January 2010 HPA Update $FRE $FNM

The J.P. Morgan HPI model projects that home prices will bottom in the second half of 2010, with
peak-to-trough HPA at -13.8% and -32.6% for the FHFA purchase-only and Case-Shiller
national indices, respectively. This is an improvement from our previous projection.

· Although recent housing indicators have been mostly negative, this was expected as home sales
and prices are typically lower in the winter months. More importantly, the trailing 6-month
price momentum has been very strong. This has laid the foundation for our improved projection.

· Downside risks still remain from the build-up of foreclosures and the pace and volume of loans
that will eventually hit REO.

· Total foreclosure inventory represents a 20- month supply at the current liquidation pace.
Although the REO months’ supply fell back to normal levels, the foreclosure supply has risen
since August 2009

· Home prices weakened on a monthly basis. The LoanPerformance home price index declined by
2.0% in January, the fifth consecutive monthly drop since September 2009. The FHFA purchaseonly
index and the S&P/Case-Shiller 20-city composite dropped 1.6% and 0.2%, respectively,
in December.

· Annual price declines continue to improve. The LoanPerformance index recorded a 0.5% annual
decline in January, compared to 3.0% in December and 4.6% in November. The FHFA
purchase-only index and S&P/Case-Shiller 20- city composite were down 1.6% and 3.1%,
respectively, in December over last December.



January 2010 HPA Update