1. COMBINING TAXABLE RD/GNMA LOANS WITH TAX EXEMPT BONDS AND 4% TAX CREDITS June 2015

2. BENEFITS OF TAX CREDITS 9% New Construction/ Rehab Credit - Provides ~70% of financing subsidy for a Project. –Very competitive (extremely limited annual supply) – scored based on states qualified allocation plan (QAP) –Can’t use tax-exempt bonds 4% New Construction/ Rehab Credit - Provides ~35% of financing subsidy for a Project. –Allocated on a non-competitive basis (not limited) –Must be used with tax-exempt bonds Kent Neumann (202) 973-01072

3. COMBINING LONG TERM TAXABLE LOANS WITH SHORT-TERM TAX-EXEMPT BONDS AND 4% LIHTC COMBINING LONG TERM TAXABLE LOANS WITH SHORT-TERM TAX-EXEMPT BONDS AND 4% LIHTC Taxable RD 538/GNMA Market continues to deliver historically low pricing:  RD 538/GNMA: Taxable GNMA rates currently provide 3.5% - 4.0% all-in borrowing rate with no negative arbitrage and 35+ year amortizations.  Recently RD has been willing to consider “straight-to-perm” 538 loans resulting in even lower mortgage rates.  Traditional Long-Term Tax Exempt Bond Financing:  35+ Year Bond Coupon is 5.00% or higher (no balloon option requires longer term).  After 3 rd party fees and overides are added, all-in borrowing rates are 5.5% or higher.  New Construction/Sub Rehab Bond Financings also require a significant amount of Negative Arbitrage (~5 - 10% of Loan Amount)  Advantages of Taxable Executions:  ~1.50% lower permanent borrowing rate: resulting in additional loan proceeds on a debt service constrained loan and/or increased ongoing project cashflow.  New Construction/Sub Rehab deals: dramatic reduction in negative arbitrage deposits 3Kent Neumann (202) 973-0107

4. With todays low taxable loan rates, why not just borrow funds in the taxable market? Reason: Under Section 42, in order to qualify for the full value of the 4% Low Income Housing Tax Credits, at least 50% of aggregate basis of the building and land must be financed from tax exempt bond proceeds. However, these tax exempt bonds only need to remain outstanding until the Project’s “placed-in-service” date. 4% LIHTC 50% TEST 4Kent Neumann (202) 973-0107

5. Qualifies for 4% LIHTC; Low Mortgage Rate (and minimal negative arbitrage deposit) COMBINED TAXABLE LOAN WITH TAX EXEMPT BONDS Borrower GNMA Purchaser Draw Request Loan Funding Trustee Bond Purchaser Bond Purchaser Bond Proceeds Account ~2-Yr Bonds Bond Proceeds Bond Payoff (after Project is placed in service) GNMA Proceeds 34 Sale of Taxable GNMA 756 812 Bond Proceeds Escrow Account RD Lender 5Kent Neumann (202) 973-0107

6. Pooling of multiple Projects: Although one-off deals are possible, due to the generally smaller size of RD loans, pooling multiple Projects/Borrowers with the same underlying Sponsor can result in significant cost savings. A single Bond issuance can often be utilized for multiple Projects/Borrowers saving both expense and time. Over the past ~4 years we have financed: 10 portfolio deals in 6 States 130 separate Projects in pools ranging from 3 – 43 projects Over 4,854 affordable units using ~$175,000,000 in tax exempt Bonds Allocation of Sources and Uses: due to the assumption of existing 515 debt in most of these transactions, allocating bond proceeds to meet all tax requirements can be challenging. We have developed creative structuring techniques that can often help with this undertaking. New Section 515 loans can also be included in this structure, but often require a separate “construction lender” since are direct loans and are not eligible for GNMA securities. Details when used with RD Loans 6Kent Neumann (202) 973-0107

7. Bond Amount > Taxable Loan Amount: Other sources of funds (i.e. Equity, Subordinate loan, etc.) needed to cover the differential. Timing of funding is crucial Additional Rating Agency requirements Bridging Equity: Limited collateral available for bridge financing Seller Tax-Back or subordinate 515 loans can sometimes be used to help with timing of funds Bond Interest &Third Party (Bond Related) Fees Typically escrowed at closing with Trustee for full term of Bonds Possible limitation on Issuer Fees due to short maturity and Loan Yield limitations CERTAIN RELATED QUESTIONS & POTENTIAL ISSUES 7Kent Neumann (202) 973-0107

8. KENT S. NEUMANN, ESQ. kneumann@ennbonds.com (202) 973-0107 EICHNER NORRIS & NEUMANN PLLC 1225 19 th Street, N.W., 7 th Floor Washington, D.C. 20036 KENT S. NEUMANN, ESQ. kneumann@ennbonds.com (202) 973-0107 EICHNER NORRIS & NEUMANN PLLC 1225 19 th Street, N.W., 7 th Floor Washington, D.C. 20036