The IIS Booklet | 2004

The IIS Booklet | 2004

National Association of Local Housing Finance Agencies 2013 Annual Conference Panel: Homeownership Tools in a Historic Low Interest Rate Environment Helen Feinberg Managing Director RBC Capital Markets April 5, 2013 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 1934. 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 for the purpose of considering the transaction or transactions contemplated herein. 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 RBCCMs 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 CMs 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.

TBA Market 3 RBC Capital Markets TBA Program Lower Cost, Increased Flexibility Overview: RBCCM bankers have worked with RBCs MBS desk to offer a reduced cost TBA program for HFAs with liquid assets RBCCM has created TBA programs for seven issuers to date Forward trades (GNMA I or GNMA II) can be structured for 30, 60 or 90 day delivery at any time and for any amount Variance for delivering MBS may be customized. RBC offers variability ranging from +/- 20% and +/- 30% to 100% RBCs TBA program differs from other programs in that the issuer retains ownership of loans until MBS are sold to RBC. The Issuer may choose to sell on a forward basis or wait until MBS are available and sell in the spot market. Other programs purchase all loans from the point of reservation (changing the price each day) and have rights to specific loans. In addition, sponsors retain a right to collect penalties from lenders under certain circumstances. Due to the structure, RBCs program is more flexible in that it allows an issuer to easily move between bond funding and TBA MBS Sale funding Considerations: Allows issuers to maintain control of their program i.e. the issuer establishes mortgage rates, decides when and how to hedge and controls lender relations Required Issuer capital is determined based on the maximum loans that may be reserved before a trade/hedge is executed RBC is a financially strong trading partner due to our Aa3/AA-/AA ratings. Global Finance Magazine ranked RBC as North Americas safest bank from 2009 - 2012 4

Municipal Pass-Through Bond 5 Summary of the HFA MBS Pass-Through Bond The parties to a housing bond transaction and the flow of funds are detailed below. 1st Time Homebuyer, MRB Qualified Home Buyer MCC, Refinance, Other Mortgage Loan Funding Mortgage Originator Mortgage Loan Funding Bond Proceeds Bond Sale / Purchase Contract In t Bond Underwriter

al id u Re s Seller / Servicer Creates GNMA or FNMA MBS er es t Mortgage Payments Housing Finance Agency Structure & market Pass-Through Bond Bond Proceeds MBS Payments Distribution / Official Statement Pass-Through Bond Holder Bond Trustee 6

Principal & Interest Pro rata principal and interest passed through to investors HFA MBS Pass-Through Structure Characteristics Bonds: Backed by GNMA and/or FNMA collateral Single 30 year term bond No sinking fund amortization Can be sold at par or at a premium Can be sold Tax-Exempt or Taxable $1.00 denomination at closing, $0.01 thereafter; DTC eligible with no redemption notice Par of Mortgage Backed Securities (MBSs) equal to par of the bonds No Debt Service Reserve Fund; Lag and trustee fees must be financed Aaa / AA+ / AAA rating from Moody's, S&P, or Fitch respectively Mortgages: MBS principal received during the month passed through to bond holders on first day of following month Full MBS portfolio delivered in advance for refunding and at closing for new money All repayments and prepayments call bonds on 1st of each month 7 HFA MBS Pass-Through Bond Benefits and Concerns Benefits: Interest rate savings as compared to traditional structure (3.375% bond yield) 10 year par call Public sale within existing or stand-alone Indenture Blind pool at pricing, defined pool at closing Up to 60 days forward delivery

No Negative Arbitrage (no GICs) Facilitates the receipt of Zero Participation interest HFA receives income over time (I/O strip) Public sale facilitates liquidity and secondary market growth Concerns: Interest rate risk from loan reservation to bond pricing Blending down excess spread can be complicated Timing of pricing and closing 8 Building Pass-Through Bond Liquidity $40,863,097 $37,756,249 $200,000,000 $25,000,000 $49,846,579 Illinois Housing Development Authority Iowa Finance Authority Minnesota Housing Finance Agency New Mexico Mortgage Finance Authority

Washington State Housing Finance Commission Series 2012A 2012 Series 1(Taxable) 2013 Series 1(Tax-Exempt) 2012 Series A & B 2013 Series A & B 2013 Series A 2012 Series A 2013 Series A 1st taxable Pass-Through issue Taxable NIBP refunding; tax-exempt new money issue Four offerings, including 1st Pass-Through bond issue First Pass-Through bond sold at premium Private placed thru FHLB 100% of loans originated 100% loans originated

