Federal Government Moves to Stabilize Mortgage Markets with Takeover of Fannie Mae and Freddie Mac

September 9, 2008

U.S. Treasury Secretary Henry Paulson announced the government’s temporary takeover of mortgage giants Fannie Mae and Freddie Mac. This action comes as the mortgage markets continue to suffer from increasing loan defaults and home foreclosures. Combined, Fannie Mae and Freddie Mac control approximately 50% of the $11 trillion U.S. mortgage market. In recent months, the two companies experienced capital losses as a result of the home mortgage crisis.

By placing Fannie Mae and Freddie Mac in conservatorship the federal government, through the U.S. Treasury Department, is guaranteeing the companies’ net worth. As a result the companies’ debt has the full faith and credit of the U.S. Treasury. This action is intended to restore confidence in the mortgage market and of Fannie Mae and Freddie Mac Mortgage Backed Securities (MBS) investors.

As of July 31, 2008, the VantageTrust PLUS Fund held 17.9% of its assets in MBS guaranteed by Fannie Mae and Freddie Mac. The financial commitment of the U.S. Treasury removes much of the uncertainty about the value of these securities.

Additionally, as of July 31, 2008, the VantageTrust PLUS Fund held 0.1% (one tenth of one percent) of its $7 billion portfolio in Fannie Mae and Freddie Mac senior debt, and 0.02% in Fannie Mae subordinated debt. Both senior and subordinated debt positions now have the full faith and credit of the U.S. Treasury and continue to be senior to the new preferred shares issued as a result of the conservatorship.

Six Vantagepoint Funds held similar mortgage and debt exposure that ranged from 0.3 percent to 42.4 percent as of July 31, 2008.

As of July 31, 2008, seven Vantagepoint Funds hold stock in Fannie Mae and/or Freddie Mac with individual allocations of less than one-half of one percent.

We will continue to monitor the conservatorship of Fannie Mae and Freddie Mac for any impact on our funds and investors. For additional information read ICMA-RC's Q&A.

• Full text of U.S. Treasury Secretary Henry Paulson's announcement
• Federal Housing Finance Agency Fact Sheet on conservatorship
• ICMA-RC Questions and Answers concerning the steps taken by the Treasury to place Fannie Mae and Freddie Mac in conservatorship