Presentation to the Certified Mortgage Professionals Institute Conference

1. The Current Status and Outlook for the U.S. Economy, Housing and Mortgage Markets Specially Prepared for: The CMPS Institute South San Francisco, CA Presented by: LaVaughn M. Henry, Ph.D. Director, U.S. Economic Analysis The PMI Group, Inc. October 8, 2008

3. The National Economy

4. GDP Growth is Positive, but Weak… Source: Bureau of Economic Analysis

5. … but Growth in Demand has Fallen to Near Zero.

6. Consumer Confidence has fallen, but Spending has not fallen dramatically…Yet

7. Consumer Inflation is High and the Outlook Remains Uncertain

8. Consumer Inflation is Being Driven by Continuing Increases in Food and Energy Prices

9. Employment Growth is Under Growing Pressure, but Strong by Historical Standards

10. Demand for Mortgages has Risen Recently…

11. … but Lenders Continue to Tighten Lending Standards… Source: Federal Reserve Board

12. … as Foreclosures Continue to Increase… Source: Mortgage Bankers Association

13. Growth in Bank Credit has Gone to Zero.

14. Regional Housing Markets

16. Actual Decline Percent vs. Predicted Percent 4 th Qtr 1986 to 3 rd Qtr 2005

17. Geographic Distribution of House Price Risk 2nd Quarter 2008 – 2 nd Qtr 2010

19. Four Characteristic MSAs Chicago Miami Washington, DC Dallas

21. Excess Housing Supply is Falling Source: Census Bureau / Moody’s Economy.com

22. MSA Comparisons of Excess Housing Supply Source: Census Bureau / Moody’s Economy.com

24. Housing Affordability is Rising Source: Census Bureau / Moody’s Economy.com

25. MSA Comparisons of Housing Affordability Source: Census Bureau / Moody’s Economy.com

27. House Price/Rent Ratios are Coming back into line with Historical Standards Source: National Association of Realtors / HUD / Moody’s Economy.com

28. MSA Comparison of Housing Price-to-Rent Ratios Source: National Association of Realtors / HUD / Moody’s Economy.com

30. Existing Home Sales are Flattening Out, but at Significantly Lower Levels Source: National Association of Realtors / Moody’s Economy.com

31. MSA Comparison of Existing Single Family Home Sales Source: National Association of Realtors / Moody’s Economy.com

33. House Prices are still Declining in General, but the Rate of Decline is Slowing in Many Areas Source: Loan Performance Corporation

34. MSA Comparison of House Price Appreciation Source: Loan Performance Corporation

36. Unemployment is Rising in Many Sectors of the Economy Source: Bureau of Labor Statistics

37. MSA Comparison of Civilian Unemployment Rates Source: Bureau of Labor Statistics

39. Foreclosures are Rising at Record Rates Source: Mortgage Bankers Association

40. The Outlook: Where Do We Go From Here?