1. Single-Family Financing Essentials: Mortgage Revenue Bonds January 15, 2015 CONFIDENTIAL HFA Institute 2015

2. 2 HFA Financing Overview City Securities CorporationCONFIDENTIAL Housing Finance Authority Capital Markets Funding Activity Mortgage Lending First-time Home Buyers $$$ HFAs profit from spread between lending and borrowing

3. 3 HFA Financing Overview Traditionally, HFAs have funded lending through the sale of tax-exempt Mortgage Revenue Bonds (MRBs) under U.S. Code § 143 using allocated Private Activity Volume Cap.  Lower interest payments since investors don’t pay tax  Allows for below market-rate mortgage lending (usually)  Spread between single-family mortgage and bond rates limited to 1.125% City Securities CorporationCONFIDENTIAL

4. 4 Investor View of MRBs City Securities CorporationCONFIDENTIAL Unique type of municipal bond  Revenue stream from mortgages o Not really a muni credit, more like ABS  Prepayments make average lives unpredictable  Duration goes against the investor o Mortgage Revenue Bonds sell at a premium to other comparable municipal bonds. Limited buyer base Very much a small niche of the fixed income markets

5. 5 Has Anyone Seen an MRB? City Securities CorporationCONFIDENTIAL

6. 6 Recent Market for MRBs City Securities CorporationCONFIDENTIAL In low interest rate environments, the difference between taxable and tax-exempt rates compresses, reducing or eliminating the funding advantage for HFAs. Loss of funding advantage from tax exemption

7. 7 Recent Market for MRBs City Securities CorporationCONFIDENTIAL MRB issuance decreased significantly in the financial crisis and has stayed low due to rate compression.

8. 8 Current MRB Structures City Securities CorporationCONFIDENTIAL Over that past 5 years, HFAs have struggled to find MRB structures that provide competitive funding for single-family lending programs. Majority of recent bond issues have utilized one or more of the following structuring techniques:  Alter bond structure to attract non-traditional buyers  Use existing assets to provide subsidy to new bond issues  Use overall strength of bond indenture to support bond issues that won’t cashflow on their own

9. 9 Attracting New Buyers City Securities CorporationCONFIDENTIAL Increasing Pool of Investors Make Bonds more Generic Structure bonds so that they can be sold to average life

10. 10 Using Existing Assets City Securities CorporationCONFIDENTIAL Zero-Participation Mortgages  Transfer mortgages that are over tax-law restricted spread into a new deal  Use money that otherwise would have gone to IRS to subsidize lower mortgage rates Refunding  Refinance higher rate outstanding bond issues  Basically create new zero participation mortgages Over-collateralization  Additional mortgages allow bonds to pay down faster  Create shorter average life for investors

11. 11 Using Indenture Strength City Securities CorporationCONFIDENTIAL Front load bond maturities  Structure bonds assuming some prepayment level higher than 0% PSA Increase PAC size  More bonds sold to average life reduces bond yield “PAC in the Back” Structure  Similar benefits to front-loaded maturities  In addition, allows you to move up the yield curve to where rates are lower

