HFA Initiative Process to Release Multifamily Program Bond Proceeds from Escrow Fund January 29, 2010 3:00 PM Eastern time

HFA Initiative Process to Release

Multifamily Program Bond Proceeds from Escrow Fund

January 29, 2010

3:00 PM Eastern time

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Agenda

1. Review of Multifamily Escrow Release Timeline

2. Overview of MF NIBP Escrow Release

3. Timeline for MF NIBP Escrow Release

4. Questions

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MF NIBP Program Terms

Escrow Release Limitations

• The final Release Date may be no later than December 16, 2010.

• Redemption of Program Bonds with respect to remaining Escrowed Proceeds must be on or before February 1, 2011.

• Each bond issue is limited to a maximum of three (3) Release Dates.

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Escrow Release Limitations (continued)

• On each Release Date:

– Program Bonds outstanding shall constitute at least 30% of the sum of the (i) Program Bonds and (ii) any parity bonds which are not Program Bonds issued and outstanding under the Indenture.

• Following the final Release Date:

– The sum of the Program Bonds and any parity bonds which are not Program Bonds issued and Outstanding under the Indenture shall not exceed [Program Bonds at Settlement/.60]

– the HFA will not issue any additional parity bonds (other than parity bonds issued to refund outstanding parity bonds) so long as any Program Bonds remain outstanding.

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Notice Parties • Per the Multifamily Supplemental Indenture Appendix, Notice Parties include:

1. US Bank, acting as Administrator

2. Fannie Mae

3. Freddie Mac

4. JP Morgan Chase, acting as Treasury’s Financial Agent

• In order to ensure an orderly escrow release process, the following additional parties should receive all notices required by the below-indicated sections of the Multifamily Supplemental Indenture Appendix:

5. GSE Special Closing Counsel (Section 2.3)

6. State Street Global Advisors, acting as Special Permanent Rate Advisor (Section 2.3(a))

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Credit SpreadsProgram Bonds

&Fixed Rate Construction

Program Bonds

Variable Rate Construction Program Bonds

Aaa/AAA:

Aa/AA:

A:

60 bps

75 bps

110 bps

Aaa/AAA:

Aa/AA:

A:

140 bps

155 bps

190 bps

NOTE: Spread based on rating of the Program Bonds on the Permanent Rate Calculation Date after giving effect to the release and related conversion

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MF NIBP Bond Interest Rates

Program Bonds &Fixed Rate Construction Program Bonds

Short Term Rate: Rate equal to Investment Earnings in either the Global Escrow Agreement or 4-week T-Bill option

Short Term Rate: The lower of:

Four-week T-Bill Rate plus the Spread

Permanent Rate

Conversion Date: Release Date + two (2) months

Permanent Rate: 10-yr CMT + Spread

Settlement Date

Release Date

Conversion Date

2 months

NOTE: The underlying mortgage note rate must use the Permanent Rate as its base rate.

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MF NIBP Bond Interest Rates

Variable Rate Construction Program Bonds

Short Term Rate: Rate equal to Investment Earnings in either the Global Escrow Agreement or 4-week T-Bill option

Construction Program Bond Variable Rate: SIFMA Municipal Swap Index Rate + 50 bps

• Conversion Date: Settlement Date + 48 months

• Permanent Rate: 10-yr CMT + Spread

Settlement Date

Release Date

Conversion Date

NOTE: The base rate for the underlying mortgage note rate must use the Construction Program Bond Variable Rate for the first 48 months and the Permanent Rate thereafter.

