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July Board Meeting To be held at the offices of

Texas State Affordable Housing Corporation 2200 East Martin Luther King Jr. Blvd.

Austin, TX 78702

Thursday, July 9, 2015 10:30 a.m.

BOARD MEETING TEXAS STATE AFFORDABLE HOUSING CORPORATION

To be held at the offices of Texas State Affordable Housing Corporation

2200 East Martin Luther King Jr. Blvd Austin, Texas 78702

July 9, 2015 at 10:30 am CALL TO ORDER, ROLL CALL Bob Jones CERTIFICATION OF QUORUM Chair The Board of Directors of Texas State Affordable Housing Corporation will meet to consider and possibly act on the following: PUBLIC COMMENT PRESIDENT’S REPORT David Long

Tab A: Homeownership Finance Report Tab B: Development Finance Report Tab C: Legislative Report on the 84th Legislative Session Tab D: Monthly Budget and Investment Reports

ACTION ITEMS IN OPEN MEETING: Tab 1 Presentation, Discussion and Possible Approval of Minutes of the Board Meeting held on June 11, 2015. Tab 2 Presentation, Discussion and Possible Approval of the Texas State Affordable Housing Corporation’s 2016

Investment Policy. Tab 3 Presentation, Discussion and Possible Approval of the Texas State Affordable Housing Corporation’s 2016 Broker

Listing. Tab 4 Presentation, Discussion and Possible Approval of a Resolution Regarding the Submission of one or more

Applications for Allocation of Private Activity Bonds, Notice of Intention to Issue Bonds and State Bond Application to the Texas Bond Review Board and Declaration of Expectation to Reimburse Expenditures with Proceeds of Future Debt for the Woodside Village Apartments Project.

Tab 5 Presentation, Discussion and Possible Approval of the Corporation’s Loan Program Policies for the Texas Housing

Impact Fund. CLOSED MEETING: Consultation with legal counsel on legal matters – Texas Government Code § 551.071 Deliberation regarding purchase, exchange, lease, or value of real property – Texas Government Code § 551.072 Deliberation regarding prospective gift or donation to the state or Texas State Affordable Housing Corporation – Texas Government Code § 551.073 Personnel Matters – Texas Government Code § 551.074 Implementation of security personnel or devices – Texas Government Code § 551.076 Other matters authorized under the Texas Government Code OPEN MEETING: Action in Open Meeting on Items Discussed in Closed Meeting ADJOURN: Individuals who require auxiliary aids or services for this meeting should contact Laura Ross, ADA Responsible Employee, at 512-477-3560 or Relay Texas at 1-800-735-2989 at least two days before the meeting so that the appropriate arrangements can be made. Texas State Affordable Housing Corporation reserves the right to recess this meeting (without adjourning) and convene at a later stated time, if and to the extent allowed by law. If Texas State Affordable Housing Corporation adjourns this meeting and reconvenes at a later time, the later meeting will be held in the same location as this meeting. Texas State Affordable Housing Corporation also reserves the right to proceed into a closed meeting during the meeting in accordance with the Open Meetings Act, Chapter 551 of the Texas Government Code. If permitted by the Open Meetings Act, Chapter 551 of the Texas Government Code, any item on this Agenda to be discussed in open meeting may also be discussed by the Board (and any other authorized persons) in closed meeting.

PRESIDENT’S REPORT

Homeownership Program with Downpayment AssistanceJanuary 1, 2015 to June 30, 2015

Month Originated # of Loans % Total At a Glance January $11,182,199 93 11% Total Amount Originated $106,984,717February $15,040,357 124 14% Average Annual Income $42,651March $16,553,233 139 16% Average Purchase Price $126,141April $18,146,411 146 17% Average Loan Amount $122,971May $21,353,717 170 20% Average Household Size 2June $24,708,800 198 23% Average Interest Rate 4.881%Totals $106,984,717 870 100% Program %

Home Sweet Texas (80% AMFI) 62.99%Lender Originated # of Loans % Total Homes for Texas Heroes 37.01%

PrimeLending $11,043,079 95 11% Teacher 24.02%Cornerstone Home Lending, Inc. $10,907,800 90 10% Peace Officer 3.10%NTFN, Inc. $10,596,224 85 10% Corrections Officer 2.76%Everett Financial, dba Supreme Lending $9,161,592 64 7% Fire Fighter 2.30%Guild Mortgage Corporation $5,977,351 52 6% Veteran 1.95%Fairway Independent Mortgage Corporation $4,862,913 45 5% Teacher's Aide 0.46%First Community Mortgage $3,819,868 36 4% Professional Nursing Faculty 0.46%WR Starkey Mortgage, LLP $3,686,159 32 4% EMS Personnel 0.46%Nations Reliable Lending, LLC $3,181,305 23 3% School Counselor 0.46%Highlands Residential Mortgage $3,112,306 23 3% County Jailer 0.34%Gateway Mortgage Group, LLC $2,986,358 24 3% School Nurse 0.23%SFMC, LP (Service First Mortgage) $2,878,292 24 3% Public Security Officer 0.23%Georgetown Mortgage, LLC $2,659,578 18 2% Allied Health Faculty 0.23%Wells Fargo Bank, N.A. $2,040,760 21 2% School Librarian 0.00%Hometrust Mortgage Company $1,892,561 15 2% New/Existing HomeDHI Mortgage Company, Ltd. $1,850,182 13 1% Existing 87.82%Academy Mortgage Corporation $1,668,367 15 2% New 12.18%Primary Residential Mortgage, Inc. $1,645,689 14 2% Type of LoanRocky Mountain Mortgage Company $1,640,726 14 2% FHA Purchase 84.71%Cendera Funding, Inc. $1,446,992 12 1% Conventional Purchase 11.72%Castle and Cooke Mortgage $1,419,223 11 1% VA Purchase 2.30%Ark La Tex Financial (Benchmark Mtg.) $1,417,657 11 1% USDA RHS Purchase 1.03%Northstar Bank Mortgage $1,232,683 9 1% FHA Refinance 0.23%SWBC Mortgage Corporation $1,217,997 11 1% EthnicityPulte Mortgage LLC $1,211,940 8 1% White 44.46%Houstonian Mortgage Group, Inc. $1,140,050 9 1% Hispanic 37.89%loanDepot $979,524 6 1% Black 15.22%Aspire Financial, Inc. $879,885 6 1% Asian/Pacific Islander 1.19%Legacy Mortgage, LLC $725,829 7 1% Not Defined 0.74%Network Funding, LP $632,893 4 0% American Indian/Alaskan Native 0.32%Home Community Mortgage $585,734 4 0% Other 0.18%Interlinc Mortgage Services, LLC $568,019 5 1% Top 20 Originating Counties # of LoansAffiliated Bank $549,848 5 1% Tarrant 102Stonegate Mortgage Corporation $534,340 5 1% Harris 98Bay Equity LLC $502,849 4 0% Dallas 92First National Bank $464,627 5 1% El Paso 92V.I.P. Independent Mortgage, Inc. $428,101 3 0% Bexar 87Community Trust Bank $398,546 3 0% Bell 38Open Mortgage LLC $391,047 3 0% Travis 29American Financial Network, Inc. $389,808 3 0% Cameron 28Evolve Bank & Trust $378,025 2 0% Denton 28First California Mortgage Co (FirstCal) $320,907 3 0% Hidalgo 23Universal American Mortgage Company, LLC $307,958 2 0% Williamson 20Loan Simple, Inc. $251,808 2 0% Collin 17First Choice Loan Services, Inc. $250,355 1 0% Montgomery 13Resmac, Inc. $248,317 2 0% Webb 12New American Funding (Broker Solutions) $240,413 2 0% Johnson 11K Hovnanian American Mortgage, LLC $190,018 1 0% Grayson 11Texas Bank Mortgage Company $183,115 2 0% McLennan 11Sente Mortgage Inc. $171,830 1 0% Galveston 10Fidelity Bank $169,767 2 0% Fort Bend 10Residential Bancorp $167,226 1 0% Brazoria 9Willow Bend Mortgage Company, LLC $163,975 1 0%Movement Mortgage, LLC $163,015 2 0%

Homeownership Program with Downpayment AssistanceJanuary 1, 2015 to June 30, 2015

Lender Originated # of Loans % TotalBancorpSouth Bank $156,750 1 0%Stearns Lending, Inc. $137,464 1 0%The Home Lending Group, LLC $136,383 1 0%IberiaBank Mortgage Company $129,200 1 0%New Penn Financial, LLC $127,645 1 0%1st Preference Mortgage Corporation $104,900 1 0%City Bank Mortgage $93,229 1 0%Summit Funding, Inc. $91,315 1 0%The Lending Partners, LLC $72,400 1 0%Total Committed $106,984,717 870 100%

2014A Mortgage Credit Certificate ProgramMarch 17, 2014 to June 30, 2015

Month Originated # of Loans % Total At a Glance March 14 $1,758,328 14 3% Total Amount Originated $62,770,758April 14 $2,977,835 22 5% Average Annual Income $42,429May 14 $3,500,608 25 5% Average Purchase Price $137,152June 14 $4,480,109 35 7% Average Loan Amount $132,428July 14 $4,414,724 34 7% Average Household Size 2August 14 $3,646,487 28 6% Average Interest Rate 4.570September 14 $5,061,803 39 8% Program %October 14 $5,255,449 41 9% Home Sweet Texas (80% AMFI) 69.62%November 14 $3,739,450 28 6% Homes for Texas Heroes 30.38%December 14 $2,603,788 19 4% Teacher 18.99%January 15 $2,989,486 22 5% Peace Officer 2.74%February 15 $3,877,794 28 6% Corrections Officer 2.53%March 15 $3,975,218 31 7% Veteran 2.53%April 15 $6,122,259 46 10% Fire Fighter 1.69%May 15 $4,440,552 33 7% Professional Nursing Faculty 0.84%June 15 $3,926,868 29 6% EMS Personnel 0.42%

Totals $62,770,758 474 100% Teacher's Aide 0.42%Public Security Officer 0.21%

Lender Originated # of Loans % Total School Counselor 0.00%Cornerstone Home Lending, Inc. $10,298,244 77 16% Allied Health Faculty 0.00%Everett Financial, dba Supreme Lending $4,973,678 34 7% County Jailer 0.00%DHI Mortgage Company, Ltd. $3,595,522 24 5% School Librarian 0.00%WR Starkey Mortgage, LLP $3,242,463 29 6% School Nurse 0.00%PrimeLending $3,141,545 22 5% New/Existing HomeGuild Mortgage Corporation $2,778,313 23 5% Existing 71.31%Fairway Independent Mortgage Corporation $2,118,775 19 4% New 28.69%Wells Fargo Bank, N.A. $2,110,457 18 4% Type of LoanHome Community Mortgage $2,021,729 13 3% FHA Purchase 75.74%NTFN, Inc. $2,001,128 14 3% Conventional Purchase 11.39%Northstar Bank Mortgage $1,959,990 15 3% USDA RHS Purchase 9.70%Nations Reliable Lending, LLC $1,781,977 11 2% VA Purchase 3.16%Houstonian Mortgage Group, Inc. $1,531,533 13 3% EthnicitySFMC, LP (Service First Mortgage) $1,517,915 12 3% White 39.85%Universal American Mortgage Company, LLC $1,436,719 10 2% Hispanic 35.03%Gateway Mortgage Group, LLC $1,189,315 9 2% Black 19.82%Pulte Mortgage LLC $1,187,637 8 2% Asian/Pacific Islander 3.32%Highlands Residential Mortgage $1,068,770 8 2% Not Defined 1.38%Sun West Mortgage Company, Inc. $1,012,066 7 1% American Indian/Alaskan Native 0.31%Network Funding, LP $968,764 7 1% Other 0.29%Open Mortgage LLC $878,460 6 1% Top 20 Originating Counties # of LoansInterlinc Mortgage Services, LLC $874,751 6 1% Harris 112Primary Residential Mortgage, Inc. $744,412 7 1% Dallas 60Georgetown Mortgage, LLC $715,659 6 1% Tarrant 42First California Mortgage Co (FirstCal) $700,896 7 1% Bexar 41Sente Mortgage Inc. $669,160 5 1% Travis 38Hometrust Mortgage Company $548,823 4 1% Williamson 24Republic State Mortgage Co. $531,518 4 1% Collin 18Aspire Financial, Inc. $524,324 4 1% Fort Bend 17Affiliated Bank $523,939 5 1% Grayson 11SWBC Mortgage Corporation $483,894 3 1% Hays 11Nationstar Mortgage LLC $469,762 3 1% Denton 10Texas Bank Mortgage Company $459,427 4 1% Bell 9Movement Mortgage, LLC $399,396 4 1% Cameron 8Academy Mortgage Corporation $365,485 2 0% El Paso 7First Choice Loan Services, Inc. $293,027 3 1% McLennan 5American Financial Network, Inc. $285,728 2 0% Hidalgo 5New American Funding (Broker Solutions) $280,798 2 0% Ellis 5Cendera Funding, Inc. $274,829 2 0% Webb 5Castle and Cooke Mortgage $260,409 2 0% Comal 4Wallick and Volk, Inc. $248,660 2 0% Bastrop 4BancorpSouth Bank $248,572 2 0%

2014A Mortgage Credit Certificate ProgramMarch 17, 2014 to June 30, 2015

Lender Originated # of Loans % TotalBank of America, N.A. $236,624 3 1%W.J. Bradley Mortgage Capital, LLC $226,716 2 0%Bay Equity LLC $225,833 2 0%loanDepot $182,460 1 0%The Home Lending Group, LLC $180,175 1 0%Palm Lending LLC $177,175 1 0%First National Bank $154,106 1 0%Community Trust Bank $152,618 1 0%The Lending Partners, LLC $151,210 1 0%Willow Bend Mortgage Company, LLC $135,050 1 0%One Mortgage, Inc. $115,862 1 0%Legacy Mortgage, LLC $114,460 1 0%Total Committed $62,770,758 474 100%

Texas State Affordable Housing Corporation Development Finance Programs Report

July 2015

Affordable Communities of Texas Program Closings on NSP properties are picking up, with two properties sold over the past month, and six more under contract. Meanwhile, closings on Veteran properties are slowing down. Two properties were sold last month, and one property is currently under contract. Staff is preparing the final donated home for a disabled veteran in Killeen. The donation event is tentatively scheduled for early August. Staff did attend the donation of a home to a disabled veteran in Greenville, Texas on July 1st. The home was renovated by our partners Tarrant County Housing Partnership and Brooke Community Development. The property was owned by Tarrant County Housing Partnership, while the Corporation provided funding and technical support. With the infusion of $500,000 from Texas Community Bank, the ACT program is also preparing a number of redevelopment plans for properties already in our portfolio, as well as seeking new acquisitions, specifically in Laredo and Del Rio. Staff will be visiting the Laredo area on July 8th to meet with City officials and local partners to begin the process of identifying key neighborhoods and potential acquisitions. Here is an update on our current portfolio.