Partially originated MBS pool 100% loans originated 100% loans originated 81% GNMA MBS 19% FNMA MBS 90% GNMA MBS 10% FNMA MBS First offering 100% GNMA, most recently 65% / 35% 100% GNMA 99.7% GNMA MBS 0.3% FNMA MBS Portfolio included MCC and other non-conforming loans Portfolio included all taxexempt MRB eligible loans Portfolio included all taxexempt MRB eligible loans Portfolio included all taxexempt MRB eligible loans Portfolio included all taxexempt MRB eligible loans Over spread on alternative

tax-exempt offering; need for subsequent issue averted Excess spread retained on taxable refunding Conforming MBS loans on balance sheet Premium dollars funded DPA Excess spread retained on taxable refunding 11/05/12: 2.625% @ Par 12/05/12: 2.15% @ Par (T/E) 12/12/12: 2.30% @ Par (Tax) 07/31/12: 2.60% @ Par 10/03/12: 2.25% @ Par 01/09/13: 2.35% @ Par 12/12/12: 2.60% @ 104.00, 2.16% yield 09/28/12: 2.19% @ Par 01/22/13: 2.45% @ Par Source: Thomson Reuters 9

Modified Pass-through Structure applied to Local HFA Bond Transaction $8,270,000 ORANGE COUNTY HOUSING FINANCE AUTHORITY HOMEOWNER MORTGAGE REVENUE REFUNDING BONDS SERIES 2013A (TAXABLE) Issuer had outstanding New Issue Bond Program bonds @ 3.48% Modified Pass-Through Structure refunded prior bonds @ 2.625% Bonds issued on a Taxable basis to allow issuer to retain excess spread Underlying MBS GNMA Collateral carried 4.28% weighted average pass-thru rate (4.78% weighted average mortgage rate) 10 HFA MBS Pass-Through Bond Investor Profile 40 different investors have participated thus far: 32% - 27 investors on tax-exempt 68% - 13 investors on taxable Many of the tax-exempt buyers are participating based on the attractiveness of the tax-equivalent yield. Taxable Crossover For community banks, CRA mandate makes this product attractive.

Traditional Tax exempt 20% Many of the buyers on the pure passthrough structure are now participating on the step-in structure as well. 46% 30% 3% Secondary market liquidity has been a major topic of discussion and continues to improve with each subsequent issuance. 1% Bank 11 Insurance Co. Money Mngr. Corporation CRA

Recently Viewed Presentations

  • Going for the 3 Increases: Increase in Health, Increase in ...

    Going for the 3 Increases: Increase in Health, Increase in ...

    Times New Roman Arial Wingdings Capsules Nutritional Guidelines Over the Years Going for the 3 Increases: Increase in Health, Increase in Happiness & Increase in Energy 1916 - Caroline Hunt Diet Five Food Groups 1930s - H.K. Stiebeling Diet 12...
  • Land Empires in the Age of Imperialism, 1800-1870

    Land Empires in the Age of Imperialism, 1800-1870

    A decline in the Ottoman Empire. 1500's Ottoman Empire is the strongest in the world. Islamic Law (Shari'a) regulates daily life. Ottomans begin to lose grip on trade (Indian Ocean)
  • Factors of Income: A Machine Learning Analysis of

    Factors of Income: A Machine Learning Analysis of

    By Jordan Evans-Kaplan. Econ 490: Machine Learning. ... A Decision-Tree Hybrid.", Proceedings of the Second International Conference on Knowledge Discovery and Data Mining. Landmark paper which began the study into Census Income classification.
  • Time Period U.S. Troops in Vietnam U.S. Personnel

    Time Period U.S. Troops in Vietnam U.S. Personnel

    The frank answer is we don't know what's going on out there. The signs I see coming through the cables are disturbing signs—poor morale in Vietnamese forces, poor morale in the armed forces, disunity, a tremendous amount of coup planning...
  • Place Title Here - Secretary of State of Texas

    Place Title Here - Secretary of State of Texas

    Hart/Programming Your Ballot. Don't stress… If you are a BPS customer and you have questions or need assistance, call your BPS consultant: April, Lesya or Abra. If you are DIY and you have staff changes, get training! Contact your Sales...
  • Chapter 11

    Chapter 11

    Use a ladder belt or a leg lock to secure yourself to the ladder. Use designed and certified belts. Utility belts should not be used. ... Truss block. Tie rod. Tip. Butt. Butt spurs. Butt plate. Roof hooks. Heat sensor...
  • Theoretical Development of Fast Fourier Series

    Theoretical Development of Fast Fourier Series

    Powerpoint presentation on the Theoretical Development of Fast Fourier Series
  • Ketamine Administration for Excited Delirium

    Ketamine Administration for Excited Delirium

    EMS faces all types of pain and can administer medications to help relieve physical pain. Challenge of Treating Pain. ... Limited non-narcotic parenteral agents. Treating pain is humane. Goals of care. Adequate relief of pain. Safe medication administration.