2015 ANNUAL CONFERENCE: SINGLE-FAMILY FINANCING DIALOGUE September 28, 2015 Managing Unprecedented Diversity and Opportunities for HFA Single Family Programs Presented by Ansel Caine

HFA Single Family Funding Activity Present Caine Mitter Single Family Activity $422 mm $396 mm $527 mm $515 mm $1,629 mm $309 mm Jan-Aug 2015 $1,168 mm $121 mm % 67% 33% ■ MRB ■ MBS Sale Source: “Evolving Mortgage Funding Strategy Has Mixed Impact on Business Models”, Moody’s Investors Service, June 30, 2015 All HFAs Issuance activity where Caine Mitter advised on MRB sale or managed pipeline / bid MBS 2014Early % 25% 74% 26% ■ MRB ■ MBS Sale

Loan Program  Greater variety of HFA single family loan products  Broader universe of HFA borrowers Funding / Hedging Options  Multiple funding options in both the bond and TBA markets  Wide range of hedging strategies to manage pipeline interest rate risk  Expanding broker/dealer relationships More Single Family Financing Options

Examples of Single Family Options That Are Working Loan ProgramsFunding / Hedging Options Below Market Interest Rate Down Payment Assistance MCC ConventionalGovernment First-Time Homebuyer Non-First-Time Homebuyer Refi Low/Moderate Income Not Income Restricted Traditional MRB VRDO Floating to Fixed Swap MBS SaleWhole Loan Sale FRN Direct Purchase Zero Pass-Through MRB TBA Unused Bond Proceeds Uninvested Cash

Loan Program and Funding / Hedging Compatibility Loan ProgramsFunding / Hedging Options Below Market Interest Rate Down Payment Assistance MCC ConventionalGovernment First-Time Homebuyer Non-First-Time Homebuyer Refi Low/Moderate Income Not Income Restricted Traditional MRB VRDO Floating to Fixed Swap MBS SaleWhole Loan Sale FRN Direct Purchase Zero Pass-Through MRB TBA Unused Bond Proceeds Uninvested Cash MRB Qualified Mortgage w/ DPAAll Funding Options Compatible

Loan Program and Funding / Hedging Compatibility Loan ProgramFunding / Hedging Options Below Market Interest Rate Down Payment Assistance MCC ConventionalGovernment First-Time Homebuyer Non-First-Time Homebuyer Refi Low/Moderate Income Not Income Restricted Traditional MRB VRDO Floating to Fixed Swap MBS SaleWhole Loan Sale FRN Direct Purchase Zero Pass-Through MRB TBA Unused Bond Proceeds Uninvested Cash …Add an MCC……TBA Program Compatible

Loan Program and Funding / Hedging Compatibility Loan ProgramFunding / Hedging Options Below Market Interest Rate Down Payment Assistance MCC ConventionalGovernment First-Time Homebuyer Non-First-Time Homebuyer Refi Low/Moderate Income Not Income Restricted Traditional MRB VRDO Floating to Fixed Swap MBS SaleWhole Loan Sale FRN Direct Purchase Zero Pass-Through MRB TBA Unused Bond Proceeds Uninvested Cash …Remove MCC; Add Below Market Interest Rate Target… …MRB Compatible; Zeros Used to Achieve Full Spread

Other Important Considerations Loan Program  Limitations Based on Servicing Structure - HFA services (w/ or w/o sub-servicer) - Multiple bank servicers - Single master servicer (bank or HFA)  Down Payment Assistance Structure - Loan vs grant - Amortizing vs due on sale - Interest bearing vs zero percent - Funding source  Non-Profit Entity Competition - No MRB code-compliance - Streamlined operations  Lender Participation Funding / Hedging Options  Best Execution - Which funding option offers the best return?  Specified Pool Value - Loan balance, CRA, current issue month pay ups  Single Issuer vs Multi-Issuer Pools  Qualified Hedge Identification  Cost Hedging / Negative Arbitrage  Access to Warehousing Funds  Availability of Volume Cap  Risk Tolerance for Variable Rate Bonds and Interest Rate Swaps

Navigating All of the Options: Lending Lending Considerations for Single Family Product Selection:  What are the most effective loan products? - Keeping a simple vs diverse product portfolio for broad lender-base  How will lender participation be built? - Marketing, financial incentives, degree of flexibility - Borrow and adapt ideas from successful homeownership programs  How will the interest rate be set? - Volume vs income on each loan - Funding / hedging costs  Will MRB Code Compliance be Required? - Is there competition from non-profit entities? - Is MRB funding attractive enough to get mortgage rate down?

Navigating All of the Options: Funding Present Value Economics by Funding Source Notes  Loans being funded are market rate, government insurance, with 3.0% DPA  MRB executions based on current rates  Traditional MRB is level debt structure with back ended, 5yr 100% PSA  MRB PAC/Swap is level debt structure with back ended, 5yr 100% PSA, 33% swapped VRDOs

Vehicles for Generating Annuity Income  Mortgage Revenue Bond Programs - Ongoing spread keeps generating fees - Targeting high rate bonds by cross calling or using excess revenues will increase profitability  TBA / MBS Secondary Market Programs - Upfront gains can be used to invest in the MBS program - If an MBS sale is the best present value execution, then the long-term returns will be better than the spread generated from mortgage revenue bonds - Cash intended for MBS investment is a hedge for program and lowers overall program cost - MBS investments can be used to collateralize an existing bond indenture or fund uninvested reserves

Ansel Caine Caine Mitter & Associates Incorporated (212) West 35 th Street, Suite 900 New York, NY 10001