillion to help finance their homes. Freddie Mac is committed to raising the mortgage money needed to finance even more borrowers.

We have developed deep and liquid markets for our securities in the United States, and we are seeking investors around the world to finance housing in America. Today, Freddie Mac is recognized among the premier non-sovereign credits in the world. Over 60 central banks invest in the United States housing market through Freddie Mac. And more than one-third of our long-term debt funding comes from overseas.

A strong secondary mortgage market — led by Freddie Mac and Fannie Mae — has helped to create the best housing finance system in the world. Last year, Freddie Mac financed homes for nearly four and a half million families — a record. And we helped each of these families save as much as $30,000 over the life of their loan.

We continue to work with our industry partners to enhance technology, expand our innovative products, and provide valuable homebuyer education to help even more families get the financing they need.

Freddie Mac introduced automated underwriting to the market more than 8 years ago, and we continue to improve it. Our Loan Prospector^® automated underwriting system now can evaluate a loan for purchase in a matter of seconds — about the time it takes to sign a traditional loan application. In addition to speed, Loan Prospector's increased predictive power helps lenders approve the vast majority of applications.

We also are working with America's homebuilders to create flexible lending products that help more families achieve homeownership.

We recently joined with your leadership and with Wells Fargo — one of the nation's largest mortgage lenders — to develop a nationwide Builder Grant program. The Builder Grant Option allows builders or developers of new homes to finance the homebuyer's downpayment — up to 3 percent of the purchase price.

This program addresses one of the biggest barriers to homeownership — the downpayment. Home builders who use the Builder Grant Option have a competitive advantage in the market place. I encourage you to pick up the information sheet about this program before you leave the session today.

Freddie will continue to work with all of our lenders to develop initiatives like the Builder Grant program that can help more families overcome obstacles related to credit and lack of funds.

We also continue to enhance our multifamily business to finance more rental housing. Freddie Mac invested in a record $14 billion in Multifamily purchases in 2002. And we continue to offer a robust array of financing products, with a particular focus on affordable housing.

Specifically, Freddie Mac provided $280 million in revolving lines of credit to multifamily developers last year. This financing allowed multifamily building owners to set up a large, flexible source of funds that enables them to buy, fix-up, and reposition properties for future sale.

Finally, Freddie Mac continues to break down barriers to homeownership, particularly for minority families.

Last year, President Bush challenged the housing industry to help 5.5 million minority families become homeowners by the end of this decade.

Freddie Mac responded to the President's call with a comprehensive set of initiatives that target the entire homebuying process. We call these initiatives Catch the Dream. It represents a joint effort with the entire housing industry, including you — the nation's home builders — as well as mortgage lenders and non-profit housing and community-based organizations.

Our Catch the Dream initiatives are designed to address the barriers to homeownership that many families face — whether it's better understanding through financial literacy, better tools and technology to serve diverse homebuyer needs, or more flexible loan products. We are committed to meeting these needs.

The disparity between the national homeownership rate — two-thirds of all families own homes — and the homeownership rate for minority families — less than 50 percent — shows that there is much more we can do. Freddie Mac will continue to work with you to learn more and do more — enhance and deliver more products and expand our outreach.

In closing, it's my pleasure to be here today.

On behalf of Leland and all of the Freddie Mac staff, thank you for your partnership and for working with us so inclusively to make the world's best housing system work even better for more of America's families.

Thank you.