FFB/HUD Multifamily FFB/HUD Multifamily Risk Sharing Program Risk Sharing Program

UpdateUpdateLarry Flood- TreasuryLarry Flood- Treasury

January 15, 2015January 15, 2015

Pilot Program Update2

In October 2014, HUD/FFB closed a transaction with NYCHDC

The project, Arverne View Apartments (a.k.a. Ocean Village) is a 1,093 unit complex originally constructed in 1972 and located in Queens.

Arverne View was virtually destroyed during Hurricane Sandy and reconstructed by L+M Development Partners

Construction financing was provided by NYCHDC, New

York State, and CitiCorp.

HUD/FFB provided permanent take-out financing.

Financing Description3

Issuer: HDCProject Owner: L+M Development PartnersPurchase Price: $72,020,000Principal Amount of Certificate: $72,020,000Certificate Closing date: October 30, 2014Mortgage Loan Interest Rate: 6.00% Mortgage Loan Maturity Date: October 31, 2049Mortgage Insurer: HUDCertificate Owner: Federal Financing BankCertificate Pass-Through Rate: 3.322%

Financing Description-Con’t4

Each Certificate evidences a 100% beneficial ownership interest in the underlying multifamily project loan. Principal is passed through to the Certificate Owner on the 15th of the month in which a scheduled principal payment on the underlying project loan is due. Interest is passed through at the Certificate Pass-Through Rate. Interest received from the Project Owner in excess of the Certificate Pass-Through Rate belongs to HDC.

FHA Insurance:

The project loan is insured by HUD under Section 542(b) of the Housing and Community development Act of 1992, as amended. Under 542(b), HUD is obligated to pay 100% of any claim within 3 business days of receipt. HDC must then reimburse HUD for 50% of any loss which may occur while the insurance is in force.

Additional Security:

HDC is required to deposit a sum equal to the maximum two consecutive months debt service into a Mortgage Reserve Account to ensure timely payment to the Certificate Owner.

National Roll-out 5

We expect to be ready to work with selected HFAs on documents for acquisition deals in the next week or two.

Roll-out of new construction and mod/substantial rehabilitation program tentatively planned for mid-Spring 2015.

Small Buildings Program-under 50 units or $3 million ($5 million in high cost areas) tentatively planned for late Spring

Timing for Closing Existing Properties 6

Pilot Program

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.FFB sets Certificate rate by Noon on Wednesday prior to funding. Rate is calculated using the Treasury yield curve 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.

Timing for Closing Existing Properties – Cont

7

National Roll-out

Proposal before FFB Board to approve 60-day rate lock. No guarantees at this point but feedback so far has been positive.We expect a response in the next week or two.Several HFAs have acquisition projects that can close in the next 60-90 days. We will work with them to develop closing procedures that incorporate the 60-day rate lock.

Other Changes8

40 Year term is fine if allowed by FHA insurance.

Future transactions will be done under 542 (c)

We do not anticipate changes to our pricing model, however, we are in discussions with FFB on the liquidity premium in response to comments by NCSHA.

We are in discussions with FFB to provide permanent take-out financing for new construction/substantial rehabilitation deals either through a construction period rate locks or utilizing the cash collateralized tax-exempt bond structures.

FFB/HUD Program Goals9

To provide HFAs with an execution comparable to what the private market would provide if FHA risk sharing project loans could carry the Ginnie Mae guarantee;

To provide HFAs with an efficient way to finance the acquisition or refinancing of existing multifamily properties;

To provide either insured draws during construction, or a guaranteed federal take-out on insured-upon- completion transactions.