1. NALHFA 2012 Annual Educational Conference Meeting the Challenge: Creating Opportunities and Developing New Solutions in Affordable Housing April 25-28, 2012 Omni Austin Hotel Downtown Austin, Texas 1

2. Borrowing Taxable: A Viable Option? Financing with Taxable Bonds Benefits & Challenges Investors 2

3. Programs by Income Level Percent of NYC Area Median Income 50%40%60% $33,200 $41,500 $49,800 175% $107,900 $145,250 40% AMI HDC Applicable Programs 80/20, Mixed Income 60% AMI HDC Applicable Program LAMP, Mixed Income 175% AMI HDC Applicable Programs Mixed Income, Co-Op, New HOP 50% AMI HDC Applicable Programs 80/20, Mixed Income Income Level Family of 4 Current AMI $83,000 70%80% 80% AMI HDC Applicable Program Taxable 80/20, New Hop, Mixed Income 90%100% 100% AMI HDC Applicable Program Taxable 80/20, New HOP, Mixed Income 110%120%130% 130% AMI HDC Applicable Program New HOP, Mixed Income $83,000 $66,400 HDC Offers a Mix of Affordable Housing Programs 3

4. HDC Programs New Housing Opportunities Program (5,223 NEWHOP Units) Mitchell-Lama and Preservation Programs (25,908 Units) AMI Served: <130% (Family of 4 - $107,900) Multi-family rental housing affordable to moderate and middle income households Taxable bonds (variable or fixed rate) Tax-exempt recycled bonds may be available if low-income set asides are met HDC subordinate loans of 65,000- $85,000/unit AMI Served: approximately 100% (Family of 4 - $83,000) Multi-family rental or cooperative housing affordable to middle income households Taxable or tax-exempt recycled bonds (variable or fixed rate) Senior debt restructured at lower rate. Subordinate debt restructured at 0%. Low interest repair loans available to address capital needs Extended affordability and commitment to stay in the Mitchell-Lama program for a minimum of 10-15 years 4 31,131 Affordable housing units have been created and/or preserved from 2003 to December 2011

5. HDCs New Housing Opportunities Program (New HOP) combines a first mortgage, funded through proceeds from the sale of variable or fixed rate taxable bonds, with a second mortgage, provided through HDC corporate reserves, to finance multi-family rental housing affordable to moderate and middle income families earning 80% to 130% of New York Citys median income Program Features: Bond funded senior loan available in multiple interest rate modes, sized at an overall DSCR of 1.15 and maximum LTV of 80% Low interest subordinate loan up to $85,000/unit at a fixed rate of 1% Qualify for §421-a, or J-51 tax benefits Typically 30+ years of affordability Income and Rent Limits: Maximum income level of no more than 175% of AMI (currently $145,250 for a family of four) Maximum rents up to 130% of AMI: Studio $1,561; 1 BR $1,965; 2 BR $2,366, 3 BR $2,729 New Housing Opportunities Program 5

6. HDCs Mitchell-Lama Preservation program provides mortgage restructuring and repair loan funding financed through tax-exempt or taxable bonds, or HDC corporate reserves. Subject to the Mitchell- Lama rules, units are generally affordable to families earning approximately 100% of New York Citys median income (1) Program Features: Lower Interest Rate Financing – Existing debt is restructured at a lower interest rate and the loan term is extended Subordinate Financing – Existing second mortgage no longer accrues interest Repair Loans – New loans to finance needed capital improvements and upgrades Grant Funds – Subsidized transaction costs and capital grants Extended Affordability – 15 year commitment to stay in the Program Income and Rent Limits (1) : Maximum income level of no more than 100% of AMI (currently $81,800 for a family of four) Maximum rents up to 100% of AMI: Studio $1,188; 1 BR $1,498; 2 BR $1,806, 3 BR $2,081 Mitchell-Lama Preservation (1) Mitchell-Lama was designed to be a middle income program, but actual income and rent limits vary by each development. 6

7. Taxable 80/20 Program Combines a first mortgage, funded through proceeds from the sale of variable or fixed rate taxable bonds, with a second mortgage, provided through HDC corporate reserves At least 20% of the units affordable to moderate-income households who earn up to 80% or 100% of AMI.; remaining units are set at market levels and rented without income limitations Affordable Co-operative Housing Program Combines a construction loan and a permanent mortgage to the cooperative to be funded by taxable bonds financed under the NYCHDC Multi-Family Secured Mortgage Revenue Bonds Resolution. 2nd mortgage during construction provided through HDC corporate reserves blended with the 1st position mortgage at permanent conversion. Affordable to middle income families with incomes not to exceed 175% AMI; Up to 25% of units can be market rate Other Financing Programs 7