Program Portfolio as of 6/1/15 Acquired Sold Current

Portfolio Current

Portfolio Value ACT Land Bank 84 1 1 84 $1,309,854.67 ACT Land Trust 60 0 0 60 $650,000.00 Texas NSP 253 0 2 251 $4,755,438.66 Veteran's Initiative 12 0 2 10 $759,928.00 Totals 409 1 5 405 $7,475,221.33 Lending Programs Staff will be presenting our proposed draft policies for the Texas Housing Impact Fund. This is the first rebranding of our lending program since 2008. Multifamily Bond Programs Staff will be discussing the potential approval of a resolution to induce bonds for the Woodside Village Apartments. A project summary and resolution are included in the board book.

84th Legislative Session TSAHC Bills of Interest

All of the bills listed have been passed and signed by the Governor with an effective date of 9/1/15 unless otherwise noted. None of the bills have a material impact on TSAHC or TSAHC’s programs. HOMEBUYER ASSISTANCE HB 1428 by Raymond – The Homebuyer Assistance Program provides low income persons with disabilities mortgage down payment assistance through the Persons with Disabilities (PWD) set aside. Funding for the PWD set aside has been unreliable. HB 1428 creates a pre-approval process to prevent individuals from losing money and a home in the case of absent funding at closing time. MORTGAGE LICENSING REQUIREMENTS FOR SELF-HELP HOMEBUILDING ORGANIZATIONS SB 1296 by West – The bill makes organizations that provide self-help housing and originate residential mortgage loans for borrowers who have provided part of the labor to construct the home securing the loan exempt from the Residential Mortgage Loan Company Licensing and Registration Act. The bill also makes the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 applicable to these organizations. LOW-INCOME HOUSING TAX CREDIT (LIHTC) DEFINITION OF ‘RURAL’ HB 74 by Marquez – Requires that TDHCA by rule provide a mechanism that allows certain rural municipalities in large metropolitan statistical areas that border an “urban” municipality to be defined as “rural” for LIHTC purposes. GENERAL/SENIOR PARITY HB 3311 by Alvarado – The bill requires elderly project/general deal scoring parity for LIHTC applications. It also sets forth a formula for allocating credits and actually limits the allocation for senior developments in areas where senior developments are above the ratio of the senior population to the general population. LOCAL DEVELOPMENT FUNDS SB 1316 by Watson – Removes the local development funding requirement from the LIHTC QAP. The bill does allow TDHCA to assess a political subdivision’s financial commitment to a project in its scoring criteria. The bill also prohibits TDHCA from awarding points for the rehabilitation or the adaptive reuse of a historic building to more than two projects in the same application cycle. ADD HUD-HELD MORTGAGE PROJECTS (HUD 202) TO AT-RISK DEVELOPMENTS SB 1315 by Watson adds HUD-insured and HUD-held mortgage projects to “at-risk development” category for LIHTC scoring purposes. RENTAL ASSISTANCE DEMONSTRATION CONVERSIONS HB 2926 by Anchia – expands the definition of "at-risk development" to include a development that proposes to rehabilitate or reconstruct housing units that receive assistance or will receive assistance through the Rental Assistance Demonstration program.

UNDERWRITING STANDARDS FOR LIHTC SB 1989 by Menendez – requires TDHCA to create underwriting standards for tax credit projects. LIHTC RIGHT OF FIRST REFUSAL HB 3576 by Alvarado – first right of refusal bill that requires a qualified entity seeking to purchase a development pursuant to the right of first refusal, not later than the 180th day after the date such notice is provided or posted, whichever date is later, to submit to TDHCA the terms of the entity's offer along with evidence of its financial plan to enable the purchase. The bill requires TDHCA to review for reasonableness the submitted terms of the offer and financial plan. HB 3535 by Collier – Provides that TDHCA shall prioritize the allocation of housing credits to areas targeted for revitalization in cities larger than 500,000 that are in a county larger than 1,700,000. Filed without the Governor’s signature on 6/19/15. URBAN LAND BANK HB 1289 by Giddings – allows for Dallas urban land bank to purchase and redevelop commercial property that has been abandoned or subject to foreclosure. HOMELESSNESS TEXAS INTERAGENCY COUNCIL FOR THE HOMELESS SB 607 by Hancock – Updates the membership of the TICH to reflect changes to agency names that have been made since 1995 and allows TICH and its member agencies to seek assistance from the Texas Homeless Network if any wish to do so. Allows members to participate by teleconference. STUDY ON HOMELESS YOUTH HB 679 by Turner – directs TDHCA and TICH to conduct a study on homeless youth. HOUSING FOSTER CARE CHILDREN SB 1117 by Zaffirini – ensures that transition plans for foster children 16+ going from foster care to independent living include provisions for meeting their housing needs. SOURCE OF INCOME SB 267 by Perry – prohibits a municipality or county from enacting an ordinance that prohibits a landlord’s ability to make a leasing decision based on a tenant’s source of income. PRIVATE ACTIVITY BONDS HB 2878 by Marquez – This is a bill bracketed for El Paso. It allows the City’s PHA to combine several smaller projects into one larger issuance. The pooling of multiple properties in one issuance is already eligible under the PAB statute. This bill would save the PHA some money by eliminating the need to pay more than one reservation fee. This bill has no impact on TSAHC programs or PAB set-aside. SUNSET BILL HB 3123 by Price – omnibus bill for certain governmental entities subject to sunset review.

TEXAS STATE AFFORDABLE HOUSING CORPORATIONSTATEMENT OF NET ASSETS (unaudited)As of May 31, 2015

ASSETSCurrent Assets

Cash and Cash Equivalents $ 2,561,645Restricted Assets Held by Bond Trustee:

Cash and Cash Equivalents 3,250,337Accrued Interest 211,061

Custodial Cash and Cash Equivalents 301,516Investments, at Fair Market Value 3,851,700Accounts Receivable & Accrued Revenue, Net of uncollectible amts. of $40,829 168,422Accrued Interest Receivable 54,407Loans Receivable, Current Portion 65,000Notes Receivable, Current Portion 121,699Downpayment Assistance, Current Portion 2,216,780Prepaid Expenses 59,775

Total Current Assets: 12,862,342

Noncurrent AssetsLoans Receivable, Net of uncollectible amounts of $91,726 640,696Notes Receivable 5,496,211Investments, at Fair Market Value 3,371,523Mortgage Servicing Rights, Net of Accumulated Amortization of $2,334,000 394,062Fixed Assets, Net of Accumulated Depreciation of $568,967 1,490,532Owned Real Estate, Federal & Other Programs Net of Accum Amort $83,474 10,509,241Downpayment Assistance 2,030,604Restricted Investments Held by Bond Trustee, at Fair Market Value 125,264,963

Total Noncurrent Assets: 149,197,832

TOTAL ASSETS $ 162,060,174

(continued)

TEXAS STATE AFFORDABLE HOUSING CORPORATIONSTATEMENT OF NET ASSETS - Continued (unaudited)As of May 31, 2015

LIABILITIES Current Liabilities

Accounts Payable and Accrued Expenses $ 387,496Notes Payable, Current Portion 714,966Custodial Reserve Funds 301,516Other Current Liabilities 219,814Payable from Restricted Assets Held by Bond Trustee:

Bonds Payable, Current Portion 1,984,680Accrued Interest on Bonds 846,353

Total Current Liabilities: 4,454,825Noncurrent Liabilities

Notes Payable 3,047,907Revenue Bonds Payable 119,797,010Due to Federal Programs 3,888,057Unearned Revenue 155,152

Total Noncurrent Liabilities: 126,888,126

Total Liabilities: 131,342,951

DEFERRED INFLOWS OF RESOURCESDeferred Revenue 227,297

Total Deferred Inflows of Resources 227,297

NET POSITIONInvested in Capital Assets 1,490,532Restricted for:

Debt Service 10,362,558Other Purposes 43,534

Unrestricted 18,593,302

Total Net Position: $ 30,489,926

TEXAS STATE AFFORDABLE HOUSING CORPORATIONSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (unaudited)for the 9 months ending May 31, 2015

Operating Revenues Interest and Investment Income $ 4,736,745 Net Increase (Decrease) in Fair Value of Investments (1,678,275) Single Family Income 2,937,150 Asset Oversight and Compliance Fees 205,747 Loan Servicing Fees 94,605 Multifamily Income 202,860 Land Bank Income 184,545 Public Support Federal & State Grants 27,400 Contributions 400,692 Other Operating Revenue 143,598 Total Operating Revenues $ 7,255,067

Operating Expenses Interest Expense on Bonds and Notes Payable $ 4,234,064 Salaries, Wages and Payroll Related Costs 1,607,093 Professional Fees and Services 276,160 Amortization 164,213 Office and Equipment Rental and Maintenance 36,119 Travel and Meals 78,129 Depreciation 137,715 Program and Loan Administration 1,018,316 Grant Expenditures 49,962 Foundation Fund Grants 343,000 Other Operating Expenses 222,004 Total Operating Expenses $ 8,166,775

Net Income (911,708)

Total Net Position, Beginning 31,401,634

Total Net Position, Ending $ 30,489,926

Texas State Affordable Housing CorporationComparison of Budget to Actual

May 31, 2015

Annual Budget Actual

Percent of Annual Budget

Explanation of Variance

RevenueServicing Revenue, Net of Subservicer Fees 183,000 149,681 82%Single Family 3,550,000 3,473,940 98%Multifamily Oversight & Rental Program 591,000 541,732 92%Principal & Interest from Single & Multifamily Loan Program 277,000 205,615 74%ACT Income 1,723,000 1,034,960 60%Grants & Donations 649,000 544,953 84%Federal & State Grants 119,000 101,108 85%Investment Revenue 40,000 36,930 92%Tenant Income 15,000 11,201 75% Total Revenue 7,147,000 6,100,120 85%

ExpendituresSalaries & Payroll Related Expenditures 2,280,000 1,607,093 70.49%Professional Services 415,000 315,637 76.06%Foundation Fund Grants 330,000 343,000 103.94%Principal & Interest on Notes Payable 718,000 109,587 15.26%Travel & Meals 100,000 78,738 78.74%Furniture, Equipment, & Software 16,000 54,053 337.83%Building Maintenance 29,000 30,380 104.76%Insurance 108,000 44,305 41.02%Marketing 114,000 76,020 66.68%Professional Dues & Training 18,000 19,380 107.67%Communication 17,000 12,878 75.75%Sponsorships 14,000 10,816 77.26%Printing & Office Supplies 9,500 2,111 22.22%Freight, Delivery, Postage & Storage 7,400 7,852 106.11%Publications, Subscriptions & Other Office Expenditures 8,000 7,619 95.24%Bank Fees & Charges 18,000 13,565 75.36%Single Family/Multifamily Program Expenditures 2,779,000 2,179,638 78.43%Federal & State Grant Expenditures 104,000 64,123 61.66% Total Expenditures 7,084,900 4,976,795 70.25%

Net Income 62,100 1,123,325

Average Percent Expended = 75.0%


May 31, 2015

In February 2015 the Corporation sold the mortgage backed securities associated with the 2005A Single Family Bond Issue. As a

result of this transaction the Corporation received cash totaling $1,051,877. This transaction was not anticipated when the budget wasprepared and has resulted in the budget variance reported. The bonds associated with the 2005A issue were paid in full in March 2015.

Multifamily income is higher than budgeted because most asset oversight and compliance contracts call for annual payments to be made to the Corporation in the month of January. Additionally we received $74,380 from our newest multifamily project, Palladium,in February. We expect that this line item will be on budget by year end.

All Foundation Fund grants were approved by the Board in September 2014 and disbursed to recipients by the first week in November 2014. Additionally the Corporation received donations for the Foundation Fund that were not anticipated at the time the budget was prepared which were added to the original budgeted grant amount resulting in the additional expenditure for $13,000.

Loan expenditures are lower than originally anticipated because a note in the amount of $570,000 that was originally budgetedfor payoff in December 2014 was refinanced instead.

Furniture, equipment & software expenditures includes $32,000 for computer hardware including one high availability server. The new server replaces two and possibly three of the Corporation's existing servers. The Corporation has been working on plans to restructureits information technology systems for some time and had originally planned to make the transition to new servers in fiscal year 2016. Continued problems with the existing hardware made it necessary to escalate the timing of this transition.

Building maintenance expense is slightly over budget through May 2015 due to unexpected plumbing and electrical repairs.

Insurance expenditures are lower than budgeted due to simple timing of policy renewal. With the exception of the Corporation's property & liability insurance covering NSP and other programmatic real estate all other policies renew in July each fiscal year. We expect this line item to be on budget by year end.

All other budget variances are due to timing of expenditures and we anticipate that each will be on or near target by year end.


May 31, 2015

Monthly Investment Report

May 31, 2015

Slow But Is It Steady?

The Federal Reserve has kept the markets high on expectations this year and the focus has now switched to the June FOMC meeting especially since, for many months, it was to be the first month for the liftoff in rates. Although that is effectively off the table after some of the weak indicators in 1Q, the Fed is definitely signaling a move in 2015. As they say timing is everything. If the growth data falls into place, September is still in the cards.

The policy makers are also promising that the rises will be gradual. They do not want the markets to create a tightening in anticipation, which can over-do the effect. If it goes too fast by market action, growth could actually be threatened.

The economy seems to be mired in slower-than-expected growth. The second revision of GDP turned negative in its first contraction in a year with a widening trade deficit and accumulating inventories. The dollar strength clobbered our exports taking it down 7.6%. Along with downturns in non-residential investment (-2.8%), state and local governments curbed spending, but the federal government accelerated its spending.

The issues are not just employment and inflation. The labor market appears to be stalled but even more seriously (a) wages are not growing and (b) consumers are not spending. By not spending, the savings rate, at very low rates, also does not add to the breadth of the economic recovery.

The Forces May Be With Us

Despite the challenges, the trends are positive.

The consumer is a major key to growth. Consumers appear to be confident but remain concerned about the future. This concern is translated in to lower personal spending.

Consumer hesitancy comes from an understandably cautious view after the economic downdrafts of the 2009-2010 cycle as well as the various geo-political forces weighing. The consumer is also facing some limited inflation especially in the healthcare area which surged 0.9% in out of the pocket expenses

The consumer is also fighting employment slack in which full time positions can not be found. The only way out of this is a stronger economy. The slow growing

corporations willing to increase wages will raise confidence and spending and ultimately inflation.

beginning to come out of recession, any loss of the U.S. consumer has an even greater impact.

Geo-political events continue to cause much of the volatility globally. Greece may or may not be salvable in the EU. China is pushing strongly to move to a reserve currency which is a major issue. The Middle East continues to roil oil.

