1. Mountain Plains Housing Summit 2016
Capital Markets
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Mountain Plains Housing Summit 2016
Presented by: Mina Choo
RBC Capital Markets
May 4, 2016

2. Disclaimer
RBC Capital Markets, LLC (“RBC CM”) is providing the information contained in this document for discussion purposes only and not in connection with RBC CM serving as Underwriter, Investment Banker, municipal advisor, financial advisor or fiduciary to a financial transaction participant or any other person or entity. RBC CM will not have any duties or liability to any person or entity in connection with the information being provided herein. The information provided is not intended to be and should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of The financial transaction participants should consult with its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it deems appropriate.
This presentation was prepared exclusively for the benefit of and internal use by the recipient. This presentation is confidential and proprietary to RBC Capital Markets, LLC (“RBC CM”) and may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without RBCCM’s express written consent.
By acceptance of these materials, and notwithstanding any other express or implied agreement, arrangement, or understanding to the contrary, RBC CM, its affiliates and the recipient agree that the recipient (and its employees, representatives, and other agents) may disclose to any and all persons, without limitation of any kind from the commencement of discussions, the tax treatment, structure or strategy of the transaction and any fact that may be relevant to understanding such treatment, structure or strategy, and all materials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment, structure, or strategy.
The information and any analyses contained in this presentation are taken from, or based upon, information obtained from the recipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, and cannot be assured by RBC CM. The information and any analyses in these materials reflect prevailing conditions and RBC CM’s views as of this date, all of which are subject to change.
To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performance prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printed presentation is incomplete without reference to the oral presentation or other written materials that supplement it.
IRS Circular 230 Disclosure: RBC CM and its affiliates do not provide tax advice and nothing contained herein should be construed as tax advice. Any discussion of U.S. tax matters contained herein (including any attachments) (i) was not intended or written to be used, and cannot be used, by you for the purpose of avoiding tax penalties; and (ii) was written in connection with the promotion or marketing of the matters addressed herein. Accordingly, you should seek advice based upon your particular circumstances from an independent tax advisor.

3. Volume of Housing Bonds Issued
Capital Markets
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Volume of Housing Bonds Issued
$12.2B (Projected)
909
Series
988
Series
1,010
Series
567
Series
296
Series
331
Series
338
Series
324
Series
422
Series
401
Series
541
Series
114
Series
Sources: Thompson Financial

4. Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
Capital Markets
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Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
2006 – 2007 Pre-Financial Crisis
Sources: Bloomberg

5. Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
Capital Markets
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Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
2008 – 2010 During Financial Crisis
Sources: Bloomberg

6. Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
Capital Markets
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Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD
Sources: Bloomberg

7. Sample Single Family Financing Options
TBA (MBS)
Traditional 30-Year Level Debt
Pass-through Bonds (MBS)
Variable Rate Bonds
Overcollateralization
Economic Refunding of prior bonds
$102 ~ $108 Price (3.50% % FHA Loan/3.00% % GNMA)
~ 3.00% Bond Yield
~ 2.75% Bond Yield
~ 2.55% Bond Yield (30% swapped)
~ 2.50% Bond Yield (25% excess parity)
Sources: RBC Capital Markets

8. State HFAs Historical Balance Sheets Overview: 2005 – 2015
Capital Markets
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State HFAs Historical Balance Sheets Overview: 2005 – 2015
Debt Balances
Loan Portfolio Balances
Debt Balance Changes (Yr-Over-Yr)
Loan Portfolio Balance Changes (Yr-Over-Yr)
Sources: Fitch - STATE HOUSING FINANCE AGENCIES Peer Study, FIVE-YEAR HISTORY | September 2015

9. Housing Trends
Real Home Prices (1989 – 2016) Robert Shiller’s Irrational Exuberance
High – 1Q 2005
Low – 1Q 2012
1Q 2016 = 2Q 2008 = 2Q 2004
Peak = 69.2% 2004
1Q 2016 = 63.8%
Sources: US Census Bureau

10. Influence of Millennials (born 1981 – 1997)
Millennials Are Now The Largest Generation in the US Labor Force
Millennials Have Surpassed Baby Boomers as Largest Generation (75.4mm versus 74.9mm)
Projected Population by Generation 2015 – 2050
U.S. Labor Force by Generation

11. Facts about Millennials
42% identify with race/ethnicity other than white, vs. 21% of Baby Boomers
15% are foreign born
Most Diverse
61% have attended college, vs. 46% of Baby Boomers
Most Educated
Unemployment rate for 18–34 year olds peaked at over 13% in 2010 (down to 8.6% in 09/2014)
Usually there is a lag for youngest employees (who compete with experience)
Those entering workforce during a recession start with lower salaries (which persists for about 15 years)
Will Contend with Starting their Careers during Historic Downturn for Years to Come
Average age of first marriage in 2013: 29.0 men and 26.6 women vs men and 20.3 women in 1950
In % of 20 – 34 year olds were married (vs. 77% in 1960)
Tend to Get Married Later than Previous Generations
31% live with their parents (2014) vs. 28% in 2007
Corresponding decrease in the rate of household formation
Tighter lending environment (younger population has lower credit scores, 67% under 680 FICO)
Less likely to be Homeowners than Young Adults of Prior Generations
Sources: 15 Economic Fact About Millennials – The Council of Economic Advisors, Office of the President, October 2014

12. Disclosures of RBC Capital Markets, LLC and Royal Bank of Canada
Royal Bank of Canada will act in the capacity of an arm's-length contractual counterparty to you in connection with any swap, whose financial and other interests differ from yours, and not in any other capacity.  You should assume that each of the Royal Bank of Canada and RBC Capital Markets, LLC, (“RBC CM”) has an economic incentive for the Royal Bank of Canada to be a counterparty to any swap with you.  Neither RBC CM nor the Royal Bank of Canada owes you a fiduciary duty. Neither is required to act in your best interests nor without regard for its own financial and other interests. 
Notwithstanding the foregoing, the Royal Bank of Canada is required to disclose to you that it, or its affiliates, may engage in business with you in certain other capacities in other transactions, including without limitation, as underwriter, placement agent, remarketing agent, credit or liquidity facility provider or trustee in respect of  your bonds or other obligations; as provider of brokerage, banking or similar services in respect of your funds or investments; or as financial, investment or municipal advisor.   There are important differences in the nature of our relationship when we act as counterparty to swaps, as distinguished from the various other capacities in which we or our affiliates may act.  The duties and standards to which we are subject when acting in such other capacities may differ materially from those that apply when we act as counterparty to a swap, and may (or may not) afford substantially greater protections to you. When we act in a particular capacity, we shall have only the duties and responsibilities that pertain specifically to that capacity Royal Bank of Canada or RBC CM may, in connection with any swap, and prior to its execution, provide you with supplemental disclosure as to the additional capacities in which it, or any of its affiliates, engages in business with you, if applicable, and the material differences, if any, between any such capacity and the role of Royal Bank of Canada as swap dealer in connection with the swap and the material incentives and conflicts of interest that it may have in connection with a particular swap.
Compensation of RBC CM.  In the event that you elect to proceed with a swap with the Royal Bank of Canada as counterparty, RBC CM, as intermediary, expects to receive a payment or credit from the Royal Bank of Canada, its affiliate, which credit or payment may be substantial.