National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Programs to Assist Homebuyers Presentation to: National Association of Local Housing Finance Agencies Annual Conference April 25 – 28, 2012 Austin, Texas

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Welcome to Texas! Local HFC’s have led the nation in supporting housing! Local Issuers have: Issued Bonds under NIBP (New Issue Bond Program purchase thru Fannie/ Freddie/ Treasury). Issued MCC’s. Provided down payment assistance. Utilized funds under Housing & Economic Recovery Act (HERA) Benefited from provisions of Gulf Opportunity Zone Act. Supported housing through a period of significant challenges. Enjoyed (relatively) stable home prices and growth in employment. 1

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Advantages of MCC 1.An MCC is a direct companion to a mortgage loan, saving 10-50% of the interest on the loan. 2.Instead of giving tax benefits to a bond investor in exchange for a reduced bond and mortgage rate, MCCs give the benefit directly to home buyers. 3.Works now, if bond programs are not practical. 4.Provides savings to reduce monthly housing cost. 5.Is a companion to any loan available, except a bond loan. 3 (continued)

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Advantages of MCC 6.Allows borrowers to get the best mortgage rate, then save 35% of the interest as a federal income tax credit. 7.Can help families qualify for their loan, and the significant savings help them stay in the home by receiving $167/month savings. 8.MCCs are easy to use and benefit to the borrower. Lenders appreciate the ease of use of MCCs. 9.MCC can be combined with down payment assistance, TBA Program, second mortgage or other assistance program to help monthly affordability and cash to close. 4

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Advantages of Bonds 1.Local Issuers have historically structured and priced bonds in order to provide the lowest possible mortgage rate. 2.Bond loans have often provided down payment assistance grants. 3.Bond loans have sometimes been combined with second mortgages to fund closing costs. 4.Bond loans work regardless of borrowers’ tax situation, and provide ongoing fixed interest rate without changing borrowers’ tax treatment. 5.Bond Programs can be readily marketed, relying on lower mortgage rate. 6.Bond programs can benefit issuers with accumulation of assets or release of program fees and cash flow. 5

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Bond Loan/MCC Comparison (based on a $120,000 loan and 35% MCC) Rate ComparisonOpen Market LoanBond LoanLoan + MCC Interest Rate4.25%3.75%4.25% MCC Savings1.50% Net Cost4.25%3.75%2.75% Payment ComparisonOpen Market LoanBond LoanLoan + MCC Monthly Payments on a $120,000 Loan$590$556$590 MCC Savings TO HOMEOWNER$0$0 ($148) Monthly Cost $590$556$442 6

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 MCCs can save money MCC Savings Loan Amount$120,000 Rate4.25% Monthly Payment-Principal/Interest590 Tax & Insurance100 Total Monthly Payment690 First Year Interest$5,100 MCC Dollar-for-Dollar Tax 35%= $1,785 Savings continue each year so long as the borrower retains their mortgage and occupies the home as a primary residence. Borrower can receive benefit as an annual tax refund, or receive benefit monthly through reduced withholding, by filing a new W-4. 7 Mortgage Interest Deduction on remaining interest:$3,315

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 MCC taken:Annually or Monthly Total income$70,000$70,000 Tax amount10,00010,000 MCC Tax 35%1,7851,785 Withholding8,0006,215* Refund1,785- Initial Cost = 1% of the loan amount plus $150: $1,000 + $150 = $1,150 *Adjust federal withholding to increase take-home $148/month 8

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Why Consider Assisting Borrowers Now? 1.The need for housing and for homebuyer assistance is greater than ever. 2.MCC Programs are available in all market conditions. 3.Mortgage Revenue Bond Programs are not currently practical. 4.TBA* or other programs may provide down payment assistance. 5.Tightening credit market makes it difficult for homebuyers to purchase a home - a bond or MCC program allows issuers to help buyers in a VERY tough market. 9 (continued)

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Why Consider Assisting Borrowers Now? 6.Programs reduce the cost of homeownership for qualified buyers, and lenders can use the benefit to help qualify borrowers for the mortgage loan. 7.Programs appeal to lenders because they can continue to originate loans, often using their own products and even retaining servicing. 8.MCCs will keep lenders motivated to work with the issuer, and stay involved until it is feasible to complete a bond issue. 9.Program using committed delivery with periodic rate “To Be Announced” loan pricing. 10

National Association of Local Housing Finance Agencies Austin Texas, April 27, 2012 Low Interest Rates? A Great time for MCCs! 11