Rates

The Federal Reserve gave us no answers or schedule for anticipated rate hikes and as weak economic news broke through the month,the markets moved to accommodate an anticipated rate move from June to September.

Euro zone sovereign bond yields have had a dramatic effect on US bonds. The German bond is currently 167 basis points (1.67%) below the US 10-year. That makes even the ugly US rates look good to international investors and keeps prices high.

New bank regulations are starting to take effect in 2015, along with serious worries from small oil company failures and loan defaults, will continue to weigh down the banks who still continue to build their balance sheets and shun new deposits and investments.

Rates in the 1 and 2 year area have moved up slightly on volatility, but the long end has moved down. The downward yields in the long end are due in large part to international investors who do not want to invest in negative yields in Europe and still by comparison see value in a US Treasury at 3%.

End of Month Rates - Full Yield Curve Fed Funds to 30yr

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

3mo 6mo 1yr 2yr 5yr 10yr 30yr

May-15Apr-15Dec-14Nov-14Jun-14

Percent

Your Portfolio As of May 31, 2015

DDA25.3%

MM3.4%

CD's28.9%

Agency Notes39.8%

GNMA0.1%

Neg. CDs2.4%

TPS

P&A constantly reviews your portfolio for optimal asset allocation and a controlled average maturity because a diversified portfolio can better adjust to volatile market conditions.

The extremely low short-term rates make diversification difficult and they are reasonably expected to continue now at least through 2015. Longer term rates have moved lower and do not provide reward for extension risks.

Banks remain uninterested in new deposits and although state and local bonds continue to add value they have been discovered and are declining in yields.

Portfolios are cash heavy as we struggle to find value with a flat yield curve which provides little value under six months. Going too long has its risks if rates do rise quickly on news.

The non-cash portion of your portfolio is yielding 0.60%.

Texas State Affordable HousingPortfolio Management

May 31, 2015

Patterson & Associates901 S. MoPac

Suite 195Austin, TX 78746

-Portfolio Summary

% ofPortfolio

BookValueInvestments

MarketValue

ParValue

Days toMaturityTerm

YTM365 Equiv.

CD's - Interest at Maturity 735,000.00 3657.32 0.50085735,390.53735,000.00Federal Agency Coupon Securities 3,999,913.70 70639.82 0.6504984,005,036.004,000,000.00Negotiable CDs - 2 245,327.81 3502.44 0.40070245,451.78245,000.00Pass Through Securities (GNMA) 8,816.97 8,6460.09 5.9717,08110,356.768,816.97FHLB Dallas-Money Fund 103,970.68 11.03 0.0101103,970.68103,970.68MM Funds/NOW Accounts 242,318.47 12.41 0.6001242,318.47242,318.47CD's - Interest monthly/quarterly 2,169,914.07 54021.60 0.5511022,169,914.072,169,914.07Bank Accounts 2,540,965.24 125.29 0.00312,540,965.242,540,965.24

10,046,226.94 100.00%Investments

10,053,403.5310,045,985.43 441 235 0.445

Current YearMay 31

3,949.69Fiscal Year To Date

33,099.62Total Earnings Month Ending

The following reports are submitted in accordance with the Public Funds Investment Act (Texas Gov't Code 2256). The reports also offer supplemental information not required by the Act in order to fullyinform the governing body of the Texas State Affordable Housing Corporation of the position and activity within the Corporation's portfolio of investments. The reports include a management summaryoverview, a detailed inventory report for the end of the period, a transaction report, as well as graphic representations of the portfolio to provide full disclosure to the governing body.

__________________________________________________ ____________________Melinda Smith, Chief Financial Officer

Portfolio TSAHAPData Updated: SET_TSAH: 06/17/2015 15:34

Reporting period 05/01/2015-05/31/2015

Run Date: 06/17/2015 - 15:34 PM (PRF_PM1) 7.3.0Report Ver. 7.3.5

Texas State Affordable HousingSummary by Type

Grouped by Fund



-May 31, 2015

Security Type% of

PortfolioAverage Days

to MaturityPar

ValueNumber of

InvestmentsAverageYTM 365Book Value

Fund: Bunker Hill Debt

Bank Accounts 22,849.90 0.23 11 0.03022,849.90

Subtotal 1 22,849.90 0.23 10.03022,849.90

Fund: Bunker Hill Operating

Bank Accounts 22,839.64 0.23 11 0.03022,839.64

Subtotal 1 22,839.64 0.23 10.03022,839.64

Fund: Bunker Hill Replacement Res

Bank Accounts 38,449.87 0.38 11 0.03038,449.87

Subtotal 1 38,449.87 0.38 10.03038,449.87

Fund: General Investments

Bank Accounts 2,049,068.78 20.40 11 0.0002,049,068.78

Federal Agency Coupon Securities 3,999,913.70 39.82 4986 0.6504,000,000.00

FHLB Dallas-Money Fund 103,970.68 1.03 11 0.010103,970.68

Pass Through Securities (GNMA) 8,816.97 0.09 7,0811 5.9718,816.97

CD's - Interest at Maturity 735,000.00 7.32 853 0.500735,000.00

CD's - Interest monthly/quarterly 2,169,914.07 21.60 1024 0.5512,169,914.07

MM Funds/NOW Accounts 242,318.47 2.41 12 0.600242,318.47

Negotiable CDs - 2 245,327.81 2.44 701 0.400245,000.00

Subtotal 19 9,554,330.48 95.11 2470.4679,554,088.97

Fund: Heart of Texas DPA

Bank Accounts 168,751.75 1.68 11 0.000168,751.75

Subtotal 1 168,751.75 1.68 10.000168,751.75

Fund: NFMC Account

Bank Accounts 13,896.12 0.14 11 0.00013,896.12

Subtotal 1 13,896.12 0.14 10.00013,896.12

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:26 ST (PRF_ST) 7.2.0Report Ver. 7.3.5

Security Type% of

PortfolioAverage Days

to MaturityPar

Value

Grouped by Fund

Page 2Summary by TypeTexas State Affordable Housing

Number ofInvestments

May 31, 2015

AverageYTM 365Book Value

Fund: Neighborhood Stabilization Pro

Bank Accounts 2,960.17 0.03 11 0.0002,960.17

Subtotal 1 2,960.17 0.03 10.0002,960.17

Fund: Rita Blanca Reserve

Bank Accounts 5,650.70 0.06 11 0.0005,650.70

Subtotal 1 5,650.70 0.06 10.0005,650.70

Fund: Sagebrush Apartments - Debt

Bank Accounts 39,209.72 0.39 11 0.03039,209.72

Subtotal 1 39,209.72 0.39 10.03039,209.72

Fund: Sagebrush Apartments - Oper.

Bank Accounts 23,197.02 0.23 11 0.03023,197.02

Subtotal 1 23,197.02 0.23 10.03023,197.02

Fund: Sagebrush Replacement Res

Bank Accounts 94,343.89 0.94 11 0.03094,343.89

Subtotal 1 94,343.89 0.94 10.03094,343.89

Fund: Texas Foreclosure Prevention

Bank Accounts 0.00 0.00 01 0.0000.00

Subtotal 1 0.00 0.00 00.0000.00

Fund: Wells Fargo - CDC

Bank Accounts 4,772.50 0.05 11 0.0004,772.50

Subtotal 1 4,772.50 0.05 10.0004,772.50

Fund: Willows Operating

Bank Accounts 0.00 0.00 01 0.0000.00

Subtotal 1 0.00 0.00 00.0000.00

Fund: Willows Replacement Reserve

Bank Accounts 54,975.18 0.55 11 0.00054,975.18

Subtotal 1 54,975.18 0.55 10.00054,975.18

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:26 ST (PRF_ST) 7.2.0Report Ver. 7.3.5

Total and Average 33 10,046,226.94 100.00 2350.44510,045,985.43

Texas State Affordable HousingPatterson & Associates

901 S. MoPacSuite 195

Austin, TX 78746 -

May 31, 2015

Fund BHDEBT - Bunker Hill DebtInvestments by Fund

Par ValueDays ToMaturity

MaturityDate

CurrentRateMarket ValueCUSIP Investment # Issuer

PurchaseDate Book Value

YTM360

YTM365

Bank AccountsFrost Bank Checking76 22,849.90591398016 10.03004/20/2010 22,849.90 0.029 0.03022,849.90

Subtotal and Average 22,849.90 22,849.90 22,849.90 0.030 0.030 1

Total Investments and Average 22,849.90 22,849.90 22,849.90 0.030 0.030 1

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:26 FI (PRF_FI) 7.1.1Report Ver. 7.3.5

May 31, 2015


MaturityDate

CurrentRateMarket Value

Fund BHOPER - Bunker Hill OperatingInvestments by Fund Page 2

CUSIP Investment # IssuerPurchase

Date Book ValueYTM360

YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund BHRR - Bunker Hill Replacement ResInvestments by Fund Page 3



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund GENERAL - General InvestmentsInvestments by Fund Page 4



YTM365

CD's - Interest at MaturityBank of China CD FDIC# 33653141 245,000.0006426RP49 08/20/2015 800.60008/20/2014 245,158.27 0.591 0.600245,000.00Goldman Sachs CD FDIC# 33124144 245,000.0038147J2Y7 08/27/2015 870.40008/27/2014 245,086.24 0.394 0.400245,000.00Safra Nat'l Bk CD FDIC# 26876145 245,000.0078658QEW9 08/28/2015 880.50008/28/2014 245,146.02 0.493 0.500245,000.00


Federal Agency Coupon SecuritiesFFCB Call Note151 500,000.003133EDWQ1 10/06/2016 4930.67002/24/2015 500,716.50 0.666 0.676499,971.85FFCB Call Note152 500,000.003133EDWQ1 10/06/2016 4930.67002/24/2015 500,716.50 0.666 0.676499,971.85FHLB Call Note149 500,000.003130A3ME1 09/30/2016 4870.55012/30/2014 500,194.50 0.624 0.633500,000.00FHLB Call Note154 1,000,000.003130A4JF0 06/10/2016 3750.45003/10/2015 1,000,086.00 0.467 0.474999,970.00FHLMC Call Note135 1,000,000.003134G4Z92 04/17/2017 6860.87504/23/2014 1,003,284.00 0.871 0.8831,000,000.00FHLMC Call Note136 500,000.003134G56P5 06/24/2016 3890.50006/24/2014 500,038.50 0.493 0.500500,000.00

Subtotal and Average 3,999,913.70 4,000,000.00 4,005,036.00 0.641 0.650 498

Negotiable CDs - 2Sallie Mae Bank CD FDIC# 58177142 245,000.00795450NT8 08/10/2015 701.10008/25/2014 245,451.78 0.394 0.400245,327.81


Pass Through Securities (GNMA)Gov't National Mtg. Assn100 8,816.9736201LFC3 10/20/2034 7,0815.99002/17/2011 10,356.76 5.889 5.9718,816.97

Subtotal and Average 8,816.97 8,816.97 10,356.76 5.889 5.971 7,081

FHLB Dallas-Money FundFHLB Money Market Fund9002 103,970.68999999995 10.01009/01/2006 103,970.68 0.010 0.010103,970.68


MM Funds/NOW AccountsAustin Capital Bank MM83 242,318.475001506 10.60010/20/2010 242,318.47 0.591 0.600242,318.47Hillcrest Bank NOW Account52 0.0020115959 10.05007/31/2009 0.00 0.049 0.0500.00


CD's - Interest monthly/quarterlyEast West Bank137 755,893.54172088715A 07/12/2015 410.40007/12/2014 755,893.54 0.394 0.400755,893.54

Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund GENERAL - General InvestmentsInvestments by Fund Page 5



YTM365

CD's - Interest monthly/quarterlyEast West Bank138 45,320.53172002714 08/01/2015 610.40008/01/2014 45,320.53 0.394 0.40045,320.53Hillcrest Bank CD130 1,006,000.008410000117 07/13/2015 420.60012/13/2013 1,006,000.00 0.591 0.6001,006,000.00Hillcrest Bank CD134 362,700.008310000287 07/04/2016 3990.75004/04/2014 362,700.00 0.739 0.750362,700.00


Bank AccountsFrost Bank Checking69 2,049,068.78591359967 103/05/2010 2,049,068.782,049,068.78


Total Investments and Average 9,554,330.48 9,554,088.97 9,561,507.07 0.461 0.467 246

Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund HRTTX - Heart of Texas DPAInvestments by Fund Page 6



YTM365

Bank AccountsFrost Bank Checking153 168,751.75591746871 102/06/2015 168,751.75168,751.75



Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund NFMC - NFMC AccountInvestments by Fund Page 7



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund NSP - Neighborhood Stabilization ProInvestments by Fund Page 8



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund RBRES - Rita Blanca ReserveInvestments by Fund Page 9



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund SBDEBT - Sagebrush Apartments - DebtInvestments by Fund Page 10



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund SBOPER - Sagebrush Apartments - Oper.Investments by Fund Page 11



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund SBRR - Sagebrush Replacement ResInvestments by Fund Page 12



YTM365




Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund TXFORE - Texas Foreclosure PreventionInvestments by Fund Page 13



YTM365

Bank AccountsFrost Bank Checking73 0.00591359940 104/14/2010 0.000.00

Subtotal and Average 0.00 0.00 0.00 0.000 0.000 0

Total Investments and Average 0.00 0.00 0.00 0.000 0.000 0

Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund WELLS - Wells Fargo - CDCInvestments by Fund Page 14



YTM365

Bank AccountsWells Fargo Non-Profit Chkg0014 4,772.50999999994 109/01/2006 4,772.504,772.50



Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund WOPER - Willows OperatingInvestments by Fund Page 15



YTM365

Bank AccountsFrost Bank Checking106 0.00591501356 111/17/2011 0.000.00

Subtotal and Average 0.00 0.00 0.00 0.000 0.000 0

Total Investments and Average 0.00 0.00 0.00 0.000 0.000 0

Portfolio TSAHAP


May 31, 2015


MaturityDate


Fund WRR - Willows Replacement ReserveInvestments by Fund Page 16



YTM365




Portfolio TSAHAP




-

Texas State Affordable HousingCash Reconciliation Report

For the Period May 1, 2015 - May 31, 2015Grouped by Fund

ParValue Cash

Trans.TypeInvestment # Fund Security ID

Trans.Date Security Description

MaturityDate Interest RedemptionsPurchases

General Investments10/20/203410005/20/2015 InterestGENERAL 36201LFC3 22,957.26 GNMA 0.0M 5.99% Mat. 10/20/2034 0.00 44.18 34.46 78.6411/25/201614805/25/2015 InterestGENERAL 3134G5NX9 500,000.00 FHLMCS 0.5M 0.45% Mat. 0.00 1,125.00 0.00 1,125.0011/25/201614805/25/2015 CallGENERAL 3134G5NX9 500,000.00 0.0M 0.45% 0.00 0.00 500,000.00 500,000.00

Subtotal 0.00 1,169.18 500,034.46 501,203.64

Total 0.00 1,169.18 500,034.46 501,203.64

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:32 AC (PRF_AC) 7.2.0Report Ver. 7.3.5



-

Texas State Affordable HousingSales/Call Report

Sorted by Maturity Date - FundMay 1, 2015 - May 31, 2015

Redem. Date RedemptionPrincipal

RedemptionInterest

Book Valueat Redem.