12. 12 “PAC In the Back” Bond Structure City Securities CorporationCONFIDENTIAL BOND MATURITY REPORT - "Traditional" Bond Structure == Serial Bonds === 2029 Term Bonds == 2034 Term Bonds == 2038 Term Bonds == 2044 Term Bonds == Premium PAC Bonds ======= Bond Debt Service ===== Date Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalInterest Paid Total Debt Serv Jul 1, 2015 195,0000.20% - - - - 115,0003.125% 310,000 530,323 840,323 Jan 1, 2016 215,0000.40% - - - - 130,0003.125% 345,000 492,610 837,610 Jul 1, 2016 220,0000.50% - - - - 130,0003.125% 350,000 490,149 840,149 Jan 1, 2017 220,0000.70% - - - - 130,0003.125% 350,000 487,568 837,568 Jul 1, 2017 225,0000.80% - - - - 130,0003.125% 355,000 484,766 839,766 Jan 1, 2018 225,0001.00% - - - - 130,0003.125% 355,000 481,835 836,835 Jul 1, 2018 225,0001.13% - - - - 135,0003.125% 360,000 478,679 838,679 Jan 1, 2019 230,0001.35% - - - - 135,0003.125% 365,000 475,304 840,304 Jul 1, 2019 230,0001.45% - - - - 135,0003.125% 365,000 471,642 836,642 Jan 1, 2020 235,0001.75% - - - - 135,0003.125% 370,000 467,865 837,865 Jul 1, 2020 235,0001.85% - - - - 140,0003.125% 375,000 463,699 838,699 Jan 1, 2021 240,0002.15% - - - - 140,0003.125% 380,000 459,338 839,338 Jul 1, 2021 245,0002.25% - - - - 140,0003.125% 385,000 454,571 839,571 Jan 1, 2022 245,0002.40% - - - - 145,0003.125% 390,000 449,627 839,627 Jul 1, 2022 250,0002.45% - - - - 145,0003.125% 395,000 444,421 839,421 Jan 1, 2023 250,0002.60% - - - - 150,0003.125% 400,000 439,093 839,093 Jul 1, 2023 255,0002.65% - - - - 150,0003.125% 405,000 433,499 838,499 Jan 1, 2024 260,0002.70% - - - - 150,0003.125% 410,000 427,777 837,777 Jul 1, 2024 260,0002.75% - - - - 155,0003.125% 415,000 421,923 836,923 Jan 1, 2025 270,0002.90% - - - - 155,0003.125% 425,000 415,926 840,926 Jul 1, 2025 270,0002.90% - - - - 160,0003.125% 430,000 409,589 839,589 Jan 1, 2026 - 275,0003.30% - - - 160,0003.125% 435,000 403,174 838,174 Jul 1, 2026 - 280,0003.30% - - - 160,0003.125% 440,000 396,137 836,137 Jan 1, 2027 - 280,0003.30% - - - 170,0003.125% 450,000 389,017 839,017 Jul 1, 2027 - 285,0003.30% - - - 170,0003.125% 455,000 381,741 836,741 Jan 1, 2028 - 290,0003.30% - - - 175,0003.125% 465,000 374,382 839,382 Jul 1, 2028 - 295,0003.30% - - - 175,0003.125% 470,000 366,863 836,863 Jan 1, 2029 - 300,0003.30% - - - 180,0003.125% 480,000 359,261 839,261 Jul 1, 2029 - 305,0003.30% - - - 180,0003.125% 485,000 351,498 836,498

13. 13 “PAC In the Back” Bond Structure City Securities CorporationCONFIDENTIAL == Serial Bonds === 2029 Term Bonds == 2034 Term Bonds == 2038 Term Bonds == 2044 Term Bonds == Premium PAC Bonds ======= Bond Debt Service ===== Date Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalInterest Paid Total Debt Serv Jan 1, 2030 - - 310,0003.60% - - 185,0003.125% 495,000 343,653 838,653 Jul 1, 2030 - - 315,0003.60% - - 190,0003.125% 505,000 335,183 840,183 Jan 1, 2031 - - 320,0003.60% - - 190,0003.125% 510,000 326,544 836,544 Jul 1, 2031 - - 325,0003.60% - - 195,0003.125% 520,000 317,815 837,815 Jan 1, 2032 - - 330,0003.60% - - 200,0003.125% 530,000 308,918 838,918 Jul 1, 2032 - - 340,0003.60% - - 200,0003.125% 540,000 299,853 839,853 Jan 1, 2033 - - 345,0003.60% - - 205,0003.125% 550,000 290,608 840,608 Jul 1, 2033 - - 350,0003.60% - - 205,0003.125% 555,000 281,195 836,195 Jan 1, 2034 - - 355,0003.60% - - 210,0003.125% 565,000 271,692 836,692 Jul 1, 2034 - - 360,0003.60% - - 215,0003.125% 575,000 262,021 837,021 Jan 1, 2035 - - - 370,0003.75% - 215,0003.125% 585,000 252,181 837,181 Jul 1, 2035 - - - 375,0003.75% - 220,0003.125% 595,000 241,884 836,884 Jan 1, 2036 - - - 380,0003.75% - 225,0003.125% 605,000 231,416 836,416 Jul 1, 2036 - - - 390,0003.75% - 230,0003.125% 620,000 220,775 840,775 Jan 1, 2037 - - - 390,0003.75% - 235,0003.125% 625,000 209,869 834,869 Jul 1, 2037 - - - 400,0003.75% - 240,0003.125% 640,000 198,884 838,884 Jan 1, 2038 - - - 410,0003.75% - 240,0003.125% 650,000 187,634 837,634 Jul 1, 2038 - - - 415,0003.75% - 245,0003.125% 660,000 176,197 836,197 Jan 1, 2039 - - - - 425,0004.00% 250,0003.125% 675,000 164,588 839,588 Jul 1, 2039 - - - - 430,0004.00% 255,0003.125% 685,000 152,181 837,181 Jan 1, 2040 - - - - 440,0004.00% 260,0003.125% 700,000 139,597 839,597 Jul 1, 2040 - - - - 445,0004.00% 265,0003.125% 710,000 126,734 836,734 Jan 1, 2041 - - - - 455,0004.00% 270,0003.125% 725,000 113,694 838,694 Jul 1, 2041 - - - - 465,0004.00% 275,0003.125% 740,000 100,375 840,375 Jan 1, 2042 - - - - 470,0004.00% 280,0003.125% 750,000 86,778 836,778 Jul 1, 2042 - - - - 480,0004.00% 285,0003.125% 765,000 73,003 838,003 Jan 1, 2043 - - - - 490,0004.00% 290,0003.125% 780,000 58,950 838,950 Jul 1, 2043 - - - - 500,0004.00% 295,0003.125% 795,000 44,619 839,619 Jan 1, 2044 - - - - 505,0004.00% 305,0003.125% 810,000 30,009 840,009 Jul 1, 2044 - - - - 515,0004.00% 310,0003.125% 825,000 15,144 840,144 5,000,000 2,310,000 3,350,000 3,130,000 5,620,000 11,490,000 30,900,000 18,564,274 49,464,274

