NCSHA Conference Federal Financing Bank-HUD Financing

1. NCSHA ConferenceFederal Financing Bank-HUDFinancing October 18, 2014

2. The WHY of the Federal Financing Bank-HUDFinancing Initiative • Due to the financing collapse in 2008 HFA tax exempt rates and Ginnie Mae rates inverted. • Risk Share business volume dropped precipitously • Risk Share business volume recovered briefly with the New Issue Bond Program • Business volume continues its decline in 2014 • In the same period FHA MAP Lending LIHTC volume has increased dramatically I 2 I

3. HFA Tax Exempt Rates vs. Ginnie Mae Security Rates In late 2008 multifamily tax exempt rates and Ginnie Mae multifamily security rates inverted with HFA tax exempt rates higher than comparable Ginnies. The greatest disparity was in late 2012 when HFA rates were 130bps above Ginnies. In December 2013 a typical multifamily Ginnie Security was 76bps below a typical multifamily tax exempt bond offering. I 3 I

4. Tax Exempt vs. Ginnie Mae Security Rates I 4 I

5. HFA Risk Share Initial Endorsements FY 2007 to FY 2014 I 5 I

6. Status of NYCHDC Transaction • FHA issued firm commitment on October 10th • NYCHDC converted the financing structure on 10/15 • Project will close in escrow on Monday 10/27 • FFB/HUD Program Financing Agreement • FFB/NYCHDC Master Purchase and Sale Agreement • FFB/NYCHDC Master Escrow and Custody Agreement • NYCHDC/HUD Designation Request to FFB • FFB Project Funding 10/30 I 6 I

7. Program DocumentsTarget Distribution to HFA Focus Group Mid-November • HFA Risk Share Addendum • FFB/NYCHDC Master Purchase and Sale Agreement • FFB/NYCHDC Master Escrow and Custody Agreement • First Supplemental Escrow and Custody Agreement • Form of HFA Opinions of Counsel – Transaction Documents, Risk Share Agreement etc. • Form of Opinion of Custodian’s Counsel re Transaction Documents • HFA/HUD Designation Request to FFB I 7 I

8. Criteria for HFA Participation • The FFB program will be limited to Level I HFAs with 50%-50% risk shares. Level I HFAs have a rating of “A” or better. Twenty-eight of the thirty-three approved risk share HFAs participate at Level I. • Program will be implemented under existing 542(c) regulatory framework • HFA’s will use current risk share underwriting standards • HFA’s will process environmental reviews • Program will be implemented through amendments to existing agreements I 8 I

9. Process for HFA Participation We will send a email to all HFAs participating in the Risk Share Program the week of October 20th requesting the following: • A request to amend their risk share agreement to participate in the FFB Program, including an acknowledgement they meet program requirements e.g. Level I, A rating etc. • Projected CY 2015 volume and number of financings by month • Request for the FHA Commissioner to waive 24 CFR 266.620(e) Termination of Mortgage Insurance • Other waiver requests For HFAs anticipating closings in January or February, the letter should be submitted by November 21st. I 9 I

10. Regulation Waivers – Jerry McGuire Said “Help Me Help You” • If you don’t need it now – Can you wait – We want to focus on waivers for January – March closings. • “Blanket Waivers” are a problem from a regulatory law standpoint. • Waiver Request – Key Points: • Section(s)of Regulation to be waived • Reason for waiver – public benefit and any HFA measures to manage any increased risk • Expected funding date of initial loan subject to waiver • List of projects and projected dollar volume for the projects that will be subject to the waiver I 10 I

11. Timeline for Implementation I 11 I

12. FFB Pricing Criteria - Existing Properties • The FFB Initiative is a bridge allowing HFAs to access capital at favorable rates until the statutory prohibition on the use of Ginnie Securitization in the risk share program is eliminated. • FFB Pricing will be benchmarked to comparable Ginnie Mae Securities for program type i.e. NC/SR (221D4) or Existing Properties (223(f). • Current benchmark indication for Existing Properties is 105bps over 10 year Treasuries. I 12 I

13. Timing for Closing Existing Properties • Property must be converted to permanent phase, FHA Firm Commitment Issued and Designation Request must be submitted to FFB 7 business days prior to funding. • All documents to which FFB is a party must be dated as of the funding date, signed by all parties (except FFB), and placed into escrow on Monday 3 days prior to funding. • FFB executes all documents on Tuesday prior to funding. I 13 I

14. Timing for Closing Existing Properties – Continued • FFB sets Certificate rate by Noon on Wednesday prior to funding. Rate is based on 10 Year UST as of COB the prior Business Day. • HFA once it knows the Certificate rate is given until COB on Wednesday to opt-out of the transaction. • Closing/funding will occur on Thursday. I 14 I

15. Work Flow – Existing Transaction Pricing and Closing I 15 I

16. NC/SR Pricing Criteria • 40 Year term is fine if allowed by FHA insurance. • FFB is evaluating providing insured draws as well as funding upon completion. • Pricing could be as much as 50 basis points higher than for Existing Properties due to prospect of rising interest rates. • There will likely be a fee to extend the construction phase beyond scheduled date. I 16 I

17. October 2014 223(f) Rates I 17 I

18. OMB/Treasury/HUDPolicy Assessment – Mid 2016 • The effect of FFB financing on the broader multi-family financing market • Understand and evaluate any changes in the risk profile of loans • Evaluate the extent to which financing cost savings are passed along to tenants or reduce the amount of government development subsidies I 18 I

19. Next Steps • Complete Addenda to Risk Share Agreements • Circulate FFB Agreements • Process regulatory waivers - Initially we will focus on HFAs ready to implement transactions in January/February • Initiate development of insured advances or forward commitment program. A key focus of working group • Initially we will focus on HFAs with transactions ready to fund in January-March. I 19 I