Leveraging Assets for Tax-Exempt Multi-Family Loan Production NCSHA Presentation Leveraging Assets for Tax-Exempt Multi-Family Loan Production October 2017

HFA’s have faced two significant financial challenges since 2008 The Management Challenge HFA’s have faced two significant financial challenges since 2008 Executing tax-exempt bond-financed loans has been increasingly difficult New affordable loan products and structures offer developers many more options than in the past (FHA Tax Credit Pilot, Conduit, etc.) Tax-exemption on bonds has not provided a significant funding advantage Persistent low interest rates and investment opportunities have reduced HFA’s earnings Elimination of the guaranteed investment contract market limits investments options Most cash is invested in money market funds or other low yielding investments

The Management Challenge MassHousing seeks to provide lending for affordable multi-family housing developments requiring substantial rehabilitation or new construction, in such a way as to: Offer attractive and feasible financing for projects that utilize 4% Low Income Housing Tax Credits; Provide financing using its FHA Risk-Share program: with 30 to 40 year fixed rate, fully amortizing loans, and so that borrowers can process projects significantly faster than under FHA MAP lending program (whose delays have deterred many borrowers); Enable MassHousing to add such lending to its balance sheet, to strengthen the Agency’s long-term sustainability; and Help maintain and strengthen the projected cash flow performance of its Housing Bond Resolution.

Parameters for a Program to Leverage Indenture Cash 6/24/2018 3:45 PM MassHousing’s Solution Parameters for a Program to Leverage Indenture Cash Equity Parameters Amount of Equity Up to $50 million Goal of Resolution Equity Maximize Tax-Exempt Loan Production with return on Equity of approximately the 10-year US Treasury Bond Debt Max. Cost-of-Capital Max of 10-Yr UST + 140 bps Variable/Fixed Mix Limit new variable to approximately $50 million of $200 million in debt Loans Amount Up to $250 Million Loan rate Max of 10-Yr UST + 190 bps Spread to be earned Minimum 50 bps Tax-Exempt Program $250MM Loans at 10-Year UST + 190 bps Equity Up to $50 MM Locked in Housing Bond Resolution Debt $150 MM Fixed Rate Debt $50MM Hedged Variable 1

MassHousing’s Solution

Results have exceeded expectations 25 Projects, 2,693 tax credit units $414 million financed to date 60 bps of spread to date