MBA Economic and Mortgage Finance Outlook

MBA Economic and Mortgage Finance Outlook January 19, 2016 Presented by Joel Kan Mortgage Bankers Association

Summary of the MBA Outlook 2015 2016 2017 2018 2019 GDP Growth 1.9% 1.8% 2.0% 1.8% 1.8% Inflation 0.1% 1.3% 2.5% 2.2% 2.4% Unemployment 5.3% 4.9% 4.6% 4.5% 4.5% Fed Funds 0.375% 0.625% 1.375% 2.375% 3.375% 10-year Treasury 2.1% 1.8% 2.6% 2.9% 3.3% 30-year Mortgage 3.9% 3.7% 4.5% 4.8% 5.3% New home sales (000s) 503 569 644 696 728 Existing home sales (000s) 5,237 5,448 5,722 5,954 6,039 Purchase originations ($B) 903 990 1,092 1,178 1,245 Refi originations ($ B) 776 901 479 410 395 Total originations ($B) 1,679 1,891 1,571 1,588 1,640 Source: MBA Forecast December 2016 2

Rates and Stock Markets Continue to Show Gains US 10 Year Treasury Yield and Dow Jones Industrials Index 2.70 2.60 2.50 2.40 2.30 DJ Index 2.20 2.10 2.00 1.90 1.80 1.70 1.60 1.50 1.40 1.30 1.20 10 Yr Yield 1.10 1.00 0.90 0.80 04-Jan-16 04-Feb-16 04-Mar-16 04-Apr-16 04-May-16 04-Jun-16 04-Jul-16 04-Aug-16 04-Sep-16 04-Oct-16 04-Nov-16 04-Dec-16 21,000 20,000 19,000 18,000 17,000 16,000 15,000 Source: Federal Reserve and NYSE 3

Dec-2006 Apr-2007 Aug-2007 Dec-2007 Apr-2008 Aug-2008 Dec-2008 Apr-2009 Aug-2009 Dec-2009 Apr-2010 Aug-2010 Dec-2010 Apr-2011 Aug-2011 Dec-2011 Apr-2012 Aug-2012 Dec-2012 Apr-2013 Aug-2013 Dec-2013 Apr-2014 Aug-2014 Dec-2014 Apr-2015 Aug-2015 Dec-2015 Apr-2016 Aug-2016 Global Yields Impacting US Rates 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10 Year Treasury Comparison Percent Yield Market value of negativeyielding sovereign, government-related, corporate and securitized debt peaked at $12.2 trillion in June, up from $3.3 billion in July 2014, according to Bloomberg and Barclays. -1.0 US GREAT BRITAIN JAPAN GERMANY Source: Barclays, Bloomberg, CNBC, OECD 4

Thousands of jobs Job Growth Still Strong in 2016 400 Average Monthly Payroll Growth 2016 Average = 180,000 jobs 300 200 100 235 284 254 265 163 170 210 174 96 89 174 179 193 251 229 168 233 186 144 271 252 176 208 135 204 156-9 24 (100) (42) (200) (144) (300) (297) (400) (500) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 2016 2016 - Jan - Feb - Mar - Apr (423) 2016 - May 2016 - Jun 2016 - Jul 2016 2016 2016 2016 2016 - Aug- Sep - Oct - Nov- Nov Source: BLS 5

Most Sectors Showing Job Growth December 2016 Change YOY Pct Chg in Payrolls -10.5% Professional and Technical Health Care and Social Assistance Educational Accomodation Financial Management Arts, Entertainment Retail Trade Construction Transportation and Warehousing Other Services Wholesale Trade Government Utilities -0.1% Information -0.4% Manufacturing Mining and Logging 3.2% 2.7% 2.2% 1.9% 1.9% 1.8% 1.8% 1.6% 1.5% 1.3% 1.0% 0.9% 0.8% 0.3% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% Source: BLS 6 6

Unemployment/underutilization Rate Participation Rate Unemployment Lower, But So Is Participation 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Unemployment and Labor Force Participation 67.0 66.5 66.0 65.5 65.0 64.5 64.0 63.5 63.0 62.5 62.0 Civilian Participation Rate: 16 yr + (SA, %) Civilian Unemployment Rate: 16 yr + (SA, %) Unempl+Margin Attach+Part Time Econ Reasons/CLF + Margin Attach (SA,%) Source: BLS 7

Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Wage Growth Increasing Slowly 4.00% ECI and Average Hourly Earnings Year over year pct chg 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% ECI: Wages & Salaries: Civilian Workers (SA, Dec-05=100) % Change - Year to Year Average Hourly Earnings: Total Private Industries (SA, $/Hour) % Change - Year to Year Source: BLS 8

Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Percent Change Motor Fuel Percent Change Difference in Headline vs Core Inflation 4.0 3.0 Inflation by Select CPI Components Year over year percent change 40.0 30.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0 20.0 1.6 10.0 0.0-10.0-20.0-30.0-40.0 All Items exc Food & Energy (left axis) All Items (left axis) Motor Fuel (right axis) Source: BLS 9

Rates Expected to Increase Source: Federal Reserve, Freddie Mac, MBA 10

Housing Demand Forecast Source: Census, MBA 11

Strong Multifamily Development and Slower Single-Family 2,000 Single and Multi Family Housing Starts SAAR, 000s of units 1,800 1,600 1,400 1,200 1,000 800 600 400 200 - Housing Starts: 1 Unit (SAAR, Thous.Units) Housing Starts: Total Multifamily (SAAR, Thous.Units) Source: Census 12

Continued Strong House Price Growth 240 Chart of the Week - September 16, 2016 FHFA House Price Indexes (1991Q1 = 100) 220 200 Expanded-data HPI level in 2007Q3 180 160 140 120 100 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 All Transactions (rescaled) Purchase Only Expanded Source: FHFA 13

Credit Availability - Historical Perspective 1000 900 800 Expanded Historical Series: Mortgage Credit Availability Index, Index Level by Month (NSA, 3/2012=100) New: Expanded historical series (2004-2011) Data prior to 3/31/2011 based on less frequent and less complete data. 700 600 500 400 300 200 167.0 100 0 Data prior to 3/31/2011 was generated using less frequent and less complete data measured at 6-month intervals and extrapolated in the months between for charting purposes. Source: Mortgage Bankers Association; Powered by Ellie Mae s AllRegs Market Clarity 14

Modest Year over Year Growth in Purchase Apps Index Purchase Application Index by Week of Year (NSA) 300 250 2016 2015 Week before & after TRID/KBYO 200 150 2014 100 50 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 Week of Year Source: MBA Weekly Application Survey 15

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Large Balance Loans Lead Purchase Growth 80.0% Purchase Application Trends, by Loan Size Year year percent change in number of loans 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% <=$150K >$150K and <=$300K >$300K and <=$417k >$417K and <= $625k >$625K and <=$729k >$729K Source: MBA Weekly Application Survey 16

Refinance Index Refi Avg Loan Size ($000) Refinance Loan Sizes Tied to Applications Trends in 2016 3,500 Refinance Applications and Average Loan Size 330.0 3,000 2,500 310.0 290.0 270.0 2,000 250.0 1,500 230.0 1,000 500 210.0 190.0 170.0-150.0 MBA Volume Application Indexes:Average Loan Size:Total, Refinance(Thous$) MBA: Volume Index: Mortgage Loan Applications for Refinancing(SA, Mar-16-90=100) Source; MBA Weekly Applications Survey 17

Q1-85 Q4-85 Q3-86 Q2-87 Q1-88 Q4-88 Q3-89 Q2-90 Q1-91 Q4-91 Q3-92 Q2-93 Q1-94 Q4-94 Q3-95 Q2-96 Q1-97 Q4-97 Q3-98 Q2-99 Q1-00 Q4-00 Q3-01 Q2-02 Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Q2-14 Cash Out Refinances Slowly Returning 100% 90% 80% 70% 60% 50% Distribution of Refinance Activity Percent share of number of Freddie Mac refi loans 83% 89% 40% 30% 42% 20% 10% 12% 0% Refis with 5% Higher Loan Amount (%) Refis with No Change in Loan Amount (%) Refis with Lower Loan Amount (%) Source: Freddie Mac 18

Colorado Product Mix in 2015 Colorado US Loan Types Count Share Avg Loan Amt Count Share Avg Loan Amt Conventional Jumbo Loan 11,441 5.3% $770,118 348,229 5.1% $861,976 Conventional (any loan other than FHA, VA, FSA, or RHS loans) 142,516 66.3% $236,611 4,485,366 66.2% $210,427 FHA-insured (Federal Housing Administration) 35,230 16.4% $226,613 1,216,525 18.0% $193,547 VA-guaranteed (Veterans Administration) 24,229 11.3% $270,497 603,976 8.9% $244,648 FSA/RHS (Farm Service Agency or Rural Housing Service) 1,469 0.7% $196,049 117,416 1.7% $140,540 Total 214,885 100.0% $266,921 6,771,512 100.0% $242,741 Home Purchase - Average Loan Amount Refinance - Average Loan Amount $300,000 $300,000 $250,000 $250,000 $200,000 $200,000 $150,000 $150,000 $100,000 $100,000 $50,000 $50,000 $- $- CO Pur Avg US Pur Avg CO Refi Avg US Refi Avg Source: HMDA 19

