1. 2015 ANNUAL CONFERENCE: SINGLE-FAMILY FINANCING DIALOGUE September 28, 2015 Managing Unprecedented Diversity and Opportunities for HFA Single Family Programs Presented by Ansel Caine

2. HFA Single Family Funding Activity 2012 - Present Caine Mitter Single Family Activity 201220132014 $422 mm $396 mm $527 mm $515 mm $1,629 mm $309 mm Jan-Aug 2015 $1,168 mm $121 mm 20122013 50% 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 2015 75% 25% 74% 26% ■ MRB ■ MBS Sale

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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?

10. 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 PAC @ 100% PSA  MRB PAC/Swap is level debt structure with back ended, 5yr PAC @ 100% PSA, 33% swapped VRDOs

11. 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

12. Ansel Caine Caine Mitter & Associates Incorporated (212) 686 - 8820 acaine@cainemitter.com 225 West 35 th Street, Suite 900 New York, NY 10001