TotalAmount Net IncomeFund Matur. Date

Rate atRedem.

ParValueSec. TypeCUSIP Investment #

Issuer PurchaseDate

11/25/2016500,000.00 500,000.00 500,000.00 1,125.001483134G5NX9 05/25/2015 501,125.00 1,125.00GENERAL FHLMCS

FAC 11/25/201611/25/2014 0.450 V

Call

Subtotal 500,000.00 500,000.00 1,125.00500,000.00 501,125.00 1,125.00

500,000.00Total Sales 500,000.00 1,125.00500,000.00 501,125.00 1,125.00

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:31 SA (PRF_SA) 7.1.1Report Ver. 7.3.5

V - Security with variable rate change.

Texas State Affordable HousingInterest Earnings



-Sorted by Fund - FundMay 1, 2015 - May 31, 2015

Yield on Average Book Value

MaturityDate

CurrentRate

EndingPar Value

AverageSecurityTypeFund Book Value

BeginningBook Value

Adjusted Interest Earnings

AccretionAmortization/

EarningsAdjusted InterestAnnualized

YieldCUSIP Investment #InterestEarned

Fund: Bunker Hill Debt22,849.3876 22,849.90 0.030RR5 0.58 0.00 0.580.030BHDEBT 22,849.32591398016

22,849.90Subtotal 22,849.38 0.030 0.580.000.5822,849.32

Fund: Bunker Hill Operating22,839.1275 22,839.64 0.030RR5 0.58 0.00 0.580.030BHOPER 22,839.06591398261

22,839.64Subtotal 22,839.12 0.030 0.580.000.5822,839.06

Fund: Bunker Hill Replacement Res38,242.0177 38,449.87 0.030RR5 0.97 0.00 0.970.030BHRR 37,532.24591398288

38,449.87Subtotal 38,242.01 0.030 0.970.000.9737,532.24

Fund: General Investments103,485.749002 103,970.68 0.010RR2 0.90 0.00 0.900.010GENERAL 9,258.28999999995999,923.23154 1,000,000.00 0.450FAC 06/10/2016 375.00 100.00 475.000.559GENERAL 999,870.003130A4JF0500,000.00149 500,000.00 0.550FAC 09/30/2016 229.16 0.00 229.160.540GENERAL 500,000.003130A3ME1362,700.00134 362,700.00 0.750RR4 07/04/2016 231.04 0.00 231.040.750GENERAL 362,700.008310000287

1,006,000.00130 1,006,000.00 0.600RR4 07/13/2015 512.65 0.00 512.650.600GENERAL 1,006,000.008410000117387,096.77148 0.00 0.450FAC 11/25/2016 150.00 0.00 150.000.456GENERAL 500,000.003134G5NX9500,000.00136 500,000.00 0.500FAC 06/24/2016 208.34 0.00 208.340.491GENERAL 500,000.003134G56P5

1,000,000.00135 1,000,000.00 0.875FAC 04/17/2017 729.16 0.00 729.160.859GENERAL 1,000,000.003134G4Z928,838.09100 8,816.97 5.990GN1 10/20/2034 44.01 0.00 44.010.189GENERAL 8,851.4336201LFC3

755,893.54137 755,893.54 0.400RR4 07/12/2015 256.80 0.00 256.800.400GENERAL 755,893.54172088715A45,320.53138 45,320.53 0.400RR4 08/01/2015 15.40 0.00 15.400.400GENERAL 45,320.53172002714

245,000.00141 245,000.00 0.600BCD 08/20/2015 124.85 0.00 124.850.600GENERAL 245,000.0006426RP49245,398.06142 245,000.00 1.100MC2 08/10/2015 228.89 -145.17 83.720.402GENERAL 245,472.98795450NT8245,000.00144 245,000.00 0.400BCD 08/27/2015 83.23 0.00 83.230.400GENERAL 245,000.0038147J2Y7245,000.00145 245,000.00 0.500BCD 08/28/2015 104.04 0.00 104.040.500GENERAL 245,000.0078658QEW9242,206.9983 242,318.47 0.600RR3 123.42 0.00 123.420.600GENERAL 242,195.055001506499,968.69151 500,000.00 0.670FAC 10/06/2016 279.17 6.76 285.930.673GENERAL 499,965.093133EDWQ1

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:33 IE (PRF_IE) 7.2.0Report Ver. 7.3.5

MaturityDate

CurrentRate

EndingPar Value

AverageSecurityTypeFund

Page 2

Book ValueBeginning

Book Value

Adjusted Interest Earnings

AccretionAmortization/

EarningsAdjusted Interest

May 1, 2015 - May 31, 2015Interest Earnings

Texas State Affordable Housing

AnnualizedYieldCUSIP Investment #

InterestEarned

Fund: General Investments499,968.69152 500,000.00 0.670FAC 10/06/2016 279.17 6.76 285.930.673GENERAL 499,965.093133EDWQ1

7,505,020.19Subtotal 7,891,800.33 0.588 3,943.58-31.653,975.237,910,491.99

Fund: Sagebrush Apartments - Debt39,208.8279 39,209.72 0.030RR5 1.00 0.00 1.000.030SBDEBT 39,208.72591398253

39,209.72Subtotal 39,208.82 0.030 1.000.001.0039,208.72

Fund: Sagebrush Apartments - Oper.23,196.4978 23,197.02 0.030RR5 0.59 0.00 0.590.030SBOPER 23,196.43591398237

23,197.02Subtotal 23,196.49 0.030 0.590.000.5923,196.43

Fund: Sagebrush Replacement Res94,059.4780 94,343.89 0.030RR5 2.39 0.00 2.390.030SBRR 93,091.50591398245

94,343.89Subtotal 94,059.47 0.030 2.390.002.3993,091.50

7,745,910.23Total 8,132,195.60 0.572 3,949.69-31.653,981.348,149,209.26

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:33 IE (PRF_IE) 7.2.0Report Ver. 7.3.5

Texas State Affordable HousingAmortization Schedule



-May 1, 2015 - May 31, 2015Sorted By Fund - Fund

Original Premiumor Discount

Maturity Date

Current Rate

Beginning Par ValueEnding

Book ValueAmount Amortized

This PeriodAmort. DateFund

Amounts AmortizedAnd UnamortizedAs of 05/01/2015

Amt Amortized Through 05/31/2015

Amount Unamortized Through 05/31/2015

Investment #

IssuerPurchasePrincipal

General Investments

-50.00151 500,000.000.670

10/06/2016 499,971.85 15.09-34.91

GENERAL10/06/2015

6.76 -28.15499,950.00FFCB Call Note

21.85

-50.00152 500,000.000.670

10/06/2016 499,971.85 15.09-34.91

GENERAL10/06/2015

6.76 -28.15499,950.00FFCB Call Note

21.85

-725.00149 500,000.000.550

09/30/2016 500,000.00 725.000.00

GENERAL03/30/2015

0.00 0.00499,275.00FHLB Call Note

725.00

-300.00154 1,000,000.000.450

06/10/2016 999,970.00 170.00-130.00

GENERAL06/10/2015

100.00 -30.00999,700.00FHLB Call Note

270.00

-250.00135 1,000,000.000.875

04/17/2017 1,000,000.00 250.000.00

GENERAL10/17/2014

0.00 0.00999,750.00FHLMC Call Note

250.00

1,639.05142 245,000.001.100

08/10/2015 245,327.81 -1,166.07472.98

GENERAL -145.17 327.81246,639.05Sallie Mae Bank CD FDIC# 58177

-1,311.24

264.05 -31.65Subtotal 3,745,241.51 9.11273.16

241.513,745,264.05 -22.54

264.05 -31.653,745,241.51 9.11273.16

241.513,745,264.05Total -22.54

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:33 AS (PRF_ASW) 7.2.1Report Ver. 7.3.5

Texas State Affordable HousingProjected Cashflow Report



-Sorted by MonthlyFor the Period June 1, 2015 - December 31, 2015

InterestOriginal CostSecurity ID TotalPrincipalFundTransactionTypeInvestment # Issuer Par Value

ProjectedTrans. Date

June 2015FHLB Call Note154 3130A4JF0 0.000.0006/10/2015 GENERAL 1,125.00Interest 0.00 1,125.00FHLB Call Note154 3130A4JF0 1,000,000.001,000,000.0006/10/2015 GENERAL 0.00Call 999,700.00 1,000,000.00FHLMC Call Note136 3134G56P5 0.000.0006/24/2015 GENERAL 1,250.00Interest 0.00 1,250.00FHLMC Call Note136 3134G56P5 500,000.00500,000.0006/24/2015 GENERAL 0.00Call 500,000.00 500,000.00FHLB Call Note149 3130A3ME1 500,000.00500,000.0006/30/2015 GENERAL 0.00Call 499,275.00 500,000.00

Total for June 2015 2,000,000.002,000,000.00 2,375.001,998,975.00 2,002,375.00

August 2015Sallie Mae Bank CD FDIC# 58177142 795450NT8 0.000.0008/08/2015 GENERAL 1,336.42Interest 0.00 1,336.42Sallie Mae Bank CD FDIC# 58177142 795450NT8 245,000.00245,000.0008/10/2015 GENERAL 14.77Maturity 246,639.05 245,014.77Bank of China CD FDIC# 33653141 06426RP49 245,000.00245,000.0008/20/2015 GENERAL 1,470.00Maturity 245,000.00 246,470.00Goldman Sachs CD FDIC# 33124144 38147J2Y7 245,000.00245,000.0008/27/2015 GENERAL 980.00Maturity 245,000.00 245,980.00Safra Nat'l Bk CD FDIC# 26876145 78658QEW9 245,000.00245,000.0008/28/2015 GENERAL 1,225.00Maturity 245,000.00 246,225.00

Total for August 2015 980,000.00980,000.00 5,026.19981,639.05 985,026.19

September 2015FHLB Call Note149 3130A3ME1 0.000.0009/30/2015 GENERAL 1,375.00Interest 0.00 1,375.00

Total for September 2015 0.000.00 1,375.000.00 1,375.00

October 2015FFCB Call Note151 3133EDWQ1 0.000.0010/06/2015 GENERAL 1,675.00Interest 0.00 1,675.00FFCB Call Note151 3133EDWQ1 500,000.00500,000.0010/06/2015 GENERAL 0.00Call 499,950.00 500,000.00FFCB Call Note152 3133EDWQ1 0.000.0010/06/2015 GENERAL 1,675.00Interest 0.00 1,675.00FFCB Call Note152 3133EDWQ1 500,000.00500,000.0010/06/2015 GENERAL 0.00Call 499,950.00 500,000.00FHLMC Call Note135 3134G4Z92 0.000.0010/17/2015 GENERAL 4,375.00Interest 0.00 4,375.00

Total for October 2015 1,000,000.001,000,000.00 7,725.00999,900.00 1,007,725.00

December 2015FHLB Call Note154 3130A4JF0 0.000.0012/10/2015 GENERAL 2,250.00Interest 0.00 2,250.00FHLMC Call Note136 3134G56P5 0.000.0012/24/2015 GENERAL 1,250.00Interest 0.00 1,250.00

Total for December 2015 0.000.00 3,500.000.00 3,500.00

3,980,000.003,980,000.00 20,001.193,980,514.05 4,000,001.19GRAND TOTALS:

Portfolio TSAHAP

Run Date: 06/17/2015 - 15:32 PC (PRF_PC) 7.2.0Report Ver. 7.3.5

BOARD MEETING TEXAS STATE AFFORDABLE HOUSING CORPORATION

Held at the offices of Texas State Affordable Housing Corporation

2200 E. Martin Luther King Jr. Blvd. Austin, TX 78702

June 11, 2015 at 10:30 am

Summary of Minutes Call to Order, Roll Call Certification of Quorum The Board Meeting of the Texas State Affordable Housing Corporation (the “Corporation”) was called to order by Bill Dietz, Vice Chair, at 10:31 am, on June 11, 2015, at the offices of Texas State Affordable Housing Corporation, 2200 E. Martin Luther King Jr. Blvd, Austin, TX 78702. Roll Call certified that a quorum was present. Members Present Bob Jones, Chair (arrived at 11:10am) Bill Dietz, Vice Chair Jerry Romero, Member Gerry Evenwel, Member Members Absent Alex Meade, Member Staff Present Betsy Aldrich, Senior Accountant Tim Almquist, Single Family Compliance Manager Liz Bayless, Executive Vice President Katie Claflin, Senior Development Coordinator Delia Davila, Single Family Compliance Specialist Sarah Ellinor, Homeownership Programs Coordinator Cynthia Gonzales, Office Manager and Assistant Corporate Secretary Nick Lawrence, Controller David Long, President James Matias, Senior Multifamily Analyst Celina Mizcles, Senior Multifamily Analyst Laura Ross, Corporate Secretary Melinda Smith, Chief Financial Officer Janie Taylor, Manager of Development & Strategic Communications Michael Wilt, External Relations Specialist Guests Linda Patterson, Patterson & Associates Tim Nelson, First Southwest Company Chris Spelbring, Raymond James Morgan Keegan

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Katie Van Dyk, Greenberg Traurig LLP Public Comment No public comment was given. President’s Report Mr. Long informed the board that the program and financial reports were included in the board packets. Also included this month were the quarterly compliance and resident services reports. He noted that there were no outstanding findings reported and no exceptional items in the other reports included in the board packet. Mr. Long provided the board with an update on the pending acquisition of the Rollins-Martin Apartment complex. After the board’s approval in April, the Corporation and staff worked to provide the seller with the required documentation to submit the ownership transfer application to TDHCA. An inspection of the property was also conducted. Mr. Long recognized Ms. Bayless, Ms. Mizcles, and Mr. Matias for their hard work on the transaction. Mr. Long informed the board that under Tab 6, staff would be asking the board to ratify and accept a $500,000 equity investment from Texas Community Bank in support of our Affordable Communities of Texas Program. He noted that staff was presenting the resolution to the Board today for formal acceptance of the funds. He thanked Ms. Taylor and Ms. Claflin for their hard work in applying for the funding and working closely with Texas Community Bank throughout the process. Mr. Long noted that on June 29, 2015, the Corporation would hold Mortgage Free Monday in honor of June being National Homeownership Month. A drawing would be held and five homeowners who closed on their home loans between April 1st and June 26th would be selected to receive one month’s mortgage payment paid for by the Corporation. Mr. Long provided the board with an update on the Texas Foundations Fund. He reported that applications were due by Friday June 5th and a total of 37 applications had been received. Twenty applications were for critical repair and 17 applications were for supportive services. At least two applications had been received for each region and the total funding requested was three times the allocation available under this funding round. Mr. Long reported that staff had begun the threshold review process and would continue over the next few months to review the applications and work with the Advisory Council on the award recommendations. Those recommendations would be presented for the board’s consideration at the September board meeting. Mr. Long informed the board that the second round of Texas Statewide Homebuyer Education Program (TSHEP) training had taken place earlier in the week in San Antonio. The training was held in partnership with RAISE Texas and the Federal Reserve Bank of Dallas out of their San Antonio office. Twenty eight counselors representing 20 organizations and eleven cities across the state had participated in the training. Mr. Long stated that the Homeownership staff would be attending several meetings and homebuyer fairs over the next month to promote the Corporation’s home buyer programs. He also noted that the 84th Legislative Session had ended the 1st of June; staff would be providing