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MF Program Bond Escrow Release – Timeline

Timeline Requirement

At least 14 days prior to the Release Date

• HFA delivers the Notification of Interest Rate Conversion/Release Certificate (Exhibit A to the Multifamily Supplemental Indenture Appendix) to the following:

1. Notice Parties, as defined in the Supplemental Indenture Appendix

2. HFA Trustee

3. GSE Special Closing Counsel

4. State Street Global Advisors, acting as Special Permanent Rate Advisor

5. Rating Agencies

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At least 14 days prior to the Release Date

(continued)

• Exhibit A to the Multifamily Supplemental Indenture Appendix will include the following information:

1. Proposed Release Date

2. Proposed Conversion Date

3. Principal Amount of Program Bonds being Converted

4. Proposed Permanent Rate Calculation Date (Actual date may be no later than 7 days prior to Release Date)

5. Anticipated Bond Rating on Release Date

– If available, the actual rating may be provided.

– If the final rating letter does not match the anticipated rating in Exhibit A, the release fails

6. Bond Type: Determination of either (i) Program Bond or (ii) Fixed or Variable Construction Program Bond

– NOTE: A new form of Exhibit A is being prepared to reflect the addition of the Bond Type requirement.

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At least 14 days prior to the Release Date (continued)

• Subsequent to receipt of Exhibit A, the GSEs will provide to the HFA Trustee and Administrator their written Consent to the proposed Permanent Rate Calculation Date and Release Date.

• NOTE: A form of GSE Consent to proposed Permanent Rate Calculation Date and Release Date is currently being prepared

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No later than 7 days prior to the Release Date

• HFA or the HFA’s agent must apply for new CUSIP for Converted Bonds

• HFA appoints an Exchange Agent (HFA Trustee) to facilitate exchange offer through DTC ATOP system

• HFA delivers to DTC Notice of Exchange regarding the exchange of existing CUSIPs associated with Pre-Conversion Bonds for new CUSIPs associated with Converted Bonds.

– On the Release Date, the outstanding balance of the CUSIP associated with Pre-Conversion Bonds will be reduced and the new CUSIPs associated with Converted Bonds will be credited for the same amount, equal to that release

• Deliver draft of Supplement to Official Statement as attachment to DTC Notice

• NOTE: Sample of DTC Notice is currently being prepared

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No later than 7 days prior to the Release Date (continued)

• Global Escrow Agreement: HFA Trustee provides written notice to Escrow Agent (US Bank) of amount to be withdrawn from Global Escrow Agreement (Exhibit A to Schedule II of Global Escrow Agreement)

• Treasury Bill Option: If the T-Bill option is used, the Release Date specified by HFA must coincide with the maturity date of T-Bill investments. HFA Trustee must calculate accrued interest on the T-Bill investment for payment to DTC as interest on the Bonds.

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No later than 7 days prior to the Release Date (continued)

• SSgA confirms or calculates the Permanent Rate (“Permanent Rate Calculation Date”)

– If CMT is already locked: SSgA confirms CMT and sets Credit Spread based on anticipated rating provided in Exhibit A

– If CMT has not been locked: SSgA rate locks CMT and sets Credit Spread based on anticipated rating provided in Exhibit A. Subject to US Treasury and GSE approval, CMT Locks from SSgA may be requested by HFA prior to the Permanent Rate Calculation Date in order to provide the HFA with additional flexibility.

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No later than 1 business day prior to Release Date

• HFA delivers to the HFA Trustee, and the HFA Trustee delivers to the Notice Parties and the GSE Special Closing Counsel, Release Date Required Documents, which include:

1. Certificate of SSgA specifying the Permanent Rate Calculation Date, Four Week T-Bill Rate (for calculation of the Short Term Rate), Credit Spread and Permanent Rate

2. Program Bond Official Statement or Official Statement Supplement

3. If applicable, an amendment or supplement to the bond indenture prepared by the HFA to describe changes in the Bond rate or other Bond terms upon release of Escrowed Proceeds

4. HFA 10b-5 certificate concerning Program Bond Official Statement (or Supplement)


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No later than 1 business day prior to Release Date (continued)

5. HFA Counsel 10b-5 opinion concerning Program Bond Official Statement (or Supplement)

6. Final Rating Agency Rating Letter for Program Bonds

• The rating detailed in the letter must match the anticipated rating provided by the HFA in Exhibit A. If it does not, the escrow release fails

