Connecticut Avenue Securities Investor Presentation

How MI Works: Typical Loan Possible Claim Outcomes MI Coverage "Percentage Option" Settlement Property Sale Conveyance Rescission - MI elects to pay amount equal to Total indebtedness * MI coverage % Indebtedness-Defaulted UPB + DQ Interest + Allowable Expenses CAS Investor sustains net loss after MI benefit is recognized Fannie Mae disposes of property prior to MI's settlement of the claim MI responsible for payment equal to the lesser of the loss sustained by Fannie Mae or the amount calculated under the Percentage Option CAS deal could sustain a loss if amount recovered from MI is less than loss amount because MI caps expenses and accrued interest MI opts to acquire the property from Fannie Mae by paying amount equal to Total Indebtedness (subject to MI limits on expenses) Fannie Mae transfers property deed to MI company CAS deal sustains no loss (unless MI limits on expenses apply) MI QC review uncovers R&W breach and rescinds coverage Fannie Mae will seek make-whole recoveries from the seller/servicer for amount equivalent to MI proceeds that are otherwise contractually due. If Fannie Mae also identifies a R&W breach, seller/servicer may be responsible for the entire loss. CAS investor will receive benefit equal to the amount of make-whole recoveries collected by Fannie Mae Post-crisis, MI benefits were reduced in some cases due to a Deferred Payment Obligation (DPO) imposed by MI regulators In this event, Fannie Mae will step in and make the CAS investor whole for the full MI claim amount due MI Factor: Fannie Mae recently began to streamline the MI claims process, whereby foreclosure expenses are determined by applying a numerical factor to all applicable claim amounts. The factor is established based on Fannie Mae's historical data on foreclosure expenses paid on MI claims and is intended to have no material impact to the overall levels of mortgage insurance proceeds. It is designed to simplify and accelerate MI claim calculations and increase certainty of payment amount. This process is in effect with a limited number of MI providers and it is our intention to expand in the future. The same factors will be used for all participating MI's and will apply to all claim payments regardless of when the loan was originated. 84 © 2021 Fannie Mae.

View entire presentation