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the board with a final report on what was passed and accomplished during the session at the July board meeting. Mr. Long provided the board with a brief update on the office building the Corporation purchased located at 1910 East MLK. He noted that construction activities were underway and they were scheduled to be completed by late August or early September 2015. Mr. Long introduced the professionals in attendance at the meeting including Ms. Van Dyk, the Corporation’s general counsel; Ms. Patterson, the Corporation’s Investment Advisor; Mr. Spelbring, the Corporation’s underwriter; and Mr. Nelson, the Corporation’s Financial Advisor. Tab 1 Presentation, Discussion and Possible Approval of Minutes of the Board

Meeting held on April 16, 2015. Mr. Evenwel made a motion to approve the minutes as written of the Board meeting held on April 16, 2015. Mr. Romero seconded the motion. Mr. Dietz asked for public comment and none was given. A vote was taken on the motion and the motion passed unanimously. Tab 2 Presentation, Discussion and Possible Approval of the Texas State

Affordable Housing Corporation’s 2015 Investment Policy. Ms. Patterson, the Corporation’s Investment Advisor with Patterson & Associates, provided the board with a brief update on current market conditions and how they affected the Corporation’s investment portfolio. Ms. Smith further explained that the Corporation was required by the Public Funds Investment Act to annually approve its Investment Policy. She referred the board to the revised copy provided to the members at the beginning of the meeting. Ms. Smith spoke about the changes that were made. She explained that revisions to the Investment Policy included allowing the Corporation to reinvest in mortgage backed securities (MBS) related to the Corporation’s single family bond transactions that would be addressed under Tabs 4 and 5 by Mr. Nelson, the Corporation’s Financial Advisor with First Southwest Company. As a result of this possible action, staff and advisors had revised the Investment Policy to allow for the reinvestment of Corporation funds in mortgage backed securities. Currently the Investment Policy had a three year weighted average maturity for investments. A sub-portfolio had been created in the Policy for these investments so they could have a longer weighted average maturity to accommodate the mortgage backed securities which could have a remaining maturity of 20 years or more. Ms. Smith noted that related changes could be found throughout the Investment Policy addressing the investment in mortgage backed securities, providing for a 20 year weighted average maturity. Mr. Romero asked if there would be a higher yield to the Corporation with the 20 year maturity. Ms. Patterson explained there would be a higher yield. She added that this type of investment wasn’t allowed under the current policy. Since they were securities that already existed, changing the policy and setting them up as a sub-portfolio allowed the Corporation to protect the principle and only use the interest. Mr. Evenwel commented that it sounded like a reinvestment plan. Ms. Smith confirmed that the sub-portfolio was created explicitly for the surplus bond funds. Only those funds could be moved into that portfolio. Mr. Long added that reinvesting excess revenue for selling the securities would provide a better return on investment. Mr. Long stated that with the changes, the

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Investment Policy would provide staff the option to acquire the excess MBS or depending on the market conditions receive the excess funds available after early redemption of the bond transaction. Ms. Smith added that the changes to the Investment Policy separated out for the purposes of the weighted average maturity so that we could have a portfolio that was longer term and leave the rest of the portfolio at a shorter term. Mr. Romero made a motion to approve the Investment Policy as presented with the changes recommended. Mr. Evenwel pointed out that on page 15 the Policy said it would be adopted by written resolution. Ms. Patterson stated that most assumed if a formal resolution wasn’t presented then having the vote in writing in the transcript would suffice. Ms. Van Dyk, general counsel for the Corporation, suggested that the board vote to approve the policy today and then formally approve a written resolution at the July board meeting. Mr. Romero moved to approve the 2015 Investment Policy as revised and presented to the Board today. Mr. Evenwel seconded the motion. Mr. Dietz asked for public comment and none was given. A vote was taken and the motion passed unanimously. Tab 3 Presentation, Discussion and Possible Approval of the Texas State

Affordable Housing Corporation’s 2015 Broker Listing. Ms. Smith explained that under the Public Funds Investment Act, the Corporation was also required to present the Broker Listing to the Board for approval on an annual basis. She explained that the broker listing was a list of brokers that Patterson & Associates used when they purchased investments on our behalf. Ms. Smith noted that two companies had been added to the list this year: Piper Jaffray and RBC Capital. All other companies previously on the list had remained. Mr. Romero stated that he would abstain from voting since Wells Fargo was on the list. He asked Ms. Van Dyk, general counsel for the Corporation, if a vote could take place given the acting Chair would have to motion or second and Ms. Van Dyk confirmed that the board could still vote on the matter. Mr. Dietz noted that he would also have to abstain due to Raymond James being on the list. Mr. Romero suggested that the item be moved to the end of the agenda to allow Mr. Jones time to arrive so he could participate in the vote. The board agreed with this suggestion. Mr. Evenwel had additional questions regarding the Broker Listing before it was tabled to the end of the meeting. He noted the different terminology used in the Broker Listing and the Investment Policy. The Broker Listing referred to broker dealers, but Attachment A of the Investment Policy, referred to firm and broker. Ms. Patterson explained that Attachment A of the Investment Policy was the certification. The word firm was used because the certification went to anyone who endeavored to sell an investment to the Corporation, which could include banks and pools not just brokers and dealers. Mr. Evenwel also noted that the Broker Listing didn’t refer back to the Investment Policy. Ms. Patterson noted that it referred back to Attachment A of the Investment Policy and Ms. Smith added that the Broker Listing and Investment Policy were combined into one document when they were sent out to potential broker firms. They were only separated for the purposes of

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seeking annual approval by the board. Mr. Romero suggested that the language be made more consistent where it referenced broker dealers. He noted that these changes could be made going forward and did not need to be included in the Broker Listing approved by the Board at the meeting today. Ms. Patterson made a final note that the language in the certification was not specific; it was approved by both parties so very often the certifications came back with additions or changes. After further discussion, the agenda item was tabled to the end of the meeting. Tab 4 Presentation, Discussion and Possible Approval of a Resolution Relating to

the Sale of Mortgage-Backed Certificates Relating to the Texas State Affordable Housing Corporation Single Family Mortgage Revenue Bonds (Fire Fighter and Law Enforcement or Security Officer Home Loan Program), Series 2005B, and the Redemption in Whole of Such Bonds, and all matters related thereto.

Mr. Long explained that Tabs 4 and 5 addressed similar transactions and Mr. Nelson, the Corporation’s financial advisory, would speak to both items during his presentation. Mr. Long added that the board had approved the bond redemption in February 2015 for the 2005A Single family transaction and Tabs 4 and 5 were very similar to that transaction, with some additional options for reinvestment. Mr. Nelson began by explaining that Tab 4 dealt with the 2005B bond transaction that closed in October 2005 under the Fire Fighter and Law Enforcement or Security Officer Home Loan Program. The transaction, totaling $20 million, had a 10 year call giving the Corporation the ability to call the bonds at the 10 year mark and sell them at a 102.5% premium. Mr. Nelson noted that the mortgage backed securities (MBS) underlying the transaction had a 5.49% coupon creating a substantial premium that could be captured by calling the bonds. Mr. Nelson then explained that the 2006A transaction under Tab 6 closed in February 2006 under the Professional Educators Home Loan Program. The transaction, totaling $23,809,000, had a 9 year call giving the Corporation the ability to call the bonds at the 9 year mark. He noted that the MBSs underlying the transaction also had a 5.49% coupon. Mr. Nelson explained that with the board’s approval allowing the Corporation’s management to make the final decision to make the optional redemption of the 2005B and 2006A single family bond transactions, he would prepare the bid package and distribute it to 30 to 40 active investors. The MBS pools would likely be offered for bid in the middle of July or August, depending on market conditions. The trustees would be consulted to determine whether the MBS would be marketed before the condition call notice was issued. Mr. Nelson stated that the difference between these transactions and the transaction approved by the board in February was that rather than selling all of the MBS and the Corporation receiving the excess funds from the sale, the Corporation was considering whether to sell fewer MBS and retain a portion of the MBS as part of the transaction. The primary benefit of this would be to retain program assets and on the financial end, the return on this type of investment would provide a greater return than any other type of investment currently outlined in our Investment Policy and approved by the Public Funds Investment Act.

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Mr. Romero asked what the Corporation would earn from the 2005B and 2006A transactions if the bonds weren’t called. Mr. Nelson explained that on the 2006A transaction, the Corporation would likely earn about $9,000 over time. The 2005B would bring $100,000. By calling the bonds, the Corporation had the potential to earn 8 to 10 times that amount. Mr. Romero asked if there was a possibility for a bigger payout when the bonds were called, noting that the conservative estimate provided in February had been exceeded when the transaction had closed. Mr. Nelson noted that it was definitely possible that the Corporation would realize more of a profit from the sale of the bonds then conservatively predicted. Mr. Jones joined the meeting at 11:10am. Mr. Long explained that staff was proposing that rather than receiving the excess funds at closing, as the Corporation did under the 2005A single family optional redemption transaction, the Corporation would reinvest in the remaining program MBS. He noted that the Corporation could also consider using a portion of our capital reserves to acquire additional MBS related to these transactions. Mr. Romero asked about the monetary yield of leaving the funds in securities and Mr. Nelson explained that we would receive an estimated $55,000 in interest per year. Mr. Jones asked Mr. Long for staff’s reasoning behind leaving the funds in the securities. Mr. Long stated that it would be an opportunity to earn a higher rate of return on investment compared to the rate of return we would realize though traditional investments. This provided the Corporation the opportunity to invest in our own program assets. Mr. Long noted that the resolution before the board would authorize staff to consider all options before making a determination on how to proceed. Mr. Long noted that the issuer fee earned on the bond transactions was around $1,800 per year, and comparing that to earning the estimated $55,000 a year seemed like a very viable option. Mr. Nelson clarified that in addition to the estimated $55,000 earned every year from the mortgage backed securities the Corporation would also retain the anticipated principle amount of $1 million invested into the securities. Mr. Romero suggested the option of investing half of the funds in securities and taking the other half to invest in traditional investments. Discussion followed on the structure of the deal and how much money could be earned from all scenarios. Mr. Romero requested that staff send the board the final breakout of the transaction once it was finalized, as he wanted to see the final breakout of the transaction for informational purposes. Mr. Long agreed to provide the information to the board via email. It was emphasized that no discussion via email would occur on the information that was sent to the board. Mr. Evenwel made a motion to approve the resolution relating to the sale of Mortgage-Backed Certificates relating to the Texas State Affordable Housing Corporation Single Family Mortgage Revenue Bonds (Fire Fighter and Law Enforcement or Security Officer Home Loan Program), Series 2005B, and the redemption in whole of such bonds, and all matters related thereto. Mr. Romero seconded the motion. Mr. Dietz called for public comment and none was given. A vote was taken and the motion passed unanimously.

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Tab 5 Presentation, Discussion and Possible Approval of a Resolution Relating to the Sale of Mortgage-Backed Certificates Relating to the Texas State Affordable Housing Corporation Single Family Mortgage Revenue Bonds (Professional Educators Home Loan Program), Series 2006A, and the Redemption in Whole of Such Bonds, and all matters related thereto.

Mr. Dietz formally welcomed Mr. Jones to the meeting. He noted that Mr. Jones voted on Tab 4 and would vote on the rest of the items on the agenda. Mr. Romero made a motion to approve the resolution, with the correction noted by Mr. Evenwel, relating to the sale of Mortgage-Backed Certificates relating to the Texas State Affordable Housing Corporation Single Family Mortgage Revenue Bonds (Professional Educators Home Loan Program), Series 2006A, and the redemption in whole of such bonds, and all matters related thereto. Mr. Evenwel seconded the motion. Mr. Dietz asked for public comment and none was given. A vote was taken and the motion passed unanimously. Tab 6 Presentation, Discussion and Possible Approval of a Resolution Approving

an Equity Equivalent Investment from Texas Community Bank in the Amount of Five Hundred Thousand Dollars ($500,000) and at a Fixed Interest Rate of Two Percent (2.00%) Per Annum, and Ratifying and Approving all Actions of the President and Executive Vice President Relating to the Execution of the Agreement Relating to Such Investment, and Authorizing and Approving Further Related Actions.

