2. Tom Corbett, Governor Brian A. Hudson, Executive Director PENNSYLVANIA HOUSING FINANCE AGENCY How HFAs Are Financing Homeownership in a Complex Time

3. PENNSYLVANIA HOUSING FINANCE AGENCY AKA… Crash Burn & Learn

4. PENNSYLVANIA HOUSING FINANCE AGENCY BC  Whole loan bond program started in 1982  Funded Conventional and Government  Took over all servicing in mid 1990s  ‘Off and On again’ self insurance fund; mid 90s and again from 2009 – 2012  Life was good. ‘Only game in town.’  Biggest problem = not enough volume cap and how much spread

5. PENNSYLVANIA HOUSING FINANCE AGENCY The Crash  No more interest rate advantage  No more AA rated PMI companies  Challenge to keep DPA program alive  No other funding sources except MRB  VRDO’s  Downgrading and lack of liquidity providers  SCARY TIMES!!!

6. PENNSYLVANIA HOUSING FINANCE AGENCY The Burn  Adverse selection  Kept MRB alive, but higher rates  No overlays = mission served  Refi boom = run off of good MRB loans  Not feeding conventional loans to MRB program  Tsunami of new regs to incorporate  Attrition of lender network

7. PENNSYLVANIA HOUSING FINANCE AGENCY The Learn  HFA network was invaluable  Became approved Ginnie issuer in spring of 2009  Rolled out new program in May; no MRB requirements  ‘Hedge’ was a higher rate  Learning curve to switch to MBS  NIBP/Fed 1 st Timers’ Credit 2009-2010  Started secondary/TBA program in 4 th Q 2011  Rolled out Fannie program in May 2012  Started doing FHA refi’s in 1 st Q 2013  Rolled out MCCs in July 2013

8. PENNSYLVANIA HOUSING FINANCE AGENCY Now what? Programmatic issues.  How do we continue to serve our mission, add value, and be different?  Programs: MCCs, DPA, partnerships, underwriting flexibilities, counseling  ‘Friendly’ investor; less buybacks, accessible  Servicing  More complicated to explain programs.  More time reviewing files and fixing things  QC!!!

9. PENNSYLVANIA HOUSING FINANCE AGENCY Now what? Financial issues.  More money, more problems  Performance issues in bond program  Runoff, adverse selection, less conventional  Versatility is great, but it’s a balancing act.  TBA or MRB?  Both  MCC program = competition  Cash up front or over time