1. 0 Presentation prepared for Public Finance Headquarters 1400 Wewatta Street, Suite 800 Denver, CO 80202 (800) 722-1670 2014 Annual Conference Structuring Homeownership Programs In a Competitive Market Who? What? Why? October 2014 JIM STRETZ Senior Vice President stretz@gkbaum.com

2. 1 Presentation prepared for 2006 2014 (estimated) Whole Loan306 MBS1829 Mixed316 MCC1427 Changing HFA Strategies HFA’s switching to (or including) MBS’s are also selling into the cash or TBA market using their balance sheets, “zeros” or TBA as a rate hedge.

3. 2 Presentation prepared for HFA Rates as of October 13, 2014 Freddie Mac Primary Mortgage Market Rate 4.12% Rates shown above are for unassisted loans. HFAs that do not have a posted rate on their website include: Arkansas, Indiana, Massachusetts and Virginia. (*) Denotes HFAs with no difference between the DPA and no DPA rate, (D) denotes rates that include DPA, (M) denotes HFAs advertising an MCC program on their website and (L) a local premium priced DPA program as competition.

4. 3 Presentation prepared for HFA Rates as of January 13, 2014 HFAs that do not have a posted rate on their website include: Arkansas, Hawaii, Indiana, Massachusetts, Mississippi and Virginia. (D) denotes rates that include DPA, (M) denotes HFAs advertising an MCC program on their website. Freddie Mac Primary Mortgage Market Rate 4.510%

5. 4 Presentation prepared for Who is Doing What? U.S. Bank – 3 rd Party Hedge U.S. Bank – Self Hedge U.S. Bank – Non TBA Idaho – 3 rd Party Hedge Idaho – Self Hedge Alabama – Self Hedge Alabama – 3 rd Party Hedge Self Hedge – Self Serve Non-TBA – Multiple Servicers Rhode Island Connecticut New Jersey Delaware Maryland Washington, D.C. Non-TBA – Self Serve

6. 5 Presentation prepared for The Fed Driving Mortgage Rates Down Timeline of Asset Purchase Programs Source: Board of Governors of the Federal Reserve System USD, Billions (Par) SOMA Domestic Securities Holdings

7. 6 Presentation prepared for TBA – Where the Rate Subsidy is Found Since the beginning of the current purchase program in 2012, we have purchased nearly $75 billion in MBS on average per month, including reinvestments. This translates into about 50 percent of monthly gross issuance, below the monthly purchase rate of roughly two-thirds, during the first round of large-scale MBS purchases in 2009. – SIMON POTTER, Federal Reserve Bank of New York ‘‘ ‘‘ SOMA Agency MBS Purchases Source: Federal Reserve Bank of New York Note: Figures are monthly Billions of U.S. Dollars

8. 7 Presentation prepared for The State of the Market SOMA Agency MBS Purchases as a Share of Gross Fixed-Rate Issuance Source: Federal Reserve Bank of New York; eMBS Note: Figures are monthly Percent

9. 8 Presentation prepared for The Fed’s Sweet Spot SOMA Agency MBS Holdings August 2014 Source: Federal Reserve Bank of New York; eMBS Percent Coupon (Percent)

10. 9 Presentation prepared for Your Opportunities

11. 10 Presentation prepared for The Mortgage Market

12. 11 Presentation prepared for Mortgage Rates and MRBs The Mortgage Market

13. 12 Presentation prepared for Lower Rates Better Distribution - paying competitive SRPs - higher level of service - using HFA status in Community - marketing to Realtors and Lenders - Streamline process - Taking Broker Risk Down Payment Assistance - Flexibility in setting rate and DP amount - Not using Premium Pricing as Source Other- - MCCs - Listing of Rates on Industry Pricing Services Setting Your HFA Product Apart – The Basics of Adding Value  Using balance sheet subsidy-refundings, short term debt and reserves  HFA preferred pricing  Fannie Mae risk share  Taking PMI exposure risk  Using CRA motivated investors  Drive costs down and revenues up Lower Rates  Paying competitive SRPs  Higher level of service  Using HFA status in community  Marketing to realtors and lenders  Streamline process  Taking broker risk Better Distribution  Flexibility in setting rate and DP amount  Not using premium pricing as source Down Payment Assistance  MCCs  Listing of rates on industry pricing services  Differentiate between customers and constituents Other

14. 13 Presentation prepared for Take Control of Your Program  Tapering of the Federal Reserve Stimulus bond buying program might increase mortgage rates.  GSE reform has set as a goal more reliance on private label issuance. HFA whole loan indentures are functionally private label mortgage securities.  As GSE fees are increased, HFA conventional whole loan programs get more competitive.  Dropping MRB requirements when using market rate programs will make it harder to convert back. Successful HFAs have both first-time homebuyer and higher rate non-first-time homebuyer products.  HFAs are finding other ways to provide better products beyond down-payment assistance and Fannie preferred pricing and products. Use of other HFAs as Master Servicer Using Program Advisors Stay mission focused  Use of Market Rate Programs are familiarizing HFA staff on how to use the TBA market to hedge pipelines and execute MRB, TBA or Market Rate Programs in-house. Summary

15. 14 Presentation prepared for So Many Options- How can you choose? So Many Options- Which strategy is right for your market?

16. 15 Presentation prepared for The Good News This report was prepared from data believed to be reliable but not guaranteed by us without further verification or investigation, and does not purport to be complete. It is not to be considered as an offer to sell or a solicitation of an offer to buy the securities of the entities covered by this report. Opinions expressed are subject to change without notice. George K. Baum & Company may act as a principal for its own account or as agent for another person, in connection with the sale or purchase of any security which is subject in this report. Competition Just Makes Us Stronger!