Ms. Taylor explained that Texas Community Bank (TCB) was a locally owned and operated, community-oriented financial institution based in Laredo with branches in Somerset, San Antonio, Brownsville, McAllen and Del Rio. TCB had recently awarded the Corporation with an equity equivalent investment (EQ2 award) of $500,000 to support activities of the Affordable Communities of Texas (ACT) Program in TCB’s service areas. The investment was for five years at an interest rate of 2%. The Corporation would make quarterly interest payments to TCB and provide them with an annual report of program activities. Ms. Taylor stated that it was an honor to receive the investment from TCB. The approval process had begun in January and staff was excited to have the resolution before the board today for approval of the investment. Ms. Taylor thanked Ms. Claflin and Ms. Bayless for their help and hard work during the process. She also thanked Mr. Romero and the Corporation’s general counsel for their guidance. Mr. Romero asked about the service areas covered by TCB, and Ms. Taylor explained that they served Webb, Bexar, Atascosa, Hidalgo, Cameron and Val Verde counties. Mr. Jones asked if the funds needed to be spent in those counties and Ms. Taylor confirmed that they needed to be used for program activities in TCB’s service areas. Mr. Dietz asked about the specific program activities that the funds would be used for, and Ms. Taylor explained that the funds would be used to acquire and rehab vacant or foreclosed properties. The properties would then be sold to low-income Texans. Mr. Long noted that the ACT Program had been in place for several years and the EQ2 award would provide additional resources for the program. Ms. Taylor explained that per the agreement with TCB, the term of the investment would automatically extend for a five-year term under the same terms and conditions once the original five year term was complete, unless TCB notified the Corporation 60 days prior to the maturity date. If this happened, the investment would be paid back in full, although Mr. Romero commented that in most cases a one year extension could be requested in order to finish projects

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that were in process. Ms. Taylor explained that the Corporation currently had an EQ2 award with Wells Fargo which we received in 2006 for a little over $1 million that was used for the Corporation’s Direct Lending program. Mr. Jones asked why it was called an investment instead of a loan and Ms. Taylor explained that it was different; there was no collateral required for the investment and it could be used by the bank for their Community Reinvestment Act obligations. Mr. Romero added that banks could carry EQ2 awards on their books as a debt instrument versus a contribution. The interest would be paid quarterly and the principle would not need to be paid until the end of the term. Mr. Long recognized Ms. Taylor for all her work in securing the EQ2 award for the Corporation. Mr. Romero added that it was Ms. Taylor’s persistence that led TCB to give the Corporation the investment, noting that this was TCB’s first EQ2 award. Mr. Romero made a motion to approve the resolution approving an Equity Equivalent Investment from Texas Community Bank in the amount of five hundred thousand dollars ($500,000) and at a fixed interest rate of two percent (2.00%) per annum, and ratifying and approving all actions of the President and Executive Vice President relating to the execution of the Agreement relating to such investment, and authorizing and approving further related actions. Mr. Jones seconded the motion. Mr. Dietz asked for public comment and none was given. A vote was taken and it passed unanimously. Mr. Dietz congratulated staff on their hard work. Mr. Jones asked if the ACT program was already active in TCB’s service areas and Ms. Taylor stated that they were currently working in Laredo, Bexar County and the Valley. Ms. Taylor added that staff would make every effort to reach out to the areas we haven’t worked in yet. Tab 7 Presentation, Discussion and Possible Approval of a Resolution to Appoint

Mr. Bruce Fielder as the West Texas Region Member of the Texas Foundations Fund Advisory Council Created by the Board of Directors of the Corporation, and to Change the At-Large Member Position of the Texas Foundations Fund Advisory Council to be the East Texas Region Member Position.

Ms. Bayless explained that the Advisory Council was made up of representatives of the various Texas geographic regions outlined in the Texas Foundations Fund (TFF) guidelines. Currently, the only region not represented on the Advisory Council was the East Texas region. Instead, the Advisory Council had an at-large position that could be filled by a person residing anywhere in Texas. The at-large position was currently filled by Mr. Steve Carriker, a resident of Central Texas, whose term would be expiring on June 30, 2015. In the resolution before the board, staff was recommending that the Board change the at-large position on the Advisory Council to an East Texas region position. Ms. Bayless informed the board that she had spoken with Mr. Carriker and he was supportive of this change. Ms. Bayless also explained that the resolution would appoint Mr. Bruce Fielder to fill the vacant position representing West Texas and the Panhandle. Ms. Bayless gave a brief explanation of Mr. Fielder’s background, noting that he lived in Amarillo and presently served as the mortgage compliance manager for City Bank Texas. Ms. Bayless expressed staff’s appreciation for Mr. Carriker and his service on the Advisory Council. They also looked forward to identifying a qualified representative from East Texas to

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fill the newly designated position. She also stated how pleased staff was that Mr. Fielder was interested and willing to help on the Advisory Council as the West Texas region representative. Mr. Dietz asked how many regions were on the TFF map, and Ms. Bayless explained that there were 8 regions, which were represented by 7 members of the Advisory Council with one position remaining vacant. Also serving on the Advisory Council was Mr. Romero as the board’s representative and Ms. Bayless who served ex officio. Mr. Dietz asked if there was an advantage to keeping the at-large position and Ms. Bayless relayed staff’s feeling that it might make the council too large. Ms. Bayless explained that having regional representation on the Advisory Council was important because it meant having someone from each region who could advocate on behalf of organizations in their regions. Members of the Advisory Council were also responsible for raising $5,000 per year and the Board had approved the policy that any funds raised by a council member could stay in their own region Mr. Jones made a motion to approve the resolution to appoint Mr. Bruce Fielder as the West Texas Region member of the Texas Foundations Fund Advisory Council created by the Board of Directors of the Corporation, and to change the at-large member position of the Texas Foundations Fund Advisory Council to be the East Texas Region member position. Mr. Romero seconded the motion. Mr. Dietz asked for public comment and none was given. A vote was taken and the motion passed unanimously. Tab 8 Presentation, Discussion and Possible Approval of Allocation of TSAHC

Revenues for the benefit of the Foundations Fund. Mr. Romero explained that he had requested this tab item in order to discuss ways to move the Texas Foundations Fund (TFF) to the next level. Since its creation in 2008, the Corporation had received 148 applications for funding under TFF and awards of almost $2 million had been made. TFF was established as a way for the Corporation to support affordable housing across the State of Texas. The board had originally authorized $500,000 for TFF, stipulating that $250,000 of the $500,000 be set aside as a corpus for the Fund. Mr. Romero reported that he had spoken with staff about ways to make TFF a true foundation, something that could not be done with only $250,000 set aside. One of the things discussed was designating that a portion of excess revenues be added to TFF every year in order to reach a foundation dollar amount that could be used to fund TFF and also support other Corporation programs across the state. Mr. Romero relayed staff’s suggestion that a working group be put together with both board and staff representation to discuss ideas for making this happen. Any ideas and suggestions from the working group could then be presented to the Board for their consideration. It was noted that to create a true Foundation, the principle amount would be locked in and the Corporation would use interest from the money invested to create the TFF awards each year. Mr. Jones asked how much money would be required to generate $250,000 to $300,000 in interest every year. Mr. Long stated that $25 to $30 million would be needed in order to generate $500,000 to $600,000 in interest. Mr. Long acknowledged that this was unattainable without the help of significant donations and strong fundraising. It was an important question for the working group to address.

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Mr. Dietz commented that TFF was a very valuable program and one of the most visible things the Corporation did. He approved of the suggestion of the working group as a way to formulate how to carry TFF to the next level. It was determined that staff would move forward with the creation of the working group to address ways to improve and evolve TFF. Tab 3 Presentation, Discussion and Possible Approval of the Texas State

Affordable Housing Corporation’s 2015 Broker Listing. Mr. Dietz recalled that this item had been tabled earlier in the meeting in order to allow time for Mr. Jones to join the meeting and participate in the vote. His participation was needed because two members present (Mr. Romero and Mr. Dietz) would be abstaining from the vote due to a conflict of interest. Ms. Van Dyk informed the board that after a review of the Corporation’s bylaws and the Public Funds Investment Act, she had determined that a vote on this item would require a majority of board members present at the meeting for a vote to pass. She pointed out that the Broker Listing was last approved by the board in August, so the board had the ability to vote on the item at the next meeting and still meet the requirement that it was reviewed and approved by the board on an annual basis. After further discussion, the item was tabled until the next meeting. Open Meeting Mr. Long informed the board that the next meeting was tentatively scheduled for Thursday, July 9, 2015. Mr. Dietz thanked Ms. King for recording the meeting. Adjournment Mr. Dietz adjourned the meeting at 12:10pm. Respectfully submitted by________________________________________________ Laura Ross, Corporate Secretary

Texas State Affordable Housing Corporation Authorized Broker/Dealer List

Fiscal Year 2016

The authorized broker/dealer list for Texas State Affordable Housing Corporation is shown below. Each of these firms, and the individual or broker covering the account, has been or will be sent the Investment Policy. In accordance with the Public Funds Investment Act (TX Gov’t Code 2256.005(k)) before any broker/dealer transacts business with the Corporation it will have had to certify in writing to a review of the Policy and have certified that procedures are in place to assure compliance with that Policy. Attachment A of the Policy is the certification form used for this purpose. The Corporation's Policy establishes specific criteria for the brokers and requires that the list of broker/dealers be approved annually by the Board. Patterson & Associates maintains the brokerage compliance files for the Corporation. When any material changes are made to the Investment Policy the new Policy is sent out for re-certification.

1. Bank of America/Merrill Lynch 2. Barclay’s Capital 3. G.X. Clark 4. Mizuho Securities 5. Morgan Stanley 6. Mutual Securities 7. Piper Jaffray 8. Raymond James 9. RBC Capital

10. Stiefel Nicolaus 11. Wells Fargo

68821278.3 / 10608258

RESOLUTION NO. 15-___

RESOLUTION Regarding the Submission of one or more Applications for Allocation of Private Activity Bonds, Notice of Intention to Issue Bonds and State Bond Application to the Texas Bond Review Board and Declaration of Expectation to Reimburse Expenditures with Proceeds of Future Debt for the Woodside Village Apartments Project

WHEREAS, the Board of Directors of the Texas State Affordable Housing Corporation (the “Corporation”) desires to submit one or more Applications for Allocation of Private Activity Bonds to the Texas Bond Review Board, in connection with qualified residential rental housing bonds (the “Bonds”) relating to a qualified residential rental project known as Woodside Village Apartments located at 2020 Martin Luther King, Jr. Blvd., Palestine, Texas 75801 (the “Project”);

WHEREAS, the Corporation intends to issue the Bonds and loan the proceeds to DHI Woodside Apartments, LLC or its assigns (the “Borrower”), which will use the proceeds for the acquisition, renovation, rehabilitation and equipping of the Project and further intends to make certain capital expenditures with respect to the Project and currently desires and expects to reimburse the capital expenditures with proceeds of such debt;

WHEREAS, under Treas. Reg. § 1.150-2 (the “Regulation”), to fund such reimbursement with proceeds of tax-exempt obligations, the Corporation must declare its expectation to make such reimbursement;

WHEREAS, the Corporation desires to preserve the ability of the Borrower to reimburse the capital expenditures with proceeds of tax-exempt obligations; and

WHEREAS, the Board desires to make all other appropriate filings and requests to the Texas Bond Review Board to enable the Corporation to issue the Bonds.

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE TEXAS STATE AFFORDABLE HOUSING CORPORATION:

1. That the President of the Corporation or any officer of the Corporation is hereby authorized and directed to execute and deliver one or more Applications for Allocation of Private Activity Bonds to the Texas Bond Review Board in connection with requesting an allocation for the Bonds, together with any documents, certificates or instruments related thereto.

2. That the President of the Corporation or any other officer of the Corporation is hereby authorized and directed to file with the Texas Bond Review Board one or more Notices of Intent to Issue Bonds and one or more State Bond Applications in connection with the Bonds and such officers are further authorized and directed to request that the application(s) be approved by the Executive Director of the Texas Bond Review Board in accordance with Chapter 181 of the Texas Administrative Code, as amended.

3. That the President of the Corporation or any other officer of the Corporation is hereby authorized and directed to take any and all other actions necessary or incidental to securing the private activity bond allocation(s) and the approval of the Bonds from the Texas Bond Review Board.

68821278.3 / 10608258 2

4. That the Corporation reasonably expects that the Borrower will reimburse capital expenditures with respect to the Project with proceeds of debt hereafter to be incurred by the Corporation, and that this resolution shall constitute a declaration of official intent under the Regulation. The maximum principal amount of obligations expected to be issued for the Project is $7,000,000.

PASSED, APPROVED AND EFFECTIVE this July 9, 2015.

TEXAS STATE AFFORDABLE HOUSING CORPORATION

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Texas State Affordable Housing Corporation Multifamily Private Activity Bond Project Summary

Page 1 of 2

RE: Woodside Village Apartments

Summary: The Corporation received an application for multifamily bond financing from Dawson Holdings, Inc. (DHI) for the purpose of acquiring and renovating the Woodside Village Apartments, a 92-unit affordable housing project in Palestine, Texas. The Corporation would utilize $6.525 million in private activity bond volume cap to fund the project.

Public Benefit: The proposed project will preserve 92 units of affordable housing in Palestine, Texas. All of the project’s units serve households at or below 60% of the area median income. Palestine meets the Corporation’s targeted housing needs for Rural and Small Urban markets and At-Risk Preservation projects. The proposed project will preserve affordability for an additional 40 years under the terms of the proposed housing tax credit and FHA financing. No property tax exemptions will be requested.

Financial Summary: $6.525 million in private activity bonds would be issued by the Corporation as part of an overall $10 million in financing for the acquisition and renovation of Woodside Village Apartments. The Corporation’s bonds will be issued as short-term financial instruments to cover acquisition and renovation expenses. Once renovation is complete, a new 40-year FHA insured mortgage will repay the bonds and become the primary source for permanent financing. Additional financial sources for the project include 4% Low Income Housing Tax Credits, deferred developer fees and other third party debt or equity. The Corporation’s staff will conduct a more thorough review of underwriting and financial feasibility of the project if the Board approves the inducement resolution.

Market Conditions: Woodside Village Apartments is located in Palestine, Texas. Palestine is the county seat of Anderson County and is located in east Texas at the intersection of highways 79, 84 and 287. While the primary economic driver of the region is lumber and mineral extraction, the largest single employer is the Texas Department of Criminal Justice. More than 3,700 employees manage and run four state prison facilities in Anderson County. Despite the high concentration of criminal justice facilities, much of the economic growth in Palestine in the past ten years has been a result of oil and gas exploration, along with lumber extraction. This growth has helped decrease unemployment in the area to 4.8%, below the statewide average of 5.1%. However, median incomes in both Palestine ($35,168) and Anderson County ($40,653) are below the statewide average of $51,900.

Map of Project Area

Texas State Affordable Housing Corporation Multifamily Private Activity Bond Project Summary

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The percentage of persons renting in Palestine is at 40.89% with only 29.64% renters for Anderson County. Rents are generally lower than in larger urban areas, with median rents of approximately $736 per household. Home prices are also low compared to statewide averages, with Palestine and the surrounding area reporting a median home price of $82,000, compared to the statewide median of $128,900.

Borrower Summary: Dawson Holdings, LLC (“DHI”), the applicant, was formed in 1997 and has since completed the acquisition and rehabilitation of more than 6,000 units of affordable housing in 55 projects. DHI has focused on project based Section 8 housing, HUD multifamily and low income housing tax credit acquisitions. Their corporate footprint stretches from Washington to Texas with their home offices in Sausalito, California. DHI has submitted letters of recommendation from several of their current and former investment partners, including Pillar Financial, Red Stone Capital and WNC and Associates. They completed acquisitions for two existing HUD developments in Big Spring and Marshall, Texas in 2014 using a combination of FHA and housing tax credit financing. Though they are quite new to the Texas market, their partnerships with oversight agencies in California and Arizona have provided them with positive reviews. Additionally, DHI has worked closely with local officials in Palestine and received recommendations from several local officials, along with a resolution of support from the City of Palestine to move forward with their proposed application for bonds and housing tax credits. Recommendation: Staff recommends that the Board approve the inducement resolution presented today. The resolution allows DHI and the Corporation to move forward with the process of reserving private activity bond volume cap to Woodside Village Apartments, to conduct public hearings in accordance with federal regulations and to negotiate the terms and conditions of the bond issuance. Staff will return to the Board once all of these steps are taken to ask for approval of the bond issuance.