Historical Originations Trends Annual Growth in Home Purchases Annual Growth in Refinances 30% 300% 20% 250% 10% 200% 0% -10% -20% 150% 100% 50% 0% -30% -50% -40% -100% CO Pur Num US Pur Num CO Refi Num US Refi Num Source: HMDA 20

4.7% 4.9% 4.7% 4.4% 4.7% 4.6% 4.9% 5.0% 18.6% 19.7% 20.0% 19.1% 19.0% 17.9% 19.4% 22.9% 19.8% 25.4% 26.9% 27.3% 33.0% 29.4% 33.4% 35.9% 43.0% 41.5% 42.7% 50.1% 48.4% 49.2% 45.8% 53.8% Changing Composition of Lending Institutions SHARE ORIGINATIONS VOLUME ($) BY TYPE 2008 2009 2010 2011 2012 2013 2014 2015 Large Bank Independent Mortgage Bank Community Bank Credit Union Source: HMDA 21

Fully-Loaded Production Expenses ($ per loan) Avg. Fiirm Production Volume ($Ms) IMB Fully-Loaded Production Expenses ($ per loan): $9,000 $700 $8,000 Fully-Loaded Production Expenses ($ per loan) Avg Firm Production Volume ($Ms) $600 $7,000 $6,000 5,815 $500 $5,000 $400 $4,000 $300 $3,000 $2,000 $200 $1,000 $100 $0 4,884 4,810 3,738 3,581 4,376 4,402 5,147 4,677 4,802 4,930 5,837 5,644 5,315 5,118 5,292 5,128 5,163 5,603 5,779 5,818 6,368 6,959 8,025 6,932 6,769 7,000 7,195 6,984 7,080 7,747 7,845 7,120 $0 Q216 Q116 Q415 Q315 Q215 Q115 Q414 Q314 Q214 Q114 Q413 Q313 Q213 Q113 Q412 Q312 Q212 Q112 Q411 Q311 Q211 Q111 Q410 Q310 Q210 Q110 Q409 Q309 Q209 Q109 Q408 Q308 Source: MBA s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport

IMB Employee Mix Over Time Source: MBA s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport

Percent Mortgage Performance Continuing To Improve 12.00 10.00 Mortgage Delinquency Rates Seasonally adjusted, excludes loans in foreclosure 10.06 8.00 6.00 4.00 4.46 4.52 2.00 0.00 2004-Q1 2004-Q3 2005-Q1 2005-Q3 2006-Q1 2006-Q3 2007-Q1 2012-Q1 2011-Q3 2011-Q1 2010-Q3 2010-Q1 2009-Q3 2009-Q1 2008-Q3 2008-Q1 2007-Q3 30 Days Delq 60 Days Delq 90+ Days Delq 2012-Q3 2013-Q1 2013-Q3 2014-Q1 2014-Q3 2015-Q1 2015-Q3 2016 - Q1 2016 - Q3 Source: MBA National Delinquency Survey 24

Percent Elevated Loans in Foreclosure in Judicial Foreclosure States 8.00 Loans in Foreclosure by Dominant Process As percent of loans serviced, based on loan count 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Q12006 Q22006 Q32006 Q42006 Q12007 Q22007 Q32007 Q42007 Q12008 Q22008 Q42008 Q32008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 Q42014 Q12015 Q22015 Q32015 Q42015 Q12016 Q22016 2.51 1.01 0.83 Q32016 Judicial Only Non-Judicial Only Both Processes Source: MBA National Delinquency Survey 25

Recent Loan Vintages Performing Extremely Well 16.00% Trend in Seriously Delinquent Rate (includes 90+ day and loans in foreclosure) 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2.00% 0.00% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 102 105 Source: MBA National Delinquency Months Since SurveyOrigination (Jan 1, YYYY = Origination Date) Source: MBA National Delinquency Survey 26

Billions of dollars in originations Historical and Forecasted Originations $4,000 Mortgage Originations: 1999-2019 $3,500 $3,000 $2,500 $2,000 $1,500 901 479 410 395 $1,000 $500 990 1,245 1,178 1,092 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Purchase Refi Source: MBA Forecast December 2016 27

MBA Research Sign-ups and Services Mba.org/PerformanceReport 28

Contact Information & MBA Resources Joel Kan Associate Vice President, Industry Surveys and Forecasting 202-557-2951 jkan@mba.org MBA Research: www.mba.org/research RIHA: www.housingamerica.org 29