14. 14 “PAC In the Back” Bond Structure City Securities CorporationCONFIDENTIAL BOND MATURITY REPORT - "PAC in the Back" == Serial Bonds === 2029 Term Bonds == 2034 Term Bonds == 2038 Term Bonds == Premium PAC Bonds ======= Bond Debt Service ===== Date Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalInterest PaidTotal Debt Serv Jul 1, 2015 350,0000.20% - - - - 350,000 494,156 844,156 Jan 1, 2016 355,0000.40% - - - - 355,000 460,521 815,521 Jul 1, 2016 355,0000.50% - - - - 355,000 459,811 814,811 Jan 1, 2017 355,0000.70% - - - - 355,000 458,923 813,923 Jul 1, 2017 355,0000.80% - - - - 355,000 457,681 812,681 Jan 1, 2018 355,0001.00% - - - - 355,000 456,261 811,261 Jul 1, 2018 360,0001.13% - - - - 360,000 454,486 814,486 Jan 1, 2019 360,0001.35% - - - - 360,000 452,461 812,461 Jul 1, 2019 365,0001.45% - - - - 365,000 450,031 815,031 Jan 1, 2020 365,0001.75% - - - - 365,000 447,384 812,384 Jul 1, 2020 370,0001.85% - - - - 370,000 444,191 814,191 Jan 1, 2021 370,0002.15% - - - - 370,000 440,768 810,768 Jul 1, 2021 380,0002.25% - - - - 380,000 436,791 816,791 Jan 1, 2022 380,0002.40% - - - - 380,000 432,516 812,516 Jul 1, 2022 385,0002.45% - - - - 385,000 427,956 812,956 Jan 1, 2023 390,0002.60% - - - - 390,000 423,239 813,239 Jul 1, 2023 395,0002.65% - - - - 395,000 418,169 813,169 Jan 1, 2024 400,0002.70% - - - - 400,000 412,936 812,936 Jul 1, 2024 405,0002.75% - - - - 405,000 407,536 812,536 Jan 1, 2025 415,0002.90% - - - - 415,000 401,967 816,967 Jul 1, 2025 420,0002.90% - - - - 420,000 395,949 815,949 Jan 1, 2026 - 425,0003.30% - - - 425,000 389,859 814,859 Jul 1, 2026 - 430,0003.30% - - - 430,000 382,847 812,847 Jan 1, 2027 - 440,0003.30% - - - 440,000 375,752 815,752 Jul 1, 2027 - 450,0003.30% - - - 450,000 368,492 818,492 Jan 1, 2028 - 455,0003.30% - - - 455,000 361,067 816,067 Jul 1, 2028 - 465,0003.30% - - - 465,000 353,559 818,559 Jan 1, 2029 - 470,0003.30% - - - 470,000 345,887 815,887 Jul 1, 2029 - 480,0003.30% - - - 480,000 338,132 818,132