Texas State Affordable Housing Corporation Texas Housing Impact Fund

Policy and Guidelines

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1. Policy. This policy has been adopted by the Texas State Affordable Housing Corporation (the �Corporation�) in order to organize and codify its administration of the Texas Housing Impact Fund (the �Fund�). The Fund supports the Corporation�s mission to promote equal access to safe, decent, and affordable housing with an emphasis on serving rural and underserved markets. The Fund provides financing to non-profit and for-profit developers for the purpose of increasing and preserving the stock of affordable housing throughout the state of Texas.

2. Source of Funds. The primary source of monies available to the Fund are investments made by public and private entities into the Fund�s loan fund. The Corporation also commits its own funds to the Fund and borrows funds from public or private entities. All loan commitments will be conditioned upon the availability of funds.

3. Eligible Activities. The Corporation uses the Fund for:

a. Construction Loans: Short-term financing for acquisition, construction or rehabilitation of affordable multifamily rental housing;

b. Permanent Loans: Long-term financing for affordable multi-family rental housing that has been newly built or rehabilitated;

c. Revolving Lines of Credit: Financing for the acquisition, construction and/or rehabilitation of single family homes for sale to low-income households; and

d. Any other purpose deemed suitable under the Fund policies and approved by the Corporation�s Board.

4. Use of Loan Proceeds. Loan proceeds may be used for the acquisition of real property, on-site infrastructure, and the construction or rehabilitation of housing units. Loan proceeds may not be used for off-site infrastructure, administrative costs, general operating costs, or developer fees and profits. Eligible predevelopment and soft cost expenses may include, but are not limited to, environmental surveys, market assessments, engineering fees, architect fees, or other expenses approved by the Corporation.

5. Application Process. The Corporation accepts loan applications for eligible activities (�Developments�) on an ongoing basis. The Corporation will publish an application package to its website. Borrowers should download and complete the application pursuant to the guidelines included in the application. At a minimum, applications must be completed in the following manner:

a. All applications must be signed and dated as required in the application package;

b. The application submission fee must be submitted with the complete package;

c. Applications must be typewritten on the printed application provided by the Corporation. Handwritten applications will not be accepted: and

d. Electronic copies of an application must be readable using Adobe PDF Reader software. Each tab or attachment must be properly bookmarked. Scanned documents must be legible and printable on standard 11� by 8.5� paper.

6. Application Review.

a. Applications will be reviewed in the order they are accepted. Applications will be reviewed for Threshold Criteria (defined below) and, if thresholds are met, Underwriting Standards (defined below). The Corporation may delay the consideration of an application for an award if there are errors, omissions or insufficient documentation that the Corporation deems necessary to complete its review. If an application fails to fulfill the minimum Threshold Criteria for the Fund, the application will be terminated and notification will be provided to the borrower.



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b. Applications that pass the threshold and underwriting review processes will be presented to the Corporation�s Loan Committee (hereinafter defined). If there are insufficient funds available at the time an application is brought to the Loan Committee the application may be held for a period of no longer than 90 days and reconsidered for funding if funds become available. If funds are not available, the Corporation will return any application or commitment fees submitted by a borrower.

7. Threshold Criteria. All applications must meet the following minimum threshold criteria (�Threshold Criteria�) to be presented to the Loan Committee:

a. Eligible Borrowers. Any reputable and experienced entity engaged in affordable housing Development, including non-profit or for-profit builders, developers, partnerships, limited liability companies, municipalities, housing authorities, or other business entities as approved by the Board of Directors (the �Board�) are eligible to apply for funding. The Corporation will not fund real persons or entities not registered with the Texas Secretary of State. All borrowers must also provide or meet the following requirements:

i. All borrowers must be registered with the Texas Secretary of State at least 30 days prior to the execution of a loan commitment;

ii. All borrowers must have a current certification of corporate status from the Texas Secretary of State and certificate of account status from the Texas Comptroller of Public Accounts;

iii. All non-profit borrowers must have valid and current IRS determination letters regarding their status as a 501(c)3 or (c)4 nonprofit corporation, along with a confirmation that the corporation is registered with the Texas Secretary of State as a non-profit; and

iv. Borrowers must demonstrate:

A. An acceptable history of repaying credit in a timely manner, as agreed;

B. A reasonable plan for use and repayment of loan proceeds;

C. Payments of all taxes, license fees and other fees required by applicable statutes; and

D. Other requirements which may be applied on a case-by-case basis by the Corporation

b. Experience Threshold. All borrowers must be able to demonstrate sufficient experience in residential construction, the development of infrastructure, and marketing of affordable housing. Proof of experience may be demonstrated through evidence of past completed developments, partnerships with experienced developers and other development experience as approved by the Corporation. At a minimum, a borrowers must have developed a number of homes or housing units equal to at least one-half (1/2) of the number of units in the borrower�s application. The Corporation may consider the experience of a borrower�s staff and board in determining the borrower�s experience.

c. Affordability Threshold. Affordability requirements will be based on the Corporation�s statutory requirements and reasonable targets above those statutory minimums. Affordability requirements are different for Developments that target homeownership versus rental opportunities for low-income households. At a minimum the Corporation will require properties targeting rental housing to:

i. Reserve at least 20% of the total units in the Development for persons or families earning 50% of the area median income (�Extremely Low-Income�), as determined by the U.S. Department of Housing and Urban Development (HUD), based on the size of the unit and number of persons occupying the unit; or



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ii. Reserve at least 40% of the total units in the Development for persons or families earning 60% of the area median income (�Very Low-Income�), as determined by HUD, based on the size of the unit and number of persons occupying the unit.

For Developments targeting the renovation or construction of homes for sale to low-income households the Corporation will require the following affordability standards:

i. At least 51% of the homes renovated or constructed using a revolving line of credit will be sold

to households earning 80% or less of the area median income (�AMI�) or Statewide Median Income, whichever is greater. The Corporation may require a minimum number of households earning 80% or less of the AMI (�Qualified Households�) based on the percentage of funds provided by the Corporation, the nature of the investment, and any other factors the Corporation deems necessary (the �Affordability Requirement�).

ii. All for-sale housing developed, regardless of whether the buyer is a Qualified Household or not, must be financed with fixed rate loans. No homes may be sold with the use of non-profit or developer grants or down payment assistance that exceeds 5% of the appraised value of the home, unless otherwise approved in writing by the Corporation. Borrowers that do not fulfill Affordability Requirements will be subject to additional fees, fines or payments as determined by the loan agreement.

iii. A Land Use Restriction Agreement (the �LURA�) or other restrictive covenant may be recorded with each housing unit and/or parcel of land developed.

d. Development Threshold. To ensure that working families have safe, decent affordable housing, and to ensure long-term affordability and usability, homes must meet the following standards:

i. All Developments, at the time of acquisition or completion of construction or rehabilitation, must meet all local building codes for the jurisdiction where they are located. If the Development is located in an area where no building codes are in place or have been adopted, the Development must meet the most recent International Residential Code, or International Building Code;

ii. All Developments, at the time of acquisition or completion of construction or rehabilitation, must be compliant with the Federal Fair Housing Act Accessibility Standards, Titles II and III of the Americans with Disabilities Act of 1990, Texas Minimum Construction Standards and §2306.514 (visitability guidelines) of the Texas Government Code. Borrowers must submit to the Corporation a certification from the project architect, engineer or other third party building inspector that the proposed Development will meet or exceed the above listed accessibility requirements;

iii. All Developments, at the time of acquisition or completion of construction or rehabilitation, must be compliant with the U.S. Department of Energy�s Energy Star Fund, as confirmed by a certified third-party Home Energy Rating System (�HERS�) inspector or as certified to by the Development�s architect or engineer; and

iv. All Developments, at the time of acquisition or completion of construction or rehabilitation, must have sidewalks, driveways and streets that are compliant with the Americans with Disabilities Act and Fair Housing Accessibility Standards.

e. Environmental Threshold. The Corporation will consider environmental or site specific conditions, including, but not limited to, adjacent or nearby land uses in determining the risk of environmental hazards. If the Corporation, in its sole determination, finds that an environmental hazard creates a risk to the health and well-being of Qualified Households, an application may be denied funding. The



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Corporation will also require the submission of a Phase I Environmental Site Assessment, any necessary updates, and/or a Phase II Environmental Site Assessment, for new construction developments proposed on land that is not currently or has not previously been used for the planned redevelopment use. At loan closing borrowers must agree to an environmental indemnity, in favor of the Corporation, in a form provided by the Corporation�s Counsel.

f. Relocation Threshold. The Corporation will not award funds to any Development which may cause the displacement of a Qualified Household. Borrowers may propose Developments that temporarily displace Qualified Households, as long as there are sufficient funds to assist Qualified Households with temporary relocation costs.

g. Aggregate Exposure Limits.

i. The Corporation will maintain a maximum aggregate exposure limit (�Aggregate Exposure Limit�) of $3 million dollars. This policy will limit any single borrower, or group of related entities, from receiving outstanding loans from the Fund in an amount greater than the Aggregate Exposure Limit. The Aggregate Exposure Limit excludes loans made through one of the Corporation�s conduit lending channels.

ii. Aggregate Exposure Limit risk policies are made with the understanding that in instances where the Corporation is asked to make an additional loan commitment to a strong borrower that would exceed the exposure limit, (1) the Board may permit a policy exception, or (2) the Corporation will make an effort to refer the borrower to other sources of financial assistance. Moreover, in instances where the risk exposure limit is not exceeded, but the Corporation�s fund balances are exhausted, the Corporation may seek external sources of loan guarantees or may require additional requirements on the collateral position.

iii. For purposes of this Policy, loans will be grouped by borrower and related entities. Related entities will include those corporations, partnerships and limited partnerships where the borrower or sponsor has an equity stake. It will also include those loans where the borrower or sponsor is a guarantor.

8. Underwriting Standards. The Corporation will review all applications that meet Threshold Criteria, using the following underwriting standards (�Underwriting Standards�). Borrowers must understand that Underwriting Standards are subjective in many aspects. The Corporation strives to use objective criteria, however the Corporation�s lending activities are generally subject to greater risks than what is typically experienced by conventional lenders and therefore must utilize criteria that are not easily measurable. The Corporation�s review process will consider five key factors to determine feasibility of a Development:

a. Financial Feasibility. The Corporation will thoroughly evaluate the Development budget, cash flow analysis and pro forma to determine the feasibility of each Development. The Corporation will use the following minimum standards to determine feasibility:



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i. Loan to Value Ratio (LTV): Generally, the maximum LTV for all loans is 80%. The LTV will be calculated on the amount of the loan request and the total appraised value of land and completed on-site improvements including housing units. The Corporation may consider other loan-to-value limits based on financial strength and the amount of guarantees provided by the Applicant;

ii. Sales and Income Projections. For applications to develop for-sale housing, the cash flows and proforma sales projections must demonstrate that 100% of the principal balance and interest can be repaid prior to the Maturity Date (as defined herein) of the loan. The Corporation may include extensions to the Maturity Date in its calculation of sales projections; and

iii. iii. Debt Coverage Ratio. All rental Developments must maintain, for the life of the loan or 15 years, whichever is longer, a minimum debt coverage ratio (DCR) of at least 1.15. The Corporation reserves the right to raise the minimum DCR requirement based on the source of funds to be used and the perceived risk of the transaction.

iv. iv. Vacancy Rate. For rental Developments, the Corporation will use a minimum vacancy rate of 8% for all loans. Developments with 100% project based section 8 vouchers may be underwritten using a vacancy rate of 5%. The Corporation may use higher vacancy rates based on the current and historical rate reported in the third party market analysis or data obtained by the Corporation.

v. v. Expense Ratio. For rental Developments, the Corporation will limit the amount of operating expenses to 70% of effective gross income (�EGI�) for the life of the loan or 15 years, whichever is less. The calculation of operating expenses and EGI will be determined solely by the Corporation.

vi. vi. Repayment Sources. The Corporation will consider the availability of repayment financing commitments in its analysis. Borrowers must submit executed commitment agreements to the Corporation for consideration in underwriting. The Corporation will work with borrowers to review alternative-financing structures.

vii. vii. Reserve Requirements. All rental Developments are subject to the following escrows and reserve accounts:

A. Escrows may be required for property taxes and insurance;

B. Replacement Reserves for new construction Developments in the amount of $300 per unit per year adjusted for inflation for the term of the loan , The starting figure for acquisition or rehabilitation Developments will be $350 per unit per year; and;

C. Operating Reserves in the amount of 3% of the EGI for a Development with more than 35 units, or 5% of EGI for a Development with 35 units or less.

b. Collateral. The Corporation strives to make loans that are fully collateralized through real property, letters of credit, or other financial instruments. The Corporation may consider unsecured loans on a case-by-case basis. In the case of real property, the Corporation will obtain an insured, primary or subordinate mortgage lien on the subject real estate with full recourse to borrower evidenced by a security agreement and UCC-1 filings. Assignments of rents, leases and contracts affecting real estate may also be taken. When appropriate, a secondary source of collateral repayment may also be identified (e.g., personal guarantees, assignments or other appropriate security) if the Corporation determines that its primary source of collateral could deteriorate.

c. Financial Strength. The Corporation will analyze each borrower�s financial statements and records to determine if there are sufficient cash reserves to maintain the operations for a period equal to the term at which developer fees or profits can be distributed from net proceeds.



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d. Market Conditions. The Corporation will require the submission of market conditions data by borrowers, and may conduct its own assessment of market conditions to determine the feasibility of the Development. Market data that will be required includes current information on demographics, population growth, employment trends, median homes prices, zoning requirements, absorption rates, and any other indictors of the market capacity for the Development.

e. Community Impact. The Corporation will evaluate the Development in the context of the Corporation�s organizational mission. Specifically, the Corporation will evaluate the degree of housing need in the local community and the number of units to be produced by the Development. The Corporation will give priority to Developments that include short-term LURAs, equity limitation provisions or other mechanisms that ensure the affordability of housing units.

9. Targeted Housing Needs. In order to increase the production of housing located in rural areas and/or accessible to persons with disabilities, the Corporation will provide an interest rate reduction in the amount of .25% from the minimum interest required in this policy if the Development meets one or both of the following standards:

a. Rural development: The property is located within an area that is: (a) outside the boundaries of a primary metropolitan statistical area (PMSA) or metropolitan statistical area (MSA); or (b) within the boundaries of a PMSA or MSA, if the area has a population of 20,000 or less and does not share a boundary with an urban area; or

b. Accessible rental Development: All ground floor units are designed to be accessible for persons with mobility impairments and at least 30% of all units in the development are accessible for persons with mobility impairments and/or visual and hearing impairments. For for-sale Developments all single family new construction homes are required to be accessible pursuant to the Corporation�s development standards.

