Mountain Plains Housing Summit 2016 Insights and Trends

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

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Volume of Housing Bonds Issued 35 $31.8B $31.6B 30 $24.5B 25 20 $18.3B ($Billion) $16.7B $14.2B 15 $13.2B $12.2B (Projected) $10.9B $10.4B $10.0B $9.3B 10 5 $3.9B 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD 422 Series 909 Series 988 Series 1,010 Series 567 Series 296 Series 331 Series 338 Series 324 Series 401 Series 541 Series 114 Series Sources: Thompson Financial RBC Capital Markets 3

Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD 2006 2007 Pre-Financial Crisis 7.00 6.00 5.00 (%) 4.00 3.00 2.00 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 FNMA Mortgage Commit. Rate 30-Yr MMD (Muni Bond Yld) 30-Yr U.S. Tsry Yld Sources: Bloomberg RBC Capital Markets 4

Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD 2008 2010 During Financial Crisis 7.00 6.00 5.00 (%) 4.00 3.00 2.00 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 FNMA Mortgage Commit. Rate 30-Yr MMD (Muni Bond Yld) 30-Yr U.S. Tsry Yld Sources: Bloomberg RBC Capital Markets 5

Historical FNMA Rates, 30-Yr Treasury, 30-Yr MMD 7.00 6.00 5.00 (%) 4.00 3.00 2.00 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 FNMA Mortgage Commit. Rate 30-Yr MMD (Muni Bond Yld) 30-Yr U.S. Tsry Yld Sources: Bloomberg RBC Capital Markets 6

Sample Single Family Financing Options $102 ~ $108 Price (3.50% - 5.00% FHA Loan/3.00% - 4.50% GNMA) TBA (MBS) ~ 3.00% Bond Yield Traditional 30-Year Level Debt ~ 2.75% Bond Yield Pass-through Bonds (MBS) ~ 2.55% Bond Yield (30% swapped) Variable Rate Bonds ~ 2.50% Bond Yield (25% excess parity) Overcollateralization Economic Refunding of prior bonds Sources: RBC Capital Markets RBC Capital Markets 7

State HFAs Historical Balance Sheets Overview: 2005 2015 Debt Balances Loan Portfolio Balances $2,500 $3,000 $2,500 $2,000 $2,000 $1,500 ($mil) ($mil) $1,500 $1,000 $1,000 $500 $500 $0 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average of All State HFAs Average of All State HFAs Debt Balance Changes (Yr-Over-Yr) Loan Portfolio Balance Changes (Yr-Over-Yr) 20.0% 20.0% 15.0% 15.0% 10.0% 10.0% 5.0% 5.0% 0.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -5.0% -5.0% -10.0% -10.0% Average of All State HFAs Average of All State HFAs Sources: Fitch - STATE HOUSING FINANCE AGENCIES Peer Study, FIVE-YEAR HISTORY | September 2015 RBC Capital Markets 8

Housing Trends Real Home Prices (1989 2016) Robert Shiller s Irrational Exuberance High 1Q 2005 Low 1Q 2012 1Q 2016 = 2Q 2008 = 2Q 2004 Percentage of Homeownership Since 1965 70 69 Peak = 69.2% 2004 1Q 2016 = 63.8% 68 67 66 65 64 63 62 61 60 1965 1975 1985 1995 2005 2015 Sources: www.irrationalexuberance.com; US Census Bureau RBC Capital Markets 9

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 1995-2015 RBC Capital Markets 10

Facts about Millennials Most Diverse 42% identify with race/ethnicity other than white, vs. 21% of Baby Boomers 15% are foreign born Most Educated 61% have attended college, vs. 46% of Baby Boomers Will Contend with Starting their Careers during Historic Downturn for Years to Come 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) Tend to Get Married Later than Previous Generations Average age of first marriage in 2013: 29.0 men and 26.6 women vs. 22.9 men and 20.3 women in 1950 In 2013 30% of 20 34 year olds were married (vs. 77% in 1960) Less likely to be Homeowners than Young Adults of Prior 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) Sources: 15 Economic Fact About Millennials The Council of Economic Advisors, Office of the President, October 2014 RBC Capital Markets 11

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