15. 15 “PAC In the Back” Bond Structure City Securities CorporationCONFIDENTIAL == Serial Bonds === 2029 Term Bonds == 2034 Term Bonds == 2038 Term Bonds == Premium PAC Bonds ======= Bond Debt Service ===== Date Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalRate Maturing PrincipalInterest PaidTotal Debt Serv Jan 1, 2030 - - 485,0003.60% - - 485,000 330,212 815,212 Jul 1, 2030 - - 495,0003.60% - - 495,000 321,482 816,482 Jan 1, 2031 - - 505,0003.60% - - 505,000 312,572 817,572 Jul 1, 2031 - - 515,0003.60% - - 515,000 303,482 818,482 Jan 1, 2032 - - 525,0003.60% - - 525,000 294,212 819,212 Jul 1, 2032 - - 535,0003.60% - - 535,000 284,762 819,762 Jan 1, 2033 - - 540,0003.60% - - 540,000 275,132 815,132 Jul 1, 2033 - - 550,0003.60% - - 550,000 265,412 815,412 Jan 1, 2034 - - 560,0003.60% - - 560,000 255,512 815,512 Jul 1, 2034 - - 570,0003.60% - - 570,000 245,432 815,432 Jan 1, 2035 - - - 585,0003.75% - 585,000 235,172 820,172 Jul 1, 2035 - - - 595,0003.75% - 595,000 224,203 819,203 Jan 1, 2036 - - - 605,0003.75% - 605,000 213,047 818,047 Jul 1, 2036 - - - 620,0003.75% - 620,000 201,703 821,703 Jan 1, 2037 - - - 630,0003.75% - 630,000 190,078 820,078 Jul 1, 2037 - - - 640,0003.75% - 640,000 178,266 818,266 Jan 1, 2038 - - - 655,0003.75% - 655,000 166,266 821,266 Jul 1, 2038 - - - 325,0003.75% 340,0003.125% 665,000 153,984 818,984 Jan 1, 2039 - - - - 680,0003.125% 680,000 142,578 822,578 Jul 1, 2039 - - - - 695,0003.125% 695,000 131,953 826,953 Jan 1, 2040 - - - - 710,0003.125% 710,000 121,094 831,094 Jul 1, 2040 - - - - 725,0003.125% 725,000 110,000 835,000 Jan 1, 2041 - - - - 735,0003.125% 735,000 98,672 833,672 Jul 1, 2041 - - - - 750,0003.125% 750,000 87,188 837,188 Jan 1, 2042 - - - - 765,0003.125% 765,000 75,469 840,469 Jul 1, 2042 - - - - 780,0003.125% 780,000 63,516 843,516 Jan 1, 2043 - - - - 795,0003.125% 795,000 51,328 846,328 Jul 1, 2043 - - - - 815,0003.125% 815,000 38,906 853,906 Jan 1, 2044 - - - - 830,0003.125% 830,000 26,172 856,172 Jul 1, 2044 - - - - 845,0003.125% 845,000 13,203 858,203 7,885,000 3,615,000 5,280,000 4,655,000 9,465,000 30,900,000 17,560,332 48,460,332

16. 16 “PAC In the Back” Bond Structure City Securities CorporationCONFIDENTIAL Bond Amounts: Bond TypeTraditionalPAC in the Back Serial Bonds 5,000,000 7,885,000 2029 Term Bonds 2,310,000 3,615,000 2034 Term Bonds 3,350,000 5,280,000 2038 Term Bonds 3,130,000 4,655,000 2044 Term Bonds 5,620,000 N/A Premium PAC Bonds 11,490,000 9,465,000 Total Bonds 30,900,000 Total Bond Yield (@ 100% PSA)3.30%3.12%

