Morgan Keegan

NIBP Successes and Challenges in the Municipal Housing Market

May 19, 2011

NALHFA 2011 Educational Conference

Chris Spelbring, First Vice President951 East Byrd Street, Suite 930

Richmond, Virginia 23059Phone: 804.225.1161

chris.spelbring@morgankeegan.com

Morgan Keegan2

The Urban Residential Finance Authority of the City of Atlanta (“URFA”) issued $25 million of Escrow Bonds in January of 2010.

A mortgage-backed security warehousing facility was secured to facilitate the program.

URFA intended to undertake a single conversion in late 2010 and had originated $19.4 million of loans based on the original program parameters.

Upon program extension to the end of 2011, URFA (1) submitted a ceiling rate request that significantly lowered the conversion bond and program mortgage rate from 5.00% to 4.375% (2) secured a new warehousing facility that terminates at the end of 2011 and (3) undertook actions to sell the existing mortgage production.

Selling the mortgage production in lieu of delivering the collateral as security for a bond conversion allowed URFA to open up a like amount of capacity for new loan production.

Opportunistic mortgage loan sales have provided significant economic benefits to URFA.

If URFA fully commits its $25 million allocation then its total mortgage loan production related to NIBP will total $44.4 million, effectively doubling the original goal.

Successful NIBP Program Example

Morgan Keegan3

If an HFA’s NIBP program has been fully utilized, the HFA will need to undertake actions to convert the NIBP bonds. Timing of the conversion will depend on a number of factors including:

1. Availability of collateral for transfer into trust estate 2. Profit generated by warehousing of mortgage backed securities3. Ongoing issuer fees4. Confirm that the closing date is available

If an HFA’s NIBP program has not been fully utilized, the HFA will still need to undertake actions to convert the NIBP bonds. Each HFA should consider the items listed above as well as the factors detailed below:

1. Determine optimal conversion amount based on existing and future mortgage production2. Factor in the Short-Term Rate and three month period between the Release Date and the

Conversion Date when establishing final file submission and final loan purchase dates

NIBP Considerations as December 31, 2011 Approaches

Morgan Keegan4

Current Market Challenges

Tax-exempt, bond funded mortgage rates are considerably higher than those available through traditional avenues.

Negative arbitrage persists as short-term investment rates continue to remain at historic lows.

4.0000

4.5000

5.0000

5.5000

6.0000

6.5000

7.0000 GNMA Current Coupon (Adjusted)

'AA' Tax-Exempt Housing Bonds Mortgage Rate

Morgan Keegan5

Continued dialogue with U.S. Department of Treasury. Seek funding mechanisms that will deliver results similar to NIBP.

Continued monitoring of tax-exempt markets and bond structuring opportunities in an effort to deliver a competitive mortgage product.

Non-bond related mortgage origination opportunities.

Mortgage credit certificates.

2012 and Beyond