1. Multifamily Financing Frontiers FFB Risk Sharing Karen E. Kelleher NCSHA Annual Conference & Showplace Nashville, September 28, 2015

2. Changing HFA Environment Pre-Recession Tax Exemption = Competitive Pricing Advantage Relatively High Interest Rates = High Investment Income (GICs) Less Multifamily Competition 2015 Tax Exemption = Competitive Pricing Disadvantage Low Interest Rates = Nominal Investment Income Many Competitive Multifamily Products Soft Money Shrinking, Volume Cap May Become Scarce Need to offer Better Products and Better Terms

3. FHA Programs Comparison Chart MAP Programs FHA MAP Insurance Programs (Typically Private, For-Profit Lenders) Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending Program223(f)223(f) Tax Credit Pilot221(d)(4) FHA Risk %99% Rehab Per UnitUp to $17,500/UnitUp to $40,000/unitOver $40,000/unit Davis Bacon Applies?No Yes Affordability Required?None None (but LIHTC does) None Equity Takeout Permitted? Yes Closing Process HUD MAP Underwriting/ Closing Process HUD Pilot Underwriting/ Closing Process HUD MAP Underwriting/ Closing process Best ExecutionTaxable (GNMA)Tax-Exempt (GNMA)Either Current Est. Lending Rate3.41%3.41% + COI3.90%

4. FHA Programs Comparison Chart MAP Programs FHA MAP Insurance Programs (Typically Private, For-Profit Lenders) Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending Program223(f)223(f) Tax Credit Pilot221(d)(4) FHA Risk %99% Rehab Per UnitUp to $17,500/UnitUp to $40,000/unitOver $40,000/unit Davis Bacon Applies?No Yes Affordability Required?NoneYes (b/c LIHTC)None Equity Takeout Permitted? Yes Closing Process HUD MAP Underwriting/ Closing Process HUD Pilot Underwriting/ Closing Process HUD MAP Underwriting/ Closing process Best ExecutionTaxable (GNMA)Tax-Exempt (GNMA)Either Current Est. Lending Rate3.41%3.41% + COI3.90%

5. FHA Programs Comparison Chart Traditional HFA Risk-Sharing HFA Traditional Risk Sharing Program Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending ProgramHFA Risk Share FHA Risk %50-90% Rehab Per Unit 1 <15% of value ≥15% of value Davis-Bacon Applies?No Yes Affordability Required? 20%@50% of AMI or 40%@60% of AMI Equity Takeout Permitted? Waiver Required Closing Process HFA Underwriting, Limited HUD Review HFA Underwriting, Limited HUD Review Best ExecutionTaxableTax ExemptTax-Exempt Current Est. Lending Rate5.25%4.75%4.95% [1] [1] 1. V alue after rehab. Financing existing project without substantial rehab must be structured as acquisition. See 24 CFR §266.200. [2] [2] 2. Applies only to substantial rehab or new construction of 12 or more units where construction advances are insured. [3] [3] 3. HUD retained reviews include 2530, wage rate, subsidy layering, environmental, unless delegated. If HFA assumes <50% of risk, underwriting and loan terms are subject to HUD right to review, modification and approval by HUD. 5. The risk sharing statute currently prohibits pooling of risk shared mortgages into securities guaranteed by GNMA.

6. FHA Programs Comparison Chart Traditional HFA Risk-Sharing HFA Traditional Risk Sharing Program Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending ProgramHFA Risk Share FHA Risk %50-90% Rehab Per Unit 1 <15% of value ≥15% of value Davis-Bacon Applies?No Yes Affordability Required? 20%@50% of AMI or 40%@60% of AMI Equity Takeout Permitted?Waiver Required Closing Process HFA Underwriting, Limited HUD Review HFA Underwriting, Limited HUD Review Best ExecutionTaxableTax ExemptTax-Exempt Current Est. Lending Rate5.25%4.75%4.95% [1] [1] 1. V alue after rehab. Financing existing project without substantial rehab must be structured as acquisition. See 24 CFR §266.200. [2] [2] 2. Applies only to substantial rehab or new construction of 12 or more units where construction advances are insured. [3] [3] 3. HUD retained reviews include 2530, wage rate, subsidy layering, environmental, unless delegated. If HFA assumes <50% of risk, underwriting and loan terms are subject to HUD right to review, modification and approval by HUD. 5. The risk sharing statute currently prohibits pooling of risk shared mortgages into securities guaranteed by GNMA.

7. FHA Programs Comparison Chart HFA FFB Risk Sharing Program [1] [1] 5. Varies by region. HFA FFB Risk Sharing Program Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending ProgramHUD/FFB Risk Share FHA Risk %50% Rehab Per Unit $30,000-$40,000 >$30,000-$40,000 Davis-Bacon Applies?No Yes Affordability Required? 20%@50% of AMI or 40%@60% of AMI Equity Takeout PermittedWaiver Required Closing Process HFA Underwriting, Limited HUD Review HFA Underwriting, Limited HUD Review Best ExecutionParticipation Participation + Short-Term Tax- Exempt ?? Current Estimated Rate3.71%3.71% + COI??

8. FHA Programs Comparison Chart HFA FFB Risk Sharing Program [1] [1] 5. Varies by region. HFA FFB Risk Sharing Program Deal TypeLight or No Rehab Moderate Rehab with Tax Credit Equity New Construction or Substantial Rehab Lending ProgramHUD/FFB Risk Share FHA Risk %50% Rehab Per Unit $30,000-$40,000 >$30,000-$40,000 Davis-Bacon Applies?No Yes Affordability Required? 20%@50% of AMI or 40%@60% of AMI Equity Takeout PermittedWaiver Required Closing Process HFA Underwriting, Limited HUD Review HFA Underwriting, Limited HUD Review Best ExecutionParticipation Participation + Short-Term Tax- Exempt ?? Current Estimated Rate3.71%3.71% + COI??

9. FFB Risk Share Closing Process /Terms Few Differences from Traditional Risk Sharing Rate Lock Process Prepayment Lockout Mortgage Reserve Fund Final Endorsement/Closing Process

10. FHA vs. Risk Share Borrower Choices Terms –Interest Rate and Fees/Servicing Spread –Term and amortization –LTV Ratio, Loan Amount –Prepayment Rights –Davis-Bacon applicability –Rent/Vacancy Underwriting Process –Rate Lock Process –Closing Process –Replacement Reserve Draw Process –Credit review

11. Questions?