Single-Family Financing Essentials: MRBs Current Market & Executions Capital Markets 2016 HFA Institute Single-Family Financing Essentials: MRBs Current Market & Executions January 14, 2016

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Market Conditions Will Drive Pricing Levels for an MRB Issuance On December 15, 2015, the Federal Reserve raised interest rates for the first time in nearly a decade Shift in “AAA” MMD & 10-Yr Treasury Since January 2015 10-Yr “AAA” MMD & 10-Yr Treasury January 1, 2013 to Present Source: TM3, Thomson Reuters 10, year “AAA” MMD and 10 year Treasury shown to represent different average lives of municipal transactions Rates as of January 12, 2016 Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

HFAs Can Utilize Numerous Approaches for a Fixed Rate Offering Fixed Rate Mortgage Revenue Bond Issue Without Structure Higher cost of funds 30 year level debt service Serial and term bonds No PAC bond Cross-calling Bond proceeds can acquire fully originated loan portfolio or acquisition fund (MBS or Whole Loan) Extended delivery (up to 6 or 7 weeks without pricing penalty) to mitigate negative arbitrage in acquisition fund Fixed Rate Mortgage Revenue Bond Issue With Structure 30 year level debt service Serial and term bonds Issuance will include a PAC bond Some limited ability to cross-call Bond proceeds can acquire fully originated loan portfolio or acquisition fund (MBS or Whole Loan) Extended delivery (up to 6 or 7 weeks without pricing penalty) to mitigate negative arbitrage in acquisition fund MBS Pass-Through Bond 30 year debt service One single maturity; par and premium structures Monthly redemptions from underling GNMA and GSE MBS Underlying collateral and average life expectations drive bond pricing Fully originated MBS portfolio required at bond settlement, though can sell blind pools No cross-calling Extended delivery (up to 6 or 7 weeks without pricing penalty) Ability to dual track production with TBA and asset sales Lower cost of funds Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

The Tax Exempt Variable Rate Market Has Remained Stable and Can Reduce Interest Costs The weekly SIFMA index has been set at 0.01% since October 23, 2015 Shift in Weekly SIFMA & 30-Day LIBOR Since January 2015 Weekly SIFMA & 30-Day LIBOR January 1, 2013 to Present From 2015-02-19 VA Secretary of Transportation vFINAL Source: TM3, Thomson Reuters, SIFMA Weekly SIFMA Index and 30 day LIBOR shown to represent different average lives of municipal transactions Rates as of January 12, 2016 Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

A Judicious use of Variable Rate Debt is Viable Approach for Select HFAs Selected Recent Housing Issues Treasury and Housing Bond Rates* * Source: RBC CM and Bloomberg (for 10 Year Treasury Yields) Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

Refunding Opportunities HFAs can undertake current refundings of tax exempt, private activity mortgage revenue bonds A refunding can create excess spread 1.125% of spread is permitted on single family MRB issues A refunding will lower the bond yield, while the loan characteristics of the transferred mortgage pool is remains largely unchanged Excess spread can be utilized to subsidize new mortgage loan productions at attractive lending rates Subsidized new money issuance at the time of the refunding 0% pool Economics of a refunding can be enhanced with over-collateralization or use of structure and/or variable rate debt 2006 saw record municipal single family issuance – refunding opportunities exist as we approach 10 year optional redemption dates Single Family Municipal Bond Issuance ($MM) Source: Thomson Reuters Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

Summary of Hypothetical Structure Options Each structure has its pros and cons, and should be evaluated based upon program requirements and risk tolerances of each HFA. Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC

Why Mortgage Revenue Bonds? Add spread producing assets to HFA balance sheets Some HFA balance sheets have decreased 50% or more in recent years Reliable income stream realized over life of loans HFAs can dual track mortgage loan production with TBA and other sales Potential uncertainty of TBA market once Fed stops its purchases Moody’s pointed out in late 2014 that if HFAs do not return to their previous business model of financing on- balance sheet mortgage loans to create a more predictable revenue stream to help support their operating costs, their portfolio performance could dip.  Moody's says such a dip could lead to a negative sector outlook Single-Family Financing Essentials: MRBs I January 14, 2016 RBC Capital Markets, LLC