1. 0 Presentation prepared for Public Finance Headquarters 1400 Wewatta Street, Suite 800 Denver, CO 80202 (800) 722-1670 Single-Family Financing Essentials, Part 2: Securing the Best Price MRB, Mortgage Market or Both? January 2015 JIM STRETZ Senior Vice President stretz@gkbaum.com

2. 1 Presentation prepared for Who is Doing What? U.S. Bank MS – 3 rd Party Hedge U.S. Bank MS – Self Hedge w/ 3 rd Party Advice U.S. Bank MS – Non TBA Idaho MS – 3 rd Party Hedge Idaho MS – Self Hedge Alabama MS – Self Hedge Alabama MS – 3 rd Party Hedge Self Servicing – Self Hedge Multiple Servicers – Non-TBA Rhode Island Connecticut New Jersey Delaware Maryland Washington, D.C. Self Servicing – Non-TBA

3. 2 Presentation prepared for Reserve Requirements Lower Requirements (0% - 3%) Higher Requirements (5% - 7%) Ratings Rating Higher than Whole Loans with Similar Parity Rating Influenced by PMI Providers & Reserve Investments Risk No exposure to PMI CreditExposure to PMI Providers’ Credit Cash Flow Timing Predictable, Scheduled/Scheduled Less Predicable, Actual/Actual Optimal Structure Lowest Cost Possible with Pass-Through Structure Pass-Through is 50 to 100 bps Higher in Rate Portfolio Data Information Standardized & Available by Third Party Information Produced by HFA and Different from Issuer to Issuer Mortgage Costs Higher Costs with GSE Guaranty & Adverse Market Fees None MRB Cost Considerations M B S Whole Loans Consideration

4. 3 Presentation prepared for HFA Mortgage Market Cost Considerations Different HFA strategies listed from lowest estimated net cost to highest. 1)In-house hedging, using TBA or window 2)In-house hedging, using Broker Dealer as Advisor 3)Hedging using Financial Advisor to run the program 4)Third Party Hedge Provider for a fee less any shared profits on the back-end for benefits received by early delivery, specified pools and CRA motivated investors 5)Third Party Hedge Provider for a set fee Defined: MBS Sale to Third Party or Whole Loan Sale to GSE Window, Hedging Rate Risk in TBA Market or GSE Window Note: In 1 – 3, the HFA takes all the risk.

5. 4 Presentation prepared for MRB or Mortgage Market Comparison using rates as of Jan 5, 2015. Assuming $20 Million Portfolio 4% Ginnie Mae MBS Estimated Net Return after Down Payment & Expense Reimbursement Structure100% PSA200% PSA300% PSA Pass- Through 105.4103.8102.9 Traditional104.3102.7101.7 MBS Sale105.0 Paid Upfront at Sale Mortgage Market Mortgage Revenue Bonds

6. 5 Presentation prepared for 2006 2015 (estimated) Whole Loan306 MBS1829 Mixed316 MCC1433 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.

7. 6 Presentation prepared for HFA Rates as of January 9, 2015 Freddie Mac Primary Mortgage Market Rate 3.73% Rates shown above are for unassisted loans. HFAs that do not have a posted rate on their website include: Arkansas, Hawaii, Indiana, Massachusetts Pennsylvania, and Virginia. (*) denotes HFAs with no difference between the DPA and no DPA rate, (D) denotes a DPA program, (M) an MCC program and (L) a local premium priced DPA program as competition.

8. 7 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%

9. 8 Presentation prepared for Minimize Rate Risk with Third Party No Opportunity with 3 rd Party except forward swaps or TBA TBA & GSE Window Hedge Reserves Reserve Requirements per Indenture Minimal Hedging Balance Sheet Hedging and TBA TBA & GSE Window RevenueAnnuityPaid Upfront Tax StatusTax ExemptTaxable MRB v Mortgage Market Cost Considerations M R BsMortgage Market Considerations

10. 9 Presentation prepared for Fed Absorption of MBSs Produced

11. 10 Presentation prepared for Mortgage Rates and MRBs The Mortgage Market Fed Purchases at Zero (see prior slide)

12. 11 Presentation prepared for Both MRB and Mortgage Markets offer executions that provide excess revenue. With Bond Counsel approval you can hedge rate risk execution with TBA and execute MRB. – Example: Minnesota HFA this week, $60 million pass-through MRB In today’s market, MRB execution forces HFA to use excess revenue for Homebuyer subsidy. Mortgage Market programs can be sponsored by any government entity without financial investment, creating competition. HFA’s must do more than “sponsor” to be competitive. The more the HFA can do in-house – the lower the costs. Non-Economic reasons for MRB Execution include: – Build Assets, Use Volume Cap, Keep Excess Revenues targeted to Homebuyers Summary What’s the Best Execution? It Depends!

13. 12 Presentation prepared for 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. Disclaimer