10. Awards. Once the Corporation has determined that an application has passed all Threshold Criteria and Underwriting Standards it will be submitted to the loan committee (�Loan Committee�) made up of an appointee of the Board, and the Corporation�s President, Executive Vice President and Chief Financial Officer. The Loan Committee will review a loan summary, underwriting report and any additional supplementary materials collected and prepared for presentation by the Fund manager The Loan Committee must have a simple majority vote of a quorum of the members to approve an award or recommendation to the Board. A quorum of the Loan Committee will be at least three members. If a loan is not approved, the Corporation will notify a borrower, in writing, that the application was not approved. The approval of loans will be limited in the following manner:

b. The Loan Committee may approve awards pursuant to this policy up to but not exceeding $250,000.

c. The Loan Committee may approve awards up to but not exceeding $1 million if the Corporation is acting as a conduit for another financial institution that will purchase the loan upon closing.

d. The Loan Committee will present all other loans to the Board for consideration and/or approval.

11. Loan Agreements. The Corporation�s President and Executive Vice President, will be authorized to consent to, accept, execute and attest any such agreements, assignments, certifications, contracts, documents, instruments, releases, financing statements, letter of instruction, written requests, Notices of Intent, Commitment Letters, closing documents and other papers, whether or not mentioned herein, as may be necessary or convenient to carry out or assist in carrying out the purposes of this Policy



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12. Structure of Loans. The Corporation will structure loan agreements, rates and terms using the following guidelines:

a. Term.

i. For revolving lines of credit used for the construction of new homes or rehabilitation of existing homes for sale to Qualified Households, the standard length of loan agreements will be 24 months from the date of closing, (�Term�). Full repayment of the line of credit will be due on the first day of the month following the end of the loan Term (Maturity Date�). . Borrowers may be granted one 6 month extension to the Maturity Date, if certain benchmarks are met in the development process as detailed in the loan agreement.

ii. For rental housing developments, the Term of loan agreements is 15 years. The amortization period for loans will be based on the financial analysis and source of funds, but is generally 20 to 30 years. The Corporation�s maximum term and amortization period will be 40 years. Full payment of principal and interest must be made by the end of the Term or the maturity date (�Maturity Date�). The Corporation may set other Term or renewal schedules, as necessary.

b. Interest Rate. Interest rates for the Fund will be set at a fixed rate of interest based on the cost of funds available to the Corporation. The minimum interest rate for the Fund will be at least two percent (2.5%) above the cost of funds to the Corporation, except as may be permitted in accordance with this policy. The cost of funds (the �Cost of Funds�) will be calculated using the blended interest rates of all sources to be used in the financing. Loans not paid in full at the Maturity Date or extended Maturity Date will accrue interest at a rate of fifteen (15.00%) annually after the Maturity Date has past.

c. Payment.

i. For revolving lines of credit used for the construction of new homes or rehabilitation of existing homes for sale to Qualified Households, payments of principal and interest, if any, will be made from the net sales proceeds (i.e., those proceeds remaining after the payment of normal and customary closing costs) received from the sale of lots or homes. Interest payments will be calculated on the principal balance of the loan outstanding from time to time and based upon the actual number of days elapsed divided by 360. Payment of all principal and interest, if any, will be made from financial guarantees within 45 days after the Maturity Date in the event that full payment has not been made.

ii. For rental housing developments, Payments of principal and interest must be paid on the first of each month from revenues of the Development (or from any guarantees if revenues are not available) in accordance with an amortization schedule as discussed under �Term� above. Interest payments shall be calculated on the principal balance of the loan outstanding from time to time and based upon the actual number of days elapsed divided by 360. Payment of all principal and interest, if any, will be made from financial guarantees within 30 days after the Maturity Date in the event that full payment has not been made.

d. Late Payments, Delinquencies, and Defaults. The Corporation will maintain complete records of the status of each loan, including any late payments, delinquencies or defaults. Penalty fees may be assessed in compliance with loan documents and state laws. Each of the following events will be considered events of default for the purpose of the loan documents:



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i. If a loan payment is more than ten (10) days late, a notice of late payment will be forwarded to the borrower and a late fee of Fifty Dollars ($50) will be added to principal balance of the loan.

ii. If a loan payment is more than twenty (20) days late, the Corporation will notify Borrower in writing and demand immediate payment.

iii. If a loan payment is more than 30 days late, a notice of default will be issued by the Corporation to the Borrower in writing. An additional late fee of Fifty Dollars ($50) will be added to the principal balance of the loan.

iv. If a loan payment is more than 45 days late the Corporation will issue a second notice of default to the Borrower in writing, and a report will be provided to the Corporation�s Board, unless all defaults are cured prior to the next regularly scheduled Board meeting. Staff may make the following recommendations to the Board including, but not limited to:

A. Correspondence or meeting with members of the borrower's mangers and/or officers;

B. An on-site inspection of borrower�s operations, including their books;

C. The sending of a third notice of default;

D. The charging of additional late fees;

E. The development of a re-structuring plan; and/or

F. Other action staff may recommend.

v. If a loan payment is more than Sixty (60) days late the Corporation�s default committee (�Default Committee�) consisting of a loan officer, President, Executive Vice President, Corporation�s General Counsel, and Board Chair will be convened. The committee will examine the situation, based upon a meeting with the borrower and a detailed account of operational information. The Default Committee may carry out the following actions:

A. A loan re-structuring;

B. A strategy to sell the loan;

C. A notice of intent to foreclose; and/or

D. A further forbearance of action based upon certainty of repayment and confidence in operations.

e. Foreclosures. Notwithstanding the timeline provided above, in the event the Corporation determines in its sole discretion that a foreclosure action is necessary to protect its security for the loan prior to the 30th day after an event of default, the Corporation may initiate foreclosure proceedings prior to such date. The Corporation will consider foreclosure as a last option when considering actions on loans in default. In instances of foreclosure, the Corporation will make a detailed assessment of the situation to the Board, including a full analysis of the plans and consequences of foreclosure. All foreclosure proceedings and actions will be done in such a way as to provide maximum protection for the Corporation and for the interest of affected parties, especially any families or individuals who have committed to purchase housing units. In the event of a collateral liquidation, every attempt will be made to cover the cost of the Corporation�s loan principal, accrued interest, if any, and the transaction costs of liquidation (i.e. legal, marketing, staff time).



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f. Subordination. On a case by case basis, the Corporation may agree to subordinate the payment of its loan to that of one or more senior loans. In addition, the Corporation may also agree to allow a loan to be payable only from net cash flow in specific circumstances. All decisions regarding subordination will first be made by the Loan Committee; however, if the terms of subordination are not typical in the marketplace for a particular type of transaction, the determination will be provided by the Board.

g. Permanent/Take-Out Financing. All loans used for the development of new subdivisions or the construction of infrastructure will require the borrower to meet certain marketing and/or pre-sale requirements. If the borrower will be constructing site improvements to the property, the borrower must present a sales contract(s) for at least 70% of the proposed lots. If the borrower will be the primary contractor for completed housing units, the borrower must provide a sales contract(s) for at least 40% of the lots and homes to be developed. The Corporation may also require a purchaser waiting list that includes at least 50% of the number of lots or housing units to be developed.

h. Revolving and Renewable Loans: The Corporation may consider on a case-by-case basis revolving loans that allow borrowers to pay back all or a portion of the principal balance and later draw additional funds against the principal balance during the initial Term. The Corporation may consider on a case-by-case basis renewable loans that allow the borrower and Corporation to agree upon the terms of renewing a loan after the full payment of principal balance and interest of the original loan. Renewable loans will require the payment of closing fees, as well as the setting of a new Term, Interest Rate and Maturity Date.

i. Equity Investments. The Corporation will consider any financing, loan or investment of funds into a Development as an equity investment (�Equity Investment�) when the borrower cannot provide sufficient guarantees or owner equity, as determined by the Corporation. The Corporation may consider Equity Investments in Developments that serve very low-income (50% AMI and below) or special needs populations. A minimum number of very low-income or special needs units may be required based on the amount and nature of the contributions made by the Corporation. Additional fees or charges may be included in loan payment terms for units or lots sold to non-qualified households.

13. Commitment of Funds. The Corporation will provide borrowers whose loans have been approved a letter detailing the commitment of funding made by the Corporation (�Commitment Letter�). The Commitment Letter will detail the rates, terms and other conditions of the loan, as well as any due diligence materials or documents that must be submitted by the borrower prior to closing. The Commitment Letter will set timelines for the execution of the commitment, payment of fees and closing of the loan. The borrower will be solely responsible for fulfilling the requirements of the Commitment Letter. The Corporation will have the right to terminate any Commitment Letter if it becomes aware of any changes or adverse events that may conflict with assumptions made during underwriting or that negatively affect the financial position of the borrower.

14. Fees. The Corporation will be authorized to charge fees, penalties or other monetary accruements in the following manner:

a. Application Fee. The Corporation may require the payment of an application fee (the �Application Fee�) to cover the cost of document preparation, data entry, staff review time and other expenses as necessary. The Application Fee will be no greater than $500, and may be waived for non-profit applicants. An application will not be accepted by the Corporation unless it is accompanied by the appropriate Application Fee.



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b. Origination Fee. The Corporation will collect at closing an origination fee (the �Origination Fee�) of the greater of one percent (1%) of the approved loan amount, or $2,500. The Origination Fee will be used to offset the Corporation�s cost for legal counsel and document preparation. If the Corporation determines that the loan will require additional services or expenses due to the structure or nature of the loan, the Origination fee may be increased at the sole discretion of the Corporation.

15. Loan Closing. Borrowers will receive instructions with the Commitment Letter that detail the required steps and actions necessary to close on their loan. The Corporation may require the following documentation prior to closing:

a. Appraisal;

b. Site and Development Plans;

c. Final Budget and Timeline;

d. Construction Contracts;

e. Financial Statements;

f. Certificates of Corporate Status;

g. Title Insurance;

h. Surveys;

i. Insurance;

j. Legal Opinions;

k. Fees and Expenses;

l. Proof of Zoning;

m. Loan Documents; and

n. Other documents as required by the Corporation.

16. Construction Loan Administration.

a. Draw Requests. Borrowers are required to submit requests for reimbursement or advances on their line of credit using forms provided them by the Corporation. Contractor/Supplier invoices are required to maintain oversight of construction procedures and fiscal management.

b. Site Inspections. The Corporation may engage an experienced construction supervisor or architect to act as the Corporation�s inspector. The inspector will perform site visits for each draw request to evidence work-in-place, conformity with plans, specifications and building standards. The cost of inspections will be paid by borrowers, from loan proceeds if desired. .

c. Advances to Borrower. The Corporation may allow borrowers to receive loan funds in advance of the start of construction activities, based upon the sole determination of the Corporation. Advances for new construction activity will be limited to $25,000 and advances for renovation or rehabilitation activities will be limited to $15,000. Additional advances of loan funds may be approved based upon the borrower�s continued compliance with the terms and conditions of the loan.

d. Retainage. The Corporation will withhold 10% from each draw request made by the borrower and a total of 10% from the loan amount until all contractors and/or subcontractors have submitted affidavits of lien releases for the subject property.



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e. Interest Reserve. Wherever possible, the Corporation will require borrowers to pay interest from other Development sources or unrelated income. In instances where other sources are restricted, and/or unrelated income is unavailable or unreliable, the Corporation may permit a loan to self-fund accrued interest.

f. Third Party Lenders/Funders. When possible, the Corporation will require other Development sources to fund prior to the Corporation�s loan. When pro-rata funding occurs, the Corporation will seek to administer other Development sources. The Corporation will seek to hold all Development retainage when possible.

17. Acquisition Loan Administration. The Corporation may provide up to 100% of its loan funds for the purpose of acquiring real property if the Corporation�s financial interest in property does not exceed 50% of the total projected Development costs. If the Corporation does provide proceeds for acquisition, borrowers must provide the Corporation with a complete loan closing document package at least 7 days prior to the anticipated loan closing date. The Corporation may deposit the full amount of acquisition loan proceeds into an escrow account with the mortgage title company not more than 5 days prior to the closing of the loan. If delays in closing occur and exceed 5 days, the full amount of funds placed in escrow will be returned to the Corporation immediately upon the Corporation�s request.

18. Loan Loss Reserves. The Corporation will establish a reserve fund to cover the cost of financial losses to the loan portfolio and for the repayment of funds borrowed by the Corporation to fund loans (�Loan Loss Reserve�). The amount of Loan Loss Reserve will be equivalent to at least 5% of the principal balance of all outstanding loans, or at least 3 months of payments on borrowed funds, whichever is greater. The Corporation may maintain a higher amount of Loan Loss Reserves based on an assessment of loan ratings of all loans in the portfolio.

19. Loan Ratings. The Corporation will establish a loan rating policy in order to track the level of risk and strength of its portfolio. The loan rating policy will look at actual operations and repayment performance, strength of collateral (loan to value ratio), strength of repayment capacity (current ratios, debt coverage ratio, etc.) and management capacity. The loan rating policy will be updated annually.

20. Loan Monitoring Policy. The Corporation will establish and maintain loan monitoring policies in order to maintain the Corporation�s security interest and to assist borrowers in organizational growth and asset management. The Corporation will maintain data on the regularity of payments, annual financial statements of borrowers, status of Development from site inspections, and updates on the collateral value. The Corporation may provide technical assistance, when necessary, to borrowers. The nature and frequency of loan monitoring will be based on loan type, the life cycle of the loan (construction period, business cycle, etc.), performance, and overall risk evaluation, and will be included in the loan agreement.

21. Loan Monitoring Report. Annually, the Corporation will produce a loan monitoring report on each outstanding loan in its portfolio and provide an analysis of the value of collateral (�Annual Loan Monitoring Report�). This evaluation will be done through staff analysis of comparable values, and does not, except in workout situations, require an appraisal report. The Annual Loan Monitoring Report will be presented to the Board and will be available to investors and note purchasers.

22. Monitoring Social Impact. The Corporation will compile a report on the social impacts of the Fund (the �Social Impact Report�) annually. The report presented to the Board and investors annually will include the following data:

a. The geographic distribution of loans;

b. The type of loans;



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c. The numbers and type of housing units created;

d. The economic and demographic characteristics of households; and

e. The leverage capacity of loans

23. Conflict of Interest Policy. The Corporation, in the process of reviewing and awarding loans under this Fund, will adhere to the conflict of interest policies set by the Corporation�s Board and pursuant to §2306.5545 of the Texas Government Code. Additionally, at or prior to each Board meeting, each staff member and Board member will disclose the nature of any potential conflicts of interest that would be created by their participation in the discussion of a particular loan, application, membership or policy.

24. Board Waivers. The Corporation�s Board may consider and approve a waiver to these policies at any time. Borrowers may request that the Board consider a waiver of these policies at a public meeting of the Board.