8. HDC makes 2nd position loans from its corporate reserves alongside loans funded with bond issuances Loans can later be packaged with other loans and securitized through the issuance taxable bonds Loans are then pledged as security for the bonds Proceeds used to replenish the Corporations reserves and re-lent to new developments Securitizations 8

9. Direct Placement No Liquidity No Credit Enhancement No Remarketing Rates reset with a spread to an Index such as 3 month LIBOR or 3 month FHLB Discount Note Outstanding FHLB Index Floaters (As of 1/31/2012) Taxable Issuances 9

10. Portfolio Analysis Yield Curve: use current historic low interest rate environment to evaluate where interest savings can be achieved Are there opportunities within the portfolio for taking advantage of refunding of Tax- Exempt AMT bonds into taxable bonds Refunding 10

11. Borrowing Taxable: A Viable Option? 11

12. Historic low interest rate environment No Yield Restrictions No Arbitrage No additional credit risk: same security as their tax-free counterparts No Volume Cap Allocation Supply & Demand Benefits & Challenges 12

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15. Investors Have Increased Focus on European Fiscal Issues, Influencing U.S. Treasury Movements Taxable Fixed Rate Overview US Treasury Yield Curve Source: Bloomberg US Treasury Rates Over The Last 10 Years While the U.S. released slightly weaker than expected economic data reports last week, investors focused on the deteriorating position of the European economy Manufacturing, labor market, and housing data all suggested some slowing from the U.S. economic strength shown at the start of the year 10-year spreads across Spain, Italy, and France widened an average of 8 bps last week, and are now 51 bps wider this month Over this time period, 10-year UST yields have declined 25 bps in a flight to quality movement This week, the federal reserve will auction $35 billion in 2-year notes, $35 billion in 5-year notes, and $29 billion in 7-year notes on Tuesday, Wednesday, and Thursday, respectively In addition to these auctions, the FOMC statement release expected on Wednesday and Q1 Real GDP released on Friday may impact Treasury movements % % 15

16. Short-Term Market Tone Remains Positive SIFMA drifted higher last week in the final days before the U.S. tax deadline and as traditional cross-over investors continued to shift out of the short-term tax-exempt market in search for higher yields SIFMA increased to 0.26% this week, its highest level since April 2011 The overnight repo rate has remained elevated over the last several weeks, contributing to the decreased short- term municipal demand from cross-over investors; however, should repo rates continue to decline there may be an influx in tax-exempt demand 1M LIBOR has not increased in the last 72 trading sessions, and is currently at 0.23975%, its lowest level since October 2011 SIFMA vs. LIBOR (Since Jan 2008) Source: Bloomberg % SIFMA/LIBOR Ratio (2011 to 2012 YTD) Source: Bloomberg SIFMA Short-Term Market Update 16

17. Source: Bloomberg; TM3 Municipal and Treasury Rates and Ratios Source: Bloomberg; TM3 10-year MMD, 10-year UST, and MMD/UST Ratios 30-year MMD, 30-year UST, and MMD/UST Ratios 17

18. Benefits & Challenges 18

19. Taxable Municipal Issuance Has Continued to Fall $bn Source: Thomson Reuters, excludes debt subject to AMT, as of April 23 rd, 2012 Note: Data includes all supply with YTM of 1.088 and greater Year-to-date supply 19

20. Borrowing Taxable: A Viable Option? 20

21. Banks – CRA motivation Insurance Companies Pension Funds Bond Funds Corporations High Net Worth Individuals Investors 21

22. Taxable Investor Breakdown Taxable Investor Base Overview Taxable Investor Allotment Trends in 2011 Taxable Investor Breakdown by Maturity Taxable Investor Breakdown by Rating Category In 2011, insurance companies made up the largest single investor base of taxable bonds offered by an indicative firm, totaling 32.75% of all allotments Retail investors and investment advisors purchased 33.00% of all taxable bonds offered Bond funds made up 14.70% of all allotments of taxable paper offered in 2011 In 2011, insurance companies were allotted taxable bonds most heavily concentrated in the 11-20 year sector of the curve Retail buyers were heavily invested in shorter term bonds (1-10 years), while investment advisors focused on the 11-20 year sector $000 22

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