17. The Municipal Securities Rulemaking Board (the “MSRB”) has adopted MSRB Rule G-23 (“G-23”). G-23 prohibits a broker, dealer or municipal securities dealer (each, a “Dealer”) from acting as a Financial Advisor or Municipal Advisor, as defined in Section 15B of the Securities Exchange Act of 1934, as amended, to an issuer of municipal securities on a particular issue of municipal securities and subsequently switching roles to act as an underwriter or placement agent with respect to the same particular issue of municipal securities. MSRB Notice 2011-29 (the “G-23 Notice”) defines “underwritings” to be both (i) the acquisition, either alone or as a participant in a syndicate or other similar account formed for purpose of acquiring an issue of municipal securities, of all or any portion of an issue of municipal securities, directly or indirectly, from the issuer, as principal and (ii) acting as an agent for the issuer in arranging the placement of such issue. Additionally, the MSRB states in the G-23 Notice, “the primary role of an underwriter is to purchase securities in an arm’s-length commercial transaction between the issuer and the underwriter” and, “the underwriter has financial and other interests that differ from those of the issuer.” Furthermore, G-23 states that an underwriter may provide advice concerning the structure, timing, terms, and other similar matters related to the issuance of municipal securities to the extent the underwriter discloses that such advice is provided with respect to the underwriting and not in relation to a financial advisory relationship, as specifically defined in G-23. The MSRB has also adopted MSRB Rule G-17 (“G-17”). In accordance with MSRB Notice 2012-25 (the “G-17 Notice”), a Dealer, which is involved as the underwriter in the sale of municipal securities on a negotiated basis (the “Underwriter”), is required to provide to the Municipal Entities, as defined in Section 15B of the Securities Exchange Act of 1934, as amended, that are involved in the issuance of such municipal securities the following written disclosures: (a) G-17 requires the Underwriter to deal fairly at all times with both municipal issuers and investors; (b) the Underwriter’s primary role in any anticipated purchase and sale of such municipal securities is to purchase the municipal securities with a view to distribution in an arms-length commercial transaction with such Municipal Entities, and the Underwriter has financial and other interests that differ from those of such Municipal Entities; (c) unlike a Municipal Advisor, the Underwriter does not have a fiduciary duty to such Municipal Entities under the federal securities laws, and is, therefore, not required by federal law to act in the bests interests of such Municipal Entities without regard to its own financial or other interests; (d) the Underwriter has a duty to purchase such municipal securities from such Municipal Entities at a fair and reasonable price, but must balance that duty with the Underwriter’s duty to sell such municipal securities to investors at prices that are fair and reasonable; and (e) the Underwriter will review the official statement for such municipal securities in accordance with, and as a part of, its responsibilities to investors under the federal securities laws, as applied to the facts and circumstances of the Transaction. Furthermore, under G-17 the Underwriter may not recommend that such Municipal Entities not retain a Municipal Advisor. Accordingly, and in compliance with G-17, G-23, the G-17 Notice and the G-23 Notice, City Securities Corporation (“CSC”) hereby expressly states that: (a) CSC is acting as an underwriter or placement agent under G-17 and G-23 and not as a Financial Advisor or Municipal Advisor in connection with all services proposed and/or provided with respect to any of the matters set forth in the City Securities Corporation Possible Financing Options attached to these disclaimers (the “Financial Presentation Materials”); (b) any services provided by CSC as they relate to its role as underwriter or placement agent should not be construed by anyone to be those provided by a Financial Advisor or Municipal Advisor and such notice, as required under G-23 and the G-23 Notice and described above, is hereby provided; (c) the written disclosures, as required under G-17 and the G-17 Notice and described above with respect to CSC acting as the Underwriter, are hereby provided to each recipient of the Financial Presentation Materials; and (d) it is CSC’s understanding that each Municipal Entity that is involved in the issuance of one or more of the municipal securities identified in the Financial Presentation Materials has consulted, or will consult, with such Municipal Entity’s own legal and financial advisors to the extent such Municipal Entity deemed, or will deem, appropriate in connection with the issuance and sale of any such municipal securities. Disclaimer 17 City Securities CorporationCONFIDENTIAL

18. 18 Headquarters 30 South Meridian Street Suite 600 Indianapolis, IN 46204 Linda Matkowski Executive Vice President lmatkowski@citysecurities.com 317.808.7245 ©2015 City Securities Corporation. All Rights ReservedCONFIDENTIAL Denver Office 2373 Central Park Blvd. Suite 100 Denver, CO 80238 Marc Krasner Senior Vice President mkrasner@citysecurities.com 303.803.1606