7. Bond Counsel opinion dated as of the Release Date, concerning Program Bond enforceability and tax exemption of interest


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• HFA delivers to GSEs and GSE Special Closing Counsel an Issuer Certificate certifying certain mortgage loan level information, including:

– Mortgage loans acquired or financed with Escrowed Proceeds meet the requirements of Permitted Mortgage Loans per the Multifamily Supplemental Indenture Appendix. Permitted Mortgage Loans are limited to:

1. FHA insured, including FHA risk-sharing2. GNMA guaranteed3. GSE guaranteed4. HFA underwritten

– For HFA Underwriting Only: Actual terms of the mortgage loan satisfies the terms approved by the GSE loan committee.

– Any other information requested by the GSEs or their counsel

– NOTE: Form of Issuer Certificate currently being prepared


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• HFA Trustee delivers to the HFA, the Notice Parties and the GSE Special Closing Counsel the Interest Rate Conversion Certificate (Exhibit B to Supplemental Indenture Appendix)

• GSE Special Closing Counsel provides the GSE Special Counsel Certification to GSEs confirming receipt and review of documentation and opinions relating to establishment of Release Date

• HFA wires $7,500 to US Bank, as Administrator, for the GSE Special Closing Counsel Legal Fee

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• Use the following wiring instructions to submit the GSE Special Closing Counsel Legal Fee:

– For Escrow Fees on the 12/23/09 Settlement Issues it is:

US BANK AS CLOSING AGENT ABA = 091000022 U.S. Bank BBK = U.S. Bank N.A. BNF = U.S. Bank Trust N.A A/C : 173103321118 OBI=HFA NIBP Dec 2009 Fee Collection Account 135213003

– For Escrow Fees on the 1/12/10 Settlement Issues it is:

US BANK AS CLOSING AGENT ABA = 091000022 U.S. Bank BBK = U.S. Bank N.A. BNF = U.S. Bank Trust N.A A/C : 173103321118 OBI=HFA NIBP JAN 2010 Fee Collection Account 135213403


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On the Release Date

• US Bank, as Administrator, wires to GSE Special Closing Counsel the GSE Special Closing Counsel Legal Fee

– A $7,500 fee will be due and payable for each of the 3 escrow draws allowed per Multifamily issuance. All applicable DTC fees will be included in the $7,500.


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On the Release Date (continued)

• The Exchange Process on the Release Date via DTC includes the following:

1. Global Escrow Agreement: If Global Escrow Agreement is applicable, on the Release Date, Escrow Agent withdraws from the Global Escrow Agreement and sends (i) to HFA Trustee funds representing Release Amount and (ii) to US Bank, as GSE Administrator, interest accrued on Release Amount to the Release Date

– HFA Trustee reports accrued interest to DTC at 0%.

– NOTE: Exhibit A to Schedule II of Global Escrow Agreement is being revised to reflect the application of accrued interest

2. Treasury Bill Option: If T-Bill option is applicable, on the Release Date, HFA Trustee (i) liquidates T-Bill position, (ii) calculates accrued interest on release amount, and (iii) pays DTC accrued interest received.


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On the Release Date (continued)

3. DTC debits GSE Administrator account to reflect that the Escrow Program Bonds are reduced by the amount of the Converting Bonds

4. Exchange completed via DTC ATOPs exchange functions between Exchange Agent (HFA Trustee) and GSE Administrator settling security and cash positions

• US Bank updates schedule of securities for the Custodial Receipts


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Contact Information

US Bank:

State Street Global Advisors:

DTC:

JPMorgan Chase

[email protected]

[email protected]

Send to: [email protected] with copy to [email protected]

– Reference “{Escrow Bond CUSIP} HFA INITIATIVE” in subject line

[email protected]

Escrow Release Contacts

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Questions...

Q&A